The ultimate guide to ESOS
It is no surprise that the conservation of energy impacts not only our expenses but also the overall company’s carbon footprint. One of the latest attempts of the UK to reduce the impact on the environment is the Energy Savings Opportunity Scheme (ESOS)
What is ESOS?
Energy Savings Opportunity Scheme was implemented in 2014 to encourage energy assessments for United Kingdom entities that check the essential criteria. The BIG companies in the UK are required to comply with ESOS and it is essential to understand what it covers, including the steps that are required to be complied with.
This relates to major enterprises – requiring them to locate and implement energy-saving initiatives. This will help to have a significant effect on the workings of UK organizations.
The target purpose is to reduce the overflow of energy consumption, fight against climate change and improve the security of energy. This means that if the companies are conscious about their energy consumption and take measures to reduce their usage, it will also lower the carbon emissions emitted. This will help bring in better business opportunities, investments, and also security while dealing with waste.
Table of contents:
- What is ESOS?
- What is ESOS Phase 3?
- Qualification: what companies are covered under ESOS?
- How can a company benefit from ESOS compliance?
- How does it work?
- ESOS compliance: Steps to follow
- How is ESOS different from SECR?
- Conclusion
What is ESOS Phase 3?
ESOS Phase 3 is the third and most recent phase of the ESOS scheme.
It applies to organizations in the UK that meet the qualification criteria, which includes businesses with:
- 250 or more employees.
- An annual turnover in excess of €50 million (approximately £44 million)
- An annual balance sheet total in excess of €43 million (approximately £38 million).
These organizations are required to carry out an ESOS assessment every four years, which involves measuring their total energy consumption and identifying cost-effective energy-saving opportunities.
The deadline for compliance with ESOS Phase 3 is 5th December 2023. Organizations that fail to comply with the scheme may face penalties, including fines and reputational damage.
Qualification: what companies are covered under ESOS?
Not all UK companies have to comply with the ESOS compulsorily. Companies with an annual revenue of 50 million Euros and more are required to report the ESOS. If you are the founder of a small or medium size company, you are free from needing to provide an ESOS compliance report. It also includes large non-profit organizations.
It also includes companies run by 250 people or more, a member of a corporate group that fulfils either of the previously mentioned conditions.
However, in my honest opinion, the size of the company doesn’t matter. Even small or medium size companies can emit an excessive quantity of carbon emissions and consume a large amount of energy. I believe ESOS should require all companies to provide a report based on ESOS – which can soon be a reality.
How can a company benefit from ESOS compliance?
Most companies are unaware of the benefits and assume it is a burden. It becomes a lot easier to reduce energy use, which results in overall cost savings. The company also can attract better investments. Also, companies who fail to comply with the rules can attract penalties of up to 50,000 Euros.
The main benefits are:
Reduced energy costs: Businesses can reduce their energy consumption and save on energy costs by identifying cost-effective energy-saving measures.
Improved energy efficiency: ESOS assessments can help businesses improve their energy efficiency by identifying areas where energy can be used more efficiently and effectively.
Increased competitiveness: Energy-efficient businesses are more competitive and can be more attractive to customers, investors, and other stakeholders.
Compliance with regulatory requirements: It is a mandatory scheme in the UK. Complying with it can help businesses avoid penalties and fines.
Positive environmental impact: ESOS assessments can help businesses make a positive contribution to the environment and climate change mitigation by reducing energy consumption and greenhouse gas emissions.
Enhanced reputation: Implementing energy-saving measures and demonstrating a commitment to sustainability can enhance a business’s reputation and brand image.
How does it work?
Energy Savings Opportunity Scheme is primarily regulated by the Environment Agency of the United Kingdom. The companies are required to report to ESOS – audit all the processes and activities that are engaged in energy consumption. The companies are also required to list down cost-efficient processes and tactics to improve them every four years.
The required company needs to appoint someone who can complete the ESOS assessment. This is done considering certain criteria.
ISO 50001 certification
If the Energy Management System of the company is already regulated based on ISO 50001. In such case, the company needs to comply with the following:
Board level director needs to analyze the ISO 50001 results and verify that the organization is indeed ISO 50001 compliant. He should also confirm that the results and verification are accurate.
The Environment Agency needs to be informed about the same since the Environment Management System set under ISO 50001 already complies with the standards set in the ESOS.
Organizations need to comply with the ESOS in the following cases:
- Does not have an EMS
- Has an EMS, but doesn’t comply with ISO 50001
- It Complies with ISO 50001 EMS but doesn’t cover all the energy consumption under ESOS.
ESOS compliance: Steps to follow
Those companies that are new to ESOS regulations will find the following steps helpful for ESOS assessment:
Determine the total energy usage
This includes the total energy consumed by the company’s assets and operations – buildings, industrial operations, and transportation.
All types of fuels are covered under the ESOS with no exemptions. It includes renewables, electricity, gas, heat, and other fuels. It notifies that the company is only responsible for its energy consumed and not for the energy that may be supplied – especially in the case where the tenant renting the property is supplying the energy. In such cases, they are responsible.
