The Challenge
ESOS is mandatory and here to stay. We are currently in Phase 4, with Phase 5 starting on the 6th December 2027. All indications are that Phase 5 will also require you to consider the carbon impact of your business.
The fines are real and the Environment Agency has already announced that failure to complete an ESOS assessment will result in a fine of upto £50,000 plus £500 per working day for non-compliance. To date 161 organisations have been fined with approximately £4 million in fines issued.
The Opportunity
For any business that uses a significant amount of energy, ESOS provides the opportunity to save money whilst complying with the regulations. In the majority of cases, ESOS will provide you with several opportunities to improve your business and save money. The cost of complying is minimal in comparison to the amount you could save. In addition:
- It’s a free look at where you waste money. The audit identifies and costs energy savings. Most organisations find measures that can payback within a few years.
- The data feeds other reporting. The same energy data supports Scope 1 and 2 reporting, SECR, carbon reduction plans for public tenders and net zero targets. Done properly, it means collecting the data once rather than several times.
- It gives the board something to act on. A board director now has to sign off the assessment. That puts energy in front of decision-makers and makes action plans more likely to be funded.
- It’s a step towards net zero. It will help you longer term to go beyond compliance and set out a credible decarbonisation pathway.
- It cuts risk. Missing the 5 December 2027 deadline can bring Environment Agency penalties and public naming.
PNZ Approach
Here’s how an ESOS assessment runs under Phase 4. The key dates are a qualification date of 31 December 2026 and a deadline of 5 December 2027 to notify compliance.
- Check qualification. On 31 December 2026, is the organisation (or anyone in its group) a large undertaking? That means 250 or more staff, or turnover above £44m and a balance sheet above £38m.
- Measure total energy use. Take a 12-month period of data covering buildings, industrial processes and transport. The period can’t start before 6 December 2022 and must start no more than 24 months before the audit.
- Identify significant energy use. This must cover at least 95% of total consumption.
- Set energy intensity ratios. Do this for buildings, transport and processes, using verifiable data or a reasonable estimate.
- Choose the route and the assessor. The two routes are an ESOS energy audit or ISO 50001. Appoint an approved lead assessor unless ISO 50001 covers all significant energy use.
- Carry out the audits. This includes site visits, identifying savings opportunities and costing them. Phase 4 also requires a review of progress against the Phase 3 action plan, with reasons for any missed commitments.
- Write the ESOS report. Phase 4 asks for more detail on savings already achieved, and the findings must be shared across the corporate group.
- Get board sign-off. One board-level director must sign off both the assessment and the notification.
- Notify compliance. Submit through MESOS by 5 December 2027.
- Keep the evidence pack. Then follow up with the action plan and annual progress updates. Phase 3 progress updates are due by 5 December 2026.
