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Carbon Insetting vs Carbon Offsetting

July 2023 by Louise Chan

Photo by Federico Respini on Unsplash

Many consumers have heard of carbon offsetting, used often by companies to compensate for their carbon emissions. However, another solution, increasingly preferred by companies, is cropping up, known as carbon insetting.

With governments and companies rushing to hit net-zero by 2050, many are adopting carbon offsetting and buying carbon credits to reach carbon-neutral status. Carbon offsetting is when a company invests in carbon-reduction projects elsewhere to compensate for the carbon its value chains produce. This is a convenient solution for the company, as it can then claim to have achieved net-zero without altering its production line.

However, this does not reduce the amount of carbon dioxide already produced and emitted into the atmosphere, which will continue to contribute to global warming and climate change. Additionally, due to its convenience, many companies choose offsetting instead of other solutions, often affecting direct efforts to solve the root problem — carbon emissions.

Carbon Insetting

Carbon insetting offers an alternative to this flawed solution. Aptly described by the World Economic Forum, “carbon insetting focuses on doing more good rather than doing less bad within one’s value chain”. Instead of investing in projects outside their value chains, companies engaging in carbon insetting invest in reducing carbon emissions within their own value chains. At the same time, these projects can also create positive impacts on communities, landscapes and ecosystems.

Companies committing to carbon insetting have to first determine their scope 1, 2 and 3 emissions, to identify areas with high carbon emissions and develop appropriate measures to reduce them. Hence, implementing carbon insetting usually helps develop a better and more efficient supply chain, compelling a company to reduce emissions internally across its business activities.

According to the International Platform for Insetting, common insetting actions involve implementing effective nature-based solutions, such as natural systems agriculture and ecosystem restoration approaches. Local producers and communities are often positively impacted too as these investments improve their livelihoods.

Not only does insetting help companies achieve their sustainability goals, but it also allows them to build climate resilience, supply chain stability and future-proof their businesses.

A business that took action

Many companies have already started their carbon insetting journey, and one such example is the coffee giant, Nespresso. Heavily reliant on agriculture for its coffee products, Nespresso is vulnerable to the adverse impacts of climate change. Coffee farmers have been negatively impacted by varying climate conditions, such as drought or extreme rainfall, which decreases their coffee quality and yield, ultimately affecting their livelihood.

In order to increase the resilience of farming communities against climate change, the coffee company introduced its agroforestry programme in 2014. Agroforestry is where trees are deliberately planted among or around crops on the same piece of land. This protects, conserves and diversifies vital natural resources and ecosystems.

When specifically applied to coffee farms, coffee trees grow beneath a canopy and within the landscape of other trees. Adding these non-agricultural trees brings a range of benefits, including soil protection, water replenishment, windbreak and temperature regulation. These factors, combined with the fact that coffee trees flourish when grown under shade, mean crops are produced at a more stable volume with consistent quality — increasing farmers’ yield and, thus, their livelihood. Additionally, the trees also act as a carbon sink and improve wildlife habitats, leading to an increase in biodiversity.

Through agroforestry, not only is Nespresso able to build resilience against climate change across communities and its supply chains, but it also restores the ecosystem its business depends heavily on.

The example shows that carbon insetting has unlimited potential and endless possibilities. Its successful implementation will not only bring the company closer to net-zero and tighten its supply chain, but will also improve livelihoods, communities and ecosystems.

Taking the first step

Carbon offsetting can offer a viable solution for companies to achieve some of their climate goals, but it is only a first step. The credibility and integrity of such claims have slowly been improving, with the Voluntary Carbon Market Integrity Initiative (VCMI) launching its Claims Code of Practice just last month. New standards have been released to ensure companies’ claims about their contribution to combat climate change are sound. It calls for businesses to purchase only the highest quality of carbon credits, and most importantly, it emphasises that the use of carbon credits should accelerate — and not hinder — businesses’ direct efforts to reduce carbon emissions.

Carbon insetting requires a company to be proactive in its fight against climate change rather than being reactive. Organisations serious about reaching net-zero should take action by looking inwards at their supply chains and identifying critical areas where carbon insetting can be applied. By doing so, they can make tangible progress in reducing their carbon footprint and driving positive change.

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