Phase 3 of the Energy Savings Opportunity Scheme (ESOS) is officially over, and we are in Phase 4. However, you still have until 5 March 2025 to submit your Phase 3 Action Plan. Here’s what you need to know.

What is ESOS?

The Energy Savings Opportunity Scheme is a mandatory scheme requiring large UK businesses to report on their energy use and identify possible ways to save energy. It runs in four-year phases. Phase 4 started on 6 December 2023. Businesses in scope of ESOS Phase 4 must submit a compliance notification by 5 December 2027.

However, businesses in scope of ESOS may still be working on their Phase 3 Action Plan. Due to delays in getting the digital submission system up and running, plans will be accepted up to 5 March 2025.

Check if your business has to comply with ESOS

Your ESOS obligations depend on the size category of your business as of 31 December 2022. This was the “qualification date” for Phase 3. If your organisation met the description of a “large undertaking” on that date, you now have an obligation to comply with ESOS Phase 3 even if the business has subsequently changed in size.

For the purposes of ESOS Phase 3, a large undertaking is any UK company that:

• employs 250 or more people;
• andhas an annual turnover in excess of £44 million
• andhas an annual balance sheet total in excess of £38 million.

If your company fitted this definition on the qualification date, it must carry out ESOS reporting, even if it has subsequently changed in size and no longer meets the criteria.

The qualification date for Phase 4 will be 31 December 2026. If your business meets the above criteria on this date – even if you aren’t eligible at the moment – you will be subject to ESOS and must submit a compliance notification by 5 December 2027.

Late to comply with Phase 3? Take action now

ESOS administrator, the Environment Agency, does not have a systematic way of notifying businesses that they are in scope, relying instead on companies becoming aware of the scheme through sources such as the Energy Advice Hub and by doing their own checks. As a result, some businesses may not be aware that they were in scope of ESOS Phase 3.

These businesses still need to comply with the requirements of ESOS. Chiefly, this includes submitting a notification of compliance, followed by an Action Plan. If you did not submit a notification of compliance by 6 August 2024, you may be at risk of enforcement action and should contact the Environment Agency immediately.

If you did submit a notification of Phase 3 compliance, you have until 5 March 2025 to complete an Action Plan.

If you previously had to comply with ESOS but now don’t

If your organisation qualified for ESOS Phase 2 but did not meet the criteria for Phase 3 on the qualification date, you are advised to submit a DNQ (Do Not Qualify) notification to the Environment Agency. This should be done through the same online portal that you would use for your compliance notification (MESOS). The deadline for DNQ notifications was the same as for compliance notifications: 6 August 2024. If your business has not done this yet, do it as soon as possible.

Submitting your ESOS Phase 3 Action Plan

Phase 3 of ESOS introduced a new requirement for organisations to produce an Action Plan. The plan should include:

• What you intend to do to reduce your organisation’s energy consumption over the next four years;
• When you intend to do it;
• Whether it was recommended through your ESOS assessment;
• What energy savings you expect to see by carrying out your action plan; and
• How you estimated those energy savings.

Action plan functionality is now live within the online compliance portal (MESOS) – you will need a registered organisation account to make a submission, by 5^th March 2024.

Progress reports

You are expected to begin implementing your Action Plan and documenting your progress. ESOS Phase 3 compliance requires two annual progress reports in the two years following the Action Plan deadline. This means a report by 5 March 2026 and another by 5 March 2027. Your plan and progress updates must be made public.

What’s happening with ESOS Phase 4?

Although we are currently in Phase 4 of ESOS, we have not yet reached the qualification date of 31 December 2026. Our ESOS Phase 4 blog post gives an idea of what to expect, although requirements are changing and there will be more updates to come.

However, if you suspect you will meet the Phase 4 eligibility criteria by the qualification date, you can begin preparing now to make compliance smoother and more straightforward when the time comes.

This means ensuring your energy consumption is measured and you have ready access to this data, including transport fuel as well as the energy used for industrial processes, heating and lighting buildings, and so on.

You should also start considering ways your organisation can become more energy efficient, particularly as Phase 4 will require evidence of audit actions and progress. In Phase 4, Display Energy Certificates and Green Deal Assessments will no longer be valid routes to compliance, so your organisation may need to rethink its approach.

The Energy Advice Hub updates its ESOS FAQs regularly and reports any changes to the scheme as they happen, so keep an eye on the site to stay informed.