“We are very committed to our purpose of creating a healthier planet for our children, working towards our climate goal of helping our customers around the world to reduce greenhouse gas emissions with our renewable and circular solutions by at least 20 million tons every year by 2030.” Mercedes Alonso, Executive Vice President, Renewable Polymers and Chemicals at Neste, talks to Il Bioeconomista. In this long exclusive interview, she talks about Neste, the circular bioeconomy and the green recovery after the Covid19.
Interview by Mario Bonaccorso
In 2015 Neste started a transition from a petrochemical company to a bio-based company, focused on renewable raw materials. What does this mean at the business and mindset level?
Neste started its transformation journey already much earlier than 2015: Neste filed a patent application for the hydrogen treatment technology (NEXBTL™) as early as 1996, and our first renewable products production unit based on this technology unit came onstream already in 2007. So really, we have been on this transformation journey for over 20 years.
We can say that we have developed a completely new business focused on renewables and we continue to grow. Today, Neste is the world’s largest producer of renewable diesel and sustainable aviation fuel, providing bio-based feedstock for the production of more sustainable polymers and chemicals. Additionally, Neste is developing chemical recycling of plastic waste to increase recycling rates to combat plastic pollution. In 2019, Neste’s revenue stood at EUR 15.8 billion, 82% of the company’s comparable operating profit coming from renewable products,which we produce in our refineries in Finland, the Netherlands and Singapore.
We are very committed to our purpose of creating a healthier planet for our children, working towards our climate goal of helping our customers around the world to reduce greenhouse gas emissions with our renewable and circular solutions by at least 20 million tons every year by 2030. Our sustainability-focus also attracts like-minded partners which are essential to large-scale sustainability transformations, such as reducing global reliance on fossil oil.
In September 2019, Harvard Business Review listed Neste among the Top 20 Business Transformations of the Last Decade among global companies that have achieved the highest-impact business transformations. With a ranking as the 12th on the list, Neste was recognized for its successful transformation from a Finland-based traditional fossil oil refiner to a global leader in renewable diesel and sustainable aviation fuel. A recognition like that only fuels our ambition to continue forward in our own transformation while we provide solutions for other industries to progress in their transformation.
As you said, Neste is today the world’s largest producer of renewable diesel and renewable jet fuel refined from waste and residues, introducing renewable solutions also to the polymers and chemicals industries. As far as you’re concerned, is the future of petrochemical industry really bio-based?
The answer is simple: yes it is. We must reduce and eventually replace all our fossil resource use with more sustainable, bio-based alternatives. In addition, our future should be built upon circular bioeconomy, as circularity is definitely needed to prevent overuse of resources, both the currently used fossil ones and increasingly also bio-based, i.e. renewable resources. We should keep the carbon in use as long as we can through circularity.
We are facing all around the world a health crisis that is also an economic crisis never known for the last 70 years. What role will the bioeconomy have to restart?
The pandemic and the resulting economic downturn are certainly very serious crises we are facing together globally. The climate crisis that we are facing will, however, have even larger negative impacts globally unless we continue to develop and quickly adopt a variety of solutions to reduce climate emissions in every area of life. Bioeconomy combined with circular economy will play a significant role in keeping our societies running and economies working by providing some of the key solutions to combating climate change.
In the spring 2020, Neste together with 180 Members of the European Parliament, Ministers, companies and other stakeholders joined an alliance calling for a “Green Recovery” after the coronavirus (Covid-19) crisis in Europe. We strongly believe that continuing on the path set by the European Green Deal towards climate-neutral Europe by 2050 and placing the fight against climate change at the core of the economic strategy will contribute to the quick recovery of the economies and the societies in Europe. It will help them become more sustainable and resilient in the future. Such a green recovery would require investments to be aimed to accelerate the transition to a circular bioeconomy as the means to achieve a climate-neutral economy in Europe.
One thing seems obvious: the world will no longer be as before. Our priorities, our reference points will change. How will this change be better addressed?
This is not the first time when we are facing changes. And as always, we must acknowledge the fact that change is evident and necessary and that we must now commit to rebuilding stronger economies and more resilient, more sustainable businesses, e.g. with renewable and circular solutions. There is a lot of data indicating that more sustainable companies outperform less sustainable peers in longer term. Neste itself is a good example of that. We would like to encourage all to embrace change and view the current situation as a great possibility to commit to or reinstate a commitment to a transformation journey towards a more sustainable future.
How is this crisis affecting Neste’s business?
All companies are affected by the pandemic, Neste is not an exception. As always, we have put the safety and wellbeing of our own employees, customers and partners first, while we have continued to carry out our daily business activities during these extraordinary circumstances. Thanks to digital technology, many of our employees have been able to carry out their work from remote offices while our operational staff, e.g. at our refiners, have taken extra measures to keep themselves, colleagues and all external stakeholders safe and healthy while keeping our operations running.
We are happy to say that Neste’s overall performance was solid during the third quarter despite the COVID-19 pandemic and we continue to execute our strategy focused on renewable and circular solutions. Our Renewable Products business was very resilient and improved its sales margin and sales volume in the third quarter 2020 compared to the corresponding period last year. The Singapore renewable production capacity expansion project is proceeding according to the updated completion schedule, and our project for future renewables capacity expansion in Europe is progressing well. We have made several new contracts and partnerships in Renewable Aviation and Renewable Polymers & Chemicals businesses despite the COVID-19 situation.
In order to ensure the long-term competitiveness of the Oil Products business we initiated co-operation negotiations on a plan to restructure our refinery operations in Finland. We are also exploring the transformation of our Porvoo refinery operations to co-processing renewable and circular raw materials.
What are your next steps in the circular bioeconomy?
As said, we remain committed to implementing our strategy focusing on renewable and circular solutions. We have ambitious growth targets and are, for example, currently expanding our renewables production capacity at our production site in Singapore. The investment will extend Neste’s global renewable products’ production capacity from the current 3 million tons to close to 4.5 million tons annually in 2023. We are already assessing other options to increase our production capacity even further.
In March 2020, we announced a target to grow the share of waste and residues to 100% of the company’s total renewable raw material inputs by 2025. All Neste’s refineries producing renewables have been technically capable of running on 100% waste and residue oils and fats as raw materials since 2015.
Neste continues to develop also non-waste raw material platforms, such as algae, CO2 and power-to-X to meet the raw material needs for more sustainable products without fossil oil in the longer term.
Besides continuing to rely on our proprietary NEXBTL™ technology, enabling us to use a wide variety of renewable fats and oils in the production of renewable products, we are constantly looking into diversifying its portfolio with new raw materials, some of which require Neste to adopt new production technologies. We are actively researching and evaluating such technologies to build new business and growth.
We continue to partner up with several globally operating brands (similarly to the partnerships that we have already announced, including Ikea, Covestro, Clariant, Jokey among others) to help them introduce renewable content into their products and offerings. With our products and support, we are helping these companies to meet their sustainability goals and contribute positively to some of the global sustainability challenges, such as climate change.
We also continue accelerating the shift towards a circular plastics economy. Together with several plastics value chain partners (e.g. Ravago, Remondis, Recycling Technologies), we are developing chemical recycling technologies and capacity to increase plastics recycling rates and to tackle the plastic waste challenge. With chemical recycling, also hard-to-recycle plastics, such as multimaterial, multilayer and colored plastic packaging, can be upcycled into high-quality new plastics. We have set a target to process annually over one million tons of plastic waste from 2030 onwards.