Guidance

Energy Savings Opportunity Scheme (ESOS)

Find out if you qualify for ESOS and how to comply.

September 2023: Summary of changes for Phase 3

  • ESOS participants do not need to submit their notification of compliance until 5 June 2024 (previously the date was 5 December 2023)
  • the qualification thresholds and date have not changed; ESOS still applies to all organisations (and their corporate groups) that were classed as large undertakings on 31 December 2022

About the Energy Savings Opportunity Scheme (ESOS)

ESOS is a mandatory energy assessment scheme for organisations in the UK that meet the qualification criteria. The Environment Agency is the UK scheme administrator.

Organisations that qualify for ESOS must carry out ESOS assessments every 4 years. These assessments are audits of the energy used by their buildings, industrial processes and transport.

The ESOS audit is designed to identify tailored and cost-effective measures to allow participating businesses to save energy and achieve carbon and cost savings. The audit costs are estimated to be significantly outweighed by the savings from implementing the recommendations.

Find out if you qualify for ESOS phase 3

ESOS applies to large UK undertakings and their corporate groups. It mainly affects businesses but can also apply to not-for-profit bodies and any other non-public sector undertakings that are large enough to meet the qualification criteria.

Your organisation qualifies for the third compliance period (ESOS phase 3) if, on 31 December 2022, it met the ESOS definition of a large undertaking.

Corporate groups qualify if at least one UK group member meets the ESOS definition of a large undertaking.

If you’re very close to the qualification threshold or have substantially increased or decreased in size in recent years, read the full guidance on complying with ESOS. This includes additional information on how to assess if you qualify.

Public sector organisations do not usually need to comply with ESOS. For more information on organisations that do not need to comply, see section 1.2 of the full guidance on complying with ESOS.

Please note that these pages do not include all aspects of complying with phase 3 of ESOS. We will update both guidance pages once the phase 3 requirements have been finalised in legislation.

Large undertakings

For the qualification date for the third compliance period of ESOS (31 December 2022) a large undertaking is any UK company that either:

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

You must take part in ESOS if your undertaking is part of a corporate group which includes another UK undertaking or UK establishment which meets these criteria.

Where a corporate group participates in ESOS, unless otherwise agreed, the highest UK parent will act as a ‘responsible undertaking’ and be responsible for ensuring the group as a whole complies.

UK registered establishments of an overseas company will also need to take part in ESOS (regardless of their size) if any other part of their global corporate group activities in the UK meet the ESOS qualifying criteria.

An ‘establishment’ is a branch within the meaning of the Eleventh Company Law Directive (89/666/EEC), or a place of business that is not such a branch but where there is some degree of physical presence in the UK.

A person is employed by an undertaking if they are:

  • an employee
  • an owner or manager
  • a partner

An ‘employee’ is a person employed under contracts of service. Their contracted hours and status (full time or part time) are irrelevant to their classification as an employee.

The number of employees means the average number of people employed by the undertaking in the year.

To work out your average number of employees, you need to:

  1. Find the number of people employed by the company for each month of the financial year (whether for the whole month or part of it).
  2. Add together the monthly totals.
  3. Divide the total by the number of months in the financial year.

Deadlines for ESOS compliance

September 2023: Summary of changes for Phase 3

  • ESOS participants do not need to submit their notification of compliance until 5 June 2024 (previously the date was 5 December 2023)
  • the qualification thresholds and date have not changed; ESOS still applies to all organisations (and their corporate groups) that were classed as large undertakings on 31 December 2022

These deadlines were circulated in the Environment Agency June 2023 newsletter.

Organisations that qualify for ESOS must notify the Environment Agency by a set deadline that they have complied with their ESOS obligations.

Organisations that qualify for ESOS in phase 3 will be required to comply with the new legislation when it comes into force. You can find details of the changes announced in the government response to the ESOS consultation.

To ensure there is reasonable time for participants to meet the new requirements and for assessors to carry out assessments, participants in phase 3 will be allowed until 5 June 2024 to provide a notification of compliance (previously 5 December 2023). This is in line with requests from stakeholders.

The qualification thresholds and the qualification deadline have not changed. ESOS still applies to all organisations and their corporate groups that were classed as large undertakings on 31 December 2022.

You must submit your notification of compliance via an online system, which is currently being updated. The amended legislation will be in force before 5 December 2023, subject to parliamentary procedures, and the updated online system is likely to be in place by the end of 2023. We will update this guidance once the system is available.

ESOS regulation and penalties

Your environmental regulator  is responsible for compliance and enforcement activities. It may issue civil sanctions including financial penalties if an organisation does not meet the scheme’s obligations.

