*Updated April 2021: With the qualification date for the third ESOS compliance period approaching, businesses must determine whether they must take part in ESOS.  

31 December 2022 is the ‘deciding’ date about whether or not your organisation qualifies for ESOS reporting.  

Organisations that qualify for ESOS reporting must understand their responsibilities, and update their capacity for energy auditing and reporting now, to make the process of compliance easier.  

What is ESOS?

ESOS stands for the Energy Savings Opportunity Scheme. It was established by the UK government to implement Article 8 (4 to 6) of the EU Energy Efficiency Directive (2012/27/EU).

It is mandatory for organisations in the UK that meet certain criteria to undergo an ESOS energy assessment, administered by the Environment Agency. These organisations must carry out an ESOS assessment every four years to identify cost-effective energy saving measures.

The scheme was introduced to large companies with the requirement for them to reduce their carbon emissions and save on their energy. These companies would undertake an energy audit that would then be overseen by an approved ESOS Lead assessor every four years.

What’s included in an ESOS audit?

  • the energy used
  • industrial processes
  • transport

Which organisations are affected by ESOS?

Organisations that meet the ESOS definition of a large undertaking:

  • Employ 250 or more people
  • Annual turnover in excess of 50 million euro
  • Annual balance sheet total in excess of 43 million euro
  • Overseas companies with a UK-registered establishment with 250 or more UK employees (paying income tax in the UK)

Over 10,000 companies in the UK will need to comply.

If your business does have to comply, we can arrange a team of Energy Auditors to come and assess your business and provide guidance in the way forward. You can read more on ESOS compliance.

ESOS Phase 2

What was ESOS Phase 1?

Phase 1 of ESOS. It applied to companies that were assessed before 31 December 2014 as ‘large companies’; having more than 250 employees and/or a turnover exceeding 50M Euros in their last published accounts.

The process required businesses to:

  1. Calculate total energy consumption
  2. Identify areas of significant energy consumption
  3. Appoint a lead assessor (internal or external) who is registered with an approved organisation
  4. Identify energy-saving opportunities
  5. Notify the Environment Agency
  6. Keep records

ESOS 1 required energy audit submissions by December 2015. Less than two-thirds of companies actually complied with the requirement at the time.

What was ESOS Phase 2?

ESOS 2 also applied to large businesses. It was the second submission in an ongoing 4-year cycle. Many businesses had to conduct an energy audit and produce a plan to make energy efficiency savings.  

Although we are leaving the EU, ESOS was adapted into the UK Energy regulations.  Therefore, UK businesses had to comply with ESOS Phase 2, whose completion deadline was 5 December 2019. Businesses were assessed as at 31 December 2018 to determine whether they qualify. 

What happened if ESOS Phase 2 dates were not met?

If qualifying organisations failed to meet ESOS Phase 2 dates, they would face punitive action:  

  • A fine of up to £50,000  
  • and/or a fine of £500 per day of non-compliance (for a maximum of 80 days).  

The Environment Agency took punitive action against companies such Gumtree and eBay during the ESOS Phase 2, with fines ranging from £1,560 to £45,00 

What steps can businesses take ahead of the qualifying period?

Businesses should look to incorporate smart sensor technology into their operations to make the process of auditing energy usage easier.  

Smart sensors can help organisations establish a  real-time overview of business energy usage and needs, provide a thorough understanding of current operational energy usage, and identify areas of wastage. 

ESOS encourages businesses to look for ways to improve their carbon footprint, and businesses that qualified for Phase 2 must find ways to improve their energy usage.  

Automating energy processes in operations can drastically reduce energy wastage, improve compliance protocols and extend the life of mission-critical hardware. 

Businesses have a responsibility to think to the future; and can save on costs by thinking green.  

The benefits of ESOS reporting

Although ESOS reporting does add some additional energy administration, it can also unearth valuable opportunities for energy efficiency.

Executing the energy efficiency program uses scarce resources but will provide lasting benefits:

  • Reduced energy costs
  • Improved financial performance as a result
  • Demonstrate corporate social responsibility
  • Opportunities to do business with ‘eco-friendly’ companies

There is a framework for ESOS Phase 2 compliance.  It is best to commit to an energy efficiency plan now to maximise the energy cost savings benefits, and also to limit the impact on resources.

An alternative approach is to achieve ISO15001 which gives you an ongoing corporate energy management system and also a clear recognition that your organization is striving to improve energy efficiency.

Using the services of an expert utilities team can help you with both the reporting and with recommendations for improving your organisation’s energy efficiency.

Expert ESOS management

At Smarter Business, we offer a range of solutions aimed at guiding businesses through ESOS compliance and beyond. We help businesses drive efficiencies, reduce consumption and realise cost savings from their ESOS obligations.

Find out more