HELSINKI/STOCKHOLM — Neste Oyj, the Finnish state-owned refiner and the world’s leading producer of Sustainable Aviation Fuel (SAF), is facing severe reputational and regulatory headwinds following a joint investigative report by SVT, YLE, and Climate Home News. The investigation alleges significant discrepancies in the company’s raw material sourcing from Malaysia, suggesting that banned palm oil may be entering the supply chain disguised as recycled cooking oil.
For Nordic investors and policymakers, the implications extend beyond a single corporate scandal. This development strikes at the heart of the EU’s decarbonization strategy and raises critical questions about the scalability and traceability of the green transition in the aviation sector.
The Core Allegation: A Supply-Demand Imbalance
According to EU regulations under the Renewable Energy Directive (RED II), aviation biofuel qualifies as “sustainable” only if produced from waste products, such as Used Cooking Oil (UCO). Fresh palm oil is prohibited due to its association with deforestation and higher lifecycle emissions.
However, customs data obtained by the investigative consortium reveals that Neste imported approximately 250,000 tons of UCO from Malaysia in the recent reporting period. Industry estimates, including data from Transport & Environment, suggest Malaysia’s total annual capacity for collectable UCO is no more than 100,000 tons.
“This mathematical impossibility suggests that the surplus is likely fresh palm oil mislabelled as waste,” says Simon Suzan of Transport & Environment. “The entire biofuel market is currently struggling with verification of raw materials.”
The Business Case for Fraud
The allegations highlight a structural bottleneck in the SAF market: demand is outpacing the supply of genuine waste oil. As airlines rush to meet ReFuelEU Aviation mandates—which require 2% SAF blending in 2025, rising to 70% by 2050—the premium paid for certified UCO has created a perverse incentive.
In Malaysia, subcontractors collecting oil from restaurants are reportedly paying above-market rates for UCO, sometimes exceeding the cost of new palm oil. An undercover segment of the investigation showed suppliers accepting new palm oil without verification, labelling it as waste.
“For Neste, the pressure is twofold,” explains a Nordic energy analyst who requested anonymity. “They must secure volume to meet long-term airline contracts, but they must also maintain strict ESG compliance. When supply is tight, the temptation to loosen due diligence increases.”
Corporate and Regulatory Fallout
The reaction from stakeholders has been swift, signalling a potential shift in risk assessment for the sector.
Neste’s Response: Carl Nyberg, Neste’s Vice President, stated in an interview that the company was unaware of the specific lapses shown in the investigation. “If we have suspicions about the raw materials we receive, we investigate and stop deliveries from such suppliers,” Nyberg said, emphasizing the company’s commitment to auditing.
Airline Exposure: SAS CEO Anko van der Werff acknowledged the severity of the issue. “Fraud is a problem. We need to raise this with our supplier Neste.” Airlines purchasing SAF credits to meet corporate net-zero pledges face “greenwashing” liabilities if the fuel’s origin is compromised.
EU Policy Risk: Anna-Kaisa Itkonen, spokesperson for the European Commission, noted that such fraud undermines the policy framework. “This was not the intention when we developed the policy to make aviation greener and cleaner.”
Strategic Analysis for Investors
For readers of the Nordic Business Journal, this situation presents three key areas of risk and opportunity:
1. ESG Valuation Risk: Neste has long traded at a premium due to its sustainability leadership. Persistent supply chain controversies could compress this valuation multiple as institutional investors reassess the company’s governance score.
2. Regulatory Tightening: Expect the EU to accelerate the implementation of digital product passports and stricter mass-balance auditing. Companies that invest early in blockchain-based traceability or synthetic fuels (e-fuels) may gain a competitive moat over those relying on biomass feedstocks.
3. The “Green Premium” Volatility: If UCO verification becomes stricter, the cost of compliant SAF will rise. Airlines may push back on pricing, squeezing refiner margins. Investors should monitor Q3 and Q4 earnings calls for guidance on feedstock cost inflation.
The Path Forward
The investigation underscores that the transition to green aviation is not merely a technological challenge but a supply chain governance challenge. While Neste remains a critical player in the Nordic energy landscape, the discrepancy between import figures and local availability in Malaysia requires a transparent, third-party resolution.
The Finnish state, as a major shareholder, faces pressure to ensure that its flagship energy company not only meets volume targets but sets the global standard for integrity. The credibility of the entire Nordic sustainability brand is, in part, tied to the outcome of this scrutiny.
Editor’s Note: Strategic Follow-Up
Next Steps for Readers:
In our next issue, we will analyse the emerging e-fuel (Power-to-Liquid) market as a potential solution to biomass feedstock fraud. We will examine which Nordic startups are securing funding to bypass agricultural supply chains entirely.
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Disclaimer: This article is based on investigative reporting by SVT, YLE, and Climate Home News. Neste Oyj maintains that it complies with all applicable sustainability regulations.