With the new energy saving regulations fast approaching, businesses are at risk of financial penalties for non-compliance if they fail to take action now.
ESOS is a new piece of EU legislation which requires large enterprises to introduce a mandatory programme of energy audits. Over 9000 of Britain's biggest companies will be required to comply - with the initial audits to be undertaken by 5 December 2015. With only two months to go and industry experts predicting that the process will take at least that amount of time to complete, businesses need to act fast to avoid failing foul of the law.
Who does the legislation apply to?
ESOS applies to your business if:
- the business employs 250 or more people, or
- has an annual turnover in excess of 50 million euro (£38,937,777), and
- an annual balance sheet total in excess of 43 million euro (£33,486,489).
It also applies to overseas companies with a UK registered establishment which has 250 or more UK employees (paying income tax in the UK).
Responses to the legislation by affected businesses have been alarmingly low with only 1% so far declaring that they are compliant. If you haven't started your assessment yet we recommend that this becomes a priority, and is started immediately. Non-compliance with the deadline date could amount to the EA taking enforcement action against you including your being given a financial penalty.
Top tips for business
Here are our top tips to help you through the process:
- Appoint a strong project lead able to focus all if not much of the role's attention on ensuring compliance by the deadline. The lead should be supported by a project team representing key stakeholders across the organisation that will assist with the compliance tasks
- Define and monitor progress against key milestones, factoring in extra time that might be needed
- Ensure key departments are sufficiently briefed and involved to ensure various tasks are achieved - data gathering, verification, audits etc - eg. Estates Management, Finance, HR, Logistics
- With the support of a senior sponsor escalate matters that need speedy resolution if delays occur
- Ensure senior management and the board are made aware of role and any approvals that will be required
- There is detailed guidance available but do use the esos help desk to clarify any queries you might have at ESOS@environment-agency.gov.uk
- Use the regulations to see how ESOS can reinforce your approach to energy efficiency and carbon reduction and cost reduction
- Determine priorities for improvement based on the audit findings and costings
- Communicate your approach across the organisation to highlight the important role teams and individuals also play in delivering the regulation's aims
- For each part of the project think about what information you will store in your evidence pack in the event of any subsequent audit by the enforcement agency.
- Think about new business as usual activities so that ESOS can help achieve ongoing organisational improvement opportunities rather than when future obligation duties fall due.
We have compiled a case study about our approach to compliance with ESOS, available here.
If your organisation cannot comply fully by 5 December 2015, you will need to inform the Environment Agency of this by the same date via an online portal, giving information on why you have been unable to comply and when you expect to submit your notification of compliance. The deadline for compliance is set in the EU Energy Efficiency Directive and ESOS Regulations 2014. The scheme regulators cannot amend this deadline. Qualifying organisations that do not complete a compliant ESOS assessment and notify the Environment Agency by 5 December 2015 will be at risk of enforcement action including the possibility of civil penalties. However, under the regulations the regulators are able to waive or modify enforcement action and penalties relating to non-compliance. This approach includes:
- Not normally expecting to take enforcement action for late notification provided it is received by 29 January 2016. This is not an extension to the legal deadline. Rather, it reflects the Environment Agency's ability to exercise discretion when taking enforcement action.
- Giving until 30 June 2016 to achieve ISO 50001 (international energy management standard) certification as a form of compliance.
If you require help or assistance in relation to this topic please contact Hannah Price or a member of our specialist Regulatory team.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.