Navigating CBAM: The future of CO2 accounting and data collection

The Carbon Border Adjustment Mechanism (CBAM) represents one of the most significant changes to emission reporting and sustainability regulation in recent years. Designed to prevent carbon leakage and align with the EU Emissions Trading System, CBAM introduces new challenges for businesses, particularly those dealing with carbon-intensive products. As companies navigate the evolving landscape of emissions reporting, it’s crucial to understand the latest requirements, key challenges, and solutions available to ensure compliance.

In this post, we’re sharing insights from a recent webcast hosted by Cozero in partnership with CO2 IQ. During this impulse, CEO Helen Tacke and CBAM expert Dr. Ulf Narloch explored the tightened CBAM reporting requirements coming into effect from Q3 2024.

They evoked the types of emissions data companies must provide, how to obtain this information from manufacturers, strategies for dealing with challenges in the reporting process, and how companies can set themselves up for success in the long term.

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Short recap about CBAM and why it matters

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CBAM is the EU’s latest climate policy response to the global climate challenge. It aims to level the playing field by ensuring that imports into the EU meet the same environmental standards as domestic products. The regulations require companies to report their CO2 emissions accurately and prevent cheaper, carbon-intensive imports from undermining the EU's climate policies. CBAM primarily targets six high-emission goods, with iron and steel standing out as the largest. 

While the goal is clear, the path to compliance is filled with complexities. Companies are now required to shift from relying on global standard emissions values to collecting real data from manufacturing facilities. While cumbersome, this shift is essential not only for meeting regulatory demands but also for maintaining a strong sustainability posture in a rapidly changing world.

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What’s changing in CBAM reporting in Q3 2024?

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Until recently, companies could use global default values provided by the EU for their emissions calculations. However, under the new CBAM regulations, actual emissions data from production facilities is required. This means tracking activities like fuel consumption and greenhouse gas concentrations directly from suppliers and manufacturers.

"We are now moving into a new phase of CBAM reporting. From this quarter onwards, actual data from producers is required." pointed out Dr. Ulf Narloch.

For many companies, this shift has created significant challenges. Collecting accurate data across a complex supply chain is no easy task and can become very challenging, depending on where your company sits in the production chain. Companies with many precursors involved in the production of imported goods need to collect data from each manufacturer. And many suppliers lack the infrastructure or resources to provide a good level of information detail, leaving companies grappling with incomplete or non-compliant data. 

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The data challenge and why suppliers are struggling

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One of the biggest hurdles companies face is obtaining reliable emissions data from suppliers, especially regarding indirect emissions. These emissions, spanning along the entire value chain, refer to the emissions from the electricity, heat, or steam used during the production of goods imported into the EU. Many suppliers, particularly in mid-sized industries, are not yet equipped to meet the accounting demands of CBAM reporting.

"Even when data is requested from suppliers, they often simply cannot provide the information." explained Helen Tacke.

Requests for data often go unanswered or are returned with incomplete or low-quality information. Smaller suppliers, who already juggle multiple priorities, may find themselves overwhelmed by the additional burden of detailed CO2 reporting. This results in delays or inaccurate data, making it difficult for companies to comply with the new standards.

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Overcoming data gaps with technology solutions

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To address these data challenges, companies must move beyond traditional methods like extended questionnaires. Instead, CBAM-ready emission technology can provide scalable, automated solutions that simplify data collection and integration.

At Cozero, we develop a streamlined supplier engagement module to help suppliers generate emissions data more easily. Based on specific activities and data points, the system automatically calculates key details, which are then passed along to the company for use in their CO2 accounting. This solution not only reduces friction for suppliers but also ensures better quality and consistency in emissions reporting.

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The three pillars of effective CBAM compliance

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For companies looking to integrate CBAM-compliant data into their operations successfully, three key areas need to be addressed:

1. Technology: Managing large volumes of data is essential for querying, tracking, and evaluating emissions data quality. Scalability is critical, as the volume of data collected will only grow over time.
   
   
2. Decentralization: CO2 accounting requires a decentralized approach, especially for multinational companies. Business units across different regions must take responsibility for their data collection, ensuring that suppliers are empowered to provide accurate emissions figures.
   
   
3. Communication: Clear communication with suppliers is essential to ensure they understand why data collection is important and what the risks and benefits are. Training, supplier academies, and engagement programs can help suppliers feel more equipped to meet these new demands.

For Helen Tacke, "clear communication with suppliers is crucial to ensure they understand the benefit and risk behind the data requirements."

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The future of CBAM compliance and why acting now is critical

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With CBAM in full swing, companies must act now to ensure compliance. Although the mechanism will not become fully chargeable until 2026, businesses must begin laying the groundwork today. Many companies will face scrutiny from regulators, particularly larger importers, who will be expected to provide accurate emissions data or face penalties.

Starting early is crucial. While companies may be allowed to use standard values for now, it’s essential to demonstrate that reasonable efforts have been made to obtain actual emissions data. This process is time-consuming, with companies reporting that building a solid data foundation can take anywhere from three to nine months.

"Waiting is not an option, companies must start building their emissions data foundation now to be ready for 2026 when the CBAM levies start to kick-in." emphasized Dr. Ulf Narloch.

The long-term goal should be to continuously improve data collection and integrate these emissions metrics into broader CO2 accounting efforts. By doing so, companies can not only comply with CBAM regulations but also use the data to drive decarbonization efforts and support suppliers in improving their environmental impact.

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Preparing for 2026 

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By 2026, CBAM will become fully enforceable, with emissions data directly influencing the costs companies face. Standard values will no longer be enough; national standard values could be significantly higher, depending on the country of origin. Companies that fail to prepare will not only face financial penalties but may also fall behind competitors in terms of sustainability performance.

The message is clear: waiting is not an option. Companies must focus on building a reliable emissions data foundation now, to mitigate risk, avoid financial penalties, and align themselves with evolving regulatory demands.

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Final thoughts: Building synergies for the future

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CBAM represents a major step forward in global efforts to reduce carbon emissions. For companies, this shift in regulatory requirements offers an opportunity not only to comply but to lead. By integrating CBAM-compliant data into broader CO2 accounting efforts, companies can better support their decarbonization strategies and build stronger, more sustainable supply chains.

Ultimately, it’s about building synergies: between suppliers, technology, and communication. With the right tools in place, businesses can transform emissions reporting from a regulatory burden into a driver of long-term value.

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