Streamlined Energy and Carbon Reporting (SECR) is a framework established by the UK government for mandatory reporting of energy and carbon emissions by certain organizations. SECR requires companies to report their energy use, energy efficiency and greenhouse gas emissions in their annual reports, and to set intensity-based reduction targets for energy and carbon emissions. The goal of SECR is to encourage organizations to reduce their energy consumption and greenhouse gas emissions, and to provide investors and other stakeholders with transparent and comparable information on the environmental performance of companies. SECR is mandatory for large UK companies and large LLPs (Limited Liability Partnerships) that are required to report under the Companies Act 2006. This includes companies on the main market of the London Stock Exchange and companies with over 250 employees.

All UK businesses in the following three categories have to comply, unless they meet certain exemption criteria:

• Quoted companies (i.e. listed on the stock market)
• Large unquoted companies
• Large limited liability partnerships (LLPs)

Companies and LLPs are defined as large if they meet two or more of the following criteria:

• A turnover of £36 million or more;
• A balance sheet of £18 million or more; or
• 250 employees or more.

Large unquoted companies and LLPs are exempt from reporting if they can show that their energy use is less than 40 MWh over the reporting period.

According to the UK’s SECR legislation, quoted companies must report:

• Scope 1 and 2 emissions: They are encouraged to also report Scope 3 emissions, but this is voluntary.
• At least one intensity ratio: Intensity ratios compare emissions data with an appropriate business metric or financial indicator, such as sales revenue or square meters of floor space.
• Energy efficiency actions: A narrative description of the principal measures taken for the purpose of increasing the businesses’ energy efficiency in the relevant financial year.

Large unquoted companies and LLPs  must report:

• UK energy use (as a minimum gas, electricity and transport, including UK offshore area) and associated GHG emissions.
• At least one intensity ratio: Intensity ratios compare emissions data with an appropriate business metric or financial indicator, such as sales revenue or square meters of floor space.
• Energy efficiency actions: A narrative description of the principal measures taken for the purpose of increasing the businesses’ energy efficiency in the relevant financial year.

The Task Force on Climate-related Financial Disclosures (TCFD) is an organization established by the Financial Stability Oversight Council (FSOC) with the goal of providing recommendations for voluntary climate-related financial disclosures. The TCFD's recommendations are intended to help companies identify and disclose information that would be material to the understanding of their exposure to risks and opportunities related to climate change. The main goal of the TCFD is to increase transparency and accountability of companies on their climate-related risks and opportunities and provide useful information for investors, lenders, insurers and other stakeholders to assess the long-term value of companies.

• All UK businesses with more than 500 employees traded on a UK regulated market, as well as banking and insurance companies.
• All UK companies and LLPs with more than 500 employees and over £500M in turnover.

• Companies must report on their governance, strategy, risk management, targets, and metrics with respect to climate-related risks and opportunities.
• Companies must disclose their  scope 1,  scope 2, and, if appropriate,  scope 3 emissions.

The Securities and Exchange Commission (SEC) is an independent federal agency that oversees the securities industry and protects investors. In relation to the environment, the SEC plays a role in ensuring that companies disclose accurate and relevant information about the material risks and impacts of climate change and environmental issues on their business operations and financial performance. The SEC has issued guidance to companies on the disclosure of climate-related risks in their financial filings, and has taken enforcement actions against companies that have failed to provide adequate disclosure of such risks. Additionally, SEC has also issued interpretive guidance on the use of Non-GAAP measures and encourage companies to include Environmental, Social, Governance (ESG) information in their financial filings. The SEC also monitors the activities of companies and investors to ensure compliance with securities laws and regulations, and to detect and prevent fraud and other forms of misconduct related to environmental issues.

Among other things, companies would need to disclose the following:

• Scope 1 and scope 2 emissions
• Scope 3 emissions, if they are material or if the company has set scope 3 targets (small companies are exempt from this requirement)
• Governance of climate risks
• The material impact of climate risks on its business
• The impact of climate risks on strategy and business model
• The impact of climate-related events (e.g. severe weather) on items of their consolidated financial statements

The EU’s Non-Financial Reporting Directive (NFRD) applies to certain large companies and public-interest entities which meet two of the following three criteria.

