Crude palm oil's role in our raw material portfolio has become less significant in recent years. In 2016, it accounted for less than 20% of our raw material usage. All the CPO we have used has been fully traceable to the plantation level since 2007, and 100% certified since 2013.
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 10 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 representing over 71% of the global usage, biofuel industry some 16% and chemical industry over 11% (source: USDA).
Renewable fuel produced from crude palm oil can significantly cut climate emissions. Neste's renewable diesel produced from sustainably-produced crude palm oil reduces greenhouse gas emissions by 59% on the average when compared to crude oil based diesel. Already 35% of the crude palm oil that we procure comes from mills with methane recovery systems or systems to prevent its formation. Together with several partners, we are developing a new method to prevent formation of methane in palm oil mills.
In 2016, Neste's use of crude palm oil decreased to 516 000 tons of certified, sustainably produced crude palm oil. This represents approximately 0.8% of the global consumption of palm oil, and 5% of the biofuel industry's usage.
Examples of our sustainability projects and cooperation
We do continuous work to develop the sustainability of our palm oil supply chain and to prevent deforestation. Our key partner in this area is CORE (The Consortium of Resource Experts). This association of Daemeter, Proforest, and the Rainforest Alliance supports us particularly in our continuous efforts to develop the transparency of our raw material supply chains. We have assessed the environmental risks of our company’s palm oil supply chain, and prepared an action plan for further preventing and mitigating those risks. The implementation of the action plan began in the beginning of 2017.
All our major palm oil suppliers had committed themselves to No-Deforestation guidelines in their third-party sourcing by the end of 2015. We have continue monitoring the progress of their implementation process.
In 2016, 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 2016 included also approximately 33,000 Indonesian smallholders organized as cooperatives.
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.
- Engaging in a smallholder project coordinated by GAR (Golden Agri Resources), SPKS (Indonesian Palm Smallholders Union), and WRI (World Resources Institute).
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. Neste’s aim is to further increase the share of smallholders in the company’s procurement.
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 harassment, discrimination, child labor, forced labor, and any exploitation. We require the same from all our partners. We have defined our stand in our Human Rights Commitment and Human Rights Principle, which we are currently developing further.
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.
In 2016, we launched a comprehensive program on human and labor rights, and produced a Human and Labor Rights Roadmap that crystallizes our main activities in this area. Many of these activities are projects that involve and engage several stakeholder groups. We believe that collaboration between companies, governments, investors, and civil society offers the greatest potential for increasing protection for human rights and labor standards globally.
Neste is working hard to tackle common challenges related to human rights and the fair treatment of workers in the palm oil industry. We have, for example, conducted a field survey focusing on social questions concerning foreign migrant workers in Malaysian palm oil plantations in cooperation with Business for Social Responsibility (BSR). We have launched a similar study in Indonesia focusing on working conditions in plantations in Indonesia and the impact of workers on communities beyond the plantations.
We have prepared for a multi-year, multi-stakeholder collaboration project, “A Fair Employment Initiative” in Malaysia, and support another UNICEF-led project studying the upholding of children's, women's and families' rights in palm oil production. Our work with smallholder producers of palm oil also supports development of social issues in the palm oil industry.