What CBAM Will Require

• Timeline and Scope
  The transitional phase (2023-2025) required importers to report emissions embedded in certain imported goods. As of January 2026, the definitive regime comes into force, meaning certificate purchase and surrender obligations. Sectors covered include iron & steel, cement, fertilisers, aluminium, hydrogen and electricity.
• What data will be required?
  Importers will need accurate embedded emissions data for imported goods. That means data from suppliers, knowledge of production processes, indirect emissions (e.g. electricity used), emissions factors. Where primary data is unavailable, default / average emission values may be used, but these have limitations.
• Financial implications
  From 2026, companies must acquire CBAM certificates corresponding to emissions not yet subject to a carbon price in the country of origin. In practice, this means emissions cost (similar to what EU producers pay under EU ETS) will be added to importers’ costs. Exemptions or simplified rules (for smaller importers, occasional importers under certain thresholds) are under discussion in proposed simplification legislation.

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The Hidden Scale of the Risk: Why Upstream Emissions Matter More Than Many Realise

• Corporates report that their Scope 3 supply-chain emissions are on average 26 times greater than their direct operational emissions (Scopes 1 & 2). This is especially true in manufacturing, retail, materials sectors.
• In the retail and wholesale sector across Europe, approximately 98% of emissions come from supply chains (Scope 3), not from stores, heating, or logistics within their own operations.
• These upstream emissions are exactly where CBAM and other regulations will hit hardest. If you only measure your direct emissions, you may have large hidden liabilities ahead.

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Challenges for Organisations

• Data gaps and supplier cooperation: Bright-line data from suppliers is often missing or inconsistent. Many suppliers do not publish emissions or cannot provide verified data.
• Estimations vs accuracy: Relying on generic emissions factors or spend-based estimates may cover you initially, but will carry risk (errors, under- or over-exposure).
• Internal capability: Collecting, processing, and verifying emissions data requires staff, systems, and cost. Not all organisations have these.
• Financial forecasting: CBAM certificate prices, regulatory changes, and supplier cost shifts are uncertain. Poor forecasting risks unexpected costs.

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Practical Steps for Organisations

1. Map your supply-chain imports Identify which goods you import that are likely under CBAM tariffs. Focus on sectors like steel, cement, aluminium.
2. Collect baseline emissions data Even if imperfect. Use default methods, spend-based estimates, supplier questionnaires.
3. Identify hotspots For example, which materials, suppliers or shipping routes contribute most emissions or cost under CBAM scenarios.
4. Budget for future cost exposure Scenario modelling helps estimate what your costs will be when certificate prices come into effect.
5. Engage suppliers Begin asking for emissions data; build relationships. Transparency will reduce risk and improve negotiating power.

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How NetZero Lite and NetZero Pro Can Help

• NetZero Lite is ideal for organisations needing a fast start. Shared with suppliers, it lets them map Scope 1 and 2 emissions, plus waste and water, build a baseline from spend-based data, and return results. This quickly and cost-effectively creates an initial supply chain dataset, helping you see where CBAM exposure may lie.
• NetZero Pro goes further. It covers your organisation’s full Scope 1–3, with suppliers submitting emissions directly and attaching evidence, reducing estimates and easing validation. Data gaps are flagged automatically, while consultants provide scenario modelling, sourcing guidance, and decarbonisation planning to reduce exposure over time.

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Conclusion

CBAM enforcement marks a shift from reporting to financial liability. Organisations that act now will avoid cost surprises, regulatory penalties, reputational risk. Measurement, visibility and early strategy are essential.

The first step is understanding your exposure. Organisations that map emissions now and begin scaling their strategy will be better placed to manage costs and comply with CBAM.

Key words

• CBAM: The Carbon Border Adjustment Mechanism (CBAM) is an EU regulation designed to ensure that imports of carbon-intensive goods face comparable carbon costs as EU domestic goods, to avoid “carbon leakage.” It covers sectors like steel, cement, aluminium, fertilisers, electricity and hydrogen.
• Carbon leakage: Occurs when companies shift production to countries with weaker climate policies to avoid stricter regulations, which can increase overall global emissions.

Sources

• EU Carbon Border Adjustment Mechanism official page: “definitive regime from 2026”
• Reuters: “EU’s carbon cost rules are changing ... prepare for CBAM”
• British Chambers: “Understanding EU CBAM: what UK businesses need to know”
• BCG and CDP: Scope 3 emissions are 26 times direct emissions for many companies
• EuroCommerce: retail & wholesale sector emissions distribution (98% from supply chain)