From Financials to Sustainability Reporting

By Sarah Shannon

In the business world, understanding the health and performance of your company has traditionally relied heavily on financial data. For years, financial reports have been the cornerstone, providing insights into revenue, expenses, profits, and more. However, as the climate crisis escalates businesses face increasing pressure to operate sustainably so a new form of reporting is emerging—one that goes beyond the balance sheet to assess the environmental and social impact of operations.

The Rise of Sustainability Reporting

Historically, businesses diligently produced financial reports to comply with regulations like those set by HM Revenue & Customs (HMRC). These reports were crucial for tax purposes, providing transparency and accountability to stakeholders. However, as concerns about climate change, scarce resources, and social inequality mount, there’s a growing recognition that traditional financial reporting is not enough to capture the full picture of a company’s performance.

Expanding scope of sustainability reporting

Enter sustainability reporting which is gaining momentum and becoming increasingly more relevant for businesses all around the world. With the introduction of regulations like the Streamlined Energy and Carbon Reporting (SECR) and the Corporate Sustainability Reporting Directive (CSRD), sustainability reporting is being elevated to an equal footing with financial reporting.

Streamlined Energy and Carbon Reporting (SECR)

In 2019 SECR, was introduced in the UK. It requires large companies that fit strict criteria to report on their energy use, greenhouse gas emissions, and energy efficiency measures in their annual reports (again what they report is determined by certain criteria?. This regulation aims to increase transparency around energy and carbon emissions and encourage companies to reduce their environmental impact. Read more details on criteria at GOV.UK

Corporate Sustainability Reporting Directive (CSRD)

Similarly, CSRD, a proposed European Union directive, seeks to expand the scope of sustainability reporting requirements for companies. It mandates certain companies to disclose information on environmental, social, and governance (ESG) matters in their annual reports. Different companies will be obliged to comply with the requirements for the first time in various fiscal years, depending on specific criteria. Read more on the EU CSRD page

What should be included in reports?

Under the CSRD rules, reporting entities will be required to report qualitative and quantitative information related to:

Diversity of company boards
Double materiality
ESG targets and progress in reaching them
Greenhouse gas emissions and targets
Human rights issues
Social responsibility and employee treatment
Sustainability goals, performance and policies

These regulatory developments signal a significant shift in how businesses are expected to operate and communicate their performance to stakeholders. No longer can sustainability be treated as a mere side issue or optional reporting. It is now recognised as a fundamental aspect of business strategy and risk management.

Integrating Sustainability for Deeper Insights

By integrating sustainability reporting into their practices, businesses can gain a deeper understanding of their impact on the environment and society. They can identify risks and opportunities, improve resource efficiency, enhance brand reputation, and build trust with customers, investors, and other stakeholders.

Even better, sustainability reporting can drive innovation and foster a culture of continuous improvement within organisations. By collecting, managing and monitoring data sets a business can identify trends, make data driven decisions, drive sustainability initiatives and communicate ESG efforts to stakeholders. Also help set realistic targets and enable business to reflect and track progress. By publicly disclosing their performance, companies can hold themselves accountable and strive for positive change.

Paving the Way for a Sustainable Future

In conclusion, the evolution from financial reporting to sustainability reporting represents a fundamental shift in how we measure the health and success of businesses. As regulations like SECR and CSRD come into force, businesses have a unique opportunity to embrace sustainability as a core value and contribute to a sustainable future. By unlocking the true health of their business through comprehensive reporting, companies can pave the way for a more sustainable and prosperous future for all.

Are you ready for sustainability regulation? Let us help you gather data and confidently report your sustainability achievements?

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Strategies for Overcoming Responsible Sourcing Challenges

By Sarah Shannon

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As a responsible sourcing specialist, your role is pivotal, but it’s no secret that it comes with its fair share of challenges. Not only are you tasked with championing sustainability while also ensuring your organisation still gets value for money while also maintaining quality and compliance and above all being good for the planet. In this blog post, we’ll delve into the common challenges faced by responsible sourcing specialists and explore strategies to overcome them effectively.

