ESOS Phase 4: What UK Businesses Need to Know

The Energy Savings Opportunity Scheme (ESOS) is a mandatory UK energy assessment scheme for large organisations. It requires qualifying businesses to assess energy use across buildings, transport and operational activities, identify energy saving opportunities and report compliance to the Environment Agency every four years.

Many organisations are already starting work on ESOS Phase 4, with businesses beginning data collection, audits and early-stage preparation work ahead of the next compliance cycle.

With the latest Phase 4 position now clearer, businesses are starting to assess how the next compliance cycle differs from Phase 3 and what that means in practice for their organisation.

Below is a practical overview of the main things businesses need to know about ESOS Phase 4.

What is ESOS Phase 4 and when does it apply?

ESOS Phase 4 is the next compliance period under the Energy Savings Opportunity Scheme.

The qualification date for Phase 4 is 31st December 2026, and organisations that qualify will need to submit their notification of compliance by 5th December 2027.

Like previous phases, organisations will need to assess energy use across buildings, transport and industrial processes, identify areas of significant energy consumption and complete compliant energy audits or alternative routes to compliance where applicable.

Although the reporting deadline is in 2027, many organisations are already starting work now. ESOS assessments must be based on a continuous 12-month period of verifiable energy data that includes the qualification date, meaning businesses are already moving into the relevant data collection period for Phase 4.

In practice, early preparation usually makes the process significantly more manageable. It gives organisations more time to engage with lead assessors and consultants while availability is still relatively high, resolve any supplier or metering data issues, and avoid unnecessary pressure closer to the compliance deadline.

What still stays the same from ESOS Phase 3?

Despite some of the discussion around potential reforms, the core structure of ESOS remains largely unchanged for Phase 4.

Organisations will still need to:

• calculate total energy consumption,

• identify areas of significant energy consumption covering at least 95% of total energy use,

• complete ESOS-compliant energy audits where required,

• and have the assessment reviewed and signed off by an ESOS lead assessor.

The audits themselves must still be based on 12 months of verifiable energy data and include site visits alongside analysis of energy consumption and energy-saving opportunities.

The overall purpose of ESOS also remains the same. Phase 4 is still fundamentally an energy efficiency compliance scheme focused on helping organisations understand how energy is being used and where cost-effective savings opportunities exist.

For organisations that completed Phase 3, the underlying assessment process for Phase 4 therefore remains unchanged.

What are the main changes in ESOS Phase 4?

The overall structure of ESOS remains broadly the same for Phase 4, but there are still a few important updates businesses should be aware of.

The government has confirmed that:

• progress against action plan commitments is expected to form part of the Phase 4 assessment process,

• organisations will need to explain where planned actions have not been completed,

• and Display Energy Certificates (DECs) and Green Deal Assessments (GDAs) are expected to be removed as routes to compliance.

In practice, this means there is now greater emphasis on ongoing energy management and accountability between compliance periods, rather than ESOS being treated purely as a once-every-four-years reporting exercise.

Are the qualification thresholds changing for Phase 4?

No. The qualification thresholds for ESOS Phase 4 are not currently changing.

The government had previously proposed changes to better align ESOS qualification criteria with Streamlined Energy and Carbon Reporting (SECR), but these proposals have now been postponed.

For Phase 4, organisations should therefore continue working on the basis of the existing ESOS qualification thresholds.

In most cases, an organisation will qualify if, on the qualification date of 31st December 2026, it:

• employs 250 or more people, or

• has an annual turnover above £44 million and an annual balance sheet total above £38 million.

Corporate groups may also qualify where at least one UK group member meets the definition of a large undertaking.

For businesses that qualified in Phase 3, the qualification approach for Phase 4 therefore remains unchanged.

What happened to the proposed net zero and decarbonisation changes?

One of the biggest areas of discussion ahead of Phase 4 was the proposal to refocus ESOS so that it covered net zero and decarbonisation planning alongside energy efficiency.

This would have represented a significant shift in the direction of the scheme, with much greater emphasis on greenhouse gas emissions, decarbonisation pathways and longer-term net zero planning.

However, the government has now confirmed that these proposals will not go ahead for Phase 4 and have instead been postponed until Phase 5.

As a result, ESOS Phase 4 remains primarily an energy efficiency compliance scheme rather than a full net zero assessment framework.

That said, many organisations are still choosing to look at ESOS alongside wider carbon reduction and net zero strategies, particularly where they already have ESG, investor or customer requirements in place.

