For insetting to play its part in tackling Scope 3 emissions, the market needs a unified direction

As a result, regulators are beginning to set legislation requiring large companies to at least measure their Scope 3 impact, with a view to ultimately reducing these emissions.

Companies have a number of options to address these emissions: they can carefully select suppliers or set supply chain emissions-reduction targets. Certain companies are also looking to implement ‘insetting’ projects. These will see them work with their suppliers and implement projects that reduce emissions directly within their supply chain. When executed correctly, insetting projects can also provide additional positive outcomes for local communities, landscapes and ecosystems.

Insetting has significant potential to address Scope 3. However, according to a new report from Abatable and the International Platform for Insetting (IPI), Addressing Scope 3 – how insetting can be scaled to tackle supply chain emissions, consensus quickly needs to be established on how to precisely define and implement the practice if it is to effectively scale as a credible climate solution.

Alignment needed

The report, which surveys the project developers who are pioneering insetting projects, finds that alignment is sorely needed on insetting best practices and the associated claims companies can make against their overall emissions-reduction targets. This is crucial as companies increasingly look towards insetting as a climate solution amidst increasing public scrutiny over their net-zero plans.

Having sound principles behind the implementation of insetting projects and how companies claim climate and nature benefits from insetting is therefore crucial if the practice is to scale as an effective and credible solution to meet global climate and nature goals.

Boundary disputes

One of the report's main findings is that it is key to establish where the boundaries of insetting lie. There is confusion from market actors, particularly in the agricultural sector, about whether ‘on-farm’ or wider landscape projects constitute insetting.

On the other side of the equation, from a corporate claims perspective market players also stated there is a blurred boundary between where a Scope 3 reduction claim stops and a Beyond Value Chain Mitigation (BVCM) claim (where companies finance additional climate action outside of their value chain) starts.

The lack of clarity from existing standards and frameworks on these points is inhibiting companies from taking action.

How to measure impact?

The report finds that additional consensus is also needed on how insetting is measured, verified and attributed on the project supply side, with guidelines and frameworks still ambiguous or in development.

It also finds that standard setters need to increase alignment and retain a degree of flexibility when defining rules for the sector due to the current state of play of insetting project guidance and methodologies, the current levels of traceability of different agricultural commodities and the availability of data to measure and report on project outcomes.

Modular, adaptable approaches will be needed to balance flexibility with stringency across the various insetting environments.

Finally, it is important that companies recognise that high-quality insetting projects come with a cost, but also that they offer additional longer-term direct business benefits including more resilient supply chains and a shield against future carbon pricing dynamics.

A map of the insetting ecosystem. Source: Abatable, in collaboration with WBCSD. Mapping is not exhaustive.

Recommendations

The report outlines a series of recommendations for the main insetting stakeholders:

We expect to see critical steps forward on all these issues in 2024. As our report demonstrates, voluntary carbon market project developers can also play a fundamental role by transferring their knowledge to this growing market to enable a positive future for climate, nature and people.

It is clear that the project developers we interviewed see insetting as a big part of the future of carbon markets. With the right frameworks in place, it can scale as a worthwhile market-driven climate solution.

The report is the product of 20 detailed interviews conducted by Abatable and the IPI with key stakeholders in the insetting space, including Conservation International, Ecosecurities, Indigo Ag, Rabobank and South Pole. Its insights were shaped by Alicia Hudson, Business Development Coordinator, Callum Hunt, Research Manager, and Marc Height, Content Manager at Abatable.

The report complements Abatable’s carbon market intelligence services, which include its VCM country policy profiles. These are designed to allow policymakers, investors and project developers to compare country policy risk profiles to understand national policy landscapes and make informed decisions.

The International Platform for Insetting is a collaborative membership organisation for businesses implementing insetting projects that achieve positive impacts for the environment and communities along their value chains. Its purpose is to support businesses with implementing effective and scalable nature-based solutions through insetting, enabling them to set and achieve ambitious climate goals, build resilient and regenerative business models, and reverse the loss of nature within and beyond their value chains.