Neste is a publicly listed oil and renewable fuels refiner company headquartered in Finland with midstream and downstream activities. In 2020, it had USD 14.35 billion in revenue and a reported 4,833 employees*. Its main business activities are oil and biofuel refining and retail. Neste's mature and profitable biofuels business shows that oil and gas refining companies can build a successful low-carbon business.
Neste was one of only 13 of the 100 companies assessed that disclosed information on how much of its revenue comes from low-carbon products. In 2019, Neste’s renewable products division accounted for 23.1% of its external revenue and this share rose to 35% in 2020, which is far higher than for any other companies assessed. By setting a target for how much of its future revenue will come from low-carbon products, Neste can drive the expansion of its renewable products division further.
The renewable products division also accounted for 81% of Neste’s comparable operating profit in 2019 and 94% in 2020, demonstrating that low-carbon products can be profitable for oil and gas companies.
Neste has a strong supplier engagement strategy, particularly for its biofuel feedstock, which is important given reports that Neste is linked to palm oil driven deforestation. This is set out in Neste’s Responsible Sourcing Principle, wherein the company sets commitments for itself and suppliers, such as not to source from areas linked to land conversion after 2007 and to carry out due diligence.
In 2020, 83% of Neste’s biofuel feedstock was from waste or residues, and the company aims to take this to 100% by 2025. Neste is also working with recycling companies like REMONDIS and Ravago to access post-consumer waste plastic, with the aim to process more than 1 million tonnes of waste plastics by 2030 to reduce dependence on crude oil for refining and petrochemicals.
Neste has set a target to reduce customers’ emissions with its renewable and circular solutions by 20 million tonnes of CO2 equivalent annually by 2030. It is establishing partnerships with large clients in its three target sectors: road transportation, aviation, and polymers and chemicals. For example, it has established partnerships with at over 15 airlines and airports to expand the demand for its sustainable aviation fuel. It also provides low-carbon products to retail customers, with its renewable diesel sold at more than 350 service stations. The company is also launching a commercial charging service for electric vehicles in Finland.
Neste has set an ambitious target to reduce its scope 1 and 2 CO2 emissions by 50% by 2030 compared to 2019. This level of ambition is almost fully aligned with its 1.5°C pathway. This does not include its non-CO2 greenhouse gas emissions such as methane, which Neste states are lower than the reporting threshold set by the European Pollutant Release and Transfer Register.
However, Neste does not yet have an emissions target for its scope 3 emissions, which accounted for nearly 94% of its total scope 1, 2 and 3 emissions in 2020. Its target to provide solutions that reduce customers’ emissions does not guarantee that its scope 3 emissions will decrease. Neste should prioritise setting scope 1, 2 and 3 emissions reduction targets that are aligned with its 1.5°C pathway and should also set short-term intermediate targets.
Neste invested 47.6% of its capital expenditure (CapEx) in renewable products in 2019, with the share rising to 67.2% in 2020. This was the second highest proportion of CapEx dedicated to low-carbon and mitigation technologies of the 100 companies assessed. Neste has been investing in biofuel processing capacity expansion at a Singapore refinery and is nearing a final investment decision on a new renewable products refinery in Rotterdam.
The company can improve its performance in this area further by setting a target for future CapEx towards low-carbon and mitigation technologies. The company should strive to meet the sectoral expectation for oil and gas companies to direct 77% of CapEx to low-carbon and mitigation technologies to align with a 1.5°C scenario.
Neste’s scope 1, 2 and 3 emissions intensity has not seen a steady decline between 2014 and 2019. The company’s scope 1, 2 and 3 emissions intensity rose in 2016 and 2018, when biofuels accounted for a lower share of its overall product mix. If the trend from 2014 to 2019 is continued in the future, the company’s scope 1, 2 and 3 emissions intensity will remain largely stable, rather than decreasing. Neste needs to achieve an annual decrease of about 4% in its scope 1, 2 and 3 emissions intensity to align with its 1.5°C pathway.
Neste receives a trend score of =. If the company were reassessed in the future, its score would likely stay the same. The company’s scope 1, 2 and 3 emissions intensity is not estimated to decrease at the rate required by its 1.5°C pathway if the trend seen between 2014 and 2019 continues.
However, Neste has dedicated high levels of CapEx to low-carbon projects and has a clear plan to expand its low-carbon product offering to further sectors. Its investments in less mature technologies such as electrolysis of green hydrogen and carbon capture, utilisation and storage could enable further emissions reductions. Additionally, the company’s investments in increasing its renewable product capacity will enable a greater relative share of low-carbon products in its fuel mix in the future and may decrease its scope 1, 2 and 3 emissions intensity.
As part of Neste’s target of reaching carbon neutral production by 2035, Neste has set a target to reduce absolute scope 1 and 2 emissions by 50% by 2030 compared to 2019. The company lacks a scope 3 emissions reduction target but aims to provide renewable and circular solutions that reduce customers emissions by 20 million tonnes of CO2eq 2030.
Neste is scaling up its renewable fuel offering by investing in new biofuel refineries and developing partnerships in its targeted sectors. It is aiming to reach 100% renewable electricity use by 2023, up from 4.7% in 2020, which will significantly reduce its scope 2 emissions.
Neste invested 47.6% of its CapEx in renewable products in 2019 and 67.2% in 2020. Neste is expanding its Singapore refinery’s renewable products capacity from 3.2 million tonnes per year to 4.5 million tonnes and is close to a final investment decision on a similar expansion at its Rotterdam refinery.
Neste has grown its biofuel business from around 15% of its total revenue in 2014 to 23% in 2019 and 35% in 2020. However, the company has not seen a consistent reduction in its scope 1, 2 and 3 emissions intensity, as the proportion of biofuels in the company’s portfolio fell in 2016 and 2018.
Neste has successfully created a profitable biofuel business and is investing in new technology such as power-to-X which uses electricity to convert CO2 to fuels and chemicals. However, its emissions reductions have been limited and Neste US is listed as a member of the American Petroleum Institute.