to the report Introduction to the report

In addition to the annual reports, ment systems, and a short analysis of corporate responsibility includes Introduction Kesko has published three separate stakeholder groups and key areas of most of the results of our environ- environmental reports for 1997-1999. impact. Performance Indicators have mental activities, but more details are The report on corporate responsibili- been arranged under three basic hea- available on Kesko’s Internet pages, ty is now being published for the first dings: economic, environmental and under ‘Environment’. The ethical time. Kesko considers wider repor- social elements. Information on de- quality control system presented in ting on corporate responsibility im- velopment over at least the last three the environmental report for 1999 portant, and hopes that companies years has been provided, wherever fi- can be found in this report under will show widespread commit- ‘social responsibility’, which now ment to adopting a uniform includes Kesko personnel, framework for reporting, too. The economic res- in order to facilitate ponsibility indicators company comparisons. have been compiled Kesko considers that from Kesko’s fi- ’Sustainability Repor- nancial statements. ting Guidelines on Eco- Kesko’s corpora- nomic, Environmental te responsibility re- and Social Performance’ port has not been veri- published by the Global fied by an impartial Reporting Initiative organisa- source. Kesko considers tion in summer 2000 best suits this that verification will only beco- purpose, and has therefore based its me necessary when sufficient reporting on these guidelines (see structure for international repor- www.globalreporting.org). ting practice – making provision Following the guidelines given by for verification – has been adopted. GRI, Kesko’s report on corporate res- A significant part of this report is de- ponsibility gives basic information rived from Kesko’s audited books about Kesko as a company, the senior and financial statements and from a management’s statement on the pre- gures have been available. A summa- partly certified environmental sys- sent situation in issues of responsibi- ry table of key indicators has been tem, so, although the figures have lity and on the vision for areas of fu- drawn up. not been verified, they are still very ture emphasis, descriptions of rela- Kesko will not publish a separate reliable. ted strategies, policies and manage- environmental report. The report on

2 Building for a better tomorrow

Responsibility and honest working tion UNEP and many major interna- future areas of focus and targets. Our methods – one of Kesko’s seven basic tional organisations and associations vision is for corporate responsibility values – oblige us to maintain good support the Sustainability Reporting to be considered as a core area of ma- relations with society and our stake- Guidelines devised by GRI. The GRI nagement culture; its results must be holders. Although we have just system also mirrors the approach ta- measurable and any results published reached the first stage in our syste- ken by Kesko’s management regar- must also be open for verification by matic and target-oriented activities in ding key indicators of responsibility outsiders. At Kesko, this can already the sphere of corporate responsibili- and reporting on them, which is why be seen in the contents of the strate- ty, we have already accomplished ma- we have applied the GRI guidelines gies being built for the future, and in ny practical things. Our many deca- when preparing our report. the fact that more international stan- des of growth and profitability have Although we do not consider our- dards are being adopted. enabled us to provide a significant fi- selves completely ready to fulfil the We look forward to receiving a lot nancial contribution to the promo- requirements of international repor- of feedback on the ideas and hopes tion of social well-being. We have re- ting, we want to present our share- that this first report on corporate res- ceived wide recognition for our work holders with an evaluation of the re- ponsibility triggers off. There is lively for the environment and have every sults of responsible operations. Pub- debate on the subject, both national- reason to consider ourselves standard lishing this report is a means to hel- ly and internationally, and the num- bearers in the ethical quality control ping us see how our operations are ber of reports published is expected of products. linked to society and to consider our to increase significantly in the next Non-governmental organisa- few years. We believe that this cur- tions, trade unions and investors rent transition period will gradual- have shown a growing interest in ly lead to an established method of corporate responsibility. This inte- reporting, which will increase the rest is natural, and simply amount and availability of corpo- heightens the need for continuous rate information, thus facilitating interaction between companies comparison between companies and their stakeholders. Companies and tracking of their annual prog- must recognise the scope of their ress. responsibility, be capable of measuring the results of their res- Matti Honkala ponsibility and be willing to report President and CEO on these in public. In a scenario Kesko Corporation such as this, performance compa- risons can only function if there is consensus – preferably on an in- ternational level – regarding con- tents, indicators and reporting. One of the systems already available Matti Honkala, President and CEO is GRI, the Global Reporting Initiati- (right) and ”Kesko Employees of the ve. The UN environmental organisa- Month” in 2000.

3 tents Contents Con

Introduction to the report 2 Eco-efficient construction 24 Building for a better tomorrow Success in energy savings 24 – statement by President and CEO 3 Significant changes in the Basic information about Kesko Group 5 environmental profile of electricity 24 Key indicators of corporate Transport 26 responsibility for 1998-2000 6 Emissions in transport 27 Future of corporate responsibility 8 Waste management and recycling 27 Vision of key factors in corporate responsibility 8 Recycling experiments in Strategies 9 electronics and furniture 28 Areas of influence 9 Water consumption 29 Kesko’s policies and management systems Use of materials 29 guiding corporate responsibility 10 Co-operation with suppliers 30 Key stakeholders 12 More K-environmental stores 30 Indicators of corporate Stakeholder co-operation responsibility and performance 14 and communications 31 Economic performance 14 Environmental risks, damages and accidents 31 Economic development from Social performance 32 the viewpoint of shareholders 15 Quality of management 32 Investments and store network 16 Employee statistics 33 Job development 18 Health and safety 34 Salaries, social security expenses and taxes 19 Salaries and other benefits 35 Employee pension and health insurance systems 19 Pensions 35 Suppliers of goods and services 20 Equality policy 35 Financial support 21 Training 36 Environmental performance 22 Unionisation 36 General 22 Ethical quality control of suppliers 37 Logistics and real estate are the key Terms and calculation of key indicators 41 areas in environmental activities 24

4 Basic information about Kesko Group

Kesko as a company percent of the shares, and had 38.6 square metres and other premises for percent of voting rights. 64,000 square metres. The total floor Kesko is a marketing and logistics At the end of 2000, the market va- area of the premises rented for use by company, which develops retail lue of A shares was EUR 538 million the Group was 1,445,000 square met- concepts and operating systems. The and the market value of B shares res, consisting mainly of retail stores. commercial divisions – to be incorpo- EUR 629 million, with the total mar- The majority of the store premises rated during 2001 into subsidiaries ket capitalisation of the company owned or rented have been further wholly owned by Kesko – are respon- being EUR 1,167 million. rented out to K-retailers. sible for marketing, purchases, logis- tics and store sites as well as for retai- ling in home and speciality goods, hardware, builders’ and agricultural Personnel Suppliers supplies. The groceries trade accoun- In 2000, the average number of per- In 2000, Kesko bought products and ted for a little over half of the Group sonnel in the Kesko Group was services from about 42,000 companies net sales, which totalled EUR 6,308 11,099. Of these, 29 percent worked at the total cost of EUR 5.5 billion. Of million in 2000. Foreign operations for the parent company, 42 percent these, about 32,000 were Finnish supp- accounted for 4.5 percent of the net for subsidiaries engaged in retailing liers, accounting for 85.3 percent of sales. and 21 percent for other subsidiaries. Kesko’s purchases. Foreign suppliers – Kesko works in close co-operation A total of 938 employees, i.e., eight about 10,000 in all – accounted for 14.7 with K-retailers, who are the most im- percent of the total personnel, wor- percent. The major importing count- portant customer and shareholder ked abroad. The total number incre- ries were Germany, Spain, Sweden, Ja- group in Kesko. There were 1,622 K- ased by 106 persons; an increase of pan and Italy. retailers at the end of 2000. The one percent in terms of 1999 figures. Kesko is a member of the following number of K-stores – Kesko’s own re- international purchasing organisations: tail outlets included – totalled 2,017, Associated Marketing Services AMS Real estate and their sales were EUR 6.7 billion. (groceries), EuroMat (building and in- At the end of 2000, Kesko Group terior decoration products), Intersport owned 1,121,000 square metres of International (sports goods), EP:Inter- Kesko’s shareholders real estate, of which store premises national (home electronics) and World Kesko’s B shares (formerly ordinary accounted for 750,000 square metres, Wide Retail Exchange (business-to-bu- shares) have been listed on the HEX offices and warehouses for 307,000 siness Internet marketplace). Helsinki Exchanges since 1960, and A shares (formerly exclusive shares) since 1999. The shares differ from each other only with respect to the vo- tes they carry at the General Meeting. Each A share entitles the holder to 10 votes and each B share to 1 vote. Kesko had 24,496 shareholders at the end of 2000. A shares accounted for 35.2 percent of all shares and 84.4 percent of all votes, while B shares accounted for 64.8 percent of all sha- res and 15.6 percent of all votes. Fo- reigners held 18 percent of all shares. K-retailers held a total of 18.8

5 Customers

K-retailers, who totalled 1,622 at the end of 2000, accounted for 52.3 percent of Kesko’s sales. K-retailers made 86.3 percent of all their purchases from Kesko. Kesko also has

indicators about 30,000 other wholesale custo- mers – hotels, restaurants, service sta-

Key tions, kiosks, construction companies etc. – which accounted for 33.0 percent of sales. About 14.7 percent of Kesko’s sales are channelled through its own subsidiaries (e.g. Anttila Oy, Citymarket Oy/non-food) directly to consumers.

Key indicators of corporate responsibility for 1998-2000

Key indicators of Kesko’s corporate of the indicators have been used for a the first time or currently has limited responsibility have been compiled in longer period, in which case the com- scope for comparison. Our purpose this table. The indicators will be parison is presented over a three year is to make the year 2000 a starting- presented later in more detail, in the period. With some indicators, no point for the evaluation of Kesko’s section ‘Indicators of corporate res- comparison is possible, as the infor- corporate responsibility perfor- ponsibility and performance’. Many mation has either been collected for mance.

