ESOS compliance – does your organisation need to comply?


In response to the Energy Efficiency Directive, the Department for Energy and Climate Change (DECC) through the Energy Savings Opportunity Scheme Regulations 2014 established the Energy Savings Opportunity Scheme (ESOS) for large undertakings and their corporate groups. The introduction of the scheme is estimated to lead to £1.6bn net benefits, with the majority being felt by businesses as a result of energy savings. The Environment Agency has been appointed as UK scheme administrator, as well as the regulator for England, with other public bodies serving as regulators for other UK jurisdictions. To aid understanding and implementation of ESOS, DECC and the Environment Agency have published guidance which can be accessed here and here.

What is ESOS?

ESOS is a mandatory energy assessment and energy saving identification scheme for large undertakings and corporate groups. It is applicable throughout the United Kingdom.

Who does it apply to?

ESOS applies to all large undertakings on the qualification date, of 31 December 2014 and every four years thereafter. An undertaking is widely defined as ‘(a) a body corporate or partnership, or (b) an unincorporated association carrying on a trade or business with or without a view to profit’.

A large undertaking is defined as any UK undertaking that

  • Employs 250 or more people or
  • Has an annual turnover in excess of €50 million and a balance sheet total in excess of €43 million.

An undertaking must also participate if it is part of a corporate group, which includes another UK undertaking that meets either of the conditions. To determine whether ESOS applies it is necessary to consider your organisation’s corporate legal structure as different undertakings with a common parent may impact on your qualification for the scheme.

There are also exemptions to the ESOS scheme. ESOS does not apply if your organisation is defined as a Contracting Authority under the Public Contracts Regulations 2006, your organisation is subject to an insolvency procedure or it does not meet the qualification criteria outlined. Housing associations are treated as contracting authorities under the Public Contract Regulations. For housing associations though they could be caught by ESOS through another undertaking where they have a common parent. Additionally, due to the savings that could be made in terms of energy efficiency and financial net benefits voluntary participation for public bodies has also been recommended by DECC and the Environment Agency.

If applicable, how do you comply?

To comply participants are required to engage in a three part process which includes:

  1. Measuring total energy consumption: all energy consumed from buildings, transport and industrial processes (known as significant energy consumption) from combustible fuels, renewable energy and electricity using verifiable data
  2. Conducting an energy audit to identify cost effective energy efficiency recommendations

o   Significant energy consumption must be subject to one of the following:

  • ESOS Energy Audit
  • Display Energy Certificate
  • Green Deal Assessment
  • ISO50001 Energy Management System

o   If an organisation has ISO 1401 management system where there is evidence of energy use, parts of it can be integrated into the ESOS Audit

o   Audits can take place at anytime within the four year to show compliance providing it is done by compliance date

o   Implementation of recommendations from ESOS assessment is not mandatory but it is necessary to enjoy financial benefits

  1. Report compliance to Environment Agency: ESOS assessment must be viewed by board level director and Lead Assessor and the Environment Agency notified that the participant has complied with the scheme.

It is also a requirement to have a Lead Assessor, who would be responsible for various roles including undertaking, overseeing or reviewing the ESOS audit, identifying savings opportunities and maintaining an ESOS Evidence Pack. This should provide a record of the responsible undertakings that make up the participant under the scheme, details of the Lead Assessor and board level director, calculation of total energy consumption and steps taken to compliance.

The regulators has the authority to apply civil penalties against any participants ranging from fixed amounts of £5,000 to £50,000 and variables of £500 for each day of non-compliance for certain categories. The Environment Agency also has the authority to ‘name and shame’ participants who are non-compliant.

If you would like advice about the applicability of ESOS to your organisation or any other regulatory matter please contact Daniel Milnes.

Nat Avdiu

About Nat Avdiu

Nat Avdiu is a Paralegal in the Contracts and Projects team at Forbes Solicitors. Nat provides updates for clients on a range of issues including: governance, data protection and freedom of information, procurement and charity law.
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One response to ESOS compliance – does your organisation need to comply?

  1. George Lamont says:

    ESOS – The panic is now setting in, over 1000 are now compliant.
    A good source for more info from Jo Scully is EA blog

    You can also read more at ESOS Deadline
    or ESOS lead assessor

    10% is a poor result with only a few days left to comply. We have the capacity to accommodate more companies that need a Lead Assessor

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