As reported in our earlier post on changes to the environmental reporting regimes in the UK (here), certain companies are now required to participate in Streamlined Energy and Carbon Reporting (SECR), under The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (the Regulations), which come into force today, 1 April 2019. The reporting changes apply, for companies within scope, to all financial years which begin on or after 1 April 2019. Accordingly, reporting is not required until 1 April 2020 at the earliest. If the annual period used for SECR reporting is not the same as the financial year covered by the relevant report, this must be made clear in the report.
The Government recently published its long-awaited guidance on SECR, a copy of which is available here. Whilst the guidance provides some helpful background and a narrative explanation of the requirements for entities unfamiliar with the Regulations, many grey areas still remain. In particular, it was hoped that the guidance would make the application of the grouping tests to funds and portfolios clearer. However, the guidance provided is unlikely to provide much clarity for businesses within scope of SECR, especially as the grouping tests differ in a number of ways from existing reporting regimes.
The SECR regime expands the number of companies within scope of mandatory “green” reporting. The Government’s guidance emphasises the utility of environmental KPIs in reporting, and notes that entities may choose to “go beyond what is legally required”, thereby aligning SECR with a broader global move towards driving transparency for a range of stakeholders. Environmental reporting of this type is an area of particular interest for a wide range of companies, not just from a regulatory compliance perspective but also as an important tool with which to strengthen green credentials in the marketplace, reduce operational costs and environmental risks, and improve investor engagement.
A fuller update summarising the new requirements will be published on our Knowledge Hub shortly.