6 7 Future of corporate responsibility of corporate responsibility

In Kesko’s management system, imple- particular – will have greater interest maintaining financial efficiency. mentation of corporate responsibility is in the ethical dimensions of corporate As the offering of products and

Future reviewed as part of the annual quality operations as indicators of perfor- services grows, consumers will have estimate, based on the Finnish Quality mance improve. more power. The role of the media in Prize system. The indicators measuring Being a diversified company that consumer business keeps growing, responsibility have not been separated satisfies basic consumers needs, Kesko too. An increasing number of consu- from other indicators when preparing will maintain steady growth in sales, mers want to have information about annual and long-term plans. Nearly all profit performance, dividend and sha- the origin, safety and manufacturing indicators of corporate responsibility re value, and good liquidity. This deve- conditions of products, which requires included in the reporting recommen- lopment will secure ever-increasing Kesko to provide detailed manage- dations of the Global Reporting Initia- welfare for Kesko’s financial stakehol- ment of the purchase chain and open, tive have, however, already been used ders and help ensure that Kesko re- active communications. Kesko and K- in Kesko, so we have a sufficient mains a standard bearer in business retailers contribute to consumers’ amount of material for describing per- sector international development, as well-being and quality of life by means formance as regards responsibility, too. measured by environmental and social of trading operations in general, and In March 2001, the Corporate Ma- performance. Kesko will mainly grow through the decisions, choices and nagement Board approved the follo- by expanding abroad, so the majority control, as regards the products. In wing vision, that will be reviewed as of new jobs will be created outside Fin- communications and marketing, safe- soon as enough experience on defi- land. For Finnish suppliers, Kesko’s fo- ty, reliability and ethics are gradually ning the corporate responsibility and reign operations will provide new gaining a foothold, alongside the as- reporting on it has been gained both export opportunities, although the pect of price. within the Group and from the outsi- product selection will always be based Competition for new employees de. The experiences gained will also on the supply and demand in this will intensify as baby boomers appro- guide the setting of targets. For the ti- country, specifically. ach retirement age. The values and me being, self-evaluation of corporate Kesko bears significant responsibi- expectations of the new generation performance is difficult, as there is not lity for the competitiveness of retailing differ from the traditional ones. Emp- much comparative material available. based on private enterprise, which, loyees desire to choose their workpla- correspondingly, is a significant factor ces as much as employers desire to for Kesko’s success. The store sites, bu- choose their employees. The apprecia- Vision of key factors in siness operating systems, information tion of the company, as well as its corporate responsibility systems, training and other supporting brands and products all contribute to During this decade, globalisation will activities provided by Kesko must give the interest in the job itself. In order to accelerate the concentration of com- K-retailers sufficient added value outdo the competition Kesko offers in- panies, foreign investments and com- alongside advantageous purchases, so teresting, challenging jobs and shows petition over national boundaries. In- that they can be different from their that it looks after its employees. Job ter-state co-operation in the prepara- competitors and make a profit at the pressures and problems related to wor- tion of international regulations will same time. As internal migration con- king capability are prevented by syste- advance slowly, increasing pressure for tinues, the store and distribution matic, in-house job rotation and trai- responsible self-regulation by compa- networks must be kept exactly the ning, and employees are supported nies. Investors – and governments in right size to serve customers, while and encouraged to seek a balance

8 between work and leisure. Security strategy aims at ensuring un- Environmental In order to be a pioneer and lea- disturbed operations and safeguar- performance der, Kesko seeks to actively monitor ding people, property, data and the • through continuous improvement and foresee changes in society, and of- environment from accidents and in- of own activities fers expertise for the benefit of its bu- tended damage. • relatively lower energy consump- siness sector and for society as a whole. tion in transport and real estate = To be able to do this, Kesko has close Environmental strategy ensures the particularly the relative drop in contacts with non-governmental orga- systematic progress of environmental CO2 emissions nisations, authorities and other deci- activities in all major sectors. Infor- • decreasing waste, increasing re- sion-makers, and actively participates mation systems development at Kesko cycling in the operations of national and in- is an important part of environmental • co-operation with suppliers ternational organisations in the tra- activities, and the environmental stra- • linking environmental require- ding sector and in the economy as a tegy is, through this, linked to the in- ments more closely to purchases whole. formation management strategy, as = better products during their en- are many of the other issues above. tire life-cycle, less packaging ma- terial, better results from re- Strategies cycling products and packaging Areas of influence In 1999, Kesko defined the strategies for its core operations, based on the The following is a list of some of the Social performance Group’s vision. In accordance with key areas in which Kesko has a po- • a safe job for corporate personnel, Kesko’s ‘responsibility’ value, these tential to achieve results that would offering high job satisfaction and strategies also include areas relating benefit society as a whole: versatile care for employees to corporated responsibility. • affecting working conditions of the suppliers in the products supply Personnel strategy defines the mana- chain, step by step = improving wor- gement methods, systems and tools king conditions and increasing wel- that will ensure Kesko’s success. The fare, particularly in developing personnel’s motivation, job satis- countries faction, continued learning and op- • setting an example for spreading a portunities to affect common targets corresponding system to other com- are important factors for achieving re- panies operating in Finland and ab- sults and, through results, financial road influences are linked to many sectors. • input into activities that prevent so- cial problems Logistical strategy defines how the flow of merchandise from Kesko to customers is controlled as efficiently Economic performance Development in the trading sector and society as possible, also from the viewpoint • increased products trading means as a whole of Kesko’s suppliers and customers. more sales for suppliers, new com- • expertise for developing the trading The importance of economic distri- panies in manufacturing and retai- sector, the economy, regulations for bution takes on new meaning if one ling, more jobs, salaries and other international trading, the manage- considers that not only does the K- personnel benefits, more taxes to ment culture through working in store network cover nearly the whole local and central government, organisations, maintaining active of Finland but that goods are also de- funds for enhancing social security stakeholder connections, etc. livered to other customers. and developing society • financial and operational support • new investments and continuous re- to the kinds of projects that en- Real estate strategy provides the basis forms increase demand for con- hance social and community servi- for Kesko’s strong competitive posi- struction and related services ces and welfare, and that are natu- tion. Maintaining a wide and profi- • as the share value and yields incre- rally linked to Kesko’s operations table store network necessitates both ase, a steadily progressing target gi- owning store sites and renting them. ving high dividends to investors

9 Kesko’s policies and management and management systems guiding corporate responsibility

Policies Corporate responsibility is outlined Quality management its staff of 16, ensures the quality of and commitment to it is strengthe- groceries and some speciality goods. Several systems for quality manage- ned by means of operating policies They thoroughly check the opera- ment are applied at Kesko: The qua- and management systems. Kesko has tions of the suppliers delivering lity evaluation based on the criteria long promoted value, quality and en- Kesko’s own brands. The unit’s ope- for the Finnish Quality Prize has vironmental management and ethi- rations are based on the quality sys- been used as a method of self-evalua- cal operations both in the company tem complying with the ISO 9000 tion for improving operations since and in the products supply chain, so standard and the in-house control 1996. The Group’s internal quality no essential changes are required to system approved by authorities. Qua- prize competition between units the systems. lity assurance involves a wide variety encourages the constant improve- of perspectives including such things ment of operations, expertise on all as genetic modification, protection Kesko’s basic values levels and top performance. of animals, use of hormones in meat Kesko’s basic values were defined on production, use of azo dyes in groce- the basis of the survey, carried ries etc. out in 1996, among the The ISO 9000 standard personnel and K-retai- is also used at Kespro lers. The survey was Ltd, whose quality repeated in late system was certified 2000. During these in December 2000. five years, the values of the personnel had not changed much. Environmental Responsibility had grown management most in importance, which was probably due to Kesko’s active work Kesko’s first environmental poli- for ethical principles concerning the cy was published 1991. In February environment and purchasing. In 1998-1999, Kesko’s directors 1996, Kesko was the first Finnish tra- and managers – nearly 300 persons in ding company to commit to the busi- all – attended the KQ quality trai- ness charter prepared by the Interna- Guidebook on ning, specially tailored to Kesko. The tional Chamber of Commerce, for Working Practices key principles of quality management creating sustainable development. Based on these values, Kesko’s Gui- include defining the purpose, tar- The charter incorporates the key debook on Working Practices was gets, indicators and directions of ope- principles of environmental manage- prepared for in-house use. The guide rations as well as planning and imp- ment. Immediately after this, Kesko describes how Kesko employees act lementing the required measures revised its environmental policy and with each other, with customers and with the whole personnel. The target decided to adopt an environmental with other stakeholders, and is to adopt an expertise management management system based on the encourages open discussion of job va- model in 2001-2002. ISO 14000 standard in the units that lues and affairs. The Product Research unit, with have major impact on the environ-

10 ment. So far, the system has been cer- Participation in the • UGAL, EU organisation of groups tified for the logistics unit of Kesko development of the of independent retailers (Board Food, the transport and forwarding economy and the and working groups) trading sector company Kesped Ltd and the coffee roastery, Viking Coffee Ltd. More in- It is important for companies to acti- Public administration formation about environmental res- vely participate in the development in Finland ponsibility is available on page 22 of the EU and Finnish legislation and • Euro project, companies’ working onwards, Kesko’s whole environmen- in international trading regulations, group (Ministry of Finance) tal policy can be read on Kesko’s In- in order to have sufficient corporate • EU drafting section on consumer ternet pages (www.kesko.fi). expertise in decision-making, and to affairs (Ministry of Trade and be able to make decisions that can Industry) easily be put in practice. Kesko parti- • Chain – transport development Principles of socially cipates in national and international responsible trading programme (Ministry of Transport development work through central and Communications) Supply Chain Management is impor- and industry organisations, including tant in all product lines from the the following: point of view of economic efficiency, Finnish central but above all from the point of view organisations of safety. Recent food scandals, for International organisations • the Employers’ Confederation of instance, have made traceability of • International Chamber of Com- Service Industries in Finland food ingredients an important quali- merce, ICC: (Chair) ty factor. In addition to its in-house • World Council • Finnish Federation of Commerce quality control, Kesko participates in • working parties (Environment and Trade (Board and Commit- the national food quality program- and Sustainable Development, tees; Chair in Taxation and Legal me, which aims at ensuring the high Business in Society, BioSociety) Committees and in the euro wor- quality of the food chain at all stages. • the Finnish Section (Vice Chair); king group) Thanks to the high-level labour in addition to the above interna- • Central Chamber of Commerce and social welfare legislation, social tional groups Finnish back- (Board) problems in Finland are few. There- ground groups (data communi- fore, in these issues, the focus is cations and systems, insurance/ Industry and district mainly on foreign – particularly non- safety, transport/logistics) organisations, etc. EU – suppliers. The ethical quality • CIES - The Food Business Forum Kesko’s representative acts as a Chair- control system published by Kesko in • Food Safety working group man in spring 2000 is based on the UN Uni- • UNICE (Union of Industrial and • Finnish Food Marketing Associa- versal Declaration of Human Rights Employers’ Confederations of Eu- tion (Board and Foodstuffs Legisla- and the Convention on the Rights of rope) tion Group) the Child, and on the International • The Council of Presidents • ProGresS development program- Labour Organisation key conven- me for environmental affairs in the tions. The implementation of real estate and construction sector principles is supervised against the EU organisations • Helsinki Chamber of Commerce Social Accountability SA 8000 stan- • EU Commission advisory Commit- dard, based on these decisions. To tee on Commerce and Trade (abo- Kesko is also active in several industry further the introduction of the stan- lished in November 2000, some and recycling organisations. A more dard, Kesko made a co-operation ag- expert groups still operating; Kes- detailed list with www links is availab- reement with Bureau Veritas Quality ko participates in the Euro and le on the Internet version of this re- International in March 2000. More Competition Legislation Groups) port (www.kesko.fi). details on ethical quality control are • EuroCommerce, the Retail, Who- available on page 37 onwards, and lesale and International Trade the text on ethical principles can be Representation to the EU (euro, read on Kesko’s Internet pages new methods of payment and (www.kesko.fi). electronic commerce committees)

