How to Conduct Supply Chain ESG Due Diligence for Indian Exporters Under EU CBAM and CSDDD

Kaustav Chowdhury
7 minutes ago
7 min read

Indian companies exporting goods to the European Union face a rapidly evolving regulatory landscape. The EU Carbon Border Adjustment Mechanism (CBAM), which entered its definitive phase on January 1, 2026, imposes carbon pricing obligations on imported goods across six carbon-intensive sectors. The Corporate Sustainability Due Diligence Directive (CSDDD), though its first application has been postponed to July 2029 following the Omnibus I amendments, will require comprehensive human rights and environmental due diligence across supply chains. For Indian exporters, particularly in sectors such as steel, aluminium, cement, and fertilisers, proactive ESG due diligence is no longer optional. This guide outlines practical steps for Indian manufacturers and exporters to build compliance-ready supply chain ESG systems aligned with both EU requirements and India's own SEBI BRSR framework.

Understanding the Regulatory Landscape

Three overlapping regulatory frameworks shape the due diligence obligations for Indian exporters targeting EU markets:

EU CBAM

Fully operational since January 1, 2026 (following a transitional reporting-only phase from October 2023 to December 2025), CBAM requires EU importers to purchase CBAM certificates corresponding to the embedded emissions in imported goods. The mechanism covers six sectors: iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity. Indian manufacturers must supply product-specific, installation-level emissions data to their EU buyers. The first certificate surrender deadline is September 30, 2027, for 2026 imports. The European Commission published the first quarterly CBAM certificate price at EUR 75.36 per tonne of CO2 for Q1 2026 imports.

EU CSDDD

Following the Omnibus I amendments, the CSDDD transposition deadline has been extended to July 26, 2028, with first application from July 26, 2029. The directive applies to EU companies with more than 5,000 employees and net worldwide turnover above EUR 1.5 billion, as well as non-EU companies generating more than EUR 1.5 billion in EU turnover. In-scope companies must conduct due diligence on human rights and environmental impacts across their upstream and downstream value chains, directly affecting their Indian suppliers.

SEBI BRSR and BRSR Core

SEBI mandates Business Responsibility and Sustainability Reporting (BRSR) for the top 1,000 listed entities in India. The BRSR Core framework requires reporting on ESG metrics including value chain emissions. Under the SEBI value chain framework, listed companies must report ESG disclosures for suppliers and customers that individually contribute 2% or more of total purchases or sales, or that together cover 75% of aggregate purchases and sales by value, whichever set is broader. While mandatory value chain assurance, originally planned for FY 2026-27, has been deferred following SEBI's March 2025 circular, the reporting obligations continue to expand.

Step 1: Map Your EU Export Exposure

Begin by identifying which of your products fall within CBAM-covered categories: iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity. Review your export data to determine the volume and value of shipments to EU member states. Identify your EU importers (who will be the "authorised CBAM declarants" registered in the CBAM Registry) and initiate discussions about their data requirements.

Note that a de minimis threshold of 50 tonnes annually applies; below this threshold, goods are exempt from CBAM certificate obligations. Assess whether your products include CBAM-covered precursor materials, as indirect emissions from electricity consumption may also need to be reported depending on the product category.

Step 2: Calculate and Report Embedded Emissions

The cornerstone of CBAM compliance is accurate calculation of embedded emissions at the installation level. This involves two components:

Direct emissions (Scope 1): Greenhouse gas emissions from the production process itself, including combustion of fuels, process emissions, and fugitive emissions at the manufacturing facility
Indirect emissions (Scope 2): Emissions from electricity consumed during production, calculated using actual grid emission factors or supplier-specific data

Use EU-approved methodologies to define system boundaries, emission sources, and calculation formulas. Since January 2026, country-specific and product-specific default emission values have replaced earlier transitional defaults based on global averages. While these defaults may be used where actual data is unavailable, they typically result in higher CBAM certificate costs for EU importers. Providing actual, verified installation-level emissions data gives your EU buyers a competitive advantage and strengthens your commercial position as a preferred supplier.

Step 3: Establish Scope 3 Emissions Tracking

Scope 3 emissions encompass indirect emissions across your entire value chain, both upstream (raw material suppliers, logistics providers) and downstream (distribution, end-of-life treatment). Under SEBI's BRSR framework, listed companies must report ESG disclosures for material suppliers and customers based on the 2% individual contribution or 75% aggregate threshold. While Scope 3 reporting for value chain partners was originally mandated for FY 2026-27, SEBI's March 2025 circular changed this to a voluntary basis, providing additional time to build data collection systems.

