Palm oil's role in our raw material portfolio has become less significant in recent years. In 2017, it accounted for approximately 20% of our raw material usage. All the palm oil we have used has been fully traceable to the plantation level since 2007, and 100% certified since 2013. In 2017, Neste used 663,000 tons of certified, sustainably produced crude palm oil. This represents less than 1% of the global consumption of palm oil, and 6% of the biofuel industry's usage.
We do not own any oil palm plantations, nor operate any palm oil refineries. Instead, we source CPO 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 as, for example, many food industry companies do. 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 aim at building long-term relationships with our suppliers, work together in development projects, and monitor their performance with the help of independent expert parties, such as auditors. We continue being committed to do even more than what is legally required to ensure the crude palm oil we source is and remains fully sustainable.
Oil palm – superior oil yield, smaller carbon footprint
Sustainably-produced crude palm oil has lower life cycle emissions compared to other farmed vegetable oil crops. 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.
There is "good" palm oil and there is "bad palm oil". The biofuels industry is required by law to ensure that the palm oil they use 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 they use all the way to the plantation level. This is where the biofuels industry players differ from other palm oil using industries. The food industry continues to be the world's biggest consumer of palm oil accounting for nearly 70% of the global usage, industrial uses (namely the chemical industry) 17%, and the biofuel industry 16%, (source: USDA).
Renewable fuel produced from crude palm oil can significantly cut climate emissions. Neste's renewable diesel produced from sustainably-produced palm oil reduces greenhouse gas emissions by 69% on the average when compared to crude oil based diesel. Already 36% of the palm oil that we procure comes from mills with methane recovery systems or systems to prevent its formation. Together with several partners, we have explored new means to reduce methane emissions in palm oil production. In 2017, we were able to verifiy a 50% methane emission reduction from application of a belt filter press at palm oil mills.
Examples of our sustainability projects and cooperation
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. In the beginning of 2017, we completed an environmental risk assessment of our palm oil suppliers. We have engaged in a dialogue with our suppliers regarding managing the risks at their plantations. We have also started offering 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.
In 2017, we started updating our No Deforestation and Responsible Sourcing Guidelines for Renewable Feedstock with CORE. We are also developing a Supplier Sustainability Portal in collaboration with out suppliers to digitalize and enhance our supplier engagement and monitoring.
In 2017, we were awarded “Leadership” status in the CDP Forests program for our management of deforestation risks, particularly those related to our crude palm oil supply chain.
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, Neste’s crude palm oil supply chain in 2017 included nearly 36,000 Indonesian smallholders organized as cooperatives. Through developing the sustainability and traceability of the smallholders' production, we aim at enabling certification of their production, which is a prerequisite for Neste's raw material sourcing from the smallholders.
We have committed ourselves to cooperation projects aiming at supporting smallholders in the development of their sustainability expertise and the adoption of sustainable practices. We are, for example:
- participating in a project coordinated by the Malaysian organization Wild Asia involving smallholders producing palm oil in Malaysia. In 2017, the project in Borneo, Malaysia engaged 61 smallholders and 100 farmers, and enabled them to obtain RSPO Group Certification in 2017. We are working with our partners to help these smallholders gain access to international markets through obtaining International Sustainability and Carbon Certification.
- engaging in a smallholder project coordinated by GAR (Golden Agri Resources), SPKS (Indonesian Palm Smallholders Union), and WRI (World Resources Institute).
Labor rights and migrant workers
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. We published Neste Human Rights Principles in full in fall 2017. They set the standard on how we uphold best practices and ethical business conduct on crucial human rights issues. We also updated our Human Rights Commitment that was first published in 2015. It 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.
Neste is working hard to tackle common challenges related to human rights and the fair treatment of workers in the palm oil industry. We organized a workshop for our palm oil suppliers and other key stakeholders in Indonesia in February 2017. This workshop has evolved into an annual event from the first supplier workshop held in Malaysia in 2015. In the February workshop, we shared key observations from the social and labor assessments in Indonesia, conducted between November 2016 and January 2017, on working conditions at oil palm plantations and mills. Key observations included, for example, that low wages and workers’ representation (i.e. insufficient grievance mechanisms) are key issues in the palm oil industry in Indonesia. Our partner in this area is BSR (Business for Social Responsibility).
The workshops and our other main human rights activities are presented in the Neste Human Rights Activities timeline. Our projects with smallholder producers of palm oil also supports development of social issues in the palm oil industry.