11 Key stakeholders stakeholders Key

Kesko Group’s operations are very work for Kesko’s operations. Through se taxes, customs duties and by with- versatile, so corporate responsibility industry and central organisations, holding payroll taxes. involves many stakeholder groups. Kesko gives state authorities expert Here are brief descriptions of the views in the development of industrial Suppliers of most important ones: policy and regulations concerning products and services the trading sector and the economy. Kesko acts in co-operation with local Kesko buys consumer goods from Authorities (EU, authorities when developing and Finnish and foreign farmers, manu- Finnish state and local maintaining its store network. Kesko facturing industry and importers, authorities) contributes to the well-being of socie- and sells and distributes them to the The European Union and the Fin- ty by paying direct taxes and social se- K-retailers and other customers. Kes- nish government use legislation and curity contributions and indirectly, by ko builds and maintains the K-store other guidance to create the frame- collecting value added taxes and exci- network and acquires the furniture, equipment and supplies, information systems and such required by K-retai- lers for their business operations.

K-retailers and other customers

Together, Kesko and K-retailers have prepared an operating system based on contractual, vertical co-operation. Kesko is responsible for continuously developing the operating system and retail concepts, for controlling chain operations and for purchasing the products included in the chain pro- duct selections. K-retailers, as ent- repreneurs, are responsible for the profit, personnel management and implementation of the chain concept in their stores. Kesko takes charge of obtaining store sites, information sys- tems, marketing channels and trai- ning for the chain. Kesko’s store site operations promote the establishment of new enterprises and the progress of existing entrepreneurs in their career. Kesko also sells and supplies pro-

12 ducts to many other customers and and companies, institutions and pri- minates information about its opera- carries out regular surveys on K-retai- vate investors. Kesko maintains regu- tions to shareholders and the general lers’ and other customers’ views on lar contacts with representatives of public. Co-operation with news me- the services offered. the capital market and gives its share- dia takes place daily and works in holders plenty of information about both directions. Kesko orders surveys company operations on its websites on a regular basis to find out fi- Consumers and through other media. TradeMa- nancial editors’ views of Kesko and its Kesko’s co-operation with K-retailers ker, Kesko’s stakeholder magazine is communications. and other business customers serving published four times a year and sent consumers aims at satisfying consu- to all of its shareholders. Non-governmental mer needs. For this purpose, Kesko organisations and trade plans and builds retail concepts, pro- Personnel unions duct selections and marketing cam- paigns that interest consumers, and Kesko promotes the participation of Kesko maintains regular contacts implements them in co-operation its personnel in the planning and de- with consumer, environmental and with the K-retailer chains. Consumer velopment of operations and focuses human rights organisations, for ins- surveys are widely used to establish on activities that maintain working ca- tance when preparing responsibility- customer satisfaction and to improve pabilities and in-house job rotation. related operational policies and indi- operations further. The Pirkka custo- Annual surveys are carried out to eva- vidual statements, and when presen- mer magazine is distributed free of luate the personnel’s job satisfaction. ting results of its activities. The union charge to all households that have Kesko’s corporate image and attracti- with the closest ties to Kesko is the the Plussa customer loyalty card. veness as a workplace are assessed by Service Union United, which has a lo- in-Group and external surveys. cal branch organisation in Kesko. Kesko gives financial support to the Shareholders work of many socially important or- News media ganisations and institutions. Kesko is a listed company whose sha- res are held by K-retailers, enterprises Being a listed company, Kesko disse-

13 performance Indicators of corporate responsibility and performance Economic In this report Kesko has compiled – mainly following the framework re- commended by the GRI – its key re- sults in areas of corporate responsi- bility. A significant part of the indica- tors and results have been used befo- re. When statistics were compiled from areas that had never before been handled in the annual or envi- ronmental reports, comparative figu- res were, in some cases, obtained for several years. In cases where this was not possible though a reasonable amount of work, data is given for 2000 only. The purpose is to give as comprehensive a picture as possible for performance in 2000, which can be considered as a starting-point for systematic monitoring and target set- ting in corporate responsibility.

Economic performance

Good economic performance is the ba- sis of responsible operations. It secures the financial well-being of shareholders, suppliers and employees and ensures that the company participates in the de- velopment of the well-being of society as a whole, by paying taxes. A strong fi- nancial position provides opportunities to focus on environmental and social responsibility, which again contribute to economic performance. So, the three pillars of corporate responsibility are in- terdependent and should be developed side by side in a balanced way. Kesko has performed steadily over the decades. The dividends distributed

14 have exceeded the average of listed can be found in Kesko’s Annual Report. percent. For the last five years, the companies, many new jobs have been The corresponding information is also average effective dividend yield has created, and supplier invoices and so- given on Kesko’s Internet pages been 6.6 percent. According to the cial obligations have been settled on ti- (www.kesko.fi) ”Investor information”. dividend policy specified in 1997, me. The store network has been under- Kesko distributes at least a third of its going a continuous reform according to earnings per share as dividends, or a anticipated changes in residential areas Economic development half if the equity ratio exceeds 50 and consumption habits, not forgetting from the viewpoint of percent. During the last five years, shareholders services in consumers’ immediate ur- the dividend has been 81 percent of ban or rural neighbourhood. Kesko has Kesko has generated profits and paid earnings, on average. participated in the activities of citizen dividends continuously since its es- Kesko’s share price development organisations through intellectual and tablishment in 1940, except for the has been relatively steady, following financial contributions. year 1967. For the last ten years, the general trend in the trading sector The following analysis handles eco- which include the depression in the prices. For the last few years, the gene- nomic performance from the viewpoint early 1990’s, the average annual yield ral index and the weighted portfolio of different stakeholder groups. Other (dividend and appreciation) of index (Hex 20) have clearly grown fas- financial indicators and the develop- Kesko’s B share has been 8.2 percent ter than Kesko’s B share, due to the ment of business operations for 2000 and for the last five years, 9.8 trends in share prices in information

15 technology and Nokia, in particular. market value of the Helsinki Exchan- The book-entry securities system, The price development of Kesko’s A ges, but around one half of the tra- adopted in 1993, provided opportu- share has exceeded the average in the ding sector value. The market capita- nities for more detailed shareholder trading sector and also exceeded the lisation was 84.5 percent of the book monitoring. The number of share- portfolio index at the end of 2000, value of total assets, which means holders dropped in the late 1990’s, when share prices in information that Kesko’s share price does not but rose in 2000, reaching 24,496 by

performance technology took a strong downturn. seem to include such growth the end of the year. Kesko’s market capitalisation has expectations that have been com- Following the listing, private per- grown slowly over the last five years. mon in the information technology sons have been an important share- The figure was at its highest in early sector, for instance. holder group in Kesko, accounting 1998 and 2000, reaching about EUR In the early days, Kesko’s share- for about one third of the share capi- Economic 1.4 billion and at its lowest in 1996, holders consisted mainly of retailers. tal at the beginning of the 1990’s, when it dropped to about EUR 800 The listing in 1960 and share issues in and for about one quarter at present. million. At the end of 2000, the total the 1970’s and 1980’s increased and K-retailers and other private enterp- market capitalisation of the company diversified the group of shareholders. rises have retained their share of was nearly EUR 1.2 billion. That was At the beginning of 1990’s, the num- nearly 30 percent throughout the last only about 0.4 percent of the total ber of shareholders exceeded 40,000. decade, as have financial and insu- rance institutions, too. The insu- rance companies Sampo, Pohjola and Ilmarinen have long been among Kesko’s major shareholders. Major, established, Kesko-related sha- reholders continue to include the Kesko Pension Fund, Vähittäiskau- pan Takaus and K-Retailers’ Associa- tion. The abolishment of restrictions concerning foreign ownership in lis- ted companies in 1993 has raised fo- reign shareholding in Kesko to near- ly one fifth of the share capital. More detailed information about Kesko’s shareholders and share trends can be found on the company’s Internet pages (www.kes- ko.fi ”Investor information”).

