Understanding the key differences between ESOS and SECR compliance

Understanding ESOS and SECR

ESOS focuses on energy consumption within businesses, providing a framework for identifying energy-saving opportunities. It mandates regular energy audits and the identification of efficiency improvement opportunities as part of the EU Energy Efficiency Directive. ESOS operates on a four-year cycle, requiring businesses to conduct and report an energy audit covering a 12-month period within each cycle. ESOS requires businesses to assess at least 95% of their total energy usage, including transportation and building operations. Recommendations provided post-assessment are not mandatory but must be documented.

SECR aims to enhance transparency regarding energy use and greenhouse gas emissions. It requires businesses to report on their carbon emissions and efforts to reduce them. The compliance requirements mandate Scope 1 direct emissions and Scope 2 indirect emissions, as well as the related business transportation emissions associated with Scope 3. While other aspects of Scope 3 are not required to be reported, it is encouraged to voluntarily include them. Companies can choose to voluntarily comply with SECR, but if you meet the criteria for a large company then you are required to meet the regulations. The information reported must be accurate; if it’s not, it could lead to reputational damage or scrutiny from external regulatory bodies.

To check if you should comply with SECR, read our recent blog.

What’s the difference between ESOS and SECR?

Primarily the differences between the two is that SECR has a comprehensive view of a business’s environmental impact by including emissions data, and ESOS does not require the same level of emission reporting. It does, however, emphasise energy audits and actionable insights for reducing consumption which can provide valuable information to businesses. ESOS concentrates on energy consumption and energy efficiency opportunities within the business, while SECR focuses on carbon emissions, requiring businesses to quantify and report their greenhouse gas emissions. Another key difference between the two compliance systems is that ESOS operates in a four-year cycle, while SECR requires annual submissions integrated into the company’s financial reporting cycle.

How can reporting benefit a business?

Considering both ESOS and SECR can offer some substantial benefits to your business that go beyond compliance. There is potential for identifying energy-saving opportunities and improving efficiency, which can lead to significant cost reductions in energy expenditure. Businesses that are compliant with either SECR or ESOS will take actions that improve energy efficiency and, in turn, boost their green credentials – leading to a potential enhancement in the reputation of the business and improved stakeholder engagement. Being compliant also opens an opportunity for mitigating energy use and emissions risks, which can improve business resilience and long-term sustainability.

Do I need to comply with SECR and ESOS?

It’s important that businesses assess their size, turnover, and operational scope to decide if they meet compliance requirements for both ESOS and SECR. As there are individual requirements for both SECR and ESOS, ensuring that you meet the reporting and audit requirements of both schemes is essential to avoid penalties, but also to access the associated benefits.

In conclusion, while ESOS and SECR share the common goal of improving environmental performance in businesses, their distinct approaches require tailored compliance strategies. Understanding the nuances and benefits of each scheme can help businesses not only avoid penalties but also drive significant improvements in energy efficiency and sustainability practices.