• an average of at least 500 employees during the financial year;
• a balance sheet total of at least €20 million;
• an annual net turnover of at least €40 million.

NFRD is set to be replaced by CSRD for the 2023 reporting year.

These companies will have to disclose information on the policies, risks, and outcomes of their activities that are material to the understanding of the impact of their activities on the environment and society. Also, large listed companies will have to disclose information on their diversity policy for the administrative, management, and supervisory bodies. With respect to environmental impact, it is recommended that companies disclose Scope 1, 2, and 3 emissions, as well as absolute reduction targets. It is recommended that banks and insurance companies focus on their Scope 3 emissions, despite the difficulties.

The EU Directive on corporate sustainability due diligence is essential for companies to understand due to its broad implications on corporate governance and value chain management.

Here's a concise overview:

Scope and Purpose:The directive aims to foster sustainable and responsible corporate behaviors by integrating human rights and environmental considerations into corporate activities and governance. Companies are expected to identify, address, and report on negative impacts within their operations and their value chains. This is both inside and outside Europe, ensuring a responsible global footprint.

Core obligations:

1. Due Diligence Duty: Companies must establish processes to identify, prevent, and mitigate adverse human rights and environmental impacts resulting from their activities or those of their subsidiaries and value chains.
2. Climate Alignment: Large companies must also ensure that their business strategies align with the goal of limiting global warming to 1.5 °C as per the Paris Agreement.

Implications for companies:

• Legal Framework: The directive creates a harmonized legal framework across the EU, enhancing legal certainty and fostering a level playing field.
• Risk Management: Companies will need to enhance their risk management processes to address potential environmental and human rights impacts proactively.
• Financial and Competitive Advantages: Compliance could increase attractiveness to investors and customers focused on sustainability, potentially leading to better access to finance and markets.
• Innovation and Reputation: The directive encourages innovation and can significantly boost a company’s reputation by demonstrating commitment to sustainable practices.

Directors' duties:

• Directors are tasked with integrating due diligence into the corporate strategy and must consider the broader consequences of their decisions on human rights, the environment, and climate change.

Affected companies:

• The directive targets large EU companies and other high-impact sectors with substantial turnover and employee thresholds. It also applies to certain non-EU companies operating in the EU.

Enforcement and compliance:

• Enforcement will be carried out through administrative supervision at the national level and coordinated through a European network, ensuring consistency. Civil liability provisions will ensure that companies can be held accountable for non-compliance.

This directive marks a significant step in ensuring that companies operating in the EU adopt more sustainable and responsible business practices. As such, it is crucial for businesses to prepare adequately for its implementation to leverage the opportunities it presents and mitigate any potential risks.

Penalties

Companies that fail to comply with the EU's Corporate Sustainability Due Diligence risk being faced with a compliance order, or even large financial penalties based on the company's turnover. These penalties include fines of up to 5% of companies' net worldwide turnover.

Impact on energy companies

As an executive in an energy company, the CSDDD represents a significant shift towards more accountable and sustainable business practices. The directive will require energy companies to:
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• Enhance Due Diligence Processes: Strengthen existing due diligence frameworks to meet the new EU standards, which may involve additional resources and investments in compliance infrastructure.
• Broaden Scope of Responsibility: Extend sustainability efforts beyond direct operations to include all partners in their value chain, which could complicate relationships and contracts with third-party suppliers and business partners.
• Prepare for Legal and Financial Risks: Understand the potential legal implications and financial risks associated with non-compliance, including fines and reputational damage.

Compliance challenges

Implementing the CSDDD will pose several challenges:
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• Complex Value Chains: As an energy company, the value chain is extensive and complex, making it challenging to monitor and ensure compliance across all levels.
• Increased Costs: The need for enhanced due diligence and compliance mechanisms will likely result in increased operational costs.
• Stakeholder Engagement: There will be a need to engage more actively with stakeholders, including civil society and local communities, to ensure operations align with broader human rights and environmental standards.
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In conclusion, the CSDDD mandates comprehensive sustainability and due diligence practices that will significantly impact how energy companies operate within the EU. It necessitates a strategic review of current practices and potentially substantial adjustments to business operations and compliance strategies.

