From disclosure to action: Our Net Zero expert's take on ESOS Phase 4

Expert Insight

Transitioning from mandatory climate impact disclosure to mandatory action disclosure

In recent years, the regulatory landscape surrounding corporate sustainability has undergone significant transformations. These changes reflect a growing recognition of the urgent need to combat climate change and promote sustainable business practices.

One of the most noteworthy shifts in this landscape is the transition from merely disclosing climate impact to mandating the disclosure of intended actions.

This evolution is exemplified in the progression from Phase 3 to Phase 4 of the UK's Energy Savings Opportunity Scheme (ESOS).

ESOS Phase 3: setting the stage

ESOS Phase 3, like its predecessors, required large enterprises in the UK to conduct comprehensive energy audits every four years. These audits were designed to identify energy-saving opportunities and reduce carbon emissions. While this phase focused on transparency and the identification of potential improvements, it stopped short of mandating the implementation of these measures. Companies were required to disclose their energy consumption and efficiency measures, but the actual adoption of energy-saving actions remained voluntary.

The shift to ESOS Phase 4: A new era of accountability

As we move into ESOS Phase 4, the regulatory focus has shifted significantly. The key change is the move from simply disclosing climate impact to the mandatory disclosure of intended actions. This phase marks a pivotal step in holding companies accountable not just for their energy consumption but also for their proactive efforts to address these issues.

Central to ESOS Phase 4 is the requirement for companies to develop and disclose Annual Energy Action Plans. These plans must outline the specific measures that businesses intend to implement to improve energy efficiency and reduce carbon emissions. By making these plans a mandatory part of the reporting process, the regulation aims to ensure that companies are not only identifying opportunities for improvement but are also committing to concrete actions.

Why the change?

The rationale behind this shift is clear. While transparency and reporting are crucial for understanding the scope of the problem, they are not sufficient to drive the significant changes needed to meet national and international climate goals. By requiring companies to disclose their intended actions, ESOS Phase 4 aims to: Encourage Accountability: Companies are more likely to follow through on energy-saving measures if they have publicly committed to them. Promote Continuous Improvement: Annual Energy Action Plans foster a culture of ongoing assessment and enhancement of energy efficiency practices. Align with Broader Climate Goals: This proactive approach aligns with the UK's broader commitment to achieving net-zero carbon emissions by 2050.

Looking ahead

The transition from ESOS Phase 3 to Phase 4 represents a significant evolution in the regulatory landscape. It reflects a growing recognition that addressing climate change requires more than just understanding and reporting—it demands action. By mandating the disclosure of intended actions through Annual Energy Action Plans, ESOS Phase 4 sets a new standard for corporate responsibility and accountability in the fight against climate change.

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