ESOS: Companies still non-compliant as Environment Agency turns to enforcement action

EXCLUSIVE: Compliance rates for the Government's Energy Savings Opportunity Scheme (ESOS) are below expected levels, with hundreds or possibly thousands of qualifying organisations still unaccounted for almost a year after the final deadline.

A spokesperson for the Environment Agency (EA), which is managing the scheme, revealed to edie that 6,800 organisations had submitted notifications of ESOS compliance as of 28 February 2017 – just 561 more than the 6,239 businesses that edie reported were compliant two weeks before the ultimate ESOS deadline of 29 April 2016.

Of these 6,800 compliant organisations, 5,800 are ‘ultimate parent companies’ (which own more than one business covered by ESOS). The EA believes there is a total of 6,300 parent companies that qualify for the Scheme, meaning around 500 parent groups are still non-compliant and therefore at risk of enforcement action.

In terms of total compliance rates for all companies covered by ESOS, the EA has recently revised its ‘circa 10,000’ figure it used to quantify the total number of organisations covered by ESOS, “due to the flexible way in which corporate groups are allowed to form scheme participants” (through parent companies, for example).

This means the exact number of large enterprises covered by ESOS that are uncompliant with the Scheme is now unclear until a final figure is officially published.

Enforcement action

The EA spokesperson explained that the Agency’s focus is now on bringing organisations into compliance with ESOS. “We normally use enforcement notices to bring organisations into compliance and only issue civil penalties in the most serious cases,” the spokesperson said.

The Agency’s official document on enforcement and sanctions details that the maximum penalty for failing to undertake an energy audit ahead of the ESOS compliance deadline is up to £50,000, and up to £500 for each working day that the responsible undertaking remains in breach of the mandatory scheme, for a maximum of 80 working days.

While it is understood that enforcement notices have already been awarded to a number of non-compliant companies, the EA would not be drawn into specific cases when asked by edie, confirming only that it publishes details of enforcement action after the time for making an appeal has expired. If an appeal is made by a company deemed to be non-compliant, details will only be made available if it has been withdrawn or determined in the EA’s favour.

The Government is set to unveil a consultation this month which will call upon 800 businesses to provide evidence on the effectiveness of the current energy-efficiency regulations for business. For many large firms, compliance with various schemes such as ESOS and the Carbon Reporting Commitment (CRC) has more often than not been seen as an irritation due to the bureaucratic nature of reporting.

Complex landscape

Speaking to edie on the sidelines of last week’s Energy Management Conference in Birmingham, the Department for Business Energy and Industrial Strategy (BEIS) head of business energy tax and reporting Gary Shanahan conceded a need to simplify the energy-efficiency landscape.

“The consultation will come in March,” Shanahan said. “The clear consensus was that we needed to simplify the landscape to keep reporting and do that in a way that minimises the amount of times that organisations measure in different ways with the same data.

“We’re looking, once the evaluation is complete, at the steps we can take to help inform those choices. That will take some time to filter through because not all of the investments were made the day after the ESOS report was complete.

“We will look at the next compliance date at 2019 to have a look at what the impact has been in terms of savings and the effectiveness of ESOS. Some of the companies have spoken about using the audit to drive relatively cost-effective measures.”

A sample of 86 full ESOS audits carried out by the Carbon Trust found the average cost reduction achievable through the implementation of energy saving opportunities stood at 20%. The Trust found the average energy spend of ESOS-qualifying organisations to be around £1.8m, meaning that a business with an average energy spend and average reductions identified through ESOS would be in line for annual savings of £360,000.

Speaking to edie about the latest figures, Myles McCarthy, director of implementation at the Carbon Trust, said: “We have been busy supporting businesses with ESOS compliance for almost two years now, although this has dropped off recently with attention turning to the implementation of recommendations from audits. We would encourage those companies that still haven’t complied with the requirements of ESOS to get moving as quickly as possible.

“As well as avoiding penalties from enforcement action, it might be the case that organisations that have not complied do not have strong internal approaches to energy management, so they may well have lots of opportunities to save significant sums through implementing cost-effective measures.”

Strategy validation

Many businesses may use ESOS as a jumping-off point for implementing the ISO 50001 system, designed to implement and maintain a continuous standard of energy reduction. For Nestlé’s head of environmental sustainability Andrew Griffiths, ESOS has served to validate the company’s energy management strategy, with the real value lying in the internationally-recognised ISO 50001 certification process.

“ESOS validated our strategy, definitely,” Griffiths said during a session at the Energy Management Conference. “It did enhance it, but probably not massively. Because of the benefits of the process we have, we’ve probably drawn out the bulk of what we would have found through ESOS. The real step-change for us was ISO 50001. By moving from an ESOS-compliant process to 50001 drives an additional level of validation.” 

Griffiths’ views were echoed by Rolls-Royce’s energy manager Anthony Hatfield, who added: “From our perspective, we’ve had nearly a decade now of continuous improvements. We’ve fed a lot of our pipeline projects into the report. We submitted that report before the original deadline and got audited almost immediately after the deadline. But for us it’s just another form of validation.”

George Ogleby

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