Investments and store network

In 2000, Kesko Group’s investments to- talled EUR 247 million, which is 3.9 percent of net sales. This was an all-ti- me high both in monetary and relative terms. Investments in shares and in the real estate, fixtures and information technology of Kesko’s wholesale opera- tions and subsidiaries accounted for over one third, while investments in re- tail stores accounted for two thirds. Over the last five years, investments ha- ve accounted for 2.2 to 3.9 percent of

16 Kesko Food store site process

net sales. Investments have had fi- re sites, by participating in the con- reaching 29.7 percent. The percenta- nancial impact on business operations struction of new, increasingly popular ge is a little smaller than average for of construction companies, services shopping centres, and by building lar- Finnish grocery retailing, and consi- companies in the construction sector, ger stores for home and speciality derably smaller than for most Cent- suppliers of fixtures, equipment and goods and hardware trade. ral European countries. information systems, above all. 34 new stores were built and over Surveys show that consumers’ Internal migration is strong in Fin- 150 stores renovated by Kesko in experiences regarding the availability land and the purchasing power conti- 2000. New grocery stores include of retail services have improved over nues to move into growth centres and mainly large supermarkets or small the last few years, despite the growth existing population centres. Consump- urban centre stores. Hypermarkets, in the average store size and the re- tion habits are also changing. Kesko which are the largest outlets, conti- duction in the number of stores. Kes- has responded to these developments nued to slightly increase their share ko has done its best to maintain avai- by continuous investments in new sto- of the total K-grocery store sales, lability by offering, in co-operation

17 with K-retailers, a nationwide network sparsely populated areas included. nat Oy, Anttila Oy and Carrols Oy. of stores in different formats and pro- Speciality stores, including the At the end of 2000, the Group duct selections, complemented by the Tähti Optikko chain, were 726 in total had 13,361 employees. The average Anttila mail order business and the and fast food restaurants 77 in total. number in 2000 was 11,099 persons, NetAnttila online department store. Kespro Ltd, Kesko’s subsidiary representing a growth of 106 over the There were 1,249 K-grocery stores serving restaurants and other cate- previous year. The average number of

performance at the end of 2000, of which 838 were ring customers, delivered products personnel is calculated by taking into small stores (K-neighbourhood store, to 6,000 business customers. Thus, account all employees with perma- K-extra, Rimi, Pikkolo, K-mobile store Kesko’s distribution services cater for nent or fixed-term contracts and and others). The stores were located in a total of about 8,000 enterprises and excluding those on long leave (e.g. 409 towns and municipalities in all, cover practically all Finnish towns parental leave). Part-time employees Economic compared with the total of 455 in Fin- and municipalities. are converted into full-time person- land. Of all Finns, 47.3 percent live at a nel according to their working time distance not exceeding one kilometre percentage (for instance, an emplo- Job development and 28.7 percent at a distance not yee working for 30 hours per week is exceeding 600 metres from a K-grocery The number of jobs in the Kesko equal to 0.8 persons when converted store, which means that the services of Group has doubled since 1995. Big into full-time personnel). K-stores are still, on average, relatively changes occurred in 1996–1997, When the jobs in the Group are close to customers throughout Finland, when Kesko acquired Kaukomarkki- roughly divided between wholesale and retail operations, wholesaling Number of inhabitants at a distance of 600 and accounts for a little fewer than a half 1,000 metres from a K-grocery store in Finland of them and retailing for a little over one half. Retailing business includes the Anttila and Kodin Ykkönen de- partment stores, non-food trading of Citymarket department stores, the Carrols restaurants run by Kesko, the K-agricultural stores owned by K-maa- talousyhtiöt Oy and the Tähti Optikko outlets owned by Kaukomarkkinat Oy. Kesko is a nationwide company with operations in 42 localities. About 60 percent of Kesko personnel work in the greater Helsinki area. Outside this area, Kesko has four district centres (Turku, Tampere, Kuopio and Oulu),

18 each of which have 180–350 employ- At the end of 2000, Kesko out- EUR 34.6 million, which tax authori- ees, 35 Citymarket hypermarkets sourced some of its service and sup- ties divide into the localities where (with a total of over 2,500 employees) porting operations by selling its ad- the company operates. Kesko paid and 28 Anttila department stores (a vertising agency, the publishing ope- EUR 2.2 million in real estate taxes to total of over 1,400 employees). As the- rations of its customer magazines, its about 100 towns and municipalities. re are one or more K-stores in nearly in-store television operations and In addition to direct taxes, Kesko every Finnish town and municipality, film production, its real estate main- has collected a significant amount of employing about 25,000 persons in tenance services and part of its office indirect taxes and fees, such as value all, the jobs offered by the K-Alliance services. In March 2001, the corres- added taxes, car taxes, alcohol taxes, extend well-being practically throug- ponding arrangements were made in customs duties, employee payroll ta- hout Finland. information management. The ar- xes, etc. Although these payments In 2000, the opening of new City- rangements involved a total of about cannot be included in the sphere of market hypermarkets and Kodin Yk- 330 persons, who continued in their corporate responsibility proper, Kes- könen department stores caused an jobs under the new employer. ko has assumed full responsibility for increase in the number of personnel, making all payments and fees to the whereas the disposal of Aleksi 13 Oy society on time and in full. and the conversion of some Carrols Salaries, social security expenses and taxes restaurants into entrepreneur-run out- lets reduced the number. The growth In 2000, Kesko Group paid salaries of was highest in foreign operations, EUR 267.6 million, pension expenses where the personnel totalled 938 at of EUR 21.6 million and other social the end of 2000 (compared with 475 security expenses of EUR 26.4 million. in 1999). Theoretical income taxes totalled

19 performance Economic

Employee pension some pension types outside the statu- million. In fact, the proportion of im- and health insurance tory system available for them, such as ported products is higher than shown by systems an early retirement pension, granted the books, because purchases from im- Kesko Sickness Fund is responsible for production reasons. The Pension porters operating in Finland are registe- for the statutory sickness insurance Fund covers some 4,300 employees. red as domestic purchases. of the Kesko Group’s subsidiaries In 2000, Kesko Pension Fund The sphere of economic impact also and Kesko-related units, covering paid pension to 2,916 persons, a total covers investments which amounted to their total personnel of about 11,000. of about EUR 37 million. Kesko Pen- EUR 247 million. A majority of the In 2000, the sickness insurance cont- sion Fund has made profitable in- funds invested were used for buildings, ributions paid by the Sickness Fund vestments in recent years and the equipment and information technology. totalled EUR 5.8 million. pension expenses fall short of the The proportional breakdown of Kesko Pension Fund is responsib- average national level. suppliers of Kesko’s purchases is re- le for the pension contributions, ba- In the statutory employment acci- vealed by accounts data. In order to as- sed on the Employees’ Pensions Act, dent insurance system, a higher sess the impact of Kesko on its supp- of those Kesko Corporation employ- excess percentage is applied, as liers’ financial progress, information ees who are members of department prescribed for big employers. on Kesko’s share of each supplier’s sales B. Varma-Sampo is responsible for the would be required. So far, this type of corresponding pension contributions all-inclusive survey has not been carried for the employees of the subsidiaries. Suppliers of out. The subject is interesting and im- goods and services The Pension Fund also has depart- portant, and we intend to collect more ment A (closed on 8 May 1998), According to Kesko’s books, the compa- detailed information on the subject in which provides extra benefits, inclu- ny had about 32,000 domestic suppliers the future. As far as suppliers in develo- ding a pension level exceeding the of goods and services in 2000, and about ping countries are concerned, the work statutory one – a maximum of 66 10,000 suppliers abroad. Purchases from has already been started in connection percent. The employees who are Finland totalled EUR 4,710 million, whi- with ethical quality control (see ”Supp- members of department A also have le purchases from abroad were EUR 812 lier survey underway”, page 38).

20 Financial support

Kesko and its subsidiaries have tradi- tionally given support to those main- ly nationwide organisations and insti- tutions that work for the good of so- ciety. In recent years, support has been concentrated on youth and sports organisations, the promotion of a healthy way of life and children’s health care. Major donations have been given to nearly one hundred re- cipients. The K-retailers’ co-opera- tion with local organisations, sports clubs etc. has also been extensive. Drawing the line between dona- tions, sponsoring and marketing is often difficult. When clear marketing measures are left out of calculations, the financial support paid by the Kes- ko Group in 2000 amounted to two million euros. Half of this amount was directed to sports and physical exercise organisations (e.g. Finnish national alpine skiing teams, the Football Association of Finland, scholarships for young athletes). Over 450,000 euros were donated to health care. K-stores organised two important campaigns for this purpo- se for customers. The funds raised in the ’Life for Child’ campaign were donated to the Godparent opera- tions of the Lastenklinikka children’s hospital and the Finnish Heart Asso- ciation, and the funds raised by the ’Little Heart’ campaign were dona- ted to the K9 intensive care unit for children and the young, at the Hel- sinki University Hospital. The most important partner in youth opera- tions (EUR 210,000) was the Nuori Suomi (Young Finland) organisa- tion. Through this, Kesko participa- tes in the operations of about fifty sports organisations and afternoon club activities for school children. The Children’s Olympics, organised together with Young Finland, att- racted about 180,000 children in summer 2000.

21 performance Environmental performance

Starting from the year 1997, Kesko has Environmental published three environmental re- ports, which means that comparative information on key environmental im- pacts is available for several years. In 2000, environmental performance was sharpened considerably when environ- mental management systems were completed in grocery logistics and transport, and environmental calcula- tion was enhanced in both logistics and real estate operations. Kesko’s en- vironmental calculation model moni- tors the environmental impacts and costs of operations in parallel. Environmental responsibility is not just a question of decreasing the company’s environmental impacts. It also includes environmental co-opera- tion, based on life cycle thinking, with suppliers of products and services. Progress has been made in the supply chain for construction items, in parti- cular. No corresponding develop- ment, such as the effort to adopt envi- ronmental labelling, has yet been completed in the goods trade. More information on Kesko’s envi- ronmental performance can be found on our Internet pages.

