Business and the environment: costs and opportunities

The long-standing debate over whether sustainability – and, even before that, companies’ commitment to the environment – is an opportunity or a cost is an issue that has once again come sharply into the public eye as a result of recent legislation on the Carbon Border Adjustment Mechanism (CBAM), which are very much in line with the ongoing climate denial rhetoric coming from across the Atlantic. It is quite clear that the general perception of the issue leans significantly towards it being a cost (perceived as a tax) rather than an opportunity, particularly at a time of high geopolitical tensions.

One can certainly debate the quality of the new regulations and the new obligations they impose on businesses. However, if we are to take a balanced and responsible approach to the issue, we must take certain aspects into account. Firstly, the regulations must be analysed. For example, the CBAM, which came into force in recent weeks and has immediately become the subject of intense debate, stipulates a cost for this year amounting to just 2.5 per cent of the full value of the allowances to be purchased for CO₂ emissions embedded in imported goods — a proportion set to rise progressively to 100 per cent by 2034 — thus allowing companies time to optimise costs and adapt; furthermore, given the timeframe available, it is also possible to envisage driving improvements. Secondly, European climate change regulations are not an end in themselves but contribute to achieving an emissions reduction target, and should therefore be viewed as a whole. Thirdly, these regulations are inspired by a vision in which the fight against climate change will, sooner or later, become a global objective and priority. Therefore, this role of ‘problem-solver’ that the European Union has taken upon itself (and is carrying out) could, if well managed, lay the foundations for a technological competitive advantage for European businesses, which is set to have a positive impact on their development trajectory.

These considerations bring us back to the main issue, namely whether we really wish, at a political level, to work towards mitigating environmental impacts and, in parallel, towards climate adaptation. Awareness of these issues amongst the various social stakeholders is growing, so the need to tackle the causes (emissions) rather than simply the effects (land degradation) is becoming widely accepted. But the question that remains unresolved is: is the mitigation of carbon emissions an issue worthy of attention and responsibility for current generations? Or is it a burden to be left to our children?

This is the question that many companies have asked themselves, leading them to take on this challenge. And not for purely social or philanthropic reasons, but out of sheer self-interest; for whilst it is true that efforts to reduce carbon emissions represent a significant investment for a company in some cases, but it is also true that these efforts simultaneously present a major opportunity to review the company’s business model and its competitive positioning. For a growing number of entrepreneurs, the ‘carbon challenge’ has therefore become the catalyst for steering the company more successfully into the future. Taking the CBAM example again, according to iSustainability’s simulations, a company importing 1,000 tonnes of steel per year could end up paying, once fully implemented, over 200,000 euros annually for certificates if it uses the standard values set out in European legislation. By collecting and using real emissions data, this cost falls to around 160,000 euros, representing a saving of 48,000 euros each year, for the same volume of imports. For larger-scale imports, this difference increases rapidly, translating into hundreds of thousands of euros in avoidable extra costs for medium-sized and large companies. Added to this is a further level of risk linked to non-compliance: the CBAM regulation provides for penalties of up to 500 euros per tonne of CO₂, depending on the severity of the breach – ranging from incomplete declarations to unauthorised imports. According to our estimates, for large industrial groups, the total exposure – comprising additional costs and penalties – could run into the region of one million euros. The only way to prevent the CBAM from becoming a factor in the loss of competitiveness is to manage the mechanism proactively, transforming the regulatory obligation into a management lever. The real dividing line will not be between those who pay and those who do not, but between those who are able to document, plan and optimise, and those who will simply be at the mercy of the system. A process which, if initiated in 2026, can make all the difference in the coming years.

CEO of iSustainability