What is PAS 51215-1:2025 and does it apply to Phase 4?

PAS 51215-1:2025 is a new BSI specification for carrying out energy and decarbonisation assessments.

It was developed to support a more strategic and decarbonisation-focused approach to energy assessments, covering areas such as:

• greenhouse gas emissions,

• net zero planning,

• governance,

• implementation roadmaps,

• and wider decarbonisation risks and opportunities.

The standard was originally expected to help support the future direction of ESOS as part of the proposed net zero reforms.

However, because those reforms have now been postponed until Phase 5, PAS 51215-1 is currently voluntary for ESOS Phase 4 rather than mandatory.

Businesses can still choose to use the PAS where they want a broader decarbonisation-focused assessment, but it is not required in order to achieve ESOS compliance for Phase 4.

The existing PAS 51215:2014 competency standard will also remain in place for ESOS lead assessors during Phase 4.

What are the action plan and annual progress update requirements?

Action plans and annual progress reporting were introduced through the Phase 3 amendments and will continue to form an important part of ESOS going forward.

Organisations that submitted a Phase 3 notification of compliance are also required to submit an ESOS action plan, followed by annual progress updates in the subsequent two years. For Phase 3 participants, these progress update deadlines fall in December 2025 and December 2026.

These updates must explain the progress made against the commitments set out in the organisation’s action plan and must be signed off by a board-level director or equivalent.

The government has also confirmed that progress against action plan commitments is expected to form part of the Phase 4 assessment process, including explanations where planned actions have not been completed.

In practice, this means organisations should now view ESOS less as a one-off compliance exercise and more as an ongoing reporting and accountability process between phases.

What should businesses be doing now to prepare for Phase 4?

For most organisations, the best approach is to start preparing early rather than waiting until the final stages of the compliance period.

A good starting point is confirming whether the organisation is likely to qualify for Phase 4 and identifying what energy, transport and operational data will be needed for the assessment.

Businesses should also review:

• existing metering and supplier data arrangements,

• site coverage,

• Phase 3 assessment outputs,

• action plan commitments,

• and any existing progress reporting obligations.

Where issues exist around data quality, data availability or organisational responsibilities, these are usually much easier to resolve early in the compliance cycle.

It is also sensible to begin engaging with lead assessors and ESOS consultants well ahead of the compliance deadline. As previous ESOS phases have shown, demand for assessors and audit support tends to increase significantly closer to submission deadlines.

Starting early generally makes the process more manageable, reduces compliance risk and gives organisations more flexibility in how the assessment is planned and delivered.

Should organisations still be thinking about net zero even though the changes were postponed?

Yes. Although the formal net zero requirements have been postponed until Phase 5, many organisations are still looking beyond minimum ESOS compliance because of wider ESG commitments, investor expectations and customer requirements.

There is also the wider reality that the UK is legally committed to reaching net zero by 2050. The longer businesses delay reducing emissions and improving efficiency, the steeper and more disruptive that transition is likely to become later on.

For many organisations, there is also a strong commercial case for acting early. Improving energy efficiency and reducing carbon emissions can lower operating costs, improve resilience and deliver wider operational and reputational benefits.

While ESOS is not a complete net zero strategy in itself, it aligns closely with wider carbon reduction planning. ESOS directly focuses on operational energy use and Scope 1 and Scope 2 emissions, making it a strong foundation for that part of a wider net zero roadmap alongside broader Scope 3 reduction initiatives.

Final thoughts

For most organisations, ESOS Phase 4 should feel very familiar from a compliance perspective. The core structure of the scheme remains largely unchanged, and many of the more significant proposed reforms have now been postponed until Phase 5.

For businesses that have not yet started preparing, now is a sensible time to begin. Early engagement with data collection, audits and lead assessors generally makes the process far more manageable and reduces the risk of unnecessary pressure closer to the deadline.

And while net zero may not yet be a formal requirement within ESOS, the wider direction of travel is still clear. Organisations that start thinking more strategically about energy use, operational efficiency and carbon reduction now are likely to be in a much stronger position for future compliance cycles.

Get in touch!

I have extensive experience supporting organisations with ESOS compliance and would be very happy to support businesses preparing for Phase 4.

If a conversation would be useful, feel free to get in touch for a free initial call to discuss your organisation, likely requirements and the best approach to preparing for the next compliance cycle.

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