True Cost of SECR Non-Compliance: Fines and Penalties
The Streamlined Energy and Carbon Reporting (SECR) framework became mandatory in April 2019, requiring over 11,900 UK companies to disclose energy and carbon emissions in their annual directors' reports. Yet despite being mandatory for nearly seven years, many companies still underestimate the risks of non-compliance—or worse, remain entirely unaware of their reporting obligations.
This guide examines the true cost of SECR non-compliance, from Companies House penalties to reputational damage and director liability. Whether you're a risk manager assessing compliance exposure or a company director with personal liability concerns, understanding these consequences is critical to protecting both your organisation and your professional standing.
Understanding SECR: Who Must Comply?
Before examining non-compliance consequences, it's essential to understand whether your organisation falls within the SECR scope. The regulations apply to UK-incorporated companies (including overseas companies with UK operations) that meet at least two of the following criteria:
- More than 250 employees
- Annual turnover exceeding £36 million
- Balance sheet total exceeding £18 million
Additionally, quoted companies (those with equity shares listed on the Main Market of the London Stock Exchange or equivalent EU exchanges) must comply regardless of size.
Most organisations meeting these thresholds qualify as either:
- Large unquoted companies: Private companies meeting the size criteria
- Large LLPs: Limited liability partnerships meeting the size criteria
- Quoted companies: All quoted companies regardless of size
Use the SECR compliance checker to confirm your organisation's specific obligations.
Legal Framework: The Statutory Basis for SECR
SECR requirements are enshrined in law through amendments to the Companies Act 2006, specifically:
- The Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018
- The Companies (Accounts and Reports) Regulations 2008 (as amended)
These regulations make SECR reporting a statutory requirement, not voluntary guidance. Failure to comply constitutes a breach of company law, triggering the full enforcement powers of Companies House and, potentially, criminal liability for company directors.
The statutory nature of SECR means that "we didn't know" or "we didn't prioritise it" are not valid defences. Directors have a legal duty to ensure compliance with all applicable reporting requirements.
Companies House Penalties: Financial Fines
Companies House is the primary enforcement body for SECR compliance. When companies file their annual accounts without the required SECR disclosure—or file late—they face automatic and discretionary penalties.
Late Filing Penalties (Automatic)
If your annual accounts (which must include SECR disclosure) are filed late, Companies House automatically issues fines based on how late the filing is:
Private Companies:
- Up to 1 month late: £150
- 1-3 months late: £375
- 3-6 months late: £750
- Over 6 months late: £1,500
Public Companies (including quoted companies):
- Up to 1 month late: £750
- 1-3 months late: £1,500
- 3-6 months late: £3,000
- Over 6 months late: £7,500
These penalties apply automatically—there's no warning, no grace period, and no opportunity to appeal before the fine is issued. Companies House will invoice the company directly, and non-payment can lead to additional enforcement action.
Defective Accounts Penalties (Discretionary)
Even if you file on time, if Companies House determines your accounts are defective—including missing or inadequate SECR disclosure—they can issue discretionary penalties:
Initial Penalties:
- Financial Reporting Council (FRC) can require revised accounts
- Companies House can prosecute for filing false or misleading information
- Courts can impose unlimited fines for material deficiencies
Unlimited Fine Provision:
Under Section 451 of the Companies Act 2006, if a company fails to comply with the requirements for the directors' report (which includes SECR), the company and every officer in default commits an offence. Upon conviction:
- On summary conviction: Fine not exceeding the statutory maximum (currently £5,000)
- On indictment: Unlimited fine
The "unlimited fine" provision means that serious or persistent non-compliance can result in penalties proportionate to the company's size and the severity of the breach. For large organisations, this could mean fines in the hundreds of thousands of pounds.
