If you wanted to design the ideal corporate decarbonization program, would you start by looking inside or outside your company’s value chain?
Many sustainability professionals would say that the place to start is by reducing internal emissions, followed by purchasing high-integrity carbon credits from the voluntary carbon market (VCM) to compensate for residual emissions. The most sophisticated organizations are setting internal carbon prices which may bridge these strategies, defining a cost threshold above which internal decarbonization initiatives are not considered cost-effective and offsetting with credits is preferable.
Total annual investment in VCM credits is often cited as a figure that indicates the pace of corporate investment in climate action. AlliedOffsets data indicates that the estimated value of carbon credits retired in 2025 was $1.4B USD, a 28% increase from 2024, with an additional $10.7B USD committed to deals for offtakes of future credits. However, this perspective does not capture the amount of money invested and the climate impact of internal decarbonization within companies’ value chains. This value chain emissions reduction, sometimes called “insetting,” is not reported in any standardized way across companies, so it is hard to estimate the extent of these activities across the entire private sector.
To understand a bit more about the challenge of understanding the extent of corporate insets, consider the difference between buying a carbon credit to offset emissions and establishing an insetting project. When a carbon credit is issued in the VCM, a third-party standard operating a registry of projects and credits publicly lists the quantity issued. Project design is approved according to a predetermined, publicly available methodology, and emissions reductions are quantified and assured by a separate third-party verifier organization. The retirement of the credit against corporate emissions is recorded in the registry to avoid double-counting of offsets.
Insetting may follow some of these guidelines, but currently that is not a hard requirement. Instead, corporates reducing emissions within their own value chains may conduct baseline and project measurements using internal methodologies, or they may engage with a preexisting methodology from a carbon credit standard. Corporates often seek third-party verification of emissions reductions claims, but this is not often the case. Only 29,598 tons of carbon credits that were retired in 2025 (0.014% of all retired credits) were clearly designated as being used for emissions accounting and decarbonization through the ISO-14001 and ISO-14064 standards, which provide guidance on corporate environmental accounting and greenhouse gas reductions.
By engaging with insetting through the existing infrastructure of the VCM, companies seeking to decarbonize their own value chains could achieve a higher level of confidence in emissions reductions, while also helping to lay the foundations for projects that could use the same methodologies to generate carbon credits in the future. By working with carbon credit standards like Verra to design new systems that are fit for purpose for value chain decarbonization, first movers could catalyze future offsetting that will benefit smaller companies that are unable to start complex internal insetting initiatives.
Total retirements of carbon credits in AlliedOffsets’ transaction data that include “inset” in the retirement details provided by registries.
Currently, some companies do use VCM methodologies and registries for their own insetting, but it is impossible to determine the full extent. The figure above shows the small proportion of VCM credits that were definitively retired for insetting according to the data shared by registries. AlliedOffsets’ data also includes examples of internal retirements that meet the definition of insetting, such as over 95,000 tons retired by the industrial gas project developer Tradewater to compensate for emissions from their own project activities in 2025.
However, the carbon market is moving towards embracing insets in 2026 and beyond. The Science Based Targets initiative (SBTi) seems to be moving in the direction of allowing pooled value chain emissions reductions for Scope 3 emissions. That would allow companies to claim offsets from projects that relate to their broader value chain even if the project activities are outside of their specific supply chain. For example, a food and beverage brand might claim offsets from agricultural carbon projects, or a large manufacturer may use offsets from the production of material inputs.
From VCM stakeholders, there is a push to increase the transparency of credit retirements in order to increase the credibility of offset use. This would likely increase pressure on corporates to be more transparent around their use of insets, as well. In all situations, carbon offsets and insetting only work if there is confidence around the measurement and verification of emissions reductions. For this reason, companies considering insetting initiatives should investigate how they can align with existing carbon credit standards and consider co-developing new standardized methodologies for their unique insetting projects.
Are you interested in insetting and want to share your thoughts or questions with Alex? Reach out to him at alex.procton@alliedoffsets.com, or meet him in person this spring at North American Carbon World March 31-April 2, San Francisco Climate Week April 20-22, or the Environmental Markets Conference April 29-30.