Corporate Responsibility Report 2005 Kesko Corporate Responsibility Report for 2005 3

Contents Contents of the report

Contents of the report...... 3 Waste management and recycling ...... 39 As in previous years, Kesko’s sixth Corpo- now very comprehensive. The implemen- Assurances for online and Review by the President and CEO ...... 4 Product-related developments ...... 41 rate Responsibility Report has been pre- tation of environmental systems in sub- printed reports Key facts about the Kesko Group ...... 5 K-environmental stores...... 43 pared on the basis of the ‘Sustainability sidiaries outside Finland is still under An electronic version of the printed Key indicators of corporate responsibility Environmental office work programmes ...... 44 Guidelines on Economic, Environmental way. However, we have obtained waste report containing some complementary for 2003-2005 ...... 6 Stakeholder cooperation and communications ...... 45 and Social Performance’ drawn up by the management, transportation and energy information is available at Kesko’s Inter- Global Reporting Initiative (GRI). No es- consumption statistics from nearly all Vision of corporate responsibility ...... 8 Environmental risks, damage, and incidents ...... 45 net site. Additional information has been sential changes have been made in the companies and have been able to make marked in the corresponding sections of Stakeholder analysis ...... 10 structure of the report, as the guidelines more comprehensive calculations of emis- the printed report. Electronic reports are Principles and management systems guiding Social performance ...... 46 have remained unchanged. The text does sions. We expect to be able to include all presented on the Internet in their fi nal approach to corporate responsibility ...... 14 Employment and employee turnover ...... 47 not follow the order of presentation and information now unavailable in 2006– form, in the version for which assurance Values ...... 14 Average age and duration of employment ...... 48 headings in the GRI analysis in all re- 2007. Information concerning economic has been provided. Texts are not updated Ethical principles – ‘Our working practices’ ...... 14 Kesko’s profile as an attractive employer ...... 48 spects, however. Any deviations from GRI responsibility, personnel numbers and subsequently. Any changes in informa- Goals ...... 14 Management quality ...... 49 guidelines, together with any shortcom- corresponding of the joint venture, Rimi tion during the year are presented in the Strategy ...... 15 Health and safety ...... 50 ings in presenting its core indicators, are Baltic AB, are reported according to Kes- following report. Corporate policies ...... 15 Occupational health service ...... 52 noted in the comparison published at the ko’s ownership, while other indicators are An assurance statement has been Corporate Governance Statement and organisation ..15 Salaries and other benefits ...... 52 end of the report. Kesko does not claim for the whole company. In Finland, envi- provided for the printed and electronic Management systems ...... 16 Pensions ...... 53 that the report is in accordance with GRI ronmental data is unavailable on Indoor versions in Finnish and English since guidelines, preferring to rely on an inde- Group, which was acquired in 2005. 2002. Supplied by the Sustainable Busi- Reporting ...... 16 Equality ...... 54 pendent assurance provider, to whom GRI ness Solutions unit of Pricewaterhouse- Information collection and reporting system ...... 17 Training ...... 54 has given its approval and directions, to Information about K-retailers Coopers Oy, Kesko’s auditors, this state- Activities in employer organisations ...... 55 make such a statement of compliance. Kesko operates in close cooperation with ment is published at the end of the report. Economic performance ...... 18 Cooperation with employee representatives ...... 55 K-retailers, based on chain agreements The report covers performance in 2005, Share performance ...... 19 GRI core guidelines between retailers and Kesko. The report with some information for the fi rst three Investments and the store network ...... 21 Social quality control of suppliers ...... 56 The report begins with a presentation of presents information concerning K-stores months of 2006. The previous report, cov- Job development ...... 22 Managing social risks ...... 57 basic information about Kesko and an as- when this is integrally related to Kesko’s ering 2004, was published in May 2005. Salaries, social security expenses, and taxes ...... 22 Ethical purchasing principles and tools ...... 57 sessment by Kesko’s management of the reporting and complements the overall The following report, for 2006, will be Employee pension and health insurance ...... 23 Monitoring in practice ...... 57 company’s key achievements and improve- picture of the relations between Kesko published in spring 2007. Suppliers of goods and services...... 24 BSCI audits in 2005 ...... 58 ment areas in 2005. Kesko’s corporate re- and K-retailers with society and other Breakdown of economic benefits...... 25 Cooperation between Finnish importers ...... 60 sponsibility goals and vision, and stake- stakeholders. holder analysis follow, together with the Financial support...... 27 Fairtrade products ...... 60 company’s values, strategy, principles, and UNICEF project completed ...... 61 management systems guiding corporate Environmental performance ...... 30 responsibility. The main focus is on eco- Stakeholder groups Environmental system ...... 31 Other responsibility areas ...... 62 nomic, social, and environmental perform- Real estate operations ...... 32 Product safety ...... 62 ance indicators, which are again slightly Construction and maintenance ...... 32 Risk management and corporate security ...... 63 more comprehensive than those presented Structural safety ...... 32 Marketing and competition regulations ...... 64 previously. A total of 42 of the 50 GRI core PromisE classification of premises ...... 32 Privacy protection ...... 65 indicators and nine additional indicators corporate responsibility Environmental risks associated with land use .....33 Political relations ...... 65 are included in the report. A summary table of the key indicators is included (see Monitoring energy and water consumption ...... 33 Attitude to bribery ...... 65 Economic Environmental pages 6–7). A description of other areas of Social responsibility Energy and water consumption ...... 34 responsibility responsibility responsibility, such as activities promot- Environmental energy profile ...... 34 Comparison of the report with GRI guidelines ...... 66 ing product safety and privacy protection, Own Supply Own Supply Transport ...... 37 Contact personnel in corporate responsibility...... 69 can be found at the end of the report. A operations chain operations chain Transport emissions ...... 38 Assurance statement ...... 70 glossary of the most important terms and Organic Fairtrade Kesko’s CO emissions ...... 39 Definitions of terms ...... 71 Swan labels 2 a list of key contact personnel are also label EU flower Use of materials ...... 39 included. Accounting Standards SA 8000 Rules of Securities Exchange ISO 14001 standards SQ, BSCI G International operations covered Corporate Governance Statement 06 RI partially 0 O 2 Global Reporting Initiative reporting r The fi rst indicators of corporate responsi- r g e a bility regarding the Group’s subsidiaries

d n AA 1000 AS approach assurance l

i Kesko is a registered corporate member of the Global Reporting Initiative (GRI). We support

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s outside Finland were obtained for 2002.

a

h

t

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i the work of the GRI in developing globally approved recommendations for reporting on

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k In the areas of economic and social re- management a

n Values, goals, strategy t a

l S sustainable development in cooperation with a broad cross-section of stakeholders. sponsibility, statistics in this report are 4 Kesko Corporate Responsibility Report for 2005 Kesko Corporate Responsibility Report for 2005 5

Review by the President and CEO Key facts about the Kesko Group

Kesko strengthened its position in com- formance. I believe that these activities nications and daily customer service Kesko’s business operations market capitalisation stood at ¤2,320 mil- (home electronics), and Agentrics LLC parisons evaluating listed companies’ will contribute to consistent high quality needs to provide them with practical Kesko is Finland’s largest trading group, lion, an increase of ¤605 million on 2004. (former World Wide Retail Exchange, corporate responsibility in 2005. Both in all our units. information and solutions that can help and also operates in Sweden, Norway, the a B-to-B Internet marketplace). Dow Jones and Ethibel named Kesko the While our approach to responsibility is them here. I hope that this year we will Baltic countries, and Northwest Russia. Personnel leading company in the world in the re- well-known and recognised in the busi- make progress in this area in particular. The Group’s subsidiary, Kaukomarkkinat Converted into full-time employees, Customers tailing sector, and Innovest rated Kesko ness world, K-store customers do not yet Oy, also operates in many other countries, Kesko Group had an average of 21,603 em- Retailers accounted for 40% of Kesko’s Food the best company in its global analy- know much about it. Customers’ interest including Denmark, Germany, Poland, ployees in 2005. The fi gure includes half sales in 2005. On average, K-retailers sis of food and drug retailers. As Innovest in the environmental and social impacts China, and Vietnam. of the personnel employed by Rimi Baltic made 88.0% of their total purchases had also previously included Kesko in the of consumption, and their willingness to MATTI HALMESMÄKI Kesko’s division parent companies – AB. Compared to 2005, this represented (87.8% in 2004), and 90.4% of their food ‘The Global 100 Most Sustainable Corpo- act in a responsible way, look set to con- President and CEO Kesko Food Ltd, Rautakesko Ltd, Kesko an increase of 945 in Finland and 3,130 purchases (90.0% in 2004) from Kesko. rations’ list, published by the World Eco- tinue to increase. Our marketing commu- Kesko Corporation Agro Ltd, and Keswell Ltd – are responsi- in other countries. At the end of the year, Wholesale customers − hotels, restau- nomic Forum, we have good reason to be ble for store sites, purchasing, logistics, the total number of employment con- rants, catering kitchens, service stations, proud of the respect our performance has store concepts, and chain cooperation tracts was 26,978 (22,146), of which 14,707 kiosks, construction companies, and oth- engendered among the international with K-retailers. Kesko also has its own (13,602) covered personnel in Finland and ers − accounted for 29% of Kesko’s sales. investment community. retail outlets; see www.kesko.fi (Consum- 12,271 (8,544) in other countries. Approxi- Direct sales to consumers through Kesko’s The world’s leading pension funds will ers). Kesko Food and ICA AB of Sweden mately three quarters of employees own retail stores accounted for 31%. publish their joint ‘Principles of Respon- own Rimi Baltic AB, a grocery retailer in worked in retailing. sible Investments’ in spring 2006. Time the Baltic countries, on a 50/50 basis. Breakdown of Kesko’s net sales in 2005 will tell how these principles will affect Kesko’s VV-Auto Oy subsidiary imports Real estate the portfolios of pension funds and other cars and also operates as a dealer in Kesko Group owned or leased 3,438,000 m² investors, and how sustainability indexes Helsinki and Turku. of real estate and premises at the end of will be used in decision-making. I believe The Group’s net sales totalled ¤8.3 bil- 2005, which was 14% more than in 2004. that information on corporate responsi- lion in 2005, of which 46% were generated Rimi Baltic AB is not included in the bility is needed, and that the impact of in the food trade. Net sales outside Fin- fi gures. Kesko owned 948,000 m² in reliable indexes on investments will in- land represented 20.0% of total net sales Finland, and 163,000 m² in other coun- crease. It is important, therefore, for Kes- (14.6% in 2004). tries. Warehouses and offi ces accounted ko to maintain its reputation and position Kesko works in close chain coopera- for over a quarter of this total, with store Kesko Food 46.0% as a frontrunner in this area. tion with K-retailers in Finland, which premises accounting for the rest. The Rautakesko 19.2% Comparisons provide us with material numbered 1,290 at the end of 2005. Kesko total fl oor area of leased premises, Keswell 11.7% for analysing our strengths and weak- also had approximately 250 other retailer consisting mainly of retail stores, was Kesko Agro 11.3% nesses. Although the overall level of our partners in the Asko, Sotka, Tähti Optik- 1,845,000 m² in Finland and 482,000 m² VV-Auto 8.3% performance is good, there is still room ko, Byggmakker and Senukai chains. The outside Finland. The majority of store Kaukomarkkinat 3.5% for improvement. Our Group-level objec- K-Alliance had 1,789 retail stores in premises owned or leased in Finland are tives are not yet fully measurable, we Finland and 369 in other countries. Their rented to K-retailers. Kesko’s market areas have yet to assess how responsibility is sales totalled ¤9.5 billion (¤8.4 billion in linked to our economic performance, and 2004), of which ¤1.8 billion were generat- Product and service suppliers we have not made suffi cient progress out- ed outside Finland. Kesko bought products and services side Finland, including those companies valued at approximately ¤7.1 billion in acquired in 2005. Kesko’s shareholders 2005. As our Group expands and becomes Kesko is a listed company, and had 29,339 The number of active suppliers totalled more international, the importance of shareholders at the end of 2005. Series A about 25,000. Approximately 11,000 of management systems, indicators, and re- shares accounted for 32.9% of the compa- these operate in Finland, accounting for porting systems in guiding the operations 66% of total purchases, while nearly ny’s total share capital and 83.1% of all 2. will become more important. We have re- votes. The corresponding percentages for 8,000 active suppliers operate in the 1. 3. cently established a Corporate Responsi- B shares were 67.1% and 16.9%. The com- Group’s other operating countries. The 5. bility Steering Group to defi ne the extent pany’s 20 largest shareholders, calculated main countries from which goods were and profi t targets of our corporate respon- by number of votes, held 35.8% of all imported into Finland were Germany, sibility – ‘our management vision’ – and to Sweden, China, Italy, France, and Holland. votes and 20.9% of all shares. Shares held 4. ensure that our line organisation is com- by non-Finnish shareholders increased Kesko is a member of the following mitted to this vision. We have started a from 23.2% to 27.0% in 2005, equivalent international purchasing organisations: three-year development programme and to 7.1% of all votes. Associated Marketing Services AMS (gro- introduced an online information system ceries), EuroMat (building and interior Jouko Kuisma, Head of Corporate Responsibility (in the centre) discussing Kesko’s The market capitalisation of A shares 1. Finland, 2. Sweden, 3. Norway, for corporate responsibility reporting to decoration products), Intersport Interna- international sustainability index performance with Juhani Järvi, Corporate Executive was ¤770 million as of the end of 2005, 4. The Baltic countries, 5. Russia, further increase the reliability of our per- Vice President (left) and Matti Halmesmäki, President and CEO. tional (sports goods), EP International and that of B shares ¤1,550 million. Total St. Petersburg area 6 Kesko Corporate Responsibility Report for 2005 Kesko Corporate Responsibility Report for 2005 7

Key indicators of corporate responsibility for the Kesko Group 2003–2005

Indicators of economic responsibility Indicators of social responsibility

2003 2004 2005 2003 2004 2005 FAS IFRS IFRS Job satisfaction in Finland, scale 1-5 own job 3.71 3.79 3.82 Net sales, € million 7,070 7,517 8,322 superior’s performance 3.79 3.80 3.84 Profit before taxes, € million 162 241 239 unit’s operations 3.76 3.76 3.78 Return on invested capital, % 10.9 14.3 12.5 Kesko’s operations 3.70 3.68 3.64 Dividends paid, € million 91 274 95 Employee turnover 1) Investments, € million 259 192 454 new 6,650 7,247 8,568 Equity ratio, % 51.7 44.2 42.3 left 5,162 5,943 7,055 Salaries paid, € million 316 353 419 retired 151 169 177 Income tax, € million 58 47 49 Average age of employees Personnel, average 15,219 17,528 21,603 in Finland 35.0 *) 35.0 Purchases from suppliers, € million 6,258 6,514 7,103 in other countries 1) 33.0 *) 31.0 Support to organisations operating for the public good, € million 2.4 2.4 2.2 Average duration of employment in Finland, years 2) 9.0 9.0 9.0 Sickness absences per person (work days) in Finland 8.4 9.9 9.7 Indicators of environmental responsibility in other countries 1) 10.9 10.5 8.0 2) Use of electrical energy in real estate, GWh 1) 730 719 889 Funds used for health care per person, € 359 402 427 Use of heat energy in real estate, GWh 1) 337 296 299 Average annual salary per person, € Use of water in real estate, 1,000 m3 2) 713 669 650 in Finland 29,155 29,411 28,944 Emissions from the production of electrical and heat energy used in other countries 8,211 8,102 9,081 climate change,tn CO2 eq 1) 262,949 263,117 272,707 Training days per person acidification, tn SO2 eq 1) 1,050 824 1,000 in Finland 1.6 1.2 1.8 1) Distribution transport in other countries 1.5 2.9 1.0 2) loads 3) 117,782 109,278 117,571 Spending on training per person, € 453 448 370 2) kilometres, 1,000 km 4) 19,700 20,126 14,100 Social quality control of purchases tons 3) 609,000 576,000 722,784 suppliers in developing countries included in statistics 247 300 350 carbon dioxide emissions, tn 22,943 23,438 23,778 total number of employees in above companies 263,000 280,000**) 300,000**) Use of materials/waste, tn companies with SA 8000 certification 19 24 24 materials in packaging imported into Finland 31,392 33,448 29,331 number of employees in companies with SA 8000 certification 47,000 54,000 54,000 waste in distribution warehouses in Finland 9,573 9,647 8,916 suppliers included in the BSCI audit process - 31 42 of which for recovery, % 5) 89.8 89.4 89.8 waste in distribution warehouses in companies outside Finland *) *) 18,358 1) data for Rimi Baltic unavailable radioactive waste from production of electricity purchased 6) 0.96 0.54 0.79 2) data for Finland only *) data has not been collected or is inaccurate 1) It was impossible to distinguish between the use of electricity and heat in all properties outside Finland (Rimi Baltic included). **) statistics have been transferred to the common BSCI database, from where data on the employee numbers Here, district heat and the heat generated by these properties are included in the heat and all other in electricity. of Kesko’s suppliers cannot yet be obtained 2) water consumption figures of all properties outside Finland are not available 3) no load and ton statistics are available on foreign transportation or transportation outsourced in Finland 4) no distance information is available on pallet transportation outsourced in Finland, or on Rimi Baltic or Norgros, where transport emissions are calculated on the basis of fuel consumption 5) figures include organic waste 6) in Finland the amount of nuclear energy used, elsewhere the amount of radioactive waste *) data has not been collected or is inaccurate 8 Kesko Corporate Responsibility Report for 2005 Kesko Corporate Responsibility Report for 2005 9