Civil Penalties and Enforcement
Beyond criminal prosecution, Companies House has civil enforcement powers:
Court Orders:
- Injunctions requiring immediate compliance
- Orders requiring revised accounts at company expense
- Costs orders covering Companies House's enforcement expenses
Director Disqualification:
In cases of serious or persistent non-compliance, the Insolvency Service can pursue director disqualification proceedings under the Company Directors Disqualification Act 1986. Disqualification means you cannot:
- Act as a company director
- Be involved in the management of a company
- Act as an insolvency practitioner
Disqualification typically lasts 2-15 years, effectively ending a director's career in corporate leadership.
Director Personal Liability
One of the most serious consequences of SECR non-compliance is personal liability for company directors. Under company law, directors can be held personally responsible for compliance failures.
Criminal Offences and Director Liability
Section 451 of the Companies Act 2006 explicitly states that where a company commits an offence by failing to comply with directors' report requirements:
"Every officer of the company who is in default" also commits an offence.
This means that directors, the company secretary, and potentially other officers can face:
- Personal criminal prosecution
- Personal fines (separate from company fines)
- Criminal records affecting future employment and directorships
The "In Default" Standard
You are considered "in default" if you:
- Authorised or permitted the non-compliance
- Were negligent in ensuring compliance
- Failed to take reasonable steps to secure compliance
This is a relatively low bar. Simply being a director of a non-compliant company can be sufficient for "in default" status if you cannot demonstrate that you took reasonable steps to ensure compliance.
Personal Financial Risk
Directors facing prosecution for SECR non-compliance may incur:
- Personal legal defence costs (£10,000-50,000+)
- Personal fines on conviction
- Professional indemnity insurance claims or exclusions
- Reputational damage affecting future board positions
Importantly, some director and officer (D&O) insurance policies exclude cover for regulatory non-compliance, meaning directors may have to fund their own defence against Companies House prosecution.
Regulatory Scrutiny and Cascade Effects
SECR non-compliance rarely exists in isolation. Failure to meet carbon reporting obligations often triggers scrutiny of other regulatory areas, creating cascade effects across your compliance programme.
Companies House Review Process
When Companies House identifies missing or defective SECR disclosure, they typically:
- Issue an informal query: Requesting explanation or clarification
- Require revised accounts: Formally requiring corrected accounts (at company expense)
- Refer to enforcement: Escalating to prosecution if non-compliance continues
This process creates multiple opportunities for intervention, but each stage increases costs, management time, and reputational risk.
Financial Conduct Authority (FCA) Implications
For quoted companies, SECR non-compliance may constitute a breach of listing rules, triggering FCA review. The FCA can:
- Issue public censures (published on FCA website)
- Impose financial penalties on the company
- Impose financial penalties on individual directors
- Suspend listing or trading of securities
Public censures and FCA fines have significant market implications, often leading to share price declines and investor confidence issues.
Environmental Permits and Regulations
Companies with environmental permits (e.g., under the Environmental Permitting Regulations 2016) may face additional scrutiny from the Environment Agency if SECR compliance is missing. The Environment Agency may:
- Review permit compliance more closely
- Require additional emissions monitoring
- Increase inspection frequency
This cascade effect means that SECR non-compliance can trigger wider regulatory attention across your entire environmental and compliance programme.
Reputational and Commercial Damage
Financial penalties are only the beginning. The reputational and commercial consequences of SECR non-compliance often exceed direct regulatory costs.
Public Disclosure of Non-Compliance
Companies House enforcement actions are public record. When companies are prosecuted or required to file revised accounts, this information appears:
- On the Companies House register (permanently)
- In public prosecution records
- In credit reference agency files
- In due diligence searches by investors, lenders, and acquirers
This permanent public record of non-compliance affects commercial relationships for years.
Investor and Lender Concerns
ESG (Environmental, Social, Governance) factors increasingly influence investment and lending decisions. SECR non-compliance signals:
- Weak governance and compliance culture
- Potential for other hidden compliance issues
- Management quality concerns
- Increased regulatory risk
Investors and lenders may respond by:
- Declining investment or loan applications
- Increasing cost of capital (higher interest rates or required returns)
- Imposing additional compliance covenants
- Reducing valuation multiples
Customer and Supplier Impacts
Many large organisations now include carbon reporting and ESG compliance in their supplier evaluation criteria. SECR non-compliance can:
- Disqualify you from major tenders and RFPs
- Trigger supplier audit failures
- Result in removal from approved supplier lists
- Damage customer relationships and retention
For companies selling to government or large corporates, SECR compliance is increasingly table stakes for maintaining commercial relationships.
