ESOS Phase 2: what is an ‘investment grade’ audit, and how does it compare to basic compliance?

Among the greatest opportunities afforded by ESOS legislation is the potential to boost a firm’s bottom line, by investing in energy efficiency and winning new contracts from this foresight.

For example, imagine an energy-heavy business makes crucial efficiency investments based on its audit. It can achieve more streamlined production suites and energy bill cost savings, benefits which can be passed on to customers via more competitive pricing and products. Not to mention the potential to win new business from its improved green reputational stance.

Even though more basic ESOS audits will identify energy saving opportunities, these won’t provide the requisite level of insight, nor indeed the practical detail that firms really need to make the business case for energy efficiency spend solid.

Without more concrete, complex energy metrics, it’s very hard for companies to present a clear business imperative to invest to the board.

And without board approval, the investments in energy efficiency which could lead to serious business upticks won’t happen.

There is a telling irony in this, as what every board is after is surely an uptick in business.

So, for firms asking why they should go beyond the simple ESOS audit and instead engage a lead assessor who can conduct an ‘investment grade’ audit, the answer is this; it will build a solid business case for investing which will ultimately grow your bottom line.

The difference between a ‘basic’ and ‘investment grade’ ESOS audit

Official ESOS guidance advises that firms only need to conduct a ‘Type 1’ audit to comply with ESOS. This is defined as ‘a basic energy audit which identifies high level opportunities and has enough detail to develop low cost/short payback opportunities’.

Contrastingly, an ‘investment grade’ audit is much more detailed. This will allow more proactive firms to identify much deeper, more cost effective opportunities.

A study of this type will set out to identify specific technologies that could benefit specific businesses, to calculate costs and potentially set out future scenarios based on investment, to estimate payback periods and the potential energy savings which would be gained from installation of the best energy efficiency kit available.

The key to ‘investment grade’ is to go beyond compliance and benefit from real commercial implementation opportunities which the ESOS regulation is designed to encourage.

There is an admirable logic to this position, after all every firm affected by ESOS must comply regardless. To go further than this neutral position and realise real opportunities; environmental and profit-driven along with compliance is surely an intelligent choice for many firms out there.

Choose the right assessor to see you through

No matter which way a firm chooses to go with ESOS, it remains essential to choose a lead assessor who will carry and support businesses through to implementation by identifying technology providers, managing the project and running the day to day complexities of filing and administration.

The truth is; ESOS does represent extra work. But the logic is; why do the work and fail to maximise the potential returns available?

Initially, many bemoaned the fact that government didn’t force firms to actually install on ESOS recommendations, but the central viewpoint is firms don’t like being forced to spend.

Yet now, the most progressive businesses out there are realising that spending on the back of an ‘investment grade’ audit could be a smart step to securing the order book for years to come.

Was ESOS phase one a success? The Hub asks the question.