The Carbon Border Adjustment Mechanism (CBAM) has profound implications on the supply chain. These implications go beyond the scope of carbon tax and directly affect how companies manage their supply chains. The implementation of CBAM can lead to significant changes in supplier behavior and business strategies, as they need to adapt to new requirements and regulations related to carbon emissions. This may include revising production processes, investing in cleaner technologies, or reevaluating supply partnerships to minimize the impact of CBAM on costs and competitiveness. Besides economic aspects, CBAM can also influence company-supplier relationships, necessitating closer dialogue and more efficient collaborations to ensure compliance with new requirements and to optimize supply chains in the context of new realities related to climate change and associated regulations.
Supplier information has a crucial impact on the pricing of products in the European Union (EU). The calculation of CBAM costs is closely linked to a product’s embedded emissions, so inaccuracies in emission data can lead to incorrect estimations of carbon costs. For example, if a steel manufacturer overestimates emissions, the importer may have to refund excess CBAM certificates, thus increasing costs and steel prices in the EU market. This situation can affect the demand for steel products, significantly impacting both the importer and supplier.
Supplier data will play a crucial role in determining future legal exposure, with the potential to exacerbate the situation. Importers will face significant financial penalties in case of inaccurate emission reporting, with severity increasing as the issue persists. The accuracy of CBAM reports will entirely depend on the information provided by suppliers. To minimize risks, importers might impose contractual conditions, indirectly involving suppliers in the responsibility for CBAM. Non-compliance with these conditions can lead to penalties for suppliers or even termination of the contract if problems persist and cannot be resolved.
Detailed knowledge, deep understanding, and rigorous data collection from suppliers are essential aspects to ensure the accuracy of information. It is imperative for importers to recognize the crucial role of suppliers and to strengthen relationships with them. Through close collaboration, importers must ensure that their internal systems comply with CBAM reporting requirements. This collaboration may even involve direct support to suppliers in their partnerships with other material supplying entities, with a particular focus on data collection in sectors involving the use of precursors.
Ensuring data integrity is a crucial element in the context of CBAM certificates and setting the carbon price for CBAM goods. To avoid financial penalties and ensure precise certificate delivery, maintaining data integrity is essential. Thus, implementing robust data assurance measures across the entire supply chain becomes imperative to ensure transparency and reliability in reporting. Suppliers might need to collaborate closely with importers and auditors to ensure the accuracy of data regarding embedded emissions. From January 1, 2026, an independent verification requirement for CBAM reports is scheduled, highlighting the importance of rigorous data management in this context.
Use this opportunity to reassess your suppliers’ commitment, data, assurance, and your broader sustainability agenda. To avoid increased costs due to carbon taxes, companies should explore ways to decarbonize their supply chains and collaborate with suppliers to identify efficiencies in carbon management. This process can represent an opportunity to gain a competitive market advantage while simultaneously improving communication and transparency with suppliers.