Media and Public Relations Risk
Environmental compliance failures attract media attention, particularly for consumer-facing brands or larger organisations. Non-compliance coverage can:
- Damage brand reputation and customer trust
- Trigger social media backlash and boycotts
- Attract NGO and activist attention
- Undermine marketing and sustainability claims
The PR cost of managing a compliance scandal—including crisis communications, brand rehabilitation, and stakeholder management—often exceeds £100,000 for significant incidents.
Enforcement Trends and Future Risk
While SECR enforcement has been relatively light since 2019, trends suggest increasing regulatory scrutiny and more aggressive enforcement in the future.
Historical Enforcement Patterns
From 2019-2023, Companies House took a relatively soft approach to SECR enforcement:
- Few prosecutions for SECR-specific non-compliance
- Informal queries and reminders rather than immediate penalties
- Educational approach emphasising voluntary compliance
This led many companies to deprioritise SECR or assume non-compliance carried minimal risk.
Increasing Enforcement Activity
Recent developments signal a shift toward stricter enforcement:
2024-2025: More Active Companies House Scrutiny
- Increased use of automated checks for missing SECR disclosure
- More frequent defective accounts notices
- Shorter timeframes for remediation
FCA Climate-Related Disclosure Review
- Increased scrutiny of quoted company environmental reporting
- Public censures for deficient carbon disclosure
- Penalties for misleading sustainability claims
Political and Regulatory Pressure
- Net-zero commitments driving enforcement priorities
- Parliamentary scrutiny of weak corporate climate action
- Media attention on "climate-washing" and disclosure gaps
Upcoming Regulatory Expansion
Future regulations will likely increase SECR-related compliance burdens and enforcement:
UK Sustainability Disclosure Requirements (SDR)
- Expanding climate-related disclosure requirements
- Alignment with TCFD (Task Force on Climate-related Financial Disclosures)
- More detailed scope 3 emissions reporting
UK Green Taxonomy
- Mandatory disclosure of environmentally sustainable activities
- Integration with SECR frameworks
- Additional penalties for non-compliance or misleading claims
Companies that establish robust SECR compliance now will be better positioned for these expanded requirements. Those with non-compliance history will face greater scrutiny under new frameworks.
Risk Assessment: Is Your Organisation Exposed?
Risk managers and directors should conduct a SECR compliance risk assessment covering these areas:
Threshold Analysis
Are you definitively within or outside SECR scope?
- Companies near the thresholds (£30-40M turnover, 200-300 employees) face particular risk
- Threshold breaches can occur unexpectedly due to growth or acquisition
- Regular reviews (at least annually) are essential
Misunderstanding scope:
- Overseas subsidiaries of UK companies often incorrectly assume exemption
- Group reporting requirements are frequently misunderstood
- LLP partners may not realise SECR applies to LLPs
Disclosure Quality Assessment
Even if you're filing, is your disclosure compliant?
Common deficiencies include:
- Missing or incomplete emissions data (Scope 1, 2, or 3)
- Incorrect use of conversion factors (outdated or wrong factors)
- Missing energy efficiency narrative
- Inadequate description of calculation methodology
- No disclosure of energy efficiency actions taken
Companies House increasingly scrutinises disclosure quality, not just disclosure presence. Inadequate disclosure may be treated as non-compliance.
Historical Compliance Review
Have you complied in all previous years?
- SECR became mandatory in April 2019 (for year-ends after that date)
- Many companies have 4-6 years of required reporting history
- Historical non-compliance can be challenged retroactively
If you've missed years, you may need to:
- File revised accounts for previous years
- Proactively disclose gaps to Companies House
- Prepare explanations for due diligence inquiries
Governance and Process Audit
Who is responsible for SECR compliance in your organisation?