Vision of corporate responsibility

Corporate responsibility at Kesko is based responsibility has become an essential stricter control from society or exercise General Kesko Group’s total net sales will continue proach to equality, and improving the on measurable work and initiatives, linked part of day-to-day work and company pressure on them to achieve the improve- The impact of globalisation on compa- to grow. In Finland, Kesko’s personnel working conditions of employees in man- to the Group’s corporate values, goals, and management. Results must be measured ments they want. Voluntary, proactive nies’ operating environment continues to numbers can be expected to increase ufacturing operations. As the supply of strategy. Performance in the areas of eco- and improvement targets set to ensure measures, and exceeding minimum grow, both in respect of international mainly due to acquisitions, and the com- products and services grows, consumers nomic, social, and environmental respon- continuous progress. More accurate standards, allow pioneering companies to trade and foreign investments. The im- petition for new employees will intensify will have more options and more infl u- sibility is enhanced in accordance with the measurements also help rationalise oper- avoid such confl icts and at the same time portance of international organisations – as the baby-boomer generations reach ence in shaping trade and the supply of expectations of key stakeholder groups. ating practices and lower costs, particu- pull ahead of those that react slowly and whether representing different countries, retirement age. Companies that offer goods. This leverage is more often used to Although the concept of corporate respon- larly in the areas of environmental and wait for legislators to set the pace. companies, trade unions, or non-govern- good job satisfaction and varied respon- penalise clear failures than reward good sibility is commonly used, its meaning is social responsibility. mental organisations – in shaping eco- sibilities and career opportunities are performance. not suffi ciently clear in all contexts. As Public, transparent reporting of re- Our thinking behind the concept nomic developments is on the increase. the most likely to succeed here. Corpo- Kesko plays a major role in shaping a result, we at Kesko prefer to talk about sults is important, particularly for large of responsibility Many of these favour compulsory regula- rate values and responsible corporate be- families’ wellbeing and quality of life. We responsible business operations or re- listed companies trading internationally. A responsible approach to operations is tions, but decision-making in internation- haviour are valuable – young jobseekers need to dimension our store and distribu- sponsibility to stakeholders. Increasing globalisation has seen many important to Kesko for many different al forums is slow and diffi cult. There are clearly favour companies with a good tion network appropriately to serve our As late as the end of the 1990s, respon- stakeholders keep a closer eye on corpo- reasons: already a large number of standards, but reputation. Kesko’s reputation as a re- customers and be economically effi cient. sibility was assessed from the viewpoint rate responsibility. If stakeholders feel – stakeholders want to be able to evalu- adapting them to national legislation and sponsible company benefi ts the company Store sites, business operations systems, of reputation risk management and en- that companies resort to irresponsible ate a company’s performance using supervising compliance with them is in- in its recruitment both in Finland and and competitiveness-enhancing services suring a positive corporate image. Today, means to make profi t, they will demand other indicators than purely economic adequate, particularly in developing coun- elsewhere. With smaller numbers of peo- must provide K-retailers with the kind of ones tries. Pioneering companies play a valua- ple on the job market, we need to put added value they need, above and beyond – responsibility is part of a company’s ble role through their voluntary activities, more emphasis on older employees and cost-effective sourcing, to differentiate competitiveness, and is a factor in often acting as a catalyst for future rec- continue to reduce the pressures on their themselves from their competitors and competing for investors, employees, ommendations and legislation. Kesko is performance. Occupational health care operate profi tably. We believe safety, and customers one of these pioneers, and there are no needs to give more emphasis to preven- reliability, and ethics will gradually rival – responsible management is better new standards in sight that would have a tive work, reducing the number of people price in communications and marketing. management, and aims at a good work- profound impact on Kesko’s work in the taking disability pensions and raising Researchers, non-governmental ing environment in which environmen- corporate responsibility area. the average retirement age. organisations, and the media can be tal effi ciency means cost effi ciency expected to pay increasing attention to – good performance in terms of environ- Shareholders and investors Product and service suppliers investigating the true costs behind low mental and social responsibility can Kesko’s strengths include steadily grow- Comprehensive networking with suppli- prices, helping consumers to distinguish improve economic performance ing profi ts and providing shareholders ers of goods and services and K-retailers between responsible and irresponsible – good economic performance creates with a good dividend on their investment. means that all the parties involved accept competition. opportunities for improving environ- Achieving good results using responsible common values and goals. In terms of mental and social responsibility methods is increasingly important to Kesko’s own business responsibility, it Cooperation with the authorities and – responsibility involves reputation risk investors and other stakeholders. Kesko is important that the Group follows its other organisations management, which secures the stable wants to be listed in the major sustaina- values and principles when building busi- Kesko has achieved a lot of recognition development of sales, profi tability, and ble development indexes that are recog- ness premises, managing its real estate, for its work and thereby opportunities for share value nised as impartial indicators of responsi- and in purchasing, distribution, and re- making its voice heard both nationally – responsibility improves corporate ble performance. Inclusion in such index- tail store operations. Kesko’s aim is that and internationally. To continue to lead image if a company is seen as a pioneer es helps reinforce Kesko’s standing with its approach to responsibility is strongly the way and shape developments, Kesko – being a pioneer in the area of corporate existing shareholders and attracts the refl ected in the K-Alliance’s consumer must actively monitor and forecast responsibility opens up new potential attention of investors who value responsi- brands. This also means that partners changes in society and make its expertise for infl uencing national and interna- ble corporate behaviour. Large institu- have to be selected carefully, and clear available to others in the industries in tional developments in an industry. tional shareholders are becoming inter- principles and guidelines followed and which it operates and society as a whole. ested in investing in Kesko. The number monitored by everyone involved in the To do this, Kesko is committed to main- Our vision of the key issues of investors prioritising responsibility as product and service chain. taining continuous contacts with non- in corporate responsibility a factor in their investment decisions still governmental organisations, the authori- Kesko’s corporate responsibility efforts remains small, however. It is diffi cult to Consumers ties, and other decision-makers, and to are based on the Group’s values and distinguish the impact of responsibility Consumer interest in corporate responsi- participating in a wide range of national vision of corporate responsibility. The from other factors in shaping share value, bility is continuing to increase, despite and international organisations in its Corporate Management Board assesses although the negative impact of poor per- the fact that purchasing decisions are own sector and in business in general. Kesko’s vision approximately every other formance is refl ected more clearly. strongly based on price. Responsibility is year. The vision outlined below has been seen as embracing high-quality products, drawn up from the viewpoint of the Finn- Personnel the maintenance of services, good human ish market and was approved in March The proportion of net sales accounted resources policies, high standards of envi- 2005. for by operations outside Finland in the ronmental protection, a proactive ap- 10 Kesko Corporate Responsibility Report for 2005 Kesko Corporate Responsibility Report for 2005 11

Stakeholder analysis

Kesko’s vision of corporate responsibility benefi t from cooperation in developing its and planning of cooperation. Measuring, Details on Kesko’s key stakeholder groups has been considered from the standpoint operations, Kesko and its stakeholders documenting, and reporting results gained

of a variety of stakeholders in this report. need to interact on a regular, systematic, in shakeholder interaction is a challeng- Stakeholder Stakeholders’ expectations concerning Kesko Kesko’s activities Indicators The diverse nature of Kesko’s operations and measurable basis. ing task, and much still remains to be means that the Group has a large number Preparing a stakeholder analysis is done in this area. Authorities Strict compliance with legislation. Practical expertise for developing the Amount of taxes paid, number of of stakeholder groups, all of which have included in the annual planning of Kesko’s The table on page 11 presents stake- (EU, state, Good tax-paying ability, stable employment. operational base of the trading sector and jobs, payroll, investments, structure their own expectations, some of which management system. The Corporate holder groups’ expectations concerning local Maintenance of a comprehensive store and economy. Direct and indirect taxes and fees and regional coverage of the store authorities) distribution network. contributing to the wellbeing of society. network. may be mutually contradictory. To enable Responsibility Development Unit has pre- Kesko’s responsibility, Kesko’s activities Cooperation with the local authorities in stakeholder groups to feel that Kesko pared a stakeholder process description designed to meet them, and the indicators developing and maintaining the store network. meets their expectations and for Kesko to (see below) to facilitate the structuring used for assessing performance. Personnel Activities that maintain and develop job Participation of personnel in the planning and Job satisfaction survey, performance satisfaction and safety. Performance that development of operations. Improving and appraisal discussions, in-house contributes to the appreciation of the quality of management. Maintenance customer satisfaction survey. Statistics employees’ work and role in the workplace. of work ability, in-house job rotation, on employment disputes turnover, In-service training, career development, continuous training, promotion of wellbeing absenteeism, accidents, training, Kesko’s stakeholder process permanent jobs. in the workplace, motivating pay. retirement age. Employer profile. Shareholders High annual dividend. Good management Contacts with shareholders (TradeMaker Number and structure of shareholders, of corporate governance, and social magazine for stakeholders) and capital market share trading, annual dividend yield, and environmental risks. players. Comprehensive information on finan- listings in sustainable development cial performance and operations, generally indexes, trading sector comparisons. Stakeholder interaction through the Web. Competitive dividend policy.

Suppliers of Business growth, good liquidity, Goods from agricultural producers, Development and breakdown of products and long-term business relationships. manufacturers, and importers. Store network purchases by country/area. Number services planning and construction services. Furnishings, of suppliers, concentration of equipment, supplies, information systems, purchases. Terms of payment of invoices. Planning Data gathering Assurance Reporting training, and advertising for Kesko’s own business and that of K-retailers.

K-retailers K-retailers expect competitive store sites, Vertical cooperation agreement between Kesko Customer satisfaction surveys. and retail concepts, product selections, and and K-retailers. Kesko is responsible for Concentration of K-retailers’ purchases • Identifying stakeholders • Expectations and importance • Reporting and comparing wholesale prices, as well as services and other developing the Group’s operating system and in Kesko. Trends in the market to the company performance to objectives customers solutions contributing to competitiveness. retail concepts, for store sites, information shares of K-chains. Development of

• Nature of the stakeholder Wholesale customers expect competitive systems, marketing, training, etc. Kesko sales to wholesale customers. • Indicators • Reporting against criteria relationship prices and service. also sells and delivers products to (GRI, AA1000) • Stakeholder expectations • Scope, target, and timetable many wholesale customers. of the process • Assurance • Key values and operating Consumers Overall responsibility, easy shopping, Providing retail concepts, product selections, Customer satisfaction surveys. Trends principles relevant to • Type of data collection • Stakeholder feedback assistance, and advice. Opportunities to and marketing campaigns in cooperation in the sales and market shares of different stakeholders make ethical consumption choices, with the K-retailer chains that interest K-chains. Corporate image surveys. • Data auditing and analysis, recycling and other services. and satisfy customers. Plussa customer Amount and quality of feedback. comparison with objectives loyalty programme, Pirkka magazine for Development in the number and and indicators customers, customer feedback systems. sales of ‘ethical‘ products.

Non- Overall responsibility, clear operating Presentation of activities, and a proactive ap- Corporate image surveys. governmental principles, reliable results reporting, proach to contacts when drafting and imple- Amount and breakdown of support organisations open and regular communications. menting operating principles and systems. for the public good. and trade Cooperation agreements, financial support to Practical implementation: policies, guidelines, methods unions socially important organisations and institutions.

Media Open, comprehensive, reliable, and fast Information about operations required by the Daily media monitoring, corporate Documentation communications. rules of the Securities Exchange and other communications surveys, participation information. Annual report, corporate in annual report, investor responsibility report, Internet pages, stock communications, and corporate exchange and other releases, presentation responsibility report comparisons. material, news conferences, services of regional communications officers. 12 Kesko Corporate Responsibility Report for 2005 Kesko Corporate Responsibility Report for 2005 13

Key areas of influence out the purchasing chain, the emphasis is – Association for Finnish Work (Board Kesko can achieve much that benefi ts so- on preventing employees’ problems at member) ciety and its stakeholder groups through individual level. – Finfood (Chairman) Case active, target-driven operations Supporting associations and organisa- – Finnish Business & Society network In terms of economic responsibility, tions related to Kesko’s operations pro- (Board member) getting noise pollution under control at a logistics terminal Kesko’s purchases benefi t its suppliers motes services and wellbeing in local com- – EuroCommerce, the retail, wholesale and their employees, which in turn munities and society as a whole. Kesko and international trade representation The logistics terminal in question is located at Hakkila in Vantaa and handles pallets, skips, and boxes that are returned for increases tax revenues for the municipali- hopes that taking an active approach here to the EU (environmental committee reuse, together with materials destined for recycling, such as cans and board. Handling this type of material is an integral part ties and states concerned, providing more will lead to better dialogue and provide and CSR experts) of effi cient retail logistics today, and part of Kesko’s commitment to environmental responsibility. The volumes of items for reuse funds for developing social security and Kesko with more information about the – UGAL, EU organisation of groups of or recycling processed annually by Kesko nationally in Finland are considerable. Some 33 million cans were recycled in 2005, for other services. For shareholders, wishes and expectations of its stake- independent retailers (Vice Chairman, example, and over fi ve million Transbox crates. responsible and profi table operations holder groups. member of the team of legal experts) Material from across southern Finland is handled at the Hakkila Return Logistics Terminal, which separates and grades it mean a steady growth in Kesko’s share – Business Social Compliance Initiative into separate streams and forwards it on to recycling companies. Commissioned in summer 2005, the terminal deals only with value and a good dividend yield. Main- Responsible activities in BSCI (Board member) material for recycling and reuse from retail stores and hotels, restaurants, and institutional kitchens. taining a comprehensive store network organisations – International Chamber of Commerce Although carrying out a very necessary function in terms of effi cient recycling and reuse, a terminal such as this inevitably and encouraging retailer entrepreneur- Participation in national and internation- ICC (members of the environmental generates noise pollution as a result of truck traffi c, loading and unloading, and separating operations. Housing on the site ship as a local resource ensures that con- al efforts to develop the trading sector committee and corporate responsibility has been demolished and a number of changes made to the existing structures for Kesko’s recycling operations. The building sumers continue to have access to the and the economy as a whole forms part of committee, National Committee of permit for these changes was applied for by the previous owner of the site, which meant that its future use as a returns terminal services they need locally. corporate responsibility. Kesko has been Finland: Board member) by Kesko, and the nature of this operation, were not fully appreciated by nearby residents. As the original permit application Continuous improvements in environ- involved in these types of efforts through – CIES - The Food Business Forum described the building as a warehouse – with repair, garage, storage, and offi ce space – the use it is now put to was seen as mental performance result in the more numerous national and international (members of the Supply Chain Manage- a major change of usage by residents, who demanded that operations should be ended because of the noise nuisance in effi cient use of energy, reduced relative organisations and groups for decades. ment, Food Safety and Food Business August 2005. emissions, less waste, enhanced recovery In 2005, these included: in Society programmes). To reduce the level of noise, Kesko applied for a permit to build new loading and unloading docks, and transfer board rates, and more environmentally sound – Confederation of Finnish Industries baling equipment to the other side of the building. The plan was also to shift night-time operations in their entirety from the products and packaging, for example. EK (Vice Chairman) Kesko employees are also active in Vanha Porvoontie side of the site, closest to residents, to an inner part of the site. The permit for these changes was granted Improvements in the quality of man- – Central Chamber of Commerce several state committees and working and work on the modifi cations was started at the end of 2005. Local residents appealed the permit, but this was rejected by agement increase employees’ job satisfac- (Board member, Chairman of the groups, confederation committees, and the Vantaa city authorities on 28 February 2006. tion and motivation. Cooperation with Social Responsibility in Importing industry and recycling organisations in Kesko had already introduced measures designed to reduce noise levels, particularly at night, during the summer and suppliers in developing countries is help- network) Finland. A more detailed list is available at autumn of 2005 prior to starting on these structural changes. These included barring heavy vehicles from the gates on Vanha ing to improve local working conditions. – Federation of Finnish Commerce www.kesko.fi (Responsibility/Economic Porvoontie at night and redirecting traffi c through Central Warehouse 2. Night-time operations have also been curtailed, by Both in our own operations and through- (Board member) responsibility). banning the use of forklift trucks in open areas, concentrating pallet deliveries to stores between 6 in the morning and 10 at night, and by allowing vehicles picking up glass for recycling to come on site only after midday. Additional sound insulation has also been added to the fl oors and walls of the terminal. Unfortunately, it has proved impossible to observe all the new Kesko’s key channels of influence guidelines, and some element of night-time noise remains. On the basis of noise level measurements and modelling work, Kesko believes that, following the completion of the meas- ures listed in the company’s permit, the noise level resulting from the operations of the returns terminal and its impact on the UN OECD WTO nearby residential area will be below guideline levels.