The Corporate Sustainability Reporting Directive (CSRD) is a directive of the European Union (EU) that requires certain large companies to report on their environmental, social, and governance (ESG) performance. The companies that have to comply with the CSRD are the ones that meet two of the following three criteria:

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• an average of at least 500 employees during the financial year;
• a balance sheet total of at least €20 million;
• an annual net turnover of at least €40 million.

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In addition, listed SMEs, and non-EU-based companies with subsidiaries or securities in the EU must also comply with CSRD.

The CSRD was signed into law on November 10 2022 and is set to replace the NFRD, starting in the financial year 2024. Listed SMEs are given until 2027 to comply.

These companies will have to provide a non-financial statement as part of their management report and disclose information on their policies, risks, and outcomes related to environmental, social, employee-related matters, respect for human rights, anti-corruption and bribery matters and diversity. The CSRD is also known as the Non-Financial Reporting Directive (NFRD) The directive aims to improve the transparency and accountability of companies on their sustainability performance and to support investors, consumers, and other stakeholders in assessing the long-term sustainability of companies.

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Under the CSRD, companies must report on five core areas:

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• Business model (e.g. resilience to climate-related risks)
• Policies (e.g. measurable sustainability targets, due diligence processes implemented).
• The outcome of those policies.
• Risks and risk management (principal sustainability risks and how they are managed).
• Key performance indicators:
• Full scope 1, 2, and 3 emissions
• Energy consumption
• Intensity ratios (e.g. emissions per unit revenue)

The European Green Deal's Corporate Sustainability Reporting Directive (CSRD) mandates over 50,000 companies, including large, listed, and third-country companies with EU undertakings, to report sustainability information under the European Sustainability Reporting Standards (ESRS). Reporting starts on or after 1 January 2024 for large public-interest companies, banks, and insurance companies already under the Non-Financial Reporting Directive (NFRD); 1 January 2025 for other large companies; and 1 January 2026 for small or medium-sized entities and other undertakings. The CSRD and ESRS incorporate double materiality, prospective information, information about the upstream and downstream value chain, and sustainability due diligence into their reporting requirements. All sustainability information in the management report must be verified by a third party. The first set of ESRS were approved in November 2022 and emphasizes the importance of tackling climate change. The ESRS aim to harmonize with various other standards like ISSB, TCFD, and GRI to avoid repeated disclosure efforts by companies. The ESRS will bring topics previously limited to voluntary reporting into the realm of regulatory requirements under the CSRD.

On April 21, 2021, the European Commission (EC) proposed the Corporate Sustainability Reporting Directive (CSRD) requiring companies to report according to European Sustainability Reporting Standards (ESRS), with the European Financial Reporting Advisory Group (EFRAG) serving as the technical advisor. The first draft of ESRS was released for public consultation by EFRAG on April 29, 2022, with the process concluding in August 2022. After reviewing all feedback, the EFRAG Sustainability Reporting Board and Technical Expert Group approved a first set of ESRS on November 15, 2022, to be submitted to the EC, which is expected to adopt these standards by June 2023. This first set of ESRS consists of 12 standards covering environmental, social, and governance matters and includes both general and specific standards. Future plans include the publication of sector-specific standards and standards for small and medium-sized enterprises (SMEs) not covered in the public consultation. The Council approved the proposal on November 28

When do companies have the obligation to report sustainability information according to the ESRS?

The proposed CSRD shall apply for financial years starting on or after 1 January 2023, but based on the latest communication of the Council of the European Union, deadlines for implementation by companies (EU refers to undertakings) are proposed to change to:
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• 1 January 2024 for undertakings already subject to the Non-Financial Reporting Directive (reporting in 2025 on 2024 data)
• 1 January 2025 for large undertakings not currently subject to the Non-Financial Reporting Directive (reporting 2026 on 2025 data)
• 1 January 2026 for listed small and medium-sized enterprises, as well as for small and noncomplex credit institutions and for captive insurance undertakings (reporting in 2027 on 2026 data)

Is assurance mandatory?

Assurance of the sustainability reporting is proposed to be mandatory at the limited level, planning a transition to reasonable assurance in the upcoming years.

