CBAM unpacked: What businesses need to know now

Fiona Donnelly CA, Director of Sustainability at ICAS, breaks down the key takeaways from our joint webinar 'Carbon Border Adjustment Mechanisms (CBAM): What you need to know', unpacking what CBAM means in practice and what businesses need to do now to prepare for its impact on trade, data and supply chains.

A new era for carbon and trade 

CBAM is quickly moving from policy concept to business reality. As explored in our recent joint webinar with Chartered Accountants Ireland, CBAM represents a major shift in how carbon emissions are accounted for in global trade. While the idea is simply to put a fair price on carbon embedded in imported goods, the practical implications are anything but. 

With the EU already in implementation mode and the UK preparing to follow in 2027, businesses need to understand not just what CBAM is, but how it’ll affect their operations, supply chains and decision-making. 

What CBAM is trying to achieve 

At its core, CBAM is designed to prevent 'carbon leakage'. This happens when companies move production to countries with weaker climate policies, undermining global emissions reduction efforts. CBAM levels the playing field by applying a carbon cost to imports, ensuring that domestic producers aren’t disadvantaged. 

The EU scheme currently targets carbon-intensive sectors such as steel, aluminium, cement, fertilisers, electricity and hydrogen. Importers must account for the emissions embedded in these goods and effectively 'pay' for them through CBAM certificates. 

The UK version shares the same goal but differs in design. It’ll operate more like a tax, applied at the point of import, with liability likely to sit with the importer. 

EU vs UK: Similar goals, different approaches 

Although the EU and UK CBAM regimes aim to achieve the same environmental outcome, their mechanics differ in important ways. 

The EU has taken a phased approach, starting with a transitional reporting period before financial obligations fully kick in. This has given businesses time to understand requirements and build processes. 

In contrast, the UK won’t include a transitional phase. When it launches in January 2027, businesses will move straight into a chargeable regime. While there is some flexibility in the first year for registration, the expectation is that companies should already be preparing. 

Another key difference lies in how the systems operate. The EU model is certificate-based and closely linked to its emissions trading system. The UK model is more aligned with customs processes, calculating a charge based on emissions and applicable carbon pricing adjustments. 

The real challenge: Data, data, data 

One of the clearest messages from the webinar is that the biggest challenge isn’t understanding CBAM rules it’s getting the data needed to comply. 

Importers are required to report the carbon emissions embedded in their goods. In theory, this data should come from suppliers. In practice, many suppliers particularly those outside the EU aren’t ready or willing to provide it. 

Some businesses report dealing with suppliers who have thousands of product lines but no emissions data at all. Others face multi-layered supply chains involving dozens of manufacturers across different countries, making data collection extremely complex. 

To address this, the EU allows the use of 'default values' where actual data is unavailable. However, these come with increasing penalties over time, making them a short-term solution rather than a long-term strategy. 

Why supply chains are under the spotlight 

CBAM is already influencing how companies think about their supply chains. Businesses are being forced to ask questions they may not have considered before: 

• Where are our goods coming from? 
• How carbon-intensive are they? 
• Can we source lower-emission alternatives? 

In some cases, companies are shifting suppliers closer to home to reduce both emissions and administrative burden. In others, they are favouring suppliers who can provide quality emissions data. 

Interestingly, this shift isn’t always away from international suppliers. Some countries are moving quickly to decarbonise their industries, potentially making them more competitive under CBAM. 

The hidden impact on contracts and costs 

CBAM introduces a new cost and with it, new commercial tensions. 

Many existing contracts were agreed before CBAM was on the horizon. As a result, they often don’t specify who should bear the cost of carbon charges. This is already leading to difficult conversations between importers, suppliers and customers. 

Businesses are now reviewing contracts to clarify: 

• Who is responsible for CBAM compliance? 
• Who pays the associated costs? 
• What happens if emissions data is inaccurate? 

Without clear agreements, disputes are likely to increase as CBAM becomes fully operational. 

Operational reality: More than just a tax 

For many organisations, CBAM isn’t just another compliance requirement it’s a cross-functional challenge. 

Finance teams are often taking the lead, but they cannot manage it alone. Successful implementation requires coordination across purchasing, logistics, production and sustainability teams. 

Some businesses are creating dedicated 'carbon teams' to manage this complexity. These teams handle everything from supplier engagement to data collection and reporting. 

Systems also need to evolve. Companies are adapting purchase orders to capture emissions-related information and building internal databases to track carbon data alongside financial data. 

Short-term pain, long-term change 

In the short term, CBAM brings additional administrative burden and cost. Businesses must invest time in understanding the rules, registering on systems and gathering data. 

However, many expect this to become more manageable over time. Once processes are in place and data flows improve, CBAM reporting could become routine like existing tax or compliance obligations. 

In the longer term, the impact is more profound. CBAM is already driving changes in how and where goods are produced. It’s encouraging investment in lower-carbon technologies and influencing sourcing decisions. 

Part of a bigger sustainability picture 

CBAM doesn’t exist in isolation. It’s one of several measures pushing businesses toward decarbonisation. 

Other initiatives such as green public procurement, environmental product declarations and digital product passports are also shaping the landscape. Together, they are creating a powerful incentive for companies to reduce emissions across their value chains. 

This combination of regulation and market pressure is already delivering change. Some industries are shifting toward greener production methods, while others are bringing manufacturing closer to home. 

Will CBAM deliver real environmental impact? 

It’s still early days, but there are signs that CBAM is having an effect beyond Europe. 

Some countries are exploring their own carbon pricing mechanisms to retain revenue and remain competitive. Others are investing in cleaner production to reduce their exposure to CBAM charges. 

While CBAM alone won’t solve climate change, it’s an important piece of the puzzle. By linking trade with carbon accountability, it creates a strong incentive for global emissions reduction. 

The key takeaway: Get started now 

Perhaps the most practical advice from the webinar is also the simplest: don’t wait. 

CBAM may seem complex, but delaying action only makes things harder. Businesses that engage early understanding their exposure, mapping their supply chains and starting conversations with suppliers will be far better prepared. 

As one speaker put it, the key is to "get over yourself and get stuck in". CBAM is here, and it isn’t going away. 

For organisations willing to act now, it offers not just a compliance challenge, but an opportunity to build more resilient, sustainable and future-ready operations. 

For more details watch the full CBAM webinar below. 

Catch up on the CBAM webinar