General

The adoption of an environmental management system complying with the ISO 14001 standard progressed ra- pidly at Kesko in 2000, when the Kes- ko Food’s logistical unit and Kesped Ltd, a transport company, completed their system at the end of the year. The

22 system was certified in March 2001, be- mental calculation model KELO port was published in June 2000. It was coming the first certified environmen- (short for ’sustainable logistics’). given an honorary mention for corpo- tal system for logistics and transport in The co-operation between Kesko rate responsibility reporting by Elin- the Finnish trading sector, and one of and the K-retailers has been reorgani- kaari, the Finnish Association for Envi- the first in the whole world. The sys- sed, and the chain units of the division ronmental Education, which makes tem covers about 1,500 employees. parent companies will be responsible annual evaluations of environmental Real estate maintenance services were for managing it. A decision was also reporting. The points given to Kesko’s brought under the influence of certifi- made to change the environmental or- report were in the range 40-44, and the cation through outsourcing. At the be- ganisation of the K-Alliance to harmo- report ranked highest among trading ginning of 2001 Kesko sold the busi- nise with the commercial operating companies. The previous year, Kesko’s ness operations of its subsidiary Kestra model. Each chain unit is now respon- points were in the range 30-34, compa- Kiinteistöpalvelut Oy to ABB Kiinteis- sible for chain-specific environmental red with the 100 points maximum. In töpalvelut Oy, which had received the operations, such as environmental sto- the same evaluation, Kesko was awar- ISO 14001 certificate in 1999. Anttila re concepts. At the K-Alliance level, en- ded, together with Fortum, for the best has also started planning an environ- vironmental operations are guided environmental web pages in Finland, mental system based on the ISO 14001 and co-ordinated by the K-Environ- being placed in the 80-84 points range. standard. The aim is to first adopt the mental Working Group set up at the At the end of 1999, Kesko and se- system in three Anttila department beginning of 2001, to which Kesko’s di- ven other listed Finnish companies we- stores and in two Kodin Ykkönen de- vision parent companies and the re included in the Dow Jones Sustai- partment stores in early 2002, and in branch clubs of the K-retailers’ Asso- nability Group Index. In compiling other department stores and the Hä- ciation have each appointed their rep- the index, Dow Jones monitors 2,000 meenkylä warehousing complex gra- resentative responsible for environ- major listed companies, with each dually during 2002-2004. The system mental affairs. sector being represented by 15 will be included in Kesko’s environ- Kesko’s third environmental re- percent of the market capitalisation in

23 that sector. The 10 percent of the com- improve eco-efficiency and energy sa- Success in panies that best fulfil the requirements vings. Co-operation with ABB Kiinteis- energy savings

in each sector are then included in the töpalvelut increases environmental Kesko is striving to perform even bet- index. In 2000, Kesko and three other expertise in real estate maintenance ter and has adopted the KRESS real es- Finnish companies were dropped and helps Kesko strengthen its pio- tate and construction sector energy sa- performance from the Dow Jones Index, as their neering position in decreasing energy ving agreement. This agreement aims market capitalisation did not reach consumption. to cut the 1998 level of specific heat the size category required for monito- consumption by 15 percent by 2010 ring. Kesko’s environmental perfor- Eco-efficient and to turn the growth in specific mance would have been sufficient. For construction electricity consumption into decline example, in an environmental analysis by 2005. The consumption statistics Kesko applies the principles of eco-ef- made by the US company, Innovest for 2000 show that these targets have Environmental ficient construction in all its major Strategic Value Advisors, Kesko ranked already been reached. However, be- new business building projects. Buil- first out of 23 companies evaluated in cause of annual changes in tempera- dings are planned in such a way that the category ‘Global Food Industry’ ture and other factors, no final conclu- the use of natural resources and ener- with a rating of AAA. sions will be made until the consump- gy throughout their life cycles, as well tion decrease has continued for a pe- as emissions burdening the environ- riod of several years. Logistics and real estate ment, are kept under control. The total energy consumption of are the key areas in Kesko is participating in several re- environmental activities real estate managed by Kesko varies search programmes and studies that annually due to changes in buildings The majority of Kesko’s environmen- evaluate environmental impacts and and premises. The total floor area of tal impacts are caused by logistics, eco-efficiency. The EcoProp program- premises used in environmental calcu- including the warehousing, handling me of the Technical Research Centre lations by ABB Kiinteistöpalvelut Oy and transport of goods, and real estate of Finland defines environmental tar- amounted to 2,446,704 m2 (an incre- construction and use. The fuel used in gets at the project stage, classifies them ase of 1.1 percent over 1999) and the transportation causes emissions to the for different consumption levels and total volume of premises to 11,996,000 air, goods handling generates waste, proportions their impacts to the com- m3 (an increase of 8.1 percent). and real estate is needed for warehou- munity structure. The Technical Re- The combined heat energy con- sing and selling goods. Premises use search Centre of Finland’s REKOS sumption was 203 GWh, a decrease of 8.6 water and electric and heat energy, the programme on eco-efficiency in the percent compared with 1999, notwiths- production of which causes emissions construction and real estate sector de- tanding the growth in total area. The to the air. velops the planning process and crea- combined electricity consumption was Significant progress was made in tes environmental labelling suitable 369 GWh, representing a decrease of 2.6 key environmental activities during for business construction while taking percent. Specific consumption figures – the year. The completion and certifi- different characteristics into account. consumption per square and cubic met- cation of the environmental system of Kesko could possibly use this labelling re – had also declined. the Kesko Food logistics and of Kes- in the future in the real estate market, ped Ltd ensure systematic and target- while the retailers using the premises oriented operations. Part of the envi- could use it in their environmental Significant changes in the ronmental calculation system of the lo- communications. The use of life cycle environmental profile for electricity gistics chain has already been in use evaluations in technical planning is and the aim is to introduce it entirely now being tested in four Citymarket In 2000, Kestra Kiinteistöpalvelut Oy in 2001. The KELO model includes construction projects. Kesko also con- purchased a total of 447 GWh (444 terminal, packaging and transport sys- tinues to participate in the real estate GWh in 1999) of electricity for the use tems and an overall system which com- and construction sector’s ProGresS en- of the K-Alliance. Of this amount, Kes- bines the data collected and calculates vironmental programme, which deve- ko consumed 369 GWh and other the environmental burden and total lops environmental expertise and ma- Kestra electricity customers – mainly costs of the entire logistical process. In kes benchmarking surveys in which the K-retailers - 78 GWh. JP-Talotek- business construction, there are seve- Kesko has achieved excellent results. niikka/ Ympäristöpalvelut has calcula- ral development projects underway to ted the environmental profile of the

24 purchased electricity on the basis of the real estate area and energy consump- tion information provided by ABB and the energy purchasing information provided by Energiakolmio Oy. The so- called ratio system was used when calcu- lating the environmental profile for the electricity published in Kesko’s envi- ronmental report for 1999. The data for the year 2000 has been calculated using the ‘benefit sharing method’ which has now become common and gained wide national acceptance. The comparative figures for 1999 have also been converted to comply with this method. The basis of the environmen- tal profile for heat energy has remained the same in both years (the Technical Research Centre of Finland: Average district heating in Finland, 1998).

25 performance Environmental The environmental profile of the on Finnish climate change (Finland’s ads (an increase of 6 percent) rep- electricity used by the K-Alliance chan- Indicators on Sustainable Develop- resenting 658,500 tons of goods (an ged significantly during the year. This ment in 2000: www.vyh.fi, Finland’s increase of 2 percent) to the K-stores was due to a change of electricity supp- greenhouse gas emissions in 1998) and other customers. The total dis- lier, made for financial reasons. The and 0.26 percent of the total con- tance driven in distribution transporta- main supplier in 1999 (68 percent) was sumption of Finland’s energy re- tion was 18 million kilometres (an Vattenfall, which uses hydro-electric sources. The corresponding propor- increase of 5 percent). An average load and nuclear power. The main supplier tions of heat and energy consumption contained 6,145 kilos and 18.7 cubic in 2000 (92 percent) was Helsinki in the real estate managed by Kesko metres of merchandise, and the avera- Energy, which accounted for only 17 were 0.25 percent and 0.28 percent. ge driving distance per load was 168 ki- percent in 1999 and produces electri- More information about energy lometres. An average of about 3,300 city mainly by using fossil fuels. Emis- consumption, the environmental pro- customers are served each day. The sions affecting climate change, acidifi- file of electricity and its calculation can average weight and volume of loads cation and ozone in the lower atmosp- be found on Kesko’s Internet pages dropped in all distribution areas, be- here have, on the average, doubled (www.kesko.fi). cause customers have ordered smaller compared with 1999. On the other quantities at a time but more frequent- hand, the amount of radioactive waste ly than before. The kilometres covered Transport in 2000 was less than 4 percent of the per load increased in Southern Fin- amount in 1999. With the exception of Anttila, Kesko’s land and dropped in other areas. All environmental indicators of subsidiary Kesped Ltd is in charge of Anttila’s transportation was handled heat energy have improved, because all Kesko’s transportation. Kesped by Kesped Ltd and eleven other trans- both total consumption and specific owns 41 distribution lorries and also port companies. The number of loads consumption have decreased. uses 214 contract lorries. In 2000, the totalled 10,200 and the kilometres dri- The environmental information gi- company transported over 107,000 lo- ven 520,000, representing an increase ven by Helsinki Energy applies to the year 2000, whereas the information gi- ven by Vantaa Energy is for 1999. The information is comprehensive as to the consumption of primary energy, clima- te change and acidification. Compari- sons of different power plants concer- ning their effects on ozone in the lower atmosphere and the production of ra- dioactive waste include conceptual dif- ferences and inaccuracies. The electricity supplied by Kestra for the entire K-Alliance accounts for some 0.22 percent of the total impact

26 of 17 percent over the previous year. Kesko’s activities only. The number of The kilometres per load averaged 51. customers to be served, their location The total volume of forwarding for and the size of orders significantly af- which Kesped Ltd was in charge amoun- fect the final result. ted to 271,280 tons, an increase of 4.7 Emissions from energy used by percent over 1999. Forwarding real estate have been discussed before. transactions totalled 37,000. Transporta- Kesko’s operations do not cause tion from within Europe, which accoun- any significant discharges to water. ted for 76 percent of the total volume, was handled using lorries, semi-trailers and containers, and from outside Euro- Waste management pe using containers only. Kesko Food and recycling accounted for 75 percent of all imports. In 2000, the waste management section Export deliveries, mainly to Swe- of the KELO model for environmental den, the Baltic countries and Russia, calculation in Kesko’s logistical chain were handled by lorries. The total vo- has been corrected. Fuel consumption was in full use in all of Kesko Food’s lume of exports, grain trade excluded, only has been taken into account in distribution centres. In previous years, was 20,000 tons, of which Kesko Food the calculations, not fuel production information on the amounts of waste at accounted for 43 percent and Rauta- or transportation to outlets. Kesko Food was received from the Hak- kesko for 45 percent. As vehicle-specific statistics are kila Central Warehouses only. Other lacking, the development of energy units have now also been able to provi- consumption and emissions only de- de more specific statistics. The amount Emissions in transport pend on the kilometres driven. As the of corrugated board waste is now regis- No vehicle-specific fuel consumption number of kilometres grew by five tered in statistics as a total figure, inclu- statistics on Kesped’s transportation or percent, the calculated emissions also ding the board generated in distribu- its distribution in urban and regional grew by five percent. The increase per tion centres and the board received areas are yet available. Therefore, the cubic metres and tons distributed was from K-stores in connection with re- energy consumption and emissions in smaller. The emissions of distribution turn logistics. This explains the signifi- domestic transportation have been transportation can be decreased by cant growth in statistics. calculated by using the average factors using a more energy-efficient distribu- As waste management calculation studied by the Technical Research tion fleet with smaller emissions, by now covers the whole of Finland and so- Centre of Finland for road traffic (‘LII- improving the driving style and by en- me changes concerning statistics SA’, 1999). In the environmental re- hancing the efficiency of distribution. techniques have been made, the statis- port for 1999 the emission figures were Improvements in the efficiency of tics for 2000 are not fully comparable incorrect because of a human error. In distribution and a decrease in its envi- with previous years. Starting from 2000, this report, the information for 1999 ronmental impact do not depend on the KELO model produces waste mana-

