Untitled

Annual Report

2021

CHANGE RUNS ON

RENEWABLES

Strategy GovernanceSustainability Review by the Board of Directors Financials

Neste Annual Report 2021 | Content

2021 in brief 3

CEO’s review 4

Strategy 7

Innovation 10

Our businesses 12

Key events 2021 15

Key figures 2021 and financial targets 17

Information for investors 19

Sustainability 21

Sustainability highlights 22

Sustainability at Neste 23

Material sustainability topics 27

Stakeholder engagement 37

Value creation 43

Sustainability governance 44

Compliance 46

Content

Climate 47

Our carbon handprint 49

Our carbon footprint 53

Environment 59

Biodiversity 60

Raw materials 62

Renewable raw materials 63

Recycled raw materials 73

Sustainable supply chain 77

People 82

Human rights 85

Safety 90

Sustainability reporting in 2021 94

Performance in figures 96

GRI Content Index and UN Global Compact 100

TCFD Recommendations Disclosure 106

SASB Content Index 107

UN Guiding Principles Reporting Framework Index 109

Principles for calculating the key indicators 110

Independent Practitioner’s Assurance Report 112

Governance 114

Corporate Governance Statement 115

Risk management 132

Remuneration report 136

Review by the Board of Directors 143

Review by the Board of Directors 144

Key figures 162

Calculation of key figures 164

Financial statements 167

Consolidated financial statements 168

Parent company financial statements 229

Proposal for the distribution of earnings and

signing of the

Review by the Board of Directors

and the Financial Statements

246

Auditor’s Report 247

Strategy GovernanceSustainability Review by the Board of Directors Financials

Neste Annual Report 2021 | Year 2021 in brief

Revenue

15,148 MEUR

Comparable

operating prot

1,342 MEUR

Our dividend

proposal for 2022

per share

0.82 EUR

Return on average

capital employed

after tax (ROACE)

15.5%

Leverage ratio

0.6%

Neste creates solutions for combating

climate change and accelerating a shift

to a circular economy. We rene waste,

residues and innovative raw materials into

renewable fuels and sustainable feedstock

for polymers and chemicals.

Neste’s strategy remains relevant: we aim to

be a global leader in renewable and circular

solutions. Demand for renewable products

is growing substantially, driven by higher

climate ambitions and supportive regulation.

Read more about key events in 2021

on page 15 and sustainability highlights

on page 22.

Watch this video to discover

the highlights of the year.

Investments

1,535 MEUR

Our renewable products

helped reduce greenhouse

gas emissions

10.9 Mt

The share of waste and residues

of Neste’s total renewable raw

material inputs globally

92%

Safe days

306

Average number

of personnel

4,872

in brief

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Resolve, Resilience and Results

Neste Annual Report 2021 | CEO’s review

Dear Stakeholders,

2021 was a year of resolve, resilience and results for

Neste. The pandemic continued to significantly dis-

rupt our lives, roil the global economy and blanket

us all in a fog of uncertainty, yet Neste employees

pulled together impressively. We delivered excellent

performance in a year of major scheduled mainte-

nance shutdowns and high input costs, and made

clear advances in our drive to become a global leader

in renewable and circular solutions. I am incredibly

proud of this effort, and of this company.

During the year we executed our strategy by agree-

ing numerous partnerships and acquisitions to grow

our three business units – Renewable Aviation,

Renewable Polymers and Chemicals, and Renewable

Road Transportation – expanding our global access

to waste and residue recycling, and broadening our

sustainability vision to include climate, biodiversity,

human rights and our supply chain and raw materials.

Our safety record was excellent despite the height-

ened risks posed by COVID and the major turnaround

of our Porvoo refinery.

I will expand further on these remarkable achieve-

ments below, but first I would like to express my

warm thanks for your support throughout the year.

My thanks also go to all Neste employees and part-

ners for their continued flexibility and adaptability as

we navigate through the pandemic, all while keep-

ing a steady focus on safety. Our progress during the

year gives reason for optimism in 2022 and beyond,

as we work towards creating a healthier planet for

our children.

A track record of success

– right from the start

On the first working day of 2021, we announced that

we would buy a minority stake in Alterra Energy, an

innovative chemical recycling technology company,

and collaborate in commercializing Alterra’s propri-

etary thermochemical technology in Europe. This

agreement, which will help us produce high-quality

feedstock for polymers and chemicals, supports the

growth ambitions for our Renewable Polymers and

Chemicals business, and it set the tone for a busy

year of announcements and achievements across our

businesses, including:

• Expansion of our leading sustainable aviation

fuel (SAF) business through partnerships and

collaborations with leading airlines such as

Lufthansa, KLM, IAG, Delta Air Lines, Southwest

Airlines, DHL and Easyjet, and several fuel

suppliers. Our activities in the business aviation

segment continued to grow, with Neste MY SAF

available at 12 new airport locations in the US

and three in Europe. We established partnerships

with Boston Consulting Group and TripActions to

enable lower-emission business traveling with our

SAF based solution. And we took part in the first

study on in-flight use of 100% sustainable aviation

fuel on both engines of a commercial jet with

Airbus and Rolls Royce, among others.

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Neste Annual Report 2021 | CEO’s review

• A long-term commercial agreement with

LyondellBasell to source our 100% renewable

feedstock Neste RE™ and process it into

polymers. This was one of many strategic

Renewable Polymers and Chemicals agreements

in the year, with others including collaboration

with Japan’s Mitsui Chemicals and Toyota Tsusho

Corp. to enable the country’s first industrial-scale

production of renewable plastics and chemicals

from 100% bio-based hydrocarbons; entering into

a multi-year partnership with Unilever to reduce

dependency on virgin fossil resources; and a

plan to establish a joint venture with Ravago for

a chemical recycling facility in the Netherlands,

building upon the advancement of Alterra’s

technology, the company in which we purchased

a minority stake.

• Growth of our Neste MY Renewable Diesel fueling

network in target markets including the US and

Sweden, and launching MY Renewable Diesel

in Belgium. Neste MY received the TOP TIER™

Diesel Fuel certification – a performance standard

written by automakers to assist in keeping engines

cleaner – making it the very first renewable diesel

brand to gain such recognition.

• Bolstering and expanding our capacity to produce

renewable fuels, including the investment of EUR

190 million to enable production of up to 500,000

metric tons of Neste MY Sustainable Aviation Fuel

at our Rotterdam refinery; finalizing the acquisition

of Bunge Loders Croklaan’s refinery plant in

Rotterdam; and acquiring Agri Trading, one of

the largest renewable waste and residue fat and

oil traders in the United States. Our Singapore

renewables capacity expansion project is set

for start-up by the end of Q1 2023. The EUR

1.5 billion investment is planned to increase our

renewable products capacity by 1.3 million ton/a,

bringing our total annual production capacity

to 4.5 million tons. We also chose Rotterdam

as a location for our possible next world scale

renewable products refinery.

• The sale of our existing base oils business to

Chevron and an agreement to exit our base oils

joint venture with Bahrain Petroleum Company

and Nogaholding. Both portfolio transactions

support our renewable and circular solutions

strategy and show how Neste has transformed as

a company; three years ago around 30% of our

employees worked on this change strategy, and

the figure is now around 70%.

• The successful completion of the 3-month

scheduled maintenance, or major turnaround,

of our Porvoo refinery. The investment, which

totaled EUR 630 million, ensures Porvoo’s safety,

availability and competitiveness and keeps it

on track to become Europe’s most sustainable

refinery by 2030. It was an especially remarkable

undertaking considering the constraints imposed

by the pandemic.

These achievements and our excellent strategy exe-

cution helped us report a comparable EBITDA for the

year of EUR 1,920 million (EUR 1,929 million in 2020).

Our dividend proposal of EUR 0.82/share reflects our

robust balance sheet. This is a good moment to say

warm thanks to our Chief Financial Officer Jyrki Mäki-

Kala, who will retire during the spring of 2022 after

serving Neste for nine years. Jyrki will be succeeded

by Martti Ala-Härkönen, who will take up the position

on May 8 at the latest.

Matching words with deeds in sustainability

In a year of significant activity focused on tackling the

climate crisis, including the EU’s unveiling of its Fit for

55 emissions reduction plan and the COP26 Climate

Change Conference in Glasgow, we unveiled plans to

further reduce our climate impact by extending our

already ambitious commitments.

We are committed to helping customers reduce their

greenhouse gas emissions with our renewable and

circular solutions by at least 20 million tons of CO

annually by 2030. In 2021, we made strong progress

with a reduction of 10.9 million tons, the equivalent of

removing 4.2 million passenger cars from the roads

for a full year.

We also target carbon neutral production by 2035,

and continue our climate actions so they are in line

with the 1.5°C emission scenarios, criteria and rec-

ommendations of the Science Based Targets initia-

tive. Neste signed the Business Ambition for 1.5°C

Commitment Letter in 2021.

We raised our ambitions even further in 2021 by

broadening our sustainability vision to include climate,

biodiversity, human rights and our supply chain and

raw materials. We are taking the lead to transform

towards a carbon neutral value chain by now includ-

ing Scope 3 emissions – i.e. those of our customers

– in our targets, aiming to reduce the use phase emis-

sion intensity of sold products by 50% by 2040 com-

pared to 2020. We will do this through increasing the

share of renewable and circular solutions, transform-

ing our Porvoo refinery and working with suppliers

and partners to cut emissions across the value chain.

This will require transformation from Neste, its suppli-

ers and partners with new ways of working, innova-

tion and cooperation, but the cost of this effort pales

in comparison when you consider what is at stake for

the planet.

In a year of significant activity

focused on tackling the climate

crisis, we unveiled plans to

further reduce our climate

impact by extending our already

ambitious commitments.

Strategy GovernanceSustainability Review by the Board of Directors Financials

Other milestones in 2021 included establishing a

Green Finance Framework to further integrate our sus-

tainability ambitions into our financing and in March we

issued a EUR 500 million 7-year green bond, the first

of its kind for Neste. We announced in December that

we would use 100% renewable electricity in Finland

already in 2022, part of our drive towards using 100%

renewable electricity globally by 2023.

These are all efforts to be proud of, and I was

pleased to see our sustainability work recognized

externally. In 2021, Corporate Knights included Neste

on their Global 100 Index of the world's most sus-

tainable companies for the 15th consecutive year. We

were also included in the Dow Jones Sustainability

Indices for the 15th straight year. We received a

Leadership level and A- score for our climate action

from the non-profit CDP – our fifth consecutive year

at a Leadership level – and were also recognized as a

Leader in Global Child Forum’s global children’s rights

and business benchmark. Neste continues to fully

support and comply with the UN Global Compact

Principles.

Showing the way with innovation

Concrete climate action requires continuous innova-

tion, and in 2021 we showed excellent progress in our

Innovation Business Platforms, which include ligno-

cellulosic (forestry and agricultural waste based) fuels,

chemicals, and materials; scalable feedstocks for

sustainable aviation fuel including algae and munici-

pal waste; and renewable hydrogen and Power-to-X

utilizing renewable electricity to convert CO

to fuels

and chemicals. We have increased our investments

in innovation and been able to attract even more top

experts. Some 25% of Neste employees are working

in our innovation and technology divisions, and the

number is growing.

A recognition of our role as a key contributor to

the European energy transition was a EUR 88 mil-

lion grant decision from the EU Innovation Fund to

develop our green hydrogen and CO

capture & stor-

age project in Porvoo, part of our efforts to decar-

bonize production at the refinery. We also moved a

step closer to demonstrating the production of green

hydrogen at our Rotterdam refinery, entering into the

execution phase with our partners in the MultiPLHY

consortium, which aims to install, integrate and oper-

ate the world’s first high-temperature electrolyzer sys-

tem at multi-megawatt-scale.

And finally, we are progressing very well with the cre-

ation of a new R&D center in Singapore to strengthen

our global innovation and deepen collaboration with

partners in the Asia-Pacific region.

Safety at the core of our company

Before closing I will share a few words on safety,

which is a core part of Neste and a precondition for

our global growth and success. This is reflected in our

values of “We care. We have Courage. We Cooperate.”

Safety is of even greater importance during these

COVID times.

In 2021, we successfully navigated through the

pandemic’s peaks and troughs, reacting quickly to

frequent changes in national health guidelines across

multiple countries and further developing our office

and production site guidelines to ensure uninterrupted

operations. Our performance in occupational and pro-

cess safety was exemplary: a total recordable injury

frequency (TRIF) of 1.4 per 1 million hours worked,

which beat our goal for the year, and a process safety

event rate (PSER) of 1.4, which equaled our best-ever

level. This is a fantastic achievement given the chal-

lenges of the pandemic and the major turnaround of

Porvoo.

Momentum that is delivering change

Dear stakeholders, our successful track record of exe-

cution and transformation in 2021 underscores just

how agile and innovative Neste is as a company, with

dedicated employees, a clear strategy that is showing

momentum, an unmatched speed of execution and a

growing global network of partners to help us meet

our goals.

Thank you for your trust and support, and once

again thanks to our employees and partners for your

continued commitment to our purpose during a year

of significant uncertainty. I am convinced that Neste’s

resolve and resilience will continue to produce great

results in 2022 and the years to come as we drive

towards creating a healthier planet for our children.

Peter Vanacker

President and CEO

@peter_vanacker

Our successful strategy execution and transformation in 2021

underscores just how agile and innovative Neste is as a company, with

dedicated employees, a clear strategy, an unmatched speed of execution

and a growing global network of partners to help us meet our goals.

Neste Annual Report 2021 | CEO’s review

Strategy GovernanceSustainability Review by the Board of Directors Financials

Neste Annual Report 2021 | Strategy

Strategy 7

Innovation 10

Our businesses 12

Key events 2021 15

Key figures 2021 and financial targets 17

Information for investors 19

Everything we do serves

one purpose: to create

a healthier planet for

our children.

Strategy

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Neste Annual Report 2021 | Strategy

Our strategy focuses on growing in renewable and

circular solutions, creating readiness for the future,

and boosting competitiveness and transformation.

With the growth of renewable and circular solu-

tions, we aim to help our customers reduce their

greenhouse gas emissions by at least 20 million

tons of CO

e annually by 2030. We continue to

serve existing and new customers with renewable

Our aim is to be a global leader in renewable and circular solutions.

Implementation of our Faster, Bolder & Together strategy continues.

Strategy

and circular solutions, and by 2030, we will have three

strong renewables businesses: Renewable Aviation,

Renewable Polymers and Chemicals, and Renewable

Road Transportation. Growth in renewables also means

expanding our production and raw material platform,

which has been substantially strengthened through

organic growth and acquisitions, and we will continue to

grow our sourcing network and capabilities globally.

Strategy GovernanceSustainability Review by the Board of Directors Financials

Faster, Bolder & Together

Creating a healthier

planet for our children

Outcomes:

Business

transformation

Build a future-proof

and robust business

model

Climate

impact

Meet climate

commitments

Value creation

Continue

strong nancial

performance and

growth

The capacity expansion project at our refinery in

Singapore is aiming for a start-up by the end of the

first quarter of 2023, bringing our annual total renew-

ables production capacity to 4.5 million tons. The

new production line in Singapore will also provide us

with an option to produce up to 1 million tons of sus-

tainable aviation fuel (SAF) annually. Together with

our Rotterdam SAF optionality project, we expect to

achieve a SAF production capability of 1.5 million tons

annually by the end of 2023.

We are targeting a final investment decision for

our possible next world-scale renewables refinery in

Rotterdam early 2022. We focus on expanding our

renewable and circular raw material sourcing capa-

bility by continuing organic and inorganic growth in

existing markets, expanding to new geographical

markets, the diversification of raw material portfolio to

include also EU RED II (EU)2018/2001 Annex IX A raw

materials, and developing novel agricultural concepts

to provide additional vegetable oil volumes without

increasing the demand for cultivation land. We are

well on our way to reach our target of phasing out the

use of conventional palm oil by the end of 2023.

We create readiness for the future by focusing

on innovation. We develop and commercialize future

renewable and circular solutions to serve our custom-

ers in the aviation, polymers and chemicals, and road

transport sectors. Our innovation business platforms

Neste Annual Report 2021 | Strategy

focus on the commercial and technical development

of new sustainable and scalable raw materials and

technologies such as algae, municipal solid waste,

lignocellulosics, and renewable hydrogen and Power-

to-X. The aim is to start commercial operations by

2030 in one or more of the business platforms.

Future-readiness for us also means delivering on

our climate commitments to lead the transfor-

mation towards a carbon neutral value chain

by 2040. Our broadened sustainability vision also

sets aspirational targets in biodiversity, human rights,

and our supply chain and raw materials. We ensure

safety as a precondition for our operations and global

growth.

Competitiveness and transformation within

refining and distribution are the third pillar of

our strategy. Our vision is to transform our Porvoo

refinery, making it the most sustainable refinery in

Europe by 2030. This means reducing CO

emis-

sions in line with the targets of the Paris Agreement

and reaching carbon neutral production by 2035, and

replacing more than 10% of our crude oil use with

renewable and recycled raw materials in oil refining

by 2030, and creating a simplified and more flexible

asset portfolio.

Read more about our strategy on our website.

Strategy GovernanceSustainability Review by the Board of Directors Financials

Neste Annual Report 2021 | Innovation

Innovation and technology have always been in

Neste’s DNA. Our approach is to convert low-quality

raw materials into sustainable, high-quality products

and solutions.

Our growth and transformation are rooted in inno-

vation and technology which have always been

key enablers of our business. We are constantly

developing and improving our circular and renew-

able solutions. Approximately 25% of our person-

nel work with innovative research, product devel-

opment and engineering. We have dedicated teams

exploring and developing our Innovation business

platforms toward commercialization.

Innovation

Strategy GovernanceSustainability Review by the Board of Directors Financials

Lignocellulosics, algae, municipal

solid waste, renewable hydrogen and

Power-to-X are our promising growth

platforms for new business.

We invest the majority of our annual R&D expenditure

in research, development and testing future raw mate-

rials and technologies enabling their use. In 2021, our

R&D expenditure was EUR 67 million.

Our engineering arm, Neste Engineering Solutions,

also plays a key role in enabling Neste’s strategy imple-

mentation by participating in research and develop-

ment programs with technology development, model-

ling and simulation, and scaling up process engineer-

ing expertise.

Strengthening innovation

to create new business

We are focusing on scalable, sustainable raw materi-

als and required technologies for their conversion to

fuels, polymers and chemicals. Our twofold aim is to

ensure the growth of our current businesses and to

build new growth platforms for renewable and circular

solutions.

To further strengthen our R&D and innovation capa-

bilities globally, we announced that we will establish

an R&D center in Singapore. Operational in 2023,

the center will drive collaboration with partners in the

Asia-Pacific region, especially in Singapore. Neste's

Technology Center in Porvoo, Finland continues to

serve as our main R&D facility.

Innovation initiatives help the current businesses

widen the supply of renewable waste and residues

and other innovative raw materials, and develop busi-

ness around the chemical recycling of waste plastics.

The development of new businesses takes place on

the business platforms formed around scalable raw

material pools, such as:

• lignocellulosic (forestry- and agricultural waste and

residue based) fuels, chemicals, and materials;

• scalable raw materials for sustainable aviation

fuels and other renewable products, including

algae and municipal waste;

• renewable hydrogen and Power-to-X, utilizing

renewable electricity to convert CO

into fuels and

chemicals.

These globally scalable raw material pools will play

an important role in further reducing dependence on

crude oil and tackling climate change.

Neste’s green hydrogen and CO

capture & stor-

age project received a positive grant decision of EUR

88 million from the EU Innovation Fund. The project

aims to quickly and efficiently reduce greenhouse gas

emissions at our Porvoo refinery in Finland. The proj-

ect is currently in the feasibility phase.

Extensive collaboration network

Innovation requires partnering and cooperation.

Neste is already collaborating with a network of

25 leading universities and research institutes, and we

continue to expand and intensify our cooperation with

them. We work with technology companies, startups

and value chain partners to introduce innovations in

renewable and circular solutions to global-scale busi-

nesses. We have also established corporate venture

activity to invest in technology startups.

In 2021, we continued to build the Veturi ecosystem,

which gathers Finnish companies, startups, universi-

ties and research institutes to jointly build the future

capabilities needed to establish new technologies

and value chains in renewable and circular solutions.

Our Veturi project aims to develop sustainable, glob-

ally scalable raw materials and technology solutions

for transportation, and the production of chemicals

and polymers.

In 2021, we continued to collaborate with our equity

investment technology companies Alterra Energy and

Recycling Technologies related to developing chemi-

cal recycling, also known as advanced recycling,

as well as Sunfire GmbH related to green hydrogen

production. We also proceeded to the execution

phase with the MultiPLHY consortium to demonstrate

green hydrogen production at our Rotterdam refinery.

Neste Annual Report 2021 | Innovation

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Neste Annual Report 2021 | Our businesses

We are the world’s leading producer of sustainable

aviation fuel, renewable diesel, and renewable feed-

stock solutions for various polymers and chemicals

industry uses. We are also developing chemical

recycling to combat the plastic waste challenge.

We produce renewable products at our refineries

in Finland, the Netherlands and Singapore entirely

from renewable raw materials with a current annual

nameplate capacity of approximately 3.3 million

tons. In early 2023, our annual production capac-

ity will increase to nearly 4.5 million tons of renew-

ables as the extension of our Singapore refinery

comes on stream. This helps us meet the increas-

ing global demand for lower-emission products.

As we are also a technologically advanced refiner

of high-quality oil products with a commitment to

reach carbon-neutral production by 2035, we are

introducing renewable and recycled raw materials

such as liquefied waste plastic into our oil refinery

in Porvoo, Finland. At the Porvoo refinery, we aim to

increase the share of renewable and recycled raw

materials to over 10% by 2030 to substitute the use

of fossil crude oil-based raw materials.

Our station network of nearly 1,000 stations cov-

ers four countries in the Baltic Sea region: Finland,

Estonia, Latvia, and Lithuania.

We invest heavily in researching, testing and

deploying new raw materials and technologies.

Neste Engineering Solutions delivers high-quality

technology and engineering services for the group

and its external customers.

Neste renes waste, residues and innovative raw materials

into renewable fuels and renewable and recycled feedstock

for polymers and chemicals.

Our businesses

Neste’s businesses are grouped into four reporting segments:

Renewable Products, Oil Products, Marketing & Services and Others.

Renewable Products Oil Products Marketing & Services Others

Renewables Platform

Renewable

Road Transportation

Renewable

Aviation

Renewable Polymers

and Chemicals

Strategy GovernanceSustainability Review by the Board of Directors Financials

Neste Annual Report 2021 | Our businesses

Renewable Products

Renewable Aviation offers Neste MY Sustainable

Aviation Fuel™, which in its neat form and over the

life cycle reduces GHG emissions by up to 80% com-

pared to fossil jet fuel (calculation method: CORSIA).

The fuel provides an immediate solution for reducing

the GHG emissions of flying. We are actively working

with partners through the supply chain to grow the

availability of SAF for the aviation industry globally.

Renewable Polymers and Chemicals offers Neste

RE™, a drop-in solution made entirely out of renew-

able and recycled raw materials to replace fossil

feedstock in the production of polymers and chem-

icals. Neste RE can reduce GHG emissions by more

than 85% compared with fossil feedstock (LCA for

100% renewable Neste RE). The business unit is also

advancing chemical recycling for the plastics and

chemicals sectors together with value chain partners

to enable higher recycling rates for plastic waste.

Renewable Road Transportation offers Neste MY

Renewable Diesel™, enabling its customers to reduce

their greenhouse gas (GHG) emissions on average by

90% compared to fossil diesel over the fuel’s life cycle

(calculation method: EU RED II (EU)2018/2001). Neste

MY Renewable Diesel is a drop-in solution, which

means that it can be used in the existing diesel vehi-

cles and fuel infrastructures as such or in a fuel blend.

Renewables Platform enables Neste’s global

renewables production, renewable raw material sourc-

ing, and delivery of our renewables to our global cus-

tomer base. We currently use a wide variety of glob-

ally-sourced renewable raw materials, and waste and

residues account for over 90% of our global renew-

able raw material inputs. The capacity expansion

in Singapore will bring our total renewable product

capacity to 4.5 million tons annually in 2023.

Strengths:

• High-quality renewable diesel, sustainable aviation

fuel, renewable feedstock for the polymers and

chemicals production, as well as other renewable

products as solutions to significantly reduce

greenhouse gas emissions.

• Waste and residues accounted for 92% (83%) of

Neste’s renewable raw materials inputs globally in

2021.

• Capability to pretreat low-quality waste and

residue raw materials to enable their use in the

production of high-quality products.

• Global raw material supply network and customer

base.

• Capability to develop and introduce new

innovative raw materials, such as liquefied waste

plastic, into refining.

Main demand factors:

• Increasing renewable energy requirements in

transport, particularly in Europe and the U.S.

• Leading companies and brands who want

to reduce their own emissions and provide

customers with more sustainable products based

on renewable and circular solutions.

• Need to develop alternatives to reduce fossil

resource use in multiple industries, and solutions

to increase circulation of materials to tackle the

global plastic waste challenge.

Nameplate capacity:

ca. 3.3 million tons of renewable products

annually.

Main market areas:

Europe and North America, expanding in APAC.

Customers:

Retailers, wholesale customers such as transport

service companies, municipalities and other fleet

owners or operators, airports, airlines, aviation

fuel suppliers and corporate business travellers,

as well as polymers and chemicals producers.

Market position:

Neste is the world’s leading producer of sustainable

aviation fuel, renewable diesel, and renewable feed-

stock solutions for various polymers and chemicals

industry uses. We are also a forerunner in developing

chemical recycling to combat plastic waste challenge.

Main competitors:

Other renewable diesel and sustainable aviation fuel

producers in the U.S. and Europe, as well as pro-

ducers of conventional biodiesel. Other providers of

renewable and circular solutions for the polymers and

chemicals sectors.

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Neste Annual Report 2021 | Our businesses

Oil Products

Our offering includes high-quality oil products and

related services for the road transportation, non-road

uses, aviation and marine sectors, as well as for the

oil and petrochemical industries.

Neste has an ambition to make Porvoo the most

sustainable refinery in Europe by 2030. We will reduce

the refinery’s GHG emissions (Scope 1 & 2) at least

50% by 2030 and aim to reach carbon neutral pro-

duction by 2035. The share of renewable and recycled

raw materials will be increased to over 10% by 2030

to substitute the use of crude oil-based feedstocks.

As a part of the transformation of our refinery oper-

ations and securing the future competitiveness of our

Oil Products business, we decided to close our refin-

ery in Naantali, Finland in March 2021 and convert it

to a distribution terminal.

Crude oil refining capacity:

ca. 10.5 million tons annually.

Main market areas:

Baltic Sea area, Europe, and North America.

Customers:

Retailers and distributors, oil majors and trading

companies, petrochemicals companies and

companies marketing lubricants and solvents.

Main market areas:

Finland, Estonia, Latvia and Lithuania. Station

network consists of 723 stations in Finland and

224 stations in the Baltic countries. In Finland,

Neste MY Renewable Diesel is available at over

150 stations and in the Baltics at over

10 stations.

Customers:

Consumers, transport service, customers in

the aviation, shipping, industrial and agricultural

sectors, municipalities, heating customers, and

distributors.

Strengths:

• Extensive selection of high-quality solutions

combining fossil and renewable products.

• Technologically advanced refinery.

Main demand factors:

• Increasing demand for solutions containing both

fossil and renewable fuels.

• Customers’ requirements for flexibility in the

supply chain.

Market position:

Leading position in the Baltic Sea wholesale markets.

Main competitors:

Advanced refineries in Northwest Europe, Russia, and

in the Middle East.

Marketing & Services

Marketing & Services offers sustainable, low-emis-

sion and digital solutions for the needs of consumers,

companies and partners in Finland and in the Baltic

countries. We seek to develop a diverse range of ser-

vices as part of our offering and to be where the cus-

tomers are – in the mobile sphere.

Strengths:

• Best customer experience with digitalization and

new innovations.

• High-quality and sustainable solutions: Neste

MY Renewable Diesel, Neste MY Non-Road

Diesel and Neste MY Sustainable Aviation Fuel as

preferred choices.

• Strong brand and extensive station network in

Finland & in the Baltic countries.

• Customer solutions that create additional value.

Main demand factors:

• Developments in traffic and transportation

volumes.

• Customers’ growing expectations of services

and more sustainable solutions.

• Requirements by municipalities, cities, and

industry for cleaner energy solutions.

Market position:

Leading market position in Finland. Among the

leading operators in Estonia, Latvia, and Lithuania.

Main competitors:

Other large retailers in Finland and in

the Baltic countries.

Strategy GovernanceSustainability Review by the Board of Directors Financials

Neste Annual Report 2021 | Key events 2021

Key events 2021

Focusing on and investing in the Rotterdam production site

We decided to choose Rotterdam, the Netherlands, as a location for our pos-

sible next world scale renewable products refinery. We also decided to mod-

ify our existing renewables refinery in Rotterdam to enable up to 500,000 metric

tons of Neste MY Sustainable Aviation Fuel (SAF) production, an investment

of EUR 190 million. The acquisition of Bunge Loders Croklaan’s refinery plant in

Rotterdam was completed.

Helping the aviation industry with its emission reduction targets

We continued to grow our sustainable aviation fuel (SAF) business through partnerships

and collaborations with leading airlines, e.g. Lufthansa, KLM, American Airlines and DHL,

as well as several fuel suppliers. Our activities in the business aviation segment contin-

ued to grow this year making our Neste MY SAF available at 12 new airport locations in

the US and three in Europe. We established partnerships with BCG and TripActions to

enable lower-emission business travelling with our SAF-based solutions. We also took

part in the first study on in-flight use of 100% sustainable aviation fuel on both

engines of a commercial jet with Airbus and Rolls Royce, among others.

The major turnaround 2021 successfully

completed at the Porvoo renery

Neste’s three-month scheduled maintenance, i.e. major turn-

around started at the Porvoo refinery at the beginning of April. In

the successfully completed turnaround, the refinery was subjected

to regulatory inspections, maintenance works, and selected asset

improvement initiatives. With a total investment of EUR 630 mil-

lion, the major turnaround was a significant investment to secure

the refinery’s safety, availability and competitiveness.

Increasing the use of wind

and hydropower at the Porvoo

renery in Finland

We aim to use 100% renewable electricity globally by

2023. With the hydropower agreement with Vattenfall,

we will achieve our renewable electricity target in

Finland already in 2022. We have increased the use of

renewable electricity at our Porvoo refinery in Finland

with wind power delivery agreements with Statkraft,

Ilmatar and Fortum.

Expanding the availability

of Neste MY Renewable

Diesel globally

We continued to expand the avail-

ability of renewable diesel by bring-

ing it to new markets, such as Japan,

and by growing the fueling net-

work. In 2021 we launched Neste

MY Renewable Diesel in Belgium.

We also expanded our renewable

diesel fueling stations network in

Southern California.

Broadening our sustainability vision

Our broadened sustainability vision covers climate, biodiver-

sity, human rights, supply chain and raw materials. As part of

this, we set a concrete target for Scope 3 emissions. We are

committed to lead the transformation towards a carbon neutral

value chain by 2040 and reduce the use phase emission inten-

sity of sold products by 50% by 2040 compared to 2020 levels.

Progressing on our projects on

the Innovation business platforms

Our Innovation unit continued to focus on

the business platforms that are based on

scalable future raw material pools to reduce

the dependence on crude oil and tackle cli-

mate change. Our green hydrogen and CO

capture & storage project received a posi-

tive grant decision of EUR 88 million from

the EU Innovation Fund. The project aims to

quickly and efficiently reduce greenhouse gas

emissions at our Porvoo refinery in Finland.

Strategy GovernanceSustainability Review by the Board of Directors Financials

Neste Annual Report 2021 | Key events 2021

Key events 2021

Sale of base oils business

We signed an agreement to sell our existing

base oils business to Chevron. On the same

date, we also signed an agreement to exit our

base oils joint venture with Bahrain Petroleum

Company and Nogaholding.

Aiming to demonstrate production

of green hydrogen

We proceeded into execution phase with part-

ners in the MultiPLHY project, aiming to

demonstrate production of green hydrogen at

our renewable products refinery in Rotterdam.

Chemical recycling

of waste plastic

We announced our aim to establish a joint

venture with Ravago to build the first indus-

trial facility in North Sea Port in Vlissingen, the

Netherlands, for chemical recycling with an

annual processing capacity of about 55,000

metric tons of mixed plastic waste.

Green nance and green bond

We established a Green Finance Framework

to further integrate our sustainability ambitions

into our financing. Under this Framework our

first issuance was a EUR 500 million 7-year

green bond.

Strengthening global renewable raw material sourcing

We acquired 100% of Agri Trading, one of the largest renewable waste

and residue fat and oil traders in the US. The transaction strengthens our

global renewable raw material sourcing capabilities.

Strengthening global innovation

and R&D with an R&D center in

Singapore

We revealed that we will establish an R&D

center in Singapore. With this investment, we

will strengthen our global innovation and R&D,

and drive collaboration with partners in the

Asia-Pacific region, especially in Singapore.

Expanding renewable polymers

and chemicals availability globally

with our partners

We made a long-term commercial agree-

ment with LyondellBasell under which the

company sources our 100% renewable feed-

stock Neste RE™ and processes it into poly-

mers. Through the collaboration, Neste and

LyondellBasell are jointly contributing to the

development of the European market for sus-

tainable polymers and chemicals solutions.

We also collaborated with Alterra Energy

to commercialize Alterra’s waste plastic liq-

uefaction technology in Europe. The mate-

rial Alterra produces enables Neste to pro-

duce high-quality feedstock for polymers and

chemicals.

Industry’s First TOP TIER Certication

for Neste MY Renewable Diesel in North America

Neste MY Renewable Diesel received the TOP TIER™ Diesel Fuel certifi-

cation as the very first renewable diesel brand for its high quality and pow-

erful performance.

Strategy GovernanceSustainability Review by the Board of Directors Financials

Key figures 2021

Neste Annual Report 2021 | Key figures 2021

Revenue, EUR million

2021

20,000

15,000

10,000

5,000

202020192018

14,918

15,148

15,840

11,751

202020192018

Operating prot, EUR million

2021

2,500

2,000

1,500

1,000

500

1,022

2,023

2,229

828

202020192018

Comparable operating prot,

EUR million

2021

2,000

1,500

1,000

500

1,422

1,342

1,962

1,416

2021202020192018

GHG reduction achieved with

Neste’s renewable products,

million tons*

*) Compared to crude oil-based fuel.

7.9

10.9

9.6

10.0

Personnel, on average

6,000

5,000

4,000

3,000

2,000

1,000

2018

5,468

2021

4,872

2019

5,474

2020

4,833

Financial targets

2021202020192018

Return on average capital

employed after tax

(ROACE), %

21.1

15.5

26.6

17.3

Leverage ratio, %

2021

–5

202020192018

–1.5

0.6

–3.3

-4.7

Financial target: ROACE

of at least 15% annually

Financial target: A leverage

ratio of below 40%

Our dividend policy

is to distribute at least

50% of our comparable

net prot as dividend

Dividend per share, €

1,0

0,5

2018 2019 2020 2021

1.50

2.04

1.60

1.54

Financial target: 50% of comparable net profit

* Board of Directors’ proposal to the Annual General Meeting

0.76

1.02

0.80

0.82*

Strategy GovernanceSustainability Review by the Board of Directors Financials

Neste Annual Report 2021 | Key figures 2021

2021 2020 Change, %

Income statement

Revenue, MEUR 15,148 11,751 29%

EBITDA, MEUR 2,607 1,508 73%

Operating profit, MEUR 2,023 828 144%

Profit before income taxes, MEUR 1,962 786 149%

Profit for the period, MEUR 1,774 714 148%

Comparable EBITDA, MEUR 1,920 1,929 0%

Comparable operating profit, MEUR 1,342 1,416 -5%

Comparable net profit, MEUR 1,179 1,229 -4%

Profitability, %

Return on equity (ROE), % 28.5 11.8 141%

Return on average capital employed, after tax (ROACE), % 15.5 17.3 -11%

Financing and financial position

Total equity, MEUR 6,985 5,929 18%

Interest-bearing net debt, MEUR 41 -265 116%

Leverage ratio, % 0.6 -4.7 113%

Equity-to-assets ratio, % 56.6 61.1 -7%

Net Debt to EBITDA, % 0.0 -0.2 109%

Net cash generated from operating activities, MEUR 1,994 2,057 -3%

Other indicators

Capital employed, MEUR 8,742 7,236 21%

Net working capital in days outstanding 33.3 35.0 -5%

Capital expenditure and investment in shares, MEUR 1,535 1,197 28%

Research and development expenditure, MEUR 67 61 10%

Average number of personnel 4,872 4,833 1%

Total refining margin, USD/bbl 8.99 7.55 19%

Total Recordable Injury Frequency

per million hours worked (TRIF) 1.4 1.3 8%

Process Safety Events Rate (PSER) 1.4 1.6 -13%

Board of Directors’ proposal to the Annual General Meeting.

Share-related indicators

Earnings per share (EPS), EUR 2.31 0.93 149%

Comparable earnings per share, EUR 1.54 1.60 -4%

Equity per share, EUR 9.09 7.72 18%

Cash flow per share, EUR 2.60 2.68 -3%

Price / earnings ratio (P/E) 18.79 63.75 -71%

Dividend per share, EUR 0.82

0.80 2%

Dividend payout ratio, % 35.5

86.2 -59%

Dividend yield, % 1.9

1.4 40%

Dividend per comparable earnings per share, % 53.4

50.0 7%

Share price at the end of the period, EUR 43.36 59.16 -27%

Average share price, EUR 50.99 37.49 36%

Lowest share price, EUR 41.17 20.37 102%

Highest share price, EUR 64.74 60.14 8%

Market capitalization at the end of the period, MEUR 33,353 45,507 -27%

2021 2020 Change, %

Key figures 2021

Annual greenhouse gas (GHG) reduction achieved with Neste’s renewable products compared to 100% crude oil based fuel.

Calculation method complies with the EU Renewable Energy Directives; until the end of H1/2021 with RED 2009/28/EC

and in H2/2021 with RED II (EU)2018/2001.

Market-based emissions for Scope 2

2021 2020 Change, %

Sustainability indicators

Avoided GHG emissions by Neste customers

with Neste's products (compared to fossil fuel) in MtCO

10.9 10.0 9%

Neste's absolute CO

emissions in Scope 1 and 2

(production)

2.3 2.9 -21%

Use phase emission intensity of sold fuel products

(gCO

e/MJ) 55 58 -5%

Strategy GovernanceSustainability Review by the Board of Directors Financials

Neste Annual Report 2021 | Information for investors

Annual General meeting

Neste Corporation’s Annual General Meeting will be

held on Wednesday, 30 March 2022 at 12 noon EET.

The AGM will be held under special arrangements

without shareholders’ or their proxy representatives’

presence at Company’s headquarters at the address

Keilaranta 21, 02150 Espoo.

Shareholders and their proxy representatives can

participate in the AGM and exercise their share-

holder rights only by voting in advance and by

making counter proposals and presenting ques-

tions in advance, following instructions available at

www.neste.com/agm. The AGM can also be fol-

lowed via live webcast.

The Board of Directors proposes to the AGM that a

dividend of EUR 0.82 per share be paid on the basis

of the approved balance sheet for 2021. The dividend

shall be paid in two instalments.

Information for investors

Neste shares are listed on NASDAQ Helsinki under the trading code NESTE.

The company had 107,087 (94,726) shareholders at the end of 2021.

Dividend payment in 2022

• 18 March 2022: AGM record date.

• 1 April 2022: Dividend payment record date for

the first instalment.

• 8 April 2022: Dividend payable for the first

instalment.

• 30 September 2022: Dividend payment record

date for the second instalment.

• 7 October 2022: Dividend payable for the second

instalment.

Interim reports in 2022

Neste Corporation will publish financial reports in

2022 as follows:

• Interim Report January–March 2022:

29 April 2022

• Half Year Financial Report January–June 2022:

28 July 2022

• Interim Report January–September 2022:

27 October 2022

The Interim Reports are published in

Finnish and English and can be downloaded

at neste.com/investors.

Contact information

Investor Relations:

Jyrki Mäki-Kala, CFO

Tel. +358 (0)10 458 4098

jyrki.maki-kala@neste.com

Juha-Pekka Kekäläinen,

Vice President, Investor Relations

Tel. +358 (0)10 458 5292

juha-pekka.kekalainen@neste.com

Debt Investor and Banking Relations:

Mika Rydman, Vice President, Group Treasurer

Tel. +358 (0)10 458 4710

mika.rydman@neste.com

Neste’s general e-mail

address for investors:

investors@neste.com

Strategy GovernanceSustainability Review by the Board of Directors Financials



Neste share’s trading

volumes in 2021, %

Total shareholder

return, %

Non-Finnish shareholders 39.6% (40.2%)

Finnish State 35.9% (35.9%)

Finnish institutions 17.0% (16.4%)

Households 7.5% (7.5%)



Shareholder structure

on 31 December 2021, %

Earnings per share and

dividend per share, EUR

Earnings per share

Comparable earnings per share

Dividend per share

* 2021: Board’s proposal to Annual General Meeting

Neste Annual Report 2021 | Information for investors

100

-30

-20

-10

-25.4

41.5

94.0

20202019 2021

NASDAQ Helsinki 71.3% (71.8%)

CBOE Europe 24.0%

Chi-X Europe 0.1% (17.0%)

BATS Europe 0.2% (6.9%)

Turquoise 4.4% (4.3%)

Shareholders’ total return, indexed

700

300

500

100

600

200

400

2019 2020 202120182017

Neste Stoxx Nordic

Neste’s share performance 2017–2021, EUR

2019 2020 202120182017

202020192018

2021

2.5

2.0

1.5

1.0

0.5

1.01

2.33

1.50

2.04

0.76

1.02

0.93

1.60

0.80

2.31

1.54

0.82

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Sustainability

Sustainability highlights 22

Sustainability at Neste 23

Material sustainability topics 27

Stakeholder engagement 37

Value creation 43

Sustainability governance 44

Compliance 46

Climate 47

Our carbon handprint 49

Our carbon footprint 53

Environment 59

Biodiversity 60

Raw materials 62

Renewable raw materials 63

Recycled raw materials 73

Sustainable supply chain 77

People 82

Human rights 85

Safety 90

Sustainability reporting in 2021 94

Performance in figures 96

GRI Content Index and UN Global Compact 100

TCFD Recommendations Disclosure 106

SASB Content Index 107

UN Guiding Principles Reporting Framework Index 109

Principles for calculating the key indicators 110

Independent Practitioner’s Assurance Report 112

Sustainability

Creating a

healthier planet

for our children.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Sustainability highlights 2021

CLIMATE PEOPLE RAW MATERIALS

of our total renewable

raw material inputs

globally

Waste and

residues

accounted

for 92%

by 2040 compared to 2020

Commitment Letter

by Science Based Targets

initiative

safe days

(325 in 2020)

of our employees

understand how their

work contributes to

Neste's success

306

78%

external

recruitments

955

Plan to reduce the share of

conventional palm oil to

of our global renewable

raw material inputs by

the end of 2023

Neste Annual Report 2021 | Sustainability highlights 2021

Source: World Bank.

As defined by the Greenhouse Gas Protocol. Scope 3 includes relevant emissions from the

whole value chain. For Neste, the key categories are the use of sold products, purchased goods

& services and raw material & product transport.

Use phase emission intensity is calculated by dividing the emissions from the use of products

sold by Neste with the total amount of sold energy (gCO

e/MJ).

The Business Ambition for 1.5°C Commitment Letter, as part of the Science Based Targets

initiative (SBTi), is a letter for companies to commit to take urgent action aligned with 1.5°C.

2017 8.3Mt

2018 7.9Mt

2020

10.0Mt

2021

10.9Mt

Target 2030 20Mt

2019

9.6Mt

Equaling the

annual emissions

from 4.2 million

passenger cars

or the annual

carbon footprint of

1.7 million average

EU citizens

10.9Mt

The amount of greenhouse

gas emissions our customers

reduced with our renewable

products in 2021:

1.5°C

50%

Signing the Business

Ambition for

Concrete target for Scope 3

emissions

to reduce the use

phase emission intensity

sold products by

Our broadened

sustainability vision covers

Supply chain

and raw materials

Biodiversity

Climate

Human rights

SUSTAINABILITY VISION

SustainabilityStrategy Governance Review by the Board of Directors Financials

As the world’s leading producer of sustainable avia-

tion fuel, renewable diesel and renewable feedstock

solutions for various polymers and chemicals indus-

try uses, our business is built upon sustainability. We

refine our renewable products from waste, residues

and sustainably-produced vegetable oils. As the cli-

mate crisis continues, saving lives and livelihoods

requires urgent effort. Renewable and circular solu-

tions are our contribution to keeping societies running

sustainably.

In 2021, we broadened our sustainability vision: we

are aiming at tackling the climate crisis, biodiversity

loss and inequalities – not just in our own operations,

but also in our value chain.

Our purpose to create a healthier planet for

our children drives us to set high standards for

sustainability. Our broadened sustainability vision

covers climate, biodiversity, human rights, supply

chain and raw materials – all of which are interlinked.

Neste Annual Report 2021 | Sustainability at Neste

Sustainability at Neste

SustainabilityStrategy Governance Review by the Board of Directors Financials

Climate

We are well on track and continue to progress with

our existing climate commitments to reduce our

own emissions and reach carbon neutral production

(Scope 1 & 2

) by 2035, and to help our customers

reduce their greenhouse gas emissions by at least

20 million tons CO

e annually by 2030.

In 2021, we extended our climate commitments to

include also Scope 3 emissions. We are committed

to lead the transformation towards a carbon neu-

tral value chain by 2040. We aim to reduce the use

phase emission intensity

of sold products by 50%

by 2040 compared to 2020 levels (Scope 3

). This

target will be achieved through Neste’s transforma-

tion towards increasing the share of renewable and

circular solutions in its offering, as well as working

with our suppliers and partners to reduce emissions

across our value chain.

Read more about human rights.

)

Scope 1, 2 & 3 emissions as defined by the Greenhouse Gas Protocol. Scope 1 and 2 cover the emissions related to our own production. Scope 3 includes relevant emissions from the value chain. For Neste, the key Scope 3 categories are the use of sold

products, purchased goods & services and raw material & product transport.

)

Use phase emission intensity is calculated by dividing the emissions from the use of products sold by Neste with the total amount of sold energy (gCO

e/MJ).

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Sustainability at Neste

Neste sustainability vision

Nature-positive refers to halting and reversing nature loss, positive impacts outweighing the adverse impacts

Supply chain & raw materials

Neste drives safe and healthy

workplace, fair labor practices and

increased sustainability commitment

across the supply chain

Biodiversity

Neste drives a positive impact

on biodiversity and achieves

a nature-positive

value chain

by 2040

Climate

Neste leads the

transformation towards

a carbon neutral value

chain by 2040

Human rights

Neste strives to create a

more equitable and inclusive

value chain by 2030 in which

everyone works with dignity

Supply chain and raw materials

Sustainability of our supply chains and raw materials

are critically important to Neste's sustainability ambi-

tions overall. Our vision is to drive a safe and healthy

workplace, fair labor practices and increased com-

mitment to sustainability across the supply chain.

Human rights, biodiversity and climate related targets

are included in the criteria for our suppliers.

We expect all of our business partners and sup-

pliers to uphold Neste’s sustainability policies and

principles, including our Supplier Code of Conduct,

a key element in Neste’s supplier management sys-

tem. Our renewable raw material suppliers are addi-

tionally required to meet the requirements of our

Responsible Sourcing Principle, adhere to our

Human Rights Principle, as well as industry and

market-specific legal requirements.

Supplier engagement is the key to drive and improve

our supply base. We support our suppliers in the

development of sustainability policies, management

systems, transparency, traceability, due diligence and

continuous improvements. For example, we conduct

sustainability workshops with our suppliers every year

to provide a venue to specifically discuss sustainabil-

ity-related matters.

Read more about our raw materials.

We believe that innovation and collaboration are the

cornerstones to success in combating global chal-

lenges, like the climate crisis. This requires a change

in mindsets and concrete actions from all of us. But

together with our partners, we can, for example, scale

up our renewable and circular solutions, increase

innovation through extensive research and value chain

partners, and establish mutually beneficial partner-

ships committed to sustainability.

While combating the global climate challenge, we

also acknowledge our social and economic role re-

gionally and locally. We have an impact on people

within our own operations but also throughout our

value chain. We care for our own employees’ safety

and health, while also paying close attention to the

welfare of the most vulnerable groups of individuals in

our supply chain. Economic responsibility, corporate

governance and supply chain sustainability are the

cornerstones of everything we do. We have identied

several environmental, social and governance topics

as relevant for our business and our everyday sus-

tainability work, relating also to the UN Sustainable

Development Goals.

SustainabilityStrategy Governance Review by the Board of Directors Financials

• We broadened our sustainability vision to cover climate,

biodiversity, human rights, supply chain and raw materials.

• We extended our climate commitments to cover the entire

value chain (Scope 1, 2 & 3

). We aim to:

› help our customers reduce their greenhouse gas

emissions with our renewable and circular solutions by at

least 20 million tons of CO

eq annually by 2030;

› reduce our production (Scope 1 & 2) emissions by 50%

by 2030 compared to 2019 and reach carbon neutral

production by 2035;

› lead the transformation towards a carbon neutral value

chain by 2040, reduce the use phase emission intensity

of sold products by 50% by 2040 compared to 2020, and

work with our suppliers and partners to reduce emissions

across the entire value chain (Scope 3).

• We are well on track with our commitment of reaching

carbon neutral production by 2035, and we currently have

over 100 identified measures to reduce the production

emissions.

• We signed the Business Ambition for 1.5°C Commitment

Letter and continue to build on our climate actions so

that they are in line with the 1.5°C emission scenarios, the

criteria and recommendations of the Science Based Targets

initiative.

• We have an ambition to make Porvoo the most sustainable

refinery in Europe by 2030. For instance, we aim to reduce

the refinery’s greenhouse gas emissions (Scope 1 & 2).

by 50% by 2030 and introduce and scale up the use of

renewable and recycled raw materials to over 10% by 2030

to substitute the use of fossil crude oil based feedstocks at

the Porvoo refinery.

• We set a target to reach 100% renewable electricity use

globally by 2023. This target is to be achieved ahead of

schedule in Finland with the new hydropower agreement

with Vattenfall. Neste has wind power agreements in place

with Fortum, Ilmatar and Statkraft.

• We included our climate commitments into long-term

incentives (LTIs) for Neste’s key personnel.

• We published a Green Finance Framework to further

integrate Neste’s sustainability ambitions into our financing

and successfully launched EUR 500 million green bond.

• We set a target to reduce the share of conventional palm oil

(crude and refined palm oil) to zero of our global renewable

raw material inputs by the end of 2023.

• We renewed the Neste Code of Conduct.

• We developed a sustainability due diligence process

for our Oil Products suppliers. In 2021, a total of 86 were

assessed.

• We started collaborating with Fauna & Flora International

(FFI) to develop our approach on biodiversity.

Sustainability milestones in 2021

and raw material & product transport.

**)

Use phase emission intensity is calculated by dividing the emissions from the use of products sold by Neste with the total amount of sold energy (gCO

e/MJ).

We take the lead in

transforming our

value chains towards

carbon neutrality,

and setting ourselves

aspirational targets

for biodiversity, human

rights, and our supply

chain & raw materials.

Neste Annual Report 2021 | Sustainability at Neste

SustainabilityStrategy Governance Review by the Board of Directors Financials

The most recent assessment was conducted in 2020

and the most material topics we identified for Neste

are based on their relevance to our business and

stakeholders, as well as the estimated magnitude of

their impacts. Our materiality assessment process is

built on four stages: identification, evaluation, prioriti-

zation and eventually integration of the most material

sustainability topics.

Understanding the views and expectations of our

stakeholders is crucial to the success of our company and

the acceptability of our operations. In order to identify what

topics we should particularly focus on in our sustainability

efforts, we conduct a materiality assessment once every

two years and engage our key stakeholders in the process.

Neste Annual Report 2021 | Material sustainability topics

Material sustainability topics

SustainabilityStrategy Governance Review by the Board of Directors Financials

Dening material topics

Material topics are defined by identifying Environmental

Social and Corporate Governance (ESG) topics that

are relevant to our business, as well as to our stake-

holders. The topics are then evaluated with potential

sustainability impacts and business-related key risks

and opportunities. Stakeholders involved in the mate-

riality assessment process represent a large variety of

stakeholders.

Based on the results from the latest assessment

process (conducted in 2020), nine important sustain-

ability topics are identified. They are presented in the

materiality matrix on the right.

The material topics reflect Neste’s business opera-

tions, as well as strategic ambitions in combating cli-

mate change and creating a healthier planet for our

children. The material topics represent different sus-

tainability aspects, and they are relevant throughout

our value chain. Supply chain sustainability is no lon-

ger seen as a single material topic but an underly-

ing theme that needs to be taken into account when

considering each of the nine topics. Similar underly-

ing themes are economic responsibility and corpo-

rate governance. These three themes are the corner-

stones of our sustainability agenda.

The next materiality assessment will be

conducted in 2022. Read more about our

materiality assessment process.

The cornerstones for everything we do

Corporate GovernanceEconomic Responsibility Supply Chain Sustainability

Materiality matrix

Signicance of economic, environmental and social impacts

Inuence on stakeholder assessment and decision-making

Tackling plastic waste challenge

Forced labor and vulnerable groups

Signicant

Crucial

Diversity, equality and inclusion

Safety, health and wellbeing

Ethics, transparency and

open communication

Protecting biodiversity,

water and soil

Carbon footprint and

environmental impacts

Innovation and partnerships

Carbon handprint

Neste Annual Report 2021 | Material sustainability topics

In addition to the materiality assessment, we conduct

an annual Neste Brand Health Research study into the

key trends and perceptions of the main global play-

ers in renewable and circular solutions, as well as on

our sustainability topics, across Asia, Europe and the

Americas representing a wide range of organizations.

Findings from the research support the views stated

in the materiality assessment. These views represent

a clear foundation of strengths and significant oppor-

tunities for Neste. The assessment provides insight

on our progress against our goals.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Material sustainability topics

Sustainable Development Goals

The UN Sustainable Development Goals (SDGs) are

a collection of 17 interconnected global goals to help

achieve a better and more sustainable future for all.

They represent an action plan for the planet and soci-

ety to thrive by 2030, and explicitly call on businesses

to help lead this transformation. Neste recognizes the

strategic importance of the SDGs to our business and

the world and is committed to helping achieve them.

Neste has identified nine priority SDGs as the goals

we most significantly contribute to and have used the

SDG Compass to determine them. To understand

and prioritize the most relevant SDGs for Neste, we

have worked with external experts to assess both the

positive and negative impacts our business has on

the SDGs throughout our value chains. Our prioritiza-

tion process is based on our sustainability materiality

analysis, impact evaluation study, an external review

as well as an internal expert analysis.

In 2021, Neste joined the UN Global Compact

SDG Ambition Accelerator. This provided us with

the opportunity to review our current performance

and discover new opportunities for contributing to the

SDGs. As our business and the world around us con-

tinues to change and evolve, so do our actual and

potential impacts on the SDGs. Therefore a key out-

come of participating in the SDG Ambition Accelerator

workshops was the identification of three new goals

(SDG 7, 10 and 15) to add to our list of priority SDGs,

based on our new business impacts and sustainability

vision. You can read more about our impacts related

to these SDGs on pages 30–32.

Our priority SDGs

are linked to our material

sustainability topics

Turning sustainability priorities into

commitments and targets

We continue to work on embedding the SDGs into

our strategy and business targets, identifying new

impacts, and also reporting on our progress. Our

most relevant SDGs form a strong basis for our sus-

tainability work. By identifying material sustainability

topics and the relevant SDGs, we position Neste as

part of society as well as part of the global sustain-

ability framework.

Based on the identified material topics, we have

formed relevant sustainability KPIs. This helps us

integrate the renewed materiality assessment in our

sustainability agenda and to continue our sustain-

ability work in a consistent and forward-looking way.

We monitor, measure and follow up how our actions

affect the broader context. The SDG targets will be

aligned with these new sustainability targets.

The sustainability KPIs can be found in the table on

pages 33–36.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Clean Energy

• Neste increases the share of

renewable energy in the global

energy mix by producing and selling

low-emission renewable fuels for

road transportation and aviation.

› In 2021, Cologne Bonn Airport

made Neste MY SAF available for

airlines to reduce greenhouse gas

emissions at the airport.

› Hesburger and Neste started

a collaboration where the used

cooking oil from Hesburger

restaurants was recycled into

renewable diesel and used in

transportation.

› Neste’s renewable fuels portfolio

includes as well renewable

gasoline (in testing phase) and

renewable fuel oil.

• Neste aims for 100% renewable

electricity use globally by 2023.

This target is to be achieved ahead

of schedule in Finland with the

new hydropower agreement with

Vattenfall. Neste has wind power

agreements in place with Fortum,

Ilmatar and Statkraft.

Industry, Innovation and Infrastructure

• Neste’s growth and transformation is

rooted in innovation and technology.

We invest the majority of our annual R&D

expenditure in research and testing future

raw materials and technologies.

• Neste received a positive grant decision

from the EU Innovation Fund for its

Porvoo refinery green hydrogen and CO

capture & storage project.

• Neste is moving into the execution phase

with partners in the MultiPLHY project,

to demonstrate production of green

hydrogen at its Rotterdam refinery.

• Neste will strengthen its global

innovation and R&D by opening a

R&D center in Singapore.

• Neste is involved in the VTT-led

project of large-scale production and

commercialization of e-fuels.

• Neste and aviation leaders have launched

the first in-flight 100% sustainable

aviation fuel emissions study on

commercial passenger jets.

• Neste increases the use of renewable

electricity at its production sites in

Finland.

• Digitalization is an important accelerator

at Neste. Neste launched a digital

service for companies to monitor their

transport fuel emissions.

Decent Work and Economic Growth

• The new Safety Leadership Principle and team

safety commitments were the focus of Neste’s

safety leadership and culture in 2021. Especially

the theme of wellbeing was highlighted in the team

level safety commitments.

• The pandemic management activities continued

and included enhancing the safety and wellbeing of

people.

• A new leadership development program, We Lead,

and a new way of working, Smart Work, were

launched.

• We actively take steps to protect labor rights and

promote safe and secure working environments

for all workers, with special attention to vulnerable

groups.

• Neste is committed to implementing effective

measures to eradicate forced labor, modern

slavery, and child labor.

• Neste respects and supports children’s rights and

provides good-quality employment, education and

training for young people. In 2021, we hired nearly

330 summer trainees to work across different

functions at Neste.

• Neste joined the Consumer Goods Forum’s

Human Rights Coalition, which is focused on

ending forced labor through focused and collective

action. We began the work to identify key focus

areas for action under this coalition, with further

assessments projected to start in 2022.

Neste Annual Report 2021 | Material sustainability topics

How Neste contributes to the SDGs?

SustainabilityStrategy Governance Review by the Board of Directors Financials

Sustainable Cities and Communities

• Neste creates value for the society and

helps customers to reduce greenhouse

gas emissions by offering lower-emission

renewable fuels to aviation and road

transportation. Reducing emissions in

transportation will also decrease the

pollution in cities. Some examples:

› The collaboration between the City

of Oakland (CA, USA) and Neste was

recognized in the Fast Company's 2021

World Changing Ideas Awards where

Neste was the winner in one of the

categories.

› Neste’s renewable diesel is used to power

the fleets of major Californian cities,

e.g. Twin Rivers Unified School District.

› The Finnish Ham Trick encourages

households in Finland to recycle

Christmas waste fats into renewable

diesel.

• Neste helps the aviation industry to reduce

local airport emissions with the use of

Neste’s SAF. The fuel was introduced at

Gatwick airport.

• Neste refines waste, residues and innovative

raw materials into renewable fuels and

sustainable feedstock for plastics and other

materials. In 2021, the share of waste and

residues increased to 92% of Neste’s total

renewable raw material inputs globally.

Responsible Consumption and Production

• Neste refines waste, residues and innovative

raw materials into renewable fuels and

sustainable feedstock for plastics and other

materials. Neste is the world’s leading producer

of renewable diesel, sustainable aviation fuel

and renewable feedstock solutions for various

polymers and chemicals industry uses.

• Neste’s ambition is to make its Porvoo refinery

the most sustainable refinery in Europe by 2030

and to increase the share of renewable and

circular raw materials to over 10% of the oil

refinery feeds by 2030.

• Neste continued to process liquefied waste

plastic successfully at its Porvoo refinery.

• In 2021, Neste acquired a minority stake

at Alterra Energy, an innovative chemical

recycling technology company.

• Neste and Ravago aim to establish a joint

venture to build an industrial facility for chemical

recycling.

• Neste joined forces with Mitsui Chemicals,

Inc. and Toyota Tsusho Corp. to produce

renewable plastics and chemicals from Neste

RE.

• Neste acquired Agri Trading, one of the

largest independent renewable waste and

residue fat and oil traders in the US.

• Neste entered into circularity cooperation at

Dallas Fort Worth International Airport.

Reducing Inequalities

• Our human rights ambition for 2030 is

to create a more equitable and inclusive

value chain, in which everyone works

with dignity. This includes requiring

and securing minimum living wage,

advancing responsible recruitment

practices in line with the Employer Pays

Principle, increasing children’s access

to education and reducing inequalities

across the value chain.

• Neste joined the WBCSD Business

Commission to Tackle Inequality.

• Neste reaffirmed its commitment to

FIBS Diversity Charter Finland.

• Neste became a signatory to the UN

Women’s Empowerment Principles

and initiated a WEP gender-gap

analysis.

• Neste joined the Diversity Roundtable,

a cross-functional forum facilitated

by Boston Consulting Group and UN

Women Finland, with an objective of

advancing diversity in Finland.

• Neste took part in Plan International’s

#GirlsTakeover campaign.

• Neste joined two Unilever Partner

Promises – the Supplier Equity,

Diversity and Inclusion Promise and the

Living Wage/Living Income Promise.

Neste Annual Report 2021 | Material sustainability topics

SustainabilityStrategy Governance Review by the Board of Directors Financials

Life on Land

• Neste is committed to protecting

biodiversity with a vision to drive

a positive impact on biodiversity

and achieve a nature positive value

chain by 2040. We aim to create net

positive impacts for biodiversity from

new activities from 2025 onwards.

• Neste is committed to combating

deforestation and requires the same

from its suppliers.

• Biodiversity and climate topics are

key when assessing potential raw

materials. Neste’s raw material

sourcing for renewable fuels is

regulated by strict biodiversity criteria

as outlined in the EU RED II ((EU)

2018/2001).

• Neste engages in ongoing local

activities to protect biodiversity,

e.g. Neste has launched biodiversity

assessments, and in spring 2022 will

pilot new biodiversity metrics on the

refinery areas in Finland.

• Neste works closely with NGOs and

research partners who have a strong

understanding on biodiversity, e.g.

with Fauna & Flora International (FFI).

• Neste joined the Science Based

Targets Network’s (SBTN) Corporate

Engagement Program (SBT

framework for nature).

Partnerships for the Goals

• Partnerships are at the core of the SDGs and we

see them as the key to advancing sustainable

business. Recent examples of our partnerships, in

addition to the aforementioned include:

› Renewable fuel oil used in Lumene’s

manufacturing process.

› Piloting electric vehicle charging service with

Niemi Services.

› Neste and Jetflite offer lower-emission private

business flights in Finland.

› Neste joined the eFuel Alliance.

› Neste and LyondellBasell agreed on a

long-term commercial relationship to make

polymers and chemicals from renewable

feedstock more widely available to global brands.

› Neste and Unilever work together on

developing solutions for carbon-based

ingredients and packaging materials produced

from renewable materials for Unilever’s cleaning

products.

› Neste is a member of several organizations

and councils collaboratively advancing action

on sustainability, e.g. The Nordic Business

Network for Human Rights, WBCSD,

Consumer Goods Forum’s Human Rights

Coalition, Forest Positive Coalition, and the Palm

Oil Collaboration Group.

• Read more about our engagement and

commitments as well as the work we do with our

stakeholders on pages 37–42.

Climate Action

• Our climate commitments cover the entire value chain (Scope 1, 2 & 3).

We aim to:

› help our customers reduce their greenhouse gas emissions with our

renewable and circular solutions by at least 20 million CO

e tons

annually by 2030;

› reduce our production emissions (Scope 1 & 2) by 50% by 2030

compared to 2019 and reach carbon neutral production by 2035;

› lead the transformation towards a carbon neutral value chain by 2040,

reduce the use phase emission intensity of sold products by 50%

by 2040 compared to 2020 levels, and work with our suppliers and

partners to reduce emissions across the entire value chain (Scope 3).

• Neste joined the Business Ambition for 1.5°C campaign led by the

Science Based Targets initiative (SBTi).

• Neste included its climate commitments into long-term incentives

for Neste’s key personnel, updated the investment criteria to include

climate impact and updated its internal price for carbon.

• Neste aims for 100% renewable electricity use globally by 2023.

This target is to be achieved ahead of schedule in Finland with the

new hydropower agreement with Vattenfall. Neste has wind power

agreements in place with Fortum, Ilmatar and Statkraft.

• Neste published a Green Finance Framework to further integrate its

sustainability ambitions into its financing and issued its first 500 million

EUR green bond.

• Neste MY Renewable Diesel was used extensively in product

distribution logistics in Finland.

• Neste began using its own SAF in its employees’ air travel in

collaboration with Finnair. A SAF partnership to reduce the climate

impact of business air travel with BCG was also announced.

Neste Annual Report 2021 | Material sustainability topics

SustainabilityStrategy Governance Review by the Board of Directors Financials

Material sustainability KPIs

Material topic Objective Key performance indicator Target Performance in 2021 SDG link

Carbon handprint Helping our customers to reduce

their GHG emissions

Avoided GHG emissions by Neste customers with

Neste's products (compared to fossil fuel) in MtCO

20 MtCO

e annually by 2030 10.9 MtCO

e (10.0 MtCO

Share of waste and residue used in renewables’

production (%)

While Neste continues to focus on waste

and residue raw materials in the short term,

we expect to use also other types of raw

materials besides waste and residues in the

mid and longer term

92% (83%)

Carbon footprint

and environmental

impacts

Reaching carbon neutral

production and ensuring

environmental quality

Neste's absolute CO

emissions in Scope 1 and 2

(production)

50% reduction by 2030 in comparison to

2019 baseline 3.4 MtCO

2.3 MtCO

(2.9 MtCO

)

32% reduction compared to baseline.

Use phase emission intensity of sold fuel products

(gCO

e/MJ)

50% reduction by 2040 in comparison to

2020 baseline 58 gCO

e/MJ

55 gCO

e/MJ (58 gCO

e/MJ)

5% reduction compared to baseline.

Energy consumption savings achieved during

reporting year (GWh) and cumulative energy

consumption savings during 2017–2025 compared to

500 GWh target (%)

2017–2025 target: 500 GWh Energy consumption savings during reporting year 95.8 GWh (33

GWh) Cumulative savings 2017-2021 compared to target: 41%

(22%) achieved

Share of renewable electricity of total purchased

electricity (%)

Aiming for 100% renewable electricity by 2023 36.5% (4.7%)

Availability of pollution prevention technology 100% availability of pollution prevention

technology at refineries and terminals

Availability of pollution prevention technology on average 94%

(96%) at refineries and terminals

Number of permit violations Zero permit violations for Oil Products (OP)

and Renewable Products (RP)

Permit violations: 2 (2), of which 2 (1) in OP and 0 (1) in RP

Protecting

biodiversity,

water and soil

Protecting biodiversity, water

and soil and mitigating negative

impacts in Neste business

operations and supply chains

Biodiversity workplan and criteria approved Workplan and criteria presented during 2021 Workplan and criteria presented during 2021

Support for biodiversity, water and soil projects

relevant for Neste

At least one raw material-related biodiversity,

water and soil project ongoing annually

We continued a sustainability impact project in the Siak and

Pelalawan regions in Indonesia. The project aims to improve the

region's environmental performance, including conservation and

protected areas. We also initiated a biodiversity assessment at

the Porvoo refinery and Naantali terminal in Finland.

Biodiversity, water and soil issues in expansion

projects

All production expansion projects’ biodiversity

impacts evaluated and biodiversity, water and

soil aspects included in all investment

decisions

Biodiversity aspects were included in the environmental impact

assessment conducted for the Rotterdam capacity growth

decision. (New KPI.)

Neste Annual Report 2021 | Material sustainability topics

SDG10: Reducing inequalities

SDG15: Life on land

SDG7: Clean energy

SDG11: Sustainable cities and communities SDG13: Climate action

SDG9: Industry, innovation and infrastructureSDG8: Decent work and economic growth

SDG12: Responsible consumption and production SDG17: Partnerships for the goals

119

129

1312

Annual greenhouse gas (GHG) reduction achieved with Neste’s renewable fuels compared to 100% crude oil based fuel. Calculation method complies with the EU Renewable Energy Directives; until the end of H1/2021 with RED 2009/28/EC and in H2/2021 with RED II (EU) 2018/2001.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Safety, health

and wellbeing

Ensuring the health and safety of

employees and contractors in all

Neste locations and supply chain

Total Recordable Incident Frequency (TRIF)

1.7 for 2020 and 2021

Long-term target: Zero accidents

TRIF 1.4 (1.3)

Process Safety Event Rate (PSER)

1.7 for 2020 and 2021

Long-term target: Zero accidents

PSER 1.4 (1.6)

Safe days (including environmental permit violations) 310 for 2020 and 315 for 2021

Long-term target: Continuously increasing

the number of Safe Days

306 (325) Safe Days

Promoting working culture that

protects the physical and mental

wellbeing of employees while at

work

Wellbeing index from employee engagement survey

Baseline 2019 results: Engagement 71,

wellbeing 61, change adaptation 64.

Target is to maintain results on a good level.

Engagement 66 (70), wellbeing 59 (60), change adaptation 60

(62)

The voluntary exit level / voluntary turnover for the

year

To attract and retain highly skilled employees Leaving rate of permanent employees 13.0% (6.9%). Hiring rate

of permanent employees 12.1% (9.2%)

Forced labor

and vulnerable

groups

Managing forced labor risks in

Neste operations and supply

chains

(X) number of critical and major forced labor non-

compliances found in Neste Sustainability Audits, of

which (X) number have been remedied.

100% of critical and major forced labor

non-compliances remedied.

No critical or major forced labor non-compliances were identified

in sustainability audits conducted.

Number of Neste employees who have received

training on forced labor and vulnerability

To increase the number of employees who

have received training on forced labor and

vulnerability, prioritizing those involved in

supply chains and procurement

Training on forced labor and vulnerable groups carried out for

3381 employees as part of the new Code of Conduct E-Learning,

627 employees as part of the Neste Global Induction, 125

employees as part of the Supplier Code of Conduct e-learning,

and 15 employees in a specialised in-person training session for

human rights risks under new feedstock projects in Innovation.

Human Rights Due Diligence (HRDD)

carried out for

key business areas/functions

To strengthen Neste’s capacity to identify,

assess, and address human rights risks in our

operations and supply chains

Four major assessments/initiatives undertaken in 2021:

1) Corporate-wide assessment to review Neste’s salient issues

and understand gaps in mitigation activities.

2) Human Rights Risk Assessment completed for potential

Rotterdam Refinery Expansion Project.

3) Human rights risk assessments completed for Lignocellulose

and Algae Innovation platforms.

4) Development and implementation of a new channel for all

onsite workers to raise grievances and access effective remedy

during the 2021 Turnarounds.

Material topic Objective Key performance indicator Target Performance in 2021 SDG link

Neste Annual Report 2021 | Material sustainability topics

SDG10: Reducing inequalities

SDG15: Life on land

SDG7: Clean energy

SDG11: Sustainable cities and communities SDG13: Climate action

SDG9: Industry, innovation and infrastructureSDG8: Decent work and economic growth

SDG12: Responsible consumption and production SDG17: Partnerships for the goals

1098

Number of cases per million hours worked. The figure includes both Neste’s and contractors’ personnel.

) Number of cases per million hours worked.

Demeter and Mahoney not included.

HRDD refers to any activities carried out to identify, assess, address, prevent or mitigate forced labor risks, such as developing internal processes, carrying out impact assessments, risk mapping, gap assessments, etc.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Material sustainability topics

Diversity, equality

and inclusion

Fostering a diverse and inclusive

workplace that ensures fair

treatment while maintaining and

developing the skills base within

the company

Multi-country teams (%) Increasing trend 16% (14%) are multi-country teams

Women in staff (%) We recruit personnel based on their

experience, expertise, skills and values

through structured process and job criteria

guaranteeing that all applicants have equal

opportunities and treatment during the

recruitment process

31.5% (30.2%)

Female representation in people manager positions

(%) and senior management (%)

Women's representation in people managerial

positions and women in senior managers in

proportion to the overall number of women in

the Neste workforce (%)

29.8% (29.0%) women in people manager positions

25.8% (25.9%) women in senior management

Employee engagement Maintain a good level of employee

engagement

Employee engagement score4) 66 (70), which was in line with

global benchmark result. Majority of employees thought favorably

of working at Neste and would recommend Neste as a workplace.

65% (70%) felt happy working at Neste, 64% (66%) understood

how Neste plans to achieve its strategic goals, 70% (79%)

thought Neste acts in a responsible way, 79% (83%) saw safety

as a priority for Neste.

Response rate to employee engagement survey (%) To maintain a good level of response rate 81% (81%)

Tackling plastic

waste challenge

Tackling plastic waste challenge

by developing solutions to utilize

waste plastic as a raw material for

new plastics and chemicals

Volume of liquefied waste plastic processed (t/a) To process more than 1 Mt of liquefied waste

plastics from 2030 onwards to increase the

circularity of plastics and to reduce crude oil

dependence in refining and petrochemical

processes

In 2021 we successfully completed industrial-scale processing

runs with 400 (400) tons of liquefied waste plastic in Finland.

Ethics,

transparency

and open

communication

Ensure the appropriate scope and

quality of information disclosure

related to own operations and

business practices in the supply

chain and operating in an ethical

and responsible way in society

Monthly grievance log updates To roll out monthly updated grievance logs 12 (11) monthly logs

A total of suspected misconducts reported in person

or via the whistleblowing line to the Investigations

Group

To further encourage employees and external

stakeholders to report observed or suspected

misconduct

A total of 18 (16) suspected misconducts were reported in

person or via the whistleblowing line to the Investigations Group

in the following categories: HR 4 (6) reports, discrimination and

harassment 2 (4), conflict of interest 3 (0), bribery, corruption

and facilitation payment 2 (0) fraud 0 (1), competition law and

infringement 0 (1), health and safety 0 (1), and 7 (3) reports which

fell outside of these categories in "Other".

Regular supply chain transparency via traceability

dashboard (palm oil & PFAD)

To publish information twice yearly 2 (2) publications

Material topic Objective Key performance indicator Target Performance in 2021 SDG link

SDG10: Reducing inequalities

SDG15: Life on land

SDG7: Clean energy

SDG11: Sustainable cities and communities SDG13: Climate action

SDG9: Industry, innovation and infrastructureSDG8: Decent work and economic growth

SDG12: Responsible consumption and production SDG17: Partnerships for the goals

171210

151312

108

Demeter and Mahoney not included.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Material topic Objective Key performance indicator Target Performance in 2021 SDG link

Innovation and

partnerships

Initiating and fostering partnerships

between Neste and its partners

to address the challenges of and

innovate solutions for sustainable

development

Share of Clean Revenue area revenue from

Group revenue, %

To maintain the annual share compared to

previous year

Clean Revenue 39.3% (36.8%)

Share of investments consisting of Clean CAPEX,

Clean R&D and Clean M&A (Clean Investments), %

To maintain the annual share compared to

previous year

Clean Investments 68.5% (69.4%)

Supply chain

sustainability

Ensuring sustainability of Neste

suppliers and business partners

Percentage of business partners who have committed

to Neste’s minimum sustainability requirements in the

Supplier Code of Conduct (%)

100% of business partners committed 86% (100%) of the new indirect procurement supplier contracts,

99% (100%) of the renewable raw material volume and 88%

(78%) of the fossil raw material volume delivered to Neste in 2021

were covered by the Neste SCoC or equivalent.

The number of renewable raw material supplier’s

sustainability assessments and their outcome

To assess all new renewable raw material

suppliers against sustainability criteria

Total: 223 (219), New approved suppliers: 171 (120),

All approved: 186 (133), Pending: 33 (65), Rejected: 4 (21)

A total of sustainability audits conducted To increase the number of sustainability audits

conducted, prioritizing through a risk-based

approach

27 (9) sustainability audits

Economic responsibility Reporting financial statements

Corporate

governance

Reporting in the corporate

governance statement

Neste Annual Report 2021 | Material sustainability topics

New approved suppliers include Demeter existing suppliers that were excluded in 2020 due to ongoing integration. All other figures include existing suppliers, which undergo a sustainability assessment process every 3-5 years. Supplier data includes only main contractual parties, excluding sub-suppliers.

SDG10: Reducing inequalities

SDG15: Life on land

SDG7: Clean energy

SDG11: Sustainable cities and communities SDG13: Climate action

SDG9: Industry, innovation and infrastructureSDG8: Decent work and economic growth

SDG12: Responsible consumption and production SDG17: Partnerships for the goals

128

1098

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Neste Annual Report 2021 | Stakeholder engagement

Understanding the views and expectations of our stake-

holders plays a crucial role in the success of our company

and the acceptability of our operations. We aim for contin-

uous, active and open dialogue with our stakeholders and

regularly seek external views on our operations. We fol-

low the business environment actively to ensure that our

engagement is focusing on the most relevant stakeholder

groups. We regularly evaluate our sustainability topics

along with these groups in our materiality assessment

process. Active engagement is essential for us through-

out our value chain and in the collaboration with suppliers

and non-governmental organizations.

Our key stakeholders are:

• Corporate customers and consumers

• Analysts and shareholders

• Policymakers, authorities and legislators

• Suppliers of goods, raw materials and services

• Non-governmental organizations, industry

associations and cooperation bodies

• Universities and research organizations

• Local communities

• Media

• Our own employees and management

Stakeholder cooperation covers all our operations.

It is part of our daily work and management.

Stakeholder engagement

SustainabilityStrategy Governance Review by the Board of Directors Financials

B2B customers • Engaging with customers through face-to-face and online meetings, newsletters

and technical, marketing and sustainability-related training sessions

• Arranging and participating in customer webinars and events

• Gathering insight and managing customer satisfaction through surveys

• Developing joint communications with customers

• Arranging refinery site visits for customers

• Sustainability, circular economy, waste plastic

recycling, sustainability vision and climate

commitments, sustainable and high quality

products and services, supply reliability, safety,

timely distribution, customer relationships

and cooperation, innovation and R&D, Neste

refinery sites

• Forming tight partnerships with customers to reduce their carbon

footprint with our renewable and circular solutions

• Co-creating new services, building brand value and interacting with

our customers and their stakeholders

• Upholding ongoing dialogue with customers and proactively staying

in contact with customers and partners to support them

• Arranging refinery site visits for customers

Consumers

• Gathering insight through consumer surveys

• Providing fact sheets, press releases and news to our consumers regularly to best

serve them with their needs

• Working together with local distributors to provide information to customers

• Product, service and operations sustainability

and quality, customer relationships and

cooperation, innovation and R&D

• Communicating proactively

• Responding promptly to questions and concerns via phone, social

media and Neste website

Investors and equity

analysts

• Regular engagement through regulatory financial communications (financial

reporting, stock exchange releases), conference calls, roadshows, individual or

group meetings, and annual Capital Markets Day

• Climate change mitigation as business

opportunity and challenge, sustainability of raw

materials and supply chain, availability of raw

materials for renewables growth strategy

• Communicating about climate commitments, palm oil phaseout

target and other raw materials and the sustainability vision

• Transparent and regular reporting and disclosure

• Responding to questionnaires by rating companies and investors

Governmental

organizations

• Sharing views on policies, laws and regulations with officials and legislators

through public consultations, meetings, as well as part of a larger stakeholder

dialogue with policymakers

• Arranging site visits

• Climate, renewable fuels in transport,

renewable and recycled materials, circular

economy, sustainable finance

• Replying to public consultations and providing insights and analysis

to government officials and politicians

• Participating in the work of industry associations

• Arranging site visits

Suppliers and

contractors

Meeting the sustainability and human rights criteria as defined in Neste Supplier

Code of Conduct:

• Evaluating counterparty's security and reputation risks alongside an extensive

sustainability assessment

• Collecting information on our climate change impact annually

• Conducting both external and internal audits. Helping partners to perform

corrective actions in cases of non-compliances

• Arranging annual supplier sustainability workshops, trainings and seminars to

share information and support capacity building of the suppliers

• Collaborating closely with our contractors and suppliers to ensure high level of

safety, efficiency and quality

• Sustainability of supply chains and suppliers,

commitment to sustainability including areas

of governance (e.g. ethical business practices),

labor and human rights (e.g. forced labor

and freedom of association), health & safety,

environment and biodiversity protection

• Supplier Code of Conduct (SCoC) trainings and workshops for

suppliers and contractors

• Practical SCoC information guide for suppliers and other business

partners

• Continuous search for new renewable raw material suppliers

• Sustainability evaluation on our raw material suppliers

• Collaboration to enhance sustainability performance

• Audits (the number of sustainability audits was increased in 2021)

• Share information with contractors at Neste sites through regular

meetings, info sessions, trainings and newsletters

• Sustainability Desktop Review on OP suppliers

Key stakeholder How we engage Key topics of interest How we respond

Neste Annual Report 2021 | Stakeholder engagement

SustainabilityStrategy Governance Review by the Board of Directors Financials

NGOs • Ongoing dialogue with stakeholders, such as several NGOs, to transparently

report the status and progress of sustainability-related grievances linked to Neste's

raw material sourcing

• Ongoing dialogue with the Neste Advisory Council on Sustainability and New

Markets

• Projects to support the smallholders in improving their sustainability performance

and certification

• Continuous dialogue with NGOs, e.g. on biodversity and human rights

• Climate change mitigation, sustainability,

human rights, biodiversity, palm oil & PFAD

supply chains, circularity and recycling aspects

• Sustainability of supply chains and suppliers, commitment to

sustainability, protecting biodiversity, and respecting human rights

(e.g. forced labor and freedom of association)

• Provide health, safety and work wellbeing related information and

instructions for contractors, suppliers and partners

• In 2021 Neste discussed with NGO Finnwatch their concerns

related to the PFAD supplier IOI and continued the dialogue with the

supplier to ensure progress on open grievances

Industry associations

• Engaging in dialogue and working with industry associations

• Providing insight, analysis and our views on different topics

• Taking part in events and seminars

• Climate change mitigation, transport emission

reductions, circular economy, plastics recycling,

industry competitiveness, sustainability

• Memberships in relevant organizations, e.g. Renewable Carbon

Initiative (RCI), FuelsEurope, European Biodiesel Board, Advanced

Biofuels Association (US), Drivkraft Sverige, Bioenergia ry.,

Bioenergy Australia, German Chemicals Industry Association (VCI),

Plastics Europe (Germany), Essenscia (Belgium), Chemical Industry

Federation of Finland, Accelerator table (the Netherlands) and

European Bioplastics (EUBP). In addition, we are involved in many

working groups at European Chemical Industry Council (CEFIC)

Cooperation bodies

• Engaging in dialogue with cooperation bodies and supporting initiatives

• Participating in working groups for developing industry related matters within

initiatives

• Ensuring the sustainability of our entire renewable fuel production chain with

certifications

• Sustainability, plastics recycling, climate

change mitigation, resource efficiency, circular

economy, biodiversity, human rights, innovation,

climate commitments, emission reduction

• Cooperating with, e.g. Task Force on Climate-Related Financial

Disclosures (TCFD), Nordic Business Network for Human Rights,

UN Global Compact, World Business Council for Sustainable

Development (WBCSD), International Sustainability & Carbon

Certification (ISCC), Roundtable on Sustainable Biomaterials (RSB),

Roundtable on Sustainable Palm Oil (RSPO), RCI and Consumer

Goods Forum

Universities

and research

organizations

• Engaging in dialogue with student associations, local and global universities and

different research organizations

• Neste's Innovation organization, works closely with universities and research

centers all over the world

• Innovation and R&D, renewable and circular

solutions, green hydrogen, carbon capture

and storage, e-fuels, industrial chemistry,

combustion, artificial intelligence, among others

• Strategic cooperation with, e.g. Aalto University, Åbo Akademi and

VTT (The Technical Research Centre Finland), LUT University and

international partners mainly in Europe and in the US

• In 2021, Neste received a positive grant decision from EU Innovation

Fund for its Porvoo refinery green hydrogen and CO2 capture and

storage project; Neste will strengthen its global innovation and R&D

by opening an R&D center in Singapore; Neste is involved in VTT

headed project of large-scale production and commercialization of

e-fuels; Neste participated in CICAT2025 research project on circular

economy, organized by Turku University of Applied Sciences

Key stakeholder How we engage Key topics of interest How we respond

Neste Annual Report 2021 | Stakeholder engagement

SustainabilityStrategy Governance Review by the Board of Directors Financials

Key stakeholder How we engage Key topics of interest How we respond

We believe in collaboration and want to be actively involved in developing a more sustainable future. We participate in the development of our industry, relevant associations, NGOs and aim to actively engage in open dialogue with all our stakeholders.

