The Green Finance Strategy and why energy reporting makes financial (and reputational) sense

Since the Committee on Climate Change launched its wide-ranging report in May this year – which resulted in the UK Government legislating for net zero carbon emissions by 2050 – barely a day has gone by without further news and initiatives being announced about how we can meet this ambitious target.

Few can doubt the important role that business will play in this, and the launch of the Government’s Green Finance Strategy puts business – particularly the financial services sector – right ‘at the heart of efforts to tackle climate change and reduce emissions to net zero by 2050’. In addition to greater investment in sustainable projects and infrastructure, including a commitment to look at how landlords and businesses can better understand and disclose their operational energy use (for example, through a commercial Display Energy Certificate), the strategy also includes plans to boost Climate-related Financial Disclosures. This means that by 2022, publicly listed companies and large asset owners will be expected to publicly disclose how climate change risks impact their activities.

As a result, there is a growing scrutiny from investors and shareholders on how businesses are reducing their environmental impact.  Further Government initiatives are on the way too – a consultation on minimum energy efficiency standards in the non-domestic sector is set to be released later this summer.

All of this is against a backdrop of rising energy costs. The latest statistical release shows that in 2018, UK industrial electricity prices rose by 12% – so if energy saving wasn’t a board-level concern before, it certainly is – or at least should be – now. 

In light of this, what can businesses be doing now to realise the opportunities that energy saving presents whilst also proving they are taking climate change seriously?

We’ve written before about the opportunities presented by energy compliance. The new mandatory reporting obligation launched on 1 April 2019 – Streamlined Energy and Carbon Reporting (SECR) – replaces the Carbon Reduction Commitment (CRC) and will see for the first time around 11,900 companies required to report publicly on their emissions at the end of their first full financial year following 1 April 2019. 

SECR is not only designed to raise awareness of energy efficiency at board-level, but also to provide public awareness of their efforts to reduce their carbon emissions as well as demonstrating their commitment to a sustainable future. This increased transparency will also allow investors to hold companies to account if they’re not doing enough.

Preparing for SECR

For those businesses that qualified for CRC, energy reporting will be a familiar exercise. However, while the reporting element of the CRC scheme was replaced by SECR, the qualifying criteria have changed. SECR is being promoted as a less complex framework based on existing requirements for reporting on Mandatory Greenhouse Gas (MGHG) emissions. Large, unquoted companies and LLPs are the target of the Government’s proposals, meaning the changes will see over 7,900 companies being required to report on their carbon emissions for the first time over the next 18 months.

The main requirements for businesses are to:

1. Report all UK energy use and associated carbon emissions including total underlying energy use such as transport.
2. Report on energy efficiency actions taken in the last 12 months. If you don’t have these in place you will need to implement new structures and systems to do this.
3. Include this data and information within your Directors’ report.

We anticipate a transitional period which will require organisations who qualify to review and make changes to how they collect data, report and demonstrate energy efficiency changes. In our experience, even companies large enough to have their own energy teams are seeking our support as there is a lot of ground to cover if you are starting from scratch.

Time is now ticking to gather data ahead of the first SECR deadline. Inspired Energy has extensive experience in helping businesses to comply with government schemes such as SECR, with a proven track record in delivering for our clients.   

In short, in a world where all energy reporting roads will increasingly lead to net zero, SECR not only makes financial sense, it makes reputational sense too.

To find out more about how we can help you to make the most of your compliance obligations, call us today on 01772 689 250 or visit www.inspired-secr.co.uk