ESOS explained: who qualifies for ESOS Phase 4 and how to comply
ESOS, the Energy Savings Opportunity Scheme, is a mandatory UK energy assessment for large undertakings and their corporate groups. You qualify for Phase 4 if any UK group member has 250 or more employees, or turnover above £44 million and a balance sheet above £38 million, on 31 December 2026. Notify compliance by 5 December 2027.
Last updated 3 November 2026 · By Ella Sustainability Team
Get startedWhat is ESOS?
Who qualifies for ESOS Phase 4?
| Test | Phase 4 threshold | Notes |
|---|---|---|
| Employees | 250 or more | Counts employees, owners, managers and partners. Part-time staff count as one each |
| Financial test | Turnover above £44 million AND balance sheet above £38 million | Both financial limits must be met if the employee test is not |
| Accounts used | Financial year ending on, or in the 12 months before, 31 December 2026 | Each UK entity is tested on its own figures, not only the consolidated group |
| Groups | One large UK undertaking brings in the whole UK group | Defined by the Companies Act 2006 |
| Overseas companies | UK establishments take part if the wider UK group qualifies | Regardless of the establishment's own size |
ESOS Phase 4 deadlines
| Milestone | Date |
|---|---|
| Phase 3 action plan progress update due | 5 December 2026 |
| Phase 4 qualification date | 31 December 2026 |
| Phase 4 notification of compliance deadline | 5 December 2027 |
| Phase 4 action plan due | 5 December 2028 |
| First progress update | 5 December 2029 |
| Second progress update | 5 December 2030 |
| Third progress update (new for Phase 4) | 5 December 2031 |
What changed in ESOS Phase 4
How to comply with ESOS: step by step
| Step | What you need | Common hold-up |
|---|---|---|
| Total energy consumption | Electricity, gas, fuel and transport data for every UK site and entity | Bills sit with site managers, landlords and finance in different formats |
| Significant energy consumption | A ranked view of energy use by site, process and fleet | Teams cannot reach 95% coverage until the data is complete |
| Energy intensity ratios | kWh against an activity measure such as floor area or miles | Activity data held outside the sustainability team |
| Lead assessor | An assessor from an approved register, unless an exemption applies | Booked late in the cycle, when assessors are busiest |
| Energy audits | 12 months of verifiable data, starting no earlier than 6 December 2022, plus site visits | Missing months on sites that changed supplier or were acquired |
| Evidence pack | Sources, estimation methods and sign-offs | Rebuilt from inboxes and spreadsheets at the end |
ESOS penalties
| Breach | Maximum penalty |
|---|---|
| Failure to undertake an energy audit | Up to £50,000, plus £500 per working day for up to 80 days |
| Failure to notify compliance | Up to £5,000, plus £500 per working day for up to 80 days |
| Failure to keep records | Up to £5,000, plus the cost of the regulator's audit work |
| Failure to comply with a notice | Up to £5,000, plus £500 per working day for up to 80 days |
| False or misleading statement | Up to £50,000 |
ESOS vs SECR: what is the difference?
| ESOS | SECR | |
|---|---|---|
| What it is | Energy assessment and audit | Annual energy and emissions disclosure |
| How often | Every 4 years, plus action plan updates | Every year, in the annual report |
| Size test | 250+ employees, or turnover above £44m and balance sheet above £38m | Two of: £36m turnover, £18m balance sheet, 250 employees (plus all quoted companies) |
| Unit | kWh | kWh and tCO2e |
| Who signs off | Board-level director, plus an approved lead assessor in most cases | Directors, as part of the directors' report |
| Where it goes | MESOS, with most data published by the Environment Agency | Companies House filing |
Where ESOS projects go wrong
How Ella helps with ESOS
What happens next for ESOS
How Ella helps
Carbon accounting software
Collect energy data once and produce ESOS-ready datasets, SECR summaries and Scope 1 to 3 footprints.
ESG reporting software
Audit-ready ESG reporting with the source on every number, from data collection to final report.
ESG strategy software
Turn ESOS findings into a reduction plan and net zero roadmap your board can sign off.
Related resources
SECR Reporting Explained: Who Must Report and What to Include
SECR (Streamlined Energy and Carbon Reporting) requires UK quoted companies, and large unquoted companies and LLPs, to report their energy use and greenhouse gas emissions in their annual report. A company is large if it meets two of three tests: turnover of £36m or more, balance sheet of £18m or more, or 250 or more employees. Scope 3 is optional.
Scope 1 and 2 emissions explained: definitions, examples and how to calculate them
Scope 1 emissions come from sources your company owns or controls, such as gas boilers, company vehicles and refrigerant leaks. Scope 2 emissions come from the electricity, heat, steam or cooling you buy. You calculate both by multiplying activity data, like kWh or litres, by an emission factor, then report Scope 2 two ways: location-based and market-based.
Carbon Reduction Plan Template (PPN 006)
A Carbon Reduction Plan (CRP) is a short public document that suppliers bidding for UK government contracts worth over £5m a year must publish. It commits to net zero by 2050, reports Scope 1, Scope 2 and five Scope 3 categories against a baseline, lists reduction measures and is signed by a director.
PPN 006 Explained (Formerly PPN 06/21)
PPN 006 is the UK procurement policy note requiring suppliers bidding for central government contracts worth over £5m a year to publish a Carbon Reduction Plan. It replaced PPN 06/21 for procurements started from 24 February 2025, under the Procurement Act 2023. The content requirements are unchanged and assessment is pass or fail.
Frequently Asked Questions
What is ESOS?
ESOS, the Energy Savings Opportunity Scheme, is a mandatory UK energy assessment. Large undertakings and their corporate groups must measure total energy use, audit at least 95% of it, identify savings and notify compliance every four years.
Who needs to comply with ESOS Phase 4?
Any UK undertaking with 250 or more employees, or with turnover above £44 million and a balance sheet above £38 million, on 31 December 2026. If one UK group member qualifies, the whole UK group takes part.
What is the ESOS Phase 4 deadline?
The notification of compliance for Phase 4 is due by 5 December 2027. The Phase 4 action plan is then due by 5 December 2028, with progress updates in 2029, 2030 and 2031.
What changed in ESOS Phase 4?
Display Energy Certificates and Green Deal Assessments are no longer accepted as compliance routes, you must report progress against your previous action plan and explain missed commitments, and a third annual progress update has been added.
What are the penalties for not complying with ESOS?
Failure to carry out an energy audit can bring a fine of up to £50,000 plus £500 per working day for up to 80 days. Failing to notify can bring up to £5,000 plus daily penalties. Regulators can also publish the names of organisations fined.
What is the difference between ESOS and SECR?
ESOS is a four-yearly energy assessment and audit submitted to the Environment Agency. SECR is an annual energy and emissions disclosure in the directors' report. They use the same energy data but have different size tests and deadlines.
Do I need an ESOS lead assessor?
Usually yes. You must appoint a lead assessor from an approved register unless your total energy use is under 40,000 kWh or the relevant energy consumption is fully covered by ISO 50001 certification.
Can software do ESOS for me?
Software cannot replace the approved lead assessor or the site visits. ESG software such as Ella can collect and clean the energy data, split it by site and entity, keep the evidence and produce SECR and carbon reports from the same records.