Despite our focus on waste and residue oils, sustainably-produced 100% certified, and fully traceable palm oil remains in our renewable raw material portfolio of more than ten different raw materials. Palm oil's role has become less significant over the past decade. It has accounted for approximately 20% of our raw material usage over the recent years.
In 2018, Neste used 445,000 tons of sustainably produced palm oil, all of which was certified and traceable. This volume represents less than 0.5% of the global consumption of palm oil, and less than 3% of the global consumption within the biofuel industry.
The food industry continues to be the world's biggest consumer of palm oil accounting for close to 70% of the global consumption, biofuels accounting for 19%, and industrial uses (namely the chemical industry) nearly 14% (source: USDA, Oil World).
The palm oil that we have used has been fully traceable to the plantation level since 2007, and 100% certified since 2013. It fully complies with the sustainability regulation for biofuels and provides a 69% greenhouse gas (GHG) reduction on the average when refined into Neste MY Renewable Diesel. This clearly exceeds the 50% GHG emission reduction requirement for all biofuels defined in the Renewable Energy Directive (EU RED).
Approximately 27% of the palm oil we used came from mills where methane is captured or its formation reduced with other methods. In 2017, we were able to verifiy a 50% methane emission reduction from application of a belt filter press at palm oil mills. We have since continued to aim for accelerated implementation of methane avoidance methods within the palm oil industry.
We do not own any oil palm plantations or operate any palm oil refineries. Instead, we source palm oil from carefully screened, responsible producers in Malaysia and Indonesia that are committed to certification and principles of sustainability. We source certified palm oil directly from the producer companies instead of purchasing separate certificates from the world market. Buying directly from producer companies provides us with better transparency and influence in our supply chain – the more direct the supply chain, the better.
We work closely with sustainability specialists to monitor our supply chains, and we regularly engage directly with our suppliers. We aim at building long-term relationships with our suppliers and continue being committed to do even more than what is legally required to ensure that the palm oil we source is and remains fully sustainable.
Oil palm – superior oil yield, smaller carbon footprint
The oil palm (Elaeis guineensis) is a perennial plant that thrives in tropical areas. Compared to other oil plants, its oil yield is superior: on average, 4 tons per hectare and at best up to 8 tons per hectare. Oil palm cultivation is very efficient in terms of land use and consumes the least energy compared to many other oil plants. The oil palm also produces oil year round for decades, providing steady income for those cultivating it.
Sustainably-produced palm oil has lower life cycle emissions compared to other farmed vegetable oil crops. Thanks to this, renewable fuel produced from palm oil can significantly cut climate emissions and contibute to combating climate change.
There is "good" palm oil and there is "bad palm oil". The biofuels industry is required by law to ensure that the palm oil it uses is verifiably sustainably produced, and that the use of such raw material results in significant greenhouse gas savings when refined into fuel. The biofuels industry is also required to know the exact origin of the palm oil it uses all the way to the plantation level. This is where the biofuels industry players like Neste differ from other palm oil using industries.
Examples of our sustainability projects and cooperation
Neste has a clear stand against any actions that would cause deforestation. We are committed to preventing deforestation in our supply chains and require the same from all our raw material suppliers. Our deforestation risks are primarily related to our use of palm oil, which is the reason our efforts in this area are focused on the palm oil industry.
Our key partner in this area is the Consortium of Resource Experts (CORE). This association of Daemeter and Proforest supports us particularly in our continuous efforts to develop the transparency of our raw material supply chains, and in assessing and mitigating the environmental risks of our company’s palm oil supply chain.
Already in 2015, all our palm oil suppliers committed themselves to No Deforestation including their third-party sourcing. We have conducted environmental risk assessments of our palm oil suppliers amd engaged in a dialogue with our suppliers regarding managing the risks at their plantations. We have offered training to our suppliers to ensure sufficient understanding of our No Deforestation guidelines and to ensure its efficient implementation. We have continued monitoring the progress of their implementation process. We have been developing a Supplier Sustainability Portal in collaboration with out suppliers to digitalize and enhance our supplier engagement and monitoring.
Neste continues to be the only energy sector company that transparently discloses its forest footprint as part of the CDP Forests program. In January 2019, Neste’s deforestation risk management performance was evaluated within CDP Forests program as belonging, again, to the leading performers’ Leadership class, reaching ’A-’ (Forests, palm oil) and ‘B’ (Forests, cattle products) lists .
Palm oil production provides tens of millions of people with a permanent source of income and livelihood in Southeast Asia. In addition to larger oil palm producing companies, our supply chain in 2018 included over 40,000 Indonesian palm oil smallholders organized into cooperatives. Our cooperation with palm oil producing smallholders aims at supporting the development of their sustainability awareness and expertise. Adoption of sustainable practices enables smallholders to get certified; Neste requires commitment to certification from all its palm oil suppliers. Collaboration also helps reduce deforestation risk by introducing sustainable means to increase yields to the smallholders. By sourcing raw material from the certified smallholders, Neste provides them a financial incentive to remain committed to sustainable practices and continuous improvement.
We continue participating in two projects supporting smallholders in Malaysia and Indonesia. Read more about these here.
Labor rights and migrant workers
Neste has been active in tackling common challenges related to human rights and the fair treatment of workers in the palm oil industry. Our work has been recognized for making gradual impact on labor issues. Our projects with smallholder producers of palm oil also supports development of social issues in the palm oil industry.
Neste is committed to the human rights principles of the United Nations' Declaration of Human Rights and the International Labor Organization (ILO) in all its business operations. We are involved in the United Nations' Global Compact sustainability initiative, and take an unambiguous stand on harrassment, discrimination, child labor, forced labor, and any exploitation. We require the same from all our partners.
Neste Human Rights Principles set the standard on how we uphold best practices and ethical business conduct on crucial human rights issues. Our Human Rights Commitment is in line with the UN Guiding Principles for Business and Human Rights (UNGP).
We carry out a due diligence process of all companies before they are selected as suppliers. The suppliers' practices related to human rights, such as workers' rights, use of child labor, and forced labor, are also reviewed in the audits.
Landscape project in Siak, Indonesia
Together with several global brands, such as Unilever, Pepsico, Cargill, and Danone, we have started collaborating with palm oil companies Golden Agri (GAR) and Musim Mas, as well as non-governmental agencies to aim for a large-scale transformative sustainability impact in the Siak region in Indonesia. The project takes on a regional landscape approach, and aims at sustainability improvements in the production of multiple commodities, such as palm oil, pineapple, and rubber. The regional project involves also the local government with the aim to establish strong local regulations to push for sustainable transformation, as well as other local key actors and civil societies.
SUSTAIN to enhance information collection and sharing
Neste is a steering committee member of the SUSTAIN initiative bringing together oil palm growers, processors, users, sustainability experts, and technology partners to collaboratively drive innovation in addressing region-specific sustainability issues (i.e. “sustainable landscape approach”) across the palm oil supply chain. The initiative, founded by Apical and involving also its main downstream partner Asian Agri among others, aims to develop a blockchain-based sustainability assurance platform to facilitate collecting and sharing of sustainability and traceability information, allowing efficient supply chain monitoring through a shared dashboard and reporting system. The initiative benefits all actors in the industry via providing a transparent process that not only improves plantation traceability but also sustainability engagements all the way to the smallholders’ level.