ESOS - UK Compliance Targeting Improvement

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With challenging climate change targets being set in place by the UK Government to reduce emissions by 78% by 2035 compared to 1990 levels, acting now has never been more important for UK organisations in a bid to ready themselves for the work required. This will involve setting realistic goals, outlining strategies, and implementing these in line with Government targets.

In April 2021 NUS Consulting Group released a research note focusing on a UK compliance where companies have a mandatory commitment to report on their UK energy use and associated greenhouse gas emissions - Streamlined Energy and Carbon Reporting (SECR). This Legislation undoubtedly led to companies asking the question, - having undertaken SECR and highlighted (within our annual reporting) the negative effect our company is having on the environment, what can we do to improve the energy use in question (Electricity/Gas/Transport).

This is where the Energy Savings Opportunity Scheme (ESOS) comes in and begins to hold a greater importance, in contrast to where it was previously filed away as a compliance piece and potential tick box exercise. Focusing on the same energy types as SECR, ESOS requires large undertakings to complete site energy audit(s) as a representation of the company’s UK site portfolio. These audits will review how the energy is recorded, used, and from this highlight areas for improvement in energy efficiency (within site audit reports) with the aim of reducing energy consumption, being more energy efficient in its use and reducing carbon emissions.

For the qualification date for the third ESOS compliance period (31 December 2022) a large undertaking is any UK company that either:

  • employs 250 or more people
  • has an annual turnover in excess of £44 million, and an annual balance sheet total in excess of £38 million

ESOS runs on a 4-year cycle with the current Phase (3), requiring compliance by the 5th of December 2023. While implementing the recommendations gained from the site audit reports is not a mandatory part of the compliance, companies will likely have a different outlook in terms of the implementation as opposed to previous Phases (1 & 2). This will be due to a number of factors, but most likely coming as a push from within the business to reduce carbon emissions (e.g. owner, stakeholders, shareholders etc.) or even from the clients of the organization in question, having chosen to impose certain standards on their suppliers in order to remain part of the supply chain. Targets will need to be set and planning for Phase 3 agreed in order to achieve the maxim benefit.

While this research note has focused on the UK and organizations situated within, companies who have an international presence across Europe will need to widen their focus. This is due to how ESOS derives from - in the form of European Legislation - Energy Efficiency Directive (EED).

This directive holds a number of Articles, with Article 8 in particular requiring member states to undertake energy audits by 2015 and then every 4 years after. With each member state taking their own understanding of EED Article 8 (ESOS for the UK), the complexity of meeting the compliance in a number of countries becomes an intricate time-consuming procedure.

In its 3rd Phase of the compliance, it’s clear that EED Article 8 and the way that each member state has implemented this (UK included), is here to stay. The key aspect for companies in scope, is in gaining the most benefit in having to comply with the legislation, ensuring they reap the benefits of having their sites audited by implementing the recommendations highlighted within the report. A targeted approach is a must to ensure companies gain the most from the compliance.

Many industrial and commercial companies have created an environmental, social and corporate governance (ESG) policy, which is dedicated to climate change and reducing the organization’s impact on the environment, i.e., carbon reduction or neutrality commitments by a specific date. Several of them have set ambitious targets for transitioning to renewable energy.

NUS is a leading energy management and sustainability consulting firm with in-depth knowledge and experience, assisting businesses to develop detailed strategic plans to achieve their energy and sustainability objectives.

Our UK office has a dedicated team supporting clients with energy and carbon compliance reporting as well as other energy performance services, including but not limited to Pan European support in the implementation of the Energy Efficiency Directive (EED) Article 8, Energy Savings Opportunity Scheme (ESOS), Climate Change Agreement (CCA), and Streamlined Energy and Carbon Reporting (SECR). Additionally, our UK office recently hosted a webinar on “Your Net-Zero Journey” which received very positive feedbacks from clients and media.

Please visit the NUS UK office site for more information.


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Cameron Skinner