Real Estate Law Blog: Streamlined Energy & Carbon Reporting (SECR): Does the new regime apply to your business?

Streamlined Energy & Carbon Reporting (SECR)

A large number of businesses will now be subject to new environmental reporting requirements under the new SECR regime. The new requirements will affect organisations across all industries, with the potential to capture large businesses with substantial property holdings (and in particular, those with retained control over parts of let schemes) and tenant organisations who meet the qualifying criteria. The government estimates that around 11,900 companies will fall within the scope of the regime.

The SECR regime requires:

• quoted companies (of any size);
• “large” unquoted companies (including those undertaking public or not-for-profit activities); and
• “large” LLPs;

to report on their annual figures for energy use, greenhouse gas emissions and other related information for financial years which start on or after 1 April 2019.

The SECR regime supplements existing reporting requirements under the Companies Act 2006 and, in conjunction with increases to the Climate Change Levy, goes some way to replacing the abolished CRC Energy Efficiency Scheme.

In summary, an organisation will qualify as “large”, and therefore be subject to the SECR regime (unless an exemption applies), if at least two of the following qualifying conditions are met during a reporting period:

• More than 250 employees;
• Annual turnover > £36m; or
• Annual balance sheet > £18m.

Reporting will be subject to existing monitoring and enforcement provisions relating to the filing of accounts under the Companies Act 2006.

Unfortunately, the SECR regime seems to be streamlined in name only. A number of potential practical issues are already apparent.

Guidance published by Defra makes clear that, in the context of landlord/tenant arrangements, it is the consumer of energy who is responsible for reporting under SECR, rather than the purchaser of the energy supply. Qualifying tenant organisations will therefore need to report on the energy consumed within their “rented serviced areas”. The guidance suggests that tenants will need to agree with their landlord (and potentially other tenants) as to how energy consumption “estimates” are to be divided. This could prove difficult, particularly in the context of large multi-let schemes.

The obvious practical difficulty for most businesses is the need to implement new procedures to collect and record their energy use and emissions activities. This will no doubt be a time consuming process and will need the attention of the relevant directors/partners.

If you require specialist advice on the requirements of the SECR regime, or its application to your business, please contact our Environment team.

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The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.