ESOS Phase 4 Changes: What Do They Mean for Your Business?

If you’re a large business, it’s likely that you’ve been preparing to submit your ESOS Action Plan for Phase 3 of the Energy Savings Opportunity Scheme (ESOS). 

In this article, we’ll break down what happens now you have handed in your Phase 3 ESOS action plan, any changes in ESOS Phase 4, and whether your business will be affected. 

ESOS Phase 4: What Happens Next? 

By now, you should have submitted your Phase 3 ESOS action plan. The next phase of the ESOS scheme, Phase 4, will run until December 5, 2027. 

The qualification criteria for Phase 3 and Phase 4 are essentially the same. If you: 

• Employ more than 250 people or 

• Have an annual turnover exceeding £44 million and an annual balance sheet total exceeding £38 million 

You will need to take part. 

ESOS Phase 4 requires businesses to submit another assessment, reporting on the progress made against their action plans. Like Phase 3, there is more emphasis on businesses taking a proactive approach to reduce energy use, with a focus on tangible data. 

The Government is standardising the Phase 4 reporting procedure to make it easier for businesses to submit their reports and ensure consistency. It is upgrading its MESOS portal to support these changes. 

The Changes Made to ESOS Phase 4 

ESOS has grown and evolved over time, which has meant the different stages of the scheme have changed to reflect changes in circumstances. 

When Phase 4 was announced, the plan was for businesses to include a mandatory net-zero assessment. They would need to measure their greenhouse gas emissions and develop strategies for reducing their carbon footprint. However, because of the delays caused by the pandemic, this requirement has now been moved to Phase 5 of ESOS. 

Businesses are encouraged to consider net zero in their Phase 4 reporting though, and they can submit a net zero assessment voluntarily if they want. 

There were plans to lower the qualification thresholds for Phase 4 to align them with the Streamlined Energy and Carbon Reporting (SECR) requirements, meaning more businesses would have to participate. However, this change has also been postponed until Phase 5. 

Last month, we spoke with Naveed Shaikh, Director at EMC2 and ESOS Lead Assessor, who discussed these changes: 

‘They [The Environment Agency] have confirmed some smaller changes, the big one of those is the removal of compliance rules, displaying its certificates and green deal assessments are no longer valid compliance rules. 

The second one is the action plan commitment. So, as part of the ESOS Phase 4 report, the participants have to now include the update on the action plan, and if they haven’t done anything, they need to explain the reasons behind not taking any actions. 

And finally, they have also introduced voluntary net zero reporting, and so they think it’s going to be mandatory in ESOS Phase five.’ 

ESOS: The Future 

ESOS Phase 4 will run until 2027, when it will be superseded by ESOS Phase 5, which will run till 2031. 

Apart from the Phase 4 changes mentioned above moving to the Phase 5 window, not much is known about how Phase 5 will affect businesses just yet.  

However, as we move closer to 2050, it’s probable that businesses will have to consider how they align their energy audits with the UK’s own net zero targets.  

Should You Start Prepping for Phase 4 Now? 

We definitely recommend being aware of the Phase 4 deadlines and what this stage of ESOS entails. In fact, you could have already started Phase 4, as there’s nothing stopping businesses from beginning their compliance efforts early. 

You should be actively monitoring and gathering data so you’re well prepared to submit a detailed and accurate progress report. 

However, it’s worth staying flexible – deadlines and goals have shifted, and there’s the likelihood that they may change again. 

If you’re not sure where to start with Phase 4 of ESOS, we’re here to answer your questions. Just get in touch, we’re happy to advise on what you need to do to stay compliant and how you can monitor your energy use.