Carbon Accounting in the UK: SECR Compliance Guide for SMEs

UK Carbon Landscape 2026: Why SECR Matters Now

The UK's commitment to net-zero by 2050 has intensified pressure on businesses of all sizes to measure and disclose their carbon emissions. From January 2026, regulatory requirements have become more stringent, and greenwashing concerns mean stakeholders - investors, customers, and regulators - are scrutinizing carbon claims more carefully than ever.

For UK small and medium enterprises (SMEs), understanding the Streamlined Energy and Carbon Reporting (SECR) regulations is no longer optional if you meet the threshold criteria. Non-compliance can result in penalties, reputational damage, and exclusion from government contracts. This guide walks you through SECR requirements, calculation methods, and practical steps to achieve compliance.

What is SECR and Who Must Comply?

Understanding SECR Regulations

The Streamlined Energy and Carbon Reporting (SECR) framework is the UK's mandatory reporting standard for large organisations. Introduced in 2019 under the Energy Savings Opportunity Scheme (ESOS) amendments, SECR requires eligible companies to disclose annual energy consumption and associated carbon emissions in their Directors' Report.

Unlike voluntary sustainability frameworks, SECR is a legal requirement enforced by the Financial Conduct Authority (FCA) for listed companies and by Companies House for private companies above the threshold. This regulatory backing makes SECR compliance non-negotiable for affected businesses.

Eligibility Criteria: Who Needs to Report?

You must comply with SECR if your organisation meets at least one of these criteria:

• 250+ employees in your annual reporting period
• £36 million+ in annual turnover
• £18 million+ in annual balance sheet total

These thresholds apply to the parent company and its consolidation group. If your SME meets any criterion, SECR reporting is mandatory - there are no exemptions based on industry sector or emissions scale.

Learn more about What is SECR Reporting? to understand the regulatory context and reporting obligations in detail.

Scope 1 and Scope 2 Emissions: Calculations for UK Businesses

Scope 1 Emissions: Direct Emissions from Your Operations

Scope 1 covers direct greenhouse gas emissions from sources you own or control. For UK businesses, common Scope 1 sources include:

• Fleet vehicles: Petrol, diesel, and hybrid vehicles used for business operations
• Onsite energy generation: Boilers burning natural gas, heating oil, or LPG
• Refrigerant losses: Leaks from air conditioning and refrigeration systems
• Process emissions: Manufacturing or chemical processes specific to your sector

Calculation approach for Scope 1:

Scope 1 emissions = Fuel quantity consumed (kg or litres) × Emission factor (kg CO₂e per unit)

For example, if your UK distribution company operates 20 diesel vans, each consuming 5,000 litres annually, the calculation is:

20 vans × 5,000 litres × 2.68 kg CO₂e/litre = 268,000 kg CO₂e (268 tonnes)

Scope 1 requires precise fuel records and appropriate emission factors from the UK Department for Business, Energy and Industrial Strategy (BEIS).

Scope 2 Emissions: Electricity and Grid-Based Energy

Scope 2 covers indirect emissions from purchased electricity, steam, heat, and cooling. For most UK SMEs, electricity consumption is the dominant Scope 2 source.

The UK electricity grid has decarbonized significantly: the 2024 emission factor was approximately 0.207 kg CO₂e/kWh for grid electricity, down from 0.233 kg CO₂e/kWh in 2022. This declining factor reflects increasing renewable generation and reduced fossil fuel reliance in the grid.

Calculation approach for Scope 2:

Scope 2 emissions = Electricity consumption (kWh) × Grid emission factor (kg CO₂e/kWh)

Practical example: A UK marketing agency uses 50,000 kWh of grid electricity annually across its London office and regional hubs.

50,000 kWh × 0.207 kg CO₂e/kWh = 10,350 kg CO₂e (10.35 tonnes CO₂e)

This represents a ~15% reduction compared to 2022 calculations using older grid factors - a significant difference if you're tracking year-on-year improvements. Always use the current year's BEIS emission factor to ensure regulatory accuracy.

On-Site Renewable Energy and Market-Based Accounting

If your organisation generates on-site solar, wind, or other renewable energy, you can claim zero-carbon credentials for that portion of consumption. Under the Greenhouse Gas Protocol, you have two options:

• Location-based approach: Use the grid factor for all electricity (conservative, reflects your actual grid impact)
• Market-based approach: Use zero-emission factors for renewable energy you've generated or purchased (requires valid renewable energy credits or power purchase agreements)

SECR regulations permit both methods, but location-based reporting is simpler for compliance purposes.

Practical Example: SME Annual Carbon Footprint

Let's calculate Scope 1 and 2 for a hypothetical UK manufacturing SME with 180 employees, £22 million turnover, and 250+ UK headcount (group consolidation):

Emission Source	Quantity	Factor	CO₂e (tonnes)
Natural gas (boilers)	120,000 kWh	0.185 kg CO₂e/kWh	22.2
Fleet diesel (15 vans)	75,000 litres	2.68 kg CO₂e/litre	201.0
Grid electricity	180,000 kWh	0.207 kg CO₂e/kWh	37.3
Scope 1 + 2 Total			260.5

This baseline allows year-on-year tracking and demonstrates progress toward reduction targets.

How to Prepare Your SECR Report

Step 1: Establish Your Baseline and Reporting Boundary

Begin by defining your organisational boundary - which entities and operations you'll include. SECR requires consolidation of all subsidiary companies under your group control. Document your boundary clearly, as auditors will verify consistency year-on-year.

Next, establish a baseline year for comparison. Most UK businesses use the preceding financial year (e.g., 1 April 2024 - 31 March 2025 for April-year end companies).

