A Strategic Framework for Scope 3 Emissions: Insetting within Agri-Food Value Chains

Addressing greenhouse gas (GHG) emissions in the agri-food supply chain requires a granular understanding of their origin within the value chain. The internationally recognized Greenhouse Gas Protocol provides the necessary framework by categorizing emissions into three scopes, which clarifies accountability from farm to final product.

Scope 1: Direct Emissions. These are emissions from sources directly owned or controlled by the agricultural enterprise. This includes emissions from buildings and facilities (e.g., heating systems, generators) or from vehicles used for agricultural operations that belong to the farm business.

Scope 2: Indirect Emissions from Purchased Energy. This scope encompasses emissions from indirect energy sources, such as purchased electricity, steam, heating, or cooling.

Scope 3: Other Indirect Emissions. These are also a consequence of the business’s activity, but the agricultural enterprise has no direct control over them. Examples include emissions from procured products like farm inputs or emissions related to the distribution of grains. Managing scope 3 agriculture effectively requires collaboration across suppliers, processors, and distributors to track and reduce upstream and downstream GHG impacts.

The Insetting Strategy: A Value Chain-Centric Approach

For many agri-food corporations, a significant portion of their agri-food supply chain emissions originate in Scope 3, specifically from the agricultural production stage. This has led to the adoption of insetting projects as a core corporate solution.

The Insetting Program Standard (IPS) defines insetting as “actions undertaken by an organization to combat climate change within its own value chain in a manner that generates multiple sustainable positive impacts.” These insetting projects aim to reduce GHG emissions and increase carbon sequestration through nature-based climate solutions, typically involving regenerative agriculture and agroforestry programs at the local level.

An insetting strategy creates positive impacts for communities, landscapes, and ecosystems. The environmental benefits include:

• Carbon sequestration

• Reduction of GHG emissions
  

• Protection of biodiversity
   

• Conservation of natural resources
   

• Improvement of water and soil quality
   

• Strengthening of climate resilience
   

• Increased agricultural productivity
   

• Improvement of livelihoods and the lives of local communities
   

For the businesses involved, these projects help achieve climate targets, transform business models toward greater sustainability, and create a more resilient environment throughout their value chain, thereby ensuring long-term stability and quality of supply. Moreover, insetting applies exclusively to an organization’s scope 3 agriculture emissions. To be credible, these projects must also be scientifically sound and conform to the guidelines of the Insetting Program Standard, which was developed by the International Platform for Insetting (IPI).

Insetting in Practice: Corporate Case Studies

Cargill: The company’s BeefUp Sustainability initiative aims to reduce GHG emissions per kilogram of meat produced by 30% by 2030. To achieve this, the program involves projects in pasture management, animal feed production, and food waste reduction. Additionally, Cargill engages in forest protection within its supply chains to reduce emissions from land-use change, such as planting shade trees in cocoa plantations in Côte d’Ivoire and financing a community forest project in Indonesia.

Nespresso: As a concrete example of a successful insetting project, Nespresso implemented programs to plant trees in coffee-growing areas to increase carbon sequestration. As a result, this agroforestry-based nature-based climate solution has increased farm resilience to climate change while improving soil fertility, biodiversity, and water conservation. Between 2014 and 2020, Nespresso planted nearly 3.5 million trees over a total area of 7,364 ha, representing a sequestration of 770,200 t CO₂ eq. In total, nearly 13,000 coffee producers benefited from this program through diversified income (e.g., from fruit trees), training, and other support.

Organic Valley: This cooperative of organic dairy farmers pays its producers the market price for carbon for implementing low-carbon projects like solar energy, manure composting, and agroforestry. Moreover, the cooperative incentivizes producers to sell their carbon credits internally by providing technical assistance, training, and grant-writing help — support that is not available on the open carbon market.

Nestlé: Citing a lack of standards for execution and evaluation, as well as unclear carbon accounting rules, Nestlé developed its own insetting framework in 2021. To address these gaps, the company works with organizations like the IPI and follows guidance from the GHG Protocol and SBTi. Furthermore, Nestlé’s risk-based framework identifies credible and permanent nature-based climate solutions across four zones: on-farm, at the farm’s “supply shed” scale, in the landscape adjacent to a farm or supply shed, and in landscapes not adjacent to them. The framework also specifies project types, monitoring frequency, and verification levels for each zone.

Managing the Risks of Insetting

For an insetting program to be credible, it must be managed or certified by a standard and adhere to key principles. The Gold Standard participated in creating accounting guidance for value chain interventions. This guidance introduces the “supply shed” concept, which represents a group of suppliers in the same geographic area providing similar goods. This is particularly useful for industries like grains, where the mixing of products makes it difficult to trace a specific supply back to its corresponding farm.

While practical, this concept is not without risks, primarily double counting and double claiming.

Double Counting
Double counting occurs when two organizations claim the same emissions reduction in their respective GHG inventories.

• Acceptable: It is standard for a supplier’s Scope 1/2/3 emissions to be included in the Scope 3 emissions of other companies in the value chain. It is also acceptable for those emissions to appear simultaneously in national and corporate inventories. 
• To Be Mitigated: A risk arises when one company invests in a Scope 3 agriculture improvement within its supply shed and claims the reductions, while another company buys the resulting “improved” product and claims the same reductions. A robust and transparent accounting system is required to prevent this. 
• To Be Avoided: A company must not claim reductions from a project in its inventory and also issue offset credits from the same reductions on a carbon market. 

Double Claiming
A risk of double claiming exists between a company’s inventory and carbon credits used for offsetting. An offset credit must have unique ownership and should not be issued from emission reductions already claimed in a company’s inventory. To make a claim, a company must demonstrate its contribution to the reduction through:

• Direct financial investment (e.g., financing new equipment) 
• Recognized contributions within a partnership 
• Incentives for reduction (e.g., favoring suppliers with improved practices) 
• Establishing specific procurement requirements 

Insetting vs. Offsetting: A Comparative Analysis

The fundamental difference between the two concepts is that with insetting, the producer sells their improved products and the associated GHG reductions to their client within the value chain. With offsetting, the reductions are sold outside the value chain on a carbon market, while the improved products are sold to the producer’s client.

Both concepts share the challenge of agri-food supply chain emissions traceability, as products are transformed and divided as they move through the value chain.

For the grain sector, an insetting strategy, particularly one led by end customers in the supply chain can be highly beneficial. Success requires a proper evaluation of project suitability and a thorough risk analysis with mitigation measures. It also demands solid, credible accounting and reporting systems to ensure transparency and avoid greenwashing.