ESOS vs SECR: What's the Difference?

Two distinct regulatory frameworks

ESOS and SECR address different aspects of UK organisational sustainability.

ESOS requires 4-yearly energy audits to identify cost-effective efficiency opportunities.

SECR mandates annual energy and carbon disclosure within company accounts.

Neither regime replaces the other.

Large organisations typically face obligations under both frameworks, with overlapping but distinct compliance requirements.

Side-by-side comparison

Qualification differences

ESOS qualification

ESOS applies to "large undertakings" meeting specific size criteria on 31 December 2026:

• Employee test: 250 or more employees in UK group, OR
• Financial test: Annual turnover exceeding £44 million AND balance sheet total exceeding £38 million (both required)

Group aggregation rules mean a single qualifying entity brings the entire UK group into scope.

SECR qualification

SECR applies to different entity types with distinct thresholds:

• Quoted companies: All UK-listed companies regardless of size
• Large unquoted companies: Meeting 2-of-3 tests — £36m+ turnover, £18m+ balance sheet, 250+ employees
• Large LLPs: Same 2-of-3 tests as unquoted companies

The lower SECR thresholds capture a broader population than ESOS, including many medium-sized entities.

Compliance interaction

ESOS audit feeds SECR narratives

SECR energy efficiency action narratives provide the recognised vehicle for ESOS participants to report annual progress against their action plans.

Mandatory action plans and progress updates came in at Phase 3.

The Environment Agency's Phase 4 guidance, published 30 July 2026, sets the Phase 4 dates: notification 5 December 2027, action plan 5 December 2028 covering 6 December 2027 to 5 December 2031, and progress updates on 5 December 2029, 5 December 2030 and 5 December 2031.

The third progress update is new in Phase 4, added by SI 2026/701 regulation 28.

Phase 4 also requires participants to report the savings actually achieved — measures implemented, kWh saved per measure and each measure's saving category, of which only the combined figure is published — and to review the previous action plan, identifying proposed measures not implemented and why.

The full route is set out in the ESOS Phase 4 compliance guide, and specialist ESOS consultants can run the audits end to end.

Organisations subject to both regimes can satisfy this requirement through their SECR disclosure.

Data reuse opportunities

Both frameworks require energy consumption data, creating efficiency opportunities:

• Buildings energy use: ESOS audit scope overlaps with SECR disclosure requirements
• Emissions factors: ESOS intensity ratios can inform SECR GHG calculations
• Efficiency actions: ESOS opportunities directly support SECR action narratives

Do you need both?

Likely subject to both regimes

Large UK organisations typically fall under both frameworks:

• FTSE 350 companies: Quoted status triggers SECR; size likely triggers ESOS
• Large private companies: Often exceed both ESOS and SECR size thresholds
• UK subsidiaries of overseas groups: Group aggregation may bring both into scope

ESOS only

Organisations meeting ESOS thresholds but not SECR qualification:

• Private companies with 250+ employees but under SECR financial thresholds
• Groups with high turnover and balance sheet but under 250 employees (failing SECR's 2-of-3 test)

SECR only

Organisations subject to SECR but not ESOS:

• Quoted companies below ESOS size thresholds
• Medium-sized companies meeting SECR's 2-of-3 test but not ESOS thresholds

Timeline coordination

ESOS 4-yearly cycle

• Qualification assessment: 31 December 2026
• Audit period: 12 months within 24 months ending 5 December 2027
• Compliance deadline: 5 December 2027

SECR annual cycle

• Reporting period: Financial year (typically 12 months)
• Filing deadline: 6 months (PLCs) or 9 months (private companies) after year-end
• Disclosure location: Directors' report within annual accounts

Organisations can time ESOS audits to align with SECR reporting periods, maximising data reuse and narrative coordination.

Penalty frameworks

ESOS enforcement

ESOS penalties are civil sanctions under the Regulatory Enforcement and Sanctions Act 2008:

• Audit failure: Up to £50,000, plus £500 for each working day after service of the compliance notice until it is remedied, capped at 80 working days
• Notification failure: Up to £5,000, plus £500 per working day on the same 80-day cap
• Missed action plan or progress update: No penalty — the Scheme Administrator publishes the failure instead
• Public register: Non-compliance details published

The Phase 4 guidance states that regulators will not take enforcement action or issue a penalty relating to the non-submission of an action plan or progress update.

SECR enforcement

SECR operates through Companies Act 2006 filing requirements:

• Late filing penalties: £150-£7,500 depending on delay and company size
• Directors' liability: Section 418 creates potential criminal liability for knowing non-compliance
• FRC oversight: Disclosure quality monitoring without direct penalties

Looking ahead: Phase 5 alignment

ESOS Phase 5 planning includes threshold alignment with SECR to reduce regulatory fragmentation.

This change, originally planned for Phase 4, was deferred — SI 2026/701 left the thresholds untouched.

Future alignment may create a more coherent regulatory landscape while maintaining distinct ESOS audit and SECR disclosure functions.