De-mystifying ESOS and SECR

Ok, this may not be the most exciting of Insight articles, but important given the number of organisations that seem to be non-compliant with one or both of these legal obligations.

Let’s get straight into it, ESOS and SECR.

• What are they?
• Do you qualify?
• How do you comply?
• Who regulates them?
• What are the penalties for non-compliance?

ENERGY SAVINGS OPPORTUNITY SCHEME (ESOS)

What is it?

The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment scheme, introduced by the UK government to make sure large enterprises in the UK are energy efficient. Under the scheme, large undertakings are required to assess their energy usage every 4 years and to find new ways to save energy.

The ESOS cycle is driven by key dates;

If you meet the qualification criteria for a large undertaking, on the Qualification date, you must comply with the ESOS requirements, by the Compliance date.

Do you qualify for ESOS?

A large undertaking is any UK undertaking that meets either one or both of the conditions below, on the qualifying date:

• it employs 250 or more people
• it has an annual turnover in excess of £44 million and an annual balance sheet total in excess of £38 million

Undertakings that can qualify for ESOS include;

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

How do you comply with ESOS?

You must choose one or more routes to compliance that cover all your areas of significant energy consumption. You can demonstrate that you’ve made a compliant ESOS assessment using:

• ISO 50001 certification
• Display Energy Certificates (DEC’s)
• Green Deal Assessments (GDA’s)
• ESOS compliant energy audits

Most organisations use the ESOS compliant energy audit route, which must be led by a registered ESOS Lead Assessor.

During the audit, the Lead Assessor will;

• calculate your Total Energy Consumption (TEC) for a consecutive 12 month period, which includes the qualification date;
• identify your Significant Energy Consumption (SEC);
• conduct energy audits of a sample of your sites;
• produce an ESOS report which contains recommendations to reduce energy use;
• notify the regulator of your conformance, once the process is complete.

Who regulates ESOS?
ESOS  is managed by the Environment Agency in England, the Northern Ireland Environment Agency, the Scottish Environment Protection Agency, and Natural Resources Wales.

What are the penalties for non-compliance with ESOS?

Fines for non-compliance range from £5,000 to £90,000 and the names of non-compliant undertakings may also be published for all to see.

Fines increase for each day of non-compliance, and can reach:

• £5,000 for failure to maintain records
• £45,000 for failure to notify the Environment Agency
• £45,000 for businesses that do not respond to enforcement notices
• £50,000 for false or misleading statements
• £90,000 for failure to undertake an energy audit

STREAMLINED ENERGY AND CARBON REPORTING (SECR)

What is SECR?

Streamlined Energy and Carbon Reporting (SECR) is the UK Government’s name for the replacement legislation to a number of pre-existing, now expired programmes (e.g. Carbon Reduction Scheme) covering energy and carbon reporting and taxation.

The framework came into force on 1 April 2019 through The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 and applies to financial years starting on or after 1st April 2019.

Do you qualify for SECR?

You qualify for SECR if you meet the this definition of a large company.

“For SECR, large companies, as defined in sections 465 and 466 of the Companies Act 2006, are companies that meet two or more of the following criteria:

– turnover (or gross income) of £36 million or more,
– balance sheet assets of £18 million or more,
– 250 employees or more.”

How do you comply with SECR?

The reporting requirements for qualifying, large companies are;

Large unquoted companies and LLP’s

• UK energy use;
• Associated greenhouse gas (GHG) emissions;
• Energy use and greenhouse gas emissions from the previous year (exempt in 1st year);
  At least one emission intensity ratio;
• Narrative on energy efficiency measures;
• Details of methodology used.

Quoted companies

• Annual, global GHG emissions from activities for which the company is responsible, including combustion of fuel and operation of any facility, and the annual emissions from the purchase of electricity, heat, steam or cooling by the company for it’s own use;
• Underlying global energy use;
• At least one emissions intensity ratio;
• Narrative on energy efficiency measures;
• Details of methodology used.

Who regulates SECR?
SECR will be enforced by The Conduct Committee of the Financial Reporting Council.

What are the penalties for non-compliance with SECR?

Penalties for non-compliance could be substantial if comparable to those of ESOS or the CRC (fines of £40,000 plus have been issued).

Hopefully, you know have a better understanding of these important legal obligations.

If you qualify for ESOS, SECR or both and need assistance in complying, please let us know.

After all, one of our favourite mantras is;

We Make It Easy.