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The Group Responsibility
Principles and indicators of responsibility support the management
Corporate responsibility in Kesko is included in the Group’s normal management, complementing the management system with policies and principles guiding responsibility, with operating guidelines and indicators complying with the Global Reporting Initiative (GRI) recommendation. Corporate responsibility work includes good corporate governance, cooperation with stakeholders, risk management, economic, social and environmental responsibility, and all activities on behalf of product safety and consumer protection.
The corporate responsibility policies and principles approved by Kesko’s Board of Directors or the Corporate Management Board and related international commitments have been published at www.kesko.fi/responsibility.
Our responsibility programme sets concrete targets for:
The plans and actions relating to corporate responsibility are included in the different phases of Kesko’s management system like other activities. The general principles of corporate responsibility provide management guidelines, while more detailed operating practices and goals have been defined in the policies and principles relating to different areas of operations. The guide ‘Our Responsible Working Principles’ and a supporting online training programme have been prepared for training the whole personnel – including K-store people.
The corporate responsibility team that operates within the Corporate Communications and Responsibility Unit develops and coordinates responsibility actions implemented in the line organisation, and reports on the results. The team’s work is supported by a Corporate Responsibility Advisory Board, which has been appointed by the Corporate Management Board. The Advisory Board consists of members representing the management of Kesko’s various division parent companies. Its duties include determining the responsibility strategy and the operating policies and models needed for its implementation, and monitoring the results. In 2009, the Corporate Responsibility Advisory Board focused on preparing a responsibility communications plan, with the aim of starting planned communications, including the revising of the responsibility section of kesko.fi pages in 2010.
The Environmental Steering Group is responsible for developing and coordinating environmental issues in different divisions and countries. Its focuses included the actions needed to meet the collection requirements of the EU’s Battery Directive and the progress of the implementation of REACH, the EU regulation on chemicals.
A steering group consisting of representatives from the purchasing management of division parent companies coordinates responsible purchasing. In 2009, the group addressed, for example, risk classification and monitoring of suppliers, and the introduction of the database of suppliers in high-risk countries.
For the seventh time, Kesko was included in the Dow Jones sustainability indexes, DJSI World and DJSI STOXX. In the 2009 assessment, Kesko ranked the best in the sector in innovations management, risk management, supplier controls, environmental reporting, eco-efficiency of operations, and anti-corruption and antibribery measures taken.
Based on the assessment made by the EIRIS research institute, Kesko was included in the FTSE4Good Global and FTSE4Good Europe indexes focusing on responsible investment in March 2009. The assessment by EIRIS consists of the following areas: environmental sustainability, fostering human rights, countering bribery, supply chain labour standards and curbing climate change. The FTSE is a company owned jointly by the Financial Times and the London Stock Exchange.
Kesko’s listings in the ASPI Eurozone®, Ethibel Pioneer & Excellence and Kempen/SNS Smaller Europe SRI indexes were also repeated in 2009.
Every January since 2005, World Economic Forum has published the ‘The Global 100 Most Sustainable Corporations in the World’ list. Kesko has been included every year – on the 2010 list Kesko’s ranking was 33rd.
As in 2009, Kesko qualified in the 2010 Sustainability Yearbook, published by the SAM Group which draws up the DJSI index, for the Silver Class in the Food & Drug Retailers sector. No companies qualified in the Gold Class in this sector. Kesko was also recognised as the “Sector Mover”, a qualification given to the company that has achieved the greatest proportional increase in its sustainability performance.
Kesko’s rankings in different indexes are on display at www.kesko.fi/responsibility.
Economic responsibility is reflected in good management of finances, efficient use of resources, and the stable and long-term generation of economic benefit to different stakeholders. Good financial performance is sought with responsible methods – supported by good corporate governance, open communications and effective stakeholder interaction while taking environmental and social responsibility into account. In the Corporate Responsibility Report, Kesko specifies the economic benefit generated by it from the perspective of different stakeholders, market areas and communities.