Practical steps for Scope 3 tracking include:

Engaging your key raw material suppliers to collect primary emissions data at the facility level
Implementing digital tools for carbon accounting across the supply chain
Establishing baseline emissions inventories for your most material supply chain segments
Setting reduction targets aligned with science-based methodologies such as the Science Based Targets initiative (SBTi)

Step 4: Conduct Human Rights and Environmental Due Diligence

Although the CSDDD's first application has been postponed to July 2029, Indian suppliers to large EU companies should begin preparing now, as many EU buyers are already implementing voluntary due diligence processes and sending questionnaires to their supply chain partners. The CSDDD requires in-scope companies to identify, prevent, mitigate, and account for adverse human rights and environmental impacts across their value chains.

For Indian manufacturers, this means:

Documenting labour practices, occupational health and safety standards, and environmental management systems across your operations and key supplier relationships
Establishing grievance mechanisms for workers and affected communities
Conducting risk assessments covering child labour, forced labour, fair wages, working hours, freedom of association, land rights, biodiversity impact, water pollution, and greenhouse gas emissions
Aligning your policies with the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises

Step 5: Align with SEBI BRSR and NGRBC Frameworks

The National Guidelines on Responsible Business Conduct (NGRBC), released by the Ministry of Corporate Affairs on March 15, 2019, establish nine principles of responsible business conduct aligned with the UN Guiding Principles and Sustainable Development Goals. SEBI's BRSR framework, built upon these NGRBC principles, provides a structured reporting template that maps closely to the data requirements of both CBAM and CSDDD.

Key NGRBC principles relevant to export due diligence include:

Principle 2: Businesses should provide goods and services in a manner that is sustainable and safe
Principle 3: Businesses should respect and promote the well-being of all employees, including those in their value chains
Principle 5: Businesses should respect and promote human rights
Principle 6: Businesses should respect and make efforts to protect and restore the environment
Principle 8: Businesses should promote inclusive growth and equitable development

By aligning your internal ESG data collection and reporting with the BRSR format, you create a single source of truth that serves multiple regulatory requirements, reducing duplication of effort across EU and Indian compliance obligations.

Step 6: Build a Compliance Documentation System

Establish a centralised system for maintaining all ESG compliance documentation. This should include:

Emissions calculation methodologies, raw data, and installation-level records
Third-party verification and audit reports from accredited verifiers
Supplier ESG questionnaire responses and risk assessments
Human rights risk assessment records and grievance mechanism logs
BRSR filings and underlying data for SEBI compliance
CBAM-specific data shared with EU importers, including correspondence and acknowledgements

Ensure that your documentation system supports the verification and audit standards that EU regulations require. CBAM emissions data must be verified by accredited verifiers, and CSDDD compliance will require demonstrable evidence of due diligence processes.

Step 7: Engage Your Supply Chain Partners

ESG due diligence is only as strong as the weakest link in your supply chain. Develop a supplier engagement programme that includes:

ESG criteria in supplier selection and evaluation processes
Capacity building workshops for key suppliers on emissions measurement and reporting methodologies
Contractual clauses requiring ESG data disclosure and minimum environmental and social standards
Periodic audits of high-risk suppliers, with corrective action plans where gaps are identified
Collaborative improvement plans for suppliers that do not meet baseline requirements

For Indian MSMEs in the supply chain, note that the central government is working on a scheme to bear up to 90% of CBAM compliance costs for micro, small, and medium enterprises, which may reduce the financial burden of emissions reporting and verification.

Common Pitfalls to Avoid

Relying on Default Emission Values: Default values under CBAM are typically higher than actual emissions for well-managed Indian facilities. Investing in actual emissions measurement yields significant cost savings for your EU buyers and makes you a more attractive supplier.
Treating CSDDD as a Future Problem: Although the directive's application is deferred to 2029, EU buyers are already sending due diligence questionnaires to their supply chains. Late preparation risks losing EU contracts to competitors who can demonstrate compliance readiness.
Siloed Reporting: Maintaining separate data systems for BRSR, CBAM, and CSDDD reporting leads to inconsistencies and increased compliance costs. Build an integrated data system from the start that serves all three frameworks.
Neglecting Scope 3: Focusing only on Scope 1 and Scope 2 emissions leaves you unprepared for both CBAM indirect emissions reporting and BRSR value chain disclosure requirements.
Ignoring Verification Requirements: Self-reported emissions data without independent verification will not be accepted under the CBAM definitive phase. Engage accredited verifiers early to ensure your data meets EU standards.

Conclusion

The convergence of EU CBAM, CSDDD, and SEBI BRSR requirements creates a complex but navigable compliance landscape for Indian exporters. By taking a systematic approach to emissions measurement, human rights due diligence, and integrated ESG reporting, Indian manufacturers can not only meet regulatory obligations but also strengthen their competitive position in European markets. The key is to start early, build integrated data systems, engage supply chain partners proactively, and align internal processes with both Indian and EU frameworks. Companies that invest in robust ESG due diligence today will be better positioned to retain and expand their EU market access in the years ahead.