ESOS Phase 4: What’s Changing and How to Prepare

Quick summary: ESOS Phase 4 is the latest compliance cycle of the Energy Savings Opportunity Scheme, requiring qualifying UK businesses to review their energy consumption, identify efficiency improvements and meet the 5 December 2027 compliance deadline.

Key Takeaways

• ESOS Phase 4 covers the compliance period from 6 December 2023 to 5 December 2027, and qualifying organisations must complete their assessments by the deadline.
• Businesses generally qualify if they employ 250 or more people, or meet the relevant financial thresholds.
• At least 95% of total energy consumption must be covered by compliant energy audits or alternative approved routes.
• Display Energy Certificates and Green Deal Assessments are no longer accepted as alternative compliance routes.
• Organisations that took part in Phase 3 must submit their second annual progress update by 5 December 2026.
• Preparing early gives organisations more time to collect energy data, identify improvements and manage compliance costs.

What Is ESOS Phase 4?

The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment programme designed to help large UK organisations understand how they consume energy and identify opportunities to improve efficiency.

ESOS operates in four-year compliance cycles, with each phase requiring qualifying businesses to assess energy consumption across their buildings, industrial processes and transport activities.

ESOS Phase 4 is the current assessment cycle, ending on 5 December 2027.

Although the scheme focuses on identifying energy-saving opportunities, businesses generally are not required to implement every recommendation from their audits. However, separate reporting requirements mean organisations must provide greater visibility into their energy efficiency plans and progress.

Who Qualifies for ESOS Phase 4?

Organisations must assess their eligibility against the qualification criteria on 31 December 2026.

Generally, a business qualifies if it meets either of the following conditions:

• Employs 250 or more people.
• Has annual turnover exceeding £44 million and an annual balance sheet total exceeding £38 million.

Corporate group structures can also affect eligibility, meaning smaller subsidiaries may need to participate when they belong to a qualifying group. Businesses should review their organisational structure carefully rather than assuming their previous ESOS status automatically determines Phase 4 eligibility.

The government had proposed changing these thresholds for Phase 4, but the proposals weren’t taken forward, so the qualification criteria remain the same as Phase 3.

ESOS Phase 4 Key Dates and the 2027 Compliance Deadline

Understanding the relevant deadlines is essential, particularly for organisations managing multiple premises or complex energy consumption.

Businesses should also monitor their existing Phase 3 action plan and annual progress reporting deadlines, which operate separately from the main Phase 4 assessment.

Leaving preparations until late 2027 could create unnecessary pressure, particularly where energy records span several locations or suppliers.

What’s Changing in ESOS Phase 4?

ESOS Phase 4 builds on changes introduced during the previous compliance cycle, with greater emphasis on comprehensive energy assessments and ongoing accountability.

Display Energy Certificates and Green Deal Assessments No Longer Count as Compliance Routes

Previously, certain alternative assessment methods could contribute towards ESOS compliance.

However, Display Energy Certificates and Green Deal Assessments are no longer accepted as alternative compliance routes under the updated scheme.

Businesses must therefore ensure their assessments use approved methods, including compliant ESOS energy audits, ISO 50001 certification or other eligible routes where applicable.

Organisations that previously relied on these assessments should review their compliance approach early to avoid unexpected gaps.

Net Zero Reporting Stays Voluntary Until Phase 5

Net zero reporting remains voluntary for Phase 4, with mandatory requirements expected to apply from Phase 5 under the announced policy direction.

This means businesses can use their current assessments to understand emissions-related opportunities without treating a net zero assessment as an additional mandatory Phase 4 obligation.

However, organisations should monitor government guidance in case future requirements or implementation arrangements change. 

Organisations that want to get ahead can voluntarily follow the PAS 51215-1:2025 net zero assessment approach, which is expected to inform the Phase 5 requirements.

ESOS Action Plans and Progress Updates in Phase 4

One of the most significant developments in ESOS is the requirement for businesses to demonstrate how they intend to respond to identified energy-saving opportunities.

Reviewing Your Phase 3 Action Plan

Qualifying organisations were required to prepare an action plan after Phase 3, outlining measures they intended to implement over the next four years.

These plans provide a useful starting point for Phase 4 preparations.

Businesses should review which measures have been completed, which remain outstanding and whether their original priorities still reflect operational requirements.

For example, planned lighting improvements may already be complete, while larger projects involving heating systems or production equipment could require additional investment.

Annual Progress Updates

Organisations must also submit annual progress updates explaining their progress against the action plan.

These updates help demonstrate whether planned energy-saving measures have been implemented and what savings have been achieved.

Maintaining accurate records throughout the year makes reporting easier and helps businesses understand whether their energy efficiency investments are delivering the expected results.

ESOS Energy Audit Requirements for Phase 4

Energy audits remain central to ESOS compliance, providing detailed insight into where energy is consumed and how businesses could reduce unnecessary usage.

The 95% Significant Energy Consumption Rule

Under ESOS Phase 4, organisations must identify their total energy consumption and ensure at least 95% is covered by their compliance assessment.

This is known as significant energy consumption.

The remaining 5% can be excluded from detailed assessment, although it must still be accounted for when calculating total energy consumption.

Businesses should consider electricity, gas, transport fuels and other relevant energy sources when establishing their consumption profile.

Reference Periods and Energy Data

Accurate energy data is essential for producing a compliant assessment.