1. Risk Mitigation

Challenge: Managing supply, market, and compliance risks can feel like walking a tightrope. Supply chain disruptions, market fluctuations, and compliance issues are ever-looming threats.

Strategy: Conduct thorough risk assessments regularly. Diversify your supplier base to spread risk. Develop contingency plans to tackle potential disruptions. Stay informed about market trends and regulatory changes to proactively address risks.

2. Lack of Transparency

Challenge: Maintaining visibility and control over the responsible sourcing process, especially in large organisations, can be daunting. Lack of transparency makes it difficult to track purchases, monitor supplier performance, collect data and audit ESG credentials and ensure compliance with organisations procurement policies.

Strategy: Embrace dedicated Saas Solutions developed with sustainability and ESG at the forefront. Instead of adopting outdated tech that is attempting to retrofit the needs of responsible sourcing. New technologies provide real-time insights and improve transparency in line with new regulatory requirements too. One tip shared in a recent roundtable we hosted was to regularly review and refine your responsible sourcing processes to identify areas where transparency can be enhanced.

3. Supplier Management

Challenge: Identifying the right suppliers and ensuring they consistently deliver quality products and services that are sourcing widgets and treating employees responsibly can be a complex task. Supplier performance tracking is crucial but can be time-consuming without the right tools.

Strategy: Invest in robust and secure supplier relationship management (SRM) strategies. Build strong relationships with key suppliers. Develop clear performance metrics and monitor them diligently. Consider supplier development programs to help your suppliers meet your expectations. This can be achieved when you have collected the right data to assess risk and understand impact of working with your suppliers.

4. Internal Communication

Challenge: Effective collaboration with various departments within your organisation, such as finance, operations, and legal, is essential. ENgage them early on and share the company’s sustainability goals and embed it in the corporate thinking. Miscommunication, lack of consistency or lack of alignment can lead to misunderstanding or a laxed approach to responsible sourcing.

Strategy: Establish regular cross-functional meetings to align sustainability goals and objectives. Create clear communication channels to ensure information flows seamlessly between departments. Foster a culture of collaboration and open communication – share success stories.

5. Technology Adoption

Challenge: Some organisations may be resistant to adopting responsible solutions and its human nature to resist change and find it easier to rely on tried and tested processes like using clunky excel spreadsheets and email trails. Embracing technology can significantly improve efficiency and reduce manual errors.

Strategy: Embracing new technology designed around responsible sourcing can significantly improve efficiency, reduce manual errors and accelerate sustainability data collection and help a company understand their suppliers’ sustainability activity.

Adoption of responsible sourcing and procurement SaaS solutions speed up processes with automation, improve data analytics, and cost savings.

6. Cost Management

Challenge: Controlling costs while maintaining quality is an ongoing concern in procurement but even more so for the more specialist responsible sourcing experts. Price fluctuations, market dynamics, and unexpected expenses can impact on your budget.

Strategy: Develop comprehensive cost-saving strategies. Negotiate favorable contracts and explore opportunities for bulk purchasing or supplier consolidation is a given. The tough part is assessing the risk and impact of suppliers on your company’s sustainability reporting.

7. Compliance and Regulations

Challenge: Staying compliant with various local and international regulations, especially the new sustainability regulations, can be complex. Navigating environmental standards, and industry-specific requirements requires verifiable data and analysis.

Strategy: Upskill your team. Stay updated on relevant regulations through a corporate commitment to continuous education and training. Ensure your sourcing practices align with legal requirements. Work with your legal and compliance teams to navigate regulatory challenges effectively.

8. Supplier Diversity

Challenge: Many organisations prioritise seeking supplier responsibilty to embed their corporate social responsibility initiatives. However, identifying and engaging with long list of suppliers can be challenging.

Strategy: Create and champion supplier responsibility programs within your organisation and promote on public channels to ensure you attract suppliers with similar values. Actively seek out and partner with responsible suppliers to meet your organisation’s CSR goals. Promote the value of diversity and inclusion in your HR and procurement processes.

