EU CBAM Is Now in Force: Why India's Steel and Manufacturing Exporters Need SAP Sustainability Tools Right Now

CBAM Is No Longer a Future Risk — It Is a Present Financial Obligation

From January 1, 2026, the EU Carbon Border Adjustment Mechanism (CBAM) entered its definitive phase. This is not an incremental policy tightening. It is a structural change to how the EU trades with the world's manufacturing nations — and India is at the centre of it.

During the transitional phase (2023–2025), CBAM required EU importers to submit quarterly reports on embedded carbon — but with no financial obligation attached. Errors and omissions were tolerated as the market learned the rules. The definitive phase changes this entirely: EU importers must now purchase EU carbon certificates to cover the verified embedded emissions in every shipment of covered goods. The first annual reporting deadline under the definitive phase is May 31, 2026.

For Indian exporters, the consequences of being unprepared are immediate and severe. Without verified product-level emissions data, EU importers fall back on EU default values — which are intentionally set at the upper end of the emissions range for each sector and can be 30–80% higher than actual production emissions. The effective carbon cost for an exporter using EU defaults instead of verified data is not a compliance inconvenience — it is a competitive cliff edge.

Which Indian Exports Are Affected — and What the April 2026 Expansion Means

The current CBAM scope covers:

• Steel and iron — accounts for approximately 90% of India's CBAM-exposed exports to the EU
• Aluminium
• Cement
• Fertilizers
• Hydrogen
• Electricity

India exports approximately €8–9 billion worth of CBAM-covered goods to the EU annually. The Global Trade Research Initiative (GTRI) estimates that Indian steel and aluminium exporters using blast furnace-basic oxygen furnace (BF-BOF) production and coal-based power could face effective price reductions of 15–22% to remain competitive after CBAM costs are absorbed into EU importer pricing.

More critically: on April 10, 2026, the European Parliament's ENVI Committee published a draft report proposing CBAM expansion to approximately 180 additional steel- and aluminium-based manufactured products from January 1, 2028. This would extend CBAM to downstream products — machinery, automotive parts, construction components, fabricated metal goods — sectors where India's manufacturing export profile is broad. Companies currently outside the CBAM scope must begin preparing now, not in 2027.

The Verification Requirement: Why Data Quality Is Now a Trade Compliance Issue

The definitive CBAM phase introduced a requirement that was absent during the transitional phase: mandatory independent third-party verification of embedded emissions data. Only EU-recognised or ISO 14065-compliant auditors are accepted as verifiers.

This creates a two-tier system. Exporters with verified, product-level emissions data pay carbon costs based on their actual emissions — potentially much lower than EU defaults if they use cleaner production methods or renewable energy. Exporters without verified data pay based on EU defaults — the worst-case assumption for their sector.

The practical implication: collecting and verifying embedded emissions data requires systems infrastructure, not just goodwill. Manual calculations using spreadsheets cannot produce the audit trail that EU-recognised verifiers require. The emissions data must trace back to specific production runs, energy inputs, and supply chain inputs — at the product and order level, not just the facility average.

The SAP Compliance Stack for CBAM

SAP has built a four-product stack specifically designed to address CBAM's data and reporting requirements. For enterprises already on SAP S/4HANA, these products extend existing ERP data into a compliance-grade carbon accounting system — without a separate standalone carbon tool.

SAP Sustainability Footprint Management

The foundational tool for CBAM compliance. SAP Sustainability Footprint Management calculates product-level carbon footprints across the full supply chain — from raw material extraction through production, logistics, and delivery. It ingests data from existing SAP production orders, material movements, and energy consumption records to calculate Scope 1, 2, and 3 emissions at the product and batch level.

This is the data source that CBAM verification auditors will examine. The product-level carbon footprint calculated here is what EU importers declare, and what auditors verify, in their CBAM reporting. Without this system, exporters cannot produce verifiable product-level data — they can only fall back on EU defaults.

