1. Introduction

By the end of the century, the globe is expected to have warmed by 2.7°C. The public and private sectors are under increasing pressure to reduce their greenhouse gas (GHG) emissions, as we have fewer than ten years to cut our emissions in half (UNEP, 2021).

In order to achieve specific sustainable targets, many companies opt to the Carbon Offsetting as one of the green solutions.

Carbon Offsetting can be defined as a practice that allows individuals and companies to invest in environmental projects around the world in order to balance out their own carbon footprints (World Economic Forum, 2019).

Shippers, carriers, and logistics service providers are promoting Carbon Offsetting as a way to meet freight transportation climate targets. These offsets make up for emissions that their supply chains or operations are unable to reduce.

Offsetting has some critiques, some of whom have been very outspoken. It's merely lip service to action, according to (Greenpeace, 2019), which says: “When compared to ideas like frequent fliers paying more and more heavily for trips abroad, carbon offsetting transport falls very short.”

In 2017, the European Commission has published a report about the Carbon Offsetting practices where the results were depressing to read “Overall, our results suggest that 85% of the projects covered in this analysis and 73% of the potential 2013-2020 Certified Emissions Reduction (CER) supply have a low likelihood that emission reductions are additional and are not over-estimated,” the report says (Kusnetz, 2017).

Although they do exist, logistics/transport-related carbon offset projects are not well-represented in the worldwide offset market. As per (Ecosystem Marketplace, 2019), these projects made up just 0.2% of the voluntary carbon offset market in 2018, which was valued at close to US$269 million as Figure (1) demonstrates.

Figure 1: INVESTMENTS IN OFFSETTING BY CATEGORY. Data Source: (Ecosystem Marketplace,2019)

Although money spent on forestry projects and other non-transport-related initiatives is significant, it won't contribute to the decarbonization of the global network of goods transportation. Money spent on unrelated, counterbalancing projects results in a recurring cash-out that has no connection to the company.

In order to become carbon neutral, private businesses are using voluntary carbon offsetting and purchasing carbon credits more frequently. As an example, Company A could buy credits from Company B in order to promote sustainable energy. B may set up a wind farm or solar farm and profit from sustainable energy as A lessens its carbon footprint.

Alternatively, Company C may be used by Company A to finance reforestation. While C promotes biodiversity and gives work to indigenous groups that care for the forests, A offsets emissions.

Nevertheless, problems like ‘Additionality’ and ‘Duplicate Counting’ can offset the impact of the carbon market.

In the context of carbon offsetting, (Harvard University, 2019) defines ‘Double Counting’ as the event which occurs when two or more parties claim credit for the same emission reductions.
The term ‘Additionality’ in the same context, as per (Forbes,2021), refers to the concept that emission reductions or removals from a mitigation activity are additional if the mitigation activity would not have taken place in the absence of the added incentive created by the carbon credits.

For example, it is double counting if A pays B for renewable energy and both parties claim a reduction in emissions. Paying for reforestation that has previously been scheduled is therefore regarded as lacking additionality. To prevent these risks, companies and nations need to give priority to high-integrity projects with strong climate methodologies.

Businesses and nations will unavoidably use carbon offsets, even as the globe struggles to achieve net-zero emissions by 2050. It is imperative that organisations begin decarbonising their own value chains to incorporate more environmentally friendly activities and solutions before they can effectively combat the rising temperatures.

The world thinks there is an alternative course of action. Carbon Insetting!

Figure 2: Offsetting VS. Insetting. Image: (Smart Freight Centre, 2020)

2. Understanding Carbon Insetting

As per (myclimate, n.d.), Carbon Insetting refers to ‘The financing of climate protection projects along a company’s own value chain that demonstrably reduce or sequester emissions and thereby achieve a positive impact on the communities, landscapes and ecosystems associated with the value chain.’

(World Economic Forum, 2022) went to simplify the definition by saying ‘Carbon Insetting focuses on doing more good rather than doing less bad within one’s value chain.’

As Figure (2) illustrates, the International Platform for Insetting argues that Carbon Insetting is the application of nature-based solutions like reforestation, agroforestry, renewable energy, and regenerative agriculture with the goal of reducing GHG emissions from one's own supply chain.

Figure 3: Understanding carbon insetting. Image: (International Platform for Insetting, 2023)

When starting its insetting journey, a company might, for instance, assess its own supply chain to determine where the majority of its greenhouse gas emissions are entrenched. Traditionally, their energy supply is the first and major hotspot; as a result, investing in renewable energy technologies like solar or wind would be a useful answer.

By 2025, Ganni, a fashion retail business based in Denmark, promises not to cooperate with stage 1-3 suppliers that produce heat or energy using coal. As a result, it has integrated circular processes like recycling textiles and cutting waste. In order to streamline sales and marketing operations, the company has also embraced virtual software and applications, which minimises the amount of air travel that their sales staff must perform and their overall carbon footprint (GANNI, 2020).

3. The Business Case for Carbon Insetting in Logistics

While businesses are starting to realise the benefits of including transportation insets in their supply chains, this idea has not yet gained traction on a wider scale. To push this change, there has to be greater support.

Carbon Insetting solutions can all significantly lower GHG emissions while also improving public health and safety. Potentially, freight carbon insets might resemble the current Renewable Energy Credits and be applied to road freight, sea, and aviation projects. However, there isn't currently enough money or support for goods carbon offsets to have a major effect on net emissions.

A greater balance between carbon offsetting and insetting is something that many sustainability and ESG professionals are working for, especially in terms of funding. If just a percentage.