Ultimately, as responsible sourcing specialists, you play a vital role in the success of your organisation. To conquer the challenges you face, invest in regulatory training and technology, foster transparent communication –both internally and externally, and develop robust responsible supplier management strategies. By addressing these challenges strategically, you not only ensure efficient procurement and reach responsible sourcing goals but also contribute significantly to your organisation’s growth and bottom line.

Keep innovating, stay agile, and continue to strive for the best responsible sourcing practice in your critical role supporting people and then planet.

Ready to accelerate your responsible sourcing? Explore our platform by booking a short demo today.

Mastering CSRD Compliance: Essential Tips for Business

By Sarah Shannon

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Start mastering CSRD Compliance with our six essential business tips for navigating sustainability reporting requirements.

You may be more aware that to ensure compliance with EU’s CSRD regulations, businesses must take proactive steps now. In this blog, we will explore the key steps that organisations can take to meet CSRD requirements and strengthen their sustainability reporting efforts.

1. Understand the Requirements

The first step towards compliance with CSRD regulations is to gain a thorough understanding of the directive itself. The CSRD builds on existing sustainability reporting frameworks like the Non-Financial Reporting Directive (NFRD) and introduces new reporting requirements. Businesses should have a dedicated team who can familiarise themselves with the specific obligations and timelines outlined in the CSRD to ensure that they meet all regulatory demands.

2. Assess Current Practices

To align with Corporate Sustainability Reporting Directive (CSRD) regulations, businesses must assess and update their sustainability reporting practices, considering the entire value chain. Identify key sustainability issues relevant to the organisation and stakeholders, focusing on high-impact areas such as fuel consumption. This targeted approach ensures compliance with CSRD requirements, enhancing transparency and sustainability across the entire value chain.

3. Collect Accurate Data

Accurate data is the foundation of credible sustainability reporting. To meet CSRD regulations, businesses should establish a clear workflow for collecting accurate and reliable data on their sustainability performance. This may involve implementing robust data collection processes, training staff, and ensuring data quality control mechanisms are in place. A well-defined data collection strategy is essential for producing reliable sustainability reports.

4. Invest in ESG Data Management Tools

As sustainability reporting gets more complicated, businesses are finding it helpful to use tools for managing Environmental, Social, and Governance (ESG) data. These tools make it easier to accurately and securely collect supplier data, meeting CSRD requirements. Another option is partnering with consultancies that offer fully managed ESG data services, providing a simple solution for efficient data collection and reporting.

5. Report on ESG Risks and Opportunities

CSRD is transforming ESG reporting. Businesses must ensure that their reports include comprehensive information in these areas. This involves a thorough analysis of the potential impacts of ESG factors on the organisation’s performance and strategy.

6. Seek Third-Party Assurance

To enhance the credibility of their sustainability reports, businesses should prepare to obtain independent verification of sustainability data. This can instill greater trust among stakeholders and investors. Selecting a reputable third party is crucial to ensuring the validity of the reported information.

In conclusion, compliance with CSRD regulations is a critical for a growing number of businesses directly and indirectly impacted along the value chain. Businesses that embrace sustainability as a core value and prioritise compliance with the CSRD will not only meet regulatory requirements but also build trust, attract more customers and responsible investors – all wanting to contribute to a more sustainable future. By following these steps, organizations can navigate CSRD challenges and showcase their commitment to environmental and social responsibility.

Dive deeper into your value chain and supplier engagement for CSRD with our recommended read: 5 mistakes to avoid when engaging suppliers – Pulse Market

How to Prepare Your Business for CSRD Compliance

By Sarah Shannon

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The Corporate Sustainability Reporting Directive (CSRD) is a set of rules introduced by the European Union to make businesses report on their sustainability efforts starting in January 2024. Large organisations are now expected to take sustainability reporting as seriously as financial reporting. Many companies both inside and outside the EU will be impacted. Are you ready? To prepare your business for CSRD compliance, follow these simple steps:

1. CSRD Knowledge is power

Understand the Requirements: Start by getting to know exactly what CSRD wants from your business. Read the guidelines and standards provided by the European Sustainability Reporting Board (ESRB). These documents will tell you what you need to do to report your sustainability activities properly and when.

