The Energy Savings Opportunity Scheme is now in its fourth compliance period, ESOS Phase 4. UK organisations that qualify must complete their assessment and submit their notification of compliance by 5 December 2027.
Preparing for ESOS Phase 4 involves more than completing an energy audit near the deadline. Businesses need reliable energy data, clear records and enough time to assess sites across their organisation.
This guide explains what ESOS means, who qualifies and what changed during Phase 3. It also covers the Phase 4 deadline, planned changes, reporting requirements and the information businesses should start collecting now.
What is ESOS and What Does ESOS Stand For?
ESOS stands for the Energy Savings Opportunity Scheme. It is a mandatory energy assessment scheme for large organisations operating in the UK.
Organisations that qualify must measure their energy use and identify ways to improve energy efficiency. This process takes place every four years.
The assessment can include energy used by:
- Buildings
- Industrial processes
- Company transport
- Other business activities
The aim is to find practical ways to reduce energy use, costs and carbon emissions. This might include improving heating controls, changing operating hours or replacing inefficient equipment.
ESOS is managed by the Environment Agency, working with environmental regulators across the UK. It mainly applies to large businesses, but some charities, partnerships and other non-public organisations can also qualify.
Most participants must appoint an approved lead assessor. The assessor reviews the work and confirms that the assessment meets ESOS requirements.
ESOS does not normally force a business to complete every energy-saving measure identified by an audit. However, businesses must now prepare action plans and report on their progress. This creates a clearer record of what happens after the assessment.
What is ESOS Phase 3?
ESOS Phase 3 was the third four-year compliance period. Businesses assessed whether they qualified on 31 December 2022.
The final deadline for submitting a Phase 3 notification of compliance was 5 June 2024.
Phase 3 introduced several new requirements. These were designed to make ESOS a more useful part of a company’s wider energy management work.
Qualifying businesses had to calculate their total energy use and identify the activities that used the most energy. They then had to cover those areas through an ESOS audit or another approved route.
Businesses also had to produce an ESOS report, receive director-level approval and submit their information through the government’s online reporting system.
Phase 3 participants were also required to produce an action plan. This set out which energy-saving measures they planned to complete.
Two annual progress updates are then required. The deadlines are:
- First progress update: 5 December 2025
- Second progress update: 5 December 2026
Qualification Criteria
A business qualified for ESOS Phase 3 if it was classed as a large undertaking on 31 December 2022.
An organisation was classed as large if it met either of these conditions:
- It employed 250 or more people.
- It had annual turnover above £44 million and a balance sheet total above £38 million.
ESOS must also be considered at group level. If one UK business within a corporate group meets the criteria, other UK businesses within that group may also need to be included.
Organisations close to the thresholds should review their position carefully. A business may need to meet the conditions for a different size category for two accounting periods before its classification changes.
Employee numbers can include employees, owners, managers and partners. Part-time employees are still counted as employees for this purpose.
Changes such as acquisitions, company sales and restructuring can also affect qualification. Businesses should keep clear records showing how their group was structured on the qualification date.
Key Changes and Requirements Introduced in Phase 3
Phase 3 increased the amount of an organisation’s energy use that had to be covered by an ESOS audit or another approved compliance route. Businesses were required to include at least 95% of their total energy consumption, compared with 90% in earlier phases.
This could include electricity and gas used in buildings, fuel used in industrial processes, company transport and other business activities.
Once total energy use had been calculated, businesses had to identify their areas of significant energy consumption. These areas needed to be covered by an ESOS energy audit or another valid route, such as ISO 50001 where the relevant requirements were met.
Phase 3 also introduced stronger requirements for:
- Energy intensity ratios
- ESOS reports
- Action plans
- Annual progress updates
- Director-level approval
An energy intensity ratio compares energy use with a suitable business measure. A manufacturer might measure energy used per unit produced, while an office-based organisation might compare energy use per employee or per square metre.
These ratios help businesses understand whether their energy efficiency is improving, even when overall activity changes. For example, total energy use may rise because production has increased, but the business could still be using less energy for each item it produces.
