SUSTAINABILITY PRACTICES: CARBON INSETTING VS OFFSETTING TO TRANSFORM YOUR INTERNATIONAL TRADE

1. What is Carbon Insetting?

2. The Importance of Carbon Insetting for International Trade

3. Who can Implement Carbon Insetting?

4. Which Strategy to Choose?

In the landscape of global commerce, sustainability is no longer just a buzzword but a business imperative. Reducing carbon emissions is not only a mandate from governments but also a core sustainability goal for ports, cargo owners, and shipping companies. Yet, decarbonizing operations presents significant challenges, particularly for cargo owners. While they have control over their shipments' contents, they often lack sway over the type of fuels used by the vessels carrying their freight. Unlike carbon offsetting, which often involves external projects, insetting involves making changes within one’s own operations or immediate supply chain to reduce emissions.

Carbon insetting emerges as a viable solution to this dilemma, offering a way to reduce CO2 emissions intimately tied to their operations without necessitating broad logistical changes. This blog will explore carbon insetting as an proactive approach, delving into how it can reshape the future of green freight shipping by turning environmental challenges into opportunities for efficiency and compliance within the shipping industry.

What is Carbon Insetting?

Carbon insetting represents a shift from traditional offset practices—where companies invest in environmental projects externally, often in unrelated areas—to tackling emissions at the source. This method allows businesses to directly manage their carbon footprints by investing in projects that reduce emissions within their own operational domains or supply chains.

The distinction between insetting and offsetting is crucial: while offsetting can sometimes be seen as a way to buy oneself out of guilt, insetting is a strategy for genuine improvement in environmental impacts. By focusing on internal changes, companies not only reduce emissions but also often streamline processes and enhance efficiency within their operations.

Here is a detailed comparison between both strategies:

The Importance of Carbon Insetting for International Trade

International trade involves complex logistics and extensive supply chains, making it a significant contributor to global carbon emissions. The shipping industry alone is responsible for about 3% of global emissions, a number expected to grow if left unchecked. Carbon insetting offers a path forward to not just offset but reduce these emissions through improvements in operational efficiency and sustainable supply chain management. Adopting insetting practices allows companies to comply with increasingly strict global environmental regulations and meet the sustainability expectations of consumers and partners.

Benefits of Carbon Insetting for International Trading Companies

For businesses in the realm of international trade, the advantages of implementing carbon insetting strategies are manifold. Here are several benefits that underscore its importance:

• Regulatory Compliance: Many countries are tightening their environmental laws and regulations, imposing stricter guidelines on carbon emissions and sustainability reporting. Carbon insetting helps companies stay ahead of these regulations, avoiding potential fines and legal complications.
• Enhanced Brand Reputation: Today’s consumers are more environmentally conscious than ever. Companies that actively engage in sustainable practices are likely to enjoy a more positive public image, which can translate into increased customer loyalty and new business opportunities.
• Operational Efficiencies: Carbon insetting often involves upgrading technology and optimizing processes to reduce emissions. These improvements can also lead to increased operational efficiency, reducing waste, lowering energy use, and cutting costs over time.
• Stakeholder Engagement: Investors and partners are increasingly valuing sustainability. Companies that demonstrate a commitment to environmentally friendly practices through carbon insetting are more likely to attract and retain investors and business partners concerned about long-term sustainability.

Implementing Carbon Insetting in International Trade Operations

Transitioning to a carbon insetting model requires strategic planning and a commitment to changing how business is done. Here are some steps companies can take to implement these practices effectively:

• Project Selection: Identify projects within the supply chain or operational processes that offer substantial opportunities for carbon reduction. These might include switching to renewable energy sources, investing in energy-efficient equipment, or optimizing logistical routes to reduce travel distances and fuel consumption.
• Partner Involvement: Engage with suppliers and partners who are also committed to reducing their carbon footprints. Collaborative projects can lead to more significant emissions reductions across the supply chain.
• Technology Utilization: Invest in new technologies that can track and manage carbon emissions more effectively. Advanced analytics and IoT devices can provide real-time data that helps fine-tune operations and cut unnecessary emissions.

Who can Implement Carbon Insetting?

As businesses worldwide intensify their commitment to sustainability, carbon insetting stands out as a versatile strategy that can be integrated across various sectors. This practice is not confined to a single industry but is adaptable and beneficial to a wide range of sectors that contribute to CO2 emissions through their operations. Here’s a look at how different industries can implement carbon insetting effectively:

Transportation and Logistics

These companies have the potential to significantly reduce emissions through various insetting strategies, such as the adoption of alternative fuels, vehicle fleet upgrades, and logistic optimizations.

