Carbon Emissions – Insetting vs Offsetting

Carbon Insetting refers to an organization’s steps to reduce emissions produced through the company’s value chain. The company’s value chain refers to its operations, suppliers, and distribution networks.

Offsetting, in contrast, involves investing in external projects to compensate for emissions. Insetting is a longer-term approach that is much easier to control and sustain.

Both insetting and offsetting impact scope 3 emissions.

Carbon Insetting

Managing carbon insetting involves making internal changes and investments to decarbonize internal operations and the supply chain.

Examples of carbon insetting are:

• Conducting an energy assessment and implementing energy efficiency measures to reduce baseline energy consumption.
• Investing in solar, geothermal, or other renewable energy sources within the supply chain.
• Strategizing with suppliers to encourage or assist them with reducing their carbon emissions.
• Redesign products and packaging to incorporate sustainable design.

There are potentially significant benefits to incorporating insetting strategies into carbon emissions plans.

A few of the benefits of deploying an insetting strategy are:

• Insetting promotes sustainable practices, provides a means to develop a long-term strategy based on efficiencies, and it reduces emissions at the source.
• It can lead to improvements in overall supply chain efficiency and sustainability.
• Insetting demonstrates a commitment to efficiency and can improve a company’s reputation with customers and their industry. It sets a company apart from the competition.
• Insetting significantly reduces Scope 3 emissions, which are emissions from a company’s value chain.

A deeper dive into examples of insetting:

Energy Assessments — Commercial or industrial energy assessments, also known as energy audits, can identify ways to reduce energy consumption. An energy assessment, or audit, aims to evaluate the systems, equipment, and sometimes processes related to energy usage and develop a list of energy efficiency measures. These measures can be implemented to reduce energy usage for a building or group of buildings.

A commercial or industrial energy audit analyzes a building or portfolio of buildings’ energy usage patterns. It identifies areas of energy waste or excess usage and suggests upgrades to improve energy efficiency and minimize operating costs. Since energy is among the highest operating expenses for building owners and operators, it is often  included in the overall strategy to reduce costs.

The American Society of Heating, Refrigeration, and Air-Conditioning Engineers (ASHRAE) defines three levels of energy audits: Level 1 (Walk-Through Analysis), Level 2 (Energy Survey and Analysis), and Level 3 (Detailed Analysis of Capital-Intensive Modifications).

Investing in Renewable Energy — Renewable technologies include wind, solar, geothermal, biomass, and hydropower. The advantages of renewables are that they reduce the dependence on fossil fuels and emit minimal carbon emissions. There has been significant growth in the renewable energy sector due to technological improvements and an increase in demand for clean energy resources. Investments in renewable energy can fall into the category of insetting when the investments are made within a company’s own operations or value chain to directly impact their energy source and emissions. Two examples of this would be building out a solar farm or wind farm.

Strategizing with suppliers to reduce carbon emissions — The automotive industry is a good example of how OEMs have negotiated with suppliers to reduce emissions. An example can be found with Transform-Auto, which “is a voluntary program designed to help automotive suppliers reduce indirect emissions from energy consumption by providing free educational resources to help them explore renewable energy options and give them the tools to pursue a renewable energy pathway on their own or through a buyers’ cohort facilitated by Trio”.

“The Transform: Auto program has made significant progress since its launch in November 2024, in addition to the formation of the initial buyers’ cohorts. More than 500 suppliers have chosen to actively participate in the program. Program registrants have access to the Transform: Auto portal, which offers multiple free resources that demystify the renewable energy procurement process. Location-specific renewable energy guides show suppliers what options are possible at their sites. A live education series and on-demand videos explain the fundamentals of each type of renewable energy solution. The portal also enables suppliers to request 1:1 office hours meetings with a renewable energy expert at Trio.”

Redesign products and packaging to incorporate sustainable design — As organizations work to reduce their carbon footprint, many are switching to reusable food ware. Hospitals, schools, venues, and other institutions serving food can significantly reduce onsite waste and divert it from landfills.  Reusables can also help cut emissions from waste hauling and repeated manufacturing of single-use products.  In short, it can help a company with offsetting activities and reduce its scope emissions.

Stainless steel food ware is the most durable reusable food ware option available and one of the healthiest, as it does not contain PFAS often found in plastic. Compostables and recyclables do not have the same environmental benefits as reusable food ware. Organizations typically see a quick return on investment as the need to purchase single use food ware is eliminated.