Neste Annual Report 2021 | Stakeholder engagement

Local communities • Engaging in dialogue and collaboration with local communities and production site

neighbors via newsletters, meetings, regional website and social media

• Arranging site tours for various interest groups

• Engaging and meeting with authorities and local city representatives

• Supporting local voluntary work for children and youth by yearly donations

• Employment and cooperation opportunities,

safety and environmental concerns, site

investments and development as well as

impacts on the community and neighbors

• Acting sustainably, since our environmental and safety performance

affects the local communities

• Maintaining an open dialogue with local communities

• Engaging with specific local authorities on matters that concern the

Singapore Expansion project

• Employees volunteering for charitable events: running for charity

for Singapore Cancer Society and waste collection and cleaning at

different locations, among others

• At the Porvoo refinery, Neste conducts a stakeholder study

bi-annually to assess the local community and authority

perspectives on the refinery environmental and safety image and

communications. The 2021 results are communicated externally in

regional channels

Media

• Maintaining and developing relations with media globally

• Regular distribution and proactive sharing of releases, news and topics to the

media

• Actively responding to media inquiries

• Arranging interviews and media events

• Announcements, interim results and company

news, M&A cases, different projects, customer

stories and cooperations, societal and

economic topics, innovation, research and

development, sustainability topics, fuel taxing

and pricing, oil price fluctuations

• Press releases and other materials as well as company information

materials

• Following and responding to media inquiries through media service

• Connecting the media with the correct spokespersons at Neste

• Actively working together with media to best serve them

Employees

• Performance leadership and people development

• Employee engagement through several measures, e.g. Continuous listening

and employee feedback through quarterly Pulse surveys, team and individual

discussions, Town hall meetings

• Systematic support for health, safety and wellbeing of Neste people

• Several internal events, e.g. quarterly personnel infos

• Active communication, dialogue and cooperation with internal stakeholders,

including employees, line managers, employee representatives

• Updated Neste strategy and transformation,

sustainability impact and efforts, sustainability

vision, climate commitments, new ways of

working (Smart Work), health, safety and

wellbeing, ways of developing competences for

the future, business ethics and human rights,

Code of Conduct

• Active, systematic and responsive communications

• Employee training and support, e.g. on safety and wellbeing

• New ways of working and tools to support, e.g. Smart Work

• Leadership development and communication

• Facilitation concepts created for inclusive team dicussions

• Virtual leadership and facilitation training offered especially during

the pandemic

SustainabilityStrategy Governance Review by the Board of Directors Financials

Sustainability Leader: Dow

Jones Sustainability Indices

for the 15

consecutive year

Most Sustainable Companies – Leadership

Category: CDP Climate Change and

Forests Assessment

AAA rating:

MSCI ESG

Rating Index

External

recognitions

in 2021

The Advisory Council on Sustainability and New Markets, established

in 2019, is an independent external council consisting of a group

of carefully selected experts able to provide strategic insight, guid-

ance and assistance on our sustainability work. They are commit-

ted to helping accelerate Neste’s transformation and broadening its

leadership activities. The council convenes three times a year and is

chaired by John Elkington, one of the pioneers of the global sustain-

ability movement. The members of the council are:

• John Elkington

Founder & Chief Pollinator, Volans

• James Cameron

Senior Adviser to Pollination Group and Adviser to COP26

Presidency

• Marcius Extavour

Prize Lead, Carbon XPrize

• Louise Kjellerup Roper

CEO, Volans

• Bernice Lee

Executive Director of the Hoffman Centre for Sustainable

Resource Economy, Chatman House

• Vanessa Perez Cirera

Global Director for Economics at World Resources Institute

• Geoffrey Weston

Senior Partner and Global Head of Bain & Company’s Global

Airlines, Logistics and Transportation sector, Bain

The Advisory Council on

Sustainability and New Markets

Global increase in efforts to

combat climate change

2021 saw a global movement to raise the ambition

in climate targets. As climate scientists kept issuing

ever more worrying data and predictions about cli-

mate change and its impacts, many governments

around the world, including China, India, and Brazil

announced new or updated net-zero targets in the run

up to the COP 26 Conference in Glasgow. In total, 151

new climate plans were submitted in Glasgow, and

several other major global announcements, including

pledges to cut back on methane emissions by 30%

by 2030 and to stop and reverse forest loss and land

degradation by 2030, were made in parallel. Neste

welcomes these developments.

Main policy and legislative

developments in Europe

In July 2021, the European Commission published

its Fit for 55 package aiming for a 55% reduction in

greenhouse gas emissions by 2030, compared to

the 1990 levels. Neste welcomes the EU’s continuing

commitment to long-term policies and the ambition to

become climate neutral by 2050.

As part of the Fit for 55 package, the European

Commission proposed an EU-wide blending obli-

gation of Sustainable Aviation Fuels (SAF) to reduce

emissions from aviation. From 2025, a progressively

growing share of aviation fuels has to be either sus-

tainable biofuels or so-called synthetic fuels made of

hydrogen produced with renewable electricity and

captured carbon dioxide. This proposal provides a

robust roadmap for increasing the volume of SAF up

until 2050, when the share of SAF represents 63% of

aviation fuels. As the world’s leading producer of SAF,

Neste is committed to helping to meet the proposed

EU-wide obligation.

We firmly believe that all solutions are needed to

reduce greenhouse gas emissions in transport. The

number of electric cars is currently growing at a rapid

pace, which is a welcomed development as the power

generation sector is progressively embracing emis-

sion-free technologies. However, achieving the ambi-

tious climate targets requires both electric vehicles

and renewable transport fuels, as internal combustion

engine vehicles will keep playing a key role for a long

time, particularly in the heavy-duty sector. Therefore,

a broad range of sustainable raw materials are neces-

sary to enable sufficient volumes for biofuels produc-

tion. Regulatory frameworks should enable the use of

current sustainably produced and sourced raw mate-

rials and incentivize innovation for new raw materials

and their processing into biofuels. For more informa-

tion about the sustainability of our raw materials, see

page 62.

Across Europe, the EU Member States continued to

increase their ambition in cutting emissions from the

transport sector; e.g. in their implementation of the

Renewable Energy Directive, Germany increased its

road transport fuel greenhouse gas reduction obliga-

tion to 25% in 2030, and the Netherlands moved its

renewable obligation up to 28% in 2030. In Sweden,

the Parliament passed laws to raise the obligatory

greenhouse gas reduction target to 66% in diesel and

to 28% in gasoline by 2030, and to introduce a SAF

obligation.

The European Green Deal aims to reduce the use

of fossil carbon and facilitate its phase out. Key pillars

of this legislative package include the assessment

of the 2018 EU Bioeconomy Strategy as well as the

Neste Annual Report 2021 | Stakeholder engagement

SustainabilityStrategy Governance Review by the Board of Directors Financials

Circular Economy Action Plan (CEAP) adopted by the

European Commission in March 2020 with the goal of

reducing pressure on natural resources and boosting

sustainable growth. The CEAP sets out 35 actions,

many of which entail policy implications such as:

• A policy framework for bio-based plastics

and biodegradable or compostable plastics

(2021/2022)

• The Sustainable Products Initiative (2022)

• Mandatory requirements on recycled plastic

content for key products such as packaging,

construction materials and vehicles (2021/2022)

• Waste reduction targets for specific streams

(2022)

• An EU-wide harmonized model for separate

collection of waste and labeling to facilitate

separate collection (2022)

The European Union continues to develop its sus-

tainability policies. As part of its sustainable finance

strategy, the European Commission proposed its

first set of detailed rules on what economic activities

qualify as sustainable under the so-called Taxonomy

Regulation by contributing to climate change mitiga-

tion and adaptation, and publicly listed companies

need to report activities pertaining to climate change

mitigation and adaptation. Policy formulation contin-

ues in regards to sustainable corporate governance,

biodiversity and prevention of deforestation and forest

degradation.

Main policy and legislative

developments in the North America

and Asia-Pacic

In the United States, the Biden administration

announced an ambitious climate target of 50% to

52% reduction of greenhouse gas emissions from

2005 level in 2030. In the US Congress, negotiations

continue on potential policy frameworks that include

provisions to create a new blender's tax credit specif-

ically for Sustainable Aviation Fuel and an extension of

the current Blenders Tax Credit.

The Washington State Legislature passed a Clean

Fuels Program legislation in April, paving the way to

establishing a low carbon fuel standard to reduce

greenhouse gas emissions. The Clean Fuel Standard

will require fuel suppliers to gradually reduce the car-

bon intensity of transportation fuels to 20% below

2017 levels by 2038. This program allows Neste to

expand its offering of Neste MY Renewable Diesel to

Washington State.

In Canada, the federal regulatory rule-making pro-

cesses creating a Clean Fuel Standard is anticipated

to come into force in 2022. Quebec adopted new

standards and British Columbia is considering addi-

tional standards.

In the Asia-Pacific region, New Zealand declared a

climate emergency in December 2020 and has since

taken a multitude of steps, including a report by the

Climate Change Commission on pathways to reach

net-zero by 2050. This includes a consultation on a

Sustainable Fuels Mandate and more recently a con-

sultation paper on ‘Transitioning to a low-emissions,

climate-resilient future’.

In April 2021, Japan announced plans to raise

Japan’s greenhouse gas emission reduction target

for 2030 from 26% to 46% (compared to the 2013

level), to meet the overall target of carbon neutrality

by 2050. The revision of this target will require a 38%

reduction in transport emissions by 2030 (compared

to 2013 level).

Singapore, a forerunner in policy and regulatory

development in the Asian region, has the reduction

of aviation and maritime emissions from travel and

trade as part of its Green Plan 2030, although electric

vehicles are the focus for the decarbonization of road

transport.

Research cooperation

In 2021, we continued to strengthen our cooperation with companies, startups, universities

and research institutions:

• Neste’s Veturi ecosystem brings together Finnish companies, startups, universities and

research institutes to jointly build the future capabilities needed to establish new value

chains in renewable and circular solutions.

• Strategic cooperation with VTT, which fosters the joint use and development of research

infrastructures in Finland.

• Strategic cooperation with Aalto University and Åbo Akademi University with the aim

of improving the competitiveness of parties while increasing Finnish chemical industry

expertise, including in such fields as chemical and process engineering, bioeconomy,

digitalization and circular economy.

• Neste, together with UPM and Borealis Polymers, is providing a new a chemistry

professorship specializing in circular economy at the University of Helsinki. The field of

this position will encompass chemical recycling and the utilization of waste and residues.

• A five-year sponsorship for Helsinki University’s Centre for Coastal Ecosystem and

Climate Change Research (CoastClim) was established, to further understand how the

condition of the seas and climate change are linked.

• Neste donates a total of EUR one million to Aalto University and Åbo Akademi University

to support the research and education in the chemical industry and to further strengthen

the collaboration between the industry and the scientific community.

In addition, we actively engage in dialogue with several universities and research institutes on

collaboration opportunities.

Read more about Neste’s Veturi ecosystem.

Read more about our green hydrogen project in our

Rotterdam refinery carried out with our partners.

Neste Annual Report 2021 | Stakeholder engagement

SustainabilityStrategy Governance Review by the Board of Directors Financials

Value creation

Input

Indirect upstream

Direct upstream

Indirect downstream

Outcome

impact

Output

Direct downstream

• Number of suppliers in

› Renewable Products 389

› Oil Products 75

› Indirect procurement 6219

• Operations in 14 countries

• Production in 4 countries

• Total equity 6,985 MEUR

• R&D expenditure 67 MEUR

• Interest-bearing net debt

41 MEUR

• Purchases of refinery

feedstocks 4,497 MEUR

• Purchases of other goods

and services 7,658 MEUR

• Renewable raw material

inputs 3.7 Mt

• Sourced crude oil and fossil

feedstock 10.1 Mt

• Indirect procurement spend

3,184 MEUR

• Cash-out investments

1,299 MEUR

• Market cap 33,353 MEUR (at the end of 2021)

• Comparable operating profit 1,342 MEUR

• ROACE 15.5%

• Dividends 630 MEUR from 2021

• Net sales 15,148 MEUR

• Share of Clean Revenue 39.3%

• Share of Clean Investments 68.5%

• Economic value retained 1,753 MEUR

• Neste MY Renewable Diesel sales 0.8 Mt

• Sales from in-house production,

Oil Products 10.1 Mt

• 947 service stations in 4 countries

• Oil Products and Renewable Products in the

wholesale market sold in 70 countries to approx.

270 customers

• Increase in the value of the shares

and dividends

• New business opportunities

• Renewables help customers to reduce

emissions, reduce their reliance on fossil

resources, and support UN SDGs

• Help end users to avoid infrastructure and

other investments with drop-in solutions

• M&S B2B Customer satisfaction: Net

Promoter Score (NPS) 57%

• Taxes and tax-like fees paid and remitted by

Neste EUR 3.9 billion

• Creating new jobs and supporting

the existing ones in the company’s

value chains

• Redirecting consumer expenditure

towards sustainable solutions

• Supporting the development of

customers’ brand value and brand

awareness

Economic/Governance

• 100% of our palm oil

is certified and traceable to

plantations

• 100% of our PFAD

supply chain

is mapped for palm oil mills and 85% to

plantations

• 86% of the new indirect supplier contracts, 99% of

the renewable raw material volume

and 88% of the

fossil raw material volume covered by the Neste

Supplier Code of Conduct or equivalent

• Scope 2

and 3 emissions from upstream value

chain: 6.1 Mt CO

• Waste and residue raw

materials used to refine

renewables 3.4 Mt, 92% of

the total renewable inputs

• Water intake 9,263,000 m

• Energy consumption

10.1 T Wh

• Energy saving measures 95.8 GWh

• Waste generated 184,500 t of which

27% recycled

• Wastewater 8,522,000 m

• Scope 1, direct CO

emissions

1.8 Mt CO

• Scope 3 emissions from downstream

value chain million 29.5 Mt CO

• Greenhouse gas reduction achieved with

Neste’s renewable products: 10.9 Mt

10)

• Neste MY Renewable Diesel enables

on average 90% lower greenhouse gas

emissions over the fuel’s life cycle compared

to fossil diesel

10)

• Help fight the plastic waste challenge through

developing chemical recycling to increase

plastics recycling and circularity of materials

• Mitigating climate change

• Replacing fossil oil use with

more sustainable alternatives

• Improving air quality

• Reducing deforestation

• Contributing to circular economy

• Influencing operating environment

and regulation

View Neste’s tax footprint report on our website.

Read more about Neste's value creation on our website.

Environment

• 99% of Neste’s new renewable raw material

suppliers screened using social criteria

• Highly skilled employees

› Number of employees 4,872

› Hiring rate of permanent

employees 12.1%

› Leaving rate of permanent

employees 13.0%

› Recorded average training

hours per FTE 17.8

• 13,227 palm oil smallholders in

Neste’s supply chain

• Wages and salaries 365 MEUR

• Other personnel expenses 66 MEUR including

training costs 2.2 MEUR

• 68.5% men and 31.5% women

• 2/8 members of the Board of Directors and

3/12 members of the Executive Committee

are women

• Employee safety TRIF 1.1

• Safe days 306

• Contractor TRIF 1.6

• Charity work and sponsorship

1.4 MEUR

• Number of Neste employees who

participated in volunteer work 145

• Supporting social development and

the services societies provide in

countries of operation

• Enhancing competitiveness of

employees in the labor market

• Wellbeing and safety of employees

and suppliers

• Reducing transportation-related

emissions in cities and communities

• Securing human and labor rights

• Improving gender equality

Social

Includes natural gas and industrial gas suppliers.

See Principles for calculating the key indicators.

Annual average number of employees.

Full-time equivalent (FTE). Demeter and Mahoney not included.

Total Recordable Injury Frequency.

A day without a TRI accident, process safety events, fire or ignition, breach of environmental permit, or traffic accident.

Contains the use of crude palm oil (CPO) and

Refined Bleached Deodorized Palm Oil (RBDPO) that we have processed into renewable products and sold to market.

Palm fatty acid distillate.

Scope 2 market-based emissions include only CO

10)

Compared to 100% fossil diesel. Calculation principles can be found on page 110.

Neste Annual Report 2021 | Value creation

Neste’s

business model

We provide value for

society by developing

renewable, low-emission

and circular solutions for

the aviation, chemical

and plastics industries,

transport sector and

cities.

We do this by taking the

lead to transform towards

a carbon neutral value

chain by 2040, and setting

ourselves aspirational

targets for biodiversity,

human rights, supply chain

and raw materials.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Sustainability governance

The Executive Committee approves our sustainabil-

ity priorities. Responsibility for individual corporate

sustainability targets is shared between the mem-

bers of the Executive Committee. The Vice President,

Sustainability, is responsible for ensuring that relevant

management processes relating to material corporate

sustainability topics are being developed and imple-

mented as part of our strategy. The relevant Business

Units and Functions will reserve the needed resources

within their scope to implement the actions commonly

agreed in the Executive Committee.

The Sustainability Leadership Team, chaired by the

VP, Sustainability, has members from different func-

tions, e.g. Sustainability Development, Supply Chain

Sustainability, Human Rights, HSSEQ, Innovation and

Communications. It prepares the sustainability pri-

orities and proposals to be taken to the Executive

Committee by SVP, Sustainability and Corporate

Affairs, together with the relevant sustainability

experts. The Board approves the long-term ambi-

tion and targets for the sustainability agenda, as

well as the commitment to stakeholders, based on

the proposal from the Executive Committee and the

Sustainability function, and regularly reviews the sus-

tainability performance.

Neste’s sustainability work described in this report is managed by the Sustainability,

Human Resources, and Health, Safety and Environment (HSSEQ) organizations.

Sustainability governance

SustainabilityStrategy Governance Review by the Board of Directors Financials

Sustainability risk management

The most significant sustainability risks are identified

and assessed as a part of the annual risk manage-

ment cycle facilitated by Neste’s risk management

team. The risk management team monitors the level

of risks and ensures that the risks are identified and

mitigated appropriately by Neste’s business units,

functions and country units. Our risk-based approach

and our sustainability risks are further described in

our Non-Financial Information (NFI) Statement.

Our sustainability impacts are reviewed and mon-

itored frequently at many levels of the company in

addition to the Board of Directors. Sustainability-

related work, including climate change-related work,

is steered by the company’s Senior Vice President,

Sustainability and Corporate Affairs, who is a mem-

ber of the Executive Committee and reports to the

President and CEO.

The most significant

sustainability risks are

identified and assessed as

a part of the annual risk

management cycle.

Neste Annual Report 2021 | Sustainability governance

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Compliance

We are committed to high ethical standards and conduct our

business and operate in compliance with applicable laws and

regulations. That means acting transparently, responsibly, with

integrity and in accordance with our values.

Compliance

In 2021, we renewed the Neste Code of Conduct

which sets the framework for our company’s global

business operations and establishes the ethical prac-

tices to guide every Neste employee in their day-to-

day business tasks. We also require our suppliers and

other business partners to comply with applicable

laws and expect them to follow equivalent ethical busi-

ness standards as stated in the Code of Conduct, as

further described in our Supplier Code of Conduct.

The renewed Code of Conduct is based on and

structured according to our values – We care, We

have courage, and We cooperate – and incorporates

our climate and sustainability commitments. It drives

clarity and gathers Neste’s existing main principles

and key requirements in one document.

Raising awareness of and training in the Code of

Conduct and its topics are central elements of the

Neste compliance program. In connection with the

renewed Code of Conduct, we issued a new Code

of Conduct e-learning to support and deepen the

understanding of, and commitment to, these topics.

The Code of Conduct e-learning is mandatory for all

Neste employees. In the first phase, the e-learning

was issued to all office workers in November 2021.

The rest of the organization will be trained in 2022.

We regularly internally communicate on compli-

ance-related topics and train our employees both

through e-learning courses and face-to-face trainings.

In 2021, as part of the regular compliance training

efforts, we also re-issued the Privacy e-learning to

targeted employees. It was completed by over 95% of

the target group.

Neste’s Compliance Function is regularly issuing

compliance newsletters on various compliance top-

ics. In 2021, topics included, among others, privacy,

trade sanctions, competition law and ethics and gen-

eral compliance awareness.

Neste also has an Anti-Corruption Principle provid-

ing more detailed guidance on responsible business

practices and prevention of corruption. More infor-

mation on Neste’s grievance process and the related

Misconduct Investigation Standard is available in the

Corporate Governance Statement and in the Report

of the Board of Directors.

We constantly develop our compliance program with

special efforts in the defined key focus areas: com-

petition law compliance, anti-corruption, trade sanc-

tions, privacy and anti-money laundering. In 2021, we

also continued developing our compliance risk man-

agement process, including carrying out a targeted

Legal & Compliance Risk assessment survey.

Neste’s compliance program and function is

described in more detail as part of Neste’s Corporate

Governance Statement and in the Report of the Board

of Directors.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Climate

Neste is committed to lead the transformation towards a carbon neutral

value chain by 2040. The year 2021 marks an important milestone for us

as we extended our climate commitments to cover the entire value chain

(Scope 3*) in addition to our production (Scope 1 & 2).

Climate commitments are part of Neste's corporate

strategy. We have a two-pronged approach to com-

bating climate change: on the one hand we enable

change, a carbon handprint, with our lower-emis-

sion products. On the other hand, we ourselves make

a change by reducing our own carbon footprint.

)

Scope 3 refers to indirect greenhouse gas emissions across the company’s value chain, outside of production (Scope 1 & 2).

Climate

SustainabilityStrategy Governance Review by the Board of Directors Financials

We are well on track with our commitments to reach

carbon neutral production by 2035 (Scope 1 & 2),

and help our customers reduce their greenhouse gas

(GHG) emissions by at least 20 million tons of CO

annually by 2030. In 2021, we also set a concrete tar-

get for our Scope 3 emissions: we aim to reduce the

use phase GHG emission intensity of sold products

by 50% by 2040 compared to 2020 levels.

Use phase emission intensity (gCO

e/MJ) is an indi-

cator of the GHG emissions from the use of Neste’s

products (e.g. combustion of fuels) divided by the total

amount of energy sold. This target will be achieved by

continuing Neste’s transformation towards renewable

and circular solutions. In addition, we are commit-

ted to work with our suppliers and partners to reduce

emissions across the entire value chain, focusing on

the Scope 3 emission categories that are most rele-

vant for Neste.

Neste Annual Report 2021 | Climate

Committed to the TCFD reporting

framework

One part of Neste’s climate work is to understand

and evaluate the potential implications of climate

change for our business and operating environment.

Neste is committed to applying the Task Force for

Climate-related Financial Disclosures (TCFD) report-

ing framework.

Neste uses scenario-analysis as one element to

guide and influence business objectives and long-

term strategic direction. We base our scenario anal-

ysis on the internationally acknowledged climate

pathways that represent objective and well-estab-

lished benchmarks for the energy industry, e.g. IEA

scenarios. For example in 2021, one of the analyzed

pathways, the 1.5°C scenario, is compliant to achiev-

ing Net Zero 2050 and also a pathway based on exist-

ing policies. Neste uses a time horizon of 2030 and

beyond to 2040 with a main focus on transport and

the refining sector. The next 10 years are the main

focus of Neste’s strategic planning as e.g. legislation,

capacity investments by Neste’s competition and

customer preferences critical for Neste’s business for

that period can be forecasted with sufficient certainty.

Climate change and global actions to minimize climate

change result in both transitional and physical risks

as well as opportunities to Neste. These are included

in our Enterprise Risk Management process and risk

mitigation plans are implemented where appropriate.

The full TCFD recommendations set out eleven rec-

ommended disclosures around four core areas for

companies to report material climate-related informa-

tion to the market. You can navigate to all Neste dis-

closures in the annual report via the TCFD index. We

will fully implement the recommended TCFD disclo-

sures in 2022.

We are leading the

transformation towards

a carbon neutral value

chain by 2040.

Production carbon footprint

Reduce emissions in our own

production (Scope 1 & 2)

by 50% by 2030 and reach

carbon neutral production

by 2035

Value chain carbon footprint

Lead the transformation towards a carbon

neutral value chain by 2040, reduce the

use phase emission intensity of sold

products by 50% by 2040 compared to

2020 levels, and work with our suppliers

and partners to reduce emissions across

our value chain (Scope 3)

Carbon handprint

Offer solutions that help our

customers reduce their

emissions by at least 20

Mton CO

e annually by

2030 and meet their

climate targets

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Our carbon handprint

Reducing greenhouse gas (GHG) emissions and replacing crude oil-based products

with renewable and circular solutions are at the core of our strategy and also

sustainability vision. In 2021, we enabled our customers to reduce GHG emissions by

approximately 10.9 million tons. By 2030, our aim is to help our customers to reduce

their GHG emissions by at least 20 million tons per year.

The change we enable

– our carbon handprint

We calculate the carbon footprint of our fuel prod-

ucts over their entire life cycle: from the produc-

tion of their raw materials to the end use of the final

product. The carbon footprint of our other (non-fuel)

products, such as our renewable raw materials for

new polymers and chemicals, includes the acquisi-

tion of the raw materials and their transport, refin-

ery process and the end-of-life treatment of the

product.

Neste’s renewable products, such as Neste MY

Renewable Diesel, Neste MY Sustainable Aviation

Fuel, as well as Neste RE, our renewable raw mate-

rial for polymers and chemicals production, have a

50-90% smaller carbon footprint over the life cycle

compared to similar fossil resource-based prod-

ucts. The methodologies we use for calculating

life cycle emissions and emissions reduction com-

ply with the European Union’s Renewable Energy

Directive II ((EU) 2018/2001), CORSIA or ISO 14040,

ISO 14044 and ISO 14067 standards.

This means that our renewable and circular

products offer significant greenhouse gas emis-

sions savings that help our customers to reduce

their carbon footprint or the carbon footprint of

their products. This is the idea behind our carbon

handprint – offering solutions to our customers

that decrease their carbon footprint. The bigger

the handprint, the better.

SustainabilityStrategy Governance Review by the Board of Directors Financials

We are able to increase our handprint and achieve

the 2030 commitment through our strategy of grow-

ing the production capacity for renewable and circu-

lar solutions, while ensuring the emissions across the

supply chain of our products remain at a low level. We

are already expanding our Singapore refinery, which

is expected to significantly increase our handprint in

2023. In 2021, we selected Rotterdam as a location

for our possible next world scale renewable products

refinery. This investment would increase our handprint

even further.

Collaborations on handprint

methodology

Since 2016, we have been developing the world’s first

science-based method for environmental handprint

calculation and communication with the VTT Technical

Research Centre of Finland and Lappeenranta

Neste Annual Report 2021 | Our carbon handprint

University of Technology (LUT). It enables the com-

munication of the beneficial environmental and cli-

mate impacts of products and services over their life

cycles, offering both scientific and practical guide-

lines. Neste conducted the first carbon handprint

case study already in 2018.

Neste continues the handprint methodology devel-

opment in a new research project “The carbon neu-

trality empowered by handprint” with VTT, LUT

University, Business Finland and other companies.

The key research questions include how can the pos-

itive environmental impacts of circular economy solu-

tions be identified and shown, and when can a com-

pany claim to be carbon neutral. The two-year project,

started in September 2021, is developing an unam-

biguous and internationally-approved concept of car-

bon neutrality and reliable indication of the environ-

mental benefits of circular economy solutions.

Lower-emission solutions for aviation

and end customers

Commercial aviation is responsible for about 2-3%

of global carbon emissions. Neste continues to help

the aviation industry meet its emission reduction tar-

gets such as achieving net zero carbon emission

by 2050 targets. Neste MY Sustainable Aviation

Fuel™ is made from sustainably sourced, renewable

waste and residue raw materials. In its neat form and

over the life cycle, it reduces greenhouse gas emis-

sions by up to 80% compared to fossil jet fuels (calcu-

lation method: CORSIA). The fuel provides an imme-

diate solution for reducing the carbon emissions from

flying. Blended up to 50% with fossil jet fuel (the cur-

rent approved SAF blend is capped at 50%), airlines

and end customers can achieve significantly lower

greenhouse gas emissions with Neste MY Sustainable

Aviation Fuel. The fuel additionally helps reduce local

emissions and provides additional climate benefits

e.g. through reduced particulate emissions which also

contribute to radiative forcing.

Neste MY SAF for Business was introduced as a

tailored service for businesses that wish to directly

reduce their organizations air travel emissions. The

solution is offered to organizations in collabora-

tion with our airline partners. The offering brings the

benefits of SAF directly to the ultimate beneficiary –

the business that is flying. It delivers real and direct

emission reductions that can be used to meet sci-

ence-based targets.

Neste’s annual production capacity for sustain-

able aviation fuel (SAF) is currently 100,000 tons. With

Neste’s Singapore refinery expansion on the way, as

well as the modification to Neste’s Rotterdam refinery

to enable SAF production, Neste will have the capac-

ity to produce some 1.5 million tons of SAF annually

by the end of 2023.

We are actively working with partners through the

supply chain to grow the availability of SAF for the

aviation industry globally. In 2021, we started several

new partnerships and continued developing the exist-

ing ones:

• We progressed in establishing Neste as a partner

or supplier to major airlines: full service carriers

like IAG, Lufthansa Group (including SWISS),

Delta Air Lines and Southwest Airlines, cargo

carriers such as DHL, and low-cost carriers like

Easyjet.

• We expanded partnerships along the supply chain

to grow the availability of SAF: for example with

Q8, Vitol, Avfuel and Signature Flight Support.

• We opened the voluntary market and established

partnerships with BCG (in cooperation with

Finnair and SAS), TripActions and Inflexion to

enable lower-emission business traveling.

• We continued collaborating with OEMs (Original

Equipment Manufacturers) and driving future

SAF potential: flight tests with 100% SAF in the

ECLIF3 research project, in collaboration with

Airbus, Rolls Royce and DLR.

• We celebrated one year of powering flights with

SAF out of San Francisco International Airport

and Amsterdam Airport Schiphol, and the first

SAF circular economy project at Dallas Fort

Worth International Airport.

Neste MY Sustainable Aviation Fuel is now available to

airlines across a wide network of airports in Europe,

North America and Asia-Pacific.

Towards sustainable mobility

We are in the midst of a fundamental paradigm shift

in how we power mobility. We firmly believe that all

solutions are needed to reduce greenhouse gas

emissions. The number of electric cars is growing at

a rapid pace, which is a logical and welcomed devel-

opment. However, there is still not enough capacity

to produce low-emission electricity, and therefore it

is essential to calculate emissions over the whole life

cycle, instead of only the use phase emissions.

Achieving the ambitious climate targets set around

the world requires multiple solutions, such as electric

vehicles (EVs) and renewable fuels. When it comes

to especially heavy-duty vehicles, internal combus-

tion engines and renewable fuels, both biofuels and

so-called e-fuels (Power-to-X), will be needed for a

long time.

Read more about sustainable mobility.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Our carbon handprint

expanded its availability there in October. We also

opened two renewable diesel fueling stations in

Southern California in May.

In Finland we expanded the availability of Neste MY

Renewable Diesel from 126 to 152 stations, and in

Estonia from 2 to 8 stations. In Sweden, Neste MY

Renewable Diesel is available at 325 stations and in

the Netherlands at more than 115 stations.

In the United States, we started several new part-

nerships, e.g. with Argent Materials Partners and

Titan Freight Systems. We also formed a first of its

kind strategic partnership with PowerSecure to offer

businesses and cities the option to power stationary

generators with renewable diesel.

Reduced emissions with Neste MY Renewable Diesel™

Comparing 100% fossil diesel to 100% Neste MY Renewable DieselTM results on average 90%

lower greenhouse gas emissions when evaluating the emissions over the fuels’ life cycle.

Total GHG

emissions

Raw

material

Transportation Fuel

refining

Fuel

transportation

Fuel use

*Calculation method complies with the EU Renewable Energy Directive ((EU)2018/2001).

90%

GHG, gCO

e/MJ

Carbon emissions from the use of renewable diesel amount to zero, as the amount of bio-based carbon

dioxide released upon combustion equals the amount that the renewable raw material has absorbed earlier.

less

emissions*

100% fossil diesel from crude oil

Neste MY Renewable Diesel from 100% renewable raw materials

Expanding the availability of Neste MY

Renewable Diesel™ globally

Neste MY Renewable Diesel™ is a drop-in solu-

tion, for all diesel-powered vehicles, and its use does

not require any changes to the existing engines or

logistics. The use of our Neste MY Renewable Diesel

helps reduce greenhouse gas emissions by 50-90%

compared to 100% fossil diesel (Calculation method:

European Union’s Renewable Energy Directive II (EU)

2018/2001).

In 2021, we continued to expand the availability of

renewable diesel by bringing it to new markets and

by growing the station network. In July, we launched

Neste MY Renewable Diesel in Belgium, and further

Neste provides companies a carbon footprint

service for monitoring transport fuel emissions

in Finland

In 2021, Neste was the first company in Finland to provide a ser-

vice for companies to monitor their climate emissions from the

use of transport fuels. The digital service helps companies mon-

itor their consumption of Neste’s transport fuels, the resulting

greenhouse gas emissions, and emissions reductions achieved

through the use of renewable diesel over a specific time period.

Read more about the collaboration.

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Sustainable marine solutions

More than 90% of the world’s trade is carried by

sea, making maritime transport essential to the

global economy. Neste helps shipping companies

to reduce their emissions and respond to the

tightening regulations on sulphur dioxide emissions

with low-sulphur fuels. In addition, we provide

maritime solutions enabling CO

(or GHG) emission

reduction such as renewable diesel and drop-in

bio-components for marine blending. We aim to

develop new complementary solutions in order to

widen Neste’s low-emission offering for the maritime

industry.

Neste Annual Report 2021 | Our carbon handprint

Renewable and circular solutions for

the plastics and chemicals industries

Neste provides the polymers and chemicals indus-

tries with renewable and circular solutions that help

mitigate climate change and reduce dependency on

crude oil. Neste is already delivering renewable feed-

stock to be used as sustainable, drop-in raw materi-

als in the polymers and chemicals industries. With our

feedstock, the polymers and chemicals producers as

well as global brands can manufacture lower carbon

footprint products.

We are also committed to becoming a solution

provider for chemical recycling of waste plas-

tic. Chemical recycling can complement mechanical

recycling and is a necessary action toward a circular

economy. It has the potential to significantly increase

recycling rates, as it can utilize a wider range of waste

plastic, including materials that as of today have low

or no value. By developing chemical recycling technol-

ogies and capacities, we also contribute to combat-

ing the global plastic waste challenge through divert-

ing the valuable waste plastic streams from incinera-

tion and landfills to circulation. Diverting plastic waste

from incineration to chemical recycling and use as a

raw material provides significant climate benefits.

Our renewable polymers and chemicals business

is built on partnerships and collaboration across the

value chain. Downstream partners turn our renew-

able and circular hydrocarbons, sold under the brand

Neste RE™, into high quality products, and support

us in creating value and transparency.

Neste RE™ renewable hydrocarbons cut carbon footprint by more than

85% versus fossil feedstock in the polymers and chemicals industries

In 2021, Neste conducted a life cycle assessment study on the environmental impacts of the usage

of its 100% renewable feedstock, Neste RE™. It showed a greenhouse gas emission reduction

of more than 85% over the life cycle when Neste RE was used to replace conventional fossil feed-

stock in the chemical and polymers industry. The study confirms the results from earlier studies on

Neste’s feedstock for the polymers industry.

Read more about the

renewable gasoline test.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Our carbon footprint

*Scope 1, 2 & 3 as defined by the GHG Protocol.

In addition to offering renewable and circular solutions

to our customers, Neste has set ambitious targets to

reduce climate impact across the entire value chain*.

The change we make

– Our carbon footprint

SustainabilityStrategy Governance Review by the Board of Directors Financials

Our GHG emissions across the value chain

Reported GHG emissions in 2021, MtCO

0.9

Other

4.3 0.50.7 28.9

Purchased

goods

Product

transport

Raw

material

transport

Use of

products

1.8

Rening

0.5

Purchased

energy

Scope 1 & 2 accounting and reporting based on CO

Includes Use of sold products and End-of-life treatment of sold products.

Including Purchased services, Waste generated in operations, and Fuel- and energy-related activities.

We use the Scope framework defined in the Corporate Standard by

GHG Protocol to assess the GHG emissions across our value chain.

Scope 1 and Scope 2 cover the emissions related to our own pro-

duction. Scope 3 includes all other relevant emissions throughout our

value chain.

Scope 1

Direct emissions from refining

Scope 3

Other indirect emissions from value chain

Scope 2

Indirect emissions from purchased energy

The year 2021 marked an important milestone for us

as we extended our climate commitments to cover

the entire value chain (Scope 3). As we aim to reduce

our production emissions (Scope 1 & 2) by 50% by

2030 compared to 2019 and reach carbon neu-

tral production by 2035, we set a concrete target for

Scope 3 emissions to lead the transformation towards

a carbon neutral value chain by 2040, reduce the use

phase emission intensity of sold products by 50% by

2040 compared to 2020 levels, and work with our

suppliers and partners to reduce emissions across

the value chain.

Use phase emission intensity (gCO

e/MJ) is an indi-

cator of the greenhouse gas emissions from the use

of Neste's sold products (combustion of fuels) divided

by the total amount of energy sold. The main driver to

meet the intensity target is to continue our transfor-

mation towards renewable and circular solutions.

To demonstrate our climate commitments and show

leadership and determination to meet the objec-

tives of the Paris Agreement, we signed the Business

Ambition for 1.5°C Commitment Letter. This means

that we will continue to build on our climate actions so

that they are in line with the 1.5°C emission scenar-

ios, the criteria and recommendations of the Science

Based Targets initiative (SBTi).

Neste Annual Report 2021 | Our carbon footprint

Ambitious climate targets

covering the entire value chain

are an enormous undertaking.

New ways of thinking, innovation

and plenty of cooperation are

needed to meet our ambitions.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste’s commitment to reduce the climate impact

across the value chain is integrated into our corpo-

rate strategy. Neste’s strategy is to grow the share

of renewable and circular solutions, and climate

impact evaluation has been integrated into all stra-

tegic growth projects. For example, the greenhouse

gas emission sources in the possible next world scale

renewable products refinery in Rotterdam have been

analyzed, and options to minimize the emissions have

been investigated already before the Neste Board of

Directors makes the final investment decision. In addi-

tion, we included our climate commitments into long-

term incentives (LTIs) for Neste’s key personnel.

Neste Annual Report 2021 | Our carbon footprint

In 2021, Neste also announced the ambition to make

Porvoo the most sustainable refinery in Europe by

2030. One of the key topics is to reduce the refinery’s

greenhouse gas emissions by 50% by 2030. A key part

of that is to introduce and scale up the use of renew-

able and recycled raw materials to over 10% by 2030

to substitute the use of fossil crude oil based raw mate-

rials at the Porvoo refinery. The renewable and recy-

cled raw materials replace fossil crude oil-based raw

materials at the refinery. In March 2021, Neste ended

refining operations at the Naantali refinery, which

will have an impact especially on Neste’s production

emissions, but also across the entire value chain.

Neste aims for 100% renewable electricity use globally by 2023

In order to proceed with the target to use 100% renewable electricity globally by

2023, Neste has increased the use of renewable electricity at its Porvoo refinery in

Finland. Neste has agreed on wind power deliveries with its partners Statkraft, Ilmatar

and Fortum. In December 2021, Neste also signed its first hydropower agreement

with Vattenfall, and thanks to this, Neste will achieve its renewable electricity target in

Finland already in 2022.

Read more about the target.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Our pathway to carbon neutral production by 2035

Carbon footprint: emission reduction measures are the primary lever and we aim to halve

emissions by 2030.

Neste Annual Report 2021 | Our carbon footprint

To reach carbon

neutral production

by 2035, we continue

to prioritize and

implement emission

reductions across our

production sites.

Any residual production

emissions that cannot

be mitigated will be

compensated through

credible methods.

Short-term measures

For example, Neste’s aims

for 100% share of renewable

electricity by 2023

Long-term measures

Scaling up lower emission technologies and

innovations, e.g. carbon capture and storage/

utilization (CCS/U) and renewable hydrogen

Medium-term measures

E.g. Continuous energy efficiency

improvements and electrification

investments leveraging renewable energy

sources in steam and hydrogen supply

3.4

MtCO

2.0

0.0

3.0

1.0

3.5

1.5

2.5

0.5

2019 2021 20232020 2030 2035

>50%

reduction in

Scope 1 & 2

by 2030

Reaching carbon neutral production by 2035

The commitment to reach carbon neutral production by 2035 is

ambitious, but we are well on track. We have continued the evalu-

ation and implementation of the identified measures to reduce pro-

duction emissions across all our production sites. Currently, we

have over 100 identified measures to reduce production emissions.

Some of the measures have already been implemented, for exam-

ple many wind power agreements have been signed with suppliers.

Many of the measures are either in implementation planning, for

example as part of upcoming refinery turnarounds, or being

evaluated whether and when they can be implemented. The identi-

fied measures can be roughly divided into short-term, medium-term

and long-term actions on our climate roadmap towards carbon neu-

tral production.

The target is to reduce absolute Scope 1 and 2 emissions by 50%

by 2030 compared to 2019, and reach carbon neutral production

by 2035. We believe that these commitments are in line with global

climate ambitions and the Paris Agreement.

1.7

2.9

2.3

SustainabilityStrategy Governance Review by the Board of Directors Financials

Extending the climate commitments to

cover the entire value chain

We want to ensure that our entire value chain, includ-

ing Scope 3 emissions, is in line with global climate

ambitions and limiting global warming to 1.5°C. This

requires transformation beyond our own production,

and we want to lead that transformation.

The most relevant Scope 3 emission category for

Neste is the use phase emissions of the products

sold by Neste. Therefore, we have a target to reduce

the use phase emission intensity of our sold products

by 50% by 2040 compared to 2020. To meet the tar-

get, Neste will further increase the share of renewable

and circular products in its product portfolio. The use

phase emissions for renewable fuels are calculated as

zero as their combustion releases only bio-based CO

which is balanced by the amount of CO

absorbed

from the atmosphere by the renewable raw material.

See more about the accounting of the climate bene-

fits of biofuels, such as Neste MY Renewable Diesel

on our website.

For other Scope 3 areas, emissions related to pur-

chased goods, such as raw materials, are also one of

the priority areas for Neste. Neste’s strategic ambi-

tions relating to raw materials support the Scope 3

ambitions as well. For example, we continue focusing

on waste and residue in our renewable raw material

sourcing, and we are committed to reducing the share

of conventional palm oil (crude and refined palm oil) to

zero by the end of 2023. We are innovating new types

of raw materials, and are aiming to replace some of

Neste Annual Report 2021 | Our carbon footprint

the crude oil used at our Porvoo refinery with renew-

able and recycled raw materials through co-process-

ing. In addition, we will work even more closely with

our suppliers to reduce emissions related to our raw

materials.

Transportation of the raw materials and products

is another key area. We are continuously looking for

opportunities to optimize our logistics network and

gain more visibility to logistics emissions. Our ambi-

tion is to scale up the use of low-emission solutions

and increase fuel efficiency with our logistics part-

ners. As a concrete example, Neste’s product distri-

bution logistics in Finland used almost entirely Neste

MY Renewable Diesel in 2021.

We recognize that leading the transformation across

the entire value chain is a long-term ambition. We will

continue to strengthen our capabilities across the

organization and build our action plan for Scope 3

together with our suppliers and partners.

Greenhouse gas emission impact

evaluated in every investment decision

Since 2020, we have evaluated the greenhouse gas

(GHG) emission impact of every investment decision.

Our investment criteria aims to make the GHG emis-

sion impact of all investments more transparent. In

accordance with the new criteria, the GHG emission

impact is evaluated in investment calculations and

business case evaluations, and alternative solutions

with smaller GHG emission impact are presented,

when possible.

We want to ensure that our entire value chain,

including Scope 3 emissions, is in line with global

climate ambitions and limiting global warming to 1.5°C.

Progress in green hydrogen and carbon capture and storage project

In 2021, Neste continued the innovation project focusing on developing solutions for green hydrogen and

capture and storage (CCS) for the Porvoo site. These technologies are among the most important

measures to reduce production GHG emissions at the Porvoo refinery. In 2021, the project advanced to

the next phase called feasibility phase, and also received additional funding from the EU Innovation Fund.

Read more about the program.

Neste Annual Report 2021 | Our carbon footprint

Neste uses internal carbon price as a strategic tool

to support its climate commitments. Internal carbon

price is based on several external drivers and refer-

ences, to reflect the development in our operating

environment. For example, one of the key drivers, EU

ETS allowance prices have increased significantly

during 2021. Neste applies internal carbon price to

investment calculations and business case evalua-

tions. In 2021, Neste updated its internal carbon price

to 80 EUR/tCO

e starting from 2022. We evaluate that

a higher price, even exceeding 100 EUR/tCO

e, will

be needed to support global climate ambitions by

2030. The internal carbon price is regularly reviewed

as part of the strategy work.

We see that effective, robust, reliable and fit-for-

purpose carbon pricing instruments are important

to facilitate cost-efficient investment paths to reach

global climate ambitions, and also to create a stable

and predictable investment environment for compa-

nies like Neste, who are committed to fighting climate

change. Therefore, we have also signed the global

Call on Carbon initiative.

Developing our climate

compensation approach

Neste develops its climate commitments and road-

map by closely following the latest climate science

and leading practice for corporate climate targets

Therefore, ambitious emission reductions in own pro-

duction and across the value chain are the primary

lever for achieving Neste’s climate ambition.

However, there is an acknowledged need for com-

panies to contribute in emission mitigation beyond

their own value chains to counterbalance the impact

of any remaining emissions

. Therefore, to reach

carbon neutral production, different compensation

methods will be the final lever on our climate road-

map. At Neste, we want to ensure our compensation

approach is credible and leads to impactful and addi-

tional climate benefits. Moreover, we see the syner-

gies between climate compensation and the other

areas in our sustainability vision: biodiversity, human

rights, supply chain and raw materials.

In 2021, we continued developing and detailing our

compensation approach. We are evaluating the ele-

ments of creditable compensation project types and

ensuring they are available when we need them, build-

ing the way forward together with selected partners.

Employees contribute to climate

commitments innovation

To engage Neste's employees in our new cli-

mate vision, we organized an idea challenge

on our climate commitments as part of Neste's

Innovation management. Neste employees

were challenged to introduce new ideas on

how to reduce emissions across Neste’s entire

value chain. In total, 18 ideas were assessed

against five criteria, such as emission reduc-

tion potential and scalability. The winning idea

will be evaluated and the feasibility assessed

for possible future implementation.

Call on Carbon is an initiative by Climate Leadership Coalition, Haga Initiative and Skift to support ramping up climate investments and carbon pricing.

Science-Based Targets initiative, Corporate Net Zero Standard, Version 1.0, October 2021.

Traditionally, this refers to companies procuring ‘carbon credits’ from projects in e.g. reforestation, land conservation or renewable energy investments. Carbon credits are traded on voluntary carbon markets, which are expected to grow exponentially over the next decade.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Environment

We aim to ensure that all our operations are

safe for our employees, partners, neighbors,

customers and the environment.

Our business is closely linked to nature and bio-

based resources which makes protection of nat-

ural ecosystems crucial for us. We also see that

biodiversity is an integral part of our work towards

our climate commitments. In 2021, we launched

our ambitious biodiversity vision: drive a positive

impact on biodiversity and achieve a nature-posi-

tive value chain.

Environment

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Environment

Biodiversity

Protecting biodiversity is integrated into our sustain-

ability practices, processes and policies like our Code

of Conduct. We are committed to protecting natu-

ral environments with the minimum possible negative

impact. Biodiversity is considered in our supply chain;

we have committed to combating deforestation in our

supply chains, and to avoiding the conversion of habi-

tats with valuable biodiversity for biomass production,

requiring the same from all our suppliers and spear-

heading transparency in our industry’s supply chain.

To chart a path towards our vision, we have set

ourselves two biodiversity targets:

• We aim at creating net positive impacts (NPI)

for biodiversity from new activities from 2025

onwards.

• We target no net loss (NNL) of biodiversity from all

ongoing activities by 2035.

Neste’s raw material sourcing for renewable fuels is

strictly regulated by the sustainability criteria of, e.g.,

the EU Renewable Energy Directive. It defines no-go

areas and restricts the use of materials originating

from land with high biodiversity value. Similar restric-

tions are applied in the US and other markets as well,

ensuring that raw material sourcing for renewables is

environmentally sound.

In addition, using secondary raw material streams

has been a strategic focus area, reducing the poten-

tial impacts of its raw material sourcing on biodiversity.

The share of waste and residues of the total renew-

able raw material inputs globally was 92% in 2021.

To further strengthen our efforts towards our bio-

diversity vision, we started a company-wide impact

assessment taking into account the value chains on

top of our own refinery operations. We aim to final-

ize the work in 2022 to create the first biodiversity

metrics.

Achieving positive biodiversity impacts requires

partnering and cooperation. We have continued

working with NGOs and partners who have a strong

understanding on the matter. In 2021, we started a

collaboration with Fauna & Flora International (FFI), to

understand and develop more effective practices to

manage our impact on biodiversity.

We have set ourselves a principle to have all pro-

duction expansion projects’ biodiversity impacts

evaluated, and biodiversity, water and soil aspects

included in all investment decisions. For example,

in the Rotterdam capacity growth decision these

aspects were covered within the environmental impact

assessment done within the site.

Biodiversity neutral value chain: the impacts to biodiversity are minimized and the caused

negative impacts are compensated either in the direct value chain or elsewhere.

Nature/biodiversity positive business: the overall business creates more benefits than causes

adverse impacts to ecosystems.

Net positive impacts

Aim at creating net

positive impacts (NPI)

for biodiversity from

new activities from

2025 onwards

Nature positive

Neste drives a

positive impact on

biodiversity and

achieves a nature

positive value chain

by 2040

No net loss

Target no net loss

(NNL) of biodiversity

from all ongoing

activities by 2035

2025 2035 2040

Setting credible biodiversity targets and metrics is

crucial in our work towards our biodiversity vision.

To support us in our journey, Neste joined Science

Based Targets Network’s Corporate Engagement

Program for nature. Program aims to develop

Neste joined the Science Based Targets Network’s Corporate Engagement

Program for nature

science-based targets for nature through meth-

ods, tools, and guidance. Program will guide us

in developing targets and also give us an oppor-

tunity to have an impact in developing the targets

framework.

Our biodiversity vision

SustainabilityStrategy Governance Review by the Board of Directors Financials

Many local activities are ongoing. In our Porvoo

refinery and Naantali terminal we initiated biodiversity

assessments for the refinery areas. We will pilot new

biodiversity metrics in the refineries in Finland and

evaluate their applicability further in our value chain.

In the Siak and Pelalawan regions in Indonesia,

Neste together with several global brands continue

their cooperation in the Siak Pelalawan Landscape

Programme that aims to make a large-scale transfor-

mative sustainability impact in the Siak and Pelalawan

regions in Indonesia. The collaboration initially started

in 2018. Read more about the program from page 72.

Material and energy efciency

Our aim is to use energy, as well as other utilities, as

efficiently as possible. Energy efficiency plays a key

role particularly in our production and logistics.

We have made a commitment to the efficiency pro-

gram for Finland’s energy-intensive industries. During

the agreement period 2017–2025, we aim to save 500

GWh compared to the 2014 level. In 2021, our energy

saving measures totaled 95.8 GWh.

Water

Water use

Neste’s operations use water mainly for cooling.

Cooling water is withdrawn from the sea or nearby

river. Most of the water used for cooling is brackish

water. Cooling water is discharged back to the source

in a similar condition as when withdrawn, at only a

slightly elevated temperature.

A new wastewater treatment unit is under construc-

tion in Rotterdam and is expected to be completed by

end of 2023.

Water risks

We follow the current water risk status with several

tools. The most recent water risk evaluation of our

operational sites was done in 2021, based on the

WWF water risk filter tool that enables both a site-spe-

cific and global review of the water risks at the phys-

ical, regulatory and reputational levels. The results

indicate that the physical and reputational water risks

remain at an elevated level in two of Neste's refin-

ery locations: Singapore and Rotterdam. In both loca-

tions, there are separate water risk indicators, such as

flooding, water quality, ecosystem services and biodi-

versity importance that are at a significantly elevated

risk level. Both facilities are relatively new and water

use is efficient. The risks related to operations have

been assessed to be low, but this causes pressure

in pricing of water resources, both water intake and

wastewater treatment. This is taken into consideration

in operational financial planning in the long-term.

In Neste's supply chain water is mostly used in raw

material extraction and cultivation and in raw material

processing. On top of the operational site evaluations,

the water risk evaluations covered all raw material

supply chains when water risks were included in the

biodiversity impact evaluations, started in 2021.

According to our company-wide environmental prin-

ciple, all investment projects include an Environmental

Compliance Analysis and a compliance review in case

of building new production capacity or increasing the

current capacity. Water risk assessment is included in

the investment projects.

Environmental permit-related incidents

In 2021 we had two minor environmental permit-re-

lated incidents in our operations. In Porvoo Kilpilahti

harbor, and in Naantali terminal truck loading's vapor

recovery units, the emission limit values for benzene

were exceeded.

Regarding difficulties in operation of the wastewater

treatment system in Rotterdam, the water authority

has confirmed an order to improve and stabilize the

Extensive monitoring of surface

waters for more than 30 years

Surface waters (water quality and the benthos, i.e.

organisms living in the sea bottom) in the vicinity of

the Porvoo refinery have been monitored actively

for more than 30 years. For benchmark purposes

Neste undertook the very first benthos investiga-

tion as early as 1965, at the time the oil refinery

started operations.

Read more about the monitoring.

Neste Annual Report 2021 | Environment

operation, subject to a threatened penalty. The opera-

tional difficulties with wastewater arise from increased

use of waste and residue raw materials. To solve the

issue and further improve wastewater treatment at the

site, a fully new treatment facility is expected to be

completed during 2023.

Environmental quality monitoring

Continuous air quality monitoring and other environ-

mental monitoring, like marine and groundwater mon-

itoring, continued in the vicinity of the Porvoo refinery

and Naantali terminal. The area impacted by emis-

sions has diminished over the past 20 years and the

air quality around our refineries remained good in

2021.

We have three automatic air quality measurement

stations in Porvoo. The air quality measurement data

they generate is part of the national data, which is

verified and published by the Finnish Meteorological

Institute on its air quality portal.

Biodiversity initiatives at Neste’s

Mahoney site in the United States

Neste in collaboration with the local conser-

vation authorities conducted many biodiver-

sity initiatives at the Mahoney site in Mendota,

Illinois, US. The initiatives included actions

such as pollinator seeding to support endan-

gered monarch butterflies and other pollinators.

Additionally, wetland development to reduce

the total suspended solids in the nearby river

and to increase the habitat of migratory birds

and other species. We plan to continue the ini-

tiatives in 2022.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Raw materials

Sustainability of our raw materials and

supply chains are critically important

to our sustainability ambitions. Human

rights, biodiversity and climate-related

targets are included in the criteria for

our raw material suppliers. Our vision is

to drive a safe and healthy workplace,

fair labor practices and increased

sustainability commitment across the

supply chain. Read more about our

sustainability vision on page 23.

Raw materials

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Renewable raw materials

Neste uses a wide variety of sustainably-produced

renewable raw materials each year to produce

our renewable products, such as renewable

fuels for aviation and road transportation,

as well as feedstock for the production

of renewable polymers and chemicals.

Diversifying our portfolio with

beyond waste and residues

new types

of raw

materials

40Mt/a

We expect the global waste

and residue oils and fats

availability by 2030 to grow to

92%

of our total renewable

raw material inputs globally

Waste and residues

accounted for

Renewable raw materials

SustainabilityStrategy Governance Review by the Board of Directors Financials

Focus on developing new sources

of raw materials while growing the

existing pool

Neste’s renewable raw material supply was substan-

tially strengthened in 2021, despite the uncertain-

ties caused by the global pandemic. In 2021, Neste

engaged in a series of acquisitions and partnerships

to ensure growth and increasing availability of our raw

materials.

Altogether we used 3.7 million tons of renewable

raw materials, with a continued focus on developing

new sources while growing the existing raw material

pool towards lower-quality grades. In the short-term,

we continue to focus on waste and residue raw mate-

rials. In the mid- to longer term, we expect to use also

other types of raw materials, such as novel vegeta-

ble oils, agricultural and forest harvesting waste and

residues, algae, municipal solid waste and Power-to-X

for CO

conversion, among others. In 2021 we com-

municated our plan to reduce the share of conven-

tional palm oil to zero of our global renewable raw

material inputs by the end of 2023.

An extensive portfolio of globally-sourced renew-

able raw materials provides flexibility and allows us to

respond to the needs of different markets and cus-

tomers. None of the raw materials in our portfolio

individually represent the majority share of the total

annual inputs.

Read more about the collaboration.

on waste and residue raw materials in these markets,

such as animal fat waste and used cooking oil.

We completed the acquisition of Agri Trading, which

complements our previous acquisition of Mahoney

Environmental in the United States, with its wide trad-

ing network of renewable raw materials compounded

with efficient logistics.

In addition, we acquired the Bunge Loders

Croklaan’s refinery plant in Rotterdam, the

Netherlands. This acquisition allows us to accelerate

the scaling up of our renewable raw material pretreat-

ment capacity and is an important driver for expand-

ing the use of waste and residue raw materials and

increasing our raw material flexibility.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Renewable raw materials

Animal fat from food industry waste

Animal fat is derived from the food industry’s

meat processing waste. Neste sources mixed

animal fat waste that is unsuitable for human

consumption. We source it globally.

In 2021, Neste opened an office in Melbourne,

Australia focused on sourcing renewable raw

materials, such as animal fat waste, directly from

suppliers in the Australian and New Zealand

markets.

In 2021, we also acquired Agri Trading, one

of the largest independent renewable waste and

residue fat and oil traders in the United States.

The completion of this transaction is building

on our acquisition of the Dutch animal fat trader

IH Demeter in 2018. Agri Trading and Demeter

both play an important role in supporting our

raw material growth.

Read more about used cooking oil.

Our renewable raw materials

We have focused on waste and residue raw materials

for over a decade and have successfully increased

the share of waste and residues to 92% of Neste’s

total renewable raw material inputs globally in 2021.

We expect to use other types of raw materials besides

waste and residues in the mid- and longer term, such

as novel vegetable oils from advanced agricultural

concepts, as well as algae. These are presented in

further detail on pages 67-68.

Animal fat from food industry waste, used cook-

ing oil and various wastes and residues from vege-

table oils processing represent the top three waste

and residue raw material categories we use, based

on their current and estimated shares of Neste’s total

annual renewable raw material inputs. Proportions of

individual raw materials in Neste’s refining, however,

vary from year to year, depending on their availability,

price, and specific market requirements for example.

Other waste and residue raw materials we have

in our portfolio include fish fat from fish processing

waste, tall-oil-based raw materials, technical corn oil

(TCO) and acid oils.

Neste’s waste and residue supply continued to grow

organically and inorganically, for example through

mergers and acquisitions in our existing sourcing

markets. We source wastes and residues globally

for our renewables refineries located in Finland, the

Netherlands and Singapore.

The availability of waste and residues that suit our

NEXBTL refining technology is expected to grow to

40 million tons a year globally by 2030. We engage in

active research and development of new raw material

sources and processing technologies to grow the raw

material availability beyond the currently-estimated

level.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Renewable raw materials

Neste plans to reduce the share of conventional

palm oil to 0% of its global renewable raw

material inputs by the end of 2023.

Renewable raw material

inputs globally, million tons

2.0

2.5

3.0

3.5

1.5

1.0

0.5

2021

0.3

3.4

3.7

2019

2.8

0.7

3.5

2018

2.4

0.5

2.9

2020

0.6

3.1

3.7

Waste and residues

(e.g. animal fat from food industry

waste, used cooking oil)

Vegetable oils

Vegetable oil processing

waste and residues

Many vegetable oil processing wastes and resi-

dues can be used as raw materials to produce

Neste’s renewable products. Of these types of

wastes and residues, Neste uses palm fatty acid

distillate (PFAD), spent bleaching earth oil (SBEO)

and palm effluent sludge (PES).

PFAD is a processing residue derived from the

final stages of refining food-grade palm oil. It con-

sists of degraded fats, free fatty acids, that need

to be removed before palm oil meets the food

industry’s quality standards in terms of taste,

smell, color and shelf life.

We only buy PFAD from suppliers that are

committed to sustainable working practices and

meeting or exceeding strict sustainability crite-

ria embedded in biofuel regulation. These criteria

include a proactive approach to preventing defor-

estation and mitigating its risk. Read more about

PFAD supply chain traceability on page 71.

SBEO consists of oil waste recovered from

spent bleaching earth that is used in the refining

processes of various vegetable oils.

PES is oil waste derived from palm oil mill efflu-

ent; it consists of the remaining oily waste skimmed

from the palm oil mill’s wastewater (POME).

Read more about the vegetable oils

we have in our portfolio.

)

100% certified and sustainably produced crude

palm oil and refined palm oil

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Renewable raw materials

Novel vegetable oils (NVO) from

advanced agricultural concepts

As part of our mid- to long-term renewable raw

material development efforts, we have been

exploring advanced, sustainable agricultural con-

cepts that do not create additional demand for

agricultural land. With these concepts, the exist-

ing cultivation is not replaced and the indirect land

use change (ILUC) risk is minimized. These novel

cultivation methods could be applied to derive

additional new volumes of vegetable oils from a

variety of plants.

These advanced agricultural concepts are not

yet widely practiced and commercial volumes of

these raw materials are not yet available. Once

available, the use of these additional volumes of

raw materials in biofuels production will fully com-

ply with all the sustainability requirements and cri-

teria included in the EU RED II ((EU) 2018/2001).

Besides being used in the transportation and avi-

ation sectors, NVOs could be used to produce our

renewable feedstock for the polymers and chem-

icals sectors.

Over the period between 2018 and 2021,

Neste participated in an EU-funded BIOPLAT-EU

project, which uses a web-based decision sup-

port tool to assist in the repurposing of mar-

ginal, underutilized and contaminated lands for

increased biomass production in Europe. Neste

acted as the industrial partner in the project, using

the web-based platform to evaluate the potential

of oil crops produced in the marginal, underuti-

lized and contaminated lands in Europe. The proj-

ect was finalized in October 2021.

Read more about novel vegetable oils.

We continuously search for even lower quality

wastes and residues to be used in the production of

fuels, chemicals and materials. We are developing the

availability of emerging lower-quality waste and resi-

due raw materials, such as acid oils and PES, while

continuing to study lignocellulosics, such as agricul-

tural and forest harvesting residues, municipal solid

waste and wastewater-derived grease (i.e. “brown

grease”) as future raw material options.

Diversifying our raw material portfolio

while building new business platforms

We continue to work towards increasing the avail-

ability of renewable and recycled raw materials, while

also developing technologies to diversify our current

raw material portfolio further. This will help us ensure

access to sufficient volumes of raw materials to sup-

port our growing production capacity, which enables

us to maximize our positive carbon handprint.

Raw materials and technologies End-use segments

Renewable hydrogen

Pilot project ongoing at Neste’s Rotterdam

refinery with partners. Green H

and CCS project

at Neste’s Porvoo refinery in feasibility phase,

selected for EU Innovation Fund grant.

Power-to-X

Comprehensive technology mapping in progress.

Algae

Construction of the technology platform in progress.

Lignocellulose

Conversion technology alternatives evaluated.

Project development ongoing.

Municipal solid waste

Initial assessment of scalable

technologies ongoing.

Renewable

Aviation

Renewable Polymers

and Chemicals

Renewable Road

Transportation

SustainabilityStrategy Governance Review by the Board of Directors Financials

Municipal solid waste

Neste explores various fractions of municipal

solid waste that currently cannot be or are not

recycled. These vary from market to market.

Together with our partners, Neste is evaluating

several technologies and potential further part-

ners with a target of converting suitable fractions

of municipal solid waste through producing fuels

and chemicals.

Read more about lignocellulose.

and Power-to-X

Neste is exploring electrolysis and Power-to-X (PtX)

solutions as well as carbon capture and storage

(CCS) and utilization (CCU) technologies. The key

technology in PtX is electrolysis, in which hydrogen

is produced from water using electricity. When using

electricity from renewable sources, such as wind or

solar power, the technology can be used to produce

renewable hydrogen.

PtX technologies are also expected to enable the

conversion of CO

into fuels, chemicals and materials.

Production of hydrogen as well as fuels and chemicals

using PtX technologies is detached from biomass.

Neste is a minority owner of Sunfire, a leading

technology developer of high-temperature electro-

lysis and PtX solutions. We will demonstrate green

hydrogen production at our Rotterdam refinery with

CEA, Sunfire, Paul Wurth and Engie in project called

MULTIPLHY. The project aims to install and integrate

the world’s first multi-MW scale high-temperature

electrolyser system into a refinery.

Neste is also developing the Porvoo refinery in

Finland into renewable hydrogen and CO

utilization.

In November 2021, Neste received a positive grant

decision from the EU Innovation Fund for Neste’s

green hydrogen and CO2 capture & storage proj-

ect, which aims to reduce greenhouse gas emissions

at the refinery. The project introduces carbon cap-

ture and storage (CCS) and electrolysis solutions that

allow decarbonization of production at the refinery.

The project is currently in the feasibility phase.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Renewable raw materials

CASE STUDY: TRANSPORTATION

Unlocking new raw material pools

with innovation to accelerate

emission reductions in transportation

Renewable raw materials hold significant poten-

tial to accelerate the reduction of CO

emissions,

particularly in the transportation sector. Existing

low-carbon fuel technologies (e.g. renewable

diesel) can still be scaled up significantly from

current levels. Renewable waste and residue

fats and oils will be indispensable in deliver-

ing emission reductions in the near future and

over the longer term. Novel vegetable oils (such

as cover crops cultivated on existing agricul-

tural land during off-season) will be an increas-

ingly important source of raw material for further

scaling up solutions such as renewable diesel

as well as sustainable aviation fuel production.

In addition, new conversion technologies will

enable the use of currently untapped raw mate-

rial pools such as municipal solid waste and lig-

nocellulosic biomass. In the long-term, fuel pro-

duced from electricity and waste CO

, so-called

e-fuels (or power-to-liquids), will also increas-

ingly play a role. The potential of these technol-

ogies could be substantial if innovation activities

successfully enhance technology maturity and

bring down costs.

Regulators hold the key to ensuring the eli-

gibility of a broad range of raw materials to

enable the full emission reduction potential of

these renewable raw materials in transport and

beyond.

Source: Neste analysis based on WEF Clean Skies for Tomorrow and other sources Biomass potential converted to fuel potential, using around 85% conversion efficiency

(weight-based) for fats and oils and novel vegetable oils; around 25% efficiency for lignocellulosic biomass and municipal solid waste.

*80% organic waste, with 20%

non-reusable, non-separable

plastic waste

Global raw material potential for renewable fuels (Mtoe)

Commercial deploymentDemonstration

2020 2030

180–275

Signicant

potential for fuel

production in the

long-term

200–400

190–250

~150

~50

Long-term fuel potential (Mtoe)

Marine

Aviation

Road transportation

Power-to-liquids

Algae

Cellulosic energy crops

Lignocellulosic residues

(agriculture; forestry)

Municipal solid waste*

Novel vegetable oils

(cover crops; degraded land)

Waste and residue fats and oils

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Renewable raw materials

Sustainability criteria for our

renewable raw materials

• We source only sustainably-produced renewable raw

materials from suppliers who meet our strict criteria for

sustainability. These criteria are embedded into our policies

and principles, as well as the regulatory requirements in

our key markets.

• We only accept renewable raw materials that are traceable

to the point of origin.

• We select our renewable raw material suppliers carefully,

based on a systematic approach.

• All the renewable raw materials we use meet the

sustainability criteria defined in the EU RED II

((EU)2018/2001) for the European markets or Renewable

Fuel Standard (RFS), California/Oregon/BC Low Carbon

Fuel Standard (LCFS) requirements, as applicable, for North

America. The raw material mixes used for products in

specific markets additionally meet local market-specific and/

or industry-specific regulatory requirements.

• We are committed to avoiding conversion of habitats with

valuable biodiversity for biomass production. We ensure

that the production of our raw materials has not caused

deforestation and that human rights have been respected.

• We ensure that the renewable raw materials that we use

to produce renewable fuels always provide the required

greenhouse gas emissions savings (at least 50% reduction

as per EU RED II (EU) 2018/2001) over the fuels’ life cycle

compared to similar emissions from 100% fossil alternatives.

• All the renewable raw materials we use are either certified

or their compliance with applicable laws and regulations is

verified according to the legislation of the country to which

the end product will be supplied.

We accept only renewable

raw materials that are

traceable to the point

of origin.

We maintain a presence on the ground in the regions

where we source raw materials. This allows us greater

visibility of the whole supply chain, closer engagement

with our suppliers and the ability to ensure the highest

level of sustainability performance. Read more about

our supplier engagement on pages 77–81.

Our cooperation particularly with palm oil produc-

ing smallholders aims to support the development of

their sustainability awareness and expertise. In 2021,

our supply chain included approximately 13,200

(14,400) Indonesian palm oil smallholders, organized

into cooperatives. The adoption of sustainable prac-

tices enables smallholders to achieve a certification.

Neste requires a commitment to certification from all

its palm oil suppliers.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Progress in PFAD

supply chain traceability

Within the European Union, biofuel producers are

required by law to use only raw materials that are

traceable to the point of origin. We meet the trace-

ability requirements among other legal sustainability

requirements in all of the markets where our prod-

ucts are sold. This also means that if, PFAD is clas-

sified as a residue within a specific market for exam-

ple, we ensure traceability to the palm oil refineries

where PFAD is removed to produce food-grade palm

oil. If PFAD is classified as a co-product, traceability

is ensured to the palm oil plantations.

Since 2017, we have been working towards a target

of developing traceability for our entire PFAD supply

chain to palm oil plantations. Working towards the tar-

get has required us to map large parts of previously

unmapped food industry palm oil supply chains, but

we have made significant progress.

During 2021, we were able to independently map

and validate 100% (99.97%) of our PFAD supply chain

to the supplying palm oil mills and 85% (85%) all the

way to plantations. This significantly surpasses the

fuel industry’s current regulatory requirement for res-

idue raw materials, or in the case of PFAD, traceabil-

ity to the palm oil refinery. When mapping the supply

chain to the plantations, publicly available data (e.g.

on RSPO, ISCC, ISPO certifications) and supplier

reporting have been used.

We continued engaging with PFAD-supplying palm

oil refineries to ensure that their operations and those

of their supplying mills are in compliance with our sus-

tainability policies and principles. We have also evalu-

ated each palm oil mill for environmental risks as part

of our proactive approach to preventing deforestation.

In 2021, we focused on improving our suppliers’ No

Deforestation, Peat and Exploitation (NDPE) Policies,

due diligence processes, traceability to plantation

data collection, human rights, grievance mechanism,

among others. We also continued to work with our

partner Consortium of Resource Experts (CORE) and

palm oil suppliers to improve traceability and sustain-

ability within the industry.

Traceability to plantations (TTP) method

Our aim is to develop a commonly accepted and

adopted approach to tracing palm oil-based waste

and residues, such as PFAD. For this, we have contin-

ued to develop the “traceability to plantations” (TTP)

Building industry-

wide acceptance

for Traceability

to plantations

approach could

significantly

improve the overall

transparency of

palm oil supply

chains for all

industries.

Neste Annual Report 2021 | Renewable raw materials

approach. The TTP approach gathers data from sup-

pliers sourcing raw materials in higher-risk areas,

such as those in close proximity to forests, unculti-

vated peat and protected areas.

In previous years, we have engaged with palm oil

and PFAD suppliers to introduce the approach and

gather feedback. Building industry-wide acceptance

for the approach could significantly improve the over-

all transparency of palm oil supply chains.

Due to the ongoing pandemic situation, most of our

usual in-person supplier engagements were replaced

by online meetings. We continue to engage with our

suppliers via virtual platforms and video conferences

for sustainability policy development, due diligence,

traceability, training and workshops, grievance man-

agement, third-party suppliers, transparency and

reporting, among others. We have online calls on a

quarterly basis and discuss working closely with our

suppliers on monitoring their time bound action plans.

2017

Neste sets a new public target to

map its entire PFAD supply chain

to oil palm plantations.

*Based on Risk-calibrated Traceable to Plantation approach. Figures are weighted by refinery volumes supplied to Neste.

% of Neste's PFAD supply traceable to plantation*

2018

44%

2019

49%

2019

54%

2019

63%

2019

71%

2020

76%

2020

2021

85% 85%

83%

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Renewable raw materials

Palm oil & PFAD supplier

sustainability workshops

Neste actively engages with its renewable raw

material suppliers through workshops to col-

laboratively develop innovative solutions in

the supply chain, continuously improve sus-

tainability and resolve any grievances where

they occur. In August 2021, Neste organized

a two-day grievance-mechanism workshop

for its direct suppliers to engage in capacity

building, guide them in establishing effective

grievance mechanisms and share best prac-

tices and practical steps for addressing No

Deforestation, Peat and Exploitation (NDPE)-

related grievances.

Read more about the program.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Recycled raw materials

Neste creates solutions for combating climate change

and accelerating a shift to a circular economy. To drive

a transition to a circular economy in the polymers and

chemicals sectors, we continue developing technologies

and capacity with value chain partners to chemically

recycle post-consumer plastic waste that is currently

difcult or impossible to recycle mechanically.

(3 Mt) the amount of non-

renewable resource use

that Neste’s renewable and

circular solutions helped

replace in transport, aviation

and polymers and chemicals

sectors in 2021*

3Mt

*Calculating principles can

be found on page 110.

>1Mt

of plastic waste annually

from 2030 onwards

Aiming to process

800t

of liquefied waste plastic

processed at Neste’s

refineries in Finland during

trial processing runs

Recycled raw materials

SustainabilityStrategy Governance Review by the Board of Directors Financials

Chemical recycling increases

circularity of materials

Neste is advancing chemical recycling, also known as

advanced recycling, to speed up the transition to a

circular economy for plastics. Neste’s ambitious goal

is to process over one million tons of plastic waste

annually from 2030 onwards.

Chemical recycling complements mechanical recy-

cling and enables recycling of plastic waste that

is currently hard or impossible to recycle. It means

transforming waste plastic back into a raw material

similar to crude oil via a liquefaction process, which

allows processing it into high-quality materials again.

Through chemical recycling, hard-to-recycle plastic

waste such as colored, multi-layer and mixed-mate-

rial plastics can be turned into high-quality products

again.

Neste’s development of chemical recycling tech-

nologies and capacity with value chain partners sup-

ports Neste’s strategic target of becoming a global

leader in circular solutions. It is also aligned with

our aim of reducing climate emissions and reducing

crude oil dependency in society. The development of

chemical recycling is crucial for meeting the ambitious

circular economy targets in Europe, which aim for a

50% recycling rate of all plastic packaging by 2025

and 55% by 2030.

Chemical recycling creates possibilities and incen-

tives to divert plastic waste from landfills and incinera-

tion by turning plastic waste into a valuable resource.

Diverting plastic waste from incineration back to the

plastics value chain provides significant greenhouse

gas emission savings. It also helps tackle the plastic

waste pollution challenge through creating value from

currently hard-to-recycle plastic materials which can

contribute to the reduction of plastic waste polluting

the environment.

Sources of figures: Plastics Europe, Deloitte, 2018 and 2019

Total plastics

demandin Europe

51Mt/a

and growing

In the EU waste

package, recycling

target for plastic

packaging

50% by 2025

55% by 2030

9.4Mt/a

currently collected

for recycling in Europe

3–4Mt/a

actually recycled

in Europe

>1Mt /a

Neste target

Post-consumer waste in Europe

29Mt/a of which 18Mt

packaging

EU’s Strategy

for Plastics in a

Circular Economy:

Increase recycling of

plastic and reuse of

plastic packaging

by 2030

Plastics demand and recycling targets

Neste Annual Report 2021 | Recycled raw materials

For chemical recycling, upstream partners are

needed to collect, sort and process plastic waste. We

have developed several partnerships to develop these

technologies to enable their commercialization and to

speed up their adoption. One of these partnerships

is with Ravago, with whom we aim to establish a joint

venture to build an industrial facility for chemical recy-

cling in North Sea Port in Vlissingen, the Netherlands.

Chemical recycling provides several benefits, such as:

• Supporting the global reduction of plastic waste

and accelerating circularity of materials by

diverting valuable materials away from landfills and

incineration.

• Complementing mechanical recycling, to help

increase recycling rates by recycling a wider

range of waste plastics (e.g. mixed, multilayer,

multimaterial and colored plastics).

• Contributing to reducing crude oil dependency in

society.

• Enabling production of high-quality end products

based on recycled materials.

• Providing a circular drop-in feedstock solution for

chemicals and polymers.

• Enabling Neste to contribute to the global

development of efficient new solutions to tackle

the global plastic waste challenge.

Read more about chemical recycling.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Liqueed waste plastic

processed at the Porvoo renery

Neste has successfully concluded its first series of

trial runs processing liquefied waste plastic at its

Porvoo refinery in Finland. After kicking the series off

with its first-ever industrial scale trial run with liquefied

waste plastic in 2020, Neste has conducted additional

runs in 2021. In the course of the trial runs, Neste

has been able to upgrade liquefied waste plastic to

drop-in solutions for plastic production and develop

related processing capabilities at industrial-scale.

In total, Neste has processed about 800 tons of liq-

uefied waste plastic at our refineries in Finland. With

the latest trial runs in Porvoo, we are laying the foun-

dation for replacing crude oil-based raw materials

with liquefied waste plastic and strengthening circu-

larity together with our customers.

The trial runs will continue with higher volumes in

2022. Our decades of experience in oil refining, com-

bined with refining expertise in upgrading low-quality

raw materials, provide a solid foundation for the rapid

demonstration and scaling up of chemical recycling.

Neste RE – renewable and recycled

Neste RE™ is a raw material for polymers production

that is made entirely out of renewable and recycled

raw materials. It is a drop-in solution that can be used

on its own or in a blend to create products of identical

quality to those made out of conventional raw materi-

als based on virgin fossil oil.

Neste RE can be produced entirely without vir-

gin fossil oil, from 100% renewable and recycled raw

materials. The renewable component of Neste RE is

produced through Neste’s proprietary NEXBTL refin-

ery process. It is made from renewable raw materi-

als, primarily waste and residue oils and fats, such as

used cooking oil.

Sustainability criteria for

liqueed waste plastics

• In our chemical recycling value chain we

accept only liquefied waste plastics that

are traceable and comply with the ISCC

Plus certificate requirements.

• All our suppliers are required to fulfill

the requirements of our Supplier Code

of Conduct (SCoC). A supplier’s ability

to meet the requirements of the SCoC

is regarded as a significant factor

when Neste is deciding an initiation or

continuation of a business relationship with

a supplier.

• We require our liquefied waste plastics

suppliers to comply with applicable laws

and regulations and environmental permits.

We expect them to follow equivalent ethical

business standards as stated in the Neste

SCoC.

• Our liquefied waste plastics suppliers must

uphold Neste’s policies and principles,

including the requirements of our SCoC.

• We select our liquefied waste plastics

suppliers carefully, based on systematic

controls for counterparty screening and

monitoring in which all potential business

partners and suppliers undergo automated

pre-screening.

We have an ambition to make

our Porvoo refinery the most

sustainable refinery in Europe

by 2030. We aim to increase the

share of renewable and circular

raw materials to over 10% of the

crude oil refinery feeds by 2030.

Neste Annual Report 2021 | Recycled raw materials

The recycled component of Neste RE consists of

chemically recycled plastic waste. Chemical recycling

enables Neste to use plastic waste that cannot or is

hard to be recycled mechanically, such as colored,

multilayered or multi-material packaging and films, for

example.

Neste RE can be used for plastics and chemicals

in a wide range of applications such as toys, sports

equipment and clothing, food and beverage packag-

ing, home and personal care and medical devices.

Neste is collaborating with industry forerunners to

produce a wide variety of high quality polymers and

chemicals from Neste RE. Read more about our part-

nerships on the next page.

Read more about Neste RE.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Recycled raw materials

Progress with strategic partners

Neste continued to collaborate with forerunners in the

polymers value chain to accelerate a shift to a circular

economy. These close collaborations and initiatives

across the polymers value chain are crucial to achiev-

ing a large-scale circularity transformation within the

sector. Besides continuing the work with its existing

partners, like LyondellBasell and Unilever as well as

Borealis, Neste also started new and further devel-

oped existing strategic partnerships.

In early 2021, Neste communicated that it had

acquired minority stake in Alterra Energy, an

innovative chemical recycling technology company.

The collaboration includes joint technology develop-

ment, global technology licensing and jointly working

towards commercializing Alterra’s proprietary lique-

faction technology with strong initial focus on Europe.

Neste joined forces also with Mitsui Chemicals,

Inc. and Toyota Tsusho Corp. to produce renew-

able plastics and chemicals from Neste RE, 100%

bio-based hydrocarbons. Neste RE replaces a part

of the fossil feedstock in the production of a variety of

plastics and chemicals at Mitsui Chemicals’ crackers

at Osaka Works. The plastics and chemicals are pro-

duced with significantly lower life cycle greenhouse

gas emissions than products made from traditional

raw materials, such as fossil oil.

Neste continued its partnership with Lyondell-

Basell and agreed on a long-term commercial rela-

tionship to make polymers and chemicals from

renewable feedstock more widely available to global

brands. LyondellBasell will begin to source Neste RE.

The feedstock will be processed through the cracker

at LyondellBasell's plant in Wesseling, Germany, into

polymers and sold under the CirculenRenew brand

name. Together, Neste and LyondellBasell contribute

to the development of the European market for more

sustainable polymers and chemicals solutions.

Neste and Unilever started working together

on developing solutions for carbon-based ingredi-

ents, as well as packaging materials produced from

renewable materials for Unilever’s cleaning products.

A concrete goal will be the production of surfactants

based on Neste’s renewable and recycled materi-

als as crucial ingredients for Unilever cleaning prod-

ucts. Furthermore, the work on solutions for packag-

ing via polyethylene and polypropylene produced with

renewable and recycled materials from Neste will be

part of the project.

In late 2021, Neste announced its plans with its

partner Ravago to set up a joint venture and build

an industrial liquefaction facility in North Sea Port in

Vlissingen, the Netherlands. Neste started collaborat-

ing with Ravago in 2019 with the target of building

chemical recycling capacities of more than 200,000

tons per year by 2030. The companies are now plan-

ning to build an industrial facility for chemical recycling

in Vlissingen with an estimated capacity of 55,000

tons. The liquefaction technology for the site will be

provided by Alterra Energy.

Neste continued its strategic partnership with LG

Chem, South Korea’s largest diversified petrochemi-

cals company, to replace fossil feedstock with Neste’s

renewable hydrocarbons. In 2021, LG Chem success-

fully mass-produced the world’s first ISCC Plus cer-

tified ‘Bio-balanced’ Super Absorbent Polymer, and

delivered it to a customer to be used for making baby

diapers, among other products.

Read more about our partnerships to create

circular business solutions.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Sustainable supply chain

In 2021, we established our broadened sustainability vision

that also covers our supply chains and raw materials, which

are critically important for reaching our sustainability ambi-

tions. Our vision is to drive a safe and healthy workplace,

fair labor practices and increased commitment to sustain-

ability across the supply chain. We continue to require all

of our suppliers to be committed to our Supplier Code of

Conduct and have a grievance process that we will continue

to develop to ensure that it is best-in-class. Read more about

our sustainability vision from page 23.

