Offsetting, Insetting, or Both?

Current Trends in Sustainable Palm Oil Certification

Caleb Gallemore, Kristjan Jespersen

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Private environmental standards attempt, in part, to internalize environmental externalities. Offsetting firms’ environmental externalities by buying credits is one option. Another is insetting, in which firms attempt to address externalities and provide positive benefits within their own supply chain. These two approaches to internalizing externalities can be in tension, leading toward different types of sustainable markets. Firms adopting private standards as way of avoiding reputational risks may be more likely to support insetting than offsetting strategies if their primary goal is to distinguish themselves from the rest of their industry, but these strategies can also risk separating the market into niche, high-quality producers alongside a low-quality majority. These tensions play out in the Roundtable on Sustainable Palm Oil (RSPO), where offsetting and insetting exist side-by-side. Strategic pressures promoting insetting strategies lead firms to exit the system’s offset market, but this comes with the cost of losing some of the flexibility and lowered entry barriers the offset approach offers. New technologies might allow standards to combine the benefits of both approaches, keeping the reputational benefits of insetting and the flexibility of offsetting.
Original languageEnglish
Article number5393
JournalSustainability
Volume11
Issue number19
Number of pages15
ISSN2071-1050
DOIs
Publication statusPublished - 2019

Keywords

  • Palm oil
  • Environmental standards
  • Multi-stakeholder initiatives (MSi)
  • Roundtable for Sustainable Palm Oil (RSPO)
  • Offsetting
  • Insetting
  • Certification

Cite this

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abstract = "Private environmental standards attempt, in part, to internalize environmental externalities. Offsetting firms’ environmental externalities by buying credits is one option. Another is insetting, in which firms attempt to address externalities and provide positive benefits within their own supply chain. These two approaches to internalizing externalities can be in tension, leading toward different types of sustainable markets. Firms adopting private standards as way of avoiding reputational risks may be more likely to support insetting than offsetting strategies if their primary goal is to distinguish themselves from the rest of their industry, but these strategies can also risk separating the market into niche, high-quality producers alongside a low-quality majority. These tensions play out in the Roundtable on Sustainable Palm Oil (RSPO), where offsetting and insetting exist side-by-side. Strategic pressures promoting insetting strategies lead firms to exit the system’s offset market, but this comes with the cost of losing some of the flexibility and lowered entry barriers the offset approach offers. New technologies might allow standards to combine the benefits of both approaches, keeping the reputational benefits of insetting and the flexibility of offsetting.",
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Offsetting, Insetting, or Both? Current Trends in Sustainable Palm Oil Certification. / Gallemore, Caleb; Jespersen, Kristjan.

In: Sustainability, Vol. 11, No. 19, 5393, 2019.

Research output: Contribution to journalJournal articleResearchpeer-review

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