ESOS compliance: reading Phase 4 in full
The Energy Savings Opportunity Scheme runs in four-yearly phases.
Phase 4 qualifies large undertakings on 31 December 2026 and requires a notification of compliance by 5 December 2027.
This page sets out who is in scope, what the assessment now has to cover, the routes still open, and how ESOS data carries through to SECR and UK SRS.
Who qualifies as a large undertaking
ESOS is mandatory for large undertakings and their corporate groups.
The qualification test is set out in Regulation 5 of the Energy Savings Opportunity Scheme Regulations 2014[3].
An organisation qualifies if it has 250 or more employees, or if it meets both financial thresholds: an annual turnover over £44 million and an annual balance sheet total over £38 million[2].
The Environment Agency’s Phase 4 guidance states that test in sterling, and SI 2026/701 did not change it[2][7].
Either the headcount test on its own, or both financial tests together, brings an organisation into scope[3].
Group aggregation matters.
If any UK entity in a corporate group meets the thresholds, the whole UK group is generally treated as a large undertaking and brought into scope[3].
| Test | Threshold | How it applies |
|---|---|---|
| Employee test | 250 or more employees | Qualifies on its own |
| Financial test (both required) | > £44m turnover AND > £38m balance sheet | Both must be exceeded |
| Group aggregation | Any UK entity in the group qualifies | Whole UK group is brought into scope |
| Assessment date | Qualification date: 31 December 2026 | Status fixed for the Phase 4 cycle |
The four-yearly audit cycle
ESOS runs in four-yearly compliance phases.
Each phase has a qualification date in the penultimate year, and a notification of compliance is then due by 5 December of the following year[6].
Phase 4 covers the period from 6 December 2023 to 5 December 2027.
Organisations are assessed against the thresholds on 31 December 2026, and those in scope must notify the Environment Agency that they have complied by 5 December 2027[1].
The Department for Energy Security and Net Zero (DESNZ) has been the policy lead for ESOS since February 2023; the Environment Agency is the scheme administrator in England[1].
| Milestone | Date | What it means |
|---|---|---|
| Phase 4 begins | 6 December 2023 | Start of the current four-year compliance period |
| Qualification date | 31 December 2026 | Large-undertaking status assessed |
| Notification deadline | 5 December 2027 | Notification of compliance due, via MESOS |
| Phase 4 ends | 5 December 2027 | Compliance period closes |
| Action plan due | 5 December 2028 | Covers 6 December 2027 to 5 December 2031 |
| First progress update | 5 December 2029 | Progress against the action plan |
| Second progress update | 5 December 2030 | Progress against the action plan |
| Third progress update | 5 December 2031 | New for Phase 4 — SI 2026/701 reg 28 |
The 95% coverage rule — a Phase 3 change that carries on
The ESOS (Amendment) Regulations 2023 reduced the de minimis exemption from 10% to 5%, with effect from Phase 3[4].
In practice that means an ESOS assessment must now cover at least 95% of an organisation’s total energy consumption across buildings, industrial processes and transport[4].
The remaining 5% can be left out as de minimis.
Tightening the threshold raises the bar on data quality: more of an organisation’s energy use has to be measured, audited and reconciled before a notification can be made[4].
The same amendment regulations introduced an Action Plan and Progress Update structure, inserted as Part 6A of the ESOS Regulations[4].
Neither figure moved for Phase 4: SI 2026/701 leaves the 95% coverage rule and the qualification thresholds as they are[7].
Routes to compliance
Phase 4 has two routes[2].
An ESOS energy audit, reviewed by a lead assessor drawn from an approved register, remains the core route[2].
The alternative is ISO 50001. Where certification covers total or significant energy consumption — significant meaning at least 95% of the total — the participant is deemed to have complied with the duties to appoint a lead assessor, carry out the ESOS energy audit and produce the ESOS report[2].
A notification of compliance is still required in every case[2].
Partial ISO 50001 coverage exempts only the certified consumption; the remainder is audited under standard ESOS rules, with a lead assessor appointed[2].
