forward earth's CBAM solution

Background

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The Carbon Border Adjustment Mechanism (CBAM) is a carbon tariff on carbon intensive products imported into the EU. It currently applies to a list of products from the following product groups: cement, iron and steel, aluminum, fertilizers, electricity and hydrogen. Within the regulation different parties have specific roles and responsibilities. The main parties involved are the importer and the operator. In essence, the importer (declarant) is the entity that imports CBAM goods into the EU and also the entity that needs to report the emissions associated with these imports in the form of a CBAM report. The operator is the supplier of the importer and produces the CBAM product. Thus, the operators are responsible for tracking the direct and indirect emissions of the products they produce. The operator shares the calculated emissions including other required data with the importer, who then includes it in their CBAM report. During the so-called transitional period which started in October 2023 and lasts until December 2025, CBAM reports have to be submitted to the European Commission on a quarterly basis. In January 2026, the so-called definitive period will start. Most importantly, from then on CBAM certificates need to be purchased and the reporting is switched to an annual basis to lower the administrative burden. The idea of the transitional period is to serve as a pilot. Based on the learnings made during that time, the Commission may introduce other changes such as refining the calculation methodology.

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For a more thorough explanation of the background, the other entities and the implementation of CBAM, see our previous article.  

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Challenges

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The extensive CBAM regulation creates a multitude of challenges for the different players:

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Importers need to collect information from multiple sources and compile them in a report. While they do not need to perform the calculations themselves, they are the ones ultimately responsible for a correct, complete, and timely report submission. Since July 2024, importers are required to use primary data (emission data collected from the suppliers) to avoid penalties. This means that using default values for calculating the emissions is generally no longer allowed (only some exceptions remain). However, with many suppliers still unprepared to share the required data financial penalties are looming.

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Supplier management platforms have the infrastructure for importers and operators to communicate and exchange information. They are therefore the natural player to take over the emissions data exchange. However, they are not set up for the specific calculations and reporting requirements of CBAM, therefore possibly missing out on this market. 

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Operators are confronted with a high reporting burden. Not only do they need to create complex calculations following a very specific methodology for their own operations. They may even need to collect data from some of their own suppliers of purchased precursors, which may struggle with the same challenges. Many operators might not have the expertise to perform these calculations themselves. Additionally, the templates provided by the EU are cumbersome, requiring significant manual input and covering all product groups in one, which creates confusion and inefficiency. This results in a time-consuming, error-prone, and expensive process, potentially necessitating reliance on external consultants.

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Solution

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forward earth is offering a software solution that addresses the challenges of CBAM reporting for importers and operators. Our AI-powered solution allows operators to generate primary data easily and with a high degree of automation, even from precursor products.. Our intelligent calculation engine performs CBAM-compliant calculations in a way that is much more efficient and less error prone than using spreadsheets. 

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At the same time our integrated white-label CBAM solution enables supply chain management platforms to provide additional value to their customers and increase their own revenue. Platform providers can integrate our white label solution into their platforms and can retrieve data using our API. This allows them to offer a CBAM solution without having to build one themselves. Importers and operators don’t need to use Excel sheets or a new tool. Instead, everything can be done via the supplier management platforms they are already using for a truly seamless customer journey. Our solution is available for the aluminum sector, iron & steel and other sectors will follow shortly.

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The forward earth CBAM solution is simple & easy to use without making compromises and includes the following functionalities:

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- Tailored assessment flow: The product category specific assessment flow simplifies the user interface and takes away distractions  

- CN code mapping: Our AI-solution immediately identifies relevant goods for CBAM reporting based on their CN code

- Included emission factors: The solution stores all relevant emission factors and default values, eliminating the need to consult any other documents

- AI-automated data extraction: Energy data from invoices, energy management systems and spreadsheets can easily be extracted using our tried and tested AI-based data extraction tool

- AI-chatbot: Get answers to all relevant questions related to CBAM and beyond immediately through our integrated chatbot

- Results shared at the click of a button: data can be shared with the importer via the Supply Chain management platform or directly via export

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With the forward earth CBAM solution compliance is guaranteed. We follow all requirements of the regulation, so that you do not have to worry about it. On top of that, once a calculation has been performed, all future calculations will be significantly easier. Looking ahead, CBAM calculations done with forward earth’s solution can be used as a basis for  a full product carbon footprint and life cycle assessment. How this can be done, will be covered in an upcoming article!

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If you are interested in our solution, please contact us under contact@forward-earth.com!

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