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 above €50 million (broadly £44 million) and a balance sheet total above €43 million (broadly £38 million). 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) | > €50m turnover AND > €43m 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 to the Environment Agency |
| Phase 4 ends | 5 December 2027 | Compliance period closes |
The 95% coverage rule
The ESOS (Amendment) Regulations 2023 reduced the de minimis exemption from 10% to 5%. 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].
Routes to compliance
There is more than one way to meet ESOS, but the available routes have narrowed for Phase 4.
ESOS-compliant energy audits remain the core route, signed off by a registered lead assessor. Certification to ISO 50001 covering 100% of energy consumption is an accepted alternative to carrying out separate ESOS audits[1].
Display Energy Certificates (DECs) and Green Deal Assessments (GDAs) have been removed as compliance routes for Phase 4, confirmed by DESNZ in February 2025[1].
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 sign-off required |
| ISO 50001 certification | Available | Must cover 100% of energy consumption |
| Display Energy Certificates (DECs) | Removed | No longer a compliance route for Phase 4 |
| Green Deal Assessments (GDAs) | Removed | No longer a compliance route for Phase 4 |
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].
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 day the breach continues[5].
Failure to notify can attract up to £5,000 plus £500 per day. 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 day |
| Failure to notify compliance | Up to £5,000 | £500 per day |
| 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. An organisation is a large undertaking if it has 250 or more employees, or an annual turnover above €50 million (broadly £44 million) and a balance sheet total above €43 million (broadly £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.
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. ESOS operates on a four-yearly cycle, so each phase has its own qualification date and a notification deadline of 5 December in the year following qualification.
What is the 95% energy-coverage rule?
The ESOS (Amendment) Regulations 2023 reduced the de minimis exemption from 10% to 5%, which means an ESOS assessment must now 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. This is a tighter coverage requirement than earlier phases.
What are the routes to ESOS compliance?
For Phase 4 the main routes are ESOS-compliant energy audits and certification to ISO 50001 covering 100% of energy consumption. Display Energy Certificates (DECs) and Green Deal Assessments (GDAs) have been removed as compliance routes for Phase 4. Organisations can use a combination of routes, but the assessment as a whole must reach the 95% coverage threshold and be signed off by a lead assessor where audits are used.
What are the penalties for failing to comply with ESOS?
The Environment Agency, as scheme administrator in England, can impose civil penalties. Failure to undertake an energy audit can attract a penalty of up to £50,000 plus £500 per day of continued non-compliance; failure to notify can attract up to £5,000 plus £500 per day. The Environment Agency also publishes details of organisations that receive penalty notices.
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. Action-plan progress reporting introduced in the 2023 amendments strengthens that link.
- 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) — GOV.UK / Environment Agency · Scheme administration, notification of compliance, 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); Action Plans and Progress Updates (Part 6A)
- 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