Most of the economic benefit generated by Kesko – nearly 83% of Kesko’s net sales -goes to suppliers of goods from which total purchases were €7.0 billion in 2009. Finnish suppliers accounted for 70% of all. In 2009, Kesko had approximately 29,500 active suppliers of goods and services (Kesko’s annual purchases exceeding €1,000), of which 16,300 operated in Finland. Kesko’s investments in Finland totalled €128 million and in other countries €70 million.
Together with the K-retailers, Kesko is responsible for a nationwide store network in Finland. Its services are complemented by a mail order business and e-commerce.
At the end of 2009, there were 1,030 K-food stores i.e. 25 fewer than the year before. The store network covered 311 of Finland’s 348 cities and municipalities. 51% of Finnish households lived within one kilometre of the nearest K-food store. 97 new K-retailers started during the year.
The total number of other K-Group stores in Finland was 720. Store numbers are specified in the tables of each division in Divisions section.
There were 133 building and home improvement stores in other Nordic countries. There were 34 building and home improvement stores and nine furniture stores in the Baltic countries. There were 10 building and home improvement stores in Russia and four in Belarus.
Sales to the K-retailers accounted for 51% of Kesko’s total sales. Kesko’s own retail stores accounted for 27% of the company’s total sales.
In 2009, Kesko and its subsidiaries gave financial support amounting to approximately €1.5 million to some 150 organisations and institutions operating for the public good.
Support is primarily directed to areas associated with wellbeing of families with children. In 2009, funds were above all directed to support the work for the mental health of the young. Kesko’s cooperation with the Young Finland Association to promote physical exercise of children and the young and a healthy way of life has continued for over a decade. Scholarships were granted to talented young athletes, art students and polytechnic students for the 22nd time. Through the UNICEF, Kesko also donated funds to the education of children in Vietnam.
The Happy Christmas Spirit collection organised jointly for the 13th time by the Mannerheim League for Child Welfare, the Finnish Red Cross, the Finnish Broadcasting Company’s YLE Radio Suomi and Morning TV, and Kesko for the benefit of low-income Finnish families with children raised €950,000, which was a new record. K-food stores’ and Chiquita’s ‘Give Children a Life’ campaign raised €160,000 for purchasing intensive care equipment for premature babies in the university hospitals in Helsinki, Turku, Tampere, Kuopio and Oulu. Procter&Gamble’s and K-food stores’ Pampers campaign raised funds for UNICEF to provide vaccine for the protection of newborn babies against tetanus. K-retailers complemented the campaign by donating funds for nearly 600,000 further inoculations.
The Kesko Group’s certified ISO 14001 environmental management system covers all major environmental impacts of operations. During the year, the certification of Keslog’s transportation and warehouse operations was revised and Anttila Oy included their new department store in Rovaniemi and the Anttila Store in Nummela in the system. Business partners providing property construction, maintenance and waste management services for Kesko have similar systems. VV-Autotalot Oy and Turun VV-Auto Oy comply with the action plan of the Finnish Central Organisation for Motor Trades and Repairs and the quality requirements of the Volkswagen Group.
K-stores’ environmental management is based on the requirements of the K-environmental store diploma. Bureau Veritas Quality International (BVQI) audits the fulfilment of these requirements. At the end of the year, 457 K-food stores had the diploma. All K-citymarkets and K-supermarkets fulfil the requirements in accordance with their chain concept, as do 138 K-rauta and Rautia stores, and 29 K-maatalous agricultural stores.
The combined electricity consumption of Kesko and the K-stores operating in Kesko’s premises in Finland was 766 GWh. Electricity consumption increased by 2.0% while the total area of real estate increased by 2.6%. The consumption of heat energy totalled 329 GWh (288 GWh in 2008). In all real estate, the specific consumption of electric energy decreased by 0.6%, whereas the specific consumption of heat energy increased by 11.1% due to the cold weather.
