What is carbon insetting?

Insetting, a little-known yet strategic option for businesses to reduce their emissions within their value chain (Scope 3), represents a pivotal shift in corporate environmental strategy. It involves partnering or investing in activities that reduce GHG emissions within a company's sphere of influence. 

This mechanism plays a crucial role for forward-thinking businesses aiming to accelerate climate action, achieve net-zero emissions by 2050, and transition to resilient and regenerative business models. By investing in healthy ecosystems both within and beyond their operations, companies can harmonize their activities with the ecosystems they rely on, driving decarbonisation and supporting suppliers and third parties in a broader scope of responsibility.

What is insetting?

Carbon insetting is a strategy used by companies to reduce their emissions and carbon footprint within their supply chain or industry. This approach involves investing in nature-based solutions such as reforestation, agroforestry, renewable energy, and regenerative agriculture. These solutions are aimed not only at sequestering carbon but also at creating positive impacts for communities, landscapes, and ecosystems associated with the company's value chain.

In broader terms, carbon insetting refers to actions taken by an organisation within its value chain to mitigate climate change. Specifically, it involves the intentional reduction of Scope 3 emissions, which are the indirect emissions that occur in a company's value chain, including both upstream and downstream activities, accounting for 90% of a company’s carbon footprint. This reduction method is seen as an innovative approach to carbon footprint reduction, helping companies meet their sustainability goals. 

In short, carbon insetting is a comprehensive, integrated approach used by businesses to reduce their environmental impact by focusing on sustainable practices and projects within their own operations and supply chains, thereby contributing to the broader goal of climate change mitigation.

To gain a deeper understanding of carbon insetting, let's explore related terms that illustrate various aspects of this concept:

• Carbon insetting projects: These are initiatives implemented within a company's value chain aimed at both reducing greenhouse gas (GHG) emissions and enhancing carbon storage. Such projects not only have a beneficial impact on reducing emissions but also positively affect local communities, natural landscapes, and ecosystems.
• Insetting interventions: These usually involve adopting practices related to regenerative agriculture and agroforestry. These approaches are implemented at both the individual farm level and within broader local community contexts. Their primary goal is to restore natural carbon sinks by preserving and rehabilitating surrounding environments, which include forests, wetlands, and various coastal and marine ecosystems. By adopting these methods, businesses not only move towards meeting their sustainability objectives but also fortify their resilience against climate-related challenges, stabilise their supply chains, prepare their operations for future demands, and elevate the quality of their raw materials.

What is the difference between carbon offsetting and carbon insetting?

Carbon insetting has emerged as a response to the limitations and criticisms of the more traditional approach to mitigating emissions, known as carbon offsetting. Over the years, offsetting, which involves compensating for emissions by investing in external projects like renewable energy or forest conservation, has faced scrutiny. Critics argue that it allows companies to pay their way out of direct responsibility for reducing emissions, without making substantial changes to their operations. While both insetting and offsetting aim to reduce carbon emissions, they differ significantly in approach and impact.

Carbon offsetting is a strategy where businesses seek to counterbalance their emissions by investing in external projects that reduce carbon dioxide elsewhere. This approach typically involves third-party managed projects, where companies buy carbon credits from initiatives such as renewable energy generation or forest conservation. Offsetting is a transactional process, external to the company's operations, primarily aimed at achieving carbon neutrality or compensating for emissions that are currently unavoidable.

Carbon insetting, conversely, represents a more integrated and holistic approach. It involves a company's direct investment within its value chain to reduce emissions and store carbon. This strategy focuses on the company’s internal operations and supply chain, encompassing sustainable practices directly related to the business’s activities. Insetting often involves practices like regenerative agriculture, agroforestry, or improving soil health. Unlike offsetting, which benefits external projects, insetting enhances a company's overall sustainability, strengthens supply chain resilience, and creates positive impacts on ecosystems and communities within its sphere of influence.

The key difference between these two approaches lies in their impact area and the nature of interventions. While offsetting activities are external to a company’s value chain, often seen as short-term solutions or complementary to direct emission reductions, insetting provides a long-term, integrated approach, focusing on sustainability and directly impacting business operations and practices. 