Step 2: Collect Energy and Fuel Data

Accurate data collection is the foundation of compliant reporting. You'll need:

• Utility invoices: Electricity, natural gas, heating oil, and water bills covering your full reporting period
• Fleet records: Fuel receipts, mileage logs, and vehicle registration documents
• Process emissions: Manufacturing data, refrigerant top-ups, and chemical usage records
• Third-party consumption: Data centre energy, outsourced facilities, and contracted transportation

Implement a data management system or spreadsheet template to centralise this information. Greenio's platform automates much of this collection and reduces manual errors.

Step 3: Apply Correct Emission Factors

Use BEIS-aligned emission factors published annually. For 2024-2025 reporting:

• Grid electricity: 0.207 kg CO₂e/kWh (location-based, UK grid average)
• Natural gas: 0.185 kg CO₂e/kWh (or 2.04 kg CO₂e/m³)
• Diesel: 2.68 kg CO₂e/litre
• Petrol: 2.31 kg CO₂e/litre
• LPG: 1.55 kg CO₂e/kg

Never use outdated factors from previous years - regulatory auditors expect current-year alignment with BEIS guidance.

Step 4: Calculate and Document Methodologies

Calculate Scope 1 and Scope 2 emissions using your collected data and approved factors. Document your methodology clearly, including:

• Data sources and collection methods
• Assumptions (e.g., estimated consumption for missing months)
• Calculation tools or systems used
• Changes in methodology from prior years

This documentation supports audit trails and demonstrates due diligence if challenged by regulators.

Step 5: Disclose in Directors' Report

SECR compliance requires disclosure in your Directors' Report (part of your annual financial statements filed at Companies House or published alongside annual reports for listed entities).

Required disclosures include:

• Energy consumption: Total kWh of purchased electricity, gas, and other fuels
• Greenhouse gas emissions: Scope 1 and Scope 2 CO₂e in tonnes
• Intensity metric: Emissions per employee, per £ turnover, or per unit produced
• Methodology statement: How you calculated emissions and which emission factors you used
• Improvements and targets: Any efficiency measures or emissions reduction targets

Review SECR Deadlines 2026 for filing deadlines aligned to your reporting period end date.

Emission Factors and UK-Specific Guidance

Why UK Emission Factors Matter

The electricity grid's carbon intensity varies by region and season. The UK uses a single national average factor (0.207 kg CO₂e/kWh in 2024-2025) rather than regional multipliers, simplifying calculations for multi-location businesses.

However, this national factor masks real variation: wind-heavy regions like Scotland have lower effective factors, while gas-dependent periods (winter peak demand) have higher factors. For SECR purposes, you must use the national published factor - adjustments for regional variation are not permitted.

Finding BEIS Emission Factors

The Department for Business, Energy and Industrial Strategy (BEIS) publishes annual emission factors in October, covering:

• Electricity (location-based and market-based)
• Natural gas, LPG, and heating oil
• Transport fuels
• Process-specific emissions (refrigerants, solvents)

Access current factors via the UK Department for Energy Security and Net Zero (DESNZ) website, or use platforms like Greenio that auto-update factors annually.

FAQ: SECR Compliance for UK SMEs

What is SECR and who must comply?

SECR (Streamlined Energy and Carbon Reporting) is the UK's mandatory carbon disclosure framework for large organisations. You must comply if your group has 250+ employees, £36m+ turnover, or £18m+ balance sheet total. Compliance requires annual disclosure of Scope 1 and Scope 2 emissions in your Directors' Report.

What emission factor should UK businesses use?

Use BEIS-published emission factors for your reporting year. For 2024-2025, the UK grid electricity factor is 0.207 kg CO₂e/kWh. Natural gas is 0.185 kg CO₂e/kWh. These factors are updated annually in October and must align with the year you're reporting.

When is the SECR reporting deadline?

SECR requires disclosure in your Directors' Report filed alongside your annual accounts. Deadlines depend on your year-end: companies with 31 December year-ends typically file by 30 April the following year. Check Companies House filing rules for your specific deadline.

Does SECR cover Scope 3 emissions?

No. SECR mandates only Scope 1 (direct) and Scope 2 (indirect electricity and heating) emissions. Scope 3 (supply chain, business travel, waste) is voluntary under SECR but increasingly expected by investors and stakeholders.

Can we use our own emission factors instead of BEIS?

No. SECR regulations require use of BEIS-approved emission factors. Using alternative sources risks audit failure and non-compliance findings. Always cross-reference your factors against the BEIS published guidance.

Reducing Emissions: Beyond Compliance

Regulatory compliance is a baseline. Progressive UK businesses use SECR reporting as a springboard for emissions reduction:

• Energy audits: Identify high-consumption areas and retrofit opportunities
• Renewable procurement: Switch to renewable electricity contracts (reduces market-based Scope 2)
• Fleet electrification: Transition diesel vans to electric vehicles (reduces Scope 1)
• Supply chain engagement: Collaborate with Scope 3 partners on decarbonization

Setting science-based targets aligned to the UK's net-zero commitment demonstrates genuine climate commitment beyond regulatory minimums.

Conclusion: Simplify SECR with Accurate Tooling

SECR compliance is non-negotiable for UK SMEs above the threshold, but it needn't be burdensome. Accurate calculations, current emission factors, and clear documentation form the foundation of defensible reporting.

Greenio automates SECR reporting with BEIS-aligned emission factors, multi-year tracking, and Directors' Report templates. By centralising energy data and applying verified factors, you reduce calculation errors, audit risk, and compliance overhead.

If your organisation meets SECR criteria, now is the time to establish robust carbon accounting processes. Understanding What is Carbon Accounting? and implementing structured methodology positions you for both regulatory compliance and strategic emissions reduction.

Start your SECR compliance journey today with data-driven tooling and verified emission factors.