The European Sustainability Reporting Standards Q&A is a helpful starting point to answer your questions:

Q&A adoption of European Sustainability Reporting Standards (europa.eu)

2. Collect and Track Data:

To fully meet CSRD requirements, you’ll need to gather information about how your business impacts the environment and society. This includes data from your operations, suppliers, and partners. Make sure your data collection methods are accurate and dependable. Consider using a double check to identify the most important sustainability issues for your business and stakeholders.

3. Get Your Team Ready for CSRD:

Do you have the resources to create a CSRD compliance team. Make sure this team can get to know and work with all relevant departments within your business to identify and gather the data needed. There’s clear need for greater education and awareness as well as adequate HR to implement effective CSRD strategies. So, train your CSRD team so they know what’s required and can stick to the reporting rules.

4. Check Where You Stand:

Keep in mind that CSRD deadline differs depending on your business type and size, so make sure you know when your reporting obligations start. However, remember who you do business with matters and they may already be obligated to report and could turn to you with a DDQ.

Carefully review your business to see if CSRD rules affect your business. Are you affected directly because of the size of your organisation? Are your clients affected therefore likely to ask you to respond to a DDQ questionnaire. This helps you spot any upcoming challenges and areas that need special attention now.

Remember CSRD compliance will be time-consuming (especially at the start) and require a lot of information gathering but it will get easier the earlier you start. So prepare early and thoroughly and allocate adequate resources – time and team. Consider using technology and software in a secure platform to make data collection easier, more accurate and secure.

Ultimately, CSRD compliance is a major step towards proving that your business genuinely cares about sustainability and being transparent. By embracing CSRD rules, you can align your business with global sustainability goals and boost your reputation in a world that increasingly values responsible businesses.

Get ahead of the CSRD curve with Pulse Market.

Get in touch now to explore Pulse Market – the secure and simplified data solution.

7 Key Drivers for Corporate Transformation in the Era of CSRD and SECR

By Sarah Shannon

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Are you Embracing Change Beyond Compliance?

In today’s fast-paced business world, companies are increasingly recognising the importance of adapting and evolving to satisfy sustainability regulations alongside satisfying employee, customer and investor demands. Let’s be honest it is the regulatory drivers like SECR and CSRD that are the key to making most Boards take notice and take action.

This blog explores the seven key drivers that are driving businesses to undertake urgent corporate transformation.

1. Global Influence:

In light of growing environmental crises, big companies are rethinking and adjusting their ways to lessen their impact on the environment. They’re leading the charge for positive change worldwide. But for many of these organizations, especially in financial services, going green isn’t just a choice anymore.

With CSRD/SECR regulations, it’s quickly becoming a legal must to report accurately. This pushes companies to not just talk about their emissions but to really work on cutting them down. They’re now turning their attention to their supply chain to get a grip on their Scope 3 emissions.

2. Consumer Expectations:

Nowadays, consumers want brands to be open and responsible. Companies that go green and share their carbon use and reduction plans will not find CSRD and SECR daunting. They know they can really win over customers’ trust and loyalty – plus, they’ll be following the rules (that are only going to get tougher)!

3. Investor Pressure:

Investors are paying more attention to how companies handle environmental, social, and governance (ESG) issues. Companies that get ahead in these areas, like those required by SECR, tend to draw in and keep investors who think about the future.

4. Align CSRD and ESG to gain Competitive Advantage:

By following CSRD and SECR rules, companies can boost their overall ESG impact, showing they care about being open and responsible, which helps them shine in the market.

5. Risk Management:

Understanding and mitigating environmental risks is crucial for long-term sustainability. SECR compliance helps companies identify and address these risks, thereby safeguarding their future.

