ESOS

You must calculate your total energy consumption during the reference period. This must be calculated in a common unit, which can either be an energy unit (such as kWh) or energy spend in pounds sterling. Please note that CO2 is not an energy unit. Your total energy consumption includes all input energy use e.g. buildings, industrial processes and transport. All energy consumed in the UK by a qualifying group needs to be included. Use the Government conversion factors for company reporting to help you measure energy consumption in common units. If a fuel you use isn’t listed, you should contact your fuel provider to get information about its properties.

The purpose of this calculation is to help you identify what energy your assets/activities use and which assets/activities you will subsequently need to ensure are covered by a route to compliance. Under ESOS, energy is defined as all forms of energy products, including:

• combustible fuels;
• heat (excluding your organisation’s surplus heat from industrial processes);
• renewable energy;
• electricity;
• fuel used in transport.

There are no fuel type exemptions in ESOS.

Energy that is both supplied to and consumed by an organisation is in the scope of ESOS. For the purposes of calculating your total energy supply, which is done to identify your areas of significant energy consumption, you only need to consider input energy. Only include heat where you are importing the heat to your site or process. Where the heat is obtained by converting another source of energy such as gas into heat (on site) then exclude the heat produced to avoid double counting. However please note that all heat must be included in your audits and energy profiles.

“Energy supplied” means any energy that your organisation uses under an agreement with a supplier or third party. This includes energy that’s supplied to assets you hold or activities your organisation carries out, and includes buildings, installations, transport and construction activities. Energy used in the offshore gas and oil industry within UK waters is included in ESOS.

Only energy consumed in the UK by a qualifying group needs to be included. Do not include energy which your organisation uses overseas unless it involves international travel in which case special rules can apply.

You only need to include energy consumption in relation to activities that you are carrying out and any assets that you held on the qualification date and still hold on the compliance date. You may elect to exclude from the total energy consumption calculation energy consumed by any asset which is no longer held by you, or by any activity which is no longer carried out by you on the compliance date. Note that holding an asset doesn’t mean you have to own the asset (e.g. you may be borrowing, using, renting or leasing the asset).

In relation to multi-tenanted buildings and landlord-tenant relationships, under ESOS the responsibility to include energy within an organisation’s total energy consumption calculation is determined by whether the participant is supplied with that energy and consumes that energy by the assets it holds or by the activities it carries out.

Where that participant supplies energy to another organisation and it is measured or can be reasonably estimated, that energy does not form part of their total energy consumption calculation. The landlord and tenant should determine between themselves who is responsible for the energy based on the information above and bearing in mind that the organisation with the ability to control the energy use should take responsibility for the energy supply and audit it to identify energy saving opportunities.

Where an ESOS participant moves from one building, or asset, to another during the period between the qualification date and the compliance date then they must include in their total energy consumption calculation, the energy use for the activities that are carried out in the original building and are being moved to the new building (such as use of computers, copiers, manufacturing processes, etc.), where the energy is measured or can reasonably be estimated, but not energy uses associated with the buildings themselves (such as heating, ventilation air conditioning, lifts, etc.).

You will need to include the energy used in the building in your total energy consumption calculation even if the building is unoccupied on the qualification date. Where an employee works from home, you do not need to include the energy used by them within their homes, in your total energy consumption calculation.

Energy consumption from transport is included in ESOS. You are only required to include transport where your organisation is supplied with the fuel for business purposes, not where you procure a transportation service that includes an indirect payment for the fuel consumption. When calculating your energy consumption from transport activities, you may make reasonable estimations based on verifiable data (e.g. expenditure) in cases where you do not have actual usage data (e.g. litres). For instance, you could use the number of expensed miles multiplied by an average fuel consumption factor to estimate the usage.

Where estimates are used the reason and method of estimation should be kept in your evidence pack. Energy consumed for the purposes of transport means energy used by a road going vehicle, a vessel, an aircraft or a train.

