Many businesses in the scope of the UK's Energy Saving Opportunities Scheme ("ESOS") will, having submitted their ESOS notification to the Environment Agency, now have put this reporting obligation to the back of their mind until phase 4 in around three years' time. However phase 3 of ESOS brought some important changes, one of which will keep ESOS on the agenda on an at-least-annual basis for the foreseeable future.
Whereas ESOS has until this point been a relatively light reporting obligation, albeit backed by an energy audit with associated time and cost burdens, the introduction of a requirement for businesses to draft and implement an "ESOS action plan" changes the nature of the obligation significantly. The Government's intention behind requiring businesses to audit their energy use was in broad terms to encourage the voluntary adoption of energy efficiency and energy reduction measures by giving those businesses full sight of energy usage and therefore cost. The ESOS Action plan will crystallise that intention.
ESOS Action plan
The ESOS action plan must set out how and when businesses plan to reduce energy consumption, whether these plans are based on recommendations through the ESOS assessment, and expected energy savings (including how these savings were estimated). The action plan must be signed off by a "responsible officer", who must be a board level director or equivalent. The responsible officer must confirm that they have seen and considered the action plan, and that they are satisfied to the best of their knowledge that they organisation has complied with the statutory requirements relating to the action plan.
Preparation of the action plan is the responsibility of the entity that was responsible for submitting the ESOS compliance notification to the Environment Agency. The guidance implies that the action plan should cover the same entities as the compliance notification. This could be a significant lift within a corporate group, and a further incentive to disaggregate in complex groups.
Alternatively, the business may submit a notification that it does not intend to take any energy efficiency measures. Given that the action plans will be public, this option is unlikely to be particularly palatable. Where, for example, energy use is minimal, or in rented buildings where the tenant has energy responsibility but limited control over building efficiency, a notification that no action will be taken may be justified. It is not yet clear whether such a notification can be accompanied by an explanation of the reason for no action being taken.
Entities which do not meet the deadline for submitting an action plan will be deemed to have submitted a notification that no action will be taken.
Energy... and carbon?
The Government's ESOS guidance notes that reporting undertakings may wish to include additional information in the action plan "to reflect and make public other actions to save energy and/or greenhouse gas emissions that you may be taking outside of ESOS". As an example, it lists other schemes, including the UN Race to Zero and Science-based Targets Initiative (SBTi). ESOS has always been focused squarely on energy efficiency and not carbon (in contrast to the Streamlined Energy and Carbon Report regime which covers both), despite the obvious intrinsic link between the two. It is curious therefore that the Government considers the ESOS action plan a natural home for greenhouse gas reduction targets, and even possible that the ESOS action plan may end up being the precursor to transition plan disclosures which are being mooted in different parts of the Government.
Annual updates to the action plan
Annual progress updates to the plan will be required. These interim reports must identify actions taken to implement energy efficiency measures, whether such measures were achieved by the date specified in the action plan (if they were identified in it), and any measures listed in the action plan which were not achieved by the intended date, as expressed in the action plan. The progress update must also estimate the reduction in energy consumption that has or will be achieved in the relevant annual period, and a methodology for its calculation.
Similarly to the main action plan, if an undertaking fails to submit a progress update, it is automatically recorded that it has taken no energy saving actions during the year.
Where an action plan identifies other commitments, for example a greenhouse gas reduction target, annual updates must also include progress made against those commitments.
Timetable
Although the legislation changing phase 3 of ESOS was brought into force at the end of November 2023, the Government was not wholly prepared to implement the changes. The MESOS system via which compliance was to be notified was not made available in time, resulting in extensions to the notification deadline and a further enforcement stay for notifications up to 6 August 2024.
Action plans must also be submitted via MESOS, but the functionality for this is not yet available. The Government intends to publish guidance and an example of the online system template on or before 1 November, only shortly before the deadline specified in the legislation of 5 December 2024. With that in mind, the Government has extended the deadline for submission of the first plans to 5 March 2025, though it encourages businesses to submit them by the original December deadline where possible.
It is not clear how the delay to initial submission of the action plan will affect the timing of annual progress updates, if at all. It is more likely that the Government will adhere to the original timing in order to get back on track, with the first annual progress report due on 5 December 2025 and the second on 5 December 2026. 5 December 2027 will be the deadline for the fourth compliance period, working on the (large) assumption that no further changes to ESOS will be made before then.
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