Impact of the Carbon Border Adjustment Mechanism regulation on procurement

In a long-term move towards environmental sustainability, the European Union (EU) has unveiled the Carbon Border Adjustment Mechanism (CBAM). This regulation, a main pillar of the EU’s ambitious green deal, aims to combat climate change by significantly reducing greenhouse gas emissions. From 2026, CBAM will introduce new tariffs on imported products from outside the EU based on their contained carbon.

Importers will be required to acquire certificates corresponding to the total emissions of imported goods, priced at the prevailing rate of CO2 in the EU. This measure targets the following carbon-intensive goods: aluminium, cement, electricity, fertilizers, hydrogen and steel. Incorporating Scope 1 emissions from production facilities and Scope 2 emissions from electricity usage during manufacturing, CBAM is taking a comprehensive approach to carbon accounting. However, it’s important to highlight that CBAM does not cover emissions falling under Scope 3 categories, such as those originating from primary products and transportation.

Why is such a regulation necessary and how will it work in practice?

CBAM primarily aims to reduce the risk of carbon leakage by discouraging companies from relocating their production to countries with less stringent environmental regulations. Furthermore, it aims to encourage cleaner industrial production practices in non-EU countries, thus promoting global sustainability efforts.

Who is affected by the regulation?

Importers will gradually be required to pay for CBAM certificates, aligning with the timeline when European suppliers start being charged for their emissions. The financial impact on European importers will be determined by the difference between the emissions of European suppliers and those of importers.

2024 Raw Materials Study

Results & recommendations for action

We have gathered insights from over 200 European business and procurement leaders across various industries regarding their current approaches to commodity management.

Download study results

The impact of CBAM regulation across key intervention areas

The resulting increase in cost levels, affecting both domestically produced and imported goods, is set to redefine suppliers’ competitive landscape. Their ability to remain competitive will hinge on the variance in their emission levels.

Beyond cost increases, CBAM will have further implications

Supplier engagement & reporting (from 2024 onwards)

Importers must request data on the contained emissions from non-EU suppliers for quarterly reporting.
Administration (from 2026 onwards)

Importers must register with national authorities to purchase CBAM certificates and surrender them annually according to contained emissions.
Progressive payments (from 2026 onwards)

Importers will have to pay for the CBAM in stages, to the extent that European suppliers start paying for their emissions.

Which specific measures should companies take in order to comply with CBAM?

Create transparency of goods imported from non-EU countries on a supplier level within the scope of the regulation
Prepare quarterly reporting of emissions contained in imports. Apply EU default values during the transition period for goods for which no specific supplier emissions are available
Conduct a preliminary financial impact assessment of the gradual roll-out of CBAM from 2026 to 2034 taking into account emissions included in imports, free allowances and CBAM costs
Engage with your non-EU suppliers to collect product and supplier-specific emissions data now, which has to be included in quarterly reporting from 2026 and onwards
Refine the impact assessment and develop a strategy based on financial impact and a sustainability roadmap as more supplier specific data is collected

Get in contact with our experts

Lars-Peter Häfele

Managing Director

office@kgmstrategy.com Contact

Patrick Lepperhoff

Principal

patrick.lepperhoff@kgmstrategy.com Contact

Our expertise related to CBAM

Expertise

Sustainable Procurement

Our experts for sustainability and decarbonization will accompany you on this path using our procurement approach.

Expertise

Supply Chain Resilience

While many buyers view resilience as a purely defensive strategy to secure and stabilize supply, a resilient supply chain can also bring significant competitive advantages.

Industry

Industrial Goods

Increasingly volatile order volumes and complex value creation structures are challenging for the industrial goods sector and heightening the importance of procurement in recent years.