Kesko used centralised purchasing to buy 75% of the electricity used. All electricity bought was carbon-free, produced with nuclear power and renewable energy sources. The carbon dioxide emissions of electricity used by the whole K-Group have decreased by 93% since 2001.
A total of 12.0 million kilometres was driven in distance and trunk transportation, 17.0 million kilometres were driven in distribution transportation, and 9.9 million kilometres were driven in outsourced transportation. Transportation caused approximately 46,025 tons of carbon dioxide emissions in Finland, or about 0.0252 kilos per each kilo transported. Proportional CO2 emissions increased by 3.7% from the previous year.
Emissions of electricity and heat energy purchased in Finland and the energy and emissions statistics of foreign subsidiaries will be presented in the Corporate Responsibility Report.
Waste recovery rate dropped slightly from the previous year. In Kesko Food’s warehouse operations, the total amount of waste was 6,539 tons and the waste recovery rate was 86%. 74 million cans and 28 million recyclable plastic bottles were collected in return logistics. The total waste amount of the Anttila distribution centres was 651 tons (740 tons) and the recovery rate was 97% (96%). Recovery rates of department stores varied between 68% and 100% depending on regional recycling possibilities.
In the autumn, Intersport organised a recycling campaign with the Finnish Red Cross and Halti. The stores received more than 2,200 old outdoor coats and jackets brought by customers. In all, 64 bales of inspected coats and jackets were transported to Kyrgyzstan, Mongolia and Tadzhikistan, which suffer from the cold and poverty.
Kesko’s social responsibility can be divided into direct social responsibility for its own personnel, and indirect social responsibility for personnel helping to produce the merchandise sold by Kesko.
The core areas of social responsibility for own personnel are a good working community, equality, competence development, and health and safety. An annual personnel survey with the same content that is conducted throughout Kesko and its chain stores provides information about the strengths and development needs of working communities.
The work and productivity programme that had started in 2008 continued in 2009. The programme has promoted the adoption of different working hour systems, the systematic management of working hours and specified the monitoring absences due to illness. Other core areas have included competence, wellbeing and leadership development as well as occupational health care services, which in Finland focus on operations that maintain work capacity and promote the wellbeing of work community.
For more information about HR issues, see pages 44–46 and the Corporate Responsibility Report.
Kesko’s own two-member monitoring team that was established in Shanghai in October 2008 made 161 factory visits to the premises of 50 suppliers in China in 2009. The suppliers and the factories they use first fill in Kesko’s self-assessment form, which complies with the practices of the BSCI audit. The monitoring officers compare the responsibility practices of factories on site with Kesko’s requirements, decide on any required corrective actions and give support to factories implementing these corrective actions. Compliance with chemical regulations defined by Kesko is also verified during these visits.
The goal of monitoring is always an independent audit, carried out according to either the BSCI audit model or the SA8000 standard. The objective of Kesko, such as all BSCI members, is to do business in the so-called high-risk countries only with suppliers who have passed the audit. At the end of 2009, audits had been carried out in 107 of the factories of Kesko’s high-risk suppliers, compared with 32 the year before. More than 40 Kesko’s suppliers participated in the training events arranged by the BSCI in China, Vietnam, Bangladesh and Turkey.
Suppliers’ audit information is collected in the database developed by Kesko for this purpose. In addition to BSCI audited suppliers, Kesko had 30 suppliers with SA8000 certification and 112 suppliers of Fairtrade products. In all, Kesko has participated in ensuring decent working conditions and terms for workers of some 250 companies in developing countries.
Kesko’s division parent companies have several sustainable sourcing policies concerning the origins and production conditions which affect the creation of selections and promote the sales of the products in question.
The selection and marketing policies concerning organic and Fairtrade products and products with environmental labelling are included in the K-food stores’ chain concepts. Kesko’s statement on fish and shellfish purchases relies on the guidelines of the WWF for products from nearby areas and on the guidelines of the Marine Conservation Society for products from further away.