For businesses formulating strategies to mitigate their environmental impact, understanding these differences is vital. Each strategy has its role in the broader context of environmental sustainability, but insetting offers a more comprehensive and sustainable method to directly address a company's carbon footprint, thereby playing a crucial role in corporate environmental responsibility.

How does carbon insetting work?

The goal of insetting is avoiding, reducing or sequestering upstream or downstream carbon emissions. Carbon insetting, as a practical approach within a company, typically follows a structured process to ensure that investments in sustainability are both effective and align with the company's broader environmental goals. This involves identifying and investing in projects that directly reduce emissions within the company's operations and supply chain.

A step-by-step process for carbon insetting implementation

1. Scoping study

‍This initial phase is critical. Companies must identify the key areas within their supply chain where carbon insetting can have the most impact. This involves understanding local challenges, engaging with stakeholders, and determining which projects are most appropriate and beneficial for the local context.

2. Feasibility study

After identifying potential areas for insetting, companies conduct a detailed assessment to examine the needs more closely. This includes consulting with stakeholders, selecting local partners, and collaboratively designing the project. This phase culminates in a comprehensive project plan, complete with technical specifications and financial budgeting.

3. Project initiation and implementation

With a robust plan in place, the next step is to formalise agreements and kick off the implementation of the project. Depending on the nature of the project, such as agroforestry or reforestation, this phase can span several years to align with environmental cycles and ensure effective execution.

4. Operation, monitoring, and certification

‍The final phase involves the ongoing management of the project, regular monitoring of its progress, and certification of its impacts. This ensures that the project delivers the intended benefits over its lifespan, which can often exceed a decade. Benefits can be observed usually one or two years after implementation. 

How can insetting be integrated into a decarbonisation strategy?

For businesses looking to reduce their carbon footprint comprehensively, integrating carbon insetting into their decarbonisation strategy is key. Carbon insetting should be viewed as a component of a larger sustainability framework, particularly following initial direct emission reductions. It helps address indirect emissions related to supply chain activities, effectively reducing the overall carbon footprint.

At which stage of the decarbonisation strategy should insetting be implemented?

Insetting is best implemented after a company has taken steps to reduce its direct emissions, such as optimising energy efficiency or transitioning to renewable energy sources. Once these direct measures are in place, insetting becomes a powerful tool to tackle the more complex challenge of indirect emissions in the supply chain. It allows companies to extend their sustainability efforts beyond their immediate operations, making a broader impact on the environment and their industry.

What is the value of insetting?

• Long-term decarbonisation: Carbon insetting supports companies in achieving long-term decarbonisation, particularly within their Scope 3 emissions. By supporting suppliers in adopting sustainable practices, companies can significantly reduce emissions associated with outsourced production, addressing a critical area of climate risk.
• Building stronger connections: Insetting fosters deeper relationships with third parties like suppliers, enhancing the overall value of products. It facilitates the transition to resilient and regenerative business models.
• Multiple positive impacts: Businesses engaging in insetting can reduce their GHG emissions and enhance carbon sequestration. 
• Integrated approach: Insetting projects are developed within ecosystems connected to the organisation's value chain, allowing the integration of the company’s vision, values, management system, and programs.
• Transforming business models: Close collaboration with suppliers to implement low-carbon and regenerative practices at the core of a company’s value chain promotes sustainable land use and builds a more resilient business model.
• Achieving targets: These projects deliver wide-ranging positive impacts, helping companies achieve their sustainability targets and fulfil commitments related to climate, nature, and communities.
• Competitive advantage: Improved management of agricultural lands and natural resources boosts productivity and ensures a more stable supply of raw materials, enhancing the long-term resilience of value chains.
• Scaling nature-based solutions: It enables businesses to integrate investments in nature into their sustainability strategies and goals. Practices like improved agriculture, agroforestry, restoration, and conservation address both climate and nature crises effectively.

Carbon insetting offers a comprehensive approach to environmental sustainability, benefiting companies, communities, and ecosystems alike. It aligns with global efforts to mitigate climate change, enhances supply chain resilience, and fosters a collaborative approach to sustainability.

What are the remaining challenges associated with insetting?

While carbon insetting offers numerous benefits, it is not without its challenges, which can impact the effectiveness and reliability of such projects:

1. Effort and resources: Implementing carbon insetting projects demands considerable effort and resources. This includes the initial setup, ongoing management, and regular monitoring of the project's impact. Such an investment of time and resources can be significant, especially for smaller companies.

