The ESOS Phase 4 Compliance Process: A Step-by-Step Guide

The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment scheme for qualifying organisations in the UK.

With ESOS Phase 4 now subject to updated government guidance, businesses that qualify need to understand exactly what is required to achieve compliance.

The Phase 4 compliance notification deadline is 5 December 2027, but organisations should not wait until the deadline approaches before beginning their assessment. The process can involve energy data collection, calculations, audits, site visits, recommendations, evidence gathering, director sign-off and formal notification.

This guide explains the ESOS Phase 4 compliance process and what businesses need to do.

What is ESOS Phase 4?

ESOS stands for the Energy Savings Opportunity Scheme.

It requires qualifying organisations to assess their energy consumption and identify opportunities to improve energy efficiency.

The scheme applies to qualifying UK organisations, including corporate groups where the relevant qualification criteria are met.

Phase 4 introduces a number of changes compared with previous compliance periods, including the removal of certain alternative compliance routes and additional reporting around energy savings and implemented measures.

Step 1: Determine whether your organisation qualifies

The first stage is establishing whether your organisation falls within the ESOS qualification requirements.

For businesses that are part of a corporate group, this needs to be considered at group level rather than simply looking at one individual company.

The responsible undertaking should establish which entities are included in the participant group and determine the organisation’s total energy consumption for the relevant reference period.

Getting this stage right is important because an incorrect assessment of the group structure can affect the entire compliance process.

Step 2: Calculate total energy consumption

Once the relevant organisations have been established, the next step is to calculate total energy consumption.

ESOS requires organisations to quantify their energy consumption in kWh.

Businesses need to collect appropriate and verifiable energy data covering the relevant reference period and consider the different forms of energy used across their operations.

This can include energy associated with:

• Buildings
• Industrial processes
• Transport
• Other business activities

The quality of the underlying energy data is fundamental to the assessment.

Step 3: Identify significant energy consumption

Organisations then need to consider where their significant energy consumption occurs.

This enables the ESOS assessment to focus attention on the areas where energy efficiency improvements could potentially deliver the greatest benefits.

The assessment needs to ensure that the relevant energy consumption is covered by an appropriate ESOS compliance route.

Step 4: Choose your ESOS compliance route

For Phase 4, organisations can use one or more permitted compliance routes to cover their relevant energy consumption.

These can include:

• ESOS-compliant energy audits
• ISO 50001 certification
• A combination of permitted routes

Importantly, Display Energy Certificates and Green Deal Assessments have been removed as alternative compliance routes for Phase 4.

Businesses therefore need to review their existing compliance arrangements rather than assuming that a route used during an earlier ESOS phase will still be acceptable.

Step 5: Appoint an ESOS Lead Assessor

Where required, the responsible undertaking must appoint an ESOS Lead Assessor from an approved register.

The Lead Assessor reviews the ESOS assessment and considers whether it meets the requirements of the regulations.

A Lead Assessor is not required where the organisation’s total energy consumption is less than 40,000 kWh, where 100% of total energy consumption is covered by ISO 50001 certification, or where energy consumption is zero.

For businesses requiring a Lead Assessor, it is sensible to make the appointment early in the process.

Step 6: Carry out the required energy audits

Where an energy audit is being used as the compliance route, the audit needs to meet the ESOS requirements.

An ESOS energy audit should analyse the organisation’s energy consumption and energy efficiency and identify energy-saving opportunities.

Site visits are also an important part of a compliant ESOS energy audit.

The purpose is not simply to produce an energy consumption report. The audit should help identify realistic opportunities to reduce energy consumption and associated costs.

Step 7: Identify energy-saving opportunities

One of the most valuable elements of ESOS is the identification of opportunities to improve energy efficiency.

Depending on the organisation, recommendations could relate to areas such as:

• Lighting
• Heating and cooling
• Building controls
• HVAC systems
• Motors and equipment
• Compressed air
• Refrigeration
• Building fabric
• Energy management
• Transport
• Industrial processes

The recommendations should be supported by appropriate analysis so that the business can understand the potential energy and financial benefits.

Step 8: Prepare the ESOS report and evidence pack

The next stage is documenting the assessment.

