Carbon offsets are pretty well known by the supply chain industry. A freight company may purchase carbon credits from an accredited organization that plants trees in another part of the world to offset emissions from its operations of transporting goods.
But what are carbon insets?
Carbon insetting happens when a company invests in making parts of its own supply chain more sustainable. The investment could occur upstream or downstream, and it could reduce, avoid or sequester carbon dioxide emissions.
Aside from carbon dioxide emissions, carbon insets can also have positive impacts on biodiversity, suppliers and their communities, the health of soils or ecosystems where ingredients for products may be grown.
Rather than pitting carbon offsets and insets against each other, many believe that companies should leverage both strategies to reduce and sequester carbon emissions.
Carbon insetting examples
“Insetting focuses emission-mitigation strategies directly in the sphere of influence of a company,” said Danny Gomez, managing director of financial and emerging markets at FreightWaves.
For it to be a carbon inset, it has to be an investment to reduce scope 3 emissions within a company’s supply chain. A common carbon insetting strategy is to invest in making suppliers’ operations more sustainable. A retailer that sells food or beverage products may invest in making its supply chain more sustainable by implementing regenerative farming techniques.
Ben & Jerry’s is partnering with the PUR Project in Uganda. The company is investing in agroforestry and other regenerative agriculture practices in areas where it sources vanilla for ice cream.
About 100,000 native trees were planted in and around vanilla plots in Uganda where Ben & Jerry’s sources some of its vanilla. The trees provide extra shade and humidity to the plants, give farmers a chance to diversify their income and enrich the nutrient density and structure of the soil.
“Insetting has tremendous potential to tackle some of the most crucial challenges around supply chain sustainability including climate change, biodiversity loss and farmer livelihoods,” according to the International Platform for Insetting.
Lack of standardization for insets, other environmental claims
Companies can only use carbon insets to address scope 3 emissions. And there is no global set of standards that companies are required to adhere to. This means companies need to work to ensure their insetting projects are having the impacts they predict. They also may use third-party organizations to verify the credibility of the impacts for their customers and investors.
The lack of standards may seem like a big deterrent, and it needs to be addressed to make carbon insets credible. However, there are few standards for tracking carbon emissions, carbon offsets, or other environmental claims, globally. Governments and organizations around the world are working to make sustainability more standardized and comparable.
The Smart Freight Centre created a guideline for carbon insetting for sustainable aviation fuel. The center also has been looking into insetting in freight in general for two years. The Securities and Exchange Commission proposed rules in March to standardize the disclosure of climate-related claims such as emissions.
“I believe that often offsets are a gateway to more meaningful sustainability practices. Not everyone will move to insets, as they typically require larger investments, but the appeal is clear, and hopefully the demand for insets will continue to rise, alongside offsets,” Gomez said.