Written by Richard Vockins,
CBRE Energy & Sustainability Analyst, Global Corporate Services
The latest piece of environmental legislation to arrive off the conveyor belt from the UK Government is the Energy Savings Opportunity Scheme (ESOS). You can hear the collective groan from UK businesses (but not the public sector or SMEs, who are exempt) as they realise there is yet more mandatory legislation which they will need to adhere to if they meet the qualification criteria.
Yet ESOS should not be considered a burden as unlike other pieces of environmental legislation such as the CRC (largely considered as a carbon tax and a time consuming exercise), ESOS’s main goal is to highlight the energy saving opportunities within large organisations.
ESOS requires large organisations to conduct an energy audit covering buildings, transportation and industrial processes every 4 years. You are considered a large organisation if you have more than 250 employees or a turnover exceeding €50m (approx. £42.5m) and a balance sheet exceeding €43m (approx. £35m). There are currently three phases outlined, each of four years, with penalties for non-implementation ranging from £5,000 to £50,000 depending on the severity of the misdemeanour.
In total, approximately 7,300 organisations will be impacted by ESOS, spanning 170,000 to 200,000 buildings. An estimated £1.6bn net benefit to the UK is predicted over the three phases, most of which will be felt through reduced energy bills for businesses. The Carbon Trust predicts two or three times this figure, and forecasts a return on investment, within 3 years, from the adoption of “low hanging fruit” measures with savings of up to 25% on current energy bills if further measures are implemented. In contrast, the government has predicted a modest 6% saving through the adoption of ESOS.
However, it is estimated that an ESOS audit could cost each organisation £21,000, with this step needing to be repeated every 4 years. It is therefore understandable why this is not being celebrated as this is a substantial cost for any business. In addition, data collection for mandatory pieces of legislation is often a time consuming and convoluted process where there is little opportunity for data analysis and identification of where improvements can be made.
A clever part of the ESOS guidelines is that the assessments carried out must be signed off by a Director. This stipulation is designed to raise awareness of the energy uses in an organisation at all levels and also increases the likelihood of energy saving opportunities being implemented, given the sway a Director often has.
In summary, the ESOS has been designed to be minimally intrusive to organisations that already have a system in place to manage energy use, while allowing other large organisations to start the process of energy management. With reported savings of up to 25% on current energy bills, organisations should be embracing the ‘O’ of ESOS and really finding the opportunities which lie inside their organisation.
View CBRE's ESOS document here