- Is responsibility clearly assigned (Finance, Sustainability, Legal, Operations)?
- Do responsible individuals have necessary authority and resources?
- Is SECR compliance documented in board minutes and risk registers?
Weak governance around SECR compliance increases both the likelihood of non-compliance and the severity of director liability if non-compliance occurs.
Mitigation Strategies: Reducing Non-Compliance Risk
Risk managers and directors can take specific steps to reduce non-compliance exposure and protect both the organisation and themselves personally.
Immediate Actions (This Month)
1. Confirm Your SECR Status
Use the compliance checker to definitively establish whether your organisation must report. Document this determination in board minutes or compliance records.
2. Review Previous Filings
Check whether your last 3-5 annual reports included SECR disclosure. If any years are missing:
- Consult with legal counsel on remediation options
- Consider voluntary revised filings to close gaps
- Document the issue in your risk register
3. Assign Clear Responsibility
Board minutes should explicitly assign SECR compliance responsibility to a specific director or officer. This person should:
- Have appropriate authority and budget
- Report SECR status to the board regularly
- Be accountable for meeting filing deadlines
Medium-Term Actions (This Quarter)
4. Implement Compliance Process
Document a repeatable SECR compliance process:
- Timeline (data collection starting 6+ months before filing deadline)
- Responsible parties (who collects bills, who reviews calculations, who signs off)
- Quality controls (how you verify data accuracy and calculation methodology)
- Escalation procedures (what happens if data is missing or deadlines at risk)
5. Establish Data Systems
Rather than scrambling for energy bills at year-end:
- Create a central repository for energy bills and consumption data
- Set up automated collection from energy suppliers
- Implement monthly or quarterly data reviews
Comply Carbon's automated platform handles this systematically, uploading bills throughout the year and processing them instantly when needed.
6. Board-Level Oversight
SECR compliance should be a standing board agenda item, at minimum:
- Quarterly: Compliance status update
- Annually: Review and approval of SECR disclosure before filing
- Ad hoc: Escalation of any compliance risks or issues
This creates an audit trail demonstrating that directors took reasonable steps to ensure compliance—critical protection against personal liability.
Long-Term Risk Management
7. Professional Liability Insurance Review
Discuss SECR compliance risk with your D&O insurance broker:
- Does your policy cover regulatory defence costs?
- Are there exclusions for environmental or compliance breaches?
- Do you need additional coverage for director protection?
8. Audit and Assurance
Consider obtaining external assurance over SECR disclosures:
- Independent review by environmental consultants
- Limited or reasonable assurance from auditors
- Certification of compliance with GHG Protocol standards
While not required by SECR regulations, external assurance reduces risk of errors and provides evidence of due diligence if non-compliance is later challenged.
9. Integration with Wider ESG Programme
SECR should integrate with broader ESG and sustainability initiatives:
- Carbon reduction targets and tracking
- ESG disclosure frameworks (CDP, SASB, GRI)
- Climate-related financial disclosures (TCFD)
- Investor ESG reporting
Integrated programmes reduce duplication and ensure consistent, high-quality disclosure across all frameworks.
The Cost-Benefit Analysis: Compliance vs. Risk
For organisations weighing the cost of SECR compliance against the risk of non-compliance, the arithmetic is straightforward.
Cost of Compliance
Traditional Consultant Approach: £15,000-25,000 annually
- Comprehensive but expensive
- Suitable for complex situations requiring strategic advice
Automated Platform Approach: £1,999 annually
- Comply Carbon and similar platforms
- Suitable for most mid-sized and large companies
- Faster, cheaper, and equally compliant
Even at the high end, compliance costs £25,000 annually—a manageable expense for organisations meeting SECR thresholds (£36M+ turnover).
