Europe is locking in a new norm: If you make it or import it, you need credible carbon data for it. Two policies are driving this shift. The Carbon Border Adjustment Mechanism (CBAM) has moved from a 2023–2025 reporting-only phase to full operation from 2026, putting a price on the embedded emissions of key imports such as steel, cement, aluminium, fertilisers, electricity and hydrogen. In parallel, the Corporate Sustainability Reporting Directive (CSRD) requires thousands of companies to disclose standardised, assured sustainability information and use the ESRS framework. Together, they turn carbon transparency from avant-garde into a market requirement.
This convergence matters for operations, procurement, and export strategy. CBAM aligns import costs with the EU carbon price, while CSRD pulls consistent Scope 1–3 data into annual reports that investors, customers, and regulators will scrutinise. The effect is end-to-end visibility: The same tonne of emissions that shows up at the border under CBAM must also be reflected in a company’s value-chain disclosure under CSRD. Even non-EU suppliers are being drawn into the system via a new CBAM registry portal that lets overseas manufacturers share verified emissions data directly with EU partners.
For leaders planning the next phase of their sustainability strategy, the signal is clear: Carbon performance now influences total landed cost, access to the EU market, and corporate credibility. The EU is also fine-tuning rules to keep burdens practical without changing the direction of travel; simplification proposals are on the table, but the core requirements and timelines above remain the reference point for 2025–2026 decisions.
In this article, we’ll unpack how the two regulations work and where they intersect, why their convergence is creating a de facto European carbon reporting standard, and what it means for business strategy. You’ll see how procurement, logistics, and export decisions are already evolving under this new framework—and we’ll close with practical steps companies can take to stay compliant, competitive, and credible in Europe’s data-driven carbon economy.
Understanding CBAM: Pricing carbon at the border
What is CBAM?
CBAM explained: The Carbon Border Adjustment Mechanism (CBAM) is the European Union’s tool for ensuring that imported goods carry the same carbon cost as those produced within the bloc. It functions as a carbon pricing system for imports, preventing carbon leakage, where manufacturers shift production to regions with weaker environmental standards. The more carbon-intensive a product is to make, the higher its cost at the EU border. To maintain fairness, any carbon price already paid in the exporter’s home country can be deducted from its CBAM obligation. The mechanism levels the playing field between EU and non-EU producers while aligning global trade with Europe’s environmental objectives.
Illustration describing how CBAM works.
Introduced as part of the EU Green Deal, CBAM entered its transitional phase in October 2023, requiring importers to report the greenhouse gas emissions embedded in specific goods without yet paying a carbon price. From 1 January 2026, the definitive regime begins, and importers will need to purchase CBAM certificates to cover those emissions at a rate linked to the EU Emissions Trading System (ETS) price—currently hovering around €80 per tonne of CO₂.
Who and what is affected
In its first phase, CBAM applies to six key sectors: iron and steel, cement, aluminium, fertilisers, electricity, and hydrogen. These are among the most carbon-intensive industries, responsible for roughly half of the total industrial emissions under the EU ETS. Over time, the scope may expand to include additional materials and downstream products by 2030, meaning that virtually all high-emission goods entering the EU market will eventually face a carbon cost.
For many companies, this mechanism will redefine EU carbon compliance and carbon reporting regulation across Europe. Even companies outside the EU that supply these materials must now monitor and disclose emissions data at a level of accuracy that aligns with EU standards.
Read more: Benchmarking emissions: What’s a good carbon footprint for my industry?
Why CBAM matters
The EU carbon reporting framework isn’t just an environmental measure—it’s an economic safeguard. Europe’s heavy industries, like steel and cement, account for around 22% of the total EU greenhouse gas emissions, and their products are often undercut by cheaper, higher-emission imports. By applying the same carbon price at the border, CBAM compliance protects EU manufacturers while encouraging global producers to decarbonise.
The scale may seem modest—covering roughly 3% of all EU imports by value—but the implications are significant. At current carbon prices, CBAM could raise an estimated €14–€15 billion annually once fully implemented, funding further green initiatives and solidifying Europe’s global environmental leadership.
Strategic impact
For businesses trading with the EU, CBAM compliance will soon be a prerequisite for market access. Companies must build systems capable of tracking and verifying emissions across their supply chains, coordinate with suppliers to collect accurate data, and be prepared for auditing by national authorities.
