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Avoiding the ‘carbon grab’: How to design a fair and sustainable carbon removal supply chain program


Forest Canopy

As more primary sector exporters turn their attention to carbon removals, ‘insetting’ — implementing carbon removals projects within your supply chain — is growing in popularity. But not every insetting program is created equally, and companies should think carefully about designing a program that is beneficial not just for their climate targets, but also for the farmers and suppliers involved.


We spoke to Rebecca Hunink, Head of Growth at CarbonCrop, about what it takes to make a fair and sustainable carbon removal insetting program — and not upset your farmers in the process.


But first, what is insetting?


Insetting, insofar as it concerns carbon removals, involves implementing carbon removal activities within your own supply chain. It’s the flipside of ‘offsetting’, which is where companies invest in carbon credits (typically reduction or avoidance credits rather than removal credits) outside of their supply chains in order to ‘offset’ their supply chain impact. These offsets often take place in foreign countries and on projects that have little to do with a company’s supply chain and operations.


Carbon removal insetting is growing in popularity because it gives companies more control and transparency over their carbon removals, while also giving them a great story to tell about all the co-benefits they generate in their own backyard.


Start with the farmers


“The first consideration for any company looking at carbon removals should be your farmers,” says Hunink. The potential for carbon credit revenue from native New Zealand farm/forestland means that carbon is creating more and more opportunities for farmers to generate revenue, diversify their revenue streams, and build more resilient businesses.


“Farmers are now in a situation where they will soon have the choice of who gets their meat and who gets their carbon,” Hunink explains. Theoretically, this puts the farmer in a position of power. The corporate demand for carbon removals is a huge opportunity for these landowners, but many start with a relatively limited understanding of carbon removals and carbon credit trading, making it easy for them to be taken advantage of.


“Not all carbon programs are created equal,” says Hunink. “We’ve seen carbon programs that essentially exploit the farmer in some way — whether it’s seeking to lock farmers in without immediate financial benefit, or preventing them from diversifying across multiple carbon programs.”


It’s great that companies want to invest in carbon removal — but like everything in the climate transition, if it’s not done in a way that’s fair to all involved, it’s not worth doing at all.


“The reality is, there is a finite pool of carbon removals on private farmland available to benefit primary sector processors,” says Hunink. It won’t be long before New Zealand’s carbon removals are in high demand. The challenge for primary sector exporters will be taking advantage of being first movers without taking advantage of the people who make these removals possible for them.


“Primary sector exporters building supply chain carbon removal programs need to balance the high-integrity thresholds of the carbon markets with fairness to their farmer suppliers,” Hunink explains. Unfair programs might benefit companies in the short-term by providing guaranteed supply, but these programs can only fail in the long-run if they are designed to take advantage of the limited ‘carbon awareness’ of the farmers involved.


What’s good for farmers is good for everyone


The flipside to taking advantage of farmers is letting them keep control of their carbon. We call this carbon sovereignty.


Carbon sovereignty means farmers get to choose how and to whom they sell their credits. Although your company may help its suppliers get their carbon programs off the ground, this shouldn’t give the company the right to overly dictate the terms of the agreement.


If you want to keep long-term suppliers, engage with their best interests in mind — just as you would with your livestock or milk supply arrangements. Supply chain resilience and security are top of mind since the pandemic, and strong supplier relationships are the bedrock of a stable supply chain.


How not to design a carbon removal insetting program


Let’s break down what to avoid in your carbon removal insetting program with a hypothetical example.


Let’s say a meat company wants to implement carbon removals within its supply chain. It locates high-quality carbon removals on some of its farmers’ land, and persuades the farmer to get on board. Sounds great — but then, the company places an entire farm under a ‘carbon contract’ as a supply pool of carbon removals for future net-zero meat sales. Here’s the problem: the farmer doesn’t get paid until the meat is sold. That’s an issue, because if demand for the product is not high enough, the farm’s carbon might not be purchased. But at the same time, the contract restricts the farmer from allocating any of their carbon to another program, because they’re registered their whole farm’s carbon into the meat scheme.


What’s happening here? The meat company is taking advantage of being a first-mover in carbon programs and locking up all the farmer’s carbon for their potential future use, without thinking about the farmer’s side of the equation.


This is pretty damaging to that company’s relationship with their supplier. If your carbon removals come at the cost of the people who make them possible, it’s really not a happy ending for anyone.


Six secrets to fair, sustainable insetting programs


So now that we’ve covered what not to do, let’s take a look at the six key steps to creating mutually beneficial carbon removal insetting programs. Ask your team these questions and think carefully about the long-term consequences and considerations of the decisions that go into designing your insetting program.


1. Understand farmer incentives


What are your farmers’ needs and expectations? What are the secondary and tertiary consequences of a program that is not mutually beneficial for both farmers and the company? (The potential supply chain and reputational ramifications are just a start…)


What restrictive contract terms should you avoid? Where can you give a little to ensure all parties feel good about the arrangement?


Think through the logistics of your program: When does the farmer get paid in relation to the life cycle of a carbon credit?


2. Understand integrity demands


Depending on the climate regulations you are subject to, or the voluntary targets your company has committed to, it’s important to understand the integrity demands placed on any supply chain carbon removals you’ll be claiming.


Your carbon removal claims will need to be backed up by robust carbon accounting and tracking, and verified by appropriate methodologies (and ideally independently verified). Find a partner who can ensure a high degree of transparency before you begin your insetting journey.


3. Make it ethical


Is your program designed in a way that is fair and respectful to your farmers? Is your program simply designed to ‘snatch’ carbon at the lowest price?

Is your company making a power play under the guise of ‘early mover advantage’? Is access to your program equitable, regardless of size or scale?


4. Give programs flexibility and farmers sovereignty


The best supply chain carbon removal programs give farmers the ability to engage with multiple carbon programs. This gives them independence and true carbon sovereignty, ensuring that they stay happy, loyal suppliers within your value chain.


Structure agreements in ways that don’t sneakily monopolise a farmer’s carbon.


5. Respect farmer autonomy


Although you can (and should) help farmers make informed decisions about what’s best for their land, carbon, and business, be careful about offering specific forestry advice. For this, you may need to be a registered forestry advisor — which, we’re guessing, you’re probably not!


6. Set the stage for long-term partnerships


Make sure your carbon programs are designed with the long term in mind, so that they can benefit your company, your supply chain, and your suppliers in the years to come.


Carbon removals bring both risk and reward, and these should be shared between suppliers and buyers.


Consider that carbon markets and climate regulations are constantly evolving; programs should be structured in ways that allow them to change with market conditions.


 

Say hello to CarbonCrop


At CarbonCrop, we don’t want carbon removals to give anyone a headache. CarbonCrop lets you manage carbon removals in your own metaphorical backyard without resorting to DIY. Our platform helps sustainability teams measure, track, and monetise their supply chain carbon removals in near real-time.


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