UNEP Other sub- ILO Global influence organisations GRI EU Parliament ICC EU Commission

EU influence CSR Euro- UGAL Europe Commerce UNICE

Finnish Federation of Finnish Commerce Confederation Business & of Finnish ICC Society Federation Commercial Industries EK Finland of Finnish Employers’ Commerce Association and Trade Central Chamber of Commerce Industry Finnish influence associations Finnish Business and Policy Forum EVA / the Research Institute of the Finnish Economy ETLA Kesko 14 Kesko Corporate Responsibility Report for 2005 Kesko Corporate Responsibility Report for 2005 15

Corporate responsibility forms part of administration, human resources, envi- The Kesko Group has a Corporate Man- Kesko’s principles and management systems excellent practices, and other goals sup- ronmental issues, communications, fi nan- agement Board, the Chairman of which is porting responsible activities include ex- cial management, real estate, fi nancing, Kesko’s President and CEO. Its members guiding our approach to corporate responsibility ceeding customers’ expectations, devel- security, and risk management. Kesko’s comprise the Corporate Executive Vice oping best practices in the sector, and values-driven approach to corporate President, Deputy to the President and management by values. responsibility is included in our corpo- CEO; the Presidents of the major division The Kesko Group has operated in line with that all four values are important and been in use since 1999, and were revised rate policies and principles, particularly parent companies; and the Senior Vice the Group’s value, quality, and environmen- have been well implemented. A good in 2002 to refl ect the Group’s new values. Strategy in respect of administration, human Presidents responsible for Finance, tal management systems since the mid- working environment was seen as the An ‘Our Working Practices’ booklet pro- Information about Kesko’s strategy resource, and environmental policies. Human Resources and Corporate Commu- 1990s. The management system was up- most important single value, and employ- vides detailed guidance on practical mat- can be found in the company’s Annual nications. The Corporate Management dated in 2002 to further highlight the im- ees said that is was also the one in re- ters related to working in accordance with Report, which can be consulted online at Corporate Governance Statement Board has no authority based on legisla- portance of values in underpinning all our spect of which there is still the most im- our values. The guide has been translated www.kesko.fi (Investors). and organisation tion or the company’s Articles of Associa- operations. As part of closer chain cooper- provement to be made. Corporate respon- into Swedish, Estonian, Latvian, Lithua- Corporate responsibility is refl ected in Kesko’s Corporate Governance Statement tion. It acts as an advisory body appointed ation, Kesko and K-retailers have agreed to sibility is considered the value best re- nian, Russian, and English. Separate the development of leadership, competen- is updated regularly, and can be consulted by Kesko’s President and CEO, which is re- follow the same values and ethical princi- fl ected in operations, but is seen as the training material has been developed to cies, the store network, business operat- at www.kesko.fi (Investors) and in the An- sponsible for dealing with Group-wide de- ples, and as Kesko’s international expan- least important of the four. The plan is to support the adoption of the Group’s ethi- ing systems, chain concepts, and brands. nual Report for 2005. The most recent up- velopment projects and Group-level princi- sion proceeds this practice will be intro- repeat the survey in Finland in autumn cal principles and values. K-retailers have Kesko aims at controlled growth and date was made on the basis of the Corpo- ples and practices. The Corporate Manage- duced in subsidiaries outside Finland. 2006, and conduct a corresponding sur- also adopted the same values and princi- offering investors a steadily growing re- rate Governance Recommendation for ment Board also participates in the prepa- vey for the fi rst time in subsidiaries out- ples. We plan to conduct an assessment of turn. A systematic approach to risk man- Listed Companies issued in summer 2004. ration of matters that are considered by Values side Finland and in K-stores. how well these principles are recognised agement and diversifi ed operations pro- Since the 2005 Annual General Meet- Kesko Corporation’s Board of Directors. Kesko’s present values were introduced in A number of corporate responsibility in connection with the above value survey vide a good foundation for a stable cash ing, Kesko Corporation’s Board of Direc- The Corporate Responsibility Unit, 2002. Their importance and role in plan- indicators can also be used to measure in autumn 2006. fl ow and solid earnings- and dividend- tors has consisted of seven members, responsible for the development and co- ning operations and day-to-day activities how well a company implements its val- ‘Our Working Practices’ can be con- generating capacity. Good fi nancial man- elected for three-year terms rather than ordination of corporate responsibility at have been discussed throughout the ues. The illustration below gives some sulted at Kesko’s web site: www.kesko.fi agement has also contributed to responsi- the recommended one-year term of offi ce. Group level, was organised under Corpo- Group at employee and training events. examples of these indicators. (Responsibility). ble operations in environmental and so- Four members were independent of the rate Development, headed by the Corpo- A survey of employees’ views of the im- cial issues. Kesko has been, and intends company. The term of all present mem- rate Executive Vice President, Deputy to portance of Kesko’s values and how they Ethical principles – ‘Our working Goals to continue to be, a pioneer in the trading bers will expire at the close of the 2006 the President and CEO from 1 April 2005. are refl ected in operations was conducted practices’ The Group’s goals guide how the goals and sector in corporate responsibility, some- Annual General Meeting. In January 2006, the Corporate Manage- in the Group’s Finnish units in late 2003. Kesko’s ethical principles covering its objectives for its divisions and chains are thing that has been refl ected in ‘the best The Board of Directors established an ment Board established a Corporate Re- This indicated that Kesko employees feel personnel – ‘Our Working Practices’ – have set and how strategies are implemented. in the sector’ rating received in the Dow Audit Committee made up of three mem- sponsibility Steering Group, comprising Jones Sustainability Indexes. bers in April 2004. No Board members seven members drawn from Kesko’s man- with specifi c responsibility for corporate agement, representing different areas of Corporate policies responsibility matters have been appoint- corporate responsibility (representatives Kesko’s values Above and beyond the Group’s strategy ed. The Board of Directors will review the of Kesko Food, Rautakesko, Kesko Agro, and management system, Kesko’s corpo- Corporate Responsibility Report in the Keswell, Human Resources, Real Estate rate policies guide planning and opera- spring after it has been completed and Services, and Corporate Communica- tions at all business levels. They cover any other related issues as necessary. tions). The responsibilities of the group,

Goals

Good performance Most satisfied customers Excellent practices, Competent and – increasing – growing customer stores, and services motivated people • internal and external customer satisfaction surveys value shareholder value • Best practices and • Management by values • Return on equity of • Exceeding customer performance in the • Systematic 12% • development of net sales, market share, and profit expectations trading sector development of • customer surveys • The best in the • High level of corporate competencies • Return on invested • investor surveys industry – leadership responsibility capital of 12% in selected markets • Growth in Finland will • job satisfaction survey exceed market growth • internal customer satisfaction survey • sickness absences, accident statistics • Growing proportion of international • equality statistics, training statistics, etc. operations

• customer, decision-maker and media surveys • sustainability indexes 16 Kesko Corporate Responsibility Report for 2005 Kesko Corporate Responsibility Report for 2005 17

chaired by the Corporate Executive Vice stages of the management system in the An environmental management system Reporting tal income, costs, and investments in and combines responsibility data from President, include outlining stakeholders’ same way as all other operations. complying with the ISO 14001 standard Corporate responsibility reporting affects this way. various organisational levels and from expectations concerning Kesko’s corpo- Kesko’s management system includes has been adopted in all Kesko units that performance in the same way as fi nancial Independent assurance improves the separately specifi ed source systems in a rate responsibility, defi ning the strategy quality evaluation, which is carried out by impact the environment to a signifi cant reporting affects fi nancial performance. reliability of reporting information and form required by GRI guidelines. The sys- for responsibility, agreeing on the operat- units in the form of annual self-assess- extent. Environmental management in Where performance can be measured, promotes the continuous development tem has been tailored for Kesko’s operat- ing principles and systems required for ment, based on the criteria of the Finnish K-stores is based on the K-environmental clear targets can be set and management of indicators and measuring methods – ing sector environment – the indicator of their implementation, and monitoring the Quality Award. A competition for the store concept. Compliance with the latter improved. The reporting recommenda- and an assurance has been provided for materials use, for instance, complies with implementation of decisions in the Group’s internal quality prize is arranged is monitored through independent audits. tions of the Global Reporting Initiative Kesko’s Corporate Responsibility Report the reporting requirements of the packag- Group’s various unit. The group’s work every second year, and the ‘Quality Action More information about certifi cations have provided Kesko with a good basis for since 2002. ing waste directive. The calculation of will start in spring 2006, with the discus- of the Year’ competition annually. The within the system is given on page 31, and analysing its corporate responsibility, de- emissions from energy consumption and sion and implementation of Kesko’s cor- quality actions recognised in 2005 were about K-environmental stores on page 43. veloping responsibility indicators, and re- Online information collection and transportation has also been automated porate responsibility development pro- Anttila Oy’s ‘Best Service’ concept, Kes- Kesko’s environmental policy can be con- porting progress in this area to the public reporting system in the system. gramme for 2006–2008. well Ltd’s IT news fl ash campaign, and sulted at www.kesko.fi (Responsibility). In at large. Kesko joined the Organisational Kesko and the Finnish division parent The most important separate source Some corporate responsibility indica- Kesko Food Ltd’s Logistics’ H.Y.M.Y. pro- its environmental policy, Kesko has com- Stakeholders, a network established by companies adopted an online system for system to be integrated into the reporting tors have been included in units’ bonus gramme. K-supermarket Länsitori in Tam- mitted itself to the Business Charter for GRI, at the beginning of 2005, and a Kes- collecting information and reporting on system was EnerKey, a web-based con- systems, covering areas such as job satis- pere was the winner in the small enter- Sustainable Development published by ko representative was invited to join the corporate responsibility in 2005. The sys- sumption monitoring system supplied by faction, customer satisfaction, and recy- prises and business units category in the the International Chamber of Commerce GRI working group on indicators, which tem has been designed to improve the ef- Energiakolmio Oy (more information on cling performance. 2005 Finnish Quality Award competition. ICC. is aiming to publish a revised reporting fi ciency and systematic nature of collect- page 34). This has enabled consumption Kesko Food is gradually adopting a Quality control in respect of purchas- recommendation in autumn 2006. ing information on corporate responsibil- and area information on approximately Management systems quality system based on the EFQM / ISO ing, particularly that with a risk compo- Progress made in the areas of envi- ity and reporting processes, and enable 600 properties owned or leased by Kesko Kesko’s management system is used to 9000 standard. It was expected that the nent, such as imports from developing ronmental and social responsibility also the more effi cient use of responsibility to be automatically transferred monthly plan and manage the Group’s operations system, documented in Kesko Food’s in- countries, is carried out in compliance has a fi nancial impact. Successful envi- performance indicators in monitoring to the corporate responsibility reporting to ensure that its goals are attained. The tranet, would have been largely completed with the principles of the European Busi- ronmental activities usually mean cost day-to-day operations and Kesko’s man- system, thereby making more detailed system highlights the importance of pri- in 2005, but updating resulting from or- ness Social Compliance Initiative and the savings in a company like Kesko. How- agement system. monitoring of chain-specifi c consumption oritising customer orientation, people ganisational changes in Kesko Food has international Social Accountability SA ever, Kesko considers that recommenda- The system consists of a data collec- and targets possible. In respect of other management, promoting participation slowed down progress. The quality control 8000 standard. More information about tions concerning environmental account- tion module, based on Kesko’s organisa- important source systems, such as waste and cooperation, greater effi ciency, and of groceries and some home and speciality social quality control/accountability can ing are still relatively imprecise, and tional structure, and separate reporting and personnel information, the objective developing competitiveness and econom- goods for which Kesko Food’s Product Re- be found beginning on page 56, and infor- has not started monitoring environmen- and analysis tools. The system collects is to integrate them by the end of 2006. ic value added. Corporate responsibility is search Unit is responsible is based on an mation on the principles followed in im- not treated as a separate issue in manage- ISO 9000 quality system and a self-control ports from developing countries can be ment terms, rather all plans and activities system approved by the authorities. Kes- found at www.kesko.fi (Responsibility/ related to it are included in the different pro Ltd has a certifi ed ISO quality system. Purchasing principles). Kesko’s management system

december r ja be n m ua ve r Kesko in the trade value chain o y Annual plan n • Operating • Operating plan environment analysis f • Human resource plan e • Customer and r b • Budget e r competition analysis b Strategic u Retailer o analyses a t r • Resource analysis entrepreneurs’ c vision y o retail trade mission

values m

– Store concepts and r

corporate a

e

r

b

operating systems policies c Suppliers of h

Kesko’s m Strategy

- Purchasing, logistics and e Strategic

goods and retail trade Consumers Long-term plan t implemen- • Competitiveness

p choices

services marketing services • Strategic initiatives e • Competitive advantages s tation

a

– Store chains management broken down p • Strategy definition

r

i

– Store sites and retailers into 3-to-5-year l • Goals/Objectives t

s

action plans u • Strategic initiatives

– Support processes Business g

u

m

a a

customers y

y

l j u u j n e

Balanced Scorecard • Risk analysis Supply / goods flow • Quality self-assessment Demand / cash flow 18 Economic performance Economic performance 19

Share performance the rate of growth levelled out in 2005, Earnings per share and Kesko has been listed on the Helsinki and Kesko had 29,339 shareholders at the dividend per share, € Stock Exchange since 1960, when its B end of the year, compared to 29,801 in Economic shares were listed. Kesko’s A share was 2004. 3.0

listed in 1999. The share series differ from The proportion of non-Finnish share- 3.00 each other only as to the votes they entitle holders continued to increase, accounting 2.0 1.89 to. A shares entitle the holder to 10 votes for 27% of the total share capital (23% in 1.87 performance each and B shares to one vote. Nearly all 1.0 2004) and 40% of B shares (35% in 2004) 1.10 1.05 1.00 trading on the Stock Exchange takes place at the end of the year. Non-Finnish own- 1.00 0.75 0.60 in B shares. In recent years, the difference ers were the largest shareholder category 0 0.60 2001 2002 2003 2004 2005 in share prices has evened out and the in B shares. Finnish households account- premium generated by the additional ed for over 28% of the total, unchanged Earnings per share Dividend per share Key economic votes of A shares has nearly disappeared. from previous years. K-retailers and other The dividend is paid in the spring from the profit recorded for the preceding financial year. The figures for 2004 and Kesko’s two share option schemes for private companies continue to represent 2005 are based on IFRS accounting, and the figures for the previous years on FAS standards. performance + - management, dating from 2000 and around a quarter of shareholders. • Profit remained at the high level • Number of K-food stores dropped 2003, have increased the company’s share The Kesko Pension Fund, Vähittäis- in 2005 recorded in 2004. by 43. capital and number of shares. Before the kaupan Takaus Oy, and the K-Retailers’ • Market capitalisation increased by one • Proportion of small stores in the K-food schemes, the share capital was ¤180.4 Association, all closely linked to Kesko, Number of shareholders at year-end million and the total number of shares, which now hold 3–4% of all shares and third. business continued to decrease. 90,213,400. Assuming that all the share 7–9% of votes each, have been major 30,000 • Investments reached an all-time high. • Proportion of domestic purchases in options are exercised by the end of the shareholders for many years. Insurance 24,000 29,801 29,339 Pirkka product sales decreased from subscription periods in 2010, the total 28,761 • Kesko was chosen as the best in its companies, banks, and other similar 18,000 25,485 25,057 68.3% to 62.5%. number of shares will increase by institutional investors have also been sector in the Dow Jones Sustainability 12,000 7,640,000, representing 7.74% of the com- Kesko shareholders for decades. Accord- Indexes. • Kesko’s support for the public good was pany’s share capital and 1.99% of votes. ing to the international Investor Relations 6,000 7% below 2004. • Kesko was listed among the 100 best At the end of 2005, A shares accounted Global Limited (IRG) shareholder register, 0 2001 2002 2003 2004 2005 companies in the world in terms of for 32.9% of all shares, entitling holders Kesko had over 160 Finnish and overseas sustainable development. to 83.1% of votes. The corresponding per- institutional shareholders, accounting centages for B shares were 67.1% and for approximately 30% of B shares, at the • Kesko Food was ranked the best food 16.9%. end of 2005. These institutions adminis- retailer in the world in the Innovest ter around 550 investment funds that sustainability analysis. Broad shareholder base have invested in Kesko’s shares. Approxi- The number of Kesko’s shareholders has mately 40 of these funds were Finnish, • Employee numbers increased in Finland increased steadily since 2000. However, and the remaining over 500 are based and other countries.

