Insetting as supporting the transformational change to net zero and nature positive value chains for agricultural companies
Our key takeaway: Intensive agricultural practices drive biodiversity loss and climate change. At the same time, there are limits to what due diligence and certifications can achieve when it comes to achieving the transformational change to net zero and nature positive value chains needed for agricultural companies. Insetting, an approach that is designed to generate greenhouse gas emissions reductions and carbon storage, while at the same time creating positive impacts for communities, landscapes and ecosystems, offers a much needed response. So long as suppliers and impacted stakeholders are in the driver’s seat.
The International Platform for Insetting (IPI) has published ‘A Practical Guide to Insetting;”
- The practice of insetting: IPI reminds us that “[i]ntensive agricultural practices drive biodiversity loss and climate change and, along with forestry and other land use, account for almost a quarter of global GHG emissions.” Land- dependent companies are starting to recognise the limits of traditional approaches in their supply chains (e.g. focused on on due diligence and sustainability certifications) “to achieve transformation at the depth and speed needed to effectively tackle climate risks, nature loss and to deliver against the Sustainable Development Goals (SDGs).” To this end, IPI highlights how forward-thinking companies have “combined climate action with addressing socio-economic issues in a strategic approach known as insetting.” In short, insetting projects are defined as “interventions along a company’s value chain that are designed to generate greenhouse gas emissions reductions and carbon storage, and at the same time create positive impacts for communities, landscapes and ecosystems.” Insetting interventions are “typically based on regenerative agriculture practices and agroforestry programmes both at farm level, within the adjacent landscapes and with local communities. They protect and re-establish natural carbon sinks through conservation and restoration of forests, wetlands, coastal and marine ecosystems. Some insetting interventions also involve energy and community activities that aim to improve livelihoods and reduce pressures on natural resources.”
- Ten lessons learned from companies on insetting: The guide delves into lessons learned from companies that are practising insetting, including Accor, Chanel, H&M Group, Kering and Nespresso. First, tailor the insetting project to the real material issues in your supply chain – focusing on those supply chains with a high strategic relevance for your company. Second, “[u]se supply risks, co-benefits and marketing potential to demonstrate the business case.” This can include using benchmark carbon prices to monetise the value of positive impacts and “us[ing] a climate risk lens that shows how insetting can help to tackle physical and transitional climate and other risks.” Third, “[e]stablish a scalable governance for insetting” which can include an internal offsetting fund, oversight by external stakeholders and establishing an internal carbon price. Fourth, “[d]evelop a system that can track and consolidate the benefits of insetting”, including linking insetting projects to company-wide targets and KPIs and making the system digital. Fifth, a “holistic strategy should follow a clear mitigation hierarchy for climate and nature.” Insetting should happen alongside other critical mitigation activities, and over time, insetting should replace offsetting. Sixth, “[g]o the extra mile when selecting and managing project developers”, which includes getting engaged beyond certification. Seventh, “[w]ork with local stakeholders to ‘Design for Need’”, which includes involving local stakeholders and making sure their voices are heard throughout the project. Eighth, “[a]ctively engage your suppliers” which includes aligning with your suppliers on the benefits of insetting. Ninth, “[a]lign payments with performance”, with payments linked to performance, often demonstrated by the delivery of climate benefits. Finally, “[c]ommunicate progress to your stakeholders.”
- Benefits and opportunities for insetting: The benefits of insetting interventions are that they “allow companies to reduce their climate impacts, whilst building climate resilience and supply chain stability at the heart of their value chains, future proofing their businesses, and improving the quality of raw materials.” The paper delves into five opportunities for realising insetting’s full potential. In particular, the paper delves into evolving insetting from projects to sourcing strategies: this entails putting suppliers in the driver’s seat, translating carbon prices into price premiums for low-carbon raw materials and facilitating peer learning among farmers and train-the-trainer approaches. The paper further discusses moving from projects to multi-stakeholder landscape projects between peers that can increase the scale and reduce costs.