ESOS Phase 4 Compliance and Energy Audits

The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment and energy-saving scheme for qualifying large UK undertakings and corporate groups. The qualification date for Phase 4 is 31 December 2026.

An organisation is considered a large undertaking for ESOS purposes if it meets either of the following conditions:

• It employs 250 or more people; or
• It has an annual turnover exceeding £44 million and an annual balance sheet total exceeding £38 million.

Corporate group rules also apply. If a corporate group contains at least one qualifying UK undertaking, the wider UK group can fall within the scope of ESOS. Organisations close to the thresholds should also take care: ESOS includes rules relating to whether an organisation has maintained its size over consecutive accounting periods.

Not sure if you qualify? Celtic Dynamics can review your organisation and help establish whether you fall within the scope of ESOS Phase 4.

The ESOS Phase 4 qualification date is 31 December 2026, and the confirmed deadline for submitting the Phase 4 notification of compliance is: 5 December 2027.

Following the compliance notification, qualifying organisations must also complete an ESOS action plan by 5 December 2028, followed by the required progress updates.

Although the compliance deadline is in 2027, organisations with large property estates, multiple sites, complex transport operations or significant industrial energy use can benefit from starting much earlier. Energy data needs to be assembled and validated, significant energy consumption assessed, and appropriate audits completed before the final report can be prepared.

ESOS Phase 4 strengthens the connection between energy assessment, recommendations and evidence of action. The Environment Agency’s 2026 guidance confirms several changes to the scheme.

These include:
– Greater reporting on implemented energy-efficiency measures, including the energy savings achieved during the compliance period.
– An action plan review within the ESOS assessment, identifying measures that were not implemented and explaining why.
– A third action-plan progress update, which will be required by 5 December 2031.
– Changes to recognised compliance routes, with Green Deal Assessments and – – Display Energy Certificates removed as Phase 4 compliance routes.
– Reduced requirements for some organisations using ISO 50001, where the certification covers the required energy consumption.
– Additional requirements designed to improve data quality and enable assessment quality checks.

Regulatory Compliance: Understand your ESOS obligations and complete the required assessment in advance of the Phase 4 compliance deadline.

Energy Cost Savings Identify practical opportunities to reduce unnecessary energy consumption and lower ongoing operational expenditure.

Prioritised Energy Projects Turn energy data into commercially relevant recommendations that help you decide which efficiency projects to tackle first.

Carbon Reduction Use the findings from your ESOS assessment to support wider decarbonisation and carbon-reduction planning.

Better Energy Data Build a clearer understanding of energy consumption across buildings, processes and transport, helping improve future energy management and reporting.

From Audit to Implementation Move beyond recommendations by progressing suitable opportunities into feasibility, design, funding, installation and verification projects.

Following the compliance notification, qualifying organisations must also complete an ESOS action plan by 5 December 2028, followed by the required progress updates.

Although the compliance deadline is in 2027, organisations with large property estates, multiple sites, complex transport operations or significant industrial energy use can benefit from starting much earlier. Energy data needs to be assembled and validated, significant energy consumption assessed, and appropriate audits completed before the final report can be prepared.

ESOS and Streamlined Energy and Carbon Reporting (SECR) are separate regulatory requirements, but the work undertaken for ESOS can support your wider energy and carbon reporting.

The Environment Agency notes that systems used to collect and audit energy data for ESOS, together with progress made implementing ESOS recommendations, can help organisations meet their SECR reporting requirements.

Taking a coordinated approach can therefore reduce duplicated work and give your organisation a more consistent view of its energy consumption, emissions and efficiency measures.

Organisations that are required to participate in ESOS should take their compliance obligations seriously.

For failure to undertake the required ESOS energy audit, regulators can impose an initial penalty of up to £50,000, together with a daily penalty of up to £500 per working day, subject to a maximum of 80 working days. Details of non-compliance can also be published. Different penalties apply to other breaches, including failure to notify or providing false or misleading information.

Starting early reduces the risk of rushed data gathering, limited audit availability and incomplete assessments as the Phase 4 deadline approaches.

Organisations can begin preparing well before the qualification and compliance dates. Key steps include reviewing your likely qualification status, understanding your corporate group structure, locating your existing energy data, reviewing recommendations from previous ESOS phases and identifying sites or areas of significant energy consumption that may require further assessment.

If you participated in previous ESOS phases, Phase 4 is also an opportunity to review what was recommended, what has since been implemented and what energy savings have been achieved. This is particularly important because Phase 4 introduces additional reporting around implemented measures and action-plan progress.

Read our step-by-step guide below.