The energy consumption of a participant includes energy which is consumed for the purposes of transport by an aircraft or a vessel during the course of any journey which:

• starts,
• ends, or
• both starts and ends

within the United Kingdom. A participant may elect to include energy consumed for the purposes of transport by an aircraft or a vessel, during the course of a journey which both starts, and ends, outside the United Kingdom or energy consumed outside the United Kingdom for the purposes of transport by a road going vehicle or a train.

The following activities should be included in your calculation of your total energy consumption:

• Fuel used in company cars on business use.
• Fuel used in fleet vehicles which you operate on business use.
• Fuel used in personal/hire cars on business use.
• Fuel used in private jets, fleet aircraft, trains, ships, or drilling platforms which you operate.

The following activities should not be included in your calculation of your total energy consumption:

• Fuel associated with train travel of your employees where you do not operate the train;
• Fuel associated with flights your employees take where you do not operate the aircraft;
• Fuel associated with taxi journeys your employees take where you do not operate the taxi firm.
• Fuel associated with transportation of goods where you subcontract a firm or self employed individual to undertake this work for you (this fuel will be included in the subcontractor’s total energy consumption calculation if they qualify).

The following types of energy are not in scope of ESOS:

• unconsumed energy that your organisation doesn’t use, and supplies to a third party;
• energy consumed outside the UK;
• energy consumed for international travel or shipping where the journey doesn’t start or end in the UK (unless the organisation wishes to include their international travel);
• Energy used in flares at petrochemical works.

You can deduct unconsumed supplies from your total provided:

• the supply is measured (for example with metering),
• the supply can be calculated based on verifiable data, or
• it can be reasonably estimated.

Where a reasonable estimate is made, please keep the details of the assumptions and methodology in your evidence pack.

You must calculate your total energy consumption over a reference period of 12 consecutive months. The reference period must include the qualification date and end before the compliance date. If you can’t use data for a full 12 months, then you should use as close to 12 months as is reasonably practicable and explain why in your evidence pack.

The reference period should be the same 12 month period for all energy supplies. If you don’t have data for part of your reference period, you can use estimates to fill in any gaps.

When calculating your total energy consumption, you must use verifiable data where reasonably practicable. Verifiable data is data you can prove, for example:

• an invoice or delivery note;
• meter reading records and schedules for electricity or natural gas;
• stock records and readings for stored liquid, solid fuels and waste;
• automatic meter reading or smart and half hourly meter data outputs, for electricity and natural gas.

If you can’t obtain verifiable data of energy use or spend you should:

• explain why in your evidence pack;
• use a reasonable estimate derived through calculation (based on other verifiable data, if possible), and show how you got this figure;
• keep records in your evidence pack.

If you can’t get verifiable data, you can fill in the gaps by estimating data. To do this, you could use:

• direct comparison;
• pro-rata extrapolation;
• benchmarking.

Direct comparison means using figures from another comparable time period to fill the gap (for example the same day/week/month in another year).

Pro-rata extrapolation means using figures you have for one period of time to get average consumption figures for a shorter period. For example, you could use the average day rate of energy use for 1 March 2023 to 25 March 2023 to estimate the energy used between 26 and 30 March 2023.

Benchmarking means using the energy consumption of one asset or activity as a proxy to estimate the consumption of another asset. For example, you could use the annual energy use of one retail outlet to estimate how much energy another retail outlet uses, particularly if they were similar size, age, or build.

After you’ve calculated your total energy consumption, you must identify assets and activities that amount to at least 95% of your total energy consumption. These are your areas of significant energy consumption and comprise the assets and activities you will audit or ensure are covered by an alternative route to compliance. This means you can exclude up to 5% of your total energy consumption from any audit or alternative compliance measures. This up to 5% is your “de minimis energy consumption”. You can classify whichever activities you choose as de minimis energy consumption. It is suggested that you include the energy from all your large undertakings in your significant energy consumption. This means you can exclude energy on:

• a group basis – for example excluding the consumption of a one or more undertakings;
• a site basis – for example excluding the consumption of a particular site or number of sites;
• an asset/activity basis – for example excluding the consumption of an asset or activity, or a defined list of assets or activities;
• a fuel basis – for example excluding consumption associated with the use of a particular fuel or fuels.

