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.
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:
| Element | Carbon Insetting (Internal) | Carbon Offsetting (External) |
|---|---|---|
| What is it? | A strategy for companies to diminish CO2e emissions in their own industrial sector, by applying internal strategies focused on their production, manufacturing and practices. | A method of counterbalancing emissions by funding external carbon reduction initiatives, by outsourcing partners in their supply chain that have active sustainability practices that can be tracked and documented. |
| Focus | Emphasizes internal tactics to lower emissions within an organization’s own process chain. | Concentrates on compensatory measures outside of the company’s direct operations. |
| Scope | Deals with emissions directly tied to a company’s specific operational activities. | Addresses a broad range of emissions, potentially including those not directly produced by the company itself, but part of their supply chain. |
| Approach | Adoption of eco-friendly procedures, enhancement of energy utilization, transition to renewable sources. | Acquisition of emission reductions credits or investment in green energy ventures. |
| Accountability | Holds the entity itself accountable for diminishing emission levels. | Allocates responsibility to offset activities, often via financial or outsourced channels. |
| Impact | Leads to a direct decline in emissions in the operational sequence, contributing to enduring ecological viability. | May not directly impact emission levels at the original source. |
| Measurement | Necessitates precise assessment and documentation of emission cuts made by in-house actions. | Depends on established procedures for quantifying the effect of investments in offset projects. |
| Cost | Upfront costs may be substantial due to the internal adoption of sustainable processes, but can yield long-term cost reductions. | Costs are associated with the purchase of carbon credits or investments in external projects. |
| Scalability | Limited by the company’s own capabilities and resources but can be extended through sourcing insets from the market. | Highly scalable through investments across a diverse array of external projects and outsourcing partners. |
| Long-term viability | Aims at fostering durable eco-friendly practices, decreasing reliance on high-emission operations, subject to regulatory shifts. | Risks associated with the constancy and actual environmental impact of offsetting projects may affect long-term dependability. |
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.
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:
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:
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:
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.
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.
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.
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:
| Industry | Insetting Strategies |
|---|---|
| Transportation & Logistics |
- Switching to biofuels - Retrofitting and upgrading fleets - Optimizing logistics and routing |
| Manufacturing |
- Improving energy efficiency - Transitioning to renewable energy - Low-carbon production processes |
| Agriculture & Food |
- Enhancing soil carbon capture - Reducing fertiliser usage - Sustainable farming techniques |
| Retail & Consumer Goods |
- Reducing supply chain emissions - Optimizing packaging and distribution - Promoting sustainable consumption |
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.
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.
You can check and download our Sustainability Reports Here.