While the regulation’s reach starts with raw materials, its ripple effects extend across entire industries. Automotive, construction, and manufacturing firms are already revising sourcing strategies, prioritising low-carbon steel, green aluminium, and sustainable cement to reduce future CBAM costs. Consulting firms such as McKinsey note that manufacturers delaying decarbonisation could face sharply rising material and production costs by 2030, while early movers that improve carbon efficiency are likely to gain a significant competitive edge.
Read more: The VSME Standard for SMEs: Simplified ESG reporting in the EU
In essence, CBAM compliance is about future-proofing trade strategy. Companies that act early—by understanding their carbon footprint, improving process efficiency, and engaging with credible carbon offset providers—will find themselves better positioned when EU carbon reporting becomes the norm.
Understanding CSRD: Raising corporate carbon transparency
The Corporate Sustainability Reporting Directive (CSRD) is the European Union’s most ambitious step yet towards EU sustainability reporting and transparency. It replaces the older Non-Financial Reporting Directive (NFRD) with a far broader, more rigorous framework that brings sustainability data to the same level of accountability as financial reporting.
In essence, CSRD reporting ensures that companies operating in Europe disclose their environmental, social, and governance (ESG) performance using standardised, verifiable data. That means no more broad statements about green goals without proof. Companies must now publish detailed, measurable information on how their operations affect—and are affected by—environmental and sustainability factors.
ESG illustration.
What CSRD reporting covers
CSRD applies to large EU companies, listed SMEs, and non-EU firms with significant activity in the European market. Once fully rolled out, it will affect nearly 50,000 companies worldwide, compared with just 11,000 under the old directive. The rollout happens in phases:
- 2025: First reports due for large public-interest companies (covering 2024 fiscal year).
- 2026: Large companies meeting two of three criteria (250+ employees, €50 million turnover, €25 million in assets, covering 2025 fiscal year).
- 2027–2028: Listed SMEs and non-EU firms with EU subsidiaries.
Read more: Countdown to CSRD: Your 12-month plan for compliance and competitiveness
These reports must follow the European Sustainability Reporting Standards (ESRS)—a set of detailed metrics covering topics from environmental mitigation and pollution prevention to biodiversity and resource use. The ESRS requires companies to disclose their Scope 1, 2, and 3 emissions, energy consumption, reduction targets, and transition plans in line with the Paris Agreement.
In short, CSRD reporting makes carbon footprint reporting Europe-wide consistent, comparable, and auditable. Every company will need to demonstrate how its business model aligns with a sustainable future.
From voluntary to verifiable
Unlike previous sustainability guidelines, CSRD doesn’t rely on voluntary participation. It’s enforced through national laws and comes with mandatory third-party assurance—meaning the data in a company’s sustainability report must be verified by an independent auditor. This is a defining shift: Sustainability data is now held to the same standard of accuracy as financial data.
Companies are responding quickly. A 2024 PwC survey found that 97% of firms expect to meet CSRD requirements by 2025, up from just 40% a year earlier. However, data quality and value-chain coverage remain key challenges. Most firms cite Scope 3 emissions—those linked to suppliers and customers—as the hardest to measure. These are precisely the emissions that connect CSRD’s internal reporting obligations with CBAM’s external trade requirements, making accurate, transparent data systems a strategic necessity.
Read more: Why scope 3 emissions are your biggest blind spot—and what to do about it
Why EU sustainability reporting matters
The implications of CSRD extend well beyond compliance. Transparent sustainability reporting influences investment, procurement, and even brand reputation. Investors are already using CSRD-aligned disclosures to assess environmental risk and corporate resilience. Suppliers who cannot provide verifiable carbon data risk losing contracts as buyers seek to meet their own CSRD reporting and EU carbon compliance obligations.
CSRD reporting.
In effect, CSRD transforms sustainability from a communications exercise into a core business function. It requires integration between finance, sustainability, and operations teams—an alignment that makes carbon management a strategic lever, not an afterthought.
The foundation of a new standard
What makes CSRD particularly significant is its interoperability with other global frameworks such as the ISSB Standards and the Greenhouse Gas Protocol. This means that companies preparing for CSRD reporting are aligning with the emerging global norm for carbon reporting regulation Europe-wide.
Read more: Aligning with CSRD: the smart move for future-proofing your business
By creating a consistent, enforceable framework for EU sustainability reporting, the directive ensures that every tonne of carbon emitted by a business is accounted for somewhere in its reports. This accountability builds trust, strengthens access to green finance, and positions compliant companies as leaders in transparency.
