The deadline for compliance with phase 2 of the  Energy Savings Opportunity Scheme (ESOS) is almost upon us.  Companies that are required to comply with ESOS must have carried out their ESOS assessment and submitted their notification of compliance to the Environment Agency (EA) by 5 December this year.  This obligation applies even where a company has complied with phase 1 of ESOS in December 2015.

The ESOS regime is a key part of the Government's strategy on energy efficiency and requires eligible organisations to review their energy consumption and to consider practicable and cost effective energy-saving opportunities.

It is not mandatory to implement the identified energy-saving measures, but it does need to carry out the review: where a company fails to comply with ESOS regulations (including failure to carry out an energy audit where it is required to do so) it risks enforcement action by the EA, and a potentially significant financial penalty.  

In particular, companies should be aware that interpretation and application of ESOS (including determination of which assets need to incorporated in an audit) can be challenging where companies are part of a wider group or have an ultimate parent based overseas.  Companies that are part of a complex structure (in particular where foreign ownership is a factor) should consider seeking advice on ESOS where they have not already done so.

Energy efficiency is an important part of the Net Zero agenda.  Obligations on companies to review and consider opportunities to save energy, including through ESOS, are unlikely to fall away, in particular given the growing emphasis on transparent reporting of energy use and carbon emissions. 

Companies should prepare themselves for ongoing and increasing requirements for scrutiny of energy usage and ways to improve their energy efficiency.  In that regard, ESOS should be viewed not just as a mandatory requirement but as a useful way to start this process.