What is Insetting?

Scope 3 emissions, often referred to as value chain emissions, encompass indirect emissions not produced by the company itself but are a consequence of the company's activities, both upstream and downstream. These can include emissions related to the production of purchased goods and services, transportation of purchased goods, business travel, and the use of sold products and services, among others.

Insetting, on the other hand, is a concept that involves investing in sustainability projects within a company's value chain to offset its carbon footprint, rather than investing in external carbon offset projects. The idea behind insetting is to create positive environmental, social, and economic impacts directly within the scope of a company's operations and supply chain.

The relationship between Scope 3 emissions and insetting is quite direct:

• Identification of Impact Areas: By analyzing Scope 3 emissions, a company can identify where its greatest environmental impacts occur within its value chain. This can inform where to focus insetting projects for the greatest potential impact.
• Targeted Reductions: Insetting projects can be designed to directly address and reduce Scope 3 emissions. For example, a company could invest in renewable energy projects within its supply chain or improve the energy efficiency of its suppliers' operations, directly reducing the carbon footprint associated with purchased goods and services.
• Sustainability Integration: Insetting allows companies to integrate sustainability more deeply into their business models by making improvements within their own value chains. This can lead to more sustainable practices and innovations that reduce overall emissions, including Scope 3.
• Stakeholder Engagement: Both Scope 3 emissions management and insetting require engaging with a wide range of stakeholders, including suppliers, customers, and partners. This engagement is critical for identifying opportunities for emissions reductions and for implementing insetting projects effectively.
• Compliance and Reporting: Companies increasingly report on their carbon emissions and reduction strategies, including Scope 3 emissions, as part of their sustainability reporting. Insetting projects can contribute to these reports, demonstrating how a company is actively working to reduce its carbon footprint across its value chain.

Scope 3 emissions analysis helps companies understand their broader environmental impact, while insetting offers a pathway to directly address and mitigate these impacts within their value chains. Both are integral to comprehensive climate action strategies for businesses seeking to reduce their environmental footprint.

Insetting in Practice 

An example of insetting could involve a company working directly with its agricultural suppliers to implement sustainable farming practices. This might include transitioning to organic farming, implementing soil regeneration techniques, or adopting water-efficient irrigation systems. These practices not only reduce emissions associated with farming but also can improve soil health and biodiversity. By investing in these changes within their supply chain, the company helps reduce its Scope 3 emissions while supporting more sustainable agricultural practices.

Advantages of Insetting 

• Supply Chain Transformation: Insetting encourages companies to look critically at their supply chains, identifying and implementing more sustainable practices that reduce carbon emissions.
• Long-term Sustainability: By focusing internally, insetting promotes long-term sustainability and resilience within the company’s operations.
• Stakeholder Engagement: This approach often involves engaging with local communities and stakeholders, leading to more inclusive and socially responsible practices.
• Brand Enhancement: Companies engaging in insetting can strengthen their brand image as they are seen as genuinely committed to sustainability.

Challenges and Considerations 

While insetting offers significant benefits, it's not without challenges. It requires a deep commitment and often a substantial initial investment. Moreover, measuring the direct impact on carbon reduction can be complex, and there may be a need for standardization in how insetting impacts are quantified and reported.

The Future of Insetting in Climate Contribution  

As global awareness of the climate crisis grows, insetting is likely to gain more prominence. This approach aligns with the increasing demand for corporate transparency and responsibility in environmental matters. The future may see more companies integrating insetting into their sustainability strategies, thus contributing more effectively to global climate change mitigation efforts.

All insetting projects undertaken must adhere to certain key principles for best practices. These include ensuring that the project brings additional environmental benefits that wouldn't occur otherwise, the permanence of these benefits, clear legal and carbon rights, meeting specific eligibility criteria, producing real and quantifiable results, avoiding double counting of emissions reductions, obtaining stakeholder consultation and consent, and ensuring no harm while also generating further environmental and community advantages.

Insetting represents a significant shift in how companies approach carbon credits and climate contribution. By focusing on internal changes and improvements, it offers a more integrated and potentially more effective approach to reducing carbon emissions.

At ClimateSeed, we believe that if this practice gains traction, it could play a crucial role in global efforts to combat climate change, signaling a new era of corporate environmental responsibility. For more information, please, contact us.

Sources:

• CG Space
• Sylvera
• World Economic Forum