As we’ll see next, when combined with CBAM, CSRD doesn’t just standardise corporate disclosure—it anchors a unified carbon accounting system across Europe. Together, they form the backbone of a new, data-driven carbon reporting standard that will influence global supply chains for decades to come.
The convergence: How CBAM and CSRD interlock
While CBAM and CSRD may appear to target different challenges—one focusing on imported goods, the other on corporate transparency—they are, in reality, two halves of the same system. Together, they’re shaping a unified approach to EU carbon reporting, urging both European and global companies to measure, verify, and disclose emissions using consistent standards.
Two frameworks, one carbon language
The Carbon Border Adjustment Mechanism (CBAM) introduces a price on the carbon embedded in imports. The Corporate Sustainability Reporting Directive (CSRD) demands that companies publicly report their own emissions, including those across their supply chains. In combination, they create a continuous carbon accountability loop: The data reported by importers under CBAM compliance must align with the Scope 3 emissions that buyers disclose under CSRD reporting.
For example, when a European manufacturer imports steel from outside the EU, that material’s carbon intensity will appear in two places—first in the importer’s CBAM declaration, and later in the company’s CSRD report as part of its total supply-chain footprint. This makes carbon transparency a shared responsibility across borders. Every participant—from the steel mill in Asia to the factory in Europe—must now speak the same language of verified carbon data.
Read more: Balancing portfolios: Nature-based vs renewable carbon credits
Building a de facto carbon reporting standard
By design, CBAM and CSRD use similar methodologies. Both draw on the EU Emissions Trading System (ETS) and the Greenhouse Gas Protocol to ensure consistent carbon accounting. The European Sustainability Reporting Standards (ESRS) under CSRD and the emission calculation methods under CBAM are gradually being aligned, meaning that corporate reports and customs declarations will soon rely on comparable datasets.
This alignment is creating what analysts call a de facto European carbon reporting standard. It’s not written as a single document, but it’s emerging through regulation: Carbon must be quantified the same way, whether reported in an annual sustainability statement or in a border import filing. That standardisation reduces ambiguity and prevents ‘double counting’, while also raising the credibility of reported data.
Why convergence matters for business
The convergence of CBAM and CSRD reporting means companies can no longer treat sustainability data as a siloed function. Procurement teams need accurate emission factors from suppliers to meet CSRD requirements. Logistics managers must account for CBAM-related carbon costs when planning imports. Finance departments will soon be responsible for verifying both.
This shift changes corporate decision-making in tangible ways:
- Procurement: Carbon footprints become a selection criterion for suppliers, not just price or quality.
- Operations: Low-carbon materials and renewable energy become essential to protect margins under EU carbon compliance rules.
- Reporting: Sustainability data must match across systems—your CBAM submission and CSRD disclosure should tell the same carbon story.
The European Commission’s vision is clear: Carbon accountability must be consistent across every stage of production and trade. This coherence transforms compliance into a strategic advantage for companies that get ahead—because clean data and cleaner products will soon define market access.
A signal to global markets
This convergence also extends beyond Europe. Non-EU companies exporting to the bloc are already adjusting their production methods and reporting systems to meet EU carbon reporting requirements. Many multinationals are even adopting CSRD-aligned disclosures group-wide to simplify compliance across jurisdictions.
In effect, CBAM and CSRD together are setting the baseline for carbon reporting regulation Europe-wide, but with global reach. They are redefining how emissions are tracked, monetised, and managed across borders, pushing every business connected to the EU to upgrade its carbon data, technology, and strategy.
As we move forward, this new standard will not only change how carbon is reported; it will redefine how trade and corporate value are measured.
Implications for business strategy
The combined force of CBAM and CSRD reporting is rewriting the rules of how companies operate, buy, and sell. Together, they transform EU carbon compliance from a technical reporting task into a driver of strategy—affecting procurement, logistics, investment, and competitive positioning.
Procurement: Carbon as a buying criterion
In the new system, a supplier’s carbon footprint directly influences purchasing decisions. Under CSRD reporting, companies must disclose Scope 3 emissions—those generated by suppliers and partners. Simultaneously, CBAM compliance requires importers to declare (and eventually pay for) the embedded emissions in goods entering the EU.
Emission scopes.
