The Carbon Border Adjustment Mechanism (CBAM) explained for the fashion industry

‍What Is the Carbon Border Adjustment Mechanism (CBAM)? 

The Carbon Border Adjustment Mechanism (CBAM) was introduced by the European Union aiming to reduce greenhouse gas (GHG) emissions, prevent carbon leakage, and promote sustainable trade by equalizing the carbon costs in and outside of the EU. More specifically, companies that import goods into the EU will have to report their embedded emissions and purchase CBAM certificates. When looking at the carbon price there will no longer be a difference in whether you import or source from the EU. 

Which Products Are Covered by CBAM?

CBAM currently covers six high emissions sectors:

• Cement 
• Aluminium 
• Fertilizer
• Iron and Steel
• Hydrogen 
• Electricity

The exact goods are then specified according to Combined Nomenclature (CN) codes which is a product identification number to group the product according to legal and custom terms. To understand whether your import is a CBAM good you should check if its CN code can be found in Annex 1 of the CBAM regulation. 

Who needs to comply with CBAM?

• EU importers of CBAM goods
• Indirect customs representatives
• Authorized CBAM declarants

Companies importing CBAM goods above the applicable threshold must apply for authorized CBAM declarant status in order to continue importing. Under the current rules, the threshold is 50 tonnes of CBAM goods per calendar year. The authorized declarants will buy CBAM certificates the price of which is based on the auction price of EU ETS allowances expressed in €/tonne of CO2 emitted.

When does CBAM apply?

In 2026 CBAM entered its definitive regime where the financial obligations to the imports were introduced while previously in the transitional phase reporting was the only requirement. This marks the transition from emissions reporting to carbon pricing. The current objective therefore becomes collecting emissions data, managing supplier information and purchasing CBAM certificates as needed. The timeline for CBAM now is:

• 2026: collecting emissions data, managing supplier information and purchasing CBAM certificates
• 2027 September: Submitting the first annual CBAM declaration and surrender certificates for 2026 imports

What are the risks CBAM brings to the fashion industry?

The impact on the fashion industry from the CBAM regulations is indirect as it is currently not part of the listed sectors though is heavily influenced by them making adjustments important. The fashion industry is particularly exposed to carbon leakage due to its highly globalized supply chains, which often rely on production in countries with less stringent climate regulations. Textiles are therefore high on the list of the next possible additions to the industries covered by CBAM. Once under the CBAM regulation, imports of covered products from these regions may incur additional costs as a carbon price is applied, making manufacturing in Non-EU countries costly. Understanding and mitigating the impacts, using for example low carbon technologies, will firstly require a detailed understanding of where the emissions come from in the supply chain to then take steps to mitigate the tax’s impact.

What Data Is required for CBAM reporting and how to prepare for it?

The reporting required during the transition was also a form of finding the data to comply during the CBAM definitive phase. The following data is required to determine where CBAM certificates need to be purchased: 

• Embedded emissions: total greenhouse gas emissions emitted during production, including from energy use and manufacturing processes.
• Quantity of goods: total mass in tones or Kwh and corresponding CN code.
• Country of origin: where the good was produced
• Carbon price paid: already paid carbon price in the country of manufacturing, which can reduce the price for import.

Having accurate data on the above not only allows for compliance and avoiding penalties but also a clear understanding of what your import costs will be. The simplified calculation for CBAM costs are:

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CBAM cost = Embedded emissions (tCO2e) × CBAM certificate price (€/tCO2e) − Carbon price already paid in origin country

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How can Unibloom help with CBAM Compliance?

CBM Compliance needs reliable supplier and emissions data. Unibloom helps companies build this data foundation by bringing together validated and specific carbon, cost, and supplier information in one workflow. Procurement and sustainability teams can compare suppliers, materials, and sourcing locations based on both emissions and cost, making it easier to identify lower-carbon alternatives while improving supply chain transparency. With specialisation in the food and  fashion industry, Unibloom helps you fill the gaps on primary supplier data you might miss, gain visibility into complex global supply chains, compare suppliers based on both cost and carbon impact, and identify lower-emission sourcing alternatives to mitigate upcoming CBAM costs.

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