27 performance Environmental

gement statistics that include the opera- turn a used appliance free of charge to Technology Agency. The experiment tions of nearly the whole of Kesko. For a retail store (replacement purchase) on returning furniture to stores was the last four years, the waste manage- or to a regional reception centre. Kes- implemented in October-December. ment statistics of the Viking Coffee ro- ko intends to have Kesped Ltd fetch The Kodin Ykkönen department store astery have been calculated on the same the appliances from the K-stores and in Varisto was one of nine furniture sto- basis. The performance of the coffee ro- transport them to Kesko terminals, in res along the Ring Road III that parti- astery proves that a target-oriented envi- which they will be loaded into produ- cipated in the experiment. Kodin Yk- ronmental programme and a certified cers’ containers and transported full könen had earlier accepted used furni- environmental system can continuously to the treatment centres of the produ- ture, but it had been transported to the reduce the amount of waste. cer community. The expenses of the landfill, as there was no system for re- national recycling system will be inclu- use available. Experiments were con- ded as recycling fees in the prices of ducted to find out the quantity and new products. The centres participa- quality of the furniture to be disposed Recycling experiments in ting in the experiment in the greater of, the reuse potential and handling electronics and furniture Helsinki area, Tampere and Jyväskylä processes of recovered material, as well Kesko is participating in several recycling received about 260,000 kilos of used as the suitability of stores for reception experiments underway in Finland. appliances, of which 66,000 kilos were of this material. A reception fee based In the national recycling experi- brought to the K-stores. Information on estimated costs was charged from ment on electrical and electronic ap- on the results of this experiment will customers. The amount of furniture pliances started in March 2000, Anttila be given during spring 2001. returned during the experiment fell and Citymarket are involved as repre- The furniture recycling and reuse short of expectations. A decision on sentatives of the retail trade, Kauko- project was started in January 2000. further activities will be made in 2001. markkinat as an importer and Musta Participants include associations and There are also several recycling Pörssi as both an importer and a retai- companies in the furniture sector, re- experiments underway in hardware ler. According to the EU draft directi- search institutes, waste management stores. Six K-rauta hardware stores are ve, the consumer should be able to re- organisations and the National participating in the recycling of plastic

28 tubes. So far, the amounts have been modest, but the experiment will conti- nue. Opportunities to recycle paint cans have been offered to professional customers in some K-rauta hardware stores. The experiences gained have been positive and the experiment will continue. Starting from the beginning of 2001, some K-rauta and Rautia hardware stores have been participa- ting in the experiment of recycling impregnated wood. Kesko is an important raw mate- rial supplier of Muovix Oy, which star- ted manufacturing plastic products of recycled material mainly for agricultu- ral uses in November 2000.

Water consumption

Water consumption increased in the real estate managed by Kesko from 460,000 cubic metres to 525,000 cubic metres. The growth was mainly due to the fact that more neighbourhood stores were included in monitoring, and dwel- lings were added as a category of their own. The high consumption of water in dwellings also slightly increased the ave- rage specific consumption of water.

Use of materials

Kesko continues its active work for packaging standardisation, use of en- vironmentally sound materials and re- duction in amounts of materials by operating in Finnish producer institu- tions and international standardisa- tion organisations. Evaluations of the packaging data of Kesko’s divisions for 2000 have still been mainly based on import forwar- ding statistics. The total amount of materials decreased by one percent compared with the previous year, alt- hough the total value of imports increased. The amount of plastic and glass packaging increased following a decrease in 1999, but remained below the 1998 figures. The amounts of ot-

29 her materials diminished. institutes, and in Finland, the Dipoli More K-environmental The percentage of packaging training centre of the Helsinki Univer- stores weight of the total volume imported sity of Technology, the Finnish Associa- The model developed by Kesko, the K- continued to drop. From 11.4 percent tion for Nature Conservation and the Retailers’ Association and the Finnish in 1997, the proportion dropped to Finnish Environment Institute. The re- Association for Nature Conservation – performance 10.3 percent in 2000. sults will be presented at the Eco-Effi- ‘the K-environmental store diploma’ – In Kesko Food, the amount of reu- ciency Fair in spring 2002. helps the K-stores to reduce the envi- sable packaging continued to incre- The long-standing work for organic ronmental impact of store operations ase, with the exception of Transbox foods and products with environmental and to guide customers towards more plastic cases. In Rautakesko and Kesko labelling has yielded good results. Sales environmentally sound consumption. Agriculture and Machinery (statistics of organic products have increased in The requirements of the model – a for 2000 apply for the Builders’ and the K-stores considerably faster than checklist with about 160 items – are re- Environmental Agricultural Supplies Division) the the average sales and the supply is not viewed annually. Until the end of amounts diminished slightly in all sufficient in all product categories. Kes- 2000, the K-environmental store diplo- units. Corresponding information on ko Food has been able to consolidate mas were awarded by the K-Retailers’ the Home and Speciality Goods Divi- the supply of organic foods by comple- Association on the recommendation sion (now Keswell Ltd) has not been menting the domestic selection with of an outside auditor. Subsequent au- available before. Statistics show that imported products. There are now 45 dits were and will be carried out every the use of return pallets is relatively types of organic fruit and vegetables two years. At the beginning of 2001, higher in building supplies, home and available throughout the year. responsibility for the development speciality goods than in groceries. The efforts of the K-stores in the or- and management of the K-environ- ganic products trade were rewarded in mental store model was transferred ‘the Organic Store of the Year 2000’ from the K-Retailers’ Association to Co-operation with competition arranged by Finfood. Out Kesko’s chain units. suppliers of 20 stores chosen for the final, 15 we- K-environmental store diplomas The trading sector bears indirect res- re K-stores and the winners in both the have been awarded for grocery stores ponsibility for the impact of purchased small and medium-sized store catego- since 1998 and for hardware stores products on the environment. These ries were K-stores. since 2000. Follow-up audits comp- impacts are reviewed for the entire life Kesko’s construction unit has also lying with revised requirements were cycle of the products. The operations carried out sustained work for impro- carried out in 2000 in all stores that of suppliers to reduce their environ- ving eco-efficiency during the life cycles had been awarded the diploma in mental impacts are assessed during of buildings (See Eco-efficient con- 1998. All of them passed the new au- supplier audits, for example. struction, page 24) dit, too. In spring 2001, there were 191 The impact of products should be evaluated during their entire life cycles. The task is difficult, because life cycle analyses can, as yet, be applied to only some production. Kesko has worked to increase their use by bilateral co-opera- tion with suppliers and by working with national and international organisa- tions. The latest pilot project in this area is entitled ‘Factor X – eco-effi- ciently to the market’. The target is to find solutions enabling production with the fewest possible natural re- sources. Kesko Food is participating in the project with a product from its Pirkka range. The resources and brains behind the project include the Euro- pean Social Fund and several research

30 K-environmental stores, comprising 100,000 in recognition of the work do- the Environmental Deed of the Year. 175 grocery stores and 16 hardware ne for sustainable development. This In November 2000, the environmental stores. All Citymarket hypermarkets time recognition was given mainly to protection prize of the Tampere Ju- and half of the superstores have been persons and institutions with merits in nior Chamber of Commerce was awar- awarded environmental store diplo- environmental education of the ded to the Lielahti Citymarket in re- mas. The list of environmental stores young: cognition of the work done for ecolo- can be found on Kesko’s Internet pa- • Helena Juutilainen from Lahti gical building methods, energy sa- ges (www.kesko.fi). (founder of the ’Bio Lahti’ event, an vings, the environmental education of Customer opinions of the K-stores’ environmental activist in sports club personnel and recycling. environmental activities were charted and organisation level) in the ‘Consumer awareness’ study by • the Southern Ostrobothnia 4-H or- Infratest Burke at the end of 2000. ganisation (recycling of agricultural According to this study, the Finnish plastics) Environmental risks, damages and accidents grocery stores with the best environ- • the Finnish Association for Environ- mental image of all store chains are mental Education from Helsinki Environmental risks are discussed in the Citymarket hypermarkets, while (an international environmental Kesko’s security and safety plan. The the K-stores were considered the best education programme for compre- greatest risk to a company operating of all the trading groups. hensive schools) in the trading sector is fire, and the re- • Pirkkomaija Heikkilä, a teacher at quired instructions and training have the Seinäjoki Vocational Education been given to the personnel to meet Stakeholder co-operation Institute (preparing an environ- this contingency. Environmental ma- and communications mental system for the institute and nagement systems include the readi- During the year, Kesko maintained applying it in catering sector trai- ness for environmental risk manage- close contacts with the stakeholder ning). ment complying with the ISO 14001 groups of its environmental activities. standard. Contacts with the Finnish and EU aut- In spring 2000, the ’Keep Lapland horities were maintained through the Clean’ association nominated Kesko’s No environmental damage or acci- Environmental Committee of the Fe- environmental activities in Lapland as dents occurred in the Group in 2000. deration of Finnish Commerce and Trade. Development work was carried out with suppliers of organic products, in particular, and Kesko had a repre- sentative in the co-operative environ- mental group of the Federation of Fin- nish Commerce and Trade and the Confederation of Finnish Industry and Employers. Kesko continued as a supporting member of the Finnish As- sociation for Nature Conservation, and in January 2000 made a co-opera- tion agreement on funding a family education programme organised by the association. Environmental affairs were emphasised in chain advertising, and the K-environmental stores in par- ticular arranged many events and gave out material under an environmental theme. Kesko’s environmental activi- ties were also presented to investors. In November 2000, Kesko gave out environmental prizes totalling FIM

31 Social performance performance Social

Social performance consists, on the one hand, of Kesko’s investments in its personnel, and, on the other hand, of Kesko’s impact on the working condi- tions and terms of those employed by the supply chain. There is plenty of in- formation available on the composi- tion and opinions of corporate per- sonnel, and the GRI framework has al- so given ideas for the compilation and analysis of new statistics. Information is being collected about the supply chain, concentrating on suppliers in developing countries for the time being. Kesko is a pioneer in the Nor- dic countries in introducing a social standard for monitoring the supply chain. Progress in this area is slow. Re- sults crucially depend on how major trading companies in the biggest countries link social requirements with their purchases and how the imple- mentation of social requirements is monitored in practice.

