More companies than ever are making climate commitments. But alongside this rise in ambition, a new generation of accounting practices is emerging that risks repeating the failures of carbon offsetting under a different name. Our report examines one of the most problematic practices: insetting through mass balance accounting.
Mass balance accounting allows companies to assign sustainability attributes — such as recycled or bio-based content, and associated emissions reductions — to selected products without ensuring those materials are physically present in them. These claims can then be used to market products as more sustainable or to report lower corporate emissions, even when underlying physical emissions remain unchanged. Products ranging from Crocs clogs to KitKat packaging already rely on this model.
In California, regulators have described free allocation mass balance as “a false and misleading marketing scheme” in legal action against ExxonMobil.
Our report details how major corporations, including ExxonMobil, Dow, Nestlé and Crocs, are using mass balance insetting across plastics, packaging and consumer goods to market their products and claim climate progress.
The use of mass balance and insetting is growing. Meanwhile, some of the same companies that use these mechanisms are lobbying to embed them into the global rules that govern corporate climate reporting.
As the Greenhouse Gas Protocol — the world’s leading corporate emissions standard — comes under review for the first time in a decade, this report arrives at a crucial time. The decisions made now will shape whether corporate climate reporting delivers real emissions cuts or rewards accounting tricks.
