By Tom Handford MRICS
SECR and TCFDs: Overview
The Streamlined Energy and Carbon Reporting policy (SECR) encourages businesses to adopt energy-efficient practices that lower costs, increase productivity, and reduce carbon emissions. The G20 Financial Stability Board's Taskforce on Climate-related Financial Disclosures (TCFDs) recommends that companies disclose energy and carbon information to help investors navigate the transition to a low-carbon economy.
The UK government's SECR policy commenced on April 1, 2019, replacing the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. Approximately 11,900 UK businesses must now report energy and carbon emissions under the new regulations, significantly more than those previously obligated under the CRC. Organizations must provide information about energy use and carbon emissions in their annual reports, categorized into Scope 1, 2, and 3 emissions.
Who must report their emissions?
SECR reporting applies to quoted companies, large unquoted companies, and large limited liability partnerships (LLPs). Companies and LLPs qualify as "large" if they meet two or more criteria: turnover of £36 million or more, balance sheet of £18 million or more, or 250 or more employees. External validation is not required but strongly recommended. Large unquoted companies and LLPs are exempt if their energy use during the reporting period is less than 40 MWh.
Scope 1, 2, and 3 emissions
The acronym "Burn, Buy, Beyond" helps distinguish the three scopes. Scope 1 covers direct emissions from burning fuel. Scope 2 encompasses emissions from purchased electricity. Scope 3 includes all other indirect emissions.
Scope 1
These emissions result directly from business operations: heating buildings, fueling company vehicles, powering non-electric machinery. Accidental or fugitive emissions, such as chemical leaks from air conditioning or refrigeration units, also fall under Scope 1. Reporting known fugitive emissions is critical, as their impacts often exceed greenhouse gas emissions.
Scope 2
These emissions stem from purchased electricity, heating, or cooling. For example, emissions produced when natural gas burns in a power station to generate electricity count as Scope 2. Companies can easily calculate these by reviewing monthly electricity bills.
Scope 3
These indirect emissions, both upstream and downstream, fall outside direct company control. Scope 3 encompasses product-related emissions. For a car manufacturer, this includes upstream supply chain and transportation emissions, plus estimated emissions from vehicle use during the sales year.
What must be reported?
Quoted companies must report global Scope 1 and 2 greenhouse gas emissions (Scope 3 is voluntary but recommended), at least one emissions intensity ratio, global energy use for the current year, previous year figures, energy efficiency actions with narrative descriptions, and the methodology used, preferably from recognized standards like the GHG Reporting Protocol or ISO 14064-1:2018.
Large unquoted companies and LLPs must report UK energy use and associated emissions, previous year figures, at least one intensity ratio, energy efficiency actions, and methodology used.
Develeco: Embodied Carbon Reporting
Embodied emissions typically fall within Scope 3, reported as Purchased Goods and Services or Capital Goods and Upstream and Down-stream transportation. Develeco's Whole Life Carbon Assessments align with TCFD requirements and address potential carbon emission duplication across scopes.
