SECR vs ESOS: Understanding UK Carbon Reporting Frameworks

If you're responsible for sustainability compliance at a UK business, you've likely encountered two confusing acronyms: SECR and ESOS. Both are mandatory UK government frameworks related to energy and carbon reporting, but they serve different purposes, apply to different businesses, and require distinct compliance actions.

Understanding the differences between SECR (Streamlined Energy and Carbon Reporting) and ESOS (Energy Savings Opportunity Scheme) is critical for compliance teams. Many businesses must comply with both frameworks, making it essential to understand how they overlap and where they differ.

This comprehensive guide compares SECR and ESOS, explains who must comply with each, and helps you develop an integrated compliance strategy.

SECR and ESOS: Quick Overview

Before diving into detailed comparisons, here's a high-level overview of both frameworks:

SECR (Streamlined Energy and Carbon Reporting)

• Purpose: Annual carbon and energy disclosure for corporate transparency
• Applies to: Large UK companies, quoted companies, and large LLPs
• Frequency: Annual reporting in Directors' Report
• Focus: Public disclosure of emissions, energy use, and efficiency actions
• Origin: Introduced April 2019 under Companies Act 2006 amendments

ESOS (Energy Savings Opportunity Scheme)

• Purpose: Detailed energy audit to identify savings opportunities
• Applies to: Large undertakings (250+ employees OR €50M+ turnover AND €43M+ balance sheet)
• Frequency: Every 4 years
• Focus: Comprehensive energy audit and identification of cost-saving measures
• Origin: UK implementation of EU Energy Efficiency Directive (2014)

Key Distinction: SECR is about annual disclosure and transparency. ESOS is about detailed auditing and identifying savings opportunities every four years.

Detailed Comparison: SECR vs ESOS

Let's compare these frameworks across key dimensions.

1. Who Must Comply?

SECR Eligibility Criteria

SECR applies to three categories:

Quoted Companies: All UK companies traded on regulated markets (London Stock Exchange, NYSE, NASDAQ, etc.), regardless of size.

Large Unquoted Companies: Private companies meeting at least 2 of 3 criteria for two consecutive years:

• £36M+ annual turnover
• £18M+ balance sheet
• 250+ employees

Large LLPs: Limited Liability Partnerships meeting at least 2 of 3 criteria for two consecutive years:

• £36M+ annual turnover
• £18M+ gross assets
• 250+ members

ESOS Eligibility Criteria

ESOS applies to "large undertakings" and their corporate groups that meet BOTH:

Employee Test: 250 or more employees (across the group), OR

Financial Test (both must be met):

• Annual turnover exceeding €50 million (approximately £43M)
• AND balance sheet exceeding €43 million (approximately £37M)

Important: ESOS uses EU financial thresholds (in Euros) even post-Brexit, as the legislation originated from EU directives. UK businesses must convert £ to € for assessment.

Key Differences

Practical Implication: Some businesses qualify for only SECR, some only for ESOS, and many qualify for both. A company with £40M turnover, £15M balance sheet, and 100 employees would qualify for SECR but not ESOS.

2. What Must Be Reported?

SECR Reporting Requirements

SECR requires annual disclosure in your Directors' Report of:

1. Energy consumption (kWh):

   • UK electricity consumption
   • UK gas and other fuel consumption
   • Transport fuel consumption

2. GHG emissions (tCO2e):

   • Scope 1 emissions (direct)
   • Scope 2 emissions (purchased energy)
   • Optionally Scope 3 emissions

3. Intensity ratio:

   • At least one ratio (e.g., tCO2e per £M turnover, per employee, per m²)

4. Methodology:

   • Calculation standards used (GHG Protocol)
   • Emission factors applied (UK Government conversion factors)

5. Energy efficiency actions:

   • Narrative description of measures taken during the year
   • Include equipment upgrades, operational changes, etc.

