Offsetting vs insetting: how to use both to accelerate your net zero plan

When on a journey to net zero organisations will come across many terms, concepts and blended approaches for consideration. One question we’re often asked is about the difference between offsetting and insetting. These strategies are complementary rather than competing tools, and when used effectively, enable you to take immediate action on unavoidable emissions while driving long-term transformation across your operations and supply chain.

Emissions reduction is a key focus for Australian organisations after the government set a 2035 target of 62–70% below 2005 levels and released a Net Zero Plan. All organisations have a part to play, and hitting this trajectory will require a dual-track approach, and this is where both insetting and offsetting can work together.

Below, we break down the definitions of insetting vs offsetting, explore what they look like in practice, and how they can be combined to support a robust, long-term decarbonisation strategy.

What is the difference between offsetting and insetting?

Carbon credits are an internationally recognised market mechanism created to support the global path to net zero. Offsetting involves the purchase and retirement of verified carbon credits to address carbon emissions you cannot yet abate. Each credit represents one tonne of greenhouse gas emissions either avoided or removed by a certified carbon project – such as reforestation, renewable energy or savanna fire management. These projects are made possible through carbon finance, meaning they rely on funding from credit purchases to exist and deliver impact. This investment is then channeled back into the projects to continue providing environmental and community benefits.

While offsetting supports projects external to your organisation’s operations, insetting targets initiatives that reduce emissions within your own value chain, with a particular focus on scope 3 emissions. This could involve collaborating with your suppliers on regenerative agriculture practices, or financing efficiency upgrades with contract manufacturers to reduce the carbon footprint associated with purchased goods and services. The Woolmark+ Insetting Program and Cargill’s Sustain Connect are two examples of initiatives that support on-farm emissions reductions, directly helping to lower the Scope 3 emissions of the brands they supply. Unlike offsets, insetting reductions are typically accounted for directly in your emissions inventory rather than claimed via tradable credit, however initiatives like SustainCERT Impact Units are emerging to enable companies to share the cost of interventions across the supply chain.

A helpful way to see the distinction is through the lens of beyond-value-chain mitigation (BVCM): offsets are actions outside your value chain (BVCM), while insetting are actions inside it. But how do they work together for maximum impact?

How they complement each other in a credible net-zero plan

A robust climate action strategy prioritises direct reductions and supply-chain transformation, while using high-quality carbon credits to address residual or near-term emissions, ensuring progress while taking responsibility now. Insetting strengthens supply chain resilience and supports sustainable long-term growth, however activities require significant time, planning and upfront investment, often taking several years to implement. Therefore, insetting should complement, not delay other critical mitigation efforts.   

Despite best efforts, some emissions remain difficult to eliminate. In the Australian Government’s recent Net Zero Transition Modelling it projects that even after widespread abatement, Australia is predicted to have 167-168 Mt CO₂e of residual emissions by 2050, with agriculture the largest share (62 Mt CO₂e); transport, industry, resources, the built environment, and energy make up the rest.

High-quality carbon credits play a crucial role in addressing residual emissions. Integrating them into your climate strategy now, while planning to phase down reliance over time, offers several important benefits:

• It places a price on carbon and ensures it is built into decision making year-on-year,
• Helps to build internal literacy and engagement in climate action
• Mobilises climate finance immediately and consistently rather than postponing action.

When choosing which carbon projects to invest in, quality is non-negotiable. TEM’s carbon project due diligence framework takes into consideration additionality, permanence, leakage safeguards and independent verification, supported by ongoing monitoring and transparent reporting of the projects we source and manage projects. This risk-based assessment protects buyers from under-performing projects and prioritises co-benefits for communities and biodiversity.

Getting started on a balanced approach

To maximise positive climate impact, combine insetting within your value chain with strategic offsetting. Here are three steps to guide you:

• Identify insetting opportunities: map your Scope 3 emissions hotspots and work with your suppliers to identify areas that you can influence. TEM recommends referring to the International Platform for Insetting (IPI), which offers practical guidance for developing insetting initiatives.
  
• Invest in high-quality carbon credits: choose high-integrity projects that address ongoing and residual emissions while delivering strong social or environmental co-benefits, as you advance your insetting and emissions reduction efforts. This is consistent with science-aligned pathways that encourage beyond-value-chain mitigation while you decarbonise operations and supply chains. TEM offers tailored portfolios, project development and marketplace solutions to suit different objectives and risk profiles.
  
• Evidence and communication: Support your claims with transparent, high-quality data, demonstrating how your projects have achieved real, additional and verifiable impact. Clearly distinguish between emissions you’ve reduced through insetting and those you’ve compensated via offsetting. By reporting and promoting your impact in an accurate and transparent manner, your organisation can meet the evolving expectations of the ACCC on environmental claims and best practice disclosure.

Simply put, insetting reduces emissions at its source, and offsetting finances climate action beyond your four walls. The fastest credible progress happens when you do both – cutting emissions within your value chain at pace and using high-quality carbon credits to take responsibility for what remains along the way.

If you’d like to explore either pathway, or the right blend for FY26 and beyond, our team are here to help. Contact us today.