The 80/20 Actual Data Rule: Collecting Supplier Data and Avoiding the Mark-up

One of the least understood but most critical rules of the CBAM regulation is the 80/20 actual data rule. This rule requires that at least 80% of the precursor data in a product's embedded emission calculation come from actual supplier data. Simple on the surface, in practice this rule requires producers to fundamentally rethink their supply chain management strategy. In this article we cover in detail why the 80/20 rule exists, how it works and how to comply with it.

What Is the 80/20 Rule?

The EU CBAM regulation allows two types of data in the embedded emission calculation:

Actual data: An emission value taken directly from the supplier, genuinely measured or calculated at that supplier's production facility.

Default value: A value published by the European Commission that is the sector average for the relevant precursor. It is usually a conservative (high) value.

The 80/20 rule states that at least 80% of the precursor emissions calculated for a product must come from actual data. A default value may be used for the remaining 20%. This rule is the primary mechanism steering producers towards collecting actual data from their suppliers. The rule came into force during the transitional period on 1 July 2024 and gained force with the definitive regime.

Scope: The 80/20 rule applies in particular to complex products with more than one precursor. Carbon steel, high-alloy steel, aluminium products and similar multi-precursor goods are within this scope. A different data collection logic applies to simple products (such as cement clinker itself); for those, importers report the actual embedded emissions.

An important point: the 80/20 ratio is calculated per product. In other words, it is not enough for a producer to collect 80% actual data overall; this threshold must be met separately in the calculation of each individual product.

Why Does This Rule Exist?

There are three core motivations behind the 80/20 rule:

1. Reflecting Actual Emissions

Default values are sector averages. But the actual emission value of two different producers can be very different. The real carbon footprint of a producer running at high efficiency and using renewable electricity can be much lower than the default value. When a default value is used, that advantage is lost.

CBAM's aim is to reflect the product's real carbon cost. That aim can only be achieved with the use of actual data.

2. Supply Chain Transparency

The EU does not see CBAM merely as a customs mechanism; it also sees it as a tool to increase carbon transparency in global supply chains. The 80/20 rule forces suppliers to measure and report their own emissions. This ripple effect leads even sectors outside CBAM scope to begin tracking carbon.

3. Discouraging the Use of Default Values

If using default values were free and penalty-free, no producer would go to the trouble of collecting actual data. The 80/20 rule plus the mark-up penalty closes off that path financially.

How Is the 80/20 Rule Calculated?

In the precursor emission calculation, two values are used for each intermediate product:

• The precursor quantity (tonnes)
• The embedded emission per precursor (tCO₂/tonne)

These two values are multiplied to calculate the total precursor emissions. The critical question for the 80/20 rule is: how much of the total precursor emissions comes from actual data?

The Calculation Formula

Actual Data Ratio = (Precursor Emissions Calculated With Actual Data)
                    ÷ (Total Precursor Emissions)

This ratio must be 80% or above.

A Simple Example

An EAF (electric arc furnace) producer makes carbon steel. Its main precursors:

• Scrap metal: 80 tonnes, 0.05 tCO₂/tonne (actual data)
• Alloying elements: 5 tonnes, 2.0 tCO₂/tonne (default value)
• Electrode: 2 tonnes, 3.0 tCO₂/tonne (actual data)

Total precursor emissions:

• Scrap: 80 × 0.05 = 4.0 tCO₂ (actual data)
• Alloy: 5 × 2.0 = 10.0 tCO₂ (default value)
• Electrode: 2 × 3.0 = 6.0 tCO₂ (actual data)
• Total: 20.0 tCO₂

Actual data ratio:

• Actual data total: 4.0 + 6.0 = 10.0 tCO₂
• Ratio: 10.0 / 20.0 = 50%

This producer has not met the 80/20 threshold. The use of default values must be limited to 20%; here the share coming from default values is 50%.

What Happens Then?

When the threshold is not met, two things happen:

1. A mark-up penalty is applied: A year-by-year mark-up is added to the precursors for which default values were used (+10% in 2026, +30% in 2028).

2. A compliance issue arises: According to some interpretations, a calculation below the 80% threshold does not produce a valid CBAM report. This point is not clear in the regulation and depends on the interpretation of the verification bodies. The conservative approach is to meet the 80% threshold.

The Multi-tier Nature of the Supply Chain

What makes the 80/20 rule hard to apply is the multi-tier structure of the supply chain. A producer may not meet this rule by collecting data only from its direct suppliers.

