In October 2017, the Department for Business, Energy & Industrial Strategy (BEIS) opened a consultation on proposals for a new framework for energy and carbon reporting.
The proposals for ‘Streamlined Energy and Carbon Reporting’ aims to minimise administrative burden, raise awareness of energy efficiency, reduce energy bills and save carbon for large businesses operating in the UK.
The Government sought industry views on the proposed framework, including:
Since the consultation closed in January 2018, the Government is reviewing feedback before publishing its final response.
As one of the UK’s largest certification provider for energy assessors, we’ve published our response to the ‘Streamlined Energy and Carbon Reporting’ consultation below:
Q1. Do you agree that the proposed energy and carbon reporting policy should apply across the UK? [Yes or No] Please explain your answer.
Yes – The organisations that the Streamlined Energy & Carbon Reporting (SECR) will apply to will operate across the UK. To this effect, it would make sense to cover the UK. Also, ESOS as an example already covers the UK, thus it makes sense to have a more territorially robust policy.
Q2. Do you have any comments on the analysis set out in the Impact Assessment?
We would welcome any additional evidence on costs and benefits to support a final assessment of impacts. Please contact us at email@example.com if you would like to discuss our assumptions or provide us with additional sources of evidence, or if you would be interested in attending any analytical workshops we may hold.
There is enough evidence in the impact assessment to suggest there is significant overlap between the different organisation populations to suggest that this is a valid exercise. Also, a lot of the ‘leg work’ involved in the production of the reports has overlap too.
Also, by streamlining the ambiguity of whether an organisation qualifies (or is ‘in or not’) may be relieved as it will fall into a more robust common structure.
Q3. Do you agree that reporting should be done through annual reports? [Yes or No] Please explain your answer.
If yes, would any of the following, forming part of companies’ annual reports, be better suited? a) Directors’ reports, b) Strategic reports, or c) a new, bespoke report. Please explain your answer, note any issues you see with using these reports, and provide any comments on how proposals might best fit within the annual reports regime.
Yes, the reporting should be done through annual reports. However, to embed the reporting into existing reports may dilute their purpose. Thus, by having a new bespoke report alongside, it would carry more meaningful information. Although existing principles of Directors’ sign-off needs to be maintained.
Also, organisations will have inevitable changes in personnel, which can result in delays to compliance as the responsibility for carrying activity out is overlooked or evaded. By having this on an annual reporting agenda, these instances could be reduced.
A bespoke report will allow a more robust approach to consideration for the KPIs / metrics that need to be reported.
Increasing as part of procurement requirements organisations need to demonstrate certain activities relating to energy and carbon (e.g. 14001 certification, carbon foot printing etc.). Thus, from an organisational perspective, this could provide a supplementary source for this information.
Q4. Do you agree that from 2019, energy and carbon reporting to Companies House should be electronic? [Yes or No]. If yes, please specify any digital formats, such as XBRL /iXBRL, that may be suited to this purpose, and any opportunities and challenges these may present.
Yes, electronic reporting is having benefits for compliance, monitoring and traceability. Stroma has significant experience in this area for other mandatory Government Schemes, thus, can offer advice on reporting methods and formats.
Reports should be signed off by named directors and named competent personnel as with ESOS.
Q5. Do you agree that the government should seek to establish a mechanism for collating published energy and carbon data, for example, via a central published report or tool? Please explain your answer.
Yes, this is strongly supported. This could help to achieve energy efficiency and carbon reduction targets in the UK. More accurate benchmarking across different asset types and sectors could also be performed. As we move forward into Digital Built Britain, this would be very useful data. It would help to bring more meaningful work out of other schemes and government policy areas. For example, Building Information Modelling (BIM) or digital engineering.
Q6. Do you think that the policy should apply to:
A. all ‘large’ companies based on employee numbers and financial tests;
B. companies who meet the 6GWh ex-CRC annual electricity use threshold described;
C. another threshold?
Please explain your answer. Please state if you have any views on whether reporting should be required to operate at the group or individual company level.
An energy threshold should not be used as this is not always easily measurable to establish qualification.
Employees number and financial tests should be the chosen method as organisations can check this information more readily without external support, thus helping to establish whether they qualify quicker.
Other thresholds may also need to be considered.
Scenario: An organisation could qualify for ESOS by way of employees or financial criteria. However, a lot of their buildings could be exempted from the exercise because the buildings are on a service charge. There may be instance where the assessment of some assets could end up going missed, as the landlord may not have acted, or fell out of the qualification criteria.
Q7. If you prefer Population Approach A (all ‘large’ companies), which of the proposed company size definitions seems the most appropriate to you, (i) Companies Act 2006, or (ii) ESOS, or (iii) any others?
The use of companies Act Definition would achieve better consistency. It would help to relieve qualification ambiguity.
Q8. If you prefer Population Approach C, which energy use threshold is most appropriate? Please explain your answer, and state who you think should be required to report, describing any other energy threshold(s) you may favour (with options including but not limited to 6GWh per year across all energy products, and 500MWh per year for each of electricity, gas, and transport).
Energy threshold could be difficult for an organisation to establish itself. Also, organisations can have significant changes in their energy consuming assets during measurement periods, thus, this could be a significant amount of work to establish qualification.
Q9. Should reporting requirements within the Companies Act regime also apply to Limited Liability Partnerships (LLPs)? [Yes or No]. Please explain your answer.
Yes, LLPs should be included as they can be sizable organisations with significant energy consumption. They should be brought into qualification criteria if not currently included.