Identifying and selecting good partners are crucial to the sustainability

of supply chains. Ensuring the sustainability of Neste’s supply chains

begins before a deal has been closed or raw materials, products,

components, materials or services are delivered.

Sustainable supply chain

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Sustainable supply chain

We expect all of our business partners and suppliers

to uphold Neste’s policies and principles, includ-

ing our Supplier Code of Conduct, a key element

in Neste’s supplier management system. Additionally,

our renewable raw material suppliers are expected to

meet the requirements of our Responsible Sourcing

Principle, and adhere to our Human Rights Principle,

industry as well as market-specific legal requirements.

Neste Supplier Code of Conduct

Our commitments to responsible and ethical business

depend not only on our own people but also upon

forming relationships with business partners who

share our commitments.

The Supplier Code of Conduct updated and imple-

mented in 2020, outlines the basic requirements

Neste expects from its suppliers and their own first

tier sub-suppliers, contractors and business part-

ners to adhere to and implement throughout their

businesses.

The Supplier Code of Conduct is included in the

terms of contracts with all suppliers, contractors and

other business partners participating in the delivery

of products, components, materials or services to

Neste, covering both direct and indirect procurement.

We have carried out training to support the imple-

mentation of the Neste Supplier Code of Conduct,

and also in 2020 published an official guide with prac-

tical recommendations to help our suppliers meet

their obligations to comply with the Supplier Code of

Conduct. In 2021, we updated the guidance on equiv-

alence assessment and clarified the guidelines.

We created a Supplier Code of Conduct e-learn-

ing in 2021, which was completed by all relevant

Neste employees. The purpose of the e-learning was

to outline the main elements of the Supplier Code

of Conduct and describe how to report potential

violations.

Neste’s suppliers are expected to comply with requirements

set by Supplier Code of Conduct for ve elements:

Compliance

with laws and

regulations

Human and

labor rights

Business

conduct

Occupational

health, safety

and security

Environmental

impact and climate

change

In 2021, 99% (100%) of the renewable raw material

volume and 88% (78%) of the total supplied volumes

of crude oil and fossil feedstocks were covered by

Neste’s Supplier Code of Conduct or equivalent. 86%

(100%) of the new indirect supplier contracts included

commitment to Neste Supplier Code of Conduct or

equivalent.

Visibility in our supply chains

Identifying and selecting good partners is crucial to

the sustainability of our supply chains. In addition to

understanding the sustainability performance of our

direct suppliers, we also want to gain visibility in prac-

tices throughout the entire renewable raw material

supply chain, including our sub-suppliers.

During the supplier onboarding we require our

renewable raw material suppliers to disclose their

supply chain actors and locations as determined by

market requirements – and even go beyond that in

some cases. For crude palm oil we, for example, need

to know the exact coordinates of the plantations. As

for used cooking oil, in addition to regulatory require-

ments, we require exact information about the actors

in our supply chain until the collection point where the

used cooking oil is gathered.

Sustainability risk assessment

in our supply chain

Neste has undertaken several initiatives to iden-

tify and understand how risks may be present in our

operations and supply chains. To ensure our suppli-

ers’ compliance with the Supplier Code of Conduct,

Neste has implemented systematic controls for coun-

terparty screening and monitoring in which all poten-

tial business partners and suppliers undergo auto-

mated screening, escalated to a manual review if any

issues are found or the counterparty’s business case

matches predefined criteria.

While the screening is predominantly focused on

economic sanctions and similar compliance issues,

counterparties are also screened for selected ethical

concern categories in third-party enforcement data-

bases and major news outlet sources.

A key element in understanding sustainability risks

in our supply chains is to assess country risk. We use

a bespoke, industry leading country risk assessment

methodology to map sustainability risks for the coun-

tries in which we operate and have supply chains.

We continue commercial negotiations only with

approved parties who meet our sustainability require-

ments, and all partners must continue to meet these

criteria and commit to developing their operations in

the future. Our overall approach to advancing sus-

tainability due diligence throughout the supplier rela-

tionship is to work with our suppliers to drive positive

practices and mutually enhance sustainability perfor-

mance through continuous engagement, collabora-

tion, and improvement.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Renewable raw material suppliers

Our renewable products raw material suppliers are

subject to rigorous sustainability due diligence as part

of our supplier sustainability approval process under

the Neste Principle on Renewable Products Supplier

Sustainability Approval. The Principle applies world-

wide to any Neste company which is establishing a

business relationship with a supplier of renewable

raw material for Neste’s renewable products. It sets

the minimum sustainability requirements for approv-

ing suppliers through a five-step sustainability due dil-

igence process:

1. Raw Material Evaluation

2. Country and Raw Material Risk Assessment

3. Counterparty Screening

(incl. Risk-based Financial Risk assessment)

4. Sustainability Desktop Review

5. Sustainability Audits

In order to identify sustainability risks in our renew-

able raw material supply chains, we use risk indices

and maintain a country risk categorization. Our cat-

egorization also includes a list of no-go countries

and regions based on considerations including trade

sanctions, conflicts and sustainability risks.

In addition to assessing country risks, our risk

assessment includes mapping of supply chains

and operations, desk-based research, supplier

self-assessment questionnaires, supplier engage-

ment and discussions with expert stakeholders.

The Sustainability Desktop Review encompasses a

comprehensive range of Environmental, Social and

Governance (ESG) topics that include governance,

labor standards and practices, human rights, environ-

ment and health and safety.

Based on the supplier risk assessment, we are bet-

ter able to prioritize sustainability audits, conducted

either by our own local sustainability specialists or a

third-party auditor. In case a third-party auditor con-

ducts the audit, a Neste sustainability specialist par-

ticipates to strengthen the collaboration with the sup-

plier. The purpose of Neste sustainability audits is

to assess and determine suppliers’ compliance with

Neste’s Supplier Code of Conduct, our Human Rights

Principle, Neste Responsible Sourcing Principle and

local regulatory requirements.

The sustainability due diligence process is mainly

managed on Neste’s Supplier Sustainability Portal

(SSP), a digital platform that is used to facilitate our

evaluation of potential and existing renewable raw

material suppliers, to support performance monitoring

and to enable active supplier engagement. The portal

was brought fully into use in 2020. In 2021 the total

number of onboarded renewable raw material suppli-

ers was 223. In 2021, our focus area with the portal

was to finalize the supplier deployment and continue

our development work.

Sustainability audits

In 2021, we conducted a total of 19 sustainability audits

for renewable raw material suppliers, of which 3 were

onsite, 9 were virtual and 7 were third party audits.

Due to the ongoing pandemic situation in 2021, we

had to favor virtual auditing practices. The majority of

the audit findings in 2021 were related to health and

safety practices. We also conducted 8 sustainabil-

ity audits for contractors in the Singapore Expansion

project. In 2022, we aim to focus on increasing the

number of audits, prioritizing through a risk-based

approach and paying specific attention to third-party

auditing.

In 2021, we also published the Neste Sustainability

Audit Standard internally for all Neste companies and

employees. The purpose of the standard is to pro-

vide a basic understanding of the Neste sustainabil-

ity audit process and give guidelines and assessment

criteria for conducting the audits.

Supplier capacity building trainings

Understanding that risk assessments and sustainabil-

ity audits alone are not sufficient for tackling sustain-

ability issues, we also commit to train our employees

on our policies and organize capacity building trainings

for our suppliers operating in high-risk sectors and

geographies. In 2021 we conducted Health & Safety

and Environmental Management capacity building

online trainings for our Chinese, Latin American and

European renewable raw material suppliers.

In 2021 we also organized sustainability workshops

for our palm oil and PFAD suppliers. Read more from

page 72.

Neste Annual Report 2021 | Sustainable supply chain

Ethical Business Practices 3%

Human and Labor Rights 31%

Health & Safety 57%

Environment 9%

󰈉

Audit ndings - different sustainability

categories, renewable raw material

suppliers, %

SustainabilityStrategy Governance Review by the Board of Directors Financials

Oil suppliers

As we are transforming from a traditional oil refiner

into a provider of renewable and circular solutions,

we continue to produce high-quality oil products from

crude oil and condensates. In 2021, we announced

an ambition to make our Porvoo refinery the most

sustainable refinery in Europe by 2030 and aim to

increase the share of renewable and circular raw

materials to over 10% of the refinery feed by 2030.

Neste is purely a buyer of crude oil; we do not own

shares in any company producing crude oil, nor are

we engaged in oil exploration or drilling. Additionally,

we do not purchase crude oil from Arctic sea areas or

conflict areas.

The due diligence process for our Oil Products (OP)

suppliers includes Country Risk Assessment and

Counterparty Risk Assessment. In 2021, we devel-

oped and implemented a Sustainability Desktop

Review based on publicly available information of the

suppliers to complement the existing process. In addi-

tion to assessing country and counterparty risks, our

sustainability due diligence process includes review-

ing a range of Environmental, Social and Governance

(ESG) topics that include governance, labor standards

and practices, human rights, environment, health and

safety as well as oil production specific topics, such

as flaring.

In 2021, a total of 86 OP suppliers were assessed.

In 2022, we will focus on further improving the sus-

tainability due diligence process and are committed

to continue assessing all new suppliers.

Indirect procurement

Neste’s Indirect Procurement function covers pur-

chasing of goods and services that are not included

in the sourcing and delivery of refined crude oil and

renewable raw materials. It is responsible for sourc-

ing, contract management, purchasing and supplier

management. Prior to a commercial relationship with

a supplier, the function carries out an initial analysis,

including approval of the Neste Supplier Code of

Conduct, Counterparty Screening and the supplier’s

financial status check. Sustainability, security, safety,

quality, reliability, technical, financial and legal aspects

are core requirements and used as criteria in supplier

selection.

Liqueed waste plastic suppliers

We are exploring ways to increase the availability of

emerging, even lower-quality waste and residue raw

materials. Liquefied waste plastic, for example pro-

vides our traditional crude oil refineries with an oppor-

tunity to replace crude oil use with more sustainable

alternatives. We aim to increase the volumes of liq-

uefied waste plastic processing gradually to continue

learning and developing the value chains and pro-

cessing technologies. Our target is to process over

one million tons of waste plastic annually from 2030

onwards.

In 2021, we developed a sustainability process for

our liquefied waste plastic and other potential types of

suppliers, and will continue the piloting of the process

also in 2022.

Neste’s grievance process

We continuously improve our procedures for pro-

cessing raw material-related grievances. We publish

monthly grievance log updates on our website, and

track and publicly disclose the number and type of

grievances that have been raised in person or via our

whistleblowing channel.

We take all allegations of suspected sustainability

violations and shortcomings seriously and investigate

the cases. Upon learning about serious allegations

concerning our suppliers, we put all further purchases

Neste Annual Report 2021 | Sustainable supply chain

Crude oil and fossil feedstock

sources by region, million tons

Other countries

Kazakhstan

Norway

Russia

2021

10.1

2019*

15.6

2020*

14.0

from those suppliers or supply chains on hold. If the

sustainability criteria and requirements included in our

contracts have been verifiably breached, the nature of

these is considered serious and progress to resolve

those issues is not made in a reasonable time, we ter-

minate our contract with the supplier in question.

Our primary means of action is based on engage-

ment and cooperation with our supplier to remediate

the issue. This is because we believe that ending pur-

chases does not sufficiently ensure that problems are

resolved.

We have a proven track record of collaborating with

our suppliers and external sustainability organizations,

such as locally operating NGOs, to make a positive

sustainability impact on the supply chain. We engage

regularly with our suppliers in terms of sustainabil-

ity policy development, due diligence, traceability,

training and workshops and grievance management,

among others.

Read more about our

renewable raw material grievances.

)

Reporting accuracy improved in 2021.

Kazakhstan earlier included in the Russian volumes.

SustainabilityStrategy Governance Review by the Board of Directors Financials

How do we deal with shortcomings?

Engagement and cooperation with our suppliers are

the primary ways of action to address any shortcom-

ings. Ending purchases does not solve any problems;

instead by working together with our suppliers we are

able to make improvements.

Engaging with strategic

Chinese suppliers to mitigate

re safety risks

In 2021, Neste worked with a professional fire engi-

neering company to evaluate the existing fire safety

risks of two strategic Chinese used cooking oil (UCO)

suppliers. The evaluation included fire safety manage-

ment, construction-related fire protection, safe evac-

uation and fire-fighting equipment. We were able to

raise the suppliers’ awareness and engage with them

to reduce the fire risks through reasonable and prac-

tical guidance.

Improving deforestation monitoring in Neste’s palm oil and PFAD supply chains

In 2021, Neste partnered with Earthqualizer to improve deforestation monitoring in its palm oil and PFAD supply chains. With

this proactive approach, Neste hopes to get in touch with its suppliers more quickly and regularly. By leveraging value-added

intelligence, we can help suppliers interact with their suppliers by providing the evidence needed to drive supply chain activi-

ties, which help increase discussion, monitoring and review, and creates a positive impact. Neste’s multi-tier upstream supply

chain has more than 1,400 indirect suppliers.

Neste Annual Report 2021 | Sustainable supply chain

We address shortcomings once we become

aware of them by:

• Requiring the supplier to report the situation as part of

Neste’s grievance mechanism.

• Engaging and cooperating with suppliers. This is our

primary way of action.

• Providing an assessment and, if necessary, conducting

supply chain audits locally by Neste’s or the partner’s

sustainability experts.

• Requiring a detailed plan for corrective actions from the

supplier.

• Cooperating with the supplier and other stakeholders to

develop operations and perform necessary corrective

actions.

• Monitoring and updating on the progress online.

• Ending purchases, if we do not see adequate progress or if

the supplier loses their certificate

• Reviewing, improving and adjusting our processes where

needed.

Read more about our renewable raw

material grievances from page 80.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Our people

Our success is based on our people.

To carry out our strategy and business

growth, our values guide our work.

We support, develop and take care of the wellbeing of

our people to enable them to grow, innovate and build

our future. We provide them clear and transparent

targets, competence and career development oppor-

tunities, empowering leadership as well as competi-

tive compensation and rewards based on roles and

responsibilities. As an employer, we want to offer a

meaningful place to work for highly competent talents

who share our values and are eager to join our jour-

ney towards a carbon-neutral world.

Our people

SustainabilityStrategy Governance Review by the Board of Directors Financials

Transformation strongly in focus

Altogether about 955 employees were hired globally

by the end of 2021. About 40% of the recruits were

temporary, and nearly 330 were summer trainees.

Most of the permanent recruits focused on grow-

ing our Renewable business units or Innovation and

Neste Engineering Solutions units.

Refinery operations in Porvoo and Naantali were

restructured to ensure the competitiveness of the Oil

Products business. The refinery operations in Naantali

were shut down in March 2021. The final number of

permanent redundancies decreased from 310 to 217

as a result of successful job changes.

We implemented a large-scale change support

program that includes offering new jobs for employ-

ees in other Neste locations and functions. We sup-

port the relocation of employees and their compe-

tence development to meet new roles and tasks. The

leaving employees are supported financially as well

as by providing support for re-employment and train-

ing, e.g. by providing personal career coaches. 70%

of employees participating in the program have taken

a new step in their careers by October 2021, finding

new career paths and developing professionally.

We continue investing in sustainable refining and

circular solutions. To support our innovation capabili-

ties, we are building a new research and development

centre in Singapore. Having a strong focus on com-

mercial and innovation capabilities is one of our keys

to success at Neste.

Developing capabilities to deliver an

excellent customer experience

During 2021, we took the first steps towards the exten-

sive development of renewable capabilities. The joint

Neste Annual Report 2021 | Our people

capability development will have two approaches:

extending the existing capabilities developed by

Renewable Road Transportation to Renewable

Aviation and Renewable Polymers and Chemicals,

and building completely new capabilities for all three

customer-centric business units. The prioritized devel-

opment capabilities are strongly related to Neste’s

ambition and strategy to be more customer-centric in

the future.

During the past year, in close cooperation with busi-

ness leaders, we have created a competence frame-

work for our commercial organization, defined com-

petence expectations for Renewables’ commercial

roles, piloted and implemented individual-level devel-

opment planning for the competence framework, and

are currently piloting talent acquisition and recruit-

ment competencies.

Ensuring diversity, equality

and inclusion

We believe that equality and non-discrimination are

fundamental rights for everyone. We drive equal

opportunities and think that a wide range of perspec-

tives are needed to increase innovation and make bet-

ter decisions. Inclusion is embedded in our values, in

which we welcome everyone on Neste’s growth jour-

ney and care for everyone’s right to be their own true

selves.

We have a great opportunity to increase and fos-

ter diversity as we expand our business and grow

globally. To truly benefit from increasing diversity and

making people feel valued and supported, we have

continued to develop inclusive leadership and culture

of belonging based on our values. The key actions

are strongly linked to our people-related initiatives:

leadership development programs, Smart Work to

support the "new normal" of the pandemic situation

and renewal of the Code of Conduct. Read more

about the Code of Conduct from page 46.

Our Executive Committee follows the progress of

our development work and efforts in the Diversity &

Inclusion field on a quarterly basis, and the theme is

also regularly discussed in the Board of Directors.

At Neste, inclusion also means that the thoughts

and ideas of our people matter. We all have the oppor-

tunity to contribute to our success and take part in

driving Neste forward. Through a continuous listening

program, we ensure that we have an understanding

on how our people are doing and hear their views to

provide valuable information to support management

and decision-making.

955

employees

were hired globally

by the end of

2021.

Altogether about

The refinery

operations in Naantali

were shut down in March 2021.

The final number of permanent

redundancies decreased from

as a result of successful

job changes.

310 217

Donations and voluntary work

We engage positively with all the communities

close to our operations. Our goal is to have a

positive impact through charitable donations

to causes that align with our purpose, values

and strategy. For this reason, we make dona-

tions in line with three key themes: innova-

tion and education; climate and environment;

and diversity and inclusion. In 2021 we made

donations to the Baltic Sea Action Group, the

Finnish Refugee Council and Buffalo Bayou,

among others.

In addition, we offer our employees a ded-

icated paid full day for voluntary work as we

believe volunteering activities are a way to

build closer ties to our society. In 2021, many

of our employees opted to dedicate their time

to charitable endeavors, including raising

money for charity through sponsored sports

challenges and waste collection.

Read more about our donations.

SustainabilityStrategy Governance Review by the Board of Directors Financials

The broader annual employee survey is comple-

mented by shorter pulse surveys on current top-

ics on a regular basis, as well as by surveys gather-

ing onboarding and offboarding experiences. Due to

the pandemic, we have recently focused on themes

related to wellbeing. The survey results are regularly

discussed and measures are agreed within teams at

each level of the organization.

In addition to our employee surveys, we encourage

people to share their ideas, e.g. by giving and ask-

ing for feedback, having regular discussions with their

managers and team, sharing information and experi-

ences and utilizing our common open communication

channels. These are all ways of driving collaboration

and belonging.

Wellbeing and development

are key to success

Wellbeing at work is a critical factor for us to succeed.

It consists of different elements: competence, motiva-

tion, health, work environment, work community and

leadership. Individuals, managers and the work com-

munity all play a part in ensuring that work feels good

and does good.

During 2021, we launched a new leadership devel-

opment program, ‘We Lead’, that is tightly aligned with

our values: We care, We have courage, We cooper-

ate. At We Lead, we provide tools for our leaders and

experts to take care of themselves and their teams. A

new learning path has also been created for Neste’s

new people managers.

Learning is possible on a group-wide basis in areas

such as leadership, innovation, safety, hybrid work,

influencing & presentation skills and language skills.

In addition, the business units and functions have

defined strategic capabilities and implemented vari-

ous development initiatives required for their success.

We have supported our people in various ways

during the pandemic, as many have been working

remotely since mid-March 2020. Concrete activities

have been provided to support smart ways of work-

ing, e.g. virtual leadership and remote facilitation,

Walk and Talk meetings, virtual coffees and several

wellbeing challenges such as Small Steps Towards a

Better 2021.

Our way of working, called Smart Work, is based

on trust and collaboration, which encourages us to

act safely and create a feeling of belonging while

working efficiently. Team discussions are at the core

of implementing Smart Work. Concrete practicalities

are defined together on a team level according to the

relevant guidelines.

As a part of our wellbeing at work, we have also

developed occupational health services in Finland, as

Terveystalo was chosen as a centralized service pro-

vider in Finland as of June 2021.

At Neste, health, safety and wellbeing at work are

interrelated. Neste’s teams renewed their safety com-

mitments this year, and wellbeing was included in many

of them. In the major turnaround project, TA2021, in

Porvoo, we trained many of our own employees and

contractors, wellbeing as one of the important topics.

In 2021, we published our new sustainability vision,

which includes requiring and securing living wages,

as well as joined Unilever's Living Wage/Living Income

Promise. In 2022, we will start reviewing the salaries

of our employees against selected living wage bench-

marks. Read more about living wages in the Human

rights section.

Neste Annual Report 2021 | Our people

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Human rights

Human rights

In line with the United Nations Guiding Principles on Business and Human

Rights, our Human Rights Principle sets the path and standards for a

rights-based approach in all of Neste’s business decisions. We expect all of

our business partners to uphold our commitment to respect and remediate,

and our ambition to promote positive human rights impacts.

Reducing inequality

Children & education

Responsible recruitment

Living wages

Our vision for a sustainable future

In 2021, Neste published a new sustainability vision,

including ambitious targets for human rights. Under

this vision, our new human rights ambition for

2030 is to create a more equitable and inclusive

value chain, in which everyone works with dignity.

This includes requiring and securing living wages,

advancing responsible recruitment practices in line

with the Employer Pays Principle, increasing chil-

dren’s access to education, and reducing inequal-

ities across the value chain. Read more about our

sustainability vision on page 23.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Identify actual & potential impacts

• Ongoing, annual practice of reviewing Neste’s salient issues and

understanding the gaps in our mitigation activities

• Human Rights Risk Assessment, Gap Assessments and Risk Assessments

integrated into the early phases of all major business development and

investment projects. Collaboration with independent third parties

• Country risk assessments

• Supplier Sustainability Portal used for supplier management and

traceability throughout the business relationship, supported by regular and

ongoing desktop audits and direct supplier engagement

Example: In 2021 we collaborated with BSR to conduct a Human Rights Risk

Assessment of Neste’s potential Rotterdam expansion project. The meth-

odology used in the assessment was based on the United Nations Guiding

Principles on Business and Human Rights, including a salience assessment.

Prevent & mitigate adverse impacts

• Supplier Code of Conduct approval by suppliers and business partners

• Counterparty pre-screening for all potential business partners, escalated to

manual review if any issues are found

• Supplier Sustainability Survey and desktop audit for all new renewable raw

materials suppliers

• Regular personnel surveys for all Neste employees

• Human rights training included in e-learning rolled out globally to all

employees, with targeted in-person training for specific teams and functions

• Dedicated human rights specialists stationed on the ground for high-risk

projects

• Capacity building with suppliers in high-risk geographies and supply chains

• Sustainability audits with strong human rights criteria

• Multi-stakeholder collaboration and partnerships to jointly address root

causes and systemic issues

Example: In 2021, we collaborated with external experts to evaluate fire safety

risks with two of Neste’s strategic used cooking oil suppliers in China. The eval-

uations included site inspections to assess fire safety management, construction

fire protection, safe evacuation facilities and fire facilities. As part of the collabo-

ration, our suppliers were provided with fire safety training and practical guidance

for ensuring correct fire protection design on their sites.

Policy commitment

• Neste Code of Conduct

• Neste Human Rights Principle, supported by operational policies and

procedures

Example: Our Code of Conduct, renewed in 2021, applies to the entire Neste

group and contains key human rights requirements and expectations for all

Neste employees to comply with in their daily work. For example, all employees

are aware of how their work impacts people’s human rights in Neste’s oper-

ations, value chain and communities, understand the potential human rights

risks in their daily work and decision-making, and know how to recognize and

report signs of modern slavery.

Remedy adverse impacts

• Company wide grievance mechanism, Ethics Online

• Operational-level grievance mechanisms designed for individual sites and

projects

Example: At an operational level, following the successful implementation of

an onsite grievance mechanism to capture worker voices at the Singapore

refinery expansion during 2020, we took steps to implement similar practices

for our 2021 Turnarounds, including at our Porvoo refinery, to provide a channel

for all onsite workers to raise local complaints and access effective remedies.

Neste Annual Report 2021 | Human rights

Remedy adverse impacts Prevent & miti

Identify actual

Policy commitment

Embedding human rights

due diligence at Neste

Human rights

due diligence:

a people-rst approach

In recognizing that our human rights

impacts may change over time as

our operations and value chains con-

tinue to evolve, we are committed

to embedding human rights due dil-

igence across our business as an

ongoing, iterative process

We achieve this by building human

rights due diligence into our existing

systems and processes, and creating

new and separate processes when

needed

When assessing human rights risks

we engage with affected stakehold-

ers and pay special attention to vul-

nerable groups such as women, chil-

dren, migrant workers and Indigenous

peoples. In all cases, we centralize

our rights holders and ensure a peo-

ple-first approach

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Human rights

Embedding respect for human rights

across the business

In order to embed respect for human rights through-

out our business operations and value chains, our

ongoing process of human rights due diligence is

informed by meaningful stakeholder engagement,

through which we assess risks to human rights, take

action to prevent and mitigate these risks, track the

effectiveness of our measures and provide remedy

when needed. Below we highlight some of our key

activities and engagements to advance respect for

human rights throughout 2021.

Focusing on salient issues

In 2017, we published Neste’s seven salient human

rights issues in our Human Rights Principle.

Recognizing that our impacts on people continue to

evolve as our business changes and our approach to

human rights due diligence develops, in 2021 we ini-

tiated a new procedure for reviewing Neste’s salient

issues and understanding the gaps in our mitiga-

tion activities. This saliency review will be adopted

as an ongoing, annual practice at Neste, enabling us

to better manage risks to human rights across all of

our business activities. It will also serve as the basis

for reviewing and updating the Neste Human Rights

Principle in 2022.

Social,

economic and

cultural rights

Fair treatment

& access to

remedy

Fair

employment

Rights of

children

& youth

Forced

labor

Equality,

diversity & non-

discrimination

Health &

safety

Our most

salient human

rights Issues

Impact assessments and social audits

We are committed to assessing and monitoring our

human rights impacts in both our own operations and

our supply chains. Our Supplier Code of Conduct

defines minimum human rights requirements for

all of our suppliers and business partners, who are

also required to undergo a robust human rights

assessment before they can partner with Neste. Our

Sustainability Audits have a strong human rights focus

and prioritize assessing impacts on people. You can

read more about the Sustainability Audits carried out

in 2021, including a summary of results and key find-

ings on human rights topics on pages 77–81.

In line with our ambition to advance a rights-based

approach in all of Neste’s business decisions, in 2021

we strengthened the human rights criteria and assess-

ments required for decision making on strategic busi-

ness development, investments and innovation proj-

ects. The aim of this is to ensure that human rights

impacts are comprehensively assessed for all major

projects at Neste before any final investment decision

is made, and starting from the earliest stages in the

project.

We continue to monitor and assess risks to peo-

ple working onsite at our refineries, including during

our refinery turnarounds and at our refinery expan-

sion project in Singapore. Following the successful

implementation of an onsite grievance mechanism

to capture worker voices at the Singapore refinery

expansion during 2020, in 2021 we took steps to

implement similar practices at our Porvoo refinery to

provide a channel for all onsite workers to raise local

complaints and access effective remedy during the

2021 Turnaround.

Following the recommendations from our 2018

Human Rights Risk Assessment for the construc-

tion phase of the Singapore refinery expansion proj-

ect, throughout 2021 we continued to carry out regu-

lar site checks and social audits for our construction

contractors in Singapore, paying special attention to

the rights and needs of migrant workers, a vulnerable

group on our site.

Modern slavery

Neste supports the elimination of all forms of modern

slavery. We recognize that modern slavery is a grow-

ing global issue from which no industry is immune,

and we are committed to taking the appropriate steps

to identify vulnerable workers and mitigate modern

slavery risks in our operations and supply chains.

You can read more about the steps we are taking to

address modern slavery risks in our annual Modern

Slavery Statement.

Implementing effective grievance

channels at the Singapore

Expansion Project

In 2020–2021, we established a site-level griev-

ance mechanism to capture local complaints

and work-related issues at the Neste Singapore

Expansion Project. It is our priority to ensure that

all workers have a voice and can raise their con-

cerns directly to Neste, including the employ-

ees of our contractors and sub-contractors.

Read more about the work.

SustainabilityStrategy Governance Review by the Board of Directors Financials

In 2021, Neste was recognized

as a Leader in the Global Child

Forum's latest benchmark on

children’s rights and business.

Neste Annual Report 2021 | Human rights

Children & youth

We are committed to respecting and supporting chil-

dren’s rights, and to implementing the Children’s

Rights and Business Principles throughout our

business and value chains. In 2021, Neste was rec-

ognized as a Leader in Global Child Forum’s latest

global children’s rights and business benchmark,

The State of Children’s Rights and Business 2021.

Neste placed among the top 9% of the 832 bench-

marked companies across nine global industries and

was ranked 3rd out of 119 companies assessed in

the energy and utilities sector. Below are two exam-

ples of collaborative initiatives Neste participated in to

promote children’s rights during 2021. You can read

more about our broader activities to advance respect

for children’s rights throughout our business on our

website.

On October 11, 2021, Neste took part in children’s

rights organization Plan International’s #GirlsTakeover

campaign. As part of the campaign, Neste’s President

and CEO, Peter Vanacker, handed over his role to

15-year-old Martta Lyytinen for the day. The aim of

the takeover is to provide a platform for girls’ voices

and empower girls to drive decision making in a gen-

uine and meaningful way. During her takeover as

CEO, Martta shared her viewpoints on topics ranging

from the climate crisis to equality, inclusion and social

impact.

Read more about the initiative.

We also support and promote children’s rights in our

supply chains. Since 2019, Neste, together with a

number of major brands, partnered with Business for

Social Responsibility (BSR) and Wilmar on a pro-

gram aimed at protecting the rights of children living

on palm plantations. In 2020, the initiative included

the publication of the Child Protection Policy

Implementation Manual and a series of workshops

on child protection in the Indonesian palm oil sector.

In 2021, the practical applicability of the manual was

tested and assessed through pilots on selected palm

oil plantations in Indonesia and Malaysia, with NGO

support.

Training and capacity building

Understanding that impact assessments and social

audits alone are not sufficient for tackling human

rights risks, we are also committed to training our

employees on our policies, and engage in capacity

building with suppliers operating in high-risk sectors

and geographies.

In 2021, our new Code of Conduct e-learning was

rolled out to all Neste employees including topics

on advancing respect for human and labor rights,

and encouraging everyone to be aware of what is

expected of them and how their work impacts the

human rights of people in our operations, value chain

and communities.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Human rights

We also integrated human rights trainings into both

our global induction for all new Neste employees, and

our new Supplier Code of Conduct e-learning, which

includes specific sections on human rights and mod-

ern slavery.

In line with our KPI to increase the number of Neste

employees who have received training on forced labor

and vulnerability, in 2020 we carried out targeted

human rights and modern slavery trainings for our

global procurement and renewable raw material sup-

ply teams. In 2021, we expanded and tailored these

training sessions to key members of the innovation

team involved in carrying out new research and devel-

opment projects at Neste.

In 2021, we also continued to advance capacity

building in our renewable raw materials supply chains,

conducting a series of workshops on grievance mech-

anisms with our palm oil suppliers in Malaysia and

Indonesia. You can read more about the workshops

from page 72.

Collaborating to advance business

respect for human rights

We believe that human rights are best advanced

through collaboration. We actively seek out oppor-

tunities to work with stakeholders, collaboratively

enhance our leverage to tackle root causes of adverse

human rights impacts and contribute to systemic pos-

itive change and the wider realization of human rights.

Below you can find examples of our key collaborative

engagements in 2021:

In January 2021, Neste, and 11 other companies in

the Nordic Business Network for Human Rights,

signed a joint statement in support of EU legisla-

tion on mandatory human rights due diligence. The

statement calls for maximum alignment with the UN

Guiding Principles on Business and Human Rights

(UNGPs), noting that “looking forward to the next

decade, there is an urgent need to harness the trans-

formative power of the UNGPs in the pursuit of recali-

brating the relationship between business and society

and realizing universal human rights for all”.

Read more about the joint statement.

In the autumn of 2021, we became a member of

the Consumer Goods Forum (CGF) and joined the

Human Rights Coalition on Working to End Forced

Labour. Together with our 27 co-members of the coa-

lition, we are committed to helping achieve fair and

decent

working conditions worldwide by driving individ-

ual and collective action in our operations and supply

chains to eradicate forced labour.

Understanding the urgent need to build inclusive econ-

omies and reduce inequalities, in 2021 we joined the

World Business Council for Sustainable Development

(WBCSD) Business Commission to Tackle Inequality

(BCTI). In 2022, we will continue to work closely with

WBCSD and partner companies in this initiative, which

aims to mobilize the global business community to tackle

inequality and generate shared prosperity for all.

In 2021, Neste joined two Unilever Partner Promises:

the Supplier Equity, Diversity and Inclusion Promise and

the Living Wage/Living Income Promise.

Recognizing the importance of empowering women

and promoting gender equality, in 2021, we became a

signatory to the UN Women’s Empowerment Principles

(WEPs).

Read more about Neste’s commitment and

progress in implementing the WEPs.

We also took part in a Boston Consulting Group and

UN Women’s Diversity Roundtable where Neste’s CEO,

Peter Vanacker, together with other leaders from large

Finland-based corporations and universities came

together and discussed and committed to concrete ini-

tiatives on how we can advance diversity and inclusion.

Reporting

In 2021, we are reporting in accordance with

the United Nations Guiding Principles on

Business and Human Rights (UNGP) Reporting

Framework for the first time. You can access the

framework index on page 109.

We collaborate with others to tackle the root

causes of adverse human rights impacts and

advance positive systemic change.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Safety

Safety is integral to our values. Improving safety and operational

excellence enables us to achieve our strategic targets. For us, safety

means excellence in risk management and being in full compliance

with regulatory requirements at all times. It is about the existence and

effectiveness of all safety barriers that help to manage risks, prevent

incidents and mitigate adverse consequences.

We are determined to protect people and the envi-

ronment as well as our operations, assets, informa-

tion and brand from any harm. We believe that this

can be achieved when everyone is truly committed

to managing and improving safety. We understand all

hazards related to our operations and have excellent

ways to evaluate and manage risks. We strive to learn

from experience and continuously improve our capa-

bilities to understand and manage hazards.

Our safety vision – No harm. Together.

Safety

at Neste

Understand

hazards and risks

Manage risks

and opportunities

Learn from

experience

Commitment to

operational excellence

Assets

Environment

People

Information

OperationsBrand

Safety

SustainabilityStrategy Governance Review by the Board of Directors Financials

Driving safety excellence

through the Operations Excellence

Management System

Safety performance improvement work continued

in 2021. Neste’s Operations Excellence Policy, Life

Saving Rules, Operations Excellence (OE) Principles

and supplementary detailed standards set require-

ments and guidelines for how we manage and improve

safety.

The key activities in 2021 were the implementation

of the updated Safety Leadership Principle, deploy-

ment of the Incident Learning Practices, systematic

use of the Health, Safety and Excellence (HSE) design

guidelines for investment projects and approval of the

storage tank safety standard.

As Neste operates in a safety critical business, our

operations have the potential for major accidents.

Therefore, one foundational driver for our safety man-

agement is to eliminate High Potential (HiPo) events

in our operations. HiPo events have the potential for

serious incidents, but do not necessarily have con-

sequences. We improved the reporting of the HiPo

events as a new safety performance indicator globally

in 2021.

Developing safety

leadership and culture

The implementation of the new Safety Leadership

Principle and updating the team safety commitments

were the key focus areas when developing Neste’s

safety leadership and culture during 2021.

The new safety leadership workshops and train-

ing covered the following areas: fair and just culture;

compliance with legislation and relevant standards;

Stop Work Authority; Life Saving Rules; awareness

and prevention of HiPo incidents; questioning attitude

and workforce engagement. In total, 30 workshops

were organized covering 300 key leaders. The imple-

mentation of the agreed leadership actions will con-

tinue in 2022.

Systematic communication continued on several

levels to support developing Neste’s safety culture

and leadership. The main communication activities

included the development of coherent safety mes-

sages, global networking to share best practices

and learning, media interviews, seminars and several

safety campaigns, e.g. finger and hand injury preven-

tion and turnaround safety management.

Process safety

In process safety, the effectiveness of the Process

Hazard Analysis (PHA) implementation and utiliza-

tion of the HSE design guideline for investments were

in focus in 2021. Defining the process safety design

guidelines for new technologies in the Renewable

Products (RP) business, improving clarity and effec-

tiveness in process safety requirements and starting

the implementation of the new storage tank safety

standard were also in focus for process safety.

Local initiatives, such as integrated safe system of

work (ISSOW), pre start-up safety review and manag-

ing winter conditions continued as planned.

The implementation of the standardized manage-

ment of the change system proceeded slower than

planned. It is in use in our sites in Finland, but not fully

implemented in other sites and functions. The work

continues in 2022.

Neste Annual Report 2021 | Safety

Contractor safety

The use of the contractor safety management model

continued in 2021. We are continuously driving

improvements with our contractors through auditing,

regular performance evaluation, mutual feedback and

with higher focus on subcontracting. Approximately

2,000 contractor HSSEQ performance assessments

and over 80 contractor safety management audits

provided valuable information for the performance

improvement.

In local organizations, activities continued to drive

improvements in the targeted areas. These include e.g.

contractor safety roadmap, safety in road transporta-

tion in Marketing & Services as well as ensuring effec-

tive contractor safety practices in the turnarounds and

investments in our Oil Products, Renewables Platform

and Neste Engineering Solutions businesses. The

key elements in these are a visible leadership com-

mitment, systematic inductions and work practices

including management of simultaneous works.

Key project performance during 2021

One of the focus areas of 2021 was to ensure safety

in different projects, such as investments, change

projects and turnarounds. The closure of the Naantali

refinery was completed without safety deviations. In

the Porvoo refinery’s major turnaround, the overall

safety target was not met, but the safety performance

was clearly better than in the previous turnaround in

2015. A thorough lessons learnt process is ongoing to

ensure improved performance in the future.

SustainabilityStrategy Governance Review by the Board of Directors Financials

The Singapore expansion project continued at

a good safety level. Project Total Recordable Injury

Frequency (TRIF) was well within our target range.

Key actions to drive the performance included sys-

tematic work management at the site and dedicated

action focusing on the most challenging contractors.

Unfortunately one serious accident occured. The cor-

rective actions focused on the work risk management

and manual handling.

The integration of new acquisitions with Mahoney

Environmental and Neste’s Rotterdam terminal con-

tinued. The integration to Neste practices will continue

in 2022 covering all the elements of the Operations

Excellence Management System (OEMS), for example

Safety Leadership, Life Saving Rules, reporting, tar-

get setting and implementation of the OEMS require-

ments with the fit-for-purpose approach.

The Rotterdam terminal had a very good perfor-

mance. Continued safety performance improvement

at Mahoney Environmental is an important priority.

There was a serious occupational accident at one

of the facilities. The accident was thoroughly investi-

gated, several actions were defined and their imple-

mentation is followed regularly. The key actions focus

on energy isolation practices, training and compe-

tence development.

The Future Oil Products (FOP) transformation pro-

gram in Finland continued during 2021 with an

emphasis on risk and change management practices.

No major safety deviations took place in 2021.

Product and chemical safety

Neste is committed to complying with all applicable

legislation. Chemical legislation continues to rapidly

develop in many countries and areas. We follow the

changes closely and implement new requirements

as needed. During 2021, we have updated or com-

piled safety data sheets, registrations and notifica-

tions according to regulatory requirements in differ-

ent areas and countries, e.g. a plan was developed

and executed to fulfill the new requirements in the UK

after Brexit (UK REACH). Providing the required reg-

istrations and notifications, as well as carefully com-

piled safety data sheets in national languages, is the

core to product safety at Neste.

High quality occupational hygiene surveys have

been conducted in Neste’s sites since 1977. In 2021,

approximately 20 surveys for chemical agents, noise

and other occupational exposure agents were carried

out in the Finnish operations. Highlights of the year

were the surveys in the Porvoo major turnaround, in

the shutdown of Naantali refinery and the survey of

natural radiation. Exposure assessments of new feed-

stock materials, such as liquefied waste plastic (LWP),

were also of special interest. Occupational hygiene

surveys are conducted as an integral part of the risk

assessments and Personal Protective Equipment

(PPE) guidance.

Occupational health services

Neste’s occupational healthcare (OHC) aims at cre-

ating a healthy and safe working environment and

a well-functioning work community. OHC promotes

employees’ health, maintains work ability and func-

tional capacity as well as prevents risk of occupa-

tional illnesses. Neste OHC is promoting wellbeing

at exceptional times globally during the pandemic by

e.g. organizing expert webinars for employees about

mental wellbeing, ergonomics, nutrition, sleep and

recovery skill.

We follow the Neste Occupational Health Principle

in the whole organization, subject to local legislation

and requirements. In non-operational locations, such

as offices or common functions, the requirements

apply as far as they are relevant. By following our prin-

ciple globally, we are aligning the quality of our health

services.

Neste has also established a reproductive health

standard to make sure that any exposure of Neste

employees to chemical factors, temperature, noise,

pressure vibration, radiation or other physical or bio-

logical factors will not affect or compromise the repro-

ductive health of the employee. This standard is appli-

cable to all employees of Neste, and to anyone work-

ing for the business of any company within Neste

Group or acting on behalf of such company.

COVID-19 pandemic management

The ongoing pandemic continued to have an impact

on Neste’s activities. The pandemic preparedness

and management activities continued based on the

processes created in 2020. The pandemic manage-

ment was led by both the corporate and local crisis

management teams, as well as line organizations.

The main activities included the effective implemen-

tation of the pandemic preparedness plans and sys-

tematic communication on Neste’s global and local

level response to the development of the pandemic.

The results of the activities were successful. The

number of COVID-19 cases among Neste personnel

and the effect on the operations were low. The big-

gest impact was with the Singapore expansion proj-

ect, as the local COVID-19 restrictions caused chal-

lenges in workforce availability.

Neste Annual Report 2021 | Safety

SustainabilityStrategy Governance Review by the Board of Directors Financials

Safety performance in 2021

Neste’s occupational safety performance (TRIF, or

rate of accidents requiring medical treatment per mil-

lion hours worked, including contractors) was in 2021

1.4 (1.3 in 2020) which was better than the target for

2021 (1.7) but slightly worse than in 2020.

Process safety performance (PSER, or the rate of

process safety events per million hours worked) was

in 2021 1.4 (1.6 in 2020) which was better than 2021

target level (1.7) and better than in 2020.

We also measure the number of safe days. These

are the days without occupational accidents, process

Neste Annual Report 2021 | Safety

safety events, other fires and leaks, environmental

non-compliances, marine safety incidents and traffic

accidents. In 2021, the number of safe days was 306

(325), and the number of incidents was 67 (41). At

Porvoo TA2021 major turnaround there were 22 safe

day incidents.

The major turnaround at Neste’s Porvoo renery

was successfully completed under exceptional

circumstances

Neste ensures the safe and undisturbed operation of its refineries

through regular turnarounds. A major turnaround was success-

fully completed at Neste’s Porvoo refinery in June 2021. Together

with the authorities and healthcare professionals, Neste defined

a comprehensive health security plan for the turnaround. Around

6,000 people from multiple countries took part in the turnaround

works, and over 1.5 million working hours were completed. A

total of about 61,000 COVID-19 tests were taken during the turn-

around. Thanks to the comprehensive precautionary measures,

the corona situation at the refinery remained calm, and extensive

chains of infection were avoided.

Read more about the major turnaround.

Process safety event rate (PSER)

2021

1.4

0.6

0.8

TRIF own employees TRIF contractors TRIF totalPSER1 PSER2

2018

0.4

2.1

1.7

2019

0.6

1.4

0.9

2020

1.6

1.0

0.6

Total recordable injury frequency (TRIF)

2.0

4.0

5.0

1.0

3.0

2021

1.1

1.6

1.4

2018

1.3

2.2

1.7

2019

1.1

2.7

1.7

2020

1.1

1.6

1.3

SustainabilityStrategy Governance Review by the Board of Directors Financials

Neste Annual Report 2021 | Sustainability reporting in 2021

In the following year we will take full use of the revised

Universal GRI Standards along with the new Sector

Standards, which come to force in 2023. An inde-

pendent third party, KPMG Oy Ab, has assured the

Topic-specific GRI disclosures for economic, social,

and environmental indicators as well as General GRI

disclosures 102-8 and 102-41. Information presented

on the Sustainability highlights, Material sustainabil-

ity KPIs, Value creation, and Performance in figures

pages of the report have also been assured. In our

report, we have aimed to focus on the most essential

sustainability topics, based on our materiality assess-

ment conducted biannually, latest in 2020. Our 2021

Sustainability Report is published only in English.

Sustainability

reporting in 2021

Our 2021 Sustainability Report has been prepared in

accordance with the GRI (Global Reporting Initiative)

Standards: Core option. In this report we report according

to the GRI Universal Standards 2016 and their updates.

SustainabilityStrategy Governance Review by the Board of Directors Financials

We are committed to the UN Global Compact

(UNGC), United Nations Guiding Principles on

Human Rights (UNGP) and the International Labor

Organization (ILO) Declaration on Fundamental

Principles and Rights at Work. Neste has been a sig-

natory of the UNGC Principles since 2014. Our annual

report includes information corresponding to the

reporting requirements as we are committed to com-

plying to the Ten Principles in each of the UNGC areas

for human rights, labor, environment and anti-cor-

ruption. The reported indicators and the Global

Compact Principles are listed in connection with the

GRI Content Index, and for the UN Guiding Principles

Reporting Framework metrics we have an index in the

report as well.

Neste is committed to apply the Task Force on

Climate-related Financial Disclosures (TCFD) reporting

principles from 2019, in order to disclose climate-re-

lated financial risks and opportunities in the report-

ing. In addition to the Sustainability report, part of our

TCFD reporting takes place within the Non-Financial

Information Statement in the Review by the Board of

Directors. Our Sustainability Report includes the TCFD

index for navigation purposes between these sections

in the Annual Report. Our intention is to extend our

reporting within the recommended TCFD implemen-

tation time frame.

We are actively following various sustainability

reporting framework developments, especially with

the global sustainability reporting standardization in

the EU and at the ISSB, in order to keep our report-

ing methodologies up to date proactively. In addition

to GRI, in the 2021 Sustainability Report we report

according to SASB Oil & Gas Refining and Marketing

Standards where applicable, as Neste is catego-

rized under this sector standard by SASB. However,

we aim at reporting also according to SASB Biofuels

Standards in the future as we see that being an even

more relevant sector standard for Neste. Our report

also adheres, in all material respects, to the AA1000

AccountAbility Principles.

We support the principles of the World Economic

Forum’s (WEF) Stakeholder Capitalism. Our reporting

based on GRI, SASB and TCFD fulfils the requirements

for most of the WEF Stakeholder Capitalism Metrics

(SCM). Hence, we are continuing reporting with the

GRI supported by SASB and TCFD, yet paying close

attention to any additional SCM requirements.

Our reporting meets the requirements of the EU

Directive on disclosure of non-financial and diversity

information and the Finnish Accounting Act, as well as

the information in accordance with the current require-

ments of the EU Taxonomy regulation. The infor-

mation is disclosed in the Non-financial Information

Statement. The required non-financial information is

disclosed in the Corporate Governance Statement

and the Review by the Board of Directors, whereas

in our Sustainability Report, we respond to broader

stakeholder expectations and to many requirements

of international indices. We published our 2020

Annual Report and the included Sustainability Report

on March 3, 2021 in PDF format on our website.

Reporting principles and guidelines

Our financial reporting complies with the international

IFRS accounting standards, and governance-related

reporting complies with the legislation on listed com-

panies and the Finnish Corporate Governance Code.

The disclosure of environmental costs and liabilities is

based on the Finnish Accounting Act. The reported

financial indicators are based on audited information.

The general guideline issued by the Accounting Board

on the preparation of review by the Board of Directors

is followed in calculating the personnel-related fig-

ures. Calculations related to safety-related accident

frequency rates comply with the calculation principles

of Concawe (the oil companies’ European association

for environment, health and safety in refining and dis-

tribution). Changes to information disclosed in previ-

ous years or calculation principles are communicated

in connection with the relevant indicators. The defini-

tions, calculation principles and formulas of reported

indicators are presented separately under “Principles

for calculating the key indicators”.

Scope of the report

Similarly to the Annual Report, the reporting period of

the Sustainability Report is the financial year, January

1 – December 31, 2021. The safety and environmen-

tal reporting for 2021 covers the refineries in Finland

and abroad in which the company has a holding of

more than 50%. In addition, safety and environmen-

tal reporting covers the company’s terminals, offices

and country-specific retail companies in alignment

with the financial reporting scope. The company does

not report environmental information on sites in which

the company only has a minor part of the premises

of an office building in its use. The reporting of safety

information also covers service providers and con-

tractors. The reporting indicators do not cover Agri

Trading Corporation which was acquired at the end of

2021, due to the ongoing integration process. As an

exception, the average number of personnel includes

all operations and acquisitions.

Reporting systems

Neste collects environmental and safety information

with the HSEQ reporting tool, which supports Neste’s

monthly and annual reporting. Personnel-related indi-

cators are derived from the HR systems. The com-

pany also has other reporting tools for collecting infor-

mation required for sustainability reporting.

We are actively following various sustainability

reporting framework developments, especially with

the global sustainability reporting standardization

in the EU and at the ISSB, in order to keep our

reporting methodologies up to date proactively.

Neste Annual Report 2021 | Sustainability reporting in 2021

SustainabilityStrategy Governance Review by the Board of Directors Financials

2021 2020 2019

Emission limits and overruns:

Deviations from environmental permits 2 2 3

Emissions into the air, tons

Direct CO

emissions (Scope 1) 1,828,000 2,149,000 2,464,000

Indirect CO

emissions (Scope 2, location-based) 519,000 625,000 518,000

Indirect CO

emissions (Scope 2, market-based) 509,000 736,000 941,000

Other indirect GHG emissions (Scope 3)

35,000,000 48,000,000 49,000,000

Purchased goods and services

2) 3)

4,900,000 5,900,000 3,900,000

Fuel- and energy-related activities

100,000 100,000 100,000

Upstream transportation and distribution

2) 5)

700,000 700,000 800,000

Waste generated in operations 200,000 100,000 200,000

Downstream transportation and distribution

2) 6)

500,000 700,000 800,000

Use of sold products 27,600,000 38,700,000 41,300,000

End-of-life treatment of sold products 1,300,000 1,600,000 1,900,000

VOC 3,170 3,430 3,920

NOX 1,090 1,410 1,490

2,850 3,470 4,110

Particulate matter 64 90 110

Energy use

Total energy consumption, TWh 10.1 12.2 12.8

Fuels and natural gas, % 72.0 72.9 74.2

Purchased electricity, % 13.1 11.8 11,8

Purchased heat, % 14.9 15.3 14.0

Energy efficiency, energy saving measures GWh 95.8 33 16

Performance in figures Climate and the environment

Water, m

Water intake 9,263,000 8,557,000 9,120,000

Total water withdrawal by source

Surface water 7,927,000 8,283,000 8,866,420

Municipal water supplies 1,336,000 274,000

253,000

Wastewater 8,522,000 8,880,000 8,159,000

Effluents to water, tons

Effluents of oil to water 0.6 1.0 1.6

Chemical oxygen demand 240 240 299

Effluents of nitrogen to water 31 68 83

Effluents of phosphorus to water 1.0 1.4 1.2

Waste, tons

Ordinary waste for disposal 5,700 3,300 5,380

Ordinary waste for recovery 18,200 33,100 56,400

Hazardous waste for disposal 129,200 75,600 104,800

Hazardous waste for recovery

31,400 N/A N/A

Number and magnitude of significant releases 3 pc / 45m

+ 10 tons

0 2 pc / 75m

Carbon dioxide recovered, tons 130,400 134,200 170,300

Washing lye sold, tons 7,900 7,500 10,590

2021 2020 2019

Neste Annual Report 2021 | Sustainability reporting in 2021

Scope 1 and 2 emissions reporting covers CO

emissions. Scope 3 emissions reporting covers GHG emissions and is reported as CO

Calculation principle changed in 2021.

Calculation principle changed in 2020.

Only natural gas related emissions included.

Part of upstream transportation emissions are accounted in other categories.

Part of downstream transportation emissions are accounted in category 4.

Ground water from 2020 and 2019 corrected to be included in Municipal water supplies.

Reporting accuracy improved in 2021. Hazardous waste for recovery earlier included in Waste for reuse, which is now specified as Ordinary waste for recovery.

SustainabilityStrategy Governance Review by the Board of Directors Financials

Performance in figures Climate and the environment

Supply chain and raw materials

Renewable raw material inputs, million tons 3.7 3.7 3.5

Share and use of waste and residue raw materials

in refining renewables

92%

3.4 Mt

83%

3.1 Mt

80%

2.8 Mt

GHG emission reduction achieved with Neste's

renewable products compared to crude oil-based diesel,

million tons

2) 9) 10)

10.9 10.0 9.6

GHG emission reduction with Neste's renewable products

compared to crude oil-based fuels

2) 9) 10)

50–90% 50–90% 50–90%

Number of all renewable raw material suppliers 389 405 255

Share of certified palm oil of all palm oil use sold as product

11)

100%

236 kt

100%

454 kt

100%

674 kt

The number of oil palm smallholders 13,227 14,403 36,947

The number of palm oil suppliers 6 6 7

The number of plantations 69 110 158

The number of palm oil mills 29 38 59

Average GHG emission reduction

of palm oil based products

2) 10) 12)

80% 77% 74%

The number of renewable raw material suppliers’

sustainability assessments and their outcome

13)

Total: 223

New approved

suppliers: 171

All approved: 186

Pending: 33

Rejected: 4

Total: 219

New approved

suppliers: 120

All approved: 133

Pending: 65

Rejected: 21

Total: 91

New approved

suppliers: 52

All approved: 55

Pending: 36

Rejected: 0

Crude oil and fossil feedstock sources by region, million tons 10.1 14.0 15.6

Russia 7.8 9.5

14)

12.2

14)

Norway 1.3 1.7 1.4

Kazakhstan 0.3 1.2 0.4

Other countries 0.7 1.6 1.6

2021 2020 2019

Calculation principle changed in 2021.

Annual greenhouse gas (GHG) reduction achieved with Neste’s renewable products compared to 100% crude oil based fuel. Calculation method complies with the EU Renewable Energy Directives: until the end of H1/2021 with RED 2009/28/EC and in H2/2021 with RED II (EU)2018/2001.

10)

Calculation principles can be found on page 110.

11)

Contains the use of crude palm oil (CPO) and Refined Bleached Deodorized Palm Oil (RBDPO) that we have processed into renewable products and sold to market.

12)

New reported figure 2021.

13)

New approved suppliers include Demeter existing suppliers that were excluded in 2020 and 2019 due to ongoing integration. All other figures include existing suppliers, which undergo a sustainability assessment process every 3–5 years. Supplier data includes only main contractual parties, excluding sub-suppliers.

14)

Revised: Reporting accuracy improved in 2021. Kazakhstan earlier included in the Russian volumes.

Neste Annual Report 2021 | Sustainability reporting in 2021

SustainabilityStrategy Governance Review by the Board of Directors Financials

Personnel by segment

as of 31 December 2021, %

Renewable Products 18.9% (23.1%)

Oil Products 28.9% (30.2%)

Marketing & Services 9.0% (7.3%)

Neste Engineering Solutions 16.7% (16.2%)

Innovation 7.9% (7.0%)

Other functions 18.7% (16.2%)



Personnel by personnel group

as of 31 December 2021, %

Blue-collar

24.7% (27.8%)

White-collar and

senior management

75.3% (72.2%)

󰌱

Personnel by country

as of 31 December 2021, %

Finland 70.6% (74.6%)

The USA 9.4% (7.4%)

Singapore 7.3% (6.9%)

The Netherlands 5.7% (4.5%)

Other countries 7.0% (6.6%)



Employment length of employees

as of 31 December 2021, %

20212020

1–4

years

34.3

34.2

5–9

years

16.8

17.3

Less than

1 year

13.0

10.9

10–19

years

20.6

20.3

20–29

years

8.0

7.5

30–

years

9.3

7.8

Employee breakdown by age

as of 31 December 2021, %

20212020

< 30

years

11.3

10.4

30–39

years

32.7

33.6

40–49

years

27.9

29.2

50–59

years

22.3

21.7

5.8

60–

years

5.3

Neste Personnel and Contractor Safety Performance

as of 31 December 2021

2021 2020 2019

Total recordable injury frequency (TRIF) total

1.4 1.3 1.7

- TRIF own employees 1.1 1.1 1.1

- TRIF contractors 1.6 1.6 2.7

Lost workday injury frequency (LWIF) total

1.0 1.2 1.3

- LWIF own employees 1.1 1.0 1.0

- LWIF contractors 0.7 1.6 1.7

Process safety event rate (PSER) total

1.4 1.6 1.4

- PSER 1 0.6 1.0 0.6

- PSER 2 0.8 0.6 0.9

Safe Days

306 325 314

Fatalities

0 0 0

Average

number of

personnel

(4,833)

4,872

Neste Annual Report 2021 | Sustainability reporting in 2021

Performance in figures People

SustainabilityStrategy Governance Review by the Board of Directors Financials

Performance in figures People

Information on employees and governance bodies

by gender ratio as of 31 December 2021, %

Women Men

2021 2020 2021 2020

All employees

31.5 30.2 68.5 69.8

Blue-collar

1.2 1.7 23.6 26.1

White-collar and senior management

30.3 28.5 45.0 43.7

Managers 30.3 29.0

69.7 71.0

Senior managers

25.9 25.9 74.1 74.1

Neste Executive Committee

25.0 25.0 75.0 75.0

Board of Directors

25.0 37.5 75.0 62.5

Permanent

30.6 29.0 67.0 67.8

Temporary

0.9 1.2 1.6 2.0

Full-time 30.1 28.9 67.7 68.8

Part-time 1.3 1.3 0.9 1.0

Total Finland USA Singapore The Netherlands Other countries

Women Men Women Men Women Men Women Men Women Men Women Men

All employees 31.5 68.5 33.6 66.4 22.7 77.3 24.0 76.0 15.5 84.5 42.5 57.5

- under 30 3.8 6.6 4.2 6.5 2.5 9.1 4.0 6.6 1.1 8.1 3.0 3.0

- 30–50 19.8 44.9 20.6 43.1 13.1 46.8 16.6 57.1 12.6 53.1 30.1 41.0

- over 50 7.9 17.1 8.8 16.8 7.1 21.4 3.4 12.3 1.9 23.3 9.4 13.6

Hiring rate of permanent employees , all 11.5 12.4 8.2 6.1 37.3 47.6 19.5 11.1 35.7 22.0 7.0 10.1

Proportion of permanent hires 29.9 70.1 40.2 59.8 18.7 81.3 35.6 64.4 23.1 76.9 34.5 65.5

- under 30 8.0 16.4 12.5 14.7 3.5 21.2 15.6 24.4 3.1 7.7 3.5 3.5

- 30–50 19.8 45.1 25.5 39.3 11.8 50.7 20.0 33.3 20.0 47.7 31.0 62.1

- over 50 2.1 8.7 2.2 5.8 3.5 9.4 0.0 6.7 0.0 21.5 0.0 0.0

Leaving rate of permanent employees, all 9.5 14.7 9.8 16.2 15.7 24.2 6.1 8.4 9.5 3.5 4.2 1.6

Proportion of permanent leavers 22.8 77.2 23.4 76.6 16.0 84.0 18.5 81.5 33.3 66.7 19.5 80.5

- under 30 1.5 9.5 2.0 6.5 0.0 23.0 0.0 3.7 0.0 33.3 0.0 19.5

- 30–50 13.5 40.7 12.4 37.3 14.0 52.0 18.5 74.1 16.7 8.3 16.0 51.9

- over 50 7.9 26.9 9.1 32.8 2.0 9.0 0.0 3.7 16.7 25.0 3.5 9.1

Permanent employees 30.6 67.0 32.5 64.6 22.7 77.3 23.4 74.6 15.5 83.8 41.9 55.8

Temporary employees 0.9 1.6 1.1 1.9 0.0 0.0 0.6 1.4 0.0 0.7 0.6 1.8

Full-time employees 30.1 67.7 32.2 65.6 21.8 76.4 24.0 76.0 13.3 82.7 40.1 56.6

Part-time employees 1.3 0.9 1.4 0.9 0.9 0.9 0.0 0.0 2.2 1.9 2.4 0.9

Employee distribution and turnover as of 31 December 2021, %

Neste Annual Report 2021 | Sustainability reporting in 2021

100

SustainabilityStrategy Governance Review by the Board of Directors Financials

GRI 102: General Disclosures 2016

1. Organizational profile

102-1 Name of the organization

19–20

102-2 Activities, brands, products,

and services

12–14

102-3 Location of headquarters Espoo, Finland

102-4 Location of operations Operations in 14 countries: Finland, Australia,

Belgium, China, Estonia, Germany, Italy,

Latvia, Lithuania, the Netherlands, Singapore,

Sweden, Switzerland, the USA (R)

102-5 Ownership and legal form

19–20

102-6 Markets served

12–14

102-7 Scale of the organization

17–18

102-8 Information on employees and

other workers

98–99, 111

The rate of temporary employees is very low

and not relevant for reporting. Neste reports

only total number of employees.(O)

102-9 Supply chain

43, 62–72, 73–76,

78–81

102-10 Significant changes to the

organization and its supply

chain

In 2021 Neste acquired Bunge Lodgers

Croklaan's refinery plant as well as of Agri

Trading. Neste now holds all their shares.

Neste sold its LPG cylinder business and its

50% shareholding in the bottling plant Oy

Innogas Ab. (R)

102-11 Precautionary Principle or

approach

23–26, 27–32, 44–

46, 59–61, 90–93,

153,156-157

102-12 External initiatives

38–40, 94–95

Certificates,

Involvement in

organizations

and joint projects

102-13 Membership of associations

38–40,

Involvement in

organizations

and joint projects

2. Strategy

102-14 Statement from senior

decision-maker

4–6

GRI Content Index and UN Global Compact

3. Ethics and integrity

102-16 Values, principles, standards,

and norms of behavior

4–6, 46, 82–93

Our values

4. Governance

102-18 Governance structure

44–46, 115–122,

128–130

5. Stakeholder engagement

102-40 List of stakeholder groups

37–40

102-41 Collective bargaining

agreements

3,510 persons, 73.2% (R) 3

102-42 Identifying and selecting

stakeholders

37–42

102-43 Approach to stakeholder

engagement

27–29, 37–42

102-44 Key topics and concerns

raised

27–29, 37–42

6. Reporting practice

102-45 Entities included in the

consolidated financial

statements

94–95, 110–111,

172–174,182

102-46 Defining report content and

topic Boundaries

27–29, 94–95

102-47 List of material topics

27–32

102-48 Restatements of information

94–95, 110–111

No major changes during the reporting period.

Possible changes in the previously disclosed

key figures are disclosed in connection with

the figure in question. (R)

102-49 Changes in reporting

27–32, 94–95

102-50 Reporting period

94–95

102-51 Date of most recent report

94–95

102-52 Reporting cycle

94–95

102-53 Contact point for questions

regarding the report

Sustainability, Safety, and Environment

contacts

102-54 Claims of reporting in

accordance with the GRI

Standards

94–95

102-55 GRI content index

100–105

GRI Standards Disclosure

Location

in the report

or our webpage Reporting (R) / Omission (O)

Global

Compact

Principles

Neste Annual Report 2021 | Sustainability reporting in 2021

GRI Standards Disclosure

Location

in the report

or our webpage Reporting (R) / Omission (O)

Global

Compact

Principles

101

SustainabilityStrategy Governance Review by the Board of Directors Financials

102-56 External assurance

112–113

GRI 103: Management Approach 2016

103-1 Explanation of the material

topic and its Boundary

27–32, 94–95

103-2 The management approach

and its components

27–32, 44–46,

94–95

103-3 Evaluation of the management

approach

27–32, 44–46,

94–95

GRI 200: Economic

GRI 201: Economic Performance 2016

201-1 Direct economic value

generated and distributed

Value Creation

201-4 Financial assistance received

from government

149, 190

GRI 203: Indirect Economic Impacts 2016

203-2 Significant indirect economic

impacts

GRI 205: Anti-corruption 2016

205-2 Communication and training

about anti-corruption policies

and procedures

46, 78,

156–157,160

Neste Board Audit Committee receives

regular updates on Neste compliance

program and compliance activities, including

such related to anti-corruption. All Neste

employees have access to the company’s

Anti-corruption Principle and related guidance

via Neste global intranet and compliance

newsletters. Neste ExCo members and

targeted employees are required to complete

an Annual Compliance Acknowledgement

confirming their compliance with i.a. the

Code of Conduct (CoC) and Anti-corruption

Principle. In 2021, Neste renewed its CoC,

which has been launched and communicated

internally via different channels and also

available on Neste's external webpages. A

related CoC e-learning was issued as a first

step to all office workers in 2021. We also

require our suppliers and other business

partners to comply with applicable laws

and expect them to follow equivalent ethical

business standards as stated in the CoC

(including zero tolerance to corruption), as

further described in our Supplier Code of

Conduct. We are continuously developing our

anti-corruption training processes and aspire

to extend the reporting with the remaining

indicator requirements related to training when

applicable. (R/O)

205-3 Confirmed incidents of

corruption and actions taken

35, 46,160

No confirmed incidents during the reporting

period. (R)

GRI 206: Anti-competitive Behaviour 2016

206-1 Legal actions for anti-

competitive behavior, anti-

trust, and monopoly practices

No cases during the reporting period. (R)

Neste Annual Report 2021 | Sustainability reporting in 2021

GRI Standards Disclosure

Location

in the report

or our webpage Reporting / Omission

Global

Compact

Principles

GRI Standards Disclosure

Location

in the report

or our webpage Reporting / Omission

Global

Compact

Principles

102

SustainabilityStrategy Governance Review by the Board of Directors Financials

GRI 300: Environmental

GRI 301: Materials

Neste

indicator

Volume of liquefied waste

plastic processed (t/a)

35, 75

GRI 302: Energy 2016

302-1 Energy consumption within

the organization

33, 61, 96, 110

7, 8

302-4 Reduction of energy

consumption

33, 56, 61, 96,

110

Energy savings consists of different initiatives

in our production covering steam and cooling.

(R)

8, 9

GRI 303: Water and effluents 2018

303-1 Interactions with water as a

shared resource

7, 8

303-2 Management of water

discharge-related impacts

61, 110

7, 8

303-3 Water withdrawal

61, 96, 110

Neste water withdrawal is reported only in

total. Neste’s water withdrawal from areas

with water stress is not significant and seen

as not material. Neste is reviewing the GRI

reporting on water categories including certain

amount of total dissolved solids (R/O).

7, 8

GRI 304: Biodiversity 2016

304-2 Significant impacts of

activities, products, and

services on biodiversity

33, 60–61

Neste is developing its biodiversity work

consistently, and will be proceeding with the

company's biodiversity vision in the following

years. Details in accordance with the indicator

requirements will be reported as the work is

progressing and impacts are further mapped.

(O)

7, 8

GRI 305: Emissions 2016

305-1 Direct (Scope 1) GHG

emissions

33, 95, 96, 110

7, 8

305-2 Energy indirect (Scope 2)

GHG emissions

33, 95, 96, 110

7, 8

305-3 Other indirect (Scope 3) GHG

emissions

96, 110

7, 8

305-4 GHG emissions intensity

Emissions used in the calculation: Scope 3

Use of sold products. (R)

7, 8

305-5 Reduction of GHG emissions

33, 47–58, 110

8, 9

305-7 Nitrogen oxides (NOX), sulfur

oxides (SOX), and other

significant air emissions

96,110

Neste considers the reported emissions as

significant. (R/O)

7, 8

GRI 306: Waste 2020

306-1 Waste generation and

significant waste-related

impacts

Neste is continuously developing ways to use

materials more effectively and finding solutions

to recycle and reuse. Reducing the amount of

waste and improved material efficiency also

impacts to our climate performance.

We are currently covering the most significant

impacts in our reporting, according to the new

reporting requirements. (O)

306-2 Management of significant

waste-related impacts

65, 73–76, 80, 96

Neste’s strategic target is to become a global

leader in circular solutions. We are using

waste and residues as raw materials creating

notable positive impact in the upstream value

chain. Mapping and minimizing the most

significant impacts also in our own operations

and further downstream will enhance circular

economy and our climate performance.

Our own operation’s waste is handled by

contracted third parties locally and our waste

reporting is based on data provided by them.

We are following the local waste regulations

and legislations in our operations and

continuously looking for new opportunities to

minimize the landfill waste. (R/O)

306-3 Waste generated

GRI 307: Environmental Compliance 2016

307-1 Non-compliance with

environmental laws and

regulations

No significant fines or non-monetary sanctions

with environmental laws and regulations

during the reporting period. Regarding

difficulties in operation of the wastewater

treatment system in Rotterdam, the water

authority has confirmed an order to improve

and stabilize the operation, subject to a

threatened penalty. (R)

GRI 308: Supplier Environmental Assessment 2016

308-1 New suppliers that were

screened using environmental

criteria

77–81

Sustainability

policies and

principles

98.6 % of Neste's new renewable raw material

suppliers screened using environmental

criteria. OP suppliers and indirect procurement

proportions reporting development

proceeding. More on their screening

processes in the report. (R/O)

Neste Annual Report 2021 | Sustainability reporting in 2021

GRI Standards Disclosure

Location

in the report

or our webpage Reporting / Omission

Global

Compact

Principles

GRI Standards Disclosure

Location

in the report

or our webpage Reporting / Omission

Global

Compact

Principles

103

SustainabilityStrategy Governance Review by the Board of Directors Financials

GRI 400: Social

GRI 401: Employment 2016

401-1 New employee hires and

employee turnover

34, 43, 83, 99

GRI 403: Occupational Health and Safety 2018

403-1 Occupational health and

safety management system

90–92

403-2 Hazard identification, risk

assessment, and incident

investigation

90–91

Neste Hazard Identification and Risk

Assessment Principle includes processes

and policies for workers to report hazardous

situations and also instructions how to remove

themselves from these types of situations.

The principle describes minimum safety

requirements for operating and maintenance

procedures as well as safe work practises.

Key common requirements include the

Process Hazard analysis standard consisting

of standards for process risk classification,

process safety information and work risk

management. (R)

403-3 Occupational health services

403-4 Worker participation,

consultation, and

communication on

occupational health and safety

OEMS Safety Leadership Principle sets

requirements for Businesses to engage

workforce for Health and Safety issues

in various groups, development of work

practices, investigation of incidents and risk

assessments throughout Neste globally.

Practices and fulfilling of requirements are

followed through OEMS audit practices. In

addition to to Safety Leadership Principle the

local statutory requirements are identified and

followed to engage personnel in Health and

Safety issues. (R)

403-5 Worker training on

occupational health and safety

91–92

403-6 Promotion of worker health

40, 84, 92

403-7 Prevention and mitigation of

occupational health and safety

impacts directly linked by

business relationships

90–92

403-9 Work-related injuries

90–93, 98,

110–111

We have defined our Life Saving Rules based

on the high-risk activities which have caused

fatalities and serious injuries at Neste and

in the Industries. The purpose of the Life

Saving Rules (Working at heights, Confined

spaces, Equipment isolation, Work permit

and Traffic hazards) is to help save lives and

prevent serious injuries. In addition to Life

Saving Rules related injuries we monitor

comprehensively factors related injuries such

as lenght of absence, injury types etc.

In 2021 we faced one injury at work resulting

permanent effect on health. All together we

had six cases which included potential to

severe injury or fatality. Main injury types;

slips, strips and falls, cuts and scratches

or overextertions caused by single straining

motion at work, are the same both in

employees and contractors. Total amount of

working hours was circa 8,000,000 hours

for employees and 6,750,000 hours for

contractors. (R)

GRI 404: Training and Education 2016

404-2 Programs for upgrading

employee skills and transition

assistance programs

40, 43, 83–84

GRI 405: Diversity and Equal Opportunity 2016

405-1 Diversity of governance

bodies and employees

35, 43, 83, 98–99,

118–121

405-2 Ratio of basic salary and

remuneration of women to

men

Women's mean basic salary in relation to

men's by pay grade and employee category

in Finland: blue-collars 91%–103% and white-

collars 87%–106%. Finland is reported as it is

significant with over 70% weight of employees

in total personnel. (R)

Neste Annual Report 2021 | Sustainability reporting in 2021

GRI Standards Disclosure

Location

in the report

or our webpage Reporting / Omission

Global

Compact

Principles

GRI Standards Disclosure

Location

in the report

or our webpage Reporting / Omission

Global

Compact

Principles

104

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GRI 407: Freedom of Association and Collective Bargaining 2016

407-1 Operations and suppliers in

which the right to freedom

of association and collective

bargaining may be at risk

85–89

Neste Human

Rights

Commitment,

Neste Human

Rights Principles,

Neste Supplier

Code of Conduct,

Modern Slavery

Statement

We have put in place a firm policy to

mitigate this potential impact in our global

operations and supply chains and the policy

is implemented through our due diligence

processes. We use a bespoke, industry

leading, country risk assessment methodology

from Verisk Maplecroft to identify countries

or geographic areas with the highest risks

to freedom of association and collective

bargaining. The updated Neste Supplier Code

of Conduct includes a minimum requirement

to recognize and respect employees’ right

to organize freely and bargain collectively.

Specific operations and geographic areas not

disclosed publicly. (R)

GRI 408: Child Labor 2016

408-1 Operations and suppliers at

significant risk of incidents of

child labor

85–89

Neste Human

Rights

Commitment,

Neste Human

Rights Principles,

Neste Supplier

Code of Conduct,

Modern Slavery

Statement

We have put in place a firm policy to

mitigate this potential impact in our global

operations and supply chains and the policy

is implemented through our due diligence

processes. We use a bespoke, industry

leading, country risk assessment methodology

from Verisk Maplecroft to identify countries

or geographic areas with the highest risks of

child labor. The updated Neste Supplier Code

of Conduct includes minimum requirements

regarding child labor. Further details regarding

management approach, high risk operations

and supply chains, and measures taken by

Neste to assess and address child labor risks

available in Neste's annual Modern Slavery

Statement. (R)

GRI 409: Forced or Compulsory Labor 2016

409-1 Operations and suppliers at

significant risk of incidents of

forced or compulsory labor

85–89

Neste Human

Rights

Commitment,

Neste Human

Rights Principles,

Neste Supplier

Code of Conduct,

Modern Slavery

Statement

We have put in place a firm policy to

mitigate this potential impact in our global

operations and supply chains and the

policy is implemented through our due

diligence processes. We use a bespoke,

industry leading, country risk assessment

methodology from Verisk Maplecroft to

identify countries or geographic areas with

the highest risks of forced labor. The updated

Neste Supplier Code of Conduct includes

minimum requirements regarding forced and

compulsory labor. Further details regarding

management approach, high risk operations

and supply chains, and measures taken by

Neste to assess and address forced labor

risks available in Neste's annual Modern

Slavery Statement. (R)

GRI 412: Human Rights Assessment 2016

412-1 Operations that have

been subject to human

rights reviews or impact

assessments

85–89

Neste Human

Rights

Commitment,

Neste Human

Rights Principles,

Neste Supplier

Code of Conduct,

Modern Slavery

Statement

All of Neste operations assessed as part

of our 2021 corporate-wide human rights

saliency assessment to evaluate the risk of

Neste being associated with or complicit in

adverse human rights impacts. We assess

country risk using a bespoke, industry

leading, country risk assessment methodology

from Maplecroft to map sustainability risks

for the countries in which we operate and

have supply chains. For our renewable raw

material supply chains, we use country

risk indices and maintain a country risk

categorization. Our categorization includes

a list of no-go countries and regions based

on considerations regarding trade sanctions,

conflicts and sustainability risks. The due

diligence process for our Oil Products (OP)

suppliers includes Country Risk Assessment

and Counterparty Risk Assessment. (R)

1, 2

412-2 Employee training on human

rights policies or procedures

In 2021, 1076 hours were used for training on

human rights policies and processes relevant

to Neste’s business operations and supply

chains. 77% of Neste employees were trained

on topics related to Neste’s human rights

policies and processes during 2021. (R)

GRI Standards Disclosure

Location

in the report

or our webpage Reporting / Omission

Global

Compact

Principles

GRI Standards Disclosure

Location

in the report

or our webpage Reporting / Omission

Global

Compact

Principles

Neste Annual Report 2021 | Sustainability reporting in 2021

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GRI 414: Supplier Social Assessment 2016

414-1 New suppliers that were

screened using social criteria

43, 77–81

98.6 % of Neste's new renewable raw material

suppliers screened using social criteria.

OP suppliers and indirect procurement

proportions reporting development

proceeding. More on their screening

processes in the report. (R/O)

2, 4,

GRI 415: Public Policy 2016

415-1 Political contributions Neste does not make political contributions.

(R)

GRI 416: Customer Health and Safety 2016

416-2 Incidents of non-compliance

concerning the health and

safety impacts of products

and services

No cases during the reporting period. (R)

GRI 417: Marketing and Labeling 2016

417-3 Incidents of non-compliance

concerning marketing

communications

One legal action in Lithuania which was closed

during 2021. One new RCC complaint in the

Netherlands, and one closed case after the

rejection by the Advertising Code Committee

during 2021. (R)

GRI Standards Disclosure

Location

in the report

or our webpage Reporting / Omission

Global

Compact

Principles

Neste Annual Report 2021 | Sustainability reporting in 2021

106

SustainabilityStrategy Governance Review by the Board of Directors Financials

TCFD Recommendations Disclosure Location in the report

Governance

Disclose the organization’s governance around

climate-related risks and opportunities.

a) Describe the board’s oversight of climate related risks and opportunities.

44–46, 133

b) Describe management’s role in assessing and managing climate related risks and opportunities.

44–46, 133

Strategy

Disclose the actual and potential impacts of climate-

related risks and opportunities on the organization’s

businesses, strategy, and financial planning where such

information is material.

a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.

47–48, 134–135,156–

157

b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.

8–9, 12–14, 43, 47–58,

59–61, 62–72, 73–76,

77–81, 154, 156–157

c) Describe the resilience of the organization’s strategy, taking into consideration different climate related scenarios, including a 2°C or lower scenario.

47–48, 156–157

Risk Management

Disclose how the organization identifies, assesses,

and manages climate-related risks.

a) Describe the organization’s processes for identifying and assessing climate-related risks.

132–135, 156–157

b) Describe the organization’s processes for managing climate-related risks.

132–135, 156–157

c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.

132–135, 156–157

Metrics and Targets

Disclose the metrics and targets used to assess and

manage relevant climate-related risks and opportunities

where such information is material.

a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process

23–26, 33–36, 43,

47–58, 59–61, 96–97,

110–111, 136,154

b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.

96, 33, 54–58, 110–111

c) Describe the targets used by the organization to manage climate related risks and opportunities and performance against targets.

23–26, 33–36, 47–58,

59–61

TCFD Recommendations Disclosure

Neste Annual Report 2021 | Sustainability reporting in 2021

107

SustainabilityStrategy Governance Review by the Board of Directors Financials

SASB Content Index

Neste disclosure of SASB Sustainability Accounting Standards for Oil and Gas Refining and Marketing

Code Accounting metric Unit of measure

Location in

the report or

our webpage Additional SASB reporting information Reporting (R) / Omission (O)

GHG Emissions

EM-RM-110a.1 Gross global Scope 1 emissions, percentage covered under emissions-limiting

regulations

Metric tons (t) CO

Percentage (%)

96, 110

98% covered under EU ETS. (R)

EM-RM-110a.2 Discussion of long-term and short-term strategy or plan to manage Scope 1

emissions, emissions reduction targets, and an analysis of performance against those

targets

n/a

33, 47–58

Air Quality

EM-RM-120a.1 Air emissions of the following pollutants: (1) NOx (excluding N

O), (2) SOx, (3)

particulate matter (PM10), (4) H2S, and (5) volatile organic compounds (VOCs)

Metric tons (t)

96, 110

EM-RM-120a.2 Number of refineries in or near areas of dense population Number All 4 Neste refineries in 2021 located in near areas (within 49km) of an urbanized area.

(R)

Water management

EM-RM-140a.1 (1) Total fresh water withdrawn, (2) percentage recycled, (3) percentage in regions with

High or Extremely High Baseline Water Stress

Thousand cubic meters

(m³), Percentage (%)

96, 110

Neste’s water withdrawal from areas with water stress is not significant and seen as

not material. Percentage for recycled water is not calculated separately, as most of the

water withdrawn for cooling is discharged back to the source in similar condition as

when withdrawn. (R)

EM-RM-140a.2 Number of incidents of non-compliance associated with water quality permits,

standards, and regulations

Number

Hazardous Materials Management

EM-RM-150a.1 Amount of hazardous waste generated, percentage recycled Metric tons (t),

Percentage (%)

160,600 metric tons (t), recycled 20 % (R)

EM-RM-150a.2 (1) Number of underground storage tanks (USTs), (2) number of UST releases requiring

cleanup, and (3) percentage in states with UST financial assurance funds

Number, Percentage (%) 25 underground storage tanks for petroleum products. No UST releases.

Reporting based on Neste's environmental permits. (R)

Workforce Health and safety

EM-RM-320a.1 (1) Total recordable incident rate (TRIR), (2) fatality rate, and (3) near miss frequency

rate (NMFR) for (a) full-time employees and (b) contract employees

Rate

93, 98, 111

(1) and (2) Neste reports the most relevant OHS performance figures in its own

operations (TRIF, LWIF, PSER, Safe Days, Fatalities). (3) NMFR 142. (R)

EM-RM-320a.2 Discussion of management systems used to integrate a culture of safety n/a

90–93, 103

Neste Annual Report 2021 | Sustainability reporting in 2021

108

SustainabilityStrategy Governance Review by the Board of Directors Financials

Code Accounting metric Unit of measure

Location in

the report or

our webpage Additional SASB reporting information Reporting (R) / Omission (O)

Product Specifications & Clean Fuel Blends

EM-RM-410a.1 Percentage of Renewable Volume Obligation (RVO) met through: (1) production of

renewable fuels, (2) purchase of separated renewable identification numbers (RIN)

Percentage (%) (1) 0%, (2) 100%. (R)

EM-RM-410a.2 Total addressable market and share of market for advanced biofuels and associated

infrastructure

Reporting currency,

Percentage (%)

13, 146

Pricing Integrity & Transparency

EM-RM-520a.1 Total amount of monetary losses as a result of legal proceedings associated with price

fixing or price manipulation

Reporting currency,

Percentage (%)

No legal proceedings.

Management of the Legal & Regulatory Environment

EM-RM-530a.1 Discussion of corporate positions related to government regulations and/or policy

proposals that address environmental and social factors affecting the industry

n/a

41–42, 52, 53–

58, 66, 69–70,

134–135,153–154

Critical Incident Risk Management

EM-RM-540a.1 Process Safety Event (PSE) rates for Loss of Primary Containment (LOPC) of greater

consequence (Tier 1) and lesser consequence (Tier 2)

Rate

98, 111

Neste reports PSER1 and PSER2 rates as described in Principles for calculating the

key indicators.

EM-RM-540a.2 Challenges to Safety Systems indicator rate (Tier 3) Rate Rate 77.6. Tier 3 Challenges to Safety Systems indicator are included in Neste's PSE3

that we report. (R)

EM-RM-540a.3 Discussion of measurement of Operating Discipline and Management System

Performance through Tier 4 Indicators

n/a

90–93

Process safety management system weaknesses that may cause in the future PSE1 or

PSE2 events. They are reported as part of PSE4 indicator at Neste.

