The Environment Agency has published its ESOS Phase 4 guidance, confirming changes to compliance routes, reporting requirements and progress updates. With the compliance notification deadline set for 5 December 2027, businesses should begin reviewing their position now. [1]

For owners, directors and CFOs, the practical questions are straightforward: does the business qualify, what information needs to be reported, and how can preparation support better decisions about energy expenditure?

Does your business qualify for ESOS Phase 4?

The Energy Savings Opportunity Scheme (ESOS) applies to qualifying large UK undertakings and corporate groups.

The Phase 4 qualification date is 31 December 2026. Broadly, a UK undertaking qualifies if it:

• Employs 250 or more people; or
• Has annual turnover exceeding £44 million and an annual balance sheet total exceeding £38 million.

Smaller companies can also fall within scope through their corporate group. Businesses close to the thresholds, or those that have recently grown or shrunk, should check the detailed qualification rules. [2]

What has changed for Phase 4?

The new guidance confirms four changes particularly relevant to business leaders. [1]

1. Fewer routes to compliance

Display Energy Certificates and Green Deal Assessments are no longer available as alternative compliance routes. Businesses will need to establish the appropriate coverage through ESOS energy audits, ISO 50001 certification, or a combination.

2. More detailed reporting on progress

Participants must provide more detail about implemented energy efficiency measures and the savings achieved. Where applicable, they must review previous action plan commitments and explain why proposed measures were not implemented.

3. An additional progress update

A third progress update against the Phase 4 action plan is due by 5 December 2031, extending the reporting timetable.

4. Reduced obligations for some ISO 50001 participants

Businesses complying solely through ISO 50001 certification covering their significant or total energy consumption, as applicable, do not need an ESOS report or lead assessor.

What does this mean for owners, directors and CFOs?

Our view is that ESOS preparation should connect energy information with financial decisions.

An energy-saving recommendation becomes more useful when management can assess its implementation cost, expected return and operational impact. Finance needs enough evidence to compare it with other demands on capital.

For each opportunity, ask:

• What will implementation cost, including installation and disruption?
• What annual energy savings are expected?
• How sensitive is the financial return to energy prices and operating hours?
• Who owns delivery?
• How will the business measure the results?

These questions provide a practical basis for deciding which projects deserve funding and when they should proceed.

Track energy efficiency and purchasing savings separately

Energy expenditure depends on both consumption and price.

A lower bill could reflect reduced energy use, a better supply contract, lower market prices or changes in business activity. Tracking these drivers separately gives directors a clearer understanding of performance.

For example, negotiating a lower electricity rate can reduce expenditure without reducing consumption. More efficient equipment may reduce consumption even when rising prices obscure the benefit on the bill.

A useful management report should therefore show consumption, purchasing costs and the assumptions used to calculate savings. This also helps avoid counting the same financial benefit twice.

Key ESOS dates for your business calendar

The Phase 4 timetable is set out in the detailed Environment Agency guidance. Existing Phase 3 participants should also complete their remaining reporting obligation. [3][4]

Action plans and progress updates are published. ISO 50001 certification does not remove these obligations; participants reporting zero total energy consumption are exempt from the action plan requirement.

The reporting requirements do not mean every audit recommendation must be implemented. The guidance permits an action plan stating that no measures are proposed. [3]

Three practical steps to take now

Bring your energy information together

Collect bills, consumption records, supply contracts and site information. Identify gaps and assign responsibility for resolving them.

Review previous commitments

Record which projects were completed, delayed or abandoned. Gather evidence of savings and document the reasons for changes while the relevant information is readily available.

Connect finance, procurement and operations

Review supply arrangements alongside opportunities to reduce consumption. Give approved projects an owner, budget and review date so progress can be assessed consistently.

Gain greater control of your energy overheads

At The Procurement Group, we help businesses understand overhead spending, benchmark supplier arrangements and implement agreed changes. Electricity and gas form part of our wider procurement and cost management services. [5]

If ESOS preparation has raised questions about your energy costs, contracts or supplier management, book a 17-minute overheads review to discuss where a closer commercial review could help.

1. Environment Agency (2026). Comply with the Energy Savings Opportunity Scheme (ESOS) phase 4. Published 30 July 2026. Read the guidance summary.
2. GOV.UK (2026). Energy savings opportunity scheme (ESOS): find out if you qualify and how to comply. Updated 2 September 2026. Read the qualification and compliance overview.
3. Environment Agency (2026). How to comply with the Energy Savings Opportunity Scheme (ESOS) phase 4. Published 30 July 2026. See particularly sections 13–14 for action plans and progress updates. Read the detailed guidance.
4. Environment Agency. Comply with the Energy Savings Opportunity Scheme (ESOS): phase 3. Read the Phase 3 guidance.
5. The Procurement Group. Business cost reduction and procurement services. Visit The Procurement Group.

Sources accessed: 16 October 2026.