For transportation, the price of the fuel is based on the purchase cost – either by the company or the employees. Public transport or transport for work via air or rail is excluded.
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Identifying the high energy consumption areas
This energy needs to account for 90% of the total energy consumption. You need to determine if ISO 50001, DECs, or GDAs apply to these energy-focused sectors. The ESOS assessment requires you to consider 90% of the total energy consumption for audit. The rest 10% can be excluded – considered as ‘de minimis energy consumption’.
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Designate a professional as the lead assessor
The lead assessor supports the company in different stages – helping with the calculation and identification of energy data, verifying the reports, and reviewing the submission.
They also assist the energy audit state to conduct the audit and determine the energy-heavy sectors. They need to approve that the audit is compliant and meets the minimum requirements.
Lead assessors are appointed to monitor and evaluate the overall ESOS assessment. They can either be an internal employee or independent professionals as long as they are registered by a recognized professional organization.
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Conducting the energy audit
The listed sites of energy consumption shall be reviewed using energy consumption profiling which uses different parameters to measure energy consumption activities and assets. This can be done with upgraded energy management and software.
- The audit needs to be for a continuous period.
- It needs to cover 12 consecutive months of data, covering 24 months before reporting.
- It should not include the data of a period that was already included in the previous report.
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Reporting to Environment Agency
Once the ESOS evaluation is completed, the company needs to submit a notice of conformity to the environmental agency.
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Maintaining records and implementing the recommendations
The final step is to comply with all the recommendations mentioned in the report to reduce the consumption of energy. Even though it is not mandatory, it fructifies the assessment and helps the company to benefit from the same.
How is ESOS different from SECR?
Energy Savings Opportunity Scheme and SECR (Streamlined Energy and Carbon Reporting) are two separate UK government initiatives aimed at promoting energy efficiency and reducing carbon emissions in large companies.
ESOS requires large companies to undertake energy assessments every four years to identify energy-saving opportunities in their operations. Companies must report their findings to the government and implement any recommended energy efficiency measures. It applies to large businesses that meet certain criteria, such as having over 250 employees or an annual turnover of more than £50 million.
SECR, on the other hand, requires large companies to report their annual energy use and carbon emissions, as well as any energy efficiency measures they have implemented. The aim of SECR is to encourage greater transparency around energy use and carbon emissions, as well as to promote the uptake of energy efficiency measures. SECR applies to large businesses that meet certain criteria, such as having at least 250 employees or an annual turnover of more than £36 million.
In summary, while both ESOS and SECR are aimed at promoting energy efficiency and reducing carbon emissions in large companies, ESOS focuses on identifying energy-saving opportunities via mandatory assessments, while SECR focuses on mandatory reporting of energy and carbon emissions.
Conclusion
Being energy efficient should be a priority of every organization – not just for the environment but also to ensure better cost efficiency.
Energy hierarchy. (2022, July 10). In Wikipedia. https://en.wikipedia.org/wiki/Energy_hierarchy
FAQs
What is ESOS (Energy Savings Opportunity Scheme)?
ESOS is a mandatory energy assessment scheme in the UK that requires large businesses to carry out assessments of their energy use and identify cost-effective energy-saving measures.
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What is ESOS Phase 3?
ESOS Phase 3 is a mandatory energy assessment and energy-saving identification scheme for large businesses in the UK. It requires organizations with 250 or more employees or an annual turnover of over €50 million to carry out an energy assessment every four years and identify cost-effective energy-saving opportunities. The aim of the scheme is to help organizations reduce their energy consumption and greenhouse gas emissions, improve energy efficiency, and ultimately save money on energy bills. The deadline for compliance with ESOS Phase 3 is 5th December 2023.
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What is the difference between ESOS and SECR?
ESOS focuses on identifying energy-saving opportunities via mandatory assessments, while SECR focuses on mandatory reporting of energy and carbon emissions for large companies.
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What is the purpose of ESOS?
The purpose of ESOS is to help large businesses in the UK identify cost-effective energy-saving measures, reduce energy costs, and improve energy efficiency.
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What are the benefits of ESOS?
The benefits of ESOS include reduced energy costs, improved energy efficiency, increased competitiveness, compliance with regulatory requirements, and positive environmental impact.
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Who is exempt from ESOS?
Companies with a turnover of less than £44 million or fewer than 250 employees are exempt from ESOS. Additionally, businesses that are already covered by ISO 50001 certification, Display Energy Certificates (DECs), or Green Deal Assessments are also exempt.
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How is ESOS calculated?
ESOS is calculated based on the total energy consumption of a business, including buildings, transport, and industrial processes. The assessment also takes into account the company’s energy use during peak periods.
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What is an ESOS lead assessor?
An ESOS lead assessor is an accredited professional who assesses energy use and identifies cost-effective energy-saving measures for a business. They also ensure that the ESOS assessment meets the regulatory requirements.
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How much does an ESOS assessment cost?
The cost of an ESOS assessment depends on the size and complexity of the business. However, businesses can expect to pay several thousand pounds for the assessment and associated costs such as implementing energy-saving measures.
