Reporting on Scope 1, 2, and 3 carbon emissions is an essential practice for organizations committed to reducing their environmental impact. These scopes categorize different sources of greenhouse gas emissions. Scope 1 emissions are direct emissions from owned or controlled sources, such as company vehicles or on-site fuel combustion. Scope 2 emissions are indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company. Scope 3 emissions are all other indirect emissions that occur in a company’s value chain, including both upstream and downstream emissions, such as employee travel, waste disposal, and product use by consumers.
Proper reporting of these emissions is crucial for transparency, accountability, and driving sustainability efforts. It allows organizations to identify key areas for emission reductions and to set realistic targets for carbon neutrality.
In the UK, there are specific regulations for energy and carbon reporting. The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment and energy-saving identification scheme. It applies to large UK undertakings and their corporate groups. An organization qualifies as a large undertaking if it employs 250 or more people or has an annual turnover exceeding €50 million (about £43 million) and a balance sheet total of over €43 million (about £37 million). ESOS assessments must be conducted every four years, and qualifying companies must report on their energy use and efficiency opportunities.
Streamlined Energy and Carbon Reporting (SECR) requirements are slightly different. SECR applies to quoted companies of any size, large unquoted companies, and large limited liability partnerships (LLPs). A large company is defined in SECR as one that meets two out of three criteria: a turnover of £36 million or more, a balance sheet total of £18 million or more, or 250 or more employees. SECR requires these companies to report their annual energy use, greenhouse gas emissions, and energy efficiency actions in their annual directors’ report.
Together, ESOS and SECR help businesses understand their energy consumption and carbon emissions, encouraging them to improve energy efficiency and reduce their environmental impact.