When Neste—then operating as Neste Oil—made the decision in 2015 to drop the “Oil” from its name, it came after deep deliberation that touched on the company’s identity and, perhaps more importantly, its aspirations. It signaled to the world that Neste saw its business, first and foremost, as fighting climate change and creating a healthier planet for subsequent generations.
In the years since, the company has stayed true to that commitment. As a downstream operator, Neste’s biggest impact on sustainability comes from its sourcing strategy: that is, where it gets the resource inputs that go into its refining operations. Under the conventional refining model, operators make their finished fuel products from the crude oil and gas extracted through traditional upstream operations: namely drilling. Apart from technical issues, where those supply chain inputs—or feedstocks—come from doesn’t matter much to refiners. It all turns into the fuel for cars, planes and many, many more things that burn it, thereby adding net-new carbon to the global environment in the process.
What sets Neste apart is its focus on renewable fuels, which are created from renewable feedstocks, a broad range of waste residues like used restaurant cooking oil and animal fat. The fact that renewable fuels are derived from renewable sources means they don’t add anywhere near the carbon as traditionally sourced fuels. And that makes them increasingly attractive to fleet-owning customers like airlines and transport companies that see renewable fuels—which perform just as well as standard fuels—as a way to quickly and sharply lower their carbon footprint.
In addition to its significant research and innovation initiatives, Neste owes much of its leading position in the renewable fuel space to a global network of advanced renewable refineries and technologies, which together have enabled the company to create products with superior properties. But that’s only part of it. An equally important underpinning of this success is a new business model built on a truly global supply chain strategy. As Neste continues to add new renewable feedstock sources around the world, the breadth and diversity of its supply chain has grown steadily. So, too, has the complexity of managing it.
Renewables' production capacity is expected to reach 6.8 million tons by the end of 2026
Waste and residue products account for more than 90% of Neste’s total renewable raw material inputs
As Head of Integrated ERP at Neste, Marko Mäki-Ullakko has played a major role in the ongoing transformation of Neste’s ERP systems and processes, including the implementation of the SAP S/4HANA® solution. In his view, Neste’s decision to standardize on integrated SAP across its global operations was essential to enabling the strategic pivot toward renewable fuels. “On a process and data level, the supply chain for renewable products is quite different from that of the traditional oil business,” Mäki-Ullakko explains. “It was in many ways a new kind of business, and we needed a new foundation to build it on.”
Perhaps the best way to illustrate this contrast, he says, is to look back upstream, to where renewable feedstocks come from. “In the traditional inbound supply chain for refiners, you typically have large volumes coming in from a single source, like a tanker or a pipeline,” he explains. “With renewables, imagine individual tank trucks picking up small loads of used cooking oil at a restaurant and then moving to the next stop. It’s a completely different footprint, and it generates entirely different data flows.”
The ability to track these data flows is critical to Neste’s business model for two reasons. On an operational level, efficient production planning requires the ability to track inbound materials inventories with a high degree of granularity. With such a broad and diverse range of feedstock sources, Neste needed an ERP system that could not only track this data, but also provide the transparency necessary for process optimization. It’s a prime example of the “new foundation” Mäki-Ullakko considers so important.
Then there’s the sustainability angle. Among Neste’s growing customer base, the strongest appeal of its products is their ability to help customers meet their carbon reduction and neutrality goals. Jet fuel for airlines—which don’t have the option of “going electric” with their fleet—is a powerful example. To achieve and maintain the coveted “renewable” designation, Neste and its sustainable aviation fuel peers track the flow of inputs all the way from the restaurant to the refinery and beyond.
To Juuso Pusa, Vice President Supply Chain Management, Renewables Products, the importance of capturing a seamless, auditable record of materials movement—a proof of renewable provenance—cannot be overstated. “To meet the different regulations that govern renewable products around the world, we need to show the source of our feedstocks, what we produce and to whom it’s delivered,” Pusa explains. “That’s why transparent, end-to-end visibility of the data has really become the core element of our business.”
