Prepare your company for CBAM

What can you do as a business to prepare for the new EU climate tariff CBAM? In addition to shedding light on the impact of the legislation, we take a closer look at the possibilities for proactive compliance work. For example, in terms of analyzing emissions and having a solid system support in place.

The Carbon Border Adjustment Mechanism (CBAM ) is the EU's new climate tariff. In short, it requires importers into the EU to report their carbon emissions and buy CBAM certificates. It is the EU's solution to the problem of carbon leakage, where companies move production to countries with lower emission standards because of climate policies.

It is intended to mirror the emissions trading system known as the EU Emissions Trading System (ETS). Until now, production has been located outside the EU and therefore this carbon adjustment mechanism is set up. The CBAM should also be seen in the context of the Paris Agreement and the goal of climate neutrality by 2050.

Challenge in several areas

Of course, all companies affected by the EU climate tariff are affected in different ways. These include factors such as the size of your import business, the type of products you trade, the complexity of your supply chain and, not least, how well prepared your organization is in terms of processes and systems support.

However, regardless of how your business is affected, you would be wise to do what you can to prepare for CBAM. The rule of thumb is that the more automated processes and qualified system support you have in place to manage your supply chain, the more likely you are to be successful in your compliance efforts.

At an overall level, several likely challenges can be identified as a result of the carbon adjustment mechanism:

1. Changes in the supply chain. Many companies will review their supply chain and specifically their suppliers. This may lead to a change of suppliers in pursuit of lower carbon emissions and a shift to countries with more developed environmental laws.
2. Investment in green technologies: as the pressure for green transition increases, companies will have more incentives to invest in green technologies. In this way, CBAM can act as a springboard for a faster and more drastic transition.
3. Competitiveness on trial. While in theory CBAM provides competitive protection against countries with lower environmental standards, it also poses challenges for domestic companies. Cost increases associated with the law can in turn lead to higher prices for end consumers. The question is therefore how to remain competitive despite this.

How to work proactively with CBAM

We have already gone through some necessary initial preparations, but there is a lot more you can do to work proactively on your compliance efforts.

1. Analyze emissions. It all starts with a baseline, thanks to a detailed analysis of your existing emissions. In addition to analysing your emissions sources, you should also develop a detailed plan to see what you can do to map emissions on an ongoing basis and minimize them.
2. Collaboration in the supply chain. A prerequisite for successful CBAM compliance is cooperation in the supply chain. A good advice is to start this as soon as possible to ensure that all conditions are in place to collect data on emissions linked to the goods covered.
3. Streamline production. In addition to ensuring compliance, it is important to see what you can do to minimize emissions, and thereby reduce the costs associated with them. This could include using renewable energy, more efficient machinery or other optimization measures.
4. Evaluate financial risk. Develop business case with associated scenario analysis linked to CBAM. Basically, it is a question of comparing the cost of CBAM certificates with other options - not least with the cost of changing suppliers or moving production.
5. Education and awareness raising. Provide information about the legislation, what it means and what the effects and requirements are. This is essential for your employees to understand and apply the new rules. Internal training also helps to raise general awareness of sustainability issues.
6. Compliance systems. To ensure your compliance, you need a system support that meets the requirements. In fact, it is a prerequisite to work effectively in collecting, organizing, reporting and monitoring emissions.

Prioritize good system support

It cannot be emphasized enough how crucial it is to organize the work in an efficient way. As mentioned above, good system support is crucial to achieving this.

Just hearing the name The Carbon Border Adjustment Mechanism can make it sound like it's about a climate tariff. But within CBAM, there are hundreds of parameters you need to meet in order to comply with the legal requirements. Multiplied by the number of goods your company imports, this means that compliance quickly becomes incredibly demanding and difficult to manage. This illustrates the need to work smart and to automate.

Good system support reduces the risks associated with manual work, frees up resources in the organization and allows you to work more proactively. In this case, for example, Stratsys product ESG due diligence.

CBAM - a chance to embrace change

There is no doubt that the EU's climate tariff in the form of the Carbon Border Adjustment Mechanism places great demands on companies affected by the carbon adjustment mechanism. This applies both when the directive is fully implemented in 2026, but also from 2030, when all products under the ETS are included. ETS stands for EU Emissions Trading System and is the Union's emissions trading scheme.

As legislation, CBAM entails increased costs in the form of certificates, but the costs also depend on the underlying data collection and carbon reporting. For companies that do not meet their compliance requirements, it can be expensive.

At the same time, there are opportunities for companies that choose to be proactive and embrace the change that comes with the new climate rules. Not least, it means a chance to stay ahead of the curve when it comes to streamlining business operations.

For those who want to know more

Do you want to know more about how CBAM works - for example, how CBAM is based on the trading rights system, the purposes and goods covered, how emissions are reported, the implementation of the two-stage legislation and, not least, the negative consequences of CBAM? Then we recommend this article on the subject:

How the EU's new climate tariff, CBAM, works.