CBAM & Textiles 2026: What Phase 1 Actually Covers (and What to Do Instead)

CBAM 2026: What Changed on January 1st

The EU Carbon Border Adjustment Mechanism (CBAM) moved from a transitional reporting phase to its definitive financial obligation phase on January 1, 2026. Here's what this means:

• EU importers must now purchase CBAM certificates equal to the carbon embedded in covered goods they import
• The CBAM certificate price tracks the EU ETS carbon price — currently around €60–€80 per tonne of CO₂
• Importers who cannot provide accurate embedded emission data default to EU-set conservative default values (which are higher than typical factory emissions)
• Accurate embedded carbon data from your factory directly reduces your buyer's CBAM fee

Which Sectors Are Currently Covered by CBAM?

As of 2026, CBAM covers:

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

Textiles are not yet mandatory CBAM scope. However, textile exporters should still generate carbon reports for two critical reasons:

1. CSRD supply chain disclosures: Your EU buyers need your Scope 3 data for their own corporate sustainability reports — this is legally required for 50,000+ EU companies regardless of CBAM scope.
2. Buyer qualification requirements: EU fashion and retail brands have independently mandated carbon data from suppliers — your factory may be removed from approved vendor lists without it.

The Financial Impact of Not Having Verified Carbon Data

Here is a concrete example of what CBAM costs look like for a steel component supplier (to illustrate the principle that will apply when textiles enter scope):

The same principle applies to textiles when CBAM scope expands: factories with verified carbon data will allow their buyers to declare actual (lower) embedded emissions, saving significant fees and strengthening the supply chain relationship.

CSRD Scope 3 Readiness Checklist for Textile Exporters

Use this checklist to ensure your factory is prepared for current EU buyer requirements (CSRD Scope 3) and ready if textiles enter CBAM scope in a later phase:

Step 1: Generate Your Scope 1 & 2 Carbon Report

• ☐ Collect 12 months of electricity bills (kWh per month)
• ☐ Collect 12 months of fuel consumption records (m³ gas, litres diesel/HFO)
• ☐ Note total production output for the year (units or tonnes)
• ☐ Generate GHG Protocol report with IPCC AR6 and NEPRA 2024 emission factors
• ☐ Calculate embedded emissions per tonne of product (for your buyer's CSRD Scope 3 supplier inventory)

Step 2: Add Scope 3 Data (for CSRD Supply Chain Compliance)

• ☐ Collect freight records — sea, road, and air shipment volumes and distances
• ☐ Add upstream supply chain emissions for key purchased materials
• ☐ Apply DEFRA 2024 freight emission factors
• ☐ Document Scope 3 categories covered and methodology

Step 3: Get Verification to Build Buyer Trust

• ☐ Upload utility bills for AI-assisted document verification (Level 3)
• ☐ Ensure all emission factor sources are cited in the report
• ☐ Confirm the report includes a unique ID and QR verification code
• ☐ Consider Expert Review (Level 4) for strategic buyer relationships

Step 4: Share Proactively with Your Buyers

• ☐ Don't wait to be asked — proactively share your carbon report with each EU buyer
• ☐ Include the report in your supplier qualification pack
• ☐ Provide the QR verification code separately so buyers can verify easily
• ☐ Renew your report annually and share updated data

What Your CSRD-Ready Data Lets Your EU Buyer Do

Once you have a verified carbon report, share it with your EU buyers with these specific instructions:

1. Your report provides embedded emissions per tonne of goods exported — this figure plugs directly into the buyer's CSRD Scope 3 supplier inventory.
2. Without your data, your buyer must use industry-average emission factors that are typically higher than your actual factory's footprint, which weakens their reduction story to investors and regulators.
3. For buyers signed up to SBTi (Science Based Targets initiative), Scope 3 supplier-specific data is required to count toward their validated reduction target — generic factors don't qualify.
4. If textiles enter a future CBAM phase, the same data structure is the basis for an embedded-emissions declaration. Building it now means you're ahead, not scrambling.

ESG Reporting for Exporters: Beyond CBAM

Even if CBAM doesn't directly apply to your products yet, the broader ESG (Environmental, Social and Governance) reporting wave is reshaping global supply chains. Here's what's coming:

• 2026–2028: CSRD Phase 2 extends to smaller EU companies — more of your buyers will need your carbon data
• 2027: EU Regulation on sustainable textiles is expected to require lifecycle carbon data for textile products sold in the EU
• 2028+: CBAM scope expansion review, potentially including textiles and manufactured goods

Factories that generate carbon reports now are building the internal data collection habits, systems, and report credibility that will be required — rather than scrambling to comply when mandates arrive.