Introduction: Why Insetting Matters Now
The global push for climate resilience is redefining corporate responsibility. While carbon offsetting has long been an organizational staple, a more holistic and impactful approach is gaining significant traction for companies aiming to neutralize emissions. The term insetting is making the rounds in executive discussions and rising through the ranks of sustainable business strategies. Offsetting as an approach has become polarizing in markets and among sustainability professionals. Insetting is a more integrated, value-chain-driven approach to achieving real, measurable, and supply-chain-aligned impact.
But what exactly is Carbon Insetting, and how does it differ from offsetting?
ESG News breaks down key descriptions to ramp up your insetting knowledge—what it is, how it works, who’s doing it, and why it’s a critical tool in tackling Scope 3 emissions in alignment with science-based climate goals.
What Is Insetting?
When it comes to decarbonization, insetting refers to the practice of investing in emission reduction or carbon removal projects within a company’s own value chain. Unlike the arguably dated approach of carbon offsetting, which funds external projects (such as forest preservation or renewable energy in unrelated regions), insetting focuses on interventions that directly benefit the company’s supply chain, operations, or upstream/downstream stakeholders.
Insetting projects are typically designed to:
Reduce Scope 3 emissions (the indirect emissions across a company’s value chain)
Build resilience and sustainability into supply chains
Generate shared value for suppliers, farmers, and local communities
Carbon Insetting vs. Carbon Offsetting: What’s the Difference?
Carbon Insetting is increasingly seen as a direct, strategic sustainability investment, while offsetting is often regarded as a short-term mitigation tactic that doesn’t directly address the environmental, social, and financial impact of a company’s operations.
Why Insetting Is Gaining Traction
Carbon Insetting has emerged as a credible solution for addressing Scope 3 emissions, which often account for 70% or more of a company’s total carbon footprint. These emissions are notoriously difficult to measure and manage because they originate from suppliers, distributors, and consumers.
Key drivers of insetting adoption include:
Pressure from investors and regulators for credible emissions reductions
Scope 3 accounting standards set by frameworks like the Science Based Targets initiative (SBTi)
Corporate net-zero commitments and ESG disclosures
The desire to achieve co-benefits such as improved soil health, biodiversity, water use, and farmer livelihoods
How Insetting Works: Real-World Examples
General Mills (GIS) – Supports regenerative agriculture in U.S. wheat and dairy supply chains, reducing emissions and improving soil carbon and farmer income.
LVMH (MC.PA) – Its “LIFE 360” program includes insetting efforts across natural material supply chains (leather, cotton, grapes, flowers).
Unilever (UL) – Works with suppliers to adopt renewable energy in manufacturing, cutting Scope 3 emissions.
Mars, Incorporated – Funds climate-smart cocoa and rice farming projects in West Africa and Southeast Asia to help suppliers reduce emissions.
Nutrien (NTR) & Athian – Piloting bovine feed additives to reduce dairy methane emissions, quantified for internal Scope 3 accounting.
Nissan (NSANY) – Partners with steel/aluminum suppliers to reduce emissions through recycled content and low-carbon production.
Nestlé (NSRGY) – Invests in agroforestry and farmer training for coffee and cocoa supply chains to reduce emissions and boost resilience.
What Can Be Counted as an Insetting Project?
To be legitimate, an insetting project should:
Be tied to the company’s core supply chain
Deliver quantifiable GHG reductions or removals
Be additional (i.e., not business-as-usual)
Be verifiable and traceable
Align with broader sustainability goals (e.g., biodiversity, livelihoods)
Examples include:
Regenerative or climate-smart agriculture
Livestock methane reduction (e.g., feed additives)
Reforestation within supply chain zones
Clean energy for suppliers
Water efficiency technologies for manufacturers
Challenges and Evolving Standards
Carbon Insetting is still maturing. Challenges include:
Accounting complexity – Risk of double-counting emissions reductions
Verification standards – Lack of a unified global framework; IPI and GHG Protocol are developing guidance
Costs and scalability – Especially for smallholder farmers
Legal attribution – Companies must prove ownership of Scope 3 reductions as they become financially material
Insetting and the Future of Scope 3 Reporting
Scope 3 emissions—those occurring across a company’s value chain—represent the largest share of corporate emissions and the most difficult to manage. They encompass raw material extraction, transportation, consumer use, and product end-of-life.
Frameworks such as TCFD, ISSB, ESRS, and the U.S. SEC climate rule are increasingly holding companies accountable for these emissions.
Insetting is emerging as a key strategy.
How Insetting Aligns with the Future of Scope 3 Reporting
Strengthening Supplier Relationships and Transparency
Insetting fosters collaboration with upstream suppliers, driving transparency, emissions data collection, and climate resilience.
Improving Operational Efficiency and Risk Resilience
Tactics like soil health improvement or renewable energy use reduce costs, boost efficiency, and improve supply chain resilience to inflation and climate shocks.
Demonstrating Environmental and Social Impact with Credibility
Unlike offsets, insetting provides localized, measurable impact aligned with ESG goals. Projects often yield biodiversity, water stewardship, and social co-benefits.
Meeting Regulatory Requirements and Audit Preparedness
With robust MRV systems, insetting offers auditable, traceable proof of emissions reductions—critical for avoiding greenwashing claims.
Unlocking Capital Through ESG Performance
Insetting helps companies qualify for green finance products, attract ESG-focused investors, and improve credit ratings through credible decarbonization plans.
A Compliance-Aligned Strategy for the Next Decade and Beyond
What was once optional is becoming required. As ESG regulation tightens, insetting is fast becoming a core tool for Scope 3 compliance and long-term value creation.
Bottom line: Insetting bridges the gap between ambition and action—offering measurable, aligned, and credible decarbonization.
Conclusion: A Strategic Shift Toward Integrated Climate Action
Insetting as a tool helps evolve the complex accountability of carbon reduction to become a strategic lever for resilience, value creation, and credible ESG performance. By investing in their own operations, companies can truly future-proof their supply chains, support frontline communities, and meet the mounting demands for transparent, science-aligned climate action.
As sustainability reporting matures, expect to see insetting approaches shift from a niche strategy to a mainstream pillar of corporate decarbonization—and ESG News will be here to report on global progress.
Related Article: Atem launches free Carbon Cockpit to empower every company to succeed with carbon offsetting