ESOS audits must be based on reliable energy data and should identify practical opportunities to improve efficiency. They will usually include visits to a suitable sample of business sites.
The findings are recorded in an ESOS report and supporting evidence pack. These documents show how energy use was calculated, how the assessment was completed and which energy-saving opportunities were identified.
What is ESOS Phase 4?
ESOS Phase 4 is the current compliance period. Businesses that qualify must complete their assessment and submit their notification of compliance by 5 December 2027.
Phase 4 continues the main requirements introduced during Phase 3. Businesses will need to measure their energy use, assess the areas that consume the most energy and keep clear evidence of how they have complied.
As part of Phase 4, official government guidance has confirmed changes to some compliance routes and action plan reporting. Display Energy Certificates and Green Deal Assessments are due to be removed as separate routes to compliance. Businesses will also need to report progress against earlier action plan commitments and explain why any planned measures were not completed.
Companies should begin preparing well before the deadline. Collecting energy data across multiple sites can take time, particularly where records are held by different departments, landlords or suppliers.
Businesses planning energy audits should use a clear and recognised method. The BS EN 16247 audit standard provides a useful framework for completing an energy audit and recording the findings.
Key Deadlines and Qualification Date for ESOS Phase 4
The main confirmed ESOS Phase 4 deadline is:
- Notification of compliance deadline: 5 December 2027
Based on the four-year ESOS cycle, the Phase 4 qualification date is expected to be:
- Expected qualification date: 31 December 2026
The qualification date should be confirmed when the final Phase 4 rules and guidance are published.
Businesses that qualified during Phase 3 also have an earlier responsibility to manage. Their second annual Phase 3 progress update is due by:
- 5 December 2026
This means many businesses will be completing their final Phase 3 update while also reviewing whether they qualify for Phase 4.
Assigning responsibility early can make this easier. Businesses should decide who will manage data collection, contact site teams and work with the lead assessor.
They should also review their Phase 3 action plan. This can show what was completed, what is still in progress and what needs further explanation.
Eligibility Thresholds
The government has postponed its proposal to change the ESOS qualification thresholds.
Businesses should therefore prepare on the basis that the existing large-undertaking thresholds will continue during Phase 4.
An organisation is expected to qualify if it meets either of these conditions:
- It employs 250 or more people.
- It has annual turnover above £44 million and a balance sheet total above £38 million.
Corporate group rules are also expected to continue. A smaller business may be included if another UK company in its corporate group meets the qualification criteria.
Businesses should review their structure carefully if they have recently completed an acquisition, sale or company reorganisation.
Overseas businesses with UK operations may also be affected. Their UK establishments may need to take part if another part of the group’s UK activity meets the criteria.
Businesses near the thresholds should check the figures from the relevant accounting periods rather than relying on a single set of accounts.
What Changed in Phase 4?
The government intends to introduce several changes during Phase 4. These changes still need to complete the required legal process.
The planned changes include:
- Removing Display Energy Certificates as a separate compliance route
- Removing Green Deal Assessments as a separate compliance route
- Including progress against action plan commitments in the next ESOS assessment
- Requiring an explanation when action plan commitments have not been met
These changes would create a stronger link between Phase 3 action plans and Phase 4 assessments.
A business may need to show what it promised to do and what it actually completed. Where a measure was delayed or cancelled, the business may need to explain why.
Organisations should therefore keep evidence of completed projects. This might include invoices, approval records and updated energy-saving calculations.
They should also keep records of projects that were not completed. Useful evidence may include rejected business cases, budget decisions or details of operational problems.
What Changes Were Delayed Until ESOS Phase 5?
Two major ESOS reforms have been postponed until ESOS Phase 5.
The first is a wider focus on net zero. This proposal would add broader decarbonisation requirements to the scheme alongside energy efficiency.
The second is a proposed change to the qualification thresholds. The aim was to align ESOS more closely with the Streamlined Energy and Carbon Reporting framework.
These reforms were delayed because the Phase 3 legislation and guidance were introduced later than planned. The government decided that businesses needed more time before larger changes were introduced.