2. Certification issues: Unlike traditional carbon offsetting projects, insetting projects may face difficulties in being certified in the same way. This raises challenges in quantifying and verifying the actual carbon reduction achieved, potentially impacting the credibility of these projects.

3. Collaboration challenges: Effective insetting requires collaboration with various stakeholders, including suppliers, local communities, and environmental experts. Such collaboration can be time-consuming and challenging, especially when aligning different interests and objectives.

4. Regulatory and standards uncertainty: According to a report from the NewClimate Institute and Carbon Market Watch, there is a concern that insetting may amount to unregulated offsetting of emissions. This raises issues regarding the lack of enforceable standards and independent oversight, which could result in weaker accountability compared to traditional offsets.

5. Proving long-term impact: One of the significant challenges in insetting is proving that emission reductions are permanent and not double-counted. Ensuring that the climate benefits are sustained over time and accurately accounted for remains a complex task.

6. Lack of clarity and uniformity: There is a lack of clarity and uniformity in how insetting tools are used and managed by companies. This ambiguity can lead to inconsistent application and effectiveness of insetting projects across different industries.

In summary, while insetting presents a promising approach for companies to reduce their carbon footprint, addressing these challenges is crucial for ensuring the effectiveness, reliability, and credibility of insetting as a tool for corporate climate action.

Examples of carbon insetting projects

Carbon insetting is being implemented across various industries, each tailoring its approach to align with its unique operational context and sustainability goals. This method has been recognised and included in official climate guidance by major institutions like the Greenhouse Gas Protocol (GHGp) and the Science Based Targets Initiative (SBTi), further legitimising its role in corporate climate action​​. Businesses can also become part of the International Platform for Insetting to explore projects and insetting principles.

Here are some general examples:

• Reforestation and agroforestry: Planting trees amid crops to create carbon sinks and enhance biodiversity. 
• Renewable energy projects: Investing in renewable energy sources within the supply chain. 
• Regenerative agriculture: Implementing farming practices that restore soil health and sequester carbon. 
• Virtual operations for reduced travel emissions: Implementing technology solutions to minimize the need for air travel, thereby reducing travel-related carbon emissions. 
• Circular economy practices: Recycling and reusing materials within the production process to reduce waste and carbon footprint.
• Sustainable supply chain practices: Businesses adopt sustainable practices within their supply chains, like sourcing materials responsibly and reducing waste.

Case studies on insetting

Ganni, a fashion retail brand based in Denmark, has taken significant steps in carbon insetting. By 2025, they aim to exclusively work with suppliers that do not use coal-generated heat or energy. Their commitment extends to circular processes, such as recycling fabrics and minimising waste. Additionally, Ganni has embraced technology to reduce its travel emissions footprint. They use Plan A’s sustainability software and applications for sales and marketing operations, significantly cutting down on air travel for their sales teams.

Another notable instance of carbon insetting in practice is the project undertaken by Nespresso. The coffee company collaborated with national coffee federations, and launched an agroforestry project across Colombia, Guatemala, and Ethiopia. Aiming to combat climate change's impacts and bolster local community resilience, the project involved planting native trees in coffee regions. This effort enhanced water provision, biodiversity, and soil health, improving coffee quality and creating carbon sinks. By 2019, it resulted in nearly three million trees planted, benefitting 8,000 people, and included training in shade tree management, diversifying income for coffee farmers and protecting local ecosystems.

These examples illustrate the diverse applications of carbon insetting across different sectors. By integrating sustainable practices into their operations and supply chains, companies like Nespresso and Ganni are not only reducing their carbon footprints but also fostering greater environmental resilience and community well-being.

Insetting, in short

Carbon insetting emerges as a transformative approach for businesses to address climate change directly within their supply chains. While it offers significant benefits like long-term decarbonisation, stronger supply chain relationships, and multiple positive environmental impacts, challenges such as resource demands, certification complexities, and collaboration difficulties persist. 

As insetting gains traction, businesses must navigate these challenges thoughtfully, ensuring that their efforts contribute effectively to global sustainability goals. Plan A has a proven record in implementing effective insetting strategies and reducing emissions. Book a demo today.