July 13

Top business energy compliance challenges of 2022 and how to address them


As we pass the midway point of 2022, we must examine the biggest hurdles that will obstruct energy compliance in the future, so that we are better prepared to face the challenges we might come across. Recent events have kicked forward plans for locally-produced renewable energy, which means your organisation, whether they operate in the energy sector or otherwise, will face changes to regulations. If not accounted for, these changes could see you face a compliance violation that could hurt your  finances and your company’s credibility. 

On the other hand, knowing how these challenges can help organisations prepare for the future by making preparations for significant regulatory updates. Here are some of the top business energy compliance challenges of 2022 and beyond and the best way to address them. 

What are the top business energy compliance challenges of 2022?

TCFD reporting will be mandatory for large companies 

In 2020, large companies (including financial institutions) needed to disclose climate-related financial information, following the Task Force on Climate-Related Financial Disclosures (TCFD), and these rules were extended to the UK’s largest firms, regardless of industry.

As of 2022, all organisations, whether they are trading companies, banks, or insurers, all entities with over 500 employees and £500 million in turnover were expected to make the report. Furthermore, the Sustainability Disclosure Requirements (SDR) was expanded, requiring businesses to go public with their net-zero transition plans. The expansion of TCFD and SFD means that organisations will need to expand their reporting procedures, devouring more time and resources into the process compared to last year unless they invest in solutions that can optimise the process.  

Scope 3 emissions will get a bigger focus

GHG emissions are often broken into three categories: Scope 1, Scope 2, and Scope 3. In the coming months, we can expect regulators to put more focus on Scope 3 emissions, meaning that organisations will have to ensure that their supply chain reduces emissions. 

However, this will be a challenge for several organisations because Scope 3 covers indirect emissions, which are very hard to detect, particularly for organisations with a large supply chain. Experts state that Scope 3 makes up more than 90% of emissions within the supply chain, with more tangible, easier-to-measure emissions sources accounting for less than 10% of GHG total. 

Organisations will need to find a new way to measure indirect emissions if they are to meet compliance requirements in the future. 

UK government changes emissions caps 

The government is constantly altering the acceptable emissions gap within the UK Emissions Trading scheme. With the government and relevant administrations set to review the ETS cap, we can expect a revision to the cap that will be implemented by 2023 or 2024. 

The new cap will be a major challenge for business energy compliance because it affects the organisation’s long-term sustainability goals. They will have to revise their internal emissions targets for the future. Moreover, we can expect consistent revisions to the gap given the government’s push to net-zero emissions, with future targets becoming steeper. If left unprepared, your organisation could face rising compliance costs while facing the risk of severe compliance penalties. 

You can prevent this from happening by developing a systematic process where you can adjust internal operations instantly to respond to future revisions. This will help you take a more proactive approach to compliance management. 

Large buildings will be rated for energy use 

With public institutions starting to crack down on emissions, they are turning their gaze, with ever-increasing scrutiny, toward large buildings. In March 2021, the government consulted with specialists on a framework for rating the energy and carbon performance of commercial and industrial buildings above 1000 square meters. The rating will be rolled out in three phases, with the first introduced in 2022 to the office sector. 

The new ruling indicates that energy compliance reporting procedures would expand significantly for organisations. Furthermore, they must consider strategies for reducing emissions because regulatory institutions will be studying these reports to determine if organisations are taking measures to cut down emission levels. 

What is the best way to meet these challenges?

As the government moves forward with their ambitious plans for an emissions-free future, it leaves organisations in a constant state of vigilance because regulatory updates are constantly changing what is considered acceptable and grounds for compliance violations.

To ensure that your organisation can meet these business energy compliance challenges without letting them affect the balance sheet, you need to modernise energy compliance management. 

Energy compliance solutions can help organisations meet the changing requirements while reducing the cost of compliance. For example, the platform can help streamline reporting, allowing organisations to take a proactive approach to energy regulation while successfully meeting requirements. 

In the next few years, compliance management will be an automated, data-driven affair as organisations try to make sense of increasingly complex regulatory data. Investing in an automated platform allows organisations not only to help you avoid costly violation penalties but also to turn compliance into a value-added process to save time and money.


Compliance Strategy, Energy Compliance Challenges

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