Read the Environment Agency’s approach to ESOS regulation and penalties in their enforcement and sanctions policy (annex 2, section D). Other scheme regulators will apply a similar approach. This approach is also summarised in section 9 of the full guidance on complying with ESOS.

A summary of the penalties imposed is available on data.gov.uk.

If you do not qualify for ESOS phase 3

If you have been contacted by the Environment Agency in the past, or you qualified for phase 1 and/or phase 2 but not for phase 3, you need to tell the Environment Agency you do not qualify. You will be able to do this once the online system is available.

Complete an ESOS assessment

This is a summary of the current steps required to complete an ESOS assessment.

We will provide more detailed guidance on completing an ESOS assessment once the phase 3 requirements have been finalised in legislation.

For your assessment, you need to:

1. Calculate your total energy consumption

This is the energy used by assets held or activities carried out by your organisation or group. This includes the energy consumed by buildings, industrial processes and transport. To find out how to calculate your total energy consumption, read the full guidance on complying with ESOS.

This guidance does not include all aspects of complying with phase 3 of ESOS. We will update the guidance once the phase 3 requirements have been finalised in legislation.

2. Identify your areas of significant energy consumption

This is the energy used by assets held, or activities carried out, by your organisation that account for at least 95% of your total energy consumption. You need to:

1. Find out whether ISO 50001, DECs or GDAs cover any of your areas of significant energy consumption.

2. Identify whether ESOS compliant energy audits have been, or need to be, carried out for the areas of significant energy consumption not covered by ISO 50001, DECs or GDAs.

As long as 95% of your total energy consumption is covered, you can use a mix of approaches with some of your energy consumption covered by ISO 50001, some by DECs or GDAs, and some by ESOS energy audits.

Please note that significant energy consumption in phase 2 of ESOS was defined as at least 90% of total energy consumption, and the increase to 95% for phase 3 of ESOS is subject to parliamentary procedure.

3. Appoint a lead assessor

All participants need to have their ESOS assessment signed off by an ESOS lead assessor. It is your responsibility to select a lead assessor with the necessary skills and experience to help your business comply with ESOS. You need to appoint a lead assessor to carry out and oversee or review your energy audits and overall ESOS assessment.

Lead assessors can be employees or external contractors as long as they are members of an approved professional body register.

List of approved registers for ESOS lead assessors

If you want to become a lead assessor, you have to be (or become) a member of an approved professional body register. Individuals cannot apply directly to the Environment Agency to be approved. You can contact the approved organisations listed here for further information about the application processes or approved lead assessors on their registers.

4. Notify the Environment Agency

When you have undertaken an ESOS assessment and are compliant with your obligations, you must submit a notification of compliance using the online system, once it has been updated.

The notification includes details about your organisation and how it has complied, energy consumption information, and energy savings opportunities that have been identified. See this summary of information required for phase 3:

Once the online system has been updated and is available, you can start your notification. You can partially complete your notification and save it for submitting later.

5. Keep records

You need to keep records of how you have complied with ESOS in an evidence pack. There is no set format for this.

ESOS compliant energy audits

An ESOS compliant energy audit must meet these criteria:

1. It must be based on 12 months’ verifiable data

The data must:

  • be for a continuous period
  • begin no earlier than 6 December 2018 for the phase 3 compliance period
  • begin no more than 24 months before the start of the energy audit
  • not have been used as the basis for an energy audit in a previous compliance period

2. It must analyse the participant’s energy consumption and energy efficiency

This must be done where practical using energy consumption profiling. Energy consumption profiling involves breaking down the different ways in which energy is used by a participant’s activities and assets and analysing any variations in energy use to identify inefficiencies.

3. It must identify energy saving opportunities

Energy saving opportunities should be reasonably practicable and cost effective to implement. Recommendations should include the estimated costs and benefits of implementation.

You should assess cost effectiveness by comparing the reduction in units of energy or energy spend with the cost of implementing the measure.

Calculating the cost of implementing a measure should be based on an analysis of whether the investment will be economical over its entire life. This would include taking into account the cost of purchase, installation, maintenance and depreciation.

There is no regulatory requirement for participants to implement the energy saving opportunities identified. This is for each organisation to determine themselves.

Site visits during an audit

Organisations are expected to carry out site visits as part of their ESOS audits. It is not necessary to visit every site. Regardless of the number of site visits, organisations need to ensure they have collected and analysed data for all their areas of significant energy consumption.

Organisations with multiple sites or assets that are identical or very similar, can take a proportionate approach and apply the energy saving opportunities identified in their site visits to their wider portfolio. The lead assessor and participant organisation should determine a suitable site visit sampling approach to reflect the energy consumption patterns of their assets and activities. This is not prescribed in legislation or guidance – it is up to your organisation and lead assessor to agree this.