• Purchases from Finnish and foreign Profitability of operations suppliers increased. 2003 2004 2005 • Kesko had 11,000 suppliers of goods FAS +/- % IFRS +/- % IFRS +/- % and services in Finland and 8,000 in Net sales, € million 7,070 9.3 7,509 6.2 8,322 10.8 other operating countries. Gross margin, % 12.8 13.3 14.2 Profit before taxes, € million 162 47.3 241 39.3 239 -1.1 Profit before taxes, % 2.3 3.2 2.9 ROI (return on invested capital), % 10.9 14.3 12.5 Introduction Indicators of economic responsibility in compliance with the GRI recommendation are generally also included in the company’s fi nancial statements. The analysis of econom- Divisional net sales by market area in 2005, € million ic responsibility presented here complements analysis elsewhere by showing how the Other economic benefi ts generated by Kesko are divided between its stakeholders. Finland Baltic countries Nordic countries Other countries Purchases from goods and services providers account for the majority of the eco- Kesko Food 3,417 405 - 8 nomic benefi ts generated by the operations of Kesko and K-retailers, while salaries Rautakesko 780 393 395 42 paid to company personnel also account for a signifi cant proportion. Kesko’s purchases Kesko Agro 672 170 57 41 are divided into domestic and import purchases in all the Group’s operating countries – Keswell 934 26 11 4 as diffi cult as making such a breakdown today is – and benefi ts generated in Finland are also broken down by region. Statistics on retail service coverage refl ect the migration of VV-Auto 675 4 1 9 population that has taken place within the country in recent years and how Kesko’s Kaukomarkkinat 192 21 25 52 store network has adapted to this change. Kesko’s operations outside Finland have also Total 6,670 1,019 489 156 grown to such an extent that it has become possible to describe the economic benefi ts Total, % 80% 12% 6% 2% they generate as well. The figures include €12 million of the Group’s internal business that have been eliminated in the financial statements. 20 Economic performance Economic performance 21

Finnish Society for Financial Analysts, Investments and assets

kesko in sustainability indexes and Talouselämä magazine in 2002 and 2003 2004 2005 Dow Jones Sustainability Index in the area of environmental and social responsibility for its 2003, and the second best in 1999, 2001, FAS IFRS IFRS The DJSI World Index lists more than 300 companies (the top funds. Kesko was ranked fi rst in Storebrand SRI’s overall as- 2004, and 2005. Investments, € million 259 192 454 10% in the DJ World Index), and the pan-European index 155 sessment and in terms of environmental responsibility, and Kesko publishes its printed Annual Re- companies (the top 20% in the DJ STOXX 600 Index). Reviews are second in terms of social responsibility in spring 2003. The port in Finnish, Swedish, and English. The Investments, % of net sales 3.7 2.6 5.4 carried out by SAM Group of Switzerland and cover all areas of assessment has not been repeated. annual fi nancial statements release and Equity ratio, % 51.7 44.2 42.3 corporate responsibility. Kesko was rated the best in the retail- three Interim Reports are produced as spe- Debt to equity ratio, % 48.3 55.8 57.7 ing sector, both in Europe and the world, in the 2006 indexes. Ethibel Investment Register cial sections of the TradeMaker stakehold- Gearing ratio, % 16.2 37.0 42.4 Ethibel is a Belgian consultancy agency that screens companies er magazine, which is mailed to all share- Nordic Sustainability Index at the request of ethical investment funds and maintains a holders. In addition, the company main- This index initiated by the Nordic Council evaluates the per- register of ‘social-ethical companies’. Over 200 leading tains a mailing list of other recipients results. Outside these periods, analysts’ Kesko’s investments have a positive formance of the 500 largest companies listed on the Nordic companies are listed. Kesko was ranked number one in the of the Annual Report and TradeMaker. and investors’ questions are answered fi nancial impact on construction compa- stock exchanges in terms of corporate responsibility. The 2005 trading sector comparison made in autumn 2003 and again in Kesko’s fi nancial communications were by telephone, e-mail, and at investor nies, service companies in the construc- index includes 50 companies. Assessments are made by GES the 2005 comparison. Stock at Stake, the research agency of ranked the second best in the 2005 Com- meetings. tion sector, and suppliers of fi xtures, Investment Services of Denmark. Ethibel, merged with Vigeo of France at the end of 2005. pany Disclosure and Financial Reports equipment, and information systems. competition organised by the Helsinki In the vanguard of sustainable companies Investments in Finland are included in Kempen/SNS Smaller Europe SRI Index The Global 100 Most Sustainable Corporations Stock Exchange and Finland’s leading Kesko has been ranked among the top the ‘Breakdown of economic benefi ts’ on This index is an initiative of two Dutch investment companies, ‘The Global 100 Most Sustainable Corporations’ list has been daily, Helsingin Sanomat. Kesko has been Kempen Capital Management and SNS Asset Management, and launched during the World Economic Forum in Davos in Janu- sustainable companies in several interna- page 25. is designed for companies with a market value of under €2 bil- ary 2005 and 2006. In both years, Kesko has been included in among the top three every year since 2002. tional comparisons in recent years – and lion. The 2003 index listed 69 companies from 12 countries out the list drawn up by Innovest Strategic Value Advisors Inc. on was rated the best company in the retail- New stores and changes of a potential total of 1,700 companies. The assessment was the basis of performance in existing leading sustainability Meeting investors ing sector in the Dow Jones Sustainability Two new K-citymarkets (Raahe and Nokia) repeated in autumn 2005. indexes. In addition to economic, environmental, and social Kesko arranged press conferences for the Indexes for the entire world and for Eu- and four K-supermarkets (Oulunsalo, responsibility, Innovest’s evaluation highlighted companies’ media and analysts when announcing its rope in 2005. Kesko’s key rankings can be Runos mäki in Turku, and Kamppi and Laut- Storebrand SRI ability to link these issues to their corporate strategies as 2004 results and its three interim results found in the box on page 20. tasaari in Helsinki) were opened in Finland The Norwegian banking group Storebrand has surveyed 86 factors contributing to profi tability and added value. in 2005. The conferences were webcast in in 2005. A total of 63 stores changed type trading sector companies and selected the 30 best performers Finnish and English via the Internet. Cap- Investments and the store network as part of the chain reform, and 14 Cassa ital Market Days were arranged in April Kesko’s total investments in 2005 reached stores were opened to further test the dis- and November to provide background an all-time high of ¤454 million, equiva- counter concept. Kesko Food Ltd acquired information for analysts. lent to 5.4% of net sales (2.6% in 2004). Neste Marketing Ltd’s 50% holding in Kesko participated in the Sijoitus-In- Finnish investments accounted for ¤183 Pikoil Oy, becoming the sole owner of the vest Fair in Helsinki in the autumn, where million, and those in other countries for company in November. Pikoil had 55 Neste about 1,800 investors visited Kesko’s ¤271 million or 59.7%. Investments in K-pikkolo and 48 Neste Quick Shop service stand. Kesko also participated in events store sites totalled ¤141 million, and in stations and 27 Neste Motorest restaurants organised by the Finnish Foundation for business acquisitions ¤261 million. as of the end of the year. Share Promotion and Arvopaperi maga- Business acquisitions included Indoor In the home and speciality goods sec- zine in eight Finnish cities, attracting Group Ltd (the Asko and Sotka chains) in tor, the most important store site invest- elsewhere, including some 200 German been clearly exceeded during the past fi ve some ¤2.3 billion at the end of 2005. A over 1,000 private investors. Road show Finland, Rimi Baltic AB (merging Kesko ments took place in the Greater Helsinki funds. years, and average dividends have been shares accounted for ¤770 million of this visits, extending over 11 days in all, were Food’s and ICA’s Baltic operations on a area. New Asko and Sotka stores were More detailed information about 141% of earnings per share. total, and B shares for ¤1,550 million. made to the United States, Canada, Brit- 50/50 basis) in the Baltic countries, opened in Lommila, Espoo and Roihupelto, Kesko’s shareholders and trends in share Kesko’s share price performance has ain, Ireland, France, Holland, Norway, and Norgros AS (the Byggmakker chain) in Helsinki. An Anttila department store, prices can be found at www.kesko.fi clearly exceeded the trends on the Helsinki Impartial investor communications Sweden. Norway, and the Stroymaster DIY chain in an Intersport Megastore, a K-kenkä shoe (Investors/share information). Stock Exchange’s OMX Helsinki All Share In line with its IR strategy, Kesko contin- Kesko observes a two-week silent peri- Russia. Other investments totalled ¤52 store, and a Musta Pörssi store were and weighted OMX Helsinki CAP Indexes ually produces accurate and up-to-date od before publishing information on its million. opened in the Sello shopping centre in High long-term dividend yield over the past fi ve years. The price of information for the markets as a basis for Kesko has generated profi ts and paid divi- Kesko’s B share has more than doubled valuing Kesko’s share price. The aim is to dends every year since it was founded in since the beginning of 2001. This clear make Kesko’s activities better known and Number of K-food stores in Finnish municipalities 1941, with the exception of 1967. For the upward trend continued in 2005, with to increase the transparency of investor past 10 years, the annual yield (dividend the A share appreciating by 28% and the information, and the attraction of Kesko Municipalities % of all municipalities and appreciation, dividends reinvested) of as an investment. B share by 33%. The OMX Helsinki All K-food stores 2003 2004 2005 2003 2004 2005 Kesko’s B shares has averaged 21%, and Share Index rose by 31% and the OMX Kesko follows the principle of imparti- 10 or more 13 12 11 2.9 2.7 2.5 34% for the past fi ve years. Helsinki CAP Index by 30% over the same ality in its investor communications and 7-9 14 10 12 3.1 2.3 2.8 The dividend yield for the past fi ve period. publishes all investor information prima- 5-6 26 20 15 5.8 4.5 3.5 years has averaged 10.1%. Under its divi- Kesko’s market value has grown con- rily on its Internet pages in Finnish, 3-4 70 72 74 15.7 16.2 17.1 dend policy, established in 2005, Kesko siderably during the past three years, Swedish, and English (www.kesko.fi ). 2 106 94 95 23.8 21.2 22.0 distributes at least half of its earnings following modest development during the Kesko’s web pages have been ranked the 1 162 177 169 36.3 39.9 39.1 per share as dividends, taking however fi rst years of the new millennium. The best online pages for investors in Finland the company’s fi nancial position and op- company’s market capitalisation has in the competition organised by the Finn- none 55 59 56 12.3 13.3 13.0 erating strategy into account. This has nearly doubled since 2002, and reached ish Foundation for Share Promotion, the Municipalities in all 446 444 432 100.0 100.0 100.0 22 Economic performance Economic performance 23

Leppävaara, Espoo; and an Anttila depart- sales of Rimi Baltic AB totalled ¤808 mil- of Kesko Food’s employees by 1,800. Rau- 2005, pension expenses ¤39 million, and Act, such as an early retirement pension sented on page 53 under ‘Social responsi- ment store and a Musta Pörssi store in lion in 2005, and staff averaged 8,208. In takesko’s personnel increased by 1,400: other social security expenses ¤39 mil- for production-related reasons. bility’. Kamppi, Helsinki. line with the 50/50 ownership structure 761 in Lithuania, 258 in Norway due to the lion. Operations outside Finland account- The Pension Fund covered 3,881 em- The Kesko Sickness Fund provides stat- of the company, half of these fi gures are acquisition of Norgros AS, and 93 in Rus- ed for ¤94 million of total salaries. Share ployees of the Kesko Group and related utory sickness insurance for the employ- Number of K-food stores increased slightly booked in Kesko’s accounts. sia due to the acquisition of Stroymaster. options recognised as expenses totalled corporations at the end of 2005 (4,145 at ees of the Kesko Group and related corpo- At the end of 2005, the number of K-food Rautakesko has 14 K-rauta stores in Kesko had 26,978 employment con- ¤3.1 million. the end of 2004), with Department A cov- rations, and covers about 10,900 employ- stores totalled 1,041 outlets, which was 43 Sweden, four stores in Estonia, and three tracts at the end of 2005, of which 14,707 Income tax paid by the Group as a ering 976 (1,105) of the total. In 2005, the ees. Sickness insurance contributions paid less than in 2004. 475 (549) of these were stores in Latvia. Senukai, which is major- were in Finland and 12,271 elsewhere. This whole totalled ¤49 million, of which ¤3 Kesko Pension Fund paid ¤49.6 million by the Sickness Fund totalled ¤8.2 million small units (K-extras, K-pikkolos, and oth- ity-owned by Rautakesko, has 13 Senukai represented an increase of 4,832 employ- million was paid outside Finland. Real (¤47.2 million) in pensions to 3,284 people in 2005 (¤7.7 million in 2004). ers). The number of K-markets increased stores and 76 partnershops in Lithuania. ees in all, 1,105 in Finland and 3,727 else- estate taxes paid to 118 municipalities in (3,129). Details on the retirement age of Subsidiaries outside Finland arrange by 32. The Byggmakker chain of Norgros AS in where. Finland totalled ¤3.2 million, compared to employees and other statistics are pre- their own employee pension and health K-food stores were located in 376 of Norway, acquired in July 2005, consists of Kesko Food started rationalisation ¤0.2 million in other countries. Finland’s 432 municipalities. 44.7% of all 20 company stores and 113 retailer entre- negotiations with employees in the spring K-retailers paid ¤253 million in sala- Personnel expenses, € million Finns as of the end of 2005 lived less than preneurs operating under the company’s and launched other measures aimed at ries and ¤36 million in taxes. These fi g- one kilometre from the nearest K-food chain agreement. enhancing operations in Finland, aimed at ures include K-retailers, whose bookkeep- 2003 2004 2005 store. The accompanying table illustrates In July, Kesko also acquired the Stroy- generating annual savings of approximate- ing and salaries are handled by Vähit- FAS IFRS IFRS the density of the K-food store network. master chain, which consists of fi ve hard- ly ¤20 million. These negotiations led to a täiskaupan Tilipalvelu VTP Oy, and which Salaries and fees 316 353 419 With the exception of the Åland Islands, ware and builders’ supplies stores in the reduction in personnel numbers of nearly are estimated to account for between 80% of which profit bonuses *) 10.0 5.5 5.5 the average distance has increased com- St. Petersburg area. 80, through early retirement and other and 85% of the total business volume of Social security expenses pared to 2000, but the changes have been These acquisitions increased the net arrangements. In addition, 73 employees K-retailers. Statistics do not show the tax- pension expenses 43 5 39 small between 2003 and 2005. Distances sales of Rautakesko’s foreign subsidiaries had to made redundant. No corresponding es paid on salaries drawn by K-retailers other social security expenses 32 36 39 have decreased slightly in the provinces by 98%, and their proportion of Rauta- reductions took place in other units. themselves. As a result, the combined tax Share options granted - 1.9 3.1 of Western Finland and Lapland. kesko Group’s overall net sales to 52%. As of the end of the year, a total of data on K-retailers should be considered Large outlets – or K-citymarkets – Kesko Agro had 12 stores in the Baltic some 700 people worked in outsourced as essentially illustrative. *) paid for the fi nancial year in 2003 and 2004, and in the fi nancial year since 2005 accounted for 36.2% (35.3% in 2004) of countries, one less than in 2004. operations, including areas such as IT the sales of K-food stores in Finland. management, real estate management, Employee pension and health Taxes, € million The number of K-speciality stores in- Job development postal services, and security. insurance 2003 2004 2005 creased by 80 on 2004 to 748. This was The number of jobs in the Kesko Group K-retailers employed about 23,000 peo- In Finland, the Kesko Pension Fund is re- FAS IFRS IFRS virtually entirely the result of the transfer continued to increase in 2005, both in ple in all, including retailers themselves. sponsible for the pension contributions, Income taxes paid in Finland 54.7 43.5 46.4 of the Asko and Sotka chains to Kesko Finland and elsewhere. As there are one or more K-stores in nearly based on the Employees’ Pensions Act, of Income taxes paid in other countries 2.8 3.1 3.0 ownership in January 2005. The total The average number of Kesko Group every Finnish municipality, and Kesko those employees of Kesko Corporation, Real estate taxes paid in Finland 2.5 3.2 3.4 number of K-stores in Finland grew by 37 employees, converted into full-time em- has premises in more than 60 municipali- the division parent companies, and some compared to 2004. ployees, totalled 21,603, an increase of ties, the nearly 38,000 jobs offered by other related corporations that are mem- 4,075 on 2004. 50% of the employees of the K-Alliance make an important contri- bers of the Fund’s Department B. The Var- Labour productivity, € 1,000 Big changes outside Finland Rimi Baltic AB, or 4,104, are included in bution to the economy across Finland. ma Mutual Pension Insurance Company 2003 2004 2005 Rimi Baltic AB, a joint venture between Kesko’s fi gures. Including Rimi Baltic AB, the Kesko is responsible for the corresponding pen- FAS IFRS IFRS Kesko Food Ltd and ICA AB, began opera- Employee numbers increased by 945 in Group is the largest foreign employer in sion contributions of employees of other Average net sales per employee tions at the beginning of 2005. Rimi Finland, of which 690 resulted from the the Baltic countries. subsidiaries. The Pension Fund also has a Finland 635 638 592 Baltic has subsidiaries in Estonia, Latvia, acquisition of Indoor Group and approxi- Department A, which was closed in 1998, the other Nordic countries 226 295 506 Salaries, social security and Lithuania, and operates a total of mately 100 from the expansion of VV- and which provides extra benefi ts. Em- the Baltic countries 134 132 112 expenses, and taxes 177 hypermarket, supermarket, and dis- Auto’s retail sales. ployees covered by Department A have ac- entire Group 465 428 385 counter stores. In 2004, Kesko Food had In other countries, the start-up of Rimi Kesko Group salaries recognised in the cess to some pension benefi ts not offered Profit before non-recurring items 84 stores in the Baltic countries. The Baltic AB increased the average number income statement totalled ¤419 million in on the basis of the Employees’ Pensions per employee 10.6 11.6 9.8

