What would it look like if ESOS were easy?

energy-savings-opportunity-scheme-esos.png

ESOS is the Energy Savings Opportunity Scheme run by the Environment Agency to comply with the EU’s Energy Efficiency Directive.

It applies to businesses, charities and non-public sector organisations that are large enough to qualify.

Organisations qualify if, on the 31st of December 2018 (or the financial year just ended), they meet the ESOS definition of a large organisation – i.e, they employ more than 250 people or have a turnover of more than €50 million or a balance sheet of more €43 million during the year.

In a group company, if one part qualifies, then the whole qualifies and the highest UK parent company needs to be responsible for compliance – unless the responsibility is transferred to another group company.

The UK parts of overseas companies need to take part if any part of their group activities qualify in the UK.

So, the quick way to ESOS compliance is:

1. Work out your total energy consumption

This is simple if there are already systems in place that collect and process invoice data. If not, there is some data collection to carry out.

Most organisations will have quite good electricity and gas information. Other fuels and transport records are sometimes harder to find.

2. Identify areas of significant energy consumption

You need to identify at least 90% of usage and then figure out what existing assessments already cover these such as ISO 50001, DECs or GDAs.

The rest need to be covered with ESOS compliant audits.

The scope of the audits are decided by the lead auditor but the Association of Energy Engineers (AEE), for example, suggests than an ASHRAE Level 2 Audit which includes some measurement is appropriate.

Other schemes may have different requirements but they all will include a review of data, analysis of consumption and efficiency, identification of opportunities, site visits and a completed evidence pack that sets out the organisation’s approach to compliance.

3. Appoint a lead assessor

A lead assessor needs to do and oversee or review energy audits and overall assessment.

They (or their team) can either do the work, or work with you to review existing work – although they will be responsible for signing it off as compliant.

All lead assessors will be listed on their professional body registers.

4. Notify the Environment Agency

The Environment Agency must be notified using an online form by the 5th of December 2019.

5. Keep records

You need to keep an evidence pack of how you have carried out ESOS.

Then what?

Many ESOS reports the last time round were done and then left on a shelf to gather dust.

A significant issue is that many organisations are already quite energy efficient, especially when it comes to the large process tasks and pieces of kit that use the majority of industrial energy.

These pieces of kit can’t be quickly replaced and will have a upgrade and replacement cycle of their own.

As a result, a good ESOS assessment isn’t just an external audit at a point in time but a move towards an ongoing system of energy management and continuous improvement in energy efficiency.

Eventually, the activities being done could be formalised in an energy management system such as ISO50001.

Ideally – the output from the ESOS assessment will do two things:

  1. Come up with an action plan: Identify and rank projects that are doable – technically feasible – and have a payback that works for the company.
  2. Create a tender: Package up the rest of the projects for an Energy Services Company – so that the organisation can benefit from the savings while someone else takes on responsibility for implementation and financing.

Although the notification deadline is still some time away many of the activities can be carried out over the entire four-year period between deadlines, for example, the audits can be carried out on different parts of the portfolio during different years.

So… the place to start is with the data – and please do get in touch if you have any questions.

How to connect management, measurement and focus

management-systems-strategy.png

There are three questions that many businesses will need to address in 2018:

  1. How can we create business operations that have fewer emissions while creating more value?
  2. How can we protect the value we create – the intellectual capital – from pirates?
  3. How are we going to ethically use personal data?

These three questions are important because there are regulations and rules that need to be looked at now.

The Energy Savings Opportunities Scheme or ESOS requires large companies to audit their energy and transport use and look for savings.

The Cyber Essentials programme, run by the UK’s National Cyber Security Centre, aims to help all businesses and consumers become more secure.

And the General Data Protection Regulation or GDPR tells us how to manage personal data and keep it private.

So, what are the links between management, measurement and focus?

First, the standard approach to complying with requirements like these is to put in place a management system.

Most management systems, especially those that follow an ISO type standard, are based on the Deming Cycle – named after the engineer who helped transform Japanese manufacturing after the war into a lean powerhouse of quality.

The essential elements of the Deming Cycle are based on the principles of scientific enquiry and are:

  • Plan: Look at the situation and come up with an approach to manage it.
  • Do: Do the things in the plan
  • Study: Study what has happened and learn how to improve things. Some people use check instead of study – but Deming thought study was better as check is more about inspection, while study is about learning.
  • Act: Change the plan based on what has been learned and go through the cycle again.

