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Sustainability Reporting in 2020

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Sustainability Reporting in 2020 Annual Report 2020 CHANGE RUNS ON RENEWABLES Content 2020 in brief 3 Sustainable supply chain 58 Governance 86 CEO’s review 4 Sustainability risk assessment Corporate Governance Statement 87 in our supply chain 59 Risk management 102 Strategy 7 Identifying our supply chains 59 Remuneration report 106 Innovation 9 Sustainability with our renewable Our businesses 10 raw material suppliers and oil suppliers 59 Review by the Key events 2020 13 Sustainability within indirect procurement 60 Board of Directors 112 Key figures 2020 15 Environment 62 Key figures 129 Financial targets 16 Environmental management 62 Calculation of key figures 131 Information for investors 17 Material and energy efficiency 63 Water in our own operations 63 Financial statements 134 19 Assessing the water-related risks 63 Sustainability Consolidated financial statements 135 Sustainability highlights 20 Continuous environmental quality monitoring 63 Parent company financial statements 195 Sustainability at Neste 21 Commitment to biodiversity 64 Proposal for the distribution of earnings Material sustainability topics 23 Environmental roadmap 65 and signing of the Review by the Board Stakeholder engagement 30 People 66 of Directors and the Financial Statements 212 Value creation 35 Employees and employment 66 Auditor’s Report 213 Sustainability governance and compliance 36 Human rights 68 Climate 38 Safety 71 Our climate impact 39 Performance and reporting 2020 76 Carbon neutral production by 2035 43 Performance in figures 77 Renewable raw materials 47 GRI Content Index and UN Global Compact 79 Recycled raw materials 54 Principles for calculating the key indicators 83 Independent Practitioner’s Assurance Report 84 Neste Annual Report 2020 | Content 2 Neste creates solutions for combating Revenue Leverage ratio climate change and accelerating a shift to a 11,751 MEUR -4.7% circular economy. We refine waste, residues Comparable Our renewable products and innovative raw materials into renewable operating profit helped reduce greenhouse fuels and sustainable feedstock for plastics 1,416 MEUR gas emissions and other materials. 10.0 Mt Our dividend in brief proposal for 2021 The share of waste and In 2020, despite the COVID-19 pandemic, per share residues of the total renewable we stayed on course with our strategy: 0.80 EUR raw material inputs globally Faster, Bolder and Together. 83% Return on average Read more about key events capital employed Safe days in 2020 on page 13 after tax (ROACE) and sustainability highlights 325 on page 20. 17.3% Average number Watch this video to discover Investments of personnel the highlights of the year. 1,197 MEUR 4,833 Neste Annual Report 2020 | Year 2020 in brief 3 A global leader in renewable and circular solutions 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 and investments. Among these were the acquisitions COVID-19 pandemic, 2020 was a success for Neste of Mahoney Environmental, a collector and recycler of in many ways. Thanks to our dedicated people, we used cooking oil in the United States, and Bunge's were able to stay on course in our strategy of becom- refinery plant in Rotterdam to increase raw material ing a global leader in renewable and circular solutions. pretreatment capacity for the production of renewable We took bold steps forward on multiple fronts and products. markets and were proud to announce many new Neste’s overall performance in 2020 was solid, with agreements and partnerships especially in our growth the renewables business proving to be very resilient. areas, Renewable Aviation and Renewable Polymers Enabled by a new annual production record, we were and Chemicals. able to increase our sales volumes in renewables and Our capacity expansion for renewable products pro- help customers reduce even more greenhouse gas ceeded well despite the COVID-19 disturbances. We emissions than before. On top of this, we reached the were also happy to sign almost ten new acquisitions best ever occupational safety performance in 2020. Neste Annual Report 2020 | CEO’s review 4 However, the decline in demand for oil products was Dow Jones Sustainability Indices and the Global 100 substantially accelerated by the COVID-19 pandemic. list of the world’s most sustainable companies, and In order to improve our competitiveness and maintain we support and comply with the UN Global Compact We have made two refining operations and related strategic capabilities in Principles. Finland, we decided to restructure our refining oper- We have made two climate commitments. One is climate commitments: ations in Finland and close down refinery operations that we will help customers to reduce greenhouse gas to help customers in Naantali by the end