In this edition of Sustainability Decoded, Sandra Leyva is joined by co-author Marialicia Jauregui, a certified LCA professional and LCA Expert at Division E in ZF Group, one of the world’s largest automotive technology suppliers, where she leads product carbon footprint methodology across a global supply chain targeting climate neutrality by 2040.
On the 1st of January 2026, the European Union began charging importers for the carbon embedded in their products.
In a fully phased-in scenario that single mechanism, CBAM (the Carbon Border Adjustment Mechanism), would add an estimated €12 billion per year to EU import costs [1].
In more tangible terms, only for this year, it is forecasted that importers who cannot provide verified emissions data will face default values with a 10% markup, rising to 30% by 2028 [2].
That would be disruptive enough on its own. But CBAM is not on its own. It is one of five mechanisms converging simultaneously; each independently demanding the same thing: product-level life cycle assessment data.
Five Mechanisms, With Five Questions You’re Not Ready For
Each of these mechanisms carries its own acronym, its own compliance timeline and its own legal requirements. But strip away the regulatory language and each one is really asking a single question that most companies cannot yet answer:
Border carbon tariffs ask: | What is the actual carbon cost embedded in each product you sell across borders? |
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Border carbon tariffs are built around the actual carbon cost embedded in each product sold across borders. The EU’s answer is CBAM, a “Carbon Import Tax” that charges foreign companies a fee based on the carbon emitted in making their products. This keeps things fair for European manufacturers, who already pay for their emissions under EU rules, and stops businesses from simply moving production to countries with weaker climate policies to dodge costs, a problem known as “carbon leakage”.
An OECD study found that carbon leakage offsets roughly 13% of domestic emissions reductions in aluminum, cement, and steel [5], the exact rationale driving every country now adopting these measures.
CBAM is live and soon, not limited to the EU. Canada is scoping 2027–2029 and Australia is on the same track. If you cannot answer this question with verified data, you pay a penalty: conservative default values that inflate your reported emissions and directly increase your certificate costs.
Digital Product Passports ask: | Can you prove, digitally and at scale, the full lifecycle profile of every product you place on the market? |
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Think of a Digital Product Passport as the birth certificate and medical record of a product, all in one machine-readable file. Under the EU’s Ecodesign for Sustainable Products Regulation, every product entering the EU will need this digital record that must include carbon footprint, material composition, durability and recyclability (all built on LCA data). Enforcement begins 2026 for batteries and iron/steel, expanding to textiles, aluminum, electronics, and furniture by 2029 [7].
No passport, no EU market access.
Extended Producer Responsibility ask: | Can you substantiate the circularity claims behind your product with lifecycle data? |
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EPR is what sustainability professionals commonly refer to as the “packaging tax” (though it extends well beyond packaging). It is a policy framework that makes producers financially and operationally responsible for the end-of-life management of their products: collection, recycling, and disposal.
Rather than passing those costs to municipalities and taxpayers, EPR shifts the burden to the companies that put products on the market, creating a direct incentive to design for circularity.
EPR schemes across the Americas and Europe increasingly require LCA-backed evidence of reuse, recyclability, and material recovery to qualify for compliance or reduced fees. For companies operating circular economy and reuse models, the ability to quantify and verify circularity through lifecycle data is becoming a compliance mechanism rather than a marketing narrative.
Mandatory Scope 3 disclosure asks: | Do you actually know where 90% of your emissions come from? |
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The Corporate Sustainability Reporting Directive (CSRD) is the EU’s response to a fundamental transparency gap. For years, companies reported what they chose to report, using whatever framework they preferred, with limited comparability and no standardized assurance.
CSRD is changing that by requiring detailed, audited sustainability disclosures aligned to the European Sustainability Reporting Standards (ESRS); including mandatory Scope 3 value chain emissions. It is expanding to nearly 50,000 companies across the EU, but its reach extends globally through supply chain requirements.
And the EU is not alone. California’s SB 253 mandates Scope 3 disclosure by 2027 for companies with revenue over $1 billion operating in the state. New York, Illinois, and Washington are advancing similar legislation. Japan’s revised sustainability disclosure standards now include supply chain emissions. You interpret the signal to where the regulatory landscape is headed.
McKinsey estimates Scope 3 at approximately 90% of total company emissions [8]. The World Economic Forum puts upstream Scope 3 alone at up to 70% across complex value chains, with eight global supply chains accounting for more than half of total global emissions [9].
Industry data-sharing mandates ask: | How much of your carbon data is actually real? |
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The automotive, chemical, and manufacturing industries have stopped accepting carbon footprints at face value. Through industry-wide frameworks, companies exchanging product-level emissions data now have to disclose what percentage of that number comes from actual measured data versus industry-average estimates pulled from a database (aka as primary vs. secondary data).
That percentage is called the Primary Data Share (PDS), and it is now mandatory under three major frameworks: WBCSD’s PACT methodology for cross-sector exchange; Catena-X for the automotive industry; and Together for Sustainability for the chemical industry [10].