6. Operational Efficiencies:

Collecting data and insights internally and across the value chain to satisfy CSRD and SECR regulation leads to discovering effective operational methods. Resulting in smarter and cheaper ways to work. Saving energy and further cutting down waste is good for the planet.

7. Future-Proofing against tighter regulation:

Staying on top of environmental reporting and sustainability now is smart because it prepares companies for stricter regulations. Getting into data gathering and compliance reporting is a proactive move, helping businesses stay ahead in a world must become increasingly focused on carbon emission reduction across the supply chain.

Ultimately carbon reduction is a major focus, driven by regulatory initiatives like CSRD and SECR. These aren’t just rules to follow; think of them as part of a bigger push to make carbon reduction and social responsibility core elements of business operations. It’s about changing decision-making and operations to benefit the planet and society, which is also good for business.

Contact us about our Managed Service to help with CSRD and SECR reporting

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Embracing the circular economy: shaping a sustainable future

By Sarah Shannon

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Circular economy is the hottest topic in sustainability right now. So what is the circular economy?

Unlike the dominant linear economy of a ‘take, make, consume and bin’ the circular economy revolves around three principles:

keep products and materials in use
cut out waste and pollution
foster regeneration of natural systems

Circularity is mostly touched on in conversations with nods of the heads agreeing that it is the right thing to do. Today, not enough businesses are embracing the circular economy.

The good news is there are businesses leading the way. Organisations like Lenovo computers, Volvo cars, Ikea and Adidas are leaving behind the destructive linear economy and embracing the circular economy to reduce consumption of raw materials, carbon emissions and reduce waste.

A faster transition requires a systematic shift in the way businesses think and design products following the three principles outlined above. It also requires a fundamental shift in the way individuals consume products and services to influence change. According to European Parliament every European consumes an average of 14 tonnes of raw materials per annum and produces 5 tonnes of waste.*

*https://multimedia.europarl.europa.eu/en/video/x_V007-0034

What is holding businesses back?

Businesses are held back from making the shift either because they don’t know where to begin or fear the short term costs to shift business operations and processes.

Instead, now is the time to think differently – look to the long term savings for the business and of course the safety of the people and our planet.

Benefits of the circular economy

From the all important environmental perspective it reduces resource extraction, lowers levels of pollution and minimises wastage.

For the businesses embracing the circular economy they are experiencing numerous benefits such as:

Stimulating innovation
Attracting investment/funding
Gaining competitive advantage
Creating new business opportunities
Enhancing brand reputation
Generating job opportunities
Saving on costs of materials
Boosting the bottom line

However, achieving a circular economy requires collaborative efforts from governments, businesses, and individuals. A company can’t work on its own to achieve a circular economy. Achieving a successful transition to a circular economy requires collaborative efforts from governments, businesses and individuals. By considering each third–party partnership carefully and ensuring suppliers share the same sustainability goals they can work together to transition faster. That’s where your responsible sourcing team can play an influential role as they armed with the knowledge and tools to select suppliers that meet sustainability standards.

Discover more about procurement best practice to free up precious time to focus on your strategic goals. Visit Procurement Best Practice

https://pulsemarket.com/procurement-best-practice

CDP Reporting: Building a Sustainable Future

By Sarah Shannon

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Corporate environmental accountability has become crucial in recent years, as stakeholders evaluate how companies are addressing climate change impacts and emissions. A key resource in this effort is CDP (formerly known as the Carbon Disclosure Project), an international non-profit organisation that helps corporations create sustainability programs aimed at reducing emissions and pollution into our environment. Keep reading to learn more about the role CDP reporting can play in helping a business move towards greater sustainability!

What is CDP reporting and why it matters?