Distance of population from Inhabitants living less than one kilometre from a K-food store, % a K-food store in Finland Kesko Group’s purchases by country in 2005 2000 2003 2005 % of population Province of Southern Finland 56.4 54.9 54.2 Number of Purchases Number of Purchases 90 suppliers from these suppliers from these Province of Åland 49.8 48.1 50.2 80 in the country € million % in other countries € million % Province of Western Finland 41.3 37.6 37.7 70 Finland 11,028 4,718 81.3 3,760 1,086 18.7 60 Province of Eastern Finland 43.6 42.6 41.7 Sweden 559 76 76.0 87 24 24.0 50 Province of Oulu 41.1 38.7 37.4 Norway 258 232 98.3 45 4 1.7 40 Province of Lapland 35.0 32.5 33.0 Estonia 1,441 183 75.3 368 60 24.7 30 Whole Finland 47.3 45.3 44.7 Latvia 2,188 193 79.8 473 49 20.2 20 Lithuania 2,975 193 49.2 939 199 50.8 10 Source: Statistics Finland, Square Database 2005. Population structure 31.12.2004 (population 0 by statistical square of 250 m x 250 m). Kesko Food Ltd: K-food stores operating in 2005 (located Russia 363 35 92.1 6 3 7.9 012345678 according to Genimap Oy’s Roads of Finland, as the crow fl ys distance from each square to the Total 18,812 5,630 79.8 5,678 1,425 20.2 Distance from a K-store, km nearest K-food store) 24 Economic performance Economic performance 25

insurance cover, within the context of countries for 20.6% or ¤1,460 million. The Kesko had 1,484 private label Pirkka Breakdown of economic benefits Case local legislation and practice. details behind these fi gures by country are products as of the end of the year, follow- The operations of Kesko and K-retailers shown in the table on page 23. ing the introduction of 229 new products. benefi t their personnel, shareholders, finnish k-citymarket campaign reflected Suppliers of goods and services Kesko’s 10 largest suppliers accounted 48.4% of Pirkka products were manufac- partners, and employees, as well as mu- in consumer attitudes Kesko had about 25,000 suppliers provid- for 22.9% of the Group’s purchases (23.1% tured in Finland, and their sales account- nicipalities and states. The graph and map Products from both small, local suppliers and national manufacturers across ing goods and services valued in excess of in 2004), and its 100 largest suppliers for ed for 62.5% of total Pirkka sales. The ta- below show how these benefi ts are divided Finland were highlighted at K-citymarkets between 29 September and 8 October ¤1,000 in 2005. Approximately 11,000 of 48.9% of purchases (52.2%). Of the 10 larg- ble on page 24 gives some examples of the by stakeholder group and market area 2005. The campaign was designed to focus on the benefi ts of choosing Finnish these operate in Finland, about 8,000 in est suppliers, eight were Finnish food proportion of Finnish products in differ- (Finland, the other Nordic countries, the products in encouraging employment, and was carried out in cooperation with var- the Group’s other operating countries, and manufacturers and two were German car ent categories. Baltic countries, and Northwest Russia). It ious organisations dedicated to promoting Finnish food and domestic producers. about 6,000 elsewhere. manufacturers. Kesko’s 100 largest sup- Kesko Food had 332 Euro Shopper prod- is not possible to show the breakdown of Some 40 national suppliers and around 450 small and medium-sized com- Kesko’s purchases of goods and services pliers included 11 suppliers from outside ucts sourced through the European AMS dividends paid in the same way, beyond panies took part in the campaign. These held product demonstrations and tast- totalled ¤7.1 billion in 2005, of which sup- Finland. alliance in its selection, 21% of which were stating that non-Finnish investors held ings, and provided customers with information about natural Finnish products and pliers operating in Finland accounted for Kesko’s Finnish companies made 81.3% manufactured in Finland. 27% of Kesko’s shares at the end of 2005. farm tourism services. 66.4% or ¤4.7 billion. Purchases from other of their purchases from suppliers operat- The campaign was prominently promoted in the media: through a four-page Kesko operating countries accounted for ing in Finland. Importers accounted for 13.0% or ¤920 million, and those from other 15.7% of these purchases. This calculation colour insert placed in the country’s national daily, Helsingin Sanomat, and re- Breakdown of the Kesko Group’s net sales in 2005, % gional papers, and through TV spots. Campaign products were highlighted with is based on a list of suppliers covering special shelf labelling. Stores also featured special posters and materials at check- 81% of purchases, and on the assumption outs to attract customers’ interest. Pirkka products of domestic origin that the proportion of imports is similar Kesko Food 55.3 18.2 26.5 in the remaining 19%. When Kesko’s own The campaign had a signifi cant impact on consumer attitudes, according to a Product group Proportion of direct imports of Rautakesko 43.6 31.4 25.0 subsequent study commissioned from Taloustutkimus Oy. This showed that while domestic products, % ¤1,086 million and pur- 15% of consumers said they consciously increased their purchases of Finnish prod- Fruit and vegetables 68.3 chases of ¤741 million from importers op- Kesko Agro*) 31.3 44.1 24.6 Retailers ucts prior to the campaign, this fi gure had risen to 26% following the campaign. vegetables and root crops 74.2 erating in Finland are combined, the total Keswell 22.4 2.8 74.8 In the case of those deciding everyday food and non-food purchases, this fi gure fruit and berries 9.1 value of imports in Kesko’s Finnish opera- Other business and wholesale customers went from 16% to 29%. Perishables 76.2 tions comes to ¤1,827 million, or 31.5%, VV-Auto 74.6 25.4 Consumers The most common reasons given by respondents for increasing their purchases meat 94.0 while the value of domestic purchases to- (direct retail sales) tals ¤3,977 million, or 68.5%. These fi g- Kaukomarkkinat 2.5 93.9 3.6 of Finnish products included supporting Finnish employment or businesses (34%), ready-to-eat foods 89.5 *) incl. Konekesko reliability and safety (30%), a desire to favour buying Finnish (28%), and quality fresh bread 59.1 ures should be considered as only indica- 020 40 60 80 100 and freshness (27%). A total of 1,173 people aged over 15 were interviewed prior fish 47.7 tive, as statistics are available for compa- to the campaign, and 502 people afterwards. Processed perishables 52.5 nies rather than products. An extensive network of organisations were involved in addition to the K-city- milk products 92.3 market chain, including Finfood, the Association for Finnish Work, the Finnish ice cream 67.7 Horticultural Products Society, the Central Union of Agricultural Producers and frozen foods 40.5 Forest Owners, Arctic Flavours, Pro Agria, and Laatuketju. The campaign material edible fats 28.6 prominently featured the well-known logos of many of these organisations and Processed foods 28.8 Breakdown of economic benefits by market area, € million their various initiatives. baby foods and drinks 100.0

crisp bread and rusks 60.0 Finnish products were the theme of a promotion in K-citymarkets in autumn Salaries biscuits 39.3 2005. Karri Himberg, Store Manager of K-citymarket Jumbo, can be seen here Purchases Investments and taxes Total canned foods 23.2 arranging a display of campaign products. pet foods 9.4 Finland 4,718 183 375 5,276 Beverages and confectionary 56.2 Other Nordic countries 344 130 28 502 soft drinks 100.0 Baltic countries 583 120 67 770 juices 82.1 Northwest Russia 35 20 1 56 confectionary 46.2 Purchases: fi gures also include Kesko’s imports into Finland snack products 33.3 *) from these countries Non-food items 44.4 Investments: both acquisitions and other investments tissue paper 77.8 Salaries and taxes: companies’ income and real estate taxes tableware 76.7 washing and cleaning 24.4 personal hygiene and care 11.7 Home and speciality goods 34.6 children’s clothing 100.0 books and stationery 45.0 cleaning and home care 31.3 Purchases lamps and electrical supplies 0.0 Investments Total 48.5 Salaries and taxes Total % of combined sales 62.5 *) The column illustrating purchases has been shortened, otherwise it would be eight times as high as the one for the Baltic countries. 26 Economic performance Economic performance 27

Salaries and taxes paid by Finnish regions in 2005 As stated above, some of the products cover ¤4.5 billion of the total sum of ¤4.7 and 85% of the Group’s consolidated net Kesko pays a monthly benefi t to K- in proportion to the population Kesko buys from Finland have been man- billion. The remaining ¤200 million are sales. Because it was not possible to speci- Plussa cardholders for their purchases in ufactured in other countries. The foreign largely linked to suppliers without an fy K-retailers’ direct purchases on the ba- the form of Plussa points, which can be Uusimaa 204 products imported by Kesko or other com- unambiguous postal address or related sis of invoicing addresses, the statistics used instead of money in all K-stores and Pirkanmaa 95 panies that operate in Finland and sell to annual purchases of less than ¤1,000. have been prepared on the assumption Plussa partner companies. These benefi ts Varsinais-Suomi 94 them on to Kesko benefi t not only foreign As it has only been possible to break down that purchases have been made from with- have not been included in the calcula- Southern Karelia 93 suppliers, but generate considerable eco- purchases by suppliers’ invoice addresses, in the region in question. tions concerning the economic benefi t Päijät-Häme 90 nomic benefi t in Finland as well. Import- despite the fact that production might Absolute fi gures do not fully illustrate provided by Kesko to its stakeholders, be- Northern Savo 89 ers’ and trading commissions cover the have taken place in several locations. the differences between regions, but must cause the benefi ts are part of the pricing Lapland 88 salaries of the Finnish employees of the The purchase fi gures for the Uusimaa be related to population numbers, in par- of the products sold and reward custom- Kanta-Häme 88 companies involved and their other ex- region around Helsinki are higher than ticular when estimating service levels. ers for concentrating their purchases at Northern Ostrobothnia 84 penses. Value-added tax is also paid, to- in reality. The fi gures for salaries and taxes per in- K-stores. As some Plussa benefi ts are Kymenlaakso 83 gether with customs duties on some prod- All salaries and real estate taxes paid by habitant, shown in the graph on page 26, granted in the form of specially priced Central Ostrobothnia 81 ucts. It can be estimated that a typical Kesko have been broken down by region, illustrate the K-Alliance’s human re- Plussa card offers, Kesko does not include Central Finland 78 product imported into Finland and sold but not income tax, as this remains the source input in each region’s infrastruc- these activities under economic responsi- Southern Savo 74 by a retail store generates an economic responsibility of the tax authorities. Com- ture. The fi gures for Uusimaa are not bility but treats them as a form of normal Southern Ostrobothnia 71 benefi t equivalent to 40–50% of the prod- pared to other fi gures, real estate taxes are comparable in this respect, as they in- competition. Eastern Uusimaa 69 uct’s retail price. The same is true in such a small item that they were combined clude Kesko Group’s administrative func- Northern Karelia 68 Kesko’s other operating countries. with the taxes paid by K-retailers. tions and a major part of the personnel of Financial support Ostrobothnia 62 The benefi t from Kesko’s purchases, Only those K-retailers that are custom- the division parent companies. Invest- Kesko and its subsidiaries support a Satakunta 62 K-retailers’ direct purchases from local ers of Vähittäiskaupan Tilipalvelu VTP Oy ments could also be shown in the same number of organisations that work for Kainuu 57 suppliers, salaries and taxes (for Kesko, are included in the analysis of salaries way, provided that the time period under the good of society in Finland. In many Åland*) real estate taxes only) paid by Kesko and and taxes. They account for between 80% review is longer than one year. cases, support is based on reciprocal 0 50 100 150 200 250 K-retailers, and investments in Finland has been divided by region. *) data has not been collected More details on Kesko’s purchases are Statistics include salaries paid by Kesko and K-retailers, taxes paid by K-retailers, and real estate taxes paid by Kesko. provided for 2005 than for 2004, and now Population numbers are from the web statistics provided by regional councils. Case

Breakdown of economic benefits from Kesko’s and K-retailers’ operations by Finnish region in 2005, € million purchases from regional producers contribute to local development Juustoportti, based in Jalasjärvi in western Finland, became a Pirkka supplier around three K-retailers’ Kesko’s and Salaries Salaries Taxes years ago. The company producers Pirkka-brand Mozzarella, soured full-cream milk, and Keskos purchases direct purchases K-retailers’ paid by paid by paid by yoghurt, as well as Menu-brand products, such as bread cheese for catering customers. A major Region of goods of goods1) investments Kesko K-retailers2) K-retailers3) Total product development project between the company and Kesko Food resulted in the launch Southern Karelia 7.4 13.3 4.7 3.9 7.5 1.3 38.1 of the fi rst functional food products under the Pirkka brand in 2005 in the shape of Pirkka Southern Ostrobothnia 224.9 21.9 1.9 4.5 8.1 1.2 262.5 Reducol yogurts. These are the fi rst private brand yoghurts in the EU to contain plant sterols Southern Savo 36.0 12.5 0.6 2.6 7.4 2.0 61.1 and stanols. Eastern Uusimaa 57.3 3.4 4.9 1.3 4.9 0.7 72.5 Kainuu 4.1 6.9 0.1 1.5 3.0 0.4 16.0 A family-owned company, Juustoportti has been in operation for 40 years, and is one of Kanta-Häme 67.3 23.0 0.8 4.1 9.4 1.2 105.8 Finland’s most modern dairies. The company employs some 80 permanent employees, and Central Ostrobothnia 71.9 6.5 0.2 2.7 2.5 0.5 84.3 processed 17 million litres of milk in 2005. Juustoportti is a major employer in the local com- Central Finland 71.3 13.5 0.8 7.2 12.1 1.6 106.5 munity, a fact that was recognised with the award of the regional ‘Where there’s a will, there’s Kymenlaakso 16.2 10.5 0.3 5.9 8.3 1.2 42.4 a way’ Prize in 2005 – for the company’s contribution to local employment, economic success, Lapland 8.4 15.1 12.3 1.9 12.1 2.3 52.1 innovation, and the public good. The company was awarded the title of ‘National Entrepreneur Pirkanmaa 272.6 31.3 23.5 16.4 23.8 3.9 371.5 of the Year’ in 2004. Ostrobothnia 63.0 6.6 0.1 5.7 4.3 0.7 80.4 Juustoportti recorded net sales of €17 million in 2005; sales to Kesko accounted for Northern Karelia 30.9 7.2 0.8 3.6 6.7 1.1 50.3 some 20% of this total. Recent investments valued at around €1 million have focused on new Northern Ostrobothnia 61.1 24.5 18.4 12.1 17.5 2.3 135.9 refrigeration and packaging systems aimed at improving overall operational effi ciency and Northern Savo 82.6 19.0 1.7 7.4 13.1 1.9 125.7 doubling production of bread cheese. While the company will continue to highlight the value Päijät-Häme 106.9 14.3 0.3 7.6 9.5 0.8 139.4 of quality Finnish milk and a skilled workforce in its success, further progress in the future will Satakunta 100.1 12.9 2.1 4.4 9.3 0.9 129.7 call for building an international network and closer partnerships, says Managing Director Timo Uusimaa 2,621.4 85.8 16.0 190.5 72.7 12.2 2,998.6 Keski-Kasari. Varsinais-Suomi 581.6 33.2 13.9 18.7 21.0 3.3 671.7 This has been refl ected in Juustoportti’s work in developing product processing, packaging Åland 19.7 *) - - *) *) 19.7 services, and logistics as a means of improving the effi ciency of its overall operational chain Total 4,504.7 361.4 103.4 302.0 253.2 39.5 5,564.2 and reducing wastage at retail outlets. Kesko has played an important part in this work. A new terminal concept for Kesko deliveries will be introduced on a phased basis in spring 2006, and *) data has not been collected a new type of prepacked cheese concept is to be tested in the near future as well. 1) fi gures include purchases by 882 K-retailers 2) fi gures include salaries paid by 961 K-retailers 3) fi gures include taxes paid by 839 K-retailers and real estate taxes paid by Kesko 28 Economic performance Economic performance 29

Kesko’s support for the public good cooperation, in which Kesko is not only a had approximately 120 regional and local in Finland, € 1,000, % sponsor, but also an active player. Kesko recipients of support. Case directs its support primarily to areas as- No detailed information has yet been 2004 sociated with the everyday life of families collected on the corresponding activities rimi baltic’s sponsorship projects in with children. Supporting socially respon- of subsidiaries outside Finland, but some the baltic countries sible activities and sustainable develop- examples highlight developments. Kesko ment in Kesko’s operating environment is Agro has supported farmer organisations, Kesko Food’s and ICA AB’s joint venture in the Baltic countries, Rimi also important to Kesko. agricultural colleges and universities, Baltic, focuses its sponsorship on projects involving children, in line Drawing a line between donations, and schools for the visually and aurally with company policy. The company made contributions valued at just sponsorship, and marketing is often diffi - handicapped children in the Baltic coun- under €66,000 to projects of this type in the region in 2005. cult. When pure marketing measures are tries. Prior to the acquisition of Senukai In Estonia, Rimi Baltic took part in building playgrounds in the Sports 743 (30.9%) left out of the calculations, the fi nancial by Kesko, the Rakauskas family, who con- Haaberst and Lasnamäe districts of Tallinn, together with the munici- Youth work 915 (38.1%) support provided by the Kesko Group for tinue to own a holding in the company, pal authorities and local housing companies. The playgrounds are close to the company’s stores and reinforce Rimi Baltic’s emphasis on Health care 17 (0.7%) the public good in 2005 amounted to ¤2.2 had a non-profi t fund separate from the being a good neighbour in its local communities. The company in- Non-governmental and million (¤2.4 million in 2004). Three company, known as the ‘Senuku Charity environmental organisations 211 (8.8%) quarters of this went to sports and youth and Support Fund’, and this continues tends to continue building playgrounds at the rate of a couple a year. Culture 293 (12.2%) work. The proportion of the former in- to operate. The case on page 29 provides In Latvia, Rimi Baltic contributed €10,100 to an exercise event for Science, research and education 172 (7.1%) creased slightly, while that of the latter information on sponsorship activities women and children held on International Women’s Day, and designed National defence organisations 54 (2.2%) decreased. Kesko Food’s district centres coordinated by Rimi Baltic. to promote the importance of a healthy lifestyle. A collection drive was Total 2,404 (100%) organised in 40 stores in support of the local university children’s hos- pital. This generated €11,825, which was used to purchase Internet- connected computers for the hospital’s library, which children can use 2005 to study and keep in contact with their family and friends. Economic benefits from Kesko’s operations for various stakeholder groups, € million In Lithuania, Rimi Baltic participated in a local charity’s Christmas collection to provide Christmas food for the less well-off. The company 2003 2004 2005 also donated a 50-litas gift voucher for Rimi Baltic stores to 350 fami- FAS IFRS IFRS lies; and supported school attendance among children of large fami- Suppliers of goods and services lies by donating a backpack and other items to 150 children beginning Finland 4,485 4,521 4,718 school for the fi rst time. other countries 1,675 1,993 2,363 Sports 854 (38.3%) Suppliers of capital goods & acquisitions 259 192 454 The proceeds generated by the collection organised at Rimi Youth work 819 (36.7%) Personnel (salaries and other benefits) 316 353 419 Baltic’s stores for the university children’s hospital in Latvia were Health care 185 (8.3%) Shareholders (dividends)* 91 274 95 used to purchase computers, books, and sweets and fruit for Non-governmental and Tax authorities (income and real estate taxes) 60 56 52 patients and staff. Mᾱris Krupenkovs, Rimi Baltic AB’s Country environmental organisations 148 (6.6%) Social security Manager, Latvia (right) can be seen here handing the donation Culture 115 (5.2%) to Doctor Džeimss Rozῑtis and Director Dzintars Mozgis. (pension and social security expenses) 75 41 78 Science, research and education 93 (4.2%) Support for the public good 2 2 2 National defence organisations 18 (0.8%) * dividends paid during the fi nancial year Total 2,232 (100%)

