Four top tips for ESOS phase 3 compliance

ESOS is one of the UK’s longest-standing energy assessment schemes and is designed to enhance energy efficiency among large organisations. It is entering its third phase this year, and changes to key timelines and compliance requirements have caused headaches for many energy, carbon and sustainability managers.

To help cut through the complexity of ESOS phase 3 compliance, edie recently hosted an online event with JRP Solutions.

JRP’s director George Richards and principal consultant for sustainability and energy Owen Jones were on hand to provide their expert advice.

Here, we summarise some of the key takeaways from the webinar masterclass, which originally aired on 7 May. A recording of the full session can be accessed on-demand here.

1) Be aware of eligibility criteria and key deadlines

The speakers began the session by highlighting some key timeline changes relating to ESOS. Businesses have until 5 June to submit a notification of compliance after the Government confirmed a six-month extension. Full details must then be submitted by 6 August. Failure to meet these deadlines could result in a fixed penalty of up to £5,000, plus additional penalties for each day of non-compliance.

The full ESOS report must be signed off by a person with “management responsibility” such as a board director or chief executive.

Not every organisation operating in the UK will be required to comply with ESOS. Your organisation will  need to either have 250 or more employees, or an annual turnover exceeding £44m plus an annual balance sheet total exceeding £38m, in order for compliance to be mandatory.

Organisations will be assessed on their size based on staffing figures and financials as of 31 December 2022. However, the webinar speakers noted that growing businesses would do well to think ahead to the next phase.

Smaller organisations that are part of a larger entity that meets the ESOS compliance requirements will need to comply, however, the largest and highest UK parent is best-placed to complete this work.

2) Look at your ISO 50001 overlap

Organisations that are already certified to the ISO 50001 energy management standard have automatically been classed as compliant with ESOS under the first two phases. However, they will need to submit information through the ESOS portal.

Additionally, the UK Government now requires additional information on organisations’ total energy consumption and significant energy consumption. Data on the latter will need to be submitted in terms of absolute energy use, plus energy intensity ratios.

Organisations will also need to identify opportunities to improve energy efficiency, sharing these with the Government and across their business. They do not necessarily need to enact all – or, indeed, any – of these changes at present, but actions must be detailed in a ‘programme of implementation’.

However, JRP’s Jones noted that taking action be a requirement under ESOS phase 4, so organisations may wish to get ahead of the curve. There is also, of course, the need to weigh up the business case for action which is likely to be improved due to the energy price crisis.

Despite the additional aspects required on top of ISO 50001, the JRP experts maintained that it is a robust route to ESOS compliance for a wide range of organisations.

3) Beware common pitfalls

JRP’s Jones presented a slide outlining the most common challenges organisations face with ESOS Compliance. These are largely to do with not setting aside adequate time and resources.

Beyond understanding updated reporting and compliance requirements and underestimating the cost of inaction, he listed:

• Leaving it too long to engage and appropriate lead assessor (note that this is not needed if you are using the ISO 50001 route)
• Not choosing an appropriate auditor per the requirements for your industry sector
• Using outdated data collection processes which are time-consuming
• Failing to ensure a representative audit sample

On the former, Jones said it is “urgent” for businesses without a lead assessor to appoint one now and Richards reiterated this. Registers of qualified lead assessors are accessible through organisations including the Energy Institute and IEMA.

4) Ground your decisions in data 

Given the level of time and resource that organisations allocate to ESOS, the JRP team advised organisations to go beyond a compliance-only approach to properly seize the full scope of potential opportunities. This means baselining performance and measuring the impact of interventions regularly.

Doing this will be predicated on capturing good quality data. “Data is the new gold,” Richards said. “Getting it right is absolutely imperative”.

He said that many organisations are still struggling with data quality after two ESOS phases. These issues will need to be ironed out – there is now a requirement for organisations to explain why and how they use data estimates.

Audits can help organisations “uncover” gaps in their net-zero strategies and net-zero transition plans. It may be the case, Richards explained, that these gaps can be rectified using low-cost behaviour change and process change interventions. If not, data can help build the business case for investment in technologies such as heat pumps.

He advised that these changes should be rolled out across all sites, not just those which are audited for ESOS samples, to maximise cost savings and ensure a joined-up approach. JRP does provide a data solutions tool.

Click here to watch edie and JRP’s ESOS Phase 3 webinar in full