In today’s world, environmental sustainability is a pressing concern for investors, companies, and the public. As climate change continues to affect people and the planet, stakeholders are increasingly interested in how companies are addressing the challenges posed by a changing environment. The “E” in environmental, social, and governance (ESG) reporting has gained significant attention, and CDP is helping addressing ‘E’nvironmental factors with its reporting framework. A Framework designed for companies to disclose their environmental impacts and efforts to reduce emissions, pollution, and other forms of environmental damage.

What is CDP reporting?

CDP reporting is a process through which companies score and share their environmental data. A broad range of stakeholders rely on CDP as a process for companies to report their environmental impacts and demonstrate they are managing the risks and opportunities associated with climate change, deforestation, and water security.

How is CDP data used?

A CDP score provides a quick snapshot of how environmentally well a company is doing. CDP data reveals which companies are better long-term investments and helps investors manage environmental risks within their portfolios while assessing their investments’ carbon footprint. It’s not just investors that value CDP reports. More and more companies are turning to environmental scoring to evaluate their own environmental impact and of the third parties they work with.

Exploring the Benefits of Environmental Reporting:

The benefits of environmental reporting extend beyond accountability to investors and clients. They include:

boosting reputation by fostering transparency
benchmarking progress towards climate targets
staying ahead of environmental risks, and aligning with evolving regulations

Looking Towards the Future with Environmental Reporting

There are many more advantages to gain. Transparency, standardisation and a culture of accountability create trust among investors, shareholders, and the public, contributing to a positive image for the business.

Environmental scores allows companies to measure their environmental impact against industry peers and gain valuable insights.
Consistent reporting ensures organisations do not overlook environmental risks and aids in the development of future environmental strategies.
Environmental reporting enables companies to align with regulatory requirements, such as the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

The additional advantages of reporting are significant when it comes to supply chain transparency. It helps identify supply chain risks, mitigate reputational risks and evaluate carbon-reduction performance compared to competitors – increasingly more important with Scope 3.

Ultimately by embracing greater accountability and transparency, companies become more attractive to sustainably-conscious stakeholders: investors, suppliers, customers, and employees.

Talk to Pulse Market about our ESG Passport designed to kickstart SMEs ESG journey.

Rising to the Net-Zero Challenge:

By Sarah Shannon

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Key Considerations for SMEs Competing in Tenders

Small and medium-sized enterprises (SMEs) account for 5.5 million businesses that drive innovation and job creation in the UK economy. But they also have a significant impact on supply chain carbon emissions, making them a target for accountability under Scope 3 regulation.

To address their own indirect carbon emissions, Tier 1 organisations are turning to their suppliers – the majority are SMEs – to account and report their carbon emissions. Consquently winning business in a net-zero emissions world presents challenges for smaller businesses, but it’s not impossible to overcome, in fact it can present opportunities. In fact SMEs are getting higher up the prefered supplier list because they can demonstrate sustainability credentials unlike their larger competitors.

In this blog, we’ll share 4 key considerations for SMEs and procurement professionals eager to bid for business and win by showcasing their sustainability efforts.

1 Understand Tender Requirements

The first step for SMEs competing for tenders in a net-zero world is to understand the tender requirements. Governments and large private sector organisations are increasingly prioritising sustainability and emissions reduction in their procurement processes. This means that companies completing an RFP should evidence a clear understanding of the tender requirements and how they align with sustainability goals.

2 Build a Sustainability Strategy

To compete effectively in a net-zero world, companies of all sizes should integrate sustainability into their corporate strategy and demonstrate how it aligns with their brand and cultural values. Begin by developing a clear plan with sustainability targets and a plan to achieve them. For those struggling with resource can work with industry associations and sustainability consultants who can help tailor the sustainability plan for the business and differentiate it from competitors. Another factor in the strategy should be to complete sustainability certifications or access partnerships with sustainability-focused organisations to demonstrate their commitment to sustainability.

3 Focus on Innovation

Innovation drives sustainability, and SMEs can leverage their agility and flexibility to develop and implement innovative sustainable solutions – faster than monolithic organisations. Developing products, services, and business models that prioritise sustainability can be a strong differentiator. SMEs can collaborate with your industry peers and suppliers to drive change or government bodies and universities to access resources for research and development.

