ESOS FAQs

We’ve put together the most frequently asked questions on ESOS, to help you meet compliance.

The Energy Savings Opportunity Scheme (ESOS) is a government scheme that requires businesses to identify energy-saving opportunities. It is mandatory for UK businesses over a certain size. Businesses in scope of ESOS have to carry out audits of their energy use every four years in order to identify potential energy-saving measures. ESOS runs in four-year phases and we are currently in Phase 3, which ends on 5 June 2024.

Your business has to comply with ESOS if it met the definition of a “large undertaking” on the Phase 3 qualification date, 31 December 2022.

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

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

If your company fits 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 Department for Energy Security and Net Zero (DESNZ) tells the Energy Advice Hub that the most recent figure they have for the number of UK businesses in scope of ESOS is 11,900. They are basing this on the number of compliance notifications submitted in Phase 2, which ended in December 2019. We cannot expect a more up-to-date figure until after Phase 3 closes in June 2024.

Yes, because non-profits can still meet the definition of a “large undertaking”. Charities, trusts and unincorporated associations may also meet the criteria. For more detail, see the official guidance on who falls in scope.

No. If your organisation is a public body as defined by the Public Contracts Regulations 2015 or the Public Contracts Regulations (Scotland) 2015, then you are exempt from ESOS. But it is not always straightforward to determine, particularly for higher education bodies. Most universities are public, but some could be in scope if they self-declare as private and are large enough to be over the size threshold.

Section 1.2 of the official guidance, Who does not qualify for ESOS, has a summary of how the regulations define a public body, but also recommends that you should seek legal advice if unsure.

A small minority of organisations meet the definition of a “large undertaking” but actually have no physical assets such as buildings or vehicles using energy, or employees using energy. In these rare cases, you will need to get a board-level director to confirm that your organisation is “zero energy”. Then you have to submit an online notification to the Environment Agency informing them that this is the case. You do this through the same portal that you would otherwise use to submit your compliance notification. At the time of writing (December 2023) the portal is still in development, so it is not yet possible to do this.

If your organisation consumes energy, but the total consumption is below 40,000kWh, you have to carry out an ESOS assessment as normal but you are exempted from the requirement to have it reviewed by a lead assessor.

If any UK-registered part of an overseas company meets the ESOS qualification criteria, then ESOS applies to all UK-registered branches of the company. (Meeting the criteria means employing 250 or more people, or having a turnover above £44 million and a balance sheet over £38 million.)

Where a corporate group participates in ESOS, then usually the highest UK parent company acts as the “responsible undertaking” and takes responsibility for the ESOS compliance of the whole group.

Many large multinationals have complex legal structures, so you may need to seek expert advice when assessing if your business qualifies.

ESOS runs in four-year cycles, or phases. We are currently in Phase 3, which started in December 2019. The deadline to complete and submit your Phase 3 ESOS reporting is 5 June 2024.

Each ESOS phase has two key dates: the qualification date and the compliance date.

The qualification date for Phase 3, the current phase, was 31 December 2022. If your organisation counted as a “large undertaking” on that date, you are in scope of ESOS.

The compliance date for the current phase has been extended to 5 June 2024.

However, due to delays in launching the online compliance portal, the EA has also offered an “enforcement extension period”.

While the 5th June deadline remains, enforcement action won’t be taken against non-compliant organisations, provided they meet two conditions:

– Registration on the new compliance portal has been completed by 5 June 2024
– Organisations submit their notification of compliance by 6th August 2024.

ESOS is a UK government scheme administered by the Environment Agency. Each country of the UK has a different regulator to handle ESOS compliance and enforcement.

  • England: the Environment Agency
  • Wales: Natural Resources Wales
  • Scotland: the Scottish Environment Protection Agency
  • NI: the Northern Ireland Environment Agency
  • Offshore (businesses whose activities are wholly or mainly offshore): the Secretary of State for Energy Security and Net Zero

There are various ways in which an organisation in scope can fail to meet its obligations for ESOS Phase 3. These include, but are not limited to:

  • Missing the deadline;
  • Failing to carry out an energy audit;
  • Carrying out a poor quality audit;
  • Keeping incomplete or inaccurate records;
  • Publishing false information in your records.

The consequences of not meeting your ESOS obligations vary depending on how exactly your organisation falls short. For Phase 2, roughly two-thirds of organisations found themselves “compliant with remedials” – that is, broadly compliant but required to take action to bring their reporting up to the right standard.

A much smaller proportion (7% of organisations in scope) were deemed non-compliant in Phase 2. This can incur a serious financial penalty. The Environment Agency has the power to impose fines of up to £50,000 as well as fresh fines for each day that it takes the organisation to remedy the situation.

