Insetting: Made-up word or mechanism to be taken seriously?

July 9, 2018

Insetting: Made-up word or mechanism to be taken seriously?

Carbon offsetting has long established itself as a mechanism in the fight against global warming. Comparatively new is the term derived from it, carbon insetting. So, what exactly is behind carbon insetting?

Insetting is all about implementing climate protection measures in your own value chain. First of all, this makes sense, since most companies generate a large proportion of their carbon emissions in their own supply chain, which means they have already bought into the process. 

In basic terms, three alternative approaches are possible:

Variant 1: Carbon offsetting with a regional connection to your own supply chain

The simplest variant of insetting simply involves making sure that your carbon offset projects have a regional connection to your own supply chain when choosing them. For example, if a chocolate manufacturer purchases a large proportion of its raw materials from Côte d'Ivoire, it could support a carbon offset project in this country.

The distinction between offsetting and insetting is often not clear in this definition. The distinction depends on the regional impact of your project on pure CO2 offsetting.

Variant 2: Carbon offsetting with a direct connection to your own supply chain

A pure regional connection no longer suffices in this variant, because your own supply chain needs to benefit directly from it. For example, energy from renewable sources is generated from a carbon offset project that companies can use from their own supply chain (such as our hydropower project in DR Congo). This ultimately reduces the carbon footprint for your own products and the effects can be seen directly in your own supply chain.

Therefore, the distinction to Variant 1 is a direct functional connection to the supply chain. This often requires the creation of carbon offset projects, which is very time-consuming. Therefore, existing carbon offset projects that were designed to be extended to other regions from the outset represent a meaningful alternative (which are referred to as "Program of Activities" – POA – projects). 

Variant 3: Customized carbon offset projects in your own supply chain

The third variant is the most complex: the carbon offset project is established directly in your own supply chain. Companies need to implement measures at a local level that make their production more environmentally friendly for their own suppliers. For instance, these could be projects to reduce waste and rejects in production, reduce energy consumption or achieve a more sustainable use of scarce resources.

In order to differentiate these approaches from pure CO2 reduction measures in the supply chain, they also have to be certified according to one of the common standards for carbon offset projects. This is the only way for companies to prove that the measures they have undertaken are also suitable as insetting projects.

How do I properly go about insetting?

Which of the three variants is the right one above all depends on the resources a company has at its disposal. Company carbon offset projects in the value chain need high budgets for their planning, initiation and certification. The only option for the majority of smaller companies would be an existing carbon offset project with a regional connection to their own supply chain.

In contrast, large companies – in theory at least –  have the resources and opportunities available to implement customized carbon offset measures in their own supply chain (see Variant 3). Some companies, like the French cosmetics company L'Oréal, are pursuing this approach with great passion.

Variant 2 therefore represents a good middle ground for many companies: the use of existing carbon offset mechanisms with a functional connection to their own supply chain. ClimatePartner is developing suitable strategies for this approach.

In partnership with leading companies like Nespresso, Chanel and L'Oréal, ClimatePartner is involved in sharpening the mechanism and supplying additional examples of insetting on the Board of the International Insetting Platform (IPI). Far more important than any definition, however, are practical case studies on how climate protection can be integrated usefully into the supply chains of global companies.

 

An analysis by Dr. Christian Reisinger