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:
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Afforestation and Reforestation- to sequester carbon dioxide from the atmosphere.
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Agroforestry- Integrating trees and crops on farmlands to sequester carbon, improve soil health, and provide additional sources of income for farmers.
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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.
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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.
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Sustainable Supply Chains: Collaborating with suppliers to adopt eco-friendly practices, transportation methods, and materials sourcing to reduce the overall carbon footprint.
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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.
For example, Nespresso has outlined a comprehensive strategy to attain carbon neutrality, encompassing several key initiatives. These include a commitment to reduce carbon emissions, implementing insetting measures such as tree planting in and around their coffee farms, and actively supporting and investing in high-quality offsetting projects. Through its initiative with Pur Projet, Nespresso plans to significantly expand its tree-planting capacity in coffee-producing nations like Colombia, Guatemala, Ethiopia, and Costa Rica, aiming to triple the number of trees planted in these regions.
How does Carbon Insetting Differ from Offsetting?
Carbon insetting and offsetting present distinct approaches to reducing a company's carbon footprint:
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Carbon offsetting is an extrinsic method where a company compensates for greenhouse gas (GHG) emissions by investing in external projects that remove or reduce an equivalent amount of emissions. In contrast, carbon insetting is an intrinsic approach, focusing on reducing carbon emissions within the company's supply chain through internal emission reductions and process improvements.
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The scope of insetting is limited to the company's own supply chain and operational activities, whereas offsetting projects can be implemented globally, with the scope extending beyond the company's specific operations.
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Offsetting is considered reactive in nature, addressing emissions after they have occurred or are anticipated to happen. Insetting is regarded as proactive, aiming to mitigate emissions at the source by making changes within the company's value chain.
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The concept of insetting is also claimed to be more expansive. “The term is obviously a derivative of offsetting, and offsetting is traditionally known around carbon,” says Christopher Stephenson, director at Plan Vivo Foundation. “But insetting can extend into other areas.”
While distinctly different from each other, carbon insets and offsets are not seen as opposing concepts but can ideally be used in tandem to achieve meaningful emission reduction and expedite progress in addressing the climate crisis.
Unpacking the Scope and Benefits of Insetting
Although carbon insetting is a valuable approach for reducing emissions within a company's supply chain, it faces significant challenges, particularly in relation to the evolving regulatory and reporting framework, which is still in its nascent stage. Furthermore, its scope is limited to addressing Scope 3 emissions and does not directly tackle Scope 1 and 2 emissions. It is also important to note here that not all Scope 3 reductions are automatically considered insetting. Ensuring additionality also proves to be challenging, and there is a risk of double counting, especially given the lack of transparency and oversight.
Moreover, traditional methods for measurement, reporting, and verification (MRV) may not adequately capture the actual carbon reductions achieved through insetting projects, making it difficult to gauge their effectiveness.
Benefits
Despite these limitations, insetting still plays a vital role in a company's overall climate management strategy and offers immense utility to businesses. This includes:
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Facilitating Climate Finance:
Insetting enables the facilitation of climate finance directly within a company's value chain, especially in hard-to-abate sectors like agriculture and mining. This can enhance their financial standing and attractiveness to environmentally-conscious investors and consumers. Some carbon insetting projects may also qualify for climate finance, grants, or incentives from government bodies, international organisations, or private sector initiatives aimed at supporting sustainable and climate-friendly practices.
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Sustainable Supply Chains:
Carbon insetting enhances supply chain sustainability by engaging suppliers, promoting eco-friendly practices, and reducing emissions within the company's operations. This proactive approach fosters resilience, cost savings, and overall environmental responsibility, making the supply chain more sustainable.
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Transparency and Accountability:
Insetting typically includes monitoring and reporting emission reductions and sustainability efforts, which help in increasing transparency. This allows them to set clear emission reduction targets and makes them accountable for achieving them. It thus provides a framework for businesses to take ownership of their environmental impact and helps them enhance trust and credibility among industry peers, customers, and stakeholders.
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Risk Mitigation and Climate Resilience:
Through insetting, businesses can reduce their contribution to climate change by managing their carbon footprint and mitigating potential risks associated with regulatory changes. Further, insetting initiatives focusing on sustainable land management can improve ecosystems' resilience to climate change impacts, including extreme weather events such as floods and droughts. As climate-related risks become more prevalent, businesses that proactively address their carbon footprint will be better positioned to withstand and adapt to climate-related challenges in the long term.
