Comparing the Advantages and Regulatory Approaches of ESOS and SECR

Business Insights
08/11/2023
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Background

In the era characterized by increasing environmental concerns and growing urgency for sustainable business practices, both the Energy Savings Opportunity Scheme (ESOS) and Streamlined Energy Carbon Reporting (SECR) have taken center stage in sustainable energy reporting, promoting environmental responsibility and energy efficiency in the UK. This article aims to shed light on SECR and ESOS unique features as well as highlight their collaborative role in advancing the UK's sustainability aspirations.


Streamlined Energy Carbon Reporting (SECR)

Large UK enterprises are legally bound to comply with SECR, a regulatory framework compelling certain organizations to disclose their energy consumption and associated emissions. SECR was enforced on 1st April 2019, affecting nearly 12,000 companies in the UK.


SECR provides a multitude of benefits including:

  • Promoting transparency, SECR mandates broader corporate disclosure of energy usage, emissions, and sustainability actions,

  • Enhancing accountability, motivating firms to improve energy efficiency and reduce carbon footprints,

  • By streamlining reporting, SECR simplifies the process, reducing administrative complexities,

  • Promoting cost reductions through energy – efficient initiatives,

  • Enhancing organization's reputation aligning with global sustainability goals,

  • A valuable tool for businesses navigating a greener future.


Energy Savings Opportunity Scheme (ESOS)

ESOS, a mandatory energy assessment and energy-saving initiative, requires ‘large' organizations to calculate their total energy usage and conduct energy efficiency audits for at least 95% of energy-consuming operations. To comply with ESOS regulations, businesses must assess their energy consumption through audits conducted by an accredited ESOS Lead Assessor. These audits aim to identify cost-effective energy efficiency recommendations that enhance overall energy performance.


ESOS provides substantial benefits such as:

  • Cost reductions within an organization due to energy audits that identify opportunities for cost- effective savings.

  • Ensuring the company runs as energy efficiently as possible.

  • Enhanced environmental responsibility due to help in the carbon emissions reduction.

  • Competitiveness by encouraging the benchmarking of energy performance against industry peers.

  • Enhanced energy efficiency that aligns businesses with sustainability goals, creating a more eco-friendly, cost-effective, and competitive business landscape


SECR vs. ESOS

  • Compliance Criteria

    • SECR (at least 2)

      • 250 employees+,

      • annual turnover £36 million+,

      • balance sheet £18 million+.

    • ESOS (1 or both)

      • 250 employees+,

      • annual turnover £44 million+ and balance sheet £38 million+ (ESOS Phase 4 will match SECR criteria).


  • Exemptions to the Criteria

    • SECR

      • Business exists only for part of the reporting year,

      • Annual energy consumption is below 40,000 kWh,

      • Unquoted companies can apply for an exemption where it is not practical to obtain some or all the SECR information,

      • If company directors believe that disclosing SECR data would be detrimental to the company.

    • ESOS

      • Annual energy consumption below 40,000 kWh,

      • Overseas energy use is excluded from ESOS,

      • Business covered by ISO 50001,

      • Organizations subject to Public Contracts Regulations (2006), although some might be included.


  • Reporting Requirements

    • SECR

      • Energy use and GHG emissions in a financial year,

      • The energy efficiency actions taken,

      • The methodology used to calculate the information,

      • At least one intensity ratio.

    • ESOS

      • Total organizational energy from buildings, transport, and industrial processes, energy intensity metrics.


  • Compliance Intervals

    • SECR

      • Organizations report on their financial year annually from April 1, 2019.

    • ESOS

      • Every 4 year (current Phase 3 extended by UK Government to June 5th, 2024).


  • Penalties for Non-Compliance

    • SECR

      • £40,000

    • ESOS

      • £500 a day or £50,000 in total


Challenges associated with SECR and ESOS

Complying with regulations like SECR and ESOS can present several challenges for organizations, including complex requirements, potential data inaccuracies, evolving regulations, and overlapping reporting obligations. Resource limitations and the complexity of ESOS audits might further complicate the compliance process. Failure to comply with these regulations can result in financial penalties which highlights the need for precise management.


Conclusion

In the ongoing pursuit of a greener and more sustainable future in the UK, businesses are presented with a unique opportunity to harness the complementary strengths of both ESOS and SECR. Rather than viewing them as competing entities, business can harness their collective potential to create a more sustainable and energy-efficient corporate environment. Collaborating with professional service firms like Boxfish for support in environmental and energy compliance offers a prudent and cost-effective approach to achieve this synergy as well as ensuring precise reporting, skillfully navigating the regulatory complexities, and effectively mitigating compliance risks.


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