This approach works well for tangible things such as reducing process waste or figuring out which items of kit to replace to reduce energy use.

But… things can get messy.

All too often a management system becomes an exercise in paperwork rather than a real effort to improve something – we do it to comply or pass the audit rather than actually becoming a better organisation.

And that’s because the technical element is only one part of an organisational system.

The intangible elements are just as important to get right.

The Balanced Scorecard is a method created by Robert Kaplan and David Norton that tries to look at the organisation as a whole.

Clearly, the way in which success is measured by an organisation is in the financial returns that come from doing a project.

Customers, on the other hand, focus on what they get out of the partnership.

In order to keep customers happy, the organisation needs to have the right internal capability to do the right things.

And that only comes when the people in the organisation are given the right learning and growth opportunities.

So, once again, how does all of this connect to management, measurement and focus?

It’s because it all starts with culture.

If the people in an organisation know and get with the vision and strategy – whether it’s becoming cleaner and greener, more secure or more ethical – then we’re starting with a firm base.

We can create a strategy using the Balanced Scorecard approach that works out what people need to know and helps them learn, puts the internal processes in place that are required, shows customers how this makes us better service providers and also gives us the financial returns needed to keep shareholders happy.

Our of the Balanced Scorecard comes a set of objectives, measures, targets and initiatives.

Otherwise called a plan.

We can implement the plan using the Deming Cycle and continuously improve our organisation – and that’s where quality comes from.

That’s sort of management and measurement covered, but where does focus come in?

Well, with all these kinds of things, there are two approaches we tend to take.

Either we look for the lowest cost compliance approach – because really none of these things are really that important and the existing financial pressures and priorities don’t leave any time for the hard work of business transformation.

Or we believe that we need to change to survive – and so the work involved in really becoming cleaner, safer and more ethical is worth doing.

And the results we will get in the next year will depend on which approach we focus on.

What does the UK’s clean growth strategy focus on?

clean-growth-strategy.png

The UK’s clean growth strategy, published in October 2017, sets out how the UK can grow while cutting greenhouse gas emissions.

The economic opportunity in clean business is huge.

Countries and companies need to invest around $13.5 trillion in the energy sector alone if we are to meet the Paris committments to keep the rise in global temperature below 2 degrees.

At the same time the UK wants to keep bills low – so the reduction in emissions needs to come from the cheapest technologies, processes and systems.

The UK plans to invest £2.5 billion from 2015 to 2021 in low carbon innovation.

33% of this will go into transport, with petrol and diesel cars killed off by 2040, a shift to electric and ultra low emission vehicles (ULEVs), more cycling and walking and improved logistics.

25% will be spent on power with a focus on smart systems, nuclear, price controls and ongoing work in renewables.

4% will go towards land use and waste, with new support mechanisms after the UK leaves the EU, planting new forests, having zero avoidable waste by 2050 and investing in agri-tech, land use, greenhouse gas removal technology.

10% is targeted at smart systems including storage, demand response, nuclear and offshore wind.

Homes will get around 7% to upgrade home energy efficiency measures, smart meters, a roll out of low carbon heating and new requirements for control systems.

Business and industry will get 7% spent on them to develop a package of measures to support them in increasing “energy productivity” by 20% by 2030.

This includes minimum standards on energy efficiency, helping businesses identify where they can cut bills and industrial schemes to help large companies install energy efficiency measures and support heat recycling.

Innovation will also be supported through the ongoing Energy Entrepreneurs Fund.

The purpose of this document is to set out a framework for action.

It’s then time for businesses, investors and innovators to go after the economic opportunities out there…

How to predict the future

drucker-on-the-future.png

Peter Drucker, who died in 2005, was one of the most influential scholars of management theory – writing 39 books and his quotes and sayings litter the field.

He came up with the term knowledge worker in 1959 – well before the Internet turned us all into knowledge workers.

He also explained how he was able to predict the future. It’s easy – he said.

All we have to do look around, report what events we see happening and what we think that obviously means for the future.

Some people think that’s prediction, but it’s really just having our eyes open and taking the time to think.

So, how can we use what Drucker write about to come up with a clear strategy for the future.

First, we start by looking at the opportunities out there that we want to go after.

This is the world from our point of view – the things that we think are important and material and that should matter to everyone else.

Second, what are the opportunities that our organisation can deliver?

We need to be able to innovate – to create and deliver a product that matches the opportunity we select.

