Guide to SECR Compliance: Key Insights and Best Practices

The UK’s Streamlined Energy and Compliance Reporting (SECR) policy was put forward on April 1st, 2019. The primary goal was to enhance the overall accountability of energy consumption and carbon emissions for corporate sectors. SERC now requires 11,900 UK-based organizations to disclose their annual energy consumption, in addition to 8,000 ESOS obligated companies, under the new SECR legislation. 

According to the UK Government’s Net Zero Strategy, reducing energy usage can result in a 40% decrease in carbon emissions by 2030. Despite the positive implications for SECR compliance and supporting the UK’s net-zero ambitions, several organizations struggle with data collection and reporting. 

In this blog, we will explore the primary requirements for SECR compliance, including some common challenges in reporting and best practices to avoid such issues. 

Importance of SECR Compliance

SECR compliance not only promotes environmental responsibility but also strengthens fiscal performance. Without these measures, reports suggest that the global GDP could fall by nearly 18% by 2025.

• Legal Obligation for Eligible Companies: Under the SECR compliance framework, companies, whether quoted, large unquoted, or limited liability partnerships (LLPs), must disclose their energy consumption in their annual reports. Failure to comply can result in penalties from the Financial Reporting Council (FRC). 
• Transparency and Accountability: SECR mandates the disclosure of energy usage, greenhouse gas emissions, and energy efficiency actions, providing stakeholders with the necessary insights into a company’s environmental impact. 
• Risk Mitigation: Proper SECR reporting enables organizations to avoid penalties and plan effective risk mitigation strategies, promoting transparency and accountability in their environmental impact. 
• Global alignment: SECR aligns with international climate action frameworks such as the UN Sustainability Development Goals and the Paris Agreement. Such standardized disclosures enable investors to incorporate environmental considerations into their decision-making and capital allocation for sustainable businesses and projects.  

Let’s now understand the importance of SECR compliance in US-based organizations. 

Relevance of SECR Compliance for US Companies

Despite SECR’s strong inclination towards UK organizations, it applies to US-based companies. 

Here are some considerations for US companies for SECR compliance: 

• US companies should assess their developments to align their emission standards with the new SEC proposals and state-level regulations. 
• US businesses with UK operations need to understand SECR compliance to maintain transparency. 
• Global investors are prioritizing environmental, social, and governance (ESG) compliance, and US companies with SECR demonstrate their commitment to sustainability. 

Before moving on with the requirements for SECR compliance, let’s understand which organizations are obligated to report to SECR. 

Who Should Report on SECR?

Under the SECR framework, more than 11,000 companies are required to report to it, as mentioned in the earlier sections. An organization that is public or non-profit may also fall into this category. 

• Quoted Companies: These organizations include those listed on the New York Stock Exchange, the LSE, or the NASDAQ, regardless of their size.
• Large Limited Liability Partnerships (LLPs): LLPs are considered to be large companies when they fulfil the criteria of the Companies Act 2006. However, US parent companies with UK subsidiaries must comply with SECR regardless of the location of the parent company. 
• Large Unquoted Companies: Unquoted companies in the UK must comply with SECR if they meet at least two of the following requirements in a reporting year:
  • Annual turnover of £36 million or more
  • Balance sheet total of £18 million or more
  • Employee strength of 250 or more

For accurate guidance, it is essential to consult the UK Government’s publication for a better understanding of the overall reporting framework. 

Exemptions From SECR Compliance

The SECR compliance framework provides exemptions to organizations that do not meet specific criteria, reducing unnecessary regulatory burdens. 

• Group-Level Exemptions: An organization reporting to a particular group is exempt from complying with SECR. Additionally, they can exclude the energy consumption and carbon data readings from their annual report. 
• Low-Energy Users: A company using 40 MWh or less of energy per year is considered a low-energy user. Organizations with such exemptions can omit the data for gas, electricity, and transport fuels in their SECR disclosure; however, it is essential to calculate the total energy usage. 
• Commercially Sensitive Data Exemption: In certain instances, if a company encounters difficulties in obtaining energy-related information, it may apply for an exemption. However, a report explaining the exemption is necessary for both compliance and transparency. 

Now, let’s explore what the core requirements for SECR compliance and reporting are that organizations must know to meet sustainability. 

Key Requirements for SECR Compliance

Requirements for SECR compliance vary depending on whether a company is quoted or unquoted, with quoted companies having more extensive reporting requirements than non-quoted ones.

The following requirements are mandatory for SECR reporting:

1. Energy Consumption Reporting

Organizations must report their total energy consumption from all sources, including electricity, gas, and transport fuels. The data must be presented in kilowatt-hours (kWh) for the entire reporting period, typically aligned with an organization’s financial year. It aligns with ESG reporting requirements for accountability and transparency in assessing how energy use contributes to an organization’s overall environmental impact.

2. Greenhouse Gas (GHG) Emissions Disclosure

Companies must disclose their GHG emissions, which are categorized by the following scopes:

• Scope 1: Direct emissions from owned or controlled sources, such as emissions from fuel combustion on company premises. 
• Scope 2: Indirect emissions from the consumption of purchased electricity, steam, heating, and cooling. 
• Scope 3: Other indirect emissions that occur in the value chain, including business travel, waste disposal, and supply chain operations. 

3. Energy Efficiency Actions

SECR requires companies to report on the energy efficiency measures they have taken to reduce energy consumption. This could include investments in energy-efficient technologies, process improvements, or energy management systems. These actions must also be documented in the Director’s Report to provide an understanding of the environmental impact. 

4. Intensity Ratios:

Companies must calculate and report energy intensity ratios, which express the company’s energy consumption to business metrics such as turnover, production output, or floor area.  These ratios help stakeholders understand energy performance relative to its size and operations. 

