Insetting for agriculture and food supply chains
Most of a food company’s footprint sits on farms, which it cannot contract one by one. Cooperatives and sourcing programs can.
Why insetting fits agriculture and food
A missing market
Brands contract their larger suppliers routinely but cannot reach the long tail of smallholders where most of a food company’s footprint sits. Even the deepest programs therefore work through cooperatives and other intermediaries.
Strong claims, and soil carbon with safeguards
The strongest claims come from reducing methane from livestock and rice and nitrous oxide from fertilizer. These are lower emissions, measured each season, that do not reverse. Many existing insetting programs are built on soil carbon, which can be credible too if the project addresses permanence and measurement. Stored carbon can be released if practices change, and changes in the stock are slow and costly to detect.
Illustrative
Each farm, its own baseline
- Farms join
- Through a cooperative or program
- Measured
- Against the farm’s own baseline
- Counted
- Once
Typical inset projects in agriculture and food
- 01
Feed additives
Cooperatives roll out feed additives across member farms to suppress methane formation in the rumen of dairy and beef cattle. The reduction per animal comes from the methodology and peer-reviewed trials, applied to verified feeding records.
- 02
Manure biogas
Covered storage and anaerobic digesters capture the methane from manure and turn it into biogas for heat, power or vehicle fuel. The reduction is measured with gas meters against a baseline of open storage.
- 03
Rice water management
Alternate wetting and drying lets rice paddies dry out between floods, which reduces the methane produced in waterlogged soil and often saves water. Field records and water-level monitoring show the practice was followed.
- 04
Precision nitrogen
Applying nitrogen fertilizer at the right rate, time and place, sometimes with inhibitors, reduces the nitrous oxide released from fields and the emissions from making the fertilizer in the first place. It is verified from purchase and application records.
- 05
Palm oil mill methane capture
Palm oil mill effluent releases large amounts of methane in open ponds. Covered lagoons or digesters capture it for power or flaring. The reduction is metered at the mill, a single point that is easy to verify.
- 06
Soil carbon
Cover crops, reduced tillage, diverse rotations and better grazing build carbon in farm soils. Projects combine soil sampling with models, commit to monitoring for many years, and hold back a buffer of credits against reversals, because stored carbon can be lost if practices change.
How a farm inset works
Farms join through a cooperative or sourcing program. Each practice is measured against the farm’s own baseline.
- 1Cooperative and food companies
Scoping and project definition
A cooperative or sourcing program groups the farms, chooses the practice (feed, manure, rice, fertilizer or soil) and sets each farm’s baseline. Food companies agree their shares.
- 2Independent verifier
Validation report
An independent verifier confirms the scope, baselines, methodology and, for soil carbon, the sampling plan and the provisions for reversals.
- 3Farms
Implementation
Farms adopt the practice. Plot data, also used for the EU Deforestation Regulation, and herd, feed or fertilizer records are collected.
- 4Independent verifier
Verification report
The verifier checks the records and samples, and states the verified reduction for the season or year.
- 5Project developer, on the Carbon3 registry
Issuance to the project developer
Realized credits, one per tonne in the verification report, are issued to the cooperative or program and recorded on the Carbon3 registry. Future credits can also be issued to it earlier, once the project is validated. They stay labeled Future, and buyers who take them carry the delivery risk.
- 6Cooperative
Allocation
Credits go to each food company or retailer by share. Farmers receive the agreed payment.
- 7Food companies
Retirement
Each funder retires its credits once, in its FLAG or Scope 3 reporting.
From farm to brand
Farmers change practice, and the companies that buy their output pay for the change and receive the credits.
Farms
Dairy, livestock, rice or arable farms
Cooperative or program
Groups the farms and holds the farm data
Food company
Processor or brand that buys from the farms
Retailer
Sells the food company’s products
Each farm’s reduction is measured against its own baseline and counted once. Inset credits from soil projects also carry the monitoring commitment and reversal provisions set at validation.
Dairy farms reduce methane
A dairy cooperative of 120 farms introduces a methane-reducing feed additive. A cheese and yoghurt maker that buys their milk and a retailer fund it.
Who pays what
Food company A
Retailer B
| Funder | Share | Pays | Credits, years 1 to 5 | Of which future credits (years 1 and 2) |
|---|---|---|---|---|
| Food company A | 60% | €540,000 | 12,600 t | 3,600 t |
| Retailer B | 40% | €360,000 | 8,400 t | 2,400 t |
| Total | 100% | €900,000 | 21,000 t | 6,000 t |
Future and realized credits in this example
1At validation
The 6,000 tonnes planned in years 1 and 2 are bought as future credits, so the money funds the implementation and the holders carry the delivery risk.
2After each verification
The 15,000 tonnes verified in years 3 to 5 are issued as realized credits, one per tonne in the verification report.
Cost per verified tonne
Spread over 5 years of credits, the project cost comes to €43 per verified tonne, a figure to compare with the internal carbon price or with the CBAM certificate cost an importer faces. Real prices are not shown.
Assumptions
- Program cost €900,000.
- Full rate of 5,000 t a year from year 3.
- Year 1 at 40% while farms join.
- Credits are split in line with what each funder paid.
- One credit equals one verified tonne of CO₂e.
- No real companies, prices or projects. Fees are not shown.
- Illustrative split: the credits for years 1 and 2 are bought as future credits at validation; later years are taken as realized credits after each verification. The real split is agreed project by project.
Five years of farm emissions reductions
Credits per year by funder.
Credits per year, in tonnes
- Food company A (60%)
- Retailer B (40%)
- Future credits, bought at validation
21,000 t in total over 5 years
Assumptions
- Same number of farms each year.
