Against a backdrop of Net Zero and increasing climate activism, reducing carbon emissions and energy efficiency should now firmly be on the boardroom agenda. SECR, which is designed to replace the reporting elements of the Carbon Reduction Commitment Scheme (CRC) and make energy reporting a simpler process, also allows shareholders and investors to hold companies to account if they are not doing enough to reduce emissions.
However, although mandatory, we are hearing from some of our clients – many of which are manufacturers - that they are struggling to get buy-in from the top when it comes to SECR compliance.
What we have seen with previous schemes is that they can be often seen as an additional administrative burden when time and cost pressures on manufacturers are already high.And, while the SECR box will be ticked, there isn’t much appetite – or available resource – to do much more than that.
Firstly, it may be worth recapping who qualifies for SECR. It requires quoted companies, large unquoted companies and large limited liability partnerships (LLPs) to disclose carbon emissions and energy use from electricity, gas and transport as a minimum as part of their annual filing obligations. This currently accounts for around 11,900 businesses – many of which will be energy intensive manufacturers.
Now, for a significant proportion of qualifying manufacturers, managing energy consumption is not a new phenomenon.However, there are a considerable number that will be new to environmental reporting, and those responsible internally for managing the SECR reporting process will be facing pressures to ensure the right time and resource is dedicated to compliance.
So, what is the business case for going beyond ‘just’ complying? The manufacturers that are set to benefit most are those that seeing SECR as an opportunity to take control of their energy consumption and promote their sustainability credentials.
For example, although businesses are required to include any energy efficiency projects that they have carried out within the reporting year, they aren’t actually required to implement any energy efficiency measures at all.However, if an organisation doesn’t implement any efficiency projects, this will need to be stated in the report.
At a time when customers are increasingly expecting manufacturers to be demonstrating a serious commitment to sustainability, what would be best - publishing a report that is full of proactive efficiency projects, or one that shows no real action to improve sustainability at all?
As the SECR report is in the public domain, failing to implement any energy efficiency measures could result in both financial and reputational damage.
However, reputational impact isn’t the only benefit of adopting efficiency projects – improving energy efficiency is the only guaranteed way to ensure that a manufacturer isn’t paying more than they should for their energy. In fact, increasing energy efficiency through implementing physical and behavioural projects can result in an organisation ultimately making savings on its energy spend. In today’s volatile energy market, many manufacturers are seeing significant increases in their energy bills, so it’s financially prudent to ensure energy isn’t being wasted.
We are now on countdown to the first round of SECR reporting.It will be interesting to see which manufacturers will have seen SECR as an opportunity to affect real change in how they approach the management of their energy consumption.What is clear is that, as we transition into a low-carbon world, manufacturers will play a crucial role in the UK’s net zero future – and schemes like SECR should be seen as a means to achieve this, rather than another box to tick.
