Thursday 11 November 2021
Your SECR checklist: Understanding the advantages of Scope 3 compliance
As net zero targets grow nearer, becoming compliant with government legislation is in the best interests of every business. Streamlined Energy and Carbon Reporting (SECR) for Scope 3 emissions remains voluntary, but it is strongly advised for businesses that want to have a fair and accurate reflection of their carbon footprint.
SECR was introduced in April 2019 as a framework for energy and carbon reporting. It applies to all listed companies and those defined as being ‘large’ under UK company legislation, meeting two out of three of the following conditions:
- A business with more than 250 employees
- An annual turnover of more than £36 million
- Or an annual balance sheet of more than £18 million
The regulation is intended to reduce the administrative burden of overlapping carbon schemes. As well as improving the transparency of energy and carbon emissions for large UK organisations. It can also help businesses on their way towards net zero targets.
While businesses may be familiar with the reporting regime for Scope 1 and 2, Scope 3 brings a broader set of indirect emissions within a business’s reporting remit. For those choosing to comply, following a checklist can make the process stress-free and simple.
We take a look at some of the steps that can help you better understand the impact of the SECR regime on businesses.
Do you fully understand your consumption?
The first step towards SECR compliance is to start recording your energy consumption. You should consider putting in place data collection processes to monitor when, where and how much energy you are using. Businesses that already have monitoring and metering systems and data collection services are ahead of the curve.
Once your consumption has been calculated, you may find ways to improve your energy efficiency. It is also important to make sure the information collected is as accurate as possible. The correct solutions will then become startingly clear.
Have you improved your efficiency?
A requirement of SECR is to publish a statement about your energy efficiency actions. This is a public disclosure and so each business must keep in mind their corporate social responsibility (CSR) credentials. Every business is unique, meaning that each one requires a specific set of energy management solutions.
When choosing energy saving solutions, businesses should keep in mind their broader business goals. Some solutions can be costly. And while the eventual benefits will be significant, it can be intimidating for businesses with smaller budgets. For these businesses, try to work with what you have and progress with smaller projects to start with.
Through complacency, businesses could risk abandoning their CSR and green credentials. In turn, risking potential clients as societal expectations around sustainability continue to grow.
How do you report your Scope 3 emissions?
Scope 3 covers indirect emissions that occur as a consequence of a business’s supply chain activities, in other words occurring from sources that are not directly owned or controlled by the company. A significant percentage of a company’s carbon footprint may fall within Scope 3, so it is worth considering reporting these emissions.
Businesses already need to understand how to report their emissions for Scope 1 and 2. They can extend their understanding by reporting for Scope 3.
Scope 3 enables businesses to go beyond minimum carbon compliance requirements. Businesses are encouraged to report a wider range of their emissions. This includes emissions that occur as a consequence of your business’s activities outside the direct control of the organisation.
Under the Greenhouse Gas Protocol there are 15 categories of Scope 3 emissions sources. These areas could include business travel, employee commuting, leased assets and waste disposal. You will need to establish which of these categories warrant detailed reporting, through an early scoping process. The areas that are relevant to your business will need to be measured by obtaining emissions data.
EIC’s Carbon Consultancy Manager Alastair Wood said:
“Scope 3 reporting can vary wildly based on business models and operational activities. For example, some companies may have to focus on their air travel, and others on the upstream and downstream emissions associated with their goods and services. Appropriately handling Scope 3 emissions reporting builds upon the mandatory requirements of SECR towards a fuller, more representative carbon footprint. As such, Scope 3 reporting serves as a bridge for companies towards fully managing their carbon emissions and/or achieving net zero.”
