Introduction
The EU’s Carbon Border Adjustment Mechanism (CBAM) would impose rigorous new responsibilities on businesses, especially those with high carbon intensity, in Q3 2024. To lower carbon leakage and encourage cleaner living, CBAM levies some imports and mandates accurate emissions reporting. This new law will have a big impact on how suppliers relationships and procurement practices of businesses are done. To satisfy CBAM criteria, businesses have to change their sourcing strategies, include ESG considerations, and draft long-term sustainability plans.
What CBAM Means for Us?
CBAM aims to level the playing field for EU producers by taxing some imported commodities, including the Emissions Trading System (ETS), carbon taxes. Stopping carbon leaks—that is, the result of companies relocating their activities to nations with less environmental regulations—is the target.
At first, CBAM focusses on industries like iron and steel, cement, fertilisers, aluminium, electricity, hydrogen, and electricity. But by the end of 2025, it will also be targeting companies that make lime, glass, ceramics, pulp, paper, cardboard, acids, plastics, and large organic chemicals.
Reporting emissions is the big problem in CBAM.
Companies must report correct emissions data for imported goods starting in Q3 2024. This hinders the law’s purpose of decreasing emissions and promoting green industry.
Now, corporations must collaborate with sources to receive accurate emissions data. So, they can determine how CBAM will influence them. This approach requires direct and secondary pollution data. Many firms don’t know how to monitor their carbon emissions or have the information they need.
How to Use Strategy for Buying Things
EU businesses that use a lot of carbon need to make sure they have good procurement and supply chain strategies in place so they can get data from their sources and make a plan for how to meet CBAM requirements.
Get relevant information about suppliers tho CBAM
The process of gathering data is time-consuming and will need buying to work with providers. Companies will need to make sure that their providers, especially those outside the EU, know what the CBAM rules are and can give them the emissions data they need. To speed up the process, businesses should think about hiring ESG supply chain experts who have experience in this area.
Look at supplier networks again
Businesses should review their agreements and think about buying goods from EU sellers once more. They should focus on sellers who can track their emissions and find ways to make less carbon. It can help people who aren’t ready or who don’t know much about ESG problems get emissions statistics from overseas sources more easily. It will also help the company make sure that the things it buys are in line with its general goals for sustainability.
Use technology for ESG
Buying technology is important for keeping track of and reporting pollution. This can be done by adding ESG tools to buying software that is already in use or by connecting them to other technologies. These tools make it easier to comply with CBAM because they can gather, organise, track, and share ESG data and progress.
Add ESG goals
In the long run, it’s very important for companies to buy things that include their ESG goals. Businesses should set goals to lower their carbon pollution and give area managers the power to make these goals happen. Persons in charge of buying things will need to learn how to pick sellers based on how environmentally friendly they are and how much carbon they release. The buyers will have to work closely with and watch their vendors to manage and keep an eye on pollution and make sure sellers follow ESG plans.
Make a plan for the long term
To meet present and possible future legal needs, a long-term CBAM compliance plan should be made. Companies should plan ahead for the potential increase in CBAM standards by making sure they can see all of their purchases.
Preparing in Time Saves Nine CBAM is a big change for EU businesses that use a lot of carbon. There are a lot of problems, but procurement can help companies deal with them by being forward-thinking and aggressive. This will help them stay legal, lower their risks, and help make the world a greener place.
Conclusion
Finally, CBAM advises EU carbon-intensive industries to disclose their emissions and prepare ahead. Using ESG objectives, seller reevaluation, and emissions data in buying may help companies comply CBAM standards. Plan ahead, employ better ESG technologies, and establish long-term compliance strategies to respect laws, preserve the environment, and compete in a more sustainable market.
