Our guide to SECR for SMEs in the UK

June 2023

What do the experts think...

The Streamlined Energy and Carbon Reporting (SECR) legislation was introduced in the United Kingdom to incentivise businesses to reduce their carbon emissions and improve their energy efficiency. While initially targeting larger organisations, SECR is a crucial legislative instrument for small businesses to understand. From the role of small business as a supplier (and therefore contributor) to big business emissions, through to their own compliance with the legal regime. We’ve synthesised SECR so that small businesses feel equipped to comply and leverage this regulatory pillar.

What is the legislative objective of SECR?

Carbon reporting legislation is accelerating in markets around the world. SECR legislation, which came into effect in April 2019, is a reporting framework that requires certain companies to disclose their energy consumption, greenhouse gas emissions, and energy efficiency measures in their annual reports. The objective of SECR is to enhance transparency, encourage energy efficiency improvements, and enable investors, stakeholders, and the public to assess an organisation's environmental performance.

Building a SECR-compliant annual report also requires some explaining. It is recommended that companies use a widely recognized independent standard, such as: GHG Reporting Protocol (Corporate Standard), International Organisation for Standardization, ISO (ISO 14064-1:2018), Climate Disclosure Standards Board (CDSB) or the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines. Here at Trace, we follow the GHG Reporting Protocol in building our emissions reporting software. It’s important that all of our customers have access to credible carbon accounting tools that drive compliant annual reports.

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How does SECR apply to SMEs?

While SECR initially targeted large companies, it has gradually extended its scope. For SMEs, the legislation applies if they meet two or more of the following criteria: 

  1. turnover of £36 million or more, 
  2. balance sheet total of £18 million or more; 
  3. or 250 employees or more. 

Consequently, a significant number of SMEs fall within the scope of SECR. That’s why we’ve put together five main reasons why SECR is important for SMEs to include in their regulatory and reporting processes - even if only from afar! 

1. Environmental Responsibility

SECR legislation emphasises environmental responsibility and provides an opportunity for SMEs to align themselves with sustainable practices. By understanding and complying with SECR, SMEs can demonstrate their commitment to reducing carbon emissions and mitigating climate change, enhancing their reputation and attracting environmentally conscious customers, partners, and investors.

2. Cost Savings

Improved energy efficiency, which is one of the key goals of SECR, can lead to substantial cost savings for SMEs. By monitoring and reporting energy consumption, SMEs can identify areas where they can reduce wastage, optimise processes, and cut energy bills. Energy-efficient practices not only contribute to a greener future but also improve the bottom line for SMEs.

3. Competitive Advantage

SMEs that embrace SECR gain a competitive edge in the market. Many larger organisations are already prioritising sustainability in their supply chains and partnering with environmentally responsible businesses. By understanding SECR and implementing energy-efficient measures, SMEs position themselves as reliable and eco-friendly partners, attracting more business opportunities and securing long-term success.

4. Access to Funding

Understanding SECR can also facilitate SMEs' access to funding and financial support. Many financial institutions, investors, and grants favour businesses that prioritise sustainability. By complying with SECR and showcasing their commitment to reducing carbon emissions, SMEs can enhance their eligibility for green financing options, grants, and other incentives aimed at supporting sustainable initiatives.

5. Regulatory Compliance

Non-compliance with SECR can have legal implications and damage a company's reputation. Understanding the legislation helps SMEs avoid penalties and potential legal consequences, ensuring compliance with regulatory requirements. Furthermore, early adoption and proactive engagement with SECR can prepare SMEs for future sustainability-related legislation, keeping them ahead of the curve.

What to do now that you’re a SECR expert?

The SECR legislation in the UK presents a valuable opportunity for SMEs to demonstrate their environmental responsibility and realise cost savings. By understanding SECR and actively participating in energy efficiency initiatives, SMEs can contribute to a greener future while reaping numerous benefits for their businesses. It is imperative for SMEs to familiarise themselves with SECR, seek professional guidance if needed, and capitalise on the advantages it offers to enhance their sustainability, reputation, and long-term success.

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