As a result of the EU’s focus on reducing the effects of climate change, the Energy Savings Opportunity Scheme and the Streamlined Energy Carbon Reporting were brought into force in 2019.
The UK’s climate response
As a result of concerns relating to the global climate change crisis, Europe aims to become the world’s first climate-neutral continent and has set a range of EU policies and regulations to meet this target. With the UK being a key contributor to the industrial revolution, responsible for economic growth globally and therefore an increase in emissions, the UK is putting clean growth at the centre of the modern Industrial Strategy. This positive step brings in potential new obligations for businesses and charities alike.
We were asked to advise our client, a large charity, as to the potential obligations they may have as a result of the Energy Savings Opportunity Scheme (ESOS) and the Streamlined Energy Carbon Reporting (SECR). The issue was whether this charity would be caught by either of the above and what action would be needed if this was the case.
How did we help?
The SECR policy was brought into force on 1 April 2019 through The Companies (Director’s Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 with the aim to improve environmental practices within large organisations by increasing awareness of energy consumption and encouraging acknowledgment of any improvements to be made. This means that if a large organisation is caught within the framework, there are reporting requirements which must be adhered to.
A large company is one which exceeds the thresholds in respect of the number of employees (250), turnover (£36 million), and balance sheet total (£18 million). Guidance (Government Guidance on Environmental Reporting Guidelines) suggests that in relation to charities, turnover should include all income which arguably makes the threshold a lot lower for charities. For our client this meant that even if in this financial year they were below the threshold, they were set to be within the threshold as the charity continued to grow. They would then need to comply with the requirements of the 2018 legislation brought in to implement the SECR policy on disclosures concerning greenhouse gas emissions, energy consumption and energy efficiency action.
The ESOS is governed by the Energy Savings Opportunity Scheme Regulations 2014 and requires larger companies and non-public sector organisations in the UK to carry out mandatory energy saving assessments which includes calculating their total energy consumption, carrying out energy audits and identifying where energy savings can be made. If ESOS applies, the charity would need to carry out an ESOS assessment and ensure full compliance of the ESOS Regulations.
The next qualification date for the ESOS is 31 December 2022 so many charities may fall within this framework in the coming years. We therefore advised this charity as to whether the Regulations apply currently or will apply in the future and what the charity will need to do in order to comply. Both the ESOS and SECR were brought in as a result of the EU Energy Efficiency Directive and as the UK leaves the EU, both schemes have been reviewed as to whether they should remain in place post Brexit Implementation Period. The impacts of both have been evident and were reported to the Chief economist/Head of Analysis and Minister and have received sign-off for post-implementation review. The government has said it is committed to maintaining the standards of carbon reporting already established, even after Brexit and therefore these requirements will remain in force for the foreseeable future.