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Improved Industry Relations:
Implementing carbon insetting initiatives opens avenues for collaboration, shared goals, and positive engagement within the industry. It also involves working with suppliers and partners throughout the supply chain. This collaborative effort can strengthen relationships and create a more cohesive industry network.
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Supporting Local Communities:
Implementing sustainable projects helps generate employment opportunities in the area, providing direct economic benefits to the community. Insetting initiatives can also improve environmental conditions, making communities more resilient to climate-related challenges like floods, droughts, or soil erosion. Further, some projects provide additional social benefits like access to clean water, improved air quality, or education on sustainable practices. These contributions positively impact the health and livelihoods of community members.
How Can Satellite Technology Help?
Credible climate data is fundamental to all sustainable initiatives. In the context of carbon insetting, climate data is particularly important as it provides the necessary scientific foundation for companies to make informed decisions and take meaningful action in their pursuit of mitigating carbon emissions. Satellite technology, especially in this regard, provides verifiable and transparent data, helping build the credibility of inset projects in a scalable and cost-effective manner.
The benefits offered by Satellite-data extend from the designing phase of an inset project to the verification of it. For instance, it helps companies looking to implement carbon insetting projects in decision-making. This approach is especially relevant to nature-based solutions, where projects aim to utilise natural ecosystems to sequester carbon and contribute to environmental conservation and sustainability. With climate data, companies can pinpoint areas where emissions are particularly high or where carbon sequestration opportunities are abundant. This can help them make informed decisions with regard to optimising their carbon reduction efforts.
It also assists in establishing a baseline for emissions, which serves as a reference point for future improvements. Once insetting projects are implemented, satellite data in conjunction with AI capabilities can help identify potential carbon sequestration projects, such as afforestation, reforestation, or soil carbon enhancement. Furthermore, AI and satellite data can also help in optimising agricultural practices and minimising waste, presenting significant opportunities for businesses to improve operational efficiency. By comparing emissions data over time, organisations can track their progress in reducing carbon output and evaluate the effectiveness of insetting initiatives. Related: Check out our blog “Leveraging Satellite-Based MRV for Carbon Projects” to read about how satellite-based MRV helps carbon projects.
Moreover, satellite data can address significant challenges in implementing insetting projects, such as ensuring permanence and additionality. Independent verification of these factors is crucial to establish the credibility of insetting initiatives, and satellite data plays a pivotal role in accomplishing this. This can also help prevent greenwashing, ensuring that organizations genuinely contribute to carbon reduction efforts.
Furthermore, satellite data can be instrumental in evaluating potential risks to carbon sequestration projects. By monitoring climate conditions, wildfires, or deforestation changes, satellite data enables a comprehensive assessment of the project's viability and potential challenges. This data-driven approach adds an extra layer of reliability to carbon sequestration initiatives, enhancing their overall effectiveness and sustainability.
Elly Perets, CEO of Asterra, rightly articulates the role of earth observation, stating “The number of issues or the number of problems that can be solved with Earth Observation (EO) is enormous. There is potential in the agricultural, maritime, fishery, forestry, and ground engineering sectors… it’s endless. The gap right now in the market is between the organizations that provide the data and making sure that it goes all the way downstream to a solution or an application.”
Thus, climate intelligence firms play an important role here, as the terabytes of satellite data are of low value unless appropriate intelligent modeling is used to carve out actionable data sets from the mountains of raw data. Climate intelligence firms with strong analytical skills and computational capacity, which can derive and consolidate actionable data sets from various satellites and disseminate them through APIs, play a crucial role in scaling this solution.
Scaling Carbon Insetting Projects with AI and Satellite Technology
The global concentration of CO2 has recently surpassed 400 parts per million, representing a staggering 50% increase over the last 25 years. With each passing year, the risks it poses too are getting frighteningly clear. As the urgency of the climate crisis becomes increasingly evident, the need for comprehensive and multifaceted approaches to combat it has never been more critical. In this regard, while carbon insetting is not a panacea to the climate crisis, it undoubtedly holds significant potential in the fight against it. It is thus crucial to leverage every tool in our arsenal that can contribute to reducing GHG emissions.
Satellite data and AI can bring transparency and accountability to the existing opaque system and help scale the approach of carbon insetting and unlock its full potential. Collaborating with climate intelligence firms equipped with strong analytical skills and computational capabilities can help expedite this progress. By leveraging actionable data sets derived from satellites, entities can achieve their net-zero targets and drive the adoption of solutions that protect vulnerable communities and ecosystems, enhance resilience, and potentially mitigate the far-reaching consequences of climate change.
