In 2023, Sourcing Champions conducted a market study, in collaboration with our partner, Valuedesk , to explore the key challenges procurement organizations face in implementing net-zero strategies. The research revealed that while sustainability has long been on procurement’s agenda, cost pressures often delay meaningful action. However, with new carbon reporting regulations like the Carbon Border Adjustment Mechanism (CBAM) coming into effect, the financial impact of carbon emissions is becoming unavoidable. Companies must now integrate carbon visibility into procurement decisions, ensuring that emissions costs are factored into overall sourcing strategies. Additionally, procurement teams must stay informed and adaptable as regulatory frameworks evolve. While discussions about regulatory simplifications under the name “Simplification Omnibus package” continue, procurement professionals should remain vigilant and proactive in tracking regulatory updates to ensure seamless reporting, and compliance with evolving sustainability goals.
As procurement adapts to new regulatory frameworks, digitalization is becoming essential in managing emissions data, supplier compliance. Platforms like EcoVadis, IntegrityNext, and Prewave enhance visibility and accountability, enabling procurement teams to track supplier sustainability performance, emissions, and CBAM compliance. Without these digital solutions, executing sourcing strategies with accuracy and transparency would be difficult.
With the 2025 CBAM reporting requirements now in effect, procurement teams must act quickly. Are their suppliers prepared to provide accurate carbon emissions data? As the financial obligation for CBAM certificates begins in 2026, procurement will no longer be able to overlook carbon costs, though this timeline could shift if the proposed Omnibus legislation, which may introduce delays, is adopted. This shift presents an opportunity: can CBAM accelerate the transition to more sustainable sourcing decisions? This article explores CBAM’s impact on procurement, compliance, and sustainability—and how procurement teams can adapt.
CBAM Explained: What You Need to Know
The Carbon Border Adjustment Mechanism (CBAM) is the EU’s solution to carbon leakage, a practice in which companies move production to countries with less strict regulations, which led to significant amount of carbon emission, to avoid high carbon costs. EU firms will pay around €80 per ton of carbon emissions under the EU Emissions Trading System (ETS). To level the playing field, CBAM applies to carbon-intensive products like cement, steel, fertilizers, aluminium, and electricity. Importers of these goods must purchase CBAM certificates to cover emissions from their production, ensuring non-EU manufacturers face the same carbon costs as EU producers.
CBAM is being rolled out in phases. On 31 October 2024, the transition phase begins, where reporting requirements start. By 1 January 2025, companies must use only the EU-approved method to calculate emissions. From 1 January 2026, importers must declare embedded emissions and buy CBAM certificates. By the 2030s, CBAM will expand to more sectors, increasing its impact on carbon pricing. That said, the roadmap could face delays should the Omnibus proposal come into force.
For compliance, EU importers must identify CBAM-regulated goods and select an approved emissions calculation method. They must declare material quantities, as well as direct and indirect emissions embedded in imports. If a carbon price has already been paid in the country of origin, they can report it to avoid double taxation. Finally, they must purchase CBAM certificates accordingly.
CBAM is directly linked to the Corporate Sustainability Reporting Directive (CSRD) , which mandates sustainability disclosures. Both frameworks increase transparency in emissions tracking and supply chain sustainability, reinforcing the EU’s carbon neutrality goal. CSRD ensures that companies integrate environmental tax disclosures, emissions reporting, and governance compliance into their operations. Together, CBAM and CSRD promote fair competition, sustainability, and climate accountability in global trade.
CBAM Certificate Costs: A New Factor in Procurement Decisions
The products covered under CBAM’s first phase represent 4% of all EU imports, valued at over €130 billion. These imports also account for 6% of the EU’s total carbon emissions, highlighting the significant economic and environmental impact of the regulation starting in 2026 (Thomson Reuters, 2023). This, however, may change under the Omnibus proposal, which would reduce the scope but still cover a major share of emissions.
For procurement teams, this means rethinking sourcing strategies to account for rising costs. The additional expense of carbon certificates must be factored into cost scenarios, ensuring that companies fully understand the financial implications and the sustainability impact. If the cost difference is minimal, switching to a more sustainable sourcing option may be a reasonable choice. Procurement should also assess whether shifting to suppliers that offer lower-carbon alternatives could be a viable strategy, balancing compliance, cost efficiency, and sustainability goals.
To effectively integrate CBAM into procurement practices, it is essential to establish clear objectives within category strategies. This involves developing targeted initiatives to engage with affected suppliers, assess cost implications, evaluate the carbon impact, and integrate these factors into performance management. By embedding CBAM considerations into strategic decision-making, procurement teams can proactively navigate regulatory requirements while driving both sustainable and cost-effective sourcing choices.
CBAM: A Push for More Sustainable Sourcing in Procurement
With CBAM in effect—and financial obligations for carbon certificates set to begin in 2026—procurement will need to integrate carbon costs into sourcing strategies. This shift has the potential to make sustainability a key financial consideration, encouraging companies to make more sustainable sourcing decisions. Here are what companies can do to adjust themselves to the new regulations:
- CBAM’s Regulatory Influence: Procurement teams should begin adjusting to CBAM’s regulations by considering carbon costs in sourcing decisions and ensuring suppliers are prepared to meet the new reporting and certification requirements.
- Supplier Development Focus: Procurement teams should prioritize developing their suppliers’ ability to meet CBAM requirements, helping them collect and report accurate carbon emissions data. Working closely with suppliers to assess their sustainability practices and provide guidance can facilitate smoother compliance while enhancing long-term supplier relationships and sustainability efforts.
- Procurement’s Evolving Role: CBAM introduces new challenges and opportunities for procurement teams to manage, requiring the integration of carbon cost considerations into sourcing strategies to remain compliant and competitive.
References
- Procurement Magazine. (2023). New EU Carbon Emissions Tariff and Procurement. Retrieved from https://procurementmag.com/articles/new-eu-carbon-emissions-tariff-and-procurement
- EcoVadis. (2023). CBAM Explained: The EU’s Carbon Border Adjustment Mechanism. Retrieved from https://resources.ecovadis.com/supply-chain-risks-and-regulations/cbam-explained
- Thomson Reuters. (2023). EU CBAM and Supply Chains: What You Need to Know. Retrieved from https://www.thomsonreuters.com/en-us/posts/esg/eu-cbam-supply-chains/
- European Parliament. (2023). EPRS – EU Carbon Border Adjustment Mechanism (CBAM) [Video]. Retrieved from https://multimedia.europarl.europa.eu/en/video/eprs-eu-carbon-border-adjustment-mechanism-cbam_EP129899
- World Economic Forum. (2023). What is the EU’s Carbon Border Adjustment Mechanism (CBAM)? [Video]. Retrieved from https://www.weforum.org/videos/eu-what-is-carbon-border-adjustment-mechanism-cbam/
- Trading Economics. (2023). Carbon Price. Retrieved from https://tradingeconomics.com/commodity/carbon
- Carbon Trust. (2023). What CBAM Means for Businesses Across Europe. Retrieved from https://www.carbontrust.com/en-eu/our-work-and-impact/guides-reports-and-tools/cbam-what-it-means-for-businesses-across-europe
- Handelsblatt. (2023). CBAM: Where Are the Biggest Challenges? Retrieved from https://live.handelsblatt.com/cbam-wo-liegen-die-groessten-herausforderungen/
