With increasingly stringent regulations in the context of sustainability and compliance, companies are increasingly facing complex challenges. In a recent webinar organized by Tacto in collaboration with Taylor Wessing, the focus was on three significant European directives: the Carbon Border Adjustment Mechanism (CBAM), the European Deforestation Regulation (EUDR) and the Corporate Sustainability Due Diligence Directive (CSDDD). This article provides an overview of these important regulations and their impact on companies.

1. CBAM: What Companies Need to Know

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The Carbon Border Adjustment Mechanism (CBAM) aims to put a price on the CO2 emissions of goods imported into the EU, creating a level playing field in which domestic producers are not disadvantaged by the European Emissions Trading System (ETS). Until 2026, companies must submit detailed reports on the CO2 emissions of their imported goods, after which actual payments become due.

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Key facts:
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• Industries currently affected include cement, electricity, fertilizers, iron and steel, aluminum, and hydrogen.
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• During the transition phase until the end of 2025, companies must submit quarterly reports without paying CO2 prices.
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• Starting in 2026, full CO2 pricing takes effect, based on the emissions generated in the production of the imported goods.

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Companies must start requesting actual CO2 data from their suppliers now, as the use of default values is heavily restricted from mid-2024 onward. Companies should also adapt their supply contracts so they can collect the necessary data efficiently.

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2. EUDR: Protecting Forests and Supply Chain Responsibility

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The European Deforestation Regulation (EUDR) targets deforestation caused by the cultivation of commodities such as wood, soy, cattle, palm oil, rubber, coffee, and cocoa. From the end of 2024, companies may only place "deforestation-free" products on the EU market. This means that commodities produced on deforested land after the cutoff date of December 31, 2020 may no longer be traded.

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Key requirements:
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• Companies must trace their supply chains back to the origin of the commodity and provide geolocation data for the cultivation areas.
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• Detailed due diligence statements must be submitted for trading these commodities and derived products.
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• Small and medium-sized enterprises (SMEs) have until 2025 to prepare for the rules.

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Complying with these rules requires companies to collect and document precise information about the origin and production conditions of their commodities. Early action on supplier verification and traceability is critical.

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3. CSDDD: The European Supply Chain Act

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The Corporate Sustainability Due Diligence Directive (CSDDD) is the European answer to the German Supply Chain Act (LkSG). It expands companies' obligations and covers both environmental and human rights aspects along the entire supply chain. Initially, it affects companies with more than 1,000 employees and 450 million euros in revenue, with the rules being extended step by step.

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Differences from the LkSG:
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• The CSDDD also covers indirect suppliers and thus the entire value chain.
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• It introduces civil liability for companies that fail to meet their due diligence obligations.
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• Companies must assess and prioritize the impact of their activities and supply chains on human rights and the environment.

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Companies are well advised to start building structures now that ensure comprehensive risk analysis and due diligence along the entire supply chain.

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Integrating Compliance into a Software Solution

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A central message of the webinar was the importance of digital platforms such as Tacto for managing the wide range of compliance requirements. Tacto offers an integrated solution for managing supplier data, complying with regulations such as CBAM, EUDR, and CSDDD, and handling compliance-related requests.

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Benefits of the software:
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• Centralized management of all supplier data and compliance information.
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• Automated reporting and traceability.
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• Efficient supplier onboarding and monitoring.

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With such a platform, companies can not only meet their compliance requirements but also save time and resources in the long term.

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Conclusion: The Path to Compliance Requires Early Preparation

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Increasingly strict regulations such as CBAM, EUDR, and CSDDD confront companies with significant challenges. Early preparation and digitalizing supply chain and compliance processes are critical. With the right software and a clear strategy, companies can not only minimize legal risks but also make their supply chains more transparent and sustainable.

In our webinar "Navigating the Compliance Maze with Taylor Wessing: Overview of CBAM, EUDR and CSDDD" with Rebekka Ackermann, attorney at Taylor Wessing, Louis Warnking, attorney at Taylor Wessing, and Robert Kaiser, compliance expert at Tacto, we prepare you for your second CBAM reporting and inform you about the impacts of the EU Deforestation Regulation (EUDR) and CSDDD on your company. We also highlight the benefits of centralized compliance management.