By Simon Thompson, Vice President of Sales UKI and Nordics at JAGGAER
As the European Union (EU) tightens its regulations to combat climate change and become a climate-resilient society by 2050, businesses trading with the bloc must adapt to meet new standards. Policy, legislation, and strategies are being put into place to anticipate the impacts of climate change, preventing or minimising damage wherever possible.
One of these measures is the European Union’s Carbon Border Adjustment Mechanism (CBAM) that will end its transition period this year and aims to prevent carbon leakage by imposing a cost on the carbon emissions associated with imported goods. Goods affected include iron, steel, aluminium, cement, fertilisers, electricity, and hydrogen.
The electronic home appliances sector is one important downstream user of these materials, consuming over six million tonnes of raw materials per year, indirectly contributing to carbon emissions through their supply chains, particularly through scope 3 emissions, which result from activities related to assets not owned or controlled by the reporting organisation but that are part of the value chain both upstream and downstream. Notably, the electronics industry overall is among the top eight sectors for GHG emissions, and eventually will be responsible for 852 MMT of CO2e annually by 2030 if left unmanaged.
As a result of the new legislation, starting from 2026, importers of the goods subject to regulation will need to register with national authorities and purchase CBAM certificates. The price of these certificates will be based on the weekly average auction price of EU ETS allowances, expressed in €/tonne of CO2 emitted. The EU ETS operates on a ‘cap and trade’ principle, setting a cap on the total amount of greenhouse gases that can be emitted by covered installations and aircraft operators. This cap is reduced annually to meet the EU’s climate targets and has resulted in a 37% reduction in emissions from power and industry plants since 2005.
Additionally, under CBAM, EU importers must declare the emissions embedded in their imports and surrender the corresponding number of certificates each year. The required data differs from standard GHG protocols, and any carbon price already paid and certified can be deducted.
Procurement teams play a crucial role in ensuring CBAM compliance by enhancing supply chain transparency, building strong supplier relationships, and accurately tracking embedded emissions. They must prioritise low-carbon suppliers, leverage technology for data collection, collaborate to reduce emissions, and improve data analysis and reporting.
Procurement technology can support the electronics sector to achieve CBAM compliance in at least five key areas, helping to:
1. Enhance supply chain transparency
To accurately track the carbon emissions embedded in imported goods, procurement teams need robust system that allows them to access detailed reporting and monitoring of all stages of the supply chain
to ensure compliance with CBAM requirements. To do so, establishing and maintaining strong relationships with suppliers is crucial. The right software can make this collaboration significantly easier, ultimately facilitating the accurate calculation of emissions and the timely provision of necessary data.
2. Prioritise low-carbon suppliers
CBAM incentivises sourcing from low-carbon footprint raw materials and energy suppliers, therefore businesses may need to explore alternative suppliers in regions with stricter environmental regulations or establish new contracts with those investing in clean technologies. This may involve relocating some production facilities, nearshoring to reduce transportation emissions, and collaborating directly with suppliers to implement green technologies and processes.
3. Leverage technology for data collection
Leveraging technology to automate data collection from suppliers can streamline the compliance process. Automated systems reduce the risk of human error, save time, and ensure that data is collected efficiently and accurately. Implementing AI-powered procurement software also allows to continuously monitor supplier certifications and alert procurement teams when updates are needed. This proactive approach ensures that all necessary data is always current and compliant with CBAM regulations.
4. Collaborate for emission reductions
Collaboration with suppliers is essential for developing and implementing strategies to reduce the carbon footprint of sourced materials. Procurement should engage suppliers in joint efforts to identify and adopt practices that minimise emissions. Encouraging suppliers to adopt green technologies and processes can in fact lead to significant emission reductions. Procurement should promote a collective effort towards sustainability, ensuring that all parties in the supply chain contribute to the overall goal.
5. Improve data analysis and reporting
Ensuring that emissions calculations adhere to EU Commission guidelines is crucial. Procurement should utilise advanced data analysis tools to achieve precise and accurate calculations of embedded emissions. From smooth data ingestion derived from ERP, customs, and eProcurement system to extracting data from supplier contracts and ensuring their certifications are always up to date, automation can help businesses save multiple man-hours, freeing up staff for more value-add tasks as well as reducing the risk of human error.
For businesses in the electronics sector, accurately tracking embedded emissions and gathering data on the carbon footprint of non-EU suppliers will be crucial. Accurate reporting will not only prevent carbon leakage but also help businesses avoid suppliers with unsustainable production practices that increase carbon costs, thereby avoiding fines. Procurement solutions that enhance transparency, improve communication with suppliers, and ensure precise data analysis can play a pivotal role in helping businesses meet CBAM compliance. This not only drives sustainable practices but also contributes to the broader goal of a greener and more sustainable future.
Simon Thompson, Vice President of Sales UKI and Nordics at JAGGAER
This article originally appeared in the November issue of Procurement Pro.
