Don’t bear the cost burden of EU law

30-Mar-2014 - Last updated on 20-May-2014 at 13:32 GMT

Firms taking a 'make do' approach to legislation will incur scheme costs

New rules requiring all large firms to undertake mandatory energy efficiency assessments could end up being a major cost burden unless the findings are used to introduce savings in the businesses, warns a leading environmental consultancy.

While the Energy Savings Opportunity Scheme (ESOS), which comes into effect next year as part of the EU’s Energy Efficiency Directive, will require businesses to undertake energy efficiency audits every four years, it won’t compel them to introduce any of the potential savings they identify, says Christine St John Cox, knowledge leader for energy and carbon management with Ricardo-AEA.

Using data derived from the earlier Carbon Reduction Commitment (CRC) energy efficiency scheme, some 7,300 (including food and drink) companies across the UK employing more than 250 people are expected to be affected by ESOS. It could cost them in total more than £100M over 15 years without generating any significant benefits, warned St John Cox.

Will be affected

“It’s probably the large businesses that are already captured by CRC that will be affected,” said St John Cox. “However, companies won’t have to carry out audits for all their estates, just a representative sample.”

Evidence from the first CRC league table published in 2011 demonstrated that less than 25% of participating companies took full advantage of the scheme by covering a high percentage of emissions with accreditation for carbon reduction and automatic metering, she claimed.

“Unless businesses embrace ESOS it could have even less impact than CRC as ESOS carries no ‘carbon tax’,” said St John Cox. “We’re therefore concerned that companies taking a ‘make do’ approach to the legislation will incur the scheme costs, estimated to average £10,000–17,000 for each business audit cycle, without any financial gain.

“In our experience of working with companies on CRC, preparation in advance is the key to compliance and unlocking savings in the long run. The UK is likely to offer several routes to ESOS compliance so it is important for a business to explore the options that will minimise cost while still optimising impact.”

Investigate

For example, said St John Cox, a company could investigate getting accredited under the environmental management standard ISO14001 or energy management standard ISO50001. Similarly, a business should consider its internal skills and how it intends to undertake the audits, she added.

Manufacturers should take a strategic approach to energy efficiency by following up on the audits and investing in appropriate measures, she advised. It is estimated that this could help businesses make significant cost savings, potentially worth £1.9bn in total to the UK.

“You’ve got to get strategic about energy now; there are no more excuses, you’ve got to do it,” added Ricardo-AEA management consultant Paul Maryan. “You’ve got to embrace this thing; it’s not going to go away. The sooner you do it right and properly, the easier it is going to be and the more financial benefit you are going to get.”