ESOS Phase 4 Clinics: What Occupiers Need to Know

Joe Warren, Partner, Energy, Sustainability and Natural Resources at Knight Frank, explains more about the upcoming requirements, the most common challenges occupiers face and why businesses should start preparing now.

In simple terms, what is ESOS?

ESOS stands for the Energy Savings Opportunity Scheme. Introduced by the government in 2015, it’s designed to encourage large organisations to review how they use energy and identify opportunities to reduce consumption and improve efficiency.

Why should organisations be paying attention now?

ESOS operates on a four-year cycle, with most activity taking place during the final year, but recent changes have introduced more regular reporting requirements. Organisations are now required to provide annual updates against their action plans, demonstrating the progress they are making against the energy-saving measures they have identified.

Any work carried out ahead of the submission deadline can count towards compliance, but identifying energy-saving opportunities sooner also allows organisations to benefit from reduced consumption and lower energy costs much earlier.

The Phase 4 deadline might seem a way off. Why is it important for businesses to start preparing well before December 2027?

The earlier organisations begin, the more value there is to gain from the process. Energy audits can identify practical opportunities for savings, and the sooner these measures are implemented, the sooner businesses can start seeing the benefits.

Early preparation also aligns well with budgeting cycles. If audits identify projects that require investment, it gives time to build these costs into future budgets and secure internal approval. Leaving everything until the last minute can make planning, approval and implementation much more difficult.

Which organisations need to comply with ESOS, and are there any common misconceptions about who falls within scope?

The criteria for an organisation to qualify is:

• 250 or more employees – organisations of this size will generally qualify automatically, regardless of turnover.
• A turnover exceeding ~£44 million and an annual balance sheet total above ~£38 million - even if they employ fewer than 250 people.

One common misconception is that only organisations with large workforces are affected. In reality, many smaller headcount businesses can still fall within scope because of their financial performance.

When you're speaking to occupier clients, what are their biggest concerns or challenges around ESOS Phase 4?

For many clients, the biggest challenge is understanding the scheme and what is required; ESOS can be complex, especially given the changes introduced in recent years.

For occupiers, another common challenge is access to energy data. In multi-let buildings, energy costs may be recovered through service charges, making it difficult to obtain accurate consumption data. This can complicate both reporting and the identification of improvement opportunities.

There can also be limitations on what occupiers can directly control. While tenants may be able to upgrade lighting or influence operational practices, they typically cannot make changes to landlord-owned systems such as boilers or major plant equipment.

What's the most common mistake organisations make when preparing for ESOS compliance?

One mistake would be leaving compliance until the last minute, or not realising the organisation qualifies at all.

Another issue is misunderstanding corporate reporting structures. ESOS requires organisations to identify and account for all relevant entities within a reporting group and ensure that energy consumption across the entire group is captured correctly.

If parts of the corporate structure are overlooked, organisations risk submitting incomplete information and creating compliance issues further down the line.

Are there any aspects of the new Phase 4 requirements that businesses are finding particularly difficult to navigate?

The most significant change is around action plan reporting. Under previous phases, organisations could identify recommendations without necessarily having to demonstrate ongoing progress. Phase 4 places greater emphasis on accountability, and businesses will need to report annually on the progress made against proposed actions, explaining where projects have been delayed, changed or abandoned.

There is also an element of public transparency attached to this reporting, which increases scrutiny and encourages organisations to follow through on their commitments.

What risks are created from leaving ESOS until the last minute?

The most obvious risk is financial penalties for failing to comply. The Environment Agency, which administers the scheme, can impose significant fines, with additional daily penalties in some circumstances.

There is also a practical risk. As deadlines approach, demand for qualified ESOS assessors increases significantly. Organisations that wait too long may find it more difficult to secure expert support, and costs are likely to rise as capacity becomes constrained.

Starting early generally provides access to better availability, more competitive pricing and a less stressful compliance process.

Beyond avoiding penalties, what are the wider business benefits of getting ESOS right?

The biggest benefit is identifying opportunities to reduce energy consumption and operating costs.

At a time when energy markets remain volatile, reducing consumption can provide a degree of protection against rising prices. If an organisation can cut its energy use by 10%, it is automatically less exposed to future cost increases.

ESOS can also help businesses build a stronger understanding of their energy performance, support wider sustainability objectives and identify investment opportunities that deliver long-term savings.

What prompted the team to offer free ESOS clinics?

There is still some confusion in the market about ESOS and the changes that have been introduced over the years. Many organisations are aware that the scheme exists and know that the requirements have evolved but are often unclear on exactly what has changed and what they need to do.

The clinics were created to help organisations understand their obligations, separate fact from speculation, and give businesses confidence that they are taking the right approach.

What can someone expect from a 20-minute clinic appointment?

The clinics are designed as informal, practical conversations for organisations at any stage of the process.

The first step is understanding the organisation itself and determining whether it qualifies under the employee or financial thresholds. From there, the discussion focuses on the likely compliance pathway, including the number of sites involved, energy data requirements, transport considerations and any energy audits that may be required.

For organisations already planning for Phase 4, the sessions offer an opportunity to sense-check their approach, understand any new requirements and ensure they remain on track.

The aim is to provide clarity on next steps, likely timescales and the overall route to compliance.

If you could give organisations one piece of advice today to help them prepare for Phase 4, what would it be?

Start the conversation now.

Even if an organisation discovers it doesn’t qualify, the reassurance is valuable. For those that do fall within scope, early engagement provides clarity, removes uncertainty and allows sufficient time to plan effectively.

Rather than letting ESOS become something that sits on a future to-do list, acting now can provide confidence, reduce risk and create opportunities to identify meaningful energy savings well ahead of the compliance deadline.

Interested in finding out whether ESOS Phase 4 applies to your organisation?

Book a free 20-minute ESOS Clinic with Knight Frank's Energy team to discuss your requirements, understand your compliance obligations and start planning your route to Phase 4 compliance.