We ReUse sources, designs, and manufactures recycled stainless steel food ware in the USA. “It’s a lofty goal, but we’re hoping to make a huge impact by producing our products here,” said Connie Lilley, Michigan Territory Manager. “We believe it’s essential to reduce our carbon footprint as much as possible while helping our customers do the same.” We ReUse’s products have earned Platinum GreenScreen™ Certification from the Center for Environmental Health. For more information, email [email protected] and ask about current subsidies to help cover the cost of switching to reusables.

Carbon Offsetting

Offsetting involves investing in external projects that reduce or remove greenhouse gas emissions to compensate for emissions when a company cannot reduce them directly. The idea is to balance a company’s carbon footprint by financing or investing in projects that reduce carbon emissions elsewhere.

Some specific examples of carbon offsetting are:

• Utilities offer renewable natural gas and electricity programs that companies can join at their preferred percentage according to their goals and budgets.
• Purchasing carbon credits from projects that reduce emissions. We will explore carbon credits in more detail later.
• Restoring degraded land by planting trees that absorb CO2 from the atmosphere as they grow.
• Investments in capturing methane gas from landfills or livestock farms.

One advantage of offsetting is that some strategies, such as purchasing renewable energy through utilities, can be executed quicker and easier than other insetting strategies. Additionally, companies can select from a diverse range of offset project options.

Offsetting strategies have potential drawbacks, which should be evaluated before undertaking these methods to decrease carbon emissions. They are not a long-term solution, as they do not address the root cause of emissions. There is also a risk that these methods may be leveraged to avoid making critical, longer-term commitments to lower CO2 emissions. Verifying how effective offset methods are can also be particularly challenging because of the potential lack of transparency.

A deeper dive into examples of offsetting

Carbon offsets: How renewable gas is created — Carbon offsets differ from carbon credits. Carbon offsets involve removing greenhouse gases (GHGs) from the atmosphere. Carbon offsets are considered voluntary, where carbon credits are usually regulated. These terms are sometimes used interchangeably but differ in many ways.

Most utility companies offer carbon offset programs. Consumers Energy, for example, has an interesting solution called MI Clean Air. MI Clean Air is a Michigan-based renewable natural gas and carbon offsets program that focuses on the generation of biogas from organic waste, and forest preservation in Michigan. Customers can enroll in the program to offset a portion of their natural gas usage, ranging from 10% to 100%, for a monthly fee added to their energy bill.

Examples of the types of carbon credit mechanisms are:

1. Renewable Energy Credits, also known as RECs, represent the positive environmental impact of generating one megawatt-hour (MWh) of electricity from renewable energy compared to fossil fuels.
2. Carbon Sequestration Credits are generated from projects that physically remove carbon dioxide from the atmosphere and securely store it. Examples include reforestation, afforestation, and carbon capture and storage strategies.
3. By capturing the emissions, Methane Capture Credits prevent the release of methane emissions from sources like landfills, coal mines, or livestock operations into the atmosphere.

One potential disadvantage of using carbon credits is the perception of greenwashing, which can have a negative impact since it does not directly reduce a company’s emissions.

Circling back to Energy Assessments

Energy Assessments are at the heart of most of our consulting work at Energy Sciences. Understanding a facility’s baseline energy usage is key to initiating more complex energy studies or projects. For example, when we approached a Decarbonization Study for a large global automotive supplier, we started by doing an Energy Assessment for each unique facility.

Reducing energy usage is the first step in reducing carbon emissions. By implementing the energy efficiency measures identified during an Energy Assessment, a company can reduce carbon emissions while also decreasing operating costs by reducing energy usage levels to the lowest possible baseline. Then, after taking this crucial first step, further insetting strategies can be more effective as the baseline energy usage has first been reduced. Offsetting strategies can also have a greater externally perceived impact at this point as well as meaningful steps to reduce a company’s emissions have first been taken internally, before looking to external factors for improvements.

If you’re interested in learning more about what you can do to lower your energy baseline, decreaseyour energy costs and reduce your carbon footprint, contact Energy Sciences to discuss how a energy assessment can help inform your next steps.

Article co-authored by: Diana Nash, Customer Engagement Manager & Madison Kosmal, Engineer