Example: An Iron and Steel Supply Chain

Consider an integrated iron and steel producer. The production chain is roughly as follows:

Iron Ore Mining (Tier 3)
    ↓
Ore Beneficiation (Tier 2)
    ↓
Pellet Production (Tier 1)
    ↓
Blast Furnace (Producer)
    ↓
Hot Metal (Final Product)

Each tier has its own emissions:

• Tier 3 (Mining): Diesel fuel, explosives, electricity
• Tier 2 (Beneficiation): Electricity, heating
• Tier 1 (Pellet): High temperature, added chemicals
• Producer: Coking coal, limestone, electricity

For the producer to meet the 80/20 rule, as much actual data as possible must be collected for the entire chain above. If data is taken only from the pellet supplier at Tier 1, and that pellet supplier uses its own default values, this can lead to the producer indirectly using default values as well.

Most Platforms Stop at Tier 1

Many CBAM compliance platforms on the market focus only on the Tier 1 level in supplier management. They make it easy for the producer to send forms to its direct suppliers, but they do not provide access to those suppliers' sub-suppliers.

This approach may be sufficient for simple supply chains. But it falls short in complex supply chains such as iron and steel, aluminium and cement. To meet the real 80% actual data threshold, you have to go all the way down the chain.

The Challenges of Collecting Actual Data

Collecting actual data from suppliers is not easy. The typical challenges producers face are:

1. The Supplier's Measurement Infrastructure

Small and medium-sized suppliers may not have the infrastructure to calculate their own emissions. They may have fuel consumption records that have not been converted into emission factors. In this case the producer has to support its supplier through the process.

2. Language and Communication Barriers

Foreign suppliers (especially from countries such as China, Russia and India) may not follow EU regulations. Communicating in English can be difficult. Some suppliers may push back, saying "this is the producer's problem."

3. Competitive Sensitivity

Emission data can also reveal information about production efficiency. Suppliers may be reluctant to share data they see as competitively sensitive. Building a trusted relationship takes time.

4. Data Format Incompatibility

Different suppliers may send data in different formats: a PDF report, an Excel table, text within an email. Transferring this data into the producer's system in a standard way requires manual work and is error-prone.

5. Frequency and Updates

Emission data must be updated periodically (monthly, quarterly or yearly). Requesting data from the supplier every period requires a continuous follow-up process. This is an operational burden.

The Solution: A Systematic Supplier Portal

The way to solve all of the challenges above is to set up a systematic supplier portal. This portal should have the following capabilities:

Easy Access via an Invitation Link

The supplier should be able to access the portal with one click, without going through a complex registration process. An invitation link sent by email and a one-time login password provide this simplicity. The supplier should not have to create an account or download software.

A Step-by-Step Form Wizard

So that the supplier can enter data without needing technical CBAM knowledge, the form should be designed as a wizard. At each step, what is requested is explained clearly and examples are shown. Complex terms are explained in plain language.

Language Support

The supplier portal should offer multilingual support. Because foreign suppliers can work in their own language, they respond faster. This is a critical factor in meeting the 80% threshold.

Automatic Reminders

If the supplier does not respond after the first invitation, the system should send automatic reminders. Manual email follow-up is not scalable. Automatic follow-up at intervals such as 3 days, 7 days and 14 days noticeably increases the response rate.

Multi-tier Chain Support

The portal should allow your supplier to invite its own suppliers too. In other words, you as the main producer invite the pellet supplier; the pellet supplier invites the ore supplier; the ore supplier invites the miner. The chain goes as deep as the regulation requires.

A Data Approval Flow

The data the supplier submits should not be accepted automatically; it needs to be reviewed by the producer. Suspicious values (very high or very low) should trigger a warning. Data should not be included in the calculation until the producer approves it.

Automatic Tracking of the Actual Data Ratio

Beyond the portal, the producer's calculation engine should have automatic 80/20 tracking. This includes the following features:

Real-time ratio: In every calculation, the share coming from actual data and the share coming from default values should be shown separately. The total actual data ratio should be expressed as a percentage.

Threshold warning: When it drops below 80%, the system should warn instantly. It should show which precursor is missing. The supplier list should open, and it should state precisely which data is missing from which supplier.

Historical trend: It should be possible to see how the actual data ratio has changed over time. This lets the producer measure the return on its investments.

