The renewable supply chain
Materiality and risk
Preem’s vision is to lead the transition toward a sustainable society. One of our most important goals in realizing this vision is to increase renewable fuel production and sales to reduce fossil carbon dioxide emissions.
New environmental targets and directives from Sweden and the EU, such as the upcoming mandatory green house gas reduction on fuels, set clear requirements in terms of increased renewable proportions in the transport sector. The renewable supply chain is heavily regulated; traceability and compliance with the sustainability criteria for renewable fuels are required for operation in this market – and we see that as positive.
Certification and traceability make it easier to take responsibility throughout the supply chain. This reduces the risk of human rights violations, deterioration of global food security and depletion of natural resources. This also ensures sustainability in the transition from fossil to renewable sources. We don’t want to replace one environmental problem with another – we want to develop truly sustainable solutions for the future.
Governance and activities
Preem’s renewable supply chain efforts are governed by the EU Renewable Energy Directive (RED) and its implementation in Sweden through the Swedish Act on Sustainability Criteria. Certification and a Swedish “sustainability certification” from the Swedish Energy Agency are key factors for trading in renewable fuels. Preem has had a sustainability certification since 2011, which attests that we comply with the Swedish Act on Sustainability Criteria. We have also been certified as a trader with storage under the International Sustainability Carbon Certification EU(ISCC EU) since 2017. The ISCC is one of the EU voluntary certification systems that ensures RED compliance.
Code of Conduct and monitoring system in the supply chain
Internally, we use the Preem Code of Conduct to guide our renewable supply chain efforts. The Code of Conduct covers everything from collective agreements to the work environment, and, naturally, it denounces issues such as forced labor, child labor and discrimination.
Preem’s biofuels monitoring system, the Preem Sustainability System (PSS), also plays an important role in our supply chain efforts. The PSS is a part of our management system and contains work processes that help us identify and assess potential raw materials based on parameters such as technology, ethics, politics, finances, climate and market. Preem’s sustainability criteria, which are also contained in our Code of Conduct, guide these efforts. Three of them are presented below.
- Renewable fuels shall have a favourable climate effect, that is, entail a reduction of at least 50 percent in emissions of green house gases from a life cycle perspective.
- The production of the renewable fuel must not violate human rights as defined by UN conventions. This includes the prohibition of forced labor, requiring an employment contract and the right of workers to organize.
- Production of renewable fuels must not deplete water supplies or threaten biological diversity. This includes production that may cause deforestation and/or other effective carbon dioxide sinks.
Supplier controls ensure compliance with sustainability criteria
We have been constantly on the lookout for renewable raw materials ever since Preem decided to invest in renewable fuels in 2008. Now we have a small number of suppliers of renewable raw materials and fuel. We conduct a thorough assessment of a supplier’s operations, the product/raw material and its country of origin before we start working with them.
We require that suppliers either be certified under one of the EU’s certification systems or hold a Swedish sustainability certificate before we purchase renewable raw materials or products from them. Preem conducts third-party audits in exceptional cases where the supplier is considered critical to our business but does not hold any EU-approved certification. The purpose of these audits is to ensure the supplier’s compliance with the Swedish Act on Sustainability Criteria.
Joint sustainable development through follow up and audits
Preem will only approve suppliers if they have also approved our Code of Conduct or have their own equivalent code of conduct. We ask suppliers to complete a survey, so we can see if its business complies with the Code of Conduct, then we follow up the survey with supplier dialogs and audits. If needed, an action plan will be prepared and followed up at an agreed time.
Preem conducts regular assessment activities including dialogs, meetings and pre-announced audits after initiating a business relationship with a supplier. We have conducted audits of most of Preem’s renewable suppliers. So far, none of the suppliers have deviated from our Code of Conduct in such a way that we stopped doing business with them. Our goal is to grow with our suppliers and contribute to sustainable development together.
Preem’s goal is to have audited all suppliers in the renewable supply chain by the end of 2018.
Development process for renewables
Suppliers are not the only part of the equation for ensuring that the supply chain for renewables is as sustainable as possible. We also need to choose raw materials with the right climate effectiveness. The better the climate effectiveness, the more the environment will benefit. We must also consider the entire product life cycle, that is, the social and ethical issues that development of the product could contribute to throughout its life cycle. Read more about our sustainable, renewable product efforts here.
Preem needs to identify more sustainable raw materials if it is to meet future renewable fuel needs. This necessitates an ongoing search for and assessment of new suppliers. Our greatest challenge is to rapidly expand Preem’s renewable production, so we can develop our portfolio of renewable fuels. Preem is therefore focusing on two major renewable activities in 2018: adapting our business to the upcoming mandatory green house gas reduction system and obtaining ISCC certification for our renewable diesel production in Gothenburg.