Introduction
The Energy Savings Opportunity Scheme (ESOS) has been a cornerstone of the UK's commitment to improving energy efficiency among large enterprises. As we move into Phase 4 of ESOS, it's crucial for organisations to understand the changes that lie ahead and how they will impact their operations.
ESOS, established under the Energy Efficiency Directive, mandates that large undertakings in the UK conduct comprehensive energy assessments and implement measures to enhance energy efficiency. To qualify as a "large undertaking," organisations must meet specific criteria: employing over 250 individuals, or have an annual turnover exceeding £44 million and an annual balance sheet total surpassing £38 million.
Key requirements of ESOS include auditing the energy consumption of over 95% of an organisation's activities, providing recommendations for reducing energy consumption, calculating energy intensity metrics, and hiring a lead assessor to verify compliance with the scheme.
Strengthening ESOS Legislation for Phase 4
With ESOS Phase 3 coming to a close on the 5th June 2024, and recognising the need for more tangible action on energy efficiency, ESOS legislation is undergoing significant changes in Phase 4. The most noteworthy change involves the introduction of a mandatory energy reduction action plan, ensuring that the recommendations generated through energy assessments lead to practical improvements in energy performance. This shift signals a more proactive approach to energy management, moving away from a checkbox compliance mentality to fostering a culture of sustainability.
This action plan will outline the steps to reduce energy consumption and the dates for their implementation, serving as a roadmap for continuous improvement throughout Phase 4 and beyond, and must be submitted by the 5th December 2024. Furthermore, for the first time, ESOS has introduced an annual reporting requirement. Large undertakings are now required to report against their action plans by the 5th December of each interim year (2025 and 2026) before completing their Phase 4 assessment by the 2027 deadline. And, in another first, submissions will be made available in the public domain, making it easier to hold organisations to account over their action plans.
Annual Reporting, SECR and Long-Term Benefits
One of the key parallels to draw is the similarity between ESOS Phase 4's new reporting requirements and those of the Streamlined Energy and Carbon Reporting (SECR) legislation. SECR, introduced in 2019, requires organisations to disclose information about their energy consumption and carbon emissions in their annual accounts. Whilst SECR is a distinct piece of legislation focusing on emissions, as opposed to energy, ESOS Phase 4 is aligning to a similar structure by necessitating the submission of an annual report detailing progress against the prescribed action plan.
Both ESOS Phase 4 and SECR reflect a broader trend in corporate sustainability reporting. Companies are increasingly expected to transparently communicate their efforts to mitigate environmental impact, showcasing a commitment to responsible business practices. Aligning the reporting frameworks allows organisations to streamline their processes and present a unified front in addressing energy efficiency and carbon reduction. Organizations should recognize that the gradual alignment of ESOS Phase 4 and SECR, and the disclosure of a long-term action plan, is not just a regulatory requirement but an opportunity to enhance operational efficiency, reduce costs, reduce emissions, and contribute to broader environmental goals. Investing in energy efficiency measures can lead to long-term financial benefits while positively impacting an organisation's reputation.
Implications for Organisations: Time to Act
As Phase 4 of ESOS approaches, it's paramount for organisations to start making arrangements to create their action plans ahead of the December deadline. Waiting until the last minute may lead to rushed decisions and missed opportunities for optimisation. Proactive planning ensures a smoother transition to the new requirements and maximises the potential benefits of energy efficiency measures, whilst ensuring that the submitted action plans are based on sound engineering, achievable targets, and realistic projects; crucial given that they'll be open to public scrutiny.
For organisations seeking support in creating and implementing their action plans, the team of specialists at Boxfish, a leading sustainability consultancy, stands ready to assist. With a wealth of experience in guiding organisations through compliance and sustainability initiatives, Boxfish can provide tailored solutions to meet specific needs and goals.
Conclusion
The changes to ESOS for Phase 4 herald a new era of proactive energy management for large undertakings in the UK. The introduction of mandatory action plans aligns with a broader global push towards sustainability and responsible corporate citizenship. Organisations must recognise the importance of not only complying with regulations but actively participating in the transition to a more sustainable future.
As the compliance landscape evolves, the team at Boxfish encourages organisations to act now, initiating the process of creating their action plans having freshly conducted their Phase 3 assessments. By doing so, they not only fulfil regulatory obligations but also position themselves as leaders in the journey towards a greener and more efficient business landscape. Boxfish is ready to support organisations in navigating these changes, ensuring a smooth and successful transition to a more sustainable and energy-efficient future.
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