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Offsetting, Insetting, or Both? Current Trends in Sustainable Palm Oil Certification

Author

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  • Caleb Gallemore

    (International Affairs Program, Lafayette College, Easton, PA 18042, USA)

  • Kristjan Jespersen

    (Copenhagen Business School, 2000 Frederiksberg, Denmark)

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.

Suggested Citation

  • Caleb Gallemore & Kristjan Jespersen, 2019. "Offsetting, Insetting, or Both? Current Trends in Sustainable Palm Oil Certification," Sustainability, MDPI, vol. 11(19), pages 1-15, September.
  • Handle: RePEc:gam:jsusta:v:11:y:2019:i:19:p:5393-:d:271971
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    References listed on IDEAS

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    Cited by:

    1. Gallemore, Caleb & Jespersen, Kristjan & Olmsted, Paige, 2022. "Harnessing relational values for global value chain sustainability: Reframing the roundtable on sustainable palm oil's offset mechanism to support smallholders," Ecological Economics, Elsevier, vol. 193(C).
    2. Marola, Elena & Schöpfner, Judith & Gallemore, Caleb & Jespersen, Kristjan, 2020. "The bandwidth problem in telecoupled systems governance: Certifying sustainable winemaking in Australia and Chile," Ecological Economics, Elsevier, vol. 171(C).
    3. Jacopo Famiglietti & Marcello Aprile & Giulia Spirito & Mario Motta, 2023. "Net-Zero Climate Emissions Districts: Potentials and Constraints for Social Housing in Milan," Energies, MDPI, vol. 16(3), pages 1-31, February.
    4. Soleman Imbiri & Raufdeen Rameezdeen & Nicholas Chileshe & Larissa Statsenko, 2023. "Stakeholder Perspectives on Supply Chain Risks: The Case of Indonesian Palm Oil Industry in West Papua," Sustainability, MDPI, vol. 15(12), pages 1-24, June.

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