The Voluntary Carbon Market is one way for carbon pricing to be operationalized within corporate activities. Market participants engage voluntarily, meaning their activities go beyond regulation and national commitments, thereby generating additional benefits for climate action. Through offsetting, companies support emission reduction or carbon removal projects that are independent of their core business in terms of time, location, and industry, and account for them financially through the purchase of carbon credits. The market is currently undergoing significant transformation, driven by interconnected megatrends that are fundamentally reshaping its functioning.
Offsetting is often accused of greenwashing, as the purchase of carbon credits for offsetting does not necessarily incentivize a company to make meaningful structural changes to its own operations. Therefore, alongside the breakthrough in carbon management, one of the most important market trends is the decline of previously dominant but often questioned offsetting practices. Instead, insetting defined as market-based interventions implemented along the corporate value chain and accounted for between transacting parties will become the focus of corporate decarbonization strategies in the future.
What does insetting mean?
Insetting is one of the most advanced and scientifically supported tools in corporate sustainability strategies. Its essence is that emission reduction, carbon removal, or environmental restoration projects are implemented within the company’s own value chain. This means that interventions directly affect the company’s supplier network (upstream) or distribution and product/service use phases (downstream).
The explicit goal of this activity is to mitigate carbon emissions and negative environmental impacts, as well as to restore ecosystem services along the company’s entire value chain. Insetting is a transformative process. On the one hand, it is easily traceable locally, meaning that environmental benefits arise precisely where the negative impact affects nature, thereby reducing the risk of leakage (when environmental harm shifts elsewhere). On the other hand, it has a long-term impact, as the project’s success is often aligned with the company’s business interests (e.g. securing coffee yields), which incentivizes long-term maintenance, unlike one-off carbon credit transactions.
Finally, it implements a holistic systems approach, as it does not focus solely on greenhouse gas emissions but also considers water cycles, soil health, and social dimensions.
Why is this important to discuss?
Among companies, indirect emissions linked to the value chain (Scope 3) represent the “tip of the iceberg” when it comes to decarbonization challenges. According to the scientific consensus, true net-zero status cannot be achieved without a radical transformation of value chains.
Decarbonizing global corporate supply chains alone could deliver up to 50% of the Paris Agreement’s targets.
Research consistently shows that for large multinational corporations, value chain-related emissions account for between 75% and 95% of total emissions, although this varies by sector. In certain sectors, such as financial services or retail, this proportion can exceed 99%, as direct (Scope 1) and energy-related (Scope 2) emissions are minimal compared to the impact of financed or sold products.
Emission structures also differ by industry: in manufacturing, most emissions are linked to upstream supply chains, while in the automotive sector, fuel combustion during the use phase of vehicles (downstream) represents the largest environmental impact.
What are the latest insights?
The latest annual report by CDP provides one of the most detailed analyses to date of environmental transparency in corporate supply chains and offers several new insights. Its key message is that insetting is no longer merely an ethical choice; sustainable value chains are a critical pillar of corporate resilience. Amid geopolitical instability and climate shocks, only those companies can maintain operations that possess deep insight into their suppliers’ environmental exposure and actively support their green transition.
The report’s first and most important scientific finding is that Scope 3 emissions are significantly higher than previously estimated. According to the analysis, emissions linked to supply chains are, on average, 26 times higher than direct operational emissions (Scope 1 and 2) in a company’s total carbon footprint. This ratio shows a substantial increase compared to previous years, partly due to more accurate measurement methodologies and partly due to the growing complexity of supply chains. In practical terms, this means that decarbonization strategies must shift their primary focus to Scope 3, as managing Scope 1 and 2 alone is no longer sufficient.
Another important observation of the report is that value chain interventions are effective. CDP’s empirical data quantifies the effectiveness of business incentives applied across the value chain. According to the findings, suppliers that are offered concrete financial benefits and/or technical support by their buyers for decarbonization are 52% more likely to achieve meaningful annual emissions reductions than those who are not. This clearly confirms the measurable mitigation advantage of insetting over offsetting.
Finally, the CDP report concludes that the era of estimation-based accounting is coming to an end. From a scientific perspective, Scope 3 measurement is still largely based on estimates. Most large companies rely on secondary data (industry averages, emission factors) rather than collecting primary data directly from suppliers. Given the complexity of measuring Scope 3 emissions, companies will need to implement stricter monitoring systems in the future (e.g. evidence-based accounting at transaction level, soil sampling). Their main task will be to leverage digital transformation to improve data quality and thereby comply with the latest standards.
