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Going for the extra mile: preventing deforestation in Neste’s supply chains

According to the United Nations, forest loss has slowed down during the past three decades but still remains a global concern. Päivi Makkonen, Head of Supply Chain Sustainability at Neste, explains the company’s long-term commitment for a nature positive value chain.

1. How is Neste combating deforestation?
Päivi Makkonen: “Neste has a clear position against any actions that would cause deforestation: We are committed to combating deforestation in our supply chains and avoiding the conversion of habitats with valuable biodiversity for biomass production, while requiring the same from all our suppliers globally.

Neste sets high standards for sustainability, not just in our own operations but also in our value chain. We are transforming towards a carbon neutral and nature positive value chain, and set ourselves – and the whole supply chain – aspirational targets for biodiversity, human rights and raw materials.”

2. How do you ensure that your suppliers are not causing deforestation?
Päivi Makkonen: “Neste’s renewable raw material portfolio consists of a wide variety of waste and residue oils and fats and sustainably-produced vegetable oils. In 2021, waste and residues accounted for 92% of Neste’s renewable raw material usage.

We only source raw materials that are traceable which means that we source renewable raw materials only from known sources providing us with visibility into the raw material supply chain and enabling efficient monitoring and engagement with the supply chain. We source renewable raw materials only from suppliers that are committed to combating deforestation, protecting biodiversity and respecting human rights, as defined in Neste’s Supplier Code of Conduct. Our renewable raw material suppliers are regularly audited to ensure compliance with our sustainability criteria.

Knowing where our renewable raw materials come from helps us ensure that raw material production does not infringe human rights or put forests, carbon-rich areas or biodiversity at risk. Increasingly, regulation and certification systems require companies to know their supply chains: for example, within the European Union, biofuel producers are required by law to use only raw materials that are traceable to the point of origin, to their cultivation sites or production facilities. When it comes to sustainability, we at Neste always go for the extra mile and aim at doing more than what is legally required from us.”

3. Can you give us some examples of your engagement with suppliers?
“Since 2015, we have regularly organized workshops to educate our suppliers on sustainable practices, Neste’s expectations and criteria, as well as legal criteria on sustainability. The topics we have covered include effective due diligence processes, supply chain traceability, and human and labor rights, among others. In 2021, we organised a two-day workshop on  grievance mechanisms for our direct suppliers. We are also engaged in regional collaborative projects across industries to mitigate the risk of deforestation and biodiversity loss, such as the Siak Pelalawan Landscape Programme in Indonesia.”

4. What if you find a supplier breaching your sustainability requirements?
“Engagement and cooperation with our suppliers are the primary ways to address any shortcomings. We take all allegations on suspected sustainability violations and shortcomings seriously and investigate the cases, even when they are not directly related to the sourcing of raw materials. In the case of investigating credible serious allegations against our suppliers, we put all further purchases from those suppliers on hold. If the investigations reveal that the sustainability criteria have been breached and progress to resolve those issues is not made in a reasonable time, we can terminate our contract with the supplier in question. We transparently communicate about the progress and outcomes of these types of investigations on our website.”

5. Palm oil industry is identified as one key contributor to deforestation in Southeast Asia. How does Neste take this into account in its operations?
“Neste does not own any oil palm plantations, nor operate any palm oil refineries. Instead, as one of the raw materials in our extensive portfolio for our renewable products, we source palm oil and some wastes and residues from palm oil production processes from suppliers that are committed to sustainable working practices and meeting strict sustainability criteria, including a proactive approach to preventing deforestation and mitigating its risk. We source only certified and traceable palm oil for our renewable products. 

We work with expert organizations, such as CORE (The Consortium of Resource Experts), to continuously manage deforestation risks not only in our own supply chain, but also more widely in the palm oil industry. We also partnered with the non-profit organisation Earthqualizer to further improve deforestation monitoring in our palm oil and PFAD supply chains by leveraging value-added intelligence. 

Currently, certified palm oil makes up 7% of Neste’s total renewable raw material inputs globally. We aim to reduce the share of conventional palm oil to 0% of our global renewable raw material inputs by the end of 2023. As we continue to source waste and residues from the palm oil production processes, we will remain committed to the sustainability projects that aim at continuously improving sustainability within the palm oil industry.”

6. Neste has been accused of sourcing palm oil from suppliers that are linked to deforestation, are they true? 
“The claims by Friends of the Earth in 2020, repeated by the media in 2022, on Neste's palm oil suppliers’ involvement in significant deforestation between 2019 and 2020, led to comprehensive investigations at the time, involving also satellite imaging and third party experts. The investigations did not find evidence to support allegations of serious sustainability violations within our raw material supply chain.”

7. Can you give us examples of your progress in tackling biodiversity loss?
“Over the years, Neste has been recognized in international assessments for its long-term commitment on preventing deforestation. Our efforts to manage deforestation risks were evaluated as belonging to the leading performers’ Leadership level in the CDP Climate change and Forest assessment in 2021. The Global Canopy’s Forest 500 ranking recently evaluated Neste as one of the top companies out of the altogether 148 companies studied, making strong progress in curbing deforestation.

Together with our partners, we are now building the means and roadmap to achieve our goals in driving a positive impact on biodiversity. We joined the Consumer Goods Forum (CGF) Forest Positive Coalition in the beginning of 2022 and will work in collaboration with the other members to prevent deforestation in the supply chain. Additionally, we have started a collaboration with Fauna & Flora International (FFI). We believe that tight collaboration among different organizations and experts provides the most efficient means to maximize the positive impact.”