Code Activity metrics Unit of measure

Location in the

report or our

webpage Additional SASB reporting information

EM-RM-000.A Refining throughput of crude oil and other feedstocks

Barrels of oil equivalent

(BOE)

Oil Products 74 MMBOE (R)

EM-RM-000.B Refining operating capacity

Million barrels per

calendar day (MBPD)

Oil Products 0.26 MBPD (R)

Neste Annual Report 2021 | Sustainability reporting in 2021

109

SustainabilityStrategy Governance Review by the Board of Directors Financials

C2 Stakeholder Engagement

27–28, 37–40, 72, 86–89

16, 19–21

C2.1

27–28, 37–40, 72, 86–89

16, 19–21

C2.2

27–28, 30–31, 37–40, 86–89, 91

16, 19–21

C2.3

30–31, 37–40, 86–89, 91

10–11, 16, 19–21

C3 Assessing Impacts

34–36, 86–89

8, 10–14, 21

C3.1

34–36, 79, 86–89, 91–93

14, 16

C3.2

34–36, Sustainability Grievances

C4 Integrating Findings and Taking Action

10–16

C4.1

Cross–functional collaboration e.g. 44, 84, 86–89

7, 11

C4.2

81, 86

11, 15

C4.3

78–81, 83–84, 85–93

7–21

C5 Tracking Performance

34–36, 38–40, 72, 79, 84, 86–89, 91–93, 122

14, 16, 21

C5.1

34–36, 38–40, 79, 84, 86–89, 91–93, 122

14, 16, 21

C6 Remediation

80–81, 86–87, 128; Neste Human Rights Principle (p.1, 5)

9, 15, 16, 21

C6.1

80–81, 86–87, 128

9, 15, 16, 21

C6.2

35, 72, 80; Singapore Expansion, Sustainability Grievances

16, 21

C6.3

35, 80–81, 128; Grievance Process; Singapore Expansion.

9, 15, 16, 21

C6.4

35, Singapore Expansion, Sustainability Grievances

C6.5

35, Singapore Expansion, Sustainability Grievances

UN Guiding Principles Reporting Framework Index

Section of

the Framework

Location in annual report

or website

Page location in 2021

Modern Slavery Statement*

PART A: Governance of Respect for Human Rights

A1 Policy Commitment

85; Neste Human Rights Principle

A1.1

Neste Human Rights Principle was developed based on the results

of a corporate-wide human rights impact assessment, with

input from both internal and external stakeholders.

A1.2

All of Neste’s rights-holders as defined on p.7 of the Neste Human

Rights Principle

A1.3

72, 78–79, 86, 88–89, 105, 129. Neste's Human Rights Principle

is internally accessible on the Neste intranet. It is communicated

to employees via e-learnings, and to business partners via Neste's

Supplier Code of Conduct Guidance and capacity building.

9, 17, 18

A2 Embedding Respect for Human Rights

24–25, 44–45, 85–89, NBNHR Joint Statement, WBCSD CEO

Call to Action

3, 7, 19, 20

A2.1

44–45, 115, Human Rights Principle (p.7)

A2.2

44–46, 83

A2.3

46, 88–89, Neste Code of Conduct

7, 9, 16–18

A2.4

25, 38, 77–80, 86–87

9, 12–15, 17-18

A2.5

24, 46, 79–80, 85–89

7–9, 11–12, 14, 16-19, 21–22

PART B: Defining the Focus of Reporting

B1 Statement of salient issues

87; Neste Human Rights Principle (p.2-6)

B2 Determination of salient issues

B3 Geographical focus 10–11

B4 Additional severe impacts N/A N/A

Neste Annual Report 2021 | Sustainability reporting in 2021

Section of

the Framework

Location in annual report

or website

Page location in 2021

Modern Slavery Statement*

PART C: Management of Salient Human Rights Issues

C1 Specific Policies

C1 Neste Human Rights Principle, Code of Conduct, Supplier Code of Conduct,

Sustainability Policy, Neste Responsible Sourcing Principle, Neste People

Policy, Equality and Non-Discrimination Principle, Misconduct Investigation

Standard, Neste Life Saving Rules, Operations Excellence Policy, Safety

Leadership Principle, Neste Privacy Principle, Neste Cyber Security Principle

7–9

C1.1

34, 38, 40, 46, 72, 78, 79, 84, 86, 88, 89, 91–92

17–18

* 2021 Modern Slavery Statement will be published on the Neste website during H1 2022

UN Guiding Principles Reporting Framework Index

The UN Guiding Principles Reporting Framework provides comprehensive guidance for companies to report on human rights issues

in line with their responsibility to respect human rights. For full details on the framework, please visit www.ungpreporting.org

110

SustainabilityStrategy Governance Review by the Board of Directors Financials

Environment

Energy: The energy consumption figures cover

Neste’s refineries, terminals, offices, the compa-

ny’s own station business and time-chartered ships.

The figures are based on the data provided by these

units. Consumption is calculated based on invoicing

and meters. Standard conversion factors are used

(SI). Neste follows the Energy Efficiency Agreement

for Industries which is an agreement between the

Government and industrial associations on the effi-

cient use of energy, providing also guiding methodol-

ogy for energy efficiency calculations.

Carbon dioxide (CO

) or Greenhouse gas

emissions (GHG): For the Scope 1 emissions, the

emission factors compliant with the fuel classification

published by Statistics Finland were used in addition

to Neste’s in-house laboratory measurement data.

Scope 2 covers emissions from indirect purchased

electricity, steam and heat production. Market-based

Scope 2 emissions are based mainly on energy sup-

plier-specific emission factors. Location-based Scope

2 emissions are based on country-specific emission

factors (e.g. Motiva and AIB). Scope 1 & 2 accounting

and reporting is based on CO

(the estimated share of

other GHG is negligible compared to CO

Scope 3 calculation is based on the principles of

the GHG protocol. The calculation of Scope 3 emis-

sions is based on internal data sources (e.g. sales

and supply data), information available from public

sources (e.g. Renewable Energy Directive) and Neste’s

accredited in-house calculation data have been used

as the emission factors. Scope 3 emissions reporting

covers GHG emissions and is reported as CO

e. Only

relevant scope 3 categories are included in the report.

GHG emission reduction calculation method

complies with the EU Renewable Energy Directives;

until the end of H1/2021 with RED 2009/28/EC and

in H2/2021 with RED II (EU)2018/2001. Neste regu-

larly updates its GHG emission factors in line with the

updates in legislation and the certification schemes.

Since the beginning of 2021 volumes sold are applied

in calculation instead of volumes produced earlier.

Average GHG emission reduction of sourced palm oil

contains the use of crude palm oil (CPO) and Refined

Bleached Deodorized Palm Oil (RBDPO) that we have

sold within the year 2021.

VOC, NOx, SO

, PM: Other emissions to air

(excluding CO

) are measured with direct measure-

ments (on-line or periodic) or with indirect monitor-

ing methods. On-line measurement is typically done

on major emission points. Both direct measurements

and indirect monitoring is based on the site environ-

mental permit or other local environmental regulation.

Relevant process parameters linked to pollutant emis-

sions are monitored too. All emission monitoring is

done in accordance with standards. If EN standards

are not available, ISO, national or other international

standard/method is used to ensure the provision of

data of high scientific quality.

Water withdrawal: The water withdrawal volumes

are based on the company’s own measurements or

on invoicing. Neste’s water withdrawal from areas with

water stress is not significant and seen as not mate-

rial. Neste don’t currently have water withdrawal from

ground water or other water sources.

Wastewater discharges: Neste reports the

wastewater volumes, chemical oxygen consumption,

as well as the oil, nitrogen, and phosphorus releases.

The figures are calculated on the basis of refinery- or

terminal-specific data based on sampling or contin-

uous metering. The figures do not include the load-

ing values of wastewater treated in municipal or other

external wastewater treatment plants. Neste operates

according to local discharge permits and require-

ments. Our process waters are always treated to meet

the requirements before they are safely discharged.

Non-renewable resource use: The amount of

non-renewable resource use that Neste’s renew-

able and circular solutions helped replace in trans-

port, aviation and polymers and chemicals sec-

tors. Calculations include fossil resource usage over

renewable and circular production life cycles. An

energy-based comparison is made with relevant fossil

references. The difference is expressed as the energy

content of crude oil.

Principles for calculating the key indicators

Safety

Total Recordable Injury Frequency (TRIF):

Accidents at work resulting in absence from work,

restriction to work, or medical treatment are included

in the accident frequency figures. The formula for cal-

culating accident frequency (number of accidents at

work per million working hours): total number of acci-

dents at work × 1,000,000 / hours worked. The cal-

culation includes in-house personnel, contractors and

service providers working at Neste’s sites.

Workplace accidents: Accidents that occur at

work/while performing work duties.

Safe Day: A day without a TRI accident, process

safety events, fire or ignition, breach of environmental

permit, or traffic accident.

Hours worked: The hours worked by the whole

personnel and the service providers during the period

under review. When recording the working hours of

service providers, an estimate (e.g. accounting hours)

can be used if the accurate number of hours is not

known. Workplace accidents: Accidents that occur at

work/while performing work duties.

TRI (Total Recordable Injuries): All recorded

accidents at work: the number of accidents at work

resulting in absence from work, restriction to work or

medical treatment.

Neste Annual Report 2021 | Sustainability reporting in 2021

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LWIF (Lost Workday injury frequency): The

number of accidents at work resulting in lost work-

days, relative to a million hours worked.

Process safety event rate (PSER): Rate of pro-

cess safety events per million hours worked.

PSE1 (Process Safety Event): An unplanned and

uncontrolled release of any material, including non-

toxic and non-flammable materials from a process,

resulting in consequences according to the PSE1

classification.

Possible consequences:

• Workplace accident leading to absence (LWI, RWI)

or fatality.

• Fires or explosions with direct expenses

(excluding loss of production) higher than

EUR 25,000.

• Evacuation or taking cover indoors.

• A leak exceeding the reporting threshold during a

certain period, threshold according to Concawe

(European Oil Company Organisation for

Environment, Health and Safety).

• A pressure relief device (PRD) discharge with

above-mentioned consequences.

The Group-level performance indicators include the

parent company and companies where the parent

company holds more than 50% of shares. The asso-

ciate companies are not included in the calculations.

PSE2 (Process Safety Event): An unplanned and

uncontrolled release of any material, including non-

toxic and non-flammable materials from a process,

resulting in consequences according to the PSE2

classification.

Possible consequences:

• Workplace accident requiring medical treatment

(MTC).

• Fires or explosions with direct expenses

(excluding loss of production) higher than

EUR 2,500.

• A leak exceeding the reporting threshold during a

certain period, threshold according to Concawe.

• A pressure relief device (PRD) discharge with

above-mentioned consequences.

PSE3 (Process Safety Event): Cases are less

severe uncontrolled or unplanned releases and other

process safety related incidents. PSE3 represents

also process safety incidents like a challenges to

safety barrier systems, failures of safety critical equip-

ment or findings in primary containment inspection

that equipment has been operated outside accept-

able limits.

HSEQ: Health, safety, environment and quality.

Personnel

Reporting of personnel numbers: The personnel

numbers are calculated as numbers of employees,

and include, as a rule, all personnel with active con-

tracts of employment or employees on leave. Hourly

paid employees are not included as their numbers of

working hours vary greatly, and their number in pro-

portion to other employees is very small. Unless oth-

erwise specified, the personnel numbers are reported

as at December 31.

Number of permanent employees leaving the

company: The number of employees leaving a per-

manent contract of employment from Jan 1 to Dec

31/the number of permanent employees on Dec 31

(including all reasons for ending the employment).

Number of permanent employees joining the

company: The number of employees entering a per-

manent contract of employment from Jan 1 to Dec

31/the number of permanent employees on Dec 31.

Training costs: The training costs include exter-

nal training-related costs, such as the fees of external

trainers, and the participation fees for external train-

ing events, but not, for example, the salaries of partic-

ipants or the company’s own trainers

Innovation

Clean revenue means revenue from all goods and ser-

vices which have a clear environmental and/or social

benefits. Clean investments are investments in such

benefits consisting of Clean CAPEX, Clean R&D and

Clean M&A. Clean Revenue and Clean Investments

include for example revenue from, and investments

in, clean transition as well as low-carbon and circular

economy solutions.

Clean Investments (%): Clean

CAPEX+Clean R&D+Clean Acquisitions/Total

CAPEX+R&D+Acquisitions.

Clean Revenue (%): Clean Revenue/Total

Revenue.

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Independent Practitioner’s

Assurance Report

Neste Annual Report 2021 | Sustainability reporting in 2021

To the Management of Neste Corporation

We have been engaged by the Management of

Neste Corporation (hereafter “Neste”) to provide lim-

ited assurance on selected sustainability disclosures

presented in the “Sustainability section” of Neste’s

Annual Report 2021 (hereafter “Selected Sustainability

Information”) for the year ended on 31 December

2021.

The Selected Sustainability Information consists of

selected economic, social and environmental sus-

tainability disclosures listed within the GRI Standards

Topic-Specific Disclosures and General Disclosures

102-8 and 102-41 as well as information presented

in the “Sustainability highlights 2021”, “Sustainability

KPIs”, “Value creation”, and “Performance in figures”

sections in Neste’s Annual Report 2021.

The assurance engagement has also covered

Neste’s adherence to the AA1000 AccountAbility

Principles with moderate level of assurance.

Management’s responsibilities

The Management of Neste is responsible for the prepa-

ration and presentation of the Selected Sustainability

Information in accordance with the reporting crite-

ria, i.e. GRI Sustainability Reporting Standards, and

the information and assertions contained within it.

The Management is also responsible for determining

Neste’s objectives with regard to sustainable develop-

ment performance and reporting, including the iden-

tification of stakeholders and material issues, and for

establishing and maintaining appropriate performance

management and internal control systems from which

the reported performance information is derived.

The Management of Neste is also responsible for the

adherence to the AA1000 AccountAbility Principles

of inclusivity, materiality, responsiveness, and impact

as set forth in the AA1000 AccountAbility Principles

Standard (AA1000AP, 2018).

Our responsibilities

Our responsibility is to carry out a limited assurance

engagement and to express a conclusion based on

the work performed. We conducted our limited assur-

ance engagement on the Selected Sustainability

Information in accordance with International Standard

on Assurance Engagements (ISAE) 3000 (Revised),

Assurance Engagements other than Audits or

Reviews of Historical Financial Information, issued by

the International Auditing and Assurance Standards

Board IAASB. That Standard requires that we plan

and perform the engagement to obtain limited assur-

ance about whether the Selected Sustainability

Information is free from material misstatement.

We conducted our moderate assurance engagement

as a type 2 engagement in accordance with AA1000

Assurance Standard v3 (AA1000AS, 2020), issued by

AccountAbility.

KPMG Oy Ab applies International Standard on

Quality Control ISQC 1 and accordingly maintains

a comprehensive system of quality control includ-

ing documented policies and procedures regard-

ing compliance with ethical requirements, profes-

sional standards and applicable legal and regulatory

requirements.

We have complied with the independence and

other ethical requirements of the Code of Ethics for

Professional Accountants issued by the International

Ethics Standards Board for Accountants IESBA,

which is founded on fundamental principles of integ-

rity, objectivity, professional competence and due

care, confidentiality and professional behavior.

Our multi-disciplinary team of sustainability and

assurance specialists possesses the needed skills

and experience within financial and non-financial

assurance, sustainability strategy and management,

social and environmental issues, as well as the rele-

vant industry knowledge, to undertake this assurance

engagement.

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Neste Annual Report 2021 | Sustainability reporting in 2021

Procedures performed

A limited assurance engagement on Selected

Sustainability Information consists of making inquiries,

primarily of persons responsible for the preparation of

information presented in the Selected Sustainability

Information, and applying analytical and other evi-

dence gathering procedures, as appropriate. In the

engagement, we have performed the following proce-

dures, among others:

• Interviewed the members of Neste’s senior

management and relevant staff responsible for

providing the Selected Sustainability Information;

• Assessed the application of the GRI Sustainability

Reporting Standards reporting principles in

the presentation of the Selected Sustainability

Information;

• Assessed data management processes,

information collecting and working methods

used to gather and consolidate the Selected

Sustainability Information;

• Reviewed the presented Selected Sustainability

Information and assessed its quality and reporting

boundary definitions;

• Assessed of the Selected Sustainability

Information’s data accuracy and completeness

through a review of the original documents and

systems on a sample basis; and

• Assessed Neste’s adherence to the AA1000

AccountAbility Principles of inclusivity, materiality,

responsiveness, and impact through interviews

and data requests performed at Neste.

The procedures performed in a limited assurance

engagement vary in nature and timing from, and

are less in extent than for, a reasonable assurance

engagement. Consequently, the level of assurance

obtained in a limited assurance engagement is sub-

stantially lower than the assurance that would have

been obtained had a reasonable assurance engage-

ment been performed.

Inherent limitations

Due to the inherent limitations of any internal control

structure, it is possible that errors or irregularities in

the information presented in the Report may occur

and not be detected. Our engagement is not designed

to detect all weaknesses in the internal controls over

the preparation and presentation of the Selected

Sustainability Information, as the engagement has not

been performed continuously throughout the period

and the procedures performed were undertaken on a

test basis.

Conclusion

Our conclusion has been formed on the basis of, and

is subject to, the matters outlined in this report.

We believe that the evidence we have obtained is

sufficient and appropriate to provide a basis for our

conclusions.

Based on the procedures performed and the evi-

dence obtained, as described above, nothing has

come to our attention that causes us to believe that

the information subject to the limited assurance

engagement is not presented, in all material respects,

in accordance with the GRI Sustainability Reporting

Standards.

Furthermore, nothing has come to our attention that

causes us to believe that Neste does not adhere, in

all material respects, to the AA1000 AccountAbility

Principles.

In accordance with the terms of our engagement,

this independent limited assurance report on the

Selected Sustainability Information has been prepared

for Neste Oyj in connect with reporting to Neste Oyj

and for no other purpose or in any other context.

Key observations in relation to AA1000

AccountAbility Principles

Without affecting our conclusion, the following obser-

vations are made:

• Inclusivity: Neste is committed to stakeholder

inclusivity and has processes in place for active

stakeholder engagement.

• Materiality: Neste has defined material

sustainability topics and has a process in place to

regularly update these.

• Responsiveness: Neste has policies and

procedures in place to respond to stakeholder’s

expectations and integrate these into Neste’s

sustainability approach.

• Impact: Neste has identified and is in the process

of identifying its impacts relating to material

sustainability topics, measures and monitors the

impacts actively and is committed to transparently

disclosing information on these.

Restriction of use of our report

Our report should not be regarded as suitable to be

used or relied on by any party wishing to acquire

rights against us other than Neste Oyj for any pur-

pose or in any other context. Any party other than

Neste Oyj who obtains access to our report or a copy

thereof and chooses to rely on our report (or any part

thereof) will do so at its own risk. To the fullest extent

permitted by law, we accept or assume no respon-

sibility and deny any liability to any party other than

Neste Oyj for our work, for this independent assur-

ance report, or for the conclusions we have reached.

Our report is released to Neste Oyj on the basis

that it shall not be copied, referred to or disclosed, in

whole (save for Neste Oyj’s own internal purposes) or

in part, without our prior written consent.

Helsinki, 3 March 2022

KPMG Oy Ab

Leenakaisa Winberg Tomas Otterström

Authorized Public Partner, Advisory

Accountant, KHT

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Neste Annual Report 2021 | Governance

Corporate Governance Statement 115

Risk management 132

Remuneration report 136

Governance

We are committed to high

ethical standards and conduct

our business and operate in

compliance with applicable

laws, regulations and generally

accepted practices for good

corporate governance.

115

GovernanceStrategy Sustainability Review by the Board of Directors Financials

Corporate Governance Statement 2021

This Corporate Governance Statement has been pre-

pared pursuant to the 2020 Corporate Governance

Code, Chapter 7, Section 7 of the Securities Markets

Act, as well as Section 7 of the Ministry of Finance’s

Decree on the Regular Duty of Disclosure of an Issuer

of a Security. The Corporate Governance Statement

is issued separately from the Review by the Board

of Directors and it can be found, in addition to the

Annual Report, at neste.com/investors.

Regulatory framework

Neste Corporation (“Neste” or the “Company”)

observes good corporate governance practices in

accordance with the laws and regulations applica-

ble to Finnish listed companies, the Company’s own

Articles of Association, and the Finnish 2020 Corporate

Governance Code. The Corporate Governance Code

can be found at cgfinland.fi/en/. Neste also com-

plies with the rules of Nasdaq Helsinki Ltd, where it

is listed, and the rules and regulations of the Finnish

Financial Supervisory Authority.

Neste’s Audit Committee has reviewed the Corporate

Governance Statement, and the Company’s Auditor,

KPMG Oy Ab, has monitored that it has been issued

and that the description of the main features of the

internal control and risk management related to the

financial reporting process included in the statement

matches the Financial Statements.

Neste issues Consolidated Financial Statements and

interim reports in accordance with the International

Financial Reporting Standards (IFRS), as adopted

by the EU, the Securities Market Act, as well as the

appropriate Financial Supervisory Authority stan-

dards, and Nasdaq Helsinki Ltd’s rules. The Review

by the Board of Directors and the Parent Company’s

Neste’s businesses are grouped into four reporting segments: Renewable Products, Oil Products, Marketing & Services, and Others.

Shareholders / Annual General Meeting

Board of Directors

Audit Committee Personnel and Remuneration Committee

Shareholders’ Nomination Board

President & CEO

Assurance Functions

Executive Committee

Risk Management Compliance Internal Control

Renewable ProductsOil Products Marketing & Services Innovation Functions

NES

Renewable

Road Transportation

Renewable

Aviation

Renewable Polymers

and Chemicals

Renewables Platform

Neste’s Governance Bodies

Finance

Human Resources,

HSSEQ and Procurement

Sustainability and

Corporate Affairs

Legal

External

Audit

Internal

Audit

Financial Statements are prepared in accordance

with the Finnish Accounting Act and the opinions and

guidelines of the Finnish Accounting Board.

Governance Bodies

The control and management of Neste is split

between the Annual General Meeting of Shareholders

(AGM), the Board of Directors, and the President

and Chief Executive Officer (President and CEO).

Ultimate decision-making authority lies with share-

holders at the AGM which appoints the members of

the Board of Directors and the Auditor. The Board of

Directors is responsible for Neste’s strategy and over-

seeing and monitoring the Company’s business. The

Neste Annual Report 2021 | Corporate Governance Statement 2021

Board of Directors appoints the President and CEO.

The President and CEO, assisted by the Executive

Committee (ExCo), is responsible for managing the

Company’s business and implementing its strategic

and operational targets.

Neste’s headquarters are located in Espoo, Finland.

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

Annual General Meeting

Under the Finnish Companies Act, shareholders exer-

cise their decision-making power at General Meetings

of Shareholders, and attend meetings in person or

through an authorized representative. Each share

entitles the holder to one vote.

Shareholders at the AGM make decisions

on matters including:

• the approval of the Financial Statements,

• the distribution of profit for the year detailed

in the Balance Sheet,

• discharging the members of the Board of

Directors and the President and CEO from liability,

• if necessary, the approval of the Remuneration

Policy;

• the approval of the Remuneration Report; and

• the election and remuneration of the Chair, the

Vice Chair, and the members of the Board of

Directors and the Auditor.

The AGM is held annually before the end of June.

An Extraordinary General Meeting of Shareholders

addressing specific matters can be held, when con-

sidered necessary by the Board of Directors, or when

requested in writing by the Company’s Auditor or by

shareholders representing at least one-tenth of all

Company shares.

Under the Articles of Association, an invitation to a

General Meeting of Shareholders shall be delivered to

shareholders by publishing it on the Company’s web-

site neste.com no earlier than two months, and no

later than three weeks prior to a meeting, but at least

nine days before the record date set for the meeting

under the terms of the Companies Act. In addition,

the Company may, if the Board of Directors decides

so, publish details on the date and time and loca-

tion of the meeting, together with the address of the

Company’s website, in one or more newspapers.

Neste is not aware of any shareholders’ agreements

regarding the Company’s shares.

2021

The 2021 AGM was held on 30 March 2021

under special arrangement at the Company’s

headquarters in Espoo. In order to prevent the

spread of the COVID-19 pandemic, the AGM was

held without shareholders’ or their proxy repre-

sentatives’ presence at the venue of the meet-

ing. Shareholders and their proxy representatives

had the possibility to participate in the meeting

and exercise their shareholder rights by voting in

advance and by making counter-proposals and

presenting questions in advance. The AGM sup-

ported all the proposals presented to the meeting

and approved the Remuneration Report. The AGM

adopted the company’s Financial Statements

and Consolidated Financial Statements for 2020

and discharged the Board of Directors and the

President & CEO from liability for 2020.

The AGM approved the Board of Directors’

proposal that a dividend of EUR 0.80 per share

will be paid on the basis of the approved balance

sheet for 2020. The dividend was paid in two

installments.

The first installment of dividend, EUR 0.40 per

share, was paid to a shareholder registered in the

shareholders’ register of the Company maintained

by Euroclear Finland Ltd on the record date for

the first dividend installment, which was 1 April

2021. The first dividend installment was paid on

12 April 2021.

The second installment of dividend, EUR 0.40

per share, was paid to a shareholder registered in

the shareholders’ register of the Company main-

tained by Euroclear Finland Ltd on the record

date for the second dividend installment, which

was 5 October 2021. The second dividend install-

ment was paid on 12 October 2021.

In accordance with the proposal made by the

Shareholders’ Nomination Board, the AGM con-

firmed the number of members of the Board of

Directors at nine, following the amendment of the

Articles of Association to the effect that the max-

imum number of Board members is increased

from eight to ten. The AGM decided the compo-

sition of the Board of Directors and the remuner-

ation to be paid to the members of the Board of

Directors, and appointed the Auditor. The AGM

also approved the Board’s proposals to the AGM,

including amendments to the Company’s Articles

of Association.

Shareholders’ Nomination Board

Following the proposal by the Board of Directors,

the 2013 AGM decided to establish a permanent

Shareholders’ Nomination Board to be responsible for

drafting and presenting proposals covering the remu-

neration and number of members of the Company’s

Board of Directors and for presenting candidates as

potential Chair, Vice Chair, and members at the Board

to the AGM and to an Extraordinary General Meeting

of Shareholders when needed. The Shareholders’

Nomination Board shall also be responsible for identi-

fying successors for existing Board Members.

The Shareholders’ Nomination Board shall consist

of four members, three of which shall be appointed

by the Company’s three largest shareholders, who

shall appoint one member each. The Chair of the

Company’s Board of Directors shall serve as the

fourth member. The Shareholders’ Nomination Board

elects a Chair among its members.

The Company’s largest shareholders entitled to

elect members to the Shareholders’ Nomination Board

shall be annually determined on the basis of the reg-

istered holdings in the Company’s list of sharehold-

ers held by Euroclear Finland Ltd as of the first week-

day in September in the year concerned. The Chair of

the Company’s Board of Directors shall request each

of the three largest shareholders established on this

basis to nominate one member to the Shareholders’

Nomination Board. In the event that a shareholder

does not wish to exercise his or her right to appoint a

representative, the right shall pass to the next-largest

shareholder who would not otherwise be entitled to

appoint a member.

The Shareholders’ Nomination Board shall serve

until further notice, unless a General Meeting of

Shareholders decides otherwise. Its members shall

be appointed annually and their term of office shall

end when new members are appointed to replace

them.

The Shareholders’ Nomination Board shall forward

its proposals for the AGM to the Company’s Board of

Directors annually by 31 January, prior to the hold-

ing of the AGM. Proposals intended for a possible

Extraordinary General Meeting of Shareholders shall

be forwarded to the Company’s Board of Directors

in time for them to be included in the invitation to the

meeting sent out to shareholders.

Neste Annual Report 2021 | Corporate Governance Statement 2021

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Composition of the Shareholders’

Nomination Board prior to the 2022 AGM

On 20 September 2021, the following members

were appointed to Neste’s Shareholders’ Nomination

Board: The Chair, Director General Kimmo Viertola

of the Ownership Steering Department in the Prime

Minister’s Office of Finland; Deputy CEO, Investments

Reima Rytsölä of Varma Mutual Pension Insurance

Company; Director General Outi Antila of The Social

Insurance Institution of Finland and Matti Kähkönen,

the Chair of Neste’s Board of Directors.

Activities

The Shareholders’ Nomination Board makes propos-

als for the next AGM on the following:

• the number of members of the Board of Directors,

• the Chair, the Vice Chair and the members of the

Board of Directors, and

• the remuneration to be paid to the Chair, the Vice

Chair, and the members of the Board of Directors.

The nomination process of the Shareholders’

Nomination Board, its composition, and activities are

detailed in its Charter.

The Shareholders’ Nomination Board convened 9

times between the date of the 2021 AGM and 31

January 2022, and the members of the Shareholders’

Nomination Board attended such meetings as follows:

Shareholders’ Nomination Board members

Kimmo Viertola

M.Sc. (Econ.), Chair of the Shareholders’

Nomination Board since 18 September 2019.

Born in 1961.

Director General of the Ownership Steering

Department at the Prime Minister’s Office of

Finland. Member of the Board of Municipality

Finance Plc. Chair of the Shareholders’

Nomination Board of Fortum Oyj. Member of the

Shareholders’ Nomination Board of SSAB.

Holdings in Neste Corporation on 31 December

2021: no holdings/ 0 shares.

Prime Minister’s Office: 276,213,495 shares.

Outi Antila

Master of Laws with court training,

Member of the Shareholders’ Nomination Board

since 14 September 2020.

Born in 1957.

Director General, The Social Insurance Institution

of Finland. Member of the Shareholders’

Nomination Board of Outokumpu Oyj. Member of

the General Assembly of Confederation of Finnish

Industries. Member of the Advisory Council for

Employment Matters of Diaconia University of

Applied Sciences (Diak).

Holdings in Neste Corporation on 31 December

2021: no holdings/ 0 shares.

The Social Insurance Institution of Finland:

7,945,272 shares.

Reima Rytsölä

M.Soc.Sc, CEFA, AMP, Member of the

Shareholders’ Nomination Board.

Born in 1969.

Deputy CEO and Chief Investment Officer, Varma

Mutual Pension Insurance Company. Member of

the Board of Kojamo Plc. Member of the Board of

Nordea Funds Ltd. Member of the Board of Ylva

Services Ltd.

Holdings in Neste Corporation on 31 December

2021: no holdings/ 0 shares.

Varma Mutual Pension Insurance Company:

10,550,615 shares.

Matti Kähkönen

M.Sc. (Engineering), Member of the Shareholders’

Nomination Board.

Born in 1956.

Senior Advisor, Metso Corporation 2017–2019.

Chair of the Board of Neste Oyj. Vice Chairman

of the Board of Directors at Kemira, 2021–.

Chairman of the Board of Directors at the Finnish

Fair Corporation 2020–. Chair of the Supervisory

Board of the Ilmarinen Mutual Pension Insurance

Company until 2021. Chair of Neste’s Personnel

and Remuneration Committee.

Holdings in Neste Corporation on 31 December

2021: 12,310 shares.

Holdings in Neste Corporation on 31 December 2021:

Own holdings and controlled entities.

Shareholder’s holdings represented by the member of the Shareholders’ Nomination Board.

Attendance

Kimmo Viertola 9/9

Outi Antila 9/9

Reima Rytsölä 9/9

Matti Kähkönen 9/9

Decisions on the proposals for the 2022 AGM were made

by the members of the Shareholders’ Nomination Board in a

manner set out in more detail in the stock exchange release

published on 28 January 2022.

Composition of the Shareholders’

Nomination Board prior to the 2021 AGM

On 14 September 2020, the following members

were appointed to Neste’s Shareholders’ Nomination

Board: The Chair, Director General Kimmo Viertola

of the Ownership Steering Department in the Prime

Minister’s Office of Finland; Deputy CEO, Investments

Reima Rytsölä of Varma Mutual Pension Insurance

Company; Director General Outi Antila of The Social

Insurance Institution of Finland and Matti Kähkönen,

the Chair of Neste’s Board of Directors. The

Shareholders’ Nomination Board convened seven

times between its formation on 14 September 2020

and 29 January 2021 and two times between the 2020

AGM and 14 September 2020. The Shareholders’

Nomination Board presented its proposal covering

the members of the Board of Directors on 29 January

2021, but it did not reach unanimity concerning the

Board remuneration to be paid for the next term of

office.

Neste Annual Report 2021 | Corporate Governance Statement 2021

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

Board of Directors

In accordance with Neste’s Articles of Association,

the Board of Directors has between five and ten

members, who are elected at the AGM for a period of

office that extends to the following AGM.

Diversity of the Board of Directors

In planning the composition of a skilled, competent,

experienced, and effective Board of Directors from the

viewpoint of diversity, the Shareholders’ Nomination

Board also follows the following diversity principles

defined by the Company. A cooperative and func-

tional Board of Directors requires diversity for it to be

able to respond to the requirements set out in Neste’s

business and strategic objectives and to support and

challenge the company’s operational management in

a proactive and constructive manner.

Significant factors concerning the composition of the

Board of Directors include a variety of competences

that complement the other members of the Board,

education and experience in different professional and

industrial fields and in business operations and man-

agement existing in different development phases,

as well as the personal qualities of each member, all

of which add diversity to the Board of Directors. The

diversity of the Board of Directors is also supported

by experience in industrial fields and markets that are

strategically significant for Neste, experience and abil-

ities in technologies and the international operating

environment, and a diverse age and gender distribu-

tion so that both genders are always adequately rep-

resented in the Board of Directors. In considering the

composition of the Board of Directors, it is import-

ant to pay attention to Neste’s current and evolving

needs, and to ensure that the Board of Directors, as a

whole, enables the current and future business devel-

opment of Neste, which diversity also supports.

Neste’s Board of Directors was composed of nine

members between the 2021 AGM and 21 July 2021,

when Sonat Burman-Olsson announced her resigna-

tion from the Board due to her election as a member

of the Board of Directors of the Brazilian energy com-

pany Raizen S.A. After that the Board was composed

of eight members, all of whom hold a university-level

degree, and one of whom has a doctorate. These

degrees are from different fields, with technical fields

being in the majority. Each member of the Board of

Directors has international work experience in differ-

ent types of positions, and has worked or is work-

ing in the Board of Directors or management of listed

or unlisted companies. Three members have worked

in managerial positions at major international petro-

chemical companies. The Board of Directors is also

diverse in terms of cultural backgrounds: its mem-

bers come from five different countries and speak five

different native languages. Women comprise 25% of

all members of the Board of Directors. With regard

to age, the members of the Board of Directors are

divided evenly between 50 and 65 years of age. The

duration of the terms of office of the Board members

is divided as follows: four members have been on the

Board of Directors for more than four years, while four

members have been on the Board of Directors for

less than four years.

Activities of the Board of Directors

The Board shall have at least eight regular meetings

annually, all scheduled in advance, with extraordinary

meetings when necessary. Extraordinary meetings, if

requested by a Board Member or the President and

CEO, shall be convened by the Chair, or, if the Chair

is prevented from attending, by the Vice Chair, or if

deemed necessary by the Chair. The Board consti-

tutes a quorum if more than half of its members are

present. The Board is responsible for preparing an

operating plan for itself for its period of office between

Annual General Meetings, to include a timetable

of meetings and the most important matters to be

addressed at each meeting. The Board evaluates its

performance annually to determine whether it is func-

tioning effectively after the end of each financial year.

Duties of the Board of Directors

The Board’s responsibilities and duties are defined in

detail in the Charter approved by the Board. A mem-

ber of the Board of Directors may not take part in

decision-making in matters regarding (i) agreements

between such member and any entity within the Neste

Group, (ii) agreements between any entity within the

Neste Group and third parties where such mem-

ber has a material interest in the matter which may

conflict with the interest of Neste or any other entity

within the Neste Group, and (iii) agreements between

any entity within the Neste Group and a legal entity

which such member may represent, either individu-

ally or together with any other person; provided how-

ever, that this point (iii) does not apply where the party

contracting with Neste is a company within the Neste

Group. The term ’agreement’ as used here includes

litigation or other legal proceedings arising from or

relating to such agreements.

2021

The 2021 AGM confirmed the membership of the

Board of Directors at nine members, and the fol-

lowing were re-elected to serve until the end of the

next AGM: Ms. Sonat Burman-Olsson, Mr. Nick

Elmslie, Ms. Martina Flöel, Mr. Matti Kähkönen,

Mr. Jean-Baptiste Renard, Mr. Jari Rosendal, Ms.

Neste Annual Report 2021 | Corporate Governance Statement 2021

Johanna Söderström and Mr. Marco Wirén. Mr.

John Abbott was elected as a new member. Mr.

Matti Kähkönen was re-elected as Chair and Mr.

Marco Wirén was re-elected as Vice Chair. On 21

July 2021, Ms. Sonat Burman-Olsson announced

her resignation from the Board due to her elec-

tion as a member of the Board of Directors of the

Brazilian energy company Raizen S.A.

The Board convened 13 times in 2021. The

attendance rate at the meetings was 98.1%.

The Board focused in 2021 on the Company’s

long-term strategy by means of e.g. the con-

tinued scale-up of the Company’s renewables

businesses as well as the expansion of the

Company’s renewables feedstock platform and

production capabilities, including the on-going

Singapore expansion project and the project for

a possible next worldscale renewables refinery

in Rotterdam. In addition to the above and mat-

ters set out in the Board Charter, the Board also

supervised strategy execution as well as evalu-

ated the changes in the long-term operational

environment and their impact on the Company’s

business operations from e.g. a sustainability per-

spective. Leadership matters, including changes

in senior management announced during 2021,

and talent management were also dealt with by

the Board. The Board continuously monitored

the Company’s safety, financial and operational

performance as well as risk management. M&A

and investment projects were also on the Board

agenda during 2021. The Board work has during

the year assessed itself with a particular focus on

the competences of the Board members.

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The shareholdings of the members of the Board of Directors are presented below their CVs. The remuneration paid to the members of the Board of Directors is detailed in the Remuneration Report.

Board of Directors, 31 December 2021

Position Born Education Main Occupation

Independent

of the company

Independent

of major

shareholders

Personnel and

Remuneration

Committee

Audit

Committee

Attendance at

meetings

Board Committees

Matti Kähkönen Chair 1956 M.Sc. (Eng.) Non-Executive Director • • • 13/13 7/7

John Abbott Member 1960 B.Sc. (Chem. eng.) Non-Executive Director • • • 11/11 6/6

Sonat Burman-Olsson Member 1958 M.Sc. (Econ), MBA Non-Executive Director • •

•

until 21.7.2021

8/8 3/3

Nick Elmslie Member 1957 B.Sc. (Chem.) Non-Executive Director • • • 12/13 7/7

Martina Flöel Member 1960 PhD (Chem.) Non-Executive Director • • • 13/13 7/7

Jean-Baptiste Renard Member 1961 M.Sc. (Eng.) Non-Executive Director • • • 13/13 7/7

Jari Rosendal Member 1965 M.Sc. (Eng.) President and CEO of Kemira • • • 13/13 6/7

Johanna Söderström Member 1971 M.Sc. (Econ.)

EVP, Chief Human Resources Officer

at Tyson Foods Inc

• • • 12/13 7/7

Marco Wirén Member 1966 M.Sc. (Econ.)

Chief Financial Officer

at Nokia Corporation

• • • 13/13 7/7

Neste Annual Report 2021 | Corporate Governance Statement 2021

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

Matti Kähkönen

(born in 1956)

M.Sc. (Engineering)

Chair of the Board since 2018

Member of the Board since 2017

Independent member

Senior Advisor, Metso Corporation 2017–2019.

President and CEO, Metso Corporation 2011–2017.

Executive Vice President and Deputy to the CEO,

Metso Corporation 2010–2011. President, Mining and

Construction Technology, Metso Corporation 2008–

2011. President, Metso Minerals 2006–2008. President,

Metso Automation, 2001–2006. President, Metso

Automation, Field Systems Division, 1999–2001. Prior

to 1999, various managerial and development positions

in Neles-Jamesbury and Rauma-Repola. Vice Chairman

of the Board of Directors at Kemira, 2021–. Chairman

of the Board of Directors at the Finnish Fair Corporation

2020–. Board Chair of the Supervisory Board of the

Ilmarinen Mutual Pension Insurance Company until

2021. Chair of Neste’s Personnel and Remuneration

Committee.

Holdings in Neste Corporation on 31 Dec 2021:

12,310 shares.

John Abbott

(born in 1960)

B.Sc. First Class Honours, Chemical Engineering,

Birmingham University, UK

Member of the Board since 30 March 2021

Independent member

Downstream Director and a Member of the Executive

Committee of Royal Dutch Shell plc, 2013–2019.

Executive Vice President of Global Manufacturing at

Shell, 2012–2013. Executive Vice President of Shell’s

Upstream Americas Heavy Oil business, based in Calgary,

Canada, 2008–2012. Vice President Manufacturing

(Refining and Chemicals) Excellence and Support at Shell

based in Houston, USA, 2006–2008. Various positions

at Shell in the UK, Singapore, Thailand, the Netherlands,

Canada, and the USA, predominantly in the areas of

Global Manufacturing (Refining and Chemicals) as well

as Supply, Trading and Distribution, 1981–2006. (In

1994, he was also seconded to the British Government

for a short assignment). Member of the Board at Fiat

Chrysler Automobiles N.V. 2018–2021. Non Executive

Director of the Intercontinental Exchange (ICE) Futures

Europe 2021–. Advisor and participant at Mobility Impact

Partners (MIP) 2020–. Mentor in the FTSE 100 cross-

company mentoring foundation 2013–. Member of

Neste’s Audit Committee.

Holdings in Neste Corporation on 31 Dec 2021:

No holdings.

Members of the Board of Directors

Nick Elmslie

(born in 1957)

B.Sc. (Chemistry)

Member of the Board since 2020

Independent member

Chief Executive, BP Global Petrochemicals based in

Shanghai 2011–2015. Controller, Head of Finance

Function, BP Downstream 2006–2011. Various

directorial positions at BP plc., including Chief

Executive, Acetyls Business and Business Unit Leader,

Head of Chemicals Strategy and CFO, Polymers &

Olefins 1992–2006. Various positions at BP plc 1978–

1992. Member of the Board and Investor at 3fbio

Ltd 2017–. Member of the Supervisory Board of OTI

Greentech AG 2017–. Member of the Board of Fosroc

Group Holdings Limited 2009–. Chairman of i-Keg Ltd

2021–. Member of Neste’s Audit Committee.

Holdings in Neste Corporation on 31 Dec 2021:

2,000 shares.

Martina Flöel

(born in 1960)

M.Sc. (Chemistry), Ph.D. (Chemistry)

Member of the Board since 2017

Independent member

CEO of Oxea 2007–2016. Managing Director and EVP,

Europe of European Oxo in 2003–2007. Vice President

Oxo Chemicals, Celanese Chemicals 2000–2003. Plant

Manager Böhlen, Celanese Chemicals 1998–2000. Prior

to 1998, various managerial and directorial positions in

the Hoechst Group. Member of the Board of Directors

of Sasol 2018–. Member of Neste’s Personnel and

Remuneration Committee.

Holdings in Neste Corporation on 31 Dec 2021:

No holdings.

Holdings in Neste Corporation: own holdings and controlled entities.

Neste Annual Report 2021 | Corporate Governance Statement 2021

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

Jean-Baptiste Renard

(born in 1961)

M.Sc. (Eng.) and an engineering diploma in petroleum

economics from the French Petroleum Institute (IFP)

Member of the Board since 2014

Independent member

Founder and CEO, 2PR Consulting, independent

energy expert and consultant. Several positions at BP

1986–2010; Regional Group Vice President for Europe

and Southern Africa BP plc 2006–2010, Group Vice

President, Business Marketing and New Markets, and

Member of Downstream Executive Committee BP

plc 2003–2006. Non-Executive Director of Masana

Petroleum Solutions (South-Africa); Supervisory Board

Member of IFP Training (France); Non-Executive

Director of Exolum (Spain); Pro bono consulting for

social entrepreneurs. Member of the Supervisory Board

and Vice President of Entreprendre&+. Member of

the Advisory Board of IFP School. Member of Neste’s

Personnel and Remuneration Committee.

Holdings in Neste Corporation on 31 Dec 2021:

22,950 shares.

Members of the Board of Directors

Jari Rosendal

(born in 1965)

M.Sc. (Eng.)

Member of the Board since 2018

Independent member

President and CEO at Kemira since 2014. Various

divisional President and Directorial positions, including

Member of the Executive Board, at Outotec Oyj in

2001–2014. Various managerial and expert positions

in the Outokumpu Group in Finland and the United

States 1989–2001. Member of the Board of Directors

of Chemical Industry Federation of Finland 2015–,

Chairman of the Board of Directors 2017–2018 and

Vice Chairman of the Board of Directors 2019–2020.

Member of the Board of Directors of CEFIC, 2014–.

Member of the Board of TT fund of the Confederation of

Finnish Industries 2020–2021. Member of Neste’s Audit

Committee.

Holdings in Neste Corporation on 31 Dec 2021:

No holdings.

Johanna Söderström

(born in 1971)

M.Sc. (Econ.)

Member of the Board since 2020

Independent member

Executive Vice President, Chief Human Resources

Officer at Tyson Foods Inc. 2020–. Senior Vice

President, Chief Human Resources Officer at the Dow

Chemical Company 2014–2019. Vice President, Center

of Expertise Human Resources at the Dow Chemical

Company 2012–2014. Various directorial HR positions

at Dow Chemical Company, Dow Europe GmbH and

Dow Chemical Handels- und Vertriebsgesellschaft mbH

2007–2012. Head of Global Compensation & Benefits

at Huhtamäki Oyj 2006–2007. Various specialist and

managerial positions at Dow Europe GmbH, Dow

Chemical Handels- und Vertriebsgesellschaft mbH

and Dow Suomi Oy 1999–2006. Prior to 1999, various

specialist positions at Oy L M Ericsson Ab. Member of

Neste’s Personnel and Remuneration Committee.

Holdings in Neste Corporation on 31 Dec 2021:

3,000 shares.

1) 2)

Marco Wirén

(born in 1966)

M.Sc. (Econ.)

Vice Chair of the Board since 2020

Member of the Board since 2015

Independent member

Chief Financial Officer, Nokia Corporation 2020–.

President, Wärtsilä Energy & Executive Vice President,

Wärtsilä Corporation 2018–2020. Executive Vice

President and Chief Financial Officer Wärtsilä 2013–

2018. SSAB, Executive Vice President and CFO 2008–

2013. SSAB, Vice President Business control 2007–

2008. Eltel Networks, CFO and Vice President Business

Development 2002–2007; NCC, Vice President Business

Development and Group Controller 1995–2001. Chair of

Neste’s Audit Committee.

Holdings in Neste Corporation on 31 Dec 2021:

3,000 shares.

Sonat Burman-Olsson

(born in 1958)

M.Sc. (Economics), Executive

MBA, Strategic Management

Studies

Member of the Board since 2019

Independent member

– Member of the Board until

21 July 2021

Neste Annual Report 2021 | Corporate Governance Statement 2021

Holdings in Neste Corporation: own holdings and controlled entities.

Correction based on ownership existing prior to commencement of Board service.

122

GovernanceStrategy Sustainability Review by the Board of Directors Financials

Board Committees

The Board has established an Audit Committee,

which had five members until 21 July, 2021 when

Sonat Burman-Olsson resigned from the Board.

Since then, the Audit committee has had four mem-

bers. Board has also established a Personnel and

Remuneration Committee, which has four mem-

bers. A quorum exists when more than two mem-

bers, including the Chair, are present. All members

are elected from amongst the members of the Board

for a one-year term. The tasks and responsibilities of

each committee are defined in their Charters, which

are approved by the Board. The schedule and fre-

quency of committee meetings are determined by the

Chair and committee members. In addition, the Board

of Directors can appoint committees as needed, for

instance, for significant investment projects or other

special tasks. Committees meet at least twice a year.

Each committee reports regularly on its meetings to

the Board. Reports include a summary of the matters

addressed and the measures undertaken. Each com-

mittee conducts an annual self-evaluation of its per-

formance and submits a report to the Board.

Audit Committee

Under its Charter, the Audit Committee shall consist

of a minimum of three Board members that are inde-

pendent of the Company and its subsidiaries, and at

least one of whom shall be independent of Neste’s

major shareholders. Members are required to have

sufficient knowledge of accounting practices and the

preparation of financial statements and other qualifi-

cations that the Board deems necessary. The Audit

Committee is permitted to use external consultants

and experts when deemed necessary.

Duties

The responsibilities and duties of the Audit Committee

are defined in detail in the Charter approved by the

Board.

2021

Starting from 30 March 2021, the Audit Committee

comprised Marco Wirén (Chair), John Abbott,

Sonat Burman-Olsson, Nick Elmslie and Jari

Rosendal until 21 July 2021, when Sonat Burman-

Olsson resigned and the Audit Committee con-

tinued with four members. In 2021, the Audit

Committee convened seven times, and the atten-

dance rate was 96.6%. In addition to the tasks

specified in its Charter, including those relating to

external and internal audit, the Audit Committee

supervised and reviewed the Company’s finan-

cial, non-financial and sustainability reporting.

The Audit Committee also focused on risk and

compliance management, including in relation to

financial, market and geopolitical risks but also

certain other risk areas, such as IT systems, seg-

regation of duties and cyber security. Moreover,

the Audit Committee also monitored e.g. legal

and tax matters.

Personnel and Remuneration Committee

The Personnel and Remuneration Committee consists

of the Chair of the Board and at least two non-execu-

tive members of the Board.

Duties

The responsibilities and duties of the Personnel and

Remuneration Committee are defined in detail in the

Charter approved by the Board.

2021

Starting from 30 March 2021, the Personnel

and Remuneration Committee comprises

Matti Kähkönen (Chair), Martina Flöel, Jean-

Baptiste Renard and Johanna Söderström. The

Personnel and Remuneration Committee con-

vened seven times in 2021, and the attendance

rate was 100.0%. During 2021, the Personnel and

Remuneration Committee continued to focus on

reviewing and developing Neste’s total remuner-

ation and talent management and development

to support the Company’s operational and stra-

tegic targets. In line with duties coming from

its Charter, the Personnel and Remuneration

Committee also followed up the ongoing perfor-

mance period 2021 and outcomes of the reward-

ing based on 2020 results. To further ensure

the implementation of our strategy, interna-

tional growth and leadership in sustainability the

Committee led the special project on develop-

ing total compensation at Neste. In addition, the

Personnel and Remuneration Committee has fol-

lowed up the personnel engagement level based

on the Company’s Forward survey and Pulse sur-

vey results. Following up the implementation of

the strategic capability development programs

and the COVID-19 pandemic continuity plan were

also in focus during the year.

President and CEO

Neste’s President and CEO Peter Vanacker (b. 1966,

M.Sc., Chemical Engineering, Polymers Engineering),

manages the Company’s business operations in

accordance with the Finnish Companies Act and

instructions issued by the Board of Directors. The

President and CEO shall oversee the executive man-

agement of the company in accordance with instruc-

tions and orders given by the Board of Directors,

and is responsible for ensuring that the Company’s

accounts are in compliance with the law and that

its financial affairs have been arranged in a reliable

manner. The President and CEO is appointed by the

Board of Directors, which evaluates the performance

of the President and CEO annually and approves

his remuneration on the basis of a proposal by the

Personnel and Remuneration Committee. Information

on the remuneration of the President and CEO can

be found in the 2021 Remuneration report.

Neste Annual Report 2021 | Corporate Governance Statement 2021

123

GovernanceStrategy Sustainability Review by the Board of Directors Financials

Executive Committee

The ExCo assists the President and CEO in man-

aging the company and in the deployment of the

Company’s strategic and operational goals. Members

are appointed by the Board of Directors. The ExCo

meets regularly, on average once a month. Information

on the remuneration of the members of the ExCo can

be found at neste.com.

2021

During 2021 the ExCo comprised 12 members,

except for the period between 27 July 2021 and

30 November 2021 when the number of mem-

bers was 11. The ExCo had 12 meetings during

the year, and also met outside such meetings in

relation to specific themes. In addition to support-

ing the President and CEO in the fulfillment of his

general duties, the ExCo continued during 2021 to

work with the development and execution of the

company’s strategy aiming at global leadership

in renewable and circular solutions. In such con-

text, the strategic focus areas included, among

others, the continued scale-up of the company’s

Neste Annual Report 2021 | Corporate Governance Statement 2021

renewables businesses as well as the expansion

of the company’s renewables feedstock platform

and production capabilities, including the on-go-

ing Singapore expansion project and the project

for a possible next worldscale renewables refinery

in Rotterdam. Another focus area was the devel-

opment of the company’s innovation activities

through the business platforms and the chemical

recycling of waste plastic platform. The ExCo also

dealt with the company’s broadened sustainabil-

ity vision, including the new target for Scope 3

emissions and the company’s other climate com-

mitments. The restructuring of the Oil Products’

business initiated in 2020 and the Porvoo 2021

turnaround project were also closely followed by

the ExCo. In addition, a number of other mat-

ters were given special attention during the year,

including people and talent development, the

company’s M&A and investment activities, the

company’s operational excellence program, cash

flow development and cost saving efforts, IT and

cybersecurity matters as well as sustainability

and compliance matters. The company’s safety,

financial and operational performance were regu-

larly monitored by the ExCo.

124

GovernanceStrategy Sustainability Review by the Board of Directors Financials

Peter Vanacker

(born 1966)

President and CEO, Chair of the Executive Committee

M.Sc. (Chemical Engineering, Polymers Engineering)

President and CEO since 2018

President and CEO Peter Vanacker has on 9 December

2021 given notice of his resignation from the company.

He will leave his position at Neste at the latest in

June 2022.

Joined the company in 2018. Served as CEO and

Managing Director, CABB Group GmbH 2015–2018 as

well as CEO & Managing Director of Treofan 2012–2015.

Worked as Executive Vice President and Member of

the Executive Board of Bayer MaterialScience (today

Covestro AG) 2004–2012 with responsibility of the

global Polyurethanes business and as Chief Marketing

and Innovation Officer. Before that had several

directorial and managerial positions in Belgium, Brazil,

US and Germany at Bayer since 1990. Chair of the

Advisory Board for the European Institute for Industrial

Leadership. Member of the Supervisory Board of

Symrise AG.

Holdings in Neste Corporation on 31 Dec 2021:

40,512 shares.

Mercedes Alonso

(born 1966)

Executive Vice President,

Renewable Polymers and Chemicals

M.Sc. (Chem)

Member of the Executive Committee since 2019

Joined the company in 2019. Responsible for the

Renewable Polymers and Chemicals business unit.

Previously served as Marketing Director Advanced

Polymer Solutions Europe in LyondellBasell in 2019,

Managing Director Eng. Composites Europe 2016–

2019, and Global Director Corporate Marketing in A.

Schulman Inc. 2013–2016, as well as Global Business

Excellence Leader, Advanced Materials in Dow Chemical

Inc. Europe GmbH 2010–2013. Member of the Board of

The European Chemical Industry Council (Cefic) 2020–.

Holdings in Neste Corporation on 31 Dec 2021:

0 shares.

Members of the Executive Committee

Panu Kopra

(born 1972)

Executive Vice President,

Marketing & Services

BBA, MBA

Member of the Executive Committee since 2016

Joined the company in 1996. Responsible for the

Marketing & Services business unit. Previously served

as Vice President in Oil Retail Sales in Finland and Baltic

Rim 2014–2015, Vice President in Oil Retail Russia

and Baltic Rim 2010–2014, General Manager in St.

Petersburg Russia in 2009, Business Development

Manager in Renewable Products 2007–2008, Sales

Director in 2006, General Manager in Latvia 2003–2005

and in several other positions in the company.

Holdings in Neste Corporation on 31 Dec 2021:

11,355 shares.

Markku Korvenranta

(born 1966)

Executive Vice President, Oil Products

M.Sc. (Eng)

Member of the Executive Committee since

December 2021

Joined the company in December 2021. Responsible

for the Oil Products business unit. Served previously

as SVP, Group Portfolio Development at Marquard &

Bahls, in Germany, 2019–2021. EVP, Base Chemicals

& Member of Executive Board in Austria, 2010–2018.

Before that had several directorial and managerial roles

at Borealis in Austria, Finland, Denmark and Belgium

1994–2010. Has also served in various roles at Neste

Chemicals in Finland, 1990–1994. Member of the Board

of Directors of Nordic Electrofuel in Norway, 2020–.

Holdings in Neste Corporation on 31 Dec 2021:

0 shares.

Holdings in Neste Corporation: own holdings and controlled entities.

Neste Annual Report 2021 | Corporate Governance Statement 2021

125

GovernanceStrategy Sustainability Review by the Board of Directors Financials

Thorsten Lange

(born 1963)

Executive Vice President,

Renewable Aviation

M.Sc. (Banking and Auditing)

Member of the Executive Committee since 2020

Joined the company in 2020. Responsible for the

Renewable Aviation business unit. Previously served as

Head of Fuel Procurement (global) at Lufthansa Group

2001–2019. Has also served as Product Manager,

Automotive Lubricants at FUCHS DEA Schmierstoffe

GmbH&Co KG 1999–2001, Director Industry Lubricants

at DEA Mineraloel AG 1998–1999 as well as Marketing

Manager and Pricing Groundfuels at DEA Mineraloel AG

1992–1997. Member of the IATA Fuel Steering Group.

Previously as the Chairman of the IATA Commercial Fuel

Group and Member of the IATA Fuel Working Group

as well as a Member of the Star Alliance Fuel Advisory

Group.

Holdings in Neste Corporation on 31 Dec 2021:

0 shares.

Members of the Executive Committee

Matti Lehmus

(born 1974)

Executive Vice President,

Renewables Platform

M.Sc. (Eng.), eMBA

Member of the Executive Committee since 2009

Joined the company in 1997. Responsible for the

Renewables Platform. Previously responsible for the Oil

Products business area 2014–2019. Has also served

as Executive Vice President of the Oil Products and

Renewables business area 2011–2014, Executive Vice

President of the Oil Products business area 2009–2010,

Vice President of the Base Oils business in the Specialty

Products Division 2007–2009, Vice President of Oil

Refining Business Development in 2007 and Gasoline

Exports and Trading Manager 2004–2007 in the Oil

Refining Division. Member of the Board of the Chemical

Industry Federation of Finland 2019–2021. Member of

the National Emergency Supply Council 2018–.

Holdings in Neste Corporation on 31 Dec 2021:

17,511 shares.

Carl Nyberg

(born 1979)

Executive Vice President,

Renewable Road Transportation

M.Sc. (Economics and Business Administration)

Member of the Executive Committee since 2019

Joined the company in 2005. Responsible for the

Renewable Road Transportation business unit. Served

in various positions at Neste, most recently as Vice

President of Sales Scandinavia of the Renewable

Products business area 2016–2019, Vice President,

Supply, Oil Products at Neste Geneva 2014–2016 and

Trading Manager, Crude Oil 2013–2014. Managing

Director of Neste AB 2017–2019. Member of the Board

of eFuel Alliance e.V. 2021–.

Holdings in Neste Corporation on 31 Dec 2021:

5,837 shares.

Minna Aila

(born 1966)

Senior Vice President,

Sustainability and Corporate Affairs

LL.M.

Member of the Executive Committee since 2020

Joined the company in 2020. Senior Vice President,

Sustainability and Corporate Affairs. Served

previously as the EVP Marketing & Corporate Affairs

at Konecranes 2018–2020, VP, Corporate Affairs at

Nokia 2015–2018, SVP, Marketing, Communications

& Corporate Responsibility at Outotec 2012–2015

as well as Head of Communications, Federation

of Finnish Financial Services 2010–2012. Various

roles in global communications, investor relations,

corporate responsibility and government relations

at Elcoteq 2004–2009. Various roles at European

Commission 1992–2004. Chair of the EU and Trade

Policy Committee at the Confederation of Finnish

Industries EK. Vice Chair of the Business at OECD Trade

Committee. Member of the Board at Finland-China

Trade Association, National Defense Course Association

and Savonlinna Opera Festival.

Holdings in Neste Corporation on 31 Dec 2021:

1,930 shares.

Holdings in Neste Corporation: own holdings and controlled entities.

Neste Annual Report 2021 | Corporate Governance Statement 2021

126

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Members of the Executive Committee

Hannele Jakosuo-Jansson

(born 1966)

Senior Vice President,

Human Resources, HSSEQ and Procurement

M.Sc. (Eng.)

Member of the Executive Committee since 2006

Joined the company in 1990. Senior Vice President of

Human Resources, HSSEQ and Procurement. Previously

responsible for the Group’s Human Resources and

Safety corporate functions. Served as Vice President,

Human Resources at Oil Refining (2004–2005) and

Laboratory and Research Manager at the Technology

Center (1998–2004). Member of the Board of Directors

of Finnair Plc.

Holdings in Neste Corporation on 31 Dec 2021:

32,133 shares.

Lars Peter Lindfors

(born 1964)

Senior Vice President,

Innovation

Ph.D. (Tech.), MBA

Member of the Executive Committee since 2009

Joined the company in 2007. Senior Vice President

of Innovation. Previously responsible for Research &

Development, Investment Management, Information

Technology, Procurement, and Business Processes.

Served previously as Senior Vice President, Technology

and Strategy 2009–2012, Vice President for the

company’s Research and Technology unit 2007–2009,

Executive Vice President, Renewal and Development

and Member of the Executive Team, Perstorp Group

2001-2007, and prior to that at Neste as R&D Manager

and various other positions 1989–2001. Member of the

Board of the Fortum and Neste Foundation.

Holdings in Neste Corporation on 31 Dec 2021:

20,992 shares.

Jyrki Mäki-Kala

(born 1961)

Chief Financial Officer,

Strategy and IT

M.Sc. (Econ.)

Member of the Executive Committee since 2013

CFO Jyrki Mäki-Kala will retire during the spring 2022.

Joined the company in 2013. Chief Financial Officer

and responsible for the Group’s strategy, financial

management, investor relations, M&A, IT, business

processes and risk management. Served at Kemira

in various business and corporate financial positions

2005–2013 and as CFO 2008–2013. Previously worked

for Nokia Chemicals/Finnish Chemicals in various

finance and business positions 1988–2005. Member

of the Supervisory Board of Ilmarinen Mutual Pension

Insurance Company. Member of the Board of Directors

and Audit Committee of Anora Group Plc.

Holdings in Neste Corporation on 31 Dec 2021:

28,800 shares.

Christian Ståhlberg

(born 1974)

General Counsel

LL.M.

Member of the Executive Committee since 2017

Joined the company in 2017. Responsible for the

Group’s legal affairs and compliance. Secretary to the

Executive Committee, the Board of Directors, the Audit

Committee, the Shareholders’ Nomination Board and

to the Stakeholder Advisory Panel. Served previously

as General Counsel of Rettig Group Ltd 2015–2017,

Director, Legal in Pohjola Bank plc 2011–2014, Senior

Legal Counsel in Neste Oil Corporation 2007–2011 and

Senior Associate in Roschier Attorneys Ltd 1998–2007.

Holdings in Neste Corporation on 31 Dec 2021:

3,297 shares.

Marko Pekkola

(born 1969)

M.Sc. (Energy Technology)

Executive Vice President,

Oil Products until July 2021.

Member of the Executive

Committee from 2019 until

27 July 2021.

- decided to continue his career

outside Neste in July 2021.

Martti Ala-Härkönen

(born 1965)

Dr.Sc. (Econ.), Lic.Sc. (Tech.)

- has been appointed as Chief

Financial Officer (CFO), Strategy

and IT and member of the Neste

Executive Committee and will take

up the position on 8 May 2022, at

the latest.

Holdings in Neste Corporation: own holdings and controlled entities.

Neste Annual Report 2021 | Corporate Governance Statement 2021

127

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Internal Audit

Neste’s Internal Audit provides independent and

objective assurance and advisory services designed

to add value and improve the operations of Neste. As

a component in the corporate governance process,

it supports the organization by bringing a systematic

approach to evaluating and improving the effective-

ness of risk management and control and governance

processes.

Internal Audit’s activities encompass objective

examinations for the purpose of providing assess-

ments to the Neste’s Board Audit Committee and

Company Auditor

The AGM elects the Auditor annually. The Auditor’s

term of office ends at the end of the next AGM follow-

ing election.

The Auditor is responsible for auditing the

Company’s accounts, its financial statements, and

Neste’s administration. The Auditor’s Report covers

the Consolidated Financial Statements and the Parent

Company’s Financial Statements, and can be found

in the Financial Statements section of the Annual

Report.

2021

The 2021 AGM elected KPMG Oy Ab as the

Company’s new auditor, and Authorized Public

Accountant Mrs. Virpi Halonen acted as the audi-

tor with principal responsibility.

The statutory audit fees in 2021 were EUR 1.3

million, and other fees charged amounted to EUR

1 million.

management on the adequacy and effectiveness of

governance, risk management and control processes

at Neste. The scope of Internal Audit assessments

include, among others, evaluating that risk man-

agement practices are in place, significant risks are

appropriately identified and managed, key policies

and guidelines exist and are documented and effec-

tively implemented, organizational structures and gov-

ernance models enable efficient decision making and

steering system, roles and responsibilities are clear,

and results of operations and programs are consis-

tent with established goals and objectives.

Internal Audit work is carried out based on an annual

Internal Audit Plan. Neste’s strategic objectives, key

projects and identified risks are key elements in the

audit planning process. The Vice President of Internal

Audit reports periodically to the senior management

and the Board Audit Committee Internal Audit’s activ-

ities relative to the annual plan, including audit recom-

mendations and action plans established by organi-

zations aiming for the continuous improvement and

mitigation of risks.

Internal Audit is also responsible for conducting

special assignments on behalf of management or

the Board Audit Committee. As a member of Neste’s

Investigation Group, the Vice President of Internal

Audit participates in the investigation of suspected

misconduct and breaches of Neste’s policies, princi-

ples and applicable laws and regulations. To assure an

effective, efficient and value adding process, Internal

Audit cooperates actively with other Neste’s assur-

ance service functions (Corporate Risk Management,

Internal Control and Compliance) and top manage-

ment and shares best practices from a process and

governance point of view.

Internal Audit follows the mandatory elements of The

Institute of Internal Auditors’ International Professional

Practices Framework, including the Professional

Practice of Internal Auditing. The Internal Audit reports

directly to the Board of Directors’ Audit Committee

and administratively to the President and CEO. The

Board of Directors is responsible for approving the

Internal Audit Charter and the annual Internal Audit

Plan. Internal Audit Charter includes the determina-

tion regarding Internal Audit position, operational

model, process and reporting lines. Internal Audit has

at least annually a non-executive meeting with the

Audit Committee members and the Audit Committee

Chair. The Vice President of Internal Audit is respon-

sible for the internal audit activities specified in the

Internal Audit Charter.

2021

Internal Audit performed internal audits set out in

the Internal Audit Plan 2021 and special assign-

ments assigned by the senior management and

the Board Audit Committee. The Internal Audit

function continued to strengthen cooperation with

other Neste assurance functions such as compli-

ance, risk management and internal controls with

an aim to integrate activities and reporting to the

management.

Neste’s key business processes, projects and

risk areas were in focus during the year 2021,

including for example trade sanction compliance

process, excise tax management process and

Neste Green Finance Framework.

Neste Annual Report 2021 | Corporate Governance Statement 2021

128

GovernanceStrategy Sustainability Review by the Board of Directors Financials

Compliance function

Neste is committed to high ethical standards and con-

ducts its business and operates in compliance with

applicable laws, regulations and generally accepted

practices for good corporate governance. Neste’s

Code of Conduct, which was renewed in 2021, sets

the framework for Neste’s global business operations,

and establishes the ethical practices to guide Neste

employees in their day-to-day business activities and

decisions. Neste also requires suppliers and other

business partners to comply with applicable laws

and expects them to follow equivalent ethical busi-

ness standards as stated in the Code of Conduct, as

further described in our Supplier Code of Conduct.

More info on Neste’s Code of Conduct in Neste’s

Sustainability Report and in Neste’s external web

pages.

The purpose of Neste’s Compliance function is to

develop, establish, facilitate and oversee compliance

procedures and programs aimed at ensuring that

Neste’s global organisations have effective systems

and processes in place for identifying, preventing,

detecting and correcting non-compliance with appli-

cable laws, regulations and Neste’s internal rules.

The function supports Neste’s management in their

responsibility for overall compliance risk manage-

ment, as well as Neste’s organizational unit manage-

ment in their responsibilities to identify and manage

compliance risks related to their operations.

The compliance function works in close collabora-

tion with Neste’s business units, functions and other

internal assurance organizations, in particular the

Risk Management, Internal Control and Internal Audit

functions. The compliance function is headed by

the Chief Compliance Officer (CCO), who reports to

Neste’s General Counsel. The CCO reports on com-

pliance activities on a regular basis to the ExCo and

to the Board of Directors’ Audit Committee. Neste

also has an Ethics and Compliance Committee, which

oversees and steers the management of the ethics

and compliance program in Neste. Reports on sus-

pected misconducts received via the company’s

externally operated and other reporting channels are

investigated in accordance with applicable laws and

Neste’s internal Misconduct Investigation Standard.

In addition to other reporting channels, Neste has

also an externally operated misconduct reporting sys-

tem, Ethics Online, available to all Neste’s internal and

external stakeholders, including various actors in its

supply chains. Ethics Online serves as a grievance

mechanism and enables Neste’s stakeholders to raise

concerns related to alleged misconduct in Neste’s

practices. Neste’s Investigation Group is responsi-

ble for evaluating and investigating such reported

cases. Neste has a non-retaliation policy for con-

cerns reported in good faith. Neste’s main principles

and policy followed in internal misconduct investiga-

tions is described in the company internal Misconduct

Investigation Standard. The possible irregularities or

misconducts are reported regularly to the Board of

Directors’ Audit Committee.

Insider administration procedures

Neste complies with the EU Market Abuse Regulation

(596/2014), including related regulation, as well as

Nasdaq Helsinki Ltd’s Insider Guideline as a minimum

standard on insider matters. In addition, the Board

of Directors has approved the Company’s own

Guidelines for Insiders.

The Company’s General Counsel is responsible for

the coordination and supervision of insider matters,

along with the insider register manager, the insider

communication manager and individuals responsible

as heads of project-specific registers. All the above

individuals have their own deputies. In addition, the

head of each organizational unit is responsible for

supervising insider matters within his or her organi-

zation. The Company arranges training related to the

insider guidelines.

The creation and maintenance of a project-specific

insider register is the responsibility of the head of such

insider register.

The Company has defined, as persons discharg-

ing managerial responsibilities, the members of the

Board of Directors and its secretary, the President

and CEO, as well as the members of the ExCo and its

secretary. These managerial persons and their closely

associated persons must report their own transac-

tions conducted with the Company’s financial instru-

ments or financial derivatives to the Company and

the Financial Supervisory Authority without delay, and

no more than three business days of completing the

business transaction. Reports to the Company and

the Financial Supervisory Authority can be made by

following the instructions on neste.com/trading.

The Company has also named certain other per-

sons as core persons as they have better or more

information about the Company than the market.

Neste Annual Report 2021 | Corporate Governance Statement 2021

These individuals are typically those who prepare the

Company’s Interim Reports and Financial Statements,

persons responsible for the Company’s finances,

financial reporting or communication, or persons who

have access to said information, as well as certain

individuals in executive positions.

Persons discharging managerial responsibilities and

core persons may not trade with or conduct business

with the Company’s financial instruments for them-

selves or a third party, directly or indirectly during the

period from the closing date of an interim or annual

accounting period to the date of publication of the

interim report or financial statements for that period.

The minimum period concerned is always a minimum

period of 30 days prior to the date of publication of

the interim report or the financial statements, includ-

ing the date of publication (’closed window’).

The Company also maintains a project- or event-spe-

cific list of insiders for all individuals that have access

to insider information and that are employed by the

Company or otherwise perform tasks that provide

them access to insider information. Individuals who

participate in the development and preparation of proj-

ects or events that involve insider information, such

as mergers and acquisitions, are considered project-

or event-specific insiders. Project-specific insiders

may not trade or conduct other business using the

Company’s financial instruments during the project.

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

Main features of internal control and risk

management systems pertaining to the

nancial reporting process

Objectives

The objective of internal control over financial report-

ing at Neste is to provide a reasonable assurance with

regard to the financial reporting and the preparation of

financial statements in accordance with the applicable

laws and regulations and the internal requirements.

The system of internal controls at Neste Corporation

is based on the framework issued by the Committee

of Sponsoring Organizations of the Treadway

Commission (COSO).

Management sets its level of risk appetite by

defining the Group-level control objectives. Control

Objectives set the Group’s minimum control require-

ments for the control activities in financial and busi-

ness processes in order to mitigate the underlying key

risks and establish the desired level of assurance for

correct financial reporting, adherence with the regu-

lations and policies, and prevention of fraud. Group-

level control objectives are endorsed by the Executive

Committee and Audit Committee and reflect the top

management guidelines, auditor reports, policies and

regulations Neste complies with, as well as Neste

Internal Control Principle and control requirements

defined in Controls over Financial Reporting standard

(COFR).

Control environment

Under the Finnish Companies Act, the Board of

Directors is responsible for ensuring that there is

adequate control over the Company’s accounts and

finances. Responsibility for arranging this control is

delegated to the President and CEO, who is required

to ensure that the Company’s accounts are in compli-

ance with the law and that its financial management

has been arranged in a reliable manner.

The internal control at Neste is based on the cor-

porate structure whereby the operations are orga-

nized into organizational units. The heads of business

units and finance function are responsible for estab-

lishing and maintaining appropriate, up-to-date, effec-

tive and adequate controls over financial reporting.

Operational management owns the risks and controls

and is responsible that controls and deficiency related

corrective actions are implemented.

In order to provide additional assurance, Neste

has established an Internal Control function, which

is responsible for coordinating the Group-wide inter-

nal control development and monitoring. The Head of

Internal Control reports on its activities on a regular

basis to the Executive Committee and to the Board of

Directors’ Audit Committee which monitors the effec-

tiveness of the Company’s Internal Control. Internal

Control follows up and verifies that actions are taken

by the respective operational management.

Neste has prepared and established its own

Internal Control Principle in accordance with the

COSO framework. Internal Control Principle empha-

sizes the importance of internal controls and clarify

the responsibilities of the Three Lines for establish-

ing effective controls in business processes. Neste’s

values and management system containing the for-

mal Code of Conduct are the foundation of the con-

trol environment. The President and CEO and corpo-

rate management are responsible for emphasizing the

importance of ethical principles and correct financial

reporting.

Risk assessment

As a prerequisite for risk assessment, the organiza-

tion’s objectives need to be established. With respect

to financial reporting, the general objective is to have

reliable reporting and ensure that transactions are

recorded and reported completely and correctly. The

assessment of risk includes risks related to fraud.

Additional information on risk management princi-

ples is available in the Risk Management section of

the Annual Report.

Control activities

Neste control activities include instructions, guidelines

and procedures to ensure that the actions identified

by management to address the relevant risks are car-

ried out effectively. The most important guidelines

related to financial reporting systems and practices

are documented in Neste Internal Control Principle,

Access Risk Management Principles, the Controls

over Financial Reporting standard (COFR), Process

charts, month end workflows and detailed Finance

Instructions.

Key control activities are documented in a global

control catalog covering each business or financial

process. Group-level policies and guidelines are doc-

umented in the Neste Management System.

Communication

Neste corporate-level communication practices sup-

port the completeness and correctness of financial

reporting. Neste personnel have access to adequate

information and communication regarding account-

ing and reporting principles and guidelines. The main

means of communicating the relevant matters for

appropriate financial reporting consist of internal con-

trol training, detailed Finance Instructions containing

accounting principles and guidelines for forecasting

and reporting, info sessions, on-the-job training, pro-

cess walk-throughs, and postings on internal chan-

nels and pages.

Neste business units prepare regular financial and

management reports for the management review,

including analysis and comments of financial perfor

mance. The Executive Committee and the Board of

Directors receive financial reports monthly. Interim

Reports are reviewed in Audit Committee meetings,

and thereafter by the Board of Directors.

Monitoring

Management regularly monitors the effectiveness of

the controls, as a control that was initially effective

can become ineffective due to changes in the oper-

ating environment. Changes can also take place in

the controls due to changed processes, IT systems or

personnel.

The Board of Directors and the Audit Committee

regularly review the financial performance including

reviewing whether there is an adequate level of pro-

cess to evaluate the risks and effectiveness of controls

related to the financial reporting process at all levels

of the organization. The Audit Committee oversees

the Company’s finances, financial reporting, risk man-

agement, as well as the Internal Control and Internal

Audit functions, as part of the Company’s corporate

governance. Internal control deficiencies are commu-

nicated in a timely manner to those parties responsi-

ble for taking corrective action, and to management

and the Board’s Audit Committee as appropriate.

Neste Annual Report 2021 | Corporate Governance Statement 2021

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

Corporate Internal Audit assesses annually the

operational model and practices of internal control

over Neste’s financial reporting as part of business-

and process-level audits.

Training and communication

Clarify Control Requirements and tools. Support operational management and

process owners in deploying controls in the organization. Perform an active role in

communication with both personnel and stakeholders on important updates.

Remediation

Internal Control follows up and supports

the implementation of management

actions identified by its own

testing or auditor findings

and that relate to

strengthening the

control environment.

Scope

Defined based on Regulatory

environment, Strategic Objectives,

Assessment of Risks, Audit Committee

priorities, change programs and

Remediation actions.

Monitoring,

testing and

reporting

Internal Control

employs tools, such

as RPA, Celonis and

SAP GRC, and it conducts

separate tests to assess the

performance of the internal

controls and detect gaps

and areas for improvement.

Findings are reported to

relevant stakeholders.

Control development

In partnership with business

and process owners, define

and enhance the controls.

Increase control automation

and monitoring capabilities.

Keep up-to-date control

catalogs. Create and update

requirements and guidelines.

Internal

Control activity

Focus on controls over nancial

reporting and prevention of fraud

and nancial losses

Building effective Internal Control is an ongoing process driven by strategy and control objectives

2021

In 2021, the internal control activity focus has been

on three key areas:

First, establishing a renewal business remedia-

tion program under direct supervision of the renew-

able business EVPs and with the aim at addressing

control improvements that not only mitigate risks,

but also bring advancement in business processes.

Concrete improvements have been recorded in pro-

cess lead times and networking capital.

The second focus area has been on strengthen-

ing the control monitoring and control automation

technology. Neste has purchased the licenses for

GRC Process Control solution and the first phase

of implementation project is concluded in 2021.

The first phase implementation brings capabilities

for worldwide control performance and monitor-

ing. The second phase, scheduled to start in spring

2022, will bring automation capabilities for continu-

ous control monitoring. Significant monetary invest-

ment is in the financial plans for the second phase.

The third focus area has been on achieving a step

improvement in the Segregation of Duties related

controls. A new round of risk review, role design

and mitigating processes, was implemented inside

the S/4 Hana upgrade program and it is expected

to yield improved KPIs by S/4 go live, early 2022.

Key to success in developing the control envi-

ronment has been the ongoing close cooperation

between the Internal Control function and busi-

ness owners, through a network of process own-

ers and risk owners established at all levels of the

organization.

The tone at the top by the senior management

has also encompassed topics on implementing the

internal controls as a component of the successful

execution of the strategy and business objectives.

The Executive Committee is monitoring closely the

status of internal controls company-wide.

Deep dives and cooperation with the external

auditor, KPMG, have been performed and anal-

ysis results are being followed up by the Audit

Committee.

Neste Annual Report 2021 | Corporate Governance Statement 2021

The Internal Control function also conducts sep-

arate tests to assess the adequacy of internal con-

trols in business processes, recommends corrections

and reports the gaps to the respective management

teams.

131

GovernanceStrategy Sustainability Review by the Board of Directors Financials

Performance Management Process

Neste’s Performance Management Process plays an

essential role in helping the Group attain its strategic

goals and reinforcing its performance-driven mind-

set. Neste has taken a step change in developing its

performance leadership towards a more agile model

supporting daily operations.

Performance management comprises daily leader-

ship, through which individuals, teams, units and the

Company can achieve selected strategic priorities and

develop organizational capability. Performance lead-

ership is used to ensure that everyone knows the val-

ues and objectives of the Company, and their short-

and long-term objectives, and what kind of com-

petence is needed and developed to achieve these

objectives.

Individual and team objectives are based on

Neste’s strategy and way of working. There is a clear

link between wellbeing at work and good leadership

performance.

The key elements in the Neste daily performance

leadership approach are:

• setting challenging objectives and following them

through

• supporting the achievement of objectives with

up-to-date feedback

• evaluating one’s own performance and results

• developing ways of working and taking

responsibility for one’s own competence

development

• holding regular personal development discussions

and check-in discussions that support day-to-day

work.

From a financial outlook and reporting point of view,

the Neste Performance Management Process con-

sists of long-term financial projections based on the

strategy and Performance Planning covering the mid-

term (3 years) outlook. During the year, performance

is evaluated in weekly Management Reporting, the

monthly Business Review, and the bi-annual Common

Functions Review.

Financials and KPIs related information is evaluated

against the strategic goals and business plans, and

required actions are steered and followed throughout

the year.

Leading performance in daily work

Target setting discussion

One-on-one

uraging

Forward discussionCaring and intervening

am members – current topics

Neste Annual Report 2021 | Corporate Governance Statement 2021

Mission

Vision

Strategy

Value

creation

programs

Continuous development, rewarding

Value creation

Results Wellbeing

at work

Renewal

Performance Management Process

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

Risk management

Risk management objectives and scope

Neste recognizes risk management as an integral part

of sound management practice and an essential ele-

ment of good corporate governance. Risk as an ele-

ment of uncertainty (opportunity or threat) is an inevi-

table component of running the business. Systematic

risk management practices are the means to ensure

that Neste is successful in achieving the set strategic

goals and business objectives and is able to main-

tain continuous operations in a changing business

environment.

Neste’s risk management practices can be charac-

terized by the following statements:

• The company emphasizes risk aware culture and

proactive management of risks.

• Risk management is a continuous process that is

subject to improvement to reflect changes in the

external and internal environment.

• The purpose of risk management is to analyze

and manage all opportunities and threats that

the company may encounter. By exploiting

opportunities and reducing threats, Neste gains a

competitive advantage.

• Risks are managed as an integrated part of

planning, decision making, and operational

processes with a defined structure of roles and

responsibilities.

• Sufficiency of risk treatment actions and controls

is monitored systematically.

Risk management framework and principles

Framework and principles for risk management have

been defined in the Neste Corporate risk manage-

ment policy, which has been approved by the Board

of Directors. The policy is supplemented by risk man-

agement principles, guidelines, and instructions for

specific risk disciplines.

Neste’s risk management framework and processes

are aligned with the internationally recognized best

practices for risk management (COSO: Enterprise

Risk Management – Integrating with Strategy and

Performance; and ISO 31000:2009 standard).

In Neste’s risk model, risks are classified into exter-

nal, strategic, and preventable risks that are more

operational in nature.

• External risks are exposures that cannot be fully

influenced or controlled by Neste. The main risk

classes are changes in the external environment

and risks in the extended enterprise.

• Strategic risks relate to strategic choices,

strategy implementation, and risks in the planning

and execution of major projects (e.g. refinery

turnarounds). Strategic risks are not inherently

undesirable as they typically contain both upside

and downside risk potential.

• The third category of risks, preventable risks,

consists of various risk classes that arise within

the organization and are mostly controllable. In

general, Neste does not gain strategic benefits

from taking these risks.

Neste Annual Report 2021 | Risk management

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

President and CEO and

Executive Committee

Risk champions

1st Line of Defense

Ownership for risk taking

and risk treatment

2nd Line of Defense

Risk management support, facilitation,

and consultation

Ethics and Compliance

Committee, CFO

Internal

Control

Risk coordination team,

CRO

Risk

management

Internal Audit

3rd Line of Defense

Independent assurance

Risk governance

Business Units

Renewables Platform

Functions

Innovation

NES

Risk governance

The Neste Board of Directors has the ultimate

accountability for risk oversight. Among other duties

the Board is in this role responsible for setting the

Group’s risk appetite and for approving the Risk

Management Policy.

The practical implementation, development and

monitoring of risk management processes is based

on the three lines of defense model. The model distin-

guishes between:

1st Line of Defense

The first line of defense is responsible for setting the

objectives, managing day-to-day performance and

reinforcing risk responses in order to achieve the set

targets. At Neste, the first-line actors include Business

Units and Functions in their first-line roles. As a part

of the first line of defense, Neste’s President and CEO

and the Neste Executive Committee have the over-

all accountability for appropriate risk management

practices.

In practice, Business Units and Functions own and

manage risks with the help of a dedicated network

of risk champions and coordinators. The role of the

risk champions/coordinators is to represent different

risk disciplines and to ensure that risk discussions are

embedded in everyday management routines.

2nd Line of Defense

The role of the actors in the second line of defense

is to provide guidance, support, facilitation, and con-

sultation for risk management. The second line of

Neste Annual Report 2021 | Risk management

Board of Directors

Audit Committee

Compliance

defense needs to have some degree of independence

from the first line of defense in order to be able to

challenge the first line in managing performance and

making risk-informed decisions.

