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Carbon offsetting has been a popular strategy for large companies to invest in climate projects to compensate their carbon footprint for a while now. Now the concept of insetting joined the scene. Where offsetting has gone wrong, can insetting make it right?
What is Carbon Insetting?
According to the International Platform for Insetting (IPI), insetting projects are described as “interventions along a company’s value chain that are designed to generate GHG emissions reductions and carbon storage, and at the same time create positive impacts for communities, landscapes and ecosystems.”
Carbon insetting involves reducing greenhouse gas emissions within a company's own value chain rather than offsetting them through external projects. This means that low-carbon practices are directly integrated into the core business operations, from raw material sourcing to end-of-life.
Unlike offsetting, which compensates for emissions, insetting can target emissions upstream, downstream or both.
Offsetting vs. Insetting
While both strategies aim to reduce carbon footprint, the difference is more significant than you may realize. Offsetting involves investing in external projects to counterbalance emissions, often through reforestation or renewable energy initiatives. However, offsetting has faced significant scrutiny and exploitation. We see many cases of large companies purchasing carbon credits to offset their emissions without taking meaningful action to reduce their own emissions directly.
Insetting, by contrast, ensures that carbon reduction efforts are within a company’s own value chain. By focusing on operational improvements, insetting leads to a more genuine and comprehensive effort to reduce greenhouse gas emissions.
Where does Scope 3 come into play?
Scope 3 emissions, which often represent an average 75% of a company's carbon footprint, are typically the most challenging to track and manage, refer to the indirect emissions that occur in the value chain beyond direct operations, e.g. production. These emissions can come from upstream and downstream the value chain - from the fertilizer used for crops, transportation, and the use of sold products.
By focusing on insetting projects within their supply chains, companies can structurally address a large portion of their Scope 3 emissions. This approach not only reduces the overall carbon footprint but also benefits the relationships with suppliers, stakeholders, fosters innovation, and enhances supply chain resilience. Moreover, by engaging with suppliers to reduce emissions, the efforts can contribute to broader industry-wide decarbonization.
The Importance of Insetting for Net Zero
Achieving net zero emissions requires an approach that encompasses both emission reduction and removal. Insetting plays a crucial role by addressing the core of the problem. By reducing emissions within the value chain, companies can build a more resilient and sustainable business model while contributing to broader climate goals.
Our consulting expert, Liane Guernic, acknowledges the importance of insetting. She explains that “when setting net zero targets, companies can easily manage and address their scope 1 and 2 emissions. However, scope 3 emissions, due to their indirect nature, are challenging to measure and address, particularly in complex supply chains where comprehensive data is hard to get and where it can be challenging to set common sustainability targets with other actors in the supply chain.
In this context, insetting offers an effective tool to tackle these emissions. By purchasing Impact Units and co-financing emissions reduction projects in their upstream or downstream activities, companies can generate a direct positive impact on their carbon emissions. Additionally, they improve supply chain resilience, engage more effectively with stakeholders, and create cost savings through efficiency improvements, resulting in long-term growth opportunities.”
The Insetting Process with Proba
Implementing carbon insetting involves several key steps:
Beyond Carbon Reduction
The benefits of carbon insetting can go beyond environmental impact. By integrating sustainability into core operations, companies can enhance their brand reputation, improve resource efficiency, and reduce costs. Additionally, insetting often leads to positive social impacts, such as supporting local communities and creating new job opportunities.
What are your thoughts on carbon insetting?