Manufacturing

Manufacturers, especially within heavy industries like steel, cement, and chemicals, can embrace insetting by optimizing their energy use, switching to renewable sources, and refining production processes.

Agriculture and Food Production

The agricultural sector has a unique opportunity to engage in carbon insetting by adopting methods that enhance carbon sequestration in soil, optimizing the use of fertilizers, and employing sustainable agricultural practices.

Retail and Consumer Goods

Companies in the retail and consumer goods sectors can apply insetting by lowering emissions throughout their supply chains, improving packaging and distribution, and encouraging sustainable practices among their customers and suppliers.

Below is a table that succinctly captures how various industries can adopt insetting as part of their business operations:

For instance, a transportation company might implement an insetting project by transitioning its fleet to biofuel, thereby reducing dependency on fossil fuels and lowering its scope 3 carbon emissions. By retrofitting existing vessels with emission control technologies or integrating hydrogen-powered solutions, the company could realize significant cost savings compared to acquiring new assets. Furthermore, by streamlining logistics, investing in driver training, and employing efficient route planning, these insetting measures can become a fundamental component of the business strategy.

Implementing carbon insetting is not only a move towards environmental stewardship but also a strategic business decision that can lead to cost savings, enhanced brand reputation, and alignment with global sustainability goals.

Which Strategy to Choose?

Carbon insetting is not just another environmental strategy but a comprehensive approach that offers multiple benefits for international trading companies—from improving regulatory compliance to enhancing brand reputation. As global trade continues to expand, integrating carbon insetting into business operations is not only an environmental necessity but also a strategic business move. The suggestion for any and all businesses that deal in International Trade, is to work with a combination of both strategies (carbon insetting and carbon offsetting) to reduce significantly and steadily their carbon footprint, while maintaining a level of control and contributing to more sustainable practices.

If your company is ready to take its sustainability efforts to the next level, consider exploring carbon insetting as a means to not only mitigate environmental impact but also drive business value. Engage with experts, invest in sustainability projects within your operations, and set a course for a greener, more sustainable future in international trade.

For all your carbon offsetting strategies, we are here to help. 

Kerry Logistics Network Limited (“KLN”) is determined to integrate sustainability into its corporate strategy – by making long-term commitments, setting near-term targets and taking tangible actions. We shall update our sustainability plan from time to time with reference to the technological developments in the logistics industry as well as the evolving dynamics of global challenges. Our sustainability vision is supported by three principles: Commitment, Action and Transparency.

COMMITMENT

• Net Zero – KLN is committed to achieving net zero carbon emissions from its operations and value chain by 2050.
• United Nations Global Compact (“UNGC”) – KLN has taken steps to become a signatory to the UNGC. We shall disclose our progress on sustainability initiatives annually through the UNGC platform, and share our learning with the industry, with a view to accelerating the development of sustainable logistics solutions.
• United Nations Sustainable Development Goals (“UNSDGs”) – KLN is committed to promoting UNSDGs in the countries we operate. We shall adopt appropriate initiatives to contribute to UNSDGs wherever practicable in our operations, and disclose the alignment of UNSDGs with our strategic initiatives in our sustainability reports.

ACTION

• Carbon Reduction – KLN is in the process of establishing a comprehensive baseline for greenhouse gas emissions across its worldwide operations. We shall announce carbon reduction targets and explore the alignment of science-based targets across our supply chain.
• Renewable Energy – As part of its carbon management strategy, KLN shall take steps to reduce its carbon footprint by increasing the utilisation of renewable energy in its operations. Allowing for the differential development of renewable energy and relevant policies in the countries we operate, we shall encourage our respective operations to maximise the use of renewable energy whenever available and practicable.

TRANSPARENCY

• Carbon Offset – Recognising the importance of carbon offsets as a key way to drive the goal of net-zero, KLN announced a carbon offset policy in its Sustainability Report for year 2021.
• Taskforce on Climate-related Financial Disclosures (“TCFD”) – KLN has taken steps to become a supporter of TCFD, and is committed to implementing the TCFD recommendations by 2025. We shall increase the transparency on climate-related risks and opportunities, and implement climate actions in tandem with the contributions by our suppliers and customers.
• CDP (formerly known as Carbon Disclosure Project) – KLN has participated in CDP to track its progress in carbon management and emissions reduction.