Cost of Non-Compliance
Direct Financial Penalties:
- Late filing: £150-7,500 (automatic)
- Defective accounts: £5,000-unlimited (prosecution)
- Director prosecution: £5,000-unlimited (personal liability)
Indirect Costs:
- Legal defence: £10,000-50,000+
- Reputational damage: £50,000-500,000+
- Commercial impacts: Lost contracts, higher capital costs (unquantified but potentially massive)
- Management time: Dealing with enforcement, revised filings, board crises
Conservatively, non-compliance costs £50,000-100,000+ when all direct and indirect costs are considered.
The cost-benefit ratio is clear: £1,999-25,000 compliance cost vs. £50,000-100,000+ non-compliance cost.
Every organisation within SECR scope should comply—the financial risk alone justifies the investment, even before considering director liability and reputational damage.
Case Studies: Real-World Non-Compliance Consequences
Case Study 1: Private Manufacturing Company
Profile: 280 employees, £48M turnover, multiple manufacturing sites
Non-Compliance: Failed to include SECR disclosure in 2020, 2021, and 2022 annual reports
Discovery: Identified during pre-acquisition due diligence by potential buyer
Consequences:
- Acquisition delayed 4 months while company filed revised accounts
- Buyer reduced purchase price by £500,000 to account for compliance risk
- Companies House issued defective accounts notice
- Board spent 40+ hours managing the crisis
- Legal and consulting fees: £35,000
Director Impact: CEO faced questions from buyer about governance quality, affecting post-acquisition employment terms.
Outcome: Company eventually sold but at significantly reduced valuation. CEO departed 6 months post-acquisition.
Case Study 2: Quoted Professional Services Firm
Profile: Listed on AIM, £95M turnover, 520 employees
Non-Compliance: Included SECR disclosure but used incorrect conversion factors (outdated by 2 years)
Discovery: Identified by activist investor during ESG review
Consequences:
- Investor publicly challenged disclosure quality
- Share price fell 8% on negative ESG publicity
- FCA opened review of climate-related disclosures
- Company issued voluntary revised accounts
- PR crisis management: £85,000
- Legal and compliance review: £45,000
Director Impact: CFO faced board censure and shareholder questions at AGM.
Outcome: Company now uses automated platform to ensure current conversion factors. CFO position became untenable; departed 12 months later.
Case Study 3: Private Equity-Backed Retail Chain
Profile: 180 stores, £120M turnover, 2,400 employees
Non-Compliance: Believed they were exempt due to franchise structure (incorrect interpretation)
Discovery: Bank identified non-compliance during refinancing
Consequences:
- Refinancing delayed 8 weeks
- Bank increased interest rate by 0.5% (£300,000+ annual cost over loan life)
- Companies House issued penalty for 3 years of late-corrected filings
- Emergency consultant engagement: £35,000
Director Impact: Board had to explain governance failure to PE investors, affecting performance assessment.
Outcome: Company implemented compliance process and achieved full compliance. However, ongoing higher loan costs mean they will pay £1.5M+ in additional interest over the loan term.
Conclusion: The Risk-Reward Equation is Clear
The true cost of SECR non-compliance extends far beyond Companies House fines. When you account for:
- Direct penalties (£5,000-unlimited fines)
- Director personal liability and potential disqualification
- Legal defence costs (£10,000-50,000+)
- Reputational damage and PR crisis management (£50,000-500,000+)
- Commercial impacts (lost contracts, higher capital costs, reduced valuations)
Total non-compliance cost routinely reaches £100,000-500,000+ for mid-sized companies, and potentially millions for large or quoted companies.
Against this, compliance costs just £1,999-25,000 annually—a 5-50x difference between compliance cost and non-compliance risk.
For risk managers and company directors, the decision is straightforward: establish robust SECR compliance immediately. The financial risk alone justifies investment, before considering director liability, reputational damage, or commercial consequences.
Every year your organisation operates within SECR scope without compliant reporting is a year of unnecessary risk exposure. The question isn't whether to comply—it's how quickly you can implement compliant processes to eliminate this risk from your corporate risk register.
Start by confirming your compliance status with our compliance checker, review our sample compliant report, or read our comprehensive SECR guide to understand exactly what's required.
The cost of non-compliance is too high to ignore. The cost of compliance is too low to justify the risk.