Environment Agency
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
Aboutthe Energy Savings Opportunity Scheme (ESOS)
ESOSis 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 forESOSmust carry outESOSassessments 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 forESOSphase 3
ESOSapplies 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 theESOSdefinition of a large undertaking.
Corporate groups qualify if at least one UK group member meets theESOSdefinition of a large undertaking.
If youre very close to the qualification threshold or have substantially increased or decreased in size in recent years, read thefull guidance on complying withESOS. This includes additional information on how to assess if you qualify.
Public sector organisations do not usually need to comply withESOS. For more information on organisations that do not need to comply, see section 1.2 of thefull guidance on complying withESOS.
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 inESOSif 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 inESOS, 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 inESOS(regardless of their size) if any other part of their global corporate group activities in the UK meet theESOSqualifying 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:
- 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).
- Add together the monthly totals.
- Divide the total by the number of months in the financial year.
Deadlines forESOScompliance
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 theirESOSobligations.
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.
ESOSregulation and penalties
Yourenvironmental regulator is responsible for compliance and enforcement activities. It may issue civil sanctions including financial penalties if an organisation does not meet the schemes obligations.
Read the Environment Agencys approach toESOSregulation and penalties in theirenforcement and sanctions policy (annex 2, section D). Other scheme regulators will apply a similar approach. This approach is also summarised in section 9 of thefull guidance on complying withESOS.
A