You could also exclude energy using a combination of the above.

If you do not choose to identify your areas of significant energy consumption then you must audit your total energy consumption or cover it under another route to compliance.

You must calculate an energy intensity ratio for each of the following areas (termed ‘organisational purposes’) except where you have used no energy for that purpose during the reference period:

• buildings (typical indicator: gross internal floor area);
• transport (typical indicator: person mile travelled or tonne mile travelled);
• industrial processes (typical indicator: unit of industrial output e.g. mass in tonnes, volume in litres or individual production units(such as cars, fridges, etc.);
• other energy uses outside the above three categories.

An energy intensity ratio is a measurement which relates an organisation’s energy consumption to an appropriate indicator of activity by the organisation, in a way that allows comparison of energy efficiency performance over time, and against similar organisations.

The purpose of requiring an energy intensity ratio is primarily to allow participants to compare their own performance from one ESOS compliance period to the next. For this reason, the data submitted for the third compliance period will act as a baseline for future comparison.

In order to calculate your energy intensity ratios you must:

• calculate your total energy consumption and significant energy consumption, where applicable, in kWh (if you have not already calculated it in kWh);
• identify which proportions of the significant energy consumption (or total energy consumption) relate to buildings, transport, industrial processes and other energy uses;
• calculate a ratio for each which is based on each of these subtotals and a factor which measures operational activity for each of these organisational purposes.

You must include in your compliance notification the breakdown of both total energy consumption and significant energy consumption for each organisational purpose in kWh. When added together, all of your subtotals must equal your total energy consumption or significant energy consumption in kWh as applicable.

You should not include assets or activities where you did not include the energy consumption for that asset or activity in your total energy consumption or where there was no energy consumption, for example an empty building which used no energy during the reference period.

If you have an asset or activity where only some of the energy consumption is included in your total energy consumption and some is not, then you should only include data for the relevant indicator which relates to the energy consumption that is included. For example, if you have a building where tenant energy use is sub-metered and recharged and only the energy paid for by the landlord in communal areas is included in your total energy consumption, you would need to calculate or estimate the floor area for the parts of the building covered by the landlord supplies. You should keep records in your evidence pack in relation to any exclusions from the calculation of the relevant indicator.

You must choose one or more routes to compliance that cover all your areas of significant energy consumption. You can demonstrate that you’ve made a compliant ESOS assessment using:

• ISO 50001 certification;
• Display Energy Certificates (DECs) with accompanying advisory reports;
• Green Deal Assessments (GDAs);
• ESOS compliant energy audits.

If you choose to comply with ESOS using an existing certification or assessment for the third compliance period for example, it must have been issued after 5th December 2019 and be valid at the compliance date – 5th June 2024. Previous audit work, for instance performed as part of other energy audit schemes, can be used towards compliance for ESOS, provided it was conducted within the compliance period, meets the minimum requirements of an ESOS energy audit and was not used for other phases’ compliance.

You will need to appoint a lead assessor to check that your assessment meets ESOS requirements unless 100% of your energy supplies are covered by ISO 50001 certification, your total energy consumption is less than 40,000 kWh, or you have zero energy responsibility under the ESOS rules. You must specify who your lead assessor is, and also record details of personnel who carry out a significant proportion of the ESOS assessment in your ESOS report and compliance notification, when notifying the Environment Agency that you comply with ESOS. A lead assessor can be an employee of your business (“in-house”) or a third party. If you hire a lead assessor from outside your business, the overall ESOS Assessment, recommendations of any audit or alternative routes to compliance must be checked and signed off by one director. If your lead assessor works for your business or you decide not to appoint a lead assessor to review your ESOS assessment because you use less than 40,000 kWh, the overall ESOS assessment, compliance notification, recommendations of any audit or alternative routes to compliance must be checked and signed off by two directors.