At Neste, the second line of defense includes

Functions in their second-line roles and specialist

teams (corporate risk management, compliance and

internal controls). In addition, Neste has established

a separate Ethics and Compliance Committee that

aims at increasing management oversight of compli-

ance- and ethics-related issues within the Group. The

Committee also ascertains the adequacy of mitigation

actions in higher risk compliance areas.

The corporate risk management team has the over-

all responsibility to confirm that risk management

activities are carried out consistently throughout Neste

Group and all risk classes. Corporate risk manage-

ment also drives the overall development of risk man-

agement practices and tools. The team is supported

by the network of risk champions and coordinators.

3rd Line of Defense

Internal Audit as an independent team evaluates the

effectiveness and efficiency of the corporate-level risk

governance model and related risk management pro-

cesses, including the effectiveness of internal controls

and other risk treatment actions in the scope of each

audit. Internal Audit also provides recommendations

for improvement areas.

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

Risk reporting

Risk reporting aims at the transparent, consistent, and

comprehensive communication of risk status in differ-

ent areas. As a result of risk reporting, the Company’s

risk profile can be compared with the defined risk

appetite and it can be concluded whether additional

risk treatment actions are needed.

Communication regarding the most important risk

issues takes place along the strategic planning and

performance management cycle.

Formal risk reporting is directed to the Business

Unit and Function management teams, the Neste

Executive Committee, the Audit Committee, and the

Board of Directors. The Corporate risk management

team is responsible for aggregating risk information for

reporting to different internal and external audiences.

Risks relating to Neste’s business

In the pursuit of its objectives and targets, Neste is

exposed to different risk factors that stem from the

external environment, internal decision making, oper-

ating processes, and systems in use. The most signif-

icant risk factors relate to the areas mentioned below.

Any one of the risks, either singly or in the aggregate,

may have a material adverse effect on Neste’s busi-

ness, financial condition, operating results, and future

prospects.

External risks – Economic conditions,

Geopolitics, Pandemic

Overall market volatility, geopolitical tensions and the

risk of an economic slowdown may have an adverse

effect on the market conditions for the supply of feed-

stock and sales of refined products. During 2021,

the global economic and financial markets started

to recover from the heavy impact brought by the

COVID-19 pandemic. The continuing COVID-19 pan-

demic could bring risks to oil product demand, in the

form of slow economic recovery and reintroduction of

local virus containment measures (“lockdowns”) that

started to be implemented in many markets to some

extent towards the end of 2021. This, in combination

with ample global refining capacity could continue to

pressure refining margins globally.

The OPEC+ plan to taper its crude production cuts

continues until later 2022. Any additional supply cuts

from the OPEC+ as well as continued sanctions on

oil exports from Iran and Venezuela, could narrow the

discount of Urals relative to Brent crude oil, with neg-

ative impact on Neste’s business.

Natural gas prices reached record highs in Europe

in 2021 due to limited Russian supplies, and led to

rising utility costs at Neste’s refinery as well as an

increase in EU ETS allowance prices. Further increase

in natural gas prices, for instance through a particu-

larly cold winter, could continue to negatively impact

Neste’s business.

Renewable fuels policies in the EU continued to take

concrete shape as the transposition of the Renewable

Energy Directive II into national legislation has been

successfully concluded in a number of Member

States. In the United States, existing state-level pol-

icies like California’s LCFS program and US feder-

al-level Renewable Fuel Standard in combination with

the Blenders Tax Credit adopted through 2022, made

for a fairly stable regulatory environment for biofuels.

External risks – Environment

Neste’s strategic ambition is to be the global leader

in renewable and circular solutions. Growing pressure

to combat climate change and reduce greenhouse

gas emissions is therefore primarily a positive driver

for Neste’s business. However, political and socie-

tal focus on the low-carbon transition and the energy

sector’s carbon footprint also create risks. Indirect

economic and political consequences from climate

change may contribute to the general uncertainty in

the business environment and hence have an adverse

effect on Neste’s business. In addition, changes in

carbon emission trading schemes or similar initiatives

on EU-, US- or individual Member State-level may

have a significant effect on Neste’s business.

External risks – Laws and regulation

Changing regulation presents both an opportunity and

threat to Neste’s business. Neste’s refining operations

and products are subject to extensive regulation (incl.

environmental, health & safety, sustainability). General

regulatory requirements in areas like commodity trad-

ing and data protection have also contributed to the

formalization of operating procedures.

Neste’s business units mainly benefit from increased

support for biofuels and renewable fuels (for exam-

ple requirements that relate to renewable content in

diesel and gasoline). However, changes in regula-

tion especially in the European Union and the United

States also create uncertainties as these may influ-

ence the speed at which the demand for renewable

products develops, and new raw materials sources

are brought into use. For the renewable products, a

significant source of uncertainty is fragmented regu-

lation around the acceptability and use of waste and

residue feedstock.

Risks relating to strategic choices

and strategy implementation

The majority of strategic risks relate to the viability of

strategic choices and risks in strategy implementation.

Opportunities and threats may arise from changes in

the competitive landscape or from internal decision

making and use of technology.

Neste’s competitive position in the selected key

markets is good. Neste’s proprietary NEXBTL produc-

tion technology is a proven technology for produc-

ing high-quality diesel from renewable raw materials.

However, there is no assurance that this competitive

position will continue as new players enter the mar-

ket, current competitors develop their technologies

or customer preferences for clean mobility change. In

addition to the development of alternative feedstocks

and production technologies for liquid fuels, the evo-

lution of engine technologies and introduction of alter-

native powertrains can be faster than expected.

Staying ahead of competition requires continuous

improvement, the ability to challenge current business

models and a strong focus on innovations such as

new production technology and feedstock platforms.

In addition, Neste’s products and services must con-

tinuously meet customer requirements relating e.g. to

product quality and sustainability. Evolving customer

requirements together with more complex sourc-

ing and logistics networks and production methods

increase the exposure to quality risks that need to

be managed well in order to maintain the high-qual-

ity brand image. As risk mitigation, Neste has imple-

mented systematic quality management measures

both in its own operations and in partner networks.

Neste Annual Report 2021 | Risk management

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

Strong governance practices and the continued

contributions of Neste’s senior management, person-

nel and partners are vital for the company’s success.

Due to fierce competition for talent, there is a risk

that Neste may not be able to recruit and retain the

highly skilled employees that are needed for strategy

deployment and successful operations in the future.

There is also a risk that Neste will not be able to build

and manage strategic partnerships that contribute to

future success.

Project risks

Successful projects play a key role in Neste’s strat-

egy deployment, operational development, and the

digitalization of processes. Significant delays in proj-

ect planning or execution may reduce operational effi-

ciency or impair Neste’s ability to secure its competi-

tive position.

Business continuity risks

Neste’s business is dependent to a significant extent

on its refineries in Finland (Porvoo), Singapore and the

Netherlands (Rotterdam). In addition to the planned

maintenance turnarounds, for example disruptions in

the supply of utilities or breakdown of critical machin-

ery may cause unexpected shutdowns that affect

Neste’s ability to fulfill demand for end products.

The vessels chartered to Neste or owned by Neste

are subject to inherent risks like maritime disaster,

damage to the environment and loss of or damage to

cargo and property. Such events can be caused by

multiple factors, such as adverse weather conditions

or mechanical failures.

Neste has insurance in place to reduce the financial

impact of property damage, business interruption,

and maritime disasters. However, insurance does not

cover all potential losses and Neste could therefore

be seriously harmed by operational catastrophes or

deliberate sabotage.

The extent of the disrupting impact that COVID-

19 has had on the commodity and financial markets

has challenged many industries and companies. In

the oil & energy industry the pandemic has caused a

global demand shock, increased the uncertainty with

regard to the climate policies and targets and empha-

sized the need for Company-level business continu-

ity arrangements. The economic and social impacts

of the pandemic have also affected Neste’s business

environment and operating practices. Therefore, there

has been an increased focus on business continuity

both at Neste’s own offices and sites and in the cus-

tomer interface and supply chains.

Market risks

Commodity markets have been and are expected to

continue to be very volatile. General market turbu-

lence may result in unexpected swings in the market

prices of crude oil and other raw materials. It is also

expected that the high demand for different waste &

residue feedstock streams continues as competitors

are increasing their production capacity for renewable

products.

The financial results of Neste are primarily affected

by the price differential, or margin, between refined

petroleum and renewable product prices; and the

prices for crude oil, different vegetable oils and other

feedstock used. Historically, refining margins have

been volatile and they are likely to continue to be so in

the future. The main factors that may affect the refin-

ing margins include:

• Changes in aggregate demand for and supply of

raw materials and products.

• Changes in demand for and supply of specific raw

materials and products.

• Raw materials and product price fluctuations.

• Evolution of worldwide refining capacity, and in

particular development of refining capacity that

relates to petroleum and renewable products

similar to Neste.

As a part of risk management, Neste uses derivative

instruments to protect its position against fluctuations

in commodity prices.

Neste is exposed to foreign exchange risks because

most of the sales are denominated in US dollars,

whereas operating expenses (except the purchase of

raw materials) are recorded in euros. Neste limits the

uncertainties relating to changes in foreign exchange

rates by hedging its currency risks in contracted and

forecasted cash flows and balance sheet exposures.

More information on market risks can be found

in the Financial Statements Note 3 section of the

Annual Report.

Credit risk

Credit and counterparty risk arises from sales, hedg-

ing, and trading transactions, as well as cash invest-

ments. The risk is linked to the potential failure of a

counterparty to meet its contractual payment obliga-

tions, and is therefore dependent on the creditwor-

thiness of the counterparty and the size of the expo-

sure concerned. In order to manage the risk, Neste

has implemented systematic controls for counterparty

screening and monitoring.

Sustainability risks

The most significant sustainability risks that relate to

Neste’s own operations or to the extended enterprise

have been reported in line with the requirements of

the Non-Financial Reporting Directive as part of the

review by the Board of Directors.

ICT and cyber risks

Digitalization and emerging technologies (for exam-

ple the use of artificial intelligence and robotics) offer

opportunities to automate dangerous or error-prone

tasks and increase the efficiency of operations. At

the same time, the increasing sophistication of cyber

threats and generally rising frequency of attacks tar-

geted at oil & gas companies is also a concern for

Neste. Cyber risks multiply the impact of other risks

and as individual risks could also have a major nega-

tive impact on Neste’s reputation or continuity of busi-

ness operations.

The reliability of the key IT systems and partner-

ships is essential for continuous business operations.

Prolonged disruption in the availability of the key sys-

tems, data or interfaces could limit Neste’s ability to

conduct its business operations in a profitable, effi-

cient and controlled manner.

Risk management focus in 2021

In 2021, special risk management initiatives focused

on risk support for major investments, M&A transac-

tions and business model changes.

Neste Annual Report 2021 | Risk management

136

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Dear Shareholder,

On behalf of Neste’s Personnel and Remuneration

Committee (the ‘Committee’) I am pleased to present

our 2021 Remuneration Report outlining the remuner-

ation of the members of the Board of Directors and

the President and CEO (the CEO) for the financial year

of 2021 and describing how the Remuneration Policy

approved by the 2020 Annual General Meeting of

Shareholders (AGM) has been implemented in prac-

tice. This Remuneration Report has been prepared in

accordance with the Finnish Corporate Governance

Code 2020, and the requirements set forth in the

Finnish Limited Liability Companies Act, the Finnish

Securities Markets Act, and the Decree of the Ministry

of Finance. The report will be presented at the 2022

AGM of Neste for an advisory shareholder vote.

Our approach to remuneration

and link to sustainability

Our purpose as a Personnel and Remuneration

Committee is to ensure that remuneration programs

at Neste reflect our longstanding remuneration prin-

ciples of supporting the business strategy, paying for

performance, encouraging value-based behavior and

individual accountability, and paying competitively

and fairly.

Based on our remuneration principles we have

designed our remuneration policies, practices and

processes to ensure that we are able to compete and

retain the best workforce, talents and senior man-

agement in the diverse markets in which we operate.

We believe that our performance-based remuneration

programs together with selecting the right individuals

for key positions, versatile career progression, pro-

active succession planning and appropriate market

Neste Personnel and

Remuneration Committee

Matti Kähkönen

Chair of the Personnel

and Remuneration Committee

Committee members during 2021:

• Martina Flöel

• Jean-Baptiste Renard

• Johanna Söderström

competitive rewarding are key to our success also in

the future.

Neste’s safety culture has been developed system-

atically for several years and the measures related

to the improvement in both process and personnel

safety constitute 20% of the short-term incentives’

measures. Similarly, Neste’s commitment to our stra-

tegic sustainability targets is also reflected in our

long-term incentives plan where 20% of measures are

based on our combined Greenhouse Gas impact.

Our remuneration structure aims to reinforce and

support our key strategic target to become a global

leader in renewable and circular solutions, which will

support sustainable, long-term value creation for all

stakeholders. For our President and CEO a significant

proportion of remuneration is derived from variable

pay to ensure that there is strong alignment between

sustainable value creation for shareholders, company

performance and reward. The Board of Directors sets

the targets for both short- and long-term incentives

and the variable payouts are directly linked to both

operational, ESG and strategic measures.

Neste performance in 2021

In a pandemic which continued to significantly disrupt

our lives in 2021, Neste was able to deliver a compa-

rable operating profit of EUR 1,342 million and make

clear advances in its drive to become a global leader

in renewable and circular solutions.

The performance measure for Performance

Share Plan (PSP) 2019–2021 has been relative Total

Shareholder Return (relative TSR) of Neste share com-

pared to the STOXX Europe 600 index between 2019

and 2021. Neste Total Shareholder Return was at the

72nd percentile compared to the index.

Application of the

Remuneration Policy in 2021

The remuneration for the Board of Directors and the

CEO during the financial year 2021 was executed in

accordance with the 2020 Remuneration Policy. No

deviations from the Remuneration Policy have been

made and no remuneration of the Board of Directors

or the CEO has been reclaimed or restated during the

financial year 2021.

Advisory Shareholder vote regarding the

Remune ration Report 2020 and shareholder

engage ment

At the Annual General meeting in 2021, 95% of the

Neste Shareholders supported the Neste Remune-

ration Report 2020.

Looking ahead to 2022

During 2021 the Personnel and Remuneration

Committee of Neste conducted a thorough total

remuneration benchmarking review regarding Neste

remuneration plans to strengthen our pay for perfor-

mance approach on remuneration and to ensure the

competitiveness and attractiveness as an employer in

the international markets where Neste operates.

Neste President and CEO Peter Vanacker will be

stepping down during 2022 and I would like to thank

him for his excellent service to Neste. The Committee

has taken the opportunity to update the future CEO

profile and has started the search for the best candi-

date to continue the execution of our strategy.

Matti Kähkönen

Chair of the Personnel and

Remuneration Committee

Neste Annual Report 2021 | Neste Remuneration Report 2021

Neste Remuneration Report 2021

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

Remuneration of the Board of Directors

for the previous financial year

The meeting attendance fees include meeting fees

paid due to special tasks set by the Board of Directors,

but not travel expenses.

Details of the shareholdings of the Board of Directors

are shown in the web pages. These shares are per-

sonally acquired. On March 30th 2021, the 2021 AGM

confirmed the following annual fees for the members

of the Board of Directors.

In addition to the annual fees, members of the

Board of Directors received a meeting fee of EUR 600

for each meeting held in the member’s home country

Remuneration paid to the members of the Board in 2021

Board fees (EUR) Meeting attendance fees (EUR) Total (EUR)

Matti Kähkönen, Chair 67,900 12,600 80,500

Marco Wirén, Vice Chair 49,600 13,800 63,400

John Abbott

* 27,034 12,600 39,634

Sonat Burman-Olsson

** 19,878 7,200 27,078

Nick Elmslie 35,700 15,600 51,300

Martina Flöel 35,700 17,400 53,100

Jari Rosendal 35,700 11,400 47,100

Jean-Baptiste Renard 35,700 16,200 51,900

Johanna Söderström 35,700 12,600 48,300

* Member of Board since 30 March, 2021

** Member of the Board until 21 July, 2021

Chair 67,900 EUR per annum

Vice Chair 49,600 EUR per annum

Member 35,700 EUR per annum

and EUR 1,200 for each meeting held in another coun-

try, plus compensation for expenses in accordance

with the Company’s travel guidelines. The meeting fee

for telephone meetings was paid according to the fee

payable for meetings held in each member’s home

country.

Neste Annual Report 2021 | Neste Remuneration Report 2021

Remuneration has been paid from the parent company.

138

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Remuneration of the President and CEO in 2021

The remuneration of the CEO consists of fixed annual remuneration, such as base salary and fringe benefits and variable remuneration, such as short- and long-term incentives

plans. The table below includes the taxable value of the remuneration in each year.

Peter

Vanacker

Fixed Annual

Remuneration

Variable Remuneration Total Remuneration

Proportion of

fixed and variable

remuneration

Fixed Annual Salary

Short-term

incentive plan

Long-term incentive plans

Total Annual

Compensation

Cash Shares

Paid during 2021 (based

on financial year 2020

performance)

972,150.00 215,931.59 288,385.18 569,890.49 2,046,357.26** 48% / 52%

Paid during 2020 (based

on financial year 2019

performance)

925,440.00 311,271.48 190,907.70 377,197.17 1,804,816.35** 51% / 49%

* Benefits and vacation pay included in fixed remuneration.

** In 2021, as well as in 2020, the long-term share incentive rewards paid out to the President and CEO was limited to ensure that the total value of incentives (short-term and long-term incentives

combined) does not exceed 1.2 times fixed annual base salary. The table above includes the taxable value of the paid remuneration and therefore the total value of incentives may deviate from

1.2 times fixed annual base salary.

Variable, performance-based pay, meaning short- and long-term incentives, forms a substantial part of the President and CEO’s total remuneration. In 2021, the paid short- and

long-term incentives formed 52 percent of total compensation and the fixed annual salary 48 percent.

The retirement age of the President and CEO is set according to the Finnish Employee’s Pension Act (TyEL); he does not have an additional pension scheme. No other financial

benefits were paid to the President and CEO in 2021.

Neste Annual Report 2021 | Neste Remuneration Report 2021

Remuneration has been paid from the parent company.

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President and CEO 2020 STI 2020 results

Weighting Measures Level of achievement

60% Group comparable EBIT Between threshold and target

20% Comparable Free Cash Flow At maximum

10% Group Safety (TRIF) At maximum

10% Group Process Safety (PSER) Between target and maximum

Total Between target and maximum

President and CEO 2021 STI 2021 results

Weighting Measures Level of achievement

60% Group comparable EBIT Between threshold and target

20% Free Cash Flow At maximum

10% Group Safety (TRIF) At maximum

10% Group Process Safety (PSER) At maximum

Total Between target and maximum

The achievement ratio for the year 2021 to be paid in 2022 is 26.6 percent and the incentive payment of EUR 261,179 will be paid in March 2022.

Short-term incentives

The maximum short-term incentive for the President and CEO was 40 percent of annual base salary both in 2020 and in 2021. In 2020 the short-term incentive was based on

Comparable EBIT with 60% weight, Comparable Free Cash Flow with 20% weight and safety measures of TRIF and PSER with 10% weight. In 2021 the Comparable Free Cash Flow

was replaced with Free Cash Flow. The President and CEO’s achievement ratio for the short-term incentives for the year 2020 paid in March 2021 was 22.4 percent.

President and CEO 2022 STI

Weighting Measures

50% Group comparable EBITDA

20% Free Cash Flow

10% Adjusted ROACE

10% Group Safety (TRIF)

10% Group Process Safety (PSER)

Adjusted ROACE was introduced to measure how efficiently Neste uses its capital to generate profits from its current active operations.

Details of the short-term incentive plan award for the President and CEO for 2022, potential reward payment in March 2023:

Details of the short-term incentive plan award for the President and CEO for 2021:

Details of the short-term incentive plan award for the President and CEO for 2020 paid in March 2021:

Neste Annual Report 2021 | Neste Remuneration Report 2021

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

Long-term incentives

The share-based incentive payment for the President and CEO during the year 2021 was based on the

Performance Share Plan 2018–2020. The maximum long-term incentive reward for the President and CEO at

grant was 33,600 shares. Performance measures for the plan were cumulative comparable free cash flow (75%

weight) and the relative total shareholder return of Neste shares compared to the STOXX Europe 600 index (25%

weight).

Performance Share Plan 2018–2020

Weighting Measure

How the targets

were set Level of achievement

75% Cumulative Group

Comparable Free Cash Flow

The Board of Directors

set the performance

requirements for threshold,

target and maximum levels.

Maximum was achieved

25% Relative Total Shareholder

Return compared to the

STOXX Europe 600 Index

The Board of Directors

set the performance

requirements for threshold

and maximum levels.

Above upper quartile

Performance Share Plan 2019–2021

Weighting Measure

How the targets

were set Level of achievement

100% Relative Total Shareholder

Return compared to the

STOXX Europe 600 Index

The Board of Directors

set the performance

requirements for threshold

and maximum levels.

72nd percentile

Performance Share Plan 2022–2024

Weighting Measure How the targets were set

80% Relative Total Shareholder Return

compared to the STOXX Europe 600 Index

The Board of Directors has set the

performance requirements for threshold

and maximum levels.

20% Combined Greenhouse Gas Impact 2022–

2024

The Board of Directors has set the

performance requirements for threshold,

target and maximum levels.

The achievement ratio for the PSP 2018–2020 was 100 percent and 10,598 net shares were delivered to the

President and CEO. The total value of short- and long-term incentives was capped to 1.2 times fixed annual

base salary and the gross number of payable shares was cut in order for the total amount of variable pay not to

exceed this limit. The share price on the share delivery date of March 15, 2021 was 53.77 EUR.

As President and CEO Peter Vanacker has given notice of his resignation from the company, the share

allocation to him has been canceled.

Other ongoing Performance Share Plans

PSP 2020–2022: Number of original shares granted was 31,600, Performance measure is Total Shareholder

Return (TSR, weight 100%) versus STOXX Europe 600 index, shares will vest in March 2023, with no

post-vesting holding period applicable. The share allocation to the President and CEO has been canceled.

PSP 2021–2023: Number of original shares granted was 18,600, Performance measures are Relative Total

Shareholder Return 2021–2023 (TSR, weight 80%) versus the STOXX Europe 600 index and Combined

Greenhouse Gas Impact 2021–2023 (GHG, weight 20%) measured cumulatively in CO

equivalent, shares will

vest in March 2024, with no post-vesting holding period applicable. The share allocation to the President and

CEO has been canceled.

Neste Annual Report 2021 | Neste Remuneration Report 2021

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GovernanceStrategy Sustainability Review by the Board of Directors Financials

* This number of shares represents a gross earning, from which the applicable payroll tax is withheld and the remaining net value is paid to the recipients in shares.

Performance Share Plans President and CEO Peter Vanacker

Performance Share Plan Grant date

Number of shares

originally granted Vesting date

Number of

gross shares vested*

End of the

holding period Notes

PSP 2016–2018 1.9.2018 48,000 shares 23.9.2019 39,123 shares 16.3.2022

PSP 2017–2019 1.9.2018 24,534 shares 16.3.2020 22,717 shares 16.3.2021

PSP 2018–2020 1.9.2018 33,600 shares 30.4.2021 15,961 shares 16.3.2022

PSP 2019–2021 24.4.2019 40,300 shares 31.3.2022 xx 31.3.2022 As President and CEO Peter Vanacker has given

notice of his resignation from the company, the

share allocation for him has been canceled

PSP 2020–2022 6.2.2020 31,600 shares 31.3.2023 xx 31.3.2023

PSP 2021–2023 11.12.2020 18,600 shares 31.3.2024 xx 31.3.2024

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* Average Neste employee includes all wages and salaries incl. incentive payments (LTI based on accounting value) without indirect employee costs (social security costs, pension costs,

other costs) divided by the average number of personnel during the year.

** Cost provision for personnel arrangements relating to the Naantali refinery closure of 22 MEUR has been eliminated from wages and salaries before calculating the average.

*** The unused amount of cost provision reversal for personnel arrangements relating to the Naantali refinery closure of 11 MEUR has been eliminated from wages & salaries before calculating the

average. The average compensation between 2019 and 2020 has increased partly due to the divestment of Neste operations in Russia in 2019 covering 1,133 employees, and between

2020 and 2021 due to personnel decreases related to the closure of Naantali refinery. Simultaneously, strategic headcount increase has focused on white collar and higher

employee cost markets.

Remuneration and company performance

over the last five financial years

Average compensation EUR 2017 2018 2019 2020 2021

Chair of the Board

Annual Board fee 66,000 66,000 66,000 67,900 67,900

Meeting fee home/abroad 600/1,200 600/1,200 600/1,200 600/1,200 600/1,200

Vice Chair of the Board

Annual Board fee 49,200 49,200 49,200 49,600 49,600

Meeting fee home/abroad 600/1,200 600/1,200 600/1,200 600/1,200 600/1,200

Other members of the Board

Annual Board fee 35,400 35,400 35,400 35,700 35,700

Meeting fee home/abroad 600/1,200 600/1,200 600/1,200 600/1,200 600/1,200

President and CEO

(taxable value of the remuneration in each year)

Matti Lievonen (until 10/2018) 2,540,360 2,497,774

Peter Vanacker (from 11/2018) 150,040 2,131,983 1,804,816 2,046,357

Average Neste employee

* 54,822 57,830 58,378 71,216** 78,044***

Company performance

Comparable operating profit (MEUR) 1,101 1,422 1,962 1,416 1,342

Neste Annual Report 2021 | Neste Remuneration Report 2021

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Neste Annual Report 2021 | Review by the Board of Directors

Review by the Board of Directors 2021 144

Key figu res 162

Calculation of key figures 164

Review by

the Board of

Directors

144

Review by the Board of DirectorsStrategy GovernanceSustainability Financials

Review by the Board of Directors 2021

Neste ended year 2021 with an excellent performance in all business units. Our business proved to be very resilient amid

the continued COVID-19 pandemic, scheduled maintenance and high utility and feedstock costs in 2021. We posted a solid

comparable operating profit of EUR 1,342 million, compared to EUR 1,416 million in the previous year. Renewable Products

was able to improve its sales volumes and sales margin despite having several scheduled shutdowns, but was negatively

impacted by a weaker US dollar and higher fixed costs. The refining market recovered and Oil Products was able to exceed

the previous year’s result despite the largest ever turnaround implemented at the Porvoo refinery and the closure of the

Naantali refinery. Also Marketing & Services improved its performance compared to the previous year. The return on average

capital employed (ROACE) was 15.5% and our leverage ratio 0.6% at the end of the year. Our cash flow before financing

activities was very solid at EUR 511 million in a year of significant investments and acquisitions. The solid financial position

enables the implementation of our growth strategy going forward while continuing to reward our shareholders.

During the year we continued executing our strategy by agreeing on numerous partnerships and acquisitions to grow

our three renewables businesses – Aviation, Polymers and Chemicals and Road Transportation – and expanding our global

access to waste and residues. We also broadened our sustainability vision to include climate, biodiversity, human rights

and our supply chain and raw materials. As announced in our Capital Markets Day in September, we have set a target to

make Porvoo the most sustainable refinery in Europe by 2030. Our Singapore renewables capacity expansion investment

project is currently on schedule for start-up by the end of the first quarter 2023. The EUR 1.5 billion investment is planned

to increase our nameplate production capacity to 4.5 million tons annually. Together with our Rotterdam Sustainable

Aviation Fuel (SAF) optionality project, we expect to reach SAF production capability of 1.5 million tons/a by the end of

2023. The project for a possible next worldscale renewables refinery in Rotterdam is in the engineering phase. During

2021 we acquired Bunge’s pretreatment facility in Rotterdam and Agri Trading in the US to strengthen our feedstock

sourcing platform, and announced an agreement to sell our base oils business. All of these actions support our strategic

transformation and we are making good progress in our journey to become a global leader in renewable and circular

solutions. The Board of Directors will propose a dividend of EUR 0.82 per share (0.80) for 2021, totaling EUR 630 million

(614 million).

Figures in parentheses refer to the financial statements for 2020, unless otherwise noted.

The Group’s results for 2021

Neste's revenue in 2021 totaled EUR 15,148 million (11,751 million). The change in revenue resulted from higher market

and sales prices, which had a positive impact of approx. EUR 6.6 billion, and lower sales volumes mainly due to the Porvoo

refinery major turnaround, which had a negative impact of approx. EUR 2.9 billion on the revenue. Additionally, a weaker US

dollar had a negative impact of approx. EUR 300 million on the revenue.

The Group’s comparable operating profit was EUR 1,342 million (1,416 million). Renewable Products' comparable

operating profit was EUR 1,238 million (1,334 million), lower that in 2020 mainly due to the weaker US dollar and higher

fixed costs. Despite the Porvoo refinery major turnaround, Oil Products' reached a comparable operating profit of EUR 71

million (50 million) in the improved refining market. Marketing & Services’ comparable operating profit was EUR 74 million (68

million) as a result of higher sales volumes and unit margins. The Others segment's comparable operating profit was EUR

-35 million (-37 million).

Neste Annual Report 2021 | Review by the Board of Directors

The Group’s operating profit was EUR 2,023 million (828 million), which was impacted by inventory valuation gains of EUR

573 million (losses of 119 million), and changes in the fair value of open commodity and currency derivatives totaling EUR

106 million (-112 million), mainly related to margin hedging. Profit before income taxes was EUR 1,962 million (786 million),

and net profit EUR 1,774 million (714 million). Comparable earnings per share were EUR 1.54 (1.60), and earnings per share

EUR 2.31 (0.93).

Group key figures, MEUR 2021 2020

Comparable operating profit 1,342 1,416

- inventory valuation gains/losses 573 -119

- changes in the fair value of open commodity and currency derivatives 106 -112

- capital gains/losses 3 -42

- impairments 0 0

- other adjustments -1 -314

Operating profit 2,023 828

Revenue 2021 2020

Renewable Products 5,895 4,270

Oil Products 7,810 6,063

Marketing & Services 3,803 3,055

Others 170 177

Eliminations -2,530 -1,813

Total 15,148 11,751

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Neste Annual Report 2021 | Review by the Board of Directors

Comparable operating profit 2021 2020

Renewable Products 1,238 1,334

Oil Products 71 50

Marketing & Services 74 68

Others -35 -37

Eliminations -6 1

Total 1,342 1,416

Operating profit 2021 2020

Renewable Products 1,723 1,239

Oil Products 263 -396

Marketing & Services 77 68

Others -34 -84

Eliminations -6 1

Total 2,023 828

31 Dec 2021 31 Dec 2020

Return on average capital employed after tax (ROACE)

*, % 15.5 17.3

Leverage ratio (net debt to capital), % 0.6 -4.7

* Last 12 months

2021 2020

EBITDA 2,607 1,508

Capital gains/losses 0 -1

Other adjustments -118 277

Change in net working capital -362 460

Finance cost, net -39 -54

Income taxes paid -95 -133

Net cash generated from operating activities 1,994 2,057

Capital expenditure -1,298 -972

Other investing activities -186 -67

Free cash flow (Cash flow before financing activities) 511 1,019

Financial targets

Return on average capital employed after tax (ROACE) and leverage ratio are Neste's key financial targets. ROACE figures

are based on comparable results. The company's long-term ROACE target is 15%, and the leverage ratio target is below

40%. At the end of December 2021, ROACE calculated over the last 12 months was 15.5%, and leverage ratio remained

well below the 40% target.

Cash ow, investments, and nancing

The Group’s net cash generated from operating activities totaled EUR 1,994 million (2,057 million) in 2021 despite the

increase in net working capital. Cash flow before financing activities was EUR 511 million (1,019 million), mainly due to the

higher capital expenditure compared to 2020. The Group's net working capital in days outstanding was 33.3 days (35.0

days) on a rolling 12-month basis at the end of 2021.

Cash-out investments excluding M&A were EUR 976 million (762 million), and totaled EUR 1,299 (995 million) including M&A

in 2021. Maintenance investments accounted for EUR 411 million (190 million) and productivity and strategic investments

for EUR 888 million (805 million). Renewable Products' investments were EUR 877 million (670 million), mainly related to

the Singapore refinery capacity expansion project, and the acquisitions made in the segment. Oil Products’ investments

amounted to EUR 380 million (250 million), with the largest projects being the Porvoo refinery turnaround related

investments. Marketing & Services' investments totaled EUR 13 million (17 million). Investments in the Others segment were

EUR 29 million (59 million), concentrating on IT and business infrastructure upgrades.

Interest-bearing net debt was EUR 41 million at the end of December 2021, compared to EUR -265 million at the end of

2020. The average interest rate of borrowing at the end of December was 1.2% (1.9%) and the average maturity 3.7 (2.1)

years. At the end of the year the Net debt to EBITDA ratio was 0.0 (-0.2).

The leverage ratio was 0.6% at the end of December 2021 (31 Dec 2020: -4.7%). The Group's strong financial position

enables implementation of our growth strategy going forward while maintaining a healthy dividend distribution.

The Group's liquid funds and committed, unutilized credit facilities amounted to EUR 3,066 million at the end of December

2021 (31 Dec 2020: 2,922 million). There are no financial covenants in the Group companies' current loan agreements.

In accordance with the hedging policy, Neste hedges a large part of its net foreign currency exposure for the next 12

months, mainly using forward contracts and currency options. The most important hedged currency is the US dollar. At the

end of December 2021 the Group's foreign currency hedging ratio was approximately 50% of the sales margin for the next

12 months.

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Neste Annual Report 2021 | Review by the Board of Directors

Production 2021 2020

Neste Renewable Diesel, 1,000 ton 3,005 2,993

Other products, 1,000 ton 256 239

Utilization rate, % 94 94

Sales 2021 2020

Neste Renewable Diesel, 1,000 ton 3,021 2,966

Share of sales volumes to Europe, % 65 71

Share of sales volumes to North America, % 35 29

Key financials 2021 2020

Revenue, MEUR 5,895 4,270

EBITDA, MEUR 1,950 1,423

Comparable EBITDA, MEUR 1,460 1,518

Operating profit, MEUR 1,723 1,239

Comparable operating profit, MEUR 1,238 1,334

Net assets, MEUR 4,748 3,470

Return on net assets

*, % 40.9 36.3

Comparable return on net assets

*, % 29.4 39.1

* Last 12 months

Key drivers 2021 2020

Comparable sales margin, including BTC, USD/ton 715 703

Biomass-based diesel (D4) RIN, USD/gal 1.50 0.63

California LCFS Credit, USD/ton 178 200

Palm oil price

*, USD/ton 999 645

Waste and residues’ share of total feedstock, % 92 83

* CPO BMD 3

, Crude Palm Oil Bursa Malaysia Derivatives 3

month futures price

Segment reviews

Neste's businesses are grouped into four reporting segments: Renewable Products, Oil Products, Marketing & Services,

and Others.

Renewable Products

Waste and residue prices were rising during the first half of 2021 following the uptrend in vegetable oils. Over the second

half of the year price developments diverged depending on the region. The European animal fat (AF) and used cooking oil

(UCO) prices started to come down from the record-high levels in the autumn. On the other hand, US prices continued

to increase supported by the growing biofuels production capacity. Asia-Pacific AF markets continued to strengthen due

to the combined impact of tight supply and strong demand for exports. Towards the end of the year European waste and

residue prices started to rise again on the back of good demand. The vegetable oil prices increased throughout the year

lead by soybean oil (SBO) first and crude palm oil (CPO) later in the year. The palm oil gasoil price differential (POGO) started

the year at a high level and declined mid-year as CPO prices came down significantly due to signs of healthy production

recovery. However, this development was short lived as CPO prices moved significantly up again as a result of a weaker

production outlook following labor shortages and increasing fertilizer prices.

The US Renewable Identification Number (RIN) D4 price mirrored the SBO price development with a gradual increase

through mid-year before coming down during the second half of the year when the market was waiting for the final biofuel

mandate for 2021. In December, the US Environmental Protection Agency (EPA) released a proposal for the 2020–22

volume mandates, which gave a small boost to the RIN prices. The California Low Carbon Fuel Standard (LCFS) credit price

declined during the year starting from a high level of approximately USD 200/ton and ending at a level of USD 150/ton.

This reflected the weaker than expected fuel demand recovery and an outlook for increased supply of renewables to the

Californian market.

Renewable Products' full-year comparable operating profit was EUR 1,238 million (1,334 million). The comparable sales

margin was slightly higher than in 2020, supported by an outstanding sales performance. The higher sales margin had

a positive impact of EUR 36 million on the comparable operating profit year-on-year. The US Blender’s Tax Credit (BTC)

contribution was EUR 295 million (231 million) in 2021. Sales volumes were 3.021 million tons in 2021, about 2% higher

than in the previous year, and enabled by a new annual production record. This performance provides the basis for the

increase our nameplate production capacity from 3.2 million to 3.3 million tons. Higher sales volumes had a positive impact

of EUR 33 million on the comparable operating profit compared to 2020. During 2021 approximately 65% (71%) of sales

volume went to Europe and 35% (29%) to North America. The share of 100% renewable diesel delivered to end-users

was 27% (30%) of total volumes in full-year 2021. Our feedstock mix optimization continued, and the average proportion

of waste and residue inputs increased to 92% (83%). A weaker USD had a negative impact of EUR 54 million on the

segment's comparable operating profit compared to 2020. During 2021 the segment's fixed costs were EUR 68 million

higher than in the previous year, mainly due to the expansion of our Renewable Aviation and Renewable Polymers and

Chemicals business units and as we continued to build up our organization to prepare for future growth.

US dollar exchange rate 2021 2020

EUR/USD, market rate 1.18 1.14

EUR/USD, effective rate

* 1.18 1.14

* The effective rate includes the impact of currency hedges.

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Production 2021 2020

Refinery

Production, 1,000 ton 9,504 12,791

Utilization rate, % 72 84

Refinery production costs, USD/bbl 6.8 4.7

Bahrain base oil plant production (Neste's share), 1,000 ton 211 178

Sales from in-house production, by product category (1,000 t) 2021 % 2020 %

Middle distillates

* 4,823 48 6,282 47

Light distillates

** 3,420 34 4,510 34

Heavy fuel oil 1,000 10 1,309 10

Base oils 386 4 441 3

Other products 421 4 813 6

Total 10,051 100 13,354 100

* Diesel, jet fuel, heating oil, low sulphur marine fuels

** Motor gasoline, gasoline components, LPG

Sales from in-house production, by market area (1,000 t) 2021 % 2020 %

Baltic Sea area

* 6,264 62 7,830 59

Other Europe 2,485 25 4,395 33

North America 864 9 784 6

Other areas 438 4 345 2

* Finland, Sweden, Estonia, Latvia, Lithuania, Poland, Denmark

Key financials 2021 2020

Revenue, MEUR 7,810 6,063

EBITDA, MEUR 546 29

Comparable EBITDA, MEUR 353 312

Operating profit, MEUR 263 -396

Comparable operating profit, MEUR 71 50

Net assets, MEUR 2,045 1,848

Return on net assets

*, % 11.9 -16.8

Comparable return on net assets

*, % 3.2 2.1

* Last 12 months

Key drivers 2021 2020

Reference refining margin, USD/bbl 3.75 0.61

Additional margin, USD/bbl 5.23 6.94

Total refining margin, USD/bbl 8.99 7.55

Urals-Brent price differential, USD/bbl -1.87 -0.62

Urals' share of total refinery input, % 65 68

Oil Products

Crude oil prices were on a rising trend during 2021, and Brent traded between USD 50/bbl and 86/bbl. Oil demand was still

under pressure due to the COVID-19 pandemic, but recovered significantly from 2020 supported by increased road mobility

and industrial production. OPEC+ countries gradually reduced their oil production cuts. These drivers, together with rising

equity markets, gave support to oil prices. Brent price was USD 78/bbl at the year-end after peaking at USD 86/bbl during

the early fourth quarter until the new Omicron-variant caused uncertainty in the markets.

The Russian Export Blend (REB) crude averaged USD 1.9/bbl lower than Brent in 2021, and USD 1.7/bbl lower during

the fourth quarter. The REB-Brent price differential was again volatile during 2021. As OPEC+ gradually reduced their

production cuts during the year, heavier crudes were brought to the market. This combined with the rising crude oil price

and weakening fuel oil margins pushed REB prices to lower levels.

Overall the refining margin increased during 2021 as recovering demand and several refinery closures reduced product

inventories and supported margins. Margins were still very low during the first half of the year, but increased during the

second half. The gasoline margin was the strongest part of the barrel as middle distillate margins only started to increase

during the late autumn, when high natural gas prices started to impact diesel production. It is important to note that high

natural gas, electricity and emission allowance prices negatively impacted overall refining economics from the summer

onwards, partly offsetting the impact of improving reference refining margin. Neste reference margin averaged USD 3.8/bbl

in 2021 and USD 7.0/bbl in the fourth quarter.

Oil Products' full-year comparable operating profit was EUR 71 million (50 million). Oil product demand improved year-

on-year, but was still negatively impacted by the COVID-19 pandemic especially in the aviation sector. The reference margin

averaged USD 3.8/bbl (0.6/bbl) in 2021. The higher reference margin had a positive impact of EUR 236 million on the

comparable operating profit year-on-year. Our additional margin was negatively impacted by the significantly higher utility

costs and the lack of contango inventory profits, and it averaged USD 5.2/bbl (6.9/bbl). The lower additional margin had a

negative impact of EUR 196 million compared to the previous year, and EUR 93 million of that was caused by the high utility

costs. Due to the Porvoo refinery major turnaround implemented in the second quarter and the Naantali refinery closure at

the end of March, our sales volumes were significantly lower than in 2020. The lower sales volumes had a negative impact

of EUR 114 million on the comparable operating profit year-on-year. Profitability of our specialty products business was

strong in 2021. A weaker USD exchange rate had a negative impact of EUR 21 million on the comparable operating profit

compared to 2020. During the year 2021 the segment's fixed costs were EUR 52 million lower than in the previous year,

supported by the Naantali refinery closure.

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Sales volumes by main product categories, million liters 2021 2020

Gasoline, station sales 612 603

Diesel, station sales 1,629 1,559

Heating oil 663 666

Net sales by market area, MEUR 2021 2020

Finland 2,896 2,352

Baltic countries 908 703

Key financials 2021 2020

Revenue, MEUR 3,803 3,055

EBITDA, MEUR 106 96

Comparable EBITDA, MEUR 103 96

Operating profit, MEUR 77 68

Comparable operating profit, MEUR 74 68

Net assets, MEUR 212 192

Return on net assets

*, % 38.1 31.0

Comparable return on net assets

*, % 36.6 31.0

* Last 12 months

Key financials 2021 2020

Operating profit, MEUR -34 -84

Comparable operating profit, MEUR -35 -37

Marketing & Services Others

Marketing & Services segment's full-year comparable operating profit was EUR 74 million (68 million). The road

transportation fuel demand followed a normal seasonality pattern during the year, and the volumes generally increased from

2020, which was significantly impacted by the COVID-19 pandemic and related restrictions. The aviation and marine fuel

demand were still below the previous year’s level. Our sales volumes were higher than in the year 2020, which had a positive

impact of EUR 4 million on the comparable operating profit. We were also able to improve our average unit margins, which

had a positive impact of EUR 5 million year-on-year. The cost saving programs continued successfully, and the segment's

fixed costs were only EUR 3 million higher compared to the low level in 2020.

The Others segment consists of Neste Engineering Solutions, and common corporate costs. The full-year comparable

operating profit of the Others segment totaled EUR -35 million (-37 million).

Shares, share trading, and ownership

Neste’s shares are listed at NASDAQ Helsinki Ltd. The share price closed the year at EUR 43.36, down by 26.7% compared

to the end of 2020. The total shareholder return (TSR) was -25.4% (94.0%) in 2021. At its highest during 2021, the share

price reached EUR 64.74, while the lowest price was EUR 41.17. Market capitalization was EUR 33.4 billion as of 31

December 2021. An average of 0.98 million shares were traded daily, representing 0.1% of the company’s shares.

At the end of December 2021, Neste held 1,241,662 treasury shares. Neste’s share capital registered with the Trade

The Board of Directors has no authorization to issue convertible bonds or share options.

As of 31 December 2021, the State of Finland owned directly 35.9% (35.9% at the end of 2020) of outstanding shares,

foreign institutions 39.6% (40.2%), Finnish institutions 17.0% (16.4%), and households 7.5% (7.5%).

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Largest shareholders as of 31 December 2021 Breakdown of share ownership as of 31 December 2021

Shareholder Shares % of shares

State of Finland / Prime Minister's Office 276,213,495 35.91%

The Finnish Climate Fund 63,894,123 8.31%

Varma Mutual Pension Insurance Company 10,550,615 1.37%

Ilmarinen Mutual Pension Insurance Company 8,038,000 1.05%

The Finnish Social Insurance Institution 7,945,272 1.03%

City of Kurikka 4,652,625 0.60%

Elo Mutual Pension Insurance Company 3,707,974 0.48%

The State Pension Fund 2,250,000 0.29%

Danske Invest Finnish Equity Fund 1,490,000 0.19%

OP-Finland 1,305,180 0.17%

Neste Corporation 1,241,662 0.16%

Seligson & Co OMX Helsinki 25 Exchange Traded Fund (ETF) 972,000 0.13%

Nordea Fennia Fund 877,733 0.11%

Stiftelsen för Åbo Akademi 805,514 0.10%

Alhopuro Eero Sakari 732,150 0.10%

Nordea Nordic Fund 703,070 0.09%

Nordea Pro Finland Fund 630,877 0.08%

Jenny and Antti Wihuri Foundation 630,000 0.08%

Finnish Cultural Foundation 575,592 0.07%

Sakari Alhopuro Foundation 572,315 0.07%

20 largest shareholders total 387,788,197 50.41%

Nominee registered 303,890,241 39.51%

Others 77,532,620 10.08%

Number of shares, total 769,211,058 100.00%

No. of shares

No. of

shareholders

% of

shareholders

Total no.

of shares

% of

1–100 51,246 47.9% 1,852,540 0.2%

101–500 31,825 29.7% 8,318,907 1.1%

501–1,000 10,539 9.8% 7,691,985 1.0%

1,001–5,000 11,367 10.6% 23,688,781 3.1%

5,001–10,000 1,303 1.2% 8,878,956 1.2%

10,001–50,000 678 0.6% 12,529,834 1.6%

50,001–100,000 54 0.1% 3,798,471 0.5%

100,001–500,000 48 0.0% 10,633,896 1.4%

500,001– 27 0.0% 691,817,688 89.9%

Total 107,087 100.0% 769,211,058 100.0%

of which nominee registered 12 303,890,241 39.5%

By the owner sector % of shares

Central government* 44.2%

Non-Finnish shareholders 39.6%

Households 7.5%

General government 5.0%

Financial and insurance companies 1.5%

Corporations 1.0%

Non-profit organizations 1.2%

Total 100.0%

Includes both State of Finland and The Finnish Climate Fund.

By the number of shares owned

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Corporate governance

The control and management of Neste Corporation is divided between shareholders, the Board of Directors, and the

President and Chief Executive Officer (CEO). The General Meeting of Shareholders appoints the Board of Directors based on

a proposal made by the Shareholders' Nomination Board. The term of office of the Board of Directors will expire at the end

of the next Annual General Meeting of Shareholders (AGM) following its election. Neste's President and CEO is appointed

and expelled by the Board of Directors.

Changes to the company's Articles of Association can be made at the General Meeting of Shareholders based on a

proposal by the Board of Directors.

Neste Corporation's Annual General Meeting (AGM) was held under special arrangement at the Company’s headquarters

in Espoo on 30 March 2021. In order to prevent the spread of the COVID-19 pandemic, the AGM was held without

shareholders’ or their proxy representatives’ presence at the venue of the meeting. Shareholders and their proxy

representatives had the possibility to participate in the meeting and exercise their shareholder rights by voting in advance

and by making counter-proposals and presenting questions in advance.

The AGM supported all the proposals presented to the meeting and approved the remuneration report. The AGM adopted

the company's Financial Statements and Consolidated Financial Statements for 2020 and discharged the Board of Directors

and the President and CEO from liability for 2020.

Dividend of EUR 0.80 per share paid in two instalments

The AGM approved the Board of Directors' proposal that a dividend of EUR 0.80 per share will be paid on the basis of the

approved balance sheet for 2020. The dividend was paid in two instalments.

The first instalment of dividend, EUR 0.40 per share, was paid to a shareholder registered in the shareholders' register

of the Company maintained by Euroclear Finland Ltd on the record date for the first dividend instalment, which was 1 April

2021. The first dividend instalment was paid on 12 April 2021.

The second instalment of dividend, EUR 0.40 per share, was paid to a shareholder registered in the shareholders' register

of the Company maintained by Euroclear Finland Ltd on the record date for the second dividend instalment, which was 5

October 2021. The second dividend instalment was paid on 12 October 2021.

Composition and remuneration of the Board of Directors

In accordance with the proposal made by the Shareholders' Nomination Board, the AGM confirmed the number of

members of the Board of Directors at nine, following the amendment of the Articles of Association to the effect that the

maximum number of Board members was increased from eight to ten.

The AGM decided that the following were re-elected to serve until the end of the next AGM: Mr. Matti Kähkönen, Ms.

Sonat Burman-Olsson, Mr. Nick Elmslie, Ms. Martina Flöel, Mr. Jean-Baptiste Renard, Mr. Jari Rosendal, Ms. Johanna

Söderström and Mr. Marco Wirén. Mr. John Abbott was elected as a new member. Sonat Burman-Olsson announced her

resignation from the Board of Directors on 27 July 2021.

Mr. Matti Kähkönen was re-elected as Chair and Mr. Marco Wirén was re-elected as Vice Chair. Board member

introductions can be found at the company's web site.

Convening right after the AGM, Neste's Board of Directors elected the members of its two Committees. Matti Kähkönen

was elected Chair and Martina Flöel, Jean-Baptiste Renard and Johanna Söderström as members of the Personnel and

Remuneration Committee. Marco Wirén was elected Chair and John Abbott, Sonat Burman-Olsson, Nick Elmslie and Jari

Rosendal as members of the Audit Committee.

The AGM decided on the remuneration to the Board as follows:

• Chair: EUR 67,900 per annum

• Vice Chair: EUR 49,600 per annum

• Member: EUR 35,700 per annum

• Chair of Audit Committee: EUR 49,600 per annum if he or she does not simultaneously act as Chair or Vice Chair of

the Board

In addition to the annual fee, members of the Board of Directors receive a meeting fee of EUR 600 for each meeting held in

the member's home country and EUR 1,200 for each meeting held in another country, plus compensation for expenses per-

taining to the Company's travel guidelines.

Company Auditor

In accordance with a proposal by the Board of Directors, KPMG Oy Ab, Authorized Public Accountants, were appointed

as the company's Auditor, with Authorized Public Accountant Ms. Virpi Halonen as the principally responsible auditor for

Neste Corporation, until the end of the next AGM. Payment for their services shall be made in accordance with their invoice

approved by the Company.

Authorizing the Board of Directors to decide the buyback of Company shares

Under this buyback authorization, the Board was authorized to decide the purchase of and/or take as security a maximum

of 23,000,000 Company shares using the Company's unrestricted equity. The number of shares shall be equivalent to

approximately 2.99% of the Company's total shares.

Shares may be purchased in one or more lots. The purchase price shall be at least the lowest price paid for Company

shares in regulated trading at the time of purchase and no more than the highest price paid for Company shares in

regulated trading at the time of purchase. In connection with the buyback of Company shares, derivative, share lending,

or other agreements that are normal within the framework of capital markets may take place in accordance with legislative

and regulatory requirements and at a price determined by the market. The authorization shall allow the Board to decide to

purchase shares otherwise than in proportion to shareholders' current holdings (directed buyback).

Shares so purchased can be used as consideration in possible acquisitions or in other arrangements that are part of the

Company's business, to finance investments, as part of the Company's incentive program, or be retained, conveyed, or

cancelled by the Company.

The Board of Directors shall decide the other terms related to the buyback of Company shares. The buyback

authorization shall remain in force for eighteen (18) months from the decision taken by the AGM.

Amendments to the Articles of Association

The AGM approved the Board’s proposal to amend the Company’s Articles of Association as follows:

Article 4 concerning the Board of Directors was amended so that the maximum number of the members of the Board of

Directors will be increased from eight (8) to ten (10) members.

Article 9 concerning the Auditors was amended so that it corresponds to the terminology in the existing legislation on

auditing as regards wording.

The last sentence of the first paragraph of Article 10 concerning the notice to the General Meeting of Shareholders was

amended so that information about the time and location of the General Meeting as well as the address of the Company’s

web site may be published in one or more newspapers if the Board of Directors so decides. As a result of the amendment, it

will not be necessary to publish the abovementioned information in one or more newspapers (nor within the same period of

time with the AGM notice), but the power of decision in the matter will be vested in the Board of Directors.

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Due to changes in legislation, the second paragraph of Article 11 concerning Annual General Meeting of Shareholders

was amended so that, in addition to the matters to be resolved on in the Annual General Meeting of Shareholders in

accordance with the second paragraph of Article 11 of the current Articles of Association, the Annual General Meeting shall,

if necessary, resolve on approval of the remuneration policy and approval of the remuneration report.

Neste’s Corporate Governance Statement is issued as a separate document.

Innovation

Neste’s innovation expenditure totaled EUR 67 million (61 million) in 2021. The growth was largely driven by boosting efforts

in developing new innovation business platforms and by higher R&D investments into strategic areas of current renewables

businesses. The R&D laboratories were in full operation during the whole year taking necessary precautions due to the

continuing pandemic situation.

The new Innovation business platforms, focusing on new feedstock pools such as lignocellulose, algae, municipal waste,

carbon dioxide and renewable electricity utilization, continued to grow in 2021, developing co-operations and preparing for

technology demonstrations. An example is the MULTiPLHY project at the renewable products refinery in Rotterdam, which

entered into execution phase to integrate and operate the world's first high-temperature electrolyzer system provided by

Sunfire to demonstrate production of green hydrogen for the refinery's processes. At the end of 2021 Neste received a

positive grant decision of EUR 88 million from the EU Innovation Fund for our green hydrogen and CO

capture & storage

project, which is currently in feasibility phase and intends to introduce carbon capture and storage and electrolysis solutions

to allow decarbonization of production at the Porvoo refinery, which aims to be carbon neutral by 2035.

In 2021 work also continued to expand the use of waste and residue feedstock, and about 3.3 million tons (2.9 million) of

waste and residue feedstock was used during the year. Development of advanced technology for feedstock pretreatment

progressed according to plans, with focus on Renewable Energy Directive (RED) II Annex IX A and other challenging waste

and residue feedstock. To further boost its innovation capabilities and to support the feedstock expansion Neste announced

to set up a new R&D center in Singapore, which is expected to become fully operational in 2023.

Co-processing of renewable feeds to replace part of the crude oil input of the Porvoo refinery was investigated. In addition

to co-processing of renewable feeds, chemical recycling of waste plastics was advanced by exploring and developing

waste plastic liquefaction and upgrading technologies together with partners. Industrial scale test runs with liquefied waste

plastic were successfully conducted at the Porvoo refinery, and products were delivered to polymers and plastics producers.

Neste’s target is to utilize at least 1 million tons of waste plastic feedstock by 2030.

The benefit of Neste MY Renewable Diesel™ over the whole well-to-wheel lifecycle was demonstrated, and the role

of renewable fuels as a vital part of the solution to reduce transport related emissions was emphasized. Expertise was

systematically developed and used to support production and sales of new products such as Neste MY Sustainable

Aviation Fuel™, where also the use of 100% SAF was investigated in in-flight tests in the ECLIF3 consortium, Neste RE™

renewable and recycled polymers and chemicals for the petrochemical and polymer industry, as well as low sulphur Neste

Marine fuels for the shipping industry.

In 2021, we continued to build the Business Finland funded Veturi ecosystem, which gathers Finnish companies, startups,

universities and research institutes to jointly build future capabilities needed to establish new technologies and value chains

in renewable and circular solutions. The Neste Veturi project aims to develop sustainable, globally scalable raw materials

and technology solutions for transportation, and the production of chemicals and polymers. Strategic cooperation with Aalto

University, Åbo Akademi and VTT - The Technical Research Centre of Finland continued in 2021, as well as with several

existing and new international partners mainly in Europe and the USA.

Main events published during 2021

On 29 January, Neste announced that the Shareholders' Nomination Board had proposed to the AGM to be held on 30

March 2021 that Mr. Matti Kähkönen shall be re-elected as the Chair of the Board of Directors. In addition, the current

members of the Board, Ms. Sonat Burman-Olsson, Mr. Nick Elmslie, Ms. Martina Flöel, Mr. Jean-Baptiste Renard, Mr.

Jari Rosendal, Ms. Johanna Söderström and Mr. Marco Wirén were proposed to be re-elected for a further term of office.

The Nomination Board proposed that Mr. Wirén shall be re-elected as the Vice Chair of the Board. Further, subject to the

approval of the AGM of a proposal for amending the Articles of Association to the effect that the maximum number of

Board members is increased from eight to ten, the Nomination Board proposed that the Board of Directors shall have nine

members and that Mr. John Abbott shall be elected as a new member.

On 2 March, Neste announced that it had completed the acquisition of Bunge Loders Croklaan's refinery plant in

Rotterdam, the Netherlands. The refinery plant is located next to Neste’s existing biorefinery and it consists of a pretreatment

facility, tank farm, jetties and has a pipeline connection to Neste’s site. The transition of operations and employees will be

implemented in phases with the refinery plant’s full and modified pretreatment capacity available for processing Neste’s

feedstock by the end of 2024.

On 15 March, Neste announced that it had chosen Rotterdam as the location for its possible next world scale renewable

products refinery. Neste announced in March 2020 an intention to increase its renewable products production capacity

in Europe according to the company strategy. The company had concluded a thorough study phase concerning the two

possible locations, Porvoo, Finland and Rotterdam in the Netherlands. Neste has existing sites in both locations. While there

are many positive drivers for both sites, the difference between the costs is significant in favor of Rotterdam.

On 16 March, Neste announced that it had established a Green Finance Framework to further integrate the company’s

sustainability ambitions into its financing. The Green Finance Framework is designed to support financing or refinancing

Eligible Assets and Projects, i.e. investments into the development, operations, maintenance and expansion of our

renewable and circular solutions with the objective to mitigate climate change globally by reducing greenhouse gas

emissions. The environmental objectives targeted with proceeds allocated relate to the reduction of the carbon emissions

by the expansion and development of Neste’s production capacity for renewable products, which provide a sustainable and

direct drop-in alternative to fossil fuels and products.

On 18 March, Neste announced that a team of aerospace specialists had launched the world’s first in-flight emissions

study using 100% sustainable aviation fuel (SAF) on a wide-body commercial passenger aircraft. Airbus, German research

centre DLR, Rolls-Royce and SAF producer Neste teamed up to start the pioneering ‘Emission and Climate Impact of

Alternative Fuels’ (ECLIF3) project looking into the effects of 100% SAF on aircraft emissions and performance.

On 18 March, Neste announced that it issues a EUR 500 million green bond. The 7-year bond carries a coupon of 0.75

per cent. The bond offering was allocated to approximately 120 investors. The bond represented the first issuance under

the newly established Green Finance Framework.

On 25 March, Neste announced that it had submitted an application for the EUR 500 million green bond to be admitted

to trading on the official list of sustainable bonds of NASDAQ Helsinki Ltd. Trading on the green bond commenced on 29

March 2021 under the trading code "NESJ075028".

On 31 March, Neste announced that its Porvoo refinery was getting ready for the major turnaround starting in April.

The duration of the turnaround was approximately 12 weeks. The shutdown of the process units began in stages on 5

April 2021. After the maintenance work, the refinery was expected to be operating normally by the end of June. In the

major turnaround, the refinery was subject to regulatory inspections, maintenance works and selected asset improvement

initiatives that are required for the refinery's operations.

On 13 April, Neste announced that it was joining forces with Finnair to reduce carbon emissions related to Neste

employees’ business travel by using Sustainable Aviation Fuel (SAF). Neste had recently made 300 tons of Neste MY

Sustainable Aviation Fuel™ available at Helsinki Airport in Finland for Finnair’s use. By replacing a part of the fossil jet fuel

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with SAF on its flights departing from Helsinki Airport, Finnair will reduce its greenhouse gas emissions by 900 tons of CO

equivalent. The collaboration between Neste and Finnair also serves as a showcase for other businesses, since it offers a

clear solution on how to reduce business air travel emissions. Neste’s aim is to make this solution available for businesses,

public institutions and other organizations with ambitious climate commitments.

On 29 April, Neste announced that it will modify its existing renewables production capacity in Rotterdam, the

Netherlands, to enable production of Sustainable Aviation Fuel (SAF). Currently the refinery produces mainly Neste MY

Renewable Diesel™. The modifications to the refinery, an investment of approximately EUR 190 million, will enable Neste to

optionally produce up to 500,000 tons of SAF per annum as part of the existing capacity. Neste expects the project to be

completed in the second half of 2023.

On 20 May, Neste announced that Neste, Mitsui Chemicals, Inc. and Toyota Tsusho Corp. were joining forces to enable

Japan’s first industrial-scale production of renewable plastics and chemicals from 100% bio-based hydrocarbons. In this

collaboration, Mitsui Chemicals will use Neste RE™, 100% bio-based hydrocarbons produced by Neste, to replace a part

of the fossil feedstock in the production of a variety of plastics and chemicals at its crackers within Osaka Works during

2021. In doing so, Mitsui Chemicals will become Japan’s first company to use bio-based feedstock in its crackers. The

collaboration between Neste, Mitsui Chemicals and Toyota Tsusho will enable brand owners and other potential clients

in the Asian market, particularly in Japan, to start incorporating renewable plastics and chemicals into their products and

offerings.

On 11 June, Neste announced that as part of its effort to reach carbon neutrality in its production by 2035, Neste aims

for 100% renewable electricity use globally by 2023. In order to proceed with this target, Neste will increase the use of

renewable electricity at its Porvoo refinery and has signed a new wind power agreement with a wind power company

Ilmatar. Renewable electricity produced by wind power is one of the key ways to reduce greenhouse gas emissions related

to the electricity purchases of production facilities.

On 17 June, Neste announced that Neste and LyondellBasell had made a long-term commercial agreement under which

LyondellBasell will source Neste RE™, a feedstock from Neste that has been produced from 100% renewable feedstock

from bio-based sources, such as waste and residue oils and fats. This feedstock will be processed through the cracker

at LyondellBasell’s Wesseling, Germany, plant into polymers and sold under the CirculenRenew brand name. Through

their collaboration, Neste and LyondellBasell are jointly contributing to the development of the European market for more

sustainable polymers and chemicals solutions. By ensuring continuity with significant industrial-scale volumes of renewable

polymers produced with renewable feedstock from bio-based sources, the companies wish to enable sustainability-focused

brands to develop more sustainable products and offerings.

On 17 June, Neste announced that Neste and Boston Consulting Group (BCG) had signed a new agreement for the

purchase of Neste MY Sustainable Aviation Fuel™, to be delivered to airlines SAS and Finnair, covering the volume of all

the flights with these carriers taken by BCG employees in the Nordics. Through this new partnership, BCG expects to

significantly reduce greenhouse gas emissions on flights with these airlines.

On 24 June, Neste announced that the scheduled major turnaround at Neste’s Porvoo refinery in Finland was successfully

completed and production has started at the refinery. The major turnaround is a significant investment to secure

safety, availability and competitiveness of the refinery. The total investment of the Porvoo refinery major turnaround was

approximately EUR 630 million, of which approximately EUR 300 million was realized in 2021. In 2020, only the most critical

maintenance work was executed at the refinery as the corona pandemic delayed the turnaround by a year.

On 25 June, Neste announced that it had set up a supply of Neste MY Sustainable Aviation Fuel™ at Cologne Bonn

Airport. By doing so, Neste is helping to meet increasing levels of demand from air freight and corporate customers

at Cologne Bonn Airport. AFS, the leading provider for aviation fueling services in Germany, supports Neste to serve

this market. As a forerunner in sustainability, Cologne Bonn Airport is one of the first German airports where Neste MY

Sustainable Aviation Fuel (SAF) is now available for all airlines.

On 21 July, Neste announced that Sonat Burman-Olsson had announced her resignation from the Board of Directors

of Neste Corporation. The Shareholders' Nomination Board of Neste assessed that the Board remained functional after

Burman-Olsson's resignation, and that the Board's composition continued to meet the requirements set out in the Articles

of Association.

On 27 July, Neste announced that Markku Korvenranta, M.Sc. (Eng), had been appointed as Executive Vice President, Oil

Products business unit and member of the Neste Executive Committee. He was to join Neste in January 2022, at the latest,

and reports to President and CEO Peter Vanacker. Korvenranta transferred to Neste from Marquard & Bahls, Germany, and

is based in Finland. Marko Pekkola, who had been leading the Oil Products business, had decided to continue his career

outside Neste.

On 7 September, Neste announced that it had agreed to acquire 100% of Agri Trading, one of the largest independent

renewable waste and residue fat and oil traders in the United States, and its affiliate entities. The transaction supports Neste

in its efforts to build a solid, resilient and flexible global waste and residue raw material platform that can keep pace with the

customer’s growing demand for renewable products.

On 20 September, Neste announced that the following members had been appointed to Neste's Shareholders'

Nomination Board: The Chair, Director General Kimmo Viertola of the Ownership Steering Department in the Prime Minister’s

Office of Finland; Deputy CEO, Investments Reima Rytsölä of Varma Mutual Pension Insurance Company; Director General

Outi Antila of The Social Insurance Institution of Finland and Matti Kähkönen, the Chair of Neste's Board of Directors. The

Nomination Board is responsible for drafting and presenting proposals covering the remuneration and number of members

of the Board of Directors and for presenting candidates as potential Board members to the AGM.

On 23 September, Neste announced that it was holding its Capital Markets Day 2021 as a webcast under the theme:

Delivering on strategy and renewal through innovation. Neste’s strategy remains relevant: we aim to be a global leader in

renewable and circular solutions.

Demand for renewable products is growing substantially, driven by higher climate ambitions and supportive regulation.

We will grow in renewable aviation, renewable polymers and chemicals, and in renewable road transportation, and

intend to have three substantial renewables businesses by 2030. Neste has an excellent safety record, and great

progress has been made in strategy execution despite the global pandemic. Innovation will continue to be at the

core of our success. We are targeting commercial-scale operations in at least one of our current innovation business

platforms by 2030.

Neste’s renewable feedstock and production platform has been substantially strengthened through organic growth

and recent acquisitions, and we will continue to grow our platform globally. We expect the global waste and residue

availability to grow to 40 million tons by 2030. We are focusing on developing new sources while growing the existing

feedstock pool. Our target for the share of crude palm oil and refined palm oil grades is to reach zero by the end of

2023, and the share of novel vegetable oils and other new low-ILUC feedstock is expected to grow post 2023.

Great progress has been made with the Neste Excellence program. By the end of 2020, a comparable EBIT

improvement totaling EUR 237 million was realized through the program. The improvement targets for the Neste

Excellence program have been increased from EUR 225 million to EUR 350 million by the end of 2022, and from EUR

300 million to EUR 500 million by 2030. These improvements are measured compared to the year 2018.

Our estimate for the Group’s full-year 2021 cash-out capital expenditure, excluding M&A, was revised from

approximately EUR 1.2 billion to EUR 1.1 billion.

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On 4 October, Neste announced that it had signed an agreement to sell its existing base oils business to Chevron

Corporation. The agreement covers a combination of share and asset deals forming Neste's entire global base oils

business. As part of the divestment, the parties had also agreed on a long-term offtake for Neste’s base oils supply from

Porvoo, Finland. With the same date, Neste signed an agreement to exit its base oils joint venture with Bahrain Petroleum

Company and Nogaholding. The completion of the divestment is subject to the approval of the competition authorities and

customary closing conditions, with estimated completion date by the end of Q1/2022.

On 20 October, Neste announced that Neste and Ravago aimed to establish a joint venture to build an industrial facility

for chemical recycling in North Sea Port in Vlissingen, the Netherlands. The facility is intended to be the starting point of joint

global chemical recycling activities, built upon the advancement of the thermochemical liquefaction technology of US-based

Alterra Energy. With this, Neste and Ravago plan to demonstrate and advance the commercialization of chemical recycling.

The transaction is awaiting for and subject to regulatory approval.

On 27 October, Neste announced that it had extended its climate commitments. Neste has two existing and ambitious

climate commitments: reaching carbon neutral production (Scope 1 & 2) by 2035 and helping its customers reduce their

greenhouse gas emissions by at least 20 million tons of CO

e annually by 2030. This work is well on track. Neste decided

to also set a concrete target for Scope 3 emissions to reduce the use phase emission intensity of sold products by 50% by

2040 compared to 2020 levels. This target will be achieved through Neste’s transformation towards increasing the share

of renewable and circular solutions as well as working with suppliers and partners to reduce emissions across the value

chain. Neste’s climate commitments show leadership and determination to meet the objectives of the Paris Agreement and

Neste later signed the Business Ambition for 1.5°C Commitment Letter. Neste will continue to build on its climate actions

so that they are in line with the 1.5°C emission scenarios, the criteria and recommendations of the Science Based Targets

initiative (SBTi). The approval process with the SBTi will begin as soon as the sectoral guidance for the Oil and Gas industry

is published.

On 2 November, Neste announced that the Agri Trading acquisition, announced in September 2021, had been approved

by regulatory authorities, and the deal had been closed.

On 9 November, Neste announced that Martti Ala-Härkönen Dr.Sc. (Econ.), Lic.Sc. (Tech.) had been appointed as Chief

Financial Officer (CFO), Strategy and IT and member of the Neste Executive Committee. He will report to President and CEO

Peter Vanacker, and take up the position on 8 May 2022, at the latest. Neste’s current CFO Jyrki Mäki-Kala will retire during

the spring 2022 after serving the company for nine years.

On 15 November, Neste announced that that it exercised its right to redeem in full its outstanding 2.125 per cent.

unsecured fixed rate notes due in 2022 on the redemption date of 17 December 2021 in accordance with the terms and

conditions of the notes. The outstanding nominal principal amount of the notes was EUR 321 million. On the redemption

date, Neste paid the holders of the notes a redemption price equal to 100 per cent of the outstanding nominal principal

amount of each note together with any accrued but unpaid interest to but excluding the date of redemption in accordance

with the terms and conditions of the notes. The notes were listed on the official list of NASDAQ Helsinki Ltd. Neste applied

to remove the notes from trading in connection with the redemption of the notes.

On 23 November, Neste announced that it was entering into execution phase with its partners in the MultiPLHY

consortium. The MultiPLHY project aims at installing, integrating and operating the world's first high-temperature electrolyzer

system in multi-megawatt-scale at Neste’s renewable products refinery in Rotterdam to demonstrate production of green

hydrogen for the refinery's processes. The technology of the high-temperature electrolyzer is provided by Sunfire.

On 9 December, Neste announced that its President and CEO Peter Vanacker had given notice of his resignation from

the company. He will leave his position at Neste at the latest in June 2022. The search for Vanacker’s successor started

immediately.

On 22 December, Neste announced that its aim of 100% renewable electricity use will be achieved ahead of schedule

in Finland. Neste had signed its first renewable hydropower purchase agreement with Vattenfall, one of Europe’s largest

producers and retailers of electricity and heat. Vattenfall delivers the hydropower from its Nordic hydropower plants and the

deliveries started at the beginning of January 2022.

Events published after the reporting period

On 28 January 2022, Neste announced that the Shareholders' Nomination Board had forwarded to the Board of Directors

of the Company its proposals to the 2022 AGM. The Nomination Board proposed that Matti Kähkönen shall be re-elected

as the Chair of the Board of Directors. In addition, the current members of the Board, John Abbott, Nick Elmslie, Martina

Flöel, Jari Rosendal, Johanna Söderström and Marco Wirén were proposed to be re-elected for a further term of office. The

Nomination Board proposed that Marco Wirén shall be re-elected as the Vice Chair of the Board. Further, the Nomination

Board proposed that the Board shall have nine members and that Just Janz and Eeva Sipilä shall be elected as new

members.

Risk Management

Neste considers risk management an integral part of daily management processes and good corporate governance.

Systematic risk management practices are the means to ensure that Neste is successful in achieving the set strategic

targets and business objectives and can maintain continuous operations in the changing business environment. Neste’s

risk management framework and processes are aligned with internationally recognized best practices: the COSO Enterprise

Risk Management framework, and the International Standard for risk management, ISO 31000:2009.

A risk management framework and risk management principles have been defined in Neste’s Corporate Risk

management Policy which has been approved by the Board of Directors. Risk management policy is supplemented by

risk management principles, guidelines and instructions for specific risk disciplines. Communication regarding the most

important risk issues takes place along the strategic planning and performance management cycle. Formal risk reporting

is directed to the business management and function management teams, the Neste Executive Committee, the Audit

Committee, and the Board of Directors.

Risks relating to Neste’s business

The global COVID-19 pandemic continues to cause risks and uncertainties for Neste’s business. The pandemic may have

an impact on Neste’s operations, feedstock sourcing and product demand, or delivery of projects. Other risks affecting

Neste's financial results for the next 12 months include macroeconomic, regulatory and geopolitical risks, changes in market

prices and competitive situation, any scheduled or unexpected shutdowns at Neste’s refineries, potential strikes, rising

energy costs and outcome of legal proceedings. The risks may be realized e.g. as unexpected changes in biofuel regulation,

prolonged economic recession or intensified trade tensions.

For more detailed information on Neste’s risks and risk management, please refer to the Annual Report Governance’s

chapter Risk Management and the Notes to the Financial Statements. For more information on Neste’s sustainability risks,

please see Sustainability Risks under the following Non-Financial Information reporting.

Non-Financial Information Statement

Neste fulfills the requirements of the EU Directive on disclosure of non-financial and diversity information, and the changes

made in the Finnish Accounting Act. Information in accordance with the current requirements of EU Taxonomy regulation

is disclosed in this non-financial information statement. In addition, Neste reports according to the GRI (Global Reporting

Initiative) Standards Core option, and reports SASB Oil & Gas Refining and Marketing indicators where applicable. Neste

is committed to applying the Task Force on Climate-related Financial Disclosures (TCFD) reporting principles in disclosing

climate-related financial risks and opportunities in the reporting. Part of our TCFD reporting takes place within this Non-

Financial Information (NFI) Statement in addition to our Sustainability Report, which also includes the TCFD index for

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navigation purposes between these sections. For more on Neste’s sustainability, see Neste’s Sustainability Report and

Neste’s website.

Business model

Neste employed an average of 4,872 (4,833) employees during 2021, of which 1,309 (1,035) were based outside Finland.

At the end of December, the company had 4,845 employees (4,825), of which 1,461 (1,228) were located outside Finland.

We are the world’s largest producer of sustainable aviation fuel and renewable diesel refined from waste and residues,

also introducing renewable solutions to the polymers and chemicals industries. We are also a technologically advanced

refiner of high-quality oil products, exploring ways to start using waste plastics as a raw material to produce new plastics,

and developing chemical recycling to combat the plastic waste challenge.

Neste’s businesses are grouped into four reporting segments: Renewable Products (RP), Oil Products (OP), Marketing

& Services (M&S) and Others. Our renewables businesses are Renewable Aviation, Renewable Polymers and Chemicals,

and Renewable Road Transportation. Neste has integrated sustainability into its business strategy to secure the long-term

success of its business. Neste’s purpose is to create a healthier planet for our children, with a vision to lead the way towards

a sustainable future together. Neste sets high standards for sustainability. Our broadened sustainability vision is an integral

part of the new wave of Neste’s transformation: we take the lead to transform towards a carbon neutral and nature positive

value chain, and set ourselves aspirational targets for biodiversity, human rights, and our supply chain and raw materials.

Our sustainably-produced solutions are our most significant contribution to the implementation of the Paris Agreement, as

well as the United Nations’ Sustainable Development Goals (SDG).

Neste creates value for society by helping its customers reduce climate emissions by developing sustainably lower-

emission solutions for transportation, aviation, and marine uses, as well as renewable and circular solutions for the chemical

and plastics industries. Neste’s NEXBTL refining technology enables the flexible use of various renewable raw materials,

including low-quality waste and residue oils and fats. We believe in a strong focus on the circular economy. Renewable

waste and residue fats and oils will be indispensable in delivering emission reductions in the near future and over the longer

term. Novel vegetable oils (such as cover crops cultivated on existing agricultural land during the off-season) will be an

increasingly important source of raw material for further scaling up solutions such as renewable diesel as well as sustainable

aviation fuel production. In addition, new conversion technologies will enable the use of currently untapped raw material

pools such as municipal solid waste and lignocellulosic biomass. In the long term, fuel produced from electricity and waste

, so-called e-fuels (or power to-liquids), will also increasingly play a role. The potential of these technologies could be

substantial if innovation activities successfully enhance technology maturity and bring down costs. Securing the supply of

renewable raw materials is considered essential for the success of Neste’s growth strategy. Neste also focuses on providing

excellent customer service, as well as flexible and reliable customer solutions.

Neste’s value creation is also based on its high-quality products, a global business model for raw material sourcing and

product sales, in-depth knowledge of regulations and global customer requirements for both renewable and fossil products,

as well as continuous innovation and development of products and solutions. In 2021, we had refineries in Porvoo, Naantali

(until March), Rotterdam and Singapore. Non-financial assets, e.g. production, sales and sourcing expertise, are an essential

part of Neste’s value creation. Substantial effort is made to maintain and develop the skills base within the company. We are

investing in developing our corporate culture to deeply ingrain customer satisfaction, safety and operational efficiency to our

day-to-day operations. Please see Neste’s value creation map in our Sustainability Report.

See also: Outlook

Proportion of Taxonomy-eligible economic activities

The EU Taxonomy is a classification system for sustainable economic activities. It is a tool assisting in redirecting

investments toward the climate transition by defining what is environmentally sustainable economic activity through, inter alia

detailed technical screening criteria, eligibility and alignment definitions, “do no significant harm” criteria and minimum social

safeguards. Its intention is to create a common classification for sustainable economic activities and to involve financial

markets in environmental objectives and the fight against climate change. As of January 2022, large undertakings such as

Neste that are required to publish non-financial information pursuant to the Non-Financial Reporting Directive (NFRD) are

required to disclose information on how and to what extent their activities are associated with environmentally sustainable

economic activities as defined in the Taxonomy. They need to report the proportion of their activities that is considered

eligible activity in their turnover, Capital Expenditure (CapEx) and Operating Expenditure (OpEx).

The EU Taxonomy technical screening criteria for the first Delegated Act including climate change mitigation and

adaptation establishes criteria for the “Manufacture of biogas or biofuels for use in transport and of bioliquids'' activity. The

threshold for greenhouse gas (GHG) emission savings from the manufacture of biofuels and biogas for use in transport are

at least 65% for new manufacturing facilities in relation to the GHG emission saving methodology and the relative fossil

fuel comparator. The EU taxonomy refers to the manufacture of biofuels for use in transport as a sustainable activity, and

we have assessed Neste’s Renewable Products manufacturing to be an eligible economic activity based on the taxonomy

regulation. Neste's Renewable Products reporting segment includes three businesses – Renewable Road Transportation,

Renewable Aviation and Renewable Polymers and Chemicals. The Renewables Platform enables Neste’s global renewables

production, renewable raw material sourcing and delivery of our renewables to our global customer base. Renewable

Road Transportation and Renewable Aviation businesses offer renewable fuels for the road transport and aviation sectors,

whereas the Renewable Polymers and Chemicals business offers renewable feedstock solutions for various polymers and

chemicals industry uses.

The recognized activity, manufacturing biofuels, makes a substantial contribution to climate change mitigation. Neste is

committed to transformation towards a carbon neutral value chain and the production of renewable products contributes

substantially to the stabilization of greenhouse gas concentrations in the atmosphere at a level which prevents dangerous

anthropogenic interference with the climate system, consistent with the Paris Agreement’s long-term temperature goal.

Our solution for the taxonomy-eligible activity, manufacturing of Renewable Products, represents climate change

mitigation solutions and is well in line with our ambitious climate commitments. Our calculations for Taxonomy eligibility are

based on the delegated acts of the Taxonomy Regulation. In calculating the proportion of turnover from products associated

with Taxonomy-eligible economic activities, we include revenue from goods and services which have a clear relation to the

biofuels. Eligibility calculations for turnover proportion include the revenue from our Renewable Products segment. The

Capital Expenditure (CapEx) proportion calculation consists of investments related to Renewable Products. The Taxonomy-

eligible Operating expenses (OpEx) relate to Renewable Products segment short-term leases, repair and maintenance,

and R&D related to the production of biofuel. We have estimated that the proportion of Taxonomy-aligned revenue will be

somewhat lower than the proportion of eligible activities.

Proportion from products or services associated with Taxonomy-eligible economic activities:

Taxonomy

eligibility-

KPI 2021

Total

MEUR

Proportion of

Taxonomy eligible

economic activities

Proportion of

Taxonomy non-eligible

economic activities

Turnover 15,148 39% 61%

CapEx 1,535 67% 33%

OpEx 211 43% 57%

Neste is consistently following the EU Taxonomy developments, and actively preparing for the following years’ reporting

requirements with Taxonomy-aligned activities.

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Materiality

This NFI Statement focuses on the most material sustainability topics for Neste and its stakeholders in relation to value

creation and risk management. Neste conducts a materiality assessment once every two years. The most recent

assessment was conducted in 2020. The materiality assessment identified nine material topics that provide the framework

for Neste’s sustainability agenda. The nine topics are: Carbon handprint; Carbon footprint and environmental impacts;

Protecting biodiversity, water and soil; Ethics, transparency and open communication; Innovation and partnerships; Safety,

health and wellbeing; Forced labor and vulnerable groups; Diversity, equality and inclusion; and Tackling the plastic waste

challenge. Several of the material topics are relevant in our own operations but also in our supply chain. Hence, the supply

chain responsibility is no longer seen as a single material topic but an underlying theme that needs to be considered

for each of the nine topics’ impacts. Similar underlying themes are economic responsibility and corporate governance.

These three themes are the cornerstones of our sustainability agenda. Our materiality matrix describes the significance of

sustainability topics from the perspective of our business operations and stakeholders.

Neste’s nine material topics relate to all four themes in non-financial reporting requirements: environmental matters; social

and employee matters; respect for human rights; and anti-corruption and anti-bribery.

Policies and principles

Climate matters

Neste’s climate commitments are a key part of the company strategy. They are discussed at the Executive Committee

at least twice a year and by the Board of Directors at least once a year. The decision to strengthen the governance with

regular reviews was made by the Neste Executive Committee in 2019. Key risks related to climate change are presented to

the Audit Committee in connection with the risk reviews. Responsibility for climate issue management belongs to the SVP

Sustainability and Corporate Affairs, who is responsible for managing climate-related risks and opportunities and presenting

them to the Board as part of the meetings, together with the sustainability organization.

As part of Neste’s strategy development, the company has set ambitious climate targets. We are well on track with our

commitments to reach carbon neutral production by 2035 (Scopes 1 & 2) and help our customers reduce their greenhouse

gas emissions by at least 20 million tons of CO₂e annually by 2030. In 2021, we also set a concrete target for our Scope 3

emissions: We aim to reduce the use-phase emission intensity of sold products by 50% by 2040 compared to 2020 levels.

In addition, we are committed to working with our suppliers and partners to reduce emissions across the entire value chain

(Scope 3). We have an established roadmap that we follow to proceed toward the target of carbon neutral production. We

have also identified the first key actions to proceed with the new commitment covering the value chain.

Climate-related metrics for emissions, including Scopes 1, 2 and 3 emissions as well as the use phase emission intensity

of sold products are reported in the 2021 Sustainability report.

Environmental matters

All Neste’s refineries and the company-managed security stockpiles have been certified in accordance with the requirements

of the ISO 9001, ISO 14001 and ISO 45001 standards. Our key policies and principles concerning environmental matters

related to our own operations are our Sustainability Policy and Sustainability Principle. All Neste’s renewable products

refineries have EU-compliant International Sustainability and Carbon Certification (ISCC), as well as Roundtable on

Sustainable Palm Oil (RSPO) certificates. In the United States, the sustainability of Neste’s renewable fuels is monitored

based on the Environmental Protection Agency’s (EPA) sustainability requirements.

