7,000 businesses compelled to report energy use and potential energy saving strategies

Cutting energy consumption is clearly concentrating government minds as more than 7,000 businesses will soon be compelled to produce detailed reports on energy use or face fines.

The Department of Energy and Climate Change (DECC) is finalising the Energy Savings Opportunity Scheme (ESOS) to be announced in next couple of weeks.

Add to this the Coalition’s very public promotion and support for energy savings strategies in the public sector, together with the Energy Act’s impending energy efficiency imperatives, and the sustainability agenda moves even further to centre stage.

All these reinforce the reasons why SaveMoneyCutCarbon is here, growing and delivering sustainable energy saving strategies across the widest range of businesses. It should be crystal clear now that better energy-use management makes compelling business sense.

ESOS is the UK’s response to a new energy efficiency directive from the European Union. The aim is to help the EU meet its target of reducing energy consumption by 20% by 2020. Currently, the EU as a whole is ahead of carbon emissions reductions targets, unlike Britain so the country needs to shift up a couple of gears pronto – and six years is no time at all.

Companies with more than 250 employees, a turnover of more than £41.5 million or an annual balance sheet total of more than £35 million will now be affected, that’s around 10 times more than previously.

DECC is announcing the details sometime in June but, in outline, businesses will have to provide:

• A review of the total energy use and energy efficiency
• Energy use per employee, focusing on key buildings, industrial operations and transport activities
• Clear information on potential savings, identifying and quantifying cost effective energy savings opportunities
• Wherever practical these should be based on life cycle assessment not simple payback periods
• Identification of an approved ESOS assessor (either an in-house expert or an external consultant) to conduct the assessment.

ESOS could deliver energy savings of nearly £2 billion from 2015, which is why the scheme is being seen in a more positive, financially-driven light than the current frameworks such as the Carbon Reduction Commitment, Mandatory Carbon Reporting rules and Climate Change Levy.

DECC advises that compliance with the rules will cost just a fraction of the energy savings on offer. The estimated £19m cost to businesses would be balanced by overall savings of £1.9bn between next year and 2030.

Running the numbers, we think the potential savings should be much larger. DECC has taken a conservative approach in its calculations, which is understandable, given the record of not achieving energy saving, carbon reduction targets. DECC estimates that only 6% of energy saving recommendations identified by companies will be picked up and turned into real action.

In our experience, companies that are shown substantial savings that are sustainable over the longer period grab the opportunity with both hands so the savings could easily be three times the government figure.

DECC is expected to unveil a list of approved ESOS assessors to be managed by the Environment Agency – a flood of applicants is expected (sorry!)

But the good news is that companies which have an energy manager would not need to hire external auditors if they can prove that they have completed the job in-house. That will be a wake-up call for those companies frozen in the glare of complex sustainability strategies, or simply not that bothered.

It also seems certain that DECC will accept other forms of certification such as the Carbon Trust Standard and ISO 50001 energy management standard, as long as these cover 90% of the business operations as required by the legislation.

ESOS compliance

The Carbon Trust estimates that around 500 Carbon Trust Standard bearers will be large companies that would be caught up by ESOS, while CRC data suggests that 4,400 to 6,400 large enterprises are already reporting on their energy use, meaning the new ESOS regulations will not represent a huge step up in compliance requirements for those firms that are already taking steps to manage energy use.

And Jon Williams, Head of CSR and Sustainability at Achilles, the organisation which operates the Certified Emissions Measurement and Reduction Scheme, advised SME Web: “The ESOS scheme is already being seen by businesses as a real ‘double-edged sword’. Many businesses don’t measure and record their energy use and face a big administrative burden unless they get external support.

However, for those not already focused on carbon reduction and energy efficiency, ESOS compliance represents short-term pain for long-term gain. Ultimately, this is a fantastic opportunity for companies to save thousands of pounds on their energy bills while communicating positive messages on their achievements.”

We’d go further – beyond rapid payback timescales to whole lifecycle perspectives – and say that companies which grasp the commercial benefits of going green by cutting energy and water consumption will be the ones most likely to survive and thrive in the long term.