The ESOS report needs to contain the required information about the organisation, its assessment, energy consumption and identified energy-saving opportunities.

Businesses also need to maintain an evidence pack containing the information and records used to demonstrate compliance.

The evidence pack is an important part of ESOS compliance and should provide a clear record of how the organisation completed its assessment.

Step 9: Lead Assessor review and director sign-off

Before the compliance notification is submitted, the assessment needs to be reviewed by the Lead Assessor where one is required.

The responsible undertaking must also obtain the required director or management-level sign-off.

Where an external Lead Assessor has been appointed, one director or equivalent person with management control must sign off the ESOS assessment and notification.

Where the Lead Assessor is an employee of the participant, two directors are required to provide the relevant confirmations.

Step 10: Submit the ESOS notification

Once the assessment has been completed and signed off, the organisation must submit its notification of compliance through the Environment Agency’s ESOS reporting system.

The notification contains information about:

• The organisation
• The responsible undertaking
• The compliance route used
• Energy consumption
• Energy-saving opportunities
• The Lead Assessor, where required

The notification must be accurate and submitted by the Phase 4 deadline.

Step 11: Continue monitoring and reporting

ESOS Phase 4 places greater emphasis on what happens after energy-saving opportunities have been identified.

The updated Phase 4 requirements include reporting on energy savings achieved during the compliance period and information about measures that have been implemented.

There is also a new requirement for an action plan review as part of the notification of compliance.

A further progress update report is due by 5 December 2031.

This means businesses should treat ESOS as an ongoing energy-efficiency process rather than a four-yearly compliance exercise.

When is the ESOS Phase 4 deadline?

The deadline for the ESOS Phase 4 notification of compliance is:

5 December 2027

Although this may seem some way off, the assessment process can take considerable time, particularly for large organisations with multiple sites, complex operations or significant transport and industrial energy consumption.

The government’s own guidance provides examples of how organisations can stagger audits across buildings, transport and industrial processes over several years.

Starting early can therefore make the process considerably easier to manage.

What happens if you don’t comply with ESOS?

ESOS is a mandatory regulatory scheme.

Qualifying organisations that fail to meet their obligations can face enforcement action and penalties.

More importantly, leaving compliance until the last minute can create unnecessary pressure, particularly where energy data needs to be collected from multiple sites or where significant energy audits are required.

Early preparation gives businesses time to address missing information, identify the appropriate compliance route and develop meaningful energy-efficiency recommendations.

Make ESOS work for your business

The ESOS process should not be viewed simply as another regulatory obligation.

For businesses with significant energy consumption, the assessment can highlight opportunities to reduce operating costs, improve efficiency and reduce carbon emissions.

A properly conducted assessment can provide a practical roadmap for improving energy performance — and the earlier these opportunities are identified, the sooner they can potentially deliver savings.

Carbon Numbers Investments helps businesses navigate ESOS requirements while identifying practical energy-saving opportunities.

If your organisation needs help preparing for ESOS Phase 4, from understanding your obligations through to assessment, compliance and identifying energy-saving opportunities, contact Carbon Numbers Investments to discuss how we can help.

Frequently Asked Questions

What is the ESOS Phase 4 deadline?

The deadline for submitting the Phase 4 notification of compliance is 5 December 2027.

Who needs to comply with ESOS?

ESOS applies to qualifying UK organisations and corporate groups that meet the scheme’s qualification criteria.

Do I need an ESOS Lead Assessor?

Most qualifying organisations do. Exceptions include organisations with less than 40,000 kWh of total energy consumption, organisations whose total energy consumption is covered by ISO 50001 certification, and organisations with zero energy consumption.

Are Display Energy Certificates valid for Phase 4?

No. Display Energy Certificates and Green Deal Assessments have been removed as alternative compliance routes for Phase 4.

What does an ESOS energy audit involve?

An ESOS energy audit analyses energy consumption and energy efficiency, identifies energy-saving opportunities and includes appropriate site visits.

Does ESOS require businesses to implement all recommendations?

The purpose of ESOS is to identify energy-saving opportunities, rather than automatically requiring businesses to implement every recommendation. However, Phase 4 introduces additional reporting requirements concerning energy savings achieved and action plan progress.