The result is a complete shift in supplier evaluation. Businesses now look beyond price and delivery to assess carbon intensity per tonne of product. For example, automakers are sourcing low-carbon steel and green aluminium to cut both reported emissions and future CBAM costs. The cleaner the input materials, the better the margins and the lower the compliance risk.
Procurement teams are building carbon transparency into contracts, requiring suppliers to share verified emissions data. Those who can’t provide reliable figures—or whose products exceed default CBAM emission values—risk being replaced. In short, carbon data has become a new form of currency in B2B relationships.
Read more: Beyond tonnes: How carbon credit co-benefits elevate value
Logistics: Accounting for the carbon cost of movement
EU carbon reporting extends to how goods travel. Transport emissions feed into Scope 3 disclosures, and soon, carbon-efficient logistics will directly impact total landed cost. Switching to low-emission transport modes, optimising routes, and prioritising suppliers closer to EU markets can all reduce both CBAM exposure and reported emissions under CSRD.
Companies that integrate carbon pricing into logistics planning—assigning an internal cost to every tonne of CO₂ emitted—gain visibility over hidden costs and can make smarter trade-off decisions. Some have already introduced internal carbon pricing systems to prepare for external CBAM charges.
Read more: How to reduce your business’ travel emissions through nature
Exports: Competing on transparency
For non-EU exporters, CBAM compliance is now an entry requirement for accessing the European market. For EU producers, CSRD reporting offers a competitive edge: Companies that can prove lower product-level emissions gain reputational and pricing advantages.
High-emission exporters face growing pressure to decarbonise or risk losing market share. Conversely, those investing early in cleaner production can market their products as ‘CBAM-ready’, aligning with buyers’ CSRD data needs and strengthening commercial relationships. This is why trade analysts increasingly describe CBAM as both an environmental and industrial policy—one that rewards low-carbon innovation.
Finance and risk: From disclosure to performance
Financial teams are feeling the convergence firsthand. The cost of carbon—both reported and paid—will soon appear on balance sheets. Under CSRD, companies must disclose how environmental risks and carbon prices affect their business models. Under CBAM, those risks become tangible cash outflows.
This integration makes carbon efficiency a financial performance metric. Lenders and investors already favour companies with credible EU sustainability reporting and verifiable emission-reduction plans. Poor performance or opaque reporting can raise financing costs, as investors increasingly use CSRD-aligned disclosures to assess risk.
Read more: What business leaders need to know before buying carbon offsets
A strategic imperative, not a compliance exercise
The smartest companies see CBAM and CSRD not as administrative burdens, but as incentives to modernise. By tightening data accuracy, digitising carbon accounting, and engaging suppliers early, they turn compliance into strategy. Clean data improves forecasting, transparency builds investor confidence, and low-carbon sourcing reduces long-term exposure to volatile carbon prices.
The direction is clear: Europe’s carbon regulations reward accuracy, accountability, and early action. Companies that treat this as an opportunity to optimise operations and offset residual emissions through high-quality, nature-based carbon credits will not only meet compliance standards but also strengthen their market position.
Strategic steps to navigate the new carbon reality
The convergence of CBAM and CSRD reporting has made one thing clear: Businesses can no longer afford to treat carbon management as an afterthought. It’s now a measurable, reportable, and financially material part of doing business in Europe. But while the regulations are complex, compliance doesn’t have to be overwhelming—if approached strategically.
Read more: Carbon footprint offsetting strategies: How leading companies neutralise their emissions
Below are five practical steps to help companies align with EU carbon compliance requirements, stay ahead of the curve, and turn data into a strategic advantage.
1. Integrate your reporting systems
The first step towards effective EU sustainability reporting is building one unified data framework. Financial, operational, and sustainability teams must work from the same carbon dataset. This means connecting procurement systems, logistics data, and emissions tracking tools so that what’s reported under CSRD matches what’s declared for CBAM compliance.
Companies that adopt integrated carbon accounting platforms can track emissions from raw materials to final products, reducing duplication and errors. It’s not just about reporting; it’s about creating a transparent chain of evidence for every tonne of CO₂, ready for both auditors and customs authorities.
2. Strengthen supplier engagement
Your Scope 3 emissions will define your compliance success. Engage suppliers early to ensure they can provide verified emissions data that meets carbon reporting regulation Europe-wide standards.