ESOS Reporting Requirements

ESOS requires a comprehensive energy audit every 4 years that includes:

1. Energy consumption analysis:

   • Detailed measurement of all significant energy uses
   • Must cover at least 90% of total energy consumption
   • Analysis by building, transport, and industrial processes

2. Energy audit:

   • Building surveys and assessments
   • Analysis of energy bills and meter data
   • Identification of energy flows and losses

3. Energy efficiency opportunities:

   • Specific recommendations for energy savings
   • Payback periods and investment costs
   • Expected energy and cost savings

4. Compliance evidence:

   • Board-level sign-off by a director
   • Lead assessor certification (if applicable)
   • Retention of audit evidence for audits

5. Notification to Environment Agency:

   • Compliance notification before deadline
   • Evidence of audit completion

Key Differences

3. Frequency and Timing

SECR Timeline

• Frequency: Annual
• Reporting period: Your financial year
• Filing deadline:
  • Private companies: 9 months after year-end
  • Public companies: 6 months after year-end
• Ongoing obligation: Every year indefinitely

Example: For a financial year ending 31 December 2025, a private company must file SECR disclosure by 30 September 2026.

ESOS Timeline

• Frequency: Every 4 years
• Compliance phases:
  • Phase 1: 5 December 2015
  • Phase 2: 5 December 2019
  • Phase 3: 5 June 2023
  • Phase 4: 5 June 2027 (next deadline)
• Qualification date: 31 December of the year before the compliance deadline
• Audit reference period: 12 months ending on or before qualification date

Example: For Phase 4 (deadline 5 June 2027), the qualification date is 31 December 2026. Your audit should cover 12 months of energy data ending on or before 31 December 2026.

Key Differences

4. Methodology and Standards

SECR Methodology

SECR requires:

• GHG Protocol Corporate Standard: International framework for calculating emissions
• UK Government Conversion Factors: Official emission factors published annually by DEFRA
• Organisational boundary: Operational control or financial control approach
• Reporting scope: Scope 1 and 2 mandatory; Scope 3 optional

ESOS Methodology

ESOS requires:

• EN 16247 Standards: European energy audit standards
• 90% coverage rule: Must audit energy consumption representing at least 90% of total
• Comprehensive measurement: Detailed analysis of energy flows, not just totals
• Opportunity identification: Must identify and evaluate specific savings opportunities

Key Differences

SECR uses GHG accounting standards focused on calculating emissions totals. ESOS uses energy audit standards focused on understanding energy consumption patterns and identifying improvements.

5. Compliance Process

SECR Compliance Process

1. Data collection: Gather 12 months of energy bills and fuel receipts
2. Calculation: Convert consumption to emissions using conversion factors
3. Intensity ratio: Calculate at least one ratio
4. Efficiency narrative: Document actions taken during the year
5. Disclosure: Include in Directors' Report
6. Filing: Submit with annual accounts to Companies House

Typical timeline: 2-4 weeks for first-time compliance; 1-2 weeks for ongoing annual reporting

Cost: £1,999-25,000 depending on approach (automated platforms vs. consultants)

ESOS Compliance Process

1. Scoping: Identify significant energy uses and 90% coverage boundary
2. Data collection: Gather detailed energy consumption data across all sites
3. Site surveys: Conduct physical inspections of buildings and equipment
4. Analysis: Perform detailed energy audit using EN 16247 standards
5. Opportunity identification: Identify and evaluate energy savings opportunities
6. Board approval: Director signs off on compliance
7. Notification: Submit compliance notification to Environment Agency

Typical timeline: 3-6 months for comprehensive audit

Cost: £5,000-50,000+ depending on organisation complexity and number of sites

Key Differences

6. Enforcement and Penalties

SECR Enforcement

• Enforced by: Companies House
• Penalties:
  • Late filing: £150-7,500 depending on delay and company size
  • Inaccurate/incomplete information: Unlimited fines upon prosecution
  • Director liability: Personal liability for directors
• Public visibility: Non-compliance visible in public Directors' Report

ESOS Enforcement

• Enforced by: Environment Agency (England), devolved authorities in Scotland, Wales, Northern Ireland
• Penalties:
  • Civil penalty: Up to £50,000 for non-compliance
  • Publication: Non-compliant organisations published on Environment Agency website
  • Director liability: Potential personal liability
• Compliance monitoring: Random audits and checks by Environment Agency

Key Differences

SECR penalties are generally lower but more visible (public Companies House filing). ESOS penalties can reach £50,000 and involve regulatory enforcement action.