As of November 2023, the process of compliance audits for Phase 2 was still ongoing and the Environment Agency had issued 105 civil penalties amounting to £1,487,410.

The regulators do have the power to waive enforcement action and penalties, and the Environment Agency has said it won’t take enforcement action for late compliance in the first two months, providing registration on the new compliance portal has been completed by 5 June 2024 and organisations submit their notification of compliance by 6th August 2024.

However it’s worth noting that in Phase 3 the Environment Agency has been strengthening its approach to ESOS enforcement, so leniency will be less likely after this date. 

For Phase 3, there are four different routes to ESOS compliance:

  • Energy audits
  • ISO 50001
  • Display Energy Certificates
  • Green Deal Assessments

From Phase 4 onwards, Display Energy Certificates and Green Deal Assessments will no longer be valid, and both routes are “discouraged” in Phase 3. See our blogpost on routes to ESOS compliance for more details.

The official ESOS guidance explains the process of carrying out an energy audit:

  • Measure your total energy consumption over a 12-month period.
  • Identify areas of significant energy consumption (at least 95% of your total energy consumption).
  • Calculate your energy intensity ratios.
  • Consider available routes to compliance.
  • Ensure areas of significant energy consumption (or total consumption) are covered by a route to compliance.
  • Appoint a lead assessor. (There is an exception for the minority of organisations that have zero energy responsibility under the ESOS rules.)
  • Complete the ESOS report.
  • Share the report and relevant documentation with group undertakings.
  • Get one or more board level directors to review the findings of the assessment.
  • Submit your notification of ESOS compliance through the Environment Agency website. (Please note that at the time of writing, December 2023, it is not yet possible to do this because the compliance notification portal is not ready.)
  • Keep records: your compliance notification, a copy of your ESOS report and any other relevant documentation.

ESOS reporting makes a distinction between your organisation’s total energy consumption and its significant energy consumption. Both require you to choose a reference period of 12 consecutive months, but it doesn’t have to be the same 12 months for both types of consumption.

For total energy consumption, your reference period for Phase 3 must include the qualification date of 31 December 2022 and end before the compliance deadline of 5 June 2024. So the earliest it could start is 1 January 2022 and the latest it could end is 4 June 2024. You can pick any consecutive 12 months within that timespan of two years and just over five months.

For significant energy consumption, you can take any consecutive 12 months of data from between 6 December 2019 (when Phase 3 started) and 5 June 2024. But the data should be no older than 24 months by the time you do the audit (so for an audit carried out on 1 January 2024, the data should not be from any earlier than 1 January 2022).

In practice, it is much more straightforward to use the same reference period for both categories of consumption.

Your ESOS energy consumption calculation should include all sources of energy consumption, including building use and transport. You must use the same unit of measurement for all your calculations: either an energy unit such as kWh, or energy spend in pounds sterling. (It isn’t acceptable to record your energy consumption in terms of CO2 or CO2 equivalent, because these are not measures of energy.)

The government publishes tables of conversion factors that allow you to calculate the kWh for each litre of petrol burned in your company vehicles. Alternatively, you can state your company’s petrol and diesel consumption in terms of spending and give the calculations in pounds sterling.

You are also now required to include an energy intensity metric in your ESOS reporting. This is a requirement which came into force in July 2022 as part of government efforts to strengthen ESOS in Phase 3. For the energy use relating to your company’s buildings, this might be kWh/m2, while for transport energy it might be kWh per mile travelled. You should also use one or more energy intensity metrics relating to the output of your business, such as kWh per hundred customers served or kWh per £100 of turnover.

Your initial calculations will cover all sources of energy consumption, but when doing the full audit you are allowed to exclude specific areas of organisational activity. This might mean leaving out a specific site, or consumption relating to a particular activity or fuel. These excluded areas can be up to 5% of your total consumption. The excluded proportion of energy use is known as your de minimis.

You obviously still have to calculate the excluded energy use, in order to ensure it is below the 5% threshold and state exactly what percentage it is in your ESOS reporting. But you will not get any energy-saving recommendations for it. For this reason, many businesses skip the de minimis option and simply include all their consumption; if you have to measure it anyway, you might as well get the benefit of doing that work.

The de minimis rule is the same if you are following alternative routes to Phase 3 compliance such as ISO 50001 certification.

No. You must carry out site visits as part of your ESOS energy audit, but you don’t have to visit every site in your organisation.

You can instead take a sampling approach, whereby you split your portfolio into different building types, e.g. office, warehouse, retail etc and visit one of each. You can apply the findings to the rest of the sites that are identical or very similar.