Organisations must calculate total energy consumption using a consecutive 12-month reference period that includes the qualification date and meets the scheme’s timing requirements.

The data used for individual energy audits must also meet the relevant reference period rules.

Collecting invoices, meter readings and consumption records early helps identify missing information before it affects the assessment.

Site Visits and the Lead Assessor

ESOS assessments generally require oversight from an approved lead assessor, who reviews the audit work and confirms that the organisation has followed the relevant requirements.

Site visits form an important part of the process, although businesses operating multiple similar premises may be able to use representative sampling.

The appropriate approach depends on the organisation’s operations, energy consumption and the assessor’s professional judgement.

ESOS Phase 4 for Manufacturers

Manufacturing businesses often face additional challenges when completing ESOS assessments because energy consumption extends beyond conventional building services.

Production equipment, compressed air systems, industrial heating and refrigeration can all contribute significantly to overall consumption.

Process Energy and Production Sites

For manufacturers, understanding process energy matters most.

A production facility may consume relatively little energy through office lighting or heating compared with the electricity and gas required to operate machinery.

Energy audits should therefore consider how equipment operates, whether production schedules create unnecessary consumption and where improvements could reduce waste.

Potential opportunities include upgrading inefficient motors, improving heat recovery and reducing energy consumption during periods of low production activity.

Using Half-Hourly and Sub-Meter Data for Audits

Half-hourly electricity data and sub-meter readings can provide valuable insight into manufacturing energy consumption.

Rather than relying exclusively on monthly bills, businesses can examine when energy is used and identify unusual consumption patterns.

For example, consistently high overnight electricity usage could indicate equipment operating unnecessarily outside production hours.

Sub-metering can also help distinguish individual production lines or processes, making it easier to identify where improvements could deliver the greatest benefit.

How to Prepare for ESOS Phase 4

Although the compliance deadline is in December 2027, businesses should begin preparing well in advance.

Early preparation reduces administrative pressure and gives organisations more flexibility when arranging assessments.

Practical Steps to Take Before 31 December 2026

Businesses preparing for ESOS Phase 4 should focus on establishing their eligibility and organising the information required for their assessment.

Useful steps include:

1. Review qualification criteria: Check employee numbers, financial thresholds and corporate group arrangements.
2. Identify energy sources: Establish which buildings, processes and transport activities contribute to consumption.
3. Organise energy records: Gather electricity and gas invoices, meter data and relevant fuel records.
4. Review previous assessments: Examine Phase 3 recommendations and identify outstanding improvements.
5. Plan assessment resources: Establish responsibilities and consider when to appoint a lead assessor.

Businesses operating across several sites should also check that energy accounts and meter details accurately reflect their current property portfolio.

Penalties for Missing the ESOS Phase 4 Deadline

Failing to comply with ESOS can result in enforcement action and financial penalties.

Regulators have powers to impose penalties for breaches, including failure to undertake an assessment, maintain records or submit the required compliance notification.

Penalties depend on the nature of the breach and applicable enforcement provisions, with some offences attracting substantial fixed and daily penalties.

Businesses should therefore treat ESOS as a formal regulatory obligation rather than an optional energy efficiency exercise.

Turning ESOS Phase 4 Compliance Into Energy and Cost Savings

Although ESOS introduces administrative responsibilities, the assessment process can also reveal opportunities to reduce business energy expenditure.

Identifying inefficient equipment, unnecessary consumption and avoidable operating costs gives organisations a clearer understanding of where improvements may be worthwhile.

Not every recommendation will require significant investment. Changes to operating schedules, maintenance practices and energy monitoring can sometimes deliver measurable improvements without major infrastructure upgrades.

The key is using assessment findings to support informed operational decisions, rather than treating compliance as a standalone paperwork exercise.

Talk to D-ENERGi About Your ESOS Phase 4 Energy Data

Reliable energy consumption records can make preparing for ESOS Phase 4 considerably easier.

D-ENERGi supports businesses with commercial gas and electricity supply, helping organisations access the information needed to understand their energy usage.

If you’re reviewing your energy accounts ahead of the 2027 deadline, contact D-ENERGi to discuss your business energy requirements and available consumption information.

Frequently Asked Questions (FAQs)

What happens if my organisation qualified for ESOS Phase 3 but does not qualify for Phase 4?

Eligibility is reassessed for each compliance phase. If your organisation no longer meets the qualification criteria on the relevant date, it may not need to complete a Phase 4 assessment. However, if you took part in Phase 3, you’ll still need to submit your progress update due by 5 December 2026.

Do ESOS Phase 4 energy audits require visiting every site?

Not necessarily. Organisations with multiple similar premises may use representative site sampling, provided the approach satisfies ESOS requirements and is appropriate for their operations.

How much does ESOS Phase 4 compliance cost?

Costs vary depending on organisational size, the number of premises, energy consumption complexity and the availability of existing records. Businesses with multiple industrial sites may require more extensive assessments than organisations with relatively straightforward operations.

Is there a penalty for missing the ESOS action plan or a progress update?

Yes. Failure to meet applicable action plan or annual progress update requirements can result in enforcement action and financial penalties. Businesses should monitor these deadlines separately from their Phase 4 assessment obligations.

What counts as energy under ESOS Phase 4?

ESOS covers energy an organisation consumes through buildings, industrial processes, and transport. This can include electricity, natural gas, heating fuels and transport fuels used for qualifying business activities.