The Regulatory and Reporting Landscape

Module one

For most SMEs it’s not mandatory to publicly report on your environmental impact, but you’ll see various benefits to your business if you do it. Read our tips to see what you could be doing.

The benefits you’ll see:

  • Boost your competitive advantage in tenders. It can place you in better position for procurement processes as an ever-increasing amount of them, especially in relation to government contracts, require some information around your environmental impact and emission reduction plans to be publicly available.
  • Improve your reputation with customers. Transparency can help build trust and better relationships with customers – if you don’t publish your impact you could lose out to competitors who do.
  • Get ahead of regulation. Changes to regulation could include mandatory SME reporting. Getting prepared before that will save you time and stress in the future.
  • Agile responses. You’ll be able to quickly respond to stakeholders such as investors and landlords who ask for information on your emissions. This will allow your relationships to continue and flourish as you can demonstrate proactivity, meaning you’d be able to satisfy any concerns and questions.
  • Track and benchmark your progress. The ability to compare year on year results can be used as a marketing tool and a benchmarking tool against other organisations.

Look over the table below to make yourself familiar with the different reporting regulations and voluntary reporting opportunities. The best practice column shares tips and links to guides for how you can start reporting. Start to think about the top three topics or regulations you could make a start on.

Top tip: As it’s not compulsory for you to publish this information yet, it’s a good idea to talk about why you’ve decided to do this and what you’re doing to improve your emissions. Another good marketing opportunity!

Definitions

Large UK undertaking

  • 250 or more employees and/or
  • An annual turnover in excess of £36 million, and/or
  • An annual balance sheet total in excess of £18 million

UK quoted public companies

  • That is UK incorporated and whose equity share capital is listed on the Main Market of the London Stock Exchange UK or in an EEA State, or admitted to trading on the New York Stock Exchange or Nasdaq

Large UK unquoted (unlisted) companies

  • Registered and unregistered companies (including charitable companies)

Large UK Limited Liability Partnerships (LLPs)

A large unquoted company or LLP will satisfy two or more of the following:

  • An annual turnover of £36m or more
  • An annual balance sheet total of £18m or more
  • 250 or more employees

Low energy user

  • Defined as a UK quoted public company which has consumed 40MWh or less, and Unquoted companies or LLPs which has consumed 40MWh or less in the UK, including offshore, during the period in respect of which the report is prepared

Large UK Public Interest Entity (PIEs)

  • Traded, banking or insurance company with more than 500 employees

Current UK reporting regulations

Topic Related regulation Mandatory for Description Best practice
Energy use Energy Savings Opportunity Scheme (ESOS) Large UK undertakings and groups containing large undertakings in the UK Requires in-scope companies to carry out an ESOS assessment every four years. The assessment is an audit of energy used in buildings, industrial processes and transport to identify energy saving measures. This assessment can be used as a pre-requisite for the Streamlined Energy and Carbon Reporting (SECR) policy (see below). So, out-of-scope organisations wishing to comply with the SECR could conduct an ESOS assessment. Follow the Environment Agency’s guidelines to comply.
Streamlined Energy and Carbon Reporting (SECR) policy UK quoted public companies that are already obliged to report under The Companies Act 2006 (see below) As part of Mandatory Carbon Reporting (MCR), in-scope companies must measure and report in annual/directors’ report:

1)  Scope 1 emissions: annual global emissions from activities that your business is responsible for, such as fuel combustion

2)  Scope 2 emissions: annual emissions from the purchase of electricity, heat, steam or cooling by your business for your own use

3)  Underlying global energy use that is used to calculate greenhouse gas emissions, including previous year’s figure (after the first reporting year)

4)  State what proportion of total energy consumption and emissions produced are in the UK (including offshore area)

 Out-of-scope private companies (i.e. small businesses) are encouraged to voluntarily report as best practice. For mandatory and voluntary reporting follow Defra and BEIS’ environmental reporting guidelines chapter 2.
Large UK unquoted (unlisted) companies

Large UK Limited Liability Partnerships (LLPs)

