Energy used by company cars and vans, including the grey fleets, must be included in a new audit to meet European Union regulations.
Experts suggest that the audit, which will affect thousands of fleets, could result in a significant reduction in corporate mileage, particularly among employees who drive their own cars on business.
The new, mandatory energy audits – not to be confused with greenhouse gas emissions reporting which became law last year for London Stock Exchange-listed companies – are designed to promote the take-up of energy efficiency measures, reduce CO2 emissions and improve air quality.
To meet the European Union’s Energy Efficiency Directive, the UK Government has established the Energy Savings Opportunity Scheme (ESOS).
It requires all non-SMEs (companies employing 250 or more people or with an annual turnover exceeding
£40 million and a balance sheet exceeding £34m) to complete an audit every four years. Public organisations are exempt from the scheme.
Qualifying companies must measure their total energy consumption across their transport, buildings and industrial activities over a 12-month period, with the first report sent to the scheme administrator, Environment Agency, by December 5, 2015. The qualification date for the first audit is December 31, 2014.
Furthermore, the audit must include recommendations for cost-effective energy efficiency measures that can be undertaken with estimated costs and benefits quantified.
Participants are not required to implement energy efficiency recommendations identified by their ESOS assessments.
However, the Government says businesses will achieve the financial benefits that arise from avoiding energy waste only if they implement the recommendations identified.
It is estimated that energy efficiency recommendations could collectively lead to £1.6 billion savings for businesses – equivalent to a 0.7% average energy reduction – in the period to 2030.
Speaking before his recent resignation as energy minister, Greg Baker said: “We know that many businesses in the UK are already committed to energy efficiency.
“But we also know that there is still significant untapped energy potential in the UK economy. ESOS will help large organisations identify savings they can make on energy bills.”
ESOS has been established by the Department of Energy and Climate Change (DECC), which calculates around 9,400 companies qualify, with 8,500 assumed to operate fleets.
The ESOS assessment estimates the proportion of energy consumption attributable to business used by company car and van fleets, as well as grey fleet cars.
For vans it’s estimated at 59%, company cars 8% – both weighted for average mileage – and 9% for grey fleet cars calculated using purpose of trip data.
The Government’s ESOS guide estimates that an audit could trigger a 2% reduction in energy consumption for business travel in company car fleets and a 1% cut in energy consumption by vans. Private travel in company cars and vans is excluded from the audit.
While the guide does not specify a potential energy saving from a reduction in grey fleet usage, the Government believes “significant potential efficiency gains” are possible.
That view is supported by BVRLA. “The move could lead to a dramatic reduction in corporate reliance on grey fleet travel,” said a spokesman.
“Businesses which rely on grey fleet travel will no doubt welcome the opportunity to reduce their energy usage and can do so by switching from older grey fleet vehicles which aren’t as fuel efficient as the newer, cleaner vehicles provided by leasing and rental companies.”
BVRLA highlighted the case of Environment Agency, which some years ago introduced a policy that all return journeys exceeding 50 miles should be undertaken using a hire car and not a grey fleet vehicle.
This delivered a 21% grey fleet mileage reduction over a four-year period and a 470-tonne reduction in CO2 emissions as well as major financial savings.
The ESOS guide suggests several energy-saving opportunities, including improving fuel consumption by monitoring usage and driver performance, undertaking fuel efficiency driver training and investing in telematics systems.
Failure to comply with ESOS could trigger penalties of up to a maximum of £50,000 and/or an additional fine of £500 per day until compliance is achieved for a maximum of 80 days alongside publication of an organisation’s non-compliance.