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Guide to energy and carbon compliance

There is a growing range of energy and carbon compliance obligations for businesses when it comes to their energy use and sustainability performance.

6 April 2022

As the UK gears up to further incentivise businesses to play their part in achieving net-zero, energy and carbon compliance requirements are becoming more extensive and applying to larger numbers of individual businesses.

Here we lay out what energy and carbon compliance requirements exist, and which businesses they apply to.

Streamlined Energy and Carbon Reporting

Typically referred to as SECR, the Streamlined Energy and Carbon Reporting scheme requires qualifying companies to report on their energy consumption and resultant carbon emissions as part of their financial reporting.

SECR applies to UK companies and limited liability partnerships that are considered large, meaning that they meet two or more of the following criteria:

  • 250 or more employees
  • Turnover in excess of £36 million
  • Balance sheet in excess of £18 million

Even if your organisation meets these requirements, but your annual consumption is less than 40,000 kWh, you are not required to report.

To meet SECR regulations, you must disclose total energy use for your UK operations, including as a minimum, electricity, gas and transport.

It also requires associated GHG emissions to be reported using at least one metric of emissions intensity. These metrics vary from business to business but should be something that is relevant to your sector and operations, such as CO2e per m2 of shop floor space for retail or tonnes of CO2e emissions compared with sales revenue.

It should also include information on how your organisation is working to reduce emissions.

While the current minimum requirement is only reporting, rather than a demonstrable improvement, the public nature of SECR is intended as a motivator to increase the efforts of larger businesses to reduce their emissions.


The Energy Savings Opportunity Scheme (ESOS) is a mandatory reporting requirement for large businesses that qualify for it.

Originally an EU mandate, it is now operated by the Environment Agency in England, Natural Resources Wales, Northern Ireland Environment Agency and the Scottish Environment Protection Agency.

While it also applies to larger businesses, the criteria are slightly different from those laid out for SECR:

  • 250 or more employees
  • Annual turnover in excess of €50 million (£44,845,000)
  • An annual balance sheet in excess of €43 million (£38,566,700)

Qualifying businesses must carry out an ESOS energy audit by a registered ESOS provider once over a four-yearly compliance phase. The latest submission date for the current Phase is 5th December 2023. You may be fined if you do not meet this date.

An ESOS energy audit will require a minimum of one year of energy consumption data and the finished report will include energy efficiency improvements that have been identified by your auditor. You are not currently obliged to carry out these improvements, but with energy costs continuing to increase, you risk missing out on substantial savings by failing to do so, as well as the significant risk of these becoming mandatory.

Climate Change Agreement (CCAs)

For businesses operating in sectors where their trade body holds a Climate Change Agreement, this is a useful tool to reduce energy costs.

CCAs are voluntary arrangements between energy or emission-intensive industries and the Environment Agency. They are held by the relevant sector association. Currently, 53 sectors across manufacturing, agriculture and heavy industry hold CCAs in the UK.

Businesses within a sector that agree to be bound by a CCA are eligible for a 92% discount on their Climate Change Levy, an environmental tax applied to all of the electricity and gas a company consumes. In return, businesses must adhere to the carbon reduction targets laid out by their sector organisation, submitting emissions data to their association quarterly and demonstrating ongoing improvement in reducing emissions to secure their discount.

Taskforce for Climate-related Financial Disclosures (TCFD)

Large organisations in the UK are also required to make a submission based on their disclosures as developed by the Taskforce for Climate-related Financial Disclosures (TCFD).

Companies with over 500 employees that are traded on a UK regulated market, such as the London Stock Exchange or the AIM, are required to disclose TCFD data. Disclosure recommendations cover the following areas:

  • Governance, including the board’s oversight of climate-related risks and opportunities
  • Strategy, including the climate-related risks and opportunities identified over the short, medium and long-term, and the company’s planned response to climate-related scenarios
  • Risk management, including how a company will identify, assess and manage climate-related risks
  • Metrics and Targets for suitable carbon emissions reporting for the nature of the business

Energy Intensive Industries (EII) Exceptions

UK companies working in energy-intensive sectors are vulnerable to being out-competed by counterparts in countries with lower energy costs and less stringent carbon reduction requirements. Therefore, the Government exempts eligible Energy Intensive Industries (EII) from some non-commodity electricity costs.

If electrical costs make up more than 20% of the total production cost of a site, then an exemption of up to 85% on the Contracts for Difference and Renewable Obligations costs can be claimed. EII exemptions cannot be backdated, so it is crucial to understand if your sites are eligible and claim for them as soon as possible if you are not doing so already.

ISO Standards

Two primary ISO standards relate to a company’s management of energy use and sustainability.

ISO 50001 is the Energy Management System for organisations committed to monitoring and reducing the amount of resources they consume Sites that hold ISO 50001 accreditation are exempt from completing ESOS audits.

ISO 140001, Environmental Management, is designed to provide assurance to management, employees and various external stakeholders that a company’s environmental impact is being monitored and improved upon.

Both of these ISO standards are voluntary but participation shows that an organisation is taking its energy as sustainability responsibilities seriously.

CDP Reporting Framework

CDP is a voluntary reporting framework that companies may use to disclose environmental performance data to stakeholders. Reporting is conducted annually, with submissions beginning in April and being completed in July.

Three questionnaires are used, covering climate change, water security and forests. The responses a company gives, alongside general questions on their specific sector, are used by accredited scoring partners to provide environmental performance information, as well as to generate suggested measures to improve this performance.

Greenhouse Gas Reporting

Inenco’s Greenhouse Gas reporting solution is a simple one-stop process to gather and analyse your global carbon emissions. It translates these into the format required by the scheme and compiles the results into a report in the correct format, quickly and simply.

Since 2013 all UK listed companies have been legally required to report their global greenhouse gas (GHG) emissions as part of their annual report. This requirement applies to all incorporated companies listed on the main market of the London Stock Exchange, the official list of an EEA (European Economic Area) State, the New York Stock Exchange or NASDAQ.

The law requires organisations to report global emissions on all six main Greenhouse Gases (GHG), including CO2, Methane and Nitrous Oxide. Outsourcing your GHG compliance reporting to Inenco relieves your organisation of the significant burden of gathering, analysing and reporting your organisation’s global GHG emissions data.

Identification of the correct scope and data sources and then using the correct conversion factors is an onerous task that Inenco has intuitive processes to manage. Because the legislation is legally enforceable, it is critical that the report is timely, precise and backed up by auditable data to ensure compliance. It applies to all listed UK PLC organisations, which need a robust and auditable solution to ensure compliance.

For further information, or to find out how your organisation may be impacted by any compliance changes please contact us on 08451 46 36 26.