At the moment, best practice for the sampling approach is not prescribed in the ESOS legislation and it is up to the organisation to work out the approach that will give the most accurate calculations of its energy use. The guidance recommends working with your lead assessor to develop a suitable approach that accurately reflects the energy consumption patterns of your organisation’s assets and activities. You should explain your methodology in your ESOS evidence pack.

Your ESOS reporting must be signed off by an officially approved ESOS lead assessor. It is fine if this person is an employee of your organisation, provided that they are on one of the approved registers for ESOS lead assessors.

The lead assessor may carry out all the energy audits and reporting themselves, or you may get others to do this work and then bring the lead assessor in to check that it meets the ESOS requirements.

The official ESOS guidance includes a list of approved registers for ESOS lead assessors. At Sustainable Energy First, we have a team of qualified and certified ESOS lead assessors, accredited by the Association of Energy Engineers, the Energy Institute and CIBSE.

A government evaluation of ESOS Phase 1 found that businesses spent on average 15 days of staff time on their Phase 1 data-gathering and reporting. The average may be less for Phase 3, now that organisations in scope know what is involved and are used to collating their energy usage information.

Unsurprisingly, larger and more complex organisations tend to need more time for ESOS compliance activity than smaller ones.

The most time-consuming part of ESOS compliance tends to be supporting the lead assessor by supplying the information requested, accompanying them on site visits and so on.

Under ESOS, energy is defined as all forms of energy products, including:

  • combustible fuels
  • heat (excluding your organisation’s surplus heat from industrial processes)
  • renewable energy
  • electricity
  • fuel used in transport

There are no fuel type exemptions in ESOS, although some consumption may be deemed de minimis and therefore excluded from the report.

You only need to include data on transport that your company operates, e.g:

  • Fuel used in company cars on business use
  • Fuel used in fleet vehicles which you operate on business use
  • Fuel used in personal/hire cars on business use
  • Fuel used in private jets, fleet aircraft, trains, ships, or drilling platforms which your organisation operates.
  • If your employees take trains, flights or taxis for business use, that are not operated by the company, then you don’t need to report on these. You also don’t need to report on fuel used by subcontractors in transporting goods.

For advice on how to start gathering transport data, read our guide.

The point of ESOS is to help organisations identify opportunities for energy saving that they can actually act on. This means ESOS focuses only on the energy use your organisation controls.

So tenants in a building should take responsibility for the energy they consume through the operations of that business, but not for energy use associated with shared areas of the building such as lifts, heating and so on.

The most useful tool for separating out the different areas of energy use is sub-metering. Sustainable Energy First has extensive experience of helping organisations use sub-metering to take control of their energy use. To find out more, get in touch.

For Phases 1 and 2, there was no requirement for ESOS data to be presented in any particular format. For Phase 3, the government has announced that there will be a template to help standardised reporting. At the time of updating these FAQs (December 2023) this template is still in development.

Whatever the eventual template looks like, it will definitely require participants to keep clear records of how they have met the ESOS requirements. The guidance refers to this as an “evidence pack”. The more clarity, detail and structure your records have, the easier it will be for your organisation to comply with whatever is coming in future.

For now, the only element of the process that follows a specified format is notifying the Environment Agency of compliance, which is done through a webform. (As of December 2023, this webform is not yet live.)

The whole point of ESOS is to identify possible energy savings and then carry out whichever measures are practical and good value for money. To get the most financial benefit from your ESOS audit, it’s a good idea to select an ESOS lead assessor who is also capable of helping you to implement the identified energy saving measures.

Sustainable Energy First can connect you with a lead assessor who will help build a cost-effective carbon reduction strategy and gain a return on investment from your ESOS audits.

Some companies offer a ‘shared savings’ energy efficiency scheme, whereby the upfront cost of an energy saving project is covered by the supplier or a third-party financing company. The customer then repays the cost through an agreed percentage of the energy savings achieved.

This means that energy efficiency projects can be cost neutral for an organisation in the short term, while bringing savings in the long term through lower energy bills. Your lead assessor may have a similar offer or be able to recommend a company that offers such a scheme.

It is not compulsory to carry out all the energy-saving measures identified by your audit. But under the stronger Phase 3 requirements, you do need to create an ESOS action plan setting out which actions your organisation is committing to over the next four years. This should include:

  • What you intend to do to reduce your organisation’s energy consumption;
  • 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;
  • How you estimated those energy savings.

The deadline to submit your plan is 5 December 2024, six months after the ESOS compliance deadline.

You will then need to provide annual progress updates on these actions. Your plan and progress updates must be made public.

It is perfectly lawful to decide that your organisation will take no action at all, but if so you will need to submit an official notification confirming this. This will be made public, so your organisation needs to consider the reputational risk of being seen to do nothing.