- Results vary with herds and seasons.
- Real results depend on verification.
- Illustrative split: the credits for years 1 and 2 are bought as future credits at validation; later years are taken as realized credits after each verification. The real split is agreed project by project.
Food rules and claims
Land-sector targets and deforestation rules both depend on farm-level data. An inset uses the same data.
The EU Deforestation Regulation needs plot data from the farms behind products sold in the EU. Food companies set a separate land-sector target under the SBTi FLAG guidance, report farm reductions in Scope 3 under the GHG Protocol, and cannot base neutrality claims on credits under EU green claims rules. The Carbon3 registry gives each inset credit one serial number and one holder, so each tonne is counted once.
- Farmsdairy, livestock, rice or arable
- EUDRPlot data showing no deforestation after 2020, for products placed on the EU market.
- Cooperative or programgroups the farms and holds the farm data
- Food company’s reportprocessor or brand that buys from the farms
- SBTi FLAGA separate target for land-use change and land management emissions.
- GHG Protocol Scope 3A supplier’s reduction shows in Scope 3 when it is in the data the company uses, such as a supplier-specific factor.
- EU green claimsNo claim that a product has a neutral, reduced or positive climate impact when it rests on credits.
Counting each tonne once
Carbon3 registry: each inset credit has one serial number and one holder. A transfer moves it, retirement closes it.
SCHEMATIC, ILLUSTRATIVE. GENERAL INFORMATION AS OF OCTOBER 2026, NOT LEGAL ADVICE.
SBTi FLAG guidance
- What the standard is
- Companies in land-intensive sectors such as food production, food processing and food retail, or with forest, land and agriculture (FLAG) emissions of 20% or more of their total, must set a separate FLAG target covering land-use change and land management emissions, such as fertilizer, manure and livestock. Version 1.2, in effect since March 2026, also requires a public no-deforestation commitment, with a target date no later than 2030.
- A reduction in the company’s own supply chain
- Reductions on the farms that supply the company count towards its FLAG target when they show up in its sourcing data, which is why plot-level and supplier-level data matters.
- One in its industry, outside its chain
- Reductions on farms outside the company’s own sourcing do not lower its FLAG inventory. Under the Net-Zero Standard V2.0 they can count only as action in a shared supply shed or sector, reported separately.
- What an inset credit does
- Each farm reduction is measured against its own baseline, verified, then allocated once to the company that funds it, so it can sit in that company’s FLAG reporting.
EU Deforestation Regulation (EUDR)
- What the standard is
- From 30 December 2026, large and medium operators placing cattle, cocoa, coffee, palm oil, rubber, soy or wood, and products made from them, on the EU market must prove they come from land not deforested after 2020, with the geolocation of each plot of production. Micro and small operators follow on 30 June 2027.
- A reduction in the company’s own supply chain
- Operators must show that the products they place on the EU market come from plots not deforested after 2020. That plot data comes from the company’s own supply chain.
- One in its industry, outside its chain
- Due diligence covers only the products an operator places on the EU market. Plots outside its own sourcing are outside its obligation.
- What an inset credit does
- The plot data collected for the EUDR can support the farm-level baseline and monitoring of an inset project. EUDR compliance on its own is not an emissions reduction and does not generate credits.
GHG Protocol: Scope 3 Standard
- What the standard is
- The Greenhouse Gas Protocol sets the accounting rules most companies use for their emissions. Its Corporate Value Chain (Scope 3) Standard, published in 2011, covers the emissions in a company’s value chain in 15 categories, from purchased goods and transport to the use of sold products. It has no market-based method for Scope 3, so purchased certificates or credits do not change the Scope 3 figure, unlike electricity in Scope 2.
- A reduction in the company’s own supply chain
- A reduction at a supplier the company buys from lowers its Scope 3 inventory when it shows up in the data the company uses, for example a supplier-specific emission factor for the goods it purchases. A spend-based average will not show it.
- One in its industry, outside its chain
- A reduction at a producer outside the company’s own supply chain is not part of its inventory under any method. It can be disclosed separately as an action, not as a lower Scope 3 figure.
- What an inset credit does
- 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. For soil carbon, the GHG Protocol’s Land Sector and Removals Standard, effective from 1 January 2027, requires ongoing monitoring of stored carbon and treats losses as reversals. A market-based approach for Scope 3 is expected in the revised standard in the fourth quarter of 2028.
EU rules on green claims
- What the standard is
- From 27 September 2026, EU consumer law (Directive 2024/825) bans claims that a product has a neutral, reduced or positive climate impact when the claim rests on compensating emissions with credits. Claims about measured reductions in the product’s own life cycle remain possible if they are substantiated.
- A reduction in the company’s own supply chain
- A product claim can rest on measured, substantiated reductions in that product’s own life cycle, which includes reductions at its suppliers.
- One in its industry, outside its chain
- A reduction outside the product’s life cycle cannot support a claim that the product has a neutral, reduced or positive climate impact.
- What an inset credit does
- Inset credits support Scope 3 reporting and progress towards targets, not product neutrality claims. A product claim has to rest on measured reductions in that product’s life cycle. Credits never replace a company’s own emissions reductions.
General information as of October 2026, not legal, accounting or reporting advice. Standards and regulations change; check the current text.
Food and farming questions
A food company cannot contract thousands of farms one by one. Cooperatives and sourcing programs already have the farms as members, collect milk, crop or herd data, and often provide agronomy advice. That makes them the natural project developer, because they hold the data, organize the practice change and pay farmers.
Talk to us about a sourcing program
Food buyers, cooperatives and sourcing programs can see how farm emissions reductions would be scoped, verified and shared.