FOCUS ON SUSTAINABILITY
A HOLISTIC VIEW
If businesses treat CBAM and ESPR sustainability regulatory obligations as part of a unified digital compliance infrastructure then compliance becomes scalable, rather than reactive. Data architectures and verification processes for both certificate purchasing and Digital Passport requirements are possible.
“ CBAM( the EU’ s Carbon Border Adjustment Mechanism) risks exposing the cost of siloed compliance, says Matthew Ekholm, unless companies rethink management.”
By
Matthew Ekholm,
DPP and Circularity Specialist, Provenant
The EU’ s Carbon Border Adjustment Mechanism( CBAM) has entered its definitive period, creating a new layer of compliance to importers of steel, aluminium, cement, fertilisers, hydrogen and electricity.
The EU policy aims to heavily reduce‘ carbon leakage’ by ensuring that emissions are priced consistently, regardless of where the material or product in question was produced. It will do this by putting a carbon price on imported goods, so they face a similar climate cost to products within these categories made inside the region. Importers of these materials, which are often seen as carbon-intensive, are obligated to report emissions and now purchase CBAM certificates that reflect the emissions.
As CBAM enters its definitive phase in 2026, steel and aluminium importers are moving from quarterly emissions reporting to a new reality: financial exposure. Emissions data must be verifiable, auditable and sourced from increasingly complex global supply chains. What was once a transitional reporting exercise has become a cost centre. Importers must now purchase CBAM certificates reflecting embedded emissions, and the accuracy of that data directly impacts their bottom line.
Right: Matthew Ekholm, DPP and Circularity Specialist, Provenant.
Taking a strategic view
This regulation is creating a reflection point for the sector. It has evolved from a reporting obligation to a cost and operational consideration, with compliance, and the accurate purchase of CBAM certificates( increasingly reliant on the verifiability of
Image: Karlie Mitchell( Unsplash).
Image: Shutterstock. com. emissions data) accessed from supply chains that are only growing in complexity.
Many businesses have initially approached the CBAM as a targeted exercise, separate to other looming regulatory pressures or requirements, with a clear focus on meeting its deadlines. While this focused approach could be a fast-tracked way to meeting these deadlines, businesses need to look beyond this initial phase as enforcement intensifies.
We have seen the mistakes made in previous compliance efforts such as GDPR, where siloed approaches to compliance created fragmented systems and long-term inefficiencies. These targeted‘ regulation-byregulation’ approaches risk becoming longerterm operational weaknesses, creating broader and lasting financial impact.
The industry needs to consider the full backdrop of each compliance effort for longterm gain. As CBAM obligations are coming to the fore, steel and aluminium industries are also preparing for the EU’ s Ecodesign for Sustainable Products Regulation( ESPR), which will introduce new product-level sustainability requirements. The delegated act for these industries, a set of rules which will dictate which information will need to be collected, is expected to be published this year.
With the EU’ s increasing focus on sustainability in the region and for those who operate in the region, there may even be more regulations or compliance efforts to come. Those who continue to view them as separate regulatory considerations will lose out, while those businesses that begin to think of all regulatory obligations as a holistic exercise stand to gain in the longer term.
To give one scenario as an example, the ESPR and CBAM frameworks will draw on overlapping datasets, including information
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