Are businesses ready for ESOS?By: Mat Lown

With the focus on minimum energy efficiency standards (MEES) making it illegal to rent out energy inefficient buildings in 2018, some in the property sector may have overlooked the introduction of another initiative aimed at improving energy efficiency, the Energy Savings Opportunity Scheme (ESOS).

Qualifying businesses will need to have carried out energy assessments under the scheme by 5 December this year. So, what is ESOS, which companies qualify and what affect will it have on the property sector?

ESOS has been introduced by the UK Government to reduce overall energy consumption and meet the requirement of Article 8 of the European Energy Efficiency Directive. As well as reducing carbon dioxide emissions, a major part of the scheme’s rationale is to cut business energy costs, with the Government estimating savings of around £1.6 billion a year if the energy-saving opportunities highlighted by ESOS audits are realised.

ESOS will require large organisations to undertake an energy audit by 5 December 2015, and at least once every four years thereafter and report compliance to the Environmental Agency.
Will your organistion be impacted by ESOS?
Your organisation will need to participate in ESOS if, on 31 December 2014:
It employed more than 250 staff or had an annual turnover exceeding €50 million and a balance sheet exceeding €43 million.
It is part of a corporate group where one part exceeds any of the above thresholds in the UK. In this case, all UK parts of a group have to take part even if the parent is based overseas.
What do you need to do to comply?
If your organisation meets the criteria for ESOS, you will need to measure and report your total energy usage for buildings, transport and industrial processes over a 12-month period, up to and including 31 December 2014, along with complete supporting records/evidence. With this information, you must then identify areas of significant energy consumption, defined as that accounting for at least 90% of your total energy consumption.
It is essential that a Lead ESOS Assessor is appointed at an early stage to carry out, oversee and review the energy audit of areas of significant consumption as well as the overall ESOS assessment.
Acceptable auditing standards under the scheme are ESOS compliant energy audits, ISO 50001 certification (the International Standards Organisation’s energy management system) and Display Energy Certificates or Green Deal Assessments for buildings.

Get a director to review the audit findings and then notify the Environment Agency by 5 December 2015 that your organisation has completed its ESOS compliant assessment and ensure the assessment details are filed.
The scheme’s key dates are as follows:
All organisations should have determined whether they have needed to qualify for ESOS by 31 December 2014.
ESOS compliant audits need to be undertaken during 2015.
5th December 2015 is the deadline to inform the Environmental Agency that your organisation is compliant with ESOS.
What are the risks for non-compliance?
Qualified organisations that fail to comply with ESOS will be liable for a penalty up to £50,000 and details of non-compliance will be published.
Do organisations have to implement energy-saving measures?
The scheme itself merely requires companies to carry out an audit; there is no obligation to implement any changes. However, once the effort has been made to analyse energy use and identify any potential cost-saving and energy-saving measures, companies should not overlook the benefits of following these through into action. Complying with the scheme should be seen as the beginning of a process rather than as a process in its own right.
Conclusion
Most organisations of a size that fall under the remit of ESOS would be expected to have a recognised energy audit scheme in place. But, ESOS places emphasis on having this information centralised, which is particularly relevant to firms with property portfolios scattered across the UK.
Some may feel that ESOS is yet more red tape. However, for any firm looking to manage energy cost, carbon emissions and risk, the information required by ESOS would need to be compiled anyway.
There is also the benefit of ESOS helping to highlight areas where building running costs and therefore tenant service charges could be reduced. This will help competitiveness when finding tenants.
Although affecting larger firms, the principles behind ESOS of providing information for effective energy management could also benefit smaller organisations. It is also important for them to identify poorly performing property assets and reduce the risk of not being able to rent them out as well as targeting buildings that would benefit from investment to improve their appeal to tenants and boost rental income.

About the author

Mat Lown is a Chartered Building Surveyor, Partner and Head of Sustainability at construction and property consultancy, Tuffin Ferraby Taylor.