Over 2,500 businesses have already begun exchanging product carbon footprints through these standardized networks, with 30 conformant technology solutions now on the market [11].
And that number is growing quarter over quarter as more industries formalize carbon data requirements into procurement and contracting processes.
Five Questions With Life Cycle Assessment Methodology as Dependency.
LCA is the system running underneath all of them. And the quality of that data now determines import costs, market access, competitive positioning, and investor confidence simultaneously.
This is a geopolitical restructuring of global trade around carbon as an economic variable and LCA is the infrastructure making it operational.
Those five mechanisms are asking companies questions about their products. But the deeper lesson (one that took years to see through the methodology) is that product carbon footprint also asks questions about how the organization itself operates. And the most consequential one separates companies surviving the coverage from those leveraging it: what becomes possible when we stop treating this data as a reporting obligation and start treating it as decision-grade insight?
When you calculate a PCF, you pull a single thread through procurement, engineering, operations, R&D, finance and commercial; functions that have been optimized independently for decades.
This is precisely where the opportunity lives and what most people don’t articulate clearly for you is that you can use it in two directions:
The first is the traditional, inward. Through that approach, you’re able to quantify the carbon cost of a material choice or logistics route with accuracy, environmental optimization becomes financial optimization and sustainability stops being a cost center.
PwC found products with sustainability attributes achieve 6% to 25%+ revenue uplift, and 83% of companies are already investing in low-carbon product R&D [12].
The second is more innovative, outward. This is when through verified LCA data, you can show a customer that your product delivers lower total environmental cost alongside competitive financial performance. In that way, you stop selling sustainability and you start sharing additional performance metrics that include carbon, waste, etc.
Both paths require years inside the methodology and depend on data infrastructure most companies are only now realizing they need. Most companies treated sustainability as reporting and today many area realizing that PCF turns it into decision-making.
So What Do You Actually Do?
This is where most content about PCF stops.. at the problem. Here is what we have learned actually works, whether or not you have an LCA expert on your team:
1. Start with your top 3 products, not your full portfolio. The instinct is to measure everything. Don’t. Pick the five products with the highest revenue, the highest export exposure to regulated markets (EU, UK, California), or the ones your key customers are most likely to ask about first. Run those footprints. The methodological muscle you build on five products transfers to fifty.
2. Map your data gaps before you try to close them. Your first PCF will reveal where you have actual supplier data and where you’re relying on industry averages. That gap map is the deliverable. It tells you which supplier relationships need deepening, which procurement conversations need to happen, and where your Primary Data Share will land when a customer or framework asks.
3. Make Scope 3 a procurement conversation. The teams making real progress on Scope 3 are the ones who made it someone’s job to build the bridges; to translate carbon into procurement language, embed emissions criteria into supplier scorecards and create shared incentives for data transparency.
4. Build your regulatory timeline now. If you export to the EU, you need CBAM readiness now and Digital Product Passport infrastructure by 2027. If you have EPR obligations, you need LCA-backed evidence for your next compliance cycle. If you fall under CSRD or SB 253, Scope 3 disclosure is coming. Map which deadlines hit you first and work backward to the data you need.
Your first footprint will be imperfect. Your Scope 3 data will have gaps. Your suppliers will not all respond. Remember that this is the diagnostic, don’t take it as a failure. The gaps in your data are a map of the gaps in your value chain, and that map is worth more than any number you could produce today.
The convergence of requirements is compounding and it will not wait.
The question isn’t whether you’re ready.
It’s whether you can afford to keep waiting for an answer that isn’t coming.
A note from the authors:
Six years ago, we became LCA certified practitioners, and started calculating product carbon footprints. At that point, we thought we would be able to give better answers with this new skill (a number, a benchmark, something we could report and move on). Instead, each exercise surfaced harder questions we hadn’t thought to ask before. Questions about our supply chains, our organizational structure and our commercial models. Questions that, it turns out, five regulatory mechanisms are now simultaneously demanding that every company answer.
Sources:
[1] CO2-IQ, “Cost calculation for CBAM certificates,” 2026 — co2-iq.com/en/cbam-cost-calculation
[2] O’Melveny, “How the EU’s New Default Emissions Values Under CBAM Impact US Exporters,” 2026
[3] Fortune Business Insights, Carbon Footprint Management Market, 2024
[4] MarketsandMarkets, Product Carbon Footprint Market, 2025
[5][6] World Economic Forum, “The impact of the EU’s CBAM on business and the carbon-pricing landscape,” Dec 2025
[7] Circularise, “DPPs required by EU legislation across sectors,” ESPR phased timeline
[8] McKinsey & Company, “Starting at the source: Sustainability in supply chains”
[9] WEF / BCG Alliance of CEO Climate Leaders, “Scope 3 Downstream Levers Handbook,” 2025
[10] ScienceDirect, “The primary data share indicator for supply chain specificity in PCF,” 2024
[11] Carbon Trust / WBCSD PACT, “Unlocking product carbon data for more sustainable value chains,” 2024
[12] PwC, “2025 State of Decarbonization,” analysis of 4,163 companies, March 2025