ESOS and SECR Regulations: What's the Difference? 

An Introduction to ESOS

“Large undertakings” are required to undergo an obligatory assessment known as the Energy Savings Opportunity Scheme (ESOS) in accordance with Article 8 of the EU Energy Efficiency Directive. Businesses that meet the criteria are required to conduct an annual audit of the energy usage of their assets. For example, buildings, transportation, or industrial processes.

An ESOS evaluation requires businesses to:

  • Determine the total amount of energy used by their asset(s)
  • Find the areas that use high levels of energy
  • Designate an employee or contractor who’s a member of the government’s approved professional body register as their lead assessor
  • Submit a notification of compliance to the Environmental Protection Agency to notify them
  • Maintain thorough documentation of ESOS compliance

Its goal is to find areas where a company or business could make adjustments. However, they’re not required to make any to improve energy efficiency. 

What is the Importance? 

Businesses and the UK as a whole benefit from the ESOS. In order to identify inefficiencies and make cost-saving changes to reduce them, qualifying businesses measure their energy use. In turn, the government of the UK benefits from the lower carbon footprint as it works toward Net Zero goals for 2050.

Who Must Adhere to ESOS? 

Non-profits, partnerships, overseas companies with UK-based operations, and corporate bodies that meet the following requirements are eligible for ESOS:

Companies with 250 or more employees, a turnover of more than £44,845,000, and an annual balance sheet of more than £38,566,700 are required to adhere.

Are Any Organisations Exempt? 

Organisations that are exempt from the current ESOS regulations include both small and medium-sized businesses (SMEs) and public sector organisations that haven’t met the requirements by December 31, one year before the deadline. For instance, in Phase 2 (December 5, 2019), you must have satisfied the requirements by December 31, 2018.

Are There Any Repercussions? 

Yes, the Environmental Protection Agency tightens its regulations and imposes harsher penalties for noncompliance in each phase. Initial and daily fines may be imposed until the ESOS EA requirements are met. Infractions include failure to:

  • Notify the Environmental Agency: A one-time fine of up to £5,000, followed by a daily fine of up to £500 for each day that the organisation fails to.
  • Adequately keep records: An initial penalty of up to £5,000, plus the cost to the compliance body of confirming that the undertaking has been carried out in line with the scheme.
  • Conduct an energy audit: A one-time fine of up to £5,000, followed by a daily fine of up to £500 for each day that the organisation fails to.
  • Comply with a notice served: A one-time fine of up to £5,000, followed by a daily fine of up to £500 for each day that the organisation fails to.

In addition, producing a false or misleading statement can incur a penalty of up to £50,000. 

An Introduction to SECR 

In contrast to ESOS, SECR (Streamlined Energy and Carbon Reporting) measures a company’s emissions rather than its energy consumption. It replaces the previous Carbon Reduction Commitment (CRC) Energy Efficiency Scheme and became a mandatory framework for the UK government in April 2019.

The SECR increases transparency by requiring businesses to disclose their annual energy consumption and carbon emissions. Companies are required to make their:

  • Emission intensity ratio
  • greenhouse gas emissions (CO2e)
  • annual energy use in kWh
  • methodologies used
  • A description of the efficiency-enhancing actions taken
  • Previous numbers for comparison

What is the Importance? 

SECR encourages businesses to use energy efficiency measures from programs like ESOS to cut costs, increase productivity, and reduce emissions. At the same time, it holds businesses accountable. It is one of a number of programs and initiatives that the UK Government is using to get businesses to comply with their Net Zero goal by 2050.

Who Does SECR Apply to? 

SECR reporting is required for a quoted company, a large non-quoted company, or an LLP that satisfies two of the following:

  • Over 250 employees
  • £36 million or more in annual revenue
  • A balance sheet of over £18 million

Are Any Organisations Exempt? 

Public sector and charitable organisations, organisations in the private sector that are dormant (don’t submit reports to Companies House), and businesses that consume less than 40,000 kWh of energy are generally exempt from SECR.

Are There Any Repercussions? 

SECR is overseen by the Conduct Committee of the Financial Reporting Council, which has the authority to penalise businesses that qualify but do not comply. Not reporting in accordance with SECR carries penalties such as:

  • Up to £40,000 fines
  • Late deadline penalties due to Companies House rejecting annual accounts

Non-compliance penalties are still applied, despite not being official or published like those for ESOS.

Can the Public View SECR Reports? 

At the moment, ESOS public reporting is not required; however, SECR is. All of the compiled reports are made available to the public and are included in a business’s Companies House annual accounts.

In addition, it is anticipated that businesses will disclose figures in accordance with the reporting guidelines in a company report, such as a Directors’ report.

Is SECR the New ESOS? 

SECR and ESOS both have the same goal, but they focus on different measurements. SECR measures a company’s emissions, whereas ESOS focuses on ways to improve energy efficiency. However, it is possible that ESOS informs a company’s SECR report.

Together, they encourage businesses to make use of improvements in energy efficiency, which helps the UK government reach its goal of becoming Net Zero by 2050.

When is the Deadline to Meet the Requirements? 

The Stage 3 cutoff time for ESOS is the December 5th, 2023.

SECR’s cutoff time is March 31st, 2023.

Explore Our EPC Solutions 

At EPC for You, you can rely on the guidance of our knowledgeable and skilled staff. We have the expertise you need to increase energy efficiency, reduce costs, and reach compliance. We also specialise in both domestic and commercial EPC – visit our EPC survey page for more information on how we can help.

Our accredited energy assessors, with offices throughout the UK’s major cities, can assist you in meeting your ESOS obligations and avoiding upcoming penalties and deadlines. For a quote, contact us today.

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