Is Insetting the New Offsetting?

Here’s Why Insetting Can Revolutionise Corporate Climate Action

With sustainability in the corporate spotlight, businesses are increasingly scrutinizing their emissions across all scopes. For years, offsetting—primarily through purchasing carbon credits—has been the go-to method for companies to manage their carbon footprint. But there’s a new approach gaining momentum that offers a more integrated, impactful way to address emissions: insetting.

What is Insetting, and How Does It Differ from Offsetting?

Offsetting typically involves investing in projects outside the company’s value chain to counterbalance emissions—such as supporting reforestation projects or funding renewable energy initiatives. Insetting, on the other hand, focuses on addressing emissions within a company’s own value chain. By embedding sustainable practices and projects within their supply chains, companies can reduce emissions directly tied to their operations while strengthening relationships with suppliers and stakeholders.

Imagine a coffee company working with coffee growers to adopt regenerative farming practices. Not only does this reduce emissions, but it also improves soil health, strengthens community resilience, and ensures a sustainable supply chain. This holistic, hands-on approach is what makes insetting so appealing.

Recognising the Risks of Insetting: Moving Beyond Semantics

While insetting can offer substantial benefits, it’s essential to acknowledge its potential risks—particularly when insetting is seen merely as an alternate term for offsetting.

To unlock insetting’s full potential, companies need to emphasise robust MRV frameworks, proactive risk management, and strong governance. This commitment to transparency and accountability will drive genuine investment at scale, building trust among stakeholders and ensuring that insetting goes beyond semantics to deliver real environmental value.

Why Insetting Matters for Scope 3 Emissions

Scope 3 emissions—the indirect emissions from a company’s supply chain and customer use—often make up the lion's share of a company’s carbon footprint. These emissions can be harder to track and manage, as they involve third-party actors and take place outside a company's direct operations. This is where insetting shines, as it enables companies to drive meaningful reductions within their own ecosystem, actively reducing Scope 3 emissions at the source rather than relying solely on offsetting mechanisms.

Insetting isn’t just a solution—it’s an investment in building a resilient, sustainable supply chain. Here are some core benefits of insetting for Scope 3 emissions:

1. Tangible Impact on Climate Goals Insetting directly tackles the sources of Scope 3 emissions, aligning more closely with the company’s emission reduction targets. Rather than purchasing credits from outside projects that might not have a direct impact on their supply chain, companies can initiate projects that reduce emissions within their ecosystem—making their climate goals feel more achievable and meaningful.

2. Strengthened Supplier Relationships When companies invest in sustainable practices within their value chain, they often work closely with suppliers, creating shared value. This fosters a more collaborative relationship with suppliers, aligning them around sustainability goals and creating mutual benefits that go beyond carbon reduction. Suppliers feel valued and supported, creating a ripple effect of positive change throughout the supply chain.

3. Enhanced Brand Reputation and Customer Trust Today’s consumers are discerning and increasingly value brands that demonstrate genuine, direct action on sustainability. Insetting allows companies to communicate a deeper, more authentic commitment to reducing their climate impact. This fosters trust and loyalty, as customers recognize that the brand is taking responsibility for its entire value chain, not just buying credits to “offset” emissions.

4. Mitigation of Supply Chain Risks Sustainable insetting projects—like regenerative agriculture, energy efficiency initiatives, or renewable energy implementation—can make the supply chain more resilient to climate change. For instance, promoting sustainable farming practices among suppliers can mitigate risks related to water scarcity, soil degradation, and extreme weather, which are all expected to intensify with climate change. By creating a resilient supply chain, companies safeguard their operations and product quality.

5. Regulatory Alignment and Preparedness As governments and regulatory bodies increasingly look to regulate corporate emissions, insetting prepares companies to comply with evolving requirements. Many regulatory bodies worldwide are pushing for comprehensive, accurate emissions tracking and reductions within company supply chains. By insetting now, companies will be in a better position to meet future regulations, potentially avoiding fines and reputational damage.

How Companies Can Start Insetting for Scope 3 Emissions

Companies interested in transitioning from offsetting to insetting can begin with a few key steps:

1. Identify Key Emission Sources
   Conduct a thorough analysis to identify where the most significant Scope 3 emissions occur in your supply chain. This could include raw material production, transportation, product disposal, or usage.

2. Engage and Collaborate with Suppliers
   Engage suppliers on the importance of sustainability and emissions reduction. Build partnerships and co-create solutions that benefit both parties. Training, resource-sharing, and financial incentives can go a long way in facilitating sustainable practices among suppliers.

3. Develop Insetting Projects with Tangible Benefits
   Start with projects that have both environmental and social benefits. Examples could be regenerative agriculture, renewable energy installations, or waste reduction initiatives. The aim should be to reduce emissions and improve ecosystem health, while also supporting community well-being.

4. Track and Measure Impact
   It’s critical to monitor and measure the impact of insetting projects to ensure they’re delivering the intended benefits. This includes tracking emissions reductions, economic impact, and community benefits. Transparent reporting on these efforts is key to building credibility and ensuring long-term success.

Insetting as Part of a Holistic Sustainability Strategy

Insetting is a powerful tool in the sustainability toolbox, especially when used alongside other carbon reduction and offsetting measures. It empowers companies to create meaningful, measurable change within their operations, building a more resilient business model and forging stronger, more sustainable supply chains.

As companies increasingly look beyond carbon credits to fulfill their climate commitments, insetting is likely to become a standard practice. In an era where climate-conscious customers, investors, and regulators demand genuine action, insetting offers a more authentic, impactful approach to managing Scope 3 emissions—making it a compelling alternative to traditional offsetting.