Accurate CBAM Reporting with Zero Hassle and Zero Delay

What is CBAM & Why it Matters?

Definition

The Carbon Border Adjustment Mechanism (CBAM) policy was introduced by the European Union (EU) in October 2023. It places the import duty on the greenhouse gas (GHG) emissions in the production of selected imports. The industries currently covered under this policy include aluminium, cement, steel, fertilisers, electricity, and hydrogen.

Purpose

The CBAM policy is aimed at the prevention of ‘carbon leakage’ (when companies move production to countries with weaker climate rules and thus lower cost of production). This is how it ensures fair competition between EU and non-EU producers.

Business relevance

Companies outside the EU must comply with CBAM if they export the mentioned products, as EU importers are legally required to report emissions and buy CBAM certificates. High-emissions products will become costlier, thus making low-carbon producers more competitive.
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How Does the CBAM Mechanism Work?

The process of CBAM involves the following aspects:

Registration of Importers

The companies importing CBAM goods need to apply from January 1, 2025, to become Authorised CBAM Declarants. The restrictions will be imposed from January 1, 2026, allowing only registered declarants to import CBAM goods.

Reporting of Embedded Emissions

Importers need to submit quarterly CBAM reports showing the quantity of imports, direct and indirect embedded emissions, and any carbon price already paid in the country of origin.

These reports are mandatory but do not involve financial obligations at this stage. The submitted reports are further processed for data verification if actual values are used. They are verified by a certified testing body.

Purchase of CBAM Certificates

Importers must buy CBAM certificates that correspond to the amount of embedded carbon dioxide equivalent (CO2e) emissions in their imports. The price of each certificate mirrors the average EU ETS allowance price. Any carbon tax paid abroad is deducted to avoid double charging.

Annual CBAM Declaration and Reconciliation

By May 31st each year, authorised declarants must file an annual CBAM declaration showing imports and related emissions from the previous year. The declaration is compared against the number of certificates purchased. If too few certificates are acquired, financial sanctions could be imposed.

CBAM Reporting Requirements and Timeline

The CBAM is divided into two phases: the transitional phase and the definitive regime. While the first one deals with the reporting aspect, the second will be concerned with financial obligations. Here are the detailed insights into the two phases:

Transitional Phase (2023–2025): Key obligations for EU businesses

From October 2023 to the end of December 2025, the companies are obligated to report on their emissions. There are no financial obligations within the mentioned period. This time can be used by businesses to prepare for the definitive regime starting in 2026. It gives companies the opportunity to test reporting systems, collaborate with suppliers, and address data gaps before financial obligations and penalties apply. They can also prepare to become an Authorised CBAM Declarant if continuing imports into 2026.
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Reporting obligations include:
- Quarterly report submission that covers direct emissions from imports
- Incorporate actual emissions data from producers, if available, or use equivalent or default methodologies
- Produce traceable data The reports must be filed by the end of the month after the quarter.

Definitive Regime (from 2026): The post-2026 landscape

This phase will involve stricter reporting, where the companies will be financially obligated. The importing companies will submit annual reports and purchase CBAM certificates to cover embedded emissions.

Here is what specifically the companies must do:
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1. Annually submit the CBAM declaration for all the imports from the past year
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2. Buy and hand over CBAM certificates equal to the emissions in those imports
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3. Choose certificates based on the weekly EU ETS average
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4. Deduct the already paid carbon costs
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5. Get the emissions data verified by an independent body
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Companies can choose between two methodologies to calculate emissions:
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1. The calculation-based approach involves the calculation of emissions indirectly. It can be used:
- Activity data with emission factors: It can be used for tracking the amount of consumed fuel, electricity, or raw material and multiplying the value by standard factors. The result will be how much carbon dioxide each unit generates.
- Mass balance method: It compares the carbon content of all materials entering and leaving the production process to estimate how much carbon is released as emissions.

2. The measurement-based method is more direct. It measures the actual concentration of greenhouse gases and the volume of the flue gases released at the manufacturing site. This provides emissions data based on real-time monitoring rather than estimates.

Handle the reporting, certificates, and documents in the official registry

Before 2026, the companies must register as an authorised CBAM declarant with their national authority. They will need to plan their budget for buying certificates, collecting verified emissions data for each product, and ensuring suppliers can provide accurate information. Any delays, missing data, or mistakes could lead to higher costs or penalties.

Recent Updates

The EU proposed the Omnibus or Simplification Package in early 2025. These are a set of updates designed to streamline CBAM processes and support its proper implementation from 2026. 

- 50 tonne exemption rule: Importers bringing in less than 50 tonnes of a CBAM product annually are exempt from reporting and certificates, but must track volumes. 

- Simplified authorisation and digital portal: Becoming an authorised declarant is easier. Third parties can file for the companies, and all processes will run through a single EU CBAM portal. 

- New deadlines for certificates and reports: Tracking begins in 2026, but the first certificates are due in 2027. The new deadlines for reports are 31 August and for certificates are 31 October. 

- Narrowed emissions scope: CBAM now covers only direct emissions, including electricity use. The emissions do not cover steam, heat, and cooling to ease reporting.

Implications of CBAM

The implications of CBAM for importers are stated as follows:

1. Business-Level Impacts

Financial

Importers will face increased costs due to the requirement of CBAM certificate purchases. Thus, there will be a rise in product prices across sectors like aluminium, steel, and cement. Further, developing countries will also face significant costs to comply with CBAM when exporting to the EU. The economic impact on these countries could exceed the revenues generated by the CBAM, potentially causing financial strain.

Operational

Companies must adjust supply chains by working with suppliers who can provide verified emissions data, increasing contractual and compliance complexity. The businesses operating in developing countries may lack time, resources, and systems to align with the EU’s carbon pricing, thus creating operational difficulties.

