Energy reporting ramps up for cost savings
10 March 2020: businesses are being asked to report on and reduce energy use in order to save billions as part of the government’s drive towards net zero. Rachel Underhill, ICAEW Business Strategy Manager, reports.
Measurement is crucial to supporting the transition to net zero carbon emissions, and the role of Chartered Accountants across the world has never been more important to this change. Under the Streamlined Energy & Carbon (SECR) requirements, which were introduced in April 2019, we will see the first annual reports incorporating new energy data from next month.
The 12,000 businesses to which this applies will also be required to explain measures they are taking to reduce their energy use in order to reduce carbon emissions from commercial buildings, along with confirming they have carried out a full energy audit. To be done at least every four years, this audit is known as the Energy Savings Opportunity Scheme (ESOS).
This is all part of a drive by Ministers to reduce business energy use by 20% by 2030 – the equivalent of taking 22 million tonnes of C02 out of the atmosphere, which compares to the yearly emissions of some 4.6 million cars. Government are keen to stress that along with combating climate change – which is integral to the long-term sustainability of business – these measures could potentially save organisation a combined total of £6bn a year.
Energy and Clean Growth Minister Kwasi Kwarteng recently stated: “evidence shows that reporting energy use saves businesses on their bills, can boost productivity and attract increasingly green-minded customers by showing they’re committed to fighting climate change.
“These latest requirements are coming into force in this year of climate action and will help take businesses’ energy savings to the next level, cutting emissions and boosting bottom lines as we work towards net zero by 2050.”
This evidence is particularly welcome, as it has the potential to enact real change. In ICAEW’s survey on this topic in 2019, the results showed that of those already taking action on climate, cost savings would promote more action in addition to regulation. This makes complete sense both commercially and psychologically. If something saves the business money, it is far easier to convince boards to get on board with an initiative. If in addition it helps with the brand, creates new business opportunities and helps with employee engagement and retention, then it is a no-brainer.
Making these changes is hard though, as is the additional reporting required from businesses, so making them tangible to businesses of all sizes is crucial and bringing the big picture in to clear actions is the key. Big businesses are being required to make these changes from a reporting perspective, but smaller businesses can also reap the rewards if they can learn from the journeys of the big businesses.
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- The new framework applies to all quoted companies, large UK incorporated unquoted companies and large Limited Liability Partnerships with at least two of the following: 250 employees, annual turnover greater than £36m, or annual balance sheet total greater than £18m.
- Companies that fail to comply with the new SECR requirements may have to resubmit their annual company accounts to Companies House or pay fines if missing filing deadlines. Failure to file a Confirmation Statement or accounts is a criminal offence which can result in directors being fined personally in the criminal courts. The SECR builds on the previous Mandatory Greenhouse Gas Emissions Reporting framework, which has been in place since 2013 for quoted companies.
- It requires energy and emissions disclosures to be included in company annual reports for all quoted or large UK businesses for financial years starting on or after 1 April 2019.
- The government has announced ambitious measures to help industry decarbonise and reduce costs, including the £315m Industrial Energy Transformation Fund, £250m Clean Steel Fund, the £505m Energy Innovation programme, the £18m Industrial Heat Recovery Support programme, the Climate Change Agreements Scheme (worth an estimated £300m per annum) , the £6m Boosting Access for SMEs to energy efficiency competition, and the £170m Industrial Decarbonisation Challenge – supporting our mission to establish the world’s first net zero cluster by 2040, and at least one low-carbon cluster by 2030.