Insetting and the Carbon Markets

One of the biggest themes of the Future of Food and Beverage Innovation Forum was the push toward “insetting,” where companies prioritize decarbonizing their own supply chains over purchasing external "offsets." This strategy involves companies working directly with their suppliers to reduce emissions, rather than relying on credits from outside their supply chain.?

Farmers are increasingly entering the carbon market as project developers, but the buyers of their carbon credits tend to be outside of the food industry. This mismatch creates confusion in calculating a CPG company’s Scope 3 emissions, often leading to double counting issues.??

The consensus at the conference was that while offsets have faced quality issues over the past few years, the voluntary carbon market (VCM) is starting to improve, gradually restoring confidence.??

Insetting, on the other hand, is emerging as a more suitable approach, enabling companies to invest in their own supply chains. This approach not only enhances data collection but also leads to more accurate emissions reporting through improved emissions factors, which helps with industry benchmarking.??

Insetting is a better tool that leads to companies making investments with their own suppliers, creating more data that can lead to better reporting down market through more accurate emissions factors (basically better industry benchmarking). Investors are demanding that companies make emissions reductions strides all while the rules around insetting are not completely clear.??

We’ve already talked about how farm data collection has its challenges. Companies need to know field level GHG emissions and carbon removals, emissions categories and sources, breakdowns by gas and intensity factors to build accurate reporting measures. While insets are a better idea and likely will have more impact, the nascent industry will need to have a similar maturation process that the offset markets are going through.??

For insetting to succeed, it will require certification, high-quality data, and mechanisms like registries and third-party verifiers—elements that the carbon offset markets are only now beginning to develop. One of the most interesting things about insetting is the ability to directly affect your “supply shed”, or the geography where your suppliers are to focus interventions locally. Companies are very interested in supporting those suppliers down the supply chain and in their own backyards.??

How AgriCapture is addressing the growing inset market.??

First and foremost, AgriCapture already works within the rice supply chain to support decarbonization efforts with our farmers.??

The main issue we’ve seen with insetting is the mass balance approach to calculating emission reductions. If a company knows that 20% of the rice they’re sourcing from a mill is climate-friendly and comingled with traditional rice, that is how they will count it towards their sustainable sourcing or emissions goals.?

?The problem with that is AgriCapture has already identity preserved a portion of that rice, pulled it out of the total, and sold it directly to someone else. So now companies are getting credit for climate-friendly rice that they didn’t source. This can also happen when we remove the environmental asset and sell it as a carbon credit outside the supply chain.??

AgriCapture is committed to helping CPG companies decarbonize their supply chain transparency and data integrity. We have firsthand experience solving the challenges associated with crop sourcing, insetting, and developing carbon credits, and are excited to support insetting initiatives as the market matures.??