FOCUS ON SUSTAINABILITY
What does this mean for manufacturers ?
CBAM ’ s ripple effect is significant and it requires businesses to improve the way that they calculate the embodied emissions goods relying on greater supply chain transparency . This is particularly relevant for businesses producing and purchasing materials with a high carbon footprint , such as steel and aluminium , stressing the importance of supply chain traceability and transparency to accurately calculate emissions .
The bulk of many businesses ’ carbon emissions is generated via the supply chain , especially in the form of Scope 3 emissions . These emissions are those that result from activities related to assets not owned or controlled by the reporting organisation , but that the organisation indirectly affects in its value chain both upstream and downstream . Notably , 73.9 % of steel production in 2023 was in Asia ¹, where traditional Blast Furnace- Basic Oxygen Furnaces are used to turn iron ore into steel . There , furnaces have a high
Image : Shutterstock . com . carbon footprint of 1.987 tonnes of CO₂ per tonne of steel produced ², with a huge impact on final emission calculation .
In this context , procurement teams and suppliers need to work together to meet CBAM requirements by understanding emission reduction strategies , explore ways to minimise their carbon footprint and collect and verify all relevant data . A key instrument in guaranteeing this collaboration throughout all stages of the supply chain is technology , including AI and ML , applied to procurement solutions .
In fact , to accurately track the carbon emissions embedded in imported goods , procurement teams need a robust system that provides detailed reporting and monitoring at all stages of the supply chain . Building strong relationships with suppliers is essential to achieve this , and the right software can make collaboration much easier .
Furthermore , since it incentivises sourcing from suppliers with a low carbon footprint , CBAM is bound to benefit suppliers operating in regions with stricter environmental regulations ( such as the EU and UK ) and investing in clean technologies . This shift may also mean companies will relocate some production facilities , nearshore to reduce transportation emissions and directly collaborate with suppliers to adopt greener technologies and processes . For steel production , this will also mean moving away from traditional Blast Furnace-Basic Oxygen Furnaces to the eco-friendlier Electric Arc Furnaces that not only recycle scrap metal but rely on electricity , reducing steel production ’ s footprint to 0.357 tonnes of CO₂ per tonne ³.
Tools for compliance
AI-powered procurement can speed up supplier evaluation processes by analysing available data , such as certifications and emissions reports , as well as streamlining the compliance process by automating data collection from suppliers , continuously monitoring certifications and alerting teams when updates are needed .
By automating the extraction of data from systems such as ERP , customs and eProcurement platforms , businesses can save significant man-hours , reduce human error and free up staff for more valuable tasks . This also significantly improves data analysis and reporting , ensuring that emission calculations are precise and businesses are compliant with CBAM requirements and other EU Commission guidelines .
Accurately tracking embedded emissions and gathering data on the carbon footprint of their supply chain will be crucial for businesses producing or importing large quantities of goods subject to CBAM . Accurate reporting will not only prevent carbon leakage but also help businesses to avoid suppliers with unsustainable production practices that increase carbon costs , thereby avoiding fines .
Procurement solutions that enhance transparency , improve communication with suppliers and ensure precise data analysis can ease the compliance journey , enabling businesses to meet environmental regulations effectively . n
CBAM ’ s ripple effect is significant and it requires businesses to improve the way that they calculate the embodied emissions goods relying on greater supply chain transparency
Note 1 : www . eurofer . eu / assets / publications / brochuresbooklets-and-factsheets / european-steel-in-figures-2023 / FINAL _ EUROFER _ Steel-in-Figures _ 2023 . pdf
Note 2 : www . sustainable-ships . org / stories / 2022 / carbonfootprint-steel
Note 3 : www . sustainable-ships . org / stories / 2022 / carbonfootprint-steel
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Image : Shutterstock . com .
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