akar.earthInsetting: Definition
What is insetting? How companies fund emission reductions and removals inside their own supply chains, how it differs from offsetting, and Indonesian examples.
Insetting is when a company invests in emission reductions or carbon removals within its own value chain, typically with suppliers or on the land that produces its raw materials, and counts the results in its own greenhouse gas inventory. It is the supply-chain counterpart of offsetting.
Why it matters
For food, beverage, cosmetics and timber companies, most emissions sit in scope 3, often from land-use change and farming. Science-based targets for the land sector, such as SBTi FLAG, require companies to cut and remove emissions within their supply chains, which offsets from unrelated projects cannot do. Insetting also builds supplier resilience: shade trees, better soils and diversified income help farmers cope with climate stress.
How insetting is measured
- Baseline: current emissions and carbon stocks on supplier land.
- Interventions: agroforestry, reduced fertiliser, avoided deforestation, restoration.
- Monitoring: plot measurement, satellite data and farm records, ideally linked to sourcing traceability.
- Accounting: results are reported under the GHG Protocol land-sector guidance, with traceability or supply-shed boundaries.
Insetting results should not also be sold as credits to someone else, or the same tonne is claimed twice. See our comparison of carbon credits and insetting.
Indonesia angle
Indonesia supplies coffee, cocoa, palm oil, rubber and wood to global brands, mostly from smallholders. Insetting programmes typically fund shade trees in coffee and cocoa farms, rubber agroforestry or peat protection near plantations. The same plot-level data used for insetting can help with EUDR due diligence for products placed on the EU market from 30 December 2026, since both need plot geolocation and land-use history. See coffee agroforestry carbon.
Common mistakes
- Claiming insetting removals without traceability to the company’s actual sourcing.
- Selling the same removals as offsets to a third party.
- Ignoring permanence; trees on smallholder farms can be cut.
Related terms
See carbon offset, scope 3 and agroforestry, or explore the climate finance hub.
Frequently asked questions
What is the difference between insetting and offsetting?
Insetting funds climate action inside a company's own value chain, such as agroforestry on supplier farms, and counts towards its scope 3 inventory. Offsetting uses credits from projects outside the value chain.
Do insetting projects produce carbon credits?
Not necessarily. Many insetting programmes report removals and reductions directly in the company's inventory without issuing credits, which avoids double counting with the buyer's own accounts.