How to Prepare for ESOS Phase 4 Before the Qualification Date

1. Check whether your business is likely to qualify

The first step is straightforward: establish whether ESOS Phase 4 is likely to apply to your organisation. 

A UK undertaking is considered a large undertaking for ESOS if it meets either of these conditions: 

• it employs 250 or more people 

• it has an annual turnover above £44 million and an annual balance sheet total above £38 million 

The qualification assessment uses the relevant accounting period ending on 31st December 2026, or the accounting period ending in the 12 months immediately before that date. 

Businesses close to the thresholds need to look beyond a single year. Under the ESOS rules, an organisation generally retains its previous size status until it has been above or below the relevant threshold for two consecutive accounting periods. Businesses that have recently grown, downsized, or moved around the thresholds should therefore review their recent accounting history carefully. 

If your business is approaching the thresholds, reviewing its recent accounts and employee numbers now can help avoid uncertainty later. 

2. Review your corporate group structure

ESOS qualification is not always determined by looking at one company in isolation. 

If a corporate group contains at least one UK undertaking that meets the ESOS qualification conditions, the entire UK operation of that corporate group must take part in ESOS. 

That can bring subsidiaries into scope even when they would not meet the qualification thresholds individually. 

Before the qualification date, businesses with more complex ownership structures should therefore establish: 

• which UK companies sit within the group 

• which entity is the highest UK parent 

• whether any company within the group meets the ESOS qualification criteria 

• which organisation is expected to take responsibility for ESOS compliance. 

This is especially important where businesses have acquired or sold companies since the previous ESOS phase. 

Establishing the group structure early makes the rest of the assessment significantly easier. 

3. Start organising your energy data 

For many businesses, the biggest ESOS challenge is not the energy audit itself. It is finding and organising the information needed to complete it. 

ESOS assessments can consider energy used across buildings, industrial processes, and transport. 

Useful information can include: 

• electricity and gas consumption 

• meter readings 

• energy invoices 

• fuel records 

• transport and mileage information 

• records of energy generated and consumed on site, where relevant 

• details of individual sites and major energy-consuming equipment. 

The Environment Agency recommends having systems in place to collect, bring together and analyse energy data, as well as checking the accuracy of the information used. 

Businesses with several sites, meters, or supplier accounts are likely to benefit most from starting this work early. 

It is also worth identifying gaps now. Missing invoices, unclear meter information, or incomplete transport records are much easier to resolve when there is no immediate reporting deadline. 

4. Decide who will coordinate ESOS Phase 4 internally

ESOS may sit under sustainability or energy management, but completing the assessment often requires input from several parts of the business. 

Finance may hold energy invoices and financial data. Procurement may manage supplier contracts. Operations teams may understand how individual sites and equipment use energy. HR may be needed to confirm employee numbers. 

Giving one person or team responsibility for coordinating ESOS Phase 4 can make it easier to gather information, manage external support and keep preparation on track. 

It also reduces the risk of ESOS becoming a last-minute exercise as the compliance deadline approaches. 

5. Understand your ESOS Phase 4 compliance route

Businesses should also start considering how they intend to meet their ESOS obligations. 

For Phase 4, the main options are: 

ESOS energy audits 

An ESOS energy audit reviews energy consumption across the relevant parts of the organisation and identifies opportunities to improve energy efficiency. 

For businesses using the audit route, the assessment should do more than confirm energy usage. It should help identify practical opportunities, including potential costs, benefits, and payback periods where reasonably practicable. 

ISO 50001 

Businesses with a certified ISO 50001 energy management system can use it as an ESOS compliance route where the certification covers either their total energy consumption or their identified significant energy consumption. 

For Phase 4, the ISO 50001 certificate must have been issued on or after 6th December 2023 and must remain valid on 5th December 2027. 

Where ISO 50001 does not provide sufficient coverage on its own, it can be combined with ESOS energy audits to cover the remaining energy consumption. 

Phase 4 has also reduced some requirements for businesses complying entirely through the qualifying ISO 50001 route. 

One important Phase 4 change is that Display Energy Certificates and Green Deal Assessments are no longer recognised as standalone ESOS compliance routes. 

Understanding the most appropriate route early gives businesses more time to plan the work involved. 

6. Look beyond the compliance deadline

ESOS is designed to identify opportunities to reduce energy consumption, rather than to produce another report. 

Phase 4 also places greater emphasis on what businesses have actually done to reduce energy use. 

Participants will need to report relevant energy savings achieved during the Phase 4 compliance period and identify the measures responsible for those savings. 

Businesses that were required to submit a Phase 3 action plan will also need to review that plan as part of Phase 4 compliance. Measures proposed in the action plan that were not implemented during the compliance period must be identified, with an explanation of why they were not taken forward. 

That makes it increasingly useful to connect ESOS with wider energy management. 

For example, recommendations identified through an assessment could influence: 

• future energy budgets 

• equipment replacement 

• building improvements 

• operational changes 

• energy reduction projects 

• longer-term sustainability plans. 

The businesses that get the most value from ESOS will be those that treat the assessment as a source of commercial information, rather than something to complete and file away.