SAP Green Ledger

SAP Green Ledger applies double-entry accounting principles to carbon — treating carbon emissions as ledger entries alongside financial transactions. For CBAM specifically, it handles the financial accounting of carbon obligations: CBAM certificates are maintained as assets, carbon obligations are posted as liabilities per IFRS and local GAAP standards.

This matters because CBAM creates a genuine financial liability — the cost of purchasing EU carbon certificates — that must appear in financial statements. SAP Green Ledger ensures this liability is calculated at the transaction level (not estimated in aggregate), posted accurately, and traceable to specific shipments in an audit.

SAP Sustainability Control Tower

The aggregate monitoring and regulatory reporting layer. SAP Sustainability Control Tower consolidates emissions data across products, plants, and shipments into the KPI dashboards and regulatory report formats required by EU CBAM rules — including alignment with the EU's CBAM Declarant Portal reporting format and the GHG Protocol.

SAP Sustainability Data Exchange

The sharing layer: SAP Sustainability Data Exchange enables Indian exporters to share verified emissions data with their EU import partners in a standardised, auditable format. This closes the supply chain loop — the verified data flows automatically from the exporter's SAP system to the EU importer's reporting, eliminating manual data handoffs that create reconciliation errors and audit exposure.

What Indian Steelmakers Are Already Doing

The response from India's steel industry has been immediate. As Business Standard reported in January 2026: "Steelmakers rework production, strengthen compliance as CBAM kicks in." Major Indian steel producers are:

• Investing in Electric Arc Furnace (EAF) technology — which produces steel using electricity (potentially from renewable sources) rather than coal, dramatically reducing embedded carbon
• Signing Power Purchase Agreements (PPAs) for renewable energy specifically to reduce the carbon intensity of production and therefore CBAM liability
• Building compliance infrastructure — systems, auditor relationships, and data collection processes — to generate the verified emissions data that EU importers require

The companies moving fastest are those already on SAP S/4HANA, because the path to CBAM-grade data is shorter: SAP Sustainability Footprint Management activates on top of existing production and materials management data rather than requiring a separate data collection project from scratch.

The Middle East Angle

CBAM's impact is not limited to India. The UAE and Saudi Arabia are significant aluminium and steel exporters to Europe. Gulf Cooperation Council countries are closely monitoring CBAM — and several are accelerating sustainability disclosure requirements domestically in anticipation of equivalent measures. SAVIC's sustainability practice serves clients across the UAE and Saudi Arabia preparing for both CBAM compliance and the broader ESG disclosure requirements emerging from regional regulators.

What Manufacturing CFOs Must Do in the Next 90 Days

1. Calculate your CBAM exposure: Identify which product lines are exported to the EU, quantify the tonnage, and estimate the embedded carbon using your current production data. Compare against EU default values to understand your maximum financial risk if you do not provide verified data.
2. Assess your data readiness: Do you have product-level energy consumption and emissions data in your ERP? If production energy and materials are tracked at the batch or order level in SAP, the data foundation exists. If not, the data collection project must start immediately.
3. Engage an ISO 14065 verifier: Identify which third-party auditors your EU import partners will accept, and initiate a pre-engagement now. Verifier capacity is constrained in 2026 — early engagement secures access.
4. Implement SAP Sustainability Footprint Management: For S/4HANA customers, this is the highest-priority sustainability implementation of 2026. SAVIC can deliver a CBAM-focused implementation in 12–16 weeks that produces verifiable product-level carbon data from your existing SAP data.
5. Prepare for the 2028 expansion: If your products are in the ENVI Committee's proposed expansion scope, begin a CBAM readiness programme now — two years is a short window for both technology implementation and production process changes.

SAVIC's Sustainability Practice

SAVIC's sustainability practice helps Indian and Middle East manufacturing enterprises build the data infrastructure for CBAM compliance using SAP Sustainability Footprint Management, SAP Green Ledger, and SAP Sustainability Control Tower. Our implementations are designed to produce CBAM-grade verified emissions data from existing SAP S/4HANA data — without a separate standalone carbon system. Contact SAVIC for a CBAM readiness assessment and implementation timeline.