Managing energy performance

In business, it is always helpful to know what is coming and to be prepared for any eventuality. By being aware of future events that could have an impact on business operations, such as new laws or changes in fiscal policy, you can ensure that disruption is minimised and no regulations are broken.

While many businesses may believe that they already follow this plan, recent research by Royal & SunAlliance (R&SA) found that two thirds of UK companies were unaware of an important new piece of legislation that will come into force in a matter of weeks.

On 6 April 2008, the Energy Performance of Buildings Directive, European legislation designed to reduce carbon emissions, will come into effect for all UK businesses. The Directive will require all property owners and landlords to provide energy performance certificates (EPCs) to any prospective buyer or tenant when they construct, sell, lease or modify a commercial building over 10,000 m2 from 6 April. It will be extended to buildings over 2,500 m2 from 1 July and all other buildings from 1 October 2008. The EPC will highlight the efficiency of the building to potential tenants and owners, as well as ensure that newly constructed buildings comply with environmental controls.

The new legislation will also require public authorities and public institutions occupying buildings with a usable floor area over 1,000 m2 to present a display energy certificate (DEC) in an area clearly visible to the public. A DEC shows a building's energy performance by recording energy consumption over 12 months.

Additionally, businesses will be required to carry out regular inspections of air conditioning systems with an output over 250KW by 4 January 2009. The inspection involves an assessment of efficiency, and advice on improvements or replacements and alternative solutions. The Government implemented these regulations last year as part of its long term desire to reduce the UK's C02 emissions under the Kyoto Protocol.

However, despite the media attention on climate change and the Government’s emphasis on the priority of emissions reduction, R&SA's research found that two thirds of UK businesses are unaware of the energy performance directive and their environmental obligations. Only one in ten businesses knows when the directive comes into effect, which means that 90% of businesses could be subject to a fine of £5,000.

But it is not only the financial implications of non-compliance that matter. In order to sell, lease or modify a building, an EPC is required.

Without one, construction and property companies can no longer trade. Furthermore, if your building has a poor energy rating, it will have a lower value to potential buyers or tenants.

It may even be a challenge to find tenants, as a number of companies may have corporate social responsibility policies which may prevent them from working in a building whose energy performance is poor .

Recommendations

The implications could be severe but it is still not too late to act. To ensure that your business avoids a fine in April, it is recommended you do the following.

¦?Make sure you are aware which (if any) of your properties will be subject to the new legislation.This will depend on the size and use of theproperty.

¦?There will be a limited number of accredited companies that can provide EPCs, and demand is likely to exceed supply. Talk to your insurance broker or property management company to find out who will be able to provide these certificates.

¦?Formulate a strategy. Review which buildings you are going to sell, modify or re-lease over the next 12 months and prioritise.

“If your building has a poor energy rating, it will have a lower value to potential buyers or tenants

¦?Budget for compliance costs and any potential improvements to your assets as a result of your energy grade. A low energy grade could be used as a bargaining tool to reduce rent or building values.

¦?To save cost and time, collate the information needed to complete an EPC before the implementation of the directive. This includes:

- building size

- total usable floor area

- your building asset register

- an up-to-date operation and maintenance manual/log book for your building.

¦?Review your lease agreements. Make sure they are up to modern standards as advised by the British Property Federation.

¦?Make sure your property valuationsare up-to-date.

¦?If you are required to produce a DEC, make sure you have the last 12 months' utility bills available, preferably in electronic format.

¦?It is the user/operator's responsibility to make sure the energy assessment of air conditioning audits is carried out. Understand the size of your units and engage a competent person to complete the inspection.

¦?Go to http://www.communities. gov.uk/planningandbuilding/theenvironment/energyperformance/ to see your full responsibilities as landlord or tenant with regard to the Energy Performance of Buildings Directive.

Reducing energy consumption is not just about doing something because the law says we must. it is about helping to preserve the world for future generations. The continued focus on climate change and damage to the environment has changed consumer attitudes, and, increasingly, customers are demanding that businesses take their environmental responsibilities seriously. Therefore it should follow that those that listen to their customers will be the successful businesses of the future. Will you be one of them?