The ESOS scheme was borne out of Article 8 of the EU’s 2012 Energy Efficiency Directive and, enshrined in UK law, is now a mandatory scheme for qualifying organisations. Enforced by the Environment Agency and its equivalents in Scotland and Northern Ireland, there are numerous potential penalties applicable to organisations which either fail to submit or submit late key documents and/or evidence of actions.
All detail on the contents of the scheme has been taken from the gov.uk website (which also serves as the DECC/EA website); latest guidance is from a document entitled “Comply With ESOS” issued on the 17th February 2015. This supersedes the previous guidance issued by DECC in June 2014.
Additionally DECC have issued further guidance (not mandatory elements) on 27th March 2015. This contains many useful examples of audit methodologies.
Its overall objective is to ensure that directors/senior managers of “large undertakings” are aware of energy saving opportunities with a view to future implementation (which is not currently mandatory) and informed by an appropriate audit-based management system.
It’s worth noting that measures being implemented in individual EU member states to meet the Energy Efficiency Directive’s requirements vary in both content and timescale. An update on current status is available.
The Department of Energy & Climate change hope that the regulations will save energy worth some £1.6bn and that where organisations do not meet the governing size criteria for qualification they will still adopt the thinking and methodology behind the scheme as observing good business practice. ESOS will also assist in progress towards the 20 per cent reduction target the EU has for 2020.
A theme which runs through the regulations is the need to document and produce evidence for key data used, decisions taken and provide records of conversations and outcomes from meetings. This means that an Evidence Pack, with all the suggested topics covered, as recommended by the ESOS Guide plus others specific to individual circumstances, should be established at an early stage and be managed jointly by the client/participant organisation and their Lead Assessor. More on this as we progress through the regulations.
It’s estimated that between 9-10,000 organisations will have been subject to this scheme on the qualification date of 31st December 2014. This figure has been estimated as the configuration of some organisations is constantly changing and the figure for qualification will continue to change during the life of the scheme.
Essentially those who have qualified will be “large undertakings” which carry out a trade or business and have more than 250 employees; organisations can still qualify where they have less than 250 employees but a turnover of over €50m and a balance sheet of over €43m. (These figures need to be converted at €1.2841/£ which was the prevailing spot rate on 31st December 2014 giving turnover as £38,937,777 and balance sheet of £33,486,489).
Detailed payroll guidelines
There are detailed guidelines on how the 250 employees should be determined, including payroll employees of UK companies based overseas.
It’s important to note that the figures constituting a “large undertaking” will need to be maintained for two successive accounting periods (for organisations which are growing or contracting for any reasons) which usually means financial years.
The EU has also adopted the above definition for “large undertaking” however there are, as always, some differences of interpretation.
Any significant differences between Member States are likely to result in challenges by the other states based around unfair competitive advantage, whereby any measures which reduce the cost in one Member State are likely to be seen as benefiting them at the expense of …..