ESOS Phase 3 in review: Practical lessons for a smoother Phase 4
Key impacts included a reduced de minimis threshold, the introduction of energy intensity matrices, mandatory Action Plans and annual progress reporting. These changes were compounded by late-evolving guidance and stretched internal and external resources, resulting in duplication of effort and increased delivery risk.
New to ESOS? Here’s a brief overview
ESOS applies to UK organisations where at least one UK legal entity meets the qualification criteria on the qualification date. An organisation must comply if it employs 250 or more people, or if it has an annual turnover in excess of £44 million and an annual balance sheet total exceeding £38 million. ESOS applies at legal entity and group structure level, making early confirmation of organisational boundaries essential.
Key ESOS Phase 3 and Phase 4 dates to be aware of are:
- Phase 4 commences: 6 December 2023 (audits can now be undertaken that qualify for Phase 4)
- Phase 3 second Action Plan update due: 5 December 2026
- Phase 4 qualification date: 31 December 2026
- Updated ESOS guidance expected: beginning of 2027
- Phase 4 compliance deadline: 5 December 2027
- Phase 4 Action Plan submission: 5 December 2028
- Phase 4 Action Plan first update: 5 December 2029
- Phase 4 Action Plan second update: 5 December 2030
What are the changes from Phase 3 to Phase 4?
For Phase 4, the current position is that only minor changes have been announced to date. No major structural changes to the ESOS framework have been confirmed, providing continuity and an opportunity for organisations to apply Phase 3 lessons rather than adapt to a fundamentally new scheme.
Lessons learnt from Phase 3
ESOS Phase 3 highlighted that when the scheme feels challenging, it is rarely because of the technical requirements themselves. More often, difficulties arise from timing, data quality and a lack of clear ownership.
As organisations move into Phase 4, the lessons from Phase 3 provide a clear opportunity to reduce risk and gain more value from the process.
Late engagement and compressed timescales
A key challenge in Phase 3 was late engagement, with many organisations waiting until the compliance year to begin audits, data collection and approvals. ESOS audits can be carried out at any point during the four-year cycle, and those that started earlier benefited from better-quality audits, more time to resolve data gaps and greater opportunity to implement savings ahead of the deadline.
Poor data quality and unclear ownership
Poor or unverifiable data was a key cause of delay during Phase 3. Issues around organisational boundaries, missing energy data or unclear ownership often resulted in rework and reduced confidence in recommendations. Organisations that performed best invested time early in defining boundaries, validating data and assigning clear responsibility for data collation and sign-off.
Action Plans treated as a compliance exercise
The introduction of Action Plans was a positive development, but Phase 3 showed that plans created purely for compliance often struggled to gain traction. Where audits were completed early and aligned with wider business priorities, Action Plans became practical delivery tools — supporting capital planning, net zero strategies and operational decision-making.
Weak governance and lack of accountability
Strong governance consistently led to smoother outcomes. Early director engagement, clear accountability and structured progress tracking reduced compliance risk and improved internal confidence.
JRP’s ESOS Phase 3 Assessment identified 1,055 energy efficiency opportunities, equating to approximately £29.56 million in potential savings, highlighting the scale of value available where governance supports delivery.
Phase 3: What it cost when things went wrong
Phase 3 demonstrated increased enforcement activity from the Environment Agency. Late submissions increased risk, errors required resubmission and enforcement action increased, with 36 financial penalties issued at the time of reporting.
Indicative penalties included:
- Up to £5,000 for record-keeping or notification breaches
- Up to £50,000 plus £500 per day (capped at £40,000) for failure to complete audits
- Total potential exposure of up to ~£90,000, excluding publication and enforcement costs
This reflects greater scrutiny, less tolerance for delays and clearer expectations going into Phase 4.
How 2 organisations made ESOS Phase 3 work for them
Greencore (Food & Drink Manufacturing)
A large multi-site food manufacturer audited 15 sites under ESOS Phase 3, identifying 100 opportunities, with 70 implemented. Behaviour change was identified as a significant opportunity alongside technical measures. Despite challenges around data quality, increased production and competing priorities, the programme delivered identified savings of £6.3m per year, an 18% potential energy reduction, and over 15,000 tCO₂e in emissions reductions. For Phase 4, the focus is on earlier engagement, improved data quality and dedicated ownership for implementation.
Circle Health Group (Healthcare)
A large private healthcare provider with approximately 50 UK sites audited 9 representative sites under Phase 3. Implemented measures have already delivered over £600k per annum in savings and reduced emissions by 488 tCO₂e, with further opportunities identified totalling £2.2m in annual savings. Key challenges included business growth and organisational change. Phase 4 priorities include early engagement, regular progress reviews and earlier implementation of opportunities.
How to prepare and get the most out of ESOS Phase 4
Get your house in order
Engage an experienced ESOS Lead Assessor early, ensure auditors understand your sector, and confirm organisational structure and site portfolios at the outset. Early director engagement helps avoid delays at sign-off stage.
Data: your most valuable asset
Good quality, verifiable data is critical. SECR and GHG reporting can provide a strong starting point, but organisational boundaries, metrics and asset data must be clearly defined. Poor data significantly increases risk, delays and rework.
Maximise ESOS as an opportunity
Complete audits early to enable implementation and savings. Align ESOS with Net Zero and wider business objectives, review opportunities from previous ESOS phases, and focus on both behavioural and technological measures. Consider alternative financial mechanisms where capital is constrained, and ensure Action Plans are realistic and delivery-focused.
How JRP supports a smoother Phase 4
JRP delivers ESOS Phase 4 as a structured, proportionate programme that adds value beyond compliance. With experience across all ESOS phases, we focus on early readiness, robust data and delivery-focused Action Plans.
Our approach includes:
- Early qualification and scope confirmation
- Experienced ESOS Lead Assessors and sector-aware audit teams
- Data-led, risk-based audit strategies
- Guaranteed ESOS compliance in line with Environment Agency requirements (subject to timely provision of information and client approvals)
- Action Plans designed to be implemented
- Clear governance, evidence control and board-ready reporting
- Support with implementing identified opportunities
Practical tools to help you get the most from ESOS Phase 4
Managing and reporting progress tools
Effective delivery of ESOS Action Plans requires clear tracking and reporting. Using appropriate project tracking and reporting tools (such as JRP’s Project Activator) helps organisations monitor progress, maintain momentum, provide visibility to stakeholders and ensure evidence is available for compliance, governance and future reporting requirements.
Haven’t got the time or people to implement anything?
Many organisations lack the internal capacity or specialist expertise to implement energy efficiency projects. Flexible on-site energy management support can provide practical delivery capability without the need for a full-time in-house resource, helping to turn ESOS recommendations into measurable savings.
Alternative financial mechanisms
Capital constraints do not need to be a barrier to implementation. Alternative delivery and funding mechanisms — such as asset finance, power purchase agreements and energy-as-a-service models — can enable projects to proceed while managing risk and cash flow.
How to inspire and empower people to change
Behaviour change plays a critical role in reducing energy consumption. Targeted awareness training and structured engagement programmes help organisations embed energy-conscious behaviours, support cultural change and maximise the long-term impact of technical measures. JRP have training programmes available such as BeEnergy – energy awareness elearning, and the EnCO programme. Both are well recognised for measurably reducing energy consumption by applying behaviour change techniques.
Get a tailored ESOS Phase 4 Readiness Checklist
Send an email to info@jrpsolutions.com, subject line ESOS Readiness Checklist, only containing your company name in the body of the email to receive a tailored Phase 4 Readiness Checklist.
Or book a call with one of our specialists to get free support and advice.