How Insetting Helps Companies Transform their Supply Chains
Insetting provides a way for land-dependent companies to take effective action against climate change and nature loss at the center of their value chains. This promising concept is becoming a mainstream strategy for companies to achieve Science-Based Targets (SBTs), Net Zero and other sustainability commitments. However, introducing and scaling insetting is a major endeavor and one in which not enough insights have been shared to date.
In order to change that, we invited Sandra Brandt, Director at the International Platform for Insetting (IPI), to our CHOICE Event #41. She introduced the concept and practice of insetting, while Lara Obst, Co-Founder of The Climate Choice, provided practical insight into how companies can achieve the climate transparency needed for this along the entire supply chain. Here you will find the most important content from their lectures.
What Is Insetting?
Still a relatively new and little-known concept, insetting can best be summarized in a nutshell as offsetting within a company’s own supply chain – or “offsetting brought home”. Insetting projects intervene along a company’s own value chain in order to generate GHG emissions reductions and carbon storage, and at the same time create positive impacts for communities, landscapes and ecosystems.
So, in concrete terms, insetting means that a company invests in resilient and regenerative practices – mainly through nature-based climate solutions – typically at the upstream part of their own value chain. This could include investing in the farms that the company is sourcing its raw materials from. But also the wider communities of those farmers as well as their adjacent landscapes and ecosystems are possible investment targets. Through those investments, the company is generating multiple positive impacts, from carbon sequestration to developing more sustainable watersheds and protecting biodiversity. In return, those positive impacts are creating benefits for the company in terms of building a climate resilient value chain as well as lasting and impactful partnerships with their suppliers.
To get a better understanding of what these insetting projects actually look like, let’s examine some specific examples. While there is already a wide range of different types of insetting projects, the following represent some of the main and most common options:
What Makes Insetting Special?
Insetting differs from both more traditional approaches to supply chain sustainability as well as offsetting in a few specific characteristics. To begin with, insetting goes beyond “ticking the box” in terms of compliance and certification schemes. Instead, it requires a long-lasting engagement, due diligence and meaningful development of partnerships. Insetting also focuses more on the measurable impact of its projects. Companies must therefore implement long-term monitoring in order to claim the benefit.
Furthermore, through insetting, companies make direct investments into the heart of their own value chain. These investments are driven by the aim to not only do ‘less bad’, but actually to do ‘more good’ and create positive impact within the company’s value chain. With the help of insetting, companies can not only tackle some of the major supply chain challenges such as climate change, livelihoods and biodiversity loss, but also truly contribute to building more sustainable business models and accelerate the company’s transformation towards net-zero.
Why Is Insetting Gaining Momentum?
All the described features and benefits of insetting ultimately lead to the fact that the concept is currently gaining traction. Especially for land-dependent companies, insetting is becoming more and more a strategic approach to tackle Scope 3 emissions as part of their Science Based Target (SBTi) commitment. On top of that, insetting represents strong storytelling opportunities, particularly for agricultural products. Companies can invite their consumers to contribute, making them more engaged while scaling up the impact of their insetting program.
We can also currently observe that companies are using insetting to scale their investment into nature-based climate solutions. This, in return, generates multiple co-benefits that are strengthening the business case, including the management of climate risks, increased farmer livelihoods and a move towards nature-positive.
Further Resources
If you want to learn more about the topic, you can download and read the Practical Guide to Insetting. Published by the International Platform for Insetting in March 2022, it consolidates insights and up to a decade’s worth of experience from members including Accor, Chanel, H&M Group, Kering and Nespresso.
Ensuring the Basic Requirement: Climate Transparency
At the beginning of all efforts to implement climate actions in the supply chain, and thus also in insetting, is the challenge of data transparency. In this respect, companies and their sustainability managers are currently confronted with a twofold problem.
- While facing the fastest and biggest economic change in history, they are missing structured data to truly understand their own and their suppliers’ climate performance.
- Most suppliers are not climate ready and only starting to act now, while being asked for structured climate data.
To solve these two problems and effectively reduce Scope 3 emissions, which can be as high as 90%, companies need a structured climate management approach. Here are the main steps that companies have to follow.
Holistic Frameworks for Assessing and Tracking Climate Performance
First, we must take a look at the kind of data that companies need in order to fully align suppliers with their climate strategy. While many companies still rely solely on the carbon footprint in this regard, it is particularly important here to take a holistic approach instead. There are five different dimensions that describe a company’s climate performance: Governance, Strategy, Transparent, Key Metrics & Targets and Decarbonization Measures.
In order to get a clearer orientation and furthermore to better prepare for upcoming disclosure requirements and customer inquiries, it is highly recommended to draw on already established internationally recognized reporting frameworks. Here is an overview of the most important dimensions and corresponding frameworks:
From Tracking to Collaboration
The next three steps form the actual data collection process.
1) Pre Data Collection
First of all, it is important to align internally with relevant stakeholders around the project and the data needs. Once you have secured internal support, the next steps of the preparation are to select the suppliers and thoroughly inform and onboard them for the data collection process.
2) During Data Collection
On this basis, the actual data collection can now be performed. In this stage it is important to collaborate with and support your suppliers. This means that you clearly communicate every step of the way, share resources and also provide benefits for their participation.
3) Post Data Collection
In the third phase, you have to analyze the data in order to uncover risks. Start implementing supplier engagement in hotspot categories to enable strategic alignment. This third and final phase is the most important, and is often where companies struggle. It involves driving tangible improvement with suppliers through co-creation of action plans, capacity building, training programs, incentives, and more.
Start the Climate Transformation Journey
Once a company has used these steps to lay the foundation for transparent and close collaboration with its suppliers, decarbonization measures along the supply chain such as insetting become possible.
You want to learn more about it? Then attend our demo: “Introduction to Climate Data Management and Collaboration for Decarbonization“.
Ready to take the first step? With our free Climate Readiness Check, you can check your climate maturity within 5 minutes and get a first impression of our platform and the most important dimensions of corporate climate transformation.