A company that co-funds a supplier’s emissions reduction receives its share of the inset credits
A supplier reduces emissions that sit in its customers’ Scope 3, and the customers co-fund the project. Once an independent verifier confirms the tonnes, one credit per verified tonne is issued to the project developer and recorded on the Carbon3 registry. The credits are then split between the co-funders, who can report, sell or retire them.
An example from container shipping
This example follows a fictional shipping line and three fictional retailers that ship goods with it. Every number below is illustrative.
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Where the emissions sit
Shipping line
Burns marine fuel on the route. These are its own Scope 1 emissions.
Retailers A, B and C
Pay to ship their goods on the route. The same tonnes sit in their Scope 3, Category 4: upstream transportation and distribution.
The inset
The retailers co-fund a lower-carbon fuel on that route, so the reduction is inside their own supply chain.
What happens at each step
Scoping
The supplier and its co-funders define the project: which emissions source, the boundary, the baseline, the method and who pays what.
Who: Supplier and co-fundersRecord: Project scope
In this example
The line and the three retailers agree the boundary (one vessel on one route), the baseline (fuel burned in the year before the switch), the method and the shares: 50%, 30% and 20%.
Validation report
An independent body checks the scope, baseline and method before work starts, and confirms the project can be measured. From here future credits can be issued to the project developer, so funders can buy them early to finance implementation.
Who: Independent validatorRecord: Validation report
In this example
An independent validation body reviews the plan. Its validation report confirms the baseline and how fuel use will be measured.
Implementation
The supplier makes the change and monitors emissions against the baseline for the agreed period.
Who: SupplierRecord: Monitoring data
In this example
The vessel switches fuel. Bunker delivery notes, fuel use and voyage data are logged for the monitoring period.
Verification report
An independent verifier checks the monitoring data and confirms how many tonnes of CO₂e were reduced.
Who: Independent verifierRecord: Verification report
In this example
The verifier checks the fuel records against the baseline. Its verification report confirms 10,000 tCO₂e reduced.
Issuance
One realized credit per verified tonne is issued to the project developer, linked to the verification report and recorded on the Carbon3 registry. Future credits can also be issued to it earlier, once the project is validated, labeled Future.
Who: Project developerRecord: Issuance record
In this example
10,000 realized inset credits are issued to the shipping line, each linked to the verification report and recorded on the Carbon3 registry.
Allocation
The credits are split between the co-funders in line with what each one paid. Each credit has one holder at a time.
Who: Project developer and co-fundersRecord: Allocation record
In this example
Retailer A receives 5,000 credits, Retailer B 3,000 and Retailer C 2,000.
Sale or retirement
Holders keep, sell or retire their credits. A retired credit is claimed once and can never move again.
Who: Credit holderRecord: Retirement certificate
In this example
Retailer A retires its 5,000 credits for its Scope 3 report. Retailer C keeps 1,000 and sells 1,000 to another holder.
- Illustrative: fictional companies, one vessel, one route and one monitoring period.
- A verified reduction of 10,000 tCO₂e. One credit equals one verified tonne.
- Shares of 50%, 30% and 20%, in line with what each retailer paid. No prices or fees are shown.
From scoping to first revenue
Every project starts with scoping, before anything is listed. The supplier and its customers agree the emissions source, the boundary, the baseline and who funds what. The bars show the order and rough relative length of each phase for one illustrative project.
- Project work
- Independent check
- Credits and revenue
- 1
Scoping
Emissions source, boundary, baseline, method, and each co-funder’s share.
- 2
Validation report
An independent body confirms the scope and method. From here future credits can be issued to the project developer.
- 3
Implementation and monitoring
The change runs and the data builds up.
- 4
Verification report
An independent verifier confirms the tonnes reduced.
- 5
Issuance
One realized credit per verified tonne is issued to the project developer and recorded on the Carbon3 registry. Future credits can be issued earlier, after validation.
- 6
Allocation
Credits are split between co-funders by share.
- 7
Sale or retirement
Each holder keeps, sells or retires its credits.
Assumptions
- Illustrative: one simple project, relative durations only.
- A six-month first monitoring period.
- Real timing depends on the project, the method, the validator and the verifier.
- Co-funding can arrive before credits, as up-front funding.
Scope 3 rules take effect from 2027, and supplier projects take time to verify.
Supplier projects take time to scope, validate and verify, so companies that co-finance them now can show verified emissions reductions in their own value chain as these rules take effect.
2027
Revised ESRS
Scope 3 reporting under the revised European Sustainability Reporting Standards starts in 2027.
ESRS E1 explainedFebruary 2028
SBTi Net-Zero Standard V2.0
Version 2.0 becomes mandatory for new targets in February 2028.
SBTi V2.0 explained
Scope 3 is a financing problem more than a measurement problem, because the reductions that matter most need capital that pays back.
