The Energy Savings Opportunity Scheme (ESOS) stands as a valuable initiative to help businesses reduce their energy consumption, cut costs, and lower their carbon footprint. ESOS is a mandatory energy assessment and energy savings identification scheme for large organisations.

In our latest article, we will explore what ESOS is, who qualifies, how to apply, and the consequences of failing to submit an audit.

What is ESOS?

ESOS is a UK government scheme established to comply with the European Union Energy Efficiency Directive. Its primary goal is to promote energy efficiency among large organisations. ESOS mandates eligible organisations to conduct comprehensive energy assessments of their operations and identify energy-saving opportunities. This initiative is a part of the UK’s commitment to reducing greenhouse gas emissions and mitigating climate change.

Who Qualifies for ESOS?

ESOS applies to large organisations based on specific criteria. To qualify, your company must meet one or more of the following conditions:

1. Employ at least 250 people.
2. Have an annual turnover exceeding £44 million.
3. Have a balance sheet total exceeding £38 million.

Additionally, public bodies are also included within the scope of ESOS. If your organisation is part of a corporate group where at least one member meets the above criteria, the entire group must comply with ESOS.

How to Apply for ESOS

Compliance with ESOS involves several steps:

1. Appoint a Lead Assessor: Your organisation needs to appoint a Lead Assessor who will oversee the entire compliance process. This individual should be a qualified expert in energy management.
2. Gather Data: Collect energy data from across your company, including buildings, processes, and transportation. This data should cover a 12-month reference period that includes the qualification date.
3. Conduct an Energy Audit: Engage a qualified energy assessor to conduct an energy audit. The audit should identify areas where energy savings can be made.
4. Notify the Environment Agency: Notify the Environment Agency of your compliance by submitting your ESOS notification, including details of your organisation, your chosen compliance route, and the Lead Assessor’s details.
5. Submit the Compliance Report: Once the energy audit is complete, submit a compliance report to the Environment Agency. This report should detail your energy consumption, energy-saving opportunities, and the measures you plan to take to achieve those possible savings.
6. Review and Verification: Ensure that the Lead Assessor reviews and verifies your compliance report. The report should also be approved by a board-level director or equivalent.
7. Keep Records: Maintain records of your ESOS compliance, including data, audits, and reports, for at least five years.

Consequences of Failing to Submit an Audit

Failure to comply with ESOS can result in penalties. If your organisation qualifies for ESOS but fails to submit a compliance report by the deadline, the Environment Agency may impose financial penalties. The fines can be significant, so it’s crucial to prioritise compliance.

Penalties for non-compliance include:

1. Fixed Penalty: A fixed penalty of up to £50,000 may be imposed for failing to submit a compliance report.
2. Daily Penalty: If your organization continues to neglect ESOS compliance, daily fines of up to £500 per day may be levied, with a maximum cap of 80 days.
3. Reputation and Enforcement Notices: Non-compliance can harm your organisations reputation and lead to enforcement notices, which may result in further costs and regulatory scrutiny.

Phase Three…

Before delving into Phase Three, it’s crucial to understand the previous phases…

Phase One (2015) was a pilot program that laid the foundation for ESOS, requiring organisations with over 250 employees or a high annual turnover and balance sheet to comply.

Phase Two (2019) expanded ESOS’s scope to include more organisations, including those with lower energy consumption. It continued to emphasise the importance of energy audits and reporting.

Now, let’s explore what Phase Three brings to the table…

The Key Changes in Phase Three

1. Expanded Scope: Perhaps the most significant change in Phase Three is the expansion of the scheme’s scope. While the previous phases primarily focused on large organisations, Phase Three broadens the net to include more businesses. ESOS now encompasses enterprises with 40 or more employees, down from the previous threshold of 250. Additionally, organisations with an annual turnover of over £35 million will be included, regardless of their employee count.

2. Tighter Reporting Deadlines: Phase Three introduces stricter deadlines for compliance. Organisations must now complete their ESOS assessments and report their findings to the Environment Agency by June 5, 2023, providing less time for the entire compliance process.

3. Energy Efficiency Recommendations: Building on the foundation laid by previous phases, Phase Three places an even greater emphasis on energy efficiency recommendations. Organisations are required to not only identify energy-saving opportunities but also act upon them. This proactive approach encourages businesses to implement energy-efficient measures and reduce their carbon footprint.

4. Technological Advancements: With advancements in technology, Phase Three encourages the use of digital tools and software for conducting energy audits and managing energy data. These tools can streamline the auditing process, making it more accessible and cost-effective for businesses.

The Benefits of ESOS Phase Three

The implementation of ESOS Phase Three offers several benefits:

1. Reduced Energy Consumption and Costs: By identifying and acting upon energy-saving opportunities, organisations can significantly reduce their energy consumption and associated costs. This leads to improved financial sustainability.

2. Lower Carbon Emissions: The Energy Savings Opportunity Scheme (ESOS) helps reduce greenhouse gas emissions, contributing to the UK’s climate goals and demonstrating corporate responsibility in the fight against climate change.

3. Enhanced Competitiveness: Energy-efficient practices can enhance a company’s competitiveness in the market. Consumers increasingly favor environmentally conscious businesses, making sustainability a potential selling point.

4. Compliance and Avoidance of Penalties: Compliance with ESOS is not optional for eligible organisations. Failure to comply can result in substantial fines. Phase Three’s expansion means more businesses need to pay attention to their energy usage and comply with the scheme.

5. Innovation and Technological Adoption: The inclusion of digital tools and software encourages businesses to adopt innovative solutions that can make energy management more efficient and cost-effective.

Conclusion

The Energy Savings Opportunity Scheme (ESOS) Phase Three represents a significant step forward in the UK’s efforts to improve energy efficiency, reduce carbon emissions, and promote sustainability. By expanding the scheme’s reach, tightening reporting deadlines, and emphasising actionable energy-saving recommendations, it aims to drive real change in the way businesses approach energy management. As organisations adapt to these new requirements, they not only contribute to a greener future but also position themselves for greater competitiveness and success in a world increasingly focused on sustainability. It’s a win-win scenario for businesses and the environment, highlighting the importance of policies like ESOS in our journey towards a more sustainable future. The deadline for phase three ESOS reporting is June 2024.

For further guidance please contact one of our energy experts