How has COVID-19 affected SECR reporting?

How has COVID-19 affected SECR reporting?

COVID-19 has led to changes in the way we work, with working from home becoming the norm for many of us. As we look to progress to more ‘normal’ times, it’s worth reflecting on the impacts it has had on SECR.

What is SECR?

SECR stands for Streamlined Energy and Carbon Reporting, and is a mandatory UK government framework that replaced the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme in April 2019. It was introduced by the government to simplify carbon and greenhouse gas reporting, reducing the administrative burden for companies.

Companies that meet the eligibility criteria for SECR must submit a report in their Directors’ Report. SECR applies for financial years beginning on or after 1st April 2019. The qualification criteria are detailed below:

Qualification Criteria

  • Quoted companies of any size that are required to prepare a Directors’ Report
  • UK registered, unquoted large companies as defined in the Companies Act 2006. This refers to companies that fulfil at least two of the following three conditions in the financial year for which they are reporting:
  1. At least 250 employees;
  2. An annual turnover of £36m or more; and/or
  • An annual balance sheet total greater than £18m

What do you report for SECR?

Those companies that qualify for SECR will need to report on their UK energy use, and the associated greenhouse gas emissions produced. These typically cover gas and electric usage in buildings owned and/or operated by the company, and transport associated with the operations of the company.

Exactly what you are required to report on differs depending on the type of company.

How has COVID-19 impacted on SECR?

COVID-19 will have impacted on the reports that are produced from SECR in a few ways. The main tangible impact is the different energy usage companies will report compared to ‘normal’ years.

Energy use changes

All businesses have been impacted by COVID-19 in one way or another, and one side effect of the lockdowns has been a reduction in energy usage for businesses. Businesses have had to suspend their operations and move staff from offices to work from home.

Some businesses may even have gone the other way, increasing their energy usage given the sudden rise in demand for their products during lockdowns. As a result, the energy usage and associated emissions are likely not representative, and you will see a difference between those reports affected by COVID-19 and future reports.

 

To illustrate this, we can look to government data to see how energy consumption has changed at the national scale. The overall data shows a decrease in energy consumption in industrial and commercial sectors, whilst domestic demand has gone up, with more people now working from home. Data from BEIS Energy Trends show that energy requirements for the industrial sector fell by 2.1% when comparing the first quarters of 2019 and 2020, and demand from other final users (such as shops, offices, restaurants) was down 4.6%. Domestic demand was up 8.9%, attributed to the fact more people are working from home.[1]

Transport

For transport, the picture is very much the same. The Department for Transport estimate that 280.5 billion vehicle miles were driven on Great Britain’s roads in 2020, a decrease of 21.3% compared to the previous year[2]. Car traffic changed the most, estimated to have decreased by 24.7% from 2019 levels, travelling 209.6 billion vehicle miles (bvm), the lowest annual estimate of car traffic in the last 29 years. Lorry traffic did not change as much, decreasing by 5.7% compared to 2019, its lowest level since 2014.

For SECR purposes, emissions from employees commuting to and from work for which the company does not own or control is actually an optional area to report upon, and thus the reduction in commuting may or may not have an impact on the final results depending on whether the company reports on it or not.

This data should illustrate why any SECR report carried out during the COVID-19 pandemic should always keep its impact in mind. The exact impact it will have had will vary depending on the sector the business is in, how the business is structured, the decisions the business made during the pandemic, and a myriad of other variables.

Working from home

Some companies have found that working from home is not a necessity during lockdowns, but also something that its employees are keen to continue into the future. Whether this means permanently closing the offices or adopting a more flexible hybrid-working solution depends on the company. Cutting out the commute saves employees time and money, but also has the knock-on effect of reducing the emissions they produce by driving into work. Again, these emissions are voluntarily reported on in SECR reports, and thus are likely not included in most. For policymakers, it may be worth considering how working from home is reported on from an energy usage perspective.

Conclusion

COVID-19 has impacted everything we do, and SECR reporting is no different. Changes in the energy usage and transport demand will have altered the results of SECR reports from what would have been had the pandemic not happened. Longer-term implications for the figures in SECR reports may arise from permanent changes to the way we work, with flexible home-office working becoming more common. It is therefore vital to keep the impact of COVID-19 in mind when comparing year-on-year changes in energy usage, and to determine the unique reasons why the differences are there for the individual business in question.

[1] Energy Trends, January to March 2021. BEIS.

[2] Road Traffic Estimates: Great Britain 2020. Department for Transport.


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Article published 2/09/21

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