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18 November, 2019

With the deadline for compliance with the ESOS (Energy Savings Opportunity Scheme) audit rapidly approaching (5th December 2019) are you ready? Here is a summary of what you need to know…

Article 8

Article 8 of the EU Energy Efficiency Directive states that all Member States must implement high quality and cost- effective energy audits for all "large enterprises" at least every four years.

What is ESOS?

ESOS stands for Energy Savings Opportunity Scheme and is a mandatory energy assessment scheme for UK organisations that meet the necessary requirements. The Environment Agency is the UK scheme administrator.

Who qualifies for the ESOS Audit?

Organisations that qualify for ESOS audits are companies, not - for - profit bodies and any other organisations in the UK (not including public sector). The organisation must also have 250 plus employees, or an annual turnover in excess of £44,845,000 and an annual balance sheet in excess of £38,566,700.

An organisation can qualify for ESOS if they are an overseas company with a UK registered establishment, if they have 250 plus UK employees and pay income tax to the UK.

A large organisation with subsidiary companies can separate themselves and have their own independent ESOS audit. An agreement between the parent company and the subsidiary must be agreed in writing and signed appropriately. The subsidiary must then nominate a person to be the lead participant on behalf of the others.

How is the audit carried out?

A series of audits will take place to see how energy efficient the organisation is by a lead assessor. Recommendations are then given by the assessor which have to be complied with.

At least one board level director must review a compliance filing before it is submitted. This contains information such as any steps taken, which organisations are covered and who the lead assessor was. An evidence pack can then be produced and must be kept in case the Environment Agency wish to consider the accuracy of the audits.

Disadvantages of the ESOS Audit

  • The effects of not passing the audit could be quite steep in terms of costs to a business with fines of up to £50,000.
  • Negative publicity of poor results.
  • Poor results could deter potential clients who may look for companies to work with who have a keen interest in energy efficiency.
  • Companies may feel obliged to keep up with new energy efficiency products that may be developed and this could be quite costly to them.
  • ESOS audits could be time consuming for a company due to all of the work that goes into passing the audit.

Advantages of the ESOS Audit

  • Regulates large companies to ensure that they are taking how energy is produced and used seriously.
  • ESOS audits can set an example for other international companies.
  • Encourages sustainability with the use of energy resources.
  • Compliance with the ESOS audit could attract more business due to positive publicity.
  • Creates more job roles within a company as a specified person or persons could be employed to manage the company's energy efficiency.

Previous ESOS Audit and the impact this will have on the audit in December 2019

The last ESOS audit was in 2015. This is referred to as Phase 1. Many organisations did not have enough auditors to assess them for the audit and so the results for the ESOS audit were poor. Due to the fact that the Phase 1 audit in 2015 gave poor results, the evidence packs that will be issued in Phase 2 are expected to be heavily audited, so there can be no room for non - compliance.

Most organisations are now expected to be more vigilant with the audits and have a higher pass rate than in 2015. The upcoming Phase 2 audit is due on the 5th December 2019. Are you ready??

For further information please contact:

Amelia Couper

T: 01772220202

E: amelia.couper@forbessolicitors.co.uk

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