President and CEO Matti Halmesmäki is seen here with representatives from the WWF Finland and the Finnish UN Association. Anneli Alfthan, Head of Marketing, and Elisabeth Rehn, Chair- person of the Board of Trustees, repre- sented WWF Finland (on the left), and Sirpa Pietikäinen, Chairperson, and Helena Laukko, Executive Director, the Finnish UN Association. 30 Environmental performance Environmental performance 31

Environmental system to Kesped Ltd, which was renamed Keslog Kesko’s Real Estate Services Unit Kesko’s environmental management is Ltd. Keslog’s operations include foreign signed an agreement with Ovenia Oy cov- based on the company’s own environmen- transportation, forwarding, purchasing ering the management and maintenance Environmental tal policy, the International Chamber of transportation, warehousing and termi- of some 220 properties in Southern Fin- Commerce’s principles of sustainable de- nal operations, and distribution transpor- land as from the beginning of 2006. Like velopment, and the ISO 14001 standard. tation. A new delivery chain control unit Kesko, Ovenia is covered by the KRESS As of the end of 2005, the environmental was also established, mainly to develop energy-saving agreement coordinated by performance system had been certifi ed in all units with store logistics, requirements planning, MOTIVA and the Ministry of Trade and major environmental impact: logistics operating systems, and supplier Industry, and its own environmental – Kesko Food Ltd’s logistics operations - cooperation. In line with these organisa- strategy is expected to be completed by the transport and forwarding company, tional changes, the plan is to combine the the end of 2006. Key environmental Kesped Ltd environmental systems related to logis- Kaukomarkkinat Oy employs an envi- – Anttila Oy’s central unit, mail order tics and Kesped during 2006. ronmental system based on the ISO 14001 performance + - sales, and NetAnttila operations Kesko Food transferred all its return standard, although it has not been certi- • Compilation of statistics on environ- • Specific consumption of electricity and – All Anttila and Kodin Ykkönen depart- logistics terminal operations in the Great- fi ed. Kesko’s main offi ce building in Kata- in 2005 mental performance started in water increased at Finnish locations. ment stores er Helsinki area to Lassila & Tikanoja janokka in Helsinki and Kesko Food’s cen- subsidiaries outside Finland. • Greenhouse gas and acidification – Real estate management and mainte- (L&T) in summer 2005. The terminal tral warehouses in Hakkila in Vantaa, to- sends all recyclable material returned gether with the Turku distribution centre, • Number of kilometres driven and emis- emissions generated by Kesko activities nance (certifi cate held by YIT Kiin- teistötekniikka Oy, which is responsi- from stores for further treatment and have adopted an environmental pro- sions were lower in Kesped’s transpor- increased in Finland. ble for these outsourced operations). other returned components for reuse. The gramme developed by Kesko for offi ce tation business. An increase in out- • The amount of waste generated in Kesko Food revised its logistics opera- terminal is not included in Kesko’s or work (see page 43). sourced pallet transportation makes overseas operations was considerably tions as of 1 January 2006. Kesko Food’s L&T’s environmental systems at the K-stores’ environmental management comparisons more difficult, however. larger than that generated in Finland in warehousing operations were transferred moment. is based on a variety of inputs, including • Relative proportion of packaging in relation to the volume of operations.

total imports continued to decrease. • Implementation schedule of the • Relative amount of mixed waste environmental concept in the K-market Coverage of environmental management system in relation to volume of operations generated in Kesko Food’s warehouses chain had to be slowed down. declined. • More than 200 tons of wastepaper was Own • Average waste recovery rate at Finnish generated at offices. Other car Home and countries outlets speciality distribution centres was 89.8%, and Kauko- goods stores 97.5% within Anttila. K-maatalous markkinat Anttila and stores Kodin Ykkönen • Nearly all producers of imported fruit department Finland and vegetables are EurepGAP-certified stores for good agricultural practices. VV-Auto Kes- well Kesko Rimi Baltic AB • K-environmental store diplomas were Anttila Hardware and Agro awarded to 56 stores. builders’ supplies stores outside Other K-food stores • Kesko’s Corporate Responsibility Report Finland Kesko for 2004 was ranked the best in Finland. Rautakesko Corporation

Rautia stores d K-markets o t o r F o o p sk s e n K a tr Introduction , ics ist The key areas of Kesko’s environmental responsibility include energy consumption related K-rauta stores Log to real estate and transportation and associated emissions, as well as waste generated in warehousing and distribution operations. A proportion of this impact comes within Kesko’s own direct environmental responsibility, and efforts to reduce this impact need K-supermarkets to be consistent, systematic, and target-oriented. Part of Kesko’s environmental impact K-citymarkets is indirect, which makes achieving – and measuring – results more diffi cult. Environmental systems – both standardised and those developed by the company for its own needs – are important tools for Kesko and K-stores. Target-oriented environmen- tal management creates good opportunities for cost savings as well. It will be possible to achieve considerable savings in waste and energy costs in the future in countries Uncertified where the local infrastructure is still developing. Kesko’s subsidiaries outside Finland Certification underway have already started compiling environmental statistics and are developing their sys- Certified/corresponding systems tems on the basis of experience gained in Finland. 32 Environmental performance Environmental performance 33

the K- environment store manual, division- investments also include investments in try, Kesko completed safety inspections modern structures has been compensated Monitoring energy and water consumption Correct fl oor areas were verifi ed from the specifi c training programmes, and best existing properties. of the load-bearing structures at all its for by the environmental value obtained Real estate owned or leased by Kesko to- construction drawings of some proper- practices documented on the company’s Kesko defi ned target levels for its dif- major premises by the end of January by reusing an old building. No PromisE talled slightly over 3.4 million square me- ties. The specifi c consumption fi gures for intranet. The K-environmental store model ferent types of business operations, cov- 2005. Some minor damage and defects classifi cations were made in 2005. tres as of the end of 2005, of which nearly 2004 have been revised to correspond to forms part of the chain concept employed ering areas such as quality requirements were identifi ed, and resulted in further 2.8 million square metres were in Fin- more accurate specifi c consumption fi g- in the largest K-food stores (see page 43). for the mechanical and electrical services surveys and repairs. Kesko has reported Environmental risks associated land. The total gross area amounted to ures. Data for 2005 is given for both net Rautakesko started introducing the K- used in buildings in 2004. Work contin- the inspection results to RAKLI. Based on with land use over 3.7 million square metres. Most of and gross fl oor areas. rauta chain’s environmental management ued in this area in 2005, with the focus on input from these inspections, Kesko has Some surveys of contaminated land are the 14% increase in surface area in Fin- In terms of energy consumption, the system in its foreign subsidiaries in 2006, maintenance management in line with issued more detailed technical instruc- made annually in connection with con- land in 2005 can be attributed to the ac- most important types of sites are K-city- and appropriate components of the system the defi ned quality level requirements. tions, and now employs an outside struc- struction work or real estate transac- quisition of Indoor Group, that is, the markets, K-supermarkets, K-markets, developed for K-maatalous stores in Fin- Work started on building the ’Tampuuri’ tural inspector on major construction tions. Contaminated land was identifi ed Asko and Sotka chains. Anttila department stores, and offi ce land will be tested in Kesko Agro’s Baltic management system acquired for moni- projects. Particular attention is also paid in four projects in Finland in 2005, and The comparability of specifi c con- and warehouse buildings. Consumption operations. Rimi Baltic AB aims to assess toring the maintenance of Kesko’s real to safety know-how and the professional remedial action was undertaken at three sumption with the general statistics pub- monitoring is carried out as widely as the environmental systems used by its estate. This system makes it possible to mind-set of designers, supervisors, and of these. Further studies were under way lished by Motiva, for example, improved possible at these properties. The aim has parent companies during 2006 and start monitor building management and re- construction consultants. at the fourth site in spring 2006. Studies in autumn 2005, when specifi c consump- been to ensure that monitoring includes building corresponding systems of its own. pairs related to property maintenance in were carried out at six sites outside Fin- tion fi gures were presented in relation to properties in all categories to maximise real time. The aim is to use the technical PromisE classification of premises land, and some surface soil was removed the heated gross area of properties in- the accuracy of total consumption calcu- Real estate operations systems concerned as effi ciently as possi- Kesko participated in a joint project led at one of these locations. stead of net fl oor area for the fi rst time. lations. Construction and maintenance ble. The system has been in full use in by the Ministry of Environment, Motiva, Kesko continues to use the ‘core and Kesko’s real estate operations since the and RAKLI to develop an environmental shell’ model in construction, which facili- beginning of 2006. building classifi cation system (‘PromisE’) tates cost control during a building’s life- Kesko’s experts actively participated in 2002–2004. K-citymarket Seppälä in Jy- cycle by dividing a building into a long- in several working groups organised by väskylä was granted Category B status in term shell and a fl exible business core. RAKLI, the Finnish Association of Build- 2004, thanks to its use of natural light Case Allocating investments either to the real ing Owners and Construction Clients, and well-optimised energy effi ciency. K- estate shell or business operations helps including commenting on the legislation citymarket Kaakkuri in Oulu and K-city- transforming an old spinning mill into a k-food store ensure that construction embodies eco- and regulations being prepared on the market Kutomo in Forssa both rated Cate- effi cient principles. basis of the EU’s Energy Effi ciency gory C. At the Oulu site, environmental The K-supermarket in Lauttasaari in Helsinki occupies a building that was The value of Kesko’s store site invest- Directive. impact was taken into account more com- originally designed in 1950 as a dying shop and packing department for a ments in 2005 totalled approximately prehensively than normally, in accord- local spinning mill, Helsingin Villakehräämö. Today’s 2,000 m2 store is located ¤141 million. The fi gure is not comparable Structural safety ance with current construction guide- where the mill itself used to be. Business has been an integral part of life in to the value of real estate investments In accordance with joint recommenda- lines. In Forssa, the building’s poorer the Vattuniemi area of Lauttasaari for over 50 years, and local residents can reported in previous years, as store site tions produced by the construction indus- thermal insulation capacity compared to recognise the site’s original identity from the 62-metre chimney, which is a protected structure, in the middle of the site. The premises are well-located for retail purposes, and the design of the premises made it easy to adapt them to new use. Design work was started in Kesko’s environmental impact January 2004 and a construction permit for the modifi cations to the buildings was granted in April 2005. K-supermarket Lauttasaari held its offi cial grand opening six months later in November 2005. During the project, the space on the ground fl oor was converted into a complete retail store, with refrigerated environmental Purchasing Warehousing Delivery Real estate’s impact Consumption’s impact storage, space for storing bottles for recycling, and offi ce space, while the impact > transport’s impact operations’ impact transport’s on climate change on climate change storage area in the basement was partially converted into car parking. New on climate change on climate change impact on and acidification and acidification 2 and acidification*) climate change space totalling 230 m was built in the inner part of the site to give the store an integrated and extensive checkout area. A new use was also found for the mill’s old chimney, which is now used to provide ventilation for the car park, supply chain > which has places for 67 vehicles. This has proved an excellent solution, as it Purchasing Warehousing Delivery Real estate Products, Consumers Industry transport transport packaging avoided the need to build separate ventilation ducting from the car park, and the heat from the fl ow of air in the chimney helps keep it in better condition than it would be if it stood cold and unused. What used to be the boiler-room has been converted into a ventilation systems room, while the old air raid shelter has been modernised to meet current standards. As with its greenfi eld construction projects, Kesko uses a ‘core and shell’ environmental waste waste waste approach with its conversion projects. This divides a building into a long-term impact > Recovery Recovery Recovery shell, which houses ‘business cores’ that can be changed and slotted in and out as needs change. This approach is an ideal way of managing the lifecycle costs Landfill Landfill Landfill of retail premises. Kesko has previously employed this sustainable approach to converting old industrial premises in Ruoholahti in Helsinki and in Forssa. *) included in the impact associated with real estate 34 Environmental performance Environmental performance 35

Electricity, heat, and water consump- that standardised consumption fell by 3% tion of thermal energy generated by sub- spond to actual emissions. A correspond- utilities have a statutory obligation to re- The number of Kesko electricity sup- tion in Finland is monitored using the on 2004. sidiaries themselves totalled 11 GWh in ing update was made in the 2003 fi gures port this indicator. Kesko had previously pliers dropped from 10 to fi ve in 2005. EnerKey system supplied by Energiakol- Water consumption stood at 604,000 the Baltic countries. Rimi Baltic account- in 2004. included all waste generated in the fuel The share of Fortum Markets Oy rose mio Oy, which enables monitoring to take cubic metres, 11% above the fi gure for ed for approximately 70% of Kesko’s total The data on district heat is even older – cycle. The amount of nuclear waste in from 67% to 82%, while the second-largest place automatically in locations where 2004. Total specifi c consumption in- electricity consumption in Estonia and and environmental impact has been as- 2005 and the updated 2004 fi gure have supplier was Pohjois-Karjalan Sähkö Oy, the relevant electricity utility has an creased by an average of 3%, and in Lithuania, and for over 90% in Latvia. sessed on the basis of 2003 data pub- been calculated using the new formula. which accounted for nearly 11%. No pur- hour-based measurement terminal. In KRESS buildings by 1%. Water consump- lished by Statistics Finland and the spe- The tables below present the environ- chases were made from Helsinki Energy most buildings, remote terminal reading tion in K-citymarkets increased by 11%, Environmental energy profile cifi c emissions for 2003 reported by Ada- mental impact related to the generation of Oy, which accounted for 18% of the elec- takes place via the telephone network at and declined by 7% in K-markets and 9% Energiakolmio Oy has calculated Kesko’s to Energia, the information and training all the electricity purchased by Kesko and tricity supplied to Kesko in 2004. Energia- least six times a month. Readings from in Anttila department stores. environmental profi les for 2005. The fi g- company of the Association of Finnish the electricity and heat used in all real es- kolmio’s environmental profi le calcula- manually monitored meters are collected The three largest K-food store chains ures, which include a comparison with Energy Industries. tate managed by Kesko – including elec- tion for 2005 revealed that the proportion by maintenance companies. (K-citymarkets, K-supermarkets, and K- the energy protocol contained in the GRI The basis used for calculating nuclear tricity purchased by K-retailers – between of electricity generated using renewable The scope of multi-energy monitoring markets) accounted for 59% of the K-Alli- reporting guidelines, have been published waste was also changed in 2005, and the 2003 and 2005. The fi gures for 2005 and resources and nuclear power increased, (electricity, heat, and water) decreased ance’s total electricity and water con- in full at www.kesko.fi as an attachment calculation is now based only on the the changes between 2004 and 2005 are while the amount of electricity generated from 70% to 64% in 2005, mainly because sumption, and 52% of heat consumption. to this report. amount of nuclear energy used, as energy only indicative, as explained above. using non-renewable resources dropped the premises of the Asko and Sotka The primary energy used by Kesko in Kesko supplied 512 GWh or approxi- chains were not yet included. Electricity Finland in 2005 was equivalent to approx- mately 70% of the total energy used by consumption alone was monitored in 15% imately 0.4% of total energy consumption the K-Alliance in Finland, a decrease of Consumption and environmental profile of heat and electrical energy in the real estate owned or leased by Kesko in Finland, 2003-2005 of premises, primarily not owned by Kes- (1,480 PJ in 2004 according to Statistics around 2% on 2004. K-retailers purchased ko. Consumption at premises outside the Finland’s energy statistics). Electricity the remaining 220 GWh themselves. Unit 2003 2004**) 2005**) Change *) system is evaluated by type of property, used at Kesko’s Finnish premises ac- No environmental profi le for 2005 for Heat Electricity Total Heat Electricity Total Heat Electricity Total 04/05 based on the specifi c consumption of the counted for around 0.8% (87,025 GWh calculating Kesko’s indicators was availa- Volume GWh 306 667 973 259 638 897 286 734 1,020 13.7% premises monitored. according to www.energia.fi / 2005 statis- ble from energy utilities in March 2006. Primary energy PJ 1.2 4.8 5.9 1.0 5.5 6.5 1.15 6.41 7.56 16.3% tics), and district heat for about 0.9% As a result, the 2004 environmental pro- non-renewable PJ 0.9 1.7 2.6 0.85 1.2 2.05 0.95 1.15 2.10 2.7% Energy and water consumption in 2005 (31.6 TWh in 2004 according to Statistics fi le obtained from each supplier has been nuclear energy PJ - 2.0 2.0 - 1.68 1.68 - 1.97 1.97 17.6% The combined electricity consumption of Finland) of total national consumption. used for Kesko’s calculations. For electric- Kesko and the K-retailers operating in Energy monitoring and associated ity purchased by K-retailers themselves, renewable PJ 0.2 0.8 1.0 0.2 2.5 2.7 0.14 3.26 3.40 26.0% Kesko’s premises in Finland totalled 734 emission calculations were largely started the average 2004 environmental profi le of Environmental impacts GWh, an increase of 15% on 2004. When outside Finland during 2005. Foreign sub- electricity consumed in Finland has been climate change tn CO2 eq 75,582 118,552 194,134 65,103 140,269 205,372 63,000 170,006 233,006 13.5% the increase in net fl oor area during the sidiaries purchased a total of 157 GWh of used. Kesko’s indicators for 2004, which acidification tn SO2 eq 248 268 516 209 227 436 200 272 472 8.2% year is taken into account, consumption electricity and district heat. It proved im- had to be calculated on the basis of the lower atmosphere possible to identify how much electricity per square metre rose by nearly 8% on av- 2003 environmental profi le for the 2004 ozone tn C2H4 eq 6.1 10.0 16.1 5.1 5.3 10.4 5.73 8.91 14.64 40.8% erage. The specifi c consumption of K-city- was used for heating premises. Consump- report, have now been updated to corre- nuclear fuel markets rose by 10%, that of K-supermar- used***) tn - 0.75 0.75 - 0.49 0.49 - 0.55 0.55 12.2% kets by 6%, and that of Anttila depart- ment stores by 2%. The specifi c consump- *) combined change in heat and electricity tion of K-markets and other small food **) fi gures for 2004 have been updated to correspond to the actual emissions in electricity consumption, and fi gures for 2005 Specific consumption of electricity, heat and water in the real estate stores fell by 3%, in contrast, and that of are based on emission data for 2004 owned or leased by Kesko in Finland, 2001-2005 ***) nuclear waste was reported in 2003 offi ce and warehouse buildings by 7%. In the case of real estate covered by the 300 KRESS real estate and construction ener- Environmental impacts of electricity supplied by Kesko to the K-Alliance, 2001-2005