You need to explain in your evidence pack how the approach you took reflects the energy consumption patterns and saving opportunities for your portfolio of assets and activities. In a compliance audit the regulators will look for well reasoned and documented justifications for the approach you took.

ESOS: published data

The Environment Agency has published the following data in relation to ESOS:

Notification of compliance data

The Environment Agency publishes the data provided by organisations that submitted a notification of compliance in phases 1 and 2 of ESOS. This data is published to meet the Environment Agency’s statutory responsibility under the Energy Savings Opportunity Scheme Regulations 2014 and in alignment with government open data policies.

The published data:

  • shows the answers to the questions in Appendix B of the full guidance on complying with ESOS
  • does not include personal data – this is protected under the General Data Protection Regulation 2018
  • contains no amendments – unless requested or to remove personal data
  • has not been verified for compliance – it is a record of notifications

This guidance does not include all aspects of complying with phase 3 of ESOS. We will update the guidance once the phase 3 requirements have been finalised in legislation.

Some organisations within a group may be covered by a notification of a UK parent and may not be readily identifiable.

More information about ESOS

The introduction of ESOS in 2014 addressed a finding in the 2012 UK Energy Efficiency Strategy that lack of information was a key barrier to the uptake of energy efficiency measures by business.

Government established ESOS to implement Article 8 (4 to 6) of the EU Energy Efficiency Directive (2012/27/EU). The ESOS Regulations 2014 give effect to the scheme.

The current high cost of energy and the UK’s net zero legislation has made it more important to help businesses reduce their energy and emissions since leaving the EU. A Post Implementation Review of ESOS in 2020 found businesses were unlikely to carry out energy audits unless mandated to do so, which makes ESOS an important lever in encouraging energy efficiency in business.

UK regulators

The UK regulators are:

  • Environment Agency for organisations whose registered office is in England
  • Natural Resources Wales for organisations whose registered office is in Wales
  • Northern Ireland Environment Agency for organisations whose registered office is in Northern Ireland
  • Scottish Environment Protection Agency for organisations whose registered office is in Scotland
  • Secretary of State for Department for Energy Security and Net Zero for organisations whose activities consist wholly or mainly of offshore activities

We will provide more details on the ESOS scheme, your obligations and how to comply in the updated guidance, which we will publish once the phase 3 requirements have been finalised in legislation.

Contact details

For more information, email esos@environment-agency.gov.uk. The Environment Agency will respond within 10 working days. Send your queries well in advance of the compliance deadline to ensure you have enough time to fulfil your obligations before submitting your notification of compliance.

If you have queries relating to the changes to ESOS for phase 3, send them to businessenergyuse@energysecurity.gov.uk.

For offshore related queries, email OPRED@energysecurity.gov.uk.

Published 26 June 2014
Last updated 21 September 2023 + show all updates
  1. Guidance updated to reflect the changes for Phase 3.

  2. Removed 'ECMK Limited – ECMK ESOS lead assessor register' from the list of Approved registers of ESOS lead assessors as they are no longer taking part in the scheme.

  3. Added what a 'large undertaking' is defined as for the qualification date for the third ESOS compliance period, which will be 31 December 2022.

  4. Added information about ESOS phase 2.

  5. Added under section: ESOS regulation and penalties 'We publish a summary of the penalties imposed on data.gov.uk'.

  6. Updated link to The Institute of Environmental Management and Assessment to: https://www.iema.net/specialist-registers/join-esos/iema-esos-lead-assessor-register.

  7. Update to the ESOS compliance dataset. Removal of ‘intend to comply’ information as this is no longer relevant.

  8. This update is to reflect the latest position on ESOS notifications up to 31 January 2017.

  9. Section 'ESOS published data': data published on data.gov.uk provided by the organisations that submitted an intent to comply notification by 25 August 2016.

  10. Section 'ESOS published data': See the published data provided by the organisations that submitted a notification of compliance by 30 June 2016.

  11. New section 'ESOS published data'.

  12. If you qualify for ESOS you should have submitted your notification of compliance by 5 December 2015. Submit your notification as soon as possible if you haven’t done so already.

  13. You must inform the Environment Agency by 5 December 2015 if you cannot submit a notification of compliance, using the online form.

  14. Text updated to reflect the Environment Agency's amended Enforcement and Sanctions Guidance.

  15. ESOS workshop dates and venues announced for March 2015.

  16. Exchange rate figures added for pound sterling for the first compliance period based on the Bank of England daily spot exchange rate on 31 December 2014 (the qualification date).

  17. Updated list of approved registers. Text amended to reflect that the application process for registers is now closed.

  18. Page updated with: * the link to the online notification system * the list of approved lead assessors

  19. Update to the application process for registering qualified energy professionals to act as lead assessors for ESOS.

  20. First published.