Turning CBAM Compliance into a Strategic Advantage for Sustainability Goals
As global regulations evolve, companies are increasingly facing complex environmental compliance challenges. Among the most significant of these is the European Union's Carbon Border Adjustment Mechanism (CBAM), which imposes new carbon tariffs on imports to the EU from countries with less stringent climate policies for a select number of carbon-intensive products. This means that companies within scope will need to actively engage with their supply base to measure and report the carbon emissions of selected imports. To help businesses comply with these new requirements, EcoVadis has developed a solution enhancement within the Carbon Action Manager.
To navigate CBAM effectively, impacted companies should first thoroughly analyze their exposure. While there are well-founded concerns that increased costs through tariffs will be directly passed on to consumers or decrease profitability, a more effective long-term strategy is to collaborate with suppliers to reduce emissions at the source. When done well, a CBAM response strategy can shift from merely recovering costs to driving market advantage and advancing sustainability goals. This could include re-sourcing by factoring carbon costs into procurement decisions to identify lower-carbon suppliers. In any case, understanding product-level carbon emissions is crucial.
However, the path to compliance is not without its challenges. According to the recent Carbon Action Report, less than 1% of small and medium-sized enterprises (SMEs) are currently prepared for the rigorous demands of product-level carbon tracking and reporting required under CBAM. This finding underscores the urgency for companies to engage their suppliers and help them prepare to meet these new regulatory standards.
The new CBAM enhancement for the Carbon Action Manager is designed to help companies seamlessly identify, assess, collect, collaborate, report, and improve their carbon-related data across their supplier network in alignment with CBAM requirements. Here’s how it works:
1. Identify and Manage In-Scope Suppliers
Utilize the CBAM Filter and enterprise tags to quickly identify and manage suppliers affected by CBAM regulations. This approach helps provide a starting point and pinpoints key suppliers, ensuring compliance efforts are focused on the most critical areas.
2. Assess Supplier Carbon Maturity
Conduct a tailored carbon assessment for suppliers to gauge their carbon maturity. This assessment provides insights into supplier readiness and the availability of necessary product-level data.
3. Collect Data and Collaborate Based on Maturity
For high-maturity suppliers, implement streamlined workflows to collect CBAM-compliant data. For lower maturity suppliers, leverage CBAM-specific eLearning through EcoVadis Academy and the Carbon Estimator tool to build their reporting capabilities and scale compliance efforts.
4. Report, Monitor and Improve
Access dashboards and tailored corrective action plans to guide and monitor supplier progress, extract data for reporting, and collaborate on improvements. This approach helps reduce emissions, manage CBAM liabilities, and advance overall sustainability goals.
The new CBAM features for Carbon Action Manager are being progressively rolled out and build companies’ capacity to navigate the complexities of CBAM compliance efficiently. Designed to empower companies and their suppliers to effectively support the new regulation, they help transform CBAM from a compliance burden to a strategic lever that enhances market positioning and advances sustainability objectives. Given that most SMEs will not be ready for the demands of product-level carbon emissions tracking and reporting, it’s more important than ever for companies to leverage tools like the Carbon Action Manager to prepare their supply chains for the future and broader ambitions surrounding scope 3 decarbonization.
To learn more about how the Carbon Action Manager can support your business contact us today.
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