What is ESOS?

ENERGY SAVINGS OPPORTUNITY SCHEME

This government legislation is called the Energy Savings Opportunity Scheme and was introduced to encourage large UK based organisations to implement energy savings measures. Organisations that are required to comply must have energy audits carried out every four years to measure the energy they use in their buildings, transport and processes. The audits will be accompanied by cost effective recommendations which can help businesses reduce the amount of energy they use, improve energy efficiency and reduce their carbon emissions. The scheme is mandatory for those organisations classified as large undertakings and is expected to affect up to 10,000 UK businesses.

ESOS criteria

ESOS applies to your business if it meets either or both of the following criteria:

You have more than 250 employees
You have an annual turnover of more than £44m+ and a balance sheet £38m+ as of 31st December 2022.

Only one of the businesses in the corporate group umbrella needs to meet the criteria in order for you to qualify although there are rules to allow parts of the group to disaggregate from or aggregate with others in the group in order to meet compliance. There also rules regarding joint ventures, franchises, trusts, private equity firms, private finance initiatives, overseas companies with UK based undertakings and whether or not Public Bodies or Higher Education Institutions qualify under the scheme. Organisations which are very close to the qualification criteria or have recently grown or shrunk, may need to look back over several accounting periods to confirm whether or not they need to comply with Phase 3. Examples of organisations that may need to comply include:

limited companies
public companies
trusts
not-for-profit bodies (please note that most larger charities will be a corporate body and as such are considered to be an undertaking)
universities which get more than half their funding from private sources.
partnerships
private equity companies or limited liability partnerships
unincorporated associations
care homes that do not qualify as public bodies

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Higher education institutions (HEIs)

Public bodies are excluded from the scope of ESOS, however public body status in the HEI sector does not universally apply. This reflects different funding levels from public and private sources. ESOS has been implemented on the basis that it applies to HEIs that self-declare as private sector and are sufficiently large to trigger ESOS qualification.

You are not required to participate in ESOS:

If your organisation is defined as a public body (contracting authority) in: • Regulation 3 of the Public Contracts Regulations 2006 in England, Wales and Northern • Ireland for the first compliance period, replaced by Regulation 2(1) of the Public Contracts • Regulations 2015 for the second and subsequent compliance periods • Regulation 3 of the Public Contracts (Scotland) Regulations 2012 in Scotland for the first compliance period, replaced by Regulation 2(1) of the Public Contracts (Scotland) Regulations 2015 for the second and subsequent compliance periods • if your undertaking is subject to an insolvency procedure • if you do not meet the qualification criteria.

ESOS for corporate groups

Where you are part of a corporate group and only parts of the group fall into the categories above then the rest of the group will be required to participate in ESOS if they qualify. There have been two previous phases of ESOS, and we are now currently in Phase 3 of the ESOS scheme. Phase 3 includes some changes that resulted from a government consultation published in July 2022. This also included the announcement of a Phase 4. Businesses must determine whether they qualify for the scheme by the Qualification Date of 31st December 2022. If you are required to comply, you will need to appoint a Lead Assessor, who will prepare the necessary Evidence Pack which must be signed off by them and by the Board of Directors.

ESOS compliance requires qualifying businesses to:

• Identify and measure their total energy consumption for all energy classifications. • Carry out energy audits to identify and assess energy savings opportunities. • Report compliance to the Environment Agency every four years. The most common routes to compliance are: • Display Energy Certificates • Energy Audits • ISO 50001 Energy Management System

A combination of these can be used but they must cover 95% of the significant energy consumed by the organisation (energy used by buildings, transport and industrial processes). Complying with ESOS can be a demanding process. It can involve collecting and analysing significant amounts of data along with planning and undertaking energy surveys, reports, and the preparation of the evidence pack. You must then ensure you register your compliance with the Environment Agency on or before the final compliance date of 5th December 2023. To ensure you meet the Phase 3 compliance deadline, we recommend you contact Green Zone Surveys who are ESOS Lead Assessors and can manage the process for you.

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ESOS