Phase 4 will therefore remain mainly focused on energy use, energy audits and practical saving opportunities.
Businesses can still choose to connect their ESOS work with wider carbon reduction plans. Using the same reliable data for ESOS and sustainability reporting can reduce repeated work.
However, businesses should separate voluntary action from legal requirements. Final Phase 4 guidance will confirm exactly what qualifying organisations must complete.
What Are the Penalties for Non-compliance in 2027?
Businesses that fail to meet their ESOS duties can face financial penalties and enforcement action.
Possible penalties include:
- Up to £5,000 for failing to submit a compliance notification
- Daily penalties of up to £500 while some breaches continue
- Up to £50,000 for failing to complete a required energy audit
- Up to £50,000 for providing false or misleading information
Daily penalties can continue for up to 80 working days in some cases.
The regulator can also require the business to correct the problem. Details of the breach may be published, which can create reputational risk as well as extra costs.
Different failures can be treated as separate breaches. For example, a company could face action for failing to complete an assessment and for failing to submit its notification.
Businesses that are unsure whether they qualify should check their position early. Waiting until the deadline can leave too little time to collect data, appoint an assessor and complete the required work.
How Does the MESOS Platform Change Reporting?
MESOS is the online service used to submit ESOS information.
Businesses use the system to:
- Register their organisation
- Submit compliance information
- Submit action plans
- Provide annual progress updates
A notification can be started and saved before it is submitted.
The information entered may include the organisation’s energy use, its route to compliance and the saving opportunities found during the assessment.
A director or another suitable senior person must approve the information before submission. A lead assessor will also usually need to review and approve the assessment.
Businesses should prepare their data before entering it into MESOS. The platform is used for reporting. It does not replace the supporting calculations, audits and evidence pack.
Suitable energy management software for reporting can help businesses organise meter readings, invoices and site data. It can also make it easier to track changes between compliance periods.
What Energy Data Should You Start Collecting Now?
Businesses should begin by creating a complete list of their energy supplies, sites and activities.
Useful records may include:
- Electricity and gas bills
- Meter and half-hourly data
- Fuel invoices
- Company vehicle mileage
- Landlord energy statements
- Production and occupancy figures
- Previous ESOS audit reports
- Phase 3 action plans and progress records
The data should cover the buildings, processes and transport for which the organisation is responsible.
Businesses should also keep a clear record of where each figure came from. Estimates should be explained, and missing data should be identified as early as possible.
Multi-site organisations may need to contact several site managers, landlords or suppliers. Giving each location clear responsibilities can reduce delays.
Businesses should also collect information needed to calculate energy intensity ratios. This might include production volumes, floor area or employee numbers.
Organising this information now can make the Phase 4 assessment easier. It can also help the business find energy-saving opportunities before the formal audit begins.
Frequently Asked Questions – FAQ
Who needs to comply with ESOS Phase 4?
ESOS generally applies to organisations with 250 or more employees. It can also apply where annual turnover is above £44 million and the balance sheet total is above £38 million. Corporate group rules may bring smaller UK businesses into scope.
What is the ESOS Phase 4 deadline?
The confirmed Phase 4 notification of compliance deadline is 5 December 2027. The qualification date is expected to be 31 December 2026, although this should be checked against the final Phase 4 guidance.
What changed in ESOS Phase 4?
Planned changes include removing Display Energy Certificates and Green Deal Assessments as separate compliance routes. Businesses may also need to report progress against earlier action plans and explain why any commitments were not completed.
What evidence should be kept in an ESOS evidence pack?
The evidence pack should include energy data, calculations, audit reports and site visit records. It should also contain approval records, lead assessor details, action plans and evidence showing progress against energy-saving commitments.
What are the penalties for missing ESOS compliance?
Penalties depend on the type of breach. They can include fines of up to £50,000 and daily penalties of up to £500. The regulator may also publish details of the organisation’s non-compliance.
Do action plans and progress updates apply in Phase 4?
Businesses that qualified for Phase 3 must submit their required progress updates. Planned Phase 4 rules may also require organisations to report what happened to the measures included in their earlier action plans.
