What is Carbon Insetting?

What is Carbon Insetting?

Carbon insetting refers to emissions reduction or carbon sequestration activities implemented within a company's own value chain—as opposed to offsetting, which purchases credits from unrelated third-party projects. Insetting investments might include agroforestry programs with agricultural suppliers, renewable energy installations at supplier facilities, or soil carbon improvements on farms that provide raw materials. The distinguishing feature is that the climate benefit occurs within the investing company's Scope 3 footprint.

Why It Matters

The credibility crisis facing traditional carbon offsets has pushed leading companies toward insetting as a more defensible climate strategy. When a food company invests in regenerative agriculture practices among its grain suppliers, the emissions reduction is tangible, verifiable, and directly connected to the company's product. This stands in stark contrast to purchasing credits from a forestry project on another continent with no operational connection to the buyer's business.

Insetting also generates co-benefits that pure offsetting cannot. Supply chain investments in clean energy, efficient logistics, and sustainable agriculture simultaneously reduce emissions, strengthen supplier relationships, improve supply chain resilience, and often reduce costs over time. These stacked benefits create a stronger business case than offset purchases, which deliver only a climate claim with no operational value.

The International Platform for Insetting (IPI) has developed frameworks and guidance for insetting projects across agricultural, forestry, and energy value chains. While insetting lacks the standardized registry infrastructure of the voluntary carbon market, its integration with corporate Scope 3 accounting under the GHG Protocol provides a recognized framework for quantification and reporting.

For companies with agricultural supply chains—food and beverage, textiles, cosmetics, pharmaceuticals—insetting offers a particularly compelling pathway. Agriculture accounts for roughly 10-12% of global emissions, and supply chain interventions such as cover cropping, reduced tillage, improved fertilizer management, and agroforestry can sequester carbon while improving soil health, water retention, and crop resilience. Nespresso, L'Oréal, and Kering have implemented significant insetting programs along these lines.

How It Works / Key Components

Insetting projects are identified through value chain emissions mapping. Companies conduct detailed Scope 3 assessments to identify emissions hotspots within their supply chains, then design interventions that reduce those specific emission sources. A chocolate manufacturer might map its cocoa supply chain and identify deforestation-linked land clearing as the dominant emission source, then invest in agroforestry systems that increase cocoa yields on existing farmland while sequestering carbon in new tree cover.

Quantification follows established methodologies adapted from both the GHG Protocol and voluntary carbon market standards. Baseline emissions are established for the supply chain segment in question, the intervention is implemented and monitored, and resulting reductions or removals are calculated against the baseline. Third-party verification provides credibility, though the insetting field is still developing consensus on verification standards equivalent to those used in offset markets.

The accounting treatment of insetting reductions depends on the reporting framework. Under the GHG Protocol, emissions reductions achieved within the value chain directly lower reported Scope 3 emissions—they are not "claimed" as offsets but rather reflected as actual footprint improvements. This accounting treatment is generally considered more robust and transparent than offset retirement, as it reduces the company's reported emissions rather than counterbalancing them with external credits.

Implementation requires deep supplier engagement that goes beyond transactional purchasing relationships. Companies must invest in technical assistance, provide financing or risk-sharing mechanisms, and build long-term partnerships with suppliers willing to adopt new practices. This level of engagement is more resource-intensive than buying offsets but creates durable value chain transformation that persists beyond individual project timelines.

Council Fire's Approach

Council Fire helps organizations design and implement insetting programs grounded in rigorous value chain emissions analysis. We identify the highest-impact intervention points within client supply chains, develop quantification and monitoring frameworks, structure supplier engagement programs, and ensure that insetting activities align with GHG Protocol reporting requirements and emerging best practices for credible climate claims.

Frequently Asked Questions

How is insetting different from offsetting?

Offsetting purchases emissions reduction credits from projects outside a company's value chain—a tech company buying credits from a wind farm in India, for example. Insetting invests in emissions reductions within the company's own supply chain—that same tech company funding energy efficiency improvements at its component manufacturers. Insetting reductions appear as Scope 3 footprint improvements, while offsets are applied as separate claims against residual emissions.

Can insetting reductions be counted toward science-based targets?

Yes. Under the Science Based Targets initiative (SBTi) framework, insetting interventions that reduce Scope 3 emissions within the value chain count directly toward target achievement. This is a significant advantage over offsets, which the SBTi does not allow to count toward interim targets. For companies with validated science-based targets, insetting provides a pathway to demonstrate real supply chain decarbonization progress.

What are the main challenges with insetting?

The primary challenges are scale, measurement, and timeline. Insetting projects—particularly in agriculture—operate at the pace of growing seasons and require multi-year engagement before measurable results emerge. Quantifying soil carbon changes or avoided deforestation with precision remains technically challenging, though methodologies are improving. And the project-by-project nature of insetting limits the speed at which a company can address its full Scope 3 footprint compared to purchasing offsets at volume.