Quality of management

The job satisfaction of Kesko person- nel is monitored annually each No- vember through a job satisfaction sur- vey, in which employees’ satisfaction with their own jobs, their superiors’ performance, their units’ operations and Kesko’s operations are evaluated. The survey was now made for the sixth time in its present form and the res- ponse rate was 64%. Employees’ satis- faction with their own jobs, their su- periors’ performance and the opera- tions of the units had improved – the

32 and personnel views of internal custo- mer relations between various units of the Group. All units of the Group an- nually make self-evaluations in teams using the criteria of the Finnish Quali- ty Prize. During the last four years, an in-house quality competition has been linked to this evaluation. The compe- tition gives an incentive for employees results even reached an all-time high. stable and change slowly. Respect for to continuously develop their practi- Satisfaction with Kesko’s operations, other people and responsibility are ces, improve their competence and however, remained unchanged. Besi- seen as the most important values at reach top performance. des Kesko’s operations, room for imp- Kesko and its subsidiaries and their im- Personnel participation in the rovement was seen in the perfor- portance has continued to grow. Res- planning and development of opera- mance of superiors. The results of the pondents estimated that responsibility tions has increased transparency and job satisfaction survey contribute to su- is the value that has been best imple- commitment. periors’ profit bonus. mented at Kesko. As to respect for ot- The value survey of the K-Alliance, her people, respondents felt that the Employee statistics made for the first time in 1996, was re- gap between its importance and the peated in 2000. The survey had three practice had widened since the previ- The number and distribution of Kesko target groups: Kesko and its subsidiary ous survey. The results and actions re- Group personnel has changed pro- personnel, K-retailers and K-store per- quired have been discussed in the an- foundly since 1994. The number of sonnel. The results of the survey will nual management training. jobs has nearly doubled. The parent be used when developing manage- The quality of management was al- company now accounts for 29 percent ment and co-operation inside the K- so evaluated in the annual customer of all employees, compared with 55 Alliance. The response rate of Kesko satisfaction survey, made for the sixth percent in 1994, while subsidiaries en- personnel was 46%, compared with time in its present form in autumn. gaged in retailing now account for 42 42% in 1996. The survey showed that The survey is used to discover the K-re- percent instead of the previous 31 the basic values of the K-Alliance are tailers’ opinions of Kesko’s services percent and other subsidiaries for 21

33 tation on Kesko’s Internet pages, which features Kesko as an employer and lists job openings. Other electro- nic recruitment channels are also used actively to complement traditional press advertisements. The ’retention rate’ as presented performance in GRI reporting guidelines, i.e. the ra- tio of those satisfied with their jobs at Kesko to those willing to leave Kesko, Social is not available because the reasons for leaving the company have not been studied or classified. The GRI guideli- nes give a reason to consider making these kinds of surveys in the future.

Health and safety percent instead of the previous 14 tions in particular – Citymarket, Antti- percent. While in 1994 the Group had la, Carrols – offer many fixed-term and Statistics on absenteeism due to illness only a few employees abroad, the figu- part-time jobs, which are continuously covered 4,881 employees. Information re is now 8 percent. In 2001, person- in great demand. is not available on subsidiaries engaged nel structure will continue to change In January 2001, the average age of in retailing or on Kaukomarkkinat Oy. significantly, as the profit divisions are Group personnel was 35.9 years. In In 2000, the total number of days emp- incorporated into Kesko’s wholly- subsidiaries engaged in retailing, the loyees were absent was 37,482, or 7.7 owned subsidiaries. average age was 33.9 years (about 30 days per person. The breakdown of the At the end of 2000, the number of percent of employees were aged under total days away from work into paid personnel in the Kesko Group was 25), in other subsidiaries 38.3 years and unpaid sick days, accidents, care 13,361. The average number of per- and in the parent company 38.7 years. for sick children and occupational di- sonnel during the year was 11,099 (for Kesko is known better as a compa- seases is given in the figure below. the calculation method, see page 18). ny than as an employer. Kesko’s att- Kesko’s own occupational health Including fixed term, part-time and raction as a workplace was studied in service unit serves 6,200 employees of summer employment, Group employ- the ‘Universum’ survey carried out the Kesko Group. Occupational health ment increased by 4,100 persons, of among university students. Among stu- services for the retail sector employees whom nearly 3,200 were employed for dents of business administration, Kes- are mainly purchased from outside retailing operations. All units do not ko now ranks the 15th compared with Kesko. Kesko’s occupational health ser- have accurate statistics on summer the previous ranking of 27th. The vices focus on well-being at work and employees; their estimated total num- most important reason for this impro- on activities to maintain physical and ber was 600. In addition to summer vement has been the company presen- mental fitness. The latter have workers, about 3,000 employees left the Group, of whom over 2,400 had worked in retailing. About 500 employ- ees changed to new jobs within the Group, and 100 persons retired. At present, the statistics on employ- ees recruited or that have left are not sufficiently accurate. The target is to improve the collection of data in 2001 to enable an accurate analysis of emp- loyment duration and the turnover of personnel. The statistics now available show that the Group’s retailing opera-

34 accounted for over 40% of its opera- Pensions advancing in their jobs. tions in recent years. In 2000, Kesko’s 3. Promoting the equal distribution of About 100 persons retire annually occupational health services used women and men at different levels through the Kesko Pension Fund. The EUR 323 per person for the mainte- of the organisation. average amount of annual pension nance of physical and mental fitness 4. Promoting the equality of women paid in 2000 was EUR 12,747. The and for health care. and men in the salary level and in long-term trend in the number of pen- Work safety committees, occupa- other terms of employment. sions granted before the official retire- tional health service and accident in- 5. Increasing information on men’s ment age has been diminishing. In surance companies are making impor- opportunities to make use of their 2000 the average retirement age was tant preventive work, which can be rights as provided by family policy. 57 years, compared with 54.7 years in seen in practice as a drop in the num- 6. Eliminating attitudes that make it 1996. The number of employees reti- ber of accidents. In 2000, the number difficult to reach equality. ring on a full disability pension has es- of sick leave days per person due to pecially declined. In the early 1990’s, accidents was 0.5 on part of the em- about 50 employees were granted a di- The total plan is available in the web ployees included in the statistics. At sability pension each year, while in version of this report (www.kesko.fi). Kesko, the most accident-prone jobs 1999 the number dropped to 22 and According to February 2001 statis- are in warehousing and transporting. in 2000 to 14. tics, 60.5 percent of employees in the The focus of Kesko’s occupational Kesko Group were women and 39.5 Salaries and health services on activities to main- percent were men. Women accounted other benefits tain working capabilities is clearly con- for 8.3 percent of top management, In 2000, the average annual salary of nected with the change in the number 9.4 percent of senior management Kesko employees was EUR 24,109. of disability pensions. and 20.7 percent of lower manage- The amount has been calculated on ment. One out of eight Board mem- bers is a woman, which is also the case the basis of the average number of Equality policy personnel (for the calculation met- for Corporate Management Board hod, see page 18). In a group with a di- Kesko Corporation and all of its subsi- members. versified structure like Kesko, the ave- diaries employing over 30 persons par- When the equality plan was prepa- rage salary is not a very good indicator ticipate in an equality plan. The plan red in 1996, statistics divided accor- for describing the salary level and was prepared at the beginning of 1996 ding to sex were made. At that time, structure. Bonuses paid under the pro- and its implementation is evaluated women accounted for 5.3 percent of fit-sharing system accounted for two annually. The targets of the plan are top management, and there were no percent of the total payroll. defined as follows: women in the Board of Directors. The As to fringe benefits, 364 emplo- 1. Promoting equal application of division into senior and lower mana- yees had a company car, 650 emplo- women and men to open positions gement used at the time has since yees had a company dwelling and 2. Promoting equal opportunities for completely changed and no compari- 1,698 employees had a company telep- women and men in developing son can be made between 1996 and hone. Holiday cottages are rented for themselves as well as in training and the present situation. employees at a low price and their occupancy rate was nearly 100 percent. Kesko’s retailing subsidiaries offer discounts on purchases for all Kesko personnel. The Kesko Staff Club, which ar- ranges recreational activities for the personnel, promotes well-being in the working community. The Club offers a wide range of sporting, cultural and other activities. During the last three years, the annual budget of the Kesko Staff Club has exceeded EUR 500,000.

35 In subsidiaries engaged in retai- Kesko invested EUR 6.3 million in Citymarket hypermarkets). In the pa- ling, the share of women in superviso- training, which is the equivalent of rent company and VV-Auto Oy the ra- ry positions is significant. In the Group EUR 570 per person. The figure has te is 36.9 percent. level statistics, the category ”others”, in increased by 30 percent over the last The shop steward system at Kesko which most employees are classified, two years. was earlier based on the division includes both department managers More than one thousand Kesko between various office and store pre- and department supervisors in retai- employees participated in Master As- mises. In spring 2001, the shop ste- performance ling companies. Statistics show that sistant training arranged by the K-Re- ward agreement of the parent compa- 87.6 percent of the 186 department tailers’ Association. The training is or- ny was updated to meet the needs of managers in Citymarket hypermarkets ganised as distance learning. The trai- the new division parent companies. All Social are women, 81.8 percent of the 209 ning is not included in Kesko’s trai- major subsidiaries also have the shop department managers in Anttila de- ning statistics. Last year, a total of steward system. In work safety organi- partment stores are women and 42 14,000 K-Alliance employees participa- sations, employees have elected dele- percent of the 19 managers in Carrols ted in the Master Assistant training, gates for each office and store – some hamburger restaurants run by Kesko which has been offered for 40 years. premises also have work safety com- are women. mittees. The average annual salary of There are no statistics on disputes Unionisation Group personnel in 2000 was EUR in employment relationships that 24,109. No salary comparison between 4,940 of Kesko Group employees are would cover the whole Group. In men and women can be made in this unionised, mainly in the Service 2000, the lower courts had three cases report, as only some of Kesko’s salary Union United. The figure consists of concerning employment disputes in systems list employees by sex. These those employees whose union mem- the Kesko Group. statistics will improve in the future. bership fee is withheld from the salary. The unionisation rate is highest in the retailing sector (51.7 percent in Antti- la department stores and 50 percent in Training

Since 1975, Kesko has had its own trai- ning centre called K-instituutti in Es- poo by the lake Siikajärvi. First estab- lished by the K-Retailers’ Association in 1951, the institute provided courses to about 7,000 employees of Kesko and the K-stores in 2000. A total of over 40 training programmes were provided for sales assistants, retail and Kesko superiors as well as entrepre- neurs. The number of student work- days totalled 22,652. According to the training statistics prepared by Kesko, a total of 20,763 work-days, or an average of two days per employee, were spent in training. Because information from two units are missing from the statistics, the real figure is slightly higher. About 20 percent of training was external and 80 percent internal, including training at the K-instituutti. Employees in the retailing sector accounted for about a half of the total number.

