As Scope 3 pressures mount and Science Based Targets initiative (SBTi)’s Corporate Net Zero Standard (CNZS) V2.0 takes shape, real-world insetting case studies create a replicable path forward.
In the global race toward decarbonization, Scope 3 emissions—those generated across a company’s upstream and downstream value chain—remain one of the most elusive and impactful challenges for companies committed to net-zero. Often accounting for up to 90% of a business’s total carbon footprint, these emissions are complex to measure, manage, and mitigate due to their indirect nature. Insetting has emerged as a strategic solution, enabling companies to reduce upstream Scope 3 emissions by fostering decarbonization within their own supply chains, creating a collaborative and impactful approach to sustainability.
Understanding Insetting: A Strategic Approach to Scope 3
Insetting differs from traditional offsetting by focusing on emission reductions within a company’s value chain rather than purchasing external carbon credits. By implementing decarbonization projects directly with suppliers or partners, companies can achieve measurable reductions in Scope 3 emissions while aligning with their operational and sustainability goals. This approach not only addresses environmental impact but also enhances supply chain resilience, fosters innovation, and can improve the economics of sustainability initiatives.
One of the most compelling insetting examples to date comes from LSB Industries, Inc. (LSB), a leader in decarbonizing and supplying low-carbon products to chemical and industrial companies, as well as the U.S. agricultural market. LSB is collaborating with ClimeCo to replicate this model and expand its market for low-carbon products, demonstrating how insetting can create a scalable framework for emission reductions.
LSB Industries: A Case Study in Insetting
“It starts with the implementation of ‘Carbon Capture and Sequestration’ (CCS) directly at our existing El Dorado, Arkansas facility, reducing our carbon emissions and enabling us to produce low-carbon products,” shared Jakob Krummenacher, VP of Low Carbon Products at LSB Industries. “Our agreement to supply Freeport McMoRan (Freeport) with a low-carbon product is an example of insetting: value chain collaboration on decarbonization. We will reduce our Scope 1 emissions and allocate those reductions onto the product Freeport buys, providing them with a Scope 3 emission reduction.”
LSB will supply up to 150,000 short tons per annum of low-carbon Ammonium Nitrate Solution (ANS) to Freeport for five years, phasing in the low-carbon contracted volume. This initiative stems from LSB’s CCS project, undertaken with its partner, Lapis Carbon Solutions. The project will capture and sequester approximately 400,000 metric tons of CO2 produced annually from El Dorado’s ammonia production. This effort is expected to yield more than 375,000 tons of low-carbon ammonia, which LSB can sell or upgrade into other low-carbon nitrogen products, such as ANS. The CCS project also reduces LSB’s annual overall Scope 1 and 2 CO2 emissions by approximately 25%, creating a dual benefit for LSB’s operational footprint and its customers’ Scope 3 goals.
The agreement with Freeport aligns with ClimeCo’s insetting platform, which focuses on identifying, implementing, quantifying, and verifying decarbonization efforts while embedding sustainability into core procurement, sales, and operations strategies. LSB and ClimeCo are now exploring additional insetting opportunities for LSB’s remaining low-carbon volume, targeting companies in the agriculture, food, and biofuels sectors. These efforts aim to create a ripple effect, encouraging more organizations to adopt insetting as a cornerstone of their decarbonization strategies.
The Role of SBTi’s Corporate Net Zero Standard V2.0
The Science Based Targets initiative’s (SBTi) recent draft of the Corporate Net-Zero Standard V2.0 has bolstered the credibility of insetting by introducing support for market-based accounting, referred to as “indirect mitigation.” This framework allows companies to account for emission reductions through mechanisms like book and claim systems, which enable buyers to support low-carbon products or practices even when physical delivery isn’t feasible. By purchasing verified environmental attributes, companies can demonstrate progress toward Scope 3 emission reduction targets with increased confidence.
“We are at a critical moment in time with SBTi’s V2, as there is expanded opportunity for companies to move from theory to scalable, measurable environmental action without passing a hefty cost on to consumers,” explained Emily Damon, Chief Growth Officer at ClimeCo. “To create products with drastically improved climate impact requires investment, but cost increases seen by end consumers can be quite small, just cents on the dollar. Increasing numbers of consumers are buying products at a small premium to support climate projects, making a powerful choice that is creating an enormous impact.”
The Broader Impact of Insetting
Insetting offers a transformative approach to decarbonization by aligning environmental goals with business value.
“Insetting is truly a positive ripple effect for organizations looking to decarbonize and drive business value throughout their supply chain,” Damon added. “In LSB’s example, insetting improves the economics of their CCS project, in turn helping them implement additional decarbonization projects.”
By integrating sustainability into core operations, companies can reduce costs, enhance brand reputation, and meet growing regulatory and investor expectations.
However, insetting is not without challenges. Measuring and verifying Scope 3 reductions requires robust data collection and transparent reporting, often necessitating collaboration across multiple stakeholders. Additionally, scaling insetting initiatives demands significant upfront investment and alignment of incentives across supply chains. ClimeCo’s platform addresses these hurdles by providing tools to quantify and verify emission reductions, ensuring credibility and scalability.
Industry Trends and Future Opportunities
The rise of insetting reflects broader industry trends toward value chain collaboration and innovative financing models. Companies across sectors—such as agriculture, manufacturing, and energy—are increasingly adopting insetting to meet stringent ESG (Environmental, Social, and Governance) standards and regulatory requirements. For example, the food and beverage industry is exploring insetting to reduce emissions from agricultural inputs, while the energy sector is leveraging low-carbon fuels to decarbonize downstream operations.
As businesses worldwide confront the realities of climate impact, regulation, and ESG-driven investment standards, LSB and ClimeCo are poised to lead the way. By presenting new opportunities for companies to internalize their carbon liabilities and embed them into procurement, production, and performance models, they are transforming Scope 3 from a risk into a strategic opportunity. The partnership’s focus on scalable, replicable insetting strategies offers a blueprint for other organizations seeking to navigate the complexities of net-zero commitments.
Conclusion
Insetting represents a paradigm shift in how companies address Scope 3 emissions, moving beyond traditional offsetting to create meaningful, measurable change within their value chains. The collaboration between LSB Industries and ClimeCo exemplifies the potential of insetting to drive decarbonization while delivering business value. As the SBTi’s Corporate Net Zero Standard V2.0 paves the way for broader adoption, insetting is set to become a cornerstone of corporate sustainability, empowering companies to turn climate challenges into opportunities for innovation and growth.
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