The European Commission (EC) updated guidance for EU firms last week (8 August), requiring that companies source accurate emissions data from their suppliers when submitting their Q3 Carbon Border Adjustment Mechanism (CBAM) reports.
It had previously been acceptable for firms to use ‘default values’ in their reports – average emissions figures for each of the seven affected sectors quantified and documented by the EC for use by EU importers.
Default values were allowed for the first three quarterly CBAM reports carried out since the policy’s introduction in October 2023. However, the EC confirmed that Q3 2023 reports, due in October, would require companies to submit supplier data.
Supplier scramble
The decision to make supplier data mandatory came as a shock to many industry experts, with the logistical difficulty of getting suppliers to cooperate – finding and sharing the relevant emissions data in time for reporting – leading many to believe an extension on using default values would be granted.
Instead, the EC has set out new guidance outlining the amount of effort EU firms must make to secure supplier data in order to remain compliant.
New guidance
Outlining the new expectations in a video shared via LinkedIn on Saturday (10 August), CBAMBOO chief executive, Gabriel Rozenberg, warned traders that the new guidance is “strict”, putting the onus on the firm to secure supplier data and evidence their efforts.
Opening points from the update include that EU firms “bear the responsibility for ensuring the completeness and correctness of the CBAM reports”.
It also states that firms “must undertake all possible efforts to obtain actual emissions data” from their suppliers and, if they fail to do so, the ‘comments’ box in the CBAM Transitional Registry should be used to “prove that they have undertaken all reasonable efforts”.
Rozenberg said that firms must evidence claims that they could not gain data from suppliers:
“If you’re not providing that data, you need to show why it’s justified that you haven’t got that data”.
Penalties
In practice, Rozenberg said that sufficient effort would require big firms with greater resources to make many “many, many attempts” at requesting data from their suppliers, ensuring they follow up with suppliers and making sure those communications are evidenced.
Rozenberg, also warned “there is a risk of being penalised for this”.
“The authorities are going to take into account how much effort you put in versus how much means you had to get that information.
“So, if you’re a big company, they’ll say: ‘you’ve got the means to go out there and ask for that data.’”
Build strong relationships
Sandra Cooper, a trade and customs specialist at the Chartered Institute of Export & International Trade and the organisation’s resident ESG expert, has previously advised traders to build strong channels of communication with their suppliers.
She described knowledge-sharing as “vital to the success of CBAM” and advised firms to have conversations with their suppliers “sooner rather than later” to avoid reporting difficulties.
Bumpy start
So far, compliance with new reporting requirements has been poor, according to national agencies.
The FT reported in March that less than 10% of German firms and only 11% Swedish firms expected to submit CBAM reports had actually done so.
CBAM reporting became mandatory from 31 October, requiring that all EU firms importing seven highly polluting sectors: aluminium, cement, ceramics, fertilisers, glass, hydrogen, and iron and steel.
Until 1 January 2026 no taxes will be levied, instead companies will acclimate to the new requirements with time given to iron out any issues.