‘Insetting Consumer ClimateTech’ presents a multitrillion-dollar business case with the opportunity to demonstrate leadership through corporate strategy, harness impending legislation tailwinds, and attract capital market favor.
Corporate Strategy Leadership
Analyzing three of the world’s largest CPG conglomerates, Planet Tracker found that by including scope 3 emissions in the corporate climate transition plan, Unilever has reduced its climate exposure risk by 2-3.5x, compared to Colgate-Palmolive and Procter & Gamble, respectively. Without climate considerations across the value chain, the entire ecosystem carries systematic risk with the furthest upstream suppliers (e.g. farmers) and downstream communities (e.g. food deserts) positioned to carry a disproportionate burden.
Suppliers face $1.3T in lost revenue over the next five years due to climate change, material shortages, and deforestation; corporate procurement expects up to a $120B surcharge. Extreme weather left 49% of CEOs to manage supply chain disruptions, and half of F&B CEOs worry about secure access to feedstocks. If incumbents choose to ignore these environmental and business risks, these global enterprises risk obsoletion; but through insetting investments, the entire value chain can realize the economic, social, and environmental value of regenerative production and circular consumption models.
To signal their commitment to addressing global environmental emergencies, 83% of Fortune 500 companies set climate-related targets, one quarter established material and resource targets, and 5% pledged to combat biodiversity loss. As terminology is still evolving, this report proxies “scope 3 emissions”, “material recovery”, and “biodiversity protection” interventions as insetting strategies.
Unilever | Positioning sustainability as a compass towards value creation, Unilever targets net-zero scope 1-3 emissions by 2039 without reliance on offsets. Given raw materials and upstream ingredients represent 49% of company emissions and over 65% of land impact, Unilever is seizing the opportunity to inset its upstream value chain.
- Investing €1B in regenerative agriculture practices, biotechnology, carbon capture and utilization, and plastic alternatives by 2030
- Committed to 100% sustainable material sourcing and deforestation-free supply chain for palm oil, paper and board, soy, tea, and cocoa – five notoriously harmful commodity products, both environmentally and socially
Walmart | In 2016, Walmart made history as the first retailer to establish an SBT-approved and offset-free emissions reduction strategy, at 65% for scope I and II emissions by 2030 and net-zero operations by 2040 (vs. 2015 base year). The world’s largest company by revenue also detailed initial insetting-based strategies to tackle its ~90% scope III footprint.
- In partnership with WWF, CDP, and WRI, Walmart established “Project Gigaton” to mitigate one gigaton (1B tons) of value chain CO2e through supplier engagement across product design, packaging, biodiversity and more
- Committed to sustainably sourcing 20 key commodities by 2025 through regenerative agricultural practices, aided by $120M in joint investment with PepsiCo
Waste Management | By market cap, Waste Management is the largest material recovery business worldwide. The company announced a 42% scope I and II emissions reduction target (2032), with initiatives outlined to inset their value chain with core business segment upgrades.
- Committed $1B to grow recycling infrastructure by 2026 to deliver on material resource insetting objectives of upstream producers
- Increase material recovery rates 60% by 2030 (and 25% growth by 2025)
To name some others, Nestlé is investing CHF 1.2B into regenerative agriculture, Kering Group has targeted 90% scope I-II and 70% scope III emissions reduction backed by raw materials sourcing standards and advanced manufacturing initiatives, H&M Group committed to reduce scope I-III emissions by 56% (2030), and Biffa will quadruple recycling capacity and halve emissions (2030). Major corporates are leading with bold commitments that capture public affection; now they must source or generate insetting interventions to prepare for impending reporting policies, such as the EU Corporate Sustainability Reporting Directive and SFDR.
With Europe paving the way, followed by California, then other North American regions, developed markets worldwide are enacting landmark policies to mandate corporate and investor reporting transparency. The broader legislation landscape continues to show strong momentum for insetting strategies across the value chain – upstream, midstream, and downstream.
- The EU Ecodesign for Sustainable Products Regulation identifies minimum product standards across durability, reusability, reparability, and recovery mechanisms, with considerations for packaging, hazardous chemicals, and projected waste generation.
- The U.S. Inflation Reduction Act includes climate provisions of $6.2B for clean manufacturing investment credits and $5.7B for low-carbon materials.
- For consumers, legislation targets corporate supply chain transparency and anti-greenwashing measures, through digital product passports and other provenance technologies that monitor products–from design, to use, to reuse.
- The recently adopted EU Green Claims Directive outlines stipulations for sustainability claims (e.g. carbon neutral) that distinguish insetting activities from offsetting schemes.
- To deliver circular and regenerative economic systems, EPR laws and ‘Right to Repair’ policies will challenge corporations to inset upstream design solutions. French bans on the destruction of unsold inventory and food further penalize irresponsible production.
- EU packaging must contain 60% recycled content by 2025, and California mandated all packaging be recyclable or compostable by 2032. France is also the first nation to enact microplastic policies designed to keep this insidious pollutant from water systems.
Capital Market Alignment
Accepting these policy trends as inevitable, consumer capital markets continue to acknowledge the alpha opportunity in sustainability, and thereby insetting. Purpose-driven products and brands accounted for 56% of consumer market growth over the last five years; in the same timeframe, 60% of consumer sector M&A activity targeted sustainable innovation. Over half of dealmakers reported canceling pending transactions due to material ESG findings, and two thirds are willing to pay premiums for category leaders. These evolving and accelerating trends illustrate the beginning of capital market recognition for the long-term value that Consumer ClimateTech insetting strategies create within an organization.