ESOS Phase 3 compliance to reduce energy costs and emissions


ESOS, the UK’s mandatory Energy Savings Opportunity Scheme is now in its third phase and reporting is due in 2023.

ESOS is the Government’s mandatory energy assessment and savings scheme for organisations in the UK. Its aim is to help businesses identify and implement cost effective energy efficiency measures around Scope 1 and 2 and supply chain reporting.

Participants in the scheme need to set a target or action plan following the Phase 3 compliance deadline. In the 12 months following the deadline, businesses are required to set a target/action plan and report annually on their progress on a comply-or-explain basis through SECR or a specialised format if not captured by SECR. For many, this will provide additional focus to their Scope 1 and 2 science-based targets, for others it will require them to think about targets for the first time.

While ESOS is mandatory for certain organisations in the UK, complying with the scheme has broader benefits to businesses including reducing exposure to volatile energy prices and reducing emissions.

ESOS runs in a four year cycle and is currently in Phase 3. Organisations now understand the data requirements for ESOS. Data collection is easier for most businesses in the third phase compared to earlier phases of the scheme; however it can still be a lengthy process. Organisations are encouraged to start compliance process now.

The date for qualification for ESOS Phase 3 is 31st December 2022. Qualification criteria for ESOS Phase 3 has changed since Phase 2 and businesses who meet one or both of the following criteria by the qualification deadline will need to comply with the scheme:

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. Those part of a corporate group which includes a UK undertaking that meets either of the above need to comply.

ESOS Phase 3 will have a standard template for including compliance information in the ESOS report. This has been introduced with the aim of improving the quality of the audit.

Exceptions have been reduced from 10 per cent to five per cent and this change should uncover new opportunities to make energy savings and tackle Scope 3 emissions (e.g. fleet audits that previously fell into the de minimis for many).

ESOS reports need to include energy intensity metrics in line with SECR.

There is now a requirement to share ESOS reports with subsidiaries, this is particularly important for businesses with complex supply chain or organisational structures.

There is a requirement for ESOS reports to provide more information on next steps for implementing recommendations which aims to enable companies to make it easier to realise the benefits from the recommendations.

Collection of additional data for compliance monitoring and enforcement is also required. This additional data includes data on corporate structure, details of energy consumption and emissions, and energy intensity metrics.

ESOS Phase 3 compliance deadline is December 2023.

This ESOS Energy Management Factsheet includes: An energy management checklist;  A six-step guide to improving your energy management programme; How Harvey Nichols saved energy and costs through energy management.

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