Today, a customer that pays for a supplier’s emissions reduction gets nothing it can hold. With Carbon3 the cost is shared and the verified tonnes come back as inset credits.
With Carbon3, a supplier project that was a sunk cost for one customer becomes a shared asset for several.
Insetting keeps the money in the supply chain
The same retailers, the same shipping route. Insetting reduces the emissions on that route. Offsetting pays for a project somewhere else and leaves them as they are.
Insets add to a company’s own emissions reductions and never replace them. Illustrative: fictional companies.
What stands behind every credit
Carbon3 keeps an audit-ready record of each inset credit, from the project evidence to the retirement certificate. Requirements vary by project type, methodology and verification pathway.
What an inset credit represents
One quantified emissions reduction or removal of one tonne of CO₂e, inside a value chain, supported by project evidence and independent verification.
- Tied to one project activity, time period and system boundary in a defined value chain.
- A benefit that can be transferred or allocated before it is retired.
- It may count as a Scope 3 emissions reduction, depending on the company that retires it.
Carbon3 does
- Track issuance, transfers and retirement
- Record the allocation of credits between holders
- Produce audit-ready reporting outputs
Carbon3 does not
- Replace a company’s own carbon accounting judgment
- Guarantee acceptance by any standard or regulator
- Validate or verify projects: independent bodies do
Independent validation and verification
Every project needs an independent validation report and verification report before any credit is issued.
Each tonne claimed once
Credits are split between participants, with one holder per credit, so each tonne is claimed only once.
Traceable provenance
Each credit keeps a record trail from the verified project activity through issuance, transfers and retirement.
The record trail
| Record | Produced by | When | What it holds |
|---|---|---|---|
| 01Project evidence | Supplier | Scoping | Project documentation, boundary and assumptions |
| 02Validation report | Independent validator | Before implementation | Confirmed scope, baseline and method |
| 03Monitoring data | Supplier | Implementation | Measured activity against the baseline |
| 04Verification report | Independent verifier | After monitoring | The tonnes of CO₂e reduced |
| 05Issuance record | Project developer, recorded by Carbon3 | Issuance | Vintage, quantity, category (realized or future), verification reference and identifiers |
| 06Allocation and transfer records | Carbon3 | Allocation and sale | Who holds each credit, and every change |
| 07Retirement certificate | Carbon3 | Retirement | Who retired how many credits, for which claim |
What participants receive
Verification summary
Project scope, boundary and verification status.
Evidence pack export
The supporting documents and references in one package.
Credit and transfer history
Every issuance, allocation and transfer.
Retirement statement
An exportable certificate for reporting or claims.
Who else is involved
Insetting works when everyone works from the same record. These partners vary from project to project.
Validators and verifiers
Independent bodies write the validation report and the verification report. Carbon3 never validates or verifies.
MRV providers
Measurement, reporting and verification (MRV) providers supply the monitoring data a verifier checks.
ESG advisors
Advisors help companies scope projects and fit them into their climate strategy and reporting.
Banks, lenders and industry bodies
Lenders finance projects inside real supply chains. Industry bodies share methods and data across a sector.
What happens during scoping?
The supplier and its co-funders agree which emissions source the project changes, the boundary (which sites, vessels or lines), the baseline the reduction is measured against, the method, and who pays what. The result is the project scope that the validator reviews.
How do the validation report and the verification report differ?
The validation report comes first, before the change is made, when an independent body confirms that the scope, baseline and method are sound. The verification report comes after monitoring, when an independent verifier confirms how many tonnes of CO₂e were reduced. Realized credits are issued after the verification report, and future credits can be issued earlier, once the validation report is in.
Who receives the credits, and when are they issued?
Credits are issued to the project developer after independent verification. Carbon3 is the registry that records, tracks and retires them, and it never issues credits. Realized credits are issued after the verification report, one per verified tonne, each with a unique identifier linked to that report. Future credits can also be issued to the project developer earlier, once the project is validated, so funders can buy them to finance implementation. Future credits are labeled as such on every credit, and the buyer carries the risk that the planned tonnes are not delivered.
How are credits split between co-funders?
In line with what each co-funder paid, as agreed during scoping. Carbon3 records the allocation, so every credit has exactly one holder.
What if fewer tonnes are verified than planned?
Realized credits are only issued for verified tonnes. Holders of future credits carry the risk that fewer tonnes are delivered than planned. How a shortfall is shared is set in each project’s agreement between the supplier and its co-funders.
Can a buyer count the credits toward its Scope 3 target?
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. The Greenhouse Gas Protocol’s work on actions and market instruments is still in consultation, and a revised standard is expected in late 2028. Carbon3 builds to the strictest reading.
Can credits be traded before they are retired?
Yes. Credits can move between holders before retirement, and every transfer is recorded. A transfer does not change the verification behind the credit. Once retired, a credit cannot move again.
Talk to us about a supply chain
Share where the emissions sit and who could co-fund the reduction.