How Insetting Helps Companies Transform their Supply Chains

Is your company really reducing CO2? The crucial difference between offsetting and insetting.

We all know offsetting as the solution to becoming climate neutral quickly and easily. Whether it's a product, service or entire company - climate protection projects in the Global South offer CO2 offsetting where it can be implemented cheaply and efficiently. This trend reached its first peak in 2019, when over 100 international companies worldwide announced that they were starting their climate transformation. Among them were Monsanto, Coca-Cola and VW. This makes you wonder. How do large corporations manage to reduce their emissions and become climate neutral in a short space of time? There is a suspicious whiff of “indulgence trading through offsetting projects” in the air.

Start decarbonizing your supply chain today. Manage climate-relevant data to reduce emissions together with suppliers in the long term and in a targeted manner.

Does offsetting help to reduce CO2?

To become climate neutral, the UN recommends going through the following steps: Measure CO2, reduce it and then offset unavoidable emissions. Today, many consulting companies and software tools make the measurement possible, but the reduction and offsetting, often carried out by the same providers, still raise some questions. The Science-Based Target Initiative provides companies with guidelines and recommends science-based climate targets to consistently reduce CO2. For example, by switching to 100% green electricity, climate-relevant building adaptations, electric drives in mobility, low-CO2 processes in industry and the significant expansion of recycling and Cradle2Cradle design. All these steps require cooperation with suppliers and climate-compatible purchasing decisions. You don't hear anything about offsetting here. Consciously, because “emissions offsetting” is not recognized as a reduction measure.

Why is offsetting not a science-based reduction target?

Offsetting means that companies offset their calculated CO2 emissions through climate projects. These are diverse and, if reputable, certified by leading providers. Their impact on the climate is therefore internationally recognized, albeit critically scrutinized and constantly reviewed. What is missing from the principle of offsetting is the consideration of one's own emissions. CO2 offsetting takes place by offsetting at a different location and does not initially change the company's own emissions that are generated directly through the use of energy (Scope 1 and 2) or indirectly through the purchase of goods and services (Scope 3). As a voluntary climate measure, offsetting is therefore a popular and valid first step towards making a company's own climate targets visible and clearly tangible. However, CO2 reduction as such must be considered more comprehensively.

Insetting stands for CO2 reduction in our own supply chain

CHOICE EVENT #41: Insetting Insights

The location of the “offsetting measure” is crucial. While offsetting projects have a seemingly arbitrary impact location and often represent CO2 offsetting at the lowest possible price, insetting offers the opportunity to implement climate protection in your own supply chain and generate a positive impact on extensive sustainability goals. This opportunity comes with a particular challenge, as most CO2 emissions and social problems arise along the value chain. At the same time, this is also where the greatest potential for complete climate transformation lies.

How do you implement insetting?

Back in 2015, The Guardian ran the headline: Forget offsetting, insetting is the future! However, this future only now seems to be being implemented in a scalable way. To date, there is still no clear definition of “insetting projects” - also because CO2 reduction in Scope 3 (along the supply chain) is complex. Insetting is not only aimed at tree planting projects or renewable energy, but also at the concrete change of common process steps and actions, for example to increase local biodiversity, water conservation or the recyclability of products. In addition to CO2 as a measurement factor, metrics from the corporate social responsibility approach are also included here. Insetting therefore claims a holistic approach to entire ecosystems, societies and local economic structures.

What are the pros and cons of insetting?

Chance

1. Insetting has the advantage over offsetting that it takes Scope 3 into account.

2. In addition to CO2 emissions, holistic climate factors are taken into account

3. The company's own supply chain becomes more resilient, qualitatively improved and more cost-effective in the long term

Limits

1. Scope 1 and 2, i.e. the emissions generated directly by a company, are generally not changed

2. The complexity generates a comparatively high willingness to process, research and invest

3. The integration of numerous stakeholders requires time and resources

Is insetting already feasible today or still a vision of the future?

Insetting measures are a very relevant way for any manufacturing company to improve its own impact on the climate, the environment and people. However, insetting alone does not achieve climate neutrality by definition. Offsetting as a voluntary climate protection measure initially serves to offset emissions, while insetting tackles the root of the problem and attempts to change it. The following applies: one step at a time. CO2 reduction must be the clear focus, then offsetting and insetting measures follow logically.

Switching to renewable energy in Scope 1 and 2 is neither offsetting nor insetting. Emissions are effectively reduced here. The same applies to avoiding waste and water consumption in the office. However, offsetting helps to engage globally and support climate measures, thereby drawing attention to complex challenges. These challenges can then be tackled through well-structured insetting projects. Offsetting and insetting can therefore be used to complement each other in a comprehensive CO2 reduction strategy.

Are there examples of successfully implemented insetting?

In February 2020, Burberry announced that the brand had set up a “Regeneration Fund” to reduce CO2 emissions in its own supply chain. Together with its wool producers in Australia, Burberry plans to develop and implement regenerative farming methods. These are intended to promote carbon sequestration in soils, the health of water catchment areas and the biodiversity of habitats.

Ben and Jerry are funding the Rwenzori project in Uganda, which supports small vanilla farmers in building agroforestry systems to diversify their production. To this end, 100,000 indigenous trees have been planted in and around the vanilla plots, providing shade and enabling the farmers to increase their income.

Nespresso has invested $600 million in 10 million trees over a 5-year period. Working with local communities, Nespresso is planting native tree species and engaging farmers and community members to plant for this initiative.

What are the first steps towards CO2 reduction, offsetting and insetting?

1. Measuring suppliers' own climate performance and CO2 emissions along the supply chain is always the first step towards understanding emission sources and identifying reduction potential. Our Climate Intelligence Platform helps to set up a standardized climate management system.

2. Reduction targets can be based on the 7 climate impact categories and should show concrete measures within a defined period of time.

3. Offsetting options are diverse and can now be used voluntarily according to individual preferences at a fair price (from €10 per tonne of CO2).

4. Insetting projects require long-term commitment and should not be missing from a comprehensive climate strategy, especially in the manufacturing sector.

Translated with www.DeepL.com/Translator (free version)

1. Die Messung der eigenen Klimaperformance von Lieferanten sowie CO2-Emissionen entlang der Lieferkette ist immer der erste Schritt, um Emissionsquellen zu verstehen und Reduktionspotentiale zu erfassen. Unsere Climate Intelligence Platform hilft hier ein einheitliches Klimamanagement aufzusetzen.

2. Reduktionsziele können sich an den 7 Climate Impact Kategorien orientieren und sollten konkrete Maßnahmen in einem festgelegten Zeitraum aufzeigen.

3. Offsetting-Möglichkeiten sind vielfältig und können heute nach eigenen Präferenzen zu einem fairen Preis (ab 10€ die Tonne CO2) freiwillig eingesetzt werden.

4. Insetting-Projekte benötigen langfristiges Engagement und sollten in einer umfassenden Klimastrategie, insbesondere im produzierenden nicht fehlen.

Creating the basis for insetting with the help of AI

The basic prerequisite for being able to work with suppliers on insetting measures is an overview of climate-relevant information from your supply chain. By using AI, you can now access data from public sources about your suppliers quickly and on a large scale and thus achieve this overview with minimal time and resources.

Find out more about the new possibilities of our AI supplier screening here.