For the past two years, many businesses viewed the EU’s Carbon Border Adjustment Mechanism (CBAM) as a reporting exercise. That changed on 1 January 2026. The transitional period has ended and CBAM has entered its definitive compliance phase, meaning that imports of certain carbon-intensive goods into the European Union now carry real financial implications.

For South African exporters, CBAM is no longer only an ESG issue it has become a commercial, contractual and compliance consideration.

 

What is CBAM?

If your business exports products to the European Union, or supplies businesses that do, you’ve probably heard the term CBAM.

But what exaclty is it?

The Carbon Border Adjustment Mechanism (CBAM) is a European Union initiative designed to place carbon cost on certain imported goods. Its purpose is to prevent “carbon leakage”, where production moves to countries with less stringent environmental regulations.

In simple terms, the EU wants imported goods to be subject to a carbon cost similar to products manufactured within Europe.

For South African businesses, this isn’t simply another piece of European legislation. It represents a shift in how international trade is evolving with the sustainability becoming an increasingly important part of doing business.

 

Does CBAM apply to your business?

Many companies assume CBAM only applies to European importers. In reality, EU customers increasingly require emissions data from their suppliers.

That means South African exporters may need to provide:

• Verified emissions information;
• Production data;
• Supporting documentation; and;
• Ongoing sustainability reporting.

Even companies that do not export directly to Europe may be impacted if they form part of a European customer’s supply chain. Businesses able to produce accurate emissions data will generally enjoy a competitive advantage over suppliers who cannot.

The conversation is rapidly shifting from price to price plus carbon transparency.

Which industries are affected by CBAM?

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

 

What practical steps should exporters be taking now?

With CBAM now in force, exporters should be preparing alongside their EU customers.

The European Union has also introduced measures intended to simplify compliance for smaller importers, including a new 50 tonne annual threshold for many importers and streamlined procedures. However, these changes do not remove the need for many exporters to provide reliable emissions information to their European customers.

Businesses that prepare early will generally be better positioned than those reacting after customer requests arrive.

Five practical steps exporters should take:

• Identify whether any products fall within CBAM.
• Understand where emissions data originates.
• Reviewing supplier contracts and reporting obligations.
• Consider independent verification of emissions.
• Work with legal, customs, tax, and sustainability advisers to identify compliance risks.

 

Is CBAM a threat or an opportunity for South Africa?

CBAM is changing investment decisions, not eliminating opportunities in South Africa When CBAM was first announced, many businesses questioned whether manufacturing outside Europe would remain commercially viable. For South Africa, the picture is more nuanced.

South Africa continues to offer significant advantages for European manufacturers and investors, including:

• Abundant mineral resources;
• Well established industrial and manufacturing sectors;
• Access to regional African markets through the African Continental Free Trade Area (AfCFTA);
• Experienced engineering and technical expertise; and
• Long standing trade relationships with Europe.

However, investment decisions are increasingly being influenced by one additional factor – Carbon intensity.

European companies establishing or expanding operations in South Africa are placing greater emphasis on:

• Access to renewable energy;
• Energy-efficient production processes;
• Reliable emissions reporting;
• Sustainable supply chains; and
• Long term ESG strategies.

Rather than discouraging investment, CBAM is encouraging businesses to rethink how they invest. Companies that incorporate sustainability into their South African operations from the outset are likely to be better positioned to supply European markets in the years ahead. For many investors, South Africa remains an attractive destination, but one where carbon management has become part of doing business.

CBAM doesn’t make South Africa a bad investment, it changes how companies should invest.

 

CBAM as a Competitive Opportunity

Much of the discussion surrounding CBAM has focused on additional reporting requirements and increased costs. But there is another perspective – European companies are actively reviewing their supply chains.

European companies are increasingly looking for suppliers who can demonstrate:

• Transparent emission data
• Responsible manufacturing practices
• Reliable governance
• Long-term sustainability commitments
• Compliance with evolving international standards

For South African businesses, this presents an opportunity. Companies that invest in cleaner production, improved environmental reporting and robust compliance frameworks may strengthen their position as preferred suppliers to European customers. Likewise, European businesses considering investment in South Africa have an opportunity to design operations that align with both local commercial realities and international sustainability expectations from the outset.

CBAM should therefore not be viewed solely as another regulatory hurdle. It represents a shift in the way international business is conducted, where sustainability, transparency and governance are increasingly becoming drivers of investment, procurement and long-term competitiveness.

For South African businesses and European investors alike, this presents a new pressing question about CBAM – How can your business use it to gain a competitive advantage?