The Exciting World of ESOS (Energy Savings Opportunity Scheme) Compliance: What the New Phase Means for Your Organisation

Business Insights

Once, our happy little nation was a member of the EU. You might remember. The big wigs in Brussels put their heads together producing a piece of mandatory Carbon legislation aimed at large businesses and organisations.

The goal?

To drive down overall carbon impacts while enabling commercial growth with clarity and control over energy consumption. From this EU initiative, the UK Government created its version: The Energy Savings Opportunity Scheme (ESOS), which became law. ESOS is a mandatory energy assessment scheme for large organisations in the UK. So far, there have been three phases of the scheme, with each phase increasing requirements for compliance.

Upcoming ESOS Phase 4 – Including new “Annual Requirement”.

The compliance year for ESOS Phase 4 is 2027, with the deadline projected for December 2027. Although this seems far away, the compliance phase is already live, meaning any impacted organisation should be considering what is needed and potentially start site energy audits now. There is also a new requirement to update annually, updating data and commenting on progress against the recommendations of the previous phase. Much of the data collected for Phase 3 can be used for Phase 4, thanks to increased data requirements passed in 2023.

Organisations that were required to comply for Phase 3 remain in for Phase 4 unless they have reduced in size and now fall below the thresholds. There have been no changes in the qualifying criteria between phases. However, if your organisation has grown it may now mean you will need to comply with Phase 4.

ESOS Qualification Criteria

  • Large undertakings (companies with more than 250 employees, or a balance sheet of more than £38 million, and an annual turnover of more than £44 million).
  • Corporate groups containing at least one large undertaking.
  • Not-for-profit organisations meeting the large undertaking criteria.

If you are not sure if you are in or out... Green Team can review your position and recommend your next required steps.

Industry Recommendations and Potential Changes

There have been ongoing recommendations to align the thresholds for balance sheet and turnover with the Streamlined Energy and Carbon Reporting (SECR) scheme. While this alignment is unlikely to happen immediately, it would mean more organisations would be required to comply with ESOS. The SECR turnover threshold is £38 million, and the balance sheet threshold is £18 million.

Extension of ESOS Phase 3 – It’s still going…

Phase 3 was scheduled to finish in December 2023. However, the compliance deadline was extended to June 2024, and then further to August 2024, due to additional data demands and delayed publication of these changes.

Anticipated Changes for ESOS Phase 4

Although all are not yet confirmed, Phase 4 will likely include several new requirements:

  • Increased clarity and guidance for on-site auditing, including thresholds for number of buildings audited and percentage of total energy sampled.
  • Mandatory compliance with ISO 50002 or EN 16247 standards.
  • A strong focus on net zero commitments, including identifying risks and creating carbon reduction plans.
  • Public disclosure of data, with an improvement function for monitoring and quality.
  • Display Energy Certificates and the Green Deal will no longer be routes to compliance.

Benefits of ESOS Compliance

While ESOS Phase 4 will be more demanding, it presents numerous benefits and needs to be seen as a benefit and opportunity for your organisation:

Environmental Impact:

  • Compliance contributes to reducing organisation's carbon footprint, aligning with the UK government’s 2050 targets.

Cost Savings:

  • Energy audits can identify areas for significant energy savings, reducing operational costs overall.

Enhanced Reputation:

  • Demonstrating commitment to energy efficiency can enhance the organisation's reputation among stakeholders, customers, and the public.

Regulatory Preparedness:

  • Staying ahead of regulatory requirements ensures smoother operations and avoids potential penalties.

Operational Efficiency:

  • Improved energy management can lead to better operational efficiency and productivity.

Innovation and Growth:

  • The process can stimulate innovation in energy management practices, potentially leading to new business opportunities and growth.

Employee Engagement:

  • Engaging employees in energy-saving initiatives can boost morale and create a culture of sustainability within the organisation.

At Green Team we would encourage that ESOS Phase 4 be viewed not just as a compliance requirement but a value-added process that offers environmental and commercial opportunities. Organisations should leverage ESOS as a springboard for effective strategies and initiatives that benefit the organisation and its stakeholders. Ultimately, it is about doing the right thing for the environment and future generations.

Contact Green team to see how we can help