What is the period covered by the sustainability reporting?

The sustainability reporting period should be aligned to the reporting period used for the financial statements.

When will it be enforced on the NCS?

Scope 1, 2 & 3 to be enforced on the NCS as from 01.01.2024

Overview of the initial steps

The first set of European Sustainability Reporting Standards (ESRS) establishes a structure for reporting sustainability information in a comprehensive manner. It includes four main reporting areas as set out in ESRS 2. These areas are:
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1. Governance: This pertains to the processes, controls, and procedures used for monitoring and managing impacts, risks, and opportunities.
2. Strategy: This considers how a company's strategy and business models interact with material impacts, risks, and opportunities, and the approach to addressing them.
3. Impact, Risk, and Opportunity Management: This involves the processes by which impacts, risks, and opportunities are identified, assessed, and managed through policies and actions.
4. Metrics and Targets: This describes how a company measures its performance, including progress towards the targets it has set.

The first set of draft standards under the European Sustainability Reporting Standards (ESRS) includes only cross-cutting and sector-agnostic standards. Sector-specific standards and those proportionate for Small and Medium Enterprises (SMEs) are still under development and will be presented for separate public consultation in the near future. Companies are required to include the sustainability information mandated by the ESRS in their management reports.

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ISO 50001 is an international standard designed to help organizations establish, implement, maintain, and improve an energy management system (EnMS). It provides a systematic framework for managing energy use and performance to enhance energy efficiency and reduce environmental impact.

ISO 50001 is a voluntary standard. Organizations can choose to adopt and certify their energy management system against this standard to demonstrate their commitment to energy efficiency and environmental responsibility. While it is not legally required, many companies adopt ISO 50001 to improve energy performance, reduce costs, and gain a competitive advantage.

Purpose

The primary purpose of ISO 50001 is to enable organizations to continually improve their energy performance, which includes optimizing energy efficiency, reducing energy consumption, and lowering greenhouse gas emissions. The standard helps organizations integrate energy management into their overall efforts to improve sustainability and reduce operational costs.

Key components

• Energy Policy: A formal commitment by the organization to improve energy performance.
• Energy Planning: Identifying and reviewing energy use, establishing a baseline, setting objectives, and determining energy performance indicators (EnPIs).
• Implementation and Operation: Developing and implementing plans and processes to meet energy objectives.
• Monitoring and Measurement: Tracking, measuring, and analyzing energy performance data to ensure goals are met.
• Continuous Improvement: Regularly reviewing and refining the EnMS to ensure ongoing energy performance improvements.

What are the requirements?

Organizations must:

• Develop and document an energy management policy.
• Conduct energy reviews and establish a baseline.
• Set energy objectives and targets aligned with the policy.
• Implement action plans to achieve these targets.
• Monitor and measure key characteristics of operations that determine energy performance.
• Conduct internal audits and management reviews to ensure the effectiveness of the EnMS.
• Ensure continuous improvement through regular updates and refinements to the system.

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The ISO 14064 standards are a set of international standards developed by the International Organization for Standardization (ISO) that provide a framework for measuring, quantifying, and managing greenhouse gas (GHG) emissions. The standards are designed to assist organizations in creating credible and consistent GHG inventories, as well as to promote transparency and integrity in reporting and verification processes. The ISO 14064 series consists of three parts:‍

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ISO 14064-1: Specification with Guidance at the Organization Level for Quantification and Reporting of Greenhouse Gas Emissions and Removals

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Purpose‍

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This part of the standard provides guidance on the principles and requirements for designing, developing, managing, and reporting GHG inventories at the organizational level.