We expect all our business partners and suppliers to uphold Neste’s policies and principles, including our Supplier Code

of Conduct, a key element in Neste’s supplier management system. The Supplier Code of Conduct was updated at the

end of 2019, and the updated code was implemented in 2020. The Supplier Code of Conduct is included in the terms of

contract with all suppliers, contractors and other business partners participating in the delivery of products, components,

materials or services to Neste, covering both direct and indirect procurement. Our renewable raw material suppliers are

also expected to meet the requirements of our Responsible Sourcing Principle, as well as to adhere to our Human Rights

Principle, and industry and market-specific legal requirements.

Neste has undertaken several initiatives to identify and understand how risks may be present in our operations and supply

chains. To ensure our suppliers’ compliance with the Supplier Code of Conduct, Neste has implemented systematic controls

for counterparty screening and monitoring in which all potential business partners and suppliers undergo automated pre-

screening. A key element in understanding sustainability risks in our supply chains is assessing country risk. Our overall

approach to sustainability due diligence is to work with our suppliers to drive positive practices and mutually enhance

sustainability performance through continuous engagement, collaboration and improvement.

Raw material suppliers for our renewable products are subject to rigorous sustainability due diligence as part of our

Principle on Renewable Products Supplier Sustainability Approval. The principle applies worldwide to any Neste company

establishing a business relationship with a supplier supplying renewable raw material for Neste’s renewable products,

and it sets the minimum requirements for supplier sustainability approval. We continue commercial negotiations only with

approved parties who meet our sustainability requirements, and all partners must continue to meet these criteria and

commit to developing their operations in the future.

Potential Oil Products suppliers undergo a two-phase assessment that includes a financial review and a compliance

assessment. In 2021, we developed and implemented a Sustainability Desktop Review based on suppliers’ publicly

available information to complement the existing process. In addition to assessing country and counterparty risks, our

sustainability due diligence process includes reviewing a range of Environmental, Social and Governance (ESG) topics.

Neste’s key policies and principles concerning environmental matters related to the sourcing of renewable raw materials

are the Neste Supplier Code of Conduct, Sustainability Principle and Responsible Sourcing Principle. All Neste’s palm oil

suppliers are committed to No-Deforestation policies. Since 2015, this has also been extended to cover their third party

suppliers. All the palm oil we have used has been fully traceable to the plantation level since 2007, and 100% certified since

2013.

Social and employee matters

Neste’s key principles concerning social and employee matters are included in our People Policy. All the human resources

(HR) principles and standards meet the Neste Management System (NMS) requirements, as well as the needs of the

changing business environment, international growth and employment compliance. NMS combines unified policies,

principles, standards and work procedures in one transparent structure. Globally, Neste now has one HR policy, 11 HR

principles and 15 HR standards in use.

The key principles included in the People Policy are: emphasizing the importance of the continuous development of

leadership and corporate culture; acting in line with the company’s values and underlining everyone’s responsibility for their

professional development as a means of achieving excellent results; guaranteeing equal rights and opportunities regardless

of gender, ethnic origin, age, religion, political convictions, and other similar issues; promoting a workplace where everyone

understands the importance of their work in achieving common goals; and providing equal and fair compensation based on

individual and team performance. One of Neste’s central principles is to abide by all laws, statutes and official regulations

wherever the company operates and in all aspects of its operations, and to follow clear ethical standards and good

practices.

In 2021, refinery operations in Porvoo and Naantali were restructured to ensure the competitiveness of the Oil Products

business. The refinery operations in Naantali were shut down in March 2021. The final number of permanent redundancies

decreased from 310 to 217 as a result of successful job changes.

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We implemented a large-scale change support program that includes offering new jobs for employees in other Neste

locations and functions. We support the relocation of employees and their competence development to meet new roles and

tasks. Leaving employees are supported financially, as well as by providing support for re-employment and training, e.g. by

providing personal career coaches. Seventy percent of employees participating in the program had taken a new step in their

careers by October 2021, finding new career paths and developing professionally.

Safety is integral to our values. Improving safety and more broadly operational excellence covering occupational health

and safety, process and marine safety, environment management, chemical compliance, quality, security, productivity,

reliability, and efficiency enables us to achieve our strategic targets. For us, safety means excellence in risk management.

It is about the existence and effectiveness of every safety barrier that helps manage risks, prevent incidents and mitigate

adverse consequences. We are determined to protect people and the environment, as well as our operations, assets,

information and brand, from any harm. We believe this can be achieved when everyone working for and with us is truly

committed to managing and improving safety, understands every hazard related to our operations and have excellent ways

of evaluating and managing risks. Moreover, we strive to learn from experience and continuously improve our capabilities of

understanding and managing hazards.

Safety performance improvement work continued in 2021. Neste’s Operations Excellence Policy, Life Saving Rules,

Operations Excellence (OE) Principles, and supplementary detailed standards set requirements and guidelines for how we

manage and improve safety. The key activities in 2021 were the implementation of the updated Safety Leadership Principle,

deployment of the Incident Learning Practices, and systematic use of the Health, Safety and Environment (HSE) design

guidelines for investment projects.

One of the focus areas of 2021 was to ensure safety in investment, turnarounds and change projects. The closure of the

Naantali refinery was completed without safety deviations. In the Porvoo refinery’s major turnaround, the safety targets were

not met, but the safety performance was significantly better than in the previous turnaround in 2015. A thorough lessons

learned process is ongoing to ensure targeted performance in the future. The Singapore expansion project continued at

a good safety level. The integration of the new acquisitions with Mahoney Environmental and Neste’s Rotterdam terminal

continued. The integration into Neste practices will continue in 2022.

The Future Oil Products (FOP) transformation program in Finland continued during 2021 with a high focus on risk and

change management practices. No major safety deviations occurred in 2021.

Respect for Human Rights

In line with the United Nations Guiding Principles on Business and Human Rights, Neste has made a commitment to

respect human rights and remediate adverse human rights impacts throughout our business operations and value chains.

Our Human Rights Principle is informed by the International Bill of Human Rights, the International Labour Organization’s

Declaration on Fundamental Principles and Rights at Work, the Children’s Rights and Business Principles, and the

UN Declaration on the Rights of Indigenous Peoples. It is also informed by the UN Global Compact and UN Women’s

Empowerment Principles, to which we are signatories.

Our Human Rights Principle sets the path and standards for a rights-based approach in all Neste’s business decisions,

and defines our seven salient human rights issues: 1. Fair employment, 2. Health & safety, 3. Equality, diversity & non-

discrimination, 4. Rights of children and young people, 5. Forced labor, 6. Fair treatment and access to remedy, and

7. Social, economic and cultural rights – including respect for the rights of minority groups and Indigenous Peoples.

We require all our business partners and suppliers to comply with the minimum human rights requirements defined in

our Supplier Code of Conduct. In addition, we expect them to uphold our commitment to respect and remediate, and our

ambition to promote positive human rights impacts.

Neste supports the elimination of all forms of modern slavery. We recognize that modern slavery is a growing global issue

from which no industry is immune, and we are committed to taking the appropriate steps to identify vulnerable groups and

mitigate modern slavery risks in our operations and supply chains. Our Modern Slavery Statement, updated annually, details

the actions we are taking to prevent modern slavery and human trafficking in our businesses.

We are committed to respecting and supporting children’s rights, and to implementing the Children’s Rights and Business

Principles throughout our business and value chains, including in our workplace, marketplace and communities. More

information on specific measures we take and the projects in which we are involved is available on our website.

Our Code of Conduct applies to the entire Neste group and contains key human rights requirements and expectations

with which all Neste employees are to comply in their daily work. For example, all employees are expected to be aware of

how their work impacts the human rights of people in Neste’s operations, value chain and communities, understand how to

recognize potential human rights risks in their daily work and decision making, and know how to recognize and report signs

of modern slavery.

Zero tolerance for corruption

Neste and its management are committed to conducting the company’s global operations ethically and with integrity. As

stated in the company’s Code of Conduct, Neste has zero tolerance for corruption of any kind in connection with Neste’s

operations, whether committed by Neste employees or third parties acting on behalf of Neste. Neste also requires that its

external business partners acting for or on behalf of the company are aware of and share the commitment to zero tolerance

for corruption. Neste’s key policies and principles concerning anti-corruption and anti-bribery are the Code of Conduct, Anti-

Corruption Principle, and Supplier Code of Conduct. Neste renewed its Code of Conduct in 2021. More information on the

Code of Conduct renewal can be found in the Sustainability Report.

Sustainability risks

The Neste Corporate Risk Management policy, approved by the Board of Directors, defines the framework and principles

for risk management. The policy is supplemented by risk management principles, guidelines and instructions for specific

risk disciplines. The defined principles, requirements and processes also apply to sustainability risks, which are managed

as a single risk category in the quarterly risk reviews. Assessment considers short-, medium- and long-term perspectives

for climate risks. Sustainability risks, including climate change related risks, are identified and assessed twice a year to

determine which risks and opportunities could have a substantive financial, strategic or reputational impact.

Communication regarding the most important risk issues takes place along the strategic planning and performance

management cycle. Formal risk reporting is directed to the business management and function management teams, Neste

Executive Committee, Audit Committee, and the Board of Directors. Neste’s sustainability risks can be categorized as

follows:

Climate related risks and opportunities

One part of Neste’s climate work is to understand and evaluate the potential implications of climate change for our

business and operating environments. Neste is therefore committed to applying the Task Force for Climate-related Financial

Disclosures (TCFD) reporting framework. Neste uses scenario-analysis as one element to guide and influence business

objectives and long-term strategic direction. We base our scenario analysis on the internationally acknowledged climate

pathways that represent objective and well-established benchmarks for the energy industry, e.g. IEA scenarios. Neste will

continue to build on its climate actions so that they are in line with the 1.5°C emission scenarios but refers to the “most

likely” scenario reflecting the existing policies and a trajectory of 3.5°C global warming by the end of the century. In addition,

the resilience of Neste’s strategy has been assessed in the 1.5°C Scenario, which is compliant to achieving

Net Zero by 2050.

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The identification of physical risks like extreme weather events also takes this scenario into account. Climate scenario

work will be developed further in the coming years, with a more systematic approach in the 2021 Business Environment

Outlook to the spring strategy update. Risks associated with the transition to a lower-carbon economy can entail changes

for Neste to address, e.g. policy and legal risks such as uncertainty related to the development of greenhouse gas emission

pricing or unexpected requirements for lower emissions in production. Market risks such as stakeholder and customer

attitudes moving in a less favorable direction, shifts in our products’ supply and demand and services and raw materials, an

increased cost of raw materials or utilities, or scarcity of a renewable raw materials are seen as relevant risks. Physical risks

like an increased severity of extreme weather events, changes in precipitation patterns and extreme variability in weather

patterns may also affect Neste’s ability to source different feedstocks.

The adaptability and resilience of Neste’s strategy to climate change also creates opportunities by contributing to the

transition to a lower-carbon economy. Our strategy has been influenced by opportunities related to renewable products, and

we see that increasing global climate ambitions and related regulations continue to increase the demand for our renewable

products.

Risk of adverse environmental impact from emissions to air and water

Neste is subject to a wide array of laws and regulations targeting safe operations and a reduced environmental footprint. In

addition, transitioning to a lower-carbon economy entails additional requirements that affect Neste’s approach to managing

refining assets and place more emphasis on the efficient use of different utilities such as water and energy. To ensure

continuous compliance with the applicable laws and regulations, Neste has implemented certified management systems

that reflect the international standards issued by the ISO. During 2021, a comprehensive set of leading environmental

performance indicators was in use in all business units to reduce the risk of environmental permit violations or emissions and

incidents.

Risk of leaks, explosions and other chemical hazards

Due to their nature, Neste’s operations carry an inherent risk of fires, explosions, leaks or other hazards that can result in

soil, groundwater or seawater contamination.

At worst, maritime accidents would have a catastrophic impact on the surrounding environment. Neste has implemented

systematic risk management actions to minimize the probability of chemical hazards. Actions taken include ship vetting,

systematic safety procedures, partner selection and performance management, and training in Neste’s own operations.

In process safety, Neste has implemented and is continually developing comprehensive safety rules, procedures and

practices covering leadership, competence development, performance management and learning from experience.

Considerable investments are carried out annually to improve the process safety of Nestes’ assets. In 2021, the focus was

on the effectiveness of the Process Hazard Analysis (PHA) implementation and utilization of the HSE design guideline in the

investments.

Risk of adverse environmental impact from procurement of raw materials for rening

The main raw materials used in Neste’s refineries include animal fats, used cooking oils and wastes, and residues from

vegetable oil processing, as well as some vegetable oils and crude oils. In recent past years, the use of palm oil has created

a reputational risk as the sustainability of palm oil sourcing has given rise to public discussion and concerns from NGOs

and customers, for example. Neste is committed to ensuring sustainable palm oil sourcing and has implemented several

measures to improve transparency in its supply chain, as described above in Climate and Environmental matters. Our

target for the share of crude palm oil and refined palm oil grades is to reach zero by the end of 2023, and the share of novel

vegetable oils and other new low-ILUC feedstock is expected to grow post 2023.

Risk of adverse human rights impacts

Neste has undertaken several initiatives to ensure the proper management of human rights related risks across our

business.

To embed respect for human rights throughout our business operations and value chains, we carry out ongoing human

rights due diligence to identify and assess risks to human rights, take action to prevent and mitigate them, track the

effectiveness of our measures, and provide a remedy when required. In assessing human rights risks, we engage with

affected stakeholders and pay special attention to vulnerable groups such as women, children, migrant workers and

Indigenous People.

In 2021, we initiated a new procedure for reviewing Neste’s salient issues and understanding the gaps in our mitigation

activities. This saliency review will be adopted as an ongoing annual practice at Neste, enabling us to better manage risks to

human rights across all our business activities.

In 2021, we strengthened the human rights criteria and assessments required for decision making on strategic

business development, investments and innovation projects. The aim of this is to ensure that human rights impacts are

comprehensively assessed for all major projects at Neste before any final investment decision is made, starting from the

earliest stages in the project.

We continue to monitor and assess risks to people working onsite at our refineries, including during our refinery

turnarounds and refinery expansion projects, paying special attention to the rights and needs of vulnerable groups—for

example, migrant workers at our Singapore refinery expansion.

We assess and monitor our human rights impacts in both our own operations and our supply chains. For us to

effectively prioritize our activities, our risk assessment includes the mapping of supply chains and operations, country risk

assessments, desk-based research, supplier surveys, supplier engagement, and discussions with expert stakeholders. Our

Sustainability Audits have a strong human rights focus and prioritize assessing impacts on people.

We are committed to training our employees on our policies. In 2021 we rolled out human rights e-learning courses for

all of our employees, with specialized training sessions for employees working on new feedstock projects in innovation.

We also engage in capacity building with our suppliers in high-risk sectors and geographies to drive positive human rights

impacts throughout the supply chain. In 2021, we conducted a series of workshops on grievance mechanisms with our

palm suppliers in Malaysia and Indonesia.

Risk of corruption and bribery

Risks of corruption and bribery are typically treated as inherent risks in the oil and gas sector due to its global nature,

contractual relationships with local governments, and involvement in complex networks with various suppliers and

contractors. Neste has zero tolerance for any form of corruption and bribery. As a preventive measure, Neste has developed

a compliance program which includes policy statements (Code of Conduct, Anti-Corruption Principle), dedicated eLearning

packages, annual compliance acknowledgement, regular communication, and Ethics Online for the reporting of suspected

misconduct. Neste’s counterparties are required to comply with the Supplier Code of Conduct and/or their own equivalent

principles and undergo a compliance clearance and counterparty risk assessment. As stated in the Code of Conduct, Neste

has processes in place to carry out due diligence on its business partners. The Compliance clearance and counterparty

risk assessment covers the following risks: trade sanctions, politically exposed persons, money laundering, corruption and

bribery.

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Outcomes and key performance indicators

Neste’s sustainability policies and principles apply to the company as a whole and guide all its operations. In addition,

international conventions and commitments underlie Neste’s work. In 2021, Neste was included in the Dow Jones

Sustainability Index for the 15th consecutive time. Neste was included in both the DJSI World and DJSI Europe. The

industry’s best scores in materiality and environmental and social reporting contributed to the company’s inclusion among

the top performers. Neste achieved an AAA rating in 2021 in the MSCI ESG Rating Index measuring companies' resilience

to long-term ESG risks. On the 2021 CDP Climate Change and Forests assessments, Neste achieved the Leadership level,

with an A- rating.

Climate and Environmental matters

We are well on track with our commitment to help our customers reduce their greenhouse gas emissions by at least 20

million tons of CO₂e annually by 2030. Neste's performance against this target is reported in the table below.

In addition, Neste is committed to reach carbon neutral production by 2035 (Scopes 1 & 2). Neste aims for 100%

renewable electricity use globally by 2023. To proceed with the target, Neste has increased the use of renewable electricity

at its Porvoo refinery in Finland with wind power and has agreed wind power deliveries with its partners Statkraft, Ilmatar

and Fortum. In December 2021, Neste also signed its first hydropower agreement with Vattenfall. Thanks to this agreement,

Neste will achieve its renewable electricity target in Finland already in 2022.

The transition to renewable electricity has also progressed in Neste’s other production sites according to plan. For

example, about 75% of the electricity used in the Rotterdam refinery in 2021 has been renewable electricity certified with

Guarantees of Origin. In 2021, we also updated the internal price of greenhouse gas (GHG) emissions, which is used in

investment evaluations. These key climate performance indicators, GHG emission reduction for our customers and our

production GHG emissions (Scopes 1 & 2), are included in the long-term incentives for Neste’s key personnel.

In 2021, Neste also set a concrete target for Scope 3 emissions to reduce the use-phase emission intensity of sold

products by 50% by 2040 compared to 2020 levels and is working with suppliers and partners to reduce emissions across

the value chain (Scope 3).

While Neste continues to focus on waste and residue raw materials in the short term and plans e.g. to reduce the share of

conventional palm oil (100% ISCC-certified crude and refined palm oil) to 0% of its global renewable raw material inputs by

the end of 2023, we also expect to use other types of raw materials besides waste and residues in the mid and longer term.

Other climate-related metrics for GHG emissions (Scopes 1, 2 and 3 emissions, as well as the use phase of emission

intensity of sold products) are reported in the 2021 Sustainability Report, and their associated risks are discussed in the

climate-related risks above.

In 2021, we updated our Neste Traceability Dashboard to provide the latest data regarding our palm and palm fatty acid

distillate (PFAD) supply chains. By the end of 2021, we had mapped hundred percent of our PFAD supply chain to the palm

oil mills supplying the palm oil refineries where PFAD is extracted during vegetable oil refining. In 2021, we continued our

PFAD supply chain mapping efforts in collaboration with palm oil suppliers and sustainability specialists from the Consortium

of Resource Experts (CORE). With CORE, we continued conducting risk assessments of palm oil mills supplying palm oil to

refineries and engaged with suppliers to further enhance their No-Deforestation, Peat and Exploitation (NDPE) pledge. We

continued developing our Supplier Sustainability Portal to digitalize renewable raw material supplier evaluation, monitoring

and engagement.

Emissions from operations at Neste’s refineries were in substantial compliance at all sites in 2021. A total of two minor

non-compliance cases occurred in Neste’s operations, with very limited local environmental impact.

Regarding difficulties in operation of the wastewater treatment system in Rotterdam, the water authority has confirmed

an order to improve and stabilize the operation, subject to a threatened penalty payment. The operational difficulties with

wastewater are arising from increased use of waste and residue feedstock materials. To solve the issue and further improve

wastewater treatment at the site a fully new treatment facility is expected to be completed during 2023.

Efforts to improve environmental management during 2021 contributed to the performance improvement.

Key figures 2021 2020

Emission limits and overruns: All deviations

from environmental permits

Long-term target for OP and Renewable

Products (RP): zero permit violations.

Permit violations:

2, both in OP

Permit violations:

2, of which in OP, 1

and on RP Platform, 1

Energy efficiency, energy saving measures

GWh Target: Reduce Neste’s energy

consumption by 500 GWh during

2017–2025

95.8 GWh 33 GWh

GHG emissions reduction achieved with

Neste’s renewable fuels compared to

crude oil based diesel, million tons.

20 MtCO

e annually by 2030.

10.9 MtCO

10.0 MtCO

The number of renewable raw material

supplier’s sustainability assessment and

their outcome

Total: 223

New approved suppliers: 171

All approved: 186

Pending: 33

Rejected: 4

Total: 219

New approved suppliers: 120

All approved: 133

Pending: 65

Rejected: 21

Annual greenhouse gas (GHG) reduction achieved with Neste’s renewable products compared to 100% crude oil based fuel. Calculation

method complies with the EU Renewable Energy Directives: until the end of H1/2021 with RED 2009/28/EC and in H2/2021 with RED II

(EU)2018/2001. Calculation principle changed in 2021.

New approved suppliers include Demeter existing suppliers that were excluded in 2020 due to ongoing integration. All other figures

include existing suppliers, which undergo a sustainability assessment process every 3–5 years. Supplier data includes only main

contractual parties, excluding sub-suppliers.

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Social and employee matters

Neste has a great opportunity to increase and foster diversity as the business grows globally. Neste drives equality and non-

discrimination and always provides career and development opportunities to employees who are most qualified without

allowing any personal attribute such as gender, ethnic background, nationality, age, pregnancy, sexual orientation or gender

identity, disability, religion, or political opinions to play any part in decision making. To benefit from increasing diversity and

make people feel valued and supported, Neste pursues the development of inclusive leadership and a culture of belonging

based on values. The key actions in 2021 are strongly linked to Neste’s people-related initiatives: leadership development

programs, the Smart Work concept to support the new normal and the renewal of the Code of Conduct.

According to the engagement survey conducted in early 2021, our employee engagement index score is 66. The

exceptional and challenging pandemic situation affected the overall results. The majority of our employees are positive about

working at Neste and would recommend us as a workplace. Our special strengths are the meaningfulness of our own work,

satisfaction with support from the manager, and a responsible and safe way of acting for both the company and our people.

In addition to a broader employee engagement survey, we measure change through quicker pulse surveys and other

surveys targeted at specific groups.

Neste’s occupational safety performance (TRIF, or rate of accidents requiring medical treatment per million hours worked,

including contractors) was in 2021 1.4 (1.3 in 2020) which was better than the target for 2021 (1.7) but slightly worse than

in 2020. Process safety performance (PSER, or the rate of process safety events per million hours worked) was in 2021 1.4

(1.6 in 2020) which was better than 2021 target level (1.7) and better than in 2020.

Reaching further improvements in safety performance remains as a top priority for Neste. The active safety improvement

work continues. Neste’s Operations Excellence Policy, Life Saving Rules, Operations Excellence (OE) Principles, and

supplementary detailed standards set requirements and guidelines for how we manage and improve safety. The focus areas

remain on safety commitment and leadership, operational discipline, process safety, and contractor safety. The key process

safety items are investments in asset integrity, ensuring comprehensive and effective process hazard analysis and mitigation

actions in all operations, continuous development of safety-critical operations and further improvement of process safety

competence.

Key figures 2021 2020

TRIF

1.4 1.3

Process safety event rate

PSER

1.4 1.6

New employee hires and

employee turnover

Leaving rate of permanent employees

13.0%. Hiring rate of permanent

employees 12.1%.

Leaving rate of permanent employees

6.9%. Hiring rate of permanent

employees 9.2%

Employee engagement

Target: Maintain a

good level of employee

engagement.

According to the engagement survey

conducted in early 2021, the employee

engagement index score was 66. Majority

of employees thought favorably of

working at Neste and would recommend

Neste as a workplace.

65% felt happy working at Neste, 78%

understood how own work contributes to

company’s success, 70% thought Neste

acts in a responsible way, 79% saw

safety as a priority for Neste.

According to the engagement survey

conducted early 2020 the employee

engagement score was 70, which was

in line with the global benchmark result.

Majority of employees thought favorably

of working at Neste and said they would

recommend Neste as a workplace.

70% felt happy working at Neste, 81%

understood how own work contributes to

company’s success, 79% thought Neste

acts in a responsible way, 83% saw

safety as a priority for Neste.

Total Recordable Incident Frequency, number of cases per million hours worked.

The figure includes both Neste’s and contractors’ personnel.

Process Safety Event Rate, number of cases per million hours worked. The figure includes all operations in Neste’s facilities.

See also: Diversity of the Board of Directors

Human Rights

In recognizing that our human rights impacts may change over time as our operations and value chains continue to evolve,

we are committed to embedding human rights due diligence across our business as an ongoing, iterative process. We

achieve this by building human rights due diligence into our existing systems and processes and creating new and separate

processes when required. This year, we continued to conduct human rights due diligence within our supply chains and

operations to prevent, mitigate and where necessary, remediate adverse human rights impacts.

In 2021, we initiated a new procedure for reviewing Neste’s salient issues and understanding the gaps in our mitigation

activities. This saliency review will be adopted as an ongoing annual practice at Neste, enabling us to better manage risks to

human rights across all our business activities.

In October 2021, we commissioned BSR to conduct a Human Rights Risk Assessment of Neste’s potential Rotterdam

Expansion Project. The methodology used in the assessment was based on the United Nations Guiding Principles on

Business and Human Rights, including a salience assessment and the integration of considerations related to the impacts of

COVID-19. The assessment covered the project’s construction phase, with additional analysis and considerations included

for the operations phase.

In line with our ambition to advance a rights-based approach in all Neste’s business decisions, we strengthened the

human rights criteria and assessments required for decision making on strategic business development, investments and

innovation projects in 2021. We also undertook human rights risk mapping and country risk assessments completed for the

Algae and Lignocellulose Innovation projects. The aim is to ensure that human rights impacts are comprehensively assessed

for all major projects at Neste before any final investment decision is made and starting from the project’s earliest stages.

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At an operational level, following the successful implementation of an onsite grievance mechanism to capture worker

voices at the Singapore refinery expansion during 2020, in 2021, we took steps to implement similar practices for our other

2021 Turnarounds, including at our Porvoo refinery, to provide a channel for all onsite workers to raise grievances and

access effective remedy.

Anti-corruption and bribery matters

In addition to the Code of Conduct, Neste has an Anti-Corruption Principle, which sets the rules to prevent corruption in

connection with Neste’s business operations and providing more detailed guidance on responsible business practices. Anti-

Corruption topics are regularly communicated to and trained for in the organization, including an Anti-Corruption e-learning

course issued in 2019. The e-learning course also includes a requirement for employees to report observed or suspected

violations of Neste’s Anti-Corruption Principle to their own superior, Neste’s HR, and the Compliance or Internal Audit

functions. Employees may also report their concerns anonymously via Neste’s externally operated misconduct reporting

system, Ethics Online, which can be used by phone or via the website. Ethics Online is available both for employees and

external stakeholders. More information on Neste’s grievance process and the related Misconduct Investigation Standard is

available in the Corporate Governance Statement.

Neste has issued an Anti-Money Laundering and Counter-Terrorist Financing (CTF) Standard detailing Neste’s guidance

and process in relation to preventing money laundering risks.

In 2021, Neste renewed its Code of Conduct. A related Code of Conduct e-learning course was issued as a first step

for all office workers in 2021. The e-learning course also covers anti-corruption topics and how to report observed or

suspected violations of Neste’s Code of Conduct. In 2022, the Code of Conduct e-learning course will be issued for the rest

of the organization. The e-learning course was also included in the training package for all new employees.

A total of eighteen suspected misconduct incidents were reported during 2021, leading to all in all 17 investigations as

two reported cases linked, and half of these reports came via the EthicsOnline system. Confirmed misconduct by Neste

employees was identified in two of the completed investigations, and misconduct by third parties in Neste’s supply chain

was confirmed in three investigations, all leading to further actions and process improvements. No confirmed misconduct

was related to corruption or bribery. Further, no misconduct was found in eleven completed investigations. One investigation

is pending. Neste’s Investigations Group investigated the received reports and reported the number of reported cases per

category to the Board of Directors’ Audit Committee and to the Ethics and Compliance Committee, consisting of Neste

Executive Committee members, the Chief Compliance Officer, and the VP, Internal Audit. In three investigations in 2021, the

Neste Investigation Group retained independent external forensic expertise to conduct the investigation.

Training on anti-corruption, anti-money laundering, competition law compliance, trade sanction compliance and privacy

was conducted with defined target groups such as the sales, supply and procurement teams.

Recognizing the need for sustainable raw materials in the supply chain, Neste has improved its procedures for tracking

and processing grievances. This includes establishing a cross-functional team to ensure speed and consistency in how we

manage grievance cases and maintaining a publicly available log of grievances raised in our raw materials supply chains

on our website. The grievance log is updated on a monthly basis to include new grievances, as well as to provide status

updates on the remediation of existing grievances, and how these are being addressed or monitored by Neste.

Read more about the topics on Neste’s website.

Key figures 2021 2020

Human Rights Due

Diligence carried out

for key business areas/

functions.

Target: To strengthen

Neste’s capacity to

identify, assess, and

address human rights

risks in our operations

and supply chains.

Four major assessments/initiatives

undertaken in 2021:

1) Corporate-wide assessment to review

Neste’s salient issues and understand

gaps in mitigation activities.

2) Human Rights Risk Assessment

completed for potential Rotterdam

Refinery Expansion Project

3) Human rights risk assessments

completed for Lignocellulose and Algae

Innovation platforms

4) Development and implementation of

a new channel for all onsite workers to

raise grievances and access effective

remedy during the 2021 Turnarounds.

Two major assessments

completed in 2020.

1) Corporate-wide exercise to map and

understand internal processes and gaps

in addressing modern slavery risks across

all three of Neste’s operating segments

(incl. OP, RP, M&S, HR, Production,

Logistics & Operations, Indirect

Procurement and Risk Management).

2) Survey of Neste Malaysian palm

suppliers on recruitment and employment

practices for migrant workers

Key figures 2021 2020

Number of suspected

misconducts reported

in person or via the

whistleblowing system to

the Investigations Group.

Target: To further

encourage employees

and external stakeholders

to report observed or

suspected misconducts.

Number of suspected misconducts

reported in person or via the available

reporting channels including EthicsOnline

to the Investigations Group was in total

18 of which HR 4 reports, discrimination

and harrassment 2, conflict of interest

3, bribery, corruption and facilitation

payment 2, and 7 reports belong

to category “other”. Two reported

suspected misconducts linked,

leading to a total of 17 investigations.

Misconduct by Neste employees

confirmed in 2 cases, related to asset

misuse, manager conduct, substance

abuse and/or inappropriate behavior.

Misconduct by a third party confirmed

in 3 cases, related to inappropriate,

discriminative and/or non-professional

behaviour. All leading to further

actions and process improvements.

One investigation is pending. The

confirmed cases of misconduct were

not related to corruption, bribery or

facilitation payments. Renewable raw

material Supply chain related external

grievances are reported separately by the

Sustainability team on the Neste website.

Number of suspected misconducts

reported in person or via the available

reporting channels including EthicsOnline

to the Investigations Group was in total

16 of which HR 6 reports, discrimination

and harrassment 4, fraud 1, competition

law infringement 1, health and safety

1 and 3 reports belong to category

“other”. In two cases misconduct

related to inappropriate behaviour was

established and led to further actions and

process improvements. Renewable raw

material Supply chain related external

grievances are reported separately by the

Sustainability team on Neste website.

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Outlook

Visibility in the global economic development still remains low due to the COVID-19 pandemic. As a consequence, we

expect volatility in the oil products and renewable feedstock markets to remain high.

Renewable Products’ first-quarter sales volumes are expected to be on a roughly similar level as in the previous quarter.

Waste and residue markets are anticipated to remain tight as their demand continues to be robust. Following the conclusion

of the term sales contract negotiations, the share of term sales is expected to be approximately 75% of sales volumes in

2022. Our first-quarter sales margin is expected to be within a range USD 650-725/ton. The segment’s full-year fixed costs,

including, among other things, fixed costs relating to the completed acquisitions, are expected to be approximately EUR

140 million higher than in 2021.

Utilization rates of our renewables production facilities are forecasted to remain high. We have scheduled a six-week

turnaround at the Singapore refinery in the third quarter, and a seven-week turnaround at the Rotterdam refinery in the

fourth quarter of 2022. The Singapore turnaround is currently estimated to have a negative impact of approximately EUR 90

million, and the Rotterdam turnaround a negative impact of approximately EUR 100 million on the segment’s comparable

EBITDA.

Oil Products’ market demand has recovered year-on-year, but is still seen to be negatively impacted by the COVID-19

pandemic. The reference margin is expected to remain volatile and to be lower than in the fourth quarter of 2021. The very

high natural gas price is expected to keep depressing the segment’s additional margin. The first-quarter sales volumes are

forecasted to come down somewhat from the high level seen in the fourth quarter boosted by cold weather and high natural

gas price. The Porvoo major turnaround impacted refinery availability in 2021, and the planned downtime is significantly

lower in 2022.

In Marketing & Services the sales volumes and unit margins are expected to follow the previous years' seasonality pattern

in the first quarter. The COVID-19 pandemic is anticipated to have some negative impact on the demand and sales volumes.

Based on our current estimates and a hedging rate of 85%, Neste's effective EUR/US dollar rate is expected to be within

a range 1.17–1.19 in the first quarter of 2022.

Neste estimates the Group’s full-year 2022 cash-out capital expenditure to be approximately EUR 1.1 billion, excluding

M&A. Comparable EBITDA will replace comparable EBIT as Neste’s main profitability indicator starting from the first quarter

of 2022 since we consider comparable EBITDA to better reflect our underlying business performance during a heavy

investment period.

Dividend distribution proposal

Neste's dividend policy is to distribute at least 50% of its comparable net profit in the form of a dividend. The parent

company's distributable equity as of 31 December 2021 amounted to EUR 2,800 million, and there have been no material

changes in the company’s financial position since the end of the financial year. The Board of Directors will propose to the

Annual General Meeting that a dividend of EUR 0.82 per share (0.80), totaling EUR 630 million (614 million), shall be paid on

the basis of the approved balance sheet for 2021. The dividend shall be paid in two installments.

The first installment of dividend, EUR 0.41 per share, will be paid to shareholders registered in the shareholders’ register

of the Company maintained by Euroclear Finland Ltd on the record date for the first dividend installment, which shall be 1

April 2022. The Board proposes to the AGM that the first dividend installment would be paid on 8 April 2022. The second

installment of dividend, EUR 0.41 per share, will be paid to shareholders registered in the shareholders’ register of the

Company maintained by Euroclear Finland Ltd on the record date for the second dividend installment, which shall be 30

September 2022. The Board proposes to the AGM that the second dividend installment would be paid on 7 October 2022.

The Board of Directors is authorized to set a new dividend record date and payment date for the second installment of the

dividend, in case the rules and regulations on the Finnish book-entry system would be changed, or otherwise so require.

The proposed dividend represents a yield of 1.9% (at year-end 2021 share price of EUR 43.36) and 53% of the

comparable net profit in 2021.

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Key figures

Income statement 2021 2020 2019

Revenue EUR million 15,148 11,751 15,840

EBITDA EUR million 2,607 1,508 2,731

- of revenue % 17.2 12.8 17.2

Operating profit EUR million 2,023 828 2,229

- of revenue % 13.4 7.0 14.1

Profit before income taxes EUR million 1,962 786 2,067

- of revenue % 13.0 6.7 13.0

Profit for the period EUR million 1,774 714 1,789

- of revenue % 11.7 6.1 11.3

Comparable EBITDA EUR million 1,920 1,929 2,452

Comparable operating profit EUR million 1,342 1,416 1,962

Comparable net profit EUR million 1,179 1,229 1,564

Profitability

Return on equity (ROE) % 28.5 11.8 35.8

Return on average capital employed, after tax

(ROACE) % 15.5 17.3 26.6

Financing and financial position

Interest-bearing net debt EUR million 41 -265 -191

Leverage ratio % 0.6 -4.7 -3.3

Equity-to-assets ratio % 56.6 61.1 60.8

Net Debt to EBITDA % 0.0 -0.2 -0.1

Other indicators

Capital employed EUR million 8,742 7,236 7,243

Net working capital in days outstanding 33.3 35.0 36.7

Capital expenditure and investments in shares EUR million 1,535 1,197 890

- of revenue % 10.1 10.2 5.6

Research and development expenditure EUR million 67 61 54

- of revenue % 0.4 0.5 0.3

Average number of personnel 4,872 4,833 5,474

Share prices

Closing price EUR 43.36 59.16 31.02

Average price EUR 50.99 37.49 29.85

Lowest price EUR 41.17 20.37 22.19

Highest price EUR 64.74 60.14 33.33

Market capitalization EUR million 33,353 45,507 23,861

Trading volumes

Number of shares traded 1,000 246,647 340,904 307,770

- of weighted average number of shares % 32 44 40

Weighted average number of

shares outstanding 767,643,112 767,370,423 767,151,336

Number of shares outstanding

at the end of the period 767,969,396 767,836,640 767,683,600

Share-related indicators 2021 2020 2019

Earnings per share (EPS) EUR 2.31 0.93 2.33

Comparable earnings per share EUR 1.54 1.60 2.04

Equity per share EUR 9.09 7.72 7.71

Cash flow per share EUR 2.60 2.68 1.90

Price / earnings ratio (P/E) 18.79 63.75 13.32

Dividend per share EUR 0.82

0.80 1.02

Dividend payout ratio % 35.5

86.2 43.8

Dividend yield % 1.9

1.4 3.3

Board of Directors' proposal to the Annual General Meeting. 2019 key figures include extraordinary dividend.

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Reconciliation of key gures to IFRS Financial Statements

Reconciliation between comparable operating profit and operating profit is presented in Note 4, Segment information.

EUR million 2021 2020 2019

Comparable operating profit 1,342 1,416 1,962

IS Depreciation, amortization and impairments 584 680 502

Items in depreciation, amortization and

impairments affecting comparability -5 -167 -11

Comparable EBITDA 1,920 1,929 2,452

Reconciliation between comparable operating prot and comparable net prot

EUR million 2021 2020 2019

Comparable operating profit 1,342 1,416 1,962

Total financial income and expenses -61 -41 -163

IS Income tax expense -188 -72 -278

IS Non-controlling interests -2 -2 -1

Tax on items affecting comparability 89 -71 43

Comparable net profit 1,179 1,229 1,564

Reconciliation of return on average capital employed after tax (ROACE), %

EUR million 2021 2020 2019

Comparable operating profit last 12 months 1,342 1,416 1,962

Financial income 4 4 10

IS Exchange rate and fair value gains and losses -10 0 -64

IS Income tax expense -188 -72 -278

Tax on other items affecting ROACE 82 -77 35

Comparable net profit, net of tax 1,229 1,271 1,666

Capital employed average 7,952 7,326 6,275

Return on average capital employed after tax (ROACE), % 15.5 17.3 26.6

Reconciliation of equity-to-assets ratio, %

EUR million 2021 2020 2019

BS Total equity 6,985 5,929 5,922

BS Total assets 12,417 9,815 9,793

Advances received -86 -104 -46

Equity-to-assets ratio, % 56.6 61.1 60.8

Reconciliation of net working capital in days outstanding

EUR million 2021 2020 2019

Operative receivables 1,561 1,179 1,918

BS Inventories 2,618 1,829 1,678

Operative liabilities -2,795 -1,883 -2,001

Net working capital 1,384 1,125 1,595

IS Revenue 15,148 11,751 15,840

Net working capital in days outstanding 33.3 35.0 36.7

Reconciliation between comparable operating prot and comparable EBITDA

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Calculation of key figures

Neste presents Alternative Performance Measures to enhance comparability between financial periods as well as to reflect operational performance and financial risk level. These indicators should be examined together with the IFRS-compliant

performance indicators.

Key figure Calculation Reason for use

EBITDA = Operating profit + depreciation, amortization and impairments

EBITDA is an indicator to measure the operational performance and cash flow

generation of the Group and its businesses.

Comparable EBITDA =

Comparable operating profit + depreciation, amortization and impairments - items in

depreciation, amortization and impairments affecting comparability

Comparable EBITDA describes underlying operational performance and cash flow

generation.

Comparable operating profit =

Operating profit -/+ inventory valuation gains/losses -/+ changes in the fair value of

open commodity and currency derivatives -/+ capital gains/losses - insurance and other

compensations + impairments -/+ other adjustments

Comparable operating profit reflects Neste's underlying operational performance.

Items affecting comparability =

Inventory valuation gains/losses, changes in the fair value of open commodity and currency

derivatives, capital gains/losses, insurance and other compensations, impairments and

other adjustments

Items affecting comparability are linked to unpredictability events of a significant nature

that do not form part of normal day-to-day business.

Comparable net profit =

Comparable operating profit - total financial income and expense - income tax expense -

non-controlling interests - tax on items affecting comparability

Comparable net profit is the basis for Neste's dividend policy. Dividend distribution is

one element in the company's cash allocation.

Return on equity (ROE), % = 100 x

Profit before income taxes - income tax expense, last 12 months

Return on equity provide additional information on the profitability of Neste's

operations.

Total equity average, 5 quarters end values

Return on average capital employed,

after-tax (ROACE), %

= 100 x

Comparable operating profit + financial income + exchange rate and fair value gains and

losses - income tax expense - tax on other items affecting ROACE, last 12 months

Return on average capital employed after-tax (ROACE) is one of Neste's key financial

targets. It is a long-term over the cycle indicator measuring the Group's profitability

and efficiency of capital usage.

Capital employed average, 5 quarters end values

Capital employed = Total equity + interest bearing liabilities

Capital employed is primarily used to determine the return on average capital

employed (ROACE) which is Neste's key financial target.

Interest-bearing net debt = Interest-bearing liabilities - cash and cash equivalents - current investments

Interest-bearing net debt is an indicator to measure the total external debt financing of

the group.

Leverage ratio, % = 100 x

Interest-bearing net debt

Leverage ratio is one of Neste's key financial targets. It provides useful information

regarding the Group's capital structure and financial risk level.

Interest bearing net debt + total equity

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Equity-to-assets ratio, % = 100 x

Total equity

Equity-to-assets ratio provides useful information regarding Neste's financial risk level.

Total assets - advances received

Net working capital in days outstanding = 365 x

Net working capital

Net working capital in days outstanding measures Neste's efficiency in turning its net

working capital into revenue.

Revenue, last 12 months

Net Debt to EBITDA =

Interest-bearing net debt

Net debt to EBITDA measures Neste's capital structure and ability to cover its debt.

EBITDA, last 12 months

Return on net assets, % = 100 x

Segment operating profit, last 12 months

Neste uses return on net assets to follow the operational performance of its operating

segments.

Average segment net assets, 5 quarters end values

Comparable return on net assets, % = 100 x

Segment comparable operating profit, last 12 months

Neste uses comparable return on net assets to follow the underlying operational

performance of its operating segments.

Average segment net assets, 5 quarters end values

Segment net assets =

Property, plant and equipment + intangible assets + investments in associates and joint

ventures + inventories + interest-free receivables and liabilities - provisions - pension

liabilities allocated to the business segment

Segment net assets are primarily used to determine the return on net assets and

comparable return on net assets.

Calculation of share-related indicators

Earnings per share (EPS) =

Profit for the period attributable to the owners of the parent

Weighted average number of shares outstanding during the period

Comparable earnings per share =

Comparable net profit

Weighted average number of shares outstanding during the period

Equity per share =

Shareholder's equity attributable to the owners of the parent

Number of shares outstanding at the end of the period

Cash flow per share =

Net cash generated from operating activities

Weighted average number of shares outstanding during the period

Price / earnings ratio (P/E) =

Share price at the end of the period

Earnings per share

Key figure Calculation Reason for use

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Dividend payout ratio, % = 100 x

Dividend per share

Earnings per share

Dividend yield, % = 100 x

Dividend per share

Share price at the end of the period

Average share price =

Amount traded in euros during the period

Number of shares traded during the period

Market capitalization = Number of shares at the end of the period x share price at the end of the period

Calculation of key drivers

Oil Products reference margin (USD/bbl) = Product value - feed cost - standard refining variable cost - sales freights

Oil Products reference margin measures the segment's unit sales margin driven by

general market elements. USD/bbl is a standard unit used in the oil industry.

Oil Products total refining margin (USD/bbl) =

Comparable sales margin x average EUR/USD exchange rate

for the period x standard refinery yield

Oil Products total refining margin measures the segment's comparable sales margin

per refined unit sold. USD/bbl is a standard unit used in the oil industry.

Refined sales volume x standard barrels per ton

Oil Products additional margin (USD/bbl) = Oil Products total refining margin - Oil Products reference margin

Oil Products additional margin measures the segment's unit sales margin generation

capability above the general market elements. USD/bbl is a standard unit used in the

oil industry.

Renewable Products comparable sales

margin (USD/ton)

Comparable sales margin

Renewable Products comparable sales margin measures the sales margin per unit

sold.

Renewable diesel sales volume

In the business environment where Neste operates, commodity prices and foreign exchange rates are volatile and can cause significant fluctuations in inventory values and operating profit. Comparable operating profit eliminates both the inventory valuation gains/losses generated

by the volatility in raw material prices and changes in open derivatives, and better reflects the company's underlying operational performance. Also, it reflects Neste's operational cash flow, where the change in operating profit caused by inventory valuation is mostly compensated

by changing net working capital. Items affecting comparability are linked to unpredictability events of a significant nature that do not form part of normal day-to-day business. They include among others impairment losses and reversals, gains and losses associated with the

combination or termination of businesses, restructuring costs, and gains and losses on the sales of assets. Only items having an impact of more than EUR 1 million on Neste's result will be classified as items affecting comparability.

Key figure Calculation Reason for use

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Neste Annual Report 2021 | Financial statements

Consolidated Statement of Income 168

Consolidated Statement of Comprehensive Income 168

Consolidated Statement of Financial Position 169

Consolidated Cash Flow Statement 170

Consolidated Statement of Changes in Equity 171

Notes to the Consolidated Financial Statements 172

Parent company Income Statement 229

Parent company Balance Sheet 229

Parent company Cash Flow Statement 230

Parent company Notes to the Financial Statements 231

Proposal for the distribution of earnings and

signing of the Review by the Board of Directors

and the Financial Statements 246

Auditor’s Report 247

Financial

Statements

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EUR million Note 1 Jan–31 Dec 2021 1 Jan–31 Dec 2020

Revenue 4, 5 15,148 11,751

Other income 6 48 17

Share of profit (loss) of associates and joint ventures 15 -3 -38

Materials and services 7 -11,751 -9,253

Employee benefit costs 8 -431 -431

Depreciation, amortization and impairments 4 -584 -680

Other expenses 9 -403 -538

Operating profit 2,023 828

Financial income and expenses 10

Financial income 4 4

Financial expenses -55 -45

Exchange rate and fair value gains and losses -10 0

Total financial income and expenses -61 -41

Profit before income taxes 1,962 786

Income tax expense 11 -188 -72

Profit for the period 1,774 714

Profit attributable to

Owners of the parent 1,771 712

Non-controlling interests 2 2

1,774 714

Earnings per share from profit attributable to

owners of the parent (in euro per share) 12

Basic earnings per share 2.31 0.93

Diluted earnings per share 2.30 0.93

EUR million 1 Jan–31 Dec 2021 1 Jan–31 Dec 2020

Profit for the period 1,774 714

Other comprehensive income net of tax

Items that will not be reclassified to profit or loss

Remeasurements on defined benefit plans -30 -6

Net change of other investments at fair value 11 5

Items that may be reclassified subsequently

to profit or loss

Translation differences 24 4

Cash flow hedges

recorded in equity -99 73

transferred to income statement -9 -12

Share of other comprehensive income of investments

accounted for using the equity method 4 12

Total -80 77

Other comprehensive income for the period, net of tax -98 76

Total comprehensive income for the period 1,675 790

Total comprehensive income attributable to:

Owners of the parent 1,673 788

Non-controlling interests 2 2

1,675 790

The notes are an integral part of these consolidated financial statements.

Consolidated Statement of Income Consolidated Statement

of Comprehensive Income

Neste Annual Report 2021 | Primary Statements

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EUR million Note 31 Dec 2021 31 Dec 2020

ASSETS

Non-current assets

Intangible assets 13 516 264

Property, plant and equipment 14 5,152 4,477

Investments in associates and joint ventures 15 60 56

Non-current receivables 17 63 61

Deferred tax assets 11 45 35

Derivative financial instruments 16, 19 11 3

Other financial assets 17 48 32

Total non-current assets 5,894 4,928

Current assets

Inventories 18 2,618 1,829

Trade and other receivables 17 1,677 1,208

Derivative financial instruments 16, 19 243 260

Current investments 17 135 20

Cash and cash equivalents 17 1,581 1,552

Total current assets 6,253 4,869

Assets classified as held for sale 28 270 17

Total assets 12,417 9,815

Consolidated Statement of Financial Position

EQUITY

Capital and reserves attributable

to the owners of the parent 20

Share capital 40 40

Other equity 6,941 5,885

Total 6,981 5,925

Non-controlling interests 4 4

Total equity 6,985 5,929

LIABILITIES

Non-current liabilities

Interest-bearing liabilities 21 1,378 1,050

Deferred tax liabilities 11 309 222

Provisions 22 210 232

Pension liabilities 23 146 111

Derivative financial instruments 16, 19 1 1

Other non-current liabilities 21 43 21

Total non-current liabilities 2,087 1,638

Current liabilities

Interest-bearing liabilities 21 379 257

Current tax liabilities 12 7

Derivative financial instruments 16, 19 161 111

Trade and other payables 21 2,761 1,872

Total current liabilities 3,313 2,247

Liabilities related to assets held for sale 28 32 0

Total liabilities 5,432 3,886

Total equity and liabilities 12,417 9,815

The notes are an integral part of these consolidated financial statements.

EUR million Note 31 Dec 2021 31 Dec 2020

Neste Annual Report 2021 | Primary Statements

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Neste Annual Report 2021 | Primary Statements

EUR million Note 1 Jan–31 Dec 2021 1 Jan–31 Dec 2020

Cash flows from operating activities

Profit before income taxes 1,962 786

Adjustments for

Share of profit (loss) of associates joint ventures 4, 15 3 38

Depreciation, amortization and impairments 4 584 680

Other non-cash income and expenses -121 239

Financial expenses - net 10 61 41

Profit / loss from disposal of fixed assets and shares 0 -1

Cash flow before change in net working capital 2,490 1,784

Change in net working capital

Decrease (+) / increase (-) in trade and other receivables -401 735

Decrease (+) / increase (-) in inventories -795 -176

Decrease (-) / increase (+) in trade and other payables 835 -99

Change in net working capital -362 460

Cash generated from operations 2,127 2,244

Interest and other finance cost paid -52 -46

Interest income received 1 4

Realized foreign exchange gains and losses 12 -11

Income taxes paid -95 -133

Finance cost and income taxes paid -133 -187

Net cash generated from operating activities 1,994 2,057

Consolidated Cash Flow Statement

Cash flows from investing activities

Purchases of property, plant and equipment -929 -727

Purchases of intangible assets 13 -48 -35

Acquisitions of subsidiaries 27 -322 -175

Acquisitions of associates and joint ventures 15 0 -35

Proceeds from sales of shares in joint arrangements

and business operations 27 8 -2

Proceeds from sales of property, plant and equipment 6 1

Changes in long-term receivables and other investments -200 -66

Cash flows from investing activities -1,483 -1,039

Cash flow before financing activities 511 1,019

Cash flows from financing activities

Payment of (-) / proceeds from (+) current interest-bearing

liabilities 111 -35

Proceeds from non-current interest-bearing liabilities 618 0

Repayments of non-current interest-bearing liabilities -489 -142

Dividends paid to the owners of the parent -614 -783

Dividends paid to non-controlling interests -2 -1

Cash flows from financing activities -377 -961

Net decrease (-) / increase (+) in cash

and cash equivalents 134 57

Cash and cash equivalents at beginning of the period 1,552 1,493

Exchange gains (+) / losses (-) on cash and cash equivalents 9 2

Cash and cash equivalents at end of the period

17 1,696 1,552

EUR million Note 1 Jan–31 Dec 2021 1 Jan–31 Dec 2022

Including cash and cash equivalents of EUR 115 million classified as held for sale as of 31 December 2021. See Note 28 for more

information.

The notes are an integral part of these consolidated financial statements.

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EUR million Note

capital

Reserve

fund

Reserve

of invested

unrestricted

equity

Treasury

Fair value

and other

reserves

Actuarial

gains and

losses

Translation

differences

Retained

earnings

Owners of

the parent

Non-

controlling

interests

Total

equity

Total equity at 1 January 2020 40 19 16 -7 -6 -60 -39 5,957 5,919 2 5,922

Profit for the period 712 712 2 714

Other comprehensive income for the period, net of tax 77 -6 4 76 0 76

Total comprehensive income for the period 0 0 0 0 77 -6 4 712 788 2 790

Transactions with the owners in their capacity as owners

Dividend decision -783 -783 -1 -784

Share-based compensation 0 1 1 2 2

Transfer from retained earnings 0 0 0 0

Total equity at 31 December 2020 20 40 20 16 -7 71 -66 -35 5,886 5,925 4 5,929

EUR million Note

capital

Reserve

fund

Reserve

of invested

unrestricted

equity

Treasury

Fair value

and other

reserves

Actuarial

gains and

losses

Translation

differences

Retained

earnings

Owners of

the parent

Non-

controlling

interests

Total

equity

Total equity at 1 January 2021 40

20 16 -7 71 -66 -35 5,886 5,925 4 5,929

Profit for the period 1,771 1,771 2 1,774

Other comprehensive income for the period, net of tax -93 -30 24 -98 -98

Total comprehensive income for the period 0 0 0 0 -93 -30 24 1,771 1,673 2 1,675

Transactions with the owners in their capacity as owners

Dividend decision -614 -614 -2 -617

Share-based compensation 1 -4 -3 -3

Transfer from retained earnings 0 0 0 0

Total equity at 31 December 2021 20 40 19 16 -6 -22 -96 -10 7,040 6,981 4 6,985

The notes are an integral part of these consolidated financial statements.

Consolidated Statement of Changes in Equity

Neste Annual Report 2021 | Primary Statements

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Notes to the Consolidated Financial Statements

General information

Neste Corporation (Neste) is a Finnish public limited liability company domiciled in Espoo, Finland. Neste is listed on the

NASDAQ Helsinki Oy. The address of its registered office is Keilaranta 21, P.O. Box 95, 00095 Neste, Finland.

Neste Corporation and its subsidiaries (together referred to as Neste) create sustainable solutions for transport, business,

and consumer needs. Neste’s wide range of renewable and circular solutions enable its customers to reduce climate

emissions. Neste is the world's largest producer of renewable diesel and sustainable aviation fuel refined from waste and

residue, developing chemical recycling to combat the plastic waste challenge. Neste is also a technologically advanced refiner

of high-quality oil products. Neste wants to be a reliable partner with widely valued expertise, research, and sustainable

operations.

Neste's customers benefit not only from the high-quality products, but also from the comprehensive supply and logistics

services that Neste can provide in Finland and abroad. Neste’

s refineries are located in Finland, the Netherlands and Singapore

and Neste is also a co-owner of a base oil plant in Bahrain. Neste has a network of service stations and other retail outlets in

Finland and the Baltic countries.

The Board of Directors has approved these consolidated financial statements for issue on 9 February 2022.

2 Accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These

policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards

(IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations applicable to companies reporting under IFRS as adopted

by the European Union. The consolidated financial statements also include compliance with Finnish accounting and corporate

legislation. The consolidated financial statements have been prepared under the historical cost convention unless otherwise

stated in the Neste’s accounting policies.

The consolidated financial statements are presented in million euros unless otherwise stated. The figures in the tables are

subject to rounding, which may cause some rounding inaccuracies in aggregate column and row totals.

Neste discloses its accounting policies in conjunction with each note to provide enhanced understanding of each accounting

area. The following symbols IS, OCI, BS, and CF are used to show which amounts in the notes can be reconciled to

consolidated statement of income (IS), consolidated statement of comprehensive income (OCI), consolidated statement of

financial position (BS) or consolidated cash flow statement (CF).

New standards, signicant amendments and interpretations adopted by Neste

Neste applied, for the first time, certain standards and amendments, which are effective for annual periods beginning on or

after 1 January 2021. These amendments had no impact on the consolidated financial statements of Neste. Neste has not

early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The following new standards and amendments became effective as of 1 January 2021 (unless otherwise stated):

• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform Phase 2

• Amendments to IFRS 16: Covid-19-related Rent Concessions beyond 30 June 2021 (effective as of 1 April 2021)

• IFRIC agenda decision finalized in April 2021: Configuration or Customisation Costs in a Cloud Computing

Arrangement (IAS 38 Intangible Assets).

New standards, amendments and interpretations not yet adopted

Certain new interpretations, amendments to existing standards or new standards have been published. Neste intends to adopt

these standards when they become effective.

There are no IFRS or IFRIC interpretations that are not yet effective and that would be expected to have a material impact on

Neste.

Estimates and judgements requiring management estimation

The preparation of consolidated financial statements in conformity with the International Accounting Standard requires Neste’s

management to make estimates and assumptions which have an impact on reported assets and liabilities, the disclosure of

contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of income

and expenses during the reporting period. In addition, management judgement may be required in applying the accounting

principles, for example, classifying assets as held for sale.

These estimates, assumptions and judgements are based on management's historical experience and other factors,

including expectations of future events that are believed to be reasonable under the circumstances. The actual amounts may

differ significantly from the estimates used in the financial statements.

Neste follows the changes in estimates, assumptions and the factors affecting them by using multiple internal and external

sources of information. Possible changes in estimates and assumptions are recognized in the financial period the estimate or

assumption is changed.

The sources of uncertainty which have been identified as most significant estimates by Neste are presented in connection to

the items considered to be affected.

Neste proved to be very resilient amid the continued pandemic, scheduled maintenance and high energy and feedstock

costs in 2021. Oil demand was still under pressure due to the COVID-19 pandemic, but recovered significantly from 2020.

Neste continued to assess the impacts of COVID-19 pandemic by reviewing the carrying values of the balance sheet items,

which did not indicate a need for asset impairments. Neste's financial position remained strong. Visibility in the global

economic development still remains low due to the COVID-19 pandemic. As a consequence, volatility in the oil products

and renewable feedstock markets is expected to remain high. Further information is presented in the following notes: Note 3

Financial risk management, Note 13 Intangible assets.

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

OCI

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Neste has assessed the nature of its joint arrangements and determined them to be either joint ventures or joint operations.

Joint operation is a joint arrangement, whereby the parties that have joint control of the arrangement have rights to the

assets, and obligations for the liabilities relating to the arrangement. Joint venture is a joint arrangement whereby the parties

that have joint control of the arrangement have rights to the net assets of the arrangement.

Joint ventures are accounted for using the equity method. Joint operations are consolidated for its share of the assets,

liabilities, revenues, expenses and cash flow on a line-by-line basis. Under the equity method of accounting, interests in joint

ventures are initially recognized at cost and adjusted thereafter to recognize Neste's share of the post-acquisition profits or

losses and movements in other comprehensive income. When Neste's share of losses in a joint venture equals or exceeds its

interests in the joint ventures (which includes any long-term interests that, in substance, form part of Neste's net investment in

the joint ventures), Neste does not recognize further losses, unless it has incurred obligations or made payments on behalf of

the joint ventures.

Unrealized gains on transactions between Neste and its joint arrangements are eliminated to the extent of Neste’s interest in

the joint ventures. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset

being transferred.

Associates

Associated companies are entities over which Neste has significant influence but not control, and generally involve a

shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by using the equity

method as described above in the "Joint arrangements" paragraph.

Structured entities

Neste engages in business activities with structured entities which are designed to achieve a specific business purpose. A

structured entity is one that has been set up so that voting rights or similar rights are not the dominant factor in deciding who

controls the entity. An example is when voting rights relate only to administrative tasks and the relevant activities are directed

by contractual arrangements.

Structured entities are consolidated when the substance of the relationship between Neste and the structured entities

indicate that the structured entities are controlled by Neste. The extent of Neste’s interests in unconsolidated structured entities

will vary depending on the type of structured entities. Entities are not consolidated because Neste does not control them

through voting rights, contract, funding agreements, or other means.

Management uses judgement when determining the accounting treatment of the structured entities. In addition to the

voting rights or similar rights, the management considers other factors such as the nature of the arrangement, contractual

arrangements and level of influence with the structured entities.

Consolidation

Subsidiaries

The consolidated financial statements cover the parent company, Neste Corporation, and all those companies over which

Neste has control. Neste controls an entity when Neste is exposed to, or has rights to, variable returns from its involvement

with the entity and has the ability to affect those returns through its power over the entity

. Subsidiaries are fully consolidated

from the date on which control is transferred to Neste, and are no longer consolidated when this control ceases.

Acquired or established subsidiaries are accounted for by using the acquisition method. The consideration transferred

and the identifiable assets acquired and liabilities assumed in the acquired company are measured at their fair value on

their date of acquisition. The consideration transferred includes any assets transferred by the acquirer, liabilities incurred by

the acquirer to former owners of the acquiree and the equity interests issued by the acquirer. Any contingent consideration

related to the business combination is measured at fair value on their acquisition date and it is classified as either liability or

equity. Contingent consideration classified as liability is re-measured at its fair value at the end of each reporting period and

the subsequent changes to fair value are recognized in profit or loss. Contingent consideration classified as equity is not

subsequently re-measured. The consideration transferred does not include any transactions accounted for separately from the

acquisition. Acquisition-related costs are expensed as incurred.

All intra-group transactions, receivables, liabilities and unrealized margins, as well as distribution of profits within Neste, are

eliminated in the preparation of consolidated financial statements.

The result for the period and items recognized in other comprehensive income are allocated to the equity holders of the

company and non-controlling interests and presented in the statement of income and statement of other comprehensive

income. Non-controlling interests are presented separately from the equity allocated to the equity holders of the company.

Other comprehensive income is allocated to the equity holders of the company and to non-controlling interests even in

situations where the allocation would result in the non-controlling interests’ share being negative, unless non-controlling

interests have an exemption not to meet obligations which exceed the non-controlling interests’ investment in the company.

When Neste ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when

control is lost, with the change in the carrying amount recognized in profit or loss. The fair value is the initial carrying amount for

the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition,

any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if Neste had

directly disposed of the related assets or liabilities.

Joint arrangements

A joint arrangement is an arrangement in which two or more parties have joint control, and in which the sharing of control has

been contractually agreed between the parties. Joint control exists only when decisions about the relevant activities require the

unanimous consent of the parties sharing control. Joint arrangements are classified as either joint operations or joint ventures,

depending on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement.

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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Foreign currency translation

(a) Presentation currency

Items included in the financial statements of each of Neste’s entities are measured using the currency of the primary economic

environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in

euros, which is the company’s presentation currency.

(b) Transactions in foreign currencies

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of

the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement

of such transactions, and from the translation at year-end exchange rates of monetary assets and liabilities denominated in

foreign currencies, are recognized in the income statement, except when deferred in other comprehensive income as qualifying

cash flow hedges and qualifying net investment hedges.

The results and financial position of all Neste entities (none of which uses a hyperinflationary economy currency) that have a

functional currency different from the presentation currency are translated into the presentation currency as follows:

• Assets and liabilities are translated at the closing rate quoted on the relevant balance sheet date;

• Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation

of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are

translated at the dates of the transactions);

• All resulting exchange differences are recognized in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities and currency

instruments designated as hedges of such investments, are recognized in other comprehensive income. When a foreign

operation is partially disposed of, sold, or liquidated, translation differences accrued in equity are recognized in the income

statement as part of the gain or loss on the sale/liquidation. Goodwill and fair value adjustments arising on the acquisition of a

foreign entity are treated as assets and liabilities of the entity in question and translated at the closing rate.

3 Financial risk management

Financial risk management principles

The Neste Board of Directors has approved the Corporate risk management policy. This policy together with the related

principles and instructions defines the framework for financial risk management within Neste. Mandates and limits that are

applicable to financial risks have been defined in the risk management policy.

For more information regarding Neste's risk management principles and key risk areas, please refer to the risk management

section in the annual report.

Market risks

Market risk is the risk or uncertainty arising from possible market price movements and their impact on the future performance

of a business. For Neste, the main types of market risks are commodity price risk, foreign exchange risk and interest rate risk.

These are specified in more detail in the following sections.

In accordance with the Corporate risk management policy, various derivatives transactions are executed to mitigate

exposure to risk. The positions are monitored and managed on a daily basis.

1. Commodity price risks

The main commodity price risks Neste faces in its businesses are related to market prices for crude oil, renewable feedstocks,

and other feedstocks, as well as refined petroleum and renewable products. These prices are subject to significant fluctuations

resulting from a periodic over-supply and supply tightness in various regional markets, coupled with fluctuations in demand.

Neste's results of operations in any given period are principally driven by the demand for and prices of oil and renewable

products relative to the supply and cost of raw materials. These factors, combined with Neste's own consumption of raw

materials and output of refined products, drive operational performance and cash flows in Renewable Products and Oil

Products, which are Neste's largest segments in terms of revenue, profits and net assets.

Neste divides the commodity price risks affecting Neste’s revenue, profits and net assets into two main categories: inventory

price risk and refining margin risk.

Inventory price risk

From a price risk management perspective, Neste’s refinery inventory consists of two components. The first and largest

component remains relatively constant over time and is referred to as the 'base inventory’. The second and daily fluctuating

component is the amount of inventories differing from the base inventory level and at Neste it is called ‘transaction position’.

The base inventory is the minimum level that can reasonably assure the continuous operation of the refineries and prevent

deliveries from being compromised. It comprises inventories at the refineries and within the supply chain. The base inventory

includes the minimum level of stocks that Neste is required to maintain under Finnish laws and regulations.

In Renewable Products, the base inventory level is approximately half of the annual renewables refining capacity used. In Oil

Products, the base inventory is approximately one-tenth of the total annual fossil fuel refining capacity.

The base inventory creates a risk in Neste’s income statement and balance sheet since Neste applies the weighted average

method for measuring the cost of goods sold, raw materials and inventories. Hedging operations related to price risk do not

target the base inventory. Instead, Neste’s inventory risk management policies target the ‘transaction position’ in as much as

these stocks create cash flow risks depending on the relationships between feedstock purchases, refinery production and

refined petroleum product sales over any given period. According to the Neste risk management policy, any open exposures of

the transaction position are hedged without delay when the underlying pricing-in or pricing-out occurs.

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In hedging the transaction position, derivative financial instruments are used. Because of the differences between the quality

of the underlying feedstocks or end products for which derivative financial instruments can be sold and purchased and the

actual quality of Neste’s feedstocks and end products, the business will remain exposed to some degree of basis risk. Basis

risk is typically higher in the Renewables business compared to the fossil fuel refining due to the nature of the feedstock pool

and limited availability of hedging instruments.

If crude or oil product markets are in contango where current forward prices are higher than current spot prices, Neste has

the capability to build physical contango storages from time to time. These storages are excluded from the transaction position

and are hedged separately.

Rening margin risk

Neste is exposed to a greater margin volatility in the Renewable Products segment compared to that of fossil fuel refining.

In the Renewables business, the refining margin is mainly an outcome of the renewable product sale price received and

the cost of feedstocks used. The underlying indices used in renewable diesel pricing are primarily related to oil products.

Premiums over pricing indices fluctuate regionally depending on the nature of bio mandates and incentives, local supply

and demand, and fossil fuel prices. In North America, Soy Methyl Ester (SME) is an important price driver through its link to

Renewable Identification Number (RIN) prices. The cost of feedstocks depends on feedstock selection and is typically derived

from different vegetable oils and fats. Feedstock prices are mainly driven by supply and demand balances, crop forecasts

and regional weather. In Renewable Products segment, operational activities and margin hedges are the primary means of

mitigating margin volatility.

Refining margin is an important determinant of Oil Products segment's earnings. Its fluctuations constitute a significant risk.

The refining margin risk is a result of the revenue from sold petroleum products and the cost of raw materials together with

other costs. Neste’s exposure to low refining margins in traditional oil refining is partly offset by its high-conversion refinery

capacity.

With the aim of securing its margin and cash flow, Neste has defined margin hedging principles for its main refining

businesses. In the Renewable Products segment, the targeted hedge ratios are typically higher and can be expected to

fluctuate over time. In the fossil fuel business, the hedge ratios are typically moderate.

In hedging the refining margin, commodity derivatives are used. Hedging transactions are targeted at the components of

Neste’s refining margin, based on its forecast or committed sales and refinery production, which are exposed to international

market price fluctuations. Just as in transaction hedging, also when hedging the refining margin, the business will remain

exposed to a certain degree of basis risk that comes from the differences between actual qualities of feedstocks and products

and qualities of available hedging arrangements.

The exposure to open positions of commodity derivative contracts is summarized in Note 19. Neste does not apply IFRS

hedge accounting for commodity hedging positions.

2. Foreign exchange risk

As the underlying currency of Neste's main markets is the U.S. Dollar, and Neste operates and reports in Euro, this factor is

one that exposes Neste's business to currency risk. The objective of foreign exchange risk management in Neste is to limit the

uncertainty created by changes in foreign exchange rates on the future value of cash flows and earnings, and in the Group's

balance sheet. Generally, this is done by hedging currency risks in contracted and forecast cash flows and balance sheet

exposures (referred to as transaction exposure) as well as the equity of non-euro-based subsidiaries (referred to as translation

exposure).

Transaction exposure

In general, all reporting segments hedge their transaction exposure related to highly probable future cash flows. Net foreign

currency cash flows are forecast over a 12-month period on a rolling basis and hedged on average 70% for the first six months

and 30% of the next six months for the Renewable business and on average 80% for the first six months and 40% for the

following six months for the fossil fuel businesses. Deviations from the benchmark position are allowed in line with the limits

set by treasury principles. The most important hedged currency is the U.S. dollar. Other currencies to which Neste is exposed

are the Swedish crown (SEK), the Chinese renminbi (CNY), the Singapore dollar (SGD), the Australian dollar (AUD) and the

Malaysian ringgit (MYR). Neste's net exposure is managed through the use of forward contracts and options. All transactions

are made for hedging purposes and the majority is also hedge-accounted for according to IFRS. Segments are responsible for

forecasting net foreign currency cash flows, while Group Treasury & Risk Management is responsible for implementing hedging

transactions. In addition to the above mentioned foreign currency hedging programs Neste has continued to hedge the

Singapore expansion project related currency exposures until the end of the investment. Both currency forwards and currency

options can be used in order to manage this position.

Neste has several currency-denominated assets and liabilities in its balance sheet, such as foreign currency loans, deposits,

net working capital and cash in other currencies than home currency. The principle is to hedge this balance sheet exposure

fully using forward contracts. Similarly to commodity price risk management, the foreign exchange transaction hedging targets

inventories in excess of the base inventory. Open exposures are allowed based on risk limits set by treasury principles. The

largest and most volatile item in terms of balance sheet exposure is net working capital. Since many of the Neste's business

transactions, sales of products and services and purchases of crude oil and other feedstock are linked to the U.S. dollar,

the daily exposure of net working capital is hedged as part of the balance sheet hedge in order to neutralize the effect of

volatility in EUR/USD exchange rate. During 2021, the daily balance sheet exposure fluctuated between approximately EUR

983 million and 1,912 million (2020: EUR 208 million and 1,258 million). Group Treasury & Risk Management is responsible

for consolidating various balance sheet items and carrying out hedging transactions. Foreign exchange risk is estimated by

measuring the impact of currency rate changes based on historical volatility.

The exposure to open positions of foreign exchange derivative contracts is summarized in Note 19.

Translation exposure

Group Treasury & Risk Management is responsible for managing Neste's translation exposure. This consists of net investments

in foreign subsidiaries and joint ventures. Although the main principle is to leave translation exposure unhedged, Neste may

seek to reduce the volatility in equity in the consolidated balance sheet through hedging transactions. Any hedging decisions

are made by Group Treasury & Risk Management. At the end of 2021, the most important translation exposures were: U.S.

dollar EUR 571 million and Swedish Crown EUR 76 million (2020: U.S dollar EUR 227 million, Swedish Crown EUR 65 million).

Neste has not hedged the exposures in 2021 or 2020.

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3. Interest rate risk

Neste is exposed to interest rate risk mainly through its interest-bearing net debt. The objective of the interest rate risk

management is to limit the volatility of interest expenses in the income statement. The benchmark duration for the debt

portfolio is 12 months, and duration can vary between six and 96 months. As of 31 December 2021, the duration was 44

months (2020: 26 months). In addition to duration, Neste has defined a flow risk limitation.

Interest rate derivatives are used to adjust the duration of the debt portfolio. Neste's interest rate risk management is

handled by Group Treasury & Risk Management. Neste has not used interest rate derivatives in 2021 or 2020.

4. Key sensitivities to market risks

Sensitivity of operating prot to market risks arising from the Group's operations

Due to the nature of its operations, Neste's financial performance is sensitive to the market risks described above. The

following table details the approximate impact that movements in the Neste's key price and currency exposures would have

on its operating profit for 2022 (2021), assuming normal market and operating conditions and with following assumptions on

sensitivities:

• Hedging transactions are excluded

• The sensitivity of each factor in the table is individual, assuming other factors to remain constant, i.e., the ceteris

paribus principle

• The sensitivity in the EUR/USD exchange rate is based on exposure forecast

• The sensitivity in the Oil Product totals refining margin is based on forecast volumes, representing an impact from

change of 1 USD/barrel

• The sensitivity in the Oil Products crude oil price is based on impacts through inventory gains/losses and changes in

utility and freight costs

• The sensitivity in the Renewable Products raw material price is based on impacts through inventory gains/losses

• The sensitivity in the Renewable Products refining margin is based on nameplate capacity at end of 2021, representing

an impact from a change of 50 USD/ton

The re-pricing period of interest-bearing debt occurs

2021

Within

1 year

1 year–

5 years > 5 years Total

Financial instruments with floating interest rate

Loans from financial institutions 258 0 0 258

Other loans 131 0 0 131

Financial instruments with fixed interest rate

Bonds 0 399 494 893

Lease liabilities 111 141 192 444

Other loans 0 30 0 30

501 570 686 1,757

The re-pricing period of interest-bearing debt occurs

2020

Within

1 year

1 year–

5 years > 5 years Total

Financial instruments with floating interest rate

Loans from financial institutions 128 0 0 128

Other loans 26 0 0 26

Financial instruments with fixed interest rate

Bonds 0 720 0 720

Lease liabilities 114 112 177 403

Other loans 0 30 0 30

268 862 177 1,307

Approximate impact on operating profit, excluding hedges 2022 2021

+/- 10% in the EUR/USD exchange rate EUR million -289/+353 -224/+274

+/- USD 1.00/barrel in Oil Products total refining margin USD million +/-90 +/-85

+/- USD 10/barrel in crude oil price for Oil Products

USD million +/-85 +/-95

+/- USD 100/t in Renewable Products raw material price

USD million +/-150 +/-145

+/- USD 50/t in Renewable Products refining margin

USD million +/-160 +/-160

Inventory gains/losses excluded from comparable operating profit

Based on nameplate capacity

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Sensitivity to market risks arising from nancial instruments as required by IFRS 7

The following analysis, required by IFRS 7, is intended to illustrate the sensitivity of Neste's profit for the period and equity

to changes in oil prices, the EUR/USD exchange rate, and interest rates, resulting from financial instruments, such as

financial assets and liabilities and derivative financial instruments, as defined by IFRS, included in the balance sheet as of 31

December 2021 (2020). Financial instruments affected by the above market risks include net working capital items, such as

trade and other receivables and trade and other payables, interest-bearing liabilities, deposits, liquid funds, and derivative

financial instruments. When cash flow hedge accounting is applied, the change in the fair value of derivative financial

instruments is assumed to be recorded fully in equity.

The following assumptions were made when calculating the sensitivity to the change in oil prices:

• The flat price variation for oil derivative contracts of crude oil, refined oil products and vegetable oil is assumed to be

+/- 20%

• The sensitivity related to oil derivative contracts held for hedging refinery oil inventory position is included; the

underlying physical oil inventory position is excluded from the calculation, since inventory is not a financial instrument

• The sensitivity related to oil derivative contracts held for hedging expected future refining margin is included; the

underlying expected refining margin position is excluded from the calculation

The following assumptions were made when calculating the sensitivity to changes in the EUR/USD exchange rate:

• The variation in the EUR/USD-rate is assumed to be +/- 10%

• The position includes USD-denominated financial assets and liabilities, such as interest-bearing liabilities, deposits,

trade and other receivables, trade and other payables, and liquid funds, as well as derivative financial instruments

• The position excludes USD-denominated future cash flows

The following assumptions were applied when calculating the sensitivity to changes in interest rates:

• The variation of interest rate is assumed to be a 1% parallel shift in the interest rate curve

• The interest rate risk position includes interest-bearing liabilities (excluding leases), interest-bearing receivables, and

interest rate swaps, however liquid funds are excluded

• The income statement is affected by changes in the interest rates of floating-rate financial instruments except

derivative financial instruments that are designated as and qualifying for cash flow hedges, which are recorded

directly in equity

The sensitivity analysis presented in the following table may not be representative, since the Neste's exposure to market

risks also arises from balance sheet items other than financial instruments, such as inventories. As the sensitivity analysis

does not take into account future cash flows, which Neste hedges in significant volumes, it only reflects the change in fair

value of hedging instruments. In addition, the size of the exposure sensitive to changes in the EUR/USD exchange rate varies

significantly, so the position on the balance sheet date may not be representative for the financial period on average. Equity in

the following table includes items which are recorded directly in equity. Items affecting the income statement are not included

in equity.

Liquidity and renancing risks

Liquidity risk is defined as financial distress or extraordinarily high financing costs arising due to a shortage of liquid funds in a

situation where business conditions unexpectedly deteriorate and require financing. The objective of liquidity risk management

is to maintain sufficient liquidity and to ensure that it is available fast enough to avoid uncertainty related to financial distress at

all times. The COVID-19 pandemic did not have an effect on Neste's liquid funds and committed unutilized credit facilities.

Neste's principal source of liquidity is expected to be cash generated from operations. In addition, Neste seeks to reduce

liquidity and refinancing risks by maintaining a diversified maturity profile in its loan portfolio. Certain other limits have also been

set to minimize liquidity and refinancing risks. The amount of short-term financing is limited to the greater of the following: EUR

500 million or 30% of total interest-bearing liabilities. Unused committed credit facilities together with excess cash must always

be at a minimum EUR 500 million and sufficient to cover all forecasted negative free cash flows and interest bearing liabilities

maturing within the next 12-month period.

The average loan maturity as of 31 December 2021 was 3.7 years (2020: 2.1 years). The most important financing programs

in place are committed revolving multicurrency credit facility of EUR 1,200 million, committed overdraft facilities of EUR 150

million and uncommitted domestic commercial paper program of EUR 400 million.

2021 2020

Sensitivity to market risk arising from

financial instruments as required by IFRS 7

Income

statement Equity

Income

statement Equity

+/- 20% change in oil price

EUR million -/+ 2 +/- 0 +/- 7 +/- 0

+/- 10% change in EUR/USD exchange rate EUR million +100/-122 +132/-138 +83 /-101 +152 /-151

+/- 1% parallel shift in interest rates EUR million -/+2 +/-0 -/+1 +/-0

Includes crude oil, refined oil products and vegetable oil derivatives

Liquid funds and committed unutilized credit facilities 31 Dec 2021 31 Dec 2020

Liquid funds 1,716 1,572

Overdraft facilities, expiring within one year 150 150

Revolving credit facility, expiring beyond one year

1,200 1,200

Total 3,066 2,922

In addition: unused commercial paper program (uncommitted) 400 400

EUR 1,200 million revolving credit facility dated 18 December, 2019 for general corporate purposes. The facility has a tenor of

five years with two one-year extension options. The margin under the facility will be adjusted based on Neste’s progress to meet

its greenhouse gas emission reduction target.

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Maturity profile of financial liabilities based on contractual payments 31 Dec 2021 2022 2023 2024 2025 2026 2027– Total

Trade payables and other liabilities 2,656 9 9 9 1 16 2,699

Interest-bearing liabilities

Bonds 0 0 400 0 0 500 900

Loans from financial institutions 137 6 6 6 6 98 258

Lease liabilities

111 62 39 27 13 192 444

Other loans 131 0 30 0 0 0 161

Interest of lease liabilities 22 20 18 16 14 204 293

Interest of other liabilities 15 12 13 5 5 8 57

Total 3,073 109 514 62 39 1,018 4,814

Commodities 85 1 0 0 0 0 86

Gross settled forward foreign exchange contracts

- inflow (-) -3,909 -10 0 0 0 0 -3,919

- outflow 3,947 10 0 0 0 0 3,957

Derivatives total 123 1 0 0 0 0 124

Maturity profile of financial liabilities based on contractual payments 31 Dec 2020 2021 2022 2023 2024 2025 2026– Total

Trade payables and other liabilities 1,872 1 1 1 1 17 1,893

Interest-bearing liabilities

Bonds 0 321 0 400 0 0 721

Loans from financial institutions 128 0 0 0 0 0 128

Lease liabilities

114 44 30 20 18 177 403

Other loans 14 11 0 30 0 0 55

Interest of lease liabilities 22 19 18 16 15 223 312

Interest of other liabilities 15 15 8 8 0 0 45

Total 2,164 411 57 475 34 417 3,558

Commodities 96 0 0 0 0 0 96

Gross settled forward foreign exchange contracts

- inflow (-) -3,882 -98 0 0 0 0 -3,980

- outflow 3,762 99 0 0 0 0 3,861

Derivatives total -24 1 0 0 0 0 -23

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

Refer to Note 30 Leases for further information.

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Credit and counterparty risk

Credit and counterparty risk arises from sales, hedging and trading transactions as well as from cash investments. The risk

arises from the potential failure of the counterparty to meet its contractual payment obligations, and the risk depends on

the creditworthiness of the counterparty as well as the size of the exposure. The objective of credit and counterparty risk

management is to minimize the losses incurred as a result of a counterparty not fulfilling its obligations. Limits, mandates and

management principles for credit and counterparty risk are covered in the Corporate risk management policy and separate

principle and instruction-level documents.

The amount of risk is quantified as the expected loss to Neste in the event of a default by the counterparty. Credit risk limits

are set at the Group level, designated by different levels of authorization and delegated to Neste's reporting segments, which

are responsible for counterparty risk management within these limits.

When determining the credit lines for sales contracts, counterparties are screened and evaluated vis-à-vis their

creditworthiness to decide whether an open credit line is acceptable or collateral, for example, a letter of credit, bank

guarantee or parent company guarantee has to be posted. In the event that collateral is required credit risk is evaluated based

on a financial evaluation of the party posting the collateral. If appropriate in terms of the potential credit risk associated with

a specific customer, advance payment is required before delivery of products or services. In addition, Neste may reduce its

counterparty risks by selling trade receivables to a third party, e.g., the bank. The sale of the receivables essentially transfers

the title, benefits and interest in the trade receivables to the bank, indicating the bank to obtain all of the rights associated

with the receivables. The sale and transfer shall be without guarantee from the seller in respect of the buyer’s creditworthiness

and with limited recourse to the seller. The seller receives the purchase price from the bank at the time of sale. Fees and other

expenses are deducted from the payment or invoiced separately. No arrangements for selling receivables were in place in 2021

or 2020.

The credit lines for counterparties are divided into three categories according to contract type: physical sales contracts,

derivative contracts and investments. Credit lines are restricted in terms of the time horizon associated with the payment

and credit exposure risk. In determining counterparty credit limits, two levels of delegation are used: authority mandates to

rated counterparties by general rating agencies and authority mandates related to unrated counterparties. For OTC (over-

the-counter) derivative financial instrument contracts, Neste has negotiated framework agreements in the form of the ISDA

(International Swaps and Derivatives Association) master agreement with the main counterparties concerning commodity,

emission allowance, currency and interest rate derivative financial instruments. These contracts permit netting and allow for

termination of the contract on the occurrence of certain events of defaults and termination events. Some of these agreements

include Credit Support Annexes (CSA) with the aim of reducing credit and counterparty risk by requiring margin call deposits in

the form of cash or letter of credit for balances exceeding the mutually agreed limit. At the end of December 2021, Neste had

received EUR 120 million in cash collateral (2020: EUR 12 million) and EUR 0 million letter of credit (2020: EUR 5 million) due

to CSA agreements. Neste had issued EUR 0 million in cash collateral (2020: EUR 0 million) and EUR 0 million letter of credit

(2020: EUR 0 million) due to CSA agreements.

