ESOS, the UK Government’s Energy Savings Opportunity Scheme is now in its third phase. Though the compliance deadline for December 2023 may sound far away, EcoAct Senior Consultant, Naomi Rich explains why it’s time to start preparing for ESOS Phase 3 now.
With energy prices continuing to rise to unprecedented levels, it is more important than ever to ensure your organisation is running as efficiently as possible. Energy efficiency slipped down the agenda for many organisations throughout the pandemic as buildings went unused and changes in business practices put financial pressure on many. However, cutting energy use is now becoming a key priority across all sectors.
ESOS is the Government’s mandatory energy assessment and savings scheme for organisations in the UK. Its aim is to help support your organisation to identify and implement cost effective energy efficiency measures. While ESOS is mandatory for certain organisations in the UK, complying with the scheme has broader benefits to businesses, including reducing exposure to volatile energy prices and reducing emissions. Currently in the third phase of the scheme, important qualification and compliance dates are fast approaching. We outline everything you need to know to become ESOS-compliant below.
Why you should get started on ESOS Phase 3 now
Each phase of ESOS runs in a cycle which lasts for four years, and we are currently in Phase 3. Organisations now understand the data requirements for ESOS. Data collection is easier for most businesses in the third phase compared to earlier phases of the scheme; however it can still be a lengthy process. Even though the compliance deadline is over 12 months away, we strongly recommend starting now.
What are the qualification criteria for ESOS Phase 3?
The date for qualification for ESOS Phase 3 is 31st December 2022 and is now just over a month away. The qualification criteria for ESOS Phase 3 has changed slightly since Phase 2, and those businesses who meet one or both of the following criteria by the qualification deadline will need to comply with the scheme:
- Employs 250 or more people
- Or has an annual turnover in excess of £44 million, and an annual balance sheet total in excess of £38 million.
Additionally, those part of a corporate group which includes a UK undertaking that meets either of the above need to comply.
What changes do you need to be aware of for ESOS Phase 3?
Following a government-led consultation, there are several changes coming into force for ESOS Phase 3 to strengthen the scheme and allow greater energy saving opportunities. Below we outline the changes in this phase, and what this means for your business.
- In this phase, there will be a standardised template for including compliance information in the ESOS report. This has been introduced with the aim of improving the quality of the audit.
- De minimis exceptions have been reduced from 10% to 5%, and this change should uncover new opportunities to make energy savings and tackle Scope 3 emissions (e.g. fleet audits that previously fell into the de minimis for many).
- ESOS reports need to include energy intensity metrics in line with SECR.
- There is now a requirement to share ESOS reports with subsidiaries, this is particularly important for businesses with complex organisational structures.
- There is a requirement for ESOS reports to provide more information on next steps for implementing recommendations which aims to enable companies to make it easier to realise the benefits from the recommendations.
- Participants in the scheme need to set a target or action plan following the Phase 3 compliance deadline. In the 12 months following the deadline, businesses are required to set a target/action plan and report annually on their progress on a comply-or-explain basis through SECR or a specialised format if not captured by SECR. For many, this will provide additional focus to their Scope 1 and 2 science-based targets, for others it will require them to think about targets for the first time.
- Collection of additional data for compliance monitoring and enforcement is also required. This additional data includes data on corporate structure, details of energy consumption and emissions, and energy intensity metrics.
What can you do to prepare for ESOS Phase 3?
- Ensure you have a robust evidence pack – The Environment Agency reduced auditing throughout the COVID-19 pandemic. They are now looking again at submissions, so be prepared to answer questions about what happened up to 3 years ago.
- Don’t delay the process – data collection can be a lengthy procedure, so it is best to get a head start on preparing the surveys for ESOS.
- Go beyond compliance – Look at ESOS as more than a tick-box compliance exercise and your organisation will gain much greater value from the scheme including contributing to your net-zero ambitions. Looking ahead to Phase 4, it is expected that there will be a greater focus on net-zero.
For more information on energy efficiency access our Factsheet. Our team of experts can support you with your ESOS compliance and survey submissions, get in contact with us to learn more.
