Insetting funds emissions reductions inside a company’s value chain, and offsetting funds them outside it

Offsetting means financing emissions reductions or removals outside a company’s value chain to compensate for its own emissions. Insetting means financing verified emissions reductions inside that value chain, at the suppliers, carriers or farms the company buys from. The reduction then appears in the emissions the company reports as Scope 3.

Neither replaces a company’s own emissions reductions, and each does a different job. An offset addresses emissions a company has not yet reduced, while an inset is one way to reduce the emissions in its supply chain.

A company’s greenhouse gas inventory under the GHG Protocol records the emissions physically associated with its operations and value chain. Buying an offset does not change those emissions; the credit is reported separately from the inventory. An inset funds a change at a supplier, so the emissions the supplier reports as Scope 1 fall. 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 open question is how a buyer may count that reduction. When the physical product can be traced to the buyer, the reduction shows up through better supplier data. When it cannot, as with fuel delivered into a shared system, the buyer relies on a market instrument such as an inset credit or a book and claim certificate. The GHG Protocol’s actions and market instruments workstream is developing rules for this case. Feedback on its white paper closed on 31 May 2026 and showed strong support for a multi-statement reporting structure, a market-based inventory approach and a separate statement for the effects of actions. The white paper is not yet a draft standard.

• Insetting fits when the emissions sit with identifiable suppliers or carriers that could reduce them with funding: a shipping line’s fuel, a steel mill’s process, farm practices in a sourcing region. See the sectors on the Insetting 101 page.
• Offsetting and removals fit emissions a company cannot yet reduce in its own operations or value chain, and the voluntary action on ongoing emissions that SBTi V2.0 encourages.
• Many companies use both: insetting for the supply-chain emissions they can influence, and high-quality offsets or removals for the rest, each reported in its own place.