Without an organisational structure in place – with people, equipment and processes and a supply chain, we can’t deliver anything – or convince anyone else that we can.

Third, we need a customer.

Drucker said “The purpose of business is to create and keep a customer”.

Without a customer, who needs, wants and values the product that our organisation creates to address the opportunity – we’re simply setting ourselves up for failure.

And who wants that… especially when we’re starting a new year.

What are the trends to watch in 2018?

trends-watch-2018.png

Forecasts are usually a waste of time

At the start of the year, a number of predictions are made about what may disrupt life and business in the year ahead.

If we start, instead, by taking a look back, some of the biggest stories of 2017 came as a surprise.

Was anyone surprised by Trump’s policies?

The policies of the Trump administration are perhaps more of a series of road bumps to be endured rather than a revolution in how things are done.

Despite the US withdrawal from the Paris accord, it remains a leader in electric car technology and its technology companies still dominate global markets.

Attempts to support old industries will probably result in the money going to executives at large oil, gas and coal firms rather than actually helping people and communities with cleaner energy and new opportunities.

And the effect of the policies may well be to hand the Chinese a leadership position in the actual manufacturing of clean energy technology as well as increasing dominance over emerging markets.

The Brexit process was triggered

The UK will leave the European Union.

How and when and how much it will cost and who will win and lose are still being discussed.

The UK is not in a strong position.

It faces a juggernaut which is its main export and import partner and takes a long time to decide anything.

The EU can take its time – the UK needs decisions to be made soon.

And that pressure means the UK may have to settle for less than it hopes for.

Cyber-security and hacking are making headline news

2017 was full of news about Russian involvement in the US election and the extent to which foreign nations are carrying out cyber-warfare.

At the same time, criminals are targeting individuals and businesses.

Government and business are increasingly conscious of the risk of being hacked – but are still working out what to do in response.

The Grenfell fire caused 71 deaths and will result in changes to building regulations and fire safety

As more of us begin to live in cities and high-rises, the Grenfell Tower Fire has to spur action to improve safety in such buildings.

Better, more energy-effient infrastructure is needed to both prevent electrical fires from starting in the first place and stopping them quickly when something fails.

Electric cars may have reached a tipping point

Electric cars sales are still low, but their public perception as a viable alternative to petrol and diesel cars may have reached a crucial point.

Falling battery prices and increasing government support, including long-term targets to make electric cars the norm are helping the industry.

Bitcoin – bubble or not?

It’s probably one…

So, what could happen in 2018?

Security should be on our minds.

Recent news about hardware and software vulnerabilities should not be a surprise.

There are always bugs in systems.

The weakest point, however, is usually people.

Many organisations still need to really get to grips with digitisation and what it could do for them.

It’s not just doing things with computers the way they are done on paper.

And it’s not simply moving to the cloud – that is a particular type of solution – the point is what type of solution actually works for us in a particular situation.

Digitisation and security go hand in hand – we should use computers to do more, and we should be able to keep what we do on those computers confidential and secure from competitors and hackers.

The increasing complexity of everything, however, means that specialisation is now normal.

Advanced economies look at Everything as a Service, where we can find organisations and people to help with specific tasks.

It’s more about the specific solution OR the specific person that does something.

And, as no one wants to take the risk of paying up front for something they don’t understand and can’t use, paying to try things out and then use them if they work seems to be the model for the majority of products.

Unless you’re Apple, in which case you can deliberately slow down your old stuff to make people buy your new stuff…

So, for all those services, we really need to start looking at global/local partnerships.

For example, what’s stopping us from working with admin assistants in the Philippines, sysadmins in Brazil or developers in India?

Well, in 2017, nothing did…

The fact that countries are increasingly nationalistic and making it harder for people to cross boundaries, partly as a result of global terrorism, makes less and less difference in a world where everyone is connected by the Internet.

We should be looking for partners and services wherever they are – and select them based on what they do and how much they charge – and how much value we get.

Then there is the mail…

Many of us probably do the majority of our shopping online.

Vans are the fastest growing automotive segment because of all the deliveries being made.

We can order stuff from China or Taiwan on Ebay and have it here in a few weeks. If we pay more, we can have it tomorrow from the UK in the mail.

The mail order business is simply going to grow – shops are turning into places where we go and browse, like catalogs.

And then there will be all the things that no one predicted

As Donald Rumsfeld said in 2002:

Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.

In 2018 – the unknown unknowns will be the ones that get the biggest headlines.