Your lead assessor must review your ESOS assessment to consider whether it meets the requirements of the scheme. This will involve:

• reviewing the calculation of total energy consumption;
• reviewing the determination of the assets and activities in your significant energy consumption (at least 95% of the total energy consumption);
• reviewing the calculation of energy subtotals for different organisational purposes and energy intensity ratios;
• confirming that the necessary certifications and evidence exist for any alternative routes to compliance;
• reviewing that the audits undertaken meet the minimum criteria for ESOS;
• reviewing the ESOS report.

Your lead assessor can either carry out your ESOS assessment and audits themselves or check that the assessment and audits done by people who aren’t lead assessors meet the requirements.

Their role in the ESOS audits could involve undertaking, advising on, or reviewing the following activities:

• determining energy use profiles;
• calculating energy/cost savings of measures identified – life-cycle cost analysis (LCCA) or another method like Simple Payback Period (SPP);
• identifying energy saving opportunities;
• presenting audit recommendations;
• developing a process for how new audits should be done;
• developing a sampling approach;
• developing an audit timetable;
• determining the number of site visits required;
• pulling together data for the ESOS evidence pack – this is an information pack that shows how you carried out the assessment and audit.

Alternatively, other individuals can undertake these activities and the lead assessor can review them. You’re still solely responsible for:

• compliance with ESOS (your lead assessor will not be held responsible for compliance by the regulators);
• appointing a lead assessor;
• highlighting any audit work that’s already been done and which you wish to have reviewed by a lead assessor for the purposes of ESOS compliance;
• agreeing the work that the lead assessor is undertaking;
• sharing the ESOS report and any other supporting information with other group undertakings;
• getting directors or senior managers to sign off that they have reviewed the audit findings or recommendations;
• ensuring that an accurate compliance notification is submitted;
• maintaining records of your ESOS compliance for two subsequent compliance periods.

If your lead assessor reviews your ESOS assessment and does not believe that your organisation is compliant, you may still choose to submit your notification. In this case you should confirm that the assessment has been reviewed by a lead assessor and indicate that they do not believe you are compliant and why. Organisations that do not carry out a compliant audit where required will be in breach of the 2023 amended ESOS Regulations and liable to potential enforcement action.

From the third compliance period onwards, all ESOS participants must produce an ESOS report, including those that used only alternative compliance routes for ESOS compliance. An ESOS report is a record of your ESOS assessment, including records of any ESOS audits and any alternative compliance routes used.

You must include the information summarised below in your ESOS report:

• organisational details
• details of the board level director(s) responsible for sign-off, the lead assessor and any other personnel involved in completing significant parts of the assessment and/or the report
• details relating to total energy consumption and significant energy consumption calculations, energy subtotals by organisational purpose and energy intensity ratios
• estimates of energy savings achieved by the participant since the previous ESOS compliance period
• details relating to any energy audits and/or alternative compliance routes used for compliance:
  • scope and coverage of the audit/compliance route
  • summary of outputs and energy savings measures identified
  • estimated savings that could be achieved by implementing energy savings measures identified
  • information relevant to implementing energy savings measures identified

If your organisation reports as a corporate group, the ESOS report, or parts of the report, must be shared by the responsible undertaking with other undertakings within the participant group.

Your ESOS report must contain the following organisational information:

• organisation name
• the number of companies within the participant group
• corporate group structure chart or equivalent information setting out the relationship between organisations in the participant group

The corporate group structure chart or equivalent information should clearly set out the relationship between the relevant undertakings complying with the scheme as one participant, as well as identifying any organisations which are part of the corporate group, but not required to report for ESOS. This should include:

• identification of the responsible undertaking
• the highest UK parent, where this is not the same as the responsible undertaking
• any overseas parent, where applicable
• any franchises that have elected to be included within the participant group
• any trust assets to be reported on
• information on any group undertakings which have disaggregated from the participant group
• information on any group undertakings which ceased to be part of the participant group between the qualification date and the compliance date

You must also include in the report:

• the name of the board level director (or equivalent) responsible for signing off that the organisation is compliant
• where the participant has used an internal lead assessor or has not appointed a lead assessor due to low energy consumption, the name of the second director required for sign-off
• the name of the lead assessor, where the organisation is required to appoint one, and the accreditation scheme they belong to (or schemes, if they belong to more than one)
• the names of any other personnel involved in completing a significant proportion of any ESOS audit, any site visits, any data collection for the ESOS audit and/or the drafting of the report

A “significant proportion” means any person who has made a contribution of at least 5% of the total time spent on site visits, at least 5% of the total data collected for the ESOS audit and/or at least 5% of the total text of the report.