Like its business model, Neste’s working relationship with IBM Consulting™ for SAP is also a case study in evolution and adaptation. Back in 2015, at the very outset of the project, the main focus of Neste’s integrated SAP deployment was the replacement of its old ERP system—which was holding back its process efficiency—and the creation of a new process framework on top of it. But the project was still, at the time, very much about the legacy side of the business.
By 2018, when Neste’s rapidly emerging renewable business had become its focal point, the stakeholders of the integrated SAP project recognized the need to recalibrate its goals and broaden its scope. Over the course of the project, the Neste and IBM teams had evolved into a seamless collaborative relationship and the level of trust was high. So when the need to change course became clear, Mäki-Ullakko and the rest of Neste team saw an important role for IBM in helping to plot it. “IBM fully understood and shared our vision for growing the renewable side of the business, and what it meant for our implementation roadmap,” he says. “The fact that we were able to scale up and adapt the project on the fly attests to the closeness of relationship and the depth of resources and industry experience IBM was able to bring to the project.”
In the ensuing years, the strength of the relationship—and the joint-team approach it’s built on—has only grown. Leveraging the depth of IBM’s SAP deployment experience, Neste has successfully rolled out the SAP S/4HANA solution on the Microsoft Azure cloud across most of its operations, including its renewables supply chains. As part of the cloud deployment, staff from Nordcloud (link resides outside of ibm.com), an IBM Company, played a key role, while a team from IBM Consulting Cloud Migration Services assisted in the migration of SAP from on-premises infrastructure to the Azure platform.
In addition to expanding of the existing SAP landscape, IBM Consulting is continuing to provide Neste with the process design support it needs to get the most value from its ERP investments. Throughout the transformation project, a team from IBM® Organizational Change Management Services has also provided extensive support, starting from defining the harmonized processes across Neste to engaging and training the employees throughout the business transformation.
As it was designed to do, Neste’s new ERP platform is enabling supply chain process efficiency improvements and making its data more transparent. Among the most far-reaching benefits, notes Mäki-Ullakko, is the ability to spot and resolve process inefficiencies. “We’ve been able to use SAP’s process discovery capabilities to spot supply chain and production bottlenecks,” he explains. “In that way, integrated SAP has been and will be a critical tool for our process optimization efforts.”
The end-to-end visibility provided by integrated SAP has helped improve in the company’s agility in terms of finding and incorporating new feedstock sources into its refining process. And that, in turn, has helped Neste increase its renewables production capacity, which is expected to reach 6.8 million tons by the end of 2026. At present, more than 90% of Neste’s total renewable raw material inputs come from waste and residue products, and all of its renewables refineries are capable of running on 100% waste and residue raw materials.
Mäki-Ullakko is clearly proud of what he and his extended team have achieved through their ERP transformation and for what it means to Neste as a business. But it’s also clear that he cares about the larger implications of the project he’s leading, and how it fits in with Neste’s broader mission. “At Neste, we are in the business of fighting against climate change, and we want to create a healthier planet for our children,” says Mäki-Ullakko, a recent first-time grandfather. “Through our work with IBM on the integrated SAP project, we’re doing what we can to fulfill that promise.”
Neste (link resides outside of ibm.com) creates solutions for combating climate change and accelerating a shift to a circular economy. The company refines waste, residues and innovative raw materials into renewable fuels and sustainable feedstock for plastics and other materials. The world’s leading producer of sustainable aviation fuel and renewable diesel and a leader in developing chemical recycling, Neste aims to help customers reduce their greenhouse gas emissions by at least 20 million tons annually by 2030. The company also aims to make its Porvoo oil refinery in Finland the most sustainable refinery in Europe by 2030. As part of its commitment to reaching carbon-neutral production by 2035, Neste plans to reduce the carbon emission intensity of sold products by 50% by 2040. In 2022, Neste's revenue stood at EUR 25.7 billion.
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