 5)  UK energy use and associated greenhouse gas emissions, as a minimum relating to gas, electricity and transport fuel

6)  Intensity ratio

7)  Previous year’s figures for energy use and GHG emissions

8)  Information on energy efficiency measure

9)  Methodologies used in calculation of disclosures
Low energy user Not required to make the detailed disclosures of energy and carbon information. Instead, you’re required to state that your energy and carbon information aren’t disclosed for that reason.
Emissions The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 UK quoted public companies As part of MCR, in-scope companies must measure and report on annual carbon dioxide emissions in the directors’ report. Out-of-scope companies are encouraged to voluntarily report as best practice. For mandatory emissions reporting follow Defra and BEIS’s environmental reporting guidelines chapter 1, and for voluntary emissions reporting follow chapter 3.
Other environmental matters The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013

and

Companies, Partnerships and Groups (Accounts and non-financial reporting) Regulations 2016

 UK quoted public companies (with less than 500 employees)

Large UK Public Interest Entity (PIEs)

 In-scope companies must measure and report on environmental matters (including the impact of the company’s business on the environment) in a strategic report.

Basic and intermediate voluntary reporting opportunities 

Topic Initiative Who does this apply to? Description Best practice
Water N/A All businesses Report on your annual water usage in an annual report Once you start reporting your water usage, detail your previous year’s figure so you can do an annual comparison.

For more information follow Defra and BEIS’s environmental reporting guidelines chapter 4.
Waste N/A All businesses Report on your annual waste in an annual report. You can report using many different metrics:

  • Total metric tonnes per annum
  • Broken down into separate categories by weight – use the most appropriate ones for the waste you produce (e.g. paper, glass, aluminium, plastics, WEEE, aggregates, hazardous etc)
  • The final destination of the waste reported (e.g. 40% re-used , 30% recycled, 20% incinerated, 10% to landfill). This can also be presented by weight or volume.
  • The above metrics against a base year and/or set targets
  • Any waste prevention activities and the expected benefits from these
  • Energy produced from your waste if you run an industrial process and have an on-site energy-from-waste plant
  • Any costs reduced from waste which you have sold
  • Activities undertaken to divert waste from landfill
 Measuring your waste means you’re in a better position to find ways to reduce it. Once you start reporting your waste, detail your previous year’s figure so you can do an annual comparison.

For more information follow Defra and BEIS’s environmental reporting guidelines chapter 5.

WRAP is a government sponsored imitative providing help and guidance.
Energy N/A All businesses Report on your annual energy usage in an annual report See SECR reporting above for items you can report on in relation to energy
Responsible investing UN Principles for Responsible Investment (PRI) Asset owners, investment managers or service providers of the above A set of six voluntary and aspirational responsible investment principles that outline ways Environmental, Social and Governance (ESG) issues can be incorporated into investment practice. By implementing them, investors can gain accreditation by becoming a PRI signatory. For most signatories, the commitments are a work-in-progress and provide direction for their responsible investment efforts, rather than a checklist to comply with. The only mandatory requirement, beyond paying the annual membership fee, is to publicly report on your responsible investment activity through the 2020 Reporting Framework.

Advanced voluntary reporting opportunities 

Topic Initiative Who does this apply to? Description Best practice
General sustainability reporting Global Reporting Initiative (GRI) All international companies The first global voluntary standard for sustainability reporting. The standards include reporting requirements not captured under other regulations, such as measuring Scope 3 (indirect) carbon emissions. Produce a sustainability report based on GRI standards.
Climate-related financial risk Task Force on Climate-Related Financial Disclosures All financial and non-financial organisations with public debt or equity Voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. Follow the industry-specific FSB TCFD guidance.

This was last updated in September 2021 by Heart of the City. We’ve created these resources for individual SMEs to use. None of our content is to be adapted, reused or repurposed for commercial use.

Climate for SMEs: 4 Steps to Action is funded by the City of London Corporation in support of its Climate Action Strategy targets for a net zero and resilient Square Mile.

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