Can insetting stack the cards towards more sustainable supply chains?

Reuters

28-01-2025

Summary
Insetting focuses on reducing Scope 3 emissions within a brand's own supply chain
Startups like AgriWebb and Klim attracting investments to support regenerative agriculture
Partnerships like Reckitt's agroforestry trial aim to drive sustainable supply chain practices
Challenges include measuring impacts, avoiding double counting, and ensuring credibility
Market guarantees and local advocacy key to encouraging supplier participation in projects
January 20 - As corporate 2030 climate targets creep ever closer, brands are under growing pressure to reduce not only their direct greenhouse gas emissions, but those in their supply chain, which can account for 70% or 80% of their carbon footprint.
This year has seen a flurry of investments in early-stage firms offering solutions. Notable examples include Australia-based AgriWebb, offering software to help farmers manage livestock, and Germany-headquartered Klim, assisting companies to introduce regenerative agriculture in their supply chains. They landed $7.2 million and 22-million euros in successful Series C and Series A fundraising rounds, respectively.
Most recently, Earthworm Foundation and University of Oxford spin-out Nature-based Insights, announced a tie-up to help companies quantify the biodiversity impacts of nature-based solutions in their supply chains.
The pair is working with consumer goods giant Reckitt, maker of Durex condoms, to trial the introduction of agroforestry in its rubber supply chain in Thailand, Malaysia and Indonesia.
Unlike offsetting, which permits brands to balance their carbon emissions through third-party projects carried out anywhere in the world, insetting specifically targets emissions created within a brand's own supply chain or industry (so-called Scope 3).
Another platform that facilitates shared action at a landscape level is SourceUp, which connects buyers in agri-commodity supply chains with landscape and jurisdictional initiatives in production areas.
Henri Bruxelles, chief sustainability and strategic business development officer at Danone, is an advocate of insetting: 'As a food company, having a positive impact on nature is not only a question of responsibility, it's also a question of resilience and competitiveness. And if you don't act now, you'll be faced with multiple business challenges in five years' time.'
Nestle is similarly looking to build up its insetting activities. The Swiss food giant is currently supporting 15 landscape initiatives, opens new tab around the world, aligning with its 2030 goal of sourcing 50% of its goods from producers deploying regenerative farming techniques.
One of these is the public-private Cocoa and Forests Initiative, opens new tab, a forest protection and restoration scheme supported by cocoa and chocolate brands under the umbrella of the World Cocoa Foundation, in collaboration with the governments of both Ivory Coast and Ghana and sustainable trade initiative IDH.
While the seven-year-old project has seen a 'high number of trees planted' and some ecosystem restoration activities, PUR's Nobrega acknowledges that progress has been modest. He partly puts this down to the fact that there is not yet a framework in place that will allow companies to unlock carbon finance. 'What we need is support from actors like UNFCCC to say to governments, 'Look, when you're orienting your NDCs (nationally determined contributions), you should be considering the actions being taken by the corporate sector, and how those overlap.'
One organisation that is trying to establish rules of the road for corporate insetting activity is the International Platform for Insetting, opens new tab (IPI), part of the brand-led Business for Nature coalition. Other members include fashion brands Kering, Burberry and Chanel, as well as Switzerland's largest supermarket chain Migros and the French hospitality group Accor.
While the chair of IPI's technical committee Nikol Ostianova is quick to point to the numerous upsides, opens new tab of insetting, she is not blind to the challenges for brands looking to address their Scope 3 impacts in a way that is seen as both credible and effective.
While leading standard setters such as the Science-Based Targets initiative, opens new tab (SBTi) and the Greenhouse Gas Protocol , opens new tab have offered a degree of guidance on insetting as part of wider advice on Scope 3 land-based removals, the subject is still finding its place within the existing standards landscape.
However, moves towards greater clarity are afoot, Ostianová states, referencing two separate standards currently in development on Scope 3 emissions reductions: one from the Washington DC-headquartered certification body Verra, opens new tab, and the other from the UK nature-based solutions charity Social Carbon.
Underlying this is the fear that brands pursing insetting strategies could find themselves open to the same charges of greenwashing that have bedevilled offsetting. In a 2023 report, opens new tab, for example, two influential environmental groups, Carbon Market Watch and the NewClimate Institute, argued that, without the right oversight, insetting projects could easily take on the guise of 'low-credibility GHG emission offsetting'.
The report, which included an examination of insetting efforts by brands such as Nestle, PepsiCo, JBS and Deutsche Post, singles out insetting's reliance on 'non-permanent biological carbon dioxide removals', such as reforestation and regenerative farming (as opposed to permanent solutions such as geological sequestration).
Feeding these early criticisms are the difficulties that brands face around calculating insetting's impacts, especially in relation to causation (why an impact occurred), additionality (would it have occurred anyway) and attribution (who is responsible for the impact).
The latter challenge is compounded by the multiple actors that are often involved in insetting projects, Ostianova explains. She gives the example of an organic agriculture project: 'Let's say 100 seedlings come from company A, but 100 also come from company B, but then the farmer might decide to replace seedlings himself because they die. So, then what?'
To avoid brands overclaiming or finding themselves guilty of double counting, opens new tab (a common criticism in the offset market), she proposes putting the supplier 'at the centre' when it comes to providing Scope 3 decarbonisation data. More specific guidance on the topic should emerge in the European Union's Carbon Removals and Carbon Farming regulation, opens new tab, which was provisionally agreed in April 2024 but still awaits further clarification and formal adoption.
A final challenge centres on incentivising suppliers to get on board. While brands may typically cover the bulk of the costs for project management, capacity-building and a certain level of inputs, transitioning to a more sustainable mode of production will inevitably incur upfront capital investment on the part of suppliers.
The fact that nature-based projects typically take a number of years to mature and start delivering positive returns makes economic incentives even more important. Options here include financing mechanisms such as grants or project-based loans, or market-based solutions such as off-take agreements or price guarantees.
For farmers, in particular, who are often culturally resistant to major change, the latter would be preferable, according to IPI's Ostianova: 'They need to know that whatever they produce in a climate-resilient way has a market, and that very likely it's a premium market.'
It is an argument that Nestle says it has taken on board, in the form of financial support for equipment or inputs (such as biodigesters on a dairy farm) as well as price premiums (through initiatives such as the Nescafe Plan 2030, opens new tab and the Income Accelerator Program for Cocoa, opens new tab).
A Nestle spokesperson said enlisting expert partners to work alongside participating suppliers is especially helpful, while local farmers advocating for the positive outcomes of insetting can help attract support from public authorities.
Nestle advice for other brands embarking on an insetting? 'Start small and show evolution as you progress', the spokesman said. Suppliers are 'more confident to join when they see some of their peers enrolled and being successful'.
Terry Slavin contributed to this article.