It can be challenging for entities within groups to make SECR disclosures where the relevant information is not captured on an entity-by-entity basis. This guidance sets out four principles to follow in such circumstances, so that entities can report on the energy use and emissions consumed in the activities for which they are responsible.

For periods beginning on or after 1 April 2019, the Streamlined Energy & Carbon Reporting framework (‘SECR’ – see SI 2018/1155) adds to the existing GHG emissions reporting requirements for quoted companies, and it extends energy consumption and carbon emissions reporting to large unquoted companies and LLPs.

One effect of this change is that large unquoted entities that form part of a group, but are not included in a group SECR report (for instance, because the parent company is not UK-incorporated, or because consolidated accounts are not prepared at the UK level), might need to report under SECR in their own annual report.

In practice, it can be challenging to make the necessary disclosures where energy use and carbon emissions are not captured by the parent company or group on an entity-by-entity basis. This can be the case, for example, where buildings or other assets, or employee contracts, are not directly ‘held’ by the relevant entity or entities.

The guidance below has been established to help navigate such situations. We recommend applying it, since there is very limited other relevant information in either of the two main sources of guidance in this area (the DEFRA Environmental Reporting Guidelines and The Greenhouse Gas Protocol > A Corporate Accounting and Reporting Standard).

The Greenhouse Gas Protocol sets out a framework for businesses to use when setting their ‘boundaries’ for GHG reporting, and particularly which operations should form part of GHG reporting for a group. That framework focuses on the concept of ‘control’ (either financial or operational) as the basis for those decisions.

This guidance is not based on ‘control’, however, because it often does not help entities facing the challenges set out above to produce meaningful disclosures. The entities might not have financial ownership of the property that they occupy, for instance, or the ability to direct how it is operated in terms of energy suppliers and other relevant decisions.

Instead, this guidance sets out a model that is designed to result in SECR reporting on an entity-by-entity basis that (as far as possible) reflects the activities of each company, and the energy usage and emissions for which it is therefore responsible. This approach is consistent with both the wording of SI 2018/1155 and the most relevant part of the DEFRA Guidelines.

The SECR report should show “the annual quantity of energy consumed from activities for which the company is responsible …”. [Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 Sch 7 Part 7A para 20D(3)].

The DEFRA Guidelines advocate the following approach under the heading of landlord/tenant reporting responsibilities, but we believe that the same principle can be applied more widely: “Organisations in scope of SECR should report all energy use and associated GHG emissions … that they are responsible for. In the case of landlord/tenant arrangements, the party responsible for the consumption of energy should take the responsibility for reporting it under this legislation. This should include consumption of energy in rented serviced areas, where a tenant would report on energy consumption, despite not being directly responsible for its purchase, if information on energy consumption is available through sub-meters for example or provide estimates where information is not available”. [DEFRA Guidelines pp 47–48].

Consistent with this, we have identified the following four principles to guide companies in their disclosures.

1) Follow the activities. Entities should report on the energy use and emissions consumed in the activities for which they are responsible. Where another group entity owns, or other group entities own the assets that are used in its activities but the entity itself is responsible for the activities as a result of which the energy is consumed and emissions created, the entity responsible for the activities should report on them.

2) Use the best source for the amounts reported. The basis for the amounts in an entity’s SECR reporting in such circumstances should be, in descending order of preference, where available:

The approach taken should be used consistently year on year, unless a preferable approach becomes available.

Where none of these approaches is feasible, a group might decide to include 100% of its energy usage and emissions in every in-scope entity, but this should be rare.

3) Explain the methods used. Consistent with all of the sources of guidance in this area, every in-scope entity should explain clearly which of the methods above has been used as the basis for its disclosures, and why it is the most appropriate.

4) Don’t use these principles to avoid disclosure. This approach should not be used to avoid disclosure of energy usage or emissions.

Applying the above approach should mean, for instance, that:

SECR reporting is not primarily designed to allow energy usage and emissions across the UK economy to be aggregated, but the above approach should minimise the extent to which amounts are reported more than once. It should also reduce the need for cross-references between entities. It is generally helpful to avoid this for various reasons, including basic inconvenience for users and the fact that entity reports can be prepared and filed at different times.