of March 2021. We will focus emissions with our renewable and circular solutions reduce greenhouse gas the Naantali site on terminal and harbor operations, as by at least 20 million tons of CO2eq annually by 2030. well as change our operating model in the Oil Products In 2020, we made excellent progress on this with a emissions by 20 million business unit. In the second phase of the transfor- reduction of 10.0 million tons, equaling the annual car- mation, the Porvoo refinery will be developed towards bon footprint of 1.5 million average EU citizens or the tons annually by 2030 and co-processing renewable and circular raw materials. removal of 3.7 million passenger cars from the roads to reach carbon neutral The transformation will lead to approximately 370 re- for a full year. dundancies, but we will support our people in adapt- We have also made an ambitious commitment of production by 2035. ing to this change in several ways. reaching carbon neutral production by 2035. We have We put a lot of focus on operational excellence and already identified approximately 80 different measures process improvement. Until the end of 2020, we have and actions; for example, we have set a target to start been able to increase our EBIT by approximately EUR using 100% renewable electricity at our production 237 million through the successful execution of Neste sites. We have already achieved a 50% share in Rot- Excellence projects aiming at operational excellence terdam and made three power purchase agreements tons of SAF. With the Singapore refinery expansion on an investment in Recycling Technologies Ltd, a spe- and efficiency. Driven by our strategy, our portfolio for wind energy for the refinery in Porvoo. We will also the way, and with possible additional investment in the cialist plastic recycling technology provider, and ac- needs to be continuously reviewed. In 2020, we sold explore new, less emitting production methods, such Rotterdam refinery, we will have the capacity to pro- quired a minority stake in Alterra Energy, an innovative our shares in Nynas, a Swedish manufacturer and mar- as utilizing biogas or electrolysis for hydrogen produc- duce some 1.5 million tons of SAF annually by the end chemical recycling technology company. keter of naphthenic specialty oils and bitumen prod- tion. of 2023 at the latest. ucts, to Bitumina Industries. In the past two years, we In 2020, we launched a new product, Neste RE, a Limitless curiosity for innovation also successfully divested our fuel retail business in A circular economy company 100% renewable and recycled raw material for plastics In 2020 we updated our brand promise to “Change Russia to PJSC Tatneft and sold the non-strategic of- Our strategy is built on renewable or recycled solu- and chemicals production. It is a product for tackling runs on renewables”. It reflects the understanding fices of Neste Engineering Solutions and entered into tions, in other words, developing different alterna- climate change through reducing the need to use vir- that every technology, process, business and soci- a strategic partnership with Rejlers. These are exam- tives to ensure that carbon is used again and again. gin fossil resources, while it also provides a new solu- ety needs to run on something. And at the same time, ples of the major transformation we have been able to We refine waste, residues and innovative raw materi- tion to the end-of-life related challenges the polymers we will need all technology solutions to tackle the cli- accomplish, enabling us to substantially increase our als into renewable fuels and sustainable feedstock for and chemicals industries are facing today. mate crisis. When these run on renewables, so does focus on renewable and circular solutions. plastics and other materials. We aim to become a significant solution provider for change. For example, our Neste MY Renewable Diesel™ is chemical recycling and have set a target to process We speed up the pace of change through our limit- Solutions for combating climate change already being sold in almost 500 fuel stations in sever- annually over 1 million tons of waste plastic from 2030 less curiosity for innovation, something in which Neste’s Sustainability is deeply embedded in Neste’s every- al European countries, as well as in the US in California onwards. In the fall of 2020, we completed our first transformation is deeply rooted. 25% of our people are day business. We are committed to combating cli- and Oregon. Our sustainable aviation fuel (SAF) is avail- industrial-scale processing run with liquefied waste working in Innovation and Technology, which is key to mate change and accelerating a shift to a circular able and in commercial use by over 10 airlines globally. plastic, and processed 400 tons of liquefied plastic our current and future success.
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