The Regulatory Framework

SECR was introduced through The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (SI 2018/1155), which amended the Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. The regulations took effect for financial years starting on or after 1 April 2019.

SECR consolidates and extends two pre-existing UK reporting requirements. First, the mandatory GHG reporting obligation for quoted companies introduced in 2013 under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. Second, the information previously collected under the CRC Energy Efficiency Scheme, which was abolished in 2019. SECR brought large unquoted companies and LLPs into mandatory carbon reporting for the first time — a significant expansion of scope.

The UK Government’s Environmental Reporting Guidelines provide the detailed methodology and are the primary reference document for SECR compliance. The guidelines are not legally binding in themselves but represent the Government’s interpretation of how companies should discharge their statutory obligations.

Who Must Report Under SECR

SECR applies to three categories of entity, with different disclosure requirements for each:

• Quoted companies (as defined in section 385 of the Companies Act 2006 — including companies listed on the Main Market of the London Stock Exchange, an EEA-regulated market, or NYSE/NASDAQ): Must report global Scope 1 and 2 GHG emissions, global energy consumption, at least one intensity metric, and a description of the methodology used. Must also report on previous year’s figures for comparison.
• Large unquoted companies and LLPs: Must report UK-only energy consumption and GHG emissions, at least one intensity metric, information about energy efficiency measures taken during the year, and methodology used. A company qualifies as “large” if it meets two of three criteria in the relevant financial year: (a) turnover above £36 million, (b) balance sheet total above £18 million, (c) more than 250 employees.
• Low energy users: Companies that consume 40,000 kWh or less of energy in the UK in the reporting year are exempt from the detailed disclosure requirements but must state in their directors’ report that the exemption applies.

The distinction between quoted and unquoted companies is important. Quoted companies must report global emissions across all operations worldwide. Large unquoted companies report UK energy and emissions only. This creates a practical anomaly: a large unquoted UK company with significant overseas manufacturing operations may report only a fraction of its total footprint under SECR, while its quoted competitor must disclose globally. As ISSB-based reporting comes into force, this asymmetry will narrow.

What Must Be Reported: The Disclosure Requirements

SECR disclosures are included in the directors’ report (for companies) or the energy and carbon report (for LLPs). The required content is specific:

• Energy consumption: Total energy consumed in kWh, broken down by (at minimum) electricity, gas, and transport fuel. Quoted companies report globally; large unquoted companies report UK only.
• Greenhouse gas emissions: Scope 1 (direct) and Scope 2 (electricity indirect) emissions in tonnes of CO2 equivalent (tCO2e). The UK Government’s GHG Conversion Factors (published annually by DEFRA/BEIS) are the expected source for emission factors, though use of other recognised methodologies (e.g., the GHG Protocol) is acceptable.
• Intensity metric: At least one intensity ratio that expresses emissions relative to a measure of business activity — for example, tCO2e per £ million revenue, tCO2e per employee, or tCO2e per unit of production. The choice of metric must be appropriate to the business and disclosed consistently year on year.
• Energy efficiency narrative: A description of energy efficiency measures taken during the financial year. This is mandatory for large unquoted companies and optional (but expected) for quoted companies. The narrative should describe specific actions, not generic statements of intent.
• Methodology: A description of the methodology used, including organisational boundary approach (operational control vs financial control), emission factors used, and any exclusions with justification.
• Comparatives: Prior-year figures must be presented for comparison, unless this is the first year of reporting.

Scope 3 emissions are not required under SECR, though quoted companies are encouraged to include them voluntarily. In practice, leading companies increasingly disclose material Scope 3 categories alongside SECR data, anticipating future ISSB requirements.

Common Mistakes and Audit Considerations

SECR has been in force since 2019, yet compliance quality remains uneven. The most frequent errors observed by auditors and regulators include:

Incomplete energy data capture. Companies frequently undercount energy consumption by excluding certain sources — refrigerant gas, company car fuel, or energy consumed by leased assets. The SECR boundary includes all energy consumed within the chosen organisational boundary (operational or financial control), and companies must ensure their data collection processes capture all sources. A particular gap is company car fleets, where fuel consumption data may sit in expense management systems rather than energy databases.

Incorrect emission factors. The UK Government publishes updated conversion factors annually (typically in June). Companies must use the factors applicable to the reporting year, not the previous year’s factors. This is a mechanical error that auditors routinely identify. Additionally, companies operating globally (quoted companies with global reporting) must use location-based Scope 2 factors for the relevant country, not UK factors applied to overseas electricity.

Inadequate intensity metrics. Some companies select intensity metrics that are not meaningful for their business, or change metrics year on year, undermining comparability. The intensity metric should relate to the primary driver of emissions: revenue is common but can be misleading if revenue fluctuates significantly without corresponding changes in physical activity. Physical metrics (per tonne of product, per square metre of floor space) are more robust where applicable.

Treating SECR as a standalone exercise. Companies that prepare SECR data in isolation from other sustainability reporting create inconsistencies. The energy and emissions data reported under SECR should be derived from the same source data used for ESOS compliance, TCFD reporting, CDP questionnaires, and — increasingly — CSRD and ISSB disclosures. A single data management system serving multiple reporting requirements is the most efficient and reliable approach.

Missing the low-energy-use exemption statement. Companies that qualify for the 40,000 kWh exemption must still include a statement in their directors’ report confirming the exemption applies. Omitting this statement entirely — rather than including it — is a technical non-compliance, even though no detailed data is required.

Enforcement and Penalties

SECR is enforced through existing Companies Act 2006 mechanisms. The directors’ report is filed with Companies House, which has the power to reject reports that are materially non-compliant. More significantly, section 414A of the Companies Act requires that the directors’ report contains the information required by law. Directors who knowingly or recklessly approve a directors’ report that omits required SECR information commit a criminal offence, punishable by a fine (and, in the case of knowing or reckless omission, potentially imprisonment).

In practice, enforcement to date has been primarily through auditor review and Companies House filing requirements rather than direct prosecution. However, the regulatory environment is tightening. The Financial Reporting Council (FRC) has included SECR compliance in its thematic reviews of annual reports, and its findings have been publicly critical of companies that provide boilerplate or incomplete disclosures. As sustainability reporting attracts greater regulatory attention — driven by CSRD, SDR, and investor pressure — the intensity of SECR enforcement is likely to increase.

SECR in the Broader UK Reporting Landscape

SECR does not exist in isolation. It sits within a broader UK reporting architecture that includes ESOS (the Energy Savings Opportunity Scheme), mandatory TCFD reporting for premium-listed companies, and the forthcoming ISSB-based SDR corporate reporting requirements. Understanding how these frameworks interact is essential for efficient compliance.

SECR and ESOS share significant data overlap. ESOS requires large undertakings to measure total energy consumption across buildings, industrial processes, and transport, and to conduct energy audits identifying efficiency opportunities. The energy consumption data collected for ESOS can — and should — serve as the basis for SECR reporting. Companies that maintain a single energy data management system for both purposes reduce duplication, improve accuracy, and strengthen audit readiness.

Looking ahead, SECR data will also feed into ISSB-based disclosures when UK corporate reporting requirements are mandated. Companies that invest in robust SECR data processes now are building the foundation for future IFRS S2 compliance. Conversely, companies that treat SECR as a minimal compliance exercise will face a steeper transition when ISSB obligations arrive.