SECR and the Former Carbon Reduction Commitment Energy Efficiency Scheme

The Streamlined Energy and Carbon Reporting (SECR) requirements apply to all quoted companies and large unquoted companies and LLPs (Companies Act definition). Companies are required to report their UK energy use and associated intensity scope 1 and 2 emissions.

As a minimum, this should include electricity, gas and transport. An intensity metric is required, but metrics used can be decided by individual sectors and existing best practice and guidance. An exemption not to report where it is not practical to do so has also been provided. Narrative commentary on energy efficiency action taken is also required. SECR treats portfolio companies separately which is important for private equity fund portfolios. The new scheme is aligned with the current ESOS regime (see below) and allows for disaggregation.

SECR and the Climate Change Levy replaced the CRC scheme in 2019. The Government had acknowledged that the number and complexity of business energy efficiency taxes and reporting requirements made compliance for UK businesses difficult, and changes were broadly welcomed. The BVCA previously engaged on the CRC scheme as any private equity firm whose portfolio included a controlling stake in a company with UK operations needed to consider whether it was required to register with the Environment Agency as a CRC participant. The application of the Companies Act 2006 grouping tests to limited partnership structures is a complex and technical area, so the then Legal & Technical Committee sought the advice of leading corporate counsel, David Chivers QC, on the proper application of those tests in the context of the CRC legislation. The BVCA produced a note of guidance for members based on Counsel's advice, which is available below.
 

Energy Savings Opportunity Scheme

The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment scheme for qualifying UK organisations, and private equity and venture capital firms should have reviewed the impact of this in 2015. Companies that qualify must carry out ESOS assessments every 4 years.

The scheme operates a ‘one in, all in’ group qualification principle, meaning it applies to corporate groups if at least one UK group member meets the ESOS definition of a large undertaking.
 

Recent ESOS updates

1. ESOS Phase 3 compliance extension period has now ended: the original Phase 3 compliance deadline was 5 December 2023, but extended to 5 June 2024. The Environment Agency updated its ESOS guidance to confirm that this extension deadline has now passed. Any qualifying organisation that has failed to submit a notification of compliance is now at risk of enforcement action. Obligated entities that have failed to submit their Phase 3 compliance notification should take proactive steps to do so as soon as possible.
2. ESOS updates for Phase 3 onwards: ESOS includes additional compliance requirements following the submission of the compliance notification:
   a. ESOS action plan: Entities to set out what they intend to do to reduce energy consumption, when they intend to do it, whether it was recommended through their ESOS assessment, what energy savings they expect to achieve over the four year period covered by the action plan, and how they estimated these savings
   b. ESOS annual progress updates: Entities to submit this in the 12 months following their ESOS action plan to track progress. The Phase 3 submission deadline is 5 December 2024.
    
3. Phase 3 Action Plan deadline extension: The original deadline for submitting ESOS Phase 3 Action Plan was 5 December 2024, but this has now been extended to 5 March 2025. This update was provided in EA’s Newsletter Issue 28 (September 2024).
4. ESOS Phase 4 – entities should pay attention to the relevant ESOS Phase 4 dates. The compliance date is 5 December 2027. However, the qualification date is 31 December 2026, i.e the date on which ESOS qualification should be assessed.