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Key Components

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1. GHG Inventory Establishment:

• Identification of GHG sources, sinks, and reservoirs
• Quantification of GHG emissions and removals, ensuring the use of consistent and transparent methods
• Selection of appropriate GHG quantification methodologies, including direct measurement and calculation

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2. Organizational Boundaries:

• Definition of the organizational boundaries (operational control, equity share, etc.) to determine which emissions are included in the inventory

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3. GHG Emissions Reporting:

• Development of a GHG report that includes details on GHG emissions, removals, and any relevant activities that influence these figures
• The report should include information on base years, scope of emissions, data collection methodologies, and uncertainties

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4. Management Systems:

• Integration of GHG management into existing management systems to ensure continuous improvement and accuracy in GHG accounting

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5. Internal Verification:

• Internal procedures to ensure the reliability and accuracy of the GHG inventory before external validation or verification

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ISO 14064-2: Specification with Guidance at the Project Level for Quantification, Monitoring, and Reporting of Greenhouse Gas Emission Reductions or Removal Enhancements

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Purpose

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This part of the standard provides a framework for the quantification, monitoring, and reporting of GHG emission reductions or removals at the project level. It is particularly relevant for projects aimed at reducing GHG emissions or enhancing GHG removals.

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Key Components

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1. Project Design and Implementation:

• Guidance on how to structure GHG reduction or removal projects, including defining the project’s objectives, scope, and boundaries
• Identification of baseline scenarios against which the project’s GHG impacts are measured

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2. Quantification of GHG Emission Reductions:

• Methods for quantifying actual GHG reductions or removals achieved by the project
• Consideration of leakage (indirect emissions) and how it impacts the project’s GHG benefits

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3. Monitoring Plan:

• Development of a monitoring plan that includes the parameters to be monitored, frequency, and data quality requirements

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4. Reporting and Documentation:

• Requirements for transparent and accurate reporting of the project’s GHG outcomes, including the methods and assumptions used

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5. Validation and Verification:

• Procedures for third-party validation and verification to confirm that the project has achieved the claimed GHG reductions or removals

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ISO 14064-3: Specification with Guidance for the Validation and Verification of Greenhouse Gas Assertions

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Purpose

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This part of the standard provides the principles and requirements for validating and verifying GHG assertions, ensuring that an organization’s GHG reports and claims are accurate, credible, and reliable.

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Key Components

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1. Validation and Verification Process:

• Guidance on conducting the validation and verification process, which includes planning, data sampling, and evaluation of GHG assertions

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2. Roles and Responsibilities:

• Definition of the roles of the verifier, organization, and other relevant stakeholders in the validation and verification process

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3. Verification Criteria:

• Establishment of criteria for evaluating the accuracy and reliability of the GHG assertions, including the data quality, methodologies, and GHG inventory boundaries

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4. Materiality:

• Application of the materiality principle to determine whether the errors or omissions in GHG data are significant enough to influence decisions based on the GHG report

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5. Reporting Verification Results:

• Requirements for the verification report, which should include the scope, objectives, and conclusions of the verification process

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6. Third-Party Validation:

• Importance of using accredited third-party bodies to validate and verify GHG assertions to enhance the credibility of the reported data

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Applications of ISO 14064 Standards

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These standards are applicable across a wide range of sectors and can be used by organizations of all sizes, from small businesses to large multinational corporations. They are particularly relevant in sectors with significant GHG emissions, such as energy, manufacturing, transportation, and agriculture. Organizations may adopt these standards to:

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• Demonstrate their commitment to reducing their carbon footprint
• Prepare for regulatory compliance and participation in carbon markets
• Enhance their reputation and gain competitive advantages through responsible environmental practices

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Global Relevance

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The ISO 14064 standards are recognized globally and are applicable in any country. They are often used as the basis for regulatory frameworks and voluntary GHG reduction programs worldwide.

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The North Sea Transition Authority (NSTA) Framework Document outlines the governance, responsibilities, and operational guidelines for the NSTA, established under the Department for Energy Security and Net Zero (DESNZ). The NSTA, previously known as the Oil and Gas Authority (OGA), is a non-departmental public body (NDPB) that plays a critical role in the UK’s oil and gas sector, particularly in facilitating the transition towards net zero emissions by 2050.

The NSTA is responsible for:

1. Licensing and Supervision: Issuing licenses for exploration, production, and storage of hydrocarbons and CO2.
2. Regulatory Compliance: Ensuring compliance with relevant legislation and regulations, including the Energy Act 2016.
3. Emissions Reduction: Supporting the government’s net zero goals through emissions monitoring and reduction initiatives.
4. Collaboration and Stewardship: Encouraging collaboration across the industry to maximize economic recovery and support net zero transition.
5. Supply Chain and Decommissioning: Leading efforts to reduce costs and enhance efficiency in decommissioning activities while supporting the UK supply chain​​.

