Companies that are unsure of how to become ESOS compliant should take a step back and look at the bigger picture of business operations, argues Graham James, VP of CACI’s Business Intelligence group, and Chris Reed, director of SMARTflow Energy Services.
It’s been several months since large UK firms’ responsibility for complying with the Energy Savings Opportunity Scheme (ESOS) came into effect. All affected companies should by now have received a notice from Government informing them of their obligations; but many still wonder exactly what to do.
Even though we’re well into the year, however, it’s not too late for those companies who haven’t got started yet. They just need a few simple steps to catch up with the rest. And if they want to get the full set of benefits, they should link the ESOS reporting to the broader business performance. This will require a little more innovation and ‘big picture’ thinking, but will provide enduring rewards.
What to do
The good news is that the basics of the ESOS are quite simple. This year – and every fourth year going forward – companies with more than 250 employees must create an ESOS report. What this means is that they have to undergo an energy audit and compile a list of potential actions they can take to save energy.
The better news is that the ESOS is also an easy way of saving money and generating better profits from reduced operating costs. If companies act upon their audit findings and implement energy saving measures, the resources invested in the energy audit will be easily repaid and more. Between 5 and 15% of energy bills will be cut, according to CACI research. If companies can cut as much as 20% of energy costs, it would for some represent the same bottom line benefit as a 5% increase in sales.
The best news, however, is that ESOS reporting can be a great tool not only for improving bottom line, but also for upgrading production facilities and business analytics. By seizing the opportunity the obligatory ESOS audit presents to improve information flow across a whole organisation, upgrade production facilities, and increase margins on the balance sheets, companies could end up being grateful for the ESOS for a long time to come.
How to do it
To help companies seize the chance to integrate energy and business analytics, CACI and SMARTflow’s system investigates a company’s energy spend, not in isolation, but together with the costs of production data, shift patterns, HR costs, and customer and sales figures. This allows the energy savings audit to be merely one part of a larger strategy for overall business growth.
With this model, energy efficiency measures can also be implemented without impacting the balance sheet at all. The initial audit costs can be taken directly from the savings the efficiency measures create – they are, in the most literal sense of the phrase, paying for themselves. There is hence no financial risk involved in taking full advantage of the ESOS audit.
When analysed in the context of overall business development, the fully financed energy measures can therefore be used to improve building stock, production equipment and other business assets – in addition to the traditional targets of energy audits, such as lighting units and boilers. It presents companies across all sectors with an opening to improve their facilities and productivity as well as cutting their energy expenses.
Upgrading a production site this way, or even investing in new technologies, will mean more efficient production and lower operating costs, in addition to the energy savings and carbon reduction that lie at the heart of the scheme. Ultimately, this is what will be the lasting benefit of ESOS for those businesses who commit to the opportunity.
A smarter system
Integrating business analytics into the ESOS audit will therefore drive a business forward beyond the yearly saving on energy spend. And the more measuring points a business has, the more data it can gather and the more areas of business it can improve on. This is true not only in the context of an ESOS audit, but in the grander scheme of things as well – the ESOS is really only a timely reminder and a strong incentive to get started.
CACI and SMARTflow’s approach to ESOS audits is therefore to ensure that as many data sources as possible are viewed as part of the same overall analytics system. With our system, companies get a detailed feasibility study that allows them to consider several options and agree on a funding mechanism before moving on to the energy measure implementation. This lets them adapt their energy savings to fit with their business needs. It also allows everyone in the company to focus on their day jobs while the audit is being performed.
The advances made through the use of big data are obvious in many sectors and many areas of business; and this progress is no less relevant for energy analytics and broader business development. The need for increased data analysis capacity will also only increase in the future. This demand will put a stress on the need for data capabilities in companies, but also give them more possibilities than ever before. This is the reason why we encourage companies to treat the ESOS as more than a regulatory hurdle.
It’s also highly likely that once the initial tranche of companies that have to comply with the ESOS requirements have done so, the scheme will be widened to include smaller businesses and implemented on an industry wide basis. We are already receiving an increasing number of enquiries from forward thinking businesses operating outside of the ESOS criteria looking to reap the benefits available in energy efficiency. Once the scheme is rolled out across the whole industry, these companies will have a head start.
Getting started
The ESOS has been put in place by Government to reduce the country’s carbon footprint. Contributing to this and taking a stand as sustainability leaders can help companies stand out amongst their competitors. Improving business performance and saving money therefore also comes with added positive public relations, which again is helpful for attracting business investments.
Initially, ESOS savings will be somewhat small because of the one-time cost; but they will grow with time and they’ll give the business year-on-year savings for years to come. This also means that companies will face less exposure to volatile energy prices, and stay ahead of the curve on potential carbon price rises, which can only be beneficial for financial planning.
Even though some companies are still unsure of what they have to do under ESOS, it’s not too late. Energy reporting is due in December at the latest, but the reports must still cover the full year. The sooner a company starts their mandatory energy audit, the better. And the more meticulous the energy audit, the more improvements they will have a chance to make to their overall business performance. Making the most of ESOS will require a commitment to integrating energy and business analytics fully.