The best-performing companies are already issuing supplier questionnaires, requesting product-level carbon footprints, and favouring vendors that invest in low-carbon manufacturing. This collaborative approach doesn’t just reduce CBAM costs; it builds long-term supply chain resilience.
Read more: Who’s who in the carbon market: Key institutions and frameworks and what they do
3. Use advanced tools for precise carbon measurement
Accuracy is everything under the CSRD reporting and CBAM frameworks. Especially with the focus on reporting on Scope 3 supplier emissions. That’s where Green Earth’s CO₂ Expert tool makes a measurable difference.
Co2 expert tool.
Our platform helps businesses—and their suppliers—calculate, verify, and manage emissions across all scopes with precision, transforming compliance requirements into actionable insights.
Unlike standard carbon calculators, the CO₂ Expert integrates verified datasets, aligns with ESRS E1, and automatically generates outputs ready for EU carbon reporting and CBAM declarations.
For companies needing to track product-level emissions, the system calculates embedded carbon values to simplify supplier reporting, transparency, and CBAM filings.
It’s the solution for businesses that want to stay compliant, secure retailer contracts, and focus on growth—backed by data you and your buyers can trust.
4. Offset residual emissions responsibly
Even the most efficient companies have unavoidable emissions. To reach net-zero targets, companies must reduce as well as compensate as part of one holistic carbon strategy. Carbon compensation is done once measurement and reduction are in place, through verified, high-quality carbon credits.
At Green Earth, we specialise in high-impact nature-based carbon units—projects that restore forests, protect biodiversity, and support local communities while generating measurable, third-party verified carbon removals. For businesses reporting under CSRD, these projects represent more than offsets; they’re a tangible demonstration of environmental responsibility that strengthens sustainability disclosures and corporate reputation.
Combining reduction with credible offsetting ensures your reports are both transparent and meaningful—a balance investors and regulators increasingly expect.
5. Stay proactive and informed
Regulatory frameworks evolve, and so should your strategy. CSRD and CBAM will expand in scope, adding new sectors and stricter verification rules. Stay ahead by continuously monitoring updates from the European Commission, engaging in industry dialogues, and reviewing your internal reporting practices annually.
Leading companies are already conducting ‘carbon stress tests’, projecting how future carbon prices or reporting expansions could affect their costs and supply chains. Anticipation is now a competitive edge.
Read more: Carbon credit price guide: Understanding spot, forward, and market factors
Turning compliance into confidence
CBAM and CSRD together mark the start of Europe’s new carbon reality built on transparency, accountability, and measurable progress. The implications are profound. CBAM compliance ensures that imported goods reflect their true carbon cost, protecting EU industries and incentivising cleaner production abroad. CSRD reporting, in turn, creates a verified record of how companies manage, reduce, and compensate for emissions within and beyond their operations. Together, they make carbon performance visible to investors and the public.
This new visibility reshapes value: Businesses that invest early in strong data systems, accurate footprint measurement, and credible carbon offsets will not only meet regulatory requirements but lead their industries towards a low-carbon future. They will be trusted, financed, and chosen first. Those who delay risk higher costs, reduced access, and reputational damage.
For companies, this is a competitive pivot point. Those who start early with EU carbon compliance capabilities will find themselves with a data advantage, a supply chain advantage, and, increasingly, a market advantage. Transparent carbon data will soon be as essential to trade and financing as audited financial statements.
Read more: Preparing for the future: How SMEs can align with net-zero targets
At Green Earth, we see this moment as the perfect inflection point for meaningful action. With the CO₂ Expert tool, businesses can measure and manage emissions accurately, align seamlessly with ESRS and CSRD disclosure requirements, and prepare for CBAM declarations with confidence. And through our portfolio of nature-based carbon units, they can address residual emissions while directly supporting biodiversity, ecosystem restoration, and local communities.
The path ahead is clear: Compliance is not just an end goal, but the foundation for leadership. By combining precise measurement, transparent reporting, and authentic compensation, companies can turn regulation into reputation and data into trust.
Europe’s new carbon era is an opportunity to lead with integrity and to align business success with planetary resilience. The companies that act now will define the standards others follow. At Green Earth, we help you turn compliance into clarity and environmental goals into measurable progress. If you’re ready to strengthen your carbon strategy, offset with integrity, and prepare your business for the next phase of EU carbon reporting, our specialists are here to guide you.
Book a consultation today and take the first step towards a credible and efficient sustainability plan.
