Why carbon insetting?
Carbon insetting is a concept that focuses on reducing carbon emissions within the supply chain of a company or organization, or as defined under the logistic, transport and recycling sectors, to fund an emission reduction within the same sector (see book & claim hereafter). This opposes the concept of carbon offsetting, which involves compensating for emissions through external projects. The insetting approach integrates carbon reduction projects directly into a company's operations or (parallel) supply chain, fostering sustainability from within.
The key difference between carbon insetting and offsetting lies in their approach to addressing carbon emissions. While offsetting projects might involve investing in renewable energy or reforestation programs anywhere in the world, insetting projects are directly linked to a company's own activities and are designed to reduce the carbon footprint within its own operational scope or supply chain.
Carbon insetting can involve a variety of projects, such as switching to low carbon fuels, vessel retrofits, rotor sails, recycling, improving energy efficiency, or enhancing ecosystem services within the supply chain. These projects not only reduce greenhouse gas emissions but can also offer additional benefits like biodiversity conservation, enhanced social impacts, and strengthened relationships with suppliers and customers.
By implementing carbon insetting projects, companies can make a direct impact on their environmental footprint, demonstrating a commitment to sustainable practices and taking responsibility for their emissions. It allows businesses to integrate sustainability into their core operations and create value for both the environment and society.
Managing insetting projects does not come without challenges. Many companies have intricate, global supply chains. Understanding, measuring, and effectively reducing carbon emissions across these networks can be complex, requiring significant expertise, time and resources. From measuring the carbon footprint to impact verification, it also often takes a behavioural change at different levels of the organization. Cultivating a culture that prioritizes sustainability and adapts to new practices can take time and effort. Moreover evolving standardization of methodologies and environmental regulation leaves room for interpretation. To overcome these challenges, guidance from experts such as CarbonLeap, the pioneer in supply chain decarbonization, can support management in driving the sustainability agenda.
Book & Claim Chain of Custody Model:
The "Book and Claim" chain of custody model is based on the concept of carbon insetting. It is a flexible, administrative accounting framework designed to decouple the physical flow of materials or products from the transfer of specific attributes, such as sustainability benefits. Unlike traditional chain of custody models where the physical and administrative flows are linked, the book and claim system allows for the tracking, documentation, and transfer of certain product attributes independently of the actual products themselves. This model is particularly useful in sectors like aviation and shipping, where it can be challenging to directly connect supply with demand due to geographic and logistical constraints.
In this model, producers can "book" the emissions savings or other environmental benefits of a good they've produced, and customers can then "claim" these benefits for their own sustainability goals or climate disclosures, even if they do not physically receive the specific batch of product associated with those benefits. For instance, a company can purchase sustainable aviation fuel (SAF) certificates that represent the lifecycle emissions reductions from the use of SAF, even if the specific flights or transport activities the company is involved with do not directly use the SAF linked to those certificates.
One of the main advantages of the book and claim model is its flexibility and the low barrier to entry it offers, allowing for a broader participation in sustainability initiatives across different industries. It facilitates the expansion of markets for sustainable products by enabling companies to support sustainable practices and products through the purchase of certificates or Impact Units, even in cases where direct access to those products is not feasible.
Book & claim makes scalability possible as it otherwise would be too daunting to match each cargo owner or packaging company to each transport vehicle or compounding/extruding plant. We have seen a similar evolution in the energy sector where it is impossible to separate energy sources that are piped into buildings. If however, one wants to power a home solely on renewable energy, agnostic of electricity source, one can buy RECs (renewable energy certificates) and claim the lower emission.
It is important to be mindful of potential pitfalls. The separation of the attribute from the physical product means there is no direct physical traceability of the sustainable practice to the final product. This can lead to concerns about greenwashing if claims are not carefully verified and managed. Ensuring transparency, accountability, and rigorous certification standards is crucial to maintaining the credibility of sustainability claims made under a book and claim system, which is what CarbonLeap supports.
The Mass Balance Chain of Custody model:
The mass balance approach is primarily associated with tracking the flow of materials through a series of processes or across different stages of the supply chain, often used in the context of sustainable material sourcing or recycling. This method allocates the input of mixed materials (such as recycled and non-recycled content) across the output products in proportion to their mass.
The exact mass of sustainable material must be certified and tracked along the supply chain and reconciled to reflect the ratio of sustainable material integrated into the final product. This serves to back up sustainability claims such as, “made with 90% recycled plastic” although customers have no way of knowing if the final product actually contains any molecules of the sustainable materials or not.
This approach is most common for products and commodities where segregation is very difficult or impossible to achieve, such as in the plastics and petrochemical industry, but also utilised in other segments like transport and metals supply chains.
Principles of mass balance can be indirectly relevant to GHG accounting in specific contexts, such as:
Recycled and Recyclable Materials: In scenarios where the use of recycled materials influences the GHG emissions associated with a product or process, considering the reduced impact of using recycled versus virgin materials.
Scope 3 Emissions: For companies calculating their value chain (Scope 3) emissions, especially when assessing emissions associated with purchased goods and services, fuel used in transport and end-of-life treatment of sold products. The mass balance approach might inform the allocation of emissions in complex supply chains.
CarbonLeap makes tracking, tracing, compliance and verification of the mass balance principle possible through identification of inputs and outputs, quantitative analysis, process optimization, sustainability measurements, supply chain coordination and technology integration. This process is supported by its Carbon Bank using state of the art digital technology powered by SAP.
Further considerations:
Additionality
The concept of "additionality" in the context of greenhouse gas (GHG) protocols and carbon accounting is an important but sometimes complex topic, often described in terms of what would occur without a specific project or policy intervention. It revolves around the idea of distinguishing between GHG reductions that result directly from a specific intervention and those that would have happened anyway, without it. The GHG Protocol for Project Accounting, developed through a collaborative process by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), provides a comprehensive framework for quantifying and reporting GHG reductions from mitigation projects.
Additionality plays a crucial role in carbon insetting by ensuring that the carbon reduction efforts within a company's own supply chain (Scope 3) are genuinely additional and wouldn't have occurred without the specific insetting intervention. This concept is vital to qualify for insetting certification and to ensure the integrity and credibility of these efforts. It requires external financing and a careful assessment to confirm that the emission reductions are indeed above and beyond what would have occurred under a business-as-usual scenario.
CarbonLeap takes specific measures to make sure that additionality is imbedded in all its transactions. For instance, in transport decarbonization it takes into consideration all cost elements of the intervention (the fuel switch) including government subsidies to determine abatement cost and viability of the deal.
Causality
In the context of carbon insetting, causality refers to the direct impact that insetting actions have on carbon emission reductions within a company's supply chain. It emphasizes the need for clear, measurable outcomes that can be directly linked to specific insetting interventions, ensuring that the efforts truly contribute to overall emissions reduction goals and are not just incidental or unrelated outcomes.
No double counting and double claiming
This is distinct from co-claiming and co-paying which is what incentivizes contributions throughout the value chain for accommodating the CO2 reduction interventions. To avoid double claiming and double counting in carbon insetting, it's essential to establish clear protocols for tracing, validating, and reporting carbon reductions. This involves ensuring that emission reductions are uniquely accounted for and attributed, thereby preventing any overlap in claims between different entities within the value chain. Transparent, third-party validation and adherence to standards and certifications help safeguard against these risks, ensuring that each emission reduction is only counted and claimed once, aligning with broader sustainability and regulatory requirements. CarbonLeap’s CarbonBank powered by SAP using blockchain technology furthermore enhances the immutability of the Impact Units.