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Mandatory ESOS Net Zero Requirements Delayed to Phase 5: What This Means for Businesses

The Labour government has announced a significant change to the Energy Savings Opportunity Scheme (ESOS), postponing the mandatory inclusion of Net Zero considerations until Phase 5 (2027-2031). 

This decision follows delays in finalising Phase 3 legislation and aims to provide businesses with additional time to prepare for the substantial changes that Net Zero reporting will entail. 

Key Updates and What They Mean for Businesses 

Net Zero Requirements Postponed Until Phase 5 

Following a past consultation under the previous government, ESOS Phase 4 (2023-2027) was to include mandatory Net Zero reporting (the scheme currently focuses on energy consumption, and not carbon emissions). However, with recent changes in leadership and legislative delays, these requirements will now come into force in Phase 5. This delay allows the Department for Energy Security and Net Zero (DESNZ) to better understand the impacts of Phase 3 updates to the regulations before implementing further changes. 

Qualification Thresholds to Remain Unchanged for Phase 4 

Another important update is that the proposed alignment of ESOS qualification thresholds with the Streamlined Energy and Carbon Reporting (SECR) framework will not be introduced in Phase 4. Instead, any adjustments to the thresholds will be considered as part of a wider review of business energy and emissions reporting. As a result, the qualification criteria for Phase 4 remain unchanged, with the qualification date set at 31st December 2026. 

Smaller Phase 4 Changes Still Going Ahead 

Despite the postponement of Net Zero requirements, several smaller updates to ESOS Phase 4 are still expected to proceed, subject to parliamentary approval: 

  • Removal of Display Energy Certificates (DECs) and Green Deal Assessments (GDAs) as ESOS compliance routes.
  • Progress tracking on action plan commitments to be included in ESOS assessments.
  • Mandatory explanations for unmet action plan commitments.  

Further details on these changes will be provided by DESNZ in due course. The required legislative updates and corresponding guidance are expected to be in place by early 2027, ahead of the Phase 4 compliance deadline on 5 December 2027. 

Voluntary Net Zero Reporting Option in Phase 4 

Recognising that many businesses are already working towards Net Zero, DESNZ is offering a voluntary option for Net Zero reporting in Phase 4. This initiative aligns with newly developed PAS standard, to be published on 7th February 2025: 

  • PAS 51215-1:2025 – A standard outlining the process for conducting combined energy and decarbonisation assessments, resulting in an implementation plan for achieving Net Zero. 

Organisations choosing to voluntarily adopt PAS 51215-1:2025 can: 

  • Include GHG emissions related to the energy covered by ESOS. 

  • Assess governance structures and risks related to achieving Net Zero. 

  • Develop an implementation plan to reach Net Zero by 2050. 

DESNZ will provide accompanying guidance to help ensure compliance with ESOS audit requirements. The MESOS digital system will also be updated to allow organisations to disclose voluntary adherence to PAS 51215-1:2025 as part of their Net Zero commitments. 

Next Steps for Businesses 

While the mandatory Net Zero requirements have been delayed, businesses should consider adopting the Net Zero standard voluntarily. Organisations committed to net zero can use PAS 51215-1:2025 to familiarise themselves with the future requirements and prepare in advance. Although Net Zero requirements are postponed from an ESOS regulatory perspective, other supply chain pressures exist, developing a long-term decarbonisation strategy to help businesses stay ahead of regulatory changes. 

Businesses should also ensure compliance with the smaller Phase 4 updates, particularly around action plan reporting.