Financial impact of netting for instruments subject to an

enforceable master netting agreement (or similar)

31 Dec 2021 31 Dec 2020

Financial assets Financial liabilities Financial assets Financial liabilities

Derivatives Trade receivables Derivatives Trade payables Derivatives Trade receivables Derivatives Trade payables

Gross amount of recognized financial instruments 254 30 162 2 263 17 113 1

Related liabilities or assets subject to master netting agreements 98 0 98 0 89 0 89 0

CSA agreements 120 0 0 0 12 0 0 0

Net exposure 36 30 64 2 163 17 24 0

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Neste reduces credit risk by executing treasury transactions only with approved counterparties. All counterparties have a

minimum credit rating that is defined in Corporate risk management policy. Neste subsidiaries are required to deposit their

excess cash balances with the Group Treasury on an ongoing basis in order to provide sufficient visibility and management of

Neste's cash balance and risks associated with it.

As for counterparty risk management, the minimum credit rating requirement for companies providing insurance for Neste

Group is defined in treasury principles.

Neste has a large number of different counterparties on the international markets. As to the range of counterparties, the

most significant types are primarily large international oil companies and financial institutions. However, Neste's exposure to

unexpected credit losses within one reporting segment may increase with the concentration of credit risk through a number

of counterparties operating in the same industry sector or geographical area, which may be adversely affected by changes in

economic, political or other conditions. These risks are reduced by taking geographical risks into consideration in decisions on

creditworthiness.

Counterparties to contracts comprising derivative financial instruments exposure on 31 December 2021: over 80% of the

counterparties or their parent companies related to commodity derivative contracts have investment-grade rating from an

established international credit rating agency. Respectively, Group Treasury & Risk Management had an exposure for currency

and interest rate derivative contracts as of 31 December 2021 with banks, of which all have investment-grade rating at a

minimum. Commodity derivative transactions are also done through exchange, which reduces credit risk.

Neste assesses expected credit losses and calculates impairment loss from trade receivables based on historical credit

loss experience combined with current conditions and forward-looking macroeconomic analysis. Analysis is conducted

utilizing industry outlook and economic forecasts from various data sources. Neste has chosen a cautious expected credit

loss calculation as indicated by the low level of actual historical credit losses compared to the loan loss provision. The effects

of Covid-19 have been considered, and it has been concluded by management that the basis of the expected credit loss

calculation is in line with the economic outlook, taking into account Neste’s requirement of collateral from counterparties with

lower creditworthiness, and reassessment of credit limits conducted due to the pandemic. The receivables have been divided

in aging buckets and segments depending on business area and geographic region, in addition to which they are assessed

case by case. Impairment loss from trade receivables for the period is EUR 9 million (2020: EUR 9 million). Recognized credit

loss of trade receivables amounts to EUR 1 million (2020: EUR 4 million).

Financial assets are written off when there is no reasonable expectation of recovery. Indications that there is no reasonable

expectation of recovery may be, e.g., a debtor failing to engage in a repayment plan with the company, or a debtor failing to

make contractual payments more than 180 days past due. However, the write-offs are interpreted case by case and thus if

there is a high probability that the receivable is still paid, no write-off is made. For all bankruptcies and debt restructurings,

Neste makes an immediate write off. Where loans or receivables have been written off, the company continues to engage in

enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in profit or

loss.

Of the trade receivables portfolio exposure, 56% (2020: 61%) is from counterparties or their parent companies having

an investment-grade credit rating; 44 % (2020: 39%) consists of trade receivables from counterparties that do not have an

investment-grade credit rating, most of it comprising from a large number of corporate and private customers.

Analysis of trade receivables by age 31 Dec 2021

Probability of

Credit Loss, % 31 Dec 2020

Probability of

Credit Loss, %

not past due 1,253 0–0.04% 810 0–0.04%

1–30 days overdue

76 0.01–4% 23 0.01–4%

31–60 days overdue 4 5–43% 4 5–43%

61–90 days overdue 1 10–55% 49 10–55%

91–180 days overdue 3 25–100% 48 25–100%

more than 180 days overdue

74 100% 27 100%

Trade receivables total 1,412 961

Impairment loss -9 -9

Trade receivables – Net 1,403 952

Blender's Tax Credit receivables from the US tax authorities on 31.12.2021 were total EUR 96 million, of which EUR 21 million

1–30 days overdue and EUR 49 million more than 180 days overdue.

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Capital risk management

Neste's objective when managing capital is to secure a capital structure that ensures access to capital markets at all times

despite the business cycle of the industry in which Neste operates. Despite the fact that Neste does not have a public credit

rating, the Group's target is to have a capital structure equivalent to investment-grade rating. The capital structure of Neste is

reviewed by the Board of Directors on a regular basis.

Neste monitors its capital on the basis of leverage ratio, the ratio of interest-bearing net debt to interest-bearing net debt

plus total equity. Interest-bearing net debt is calculated as interest-bearing liabilities less liquid funds. Over the cycle, Neste's

leverage ratio is likely to fluctuate, and it is Neste's objective to maintain the leverage ratio below 40%.

The leverage ratio 31 Dec 2021 31 Dec 2020

Total interest-bearing liabilities 1,757 1,307

Liquid funds 1,716 1,572

Interest-bearing net debt 41 -265

Total equity 6,985 5,929

Interest-bearing net debt and total equity 7,026 5,664

Leverage ratio 0.6% -4.7%

Reconciliation of interest-bearing net debt Cash and cash equivalents Liquid investments Lease liabilities Borrowings Total

Net debt as at 1 January 2021 -1,552 -20 403 904 -265

Cash flows -117 -115 -144 397 22

New lease liabilities 0 0 141 0 141

Acquisitions and disposals -5 0 22 22 38

Foreign exchange differences -22 0 12 -10 -19

Other non-cash movements 114 0 10 0 125

Net debt as at 31 December 2021 -1,581 -135 444 1,313 41

Reconciliation of interest-bearing net debt Cash and cash equivalents Liquid investments Lease liabilities Borrowings Total

Net debt as at 1 January 2020 -1,493 -19 418 903 -191

Cash flows -64 0 -115 -24 -203

New lease liabilities 0 0 135 0 135

Acquisitions and disposals -4 0 0 19 15

Foreign exchange differences 9 0 -15 5 0

Other non-cash movements 1 0 -21 0 -21

Net debt as at 31 December 2020 -1,552 -20 403 904 -265

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4 Segment information

Accounting policy

Neste's operations are divided into four operating segments: Renewable Products, Oil Products, Marketing &

Services, and Others. The performance of the reporting segments are reviewed regularly by the chief operating

decision-maker, Neste's President & CEO, to assess performance and to decide on allocation of resources. Operating

segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-

maker.

The segments' operating results are measured based on comparable operating profit and return on comparable

net assets. The accounting policies applicable to the segment reporting are the same as those used for establishing

the Neste consolidated financial statements. All inter-segment transactions are on an arm's length basis and are

eliminated in consolidation. Segment operating profit includes realized gains and losses from foreign currency and

commodity derivative contracts hedging cash flows of commercial sales and purchases that have been recycled in the

consolidated statement of income.

Segment operating assets and liabilities consist of assets and liabilities utilized in the segments' business

operations. Assets consist primarily of property, plant and equipment, intangible assets, investments in associates and

joint ventures, inventories and receivables. They exclude deferred taxes, interest-bearing receivables, and derivative

financial instruments designated as hedges of forecasted future cash flows. Segment operating liabilities consist of

operating liabilities, pension liabilities, short-term and long-term lease liabilities and provisions; and exclude items such

as current and deferred taxes, interest-bearing liabilities, and derivative financial instruments designated as hedges of

forecasted future cash flows.

Neste's business structure

Neste's operations are built around three business areas and six common functions. The business areas act as profit

centers and are responsible for their customers, products, and business development. Business areas are: Renewable

Products, Oil Products, and Marketing & Services. The common functions are: Finance, Human Resources, HSSEQ and

Procurement, Sustainability and Corporate Affairs, Innovation; Legal, and Neste Engineering Solutions. The common functions

are responsible for supporting business areas and other organizations, and ensure their cost efficiency, transparency, and

harmonization of procedures across the company, and for overseeing the use and sufficiency of Neste's resources.

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Operating segments

Operating segments are engaged in the following key

business activities:

The Renewable Products segment produces, markets

and sells renewable diesel, renewable jet fuels and solutions,

renewable solvents as well as raw material for bioplastics

based on Neste's proprietary technology to domestic

and international wholesale markets. Renewable diesel

is produced at the Porvoo, Singapore, and Rotterdam

refineries, which have a combined capacity of 3.2 million

tons per year.

The Oil Products segment produces, markets and sells

an extensive range of low-carbon solutions that are based

on high-quality oil products and related services to a global

customer base. The product range includes diesel fuel,

gasoline, aviation and marine fuels, light and heavy fuel

oils, base oils, gasoline components, special fuels, such as

small-engine gasoline, solvents, liquid gases, and bitumens.

Oil products are refined at the Neste Finland Refinery in

Porvoo. Base oils are also produced by a joint arrangement

production plant in Bahrain. Crude oil refining capacity

is 10.5 million tons per year. Neste Shipping's chartering

operations are included in the Oil Products segment.

The Marketing & Services segment markets and sells

cleaner fuels and oil products and associated services

directly to end-users, of which the most important are

private motorists, industry, transport companies, farmers,

and heating oil customers. Traffic fuels are marketed through

Neste’s own service station network and direct sales.

The Others segment consists of the engineering and

technology solutions company Neste Engineering Solutions

and common corporate costs.

The operating segments presented above do not include

any segments which are formed by aggregating two or more

smaller segments.

The 'other expenses' included in the consolidated statement

of income for each business segment includes the following

major items:

Renewable Products: repairs and maintenance, planning

and consulting services, rents and other property costs,

travel-, HSE- and marketing costs, and insurance premiums.

Oil Products: repairs and maintenance, planning and

consulting services, rents and other property costs, travel-

and HSE costs and insurance premiums.

Marketing & Services: repairs and maintenance, rents and

other property costs and marketing costs.

Neste's customer structure in 2021 and 2020 did not result

in any major concentration in any given geographical area or

operating segment.

Renewable

Products

Oil

Products

Marketing

& Services

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2021

Renewable

Products

Oil

Products

Marketing

& Services Others Eliminations Group Note

IS External revenue 5,658 5,690 3,772 28 0 15,148

Internal revenue 237 2,120 31 142 -2,530 0

IS Total revenue 5,895 7,810 3,803 170 -2,530 15,148 5

IS Other income 10 18 9 31 -20 48 6

IS, CF Share of profit (loss) of associates and joint ventures -3 0 0 0 0 -3 15

IS Materials and services -3,576 -6,948 -3,616 -53 2,442 -11,751 7

IS Employee benefit costs -132 -103 -25 -174 3 -431 8

IS, CF Depreciation, amortization and impairments -227 -283 -29 -46 0 -584

IS Other expenses -243 -232 -66 37 100 -403 9

IS Operating profit

1,723 263 77 -34 -6 2,023

IS Financial income and expense -61 10

IS Profit before income taxes 1,962

IS Income tax expense -188 11

IS Profit for the period 1,774

Comparable operating profit 1,238 71 74 -35 -6 1,342

inventory valuation gains/losses 409 164 0 0 0

573

changes in the fair value of open commodity and currency derivatives 81 25 0 0 0 106

capital gains and losses 0 -2 5 0 0 3

impairments 0 0 0 0 0 0

other adjustments -4 5 -2 1 0 -1

IS Operating profit 1,723 263 77 -34 -6 2,023

The US Blender's Tax Credit (BTC) contribution was EUR 295 million on the Renewable Products' operating profit in 2021.

Information about Neste's operating segments as of and for the years ended December 31, 2021 and 2020 is presented in the following tables:

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2021

Renewable

Products

Oil

Products

Marketing

& Services Others Eliminations Group Note

Comparable EBITDA 1,460 353 103 11 -6 1,920

Capital expenditure and investments in shares 1,023 451 22 39 0 1,535

Segment operating assets 5,689 3,967 588 350 -328 10,266

BS Investments in associates and joint ventures 35 25 0 0 0 60 15

BS Deferred tax assets 45 11

Unallocated assets 2,045

BS Total assets 5,724 3,992 588 350 -328 12,417

Segment operating liabilities 1,327 1,990 429 281 -315 3,712

BS Deferred tax liabilities 309 11

Unallocated liabilities 1,411

BS Total liabilities 1,327 1,990 429 281 -315 5,432

Segment net assets 4,748 2,045 212 78 -13 7,069

Return on net assets, % 40.9 11.9 38.1 29.6

Comparable return on net assets, % 29.4 3.2 36.6 30.1

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2020

Renewable

Products

Oil

Products

Marketing

& Services Others

Eliminations Group Note

IS External revenue 4,114 4,578 3,031 28 0 11,751

Internal revenue 156 1,485 24 149 -1,813 0

IS Total revenue 4,270 6,063 3,055 177 -1,813 11,751 5

IS Other income 1 7 4 26 -21 17 6

IS, CF Share of profit (loss) of associates and joint ventures 0 4 0 -42 0 -38 15

IS Materials and services -2,540 -5,505 -2,874 -50 1,716 -9,253 7

IS Employee benefit costs -106 -145 -24 -158 2 -431 8

IS, CF Depreciation, amortization and impairments -184 -425 -28 -43 0 -680

IS Other expenses -201 -396 -64 6 117 -538 9

IS Operating profit

1,239 -396 68 -84 1 828

IS Financial income and expense -41 10

IS Profit before income taxes 786

IS Income tax expense -72 11

IS Profit for the period 714

Comparable operating profit 1,334 50 68 -37 1 1,416

inventory valuation gains/losses 10 -130 0 0 0

-119

changes in the fair value of open commodity and currency derivatives -105 -7 0 0 0 -112

capital gains and losses 0 0 0 -42 0 -42

impairments 0 0 0 0 0 0

other adjustments

0 -310 0 -5 0 -314

IS Operating profit 1,239 -396 68 -84 1 828

The US Blender's Tax Credit (BTC) contribution was EUR 231 million on the Renewable Products' operating profit in 2020.

Other adjustments of EUR -312 million were booked in the fourth quarter relating to the Naantali refinery closure. They included an asset write-down, and cost provisions for site demolition, clean-up and personnel arrangements.

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2020

Renewable

Products

Oil

Products

Marketing

& Services Others Eliminations Group Note

Comparable EBITDA 1,518 312 96 3 1 1,929

Capital expenditure and investments in shares 804 307 26 60 0 1,197

Segment operating assets 3,963 3,382 476 349 -249 7,920

BS Investments in associates and joint ventures 35 21 0 0 0 56 15

BS Deferred tax assets 35 11

Unallocated assets 1,804

BS Total assets 3,998 3,402 476 349 -249 9,815

Segment operating liabilities 825 1,600 339 206 -243 2,726

BS Deferred tax liabilities 222 11

Unallocated liabilities 937

BS Total liabilities 825 1,600 339 206 -243 3,886

Segment net assets 3,470 1,848 192 149 -6 5,653

Return on net assets, % 36.3 -16.8 31.0 -42.5

Comparable return on net assets, % 39.1 2.1 31.0 -18.7

2021 Finland

Other

Nordic countries Baltic rim

Other

European countries

North and

South America

Other

countries Group

IS Revenue by destination 4,877 2,603 1,155 3,122 3,230 162 15,148

Non-current assets 2,666 2 78 1,027 371 1,583 5,727

Capital expenditure 828 2 7 115 142 441 1,535

2020 Finland

Other

Nordic countries Baltic rim

Other

European countries

North and

South America

Other

countries Group

IS Revenue by destination 3,763 1,982 930 3,323 1,603 150 11,751

Non-current assets 2,531 2 81 731 233 1,220 4,797

Capital expenditure 430 1 7 93 222 445 1,197

Geographical information

Neste operates production facilities in Finland, Singapore, the Netherlands and Bahrain and its retail sales network in Finland, Estonia, Latvia and Lithuania. The following table provides information on Neste's revenue, which is allocated based on the

country of destination, irrespective of the origin of the goods or services, and non-current assets and capital expenditure, which are allocated based on where the assets are located.

Non-current assets consist of intangible assets, property, plant and equipment and investments in associates and joint ventures. 'Other Nordic countries' includes Sweden, Norway, Denmark and Iceland. 'Baltic rim' includes Estonia, Latvia, Lithuania,

Russia and Poland. Neste's activities in this geographical area consists mainly of retail activities in the aforementioned countries.

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5 Revenue

Accounting policy

Revenue from contracts with customers is recognized when or as Neste satisfies a performance obligation by

transferring control of a promised good or service to a customer. A customer obtains control when it has the ability

to direct the use of and obtain the benefits from the good or service, either over time or at a point in time. Neste

principally satisfies its performance obligations at a point in time. The amounts of revenue recognized relating to

performance obligations satisfied over time are not significant.

When, or as, a performance obligation is satisfied, Neste recognizes as revenue the amount of the transaction

price that is allocated to that performance obligation. The transaction price is the amount of consideration to which

Neste expects to be entitled in exchange for the promised goods or services. The transaction price is allocated to the

performance obligations in the contract based on the standalone selling prices of the goods or services promised.

Timing for revenue recognized at a point in time is typically when control has been transferred based on the delivery

terms used. A receivable is recognized when the goods are delivered as this is the point in time that the consideration

is unconditional because only the passage of time is required before the payment is due.

Revenue recognized over time is measured in accordance with the input method (progress measured based on

costs incurred) when the outcome of the contract can be estimated reliably. Neste uses an input method in measuring

progress of the services because there is a direct relationship between Neste’s effort and the transfer of service to

the customer. When the outcome cannot be reliably determined, the costs arising are expensed in the same financial

period in which they occur, but the revenue is recorded only to the extent that the company will receive an amount

corresponding to actual costs. Any losses are expensed immediately.

Some of Neste’s contracts may involve elements of variable considerations, such as rebates, bonuses or penalties.

The variable consideration is estimated by using either the expected value or the most likely amount –method,

depending on the type of variable element and related contractual terms and conditions. Amount of variable

consideration is included in the transaction price only to the extent that it is highly probable that a significant reversal

of revenue does not occur later.

Neste provides its customers with standard payment terms. If extended payment terms exceeding one year are

offered to customers, the invoiced amount is discounted to its present value and interest income is recognized over

the credit term.

Revenue is presented net of indirect sales taxes such as value added tax and statutory stockpiling fees, penalties

and discounts.

Low Carbon Fuels Standard credits (LCFS) and Renewable Identification Numbers (RINs) are recognized in revenue.

Blender's Tax Credit (BTC) impacts Revenue and Materials and services and is recognized if the Government of the

United States decide to grant it. The decision is made annually. Blender's Tax Credit is an incentive given to fuel

blenders to use more renewable fuel by making the bio mandates less costly to achieve. In case Neste's customers

are blenders, all or some of the BTC credit value is included in the sale price and recognized in revenue and the

Blender's Tax Credit received directly from the US tax authorities are recognized as deduction of costs in materials

and services.

2021 2020

Sale of goods 15,052 11,664

Revenue from services 78 78

Royalty income 2 2

Other 16 7

IS Revenue 15,148 11,751

Sale of goods includes product sales from the Neste's own refineries, other production facilities and retail stations as

well as other sale of petroleum products, feedstock, raw materials and oil trading. Excise taxes included in the retail selling

price of finished oil products amounting to EUR 1,517 million (2020: EUR 1,394 million) are included in product sales. The

corresponding amount is included in the purchase price of petroleum products and included in Materials and Services, in

Note 7.

Oil trading included in the Sale of goods comprise of revenue from physical trading activities conducted on international

and regional markets by taking delivery of and selling petroleum products and raw materials within a short period of time

for the purpose of generating a profit from short-term fluctuations in product and raw material prices and margins.

Net gains/losses on financial instruments related to sales designated as cash flow hedges are included in Sale of goods

amounting to EUR 6 million (2020: EUR 9 million).

Revenue from services mainly comprises revenue from the chartering services and Neste Engineering Solutions, which is

included in the Others segment.

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Revenue by category 2021 2020

External revenue

Renewable

Products Oil Products

Marketing

& Services Others Total

Renewable

Products Oil Products

Marketing

& Services Others Total

Fuels

5,517 4,882 3,667 0 14,065 4,076 3,933 2,927 0 10,937

Light distillates 138 2,325 876 0 3,339 97 1,820 720 0 2,636

Middle distillates 5,379 2,090 2,786 0 10,255 3,979 1,813 2,204 0 7,996

Heavy fuel oil 0 467 5 0 471 0 300 4 0 304

Other products 141 767 97 0 1,005 38 604 94 0 736

Other services 0 41 9 28 78 0 41 9 28 78

IS Total 5,658 5,690 3,772 28 15,148 4,114 4,578 3,031 28 11,751

Light distillates comprise motor gasoline, gasoline components, LPG, renewable naphtha, and biopropane. Middle distillates comprise diesel, jet fuels, low sulphur marine fuels, heating oil, renewable fuels, and renewable jet fuels. RINs (Renewable Identification Number), LCFS

(Low Carbon Fuels Standard) credits, and BTCs (Blender's Tax Credits) are included in the corresponding fuel categories in the Renewable Products segment.

Timing of revenue recognition 2021 2020

External revenue

Renewable

Products Oil Products

Marketing

& Services Others Total

Renewable

Products Oil Products

Marketing

& Services Others Total

Goods transferred at point in time 5,658 5,649 3,764 0 15,070 4,114 4,537 3,021 0 11,673

Services transferred at point in time 0 41 9 1 51 0 41 9 1 52

Services transferred over time 0 0 0 27 27 0 0 0 26 26

IS Total 5,658 5,690 3,772 28 15,148 4,114 4,578 3,031 28 11,751

Revenue by operating segment 2021 Renewable Products Oil Products Marketing & Services Others Eliminations Total

External revenue 5,658 5,690 3,772 28 0 15,148

Internal revenue 237 2,120 31 142 -2,530 0

IS Total revenue 5,895 7,810 3,803 170 -2,530 15,148

Revenue by operating segment 2020 Renewable Products Oil Products Marketing & Services Others Eliminations Total

External revenue 4,114 4,578 3,031 28 0 11,751

Internal revenue 156 1,485 24 149 -1,813 0

IS Total revenue 4,270 6,063 3,055 177 -1,813 11,751

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Revenue by operating destination 2021 2020

External revenue

Renewable

Products Oil Products

Marketing

& Services Others Total

Renewable

Products Oil Products

Marketing

& Services Others Total

Finland 402 1,604 2,848 22 4,877 169 1,260 2,313 21 3,763

Other Nordic countries 1,723 878 2 0 2,603 1,287 691 4 0 1,982

Baltic Rim 44 190 921 0 1,155 36 181 712 0 930

Other European countries 1,329 1,789 2 2 3,122 1,509 1,809 2 4 3,323

North and South America 2,111 1,115 0 4 3,230 1,089 512 0 2 1,603

Other countries 48 114 0 0 162 24 125 0 0 150

IS Total 5,658 5,690 3,772 28 15,148 4,114 4,578 3,031 28 11,751

6 Other income 7 Materials and services

Accounting policy

Revenue from activities outside normal operations is reported in other income. This includes items such as capital

gains on disposal of other non-current assets and rental income.

Accounting policy

Blender's Tax Credit (BTC) impacts revenue, and materials and services and is recognized if the Government of the

United States decide to grant it. The decision is made annually. Blender's Tax Credit is an incentive given to fuel

blenders to use more renewable fuel by making the bio mandates less costly to achieve. In case Neste's customers

are blenders, all or some of the BTC credit value is included in sales price and recognized in Revenue. The Blender's

Tax Credit received directly from the US tax authorities are recognized as deduction of costs in Materials and services.

2021 2020

Gain on sale of joint arrangements and business operations 5 0

CF Capital gains on disposal of other non-current assets 0 1

Rental income 13 3

Government grants 8 5

Insurance compensations 8 1

Other 14 6

IS Other income 48 17

2021 2020

Materials and supplies 12,491 9,333

Change in inventories -820 -152

External services 80 72

IS Materials and services 11,751 9,253

Government grants relate mainly to innovation subsidies, and grants to shipping operations, which are entitled to apply

for certain grants based on Finnish legislation. More information on sales of joint arrangements and business operations is

presented in Note 27.

Materials and supplies include excise taxes included in the retail selling price of petroleum products amounting to EUR 1,517

million (2020: EUR 1,394 million). The corresponding amount is included in Revenue in Note 5.

The net result of non-hedge accounted commodity and foreign exchange derivatives amounted to EUR 66 million (2020:

EUR 337 million). Net gains/losses on derivative instruments related to purchases designated as cash flow hedges amounted

to EUR 0 million (2020: EUR 0 million). Both above-mentioned items are included in Materials and supplies.

Materials and supplies also include EUR 11 million (2020: EUR 21 million) of expenses related to lease contracts which are

accounted for as an expense on a straight-line basis over the lease term. Refer to Note 30 Leases for further information.

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8 Employee benefit costs 9 Other expenses

2021 2020

Wages and salaries

365 359

Social security costs 21 17

Share-based payments 4 7

Pension costs - defined contribution plans 49 40

Pension costs - defined benefit plans 6 4

Wages and salaries capitalized in fixed assets -23 -5

Other costs 9 8

IS Employee benefit costs 431 431

2021 2020

Repairs and maintenance 127 132

Services 145 169

Rents and other property costs 30 31

Insurances 32 26

Other 69 180

IS Other expenses 403 538

Fees charged by the statutory auditor 2021 2020

Authorised Public Accountants KPMG PwC

Auditor's fees 1.3 1.5

Tax advisory 0.6 0.0

Other advisory services 0.4 0.2

2.3 1.7

Number of personnel (average) 2021 2020

Renewable Products 1,245 1,014

Oil Products 1,328 1,604

Marketing & Services 392 387

Others 1,907 1,828

4,872 4,833

Wages, salaries and other compensation for key management are presented in Note 25. Share-based payments are

described in Note 24 and defined benefit plans in Note 23.

Includes cost provision for personnel arrangements relating to the Naantali refinery closure totaling EUR 22 million in 2020 and reversed

unused provision totaling EUR 11 million in 2021.

Services include planning and consulting services, IT services, research and lab services and other services.

Rents and other property costs include EUR 9 million (2020: EUR 9 million) of expenses related to lease contracts which are

accounted for as an expense on a straight-line basis over the lease term. Refer to Note 30 Leases for further information.

Other expenses include travel expenses, HSE and advertising costs. In 2020 other expenses included provisions related to

the Naantali refinery closure totaling EUR 124 million.

Research expenditure is recognized as an expense as incurred and included in other expenses in the consolidated

statement of income.

The statutory audit fees of KPMG Oy Ab included fees of 607 thousand euros for audit and 10 thousand euros for auditor's

statements. Non-audit services to entities of Neste Group were 835 thousand euros in total during the financial year 2021.

These services included 486 thousand euros of tax advisory and 349 thousand euros of other advisory services.

In 2020 auditor was PricewaterhouseCoopers Oy and its non-audit services were 159 thousand euros, which included tax

advisory 9 thousand euros and other advisory services 150 thousand euros.

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10 Financial income and expenses

2021 2020

Financial income

Income from financial assets at fair value through profit or loss 0 0

Interest income from financial assets at amortized cost 3 4

4 4

Financial expenses

Interest expenses for financial liabilities/receivables at amortized cost

Lease liabilities -21 -22

Other liabilities -26 -20

Write-downs of loan receivables -4 0

Other financial expenses -4 -3

-55 -45

Exchange rate and fair value gains and losses

Financial instruments at amortized cost 11 -2

Financial instruments at fair value through profit or loss -21 3

-10 0

IS Total financial income and expenses -61 -41

Net gains/losses on financial instruments

included in operating profit and fixed assets 2021 2020

Foreign exchange derivatives, hedge accounted

Included in revenue 6 9

Included in materials and services 0 0

Included in fixed assets 3 2

Foreign exchange derivatives, non-hedge accounted

Included in materials and services -68 77

Commodity derivatives, non-hedge accounted

Included in materials and services 134 260

76 348

The recognized ineffectiveness was EUR 0.2 million due to Singapore expansion (2020: EUR 1.7 million).

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The major components of income tax expense 2021 2020

Current tax 94 116

Adjustments recognized for current tax for prior periods 0 1

Change in deferred taxes 94 -45

IS Income tax expense 188 72

The reconciliation of income taxes 2021 2020

IS Profit before income taxes 1,962 786

Hypothetical income tax calculated at Finnish tax rate 20% -392 -157

Differences in tax rates in other countries 195 99

Non-deductible expenses and other permanent differences -1 -2

Tax exempt income 2 1

Tax on undistributed earnings 0 0

Taxes for prior periods 0 -2

Net results of joint ventures -1 -8

Realisability of deferred tax assets 11 -2

Other -1 0

IS Income tax expense -188 -72

Effective tax rate, % 10 9

Neste's effective tax rate was lower than the Finnish statutory tax rate (20%) mainly due to lower taxation in Estonia, Lithuania,

Singapore and Switzerland, where Neste has business operations. The most significant portion of the lower tax rate relates

to Singapore and the Renewable Products’ profitability. Neste's manufacturing investment in Renewable Products during

2008-2010 in Singapore is subject to tax exemption for 2010-2023 under the applicable Singapore legislation. The realisability

of deferred taxes includes EUR 9 million impact of tax losses utilized in Bahrain, of which deferred tax asset has not been

previously booked.

11 Income taxes

Accounting policy

Neste's income tax expenses include taxes of group companies calculated on the basis of the taxable profit for

the period, with adjustments for previous periods, as well as the change in deferred income taxes. In respect of the

deferred tax liability on undistributed foreign earnings, the amount recorded is based on expected circumstances

and management expectations regarding the profit distribution. For items recognized directly in equity or other

comprehensive income, the income tax effect is similarly recognized.

Adjustments regarding uncertain tax positions (IFRIC 23), if any, are recorded based on estimates and assumptions

of the most likely amount or the expected value, depending on which method Neste expects to better predict the

resolution of the uncertainty when it is not likely that certain positions may be accepted upon review by local tax

authorities and/or courts.

Deferred income taxes are stated using the balance sheet liability method, to reflect the net tax effect of temporary

differences between the financial reporting and tax bases of assets and liabilities. Deferred income tax assets are

recognized to the extent that it is probable that future taxable profit will be available against which the temporary

differences can be utilized. Deferred income tax is determined using tax rates that are in force on the balance sheet

date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax

liability is settled.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets

against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. Deferred tax

assets are recognized for tax loss carryforwards and other unused tax credits to the extent that the utilization of the

related tax benefit through future taxable profits is probable.

Estimates and judgements requiring management estimation

Liabilities and assets are recognised with respect to income tax amounts when management is expecting to pay and

recover, respectively. Management has chosen not to discount non-current tax balances.

Neste has deferred tax assets and liabilities which are expected to be realized through the income statement

over extended periods of time in the future. Neste management has made certain assumptions regarding future tax

consequences and used certain estimates when calculating differences between carrying amounts of assets and

liabilities and their tax bases. Key assumptions underlying tax calculations include e.g. likelihood that recoverability

periods for tax loss carryforwards will not change, and that existing tax laws and rates remain unchanged into

the foreseeable future. At each balance sheet date deferred tax assets are assessed for recoverability and when

circumstances indicate that it is no longer probable that deferred tax assets can be recovered, balances are reduced

to their recoverable amounts.

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Changes in deferred tax assets and liabilities 2021 On 1 Jan 2021

Charged to

Income Statement

Charged in Other

comprehensive income Acquisitions / Disposals

Exchange rate differences, assets

held for sale and other changes On 31 Dec 2021

Tax loss carried forward 1 5 0 0 0 5

Provisions 44 -9 0 0 0 35

Pensions 22 0 8 0 0 30

Fixed assets 13 1 0 0 0 14

Derivative financial instruments 1 0 8 0 0 8

Other temporary differences 9 5 0 0 -2 13

Total deferred tax assets 90 1 16 0 -2 105

Netting against liabilities -55 -5 0 0 0 -60

BS Deferred tax assets 35 -4 16 0 -2 45

Tax on undistributed earnings 9 0 0 0 0 9

Fixed assets 249 81 0 11 0 341

Derivative financial instruments 16 15 -16 0 0 15

Other temporary differences 3 -1 3 0 -1 4

Total deferred tax liabilities 277 95 -13 11 -1 369

Netting against assets -55 -5 0 0 0 -60

BS Deferred tax liabilities 222 90 -13 11 -1 309

Changes in deferred tax assets and liabilities 2020 On 1 Jan 2020

Charged to

Income Statement

Charged in Other

comprehensive income Acquisitions / Disposals

Exchange rate differences, assets

held for sale and other changes On 31 Dec 2020

Tax loss carried forward 3 -3 0 0 0 1

Provisions 11 33 0 0 0 44

Pensions 22 -1 1 0 0 22

Fixed assets 6 7 0 0 0 13

Derivative financial instruments 1 0 -1 0 0 1

Other temporary differences 10 0 0 0 0 9

Total deferred tax assets 53 36 1 0 0 90

Netting against liabilities -13 -42 0 0 0 -55

BS Deferred tax assets 40 -6 1 0 0 35

Tax on undistributed earnings 11 -2 0 0 0 9

Fixed assets 255 -6 0 0 0 249

Derivative financial instruments 0 0 16 0 0 16

Other temporary differences 1 0 1 1 0 3

Total deferred tax liabilities 267 -9 17 1 0 277

Netting against assets -13 -42 0 0 0 -55

BS Deferred tax liabilities 255 -51 17 1 0 222

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There are in total EUR 84 million (2020: EUR 126 million) of tax loss carryforwards and other unused tax credits for which no

deferred tax asset is recognized, the majority of them relating to Neste Oil Bahrain W.L.L.. Expiry dates are between 2021 and

2026 for EUR 3 million (2020: EUR 4 million) and no expiry for EUR 81 million (2020: EUR 121 million).

A deferred tax liability has been recognized for undistributed earnings of subsidiaries where income taxes would be payable

upon distribution.

Deferred tax recognized relating to components of other comprehensive income:

Earnings per share

Basic earnings per share is calculated by dividing the profit for the period attributable to owners of the parent by the weighted

average number of shares outstanding during the year. The dilutive effect of equity settled share-based payments is included in

the computation of diluted earnings per share.

Dividend per share

The dividends paid in 2021 were EUR 0.80 per share, totalling EUR 614 million (2020: EUR 1.02 per share, totalling EUR 783

million). A dividend of EUR 0.82 per share, totalling EUR 630 million will be proposed at the Annual General Meeting on 30

March 2022. This dividend is not reflected in the financial statements.

2021

Before tax

Tax (charge)

/ credit After tax

OCI Remeasurements of defined benefit plans -37 7 -30

OCI Net change of other investments at fair value 14 -3 11

OCI Translation differences 24 0 24

Cash flow hedges

OCI recorded in equity -122 23 -99

OCI transferred to income statement -10 1 -9

OCI Share of other comprehensive income of

investments accounted for using the equity method 4 0 4

OCI Other comprehensive income -127 29 -98

2020

Before tax

Tax (charge)

/ credit After tax

OCI Remeasurements of defined benefit plans -7 1 -6

OCI Net change of other investments at fair value 6 -1 5

OCI Translation differences 4 0 4

Cash flow hedges

OCI recorded in equity 91 -18 73

OCI transferred to income statement -13 1 -12

OCI Share of other comprehensive income of

investments accounted for using the equity method 12 0 12

OCI Other comprehensive income 92 -17 76

12 Earnings per share and dividend per share

2021 2020

IS Profit for the period attributable to owners of the parent, EUR million 1,771 712

Weighted average number of shares outstanding during the year (thousands) 767,643 767,370

IS Basic earnings per share (euro per share) 2.31 0.93

Effect of share-based incentive plans (thousands) 890 1,132

Diluted weighted average number of shares during the year (thousands) 768,533 768,503

IS Diluted earnings per share (euro per share) 2.30 0.93

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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13 Intangible assets

Accounting policy

Intangible assets, except goodwill, are stated at historical cost and amortized in a straight-line method over

expected useful lives. Intangible assets comprise the following:

Computer software

Computer software licenses are capitalized on the basis of the costs incurred to acquire and introduce the

software in question. The costs include the software development employee costs and professional fees arising

directly bringing the asset to its working condition. Capitalization also depends on the technology used, e.g.,

cloud services are not capitalized. Costs are amortized over their estimated useful lives (three to five years). Costs

associated with updates or maintaining computer software programs are recognized as an expense.

Trademarks and licenses

Trademarks and licenses have a definite useful life and are carried at cost less accumulated amortization. They are

amortized over their estimated useful lives (three to ten years).

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of Neste’s share of the net

identifiable assets of the acquired business, subsidiary, associate or joint venture at the date of acquisition.

Goodwill on acquisition of subsidiaries is included in intangible assets. Separately recognized goodwill is tested

for impairment and carried at cost, less accumulated impairment losses. Impairment testing is done annually and

whenever there is an indication that the asset may be impaired. Impairment losses on goodwill are not reversed.

Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing, using those cash-generating

units or groups of cash-generating units that are expected to benefit from the business combination in which the

goodwill arose.

The discount rates used in impairment testing of goodwill represent the WACC specified for the business area in

question after tax, which is adjusted by tax effects in connection with the test. The WACC formula inputs are risk-

free rate of return, market risk premium, industry-specific beta factor, target capital structure, borrowing cost and

country risks. WACC rates are specified for each of the cash generating units separately. WACC% and growth

rate are used purely for the impairment testing.

The key assumptions used for the estimated cash flows in Renewable Products are sales margin and sales

volumes and in Oil Products the total refining margin and the sales volumes.

Estimates and judgements requiring management estimation

Intangible assets as well as property, plant and equipment are always tested for impairment, when there is any

indication that an asset may be impaired. When the recoverable amount of an asset is less than the carrying amount,

an impairment loss is recognized as an expense immediately and the carrying amount is reduced to the asset’s

recoverable amount.

The amounts recoverable from cash-generating units' operating activities are determined based on value in

use calculations. These calculations are based on estimated future cash flows approved by Neste's management,

covering a period of three years. Preparation of these estimates requires management to make assumptions relating

to future expectations. The main assumptions used relate to the sales margin, total refining margin and discount rates.

The impacts of the COVID-19 pandemic to lower demand of oil products has been taken into account in estimating

future cash flows.

Emission allowances

Emission allowances, which are purchased to cover future periods deficit, are recorded in intangible assets and

measured at cost, and emission allowances received free of charge are recorded in their nominal value, i.e., at

zero.

A provision is recognized to cover the obligation to buy emission allowances if emission allowances received

free of charge and purchased emission allowances intended to cover the deficit do not cover actual emissions.

The provision is measured at its probable settlement amount. The difference between emissions made and

emission allowances received, as well as any change in the probable amount of the provision, are reflected in the

operating profit.

Impairment of non-nancial assets

Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to

amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed

for impairment whenever events or changes in circumstances indicate that the carrying amount may not be

recoverable. An impairment loss is recognized in the consolidated statement of income to the extent that the

asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair

value less costs to sell and value in use. Non-financial assets other than goodwill that suffered impairment are

reviewed for possible reversal of the impairment at each reporting date.

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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2021 Goodwill

Software

and other

intangible

assets Total

Gross carrying amount on 1 January 120 363 483

Exchange rate differences 10 2 12

Acquisitions 206 24 230

CF Additions 25 23 48

Disposals 0 -1 -1

Reclassifications 0 0 0

Gross carrying amount on 31 December 362 410 772

Accumulated amortization and impairment losses on 1 January 0 219 219

Exchange rate differences 0 0 0

Disposals 0 -1 -1

Reclassifications 0 0 0

Amortization for the period 0 39 39

Accumulated amortization and impairment losses on 31 December 0 256 256

BS Carrying amount on 1 January 2021 120 144 264

BS Carrying amount on 31 December 2021 362 154 516

2020 Goodwill

Software

and other

intangible

assets Total

Gross carrying amount on 1 January 16 308 323

Exchange rate differences -12 -5 -17

Acquisitions 116 24 140

CF Additions 1 34 35

Disposals 0 0 0

Reclassifications 0 2 2

Gross carrying amount on 31 December 120 363 483

Accumulated amortization and impairment losses on 1 January 0 188 188

Exchange rate differences 0 0 0

Disposals 0 0 0

Reclassifications 0 0 0

Amortization for the period 0 31 31

Accumulated amortization and impairment losses on 31 December 0 219 219

BS Carrying amount on 1 January 2020 16 120 135

BS Carrying amount on 31 December 2020 120 144 264

WACC% 2021 2020

Renewable Products 5.6 359 118

Oil Products 5.8 2 2

362 120

Impairment test of goodwill

Goodwill is allocated to Neste's cash-generating units (CGU's). From identified CGU's goodwill is allocated to the following: Renewable Products cash-generating unit which is equal with the Renewable Products segment and Traffic Fuels cash-

generating unit in the Oil Products segment.

A segment-level summary of the goodwill allocation is presented below:

A decrease of 10% in sales margin and total rening margin or 2.5%-points increase in the discount rate would not create a situation in which the carrying amounts of the cash-generating units would exceed their recoverable amounts. Cash ows

beyond the three-year period are extrapolated by using 1.0% nominal growth rate in Renewable Products and -1.0% in Oil Products.

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14 Property, plant and equipment

Accounting policy

Property, plant, and equipment mainly comprise oil refineries and other production plants and storage tanks,

marine fleet, and retail station network infrastructure and equipment. Neste owns station network infrastructure

with the exception of dealer stations. Property, plant, and equipment are stated at historical cost in the balance

sheet, less depreciation and any accumulated impairment losses. Historical cost includes expenditure that is

directly attributable to the acquisition of the items in question and the initial estimate of the costs of dismantling

and removing the item and restoring the site on which it is located. Cost may also include transfers from equity

of any gains/losses on qualifying cash flow hedges related to foreign currency purchases of property, plant, and

equipment. Assets acquired through the acquisition of a new subsidiary are stated at their fair value on the date of

acquisition.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as

appropriate, only when it is probable that future economic benefits associated with the item will flow to Neste

and the cost of the item can be measured reliably. Costs for major periodic overhauls at oil refineries and other

production plants on a 3-5 year cycle are capitalized when they occur and then depreciated during the shutdown

cycle, i.e., the time between shutdowns. All other repairs and maintenance are charged to the consolidated

statement of income during the financial period in which they are incurred.

Land areas are not depreciated. The bottom of crude oil rock inventory and precious metals in catalysts used

in production process are included in other tangible assets and are depreciated according to possible usage.

Depreciation on tangible assets is calculated using the straight-line method to allocate their cost to their residual

values over their estimated useful lives as follows:

The residual values and useful lives of assets are reviewed and adjusted where appropriate at each balance sheet

date. The carrying amount of an asset is written down immediately to its recoverable amount if the former amount

is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing

proceeds with carrying amounts. These are included in 'Other income' or 'Other expenses' in the consolidated

statement of income.

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset,

a major initial investment, such as a new production facility, form part of the cost of that asset. Other borrowing

costs are recognized as an expense.

Buildings and structures, including terminals 20–40 years

Machinery and equipment:

Production machinery and equipment 15–20 years

Marine fleet 15–20 years

Retail station network infrastructure and equipment 5–15 years

Other equipment and vehicles 3–15 years

Other tangible assets 20–40 years

Expenditure on development activities is capitalized only when it fulfills strict criteria e.g., development relates

to new products that are both technically and commercially feasible. The majority of Neste's development

expenditure does not meet the criteria for capitalization and are recognized as expenses as incurred.

Leases

Neste assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys

the right to control the use of an identified asset for a period of time in exchange for consideration.

As a lessee, Neste recognizes the right-of-use asset on the balance sheet as property, plant and equipment at

a value equivalent to the initial measurement of the lease liability adjusted for lease prepayments, lease incentives,

initial direct costs and any restoration obligations at the commencement date of the lease.

Right-of-use assets are depreciated on a straight-line basis over the lease term of the assets. Right-of-use

assets are assessed for impairment in line with the accounting policy for impairment of property, plant and

equipment, intangible assets, and goodwill (see Note 13).

Refer to Note 30 Leases for further information.

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2021 Land

Buildings

and constructions

Machinery and

equipment

Other

tangible assets

Assets under

construction Total

Gross carrying amount on 1 January 280 2,529 4,971 453 1,166 9,399

Exchange rate differences 0 1 3 9 1 14

Additions 7 33 443 183 499 1,164

Acquisitions 8 66 58 4 1 136

Disposals -7 -7 -195 -99 -7 -315

Reclassifications 0 57 303 0 -350 11

Assets held for sale 0 0 10 -31 0 -22

Gross carrying amount on 31 December 287 2,679 5,593 518 1,310 10,387

Accumulated depreciation and impairment losses on 1 January 28 1,205 3,523 162 4 4,922

Exchange rate differences 0 0 1 4 0 5

Disposals -4 -6 -184 -43 0 -237

Reclassifications 2 2 7 0 0 11

Depreciation and write downs for the period 12 85 358 85 6 545

Assets held for sale 0 0 11 -22 0 -12

Accumulated depreciation and impairment losses on 31 December 38 1,287 3,715 186 10 5,235

BS Carrying amount on 1 January 2021 252 1,324 1,448 291 1,162 4,477

BS Carrying amount on 31 December 2021 249 1,392 1,879 332 1,300 5,152

The carrying amount of of assets under construction at 31 December 2021, included mainly assets related to the ongoing Singapore expansion project. Property, plant and equipment include right-of-use (ROU) assets where Neste is a lessee as specified

in Note 30 Leases.

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2020 Land

Buildings

and constructions

Machinery and

equipment

Other

tangible assets

Assets under

construction

Total

Gross carrying amount on 1 January 245 2,467 4,871 388 599 8,570

Exchange rate differences 0 0 -1 -7 0 -8

Additions 15 34 153 131 596 929

Acquisitions 28 28 21 1 1 79

Disposals -9 -11 -51 -42 0 -113

Reclassifications 0 11 9 -18 -30 -28

Assets held for sale 0 0 -30 0 0 -30

Gross carrying amount on 31 December 280 2,529 4,971 453 1,166 9,399

Accumulated depreciation and impairment losses on 1 January 14 1,108 3,138 121 3 4,384

Exchange rate differences 0 0 0 -3 0 -3

Disposals -1 -7 -45 -4 0 -57

Reclassifications 2 2 -18 -20 0 -34

Depreciation and write downs for the period

13 102 464 68 1 649

Assets held for sale 0 0 -17 0 0 -17

Accumulated depreciation and impairment losses on 31 December 28 1,205 3,523 162 4 4,922

BS Carrying amount on 1 January 2020 231 1,359 1,733 268 597 4,187

BS Carrying amount on 31 December 2020

252 1,324 1,448 291 1,162 4,477

Includes EUR 167 million asset write-down relating to the Naantali refinery closure.

Includes the write-down concerning property plant & equipment in Neste Oil Bahrain W.L.L. from 2018.

Property, plant and equipment include right-of-use (ROU) assets where Neste is a lessee as specified in Note 30 Leases.

Capitalized borrowing costs

During 2021 borrowing costs amounting to EUR 1.9 million (2020: EUR 2.0 million) were capitalized related to the Singapore expansion project. They are included in property, plant and equipment. Neste's average interest rate of borrowings for each month

was applied as the capitalization rate, which resulted in average capitalization rate of 1.5% (2020: 2.0%).

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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15 Investments in associates and joint ventures

Carrying amount 2021 2020

On 1 January 56 22

IS, CF Share of profit (loss) of associates and joint ventures -3 -38

OCI Share of other comprehensive income of

investments accounted for using the equity method 4 12

CF Investments 0 35

Translation differences 4 26

BS On 31 December 60 56

2021 2020

Country of

incorporation

Nature of the

relationship

% interest

held

% interest

held

Alterra Energy LLC USA Note 1 40.00 40.00

Glacia Limited Bermuda Note 2 50.00 50.00

Kilpilahti Power Plant Ltd Finland Note 3 40.00 40.00

Neste's interest in its principle associates and joint ventures at 31 December, all of which are unlisted, are listed in the following

table:

Note 1: Alterra Energy LLC is a US-based, chemical recycling technology company. The cooperation between Neste and

Alterra includes joint technology development and commercialization of the technology.

Management has classified Alterra as an associated company due to the considerable influence that Neste has in the

company.

Note 2: Glacia Limited is a joint venture company owned on a 50/50 basis by Neste and Stena Maritime AG (part of the Stena

Group). The company owns an Aframax-size crude tanker, which joined the Neste fleet in January 2007.

Management has classified this ownership as a joint venture because the arrangement is structured through a separate

vehicle, the legal form of which (limited liability company) separates the assets and liabilities of the arrangement from the assets

and liabilities of its shareholders, and are directed so that the relevant activities of the company require unanimous consent

from all shareholders.

Note 3: Kilpilahti Power Plant Ltd is a joint venture company that produces and supplies steam and other utilities to Neste´s

refinery and Borealis´ petrochemical plant in Porvoo, Finland. The joint venture is owned 40% each by Neste and Veolia and

20% by Borealis.

Management has classified this ownership as a joint venture because the arrangement is structured through a separate

vehicle, the legal form of which separates its assets and liabilities of its shareholders and it is directed so that the relevant

activities of the company require unanimous consent from all parties sharing control. The new power plant´s capacity is also

meant to serve external customers in addition to Neste and Borealis and thus optimize the returns of all shareholders in form

of net profit. Management has also taken into account that Kilpilahti Power Plant Ltd plans and executes the power plant

operations as its own business decisions which are operated by Veolia.

Associates and joint ventures have been consolidated using the equity method.

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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Alterra Energy LLC Glacia Limited Kilpilahti Power Plant Ltd

2021 2020 2021 2020 2021 2020

Non-current assets 29 30 15 17 471 421

Current assets

Cash and cash equivalents 2 9 29 25 38 20

Other current assets

(excl. cash and cash equivalents) 1 0 0 1 150 97

Total current assets 3 10 29 25 188 117

Non-current liabilities

Non-current financial liabilities

(excl. trade payables and provisions) 0 0 0 0 444 411

Other non-current liabilities 0 0 0 0 14 13

Total non-current liabilities 0 0 0 0 458 425

Current liabilities

Current financial liabilities

(excl. trade payables and provisions) 0 0 0 0 31 27

Other current liabilities 1 0 1 1 141 55

Total current liabilities 1 0 1 1 171 83

Net assets 31 39 43 41 29 31

Revenue 1 0 5 6 257 150

Depreciation, amortization and impairments 2 2 3 4 8 8

Interest income 0 0 0 0 0 0

Interest expense 0 2 0 0 6 5

Income tax expense 0 0 0 0 92 0

Profit/loss -8 -8 -2

-1 -4 -6

Summarized financial information in respect of Neste's associates and joint ventures are set out in the following table:

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Alterra Energy LLC Glacia Limited Kilpilahti Power Plant Ltd

2021 2020 2021 2020 2021 2020

Opening net assets 1 January 87 0 41 44 0 0

Investment in associate/joint venture 0 87 0 0 0 0

Profit for the period -8 0 -2 0 2 11

Other comprehensive income 7 0 2 -3 9 -9

Other changes 0 0 0 0 -1 -1

Closing net assets 31 December 86 87 43 41 10 0

Interest in joint venture 35 35 21 21 4 0

Carrying value 35 35 21 21 4 0

The share of profits of associates and joint ventures are consolidated based on the companys' preliminary results for the financial period. Alterra Energy LLC was purchased in December 2020 so the result for the year 2020 was not consolidated in Neste's

2020 consolidated statement of income. Additional information concerning acquisitions and disposals in associates and joint ventures during the reporting period are disclosed in Note 27.

Transactions carried out with associates and joint arrangements are disclosed in Note 25. Contingent liabilities relating to the Neste's interest in the associates and joint arrangements are disclosed in Note 29.

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

Reconciliation of summarized nancial information

Reconciliation of the summarized financial information presented to the carrying amount of its interest in the associates and joint ventures.

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16 Financial assets and liabilities by measurement categories

Neste classifies financial assets and liabilities according to IFRS 9. Accounting policies, classification criterias and other information relating to financial assets and liabilities can be found in Notes 17 and 21.

31 Dec 2021

Balance sheet item Fair value through OCI

Fair value through

profit or loss Amortized cost Carrying amount Fair value Level 1 Level 2 Level 3

Non-current financial assets

BS Non-current receivables 2 60 63 63

BS Derivative financial instruments 0 11 11 11 11

BS Other financial assets 42 6 48 48 48

Current financial assets

Trade and other receivables

1,664 1,664 1,664

BS Derivative financial instruments 20 224 243 243 1 242

BS Current investments 135 135 135

BS Cash and cash equivalents 1,581 1,581 1,581

Financial assets 62 243 3,440 3,744 3,744

Non-current financial liabilities

BS Interest-bearing liabilities 1,378 1,378 1,393 909 484

BS Derivative financial instruments 1 1 1 1

Other non-current liabilities

43 43 43

Current financial liabilities

BS Interest-bearing liabilities 379 379 379 379

BS Derivative financial instruments 59 102 161 161 25 136

Trade and other payables

2,656 2,656 2,656

Financial liabilities 59 103 4,456 4,618 4,634

Excluding non-financial items

Derivative financial instruments under Fair value through OCI -category meet criteria for hedge accounting. Accounting policies and other information relating to derivative financial instruments can be found in Note 19.

Interest-bearing liabilities at level 1 consist of listed bonds. Derivative financial instruments at level 1 consist of commodity derivatives which are directly valued based on exchange quatations. Other financial assets in fair value through profit and loss category

include unlisted other investments of EUR 6 million. Other financial assets in fair value through other comprehensive income category include unlisted shares of EUR 42 million. Fair values are determined in accordance of IFRS 13.

During the year 2021 there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

Financial instruments that are measured at fair value in the balance sheet and the interest-bearing liabilities are presented according to fair value measurement hierarchy:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3: inputs for the assets or liability that is not based on observable market data.

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31 Dec 2020

Balance sheet item Fair value through OCI

Fair value through

profit or loss Amortized cost Carrying amount Fair value Level 1 Level 2 Level 3

Non-current financial assets

BS Non-current receivables 61 61 61

BS Derivative financial instruments 0 3 3 3 0 3

BS Other financial assets 27 5 32 32 32

Current financial assets

Trade and other receivables

4 1,193 1,197 1,197

BS Derivative financial instruments 108 152 260 260 1 260

BS Current investments 20 20 20

BS Cash and cash equivalents 1,552 1,552 1,552

Financial assets 136 163 2,826 3,125 3,125

Non-current financial liabilities

BS Interest-bearing liabilities 1,050 1,050 1,072 742 330

BS Derivative financial instruments 1 0 1 1 1

Other non-current liabilities

20 20 20

Current financial liabilities

BS Interest-bearing liabilities 257 257 257 257

BS Derivative financial instruments 14 97 111 111 23 88

Trade and other payables

1,779 1,779 1,779

Financial liabilities 15 98 3,105 3,218 3,240

Excluding non-financial items

During the year 2020 there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

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17 Financial assets

Accounting policy

Financial assets are classified in the following measurement categories: amortized cost, fair value through other

comprehensive income and fair value through profit or loss. The classification depends on used business model for

managing the financial assets and the contractual terms of the cash flows. Assets are classified as current assets,

except for maturities over 12 months after balance sheet date, which are classified as non-current assets. Purchases

and sales of financial assets are recognized on the settlement date (excluding derivatives, Note 19). Financial assets

are derecognized when the rights to receive cash flows from the investments have expired or have been transferred

and the Group has transferred substantially all risks and rewards of ownership.

Amortized cost category consists of liquid funds, trade receivables and loan receivables where the business

model is to hold the asset to collect the contractual cash flows which represent only payments of principal and

interest. Financial assets recognized at amortized cost are valued using the effective interest method.

Assets at fair value through profit or loss consists of equity investments (and derivatives which do not meet the

criteria for hedge accounting). The investments in unlisted companies are measured at their fair value according to

IFRS 13. Gains or losses of the equity investments are included in financial income and expenses.

Other financial assets in fair value through other comprehensive income category include unlisted shares which

are not held for trading. These are strategic investments and Neste considers this classification to be more

relevant.

Liquid funds

Liquid funds consists of cash and cash equivalents and current investments. Cash and cash equivalents includes

cash in hand, deposits held at banks, and other highly liquid investments with original maturities of three months

or less. Current investments includes deposits held at banks and other liquid investments with original maturities

from 3 to 12 months.

Impairment

The general expected credit loss model is used for debt instruments carried at amortized cost and the impairment

is recognized through profit or loss. The credit loss is recognized based on individual assessment of receivable.

The simplified expected credit loss model is applied for trade receivables according to IFRS 9. Every business

area uses a specific provision matrix for the trade receivables due to the different nature of the businesses. The

business area impairment process is based on historical credit loss experience combined with current conditions

and forward looking macroeconomic analysis. The impairment or credit loss is recognized in the consolidated

statement of income within other expenses.

Liquid funds 2021 2020

BS Current investments 135 20

BS, CF Cash and cash equivalents 1,696 1,552

Classified as assets held for sale -115 -1

Liquid Funds 1,716 1,572

Trade and other receivables 2021 2020

Trade receivables 1,403 952

Other receivables 294 216

Advances paid 1 2

Accrued income and prepaid expenses 43 39

Classified as assets held for sale -64 0

BS Trade and other receivables 1,677 1,208

Trade and other receivables excluding non-financial items 1,664 1,197

Non-current financial assets 2021 2020

Non-current interest-bearing receivables 40 35

Other non-current receivables 23 26

BS Non-current receivables 63 61

BS Other financial assets 48 32

The maximum exposure to credit risk is the carrying amount of the liquid funds. Note 3 sets out more information about credit

risk. The impairment of liquid funds has not been recognized because the amount is immaterial.

Due to the nature of short-term trade and other receivables their carrying amount is expected to be equal to their fair value.

The maximum exposure to credit risk is the carrying amount of the trade and other receivables. Analysis of trade receivables

by age, information about the impairment and credit losses are presented in Note 3, Financial risk management, section 'credit

and counterparty risk'.

The fair value of non-current financial receivables is not materially different from the carrying amount which is also the

maximum exposure to credit risk. No impairment losses have been recognized as there are no significant credit risks

associated with the receivables. Other financial assets consist of unlisted shares.

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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18 Inventories 19 Derivative financial instruments

Accounting policy

Inventories are stated at either cost or net realizable value, whichever is the lowest. Cost is determined using the

weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labor,

other direct costs, and related production overheads (based on normal operating capacity). Net realizable value is

the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Inventories

held for trading purposes are measured at fair value less selling expenses. Standard spare parts are carried as

inventory and recognized in profit or loss as consumed. RIN (Renewable Identification Number) and LCFS (Low

Carbon Fuels Standard) credits are accounted for as government grants upon receipt of the product inventory

in the USA and are accounted for as inventory to the extent they have been separated from the physical goods,

which happens when renewable fuel is blended with fossil fuel. RINs and LCFSs are included in Finished products

and goods -category.

Accounting policy

Derivative financial instruments are initially recognized at fair value on the trade date and are subsequently re-

measured at their fair value on the balance sheet date. The fair values of the foreign exchange forward and the

interest rate swap contracts are calculated as the present values of the future cash flows and the fair values of

foreign exchange options by using the Black and Scholes option pricing model. The fair value of the exchange traded

commodity derivatives is based on exchange market quotations and the fair value of over-the-counter commodity

derivative contracts is based on the net present value of cash flows. The fair value of all derivatives is calculated

using the observable market inputs for currency and interest rates, volatilities and commodity price quotations on the

closing date. Derivative contracts are included in current assets or liabilities, except derivatives maturities greater than

12 months after the balance sheet date, which are classified as non-current assets or liabilities.

Most of the derivatives do not qualify for hedge accounting, although these instruments are mainly held for

economic hedging purposes. Changes in the fair value of derivatives, for which hedge accounting is not applied, are

recognized in the income statement either in operating profit or financial income and expenses, depending on the

underlying hedged item. Impact to the income statement from the derivatives is presented in Note 10.

When hedge accounting is applied to the derivative contracts, the method of recognizing any resulting gain or loss

depends on the nature of the item being hedged. Neste designates certain derivative financial instruments as either

hedges of highly probable forecast transactions (cash flow hedges); or hedges of the fair value of recognized assets

or liabilities or a firm commitment (fair value hedges); or hedges of net investments in foreign operations.

The effective portion of the changes in the fair value of derivative financial instruments that are designated and

qualified as cash flow hedges are recognized in equity. Amounts accumulated in equity hedging future sales are

recorded within revenue when the hedged item affects the income statement or in case of capital expenditures as

part of acquisition cost. Forward points in currency forwards and time value of options are transaction related and

thus recognized in equity and reclassified either to the income statement or adjusting the hedged item according

to hedging relationship. In cash flow hedges the critical terms in hedged item and hedging instruments are the

same and hedge ratio is 1:1. Any potential gain or loss relating to the ineffective portion is recognized immediately

in the income statement. Accured interest of interest rate swaps hedging floating rate interest-bearing liabilities is

recognized in the income statement within financial expenses. If a forecast transaction is no longer expected to

occur, the cumulative gain or loss reported in equity is immediately transferred to the income statement.

Certain interest rate swaps are designated as fair value hedges. Changes in the fair value of interest rate swaps

that are designated and qualified as fair value hedges are recorded in the income statement in financial income and

expenses, together with any changes in the fair value of the hedged asset or liability attributable to the hedged risk

compensating the effect. Any gain or loss relating to the ineffective portion is recognized immediately in the income

statement.

Neste documents at the inception of the transaction the relationship between hedging instrument and hedged

items, as well as its risk management objective and strategy for undertaking various hedge transactions. Neste also

documents its assessment, both at hedge inception and on an ongoing basis quarterly, of whether the derivatives

that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items.

Estimates and judgements requiring management estimation

Estimates of net realizable value are based on the most reliable evidence available at the time the estimates are

made. These estimates take into consideration fluctuations of price or cost directly relating to events occurring

after the end of the period to the extent that such events confirm conditions existing at the end of the period.

2021 2020

Materials and supplies 1,044 692

Finished products and goods 1,637 1,138

Other inventories 1 2

Classified as assets held for sale -64 -3

BS Inventories 2,618 1,829

Cumulative inventory valuation gains due to oil price changes amounted EUR 573 million (2020: losses EUR 119 million) of

which EUR 80 million (2020: EUR 52 million) consisted of inventory write-downs recorded at the end of the period.

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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31 Dec 2021 31 Dec 2020

Nominal value by maturity Fair Value Nominal value by maturity Fair Value

< 1 year > 1 year Positive Negative Net < 1 year > 1 year Positive Negative Net

Foreign exchange and interest rate derivatives

Foreign exchange derivatives, forwards 2,216 10 20 55 -35 2,577 70 103 15 88

Foreign exchange options

Purchased 159 0 0 0 0 205 0 6 0 6

Written 159 0 0 5 -5 205 0 0 0 0

Derivatives designated as cash flow hedges 2,534 10 20 59 -39 2,987 70 108 15 93

Foreign exchange derivatives, forwards 1,730 0 14 17 -3 1,184 28 33 1 32

Non-hedge accounting derivatives 1,730 0 14 17 -3 1,184 28 33 1 32

Commodity derivatives

Oil and vegetable oil derivatives

Sold forwards, million bbl 23 0 29 57 -29 22 0 6 85 -79

Purchased forwards, million bbl 19 0 100 15 86 18 0 108 11 97

Electricity and gas derivatives

Purchased forwards, GWh 2,966 940 91 14 77 2,164 1,094 7 0 7

Non-hedge accounting derivatives 220 86 134 122 96 26

Derivatives Total 254 162 92 263 113 151

of which

BS Non-current derivative financial instruments 11 1 10 3 1 2

BS Current derivative financial instruments 243 161 82 260 111 149

Neste uses foreign exchange, interest rate and commodity derivatives to manage market risks (Note 3). Hedge accounting is not applied to commodity derivatives, although these are mainly held for economic hedging purposes. Commodity derivatives

include oil, vegetable oil, freight, electricity and gas contracts. Neste uses forwards as hedging instruments for commodities.

Neste has designated certain foreign currency and interest rate derivatives as hedges of future transactions i.e., as cash flow hedges. Such contracts are, e.g., foreign exchange derivatives hedging USD- and SEK-sales for the next twelve months according

to the Corporate risk management policy or hedging investment costs in Singapore refinery (Note 3). On 31 December 2021, there were no interest rate swaps.

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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20 Equity

Share capital

The Parent Company's share capital registered with the Trade Register as of 31 December 2021 totalled EUR 40,000,000, divided into 769,211,058 shares of equal value. Neste Oyj has one class of shares and each share entitles a shareholder to one vote at

the Annual General Meeting. The nominal value of one share is not determined. The share capital is fully paid. There have been no changes in share capital in 2021 or 2020.

Treasury shares

On 15 March 2021 a total of 132,756 treasury shares of Neste Corporation has been conveyed without consideration to the

key persons participating in the earning period 2018-2020 of the share-based incentive program 2016 according to the terms

and conditions of the program. The directed share issue is based on the authorization granted by the Annual General Meeting

of Shareholders on 18 May 2020. The number of treasury shares after the directed share issue is 1,241,662 shares.

On 16 March 2020 a total of 153,040 treasury shares of Neste Corporation has been conveyed without consideration to the

key persons participating in the Share Ownership Plan 2016 according to the terms and conditions of the plan. The directed

share issue is based on the authorization granted by the Annual General Meeting of Shareholders on 2 April 2019. The number

of treasury shares after the directed share issue is 1,374,418 shares.

Number of shares, 1,000 Treasury shares, 1,000 Outstanding shares, 1,000

1 January 2021 769,211 -1,374 767,837

Transfer of treasury shares 0 133 133

31 December 2021 769,211 -1,242 767,969

1 January 2020 769,211 -1,527 767,684

Transfer of treasury shares 0 153 153

31 December 2020 769,211 -1,374 767,837

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

Other reserves

Reserve fund comprises of restricted reserves other than share capital.

The reserve of invested unrestricted equity includes other equity-related investments and that part of the share subscription

price that has not specifically been allocated to share capital.

Fair value and other reserves include the effective portion of the change in fair value of derivative financial instruments

that are designated as and qualify for cash flow hedges, amounts recognized directly in equity concerning other financial

assets, and concerning equity settled share based payments, the amount corresponding to the expense recognized in the

consolidated statement of income.

Actuarial gains and losses includes the remeasurements of defined benefit plans and net change of other investments at fair

value, which are recognised in other comprehensive income.

Translation differences include exchange differences arising from the translation of the net investment in foreign entities on

consolidation, change in the fair value of currency instruments designated as hedges of the net investment, and exchange

differences resulting from the translation of income statement of foreign entities at the average exchange rates and balance

sheet at the closing rates.

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21 Financial liabilities

Accounting policy

Financial liabilities are classified at amortized cost (except derivative financial liabilities whose accounting policy

is presented at Note 19). Financial liabilities measured at amortized cost are recognized initially at fair value, net

of transaction costs and subsequently measured at amortized cost using the effective interest method. Liabilities

are recognised on the date when the entity becomes a party to the contractual provisions of the instrument.

Any difference between net proceeds and nominal amount is recognized as interest cost over the period of the

borrowing using the effective interest method. Financial liabilities are included in non-current liabilities, except for

items with maturities less than 12 months after the balance sheet date, which are included in current liabilities. A

financial liability is derecognized when the related obligation is discharged, cancelled or expires.

Bank overdrafts are recorded in current liabilities on the balance sheet. Fees of revolving credit facility are

capitalized and amortized over the period of the facility.

The fair values of the listed bonds are driven from market quatations. The fair values of other interest-bearing

liabilities at amortized cost are determined by using the discounted cash flow method employing market interest

rates at the balance sheet date.

Non-current financial liabilities 2021 2020

Bonds

893 720

Loans from financial institutions 121 0

Lease liabilities

333 289

Other loans 30 41

Other non-current liabilities 43 20

Total 1,420 1,070

BS of which interest-bearing 1,378 1,050

Other non-financial items included to other non-current liabilities 1 1

Issued/Maturity

Interest

basis

Interest

rate, %

Effective

interest, % Currency

Nominal

amount

Carrying

amount

2017/2024 Fixed 1.5000 1.5080 EUR 400 399

2021/2028 Fixed 0.7500 0.9000 EUR 500 494

Total 900 893

Current financial liabilities 2021 2020

Bonds 0 0

Loans from financial institutions 137 128

Lease liabilities

111 114

Other loans 131 14

Advances received 67 85

Trade payables 1,829 1,228

Other current liabilities 760 466

Total 3,036 2,036

BS of which interest-bearing 379 257

Other non-financial items included to trade and other payables 105 93

Neste issued a EUR 500 million green bond in March 2021. The 7-year bond carries a coupon of 0.75 per cent.The bond represents the

first issuance under the Green Finance Framework established in February 2021. The proceeds from the issue are allocated in accordance

with the Green Finance Framework to investmentsinto the development, operations, maintenance and expansion of the renewable and

circular solutions with theobjective to mitigate climate change globally by reducing greenhouse gas emissions.

Refer to Note 30 Leases.

The fair values of financial liabilities can be found in Note 16. Re-pricing periods of interest-bearing liabilities are disclosed in

Note 3, Financial risk management, section 'Market risk'.

Listed bond issues

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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22 Provisions

Accounting policy

The nature of certain Neste's businesses exposes Neste to risks of environmental costs and potential contingent

liabilities. The risks arise from the manufacture, use, storage, disposal and maritime and inland transport as well

as sale of materials that may be considered to be contaminants when released into the environment. Liability may

also arise through the acquisition, ownership or operation of properties or businesses.

A provision is recognized in the consolidated statement of financial position when Neste has a present legal

or constructive obligation as a result of a past event, and it is probable that the obligation will result in payment,

and the amount of payment can be estimated reliably. Provisions can arise from environmental risks, litigation,

restructuring plans or onerous contracts. Environmental provisions are recorded based on current interpretations

of environmental laws and regulations when the conditions referred to above are met. Neste has asset retirement

obligations recorded in the consolidated statement of financial position.

Where there are a number of similar obligations, the likelihood that an outflow of resources will be required in

settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the

likelihood of an outflow with respect to any one item in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the

obligation using a pre-tax rate that reflects current market assessments of the time value of money and the

risks specific to the obligation. The increase in the provision due to passage of time is recognized as an interest

expense.

Estimates and judgements requiring management estimation

The existence of criteria for recognizing provisions and the amounts of provisions are determined based on estimates.

The amount to be recorded is the best estimate of the cost required to settle the obligation at the reporting date or

transfer to a third party. The estimate of the financial impact of the past event requires management judgement, which

is based on similar events occurred in the past, and where applicable, the opinion of external experts. Estimates may

differ from the actual future amount of the obligation and with respect to the existence of the obligation. In addition

to the provisions recognized, there are some off-balance-sheet contingent liabilities for which the future potential

outcome (timing, costs) cannot be estimated reliably.

The most significant provisions in the consolidated statement of financial position relate to environmental

liabilities. Environmental provisions are based on management’s best estimate of remediation costs. The

restructuring provision is recognized when Neste has prepared a detailed restructuring plan and published it.

Environmental

provisions

Restructuring

provisions

Provision to

return emission

allowances

Other

provisions Total

BS On 1 January 2021 204 23 0 5 232

Additions 5 0 17 5 27

Amounts used during the period -7 -10 -17 -1 -35

Reversed unused provisions -1 -11 -1 0 -12

Changes in the discount rate

and inflation assumption -3 0 0 0 -3

BS On 31 December 2021 199 2 0 9 210

Environmental

provisions

Restructuring

provisions

Provision to

return emission

allowances

Other

provisions Total

BS On 1 January 2020 86 0 4 3 93

Additions

119 23 0 2 144

Amounts used during the period -3 0 -4 0 -8

Reversed unused provisions -1 0 0 0 -1

Changes in the discount rate

and inflation assumption 3 0 0 0 3

BS On 31 December 2020 204 23 0 5 232

Environmental provisions consists mostly of Neste's asset retirement obligations (ARO) that are related to retail stations and

refineries which are expected to be realised in 1–50 years. Neste recognizes a provision for the decommissioning costs of an

oil installation to the extent that Neste is obliged to rectify damage already caused. The provisions are to be discounted, where

the effect of the time value of money is material.

The exchange rate difference relating to Neste's provisions is immaterial.

Emission allowances

Neste Finland Refineries in Porvoo and Naantali come under the European Union’s greenhouse gas emission trading system,

and were granted a total of 2.2 million tons emission allowances for 2021. Naantali refinery has been operating as a port and

distribution terminal from April 2021 onwards. Naantali port and terminal operations are no longer under the emission trading

system. In addition to refinery operations Neste purchases allowances to cover certain emissions of the local partners who

provide utility services to Neste. A provision is recognized to cover the obligation to buy emission allowances if emission

allowances received free of charge and purchased emission allowances intended to cover the deficit do not cover actual

emissions. Emission allowances, which are purchased to cover future periods deficit are accounted for as intangible assets

and measured at cost, and emission allowances received free of charge are accounted for at nominal value, i.e. at zero.

As at 31 December 2021 there was no obligation to purchase emission allowances in the balance sheet of Neste

(31.12.2020 EUR 0 million). The actual amount of CO

emissions in 2021 were 2.6 million tons (2020: 3.1 million tons).

Neste has traded emission allowances for net amount of 0.4 million tons during the financial period ended 31 December 2021

(2020: 0.6 million tons).

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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23 Employee benefit obligations

Accounting policy

Neste has pension arrangements in different countries, which are generally funded through insurance companies.

Pension cover is based on the legislation and agreement in force in each country. Pension schemes consist of

both defined benefit and defined contribution plans. Finnish statutory pensions are accounted for as a defined

contribution plan in the consolidated financial statements.

Contributions to the defined contribution plans are charged directly to the statement of income in the year to

which these contributions relate. In defined contribution plans, Neste has no legal or contractive obligations to pay

further contributions in case the payment recipient is unable to pay the retirement benefits. All arrangements that

do not fulfill these conditions are considered defined benefit plans.

In defined benefit plans, after Neste has paid the amount for the period, an excess or deficit may result. The

defined benefit obligation represents the present value of future cash flows from payable benefits, which are

calculated for by using the projected unit credit method. The discount rate assumed in calculating the present

value of the pension obligation is based on the market yield of high-quality corporate bonds (AA-rated) with

appropriate maturities. Pension costs are recognized in the consolidated statement of income so as to spread

the current service cost over the service lives of employees based on actuarial calculations. The net interest is

included as part of the finance cost in the consolidated statement of income.

The liability (or asset) recognized in the consolidated statement of financial position is the pension obligation at

the closing date less the fair value of plan assets. Actuarial gains and losses arising from experience adjustments

and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the

period in which they arise. Actuarial valuations for Neste's defined benefit pension plans are performed annually.

Estimates and judgements requiring management estimation

Accounting for defined benefit pensions and other long-term employee benefits involves making significant

estimates when measuring Neste's pension expenses and obligations. The assumptions that are the most

significant to the amounts reported are the discount rate, the rate of salary increase and future benefit increase.

Changes in these assumptions could result in significant changes to the carrying amount of Neste's pension

liability and future pension expenses.

Neste has defined benefit pension plans in Finland, Belgium, Switzerland and the Netherlands. The largest plans are in Finland,

which account for 95% (2020: 96%) of Neste's total defined benefit pension obligation and 96% (2020: 97%) of Neste's

total plan assets. The voluntary pension plan in Finland accounting for most of this has been closed since 1 January 1994.

The insured supplementary pension scheme consists of defined benefit group pension insurances, which are very similar in

structure, with the exception of retirement age and pension accrual rules.

Other long-term employee benefits are long-service remunerations, which are accounted for as an unfunded defined benefit

plan in accordance to IAS 19.

Characteristics of the post-employment dened benet plans in Finland

In Finland, Neste has a voluntary pension plan for a certain group of employees to fulfill an aggregated benefit after retirement.

The voluntary pension plan is managed in an insurance company.

The voluntary plan's benefit is based on the aggregated benefits determined by the insurance contract. The voluntary benefit

is the difference between aggregated benefits and compulsory benefits calculated at the age 63 in the old age plan. The

aggregated benefits are at most 60% or 66% of the supplementary pension salary depending on the plan. The supplementary

pension salary is calculated based on the last 10 years' salaries prior to the pension event adjusted by the index level. The

benefits in the plans are old age and disability pensions, survivors' pensions for widows and children, and funeral grants. Old-

age pension ages are 60, 62 and 65 years. In some pension schemes the pension cover also includes the right to early old-

age pension retirement ages.

The insurance company collects premiums on a yearly basis from the employer. The future premiums are adjusted so

that the old-age pension will be fully funded until retirement. The disability and survivor's pension are also financed by risk

premiums collected during the employment period. The premiums with fixed discount rate 1.5% are based on the last known

salary without any assumptions on future salary increases. The insurance company guarantees the same interest yield to the

assets in the plan, as the one they have used in calculating the premiums.

The employer finances the index-linkage by paying an additional premium covering the index increase during the year.

Discretionary bonuses from the insurance company will lower the index premium. The insurance company decides the amount

of the bonus annually.

Neste has insured the benefits index increases each year as the benefits have been increased. If the insurance company's

granted bonus index does not cover the annual index increase, the insurance company collects a premium from the employer

to cover the increase. The insurance company's bonus index varies on yearly basis.

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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Risks associated with dened benet plans

Through its defined benefit pension plans Neste is exposed to a number of risks. The employer´s defined benefit obligations

pension liability depends on the discount rate which is determined to a yield of corporate bonds as at the reporting date. A

decrease in used discount rates increase the defined benefits obligations. However, a decrease in the used discount rate

yield also increases the fair value of the assets partially offsetting the total impact of change in yield on the net defined benefit

pension liability.

The benefit of the plans is tied to the future benefit increase, which depends on inflation and common salary index. Higher

inflation increases the benefit increase, which leads to an increase in liabilities and annual payments to the insurance company.

If the active employee's salary increases more than the common salary index, the amount of promised benefit and the

benefit obligation increases together with annual payments to life insurance company.

The longevity risk is borne by the insurance company in case the actual mortality differs from the assumed. Possible

adjustments in mortality assumption have an effect on the employer's liability according to IFRS. The insurance company

completely bears the mortality risk on accrued benefits. The employers have a mortality risk only if the insurance company will

raise its future benefit accruals premiums because of mortality adjustment.

Dened benet plans

Cost of defined benefit plans 2021 2020

Service cost 6 4

Net interest (+expense/-income) 0 1

Remeasurements related to other long-term remunerations 0 0

Defined benefit cost recognized in the consolidated statement of income 6 5

Remeasurements of defined benefit plans 2021 2020

Actuarial gains/losses

Changes in demographic assumptions 0 0

Changes in financial assumptions -17 -24

Return on plan assets, excluding amounts included in net interest expense -25 8

Experience adjustments 4 9

Total remeasurements recognized in other comprehensive income -38 -7

Amounts recognized in the consolidated statement of financial position 2021 2020

Present value of funded defined benefit obligations 488 492

Present value of unfunded defined benefit obligations 8 7

Fair value of plan assets -350 -388

BS Net defined benefit liability 146 111

Changes in fair value of plan assets 2021 2020

January 1 388 385

Interest income 1 2

Return on plan assets (excluding amounts included in net interest expense) -25 8

Employer contributions 8 12

Benefits paid -19 -19

Assets held for sale -3 0

December 31 350 388

The assets are the responsibility of the insurance company and a part of the insurance company's investment assets.

The distribution within categories is not possible to provide.

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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Changes in the present value

of the defined benefit obligation

2021 2020

Funded Unfunded Funded Unfunded

January 1 492 7 487 8

Current service cost 5 1 4 0

Interest cost 1 0 3 0

Actuarial gains (-)/ losses (+) 12 1 15 0

Settlements 0 0 0 0

Benefits paid -18 -1 -18 -1

Liabilities related to assets held for sale -5 0 0 0

December 31 488 8 492 7

Significant actuarial assumptions (presented as weighted average) 2021 2020

Discount rate, %

Finland 0.80% 0.30%

Other countries 0.31% 0.28%

Future salary increase, %

Finland 3.5% 2.7%

Other countries 1.1% 1.6%

Future benefit increase, %

Finland 2.3% 1.5%

Other countries 0.0% 0.0%

Impact on the defined benefit

pension obligation

Assumptions Change in assumption 2021 2020

Discount rate

0.50% increase EUR million -22 -34

0.50% decrease EUR million 43 38

Future salary increase

0.50% increase EUR million 11 4

0.50% decrease EUR million 6 -4

Future benefit increase

0.50% increase EUR million 31 31

0.50% decrease EUR million -28 -28

The expected contributions to be paid to the defined benefit plans in 2022 are EUR 8 million.

Sensitivity analysis of signicant actuarial assumptions

Reasonably possible changes at the reporting date to one of the weighted principal assumptions, while holding all other

assumptions constant, would have affected the defined benefit obligation as shown below:

- 0.50% increase/decrease in the discount rate would lead to a decrease /increase of 4.5%/8.8% in the defined benefit

obligation.

- 0.50% increase/decrease in the rate of salary increase would lead to a increase of 2.2%/1.2% in the defined benefit

obligation.

- 0.50% increase/decrease in the rate of pension index would lead to a increase /decrease of 6.3%/5.7% in the defined benefit

obligation.

The above sensitivity analysis may not be representative of the actual impact of change. If more than one assumption is

changed simultaneously, the combined impact of changes would not necessarily be the same as the sum of the individual

change. If the assumptions change to a different level compared to that presented above, the effect on the defined benefit

obligation may not be linear.

Maturity profile of the undiscounted defined benefit obligation 2021

Within the next 12 months 20

Between 1 and 5 years 92

Between 5 and 10 years 102

Beyond 10 years 351

Total 566

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

The average duration of the defined benefit pension obligation at the end of the reporting period is 15 years.

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24 Share-based payments

Accounting policy

Neste's share-based incentive plans include a net settlement feature, i.e., share-based payments are settled net

in shares after withholding taxes, and thus they are accounted for as fully equity settled plans. The compensation

expense for the shares is recognized as an employee benefit expense evenly during the required service period

whereas the compensation expense resulting from the cash portion is recognized as an employee benefit expense

on accrual basis between grant and payment date. The entire transaction is measured at fair value prevailing on

the grant date of the share-based incentive plan and the amounts recognized in the consolidated statement of

income are accumulated in equity. The difference realized upon the settlement date is also accounted for against

equity.

The purpose of Neste's share-based long-term incentive plans is to drive long-term sustainable growth and align the interests

of executives with shareholders. The Board annually selects the members of Neste's senior management and other key

employees to participate in the long-term incentive plans.

Share-based incentive plan as of 1 January 2019

The Board of Directors of Neste Corporation decided on 12 December 2018 to establish a new share-based long-term

incentive scheme for selected members of Neste’s management and key employees. The decision included a Performance

Share Plan (also “PSP”) as the main structure and a Restricted Share Plan (also “RSP”) as a complementary structure for

specific situations.

The Performance Share Plan consists of three annually commencing individual performance share plans, each with a three-

year performance period, followed by the payment of the potential share reward. The three plans commence in the years

2019, 2020 and 2021. The commencement of each individual plan is, however, subject to a separate Board approval.

The potential reward will be paid in shares of Neste (deducted with the applicable payroll tax), provided that the performance

target set by the Board of Directors is achieved. For award plan cycles commenced in 2019 (PSP 2019–2021) and 2020 (PSP

2020–2022), relative total shareholder return of Neste's share compared to STOXX Europe 600 index is set as a performance

measure. In the PSP 2021–2023 plan, in addition to the relative total shareholder return of Neste's share, Neste's combined

greenhouse gas (GHG) impact is also set as a performance measure. The combined GHG impact includes GHG emission

reductions achieved with Neste renewable products by customers and GHG emissions from Neste production.

The combined amount of variable compensation paid to an individual participant any given year, including the long-term

incentive scheme and the annual short-term incentive scheme, may not exceed 120% of the individual' annual gross base

salary. If the individual’s employment terminates before the payment date of the share reward, the individual is not, as a main

rule, entitled to any reward based on the plan. The plans do not include a separate restriction period after the performance

period.

The Restricted Share Plan consists of annually commencing individual restricted share plans, each with a three-year

retention period after which the share rewards granted within the plan will be paid to the participants in shares of Neste

(deducted with the applicable payroll tax). The commencement of each individual plan is subject to a separate Board approval.

A precondition for the payment of the share reward based on the Restricted Share Plan is that the employment relationship of

the individual participant with Neste continues until the payment date of the reward.

The first plan (RSP 2019–2021) within the Restricted Share Plan started in the beginning of 2019 and the potential share

reward thereunder will be paid in the spring 2022. The second plan (RSP 2021–2023) started in the beginning of 2021 and the

potential share reward thereunder will be paid in the spring 2024.