Your evidence pack for ESOS compliance should contain the following:

Organisational info

  • Contact details of the organisation doing the ESOS reporting;
  • Details of any board-level directors or equivalent who have reviewed the ESOS assessment findings;
  • A written agreement on how you chose to disaggregate or aggregate group members when setting the boundaries of the corporate body for ESOS purposes;
  • If your “responsible undertaking” is anything other than the default option of the highest UK parent company, you need to show a written agreement about how this was decided.

ESOS assessment info

  • The calculation of your total energy consumption and primary evidence for how you worked it out;
  • A list of your identified areas of significant energy consumption;
  • Calculations of your energy intensity ratios, e.g. kWh per unit produced;
  • Details of the energy audits undertaken, including the audit methodology used in your ESOS energy audits;
  • Details of the energy-saving opportunities identified;
  • Details of the routes to compliance used to cover each area of significant energy consumption and, where applicable, evidence (e.g. certificates) of the alternative routes to compliance;
  • Details of energy savings achieved during the compliance period
  • A copy of your ESOS report
  • Written confirmation from the lead assessor that they reviewed the ESOS assessment;
  • Contact details of your lead assessor and the name of the approved register of which they are a member;
  • Written confirmation from the director(s) to show that they have reviewed the ESOS assessment;
  • A copy of your compliance notification submission. (This will be available to download through the compliance notification portal once it is up and running.)

Action plan info

  • A copy of your ESOS action plan
  • Copies of every subsequent annual progress update
  • Written confirmation from the directors that they reviewed the plan and progress updates.

Explaining gaps

Your organisation should do everything possible to follow ESOS best practice. But if you have fallen short in any area, your evidence pack should explain why. For example:

  • If you couldn’t provide a full 12 months of data, the reasons why not;
  • If your lead assessor has not used an energy consumption profile in your audit of an area of significant energy use, the justification for not doing so.
  • If you didn’t use verifiable data on energy use or energy expenditure to support your calculations, the reasons why you couldn’t.

Your methodology for calculating or estimating energy use should be clear from your evidence pack.

You must keep the evidence pack for the compliance period to which it relates (currently Phase 3) and the two subsequent compliance periods.

It is up to your organisation to choose which measures to carry out and how to prioritise the ones you have chosen. But your lead assessor should have helped you with this decision-making by giving you information on cost-effectiveness, ease of implementation and so on. Some lead assessors may also be able to help you move forward with the actual work, and it is a good idea to select one with this capability. (At Sustainable Energy First, we can fulfil the lead assessor role and also help you gain the best return on investment from your energy efficiency measures.)

Some energy efficiency measures have a good return on investment but cost a lot upfront. It is your organisation’s own decision how to fund this kind of measure. Some companies offer a “shared savings” finance model, where the supplier or a third-party finance company covers the cost of the work, then the organisation repays the cost through an agreed percentage of the energy savings achieved. Your lead assessor should be able to advise you on the best options for financing your energy efficiency work.

Although nobody welcomes more paperwork, there is a reason why the scheme has “opportunity” in the name. It was designed to help organisations cut their carbon footprint and energy bills in a cost-effective way. Much of the benefit from ESOS will be felt directly by businesses in the form of cost savings. But there are other benefits too, mainly a reduction in the UK’s carbon emissions and an improvement in air quality.

Businesses have been slower to implement energy-saving measures than the government originally envisaged, which means we are not yet experiencing the full benefits. This is why the government is taking steps to strengthen the scheme. A July 2021 impact assessment estimated that the strengthened scheme in future could have a value to society of £1 billion, with £907 million of this value going to UK businesses.

Yes. There are a number of changes coming in for Phase 4, mainly designed to improve the effectiveness of ESOS. There will also be an expectation that organisations act on the recommendations in their ESOS report – and if not, they will be expected to explain why.

Also in Phase 4, the balance sheet and turnover thresholds for being in scope of ESOS will be lowered to put the scheme in line with SECR, which will put more businesses in scope.

The Energy Advice Hub will publish more extensive guidance on Phase 4 in due course.

Business guide to UK energy and carbon compliance

As well as articles, FAQs and explainers, we also produce a number of FREE guides that are available to download. We have just updated our Energy and Carbon Compliance guide making it as current and relevant as possible to readers.

Our guide to mandatory energy and carbon compliance schemes in the UK is essential reading for anyone responsible for energy, sustainability, or compliance.

We also cover the wide range of voluntary schemes that can help you achieve best practice in your organisation.

If the content of this or any of our pages has interested you, please get in touch for a no-obligation chat with our industry-leading experts at Sustainable Energy First.