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Sustainability

10 minute read

CEO’s review 2020 – A global leader in renewable and circular solutions

This text has originally been published as part of Neste’s Annual Report 2020.

Peter Vanacker

Peter Vanacker

2021-03-05T00:00+02:00

It has been said that a crisis does not create character, it shows it. A crisis reveals the true colors of people and companies, and their underlying values. 2020 was a challenging year for the whole world, and also for us, revealing the true character of Neste: we are passionate, tough and successful when working together towards our shared purpose, creating a healthier planet for our children.

Despite the challenges and disruptions posed by the COVID-19 pandemic, 2020 was a success for Neste in many ways. Thanks to our dedicated people, we were able to stay on course in our strategy of becoming a global leader in renewable and circular solutions.

We took bold steps forward on multiple fronts and markets and were proud to announce many new agreements and partnerships especially in our growth areas, Renewable Aviation and Renewable Polymers and Chemicals. 

Our capacity expansion for renewable products proceeded well despite the COVID-19 disturbances. We were also happy to sign almost ten new acquisitions and investments. Among these were the acquisitions of Mahoney Environmental, a collector and recycler of used cooking oil in the United States, and Bunge's refinery plant in Rotterdam to increase raw material pretreatment capacity for the production of renewable products.

Neste’s overall performance in 2020 was solid, with the renewables business proving to be very resilient. Enabled by a new annual production record, we were able to increase our sales volumes in renewables and help customers reduce even more greenhouse gas emissions than before. On top of this, we reached the best ever occupational safety performance in 2020.

However, the decline in demand for oil products was substantially accelerated by the COVID-19 pandemic. In order to improve our competitiveness and maintain refining operations and related strategic capabilities in Finland, we decided to restructure our refining operations in Finland and close down refinery operations in Naantali by the end of March 2021. We will focus the Naantali site on terminal and harbor operations, as well as change our operating model in the Oil Products business unit. In the second phase of the transformation, the Porvoo refinery will be developed towards co-processing renewable and circular raw materials.

The transformation will lead to approximately 370 redundancies, but we will support our people in adapting to this change in several ways. We put a lot of focus on operational excellence and process improvement. Until the end of 2020, we have been able to increase our EBIT by approximately EUR 237 million through the successful execution of Neste Excellence projects aiming at operational excellence and efficiency. Driven by our strategy, our portfolio needs to be continuously reviewed. In 2020, we sold our shares in Nynas, a Swedish manufacturer and marketer of naphthenic specialty oils and bitumen products, to Bitumina Industries. In the past two years, we also successfully divested our fuel retail business in Russia to PJSC Tatneft and sold the non-strategic offices of Neste Engineering Solutions and entered into a strategic partnership with Rejlers. These are examples of the major transformation we have been able to accomplish, enabling us to substantially increase our focus on renewable and circular solutions.

Solutions for combating climate change

Sustainability is deeply embedded in Neste’s everyday business. We are committed to combating climate change and accelerating a shift to a circular economy. We have consistently been included in the Dow Jones Sustainability Indices and the Global 100 list of the world’s most sustainable companies, and we support and comply with the UN Global Compact Principles.

We have made two climate commitments. One is that we will help customers to reduce greenhouse gas emissions with our renewable and circular solutions by at least 20 million tons of CO2eq annually by 2030. In 2020, we made excellent progress on this with a reduction of 10.0 million tons, equaling the annual carbon footprint of 1.5 million average EU citizens or the removal of 3.7 million passenger cars from the roads for a full year.

We have also made an ambitious commitment of reaching carbon neutral production by 2035. We have already identified approximately 80 different measures and actions; for example, we have set a target to start using 100% renewable electricity at our production sites. We have already achieved a 50% share in Rotterdam and made three power purchase agreements for wind energy for the refinery in Porvoo. We will also explore new, less emitting production methods, such as utilizing biogas or electrolysis for hydrogen production.

A circular economy company

Our strategy is built on renewable or recycled solutions, in other words, developing different alternatives to ensure that carbon is used again and again. We refine waste, residues and innovative raw materials into renewable fuels and sustainable feedstock for plastics and other materials.

For example, our Neste MY Renewable Diesel™ is already being sold in almost 500 fuel stations in several European countries, as well as in the US in California and Oregon. Our sustainable aviation fuel (SAF) is available and in commercial use by over 10 airlines globally. Neste currently has an annual capacity of 100,000 tons of SAF. With the Singapore refinery expansion on the way, and with possible additional investment in the Rotterdam refinery, we will have the capacity to produce some 1.5 million tons of SAF annually by the end of 2023 at the latest. In 2020, we launched a new product, Neste RE, a 100% renewable and recycled raw material for plastics and chemicals production. It is a product for tackling climate change through reducing the need to use virgin fossil resources, while it also provides a new solution to the end-of-life related challenges the polymers and chemicals industries are facing today.

