The Climate of Business #36: The power of insetting - reducing emissions down the value chain

There was a lot of drama this week across the board. Honestly if has been difficult to find "light at the end of "business of climate" tunnel". From greenwashing on ESG reporting, to continued scrutiny on the ESG framework, continued with bio crusts reduce global dust emissions by 60 percent.

One good news has been that there is a lot of energy in nuclear waste which according to assessment could power the U.S. for 100 years. But the technology was never commercialised. Theoretically good news.

Next week I will dedicate the newsletter to only good news. We need a bit of a refresh.

Climate Change Reality

Everything points to another busy hurricane season (AP News )

German judges visit Peru glacial lake in unprecedented climate crisis lawsuit (The Guardian )

Mona Lisa: Climate change protester ‘tries to attack painting with cake while disguised as elderly woman’ (Independent )

What's the oldest tree on Earth—and will it survive climate change? (National Geographic )

Death toll from Brazil floods at least 91, with dozens lost (AP News )

Can cross-breeding protect endangered species from the climate emergency? (The Guardian )

We cannot adapt our way out of climate crisis, warns leading scientist (The Guardian )

Can courts trump diplomacy in delivering climate justice? (Thomson Reuters Foundation )

Spiking temperatures could cause more blackouts this summer. They won't be the last. (Politico Pro )

Miracle Fuel Hydrogen Can Actually Make Climate Change Worse (Bloomberg )

Business Climate Reality

California, New Zealand announce climate change partnership (AP News )

UK Slaps 25% Windfall Tax on Profits of Oil and Gas Firms (Bloomberg )

Fund managers call for disclaimers on ‘climate-friendly’ products (Financial Times )

Australia’s election sets a heartening precedent on climate change (The Economist )

Supreme Court rejects red states' plea to block Biden climate metric (Politico )

McDonald’s Investors Demand Civil Rights Audit in Close Vote (Bloomberg )

High gas prices, energy security fears impede decarbonisation push (Reuters )

EU leaders agree on Russian oil embargo (Politico )

EU missed climate spending target despite claiming it was met -auditors (Reuters )

Singapore’s Menon Calls for Urgency to Act on Climate Change (Bloomberg )

Reality Check

On Wednesday next week I will be speaking at the Global Fashion Summit in Copenhagen together with our client GANNI about insetting and how our assessment of their Scope 1,2,3, allowed us to identify the most effective ways to eliminate emissions down the value chain. This triggered me to dedicate this newsletter to the topic of insetting.

“The future of climate action, and to a larger extent, economic growth, depends on ecosystem regeneration. Integrating these strategies into our core business models and along supply chains will benefit all involved.”

Tristan Lecomte, Co-Founder of the IPI

What is insetting?

Insetting is a little known or discussed option for businesses to reduce their emissions, embedded within their value chain (Scope 3). The technical definition of insetting is to partner or invest in a GHG emissions-reducing activity within the ‘sphere of influence’ of a company. This sets an important stage for companies looking to take a broader view of their boundary of responsibility, going beyond their own facilities or vehicles, but supporting the suppliers and third parties to drive decarbonisation.

Why is the difference between offsetting and insetting?

Insetting is:

• Activities that are meant to reduce the carbon footprint within the value chain of a company
• Investing in your ecosystem and/or suppliers and adding value to it
• Increases the resiliency and benefits of your value chain the chain and communities embedded in your value chain
• Specific to the business
• Collaborative

Offsetting is:

• The action or process of compensating for carbon dioxide emissions arising from industrial or other human activity, by participating in schemes designed to make equivalent reductions of carbon dioxide in the atmosphere.
• Transaction between two separate businesses - purchaser and offset provider
• External to the value chain of a business

How does insetting work?

The goal of insetting is avoiding, reducing or sequestering upstream or downstream carbon emissions. Examples include re-establish natural carbon sinks through conservation and restoration of the surrounding landscapes including forests, wetlands, coastal and marine ecosystems. Further example in the coffee industry is reforestation in a coffee farm as a mean to provide shade which helps coffee grow better, it helps the environment by storing water and conserving soil, absorbing carbon, creating carbon stocks, and ultimately leading to adaptation and mitigation.

With our client GANNI, a Scandinavian fashion giant, the use case of insetting has been making their suppliers factories more environmentally friendly and energy efficient.

What is the value of insetting?

• Long term decarbonisation - the company that is for example supporting their suppliers to become more sustainable can benefit from lower emissions in its Scope 3
• “Outsourced production means outsourced emissions, and to date, it’s been convenient to put off addressing them.” ?
• Reduction of climate risk associated to Scope 3
• Builds stronger connections with third parties such as suppliers and leads to an increase in the overall value of the product in a transition to resilient and regenerative business models
• Multiples positive impacts and offers an integrated approach for the benefit of all stakeholders

What are the remaining challenges associate to insetting?

• Effort - it takes effort and resources to kick off such projects
• Not always really able to certify as carbon offsetting projects?
• Collaboration could be time-consuming and challenging

Carbon Price