gy-saving agreement, the specifi c con- 250 270 256 254 Change ***) 251 sumption of K-citymarkets and K-super- 250

markets increased, whereas that of offi ce 200 226 Unit 2001 2002 2003 2004 *) 2005 *) 2004/2005 212 212 213 213 208 209 207 205 205 204 199 and warehouse buildings fell. Revised da- 196 Volume GWh 494 509 518 523 512 -2.1% 190 187 178 179 ta on fl oorspace has raised specifi c con- 150 176 Primary energy PJ 3.8 3.7 3.6 4.6 4.8 4.9% sumption fi gures to some extent. 158 non-renewable PJ 3.5 2.9 1.6 1.1 0.8 -35.4% Heat consumption totalled 286 GWh, 100 nuclear energy PJ **) **) 1.6 1.4 1.4 -0.5% 106 99 96 101 95 94 100 93 89

an increase of 10% over 2004. Specifi c 85 renewable PJ 0.2 0.7 0.4 2.2 2.6 16.5% 80 consumption increased by 3% on average. 50 74 Environmental impact The increase in K-citymarkets was nearly climate change tn CO2 eq 173,430 127,455 118,505 110,003 112,314 2.1% 0 16%, whereas the fi gure for Anttila de- acidification tn SO2 eq 399 308 268 227 190 -19.6% 2001 2002 2003 2004 2005 2005 partment stores declined by nearly 18%. net floor area gross floor area lower atmosphere ozone tn C2H4 eq 7.5 7.1 10.0 5.3 5.6 5.1% Revised fl oorspace fi gures have affected Electricity, kWh/m2 Heat, kWh/m2 Water, litres/m2 nuclear fuel used****) tn 0.42 0.44 0.51 0.39 0.38 -3.3% changes in the specifi c consumption of - Kress real estate - Kress real estate - Kress real estate heat more than real changes in consump- *) fi gures for 2004 have been corrected to correspond to the actual emissions. Figures for 2005 have been calculated on the basis on tion. Temperature-adjusted consumption KRESS real estate is covered by the real estate energy saving agreement. emission data for 2004 The proportions of fl oor areas used in the calculation of specifi c consumption are: **) nuclear power was previously included in non-renewable energy but is now reported separately data for comparable properties shows electricity 34%, heat 45%, and water 45%. ***) change in % has been calculated from unrounded fi gures ****) nuclear waste was reported 2001-2003 36 Environmental performance Environmental performance 37

Energy consumption in Kesko and Rimi Baltic properties outside Finland in 2005 and acidifying emissions by about 21%. In most cases, transportation is handled by talled 6,719 kilos (6,777 kilos) and 19.5 m3 respect of climate warming-related emis- Kesko Food’s trucks returning from trunk (19.4 m3) of goods. The average distance Sweden Norway Estonia Latvia Lithuania sions in particular, the shortcomings in shipments or deliveries, which means driven per load was 110.9 kilometres Kesko Kesko Kesko Kesko Kesko the energy environmental profi le fi gures that these purchases are included in the (165.4 kilometres). sub- sub- sub- Rimi sub- Rimi sub- Rimi referred to above must be taken into ac- fi gures for distribution kilometres. The average volumetric effi ciency of sidiaries sidiaries sidiaries Baltic Total sidiaries Baltic Total sidiaries Baltic Total count. The amount of radioactive waste Kesped’s operations were further reor- loads remained unchanged. The size of Consumption of purchased increased by 46%, due to the increased ganised in 2005. The opening of the the average distance driven per load and electricity, GWh 9.2 9.0 5.6 12.9 18.5 4.6 68.8 73.4 12.0 33.0 45.0 scope of coverage outside Finland, partic- Mikkeli terminal in late 2004 reduced the cubic metre delivered decreased by one Consumption of self-generated ularly in Lithuania, as indicated above. number of kilometres driven in the Van- third, compared to an increase of 15% per electricity, GWh 0.1 0.1 taa distribution area, while the opening load and 10% per cubic metre in 2004. Consumption of purchased Transport of the Pakkala refrigerated terminal in Much of the reason for this change can be heat, GWh 0.6 0.6 *) *) *) *) *) *) 0.6 *) 0.6 As in 2004, transport statistics and emis- early 2005 increased transportation vol- attributed to the increase in pallet trans- Consumption of self-generated sion fi gures for 2005 included distribu- umes in the same area. The volume of portation outsourced by the Vantaa ware- electricity, GWh 0.9 0.9 2.0 2.0 8.5 8.5 tion carried out by external operators em- services bought from external transporta- houses and to other structural changes. ployed in Finland (‘+2’ carriers in refriger- tion companies in respect of pallet trans- Contract transport companies (+2 driv- Total energy use, GWh 9.8 9.6 6.6 12.9 19.5 6.6 68.8 75.4 21.1 33.0 54.1 ated transportation) in addition to Kesped portation increased in the Vantaa distri- ers) drove nearly 2.7 million kilometres Consumption of water, m3 1,073***) 680***) 4,474 **) 10,378 **) 29,320 **) operations. Much more information is bution area, which means that the quanti- (3.3 million) delivering Kesko Food goods *) Purchased heat could not be separated from purchased electricity now available on transportation by sub- ties of goods transported are recorded in – mainly meat, processed meat, and con- **) No water consumption data available for Rimi Baltic sidiaries outside Finland as well. Kesped’s statistics, but kilometres driven venience foods. This fi gure is based on in- ***) Consumption data for Sweden and Norway insuffi cient No reliable statistics are available on in respect of these small part loads could formation provided by transport compa- purchasing transportation, or on trunk not be allocated to Kesko. nies as a proportion of the total distances transportation between Kesko’s central Kesped transported 107,571 loads to K- they drove in 2005. It has not been possi- Environmental profile of energy consumption in Kesko and Rimi Baltic properties outside Finland in 2005, electricity and heat combined warehouse and distribution warehouses. retailers and other Kesko’s customers in ble to compile suffi ciently accurate statis- About 70% of domestic goods for Kesko 2005 (85,019 loads in 2004), representing tics on the loads, cubic metres, and tons Unit Sweden Norway Estonia Latvia Lithuania Total Food’s warehouses are bought at ’ex 722,784 tons of goods (576,000 tons). The covered by this type of transportation. Volume GWh 9.8 9.6 18.5 73.4 45.6 156.9 works’ prices, allowing Kesko Food to de- total distance driven was 11.9 million kilo- Kesko Food and Valio also cooperate in Primary energy PJ 0.076 0.038 0.294 0.468 0.627 1.503 cide on the mode of transport used. In metres (14.1 million). An average load to- the transport area, but the role of this as non-renewable PJ 0.008 0.004 0.294 0.239 0.063 0.608 nuclear energy PJ 0.049 0 0 0 0.553 0.601 renewable PJ 0.019 0.034 0 0.229 0.011 0.293 Environmental impact Climate change tn CO2 eq 303 81 23,605 10,638 2,725 37,351 own fuel tn CO2 eq 218 413 1,719 2,350 Acidification tn SO2 eq 0.55 0.28 241.43 271.44 14.36 528.07 Radioactive waste tn 0.039 0 0 0 0.199 0.238

Rimi Baltic’s proportion of consumption and emissions 70% 94% 73%

compared to 2004. The correct fi gures greenhouse gas emissions in 2005 (about tions and the IPCC 1996 Good Practices will be updated in the online edition of 82 million tons in 2004, www.energia.fi ), a Guide. Acidifying emissions from Kesko’s the report as soon as generating data is slight decrease on 2004. in-house generation have not been calcu- completed in summer 2006. The specifi c Outside Finland, fi gures on the con- lated, as the main fuel used is natural gas. emissions of electricity imported from sumption of primary energy in electricity Premises outside Finland, Rimi Baltic Russia in 2005 will have a considerable and heat generation in Estonia, Latvia, included, accounted for approximately impact on the 2005 profi le, according to Lithuania, Sweden, and Norway are based 26% of Kesko’s total real estate (Rimi Fortum Markets. on country-specifi c statistics on energy Baltic accounted for about 34% of all As in previous years, ozone levels in generation and statistics prepared by the foreign premises), 14% of combined elec- the lower atmosphere were evaluated on International Energy Association (IEA). tricity and heat consumption, and 15% the basis of the average profi le for Finn- Specifi c electricity-related emissions are of greenhouse gas emissions. Compari- ish electricity generation, as utilities do based on Eurelectric statistics, and assess- sons with 2004 are not meaningful as the not usually provide this data in their own ments of district heat emissions are based fi gures for 2005 include Norway, Senukai emission profi les. As a result, ozone infor- on the energy sources used. Specifi c emis- in Lithuania, and the operations of Rimi mation contains major uncertainties. sions for the nuclear energy consumed are Baltic. Given the above limitations, it can be estimated at 4.25 g per MWh, regardless of The energy consumption of the Kesko estimated that Kesko’s and K-retailers’ country. The fi gures for carbon dioxide Group in Finland and other countries com- electricity and heat consumption ac- emissions from Kesko’s in-house genera- bined increased by about 17%, climate The K-supermarket in the Kolumbus shopping centre in Vuosaari, Helsinki is expanding and is due to become counted for about 0.2% of Finland’s total tion are based on the OECD / IEA instruc- warming-related emissions by about 4%, a K-citymarket soon. Planning Manager Harri Fast (left) and Construction Manager Kimmo Leivo on the site. 38 Environmental performance Environmental performance 39

CO2 emissions in Kesped Ltd’s distribution a proportion of total transportation has tistics include companies in Sweden and and driving speed. Emissions associated information on all the carbon dioxide the total amount of materials dropped compared with delivery volumes not been detailed. Norway, the entire Rimi Baltic, Kesko with deliveries by Rimi Baltic and Nor- emissions associated with its operations, from 10.3% in 2004 to 9.4%. Anttila’s transportation remained at Agro in Estonia and Latvia, and Rautake- gros have been calculated on the basis of however. It is diffi cult, for example, to Corresponding fi gures have been cal- approximately 10,000 loads and 520,000 sko in Latvia. The statistics on kilometres the fuel used, and in the case of other for- compile statistics in suffi cient detail on culated in the Baltic companies, but no 35 kilometres driven. The warehousing and driven and quantities delivered still fea- eign subsidiaries on the basis of kilome- purchasing and trunk transportation, on summary for 2005 could yet be obtained 30 34.7 34.1

25 31.0 transportation of products sold by Rau- ture some inconsistencies and uncertain- tres driven, in accordance with the GHG the amount of fuel used in delivery trans- for this report. 29.1 20 takesko, Kesko Agro, and Keswell (exclud- ties, however, which is why only emission Protocol – Mobile Guide. port in Finland, or business travel by air Kesko continues to work actively in

15 21.0 ing Anttila) to K-retailers were mainly data has been recorded in the table below. The volumetric effi ciencies applied in or train by Kesko personnel. Annual busi- Finnish producer associations and stand- 10 handled by external service suppliers, As a result of the merger of Kesko’s and Kesped’s calculation were 50% for truck ness travel by passenger car totals ap- ardisation organisations to improve the 9.9 11.0 10.8

