SECR Reporting vs the Energy Savings Opportunity Scheme (ESOS): Understanding key differences

June 19, 2023

For commercial property owners in the UK, complying with energy and carbon-related regulations is essential to drive sustainability. Two crucial schemes that directly impact businesses in this sector are the Streamlined Energy and Carbon Reporting (SECR) and the Energy Savings Opportunity Scheme (ESOS). In this blog, we provide owners with an overview of these regulatory schemes, outlining their requirements and highlighting the key differences between them.

What are the SECR reporting regulations?

SECR, implemented in April 2019, aims to improve transparency and energy management within large companies. Commercial property owners falling within the scope of SECR are required to measure and report their energy consumption, greenhouse gas emissions, energy efficiency actions and intensity ratios annually. By requiring large companies to disclose their energy consumption and emissions, SECR encourages them to take action towards a greener and more sustainable future.

Who is required to comply?

SECR applies to "qualifying companies," which are defined as UK-incorporated companies that meet at least two of the following criteria:

A turnover of £36 million or more
A balance sheet total of £18 million or more
Employs 250 or more people

LLPs and quoted companies are also included in the scope.

What are the reporting requirements?

SECR mandates the inclusion of energy consumption, greenhouse gas emissions, intensity ratios, and energy efficiency actions in your annual Directors' Report. This includes energy used within your buildings and operations, such as electricity, gas and transport fuel. SECR also encourages the inclusion of comparative data from the previous year, enabling stakeholders to assess progress in energy efficiency and emissions reduction.

The following information must be disclosed:

Energy consumption: The regulations require reporting on the company's total UK energy consumption from activities for which the organisation is responsible.

Greenhouse gas emissions: Companies must report their annual greenhouse gas emissions, including scope 1 emissions (direct emissions from owned or controlled sources) and scope 2 emissions (indirect emissions from purchased electricity, heat, or steam).

Intensity ratios: Companies need to report an intensity ratio that puts their energy consumption or emissions in relation to a specific metric, such as revenue, production, or floor area.

Energy efficiency actions: Qualifying companies should disclose the energy efficiency measures they have implemented within the reporting period.

What is the Energy Savings Opportunity Scheme (ESOS):

ESOS is a mandatory energy assessment and reporting program in the United Kingdom. It was established in 2014 as a result of the EU Energy Efficiency Directive. ESOS is designed to help organisations identify energy-saving opportunities and promote energy efficiency across various sectors. The scheme requires businesses to conduct comprehensive energy audits every four years, highlighting areas of significant energy consumption and recommending cost-effective energy efficiency measures.

By participating in ESOS, organisations can gain valuable insights into their energy usage, uncover potential efficiency measures, reduce costs and contribute to a more sustainable future.

Who is required to comply?

ESOS has a broader scope than SECR, and applies to UK companies that meet the following criteria:

An annual turnover of £44 million or more
An annual balance sheet total of £38 million or more
Employs 250 or more people

What are the requirements to comply?

ESOS requires qualifying organisations to undertake comprehensive energy audits once every four years. The audits involve analysing energy data, identifying areas of potential improvement, and recommending energy-saving measures. To carry out the audits, organisations must:

Measure your total energy consumption: This includes energy consumed by buildings, industrial processes and transport
Identify areas of significant energy consumption: This is the energy used by your organisation that accounts for at least 95% of your total consumption.
Appoint a lead assessor: You need to appoint an approved lead assessor to carry out and oversee your energy audits and overall ESOS assessment.
Notify the Environment Agency: Once compliance, you need to submit your ESOS notification of compliance to the Environment Agency. This report includes details of the energy-saving measures identified, as well as progress made in implementing these measures
Keep records: You must keep records of how you have complied with ESOS previously in an evidence pack.

ESOS is currently in its third phase, with an upcoming reporting deadline of 5 December 2023.

What are the key differences between the two legislations?

While both SECR and ESOS focus on energy management and emissions reduction, there are important distinctions between them:

Scope: SECR covers reporting and disclosure of energy consumption and carbon emissions, while ESOS centres on energy audits and identification of energy-saving opportunities. Under ESOS, there is no requirement to record emissions.

Reporting Frequency: SECR reporting is an annual requirement coinciding with the publication of financial statements, while ESOS audits and reporting occur once every four years.

Applications for overseas companies: SECR does not apply to organisations that are not registered in the UK, whereas ESOS applies to overseas companies if they have a UK-registered establishment with 250 or more employees

Reporting requirements: SECR requires reporting on actions taken during the year to cut energy use and emissions (including at least one intensity ratio) to be included in the Directors/Annual report. ESOS, on the other hand, is completed by a qualified ESOS lead assessor and sent to the Environment Agency.

How do ESOS and SECR differ from the MEES regulations?

ESOS, SECR, and MEES (Minimum Energy Efficiency Standards) are three distinct regulatory schemes in the UK that aim to improve energy efficiency but differ in their focus and scope. While ESOS and SECR regulations apply to all large organisations within the UK, MEES specifically targets energy efficiency in privately rented commercial properties.

For more information on MEES, check out our blog articles: Understanding the MEES Regulations in the UK and Updated MEES requirements: What UK building owners should know.

The path to compliance as a commercial property owner

Under SECR’s requirements to report on measures taken to cut energy usage during the reporting year, commercial property owners have a range of options available to them. Building analytics software, such as CIM’s innovative PEAK Platform, stands out as a cost-effective, proven method to reduce energy consumption within your building portfolio. Here’s a few ways building analytics software uses its AI capabilities to reduce emissions:

Equipment performance monitoring: Building analytics software integrates with building management systems and energy meters to monitor the performance of equipment and systems. It enables property owners to identify underperforming equipment, detect anomalies, and optimise energy usage. By analysing real-time data and comparing it against baseline or benchmark data, property owners can pinpoint areas for improvement and implement energy-saving measures.

Automated fault detection and diagnostics: Building analytics software can automatically detect equipment faults, abnormal energy consumption, or system inefficiencies. By alerting property owners to these issues in real-time, they can quickly address them, improving the overall energy performance of the building.

Optimization of building systems: Building analytics software can analyse energy data to identify opportunities for optimising building systems, such as HVAC, lighting, or occupancy scheduling. By analysing energy consumption patterns, occupancy levels, and environmental conditions, property owners can implement energy-saving strategies like adjusting setpoints, optimising schedules, or upgrading equipment. This optimization leads to significant energy and emissions reductions.

Similarly, the PEAK Platform enables property owners to conduct energy audits and assessments more efficiently, simplifying the process of ESOS compliance. By automating data collection and analysis, the software eliminates the need for manual data entry and interpretation. It then effortlessly analyses energy usage patterns, identifies energy-intensive areas and pinpoints potential energy-saving opportunities. The software also supports continuous monitoring, allowing property owners to track energy consumption over time, assess the effectiveness of implemented measures and drive ongoing improvement.