UK government consults on Scope 3 emissions reporting and future of SECR regime

On 19 October 2023, the Department for Energy Security and Net Zero (DESNZ) launched a call for evidence to gather feedback on the costs, benefits, and practicalities of Scope 3 greenhouse gas (GHG) emissions reporting in the UK, and the effectiveness and impact of the Streamlined Energy and Carbon Reporting (SECR) regime (see DESNZ webpage). 

The SECR regime imposes certain GHG emissions reporting requirements on quoted companies, large unquoted companies and large LLPs (see our previous blog post). Existing SECR requirements primarily focus on Scope 1 and Scope 2 GHG emissions, with most Scope 3 emissions disclosures being voluntary. The government acknowledges that Scope 3 emissions can account for 80-95% of the total value chain of an organisation’s carbon footprint but that calculating these emissions can be difficult and complex.

Call for evidence 

The call for evidence is seeking views on the following (among other things):

• What is your view on the approach to Scope 3 reporting contained within IFRS S2? Please consider the ISSB’s approach to materiality in your answer.
• What further guidance and support might be needed for your organisation to report Scope 3 information in accordance with IFRS S2?
• If your organisation does not already prepare Scope 3 information, how long would you need to build the capacity and capability to do so?
• How are you approaching the issues around data availability in relation to Scope 3 reporting? 
• What are, or do you anticipate being, the greatest barriers to producing consistent Scope 3 data? 
• Overall, do you think the SECR regulations are achieving their original objectives?  
• Are the current SECR requirements targeted at the correct population of businesses (including LLPs)? If not, which types of businesses and of which size do you think the requirements should apply to? 
• How can the government streamline current energy and emissions reporting requirements for organisations in scope of SECR while still meeting the SECR objectives?
• Under the existing SECR framework, there are different reporting requirements for quoted companies and unquoted companies/LLPs. Are these differing requirements appropriate? If not, what reforms would you suggest? 
• If your organisation reports under SECR, has the information that you have collected and reported led you to, or helped you to, reduce your energy consumption and/or carbon emissions? 
• If you are an investor, has the information businesses report or will report under SECR affected your investment decisions? Have you used the information businesses report under SECR to hold those businesses to account for their emissions or energy consumption? 

Next steps 

The call for evidence closes on 14 December 2023 and the government aims to publish its response within 12 weeks of the closing date.

Responses to the call for evidence will be used to: 

• inform a Post-Implementation Review of the existing SECR reporting requirements (which the government aims to complete and publish findings on in 2024);
• inform the UK endorsement of the ISSB standards; and 
• feed into an assessment on if and how the Environmental Reporting Guidelines are updated. 

Once the government has received advice from the UK Technical Advisory Committee (TAC) (which is supporting the government’s assessment of IFRS S1 and S2), it will publish a draft version of the UK-endorsed ISSB standards for consultation, before finalising those standards. 

Following the endorsement process for the ISSB standards, the government will consider whether reporting requirements might be introduced that would oblige businesses to report against UK-endorsed IFRS S1 and S2, including the timeframes for implementing these requirements. The government would consult on any future obligations, including the scope of entities caught by those requirements. 

The government is separately working with the Financial Reporting Council (FRC) to review of the non-financial reporting requirements UK companies need to comply with to produce their annual report and to meet broader requirements that sit outside the Companies Act. On 24 May 2023, the government launched a call for evidence as part of the first stage of this review process, which closed on 16 August (see our previous briefing). The SECR falls within the scope of the non-financial reporting review, and any findings from the current call for evidence will be considered in the context of the government’s review of the wider reporting regime.

Further reading 

For information on the SECR, the UK’s endorsement of the ISSB standards and other major legislative and regulatory developments that will affect governance and reporting at UK companies and LLPs, see our publications: 

• Reporting under the SECR
• UK consults on using ISSB sustainability disclosure standards
• UK: FCA to consult on reporting for listed companies in line with ISSB standards in first half of 2024
• Corporate Governance On the Horizon