4 Leverage Technology

Technology is critical for enabling sustainability. SMEs can leverage it to reduce their carbon footprint and compete for tenders with an element of carbon emission accounting. Adopting energy-efficient technologies, implementing smart building systems, or using data analytics to optimize energy consumption are examples. Highlight your switch to virtual meetings and remote work that reduces travel emissions while also consider renewable energy sources can power operations.

By understanding requirements, building a sustainability strategy, focusing on innovation, and leveraging technology, SMEs can compete effectively for net-zero tenders. SMEs can help contribute to the transition to a net-zero economy while driving innovation and job creation

In conclusion, SMEs face unique challenges in competing for tenders in a business world focussing on driving down Scope 3 emissions. By gaining a closer understanding of the tender requirements, integrating sustainability into your corporate strategy, focusing on innovation, and leveraging technology, you can position your organisation as leaders in sustainability and compete effectively for tenders.

With the right approach, SMEs can contribute to the global transition to a net-zero economy while also benefiting from faster growth by attracting new customers who admire businesses with strong sustainable credentials.

Takeaway Tip: Learn more about Scope 1, 2 and 3 in the Scope of Sustainability

How Pulse Market can help:

We’ll help you track and manage Scope 3 data, decarbonise your value chain, and develop a transition plan that balances reaching your net zero goals while remaining a profitable, successful business.

Book a demo to discover more about our Procurement or Sustainability Solutions.

Get Ready for CBAM: The Next EU Regulation Set to Reduce Carbon Emissions

By Sarah Shannon

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Staying up to date with evolving ESG regulations is more important for businesses than ever before. In this article we explore an EU regulation coming into force in Autumn 2023. It is CBAM (Carbon Border Adjustment Mechanism). Read on to understand what this could mean for your business and prepare for its implementation in October 2023.

What is CBAM – Carbon Border Adjustment Mechanism

The EU and its 27 countries are working on a new common rules to lower EU’s carbon footprint and this has a knock-on effect across the globe for any industry or business trading with the EU.

What is CBAM

It is a key piece of EU’s ESG regulatory landscape. Carbon price on goods imported into the EU Aimed at eliminating carbon leakage. Carbon leakage occurs when companies relocate their production operations from a region with strict environmental regulations to a region with relaxed or non-existent rules. To combat this problem, the EU introduced the new regulation on carbon border adjustments, to ensure that companies that relocate to countries with lenient environmental policies pay a fair amount in carbon taxes. This legislation is set to reduce carbon leakage.

It is set to come into force in October 2023 with the implementation of quarterly reporting moving towards a requirement for CBAM certification planned sometime after January 2026.

How does it work?

Importers in the EU must produce quarterly reports verifying GHG emissions calculations. And purchase, surrender and declare equivalent CBAM certificates.

Who is affected?

Those that are directly impacted include importers and exporters of CBAM goods. Those that are indirectly impacted are expected to be passed on through markets.

What goods does CBAM apply to?

Aluminium
Iron & Steel
Mineral Products
Electricity
Fertilisers
Inorganic Chemicals
Hydrogen

Therefore, a broad number of sectors are impacted by CBAM. To begin with the following sectors are included: Aerospace, Automotive, Chemicals, Consumer, Energy, Engineering & Construction, Forest, Paper & Packaging, Manufacturing, Metals & Mining, Pharma & Life Science, Power & Utilities, Retail and Technology.

It is expected that more plastic and chemical goods will be added in 2026.

Ultimately this is an important step towards reducing Europe’s carbon footprint, however it is up to all countries around the globe to work together towards achieving greater environmental sustainability. We mustn’t forget that what affects one nation affects us all – and only with stronger collaboration can we hope for a greener future.

At Pulse we have a range of sustainability solutions for businesses of all shapes and sizes in the UK and EU.

To help your business progress your sustainability journey download a copy of our new ebook: ESG Insight Guide