Businesses urged to act now to avoid ESOS penalties
The final deadline for businesses to comply with Phase 3 of the Energy Savings Opportunity Scheme (ESOS) has now passed.
The deadline for businesses in London to comply with Phase 3 of the Energy Savings Opportunity Scheme (ESOS) has now passed, and the Environment Agency has made it clear that non-compliant businesses could face fines of up to £90,000. Advantage Utilities, a leading commercial energy and sustainability consultancy, is urging those who have not yet complied to take immediate corrective action.
ESOS is a mandatory energy assessment scheme for large UK organisations, designed to help businesses thoroughly review their energy consumption, identify opportunities for greater efficiency, and contribute to reducing overall energy use. By doing so, businesses can not only cut costs but also play a role in mitigating climate change and enhancing the UK's energy security.
Under ESOS, qualifying organisations must audit and report on at least 90% of their energy usage to the Environment Agency every four years. The scheme consists of four phases, each with specific deadlines. In August 2022, the government released its response to the consultation on changes to the ESOS Regulations for Phases 3 and 4.
“We are now in Stage 3 or Phase 3 of ESOS where the financial thresholds have been reduced leading to more companies qualifying and needing to act,” explains Dr. James Crosby-Wrigley, Head of Sustainability at Advantage Utilities.
To comply with ESOS Phase 3, a UK organisation must meet one of the following criteria on the qualification date: employ 250 or more people, have an annual turnover exceeding £44 million and a balance sheet total over £38 million, or be an overseas company with a UK-based establishment employing 250 or more UK staff who pay income tax in the UK.
While the Environment Agency was lenient during Phases 1 and 2, Dr Crosby-Wrigley cautions that there will be little tolerance for non-compliance in Phase 3, with potential fines reaching £90,000.
For businesses that qualify but are yet to complete their Phase 3 compliance, he advises two key routes to take. “‘The majority of organisations comply either through the development and maintenance of a certified ISO 50001 energy management system or via an energy audit route,” says Dr. Crosby-Wrigley.
The key steps for conducting an energy audit include:
Appointing an ESOS Lead Assessor
Reporting all energy use, including electricity, gas, and fleet
Conducting an energy assessment to identify efficiency opportunities
Presenting findings for sign-off by a director listed on Companies House
Submitting a notification of compliance to the Environment Agency
Maintaining an evidence pack
“With the deadline day now upon us, it’s clear that time is of the essence when it comes to Phase 3 compliance. Getting expert help and initiating an energy audit is the quickest and most effective route to making sure your business is meeting the necessary ESOS requirements,” adds Dr. Crosby-Wrigley.
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