Carbon insetting pays for emissions reductions at the suppliers a company already buys from

Insetting means financing emissions reductions within a company’s own value chain. Each reduction is quantified against a baseline, independently verified and recorded so that each tonne is claimed once. The reduction happens at a supplier, carrier, farm or other partner the company buys from, so it lowers the emissions in that company’s Scope 3 inventory.

Three conditions separate an inset from other climate spending:

1. Inside the value chain. The reduction occurs at a supplier, customer or other partner in the reporting company’s value chain.
2. Measured and verified. The reduction is quantified against a baseline using a recognized methodology and checked by an independent verifier.
3. Claimed once. Each verified tonne becomes one serialized credit, allocated by rule and retired permanently, so no two parties claim the same tonne.

Offsetting is different: it finances reductions or removals outside the value chain to compensate for a company’s own emissions. The comparison of insetting and offsetting sets the two side by side. Insetting adds to a company’s own emissions reductions and does not replace them.

The GHG Protocol splits a company’s emissions into three scopes. Scope 1 covers direct emissions from sources the company owns or controls, and Scope 2 covers the emissions from the energy it buys. Scope 3 covers every other emission in its value chain, reported in 15 categories: eight upstream and seven downstream. Upstream examples are purchased goods and services (Category 1) and upstream transportation and distribution (Category 4).

For most companies, Scope 3 is the largest part of the footprint. Across 2,229 companies disclosing to CDP in 2023, reported upstream Scope 3 emissions averaged 26 times their Scope 1 and 2 emissions, from about one times in fossil fuels to 92 times in retail (CDP and BCG, 2024).

Those same emissions are the supplier’s own Scope 1. When a supplier switches fuel, changes a process or adopts new farming practice, it pays for the change, yet the emissions reduction also appears in each of its customers’ Scope 3. Insetting lets those customers share the cost and hold an evidenced record of the reduction they helped pay for.

Many companies engage with their suppliers on climate, but few set targets for supply-chain emissions. Of companies disclosing to CDP in 2023, 41% engaged with their suppliers on climate, 21% engaged and assessed supply-chain risks, and 15% had set an upstream Scope 3 target. Companies were 2.4 times as likely to set targets for Scope 1 and 2 emissions as for Scope 3.

Rules are pushing Scope 3 forward. Under version 2.0 of the SBTi Corporate Net-Zero Standard, published on 11 June 2026, validations open on 1 February 2027 and the standard becomes mandatory for new target submissions from 1 February 2028. In the EU, the climate standard of the European Sustainability Reporting Standards, ESRS E1, includes Scope 3 emissions in what in-scope companies disclose. Disclosure creates the demand; insetting is one way to act on the emissions disclosed.

An offset pays for a project outside the buyer’s value chain and leaves its suppliers’ emissions where they were. An inset pays for a verified emissions reduction at a supplier inside the value chain, and the credits for that reduction are allocated to the partners that co-funded it.

Every inset project on Carbon3 follows the same seven steps in the same order. Carbon3 is the registry, which means it records each credit and every change to it. It does not validate, verify or issue credits.

One inset credit represents one tonne of CO₂e reduced inside a value chain. To hold up in an audit, the credit has to carry its own evidence: who it belongs to, where it came from, who checked it and what has happened to it since.

Because every allocation, transfer and retirement is written against the serial number, a buyer, auditor or advisor can follow a Scope 3 claim back to the project and the verification report behind it, which is what “claimed once” means in practice.

Insetting fits wherever one company’s emissions reduction shows up in another company’s Scope 3. The table shows typical project types; real projects are scoped one by one.

Where the physical product cannot be traced to a buyer, as with fuel in a shared bunkering or pipeline system, the environmental attribute can be traded apart from the product under a book and claim model.

The accounting rules for counting a supplier’s emissions reduction bought this way are still being written. The GHG Protocol is revising its Corporate and Scope 3 standards and developing a standard on actions and market instruments. A consolidated draft for public consultation is estimated for 2027, and the revised standard for the fourth quarter of 2028. Until then, Carbon3 builds to the strictest reading, so the evidence is ready whichever way the rules settle.

• When a supplier in the buyer’s own chain reduces emissions, the buyer’s Scope 3 goes down through lower supplier emissions data. The inset credit is the proof of that emissions reduction and who funded it, and it is not counted a second time. An emissions reduction outside the buyer’s own chain is reported separately, not as a lower Scope 3 figure.
• SBTi’s Corporate Net-Zero Standard V2.0 keeps the physical inventory as the basis for targets. Projects and certificates that meet its integrity criteria can support target implementation, reported separately; carbon credits are treated under its Ongoing Emissions Responsibility framework.
• In the EU, Directive (EU) 2024/825 applies from 27 September 2026 and bans product claims of climate neutrality based on offsetting. Inset credits support Scope 3 reporting, not “carbon neutral” product claims.

Claim treatment always depends on the applicable reporting framework.

Four kinds of participant work from the same record. Project developers register a decarbonization project and receive credits for verified reductions. Supply-chain partners co-fund a project at a supplier and receive credits to retire. Credit buyers buy credits from verified projects. ESG consultants bring a client program to the platform.

The solutions for suppliers, for buyers and for investors describe each route, and the free Data Hub shows the public emissions, targets and projects behind any company.