Mark-up impact: With the current actual data ratio, the annual financial impact of the mark-up penalty should be calculated. This helps determine which supplier's data should be prioritised.

A Practical Strategy: Where to Start?

How does a producer with thousands of precursors decide where to begin? Here is a practical approach:

Step 1: Pareto Analysis

80% of total precursor emissions usually comes from 20% of suppliers. Suppliers with a high emission load take priority first. This Pareto principle also applies to CBAM compliance.

Step 2: Start With the Easy Suppliers

Some suppliers may already have their own CBAM infrastructure and be ready to share data. These "easy wins" should take priority. Bringing them into the system delivers a quick increase in the actual data ratio and is good for team morale.

Step 3: Focus on the High-Impact Ones

Suppliers that are not easy but will create a high impact should take second priority. For these, the producer should take an active role: phone calls, one-on-one meetings, supporting the supplier.

Step 4: The Long Tail

Finally, there are many small suppliers with a low emission impact. For this "long tail", systematic automation (a portal plus automatic reminders) is the only workable solution. Manual follow-up cannot scale.

Step 5: Gaps That Cannot Be Closed

For every producer there will always be a small balance for which data cannot be obtained. Here the use of default values is unavoidable. The strategic decision is to keep this balance below 20%. The calculation engine should check this ratio automatically in every calculation.

KPIs for Sustainability Directors

KPIs that can be used to measure the success of CBAM compliance:

• Total actual data ratio (%): The share coming from actual data across all precursors
• Number of products meeting the 80% threshold: How many of our products meet this threshold?
• Percentage of responding suppliers: How many of the suppliers invited responded?
• Average response time: The average time between the invitation and the first data
• Total EUR of mark-up avoided: How much is saved compared with the alternative scenario
• Number of Tier 2+ suppliers: Of the total suppliers in the system, how many are beyond Tier 1?

These KPIs can be included in board reports and sustainability reports. They can be used in the Scope 3 category in CDP and GRI reporting.

The Carbonaz Solution

The Carbonaz platform offers a comprehensive toolset for managing the 80/20 rule:

Multi-tier supply chain: A supplier hierarchy of unlimited depth is supported. You can collect data even from your supplier's supplier's supplier. The full set of capabilities is covered on the supply chain module page.

Supplier portal and invitation link: The supplier enters the portal with one click and enters its data in a six-step wizard. Multilingual interface and support.

Automatic reminders: Automatic email follow-up at intervals of 3, 7 and 14 days. There is no need for manual follow-up.

Automatic 80/20 check: The actual data ratio is tracked in real time in every calculation. You are warned when it drops below the threshold, and the list of missing suppliers is shown.

Mark-up simulator: A projection of future cost at the current ratio. It shows which supplier's data will give the highest ROI.

Dual-role support: If the supplier is also a producer exporting to the EU, it can switch between the supplier and producer roles within the same account.

Data approval flow: The data the supplier submits is reviewed by the producer, then approved or sent back for revision. Suspicious values are flagged.

Conclusion

The 80/20 actual data rule is one of CBAM's most demanding but most critical rules. This percentage, which looks simple on the surface, in practice requires rethinking the entire supply chain management strategy. For most producers, the solution is to move from single-tier Tier 1 management to a multi-tier, systematic supplier portal.

This transformation looks like an operational burden at first. But given the mark-up penalty that comes fully into force from 2028 and the CBAM factor that rises rapidly after 2030, it is clear that the investment pays for itself quickly.

For sustainability directors, CBAM compliance is no longer a reporting obligation but an actively managed supply chain programme. KPIs are tracked, relationships with suppliers are built and data collection is continuous.

For a detailed demo on supply chain management and the 80/20 check, you can reach us through our contact page. We assess your company's current actual data ratio together and prepare a road map to reach the target.

Sources

• Regulation (EU) 2023/956 - EUR-Lex: the main CBAM regulation
• CBAM: A guide to Carbon Border Adjustment Mechanism - One Click LCA: the 80/20 rule and the transition date
• European Commission publishes 'default values' for CBAM - EY: default values and the use of actual data
• Default values transitional period - European Commission: the EU's official default values document
• High CBAM Default Values Underscore the Need for U.S. Data - Bipartisan Policy Center: the impact of high default values
• Avoid EU Default Values and Save on CBAM Costs - Climease: supplier data collection strategies