Sustainable Trade 2.0: How businesses can keep up with CBAM Compliance?

In the ever-evolving landscape of global trade, sustainability has taken center stage, and the European Union's Carbon Border Adjustment Mechanism (CBAM) is leading the charge. As Chief Sustainability Officers, Chief Risk Officers, Chief Procurement Officers, and heads of sustainability, it's crucial to understand the implications of CBAM, its urgency, and how it reshapes the rules of international trade.

4 minutes read

Understanding the Carbon Border Tax

Initiated on July 14th, 2021, CBAM is the world's first carbon border tax, a significant step towards achieving the EU's ambitious goal of net-zero greenhouse gas emissions by 2050. For businesses importing into the EU, CBAM means a paradigm shift in managing carbon emissions – a critical component now extends beyond EU borders.

In simple terms, CBAM is an import tariff linked to the carbon dioxide emitted during the production of specific goods. Starting January 2023, impacted importers must comply with new carbon reporting requirements. By January 2026, carbon import permits will be introduced, directly influenced by the EU's domestic carbon price.

Industries directly impacted include steel, aluminum, cement, electricity, and fertilizers, putting the automotive, construction, and packaging sectors under the spotlight. Chinese and Indian imports, for example, could see substantial price hikes. This is a wake-up call for businesses to evaluate their supply chains and ensure compliance with EU climate standards.

Preparation is Key

The phased implementation of CBAM provides businesses with time to adapt. Initial taxation will focus on direct emissions, with discussions for the inclusion of more goods and indirect emissions in the second phase starting in 2026. Proactive steps now can prevent businesses from facing substantial costs later.

How CBAM Works

EU importers must match the corresponding EU carbon price for their goods by purchasing CBAM certificates. These certificates, purchased from the EU country of trade, offset the carbon impact of imported goods. Annual declarations of emissions and corresponding CBAM certificates become mandatory, ensuring transparency and accountability.

Trade Impacts and the Role of CBAM

CBAM aligns with the EU's Emissions Trading System (ETS), holding companies accountable for exceeding emission caps. For carbon-intensive EU manufacturers, CBAM levels the playing field against competitors without EU green standards, fostering fair competition and driving environmental standards higher.

Finding Hidden Emissions

Many businesses unknowingly contribute to carbon emissions through their supply chains, especially in the elusive scope 3 emissions. The key to CBAM compliance is understanding the full extent of emissions. The Environmental Intelligence System (carbmee EIS™) offers a solution to this challenge.

carbmee EIS™: Your Trusted CBAM Compliance Partner

carbmee specializes in carbon management, offering a purpose-built platform, EIS™, designed for enterprises with complex supply chains. Recognized by Gartner as a Cool Vendor 2022 and featured in the Hype Cycle 2023 for Environmental Sustainability, carbmee EIS™ is the ideal choice for navigating CBAM compliance seamlessly. The platform has been designed to answer CBAM requirements in the easiest and fastest way possible.

  1. Seamless Data Ingestion: Effortlessly data loading from ERP, customs, and eProcurement systems, streamlining the CBAM reporting process.
  2. Optimization Made Easy: Identify and complete missing data with ease, eliminating the need for cumbersome questionnaires.
  3. Precision in Calculation: Adhere to EU Commission guidelines, ensuring accurate and compliant emissions calculation.
  4. Streamlined Reporting: Download quarterly CBAM reports in XML format, ready for submission to the EU.

Insights from Industry Leaders

Andreas Schön, from Kärcher, a global leader in the cleaning technology industry, attests to the game-changing impact of carbmee EIS™. “We are deeply committed to our climate goals, and our approach is to set a realistic yet ambitious carbon reduction target that truly drives action across our entire value chain. carbmee EIS™ has provided us with the tools we need, such as measuring our emissions baseline and gaining transparency beyond our factory gates, to identify the most significant opportunities for reducing our carbon footprint.” Read the full story here. 

As the CBAM compliance journey unfolds, carbmee EIS™ stands as a reliable ally, guiding EU companies through complexities with precision and efficiency. It's not just a solution; it's an informed choice for businesses committed to sustainable trade practices.

In a world where staying competitive means staying compliant, carbmee EIS™ is your trusted partner in the CBAM compliance journey. Choose the future of sustainable trade with carbmee EIS™ and unlock your maximum carbon reduction potential.

carbmee and EY have collaborated on a whitepaper to help companies better understand CBAM's implications for business and how to best comply with the new regulations. Download the free Whitepaper