36 Ethical quality control of suppliers

The trading sector is indirectly res- ponsible for the production methods of the products purchased. In parti- cular, customers are increasingly in- terested in the conditions and terms of production in the developing countries. Kesko has wanted to provi- de the public with as much informa- tion as possible on the ethical quality of its products and has developed practices that give a more detailed idea of production conditions. The target is to improve conditions in the long term in co-operation with manu- facturers.

Basis in international agreements

In April 2000, Kesko published its principles of socially responsible tra- ding (see www.kesko.fi, ”Kesko in brief”), the feasibility of which had been tested in practice with ques- tionnaires and trial audits. The principles are based on the United Nations Universal Declaration of Hu- man Rights and Convention on the Rights of the Child and on the Inter- national Labour Organisation’s key conventions. Many large European and American trading and manu- facturing companies base their ope- rations on similar principles. The tar- get is to promote the adoption of these minimum standards that have been agreed on in international fo- rums in workplaces if national legis- lation is lacking or its supervision is insufficient.

37 As to content, Kesko’s principles suppliers, Kesko can order a certifica- which contains detailed instructions are uniform with the international tion body to make an initial assessment on how to promote Kesko’s princip- Social Accountability SA 8000 stan- of SA 8000 of the candidates, which les and on introducing the standard dard (www.sa-intl.org). Kesko promo- can be used to avoid taking ethical in supplier relations. tes the adoption of the SA 8000 stan- risks. In March 2000, Kesko passed a dard by its suppliers, so that as many global co-operation agreement with Supplier survey suppliers as possible can prove with Bureau Veritas Quality International

performance underway SA 8000 certificates that they fulfil on furthering the SA 8000 certification. Kesko’s ethical requirements. It is ne- Even if Kesko’s buyers and other After the buyers had finished their cessary to have auditors who are in- quality control professionals do not SA 8000 training, a basic supplier sur- Social dependent, thoroughly trained in themselves monitor the compliance vey on implementation of Kesko’s et- the standard requirements, know lo- to the standard by their suppliers, hical requirements was started gra- cal legislation and speak the local the significance of buyers in furthe- dually in autumn 2000. The first sta- language, as the majority of SA 8000 ring the adoption of the standard is ge involves carrying out quality cont- auditing consists of interviewing per- critical. Corporate culture and wor- rol in 34 countries which, according sonnel and reading through written king conditions cannot be changed to international surveys, use child la- documents. Regular monitoring is al- and improved solely by correspon- bour and have other social problems so necessary. Certification includes dence and sending printed material, in the industry manufacturing the control audits every six months and but buyers must present the princip- product categories Kesko imports. an obligation to renew the certificate les to their suppliers personally face- The first stage of the survey, after three years. to-face. For this purpose, the training which is done in the form of ques- unit of the Bureau Veritas group has tionnaires that ask for the compa- planned and implemented SA 8000 nies’ net sales, number of personnel Co-operation basic training for Kesko buyers. By and subcontractors, working hours, agreement with BVQI the end of the year, 92 Kesko emplo- holidays and wage level, was sent to Suppliers decide themselves on comp- yees had participated in this training. 214 suppliers, of whom 135 had rep- liance with the standard and on see- In spring, buyers also received a lied by the end of the year. Respon- king certification. When selecting new handbook on ethical quality control dents had a total of about 120,000 employees. Kesko’s purchases from these companies totalled USD 50 million, which is about two percent of their combined net sales (range 0.2-9.0 percent). The principles have been discussed face-to-face with 104 companies, and ten companies have progressed to the pre-audit stage of the standard. The first Kesko supp- lier to receive the SA 8000 certificate was the Spanish supplier of fruit and vegetables, Dole Pascual. It is expected that the basic sur- vey of about 600 companies will be completed by the end of 2001, after which it will be possible to set more detailed targets for certification progress in 2002. The progress will crucially depend on the extent to which awareness of the standard increases and on the requirements made by the other supplier custo- mers, which are usually bigger than

38 Ethical principles in purchasing

Kesko. Many of them have published dividual customer’s inquiry is low, dard through co-operation with in- principles similar to Kesko’s, but ha- even if their operation might fulfil ternational purchasing groups and ve not required certificates based on the requirements of the standard. associations. For instance it has been independent audits from their supp- agreed that the SA 8000 standard will liers and rely on their own personnel be used in purchasing co-operation for monitoring. As long as principal A co-operation proposal with ICA, from Sweden. The issue to Finnish importers customers do not require indepen- will be discussed in purchasing dent certification, suppliers’ motiva- Kesko also seeks to promote the awa- groups during 2001. tion for getting one after a small, in- reness and introduction of the stan- In spring 2000, Kesko made a

39 proposal to all importers operating market shares of these products is in Finland that they draw up ethical not yet available. principles for importing activities. The proposal for common principles Preventive has since been formulated by a wor- work with UNICEF king group chaired by Kesko and comprising members from six com- The prevention of social problems performance panies, with the aim that their report has been at least as important to Kes- be published during spring 2001. ko as has been co-operation with its Kesko would like to see that a sig- partners to improve working condi- Social nificant number of Finnish impor- tions. At the beginning of 2000, Kes- ters and manufacturing companies ko started a three-year co-operation with foreign suppliers commit them- initiative with the UNICEF Finland selves to principles that promote the to assist in preventing the use of introduction of the UN and ILO child labour. Kesko has provided standards as trade conditions. Kesko USD 60,000 to field work in the town has wanted to speed up agreeing on of Bhiwandi. The project investigates common rules so that, through the the opportunities for children to at- voluntary activities of purchasing and tend school, finds solutions to family manufacturing companies, a majori- financial problems, organises voca- ty of the consumer goods sold on the tional training, etc. Bhiwandi is the Finnish market would fulfil the inter- centre of the Indian weaving in- national minimum requirements set dustry, in which 25,000 children are on production conditions. estimated to be working. Kesko will The proposal has already yielded receive the first annual report of the results in foodstuffs retailing. The Bhiwandi project in spring 2001. Finnish Food Marketing Association, Kesko also supported UNICEF in which has all food retailing groups as 2000 by sending 22,000 UNICEF its members, drew up ethical stan- Christmas cards. dards for foodstuffs purchasing in March 2001.

Fair Trade products

In co-operation with the Finnish Fair Trade Association, Kesko Food has launched Fair Trade products to the market. Social norms comparable to the SA 8000 standard are observed in their production. Environmental re- quirements are also set on the pro- ducts, and the organisation pays their members a steady producer pri- ce that exceeds the world market pri- ce. Kesko’s selections include all the products included in the program- me: coffee, tea, cocoa, chocolate, ho- ney, sugar and bananas. The Pirkka Organic Coffee roasted by Viking Coffee is the best-selling Fair Trade coffee brand. Information about the

40 Terms and calculation of key indicators

The text and graphs contain terms, indicators and abbreviations, whose contents are defined below.

Return on invested capital (ROI), % = profit before extraordinary items + interest and other financial expenses x 100 balance sheet total less interest-free debt (average during the year)

Equity ratio, % = shareholders’ equity + minority interest x 100 balance sheet total less advances received

Debt to equity ratio, % = liabilities + provisions x 100 balance sheet total less advances received

Gearing ratio, % = interest-bearing liabilities less marketable securities less cash on hand and at bank x 100 shareholders’ equity + minority interest

Market capitalisation = share price x number of shares

GWh = gigawatt hour = million kilowatt hours (kWh)

PJ = petajoule = 1,000,000,000,000 joules

CO2 = carbon dioxide = affects change in climate (”greenhouse effect”)

CO2 eq. = carbon dioxide equivalent, the amount of different gases whose combined impact on the greenhouse effect corresponds to the amount of carbon dioxide mentioned

SO2 = sulphur dioxide equivalent (affects acidification)

C2H4 = ethene (affects the ozone content of the lower atmosphere)

CO = carbon monoxide or coal gas

HC = carbon hydrides

NOx = nitrogen oxides

Transbox case = reusable transport case made of plastic

41 Kesko’s corporate responsibility report is available in Finnish and English and you can order it by mail from Kesko Cor- poration, Corporate Communications, Satamakatu 3, FIN-00016 Kesko, by e-mail from [email protected] or by phone from +358 1053 22404. You can also order and read the report at Kesko’s web site at www.kesko.fi.

For further information about the issues covered in the report please contact Jouko Kuisma, Director, EU Public Affairs and International Trade Organisations, from Kesko’s Corporate Communications and External Relations unit, tel.+358 1053 23140, e-mail [email protected].

The report has been edited by Kesko’s Corporate Communications/Jouko Kuisma in co-operation with the environ- mental team of the G.S.H. Advertising Agency (Tapio Heickell, Susanna Koivuneva, Sari Kuvaja, Timo Rantanen, Anne Soikkeli). Photos: Petri Artturi Asikainen (p. 9, 13, 20 and 36) and Elina Söyri (p. 3 and 32).

Printed by: Libris, Helsinki, Finland 2001 Paper: Lumiart Silk Both the printers and the paper used have been granted the right to use the Nordic Swan environmental label.

42 43