2022-07-29
Supply Chain
Escaping the "Climate Neutrality" Trap – with Insetting in favor of Offsetting
We all know offsetting as the quickest and easiest solution to become what we commonly refer to as "climate neutral". Whether it's a product, a service, or an entire company, carbon projects in the global south offer CO2 offsets in places, where they are implemented cheaply and efficiently.
But let's not be fooled!
Because neutrality should not be understood in the sense that existing emissions are merely measured and then "neutralized" through offsetting projects. In order to tackle climate change, we have to do much more than just compensating for our CO2 emissions! Companies actually have to reduce the amount of emissions they are producing, in order to make a difference. Driving climate transformation means to take climate action instead of offsetting your way into climate neutrality while continuing to do business the way they do.
What is the Problem with Offsetting?
Offsetting means that companies offset the calculated CO2 emissions through climate projects. These are diverse and, if reputable, certified by leading providers. Their impact on the climate is internationally recognized, but also subject to critical scrutiny and constant review.
What lacks the principle of offsetting is the consideration of a company's own emissions. Because CO2 offsetting takes place mainly in the global south, it does not initially change the company's own emissions caused by the use of energy (Scope 1 and 2) or the purchase of goods and services (Scope 3). While offsetting can function as additional climate measure, and a valid step in making a company's own climate targets visible and clearly tangible, we need to approach climate transformation more comprehensively than that.
Is Insetting the answer?
The decisive factor for whether a carbon project is effective and makes a contribution to climate transformation is the location. Carbon offset projects often have a seemingly arbitrary impact location and mainly map CO2 offsetting at the lowest possible price. In the contrary, insetting projects aim to internally reduce CO2 within the value chain. It generates carbon storage though implementing climate protection measures along the company’s supply chain. This process makes sense because most companies generate or purchase a high proportion of CO2 emissions in their own supply chain. Thereby, insetting ensures that the company's own supply chain benefits directly from a climate protection project.
Insetting involves stakeholder and suppliers along the value chain and not only benefits the company itself. In comparison to offsetting, insetting tackles the problem at its root and transforms entire supply chains. It claims a holistic approach to entire ecosystems, societies and local economic structures. Thus, it has positive impacts on extensive sustainability goals of companies.
What are the Pros and Cons of Insetting?
CHANCES
Compared to offsetting, insetting considers Scope 3 emissions.
In addition to CO2 emissions, insetting takes holistic factors into account.
The own supply chain becomes more resilient, qualitatively improved and more cost-efficient in the long run.
CHALLENGES
Insetting does not change the emissions a company directly causes (Scope 1 and 2).
It requires a high level of processing, research, and investment.
Integrating all stakeholders into this process can be time- and energy consuming.
Our focus: CO2 reduction
While insetting measures are a very relevant way for every manufacturing company to improve its own impact on the climate, the environment and people, insetting in itself does not achieve climate neutrality. Only if companies prioritize to reduce their overall emissions (in Scope 1 and 2) and in the next step make efforts to offset and inset emissions (Scope 3), we can drive effective change.
Switching to renewable energy in Scope 1 and 2 is neither offsetting nor insetting – it effectively reduces emissions. The same applies to avoiding waste and water consumption in the office. Through offsetting, however, companies are able to get globally engaged and support climate measures worldwide, thereby raising awareness for complex challenges. These challenges can then be addressed through well-structured insetting projects. As part of a comprehensive CO2 reduction strategy, companies use offsetting and insetting measures complementarily.
First Steps towards CO2 Reduction, Offsetting and Insetting
CO2 reduction, insetting and offsetting need to go hand in hand. These are the first step to take for a companies driving climate transformation:
Measure CO2 emissions along the supply chain – It is crucial to get a holistic overview over a company’s climate performance in order to identify relevant reduction potentials and take action.
Set ambitious but realistic reduction targets – A company needs to set targets aligned with Science Based Targets. They provide guidance on how companies can reduce their own emissions in line with the goals of the Paris Agreement.
Developing a climate strategy – Companies want to identify specific climate actions and measures to tackle within a specific timeframe. Especially in the manufacturing sector, insetting projects require long-term commitment and should not be missing in a comprehensive climate strategy. Additionally, companies use offsetting options voluntarily, according to their own preferences.
This is how you get started …
Every successful climate strategy starts with basic and clear insights into the company's climate performance. An easy and quick way to get those insights is our new and free version of the Climate Readiness Check, available to companies of any size and industry. It can be completed in less than 5 minutes and helps to assess your company's climate maturity as well as provides concrete recommendations for improvement.
You want to understand your climate performance, get recommendations for action and take the first step toward climate disclosure requirements? Get more information on the free Climate Readiness Check and pre-register here.