Display Energy Certificates (DECs) and Green Deal Assessments (GDAs) are no longer compliance routes: regulation 26 of SI 2026/701 omits regulation 34 of the 2014 Regulations[7].
The Environment Agency’s reason is that they “provide more limited and less tailored recommendations than an ESOS energy audit”[2].
DEC and GDA data may still feed an ESOS report — an intensity ratio, for instance — but it cannot substitute for the audit[2].
Routes can be combined, but together they must reach the 95% coverage threshold and be properly evidenced[4].
| Route | Status for Phase 4 | Notes |
|---|---|---|
| ESOS energy audits | Available | Core route; lead-assessor review required |
| ISO 50001 certification | Available | Must cover total or significant (≥95%) consumption; still notify |
| Display Energy Certificates (DECs) | Removed | SI 2026/701 reg 26 omits reg 34 of the 2014 Regulations |
| Green Deal Assessments (GDAs) | Removed | SI 2026/701 reg 26 omits reg 34 of the 2014 Regulations |
Action plans and progress reporting
The 2023 amendments shifted ESOS from a pure audit exercise towards follow-through.
Part 6A introduced a requirement to publish an action plan setting out the steps an organisation intends to take, and to report progress against it[4].
Phase 4 goes further. The action plan is due by 5 December 2028 and covers 6 December 2027 to 5 December 2031, with progress updates on 5 December 2029, 5 December 2030 and 5 December 2031[2].
The third of those is new, added by regulation 28 of SI 2026/701[7].
Two further duties are new in Phase 4. The ESOS report and notification of compliance must state the energy savings achieved during the compliance period — the measures implemented, the saving from each measure in kWh and each measure’s saving category, with only the combined figure published[2].
And an action plan review must identify the proposed measures from the previous action plan that were not implemented, and why; those submissions are not published[2].
The assessment, the action plan and every progress update need director (or equivalent) sign-off and are submitted through MESOS[2].
That follow-through is where ESOS starts to overlap with annual reporting.
Progress against an action plan can inform the energy-efficiency narrative organisations already provide under SECR, reducing duplicated effort[6].
For the detail of the Phase 4 changes and the action-plan structure, see our ESOS Phase 4 analysis.
Penalties for non-compliance
The Environment Agency can impose civil penalties on organisations that fail to comply.
Failure to undertake an energy audit can attract a penalty of up to £50,000 plus £500 for each working day after service of a compliance notice until it is remedied, capped at 80 working days[2][5].
Failure to notify can attract up to £5,000 plus £500 per working day on the same 80-day cap[2].
There is no penalty for a missed action plan or progress update: the Environment Agency guidance states that regulators will not take enforcement action or issue a penalty relating to non-submission, and the Scheme Administrator publishes the failure instead[2].
The Environment Agency also publishes the details of organisations that receive penalty notices, so there is a reputational dimension alongside the financial one[5].
| Breach | Initial penalty | Continuing penalty |
|---|---|---|
| Failure to undertake an energy audit | Up to £50,000 | £500 per working day, capped at 80 days |
| Failure to notify compliance | Up to £5,000 | £500 per working day, capped at 80 days |
| False or misleading statement | Up to £50,000 | Plus publication |
| Missed action plan or progress update | No penalty | The Scheme Administrator publishes the failure |
| Publication | Details published by the Environment Agency | Reputational exposure |
How ESOS data feeds SECR and UK SRS
ESOS, SECR and UK SRS are three distinct regimes with their own legal bases and scope tests, but they draw on the same underlying energy and emissions data.
The energy-consumption figures and efficiency opportunities identified in an ESOS assessment feed directly into the energy and carbon narrative required under SECR, and into the climate-related metrics within UK SRS S2.
Treating the three as one data exercise — rather than three separate projects — is where most of the efficiency lies.
Our ESOS and SECR comparison sets out where the two regimes diverge and where they can share evidence.
ESOS compliance: frequently asked questions
Who has to comply with ESOS?
