Carbon Offsetting vs. Carbon Insetting: What’s the Difference?
As companies face growing pressure to reduce their climate impact, two approaches have become central to corporate sustainability strategies: carbon offsetting and carbon insetting.
Both aim to address greenhouse gas emissions, but they operate in very different ways—and have very different implications for credibility, impact, and long-term decarbonisation.
What is carbon offsetting?
Carbon offsetting means compensating for emissions by funding reductions or removals outside a company’s own operations or value chain.
For example:
- A company emits CO₂ from manufacturing
- It buys credits from a forest conservation or renewable energy project elsewhere
- Those reductions are counted against its own emissions
These credits are typically traded in voluntary carbon markets and often certified by organisations like Verra or Gold Standard.
Common types of offsets
- Reforestation or avoided deforestation
- Renewable energy projects
- Methane capture (e.g. landfills)
- Carbon removal technologies
What is carbon insetting?
Carbon insetting focuses on reducing emissions within a company’s own value chain.
Instead of buying credits from unrelated projects, companies invest in emissions reductions linked directly to their suppliers, products, or logistics.
Examples:
- A food company helps farmers adopt regenerative agriculture
- A fashion brand invests in low-carbon textile production
- A steel buyer switches to lower-emission steel suppliers
The key difference:
- Offsetting = external compensation
- Insetting = internal (value chain) reduction
Why the distinction matters
1. Credibility and scrutiny
Offsetting has faced criticism over:
- “additionality” (would the project have happened anyway?)
- permanence (e.g. forests can burn)
- double counting
In contrast, insetting is often seen as:
- more directly linked to real business emissions
- harder to “game”
2. Alignment with net-zero goals
Frameworks like the Science Based Targets initiative emphasise:
- Real emissions reductions first
- Limited use of offsets, especially for long-term claims
Insetting aligns more naturally with this because it reduces Scope 3 emissions (those in the supply chain).
3. Supply chain transformation
Insetting pushes companies to:
- engage suppliers
- redesign production processes
- invest in low-carbon inputs
Offsetting, by contrast, can allow companies to avoid changing their core business model.
Are offsets still useful?
Yes—but their role is evolving.
Offsets are increasingly seen as appropriate for:
- residual emissions (those that are very hard to eliminate)
- carbon removal (e.g. direct air capture, long-term storage)
They are less accepted as a substitute for reducing emissions in the first place.
Real-world example
Imagine a company that produces packaged food:
- Offsetting approach:
Buys forest carbon credits to compensate for emissions from farming and transport - Insetting approach:
Works with farmers to:- reduce fertiliser use
- improve soil carbon storage
- cut emissions directly in its supply chain
The second approach changes the underlying emissions, not just the accounting.
Market trends
- Companies are shifting from pure offsetting to “reduce first, offset later” strategies
- Investors and regulators are demanding more transparency
- New standards are emerging to define credible claims
The line between the two is also evolving, with hybrid models appearing.
Key takeaway
The difference can be summarised simply:
- Carbon offsetting = paying for emissions reductions elsewhere
- Carbon insetting = reducing emissions within your own value chain
Bottom line
Both tools have a role, but they are not equal:
- Offsetting can help compensate for emissions
- Insetting helps eliminate them at the source
As climate expectations tighten, companies are under increasing pressure to move from offsetting toward insetting, and ultimately toward deep, measurable emissions reductions.
