For many Scottish businesses – the pressure of meeting increasingly stringent carbon reporting requirements will be part of everyday life. However, greater understanding is needed if more firms are to turn compliance into a golden opportunity for improved operational efficiencies – and ultimately bottom line impact. Dan Hubbard, Chartered Energy Manager and Strategic Account Manager, at the UK’s leading utility consultancy BiU explains
Just over a year ago, our energy team at BiU noticed a UK-wide trend: we realised that a deep (and worrying) disconnect was opening up between UK businesses and their understanding of fast-paced change relating to legally-binding reporting on carbon use.
Now, this might seem like a small-fry problem compared with some of the really big challenges we’re facing in the Brexit landscape and global climate change. But, it made us stop and think: if companies are lacking awareness and information about the basic principles of their responsibilities – then surely it stands to reason that they are also failing to see how ‘red tape’ can also present long-term opportunity?
Start with the basics
Let’s start with the newest (and perhaps biggest) change to affect UK businesses. Introduced in 2018, is the Government’s new reporting programme – known as SECR (Streamlined Energy and Carbon Reporting). It replaced the CRC Energy Efficiency Scheme. As if that’s not enough to contend with – large enterprises are also expected to comply with Phase 2 of ESOS (Energy Saving Opportunities Scheme), the Government’s flagship energy efficiency initiative.
For the uninitiated, fear not: an overview of both schemes is outlined below. However, for those of you who are clued up on the basics – then keep reading; because our message to you is about the wider business efficiency and opportunity that both schemes present.
Introducing… Energy Savings Opportunity Scheme (ESOS)
Let’s start with the Energy Savings Opportunity Scheme (ESOS). Introduced nearly five years ago to meet the requirements of the EU Energy Efficiency Directive, ESOS applies to large UK undertakings and their corporate groups. Now in Phase 2, the deadline for compliance is 5th December 2019. ESOS mainly affects businesses but can also apply to not-for-profit organisations and any other non-public sector undertakings that are large enough to meet the qualification criteria, which are:
Any UK company that either:
• Employs 250 or more people
or
• Has an annual turnover in excess of €50million (£38,937,777) and an annual balance sheet total in excess of €43million (£33,486,489).
An overseas company with a UK registered establishment which has 250 or more UK employees (paying income task in the UK).
If you’re wondering if ESOS is optional legislation, the answer is very definitely ‘no’! If you meet the qualifying criteria then participation is compulsory. And, as a Scottish business, compliance and enforcement (including financial penalties for failure to submit your returns within the required timeframe) lies with the Scottish Environment Protection Agency.
The important thing to remember is that ESOS is all about opportunity. Hence the scheme’s well-considered name. The whole point of the scheme is to assist businesses to identify and implement cost-effective energy savings. The ESOS scheme has only been in place since 2015, so it is still early days. However, the interim evaluation of ESOS (in its first phase) reports that four in five complier organisations reported some form of energy efficiency improvements in the 18 months prior to mid-2016. And, one third of these organisations also reported that ESOS had been influential in their decision to implement at least one of these improvements.
Don’t delay, act now
Our view is that ESOS can too easily devolve into a tick-box exercise. And, we advise businesses to act swiftly – the sooner you start the ESOS audit process (which has to be carried out by an approved ESOS Lead Assessor) you’re one step closer to cutting out energy wastage – and implementing a long-term carbon reduction strategy that delivers results straight to the bottom line. In fact – the Government estimates that by implementing ESOS audit recommendations, companies can achieve savings 13.5 times greater than the cost of the ESOS audit.
Meet SECR… the latest carbon reporting legislation
Moving on, let’s look at Streamlined Energy and Carbon Reporting (SECR) which is a new, mandatory carbon and energy reporting scheme for large UK companies (your turnover is £36 million or over; or your balance sheet total is £18 million or over; or you have 250 employees or more).
Companies within scope need to collect and measure their energy and carbon information – and submit this as part of their annual accounts filed with Companies House. Businesses that come under the scope of SECR will have to do their reporting for their first financial year that starts on or after 1st April 2019. This means that your first financial report will be due on or after 1st April 2020, with the exact date depending on your organisation’s financial year.
To fully explain SECR – and all that it entails – will take well beyond the space we’ve got available here – and the chances are, if you’re affected, you’ll be well underway towards compliance by now.
Our Chief Commercial Officer sees SECR as a door-opener to massive savings for UK plc: “We’re advising Scottish businesses to view SECR – like ESOS – as a means of catalysing efficiency and carbon reduction. We share the UK Government’s view that SECR should result in a reduction of £1.3 million in annual costs to business. Some 4TWh of annual energy savings and associated annual carbon savings of 0.8MtCO2e are also predicted, leading to a total forecast benefit to UK society of £1.5 billion. These are seriously big numbers.”
Knowledge is power
If you think we’ve covered every inch of detail on ESOS and SECR in the brief overviews above, well, sadly, there’s so much more you need to know. The devil is in the detail as they say. The good news is that helping businesses to understand the detail and the opportunities is very much part of our culture at BiU. With this in mind, we launched an online ‘Energy Hub’ launched to help tackle firms’ energy and carbon challenges and questions.
The Energy Advice Hub is the UK’s only dedicated ‘go-to’ content platform dedicated to delivering agnostic, non-partisan advice, news and information on energy legislation and compliance as well as other carbon reduction drivers. It guides companies of all shapes, sizes from a range sectors, through new carbon reporting legislation and share energy efficiency best practice.
Beyond compliance
Crucially, BiU’s Energy Advice Hub helps firms to go beyond basic compliance and identify real commercial opportunities from energy efficiency. It answers questions – covering the most precise of details – on a range of topics, such as smart energy procurement, energy management strategies and low carbon technologies.
“We recognised the need for a comprehensive information resource that would help companies make smart choices on energy challenges,” says Anthony Mayall. “Whether you are an energy manager, an FM, a C-suite professional, or you’re running an SME, we’re committed to delivering content on the energy topics that matter to you and your organisation.”
Even more importantly, making use of an experienced energy consultancy like BiU (biu.com) could also be a chance to approach energy use in a more strategic, high-level manner – unlocking a depth of energy savings that were previously inaccessible.
Worried about carbon reporting? Unsure of your legal obligations? Do you want to improve operational efficiencies through carbon reduction in your organisation? Request our SECR guide (secrhub.co.uk) or drop us a line to hello@biu.com
