The future of ESOS: what you need to know

This year the UK government is planning a consultation on the Energy Savings Opportunity Scheme (ESOS), which is currently compulsory for about 7,700 UK businesses. The success of the scheme so far makes it almost certain that ESOS, currently in Phase 3, will continue for at least a fourth phase. Here are some of the possible changes to look out for.

Compulsory implementation of energy saving measures?

At the moment, ESOS requires businesses to identify opportunities for energy savings (hence the name) but they are under no obligation to actually implement them. A 2018 survey found that 90% of organisations complying with ESOS had in fact planned or actually implemented at least one energy efficiency improvement, but the government’s Post Implementation Review of the scheme concludes that there is great potential for improvement in this area. The government may consider making it compulsory to implement at least some of the measures suggested by your ESOS report.

Mandatory public disclosure?

Another possible measure to strengthen ESOS could be to make it compulsory for organisations to publish their ESOS recommendations and subsequent actions. This would allow stakeholders and the general public to scrutinise what an organisation is doing about its energy use.

One of the unintended consequences of ESOS so far has been that some companies who comply with it have benefited from an image boost. 16% of compliant companies report that taking part in ESOS, even though they are just fulfilling their legal obligations, has enhanced their reputation. A future requirement to publish ESOS-related data could see more companies getting credit for their action on energy efficiency – while companies taking little action would open themselves up to reputational risk.

Widening scope?

ESOS currently covers organisations classed as a “large undertaking”, which means they employ 250 or more people, or have an annual turnover in excess of £44 million and an annual balance sheet total of over £38 million. Businesses of this size make a significant contribution to the economy, but they make up only 0.1% of the UK’s total business population. The Post Implementation Review for ESOS finds that “businesses are unlikely to carry out an energy audit unless mandated”, which means that most of the UK’s 35,600 medium-sized businesses and 5.82 million small businesses have probably never got round to measuring their energy use. Since this kind of audit is one of the most important and cost-effective ways of driving energy saving measures, the government may consider either extending ESOS to smaller businesses or coming up with an alternative scheme to encourage energy audits.

Selling the benefits?

37% of organisations who comply with ESOS have reported net cost savings as a direct result, and the Post Implementation Review suggests that this may be a significant underestimate. Some organisations have also reported additional benefits to their ESOS-related changes, such as improved indoor comfort. However, the research also shows that many businesses see ESOS as primarily a compliance issue. This is a missed chance to use their carefully gathered data and individually tailored recommendations to implement positive change in their organisations. It is possible that future phases of ESOS will have more positive publicity about the very real benefits of the scheme; it has the word “Opportunities” in the name for a reason.

To learn more about ESOS, take a look at our FAQs.