Survey Reveals Concerns Over CBAM’s Impact on Supply Chains

PwC Study on Tax Transparency in ESG

A recent study conducted by PwC focusing on tax transparency within Environmental, Social, and Governance (ESG) practices reveals significant concerns among businesses regarding the impact of carbon taxes on their supply chains. The study found that 67% of the respondents anticipate these taxes to affect their operations across various jurisdictions.

The EU's Carbon Border Adjustment Mechanism (CBAM) is at the forefront of this concern. Set to be implemented from January 1, 2026, CBAM aims to price carbon emissions for energy-intensive products like iron, steel, cement, fertilizers, and aluminum entering the EU. Businesses, particularly in carbon-intensive sectors, are expected to adapt to potential cost increases, compliance requirements, and shifts in consumer behavior during this change.

The transition period for CBAM began on October 1, 2023, with companies from seven carbon-intensive sectors required to share emissions data with the EU. This is part of the EU's broader strategy to regulate carbon emissions associated with imported goods.

The PwC survey highlights that half of the companies involved have pledged to achieve net-zero emissions, with 48% targeting this goal by 2030. These companies are actively taking steps to reduce their carbon footprint and align with ESG goals.

Recommendations for Businesses

PwC suggests that businesses should employ digital solutions for strategic assessment and management of carbon emissions, along with navigating related tax incentives. This proactive approach could offer long-term cost advantages and opportunities amid changing carbon tax regimes.

Despite these efforts, 59% of survey participants believe there is a need for more policy incentives to encourage ESG practices. Thirty-four percent suggest that combining environmental taxes with incentives could effectively promote sustainable practices.