ESOS

Approved ESOS changes and ESOS penalties

Guidance on approved ESOS changes and ESOS penalties implemented to strengthen ESOS Phase 3 and ESOS Phase 4.

If your organisation needs support completing ESOS Phase 4, see our ESOS energy audits for large organisations service.

ESOS changes and timelines:

The approved ESOS changes and new ESOS penalties for ESOS Phase 3 and Phase 4 are summarised below.

The Department for Business, Energy, and Industrial Strategy’s (BEIS) consultation on strengthening ESOS closed on 28 September 2021.

During July 2022 the Government announced its intention to make the necessary changes to ESOS in the Energy Bill.

The proposed changes were subject to legislative scrutiny and timetable, and The Energy Bill had to pass through Parliament.

It was confirmed that the qualification criteria for Phase 3 will not change, but the thresholds will be set in GBP.

All large businesses need to comply if they satisfied at least one of the below criteria on 31 Dec 2022.

250+ employees OR with a turnover of £44m+ and a balance sheet of £38m+.

The approved changes which will be introduced in ESOS Phase 3 and Phase 4 are indicated below.

If your organisation qualifies under ESOS, our ESOS Phase 4 compliance service can support audit-ready compliance and Phase 4 requirements.

Setting stronger standards for ESOS:

 

Phase 3 changes:

A standardised template for including compliance information in the ESOS report, comprising ESOS information the participant should already have available.

The reduction of the 10% de minimis exemption to up to 5%.

A minimum of 95% of the participants total energy consumption be audited and included in the report.

The addition of energy intensity metrics in ESOS reports.

Sharing ESOS reports with subsidiaries.

ESOS reports to provide more information on next steps for implementing recommendations.

Requirement for participants to set a target or action plan following the Phase 3 compliance deadline.

Collection of additional data for compliance monitoring and enforcement.

Approved Phase 4 changes:

The UK Government has made the below changes to ESOS, which came into force on 22 July 2026.

Removal of Display Energy Certificates (DECs) and Green Deal Assessment (GDAs) as a compliance route.

  • These compliance routes have been removed as they are no longer considered to meet best practice standards.
  • This means that from Phase 4 ESOS participants must use only energy audits and/or ISO 50001 certification as compliance routes.

Participants with an ISO 50001 Energy Management System covering either the total energy consumption (TEC) or significant energy consumption (SEC) are exempt from:

  • appointing a lead assessor (in Phase 3 this exemption only applied where ISO 50001 covered the whole of the TEC)
  • completing an ESOS report.

Progress against your ESOS Phase 3 action plan commitments must be included in the ESOS Phase 4 assessment. 

The details which must be included in the ESOS report and notification of compliance (NOC) and which will not be published are:

  • A description of each measure implemented to achieve the energy savings
  • Energy savings achieved by each measure
  • Energy saving category of each measure (behaviour change, training, capital investment etc)

You are now required to review your ESOS Phase 3 action plan as part of the ESOS Phase 4 assessment. The details required, which will not be published are:

  • Any measures proposed in the Phase 3 action plan and not implemented
  • Reasons why the measures were not implemented.

Lead assessors are now required to notify their professional body of each ESOS assessment they complete/review.

  • This is to allow the professional body to seek the ESOS participants consent to share its ESOS report so that the professional body can carry out a quality check.

The notification of compliance (NOC) via the MESOS reporting system must include the following:

  • Total number of sites covered by energy audits, which was voluntary in Phase 3
  • ISO 50001 certification details
  • UK SIC codes only (replacing international codes in Phase 3)

The Environment Agency’s Enforcement and Sanctions Policy as it applies to the Energy Savings Opportunity Scheme (ESOS):

The Phase 1 & 2 enforcement approach for breaching Parts 4 and part 5 of the ESOS Regulations for failing to conduct an energy audit and submitting a notification of compliance by the compliance date to the Environment Agency (EA) are summarised below.

EA issued a compliance notice followed by an enforcement notice

The company would have 3 months from the date of the enforcement notice to complete the audit/s and notify the EA online of compliance

If the company met the above requirements and notified the EA of compliance on or before the 3-month period, then the EA would not normally apply a penalty

The EA will record the failure to undertake an energy audit and submit a notification of compliance by the compliance date i.e., 05 December 2019 for ESOS Phase 2

All past non-compliance will be considered when assessing the level of any penalty in the event of any future non-compliance.

The new penalty provisions which came into effect on 8 February 2022 are summarised below.

Failure to notify:

A UK organisation that qualifies for ESOS must notify the Environment Agency that it has complied with its ESOS obligations (regulation 29). Regulation 43 sets the maximum penalties for failing to do this - they are all of the following:

an initial penalty of up to £5,000

a daily penalty of up to £500 for each working day the responsible undertaking remains in breach, starting on the day after the service of the penalty notice, subject to a maximum of 80 working days

the publication penalty

Failure to undertake an energy audit

Chapter 3 of Part 4 requires responsible undertakings to undertake an energy audit, where alternative routes to compliance do not apply. Regulation 45 sets the maximum penalties - they are all of the following:

an initial penalty of up to £50,000

a daily penalty of up to £500 for each working day the responsible undertaking remains in breach, starting on the day after the service of the compliance notice, subject to a maximum of 80 working days

the publication penalty

any steps the compliance body requires the responsible undertaking to take, including conducting or completing an ESOS assessment, to remedy the breach

Procedure for imposing ESOS penalties

We will normally impose a penalty for each separate breach of the ESOS Regulations.

Where additional daily penalties apply, we follow a different procedure. We will first serve an initial notice of civil penalty which will state all the following:

what the breach was

the maximum initial penalty for which the responsible undertaking is liable

and the amount of the additional daily penalty, and that it will accumulate from the day after the date of the notice, until the responsible undertaking returns to compliance, or it reaches the statutory maximum number of days (80)

The notice is not the final decision, no payment is required at this point, and we will not publicise it. We will not apply our discretion at this stage. Once we have determined the total penalty (initial and daily penalties) we will serve a notice of intent to impose the penalty, setting out our proposed final penalty amount. At this point the organisation can make representations, which we will consider in determining the final penalty.

Need ESOS Phase 4 guidance and compliance support?

If you need guidance and compliance support, then we would welcome the opportunity to discuss your requirements with you and indicate how we can help you achieve fast and cost effective ESOS compliance.

Call us: +44 (0) 3300 881451

Email:

Or: complete our short form to discuss your requirements.

Contact Us