Carbon Insetting vs. Offsetting: What Leading Agri-Food Brands Are Doing Differently

From Offsetting to Insetting: A Smarter Path to Net-Zero

As the pressure increases for agri-food companies to meet net-zero targets, many are rethinking their approach to climate action. Traditional carbon offsetting, investing in external projects to balance emissions, often lacks transparency and long-term impact within the value chain.

A more impactful and transparent solution is carbon insetting. Carbon insetting is a transformative strategy where businesses reduce emissions inside their own supply chains. In the dairy sector, this means empowering farmers with tools and practices that cut greenhouse gases while boosting productivity and soil health.

This edition explores how insetting is reshaping sustainability in the dairy sector. We take a deep dive into Friesland Campina’s €245 million investment in rewarding sustainable practices, break down how companies can structure insetting models that create value for both farmers and businesses, and showcase Carbery’s success in applying ODOS data to power their €6 million insetting strategy. Let’s dive in.

€245 Million for Sustainability: Inside Friesland Campinas's Carbon Insetting Model

For years, dairy farmers have been told to ‘go green’, but at what cost? FrieslandCampina found a way to make sustainability pay off. With financial premiums for reducing emissions and improving biodiversity, farmers aren’t just helping the planet. They’re boosting their profits. Through its Foqus Planet Reward System, the company has already invested €245 million in financial incentives.

How Does the Foqus Planet Reward System Work?

FrieslandCampina’s Foqus Planet Reward System provides performance-based financial incentives for dairy farmers, rewarding sustainability efforts across four key themes: Animal Health & Welfare, Climate, Biodiversity, and Grazing. Each theme has threshold values (minimum requirements to start earning) and top values (maximum possible earnings).

Here’s what farmers can earn per 100 kg of milk:

1. Animal Health & Welfare (€0.20 max) 🐄

Animal health and welfare are at the core of sustainable dairy farming. Longer-living cows and well-raised calves mean lower emissions and higher productivity. Farms improving animal welfare in 2 ways can earn:

+€0.10 → Cows living 7 years & 2 months

+€0.10 → Achieving 95 points in calf rearing

2. Climate (highest reward – up to €1.70) 🌍

Dairy farms generate significant CO₂ and nitrogen emissions, but small changes can have a big impact on sustainability That’s why the highest financial reward comes from reducing greenhouse gas emissions:

+€1.50 → Cutting CO₂ emissions from 1075g to 750g CO₂-eq/kg milk

+€0.10 → Lowering nitrogen application from 160 kg N/ha to 20 kg N/ha

+€0.10 → Reducing ammonia emissions from 70 kg NH₃/ha to 35 kg NH₃/ha

3. Biodiversity (€0.30 max) 🌱

A more diverse farm ecosystem leads to healthier soils, better crop yields, and stronger resilience against climate change. Farmers improving biodiversity in multiple ways can earn:

+€0.10 → Increasing on-farm protein production from 45% to 80%

+€0.10 → Expanding permanent grassland from 40% to 100%

+€0.10 → Allocating 40% of land to biodiversity (hedgerows, wetlands, wildflowers)

4. Grazing (€1.30 max) 🌾

Cows that graze outdoors produce healthier milk, lower emissions, and support biodiversity. FrieslandCampina rewards farmers who adopt the following grazing practices:

+€0.40 → Allowing partial grazing

+€1.30 → Maximizing full grazing

How To: Turn Mitigation Strategies Into Insetting Opportunities

Turning sustainability into profit starts with the right implementation strategy. It requires a structured implementation approach that ensures measurable emissions reductions while delivering financial returns for both farmers and cooperatives. Below, we outline two key steps for implementing mitigation-driven insetting projects with precision and impact.

1. Select the right insetting model for your company

Not all insetting programs are the same. Choosing the right insetting model depends on your supply chain emissions profile, sustainability goals, and financial feasibility. Here are the 3 most common insetting models and what to consider before selecting one of them.

Premium-Based Model (Valio) – Farmers receive payments only if they achieve long-term sustainability targets, such as carbon neutrality by 2035. This model incentivizes transformational change but requires high-accuracy tracking and long-term commitment.

✅ Ideal for: Companies focused on net-zero strategies that need verification and long-term climate impact.

Performance-Based Model (FrieslandCampina)– Farmers receive a fixed bonus per liter of milk produced if they meet sustainability criteria, such as reduced methane emissions or improved manure management. This approach integrates sustainability into milk pricing and rewards continuous improvement, making it attractive for farmers looking for predictable income.

✅ Ideal for: Companies that want ongoing engagement with farmers and steady emissions reductions over time.

Tiered Bonus System (Arla Foods) – Farmers earn up to 4 cents per liter, with payments based on a scoring system for implementing sustainability actions, such as better soil management or feed optimization. The more actions a farmer takes, the higher the reward, making this model highly flexible and scalable.

✅ Ideal for: Companies that want to encourage widespread adoption of sustainability while allowing customized progress paths for farmers.

2. Track insetting impact

An insetting model is only effective if it drives real environmental and financial impact. To determine whether your financial incentives are actually reducing emissions and improving farm sustainability, you need to track key performance indicators (KPIs) that reflect both environmental and economic success.