All participants must also include details of the following energy consumption figures calculated for the assessment:

• total energy consumption in kWh
• significant energy consumption in kWh
• percentage of total energy consumption covered by areas of significant energy consumption
• energy intensity ratios for each organisational purpose

You must also include in your ESOS report an estimate of energy savings in energy units achieved since the end of the previous compliance period. So for the third compliance period you must include energy savings achieved between 6 December 2019 and 5 December 2023 (not 5th June 2024).

These are savings that you can attribute specifically to energy efficiency measures that you have implemented during the compliance period you are reporting on (so for the third compliance period any measure that was implemented between 6 December 2019 and 5 December 2023) and do not include reductions in energy consumption for other reasons such as selling assets or reduced production output.

These savings can relate to:

• measures identified through ESOS reports
• measures identified through alternative compliance routes
• other measures not identified through ESOS

You should provide a list of the energy efficiency measures you have undertaken and provide an estimate of the total savings achieved during the compliance period for each measure. You should provide all energy savings estimates in the same energy unit. Some possible estimation methods you should follow to estimate savings are:

• data comparison: comparing energy consumption for the relevant energy supply point between two comparable periods before and after the implementation of the measure, accounting for any other variables which might affect energy consumption (for example, weather patterns, production output) to the extent this is reasonably practicable
• rated power: where you have replaced equipment or components with a higher rated power with those that have a lower rated power, you can estimate the difference based on the difference between the rated power. For example when replacing a 100W light fitting with a 40W fitting the reduction in power is approximately 60W. The annual energy saving can therefore be estimated as approximately: 0.06 kWh x 8760h (in a year) = 525.6 kWh, which can then be multiplied by the number of fittings to estimate the savings for the project
• estimate produced through a feasibility study or quote produced prior to the measure being implemented with subsequent validation, where reasonably practical, that the expected savings have been achieved
• validated estimate from previous ESOS report: where you have implemented an energy savings opportunity identified in a previous ESOS report, you can use the estimate of savings in the ESOS report. Where reasonably practical you should confirm using the data comparison method above that the approximate energy savings predicted have been achieved

If you implemented a measure which was not identified in a previous ESOS report and do not have sufficient data available to estimate the energy savings, you should identify the measure that you have implemented and state that there is insufficient data to estimate the savings.

If you implemented a large number of measures under a single programme for which you only have aggregate data for the whole programme, you should report the programme as a single measure.

You must keep records in your evidence pack of the calculation method for any estimates you used.

Having completed the ESOS Assessment, board level director(s) from one of the undertakings in the participant group will need to confirm that they:

• have reviewed the recommendations of your organisation’s ESOS assessment or alternative routes to compliance (e.g. Display Energy Certificates);
• are satisfied, to the best of their knowledge, that the organisation is within the scope of the scheme;
• are satisfied, to the best of their knowledge, that the organisation is compliant with the scheme;
• are satisfied, to the best of their knowledge, that the information provided in the organisation’s notification is correct.

Where your lead assessor is external, one director will need to provide this confirmation in writing (to be kept in your evidence pack). Where your lead assessor is internal, two directors will need to provide this confirmation in writing (to be kept in your evidence pack). There is no prescribed format for how you need to present the findings of your assessment to your director(s). As long as you have confirmation in writing to confirm the four points above and keep this in your evidence pack then that is sufficient.

Use the on-line notification system to notify the Environment Agency that you are ESOS compliant. The Environment Agency will collate the notifications from all participants on behalf of all the other regulators.