Carbon Insetting

There is a lot of talk about carbon offsets, but little is heard about carbon insets. Carbon inset is a less controversial and equally powerful mechanism for carbon reduction. Carbon insetting is a powerful tool to achieve global net zero targets.

According to the International Platform for Insetting, “Insetting is a strategic mechanism used to scale effective nature-based solutions, enabling businesses to deliver against ambitious climate and sustainability goals and harmonize their operations with the ecosystems they depend upon.” Carbon inserting is often defined to be outside scope 1 and 2 emissions.

Compared to carbon offsets that involve buying carbon credits from unrelated third parties, companies invest in carbon reduction or removal projects along their own supply chains.

Three key features emerge: (a) it operates within the company’s value chain; (b) it utilizes nature-based solutions; and (c) does not require external markets.

Take the case of Nestle. It plants trees in and around its plantations. These trees protect crops, reduce water reliance and support workers on the very farms the company sources materials from. The trees not only capture carbon from the atmosphere but also generates credits to be used against their climate targets.

  Another example is Burberry. Luxury fashion firm Burberry has created a regeneration fund to support a new portfolio of carbon insetting projects that aim to deliver regenerative agriculture practices across its supply chain.

Carbon insets attack the root cause of the problem and are a better option. Carbon offsets should be used as the last resort.

Published by Utkarsh Majmudar

Utkarsh Majmudar is a Fellow, IIM Ahmedabad and a professional with experience encompassing academics and administration at top business schools in India (IIM Lucknow, IIM Udaipur, and IIM Bangalore) and working with large corporations. His interest areas include corporate finance and CSR.

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