Compare Baseline vs. Actual Impact – Before launching insetting, establish a baseline emissions and farm sustainability profile to measure year-over-year improvements. Measure success using key metrics like Farmer Participation Rate and Cost Per Ton of CO₂ Reduced to ensure financial incentives drive real change.
Link Payments to Verified Progress – Avoid paying for actions that don’t result in measurable carbon savings by integrating third-party verification (e.g., SBTi FLAG). Track Return on Investment (ROI) to confirm that insetting payments contribute to cost-effective Scope 3 FLAG reductions and align with sustainability targets.
Adapt & Optimize – If emissions aren’t dropping as expected, analyze why farmers are not adopting key practices and adjust incentives accordingly. Monitor Rate of Practice Adoption, Sustainability Score Progression, and Long-Term Farmer Retention to refine strategies and ensure continuous improvement.

A successful insetting model does more than distribute payments. It creates a measurable climate and financial benefits. By tracking emissions reductions, financial efficiency, and farmer adoption rates, companies can ensure insetting delivers real sustainability impact and ROI for both farmers and businesses.

💡 Want to optimize your insetting model? Let’s talk

Success Story: How Carbery Group Used ODOS Data to Power Their €6 million Insetting Strategy 📊

Carbery Group, a leading Irish dairy cooperative, is driving sustainability in agriculture through its FutureProof program, a €6 million annual incentive fund rewarding farmers for adopting climate-smart practices. One key initiative is the use of protected urea, a fertilizer that significantly reduces nitrous oxide emissions. Farmers who meet FutureProof’s four sustainability criteria, including milk recording, genetic improvement, water quality assessment, and protected urea adoption, receive a bonus of 1 cent per liter of milk, adding up to €5,000 annually for the average supplier. By financially supporting emission reductions, Carbery is making sustainability profitable and scalable, ensuring the long-term resilience of dairy farming in West Cork.

Why was switching to protected urea so important?

Traditional fertilizers contribute to high levels of nitrous oxide emissions, a greenhouse gas that is nearly 273 times more potent than CO₂. By transitioning to protected urea, farmers can achieve the same crop yield with lower emissions, making it a win-win for both productivity and sustainability. However, insetting strategies only work when their impact is measurable, and that’s where ODOS played a critical role.

What role did ODOS play?

To make the FutureProof incentive program credible and measurable, Carbery needed to quantify the actual emissions reductions achieved through the use of protected urea. ODOS provided data-driven verification by analyzing the fertilizer use of all participating farmers before and after the incentive was introduced. By comparing year-over-year emissions data, ODOS determined the total tons of CO₂ saved as a result of the incentive, allowing Carbery to report verified impact to its clients and demonstrate real sustainability progress within its supply chain.

📊 Results? By integrating data-driven insights into its insetting strategy, Carbery can now:

✔ Report verified scope 3 emissions reductions: Providing transparency and credibility to their sustainability claims.
✔ Ensure its financial incentives drive real environmental change: confirming that the bonuses directly lead to measurable environmental benefits.
✔ Support farmers in sustainable practices: Facilitating the transition to eco-friendly methods without imposing financial burdens.

💡 How will you measure the success of your sustainability initiatives? Discover more success stories.

Sustainability Tips: Cost-Effective Carbon Reduction & Biodiversity Gains 🌱

Dairy farming is at the heart of global food production but also contributes significantly to agricultural greenhouse gas emissions. While transitioning to more sustainable practices can seem costly, small, targeted changes can deliver big environmental and financial benefits. By focusing on forage quality, pasture management, and fertilizer efficiency, farmers can reduce emissions, improve soil health, and increase productivity—without breaking the bank.

Here are two science-backed, cost-effective ways to drive sustainability on dairy farms:

1. Feed High-Protein Clover to Cows

🔍 Issue: Traditional dairy forage lacks sufficient natural protein, requiring farmers to supplement with expensive and often carbon-intensive imported feeds like soy. This contributes to higher emissions, deforestation, and increased production costs.

✅ Solution: Integrating high-protein clover into pastures naturally improves forage quality, reducing the need for imported protein sources. Clover is also a nitrogen-fixing plant, meaning it captures nitrogen from the air and deposits it into the soil—improving soil fertility while cutting synthetic fertilizer use.

💡 Implementation Tip: Farmers can overseed white or red clover into existing pastures to boost protein content and soil health. Studies show that a 30% clover mix can reduce nitrogen fertilizer needs by up to 100kg per hectare while increasing milk yield.

2. Increase Grazing Days

🔍 Issue: Housing cows for long periods requires higher feed inputs, increased manure management, and additional energy use for milking and ventilation—all of which contribute to emissions. Intensive indoor feeding can also increase costs while reducing soil biodiversity.

✅ Solution: Extending grazing periods by even a few weeks per year reduces reliance on stored feed, lowers emissions from manure storage, and enhances soil regeneration. Well-managed rotational grazing systems sequester more carbon, improve biodiversity, and support healthier, more resilient pastures.

💡 Implementation Tip: Farmers can adopt rotational grazing systems to maximize pasture regrowth while keeping cows on grass longer. Using grazing calendars and soil moisture monitoring can help determine the best periods to extend outdoor feeding while maintaining milk yields.

🌱 Data-driven sustainability starts with the right tools. Contact us today