One way in which the Government is trying to boost the energy efficiency of UK businesses as part of its net zero by 2050 goal is through the Energy Savings Opportunity Scheme, known as ESOS. For businesses that meet specified criteria, the scheme is mandatory and it involves tracking and reporting energy usage across business processes, facilities and transport, while identifying ways to cut consumption.

The scheme was introduced back in 2014 and is currently in the third four-year phase, with a deadline of 5 December 2023 for those who need to comply.

How do I know if I need to comply with ESOS?

If you had to comply with either of the first two phases of ESOS, it’s likely that you’ll need to submit again. Compliance is required if you are a UK company and met the following criteria to qualify as a ‘large undertaking’ on 31 December 2022:

• You have 250 or more employee, or
• An annual turnover in excess of £44 million, and an annual balance sheet total in excess of £38 million

There are a few qualifiers explained at Energy Savings Opportunity Scheme (ESOS) - GOV.UK (www.gov.uk) for example if you are part of a larger corporate group.

Are there any exceptions?

If you meet these criteria, but your business has achieved and is fully covered by ISO 50001, you don’t need to complete an assessment, but you do need to notify your regulating body of your compliance.

You are also exempt if your annual energy consumption is below 40,000kWh or you have zero energy supplies. You will still need to notify the Environment Agency and get this confirmed by a director.

What do we need to do?

Once you’ve determined whether your organisation is in scope for ESOS phase 3, you need to:

1. Decide the period for which you’re going to report. It must be a 12 month period that starts no earlier than 1 January 2022 and no later than 6 December 2022.
2. Measure your total energy consumption for that period, including transport, heating, lighting, industrial processes etc, in a common unit.
3. Identify areas of significant energy consumption. You can leave out up to 5% of your consumption under the new rules (this has been decreased from 10% previously) where it may be too complicated to gather the data for instance, but must report fully on the remaining 95%.
4. Analyse the data and recommend how you can implement efficiency measures to reduce consumption.
5. Get the report checked by a lead assessor. This must be someone qualified and listed on the government register of lead assessors. You may of course choose them to carry out the whole assessment if you prefer.

Things to look out for

Obviously the key challenge for many companies when it comes to reporting requirements like ESOS is having accurate, verifiable data.

This is where data platforms such as SustainIQ really come into their own, as pulling off an energy report for ESOS compliance is simple and quick and makes the job of the company and the lead assessor so much easier.

Don’t leave it too late to get started. Calls for organisations to make a start on their compliance started in summer 2022 and it’s good advice to start early. There are limited numbers of lead assessors available and those who leave it close to the deadline may struggle to get someone in time.

There have been a few changes made to phase 3, so if this isn’t your first time reporting to ESOS, make sure you don’t get caught out.

What happens if we miss the deadline?

One of those changes for phase 3 is an increased penalty for non-compliance – an initial penalty of up to £50k and an additional £500 per day until the completed report is submitted. Even a failure to maintain records comes with a penalty of up to £5,000, so ensuring you are collecting verifiable data regularly and consistently is critical.

What’s coming in phase 4?

It may seem that 2027 is too far away to worry about at this stage, but be prepared, regulations and requirements around ESOS phase 4 will tighten and become more stringent as we get closer to the Government’s 2050 net zero target.

The focus is expected to shift to how companies are addressing energy efficiency AND net zero, with businesses needing to identify potential risks in moving to net zero and demonstrate they have a carbon reduction strategy.

It will also be necessary from phase 4 onwards, for participants to provide explanations if goals set in phase 3 have not been met.

ESOS reports will also be required to improve the collection and monitoring of energy data, setting of controls, and appropriate staff training, so ensuring you have a robust system in place is critical.

If you need help with data collection and reporting, speak to us at SustainIQ to see how we can help you get ahead, stay compliant and ultimately, identify energy efficiency measures.