Summary

The NSTA Framework Document establishes a comprehensive governance structure to guide the NSTA in its role as a steward and regulator of the UK’s offshore oil and gas industry. It emphasizes collaboration with DESNZ to achieve net zero emissions by 2050, setting out the NSTA’s responsibilities in licensing, regulatory compliance, emissions reduction, and support for the supply chain and decommissioning. While not legally binding, it represents a mutual agreement between the NSTA and DESNZ to work within its terms to promote sustainable and efficient practices in the sector​​.

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The Task Force on Climate-related Financial Disclosures (TCFD) is an organization established by the Financial Stability Oversight Council (FSOC) with the goal of providing recommendations for voluntary climate-related financial disclosures. The TCFD's recommendations are intended to help companies identify and disclose information that would be material to the understanding of their exposure to risks and opportunities related to climate change. The main goal of the TCFD is to increase transparency and accountability of companies on their climate-related risks and opportunities and provide useful information for investors, lenders, insurers and other stakeholders to assess the long-term value of companies.

• Companies must report on their governance, strategy, risk management, targets, and metrics with respect to climate-related risks and opportunities.
• Companies must disclose their  Scope 1,  Scope 2, and, if appropriate,  Scope 3 emissions

The SME Climate Commitment is a global initiative that encourages small and medium-sized companies to halve their greenhouse gas emissions before 2030 and reach net zero emissions before 2050. The commitment also includes yearly progress disclosures to ensure accountability and transparency.

• Companies commit to halving their scope 1, scope 2 and business travel emissions by 2030, and to reaching net zero by 2050.
• If Scope 3 emissions are material to your total emissions, and the data allows you to measure them, you should also aim to cut scope 3 emissions in half this decade.
• Companies must disclose their progress on a yearly basis.

The Science-Based Targets initiative (SBTi) is a partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF) that helps companies set science-based targets for reducing their greenhouse gas emissions. The SBTi provides companies with a clear and transparent method for setting targets that are in line with the latest climate science, and helps them to align their goals with the Paris Agreement. The main goal of SBTi is to help companies to contribute to the reduction of emissions in the order of magnitude necessary to meet the Paris Agreement and to limit global warming to well-below 2 degrees Celsius above pre-industrial levels.

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This is a voluntary framework.

• Companies must set reduction targets for their scope 1 and 2 emissions for the next 5-15 years that are consistent with a temperature rise below 1.5°C compared to pre-industrial levels.
• Companies must also measure all of their scope 3 emissions
• If the company’s Scope 3 emissions make up more than 40% of their total emissions, they must also set a reduction target for Scope 3 emissions.

The Carbon Disclosure Project (CDP) is a non-profit organization that aims to encourage companies and cities to disclose their environmental impact information, such as greenhouse gas emissions, and to manage and reduce their environmental impact. CDP works with investors, companies, cities, states and regions to disclose their environmental impact data through CDP's platform. The main goal of CDP is to encourage companies to take action on climate change, water security and deforestation by providing them with the necessary data and tools to manage their environmental impact and make informed decisions.

To comply with the CDP, companies must disclose the following emission metrics:

• Scope 1, 2, 3 emissions
• Emission intensities
• Whether they had any emissions targets and emission reduction initiatives.

The Global Reporting Initiative (GRI) is an international organization that provides a framework for organizations to report on their economic, environmental and social performance, and promote sustainability reporting. GRI's framework is widely used, flexible and includes guidelines on a variety of sustainability topics, such as governance, labor practices, human rights, and environmental impact. The main goal of GRI is to increase transparency and accountability of organizations and support stakeholders in assessing the long-term sustainability of companies.

The GRI is one of the most common sustainability reporting standard, used by over 10,000 organizations around the world.

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• You must include a statement on your sustainable development strategy.
• You must determine which sustainable development topics are material to your business.
• If you decide that GHG emissions are a material topic, you must report on the following:
• Scope 1, 2, 3 emissions
• GHG emissions intensity ratio
• Reduction of GHG emissions