The Carbon Border Adjustment Mechanism (CBAM) represents an initiative by the European Union (EU) aimed at replacing the free allocation of EU Emissions Trading System (ETS) allowances. Its primary objective is to mitigate the outsourcing of production for goods affected by CBAM by requiring payment of a carbon price equivalent to that within the EU upon importation. Enacted in May 2023, CBAM has been operational since October 2023.

SupplyOn recently convened an informative webinar featuring Sunny Chowdhury, Vice President of Business Development for ESG Solutions at SupplyOn, in conjunction with legal expert and lawyer Rebekka Ackermann from Taylor Wessing. Titled "Understanding CBAM Requirements from a Legal Perspective and How to Prepare for the Next Report," the webinar served as a pivotal platform for disseminating critical insights regarding the significance of CBAM, affected goods, implementation phases, reporting timelines, and SupplyOn’s user oriented CBAM reporting solution.

Highlights and obligations of manufacturers:

• The admission procedure for CBAM declarants commences on January 1, 2025; however, importers are required to submit a CBAM Green House Gas (GHS) emissions report by January 31, 2024, owing to the production of goods from a third country.
• Currently, all products within the upstream and downstream production processes associated with goods categories such as Cement, Electricity, Fertilizer, Iron & Steel, Aluminium, and Hydrogen are deemed to be affected by CBAM.
• CBAM reporting must be filed quarterly (with the next deadline set for April 30, 2024) and impacts all companies dealing with CBAM goods, thus affecting both Small and Medium-sized Enterprises (SMBs) and Enterprises alike. While submitted CBAM reports can be amended for corrections, failure to submit the initial report on time may result in fines ranging from €10 to €50 per tonne of unreported emissions.
• CBAM compliance is currently in a transitional phase and is subject to regular updates to tighten carbon emissions, aligning with the goal of achieving carbon neutrality in Europe by 2050. Therefore, importers must remain abreast of evolving regulations leading to the full implementation of CBAM.

CBAM Reporting Requirements:

The European Union (EU) mandates all manufacturers of CBAM goods to furnish comprehensive information regarding their suppliers, CBAM goods, and the emissions associated with these goods. Supplier information encompasses various aspects, including general details about the supplier, calculations, reporting periods, as well as quantities of goods along with their respective tax reports. Similarly, CBAM goods information should encompass primary data pertaining to the production origin, customs procedures, and import area, while CBAM goods’ emissions information should delineate direct and indirect emissions, production processes, and the carbon price paid.

These three segments of reporting are required to be submitted quarterly, often involving more than 225 data points per imported goods, rendering the task particularly arduous for manufacturers. In response to this challenge, SupplyOn has developed a CBAM reporting solution that streamlines the process and automates certain tasks. This solution simplifies the reporting process by focusing solely on mandatory aspects, condensing it into four distinct steps: CBAM goods mapping, data collection, request management, and the compilation of the CBAM report draft.

Key Features of the SupplyOn CBAM Reporting Solution:

1. CBAM Goods Mapping: Suppliers are obligated to provide all requested information, including supplier name, origin code, import area, product group, and other relevant details. To facilitate this process, the solution offers a downloadable template file where suppliers can input the required data. Once the data is completed, suppliers can upload the filled template to the software for processing.
2. Data Collection: The process involves collating and collecting mandatory data, including primary data from installation sites, embedded emissions, and utilized production processes. Upon the initiation of the request, the supplier is promptly notified and provided with options regarding which installation site the request should be directed to.
3. Request Management: During this stage, manufacturers gain the capability to oversee requests, monitoring aspects such as status, completion level, and deadlines. Upon receiving the completed request from the supplier, users are empowered to either accept, reject, or request corrections as needed. Furthermore, the solution provides a plausibility check, ensuring that the submitted data aligns with average default values derived from the EU's database.
4. CBAM Report: The CBAM solution seamlessly generates a draft report in XML format, which users can directly download. Following any necessary adjustments, the finalized report can be promptly submitted to the EU’s Transitional Registry.

Analyst Perspective:

"The implementation of the Carbon Border Adjustment Mechanism (CBAM) underscores the necessity for organizations outsourcing CBAM goods to navigate evolving compliance requirements. As CBAM continues to expand its scope to encompass additional goods categories, SupplyOn’s CBAM reporting manager emerges as an indispensable digital solution. It provides essential guidance in addressing filling, reporting, and request management challenges, empowering organizations to conquer the complexities of data filing, information management, and changing compliance landscapes." says Sujan Thomas Mathew, Associate Director and Principal Analyst, Quadrant Knowledge Solutions.

About SupplyOn:

With a track record spanning over 23 years, SupplyOn was established by industry giants including Bosch, Continental, Schaeffler, and ZF. The company specializes in providing solutions to global organizations to adeptly navigate the complexities and data challenges inherent in supply chain and procurement operations. SupplyOn's procurement solutions cater to both suppliers and buyers, boasting a robust supplier community comprising over 140,000 members. Headquartered in Germany, the US, and China, SupplyOn also offers comprehensive training courses, tool-kits, and a best practices guide to facilitate effective communication between buyers and suppliers.

Conclusion:

The webinar effectively provides education to organizations affected by the Carbon Border Adjustment Mechanism (CBAM), highlighting the imminent risks associated with CBAM data filing and reporting. Additionally, it introduces a digital solution aimed at addressing the key challenges faced by these companies. The presentation outlines the features and benefits of SupplyOn’s CBAM reporting solution, encompassing functionalities such as data collection, CBAM goods mapping, request management, and CBAM report generation.

Moreover, SupplyOn’s CBAM solution extends beyond the aforementioned reporting features. Major updates are slated for release, including capabilities for comparing supplier emission intensities, predicting CBAM costs, and calculating saved costs based on received certificates, among other enhancements. Furthermore, SupplyOn is poised to unveil a comprehensive EU Environmental, Social, and Governance (ESG) reporting manager, aimed at assisting organizations in mitigating the risks associated with inaccurate and delayed reporting.

Author: Sujan Thomas Mathew, Associate Director, and Principal Analyst at Quadrant Knowledge Solutions