2. Streamlining Data Collection essential given number of required CBAM data points
Data collection is the second hurdle in the path to proper CBAM reporting and understanding financial implications in the near future. The task is inherently complex as information is not confined within the company's borders; some data must be procured from suppliers potentially beyond tier-1, risking significant delays. Companies must initiate the process as soon as possible to restrict these challenges. While a customs agent may act as the representative for CBAM reporting purposes, the collection of installation information from suppliers will likely remain the duty of the internal procurement or supply chain department. We have seen that not all customs agents are active in supporting the importers in filing the CBAM report. This is particularly challenging for non-EU established companies importing CBAM covered goods into the EU. Registration and access to the CBAM portal are not uniform across the EU member states, which adds to operational complexity.
In the interim period, many businesses are expected to lean on default values for emissions reporting till 31 July 2024 which still requires information on the installation of production and import procedures. However, it should be noted that as of 1 January 2025 (period between 31 July 2024 and 1 January 2025 existing monitoring and reporting systems can be used), only the EU-validated method will be accepted. Moreover, estimates, including default values, can represent less than 20% of total emissions only for complicated goods after the leniency period. Starting 2026, companies will have to purchase CBAM certificates that are non-transferable. With only limited possibilities to resell unused certificates, the emphasis on robust emissions information and detailed forecasting will increase. Therefore, developing effective strategies for smooth, cross-departmental data collection while maintaining the accuracy and uniformity of the data is of utmost importance.
3. Facilitating Cross-Functional Collaboration with options to mitigate compliance burden
Facilitating cooperation across various departments is another crucial lesson, as already shortly highlighted above. Active collaboration among the respective legal entities importing CBAM-covered goods and central functions such as procurement, legal, tax, and customs at the group level can significantly ease the compliance-readiness process. This becomes particularly true when the number of ‘importer of records’ may be greater than initially anticipated. The CBAM rules necessitate each legal entity importing CBAM-covered goods throughout the year to submit four reports annually, potentially significantly increasing compliance costs solely linked to regulatory requirements. Moreover, unlike ETS allowances for instance, CBAM certificates cannot be surrendered by an entity different than the purchaser. Essentially, this highlights the prospective surge in financial expenditure and complexity businesses might face in the process of abiding by the CBAM regulation. Thus, encouraging cross-functional teamwork is indispensable for efficiently ensuring compliance in which stakeholder engagement and education are required as soon as possible.
To conclude: immediate action is required to ensure reporting readiness by 31 January 2024
The onset of CBAM reporting is a challenge that can be managed by taking immediate action given the short timeline remaining. Companies that are unaware of their complete CBAM liability given unexpected imports/importers, underestimate the complex data collection and apply a siloed approach to dealing with sustainability regulations risk penalties for incompliance. Key actions include ensuring accurate understanding of CBAM obligations, operationalizing robust data collection methodologies and facilitating effective cross-functional cooperation. Through prioritizing the company’s CBAM response, corporations can ensure cost-efficient compliance with this new policy and may harness this opportunity to promote their global decarbonization efforts.
