Business urged to act now to avoid ESOS penalties

Non-compliant businesses have been advised by commercial energy and sustainability consultancy Advantage Utilities to take remedial action immediately, with the Environment Agency indicating that any businesses failing to comply could receive a fine of up to £90,000.

The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment scheme for large organisations based in the UK. It is designed to give organisations the opportunity to conduct an in-depth review of their energy use in order to identify ways to improve energy efficiency. This allows businesses to reduce their usage and costs whilst helping to tackle climate change and lead the UK towards a higher level of energy security.

ESOS requires organisations that meet the qualification criteria to audit and report on at least 90% of their energy usage to the Environment Agency every 4 years. ESOS has 4 phases (sometimes called stages) and deadlines for submission. The ESOS Regulations have been under consultation and the government response detailing changes for Phase 3 and Phase 4 of the scheme was released in August 2022.

“We are now in Stage 3 or Phase 3 of ESOS where the financial thresholds have been reduced leading to more companies qualifying and needing to act,” explains Dr. James Crosby-Wrigley, Head of Sustainability at Advantage Utilities.

“A UK organisation must comply with ESOS stage 3 if on the qualification date it either employs 250 or more people, has an annual turnover in excess of £44m and an annual balance sheet total in excess of £38m, or is an overseas company with a UK-registered establishment which has 250 or more UK employees (paying income tax in the UK),” he adds.

The Environment Agency has historically been lenient with Phases 1 and 2 but Dr. Crosby-Wrigley warns that they will accept very few excuses for noncompliance in Phase 3, with fines up to £90,000 for non-compliance.

For businesses that qualify but are yet to complete their Phase 3 compliance, he advises two key routes to take. “‘The majority of organisations comply either through the development and maintenance of a certified ISO 50001 energy management system or via an energy audit route,” says Dr. Crosby-Wrigley.

The steps to completing an energy audit include:

• Appoint an ESOS Lead Assessor
• Report on all energy use including electricity, gas, fleet
• Conduct an energy assessment to identify opportunities to increase efficiency
• Present findings to and achieve sign-off by a director listed on Companies House
• Submit a notification of compliance to the Environment Agency
• Maintain an evidence pack

“With the deadline day now upon us, it’s clear that time is of the essence when it comes to Phase 3 compliance. Getting expert help and initiating an energy audit is the quickest and most effective route to making sure your business is meeting the necessary ESOS requirements,” adds Dr. Crosby-Wrigley.