In the development of Pirkka products, the focus is on promoting a healthy way of life, like in other marketing. The K-citymarket chain has launched to the market clothing collections that are based on the Global Organic Textile Standard or made of recycled plastic material.
Rautakesko offers a wide selection of products with environmental, energy or emission category labelling. The proportion of certified timber out of total timber sales exceeded 90%. Garden furniture sold by all K-Group stores is either FSC-certified or made of sustainably cultivated tropical wood species.
Kesko Food’s Pirkka Product Research is responsible for ensuring the quality of purchases, keeping abreast of food legislation, maintaining and providing support for the self-control plans required by law and for developing own brand products together with the purchasing and marketing units.
Quality control is carried out by auditing the operations of product manufacturers and analysing product composition and quality. In 2008, the Pirkka Product Research Unit’s laboratory became the first laboratory representing the Finnish trading sector with the ISO 17025 accreditation.
In 2009, the Product Research audited 41 suppliers, of which nine were Finnish. Most of them were manufacturers of Kesko’s own brand products. A total of 5,702 food novelties and product development samples were analysed, while the total number of batch control and other self-control samples was 1,393.
The Product Research Unit also plays a key role in exceptional situations, when a product launched on the market deviates from quality or safety requirements. During the year, there were 61 product recalls (66 in the previous year), most of which related to defective quality or taste, or to a defect in manufacturing or packaging. 21 of the recall cases were Kesko’s own brands; in other cases the Product Research Unit assisted manufacturing industry. Three of the recall cases were public recalls, involving potential health hazards.
During the year, the recipe service of the K-test kitchen, which changed its name to the Pirkka test kitchen to celebrate its 50th anniversary, produced 620 recipes for both the K-Group units and directly for consumers. Kesko Food’s Consumer Service answers consumer inquiries and receives feedback. In 2009, there were 20,999 such contacts.
The Pirkka Organic range now comprises about 40 products, some of which are sold during a certain season only. The most popular Pirkka Organic products are tomatoes, carrots and eggs. New products are constantly and actively sought for the Pirkka Organic range. The most recent arrivals include Pirkka Fairtrade Organic cocoa powder and Pirkka Fairtrade Organic chocolates. These products combine Fairtrade certification and organic production.
In its reporting, Kesko follows the recommendation for reporting on sustainable development drawn up by the Global Reporting Initiative (GRI) and is an Organisational Stakeholder of the GRI. Kesko’s Board of Directors discusses the Corporate Responsibility Report annually after it has been published. Since 2002, reporting has been assured by an independent party. The report for 2009 will be published in May 2010 and PricewaterhouseCoopers Oy will be responsible for its assurance.
Kesko is committed to the Global Compact challenge launched by the UN Secretary General. In June 2009, the Global Compact Office thanked Kesko for excellent responsibility reporting and presented Kesko’s report on its web pages, classified as Notable.
The Carrotmob consumer movement arranged events at K-market Kotikontu in Helsinki and at K-market Tullintori in Tampere in October 2009. Carrotmob offers ordinary consumers a concrete way to combat climate change. The target of the events was to challenge food stores to save energy. “Every euro generated from extra sales will be invested in improving the energy efficiency of the store,” the retailers promise.
K-food stores have long focused on energy efficiency. All new island freezers purchased for K-food stores have been fitted with lids since the beginning of 2008.
LED lighting technology is replacing neon and fluorescent tubes in signage at K-food stores. The benefits of LED lighting include the following:
Kesko’s monitoring team in Shanghai, China guides, trains and monitors Chinese suppliers of Kesko’s division parent companies. Monitoring officers Angel Yang and Buick Bie help suppliers correct any deficiencies found. Monitoring also helps suppliers develop their operations and apply for a BSCI audit or SA8000 certification.
Monitoring in China started in October 2008. The monitoring team made 161 factory visits to the premises of 50 suppliers in 2009.