4. Implementing Carbon Insetting in Logistics

Among the promising insetting solutions for transportation and logistics are:

A-Promoting Sustainable Fuels

Adoption of hydrogen, biofuels, or renewable electricity requires new vehicles and infrastructure, leading to cost challenges. Companies can invest in sustainable fuels via certificate systems like RECs, driving demand, expediting production, and bridging price gaps compared to fossil fuels (Smart Freight Centre, 2020).

B- Decommissioning Outdated Equipment

Transportation networks worldwide, particularly in developing regions, face the challenge of operating with antiquated, polluting equipment sourced from developed countries. Like carbon-offset initiatives targeting emission reduction in cookstoves, carbon insetting funding can aid in the removal of high-emission transportation equipment—such as motorbikes, vans, trucks, ships, or planes—from the global freight network (Smart Freight Centre, 2020).

C- Engine retrofits

Engine retrofits involve upgrading existing equipment by incorporating technologies like diesel-particulate filters to diminish black carbon or by substituting fossil fuel engines with those running on low-carbon fuel. Such projects are cost-effective compared to purchasing new vehicles and can extend the lifespan of trucks, ships, or trains, eliminating the necessity for new manufacturing (Smart Freight Centre, 2020).

D- Enhancing Logistics efficiency

Enhancing logistics efficiency involves two key aspects: adopting low-carbon technologies in transportation networks and implementing measures such as optimized logistics, driver training, and route planning. These efforts result in reduced fuel consumption, cutting emissions that would otherwise occur under standard business practices, thus contributing to global climate goals.

5. Conclusion

Carbon Insetting presents a promising opportunity for companies to reduce emissions within their own value chains. By investing in renewable energy, equipment upgrades, logistics optimisation, and other interventions, organizations can drive meaningful climate impact and progress towards net-zero. While carbon offsetting will continue playing a role, a greater balance between offsetting and insetting is needed - especially when it comes to transportation.

By incorporating more insets into logistics operations and supply chains, companies can decarbonise their activities at the source while supporting surrounding communities. Overall, Carbon Insetting allows businesses to move beyond mere compensation and enable real emissions reductions aligned with both climate and social objectives.

Problems Solved Ltd is at the forefront of revolutionising sustainable logistics solutions. Confidently addressing complex business challenges, we thrive on crafting tailored, sustainable strategies that transform traditional operations. If you would like to learn more about Insetting or indeed would like support in making it work for you please contact us on info@psolved.com.

6. References

Ecosystem Marketplace (2019). Financing Emissions Reductions for the Future : State of the Voluntary Carbon Markets 2019. [online] Available at: https://www.forest-trends.org/wp-content/uploads/2019/12/SOVCM2019.pdf [Accessed 27 Nov. 2023].

Forbes (2021). The Concept Of Additionality In The Voluntary Carbon Market, Explained. [online] Forbes. Available at: https://www.forbes.com/sites/forbesnonprofitcouncil/2021/10/01/the-concept-of-additionality-in-the-voluntary-carbon-market-explained/ [Accessed 20 Nov. 2023].

GANNI (2020). GANNI RESPONSIBILITY REPORT 2020 — PLANET. [online] GANNI RESPONSIBILITY REPORT 2020. Available at: https://responsibilityreport2020.ganni.com/planet/ [Accessed 20 Nov. 2023].

Greenpeace (2019). Greenpeace reaction to the Spring Statement. [online] Greenpeace UK. Available at: https://www.greenpeace.org.uk/news/greenpeace-reaction-spring-statement/ [Accessed 20 Nov. 2023].

Harvard University (2019). How to solve the ‘doubling counting’ problem. [online] Harvard Gazette. Available at: https://news.harvard.edu/gazette/story/newsplus/how-to-solve-the-doubling-counting-problem/ [Accessed 20 Nov. 2023].

International Platform for Insetting (2023). WHAT IS INSETTING? www.insettingplatform.com. Available at: https://www.insettingplatform.com/insetting-explained/ [Accessed 20 Nov. 2023].

Kusnetz, N. (2017). Carbon Credits Likely Worthless in Reducing Emissions, Study Says. [online] Inside Climate News. Available at: https://insideclimatenews.org/news/19042017/cabon-emissions-credits-paris-climate-agreement/ [Accessed 20 Nov. 2023].

myclimate (n.d.). What is Carbon Insetting? [online] www.myclimate.org. Available at: https://www.myclimate.org/en/information/faq/faq-detail/what-is-carbon-insetting/#:~:text=Insetting%20refers%20to%20the%20financing [Accessed 20 Nov. 2023].

Smart Freight Centre (2020). Carbon Insets for the Logistics Sector. group.dhl.com. Available at: https://group.dhl.com/content/dam/deutschepostdhl/en/media-center/media-relations/documents/2020/dgf-carbon-insets-white-paper-smart-freight.pdf [Accessed 20 Nov. 2023].

UNEP (2021). Emissions Gap Report 2021. [online] UNEP - UN Environment Programme. Available at: https://www.unep.org/resources/emissions-gap-report-2021 [Accessed 20 Nov. 2023].

World Economic Forum (2019). What is carbon offsetting? [online] World Economic Forum. Available at: https://www.weforum.org/agenda/2019/06/what-is-carbon-offsetting/ [Accessed 20 Nov. 2023].

World Economic Forum (2022). Carbon insetting vs offsetting . [online] World Economic Forum. Available at: https://www.weforum.org/agenda/2022/03/carbon-insetting-vs-offsetting-an-explainer/ [Accessed 20 Nov. 2023].