For companies that source commodities or use natural materials in their products, understanding their full impacts, addressing their land use footprint and building sustainable supply chains is an area of increasing focus and scrutiny. As much as 90% of a company’s climate impact happens in its supply chain, and often in opaque, globally complex systems surrounding land use and sometimes involving historical or ongoing deforestation. ‘Insetting’ is a growing mechanism to address a company’s impact through a partnership or investment in an emissions-reducing activity that is within their ‘sphere of influence’ but may be beyond their direct business control. Leading companies such as CHANEL, L’Oréal, Kering and Nespresso are pioneering using the insetting approach to address their impacts and supply chains. All these companies are members of the International Platform for Insetting, which has developed a standard for insetting practices.
Read our blog I’ve heard of carbon offsetting, but what is ‘insetting’? to learn more about the details of insetting.
A landscape approach to insetting takes a broad view of a company’s boundary of influence and responsibility and looks at the wider context in which a company operates. It recognises that no one works in a bubble, taking into consideration the landscape in which a company works and accounting for externalities and chain-reaction impacts of production, use or disposal of goods. The impact of a supply chain on the broader landscape – both positive and negative – goes well beyond the boundary of a plantation or production facility (‘farm gate’). For example, commodity extraction and agriculture impact land use, watersheds, biodiversity, ecosystem resilience to weather, and culture, systematically. If the surrounding ecosystem is degraded, the whole supply chain is at risk. Therefore, a holistic, landscape approach to emissions reductions and supply chain action is needed, one that recognises the existing interconnections between production and the broader landscape and provides a better understanding of the real impacts.
Forest conservation provides an opportunity for companies to take action in the landscape of their production and address their carbon, environmental and deforestation footprints. Forests are critical for mitigating carbon emissions and at the same time also have a wide range of local environmental and social benefits.
The benefits of forest conservation beyond carbon include adapting to the impacts of climate change, creating flood barriers, regulating water flow including rain, lowering local surface temperatures, improving air quality, keeping soils nourished and healthy, protecting wildlife migration routes and habitat, and support livelihoods of local people, including helping achieve many of the Sustainable Development Goals. Read our ‘Case for Forests’ e-book to learn more about the amazing qualities of forests.
These ecosystem services are critical to a range of commercial activities, like agriculture, forestry and ranching. For a company using inputs derived from these activities, supporting conservation efforts which result in emissions reductions in the same ecosystem as their operations takes a landscape approach to reducing risks and impacts, accounting for environmental externalities, and ensuring healthy supply chains by:
- Improving supply chain and material sourcing resilience to extreme weather events, such as floods and landslides,
- Safeguarding the ecosystem services that are critical to production, for example the Amazon rainforest ‘water pump’ sustains $1-3 billion per year in rain-fed agriculture,
- Reducing risks and disruption to wildlife habitat and migration routes, for example protecting pollinators.
The Amazon Rainforest releases 8 trillion tonnes of water vapour into the atmosphere each year, which falls as rain across some of the biggest bread baskets in the world that are based in South America. The Cordillera Azul National Park in Peru is the source of 45 watersheds that feed two of the Amazon River’s major tributaries and is at the core of one of the main coffee and cocoa production areas in the country. Companies sourcing crops, commodities or livestock in this region rely on the predictability of the natural water cycle, which generally is fuelled by the local forests and can also be mapped to the specific watershed. Protecting forests is critical to healthy production and supply chains in Peru and companies can support this by financing forest conservation in the Cordillera Azul National Park.
Companies will have to use all possible mitigation options available to meet climate and zero-deforestation targets, from reducing internal emissions, to insetting and offsetting. Near-term, only a fraction of total reductions can be achieved internally through improvements in energy efficiency and processes. Reductions implemented at the supply chain level and those that reduce land use related emissions are key.
Forest conservation is a landscape approach that holistically addresses multiple impacts and offers opportunities to companies by:
- Aligning emissions reductions with a company’s operations and supply chain from the individual farm level to the supply shed,
- Providing companies of all sizes with feasible options and flexibility to increase their ambition on climate action immediately,
- Catalysing immediate investment into existing projects for critically needed emissions reductions without the need to wait for new processes or technologies to be developed and implemented,
- Making progress on zero-deforestation targets through linking ‘offsetting’ (which finances forest conservation) to supply chains or giving preference to sourcing from areas with strong forest conservation,
- Reducing supply chain risks related to environmental degradation and the associated disruption in environmental services in the broader landscape,
- Increasing supplier resilience by protecting and managing natural capital within and beyond the farm gate.
For traceable commodities, companies can address climate, deforestation and ecosystem impacts through financing forest conservation located in the direct landscape or ecosystem of their supply chain by purchasing carbon credits from an existing project or investing in developing a new project around the company’s existing farms or producing region. For example, a company with a significant water footprint could purchase REDD+ forest credits or invest in a new project that protects watershed services in the same landscape as their supply chain, contributing to supply chain resilience.
For non-traceable commodities, such as in value chains where smallholders are a big part of the supply,companies can purchase REDD+ credits from or invest in a new project in the country where a company’s commodities are purchased; for example, a company sourcing palm oil from Indonesia not traceable to farm level supporting a REDD+ project within Indonesia.
Ecosphere+ is a member of the International Insetting Platform (IPI), and our CEO Lisa Walker is on the board. We work with a range of companies to address impacts in their supply chains through financing forest conservation. We are co-organising the first IPI event in London, Nature for Impact, on 26th March, 2019. See the full agenda here.
Ring et all. (2010) ‘Challenges in framing the economics of ecosystems and biodiversity: TEEB initiatives’. Current Opinion in Environmental Sustainability, 2.15-26.