5. Reporting Period

The SECR reporting period typically aligns with the company’s financial year. The reporting period must remain consistent from year to year, allowing for accurate comparisons and trend analysis. 

Qualifying organizations must report the scope of emissions, and SECR helps companies identify energy-saving opportunities to comply with regulatory standards. 

Common Challenges for SECR Reporting

While SECR simplifies environmental reporting, several organizations of varying sizes in the US and other regions may encounter challenges that impact data accuracy and compliance. 

Here are some of the common challenges businesses face during SECR reporting:

• Accuracy of data: Most companies struggle to report accurate energy consumption when they are present across numerous locations and rely on third-party suppliers. 
• Complexities in Scope 3 emissions: Scope 3 emission reporting is not a mandatory requirement for most companies. However, companies that are obligated to disclose such data struggle with tracking indirect emissions, such as those associated with supply chains, business travel, and other activities. 
• Managing Variable Energy Sources: Energy used by organizations varies and is acquired through various providers with different formats and measurement units. Moreover, such complexity increases when factors like transport emissions are included; therefore, such calculations require appropriate data tracking and understanding conversion factors. 
• Lack of Resources and Internal Expertise: Several US businesses lack in-house sustainability experts, which complicates SECR compliance processes. Additionally, smaller companies often lack effective data assimilation and compliance risk management strategies, resulting in manual errors. 
• Data Verification: It is important to have verifiable data that helps SECR compliance and review processes for investors and other regulators. Greenwashing is a common accusation that firms face, often lacking strong data governance frameworks.

Also read: Top 5 Compliance Challenges for Teams in 2025

SECR mandates companies to disclose their energy efficiency, and accounting may take substantial actions; the following practices can help streamline this task and reduce errors. 

Best Practices for Accurate SECR Compliance

Appropriate data collection and maintaining consistency help in energy reporting and improve transparency, enabling businesses to identify energy-saving strategies. 

Here are some of the best practices for businesses complying with SECR regulations:

• Standardized Data Collection Processes: Maintaining data accuracy and consistency requires clearly defining the SECR compliance within sustainability, operations, and finance. Standardized data formats, reporting procedures, and metrics for measurements ensure SECR alignment across multiple departments. 
• Automated Energy Tracking System: Using automated energy management software for tracking real-time energy consumption helps with appropriate measurement. Smart meters and IoT sensors enable the measurement of consumption data from industrial processes through cloud-based platforms for data integration. 
• Cross-Integration with Other Sustainability Reporting: Regulatory frameworks such as ECOS, TCFD, and CSRD can streamline sustainability disclosures. Moreover, automated data transfers between SECR and ESG compliance improve overall reporting standards. 
• Avoiding Gaps While Reporting: Collecting data from various sites, facilities, and transportation operations is crucial for accurate reporting. Businesses under the SECR framework must account for their fuel types, transport emissions, and energy consumption, and maintain historical data to identify energy efficiency trends.  

Also read: ESG Disclosure Requirements in Canada: CSA and OSFI Compliance Explained.

To simplify the complexities of SECR reporting, VComply’s automated GRC solution provides the tools needed for accurate and efficient compliance for companies.

Simplify SECR Reporting with VComply’s Automated GRC Solutions

VComply’s governance, risk, and compliance (GRC) platform streamlines reporting processes, including SECR compliance. With automation, real-time monitoring, and centralized data management, VComply allows organizations to track their data and mitigate non-compliance risks.

Here’s how VComply’s GRC platform helps with compliance:

• Automated Data Collection: VComply automates data collection, thereby reducing manual entry errors and ensuring accurate reporting to maintain SECR and ESG policies. 
• Centralized Data Management: VComply centralizes compliance-related data, allowing easy access and management of data. VComply’s dashboard enhances visibility and centralizes compliance policies using automated workflows. 
• Audit Trail and Documentation: VComply maintains an audit trail, ensuring that all data remains documented, which is fundamental for transparency and accountability in SECR reporting. 

Take charge of your SECR compliance today. Book a demo with VComply to understand how automated solutions can streamline your reporting and keep your business aligned with the latest UK regulations. 

Final Thoughts

Achieving SECR compliance requires careful attention to energy consumption data, accurate GHG emissions reporting, and a strategy for energy efficiency measures. A well-structured compliance process not only helps businesses meet regulatory requirements, but it should also support their sustainability and carbon reduction initiatives. 

With VComply’s automated solutions, organizations can streamline their complex reporting operations, with accurate data management, real-time monitoring, and compliance with different regulations. 

Ensure your business stays compliant while minimizing reporting and compliance risks with a 21-day free trial of VComply today and simplify your SECR compliance process. 

FAQs

1. What is the role of Scope 3 emissions in SECR reporting?

Scope 3 emissions, while not mandatory under SECR, offer better insights into indirect emissions. Reporting these emissions supports more accurate sustainability assessments and aligns with broader ESG goals.

2. How can businesses ensure data accuracy in energy consumption reports?

Automated data collection systems reduce manual errors and ensure accurate reporting. Additionally, centralized data management platforms help maintain consistency across all energy usage records.

3. What are the key challenges in managing multiple energy sources for SECR compliance?

Managing diverse energy sources requires careful tracking of consumption from electricity, gas, and fuel. Accurate carbon conversion factors must be applied to each energy type for correct emissions reporting.

4. How can energy efficiency measures be effectively tracked for SECR reporting?

Energy efficiency initiatives should be documented with clear metrics to measure reductions in consumption. Tracking the impact of these measures ensures accurate reporting for SECR compliance.

5. Why is an intensity ratio necessary for SECR compliance?

The intensity ratio allows businesses to benchmark energy usage or emissions relative to their size. This metric provides context and helps monitor improvements over time.