Neste applies a share ownership policy to the members of the Neste Executive Committee (ExCo). According to the policy,

each member of the ExCo is expected to retain in his/her ownership at least half of the shares received under the share-based

incentive programs of Neste until the value of his/her share ownership in Neste corresponds to at least his/her annual gross

base salary.

Share-based incentive plan as of 1 January 2016

The Board of Directors of Neste Corporation decided on 14 December 2015 to establish a new long-term share-based

incentive plan for Neste’s senior management and nominated key personnel. The plan includes three individual share plans,

each with a three-year earning period. The plans began in 2016, 2017 and 2018, respectively.

The earning criteria for the earning periods 2016–2018, 2017–2019 and 2018–2020 are Neste's cumulative comparable free

cash flow (75%) and total return by Neste's share compared to STOXX Europe 600 index (25%). In plan 2016–2018 the target

long-term incentive for the President & CEO and the other members of the Neste Executive Committee (ExCo) is around 40%

of individuals’ annual fixed salary. In plans 2017–2019 and 2018–2020 the target long-term incentive for the President & CEO

and the other members of the ExCo is around 30% of individuals’ annual fixed salary. The maximum long-term incentive for

the President & CEO is 100% of his annual fixed salary and 80% for the other members of the ExCo. The combined amount of

incentives paid based on earnings under the long-term incentive program together with the incentive paid on the annual short-

term program, may not exceed 120% of participants’ annual fixed salary in any given year.

Participants shall not be entitled to sell or transfer the shares they receive as incentives during a restriction period following

the end of the earning period. The lenght of this period is three years in the 2016–2018 plan. In 2017–2019 and 2018–2020

plans the restriction period is one year.

For the 2016–2018 LTI plan cycle, the maximum target set in December 2015 for Neste's cumulative comparable free cash

flow were exceeded and Neste generated a total shareholder return clearly out performing the Europe Stoxx 600 Market Index.

A gross reward of 412,472 shares (after the share split) equaling EUR 13.0 million were awarded to the participants of the plan.

The net amount of shares delivered totalled 193,528 shares and the rest of the reward was paid in cash to cover taxes. The

fair value of the share as at delivery date were 31.6 euros (15.3.2019) and 29.8 euros (23.9.2019). The members of Neste's

Executive Committee received a gross reward equaling to 49,030 shares.

For the 2017–2019 LTI plan cycle, the maximum target set in December 2016 for Neste's cumulative comparable free cash

flow were exceeded and Neste generated a total shareholder return clearly out performing the Europe Stoxx 600 Market Index.

A gross reward of 308,515 shares equaling EUR 7.7 million were awarded to the participants of the plan. The net amount

of shares delivered totalled 153,040 shares and the rest of the reward was paid in cash to cover taxes. The fair value of the

share as at delivery date was 25.0 euros (16.3.2020). The members of Neste's Executive Committee received a gross reward

equaling to 72,789 shares.

For the 2018–2020 LTI plan cycle, the maximum target set in December 2017 for Neste's cumulative comparable free cash

flow were exceeded and Neste generated a total shareholder return clearly out performing the Europe Stoxx 600 Market Index.

A gross reward of 273,079 shares equaling EUR 14.7 million were awarded to the participants of the plan. The net amount

of shares delivered totalled 132,756 shares and the rest of the reward was paid in cash to cover taxes. The fair value of the

share as at delivery date was 53.8 euros (15.3.2021). The members of Neste's Executive Committee received a gross reward

equaling to 50,879 shares.

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Share-based incentive plan as of 1 January 2013

The Board of Directors of Neste Corporation decided on 13 December 2012 to establish a new long-term share-based incentive plan for the Neste’s senior management and nominated key personnel. The plan includes three individual share plans, each with

a three-year earning period. The share plans have started in 2013, 2014, and 2015.

The earning criteria for the earning period 2015–2017 have been Neste's cumulative comparable free cash flow (75%) and total return by Neste's share compared to a peer group of 10 oil industry peers (25%). The combined amount of incentives to be

paid based on maximum-level earnings under the short-term program and this long-term incentive program may not exceed 120% of participants’ annual fixed salary in any given year. Participants shall not be entitled to sell or transfer the shares they receive

as incentives during a restriction period following the end of the earning period. The length of this period is three years in respect of the President and CEO and the other members of the ExCo, and one year in respect of other participants.

More specific information on the share-based incentive plans is presented in the following tables.

Plan Long-Term Incentive Plan 2019 Long-Term Incentive Plan 2016

Long-Term

Incentive Plan

2013

Type Share allocation Share allocation Money Allocation

Instrument PSP 2021–2023 RSP 2021–2023 PSP 2020–2022 PSP 2019–2021 RSP 2019–2021 PSP 2018–2020 PSP 2017–2019 PSP 2016–2018 PSP 2015–2017

Grant dates 13 Jan 2021 21 Jan 2021 20 Feb 2020 6 May 2019 26 Jun 2019 11 Jan 2018 19 Jan 2017 1 Feb 2016 11 Feb 2015

Grant prices, euros 57.81 59.82 35.72 26.70 27.98 16.87 10.06 8.70 -

Share price as at grant date, euros 60.94 62.64 38.91 28.94 30.08 18.82 11.41 9.58 -

Beginning of earnings period 1 Jan 2021 1 Jan 2021 1 Jan 2020 1 Jan 2019 1 Jan 2019 1 Jan 2018 1 Jan 2017 1 Jan 2016 1 Jan 2015

End of earnings period 31 Dec 2023 31 Dec 2023 31 Dec 2022 31 Dec 2021 31 Dec 2021 31 Dec 2020 31 Dec 2019 31 Dec 2018 31 Dec 2017

End of restriction period 31 Mar 2024 31 Mar 2024 31 Mar 2023 31 Mar 2022 31 Mar 2022 31 Mar 2022 31 Mar 2021 30 Apr 2022

31 Mar 2019/

31 Mar 2021

Changes during the period,

share allocation

Shares Shares Shares Shares Shares Shares Shares Shares

Outstanding at the beginning of the

reporting period, pcs 0 0 298,338 351,752 10,100 475,829 256,009 322,783

Granted during the period 223,654 12,500 0 0 0 0 0 0

Forfeited during the period 1,200 0 9,513 9,400 0 202,750 0 0

Excercised during the period 0 0 0 0 0 34,042 256,009 6,531

Outstanding at the end of the period, pcs 222,454 12,500

288,825 342,352 10,100 239,037 0 316,252

Number of persons at the end of the

reporting year 127 7 112 90 4 97 0 69 0

Share price at the end of the reporting

period, euros 43.36 43.36 43.36 43.36 43.36 53.77 25.01 31.61 17.78

Estimated rate of realization of the

earnings criteria, % 41% 100% 61% 57% 100% 100% 100% 100% 100%

Estimated termination rate before the end

of the restriction period, % 10% 0% 5% 10% 0% 0% 0% 0% 0%

Changes during the period, money allocation: 48,930 shares excercised from plan 2015–2017.

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Fair value determination

The fair value of share-based incentives have been determined at grant date and the fair value is expensed until vesting. The

grant price, i.e., fair value as of the grant date, has been determined as follows: grant price equals the share price as at grant

date deducted by expected dividends payable during the earning period. For plans under the Long-Term Incentive Plan 2019,

which include market based criteria, the fair value estimation is calculated using the Monte Carlo simulation with Geometric

Brownian Motion. The simulation requires some parameters, such as volatility and the risk-free rate to be estimated.

The expense included in the income statement is specified in the following table:

2021 2020

Expense arising from equity-settled share-based payment transactions 4 7

Total expense arising from share-based payment transactions 4 7

At the end of the period the estimated future cash payments to be paid to the tax authorities from share-based payments are

EUR 11 million (2020: EUR 25 million).

25 Related party transactions

Neste is controlled by the State of Finland, which owns 44.2% of the company's shares. The remaining 55.8% of shares are

widely held.

Neste has a related party relationship with its subsidiaries, associates, joint arrangements and the entities controlled by

Neste's controlling shareholder, the State of Finland. Related parties also include the members of the Board of Directors,

the President and CEO and other members of the Neste Executive Committee (key management persons), close members

of the families of the mentioned key management persons and entities controlled or jointly controlled by the mentioned key

management persons or close members of those persons' families.

Subsidiaries, associates and joint arrangements are presented in Note 26 Group companies.

Parent company of Neste is Neste Corporation. The transactions between Neste and its subsidiaries, which are related

parties of the company, have been eliminated during consolidation and are not disclosed in this note. Details of transactions

between Neste and other related parties are disclosed below. All transactions between Neste and other companies controlled

by the State of Finland are on an arm's length basis.

2021

Sales of

goods and

services

Purchases of

goods and

services Receivables

Financial

income and

expense Liabilities

Joint ventures 189 121 159 2 17

Other related parties 40 50 3 0 0

229 171 162 2 17

2020

Sales of

goods and

services

Purchases of

goods and

services Receivables

Financial

income and

expense Liabilities

Joint ventures 165 125 88 2 1

Other related parties 108 45 2 0 0

273 170 90 2 1

Transactions carried out with related parties

There were no material transactions with key management persons or entities controlled by them.

The major part of business between Neste and its joint ventures was with Kilpilahti Power Plant Ltd. Neste's transactions

with Kilpilahti Power Plant Ltd consisted mainly of steam purchases and sales of heavy fuel oil, water and asphaltene.

Transactions with Nynas AB continued until 15 September 2020 when its sale of shares was completed.

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Board of Directors and key management compensation Compensation to the Board of Directors

EUR thousand 2021 2020

Salaries and other short-term employee benefits 5,346 5,150

Statutory pensions 745 749

Supplementary pensions 416 424

Share-based payments 2,736 1,712

Total (Including statutory pensions) 9,243 8,034

EUR thousand 2021 2020

Board of Directors at 31 December 2021

Matti Kähkönen 80 79

John Abbott, since 30 March 2021 40 0

Nick Elmslie, since 18 May 2020 51 29

Martina Flöel 53 51

Jean-Baptiste Renard 52 49

Jari Rosendal 47 48

Johanna Söderström, since 18 May 2020 48 28

Marco Wirén 63 68

Former Board members

Elizabeth Burghout, until 18 May 2020 0 19

Sonat Burman-Olsson, until 21 July 2021 27 48

Willem Schoeber, until 18 May 2020 0 26

Board of Directors, all members total 462 444

President and CEO

Members

of the Neste

Executive Committee

EUR thousand 2021 2020 2021 2020

Annual remuneration

Base salary 972 925 2,788 2,614

Taxable benefits 0 0 130 201

Annual incentive (STI plan) 216 311 778 654

Total annual remuneration 1,188 1,237 3,696 3,469

Vested long term remuneration

Supplementary pension (insurance contributions) 0 0 416 424

Share-based incentive plan 858 568 1,878 1,144

Total remuneration 2,046 1,805 5,990 5,036

Key management consists of President and CEO and other members of the Neste Executive Committee. There were no

outstanding loan receivables from key management on 31 December 2021 or 31 December 2020.

Compensation to President and CEO and members of the Neste Executive Committee

Compensation to the Board of Directors include annual remuneration and meeting fee paid to each member of the Board for

each meeting attended as well as for any meetings of the Board committees attended. Board members are not covered by the

company’s remuneration systems and do not receive any performance or share related payments.

Should the company decide to give notice of termination, the President & CEO shall be entitled to his salary during the

6 months period of notice, together with a severance payment equivalent to 6 months’ salary. The retirement age of the

President and CEO is according to the Finnish Employee’s Pension Act (TyEL).

Net liability of defined benefit plans of former Presidents and CEOs on 31 December 2021 were EUR 1,757 thousand (2020:

EUR 1,197 thousand).

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Subsidiaries Group holding % Country of incorporation

Agri Trading Fats & Oils, LLC (new) 100.00% USA

B J B, LLC (new) 100.00% USA

B J B, Properties of Hutchinson, LLC (new) 100.00% USA

Kiinteistö Oy Espoon Keilaranta 21 100.00% Finland

Mahoney Environmental Solutions, LLC 100.00% USA

Mahoney Transportation Services LLC 100.00% USA

Navidom Oy 50.00% Finland

Neste (Shanghai) Trading Company Limited 100.00% China

Neste (Suisse) S.A. 100.00% Switzerland

Neste AB 100.00% Sweden

Neste Affiliate B.V. 100.00% The Netherlands

Neste Asia Pacific Pte. Ltd 100.00% Singapore

Neste Australia Pty Ltd 100.00% Australia

Neste Base Oils Finland Oy 100.00% Finland

Neste Belgium NV (new) 100.00% Belgium

Neste Canada Inc. 100.00% Canada

Neste Components B.V. 100.00% The Netherlands

Neste Demeter B.V. 51.00% The Netherlands

Neste Eesti AS 100.00% Estonia

Neste Engineering Solutions B.V. 100.00% The Netherlands

Neste Engineering Solutions Oy 100.00% Finland

Neste Engineering Solutions Pte. Ltd. 100.00% Singapore

Neste Germany GmbH 100.00% Germany

Neste Insurance Limited 100.00% Guernsey

Neste Italy S.R.L. 100.00% Italy

Neste Markkinointi Oy 100.00% Finland

Neste Netherlands B.V. 100.00% The Netherlands

Neste NV 100.00% Belgium

Neste Oil Bahrain W.L.L. 100.00% Bahrain

Neste Pretreatment Rotterdam B.V. (new) 100.00% The Netherlands

Neste Renewable Solutions US, Inc. 100.00% USA

Neste RPC Solutions US, Inc. 100.00% USA

Neste Shipping Oy 100.00% Finland

26 Group companies

Subsidiaries Group holding % Country of incorporation

Neste Singapore Pte. Ltd. 100.00% Singapore

Neste Terminal Rotterdam B.V. 100.00% The Netherlands

Neste US, Inc. 100.00% USA

Neste USA, L.L.C. 100.00% USA

SIA Neste Latvija 100.00% Latvia

Sterling Logistics, LLC (new) 100.00% USA

UAB Neste Lietuva 100.00% Lithuania

Associates Group holding % Country of incorporation

Alterra Energy LLC 40.00% USA

Neste Arabia Co. Ltd. (inactive) 48.00% Saudi Arabia

Joint arrangements Group holding % Classification

Country of

incorporation

A/B Svartså Vattenverk - Mustijoen Vesilaitos O/Y 40.00% Joint Operation Finland

Bahrain Lube Base Oil Company B.S.C. (Closed) 45.00% Joint Operation Bahrain

Glacia Limited 50.00% Joint Venture Bermuda

Kilpilahti Power Plant Ltd 40.00% Joint Venture Finland

Tahkoluodon Polttoöljy Oy 31.50% Joint Operation Finland

Tapaninkylän Liikekeskus Oy 40.03% Joint Operation Finland

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Neste Demeter B.V. Navidom Oy

2021 2020 2021 2020

Proportion of shares held by non-controlling interests 49.00% 49.00% 50.00% 50.00%

Current assets 155 82 0 0

Non-current assets 0 0 0 0

Current liabilities 147 75 0 0

Non-current liabilities 0 0 0 0

Revenue 868 555 1 1

Profit for the period 5 5 0 0

Dividends paid to non-controlling interests -2 -1 0 0

Cash flows from operating activities 9 24 0 0

Cash flows from investing activities -6 -1 0 0

Cash flows from financing activities -4 -23 0 0

Specication of nancial information on subsidiaries with material non-controlling interests Unconsolidated structured entities

In 2015, Neste sold its shares of Aurora Kilpilahti Oy (former Kilpilahden Sähkönsiirto Oy) to InfraVia European Fund II, an

infrastructure fund managed by InfraVia. After the sale Neste does not have direct or indirect investment in the company.

Aurora Kilpilahti Oy is responsible for high- and medium-voltage electricity distribution in the Kilpilahti industrial area where

Neste Finland Refinery in Porvoo is situated. In addition to Neste, Aurora Kilpilahti Oy’s customers include other companies

operating in the area.

As the Kilpilahti electricity distribution network requires significant investments, Neste selected InfraVia as its electricity

distribution partner to contribute to the effective implementation of the investments and, therefore, secure reliable electricity

distribution in Kilpilahti.

Under the contractual arrangements with Aurora Kilpilahti Oy Neste has been supplying small and decreasing part of the

operating services needed in electricity distribution. It can be considered that Neste has the possibility to influence only limited

development investments made by Aurora Kilpilahti Oy. Aurora Kilpilahti Oy distributes electricity to Neste and Neste remains

to be the main user of the capacity of the electricity distribution network. Aurora Kilpilahti Oy operates on land leased from

Neste for 30 years with an option to extend the lease. Neste has not provided any financial support or other significant support

to Aurora Kilpilahti Oy without contractual obligation.

Based on the factors described above Neste has determined that it has limited influence though no control over Aurora

Kilpilahti Oy and treats the company as unconsolidated structured entity in its consolidated financial statements. Management

has assessed the company's exposure to losses by considering the nature of Neste's involvement in Aurora Kilpilahti Oy, and

the company's significance to Neste from an operative perspective. Neste's exposure is mainly dependent upon the efficient

operation of the distribution network.

Consolidated structured entities

Since 2014, Neste has treated the sold vessels’ long-term agreements made with Ilmarinen Mutual Pension Insurance

Company and Finland's National Emergency Supply Agency as structured entities. As a part of these arrangements, Neste

guarantees the vessels’ residual value and certain return on the investors’ investments.

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27 Acquisitions and disposals

Acquisitions

2021

Bunge Loders Croklaan's renery plant

On 1 March 2021 Neste acquired Bunge Loders Croklaan's refinery plant located in Rotterdam, the Netherlands. The refinery

plant is located next to Neste’s existing biorefinery and it consists of a pretreatment facility, tank farm, jetties, and has a pipeline

connection to Neste’s site. The name of the acquired company was changed from Bunge Loders Croklaan Oils B.V. to Neste

Pretreatment Rotterdam B.V. The transition of operations and employees will be implemented in phases with the refinery

plant’s full and modified pretreatment capacity available for processing Neste’s feedstock by the end of 2024. The acquisition

is consolidated into the Renewable Products segment.

The acquisition of the refinery plant supports Neste’s global growth strategy in renewables. It allows Neste to accelerate the

scaling up of renewable raw material pretreatment capacity, which is an important driver for expanding the use of waste and

residue feedstocks and increasing Neste’s feedstock flexibility.

The fair values of the acquired net assets are presented in the table below. Based on the purchase price allocation, a portion

of the purchase price was allocated to property, plant & equipment. Goodwill represents synergies arising from expanding the

use of waste and residue feedstocks, increasing feedstock flexibility, and the plant's location next to Neste's existing refinery.

Goodwill is not deductible in taxation.

The transaction costs of the acquisition are included in other expenses in the consolidated statement of income. The

acquisition does not have a material impact on the Group´s revenue nor profit. The purchase price was paid fully in cash and

material adjustments to purchase price are not expected.

Values of acquired assets and liabilities at time of acquisition Fair value

Intangible assets 1

Property, plant and equipment 104

Inventories 1

Total assets 107

Interest-bearing liabilities 10

Deferred tax liabilities 11

Current tax liabilities 3

Trade and other payables 1

Total liabilities 25

Fair value of acquired net assets 81

Consideration transferred 255

Fair value of acquired net assets -81

Goodwill 173

Cash flows of acquisition 2021

Consideration, paid in cash -255

Transaction costs of the acquisition -2

Net cash flow on acquisition -257

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Agri Trading

On 1 November 2021 Neste acquired 100% of Agri Trading, one of the largest independent renewable waste and residue fat

and oil traders in the United States. The acquisition is consolidated into the Renewable Products segment.

Neste’s feedstock strategy is focusing on waste and residues growth and the development of new feedstock sources. Agri

Trading is an important partner for Neste as an industry leader in trading animal fat waste, used cooking oil, technical corn

oil, and other vegetable oils in North America. The completion of this transaction is an important step forward in delivering

on Neste’s growth strategy in renewables and in strengthening our global renewable raw material platform. Additionally, Agri

Trading’s established logistics networks and assets will enable Neste to source and transport raw material efficiently with a

lower carbon footprint and, ultimately, enable Neste to maintain its leadership position in the global raw material market.

The fair value of acquired net assets, based on preliminary assessment, are presented in the table below. Based on

preliminary purchase price allocation, a portion of the purchase price was allocated to supplier and customer relations that

have been recognized as intangible assets. The recognized goodwill is deductible for income tax purposes, and represents

the value of acquired business knowledge and synergies. Transactions costs of the acquisition have been recognized as

other expenses in the consolidated statement of income. Agri Trading contributed revenue of EUR 103 million to Neste's

revenue during the two months under Neste's ownership. If the acquisition had occurred on 1 January 2021, the management

estimates that consolidated revenue would have been EUR 415 millions more. The acquisition does not have a material impact

on Neste's result.

Purchase price was paid fully in cash and as part of the purchase agreement with the previous owners of Agri Trading, a

contingent consideration has been agreed. There will be additional cash payments to the previous owners if they meet certain

predefined financial targets for 2022-2024. The additional cash payments will be paid during 2023-2025. As at the acquisition

date, the fair value of the contingent consideration was estimated to be EUR 23 million. The future changes in the fair value of

contingent consideration are recognized through profit or loss. The purchase price will be also adjusted by net working capital

and other provisional adjustments amounting to EUR 3 million, which Neste expects to receive during 2022. In connection with

the closing of the acquisition, the interest bearing liabilities of the acquiree were paid off, and the related cash flow impact is

presented in cash flows from financing activities.

Values of acquired assets and liabilities at time of acquisition Fair value

Intangible assets 23

Property, plant and equipment 32

Inventories 28

Trade and other receivables 27

Cash and cash equivalents 5

Total assets 115

Interest-bearing liabilities 33

Provisions 1

Trade and other payables 23

Total liabilities 56

Fair value of acquired net assets 59

Consideration transferred 72

Adjustment to consideration in 2022 -3

Fair value of contingent consideration 23

Fair value of acquired net assets -59

Goodwill 33

Cash flows of acquisition 2021

Consideration, paid in cash -72

Cash and cash equivalents in acquiree 5

Acquiree's liabilities paid off at closing -21

Transaction costs of the acquisition -4

Net cash flow on acquisition -91

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Other business combinations

In year 2021 Neste has made smaller business combinations that are immaterial individually. The collective fair values of the

acquired net assets are presented in the table below. Based on purchase price allocations, a portion of the purchase price

was allocated to supplier and customer relations that have been recognized as intangible assets. The recognized goodwill is

deductible for income tax purposes, and represents the value of acquired business knowledge and synergies. The business

combinations do not have a material impact to Neste's revenue nor result. The purchase prices were paid fully in cash.

2020

MahoneyEnvironmental

On 1 May 2020 Neste acquired 100% of Mahoney Environmental (Mahoney) and its affiliated entities. Mahoney is a leading

collector and recycler of used cooking oil in the United States. The acquisition is consolidated into Renewable Products

segment.

Neste’s feedstock strategy is focusing on waste and residues growth and the development of new feedstock sources. The

company is targeting 100% waste and residues share by 2025. The completion of this transaction is an important step forward

in delivering on Neste’s growth strategy in renewables since Mahoney Environmental already has access to a substantial

volume of used cooking oil with room to grow across North America. Used cooking oil is one of more than 10 different types of

feedstock that Neste can use to produce renewable diesel, sustainable aviation fuel and raw materials for renewable polymers.

Alongside used cooking oil collection and recycling, Mahoney also provides cooking oil equipment installation and design,

fresh oil delivery and grease trap cleaning.

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

Values of acquired assets and liabilities at time of acquisition Fair value

Intangible assets 4

Property, plant and equipment 3

Inventories 0

Trade and other receivables 0

Total assets 7

Fair value of acquired net assets 7

Consideration transferred 30

Fair value of contingent consideration 2

Fair value of acquired net assets -7

Goodwill 26

Cash flows of acquisition 2021

Consideration, paid in cash -30

Transaction costs of the acquisition 0

Net cash flow on acquisition -31

The fair values of the acquired net assets are presented in the table below. Based on purchase price allocation, a portion

of the purchase price was allocated to supplier and customer relations that have been recognized as intangible assets. The

recognized goodwill is deductible for income tax purposes, and represents the value of acquired business knowledge and

synergies. The transaction costs of the acquisition are included in other expenses in the consolidated statement of income.

The acquisition does not have material impact on the Group´s revenue nor profit.

The purchase price was paid fully in cash. In connection with the closing of the acquisition, the interest-bearing liabilities of

the acquiree were paid off, and the related cash flow impact is presented in cash flows from financing activities.

Values of acquired assets and liabilities at time of acquisition Fair value

Intangible assets 24

Property, plant and equipment 31

Inventories 2

Trade and other receivables 6

Cash and cash equivalents 5

Total assets 68

Interest-bearing liabilities 20

Trade and other payables 14

Total liabilities 34

Fair value of acquired net assets 34

Consideration transferred 143

Fair value of acquired net assets -34

Goodwill 109

Cash flows of acquisition 2020

Consideration, paid in cash -143

Cash and cash equivalents in acquiree 5

Acquiree's liabilities paid off at closing -25

Transaction costs of the acquisition -4

Net cash flow on acquisition -167

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CountTerminal Rotterdam

On 7 May 2020 Neste acquired 100% of the Dutch Count Companies BV’s Count Terminal Rotterdam BV and its supporting

entities, part of the First Dutch Group of Peter Goedvolk. The acquisition is consolidated into Renewable Products segment.

The acquisition is an important step for Neste in the execution of its growth strategy. It supports company's efforts to

build a global renewable waste and residue raw material platform that can keep pace with the world’s growing demand for

renewable products. Count Terminal Rotterdam stores, refines and blends renewable waste and residue-based raw materials

in the Rotterdam harbor area. Count Terminal Rotterdam will be the first terminal asset Neste owns for renewable feedstock

aggregation, thus enabling Neste to further develop its raw material logistics for the future. The transaction will also enhance

Neste’s competitiveness in the global renewable waste and residue raw material market.

The fair values of the acquired net assets are presented in the table below. The goodwill is non-deductible for income tax

purposes, and represents the value of synergies. The transaction costs of the acquisition are included in other expenses in the

consolidated statement of income. The acquisition does not have material impact on the Group´s revenue nor profit.

The purchase price was paid fully in cash and it is not subject to further adjustments. In connection with the closing of the

acquisition, the interest-bearing liabilities of the acquiree were paid off, and the related cash flow impact is presented in cash

flows from financing activities.

Alterra Energy LLC

On December 29, 2020 Neste acquired a minority stake in Alterra Energy LLC, an innovative chemical recycling technology

company. The collaboration between Neste and Alterra includes joint technology development and enables commercializing

Alterra’s proprietary thermochemical liquefaction technology in Europe. Neste management has classified Alterra as an

associate and is presented under Investments in associates and joint ventures.

Sale of LPG cylinder business and stake in Oy Innogas Ab Recognized values

Total consideration 9

Sold net assets -4

Gain on sale 5

Cash consideration received 9

Cash and cash equivalents disposed of -1

Net cash flow of the disposal 8

Sale of shares of Nynas AB Recognized values

Total consideration 0

Sold net assets 0

Translation differences and share of other comprehensive income related to disposal

(reclassified from equity) -42

Loss on sale -42

Net cash flow of the disposal 0

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

Values of acquired assets and liabilities at time of acquisition Fair value

Property, plant and equipment 48

Trade and other receivables 1

Cash and cash equivalents 0

Total assets 50

Interest-bearing liabilities 18

Deferred tax liabilities 1

Trade and other payables 1

Total liabilities 19

Fair value of net assets total 30

Consideration transferred 37

Fair value of acquired net assets -30

Goodwill 7

Cash flows of acquisition 2020

Consideration, paid in cash -37

Cash and cash equivalents in acquiree 0

Acquiree's liabilities paid off at closing -17

Transaction costs of the acquisition -3

Net cash flow on acquisition -57

2021

On 15 January 2021 Neste sold its liquefied petroleum gas (LPG ) cylinder business and its 50 percent shareholding in the

bottling plant Oy Innogas Ab to Oy Linde Gas Ab (formerly AGA). Liquefied petroleum gas (LPG) cylinder business and Oy

Innogas Ab were part of the Marketing & Services segment. The divestment does not have a material impact on the Group´s

revenue nor profit.

2020

During the financial period 2020, the Group sold its 49.99% shareholding in joint venture Nynas AB to Bitumina Industries

Ltd. Total consideration is subject to provisional adjustments which could change the final consideration. Loss on sales is

presented as share of profit (loss) of joint ventures in the consolidated statement of income.

Disposals

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28 Assets held for sale

Accounting policy

Non-current assets (or disposal groups) are classified as held for sale and stated at the lower of their carrying

amount and fair value, less costs to sell, if their carrying amount is recovered principally through a sale transaction

rather than through continuing use and sale is considered highly probable. For this to be the case, the asset must

be available for immediate sale in its present condition subject only to terms that are usual and customary for

sales of such assets.

The assets are not depreciated after being classified as held for sale.

2021

Futura and Mastera tankers

The assets classified as held for sale as of 31 Dec 2021 relate to the sale of the tankers Futura and Mastera. Futura and

Mastera tankers are planned to be divested within the next 12 months. The vessels are consolidated into the Oil Products

segment.

2020

Neste and Futura vessels

The assets classified as held for sale as of 31 December 2020 related to replacing the vessels Neste and Futura with new

product tankers. The vessels were consolidated into the Oil Products segment.

Base oils business

The assets held for sale at 31 Dec 2021 relate to an agreement to sell its existing base oils business to Chevron Corporation.

As part of the divestment, the parties have also agreed on a long-term offtake for Neste’s base oils supply from Porvoo,

Finland. In connection with the divestment, Neste has signed an agreement to exit its base oils joint arrangement with Bahrain

Petroleum Company and Nogaholding. The completion of the divestment is subject to the approval of the competition

authorities and customary closing conditions, with estimated completion date by the end of Q1/2022. Base oils business is

consolidated as part of the Oil Products segment.

LPG cylinder business and stake in Innogas Oy

The assets classified as held for sale as of 31 December 2020 related to the sale of Neste's liquefied petroleum gas (LPG)

cylinder business and Neste's share of the bottling plant Oy Innogas Ab operating in Kilpilahti. In the transaction, Oy Linde Gas

Ab (formerly AGA) acquired Neste’s LPG business, i.e. related agreements and assets, and Neste's 50 percent shareholding in

the previously co-owned Oy Innogas Ab. Transaction was completed in January 2021. Classified liquefied petroleum gas (LPG)

cylinder business and Oy Innogas Ab were part of the Marketing & Services segment.

Futura and Mastera vessels

Assets classified as held for sale 2021

Property, plant and equipment 15

Total 15

Neste and Futura vessels

Assets classified as held for sale 2020

Property, plant and equipment 14

Total 14

LPG cylinder business

and stake in Innogas Oy

Assets classified as held for sale 2020

Inventories 3

Cash and cash equivalents 1

Total 4

Base Oils business

Assets classified as held for sale 2021

Property, plant and equipment 9

Deferred tax assets 2

Inventories 64

Trade and other receivables 64

Cash and cash equivalents 115

Total 255

Base Oils business

Liabilities related to assets held for sale 2021

Non-current interest-bearing liabilities 3

Deferred tax liabilities 1

Pension liabilities 2

Current interest-bearing liabilities 7

Trade and other payables 18

Total 32

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Commitments 2021 2020

Commitments for purchase of property, plant and equipment and intangible assets 289 616

Other commitments 9 10

Total 298 626

Fixed fees payable under take-or-pay contracts 2021 2020

Payable 15 15

Payable after the financial period 74 87

Total payable 89 102

Value of collateral Value of collateral

Contingent liabilities 2021 2020

On own behalf for commitments

Real estate mortgages 26 26

Other contingent liabilities 59 62

Total 85 88

On behalf of joint arrangements

Pledged assets 44 40

Total 44 40

On behalf of others

Guarantees 1 1

Total 1 1

130 128

29 Contingencies and commitments

The pledged assets on behalf of joint arrangements are granted to the secured creditors as continuing security for due and

punctual payment, discharge and performance of all or any part of the secured obligations of Kilpilahti Power Plant Ltd. The

pledged assets mean all shareholder loan receivables, all contribution loan receivables and the shares of Kilpilahti Power Plant

Ltd. The security period ends on the date on which all the secured obligations have been unconditionally and irrevocably paid

and discharged in full.

Take-or-pay contracts

Neste's take-or-pay contracts relate to hydrogen supply agreements. Agreements include volume based hydrogen purchase

obligations until 2026. The total fixed fees payable under the agreements as of 31 December 2021 are presented in the table

below.

30 Leases

Accounting policy

Neste assesses at contract inception whether a contract is, or contains, a lease, i.e., if the contract conveys the right

to control the use of an identified asset for a period of time in exchange for consideration.

Neste as a lessee

Neste has lease contracts for various land areas, vessels, tanks, containers, facilities and other equipment used in its

operations. Lease contracts are made for fixed periods of 1 to 60 years. Some leases include an option to extend the

lease for an additional period after the end of the contract term or terminate the contract during the lease term.

Neste recognises a leased asset and a lease liability at the lease commencement date, except for short-term leases

and leases of low-value assets.

i) Right-of-use assets

Neste recognises right-of-use assets on the commencement date of the lease (i.e., the date the underlying asset

is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment

losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount

of lease liabilities recognised, initial direct costs incurred, any restoration obligations and lease payments made at or

before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-

line basis over the lease term. If ownership of the leased asset transfers to Neste at the end of the lease term or the

cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

The right-of-use assets are also subject to impairment.

Neste’s right-of-use assets are included in Property, plant and equipment (see Note 14).

ii) Lease liabilities

At the commencement date of the lease, Neste recognises lease liabilities measured at the present value of lease

payments to be made over the lease term. The lease payments include fixed payments (including insubstance fixed

payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and

amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of

a purchase option that is reasonably certain to be exercised by Neste and payments of penalties for terminating the

lease, if the lease term reflects Neste exercising the option to terminate.

Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in

which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, Neste uses interest rate implicit in the lease if readily

determinable and if not, Neste uses its incremental borrowing rate at the lease commencement date. After the

commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for

the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a

change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change

in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase

the underlying asset.

Neste’s lease liabilities are included in Interest-bearing liabilities (see Note 21).

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Right-of-use assets Note 2021 2020

Land 183 161

Buildings and constructions 22 20

Machinery and equipment 102 106

Other tangible assets 127 95

Total assets included in property, plant and equipment 14 434 382

Lease liabilities

Non-current interest-bearing liabilities 333 289

Current interest-bearing liabilities 111 114

Total liabilities included in interest-bearing liabilities 21 444 403

Depreciation charge of right-of-use assets Note 2021 2020

Land 14 14

Buildings and constructions 9 9

Machinery and equipment 47 41

Other tangible assets 81 61

14 151 125

Interest expense (included in finance cost) 10 21 22

Expense relating to short-term leases (included in materials and services) 7 11 6

Expense relating to short-term leases (included in other expenses) 9 5 4

Expense relating to leases of low-value assets (included in other expenses) 9 0 0

Variable lease payments not included in lease liabilities

(included in materials and services) 7 1 15

Variable lease payments not included in lease liabilities

(included in other expenses) 9 4 5

iii) Short-term leases and leases of low-value assets

Neste applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease

term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the

lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on

short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease

term.

Neste as a lessor

At inception of a lease contract, Neste makes an assessment whether the lease is a finance lease or an operating

lease. If the lease substantially transfers all the risks and rewards incidental to ownership of the asset, it is considered

to be a finance lease; if not, the lease is considered to be an operating lease. Neste has a minor amount of operating

lease contracts, whereby the lease payments are recognised on a straight-line basis over the lease term and is

included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in

negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised

over the lease term on the same basis as rental income.

Estimates and judgements requiring management estimation

Neste determines the lease term as the non-cancellable term of the lease, together with any periods covered by an

option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate

the lease, if it is reasonably certain not to be exercised.

Neste has several lease contracts that include extension and termination options. Neste's management applies

judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate

the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal

or termination. After the commencement date, Neste's management reassesses the lease term if there is a significant

event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the

option to renew or to terminate.

Neste's management applies judgement also for estimating the term of lease agreements in effect until further

notice. The management’s estimates are based on the company’s strategic situation and market conditions, as well

the costs that would incur if the leased asset would be replaced by another asset.

Additions to the right-of-use assets during the 2021 financial year were EUR 213 million (2020: EUR 136 million).

The maturity analysis of lease liabilities is disclosed in Note 3 Financial risk management.

Amounts recognised in the statement of prot or loss

The statement of profit or loss shows the following amounts relating to leases:

The total cash outflow for leases in 2021 was EUR 144 million (2020: EUR 115 million) which is included in the line item

'Repayments of non-current interest-bearing liabilities' under the cash flows from financing activities in the consilidated cash

flow statement.

Amounts recognized in the balance sheet

The balance sheet shows the following amounts relating to leases:

Neste Annual Report 2021 | Notes to the Consolidated Financial Statements

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31 Disputes and potential litigations

32 Events after the balance sheet date

Neste is involved in legal proceedings and disputes incidental to its business. In management's opinion, the outcome of these cases is difficult to predict but not likely to have material effect on the Neste's financial position.

No significant events took place in Neste after the balance sheet date.

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EUR million Note 1 Jan–31 Dec 2021 1 Jan–31 Dec 2020

Revenue 2 10,021 7,909

Change in product inventories 233 -48

Other operating income 3 27 16

Materials and services 4 -8,948 -6,696

Personnel expenses 5 -220 -253

Depreciation, amortization and write-downs 6 -236 -391

Other operating expenses 7 -511 -505

Operating profit/loss 365 32

Financial income and expenses 8 534 11

Financial income and expenses total 534 11

Profit/loss before appropriations and taxes 898 43

Appropriations 9 -54 276

Income tax expenses 10 -52 -62

Profit for the year 792 256

Parent company income statement Parent company balance sheet

EUR million Note 31 Dec 2021 31 Dec 2020

ASSETS

Fixed assets and other long-term investments 11, 12

Intangible assets 103 118

Tangible assets 1,976 1,952

Other long-term investments 2,251 1,837

4,329 3,907

Current assets

Inventories 13 1,300 921

Long-term receivables 14 66 38

Short-term receivables 15 2,552 1,564

Cash and cash equivalents 1,492 1,443

5,410 3,966

Total assets 9,739 7,873

SHAREHOLDERS' EQUITY AND LIABILITIES

Shareholders' equity 16

Share capital 40 40

Other funds and reserves

Invested non-restricted equity fund 19 19

Fair value reserve -32 64

Other funds and reverses total -13 83

Retained earnings 2,027 2,385

Profit for the year 792 256

2,846 2,764

Accumulated appropriations 17 1,092 909

Provisions for liabilities and charges 18 115 141

Liabilities 19

Long-term liabilities 1,134 1,177

Short-term liabilities 4,552 2,881

5,686 4,059

Total equity and liabilities 9,739 7,873

Neste Annual Report 2021 | Parent Company Financial Statements

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EUR million 1 Jan–31 Dec 2021 1 Jan–31 Dec 2020

Cash flows from operating activities

Profit/loss before approriations and taxes 898 43

Depreciation, amortization and write-downs 236 391

Other non-cash income and expenses -67 177

Financial income and expenses -534 -11

Divesting activities, net 0 0

Operating cash flow before change in working capital 534 600

Change in working capital

Decrease (+)/increase (-) in interest-free receivables -616 388

Decrease (+)/increase (-) in inventories -379 -3

Decrease (-)/increase (+) in interest-free liabilities 1,072 333

Change in working capital 77 718

Cash generated from operations 611 1,318

Interest and other financial expenses paid, net -11 -7

Dividends received 547 29

Income taxes paid -52 -93

Realized foreign exchange gains and losses 2 -7

Net cash from operating activities 1,097 1,240

Parent company cash ﬂow statement

Cash flows from investing activities

Capital expenditure -250 -255

Proceeds from sale of fixed assets 0 0

Investments in shares in subsidiaries -427 -234

Investments in shares in other shares -1 -15

Proceeds from shares in subsidiaries 0 0

Change in other investments, increase (-)/decrease (+) -318 -58

Net cash used in investing activities -996 -562

Cash flow before financing activities 101 678

Cash flows from financing activities

Proceeds from long-term liabilities 583 432

Payments of long-term liabilities -322 -1

Change in other long-term liabilities 121 0

Change in short-term liabilities 104 -363

Dividends paid -614 -783

Group contributions, net 76 69

Cash flow from financing activities -52 -645

Net increase (+)/decrease (-) in cash and cash equivalents 49 33

Cash and cash equivalents at the beginning of the period 1,443 1,410

Cash and cash equivalents at the end of the period 1,492 1,443

Net increase (+)/decrease (-) in cash and cash equivalents 49 33

EUR million 1 Jan–31 Dec 2021 1 Jan–31 Dec 2020

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Buildings and structures 20–40 years

Production machinery and equipment, including special spare parts 15–20 years

Other equipment and vehicles 3–15 years

Other tangible assets 20–40 years

Intangible assets

3–10 years

1 Accounting policies

The financial statements of Neste Corporation (Parent company) are prepared in accordance with Finnish GAAP. The

financial statements are presented in millions of euros unless otherwise stated. The figures in the tables are exact figures and

consequently the sum of individual figures may deviate from the sum presented.

Neste Corporation proved to be very resilient amid the continued COVID-19 pandemic, scheduled maintenance and high

utility and feedstock costs in 2021. Oil demand was still under pressure due to the COVID-19 pandemic, but recovered

significantly from 2020. Neste Oyj's Oil Products suffered from a very weak refining market in 2020 caused by the global

COVID-19 related demand destruction and oversupply. This development accelerated the need to improve the long-term

competitiveness of the refining business, and restructuring measures, including the closure of the Naantali refinery. Relating to

the closure, EUR 300 million were booked in the fourth quarter. They included an asset write-down, and cost provisions for site

demolition, clean-up and personnel arrangements.

Revenue

Revenue includes sales revenues from actual operations less discounts, indirect taxes such as value added tax and excise tax

payable by the manufacturer and statutory stockpiling fees. Revenue is recognised on accrual accounting basis.

Other operating income

Other operating income includes gains on the sales of fixed assets and contributions received as well as all other operating

income not related to the sales of products or services, such as rents.

Foreign currency items

Transactions denominated in foreign currencies have been valued using the exchange rate at the date of the transaction.

Receivables and liabilities denominated in foreign currencies outstanding on the balance sheet date have been valued

using the exchange rate quoted on the balance sheet date. Exchange rate gains and losses related to operative items are

recognized as adjustments to operative income and expenses in the income statement. Net exchange rate differences related

to financial items are reported under financial income and expenses.

Financial assets and liabilities

Derivative financial instruments are initially recognised at fair value on the trade date and are subsequently re-measured at

their fair value on the balance sheet date. Other financial assets and liabilities are measured at amortized cost and recognized

initially at fair value on the settlement date. Available for sale financial assets include non-listed shares, which are at amortized

cost.

Loans and receivables consist of cash and cash equivalents, loans granted together with trade and other receivables. Other

financial liabilities include interest-bearing liabilities together with trade and other payables. Due to the nature of short-term

trade and other receivables their carrying amount is expected to be equal to their fair value.

Changes in the fair value of derivatives, for which hedge accounting is not applied, are recognized in the income statement.

The effective portion of the changes in the fair value of derivative financial instruments that are designated and qualified as

cash flow hedges are recognized in equity.

Derivative nancial instruments

The company uses derivative financial instruments mainly to hedge commodity price, foreign exchange and interest rate

exposures. Derivatives not qualified for hedge accounting are recognized in the income statement either in operating profit or

financial income and expenses, depending on the underlying hedged item.

Current investments

Current investments includes deposits held at banks and other liquid investments with original maturities from three months to

12 months.

Hedge accounting

The company applies hedge accounting on certain forward foreign exchange contracts, options and interest rate derivatives.

Fair value hedges

The company applies fair value hedge accounting to reduce exposure to fair value fluctuations of interest-bearing liabilities

due to changes in interest rates. Changes in fair value of derivatives designated and qualifying as fair value hedges, together

with any changes in the fair value of hedged liabilities attiributable to the hedged risk, are recognized in financial income and

expenses.

Cash ow hedges

The company applies cash flow hedge accounting to reduce exposure of currency and interest rates. The result of foreign

currency derivative contracts hedging future cash flows and qualifying for hedge accounting is recognized once matured and

when the hedged item affects the income statement. Gains or losses for interest rate swaps derivative financial instrument

used to hedge the interest rate risk exposure are accrued over the period to maturity and are recognized as an adjustment to

the interest income or expense of the underlying liabilities.

Fixed assets and other long-term investments

The balance sheet value of fixed assets consists of historical costs less depreciation according to plan and other possible

write-offs, plus revaluation permitted by local regulations. Fixed assets are depreciated using straight-line depreciation based

on the expected useful life of the asset. Land areas are not depreciated. The depreciation is based on the following expected

useful lives:

Capitalized development expenditure in intangible assets consists of capitalized patents and license fees.

Investments in subsidiaries and other companies are measured at acquisition cost, or fair value in case the fair value is lower

than cost.

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2 Revenue

3 Other operating income

Inventories

Inventories are stated at either cost or net realizable value, whichever is the lowest. Cost is determined using the weighted

average method. The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs,

and related production overheads (based on normal operating capacity). Net realizable value is the estimated selling price in

the ordinary course of business, less applicable variable selling expenses. Inventories held for trading purposes are measured

at fair value less selling expenses. Standard spare parts are carried as inventory and recognized in profit or loss as consumed.

Research and development

Research expenditure is recognized as an expense as incurred and included in other operating expences in the income

statement. Expenditure on development activities is capitalized only when it fulfills tight criteria e.g. development relates to new

products that are techincally and commercially feasible. The majority of the company's development expenditure does not

meet the criteria for capitalization and are recognized as expences as incurred.

Cash pool receivables/liabilities

Cash pool items are presented as short-term receivables or liabilities.

Pension expenses

An external pension insurance company manages the pension plan.The pension expenses are booked to income statement

during the year they occur.

Appropriations

Appropriations consist of received or given group contributions from or to Neste Group companies and depreciation above the

plan.

Deferred taxes

Deferred taxes are determined on the basis of temporary differences between the financial statement and tax bases of assets

and liabilities. Deferred income tax is determined using tax rates that have been enacted at the balance sheet date and are

expected to apply.

Provisions

Foreseeable future expenses and losses that have no corresponding revenue and which Neste Corporation is committed or

obliged to settle, and whose monetary value can reasonably be assessed, are entered as expenses in the income statement

and included as provisions in the balance sheet. These items include expenses relating to the pension liabilities, guarantee

obligations, restructuring provisions, expenses relating to the future clean-up of proven environmental damage and obligation

to return emission allowances. Provisions are recorded based on management estimates of the future obligation.

Revenue by segment 2021 2020

Renewable Products 3,656 2,890

Oil Products 6,255 4,930

Marketing & Services 8 6

Other 103 83

10,021 7,909

2021 2020

Rental income 6 6

Gain on sale of intangible and tangible assets 0 0

Gain on sale of shares 0 0

Insurance compensations 8 3

Government grants 3 2

Other 9 6

Other operating income total 27 16

Revenue by market area 2021 2020

Finland 3,301 2,343

Other Nordic countries 2,195 1,527

Batlic Rim 856 434

Other European countries 2,914 3,183

North and South America 554 134

Other countries 201 288

10,021 7,909

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2021 2020

Depreciation according to plan 232 234

Write-offs 4 2

Write-downs of Naantali refining operations closure 0 154

Depreciations, amortization and write-downs total 236 391

2021 2020

Operating leases and other property costs 23 20

Repairs and maintenance 265 108

Other 223 253

Cost provisions related to Naantali refining operations closure 0 124

Other operating expenses total 511 505

EUR thousands 2021 2020

Authorised Public Accountants KPMG PwC

Auditor's fees 553 772

Tax advisory 42 9

Other advisory services 62 149

657 930

4 Materials and services 6 Depreciation, amortization and write-downs

7 Other operating expenses

5 Personnel expenses

2021 2020

Materials and supplies

Purchases during the period 8,733 6,488

Change in inventories -146 -51

8,587 6,437

External services 361 259

Materials and services total 8,948 6,696

2021 2020

Wages, salaries and remunerations 200 190

Restructuring provisions related to Naantali refining operations closure

-11 22

Indirect employee costs

Pension costs 36 35

Other indirect employee costs 9 8

Wages and salaries capitalized in fixed assets -15 -1

Personnel expenses total 220 253

Average number of employees 2021 2020

White-collar 1,740 1,731

Blue-collar 699 907

2,439 2,638

Salaries and remuneration

Key management compensations are presented in Note 25 in the Neste Group consolidated financial statements.

Fees charged by the statutory auditor

Neste Annual Report 2021 | Notes to the Parent Company Financial Statements

Includes reversed unused provision of Naantali refinery closure in 2021.

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2021 2020

Dividend income

From Group companies 547 29

From associated companies 0 0

Dividend income total 547 29

Interest income from long-term loans and receivables

From Group companies 10 8

From others 2 2

Interest income from long-term loans and receivables total 12 10

Other interest and financial income

From Group companies 1 0

Other 0 1

Other interest and financial income total 1 1

Write-downs on long-term investments

Write-downs on long-term investments -4 0

Return of write-downs on long-term investments 17 0

Write-drowns of other long-term investments 0 0

Write-downs on long-term investments total 13 0

Interest expenses and other financial expenses

To Group companies -1 -1

Other -24 -18

Interest expenses and other financial expenses total -25 -19

Exchange rate differences -15 -11

Financial income and expenses total 534 11

Total interest income and expenses 2021 2020

Interest income 13 12

Interest expenses -22 -16

Net interest expenses -9 -5

2021 2020

Change in depreciation difference

Difference between depreciation according to plan

and depreciation in taxation -182 200

Group contributions

Group contributions received 128 76

Appropriations total -54 276

2021 2020

Income taxes on regular business operations 52 80

Taxes for prior periods 0 4

Change in deferred tax assets 0 -22

Income tax expense total 52 62

8 Financial income and expenses 9 Appropriations

10 Income tax expense

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Change in acquisition cost 2021

Intangible assets Goodwill Other intangible assets Total

Acquisition cost as of 1 January 2021 1 287 288

Increases 0 18 18

Decreases 0 -2 -2

Transfers between items 0 0 0

Acquisition cost as of 31 December 2021 1 303 304

Accumulated amortization and write-downs as of 1 January 2021 1 169 170

Amortization for the period 0 31 31

Accumulated amortization and write-downs as of 31 December 2021 1 200 201

Balance sheet value as of 31 December 2021 0 103 103

Change in acquisition cost 2020

Intangible assets Goodwill Other intangible assets Total

Acquisition cost as of 1 January 2020 1 255 256

Increases 0 32 32

Decreases 0 0 0

Transfers between items 0 0 0

Acquisition cost as of 31 December 2020 1 287 288

Accumulated amortization and write-downs as of 1 January 2020 1 142 143

Amortization for the period 0 27 27

Accumulated amortization and write-downs as of 31 December 2020 1 169 170

Balance sheet value as of 31 December 2020 0 118 118

11 Fixed assets and long-term investments

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Change in acquisition cost 2021

Tangible assets Land areas Buildings and structures

Machinery

and equipment Other tangible assets

Advances paid and

construction in progress Total

Acquisition cost as of 1 January 2021 26 1,418 3,218 102 415 5,178

Increases 0 11 202 0 14 227

Decreases 0 0 -3 0 -2 -6

Transfers between items 0 58 259 0 -318 0

Acquisition cost as of 31 December 2021 26 1,487 3,676 102 109 5,400

Accumulated depreciation and write-downs as of 1 January 2021 0 797 2,410 46 0 3,253

Accumulated depreciation and write-downs of decreases and transfers 0 -2 -3 0 0 -4

Depreciation and write downs for the period 0 38 160 2 0 200

Write-downs of Naantali refining operations closure 0 1 0 0 0 2

Accumulated depreciation and write-downs as of 31 December 2021 0 835 2,567 48 0 3,451

Revaluations 6 21 0 0 0 27

Balance sheet value as of 31 December 2021 32 672 1,108 55 109 1,976

Balance sheet value of machinery and equipments used in production 1,108

Change in acquisition cost 2020

Tangible assets Land areas Buildings and structures

Machinery

and equipment Other tangible assets

Advances paid and

construction in progress Total

Acquisition cost as of 1 January 2020 26 1,409 3,176 101 292 5,003

Increases 0 4 48 0 146 198

Decreases 0 0 -24 0 -1 -25

Transfers between items 0 6 18 0 -21 2

Acquisition cost as of 31 December 2020 26 1,418 3,218 102 415 5,178

Accumulated depreciation and write-downs as of 1 January 2020 0 736 2,134 44 0 2,915

Accumulated depreciation and write-downs of decreases and transfers 0 0 -23 0 0 -23

Depreciation and write downs for the period 0 39 167 2 0 208

Write-downs of Naantali refining operations closure 0 22 132 0 0 154

Accumulated depreciation and write-downs as of 31 December 2020 0 797 2,410 46 0 3,253

Revaluations 6 21 0 0 0 27

Balance sheet value as of 31 December 2020 32 642 808 56 415 1,952

Balance sheet value of machinery and equipments used in production 808

Neste Annual Report 2021 | Notes to the Parent Company Financial Statements

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Other long-term investments

Shares in

group companies

Receivables from

group companies

Shares in

associated

companies

Receivables

from associated

companies

Other shares

and holdings

Other

receivables Total

Acquisition cost as of 1 January 2021 1,719 58 7 35 19 0 1,837

Increases 427 260 0 38 1 12 738

Decreases 0 -279 0 -36 0 -6 -321

Acquisition cost as of 31 December 2021 2,145 39 7 37 20 6 2,254

Accumulated depreciation and write-downs as of 1 January 2021 0 0 0 0 0 0 0

Decreases 0 0 0 0 0 4 4

Accumulated depreciation and write-downs as of 31 December 2021 0 0 0 0 0 4 4

Balance sheet value as of 31 December 2021 2,145 39 7 37 20 2 2,251

Other long-term investments

Shares in

group companies

Receivables from

group companies

Shares in

associated

companies

Receivables

from associated

companies

Other shares

and holdings

Other

receivables Total

Acquisition cost as of 1 January 2020 1,470 33 7 31 3 4 1,548

Increases 249 58 0 3 15 0 325

Decreases 0 -33 0 0 0 -4 -37

Acquisition cost as of 31 December 2020 1,719 58 7 35 19 0 1,837

Accumulated depreciation and write-downs as of 1 January 2020 0 0 0 0 0 0 0

Accumulated depreciation and write-downs as of 31 December 2020 0 0 0 0 0 0 0

Balance sheet value as of 31 December 2020 1,719 58 7 35 19 0 1,837

Interest-bearing and interest-free receivables 2021 2020

Interest-bearing receivables 79 93

Interest-free receivables 0 0

79 93

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12 Revaluations

13 Inventories

14 Long-term receivables

15 Short-term receivables

Revaluations

as of

Jan 1 2021 Increases Decreases

Revaluations

as of

Dec 31 2021

Land areas 6 0 0 6

Buildings 21 0 0 21

Revaluations total 27 0 0 27

2021 2020

Raw materials and supplies 601 455

Products/finished goods 698 466

Advance payments on inventories 0 1

Inventories total 1,300 921

Replacement value of inventories 1,490 1,007

Book value of inventories 1,300 921

Difference 191 86

2021 2020

Long-term receivables from others

Long-term advance payments 22 25

Other receivables 12 4

Deferred tax assets 32 8

Long-term receivables total 66 38

Short-term accrued income and prepaid expenses 2021 2020

Accrued interest 0 3

Derivative financial instruments

318 331

Current investments 135 20

Other 28 26

Total 481 380

2021 2020

Receivables from Group companies

Trade receivables 703 458

Loan receivables 139 5

Other receivables 342 217

Accrued income and prepaid expenses 73 39

Total 1,257 719

Receivables from associated companies

Trade receivables 69 21

Total 69 21

Receivables from others

Trade receivables 636 377

Loan receivables 0 4

Other receivables 181 104

Accrued income and prepaid expenses 408 341

Total 1,225 824

Short-term receivables total 2,552 1,564

Policies and principles for revaluations and evaluation methods

The revaluations are based on fair values at the moment of revaluation.

Deferred taxes have not been booked on revaluations.

The amount of derivative financial instruments presented in 2020 under short-term accrued income and prepaid expenses has

been restated with missing derivative financial instruments.

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16 Changes in shareholders' equity 17 Accumulated appropriations

18 Provisions for liabilities and charges

2021 2020

Share capital at 1 January 40 40

Share capital at 31 December 40 40

Fair value reserve at 1 January 64 -3

Increases 1,692 1,277

Decreases -1,788 -1,211

Fair value reserve at 31 December -32 64

Restricted shareholders equity 8 104

Invested non-restricted equity fund at 1 January 19 19

Transfer of treasury shares 0 0

Invested non-restricted equity fund at 31 December 19 19

Retained earnings at 1 January 2,641 3,168

Dividends paid -614 -783

Profit for the year 792 256

Retained earnings at 31 December 2,819 2,641

Non-restricted shareholders equity 2,838 2,660

Capitalized development expenditure 6 3

Distributable equity 2,800 2,657

2021 2020

Depreciation difference 1,092 909

2021 2020

at 1 Jan Increase Decrease at 31 Dec at 1 Jan Increase Decrease at 31 Dec

Restructuring provisions 23 0 21 2 0 23 0 23

Provision for environment 1 0 0 1 1 0 0 1

Provision for environment for Naantali refining operations closure 117 2 6 112 0 117 0 117

Liability to return emission rights 0 0 0 0 4 0 4 0

Other provisions 0 1 1 0 0 0 0 0

Total 141 3 29 115 5 139 4 141

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19 Liabilities

Long-term liabilities 2021 2020

Bonds 893 720

Advanced payments 19 20

Liabilities to Group companies

Other long-term liabilities 99 436

Other long-term liabilities 121 1

Accruals and deferred income 1 1

Long-term liabilities total 1,134 1,177

Interest-bearing liabilities due after five years 2021 2020

Loans from financial institutions 98 0

Bonds 494 0

592 0

Short-term liabilities 2021 2020

Advances received 36 46

Trade payables 890 821

Liabilities to Group companies

Advances received 0 0

Trade payables 736 351

Other short-term liabilities 1,718 977

Accruals and deferred income 140 95

Total 2,594 1,423

Liabilities to associated companies

Trade payables 17 0

Total 17 0

Other short-term liabilities 779 387

Accruals and deferred income 236 205

Short-term liabilities total 4,552 2,881

Short-term accruals and deferred income 2021 2020

Salaries and indirect employee costs 57 49

Accrued interests 8 9

Derivative financial instruments 307 240

Other short-term accruals and deferred income 3 2

376 300

2020Interest-bearing and interest-free liabilities 2021

Long-term liabilities

Interest-bearing liabilities 1,105 1,155

Interest-free liabilities 29 22

1,134 1,177

Short-term liabilities

Interest-bearing liabilities 1,838 986

Interest-free liabilities 2,714 1,896

4,552 2,881

Issued/Maturity

Interest

basis

Interest

rate, %

Effective

interest, % Currency

Nominal,

million

Carrying

amount,

EUR million

2017/2024 Fixed 1.5000 1.5080 EUR 400 399

2021/2028 Fixed 0.7500 0.9000 EUR 500 494

Total outstanding carrying amount 31 December 2021 893

Listed bond issues

Neste Annual Report 2021 | Notes to the Parent Company Financial Statements

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20 Contingent liabilities

Contingent liabilities 2021 2020

Contingent liabilities given on own behalf

Real estate mortgages 26 26

Pledged assets 0 0

Other contingent liabilities 23 58

Total 49 84

Contingent liabilities given on behalf of Group companies

Guarantees 278 74

Total 278 74

Contingent liabilities given on behalf of associated companies

Pledged assets 44 40

Total 44 40

Contingent liabilities given on behalf of others

Guarantees 1 1

Total 1 1

Other contingent liabilities

The Company is obliged to adjust VAT deductions made from real estate investments if the taxable utilization of real estate will

decrease during a 10 years control period.

Operating lease liabilities 2021 2020

Due within a year 16 15

Due after a year 14 8

Total 31 22

Capital commitments 2021 2020

Commitments for purchase of property,

plant and equipment and intangible assets 17 148

Other commitments 9 10

Total 25 158

Neste Annual Report 2021 | Notes to the Parent Company Financial Statements

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31 Dec 2021 31 Dec 2020

Nominal value by maturity Fair Value Nominal value by maturity Fair Value

< 1 year > 1 year Positive Negative Net < 1 year > 1 year Positive Negative Net

Foreign exchange and interest rate derivatives

Foreign exchange derivatives, forwards 1,604 10 8 45 -37 1,657 0 80 4 76

Foreign exchange options

Purchased 124 0 0 0 0 136 0 4 0 4

Written 124 0 0 3 -3 136 0 0 0 0

Derivatives designated as cash flow hedges 1,851 0 8 48 -40 1,929 0 84 4 80

Foreign exchange derivatives, forwards 2,343 0 26 27 -1 2,104 99 55 12 44

Intra-group forward foreign exchange contracts 950 0 13 23 -10 1,122 70 12 27 -15

Currency options

Purchased 35 0 0 0 0 68 0 1 0 1

Written 35 0 0 1 -1 68 0 0 0 0

Intra-group currency options

Purchased 35 0 0 0 0 68 0 0 1 -1

Written 35 0 1 0 1 68 0 0 0 0

Non-hedge accounting 3,434 0 41

51 -11 3,500 169 69 40 29

21 Derivative financial instruments

Neste Annual Report 2021 | Notes to the Parent Company Financial Statements

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31 Dec 2021 31 Dec 2020

Nominal value by maturity Fair Value Nominal value by maturity Fair Value

< 1 year > 1 year Positive Negative Net < 1 year > 1 year Positive Negative Net

Commodity derivatives

Oil and vegetable oil derivatives

Sold forwards, million bbl 26 0 29 71 -42 22 0 6 85 -79

Purchased forwards, million bbl 21 0 107 15 92 18 0 108 11 97

Intra-group oil and vegetable oil derivatives

Sold forwards, million bbl 9 0 7 48 -41 12 0 8 93 -85

Purchased forwards, million bbl 13 0 45 11 34 12 0 52 5 46

Electricity and gas derivatives

Sold forwards, GWh 0 0 0 0 0 0 0 0 0 0

Purchased forwards, GWh 2,966 940 91 14 77 2,164 1,094 7 0 7

Intra-group electricity and gas derivatives

Sold forwards, GWh 1,236 590 3 60 -57 1,248 568 0 3 -3

Non-hedge accounting 4,270 1,530 281 218 63 3,475 1,662 182 197 -15

Derivatives Total 330 318 12 335 242 93

of which

Current derivative financial instruments 318 307 10 331 240 91

Non-current derivative financial instruments 12 10 2 4 2 2

Commodity derivative contracts with non-hedge accounting status include oil, vegetable oil, electricity and gas derivative contracts. They consist of trading derivative contracts and cash flow hedges without hedge accounting status.

Neste Annual Report 2021 | Notes to the Parent Company Financial Statements

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Fair value hierarchy of derivatives 2021 2020

Financial assets Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Non-current derivative financial instruments

Currency derivatives 0 0 0 0 0 1 0 1

Commodity derivatives 0 12 0 12 0 0 0 0

Other financial assets

0 0 0 0 0 0 0 0

Current derivative financial instruments

Currency derivatives 0 48 0 48 0 152 0 152

Commodity derivatives 3 266 0 269 17 165 0 182

Financial liabilities

Non-current derivative financial instruments

Currency derivatives 0 0 0 0 0 1 0 1

Commodity derivatives 0 10 0 10 0 0 0 0

Current derivative financial instruments

Currency derivatives 0 99 0 99 0 43 0 43

Commodity derivatives 3 205 0 208 33 164 0 197

Financial instruments that are measured in the balance sheet at fair value are presented according to following fair value measurement hierachy:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: inputs other than quoted price included within Level 1 that are observable for the assets or liability, either directly (i.e. as prices) or indirectly (i.e derived from prices)

Level 3: inputs for the assets or liablity that is not based on obervable market data (unobservable inputs).

Fair value estimations

Derivative financial instruments are initially recognized and subsequently re-measured at their fair values i.e.the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participant and the measurement

date.

The fair values of the interest rate swaps are the present values of the estimated future cash flows. Foreign exchange forward contracts are calculated using the valuation model and the market rates as per last business day of financial year. The fair value of

currency options are calculated using market rates as per last business day of financial year and by using the Black and Scholes option valuation model.

The fair value of exchange traded commodity futures and option contracts is determined using the forward exchange market quotations as per last business day of financial year. The fair value of over-the-counter derivative contracts is calculated using the

net present value of the forward derivative contracts quoted market prices as per last business day of financial year.

Neste Annual Report 2021 | Notes to the Parent Company Financial Statements

2020 fair value hierarchy derivatives presentation for other financial assets from level 3 has been restated by 3 million euros concerning non-listed shares which has been measured at amortization costs.

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Country of

incorporation No of shares Holding -%

Subsidiary shares

Kiinteistö Oy Espoon Keilaranta 21 Finland 16,000 100.00

Navidom Oy Finland 50 50.00

Neste (Suisse) S.A. Switzerland 200 100.00

Neste AB Sweden 2,000,000 100.00

Neste Affliliate B.V. Netherlands 26,090 100.00

Neste Base Oils Finland Oy Finland 100 100.00

Neste Belgium NV Belgium 615 100.00

Neste Components B.V. Netherlands 40 100.00

Neste Eesti AS Estonia 10,000 100.00

Neste Engineering Solutions Oy Finland 3,500 100.00

Neste Germany GmbH Germany 25,000 100.00

Neste Insurance Limited Guernsey 7,000,000 100.00

Neste Italy S.R.L. Italy 1 100.00

Neste Markkinointi Oy Finland 210,560 100.00

Neste Netherlands B.V. Netherlands 18,000 100.00

Neste NV Belgium 4,405,414 99.99

Neste Pretreatment Rotterdam B.V. Netherlands 18,000 100.00

Neste Renewable Solutions US, Inc. USA 1,000 100.00

Neste RPC Solutions US, Inc. USA 1,000 100.00

Neste Shipping Oy Finland 101 100.00

Neste Singapore Pte. Ltd. Singapore 1,727,535,875 100.00

Neste US, Inc. USA 1,000 100.00

Associated companies

A/B Svartså Vattenverk - Mustijoen Vesilaitos O/Y Finland 14 40.00

Kilpilahti Powerplant Ltd. Finland 20,000 40.00

Neste Arabia Co. Ltd. Saudi Arabia 480 48.00

Tahkoluodon Polttoöljy Oy Finland 630 31.50

22 Shares and holdings

23 Disputes and potential litigations

Other shares and holdings

CLEEN Oy Finland 100

East Office of Finnish Industries Oy Finland 1

Kiinteistö Oy Anttilankaari 8 Finland 51

Kiinteistö Oy Himoksen Aurinkopaikka Finland 51

Kiinteistö Oy Katinkullan Hiekkaniemi Finland 102

Kiinteistö Oy Katinkultaniemi Finland 51

Kiinteistö Oy Kuusamon Tähti 1 Finland 51

Kiinteistö Oy Laavutieva Finland 51

Kiinteistö Oy Lapinniemi & Osakeyhtiö Lapinniemi Finland 24

Posintra Oy Finland 190

Recycling Technologies Ltd. United Kingdom 3,122,666

Sunfire GmbH Germany 264,121

Telephone shares

Elisa Oyj Finland 1

Osuuskunta PPO Finland 1

Pietarsaaren Seudun Puhelin Oy Finland 3

Savonlinnan Puhelinosuuskunta SPY Finland 1

Country of

incorporation No of shares

Neste Corporation is involved in legal proceedings and disputes incidental to its business. In management's opinion, the

outcome of these cases is difficult to predict but not likely to have material effect on the Neste's financial position.

Neste Annual Report 2021 | Notes to the Parent Company Financial Statements

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Proposal for the distribution of earnings and signing

of the Review by the Board of Directors and the Financial Statements

Neste Annual Report 2021 | Signature of the review by the Board of Directors and the Financial Statements

Espoo, 9 February 2022

Matti Kähkönen Marco Wirén

Martina Flöel Jari Rosendal

John Abbott Nick Elmslie

Johanna Söderström Jean-Baptiste Renard

Peter Vanacker

President and CEO

Helsinki, 9 February 2022

KPMG Oy Ab

Authorised Public Accountants

Virpi Halonen

Authorized Public Accountant

The Parent company's distributable equity as of 31 December 2021 stood at EUR 2,800 million. The Board of Directors proposes Neste Corporation to pay a dividend

of EUR 0.82 per share for 2021, totalling EUR 630 million, and that any remaining distributable funds be allocated to retained earnings.

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Neste Annual Report 2021 | Auditor’s Report

This document is an English translation of the Finnish auditor’s report. Only the Finnish version of the report is legally binding.

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Neste

Corporation (business identity code 1852302-9) for the

year ended December 31, 2021. The financial statements

comprise the consolidated statement of financial position,

income statement, statement of comprehensive income,

statement of changes in equity, statement of cash flows and

notes, including a summary of significant accounting policies,

as well as the parent company’s balance sheet, income

statement, statement of cash flows and notes.

In our opinion

• the consolidated financial statements give a true and

fair view of the group’s financial position, financial

performance and cash flows in accordance with

International Financial Reporting Standards (IFRS) as

adopted by the EU

• the financial statements give a true and fair view of the

parent company’s financial performance and financial

position in accordance with the laws and regulations

governing the preparation of financial statements in

Finland and comply with statutory requirements.

Our opinion is consistent with the additional report submitted

to the Audit Committee.

Basis for Opinion

We conducted our audit in accordance with good auditing

practice in Finland. Our responsibilities under good auditing

practice are further described in the Auditor’s Responsibilities

for the Audit of the Financial Statements section of our

report.

We are independent of the parent company and of

the group companies in accordance with the ethical

requirements that are applicable in Finland and are

relevant to our audit, and we have fulfilled our other ethical

responsibilities in accordance with these requirements.

In our best knowledge and understanding, the non-audit

services that we have provided to the parent company

and group companies are in compliance with laws and

regulations applicable in Finland regarding these services,

and we have not provided any prohibited non-audit services

referred to in Article 5(1) of regulation (EU) 537/2014.

The non-audit services that we have provided have been

disclosed in note 9 to the consolidated financial statements.

We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our opinion.

Materiality

The scope of our audit was influenced by our application

of materiality. The materiality is determined based on our

professional judgement and is used to determine the nature,

timing and extent of our audit procedures and to evaluate the

effect of identified misstatements on the financial statements

as a whole. The level of materiality we set is based on

our assessment of the magnitude of misstatements that,

individually or in aggregate, could reasonably be expected

to have influence on the economic decisions of the users of

the financial statements. We have also taken into account

misstatements and/or possible misstatements that in our

opinion are material for qualitative reasons for the users of

the financial statements.

Auditor’s Report

To the Annual General Meeting of Neste Corporation

Key Audit Matters

Key audit matters are those matters that, in our professional

judgment, were of most significance in our audit of the

financial statements of the current period. These matters

were addressed in the context of our audit of the financial

statements as a whole, and in forming our opinion thereon,

and we do not provide a separate opinion on these matters.

The significant risks of material misstatement referred to in

the EU Regulation No 537/2014 point (c) of Article 10(2) are

included in the description of key audit matters below.

We have also addressed the risk of management override

of internal controls. This includes consideration of whether

there was evidence of management bias that represented a

risk of material misstatement due to fraud.

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Neste Annual Report 2021 | Auditor’s Report

THE KEY AUDIT MATTER

Biofuel credits in the USA

(reference to notes 5 and 18 in the

consolidated nancial statements)

Renewable Products revenue includes income deriving

from biofuel credits which Neste earns its sales

operations in the USA. Neste’s biofuel credits relate to

the import and sale of renewable fuels in the USA in the

form of Renewable Identification Number (RINs), Low

Carbon Fuel Standard (LCFSs) and Blenders Tax Credits

(BTC).

RINs and LCFSs are accounted for as government

grants upon receipt of the product inventory in the USA

and are recognized as a revenue when biofuel credits

are sold to a third party. RINs and LCFSs are accounted

for as inventory to the extent they have been separated

from the physical goods, which happens when

renewable fuel is blended with fossil fuel.

As there is a risk relating to the level of judgement

included in valuation of biofuel credits it has been

considered as a key audit matter.

HOW THE MATTER WAS ADDRESSED

IN THE AUDIT

Our audit procedures related to biofuel credits

included:

• Assessment on that the Group’s accounting

principles and underlying IFRS principles have been

applied when recording biofuel credits.

• Evaluation of the process for registering biofuel

credits and monitoring balances of the eligible

credit.

• Testing of the registered balances against the

systems administered by the Environmental

Protection Agency.

• Verification of balances against purchase and sales

contracts.

In addition, our test of details included the following

procedures to confirm valuation of biofuel credits:

• Comparing the valuation of RINs and LCFSs

accounted for as inventory to quoted market prices,

assessing the reasonability of the difference taking

into account the liquidity of the market.

• Comparing the value of RINs and LCFSs against

historical sales prices obtained by Neste.

• Comparing of the value of the BTC to that confirmed

by the authorities in the USA.

THE KEY AUDIT MATTER

Revenue recognition

(reference to the note 5 in the

consolidated nancial statements)

Neste Group has several different revenue streams,

under the Renewable Products, Oil Products, and

Marketing & Services segments. The revenue streams

are different in nature and underlying risks differs by

revenue stream.

In the Renewable Products and Oil Products

segments, the company has deliveries, which can be

considered individually significant. The Marketing &

Services segment's revenues consist of several small

transactions, with short payment terms, low complexity

and significant automation.

Therefore, we have assessed that there is a risk

of misstatement of the financial statements related

to transactions occurring close to the year-end, as

transactions could be recorded in the wrong financial

period in the Renewable Products and Oil Products

segments (cut-off).

HOW THE MATTER WAS ADDRESSED

IN THE AUDIT

Our audit procedures related to cut-off in revenue

recognition in the Renewable Products and Oil

Products segments covered:

• Assessing the accounting principles and practises

applied and evaluation the appropriateness of the

revenue recognition principles in relation to the

IFRS-standards.

• Assessing the implementation as well as testing

of the operating effectiveness of the key controls

associated to sales.

• Assessing the recognition of revenues on accrual

basis by testing entries and accruals affecting

revenues based on the delivery terms in sales and

delivery documents or system generated reports.

• Analytical audit procedures.

In addition, we considered the appropriateness of the

Group’s disclosures in respect of revenues.

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Neste Annual Report 2021 | Auditor’s Report

Responsibilities of the Board of Directors

and the Managing Director for the Financial

Statements

The Board of Directors and the Managing Director are

responsible for the preparation of consolidated financial

statements that give a true and fair view in accordance

with International Financial Reporting Standards (IFRS)

as adopted by the EU, and of financial statements that

give a true and fair view in accordance with the laws and

regulations governing the preparation of financial statements

in Finland and comply with statutory requirements. The

Board of Directors and the Managing Director are also

responsible for such internal control as they determine is

necessary to enable the preparation of financial statements

that are free from material misstatement, whether due to

fraud or error.

In preparing the financial statements, the Board of

Directors and the Managing Director are responsible for

assessing the parent company’s and the group’s ability to

continue as a going concern, disclosing, as applicable,

matters relating to going concern and using the going

concern basis of accounting. The financial statements are

prepared using the going concern basis of accounting unless

there is an intention to liquidate the parent company or the

group or cease operations, or there is no realistic alternative

but to do so.

Auditor’s Responsibilities for the Audit of

the Financial Statements

Our objectives are to obtain reasonable assurance about

whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error,

and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance but is

not a guarantee that an audit conducted in accordance

with good auditing practice will always detect a material

misstatement when it exists. Misstatements can arise from

fraud or error and are considered material if, individually

or in the aggregate, they could reasonably be expected to

influence the economic decisions of users taken on the basis

of the financial statements.

As part of an audit in accordance with good auditing

practice, we exercise professional judgment and maintain

professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement

of the financial statements, whether due to fraud

or error, design and perform audit procedures

responsive to those risks, and obtain audit evidence

that is sufficient and appropriate to provide a basis

for our opinion. The risk of not detecting a material

misstatement resulting from fraud is higher than for

one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or

the override of internal control.

• Obtain an understanding of internal control relevant

to the audit in order to design audit procedures that

are appropriate in the circumstances, but not for the

purpose of expressing an opinion on the effectiveness

of the parent company’s or the group’s internal control.

• Evaluate the appropriateness of accounting policies

used and the reasonableness of accounting estimates

and related disclosures made by management.

THE KEY AUDIT MATTER

Valuation of inventories

(reference to note 18 in the

consolidated nancial statements)

The company has significant inventory balances in both

the Renewable Products and Oil Products segments.

The inventory is valued at the lower of cost or net

realizable value. The cost of inventory in the Renewable

Products segment reflects purchase prices, which are

impacted by the market prices of different feedstocks as

well as the mix of feedstocks purchased.

Inventory management, stocktaking routines and

costing of inventories are underlying key factors in

determining the value of inventories. Due to complexity

of the inventory valuation calculations for Renewable

Products the valuation of inventories is considered as a

key audit matter.

HOW THE MATTER WAS ADDRESSED

IN THE AUDIT

Our audit procedures related to valuation of

Renewable Products’ inventories included:

• Evaluating the appropriateness of the accounting

policies applied by reference to IFRS standards.

• Assessing functionality of the key IT systems of

inventory management.

• Testing of controls over inventory management and

accuracy of inventory amounts.

• Performing substantive audit procedures in order

to test the accuracy of inventory valuation at the

lower of cost or net realization value at reporting

date by testing selected inventory items to relevant

components of valuation.

In addition, we assessed the appropriateness of the

Group’s disclosures in respect of inventory valuation.

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Other Reporting Requirements

Information on our audit engagement

We were first appointed as auditors for the financial year

2021 March 30, 2021 by the Annual General Meeting.

Other Information

The Board of Directors and the Managing Director are

responsible for the other information. The other information

comprises the report of the Board of Directors and the

information included in the Annual Report but does not

include the financial statements and our auditor’s report

thereon. We have obtained the report of the Board of

Directors prior to the date of this auditor’s report, and the

Annual Report is expected to be made available to us after

that date. Our opinion on the financial statements does not

cover the other information.

In connection with our audit of the financial statements,

our responsibility is to read the other information identified

above and, in doing so, consider whether the other

information is materially inconsistent with the financial

statements or our knowledge obtained in the audit, or

otherwise appears to be materially misstated. With respect

to the report of the Board of Directors, our responsibility

also includes considering whether the report of the Board

of Directors has been prepared in accordance with the

applicable laws and regulations.

In our opinion, the information in the report of the Board

of Directors is consistent with the information in the financial

statements and the report of the Board of Directors has

been prepared in accordance with the applicable laws and

regulations.

If, based on the work we have performed on the other

information that we obtained prior to the date of this auditor’s

report, we conclude that there is a material misstatement of

this other information, we are required to report that fact. We

have nothing to report in this regard.

Other Statements

We support that the financial statements and the

consolidated financial statements should be adopted.

The proposal by the Board of Directors regarding the use

of the profit shown in the balance sheet is in compliance

with the Limited Liability Companies Act. We support that

the Members of the Board of Directors and the Managing

Director of the parent company should be discharged from

liability for the financial period audited by us.

Helsinki February 9, 2022

KPMG OY AB

Virpi Halonen

Authorised Public Accountant, KHT

• Conclude on the appropriateness of the Board of

Directors’ and the Managing Director’s use of the going

concern basis of accounting and based on the audit

evidence obtained, whether a material uncertainty

exists related to events or conditions that may cast

significant doubt on the parent company’s or the

group’s ability to continue as a going concern. If we

conclude that a material uncertainty exists, we are

required to draw attention in our auditor’s report to the

related disclosures in the financial statements or, if such

disclosures are inadequate, to modify our opinion. Our

conclusions are based on the audit evidence obtained

up to the date of our auditor’s report. However, future

events or conditions may cause the parent company or

the group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content

of the financial statements, including the disclosures,

and whether the financial statements represent the

underlying transactions and events so that the financial

statements give a true and fair view.

• Obtain sufficient appropriate audit evidence regarding

the financial information of the entities or business

activities within the group to express an opinion on the

consolidated financial statements. We are responsible

for the direction, supervision and performance of the

group audit. We remain solely responsible for our audit

opinion.

We communicate with those charged with governance

regarding, among other matters, the planned scope and

timing of the audit and significant audit findings, including

any significant deficiencies in internal control that we identify

during our audit.

We also provide those charged with governance with

a statement that we have complied with relevant ethical

requirements regarding independence, and communicate

with them all relationships and other matters that may

reasonably be thought to bear on our independence, and

where applicable, related safeguards.

From the matters communicated with those charged with

governance, we determine those matters that were of most

significance in the audit of the financial statements of the

current period and are therefore the key audit matters. We

describe these matters in our auditor’s report unless law or

regulation precludes public disclosure about the matter or

when, in extremely rare circumstances, we determine that a

matter should not be communicated in our report because

the adverse consequences of doing so would reasonably

be expected to outweigh the public interest benefits of such

communication.

251

FinancialsStrategy GovernanceSustainability Review by the Board of Directors

Independent Auditor’s Reasonable Assurance Report

on Neste Oyj’s ESEF Financial Statements

To the Board of Directors of Neste Oyj

We have undertaken a reasonable assurance

engagement on the iXBRL marking up of the con-

solidated financial statements for the year ended 31

December, 2021, included in the Neste Oyj’s digi-

tal files [5493009GY1X8GQ66AM14-2021-12-31-en.

zip] prepared in accordance with the requirements of

Article 4 of EU Delegated Regulation 2018/815 (ESEF

RTS).

The Responsibility of the Board of

Directors and Managing Director

The Board of Directors and Managing Director are

responsible for preparing the report of the Board of

Directors and financial statements (ESEF financial

statements) that comply with the requirements of

ESEF RTS. This responsibility includes:

• preparation of ESEF financial statements in

XHTML format in accordance with Article 3 of the

ESEF RTS

• marking up the consolidated financial statements

included in the ESEF financial statements with

iXBRL tags in accordance with Article 4 of the

ESEF RTS; and

• ensuring consistency between ESEF financial

statements and audited financial statements.

The Board of Directors and the Managing Director

are also responsible for such internal control as they

deem necessary to prepare the ESEF financial state-

ments in accordance with the requirements of the

ESEF RTS.

Auditor’s Independence

and Quality Control

We are independent of the company in accordance

with the ethical requirements applicable in Finland,

which apply to the engagement we have performed,

and we have fulfilled our other ethical obligations in

accordance with these requirements.

The auditor applies International Standard on Quality

Control 1 and accordingly maintains a comprehensive

system of quality control including documented poli-

cies and procedures regarding compliance with ethi-

cal requirements, professional standards and applica-

ble legal and regulatory requirements.

Auditor’s Responsibility

In accordance with the Engagement Letter our

responsibility is to express an opinion on whether the

marking up of the consolidated financial statements

included in the ESEF financial statements comply in all

material respects with the Article 4 of the ESEF RTS.

We conducted our reasonable assurance engage-

ment in accordance with International Standard on

Assurance Engagements 3000.

The engagement involves procedures to obtain evi-

dence whether;

• the consolidated financial statements included

in the ESEF financial statements are, in all

material respects, marked up with iXBRL tags in

accordance with Article 4 of the ESEF RTS, and;

• the ESEF financial statements and the audited

financial statements are consistent with each

other.

The nature, timing and the extent of procedures

selected depend on practitioner’s judgement. This

includes the assessment of the risks of material

departures from the requirements set out in the ESEF

RTS, whether due to fraud or error.

We believe that the evidence we have obtained is

sufficient and appropriate to provide a basis for our

opinion.

Opinion

In our opinion, the consolidated financial statements

included in the ESEF financial statements of Neste

Oyj identified as [5493009GY1X8GQ66AM14-2021-

12-31-en.zip] for the year ended 31 December, 2021

are marked up, in all material respects, in compliance

with the ESEF Regulatory Technical Standard.

Our audit opinion relating to the consolidated finan-

cial statements of Neste Oyj for the year ended 31

December, 2021 is set out in our Auditor’s Report

dated 9 February, 2022. In this report, we do not

express an audit opinion, review conclusion or any

other assurance conclusion on the consolidated

financial statements.

Helsinki 3 March, 2022

KPMG OY AB

Virpi Halonen

Authorised Public Accountant, KHT

Neste Annual Report 2021 | Assurance Report