What is Carbon Insetting? How Biochar is Reshaping Supply Chain Decarbonisation

For food and agricultural companies with serious Scope 3 targets, the question of how to decarbonise their supply chains has moved well beyond intention. The harder question now is how to do it in a way that survives audit, satisfies SBTi FLAG, GHG Protocol and LSRG requirements, and generates credible, verifiable outcomes.

Carbon insetting is increasingly central to that conversation. And biochar, more than almost any other intervention, is well-positioned to deliver what insetting requires.

What is carbon insetting?

Insetting, or Within Value Chain Mitigation (WVCM), refers to greenhouse gas (GHG) reductions or removals that occur within a company’s own supply chain. Unlike carbon offsetting, which relies on external credits to compensate for emissions, insetting ties climate impact directly to sourcing regions, traceable production units, and strategic supplier relationships. It is increasingly seen as the preferred route for companies seeking to meet Science-Based Targets (SBTi) and comply with emerging regulations such as the EU Deforestation Regulation (EUDR) and Corporate Sustainability Reporting Directive (CSRD).

The simplest distinction is that insetting involves a company financing or enabling mitigation inside its own value chain. Offsetting means buying a credit generated outside that value chain and using it as a separate compensation instrument.

SBTi FLAG allows only removals on land owned or operated by a company, or within its supply chain, to count toward FLAG targets. Purchased carbon credits used as offsets do not count toward near-term FLAG targets. For food and agricultural companies with land-sector exposure, this makes in-chain mitigation preferable.

Why biochar is particularly well-suited for insetting

Biochar works differently because a single application activates multiple distinct emission reduction pathways simultaneously within the same supply chain intervention. These agronomic benefits, in turn, support low-carbon farming practices while being a CDR technology.  

To illustrate what this means in practice, consider the following scenarios. When crop or forestry residues are converted into biochar rather than burned or left to decompose, emissions from baseline residue management are avoided. Where biochar improves nutrient retention, synthetic fertiliser demand falls, reducing upstream fertiliser manufacturing emissions. 

At the field level, changes in nitrogen cycling after biochar application can reduce on-farm nitrous oxide and other land management emissions. When the same farm emissions are spread over higher yields, the emissions intensity per tonne of purchased product improves. Over time, healthier soils reduce pressure to convert additional land.

Independent of all these reduction pathways, biochar stores stable carbon in soil-based pools in a form that is independently verifiable and must be reported as a removal under the Land Sector and Removals Standard, with its own traceability, monitoring, and reversal requirements.

A single intervention results in multiple distinct accounting pathways. 

How farmers benefit from insetting 

In a well-structured programme, farmers can generate income from selling biomass residues that would otherwise have no commercial value, and where programmes are structured around community or household-scale production, farmers can also be paid to produce the biochar itself. Where biochar is applied back to their land, farmers benefit from yield improvements that reduce the emissions intensity of their crop while improving their own productivity. 

The agronomic evidence from cocoa systems suggests yield improvements of 10-20% are achievable, alongside meaningful reductions in synthetic fertiliser requirements as biochar improves nutrient retention in the soil. In markets where premium pricing is available for sustainably produced crops, farmers supplying into biochar insetting programmes may also command higher prices for their output. 

Reduced water stress from improved soil water retention is a further benefit that matters considerably in the drought-prone regions where many of BioFlux's programmes operate. The result is a programme design where the financial and agronomic incentives for farmers are aligned with the climate outcomes that corporate buyers need.

How biochar insetting works in practice

To understand how this flows through a company's GHG report, consider a cocoa trader running a biochar programme across a participating supply shed. The physical intervention can take two forms depending on the programme model.

In the first, farmers are trained and equipped to produce biochar themselves from their own crop residues, typically using household or community-scale kilns. 

In the second, farmers are paid to collect and deliver their husks to a centralised production facility, and biochar is then sold or distributed back to them for application on their land.

In both cases, cocoa pod husks from participating farms are collected and pyrolysed into biochar, which is applied back to eligible plots. An MRV system records feedstock volumes, pyrolysis outputs, biochar lab data, farm and plot IDs, application dates, and monitoring data for the land-based carbon pool.

From that physical foundation, two things are calculated separately. 

First, the emission factor for participating farms falls from a baseline figure to a lower post-intervention figure, driven by changes in residue management and fertiliser use. 

Second, land-based removals are quantified using stock-change accounting and reported separately from the emission reductions. These are different accounting objects and must be kept apart.

When a chocolate company sources cocoa from that trader under a controlled mass-balance ledger, the improved emission factor is applied only to the eligible volume. The buyer reports Scope 3 Category 1 emissions and land-based removals separately. The two numbers are never blended into a single net figure.

What companies need in place to make credible claims

A credible biochar insetting claim rests on four foundations. 

First, a clear accounting boundary defining exactly what is being claimed with emission reductions, removals, or both and how the intervention connects to Scope 3 Category 1 purchased goods. 

Second, primary activity data from the farms and the biochar system itself, covering which farms participated, what residues were used, how much feedstock went into pyrolysis, how much biochar came out, and what changed in fertiliser use or residue management. 

Third, traceability to the eligible supply base, without which a company cannot credibly apply an improved emission factor across its purchased volume. 

Fourth, separate treatment of reductions and removals, since blending them into a single lower footprint number is one of the most common failure points.

If a company is also claiming removals, the evidentiary threshold increases materially. The Land Sector and Removals Standard requires removals to be reported by storage type, quantified using net stock-change logic, and monitored over time with carbon stock resampling at least every five years.

BioFlux's approach

BioFlux has developed biochar insetting frameworks for agricultural supply chains across multiple geographies, including a quantification and monetisation framework for ETG's cocoa supply chains, in collaboration with Valorise Systems, in Côte d'Ivoire and a programme structure for the Coffee Biochar Programme run by BioDiversal and Cirkular across smallholder farmers in Colombia, supported by IDH.

In both cases, the work involved separating emission reductions from removals, defining what activity data can realistically be collected at the farm level, designing traceability systems that track biochar from individual farms through to final batches, and building business cases that food companies and insetting partners can use to engage credibly with buyers and investors.

What the future looks like

The rules around insetting are getting clearer in some areas and more complex overall. 

The GHG Protocol has finalised the Land Sector and Removals Standard, giving companies stronger rules for land management emissions, removals by storage type, monitoring, and how to keep the physical inventory separate from credits. 

SBTi FLAG has clarified that removals must follow LSR requirements and that purchased offsets do not count toward FLAG targets.

At the same time, the GHG Protocol's Actions and Market Instruments workstream is being developed specifically to address value chain interventions, carbon credits, and chain-of-custody models. These areas are where the current standards are not yet the full end-state. The direction of travel across CDP, SBTi, and CSRD is toward more comprehensive assurance. 

Companies building biochar insetting programmes now should assume their claims will eventually need to survive third-party limited assurance and design their MRV and reporting infrastructure accordingly from the start.