Some companies seek to count interventions that reduce or remove carbon dioxide from within their operations as a way to “compensate” for the greenhouse gases they emit in the production of their goods and services. By addressing emissions in this way within their own value chain (through activities such as tree planting or renewable energy projects connected to their operations) companies will typically proclaim that they are ‘insetting’. Insetting is most common among companies in sectors that exploit high amounts of natural resources and complex supply chains (such as agrifood and beverages, or fashion).

While this approach sounds beneficial, it can shift attention away from the harder, more essential task of directly cutting emissions at the source. This practice is essentially the same problematic phenomenon as offsetting but occurs inside the company’s value chain – typically circumventing monitoring, reporting and verification obligations that come with conventional carbon credits outside of the value chain. Companies might overstate their progress because there is no universally accepted framework for quantifying “insetting” benefits. This is clearly a wrong way to approach climate action that risks prioritising creative carbon accounting over genuine internal decarbonisation.

Carbon Market Watch campaigns for companies to reduce their value chain emissions rather than opt for a climate accounting approach that does little to shrink their climate footprints. Carbon removals should be used for the purposes of balancing out residual emissions, rather than to facilitate business as usual and carbon intensive practices. Companies should report their emissions, short-term removals, and finally permanent removals to create a clear picture of the state of the company’s greenhouse gas emission boundaries.