What you need to know about ESOS Phase 4

ESOS Phase 4’s compliance year is 2027, with a likely deadline of December 2027. However, organisations can start their site energy audits now and much of the data collected for Phase 3 will be used in Phase 4 due to the increased data requirements passed in 2023. In this article, we'll break down what you can expect from Phase 4.

What businesses are eligible for ESOS Phase 4?

There have been no changes yet to the qualifying criteria for ESOS Phase 4 from Phase 3. This means that organisations that qualify for ESOS will include:

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

There has been a strong suggestion that the ESOS balance sheet and turnover thresholds will be changed to align with the Streamlined Energy and Carbon Reporting (SECR) scheme. there are already advantages to combining ESOS and SECR, but if it does pass it will mean more organisations will be required to comply with ESOS. 

There has also been speculation that Phase 4 will include smaller businesses to accelerate the UK’s net zero targets. This remains unconfirmed, however, and it is unlikely that the government will announce changes before the ESOS Phase 3 deadline ends.

Is ESOS Phase 3 over?

No, but ESOS Phase 3 was scheduled to finish in December 2023. In June 2023 the Environment Agency announced that the Phase 3 compliance deadline was extended to June 2024. This was due to the ESOS Phase 3 changes that placed extra data requirements on the compliance criteria. If you haven’t started your Phase 3 ESOS compliance yet, it’s paramount that you do so soon due to the scarcity of available lead assessors.

New requirements for ESOS Phase 4

Alongside the potential SECR alignment, there will likely be several new changes which could include: 

• A focus on net zero: ESOS Phase 4 could require organisations to consider their net zero commitments and identify actions that they need to take to meet them.
• There will likely be support to identify potential risks of moving to net zero alongside assistance in creating carbon reduction plans (CRPs)
• The government will provide increased clarity and guidance on site audit sampling, including a minimum threshold for both the number of buildings audited and the percentage of total energy consumption sampled.
• All reports will need to meet ISO 50002 or EN 16247 auditing standards. This is currently included as guidance for ESOS Phase 3 but will be mandatory in ESOS Phase 4.
• Display Energy Certificates (DEC) and Green Deal Assessments will no longer be considered as a viable method of compliance.
• Some of the data will be required to be made public. The reports will also need to improve the monitoring and quality of the data collected. 

Like the increased data changes for ESOS Phase 3 that came about in 2023, Phase 4 is likely to involve a significantly larger undertaking on organisations compared to ESOS Phase 3. With the government’s 2050 target drawing ever nearer ESOS is now becoming much more than a box-ticking exercise and the SECR alignment, should it happen, will empower more businesses to accelerate their decarbonisation.