ESOS applies to large undertakings and their corporate groups. The Phase 4 guidance states the test in sterling: an organisation is a large undertaking if it has 250 or more employees, or an annual turnover over £44 million together with an annual balance sheet total over £38 million — both financial tests must be met. If any UK entity in a corporate group qualifies, the whole UK group is generally brought into scope. Qualification is assessed on the qualification date for each four-yearly phase, which for Phase 4 is 31 December 2026.
When is the ESOS Phase 4 deadline?
For ESOS Phase 4 the qualification date is 31 December 2026, and the notification of compliance deadline is 5 December 2027. The compliance period runs from 6 December 2023 to 5 December 2027. The action plan is then due by 5 December 2028, covering 6 December 2027 to 5 December 2031, followed by three progress updates on 5 December 2029, 5 December 2030 and 5 December 2031.
What is the 95% energy-coverage rule?
The ESOS (Amendment) Regulations 2023 (SI 2023/1182) reduced the de minimis exemption from 10% to 5%, which means an ESOS assessment must cover at least 95% of an organisation’s total energy consumption across buildings, industrial processes and transport. The remaining 5% can be excluded as de minimis. That change applied from Phase 3 — it is not a Phase 4 change, and Phase 4 leaves the 95% figure alone.
What are the routes to ESOS compliance?
There are two routes for Phase 4: an ESOS energy audit reviewed by a lead assessor from the approved register, and ISO 50001. Where ISO 50001 certification covers total or significant energy consumption — significant meaning at least 95% of the total — the participant is deemed to have complied with the duties to appoint a lead assessor, carry out the audit and produce the ESOS report, though a notification of compliance is still required. Display Energy Certificates and Green Deal Assessments are removed: regulation 26 of SI 2026/701 omits regulation 34 of the 2014 Regulations.
What are the penalties for failing to comply with ESOS?
Civil penalties apply. Failure to undertake an energy audit can attract up to £50,000 plus £500 for each working day after service of a compliance notice until it is remedied, capped at 80 working days, plus publication. Failure to notify can attract up to £5,000 plus £500 per working day on the same 80-day cap, plus publication. There is no penalty for failing to submit an action plan or a progress update — the Environment Agency guidance states that regulators will not take enforcement action or issue a penalty for non-submission, and the Scheme Administrator publishes the failure instead.
How does ESOS connect to SECR and UK SRS?
ESOS, SECR and UK SRS are three separate regimes with different legal bases and scope tests, but they share data. Energy-consumption figures and efficiency opportunities identified through an ESOS assessment feed naturally into the energy and emissions narratives required under SECR, and into the climate-related disclosures in UK SRS S2. Phase 4 strengthens that link again: participants must now report the energy savings actually achieved, measure by measure in kWh.
- Energy Savings Opportunity Scheme (ESOS) — guidance — GOV.UK / Department for Energy Security and Net Zero · Phase 4 compliance deadline 5 December 2027; DECs and GDAs removed; DESNZ policy lead since Feb 2023
- Comply with the Energy Savings Opportunity Scheme (ESOS) phase 4 — GOV.UK / Environment Agency · Published 30 July 2026 — milestones, qualification, routes, achieved-savings reporting and penalties
- The Energy Savings Opportunity Scheme Regulations 2014 (SI 2014/1643), Regulation 5 — legislation.gov.uk · Large-undertaking qualification thresholds and qualification date
- The Energy Savings Opportunity Scheme (Amendment) Regulations 2023 (SI 2023/1182) — legislation.gov.uk · De minimis cut 10% → 5% (95% coverage) and Action Plans / Progress Updates (Part 6A), both from Phase 3
- Environment Agency enforcement and sanctions policy — Annex 2: climate change schemes — GOV.UK / Environment Agency · Civil penalty ranges for audit and notification failures
- Post-implementation review of the Energy Savings Opportunity Scheme Regulations 2014 — GOV.UK / DESNZ · Phase 4 runs Dec 2023 – Dec 2027; compliance deadline 5 December 2027
- The Energy Savings Opportunity Scheme (Amendment) Regulations 2026 (SI 2026/701) — legislation.gov.uk · Made 23 June 2026, in force 22 July 2026; reg 26 removes DECs and GDAs, reg 28 adds the third progress update