As the climate crisis worsens, there is mounting pressure on companies—from investors, advocacy groups and politicians to reduce their carbon footprint. Increasing climate regulations, too, is pushing carbon management up the boardroom agenda. This growing momentum towards climate action holds immense significance as it won't be possible to effectively address the climate crisis unless organizations decarbonize their value chains and embrace nature-positive solutions and practices. Further, experts also concur that companies failing to address climate change can expect significant financial consequences.
Thus as companies globally strive to reduce greenhouse gas (GHG) emissions, innovative approaches are emerging to create a substantial impact. Carbon insetting in this regard is gaining traction among companies looking to reduce their net emissions. The concept of carbon insetting was coined and promoted by Plan Vivo (a carbon-crediting program) and Pur Projet ( developer of nature-based projects) and has existed on the periphery of climate action for over a decade, primarily within agricultural-dependent brands. This approach is now gaining steam in various other sectors as well as popular companies like Nestlé, PepsiCo, Chanel, Nespresso and L'Oreal, have embraced insetting, propelling it into the forefront of corporate action.
The growing prominence in carbon insetting is also bolstered as influential institutions that guide corporate climate initiatives, such as the Greenhouse Gas Protocol (GHGP) and the Science Based Targets Initiative (SBTi) include it in an official climate guidance, adding legitimacy to the practice and encouraging more companies to adopt it as a part of their sustainability strategies.
What is Carbon Insetting?
The International Platform for Insetting defines carbon insetting as the “interventions along a company’s value chain that are designed to generate (greenhouse gas) emissions reductions and carbon storage, and at the same time create positive impacts for communities, landscapes, and ecosystems.”
The primary focus of carbon insetting is to directly address carbon reduction by examining processes within the supply chain that can be improved to decrease the company's overall carbon footprint.
They signify indirect emission reductions resulting from activities embedded into a business's supply chain and primarily involve integrating nature-based solutions into a company's supply chain. Some of the practices it includes are:
Afforestation and Reforestation- to sequester carbon dioxide from the atmosphere.
Agroforestry- Integrating trees and crops on farmlands to sequester carbon, improve soil health, and provide additional sources of income for farmers.
Improved Agricultural Practices- Implementing sustainable and regenerative agricultural techniques, such as no-till farming or cover cropping, to reduce emissions and enhance carbon sequestration in the soil.
Renewable Energy Projects- Investing in on-site renewable energy installations like solar panels or wind turbines to generate clean energy and reduce reliance on fossil fuels.
Sustainable Supply Chains: Collaborating with suppliers to adopt eco-friendly practices, transportation methods, and materials sourcing to reduce the overall carbon footprint.
Ecosystem Restoration: Rehabilitating degraded ecosystems, such as wetlands or mangroves, to enhance carbon sequestration and support biodiversity.
This approach so far has mainly benefited companies with a primary emphasis on land use, such as those in the food and beverage industry. Such organizations can make use of their extensive networks of farmers and broader land-use capabilities to financially support sustainable initiatives within their value chain.
Related: Learn more about Nature-based Solutions and why they are gaining prominence here.