Strategic

Importer firms will be pushed to accelerate low-carbon transitions, invest in greener technologies, and reorient sourcing toward suppliers with lower embedded emissions. Exporters may need to modernise production and adopt low-carbon technologies to remain competitive in the EU market. Other countries will also need to negotiate with the EU to secure fairer implementation and protect trade interests.

2. Risks of Non-Compliance

Penalties

Failure to submit accurate reports or surrender certificates on time can result in financial fines.

Market access

Persistent non-compliance could lead to restrictions or even loss of access to the EU market.

CBAM in the Context of Climate and ESG Regulations

CBAM is part of a broader climate and sustainability regulatory landscape. It does not operate in isolation and links directly with the EU Emissions Trading System (EU ETS). It ensures that imported products face similar carbon costs as domestic producers.

CBAM supports companies in meeting ESG reporting rules, like CSRD and GHG protocol. It eases the companies to include carbon compliance in their existing sustainability efforts. Moreover, it also prepares them for future global carbon pricing rules since similar systems may appear in other countries.  

Imports like steel and aluminium will need CBAM certificates, and more products will be covered as free ETS allowances are phased out from 2026 to 2034. CBAM and ESG reporting will be easier due to the use of consistent methods such as GHG protocol standards, lifecycle assessments, and verified supplier data.

CBAM Compliance Challenges and Solutions

Some of the key challenges that businesses face and their potential solutions are:

Gathering accurate emissions data

Many companies struggle to collect precise product-level emissions information. The problem is more prominent when suppliers are spread across different regions with varying reporting practices.

Solution: Build stronger engagement with suppliers and request verified emissions data early. Using standardised methods such as the GHG protocol or lifecycle assessments can improve consistency.

Complex supply chain reporting

Global supply chains involve different suppliers at every level. It poses a problem in tracing and consolidating emissions data from a variety of sources.

Solution: Adopt digital tracking tools and centralised data platforms. It makes it easier to collect, share, and monitor emissions data across the entire value chain.

Understanding regulatory updates

CBAM requirements will expand over time as the EU phases out free ETS allowances. It will also include more products and emission categories. Now the businesses may risk falling behind if they don’t stay informed.

Solution: Establish regular monitoring of regulatory updates and integrate compliance planning into sustainability strategies. Cross-team collaboration between sustainability, compliance, and trade teams can ensure alignment and readiness.

Managing compliance costs and competitiveness

Implementing carbon reduction measures, reporting systems, and CBAM payment increases costs. For companies in highly competitive industries, this creates pressure on profit margins and market positioning.

Solution: Invest in efficiency improvements, adopt cleaner technologies, and embed sustainability into operations. These measures not only reduce emissions but can also lower long-term costs and strengthen competitive advantage.

Shortage of accredited verifiers

The limited availability of EU-accredited third-party verifiers may lead to delays and higher costs as demand surges in 2025.

Solution: Engage early with verification authorities, establish agreements in advance, and participate in EU training or consultation programs to stay aligned.

Getting Started with CBAM

The steps that companies must take to align themselves with CBAM requirements are as follows:

- Identify CBAM products: Review imports like steel, aluminium, and cement to confirm which fall under the CBAM scope. Companies can check whether their product’s HSN (Harmonised System Nomenclature) code falls in the list of HSN’s covered under the CBAM policy.

- Map supply chains: Trace suppliers and evaluate their ability to provide reliable emissions data

- Revise contracts: Update agreements with clauses on emissions data, certificate costs, and compliance duties

- Collect and align data: Use EU methods and integrate with CSRD/ESG reporting

- Set up reporting systems: Build quarterly reporting, training, and verification processes

- Engage teams: Define roles across procurements, finance, sustainability, and operations

How Oren Sustainability Hub Helps

Oren acts as a strategic partner, and not just a tool, guiding businesses through CBAM readiness and compliance.

1. Track Embedded Emissions
- Accurately monitor Scope 1, 2, and 3 emissions across your value chain to determine the embedded carbon emissions

2. Engage Suppliers for Data
- Streamline the collection of primary emissions data directly from your suppliers using standardised data request templates

3. Generate CBAM Declarations
- Compile embedded emissions data and necessary supporting information into submission-ready CBAM declarations

4. Maintain CBAM Compliance
- Receive timely updates on evolving CBAM regulations, methodologies, and reporting requirements to ensure continuous compliance

Comprehensive Compliance for CBAM

Oren’s CBAM solution equips businesses with the tools and expert support needed to monitor, manage, and report carbon emissions across their supply chains.

1. GHG Emissions Tracking & Decarbonisation: Accurately measure and track Scope 1, 2, and 3 emissions while implementing decarbonisation strategies to reduce your carbon footprint.

2. Simulate & Model CBAM Impact: Model the potential effects of CBAM on your operations, analysing how carbon pricing and reporting obligations will impact your business.

3. Certificate Management: Streamline CBAM certificate purchases, allocation, and surrender to ensure full regulatory compliance.

Expert Advisory and Simplified CBAM Reporting

Our CBAM advisory services offer in-depth guidance on navigating the regulatory landscape, including readiness assessments, data validation, and tailored strategies for compliance.

1. CBAM Readiness & Gap Analysis: Evaluate your alignment with CBAM standards, identify gaps, and implement strategies to ensure compliance.

2. Simplified Reporting & Verification: Generate detailed GHG reports, manage quarterly goods reporting, and streamline certificate management to avoid misreporting penalties.

3. Ongoing Compliance Support: Receive continuous updates, guidance, and support to stay aligned with evolving CBAM regulations.