Q10. Please state where you agree that UK quoted companies should continue, or start to report, on one or more of the following a) global Scope 1 and 2 GHG emissions b) an intensity metric, and start to report on c) global total energy use?
Please also provide any views and evidence on the effectiveness of the current mandatory GHG reporting regime in improving corporate transparency, reducing energy use, and reducing emissions.
Global Scope 1 and 2 GHG emissions, an intensity metric and total energy use should be reported. The information provided needs to have been signed off by technically competent people. Through our schemes, members work where we aware of scenarios where GHG & ESOS reporting has led to energy and carbon reduction. There are scenarios where the reports have been used to drive change in organisations or provide platforms for business cases for case.
Q11. Do you agree that UK unquoted companies in scope should report on a) total UK energy use? b) Scope 1 and 2 GHG emissions associated with UK use? c) an intensity metric?
Please explain your answer.
Do you agree that only electricity, gas and transport energy should be in scope for unquoted companies? [Yes or No]. Please explain your answer, and if no, please set out what you think the scope should be.
For consistency, the reporting requirements should be kept the same. This would help to prevent ambiguity across different organisations.
Q12. Should the government a) mandate the use of specific intensity metrics by sector; b) propose best practice in any guidance; or c) leave the matter to sectors, and to existing best practice and guidance?
Mandating the use of specific intensity metrics could present issues. As an example, an organisation could change its buildings and number of people, and type of business over the course of time. This could mean that using standardised metrics could be difficult. It is recommended that this is considered in more detail using experience from scheme providers. Stroma are able to provide advice.
Q13. A) Do you think it should be mandatory for UK quoted and unquoted companies in scope to include information from the most recent audit (including energy management systems such as ISO50001 on i) any identified energy savings opportunities [Yes or No] and ii) any energy efficiency action taken? [Yes or No]
Yes, reports should include evidence of energy saving opportunities. This could further help to drive change throughout organisations. Also, it might help to provide more meaningful year on year assessments. Actions taken should be reported too.
Reports need to be verified by competent personnel. It should be noted there is variation in the competence required for the different activities. Thus, there needs to be upskilling in the industry or there needs to be a new level of competent persons defined (SECR Assessor?). An ESOS Lead Assessor may not be suitably qualified, this needs consideration.
B) Building on the energy and carbon disclosures proposed here, please provide views on whether in the long-term any of the TCFD recommended voluntary disclosures should become mandatory disclosures within companies’ annual reports.
The TCFD recommendations should become mandatory as this will help to maintain momentum with the assessments taking place. It may help to maintain a more stable workstream for the industry as at the moment it is cycling between peaks and troughs. It may also help to result in improved continuous improvement for organisations in terms of energy and carbon.
C) Please specify what support government could provide to support uptake of TCFD disclosures by companies from all sectors.
Lead by example by including public sector bodies in the qualifying population.
Consider a ratings scenario as with the EPC A to G rating.
D) Reporting of what other complementary information would add most value for businesses, the market and other stakeholders?
Q14. Please explain what guidance, tools and data companies might need: i) for financial and risk managers to understand climate risks and their implications for their business and ii) for companies to implement the TCFD recommendations in financial disclosures.
There may be some benefit in the production of standard tools for assessment. Also, qualifying companies will benefit from improved reporting guidance, covering different organisational structures. There should be learning from the existing schemes, Stroma can provide advice.
Q15. What other policy approaches can work with reporting to drive energy efficiency, reduce bills, reduce emissions, and improve transparency for investors so they are more able to hold companies to account? We are in particularly interested to hear about any implications of potential complementary policy approaches for the design of an energy and carbon reporting scheme.
There could be the introduction of financial incentives for the smaller companies that may find these exercises a burden. There are a lot of organisations which do not realise the value of such activity taking place due to a lack of awareness or knowledge of financial savings that’s can be achieved from energy and carbon reduction. More policy approaches should help to promote the value of such activity being carried out.
Q16. Please provide views and any information you may have on the relative costs and benefits of:
A) (1) Central digital reporting and publication of energy and carbon data, including specifically how these costs and benefits compare to reporting through the Companies Act regime on paper that is scanned to images by Companies House to make it available.
(2) Please outline the different costs and benefits of:
(i) mandating electronic energy and carbon reporting via Companies House, with complementary activity by government to collate public data and make a single central data set available
(ii) replacing reporting to Companies House with a new dedicated central IT portal, the data from which could be published
(iii) placing such a dedicated central IT portal alongside the current proposals
B) (1) Dedicated administrator(s) and regulator(s), including specifically how these costs and benefits compare to administration and regulation of energy and carbon reporting as described within the Companies Act regime.
(2) Please outline the different costs and benefits of administration and regulation in relation to both replacing the current proposed scheme and placing such a scheme alongside the current proposals.
Q17. If replacing the proposed regime in future, please set out how a dedicated central energy and carbon reporting regime could continue to meet the needs of investors and others in relation to GHG reporting by UK quoted companies, currently required to be alongside financial information in annual reports.
Q18. Do you have any other comments on the description of how potential future enhancements to energy and carbon reporting might function under any of the possible approaches, have other suggestions for future enhancements, or consider that any aspects of energy and carbon reporting proposed for 2019 might be better deferred?
Please explain your answer.
Further guidance should be provided on reporting formats or there should be the introduction of a standardised way of reporting. This would however be limited given the variation of different organisations and the energy use from their assets, along with their emissions.