Overlapping Compliance: When You Must Do Both

Many UK businesses must comply with both SECR and ESOS. Understanding the overlap helps you leverage compliance efforts across both frameworks.

Common Overlap Scenarios

Scenario 1: Large Private Company

• 300 employees, £45M turnover, £20M balance sheet
• SECR: Yes (meets 2 of 3 thresholds)
• ESOS: Yes (meets employee test)

Scenario 2: Medium-Sized High-Growth Company

• 260 employees, £48M turnover, £16M balance sheet
• SECR: Yes (meets turnover + employee thresholds)
• ESOS: Yes (meets employee test)

Scenario 3: Asset-Heavy Small Workforce Company

• 180 employees, £30M turnover, £25M balance sheet
• SECR: Yes (meets turnover + balance sheet thresholds)
• ESOS: No (doesn't meet 250 employee or both financial tests)

Synergies Between SECR and ESOS

If you must comply with both frameworks, you can create efficiencies:

Shared Data Collection

Both SECR and ESOS require comprehensive energy consumption data. Implement a single data collection system that serves both:

• Monthly energy bill collection
• Meter readings and sub-metering data
• Transport fuel consumption tracking
• Site-by-site energy breakdowns

Complementary Reporting Cycles

ESOS audits (every 4 years) can inform SECR reporting (annual):

• Year 1: Complete ESOS audit, identify savings opportunities
• Years 1-4: Implement ESOS recommendations, report progress in annual SECR disclosures
• Year 4: Report cumulative efficiency improvements in SECR
• Year 5: Conduct next ESOS audit, evaluate progress since previous audit

This creates a virtuous cycle: ESOS identifies opportunities, SECR tracks implementation.

Shared Efficiency Narrative

ESOS recommendations provide ready-made content for SECR's energy efficiency action requirement:

• "Following our 2023 ESOS audit, we installed LED lighting across 5 sites, reducing electricity consumption by 12%"
• "Implemented building management system recommended in ESOS Phase 3 assessment"
• "Upgraded fleet vehicles based on ESOS transport audit recommendations"

Cost Efficiencies

Use the same consultants or systems for both frameworks:

• Energy consultants with both SECR and ESOS expertise
• Automated platforms that handle both compliance requirements
• Shared meter monitoring and data management systems

Differences in Exemptions

Both frameworks offer exemptions, but they work differently.

SECR Exemptions

1. Low energy use: UK energy consumption ≤40,000 kWh
2. Offshore exemption: No UK energy consumption
3. Subsidiary exemption: Included in parent's consolidated report

ESOS Exemptions

1. ISO 50001 certification: Organisations with ISO 50001 covering 90%+ of energy use can use this for compliance
2. Green Deal Assessment: For organisations that are buildings (rare)
3. Recent comprehensive audit: Under certain circumstances, recent comparable audits may be acceptable

Key Difference: ESOS offers ISO 50001 as an alternative compliance route, which can be valuable for organisations already pursuing energy management system certification.

Strategic Approach to Dual Compliance

If your business must comply with both SECR and ESOS, consider this strategic framework:

1. Centralize Energy Data Management

Implement a single system that:

• Collects monthly energy bills automatically
• Tracks consumption by site, fuel type, and department
• Stores historical data for trend analysis
• Exports data in formats required for both SECR and ESOS

2. Align Timelines

Plan ESOS audits to inform subsequent SECR reporting:

• Complete ESOS audit in Q1 of phase deadline year
• Use findings to enhance next 3 years of SECR reporting
• Track implementation of ESOS recommendations in annual SECR disclosures

3. Use ESOS to Enhance SECR Quality

ESOS's detailed analysis provides rich material for SECR's efficiency actions section:

• Specific energy savings achieved
• Detailed payback periods and ROI
• Technical improvements with measurable impact

4. Consider ISO 50001

If you're facing ongoing ESOS compliance (multiple 4-year cycles), consider implementing ISO 50001:

• Provides alternative ESOS compliance route
• Demonstrates systematic energy management
• Enhances SECR reporting with structured improvement data
• Valuable credential for customers and investors

5. Leverage Automation

Modern compliance platforms can handle both SECR and ESOS data collection:

• Automated bill processing
• Emissions calculations using current conversion factors
• Report generation for both frameworks
• Historical tracking for trend analysis

SECR vs ESOS: Which Matters More?

