Sustainably-produced, 100% certified and 100% traceable palm oil is part of Neste's extensive portfolio of renewable raw materials. Despite our strong focus on waste and residue raw materials, we currently continue to use sustainably-produced vegetable oils, such as palm oil, in the production of renewables due to preferences in specific markets.
Based on changing customer preferences and regulatory trends we expect conventional vegetable oils demand to be replaced entirely by waste and residues by 2025. In recent years, palm oil has accounted for approximately 20% of our annual renewable raw material inputs.
100% certified, 100% traceable
We source only sustainably-produced palm oil from carefully selected producers in Malaysia and Indonesia who are committed to sustainable practices and meeting strict sustainability criteria embedded in the regulation on biofuels. These criteria include, for example, having a proactive approach to preventing deforestation and mitigating its risk. We do not own any oil palm plantations or operate any palm oil refineries or mills.
Like all our renewable raw materials, also the palm oil volumes that we source always meet EU RED or US EPA requirements, as well as the legal requirements set by local authorities in all our markets. The palm oil that we source is 100% ISCC-certified and 100% traceable all the way to the oil palm plantations. Most of these volumes are additionally RSPO-certified as we require all our palm oil producers to be committed to RSPO certification, in addition to our other sustainability requirements.
When sourcing palm oil, we do not purchase separate certificates from the world market as many food industry companies do. We source certified palm oil directly from producer companies, which provides us an opportunity for direct engagement and collaboration, as well as better visibility into their operations.
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.
Efficient oil crop helps combat climate crisis
The oil palm (Elaeis guineensis) is a perennial plant that thrives when cultivated in tropical areas. Oil palm cultivation is very efficient in terms of land use. Compared to other oil plants, its oil yield is superior: on average, 4 tons of oil per hectare and at best up to 8 tons per hectare. Oil palm trees do not have to be felled for the fruit bunches to be collected; instead, 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 contribute to combating climate crisis.
The palm oil that we source provides a 69% greenhouse gas (GHG) reduction on the average when refined into Neste MY Renewable Diesel and when the fuel's emissions over its entire life cycle are compared to similar emissions from fossil diesel use. The emission reduction clearly exceeds the 50% GHG emission reduction requirement for all biofuels defined in the Renewable Energy Directive (EU RED).
Approximately 29% of the palm oil we sourced in 2019 came from mills where methane is captured or its formation reduced with other methods. In 2017, we were able to verify 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.
Sustainability aspects of palm oil use
Similarly to all crops, also palm oil can be sustainably or unsustainably produced. The biofuels industry is required by law to ensure that the palm oil they use is verifiably sustainably produced. To do so, they must know the exact origin of the palm oil they uses all the way to the plantation level. This is where the biofuels industry players like Neste differ from palm oil users from other industries. The palm oil that we have used has been 100% traceable to the plantation level since 2007, and 100% certified since 2013.
European biofuels legislation prohibits the use of raw materials from estates that have been established by clearing natural forests or other land with high biodiversity value after 2008. This helps biofuels producers to ensure that their palm oil volumes have not contributed to deforestation or threatened biodiversity.
Knowing the exact origin of the palm oil helps biofuels producers and sustainability experts also to monitor that human rights violations are not taking place in their supply chains. Comprehensive data on our palm oil supply chain is transparently provided on our website. This helps our partners and third parties to monitor our suppliers' sustainability performance.
The food industry continues being 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). In order to tackle all the sustainability challenges related to the palm oil industry, sustainability criteria from the biofuels legislation would need to be extended to cover all uses of palm oil.
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 policies including their third-party sourcing. We have conducted environmental risk assessments of our palm oil suppliers and 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 policies and guidelines and to ensure their efficient implementation. We have continued monitoring the progress of their implementation process. We have been developing a Supplier Sustainability Portal in collaboration with our suppliers to digitalize and enhance our supplier engagement and monitoring.
Neste discloses its forest footprint transparently as part of the CDP Forests program. In early 2020, Neste’s deforestation risk management performance was evaluated within the CDP Forests and Water Security assessment as belonging to the leading performers’ Leadership class, reaching ’A-’ (Forests, palm oil), ‘B’ (Forests, cattle products) and 'B' (Water security) lists. Neste also reached an ‘A-’ rating in the Climate Change assessment.
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 2019 included over 36,000 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.
Read more about our smallholder collaborations 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.
Read more about our work here.
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.
Read more about our project here.
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.