We aim to become a significant solution provider for chemical recycling and have set a target to process annually over 1 million tons of waste plastic from 2030 onwards. In the fall of 2020, we completed our first industrial-scale processing run with liquefied waste plastic, and processed 400 tons of liquefied plastic waste at our refinery in Finland. In 2020, we also made an investment in Recycling Technologies Ltd, a specialist plastic recycling technology provider, and acquired a minority stake in Alterra Energy, an innovative chemical recycling technology company.

Limitless curiosity for innovation

In 2020 we updated our brand promise to “Change runs on renewables”. It reflects the understanding that every technology, process, business and society needs to run on something. And at the same time, we will need all technology solutions to tackle the climate crisis. When these run on renewables, so does change. 

We speed up the pace of change through our limitless curiosity for innovation, something in which Neste’s transformation is deeply rooted. 25% of our people are working in Innovation and Technology, which is key to our current and future success.

Our two-fold aim is to develop our existing businesses to stay ahead of the competition, and build new growth platforms in renewable and circular solutions. Currently, part of our development work in these areas takes place on three business platforms, where we study scalable but not yet fully utilized raw materials and technologies. And not only those that might be reality in 20 years, but also on those that could be available in the next 3 to 5 years.

We are, for example, putting a lot of focus on lignocellulosic fuels and materials, scalable feedstocks for aviation fuels such as algae and municipal solid waste, as well as Power-to-X solutions.

However, these new solutions and technologies require major investments. And investments need a predictable business environment and policies that encourage innovation. A carefully planned policy framework can encourage companies like Neste to innovate, and maximize value from existing resources. This is essential for accelerating the shift towards a circular economy, and for economic growth and recovery in general.

Improved occupational safety performance

Safety is integrated in our values and in everything we do. In 2020, the pandemic created many additional challenges for both office workers and for those working in our operations. Our change management included continuous support for remote work, and at our production sites, special safety measures were introduced to ensure the continuity of refinery operations and secure the supply of products to our customers. However, the full implementation of the major Porvoo refinery turnaround in 2020 was prevented by the government-imposed COVID-19 measures and delayed to 2021. Despite the challenges, we achieved our best ever result in occupational safety performance (TRIF 1.3) and our process safety was slightly better than our target level for 2020. Our systematic work for developing safety performance continues together with our people, partners, and customers.

We care. We have courage. We cooperate.

A company’s success is always based on its people. Our people continue to be the driving force behind Neste’s transformation. Their passion for creating a healthier planet for our children is what makes this company so unique. To strengthen this, our renewed values are: “We care, We have courage, We cooperate”.

These values have already been tested amidst the pandemic. I dare to claim that our decisions and actions have been based on the commitment to ensure the safety and wellbeing of our colleagues and the people around us. We care. I am very grateful to all our employees and partners who have expressed their trust and respect for those actions.

Our transformation journey continues in 2021

In 2021, we will continue on our transformation journey to become a global leader in renewable and  circular solutions. It will not be an easy year, as the pandemic is not over yet. It will rather be a year of transition, and it will take a lot of that Neste character and courage to navigate through these uncertain times.

In company transformations the most important thing is to know what you want to achieve. In 2021, we aim to expand in sustainable aviation fuels and in renewable polymers and chemicals. We will also continue to scale up our renewable production platform and ensure that more waste and residues are being reused and recycled. In addition, we want to further accelerate our innovation to develop technologies that are using new sources of waste and residue raw materials such as plastic waste, municipal solid waste, algae, and lignocellulosics. We will also further innovate in the area of renewable hydrogen and Power-to-X technologies.

The construction of our production capacity expansion in Singapore, which will bring the total global renewable product capacity to 4.5 million tons annually in 2023, is proceeding well. Looking beyond that, we are also targeting investment decision capability on the next worldscale production capacity increase by the end of 2021 or early 2022 and production start-up during the second half of 2025.

As the major turnaround at our refinery in Porvoo in 2020 had to be postponed, our goal now is to execute a safe and successful major turnaround in Porvoo in 2021. It is a significant investment, securing safety, world-scale sustainability and competitiveness of the Neste refinery in Porvoo for the next operating cycle.

I want to take this opportunity to thank our people, our customers, partners and other stakeholders for their trust and excellent cooperation in 2020. I am looking forward to 2021 as yet another exciting year of creating a healthier planet for our children.

Peter Vanacker President and CEO Twitter: @peter_vanacker