The answer depends on your objectives:

SECR Matters More For:

• Public transparency: SECR is publicly visible in your Directors' Report
• Annual governance: SECR is part of annual financial reporting cycle
• Investor relations: Investors and stakeholders see SECR disclosures
• Regulatory compliance: SECR is part of Companies Act obligations

ESOS Matters More For:

• Cost savings: ESOS identifies specific opportunities to reduce energy costs
• Technical improvements: ESOS provides detailed engineering recommendations
• Operational efficiency: ESOS deep-dives into energy consumption patterns
• Long-term strategy: ESOS provides 4-year roadmap for efficiency improvements

Both Matter For:

• Complete compliance: Avoiding penalties and regulatory issues
• Sustainability strategy: Together they provide disclosure (SECR) and improvement (ESOS)
• Stakeholder confidence: Demonstrating comprehensive energy management

Future of SECR and ESOS

Both frameworks are likely to evolve:

SECR Evolution

Expected changes:

• Mandatory Scope 3 reporting (currently optional)
• Enhanced disclosure requirements aligned with TCFD
• Integration with broader sustainability reporting (ISSB standards)
• Digital/structured reporting formats (iXBRL)

ESOS Evolution

Expected changes:

• Tighter integration with net-zero targets
• More stringent coverage requirements (currently 90%, may increase)
• Mandatory implementation of cost-effective recommendations
• Enhanced enforcement and compliance checking

Convergence Trends

Both frameworks may increasingly align with:

• International sustainability standards (ISSB, GRI)
• Net-zero transition plans
• Science-based targets
• Supply chain emissions reporting (Scope 3)

Getting Started with SECR and ESOS Compliance

For First-Time SECR Compliance

1. Determine if you meet threshold criteria (2 consecutive years)
2. Collect 12 months of energy bills
3. Calculate emissions using UK Government conversion factors
4. Choose and calculate at least one intensity ratio
5. Document energy efficiency actions taken
6. Include disclosure in Directors' Report

Use our SECR compliance guide for detailed implementation steps.

For First-Time ESOS Compliance

1. Determine if you qualified on 31 December before Phase 4 deadline
2. Identify all significant energy uses across your organisation
3. Engage lead assessor (if not using alternative compliance route)
4. Conduct comprehensive energy audits covering 90%+ of consumption
5. Identify energy savings opportunities with cost-benefit analysis
6. Obtain director sign-off
7. Notify Environment Agency before 5 June 2027

For ESOS guidance, visit the Environment Agency ESOS webpage.

Integrated Compliance Approach

1. Assess both obligations: Determine which frameworks apply
2. Centralize data collection: Single system for all energy data
3. Plan timeline: Coordinate ESOS audits with annual SECR reporting
4. Choose compliance approach: Consultants, in-house team, or automated platforms
5. Leverage synergies: Use ESOS findings to enhance SECR disclosures

Conclusion: SECR and ESOS Working Together

While SECR and ESOS may seem like duplicative compliance burdens, they serve complementary purposes. SECR provides annual transparency and public accountability. ESOS drives detailed technical analysis and identifies cost-saving opportunities.

For businesses subject to both frameworks, the key is to view them as integrated components of a comprehensive energy management strategy rather than separate compliance exercises. ESOS identifies what to do; SECR tracks and discloses what you've done.

By centralizing energy data collection, aligning compliance timelines, and leveraging the findings from each framework to enhance the other, you can turn regulatory obligations into strategic advantages: lower energy costs, improved operational efficiency, and enhanced stakeholder confidence.

Need help with SECR compliance? Get started with Comply Carbon to automate your SECR reporting in minutes, with 100% Companies House acceptance and £13k+ in cost savings compared to traditional consultants. For ESOS guidance, check our comprehensive SECR guide for related energy reporting resources.

Additional Resources:

• UK Government SECR Guidance
• Environment Agency ESOS Guidance
• GHG Protocol Corporate Standard
• EN 16247 Energy Audit Standards
• What is SECR Reporting? Complete Guide