Faster, bolder and together Annual Report 2019 Content 02 03 2019 in brief ................................... 3 Sustainability ............................... 20 Governance ................................. 71 CEO’s review .................................. 4 Sustainability highlights ....................... 21 Corporate Governance Statement 2019 ........ 72 Managing sustainability ....................... 22 Risk management............................. 89 Neste creates value ......................... 25 Neste Remuneration Statement 2019 ........... 93 Neste as a part of society ................... 26 01 Stakeholder engagement ...................... 27 Strategy ..................................... 7 Sustainability KPIs ............................ 31 Our climate impact ............................ 33 04 Innovation .................................... 10 Our businesses ............................... 11 Renewable and recycled raw materials ......... 38 Review by the Board of Directors ......... 105 Key events 2019 .............................. 14 Supplier engagement ......................... 45 Key figures .................................. 123 Key figures 2019 .............................. 16 Environmental management ................... 48 Calculation of key figures ..................... 125 Financial targets .............................. 17 Our people ................................... 52 Information for investors....................... 18 Human rights ............................... 52 Employees and employment ................. 55 Safety ..................................... 58 05 Performance and sustainability Financial statements ...................... 128 reporting in 2019 ............................. 61 Consolidated financial statements ............ 129 Performance in figures ...................... 63 Parent company financial statements .......... 188 Independent Practitioner’s Assurance Report ... 69 Proposal for the distribution of earnings and signing of the Review by the Board of Directors and the Financial Statements ..... 206 Auditor’s Report ............................. 207 Neste Annual Report 2019 | Content 2 2019 in brief 2019 in brief Revenue Neste is in the business of combating climate change. €15,840M We help transport and cities, as well as customers in the aviation, polymers and chemicals sectors make their business Comparable operating profit more sustainable. €1,962M Faster, bolder and together. In 2019 we renewed our strategy and set out on a course to become a global leader in renewable Our dividend proposal and circular solutions. We continued to be the world’s largest for 2020 per share producer of renewable diesel produced from waste and residues, €0.92 + €0.10 * but also ramped up our renewable jet fuel production capacity and built new business around renewable polymers and chemicals. * Extraordinary dividend In addition to these, we explored ways to introduce liquefied waste plastic as a raw material for new plastics and chemicals. Return on average capital employed after tax (ROACE) The year 2019 was full of new achievements and exciting 26.6% announcements. What made it so inspiring? Watch the video to discover more. Investments €890M Our renewable products The share of waste Safe days Average number helped reduce greenhouse and residues in the of personnel Leverage ratio gas emissions renewable raw materials –3.3% 9 . 6 M t 80% 314 5,474 Neste Annual Report 2019 | Year 2019 in brief 3 CEO’s review Faster, bolder, and together 2019 was a year of growth, change and excellent strategy execution for us. We achieved the best ever quarterly financial results in Q4 and posted outstanding results for the whole year. We became a truly international company with hundreds of new employees, new offices, and end-markets all over the world. In addition, we were placed in the top 3 on the Global 100 list of the world’s most sustainable companies again. All this with the best ever process safety results. Our new strategy is called “Faster, Bolder and Together” and our aim is to become a global leader in renewable and circular solutions. This reflects the understanding that there is no time to lose in combating the climate crisis. In order to succeed, we need to act, innovate new solutions and deliver them faster and bolder than ever before. At Neste, we are in a unique position to help our customers with their ambitious emission reduction targets. We have made a promise to help our customers to reduce their climate emissions by 20 million tons annually by 2030. Promising to help our customers reducing their climate emissions is, however, not enough. Therefore we have made a second promise to reduce our own carbon footprint in production ahead of the EU’s climate and energy targets. Neste Annual Report 2019 | CEO’s review 4 We have made a promise to help our customers to reduce their climate In the Renewable Polymers and Chemicals business, we emissions by 20 million tons annually by have partnered with actors like LyondellBasell and Borealis 2030. In addition, we will reduce our own to achieve the first-ever commercial-scale production of bio-based plastics from renewable material. carbon footprint in production ahead All the work we put into operational excellence and effi- of the EU’s climate and energy targets. ciency is absolutely crucial not just for business, but for our entire company: who we are and what we stand for. In 2019, we have been able to increase our EBIT by approximately EUR 33 million through the successful execution of Neste Excellence projects aiming at operational excellence and Platform for change The office in Shanghai will serve our renewable raw material efficiency. In addition, we sold non-strategic offices of Neste Neste is more than just a company. Our purpose of creating sourcing operations for China, and the Melbourne office Engineering Solutions and entered into a strategic partnership a healthier planet for our children is what drives us every day for Australia and New Zealand. New locations support the with Rejlers. We further successfully divested our fuel retail to aim higher. We are ready and willing to take the role of a expanding sourcing of waste and residue raw materials for the business in Russia to PJSC Tatneft. change maker. production of our renewable diesel, renewable jet fuel as well We want to be a platform for change where discussions as other renewable solutions globally. Innovation is in our DNA take place, innovations are made, and solutions are found. This In Singapore, we started the construction of our EUR Approximately 25% of our people are working in Innovation translates into new business opportunities for us and for others 1.4 billion investment and expansion project to produce and Technology. It is safe to say that innovation is key to our as well. Providers of sustainable solutions should think of them- renewable jet fuel and other renewable products. This biggest current and future success: it has brought us to the point selves as collaborators first, and competitors second. ever investment in our history is on track. It will expand our where we are now, and it will take us forward. Our ambition is reflected in our new vision “Leading the annual renewable capacity by up to 1.3 million tons in Singa- Still we need to look further ahead. We need to generate way towards a sustainable future together”, and in our newly pore, and extend our total renewable product capacity close to breakthroughs for future solutions as well, both those that renewed values. I believe we can still solve the climate crisis, 4.5 million tons annually in 2022. could be available in the next 3 to 5 years and those that might but only if we act now – together. We need to collaborate and We have gone into new markets with our renewable and be a reality in 20 years. build partnerships, whether it is with our customers, researchers circular solutions. In road transportation, Neste MY Renewable With this in mind, we have set three business platforms to and academia, or with governments and civil society. Diesel™ is now sold in Finland, Sweden, all the Baltic countries, develop scalable future feedstocks and required technologies, the Netherlands and California and Oregon in the US. looking beyond the present raw material sources. These A truly global company In our Renewable Aviation business, we have moved platforms are lignocellulosic fuels, chemicals, and materials; Last year was a year of growth for Neste in many ways. We from feasibility to execution and ramped up our capacity to scalable feedstocks for aviation fuels including algae and expanded our global reach with new offices in Düsseldorf, produce up to 100,000 tons of renewable jet fuel. With further solid municipal waste; and renewable hydrogen and Amsterdam, Shanghai, and Melbourne, and strengthened our production expansion on the way, we will have the capacity to Power-to-X, utilizing renewable electricity to convert CO2 into presence in Houston and Singapore. The new offices in the produce over 1 million tonnes of renewable jet fuel globally by fuels and chemicals. Netherlands and Germany also serve as global business hubs 2022. In 2019, we also started collaboration with companies As we believe in cooperation and succeeding together, we for the Renewable Aviation and Renewable Polymers and such as Air BP, Lufthansa and KLM to support these industry are actively looking into new partnerships and forms of collab- Chemicals business units, respectively. players in reducing aviation-related emissions.