5 10.0 and no statistics comparable to those for ICA’s operations in the Baltic countries, transportation and 70% for full trailer proximately 14 million kilometres. As standardisation of packaging, the use of 7.2 0 Kesko Food’s and Anttila’s transportation several changes were made in Rimi Bal- transportation. Truck transportation is some of Kesko’s division parent compa- environmentally sound materials, and re- 2001 2002 2003 2004 2005 are available. tic’s transportation systems during 2005, assumed to account for 22%, of which nies have outsourced their warehousing duce the amount of materials used. Kesko Kilos per cubic Kilos per ton Considerably more information is now including the reorganisation of refriger- 30% is considered to be rural traffi c and and transportation, and some manufac- can play an important role in determining metre delivered delivered available on the transportation carried ated storage and transportation, supplier 70% urban. Full trailer transportation ac- turers supply goods direct to K-stores, the packaging materials and quantities out by subsidiaries outside Finland. Sta- connections, and import terminal opera- counted for 78%, of which 30% was urban transportation data is not included in used for its house brands in particular. tions. traffi c and 70% rural. Kesko’s statistics. Due to the numerous Kesko Food’s logistics services have pub- The total volume of imports forwarded 62% of outsourced deliveries are made possible errors and inaccuracies associat- lished a CD-ROM manual on packaging by Kesped was 310,700 tons, a decrease of by trucks, and 38% by semi- or full trail- ed with calculating the Group’s carbon di- principles. CO2 emissions in delivery transport 2003-2005, tons 4.2% over 2004. Transportation from Eu- ers. Urban driving accounts for 70% of oxide balance, it has been decided not to 2003 2004 2005 ropean locations was handled by trucks, truck transportation, and 20% for other calculate this information until further Waste management and recycling Kesped’s delivery 17,725 17,844 15,143 semi-trailers, and containers, and from transportation. Assumed volumetric effi - notice. The KELO model continues to be used at Outsourced transport 2,911 2,739 2,351 outside Europe by containers only. Kesko ciencies are the same as for Kesped. A summary of the emissions associat- Kesko Food to produce statistical data on Anttila 638 662 667 Food accounted for 75% of all imports. Anttila’s calculations are based on gen- ed with the energy used in Kesko and K- waste management at all distribution Export deliveries, mainly to Sweden, eral factors applicable to all trucks, tak- store premises and from distribution is centres. Some units transfer data semi- Finland, total 21,274 21,245 18,161 the Baltic countries, and Russia, were ing replacements in the truck fl eet into presented on page 6. The information giv- automatically into the KELO model in co- Kesko Agro, Estonia *) *) 45 handled by trucks. The total volume of ex- account. en covers the majority of the emissions operation with the company’s waste man- 1) Rimi Baltic AB, Estonia 1,669 2,193 1,955 ports forwarded by Kesped, excluding The relative CO2 emissions of Kesped’s caused by Kesko, giving a good picture of agement operator, L&T. Estonia, total 2) 1,669 2,193 2,000 grain, was 4,210 tons (4,000 tons in 2004). transportation operations decreased by their scale and enabling them to be relat- The amount of waste generated by Kesko Agro, Latvia *) *) 52 32% per ton and 33% per cubic metre. Car- ed to the Group’s net sales. Kesko Food’s warehouses in 2005 totalled Rautakesko, Latvia *) *) 290 Transport emissions bon monoxide, hydrocarbon, and particu- 7,607 tons, a decrease of 8% on 2004. Rimi Baltic AB, Latvia *) *) 2,127 The emissions associated with deliveries late emissions also decreased. As report- Use of materials Most of the change can be attributed to Latvia, total *) 2,469 by Kesped, other Finnish transport com- ed above, this decrease in emissions can The GRI guidelines’ indicator on the use the decrease in the amount of corrugated panies, and Swedish and Baltic subsidiar- mainly be attributed to the fact that the of materials refers to the amount of pack- board collected by return logistics from Lithuania, total (Rimi Baltic AB) 3) *) *) 967 ies have been calculated according to the actual number of kilometres required for aging materials imported and packed by K-stores, as K-retailers passed more cor- Sweden, total (K-Rauta AB) *) *) 21 kilometres driven, as no fuel consump- Kesko’s deliveries cannot be included in Kesko that needs to be reported to the au- rugated board to local operators. The total Norway, total (Norgros AS) *) *) 160 tion data is available. The fi gures for the statistics. The environmental impact thorities annually under the EU packag- amount in relation to each cubic metre of Finnish transportation is based on the of changes can be assumed to be positive, ing directive. material supplied (2.1 million) dropped to Total 22,943 23,438 23,778 emission factors and defi nitions con- as pallet transportation made on behalf Packaging statistics for 2005 were cal- 3.62 kilos, from 3.86 kilos in 2004. The *) data has not been collected tained in the LIISA 2002 model produced of Kesko has generally improved the volu- culated mainly on the basis of import for- fi gure includes the corrugated board col- 1) data for 2003 and 2004 is not available on Kesko Food Ltd’s distribution in Estonia by the Technical Research Centre of Fin- metric effi ciency of transport companies’ warding statistics, as previously. The lected from K-stores. Excluding this, the 2) Estonian statistics exclude Rautakesko’s distribution in Estonia land, VTT. Information is provided on co- loads and very seldom called for carrying amount of materials, detailed in the table amount of waste totalled 1.54 kilos (1.56 3) Lithuanian statistics exclude Kesko Agro’s and Senukai’s distribution effi cients by truck type, engine category, extra loads. There are, however, no calcu- below, decreased by 12.3% from 33,448 kilos) per ton supplied. lations available on this. tons in 2004 to 29,331 tons in 2005, while Segregation improved compared to No comparative data is available on the volume of imports decreased by 4.2%. 2004, which was refl ected in an increased Kesped Ltd’s distribution figures 2003-2005 transportation-related emissions for com- The relative proportion of packaging of amount of energy waste and a decrease in panies outside Finland in respect of earli- Distribution centre km/load development tons/load development m3/load development er years. Rimi Baltic’s fi gures, for in- 2003 2004 2005 04/05 % 2003 2004 2005 04/05 % 2003 2004 2005 04/05 % stance, do not yet include indicators Packaging materials in products imported by Kesko into Finland, tons Helsinki 117 151 83 -44.9 6.1 6.7 6.9 1.8 19.2 21.0 20.5 -2.1 linked to transportation volume. Rimi and their proportion of the total weight of products, % Tampere 145 206 181 -12.4 7.4 7.7 8.5 9.9 16.9 22.1 22.6 2.2 Baltic accounts for a considerable propor- tion of transportation carried out outside Turku 101 96 88 -9.2 5.0 6.0 5.3 -11.1 15.1 15.7 14.8 -5.3 2002 2003 2004 2005 Finland, and the company’s emissions ac- Kuopio 240 217 198 -8.6 7.9 8.0 8.0 0.1 23.7 22.8 23.0 0.9 Fibre 21,048 20,352 22,698 19,615 count for some 90% of the total emis- Oulu 276 244 256 5.2 6.4 7.6 6.9 -9.2 19.1 17.6 18.6 5.4 Plastic 3,973 3,843 3,717 3,276 sions of Kesko’s overseas companies. Metal 3,244 2,781 3,828 3,295 Jyväskylä 118 146 61 -58.1 5.4 4.8 3.9 -19.1 13.0 11.1 9.2 -17.2 Glass 1,432 1,320 1,855 1,343 Mikkeli - 236 154 -34.7 - 5.8 7.8 33.8 - 18.1 24.0 32.7 Kesko’s CO2 emissions Wood 2,007 2,096 1,350 1,802 Total, Kesped 144 165 111 -32.8 6.3 6.8 6.7 -0.9 18.4 19.4 19.5 0.5 Carbon dioxide emissions are among Kes- Total 31,704 31,392 33,448 29,331 ko’s key environmental impact indicators. NB: Although tons, kilometres, and cubic metres have been rounded off in the table, percentage changes have been calculated from unrounded fi gures. Kesko does not have suffi ciently accurate Proportion of packaging, % 11.4 10.6 10.3 9.4 40 Environmental performance Environmental performance 41

mixed waste levels. The amount of mixed The amount of board at Anttila’s distri- previously, but are now provided separate- only. Rimi Baltic is presented separately, Recoverable and reusable packaging sent back in waste totalled 0.36 kilos (0.39 kilos) per bution centre decreased considerably, and ly. Waste amounts and recovery rates re- as the amount of waste generated in food Kesko Food’s return logictics, 1,000 pcs cubic metre delivered. The amount of or- successful waste segregation ensured mained at 2004 levels in these two com- stores is considerably higher than in ganic waste decreased, as centralisation that the amount of mixed waste de- panies. hardware and builders’ supplies or agri- 2001 2002 2003 2004 2005 of fruit and vegetable storage made it creased by 72%, from 64 tons to 18 tons. Comprehensive waste statistics on cultural stores. In addition to waste gen- Aluminium cans 14,100 15,300 20,000 22,243 33,434 easier to forecast warehouse turnover Construction and furniture waste was Kesko’s subsidiaries outside Finland were erated in warehousing and distribution, Disposable bottles 2,200 2,000 2,100 1,959 2,111 and reduce wastage. The amount of wood sent for recovery, for example. A total of available for the fi rst time in 2005. Waste the fi gures for Rimi Baltic, like those for Deposit bottles 922 923 833 738 730 waste continued to increase, as broken 19 tons of waste electrical and electronic has only been broken down into landfi ll, Kesko, include corrugated board (3,363 Transbox crates 4,735 5,050 5,702 5,506 5,206 disposable pallets were no longer sold on. equipment were collected from Anttila recovery, and hazardous waste for these tons) and plastic (190 tons) collected from As these pallets are now crushed and sent and Kodin Ykkönen department stores summary statistics. As segregation and stores using return transportation and for incineration, one option would be to through distribution centres for recycling statistics are not as accurate in all the sent on for recovery. include them in energy component statis- between August and December. The recov- Baltic countries as in Finland and the The amount of packaging supplied by tics. The total waste recovery rate (includ- ery rate rose to 97.5%. other Nordic countries, the recovery per- Kesko Food’s return logistics for recovery Reusable transport packaging returned to Keswell’s ing organic waste) remained at 90.0%, Rautakesko’s and Kesko Agro’s waste centages presented for the Baltic coun- and reuse remained relatively unchanged, central warehouse (number of uses) the same as in 2004. statistics have been published together tries must be considered as indicative but the volume of beverage cans collected increased from 22 million to 33 million 2001 2002 2003 2004 2005 (see page 40). No essential changes took Crates 99,273 92,324 95,000 94,000 94,000 Waste management statistics of Finnish operations, tons Roll containers - - - - 6,000 place in the recycling of Keswell’s trans- Borrowed cases 39,000 36,270 35,500 35,500 35,500 Kesko Food Anttila Rauta- Kesko port packaging. Return pallets 240,000 223,200 240,000 250,000 250,000 kesko Agro Product-related developments Long furniture pallets 15,600 15,600 7,500 7,500 16,000 2003 2004 2005 2003 2004 2005 2005 2005 Kesko’s division parent companies have Waste for recovery cooperated with suppliers to improve the energy waste 363 359 455 39 48 49 43 16 wood waste 437 764 902 53 57 102**) 140 26 metal 166 152 145 17 7 10 5 14 film plastic 327 248 237 20 21 25 3 - Case corrugated board 5,097 4,887 4,378 437 468 422 136 25 paper 193 174 153 54 60 55 1 5 recycling plastic cores from agricultural stretch film

Landfill waste Kesko Agro Ltd and Oy FL Pipe Ab began working together with nine K-maatalous organic waste*) 967 874 574 6 10 7 - 10 stores to collect and recycle the plastic cores used in rolls of stretch fi lm in autumn mixed waste 787 833 760 94 64 18 90 41 2005. All the stores that volunteered to join the project were K-environmental Hazardous waste 9 7 3 14 7 2 0.35 45 stores. The feedback from the trial has now been collated and will be used for a larger-scale collection system to be introduced in 2006. The aim is to extend the SER waste 19 0.09 network of participants involved, and make collection standard practice. Total 8,346 8,299 7,607 734 742 709 418 182 Polypropylene cores manufactured by FL Pipe and used by companies such Recovery, %*) 90.6 89.9 90.0 87.2 91.4 97.5 78.3 77.5 as Rani Plast at the heart of rolls of stretch fi lm are ideal for recycling. Cores are *) Organic waste is included in the recovery percentage. collected and shredded at a plant at Kaustinen, after which they can be used as **) Anttila has sent 6 tons of construction waste and 20 tons of furniture waste for recovery, both included in wood waste. raw material for producing new cores. The latter can be produced from up to 100% Waste statistics for Rautakesko and Kesko Agro have been presented together in previous years but are reported separately since 2005. recycled material. By returning used cores to their local K-maatalous store, farmers can make a useful contribution to plastics recycling, while the stores involved help promote a more environmentally aware approach to waste. Waste management statistics for operations outside Finland in 2005, tons The challenge for stores has been to encourage their personnel and their cus- Sweden Norway Estonia Latvia Lithuania tomers to come on board. Sales personnel need to tell customers about recycling Kesko Kesko Kesko Kesko Kesko opportunities, for example, while warehouse personnel need to ensure that only sub- sub- sub- Rimi sub- Rimi sub- Rimi the right types of cores are sent for recycling and that the process runs effi ciently. sidiaries sidiaries sidiaries Baltic Total sidiaries Baltic Total sidiaries Baltic Total Kesko Agro and FL Pipe are also marketing the idea more generally to increase its Landfill waste 215 768 468 2,622 3,090 287 4,320 4,607 2) 2,371 2) visibility in the farming community. Waste for The trial phase of the project generated a modest 5,000 kg of waste cores, but the system has the potential to produce up to 140,000 kg annually. A 70% collec- recovery 1,034 715 49 310 359 382 2,220 2,602 2) 1,023 2) tion rate is seen as realistic. Establishing and developing the system is expected to Hazardous waste 52 2 10 - 10 8 - 8 17 - 17 take between three and fi ve years. Total 1,301 1,485 527 2,932 3,459 677 6,540 7,217 1,502 3,394 4,896 The organisers are planning to arrange a competition for participants in 2006, Recovery, % 79.5 48.1 9.4 10.6 10.4 1) 33.9 36.1 2) 30.1 2) with a spa trip for two as the prize. The competition form will include listing the number of cores returned, to enable how the project is progressing around the Figures for Rimi Baltic include cardboard and plastic collected from stores. country to be monitored. 1) As components for recovery also include packaging materials associated with products sold, the recovery percentage has not been calculated. 2) As data of waste segregation into recovery and landfi ll is unavailable, only hazardous waste and the total amount are given. 42 Environmental performance Environmental performance 43

Case environmental performance of products cultural Products Society (KK) to use the K-environmental stores market chain unit, which will lead to and packaging for many years. The Corpo- society’s seed leaf symbol. The Society The K-environmental store operating changes in the store network. As a result, rate Responsibility Unit has participated has drawn up a set of guidelines entitled model is incorporated into the chain con- the chain has been forced to slow down its escaping the mould trap in several national development projects ‘Good production practices’ for growers. cepts for Kesko Food’s K-citymarkets, K- implementation schedule of the environ- Some 200 homes seriously infested by mould and mildew are identifi ed annually in aimed at promoting the measurement of Rimi Baltic has cooperated with the supermarkets, and K-markets. The entire mental concept in stores. The current tar- Finland. Eliminating the problem, and making the homes habitable again, calls for environmental impact related to produc- ministries of agriculture and farmer personnel of K-environmental stores re- get is to increase the number of 92 K-envi- the input and skills of a number of experts. As part of efforts to help combat the tion and consumption. As environmental organisations in the Baltic countries to ceive basic training on environmental is- ronmental stores by 100 during 2006. problem, Rautakesko signed an agreement with the Pulmonary Association Heli in impact must be assessed over the entire promote the awareness and commercial sues, and supplementary training on a va- Chain management work in the K-rau- January 2005. Under this, Rautakesko will donate building supplies for renovating life-cycle, achieving clear-cut results has use of national quality labels. These la- riety of themes is arranged annually. The ta and Rautia chains focuses on develop- and repairing affected homes to the ‘Mould Trap’ project, jointly run by Heli and been diffi cult and their implementation bels ensure the quality, safety, and tracea- special theme for 2005 was energy sav- ing the stores’ operating model in cooper- Asumisterveysliitto AsTe ry, an organisation dedicated to helping people deal with has progressed slowly. bility of production, which often consists ings. Bureau Veritas Quality Internation- ation with the K-environmental store de- health and housing-related problems. Rautakesko’s assistance goes to families enti- The selection and marketing defi ni- of local food, and some foods are organic. al (BVQI) audits each store when it intro- velopment teams of both chains. These tled to receive state assistance in eliminating health hazards in the home. Rautakesko tions concerning organic and Fairtrade In Estonia, Rimi Baltic sells 177 products duces the K-environmental store concept, teams consist of retailers and employees donated some €3,000 in 2005, and donations will continue in 2006. The plan is to products and products with environmental under the Estonian Taste Label, and 101 and carries out repeat audits in stores se- responsible for environmental issues. renovate around 15 homes a year during the fi rst phase of the project. labelling are included in K-food stores’ with an Approved Taste Label. The range lected by annual sampling. Audits focus Hardware and builders’ supplies stores Experts from Heli survey applicants’ homes and draw up a repair plan, and chain concepts. Kesko Food offered a se- in Latvia includes 143 products with the on evaluating whether a store meets the and agricultural stores cooperate with the monitor that the repairs needed are carried out correctly. They also train Rautakesko lection of around 500 organic products Green Spoon – Latvian Quality Label, and detailed requirements set out in the K-en- Environmental School of Finland (SYKLI) personnel and arrange joint info-sessions at stores to advice people with mould prob- and around 500 products with environ- 7 organic products with the EkoAgros la- vironmental store checklist. In addition in auditing work. Repeat audits are car- lems about the issues that need to be taken into account and the types of repair that mental labelling as of the end of 2005. bel in Lithuania. The ranges in Lithuania to training, these cover areas such as ried out every three years. The number of require specialist assistance to ensure success. Training events will be started in 2006. Both of these fi gures, the latter in particu- also include Environmental Protection product selection and labelling, preven- K-environmental stores increased by The Virtanen family from Valkeakoski was one of the fi rst participants to receive lar, increased on 2004, although the in- Club (EPC) –labelled washing powder and tion of the generation of in-store waste Rautakesko assistance. The family bought their house, which was built in the 1970s, crease in products with environmental la- detergents. and promoting the recycling of this waste, in 1998. Although surface moisture readings were taken at the time, a more thorough belling can be attributed mainly to more Rautakesko offers a wide range of recycling services and consumption-relat- going study of the house’s structures was not made. The repeated illnesses of the accurate statistics practice. There were 34 products featuring environmental, ener- ed environmental information offered to family’s children that followed after the Virtanens moved in, however, indicated that organic products in the Pirkka range. It gy, or emission category labelling. Certi- customers, in-store energy management, was estimated that the sales growth in something was wrong. Investigations showed that their home had multiple problems; fi ed timber – mainly with FFCS certifi ca- and cleaning practices. Some of the re- Pirkka and other organic products contin- the thermal insulation of the outside walls on the building’s ground fl oor proved to tion – accounted for over 90% of sawn quirements are also included in the ued to exceed the average, but no accurate be completely mould-infested, for example. Repair plans were drawn up with the goods sold by Kesko. In all, 600 tons of chains’ concept measurements. statistics are available. Some organic help of Heli and AsTe experts, but work only started on implementing them in 2004 impregnated timber were recycled All K-citymarkets and K-supermarkets, products – such as milk and meat – are de- after the liability questions involved had been resolved. through K-rauta and Rautia stores, up except for four of the latter, were K-envi- livered to K-stores directly from suppliers, The repairs needed proved very extensive. In addition to removing mildewed 37% on 2004. Rautakesko cooperated ronmental stores as of the end of 2005. and K-retailers buy organic vegetables not mineral wool insulation, the underlying load-bearing walls had to be demolished with the WWF’s Operation Mermaid in its The K-market chain targeted having all included in the Kesko range from produc- and rebuilt in sections to ensure that the fi rst fl oor was safe. A new ventilated fl oor ‘Wastewater Expert’ campaign to protect stores in the chain as K-environmental ers directly. Consequently, it is diffi cult to had to be installed above the building’s damp load-bearing base slab to eliminate the Baltic Sea and participated in the stores by the end of 2006 in 2004. In line obtain reliable information about the actu- the danger posed by moisture rising through the structure and creating new problems. ‘Mould Gap’ project organised by the Pul- with the reorganisation implemented by The symbol of the al market share of retail organic products. K-environmental store. The project was largely completed by the end of 2005, enabling the family to look monary Association Heli. See the case Kesko Food in 2005, all small stores are forward to a normal life from now on. Seven out of the 11 stores in the fi nals story on page 42 for more information. centralised under the guidance of the K- of the Organic Store of the Year competi- Anu and Jani-Pekka Virtanen’s seven-year battle against mould in their home tion arranged by Finfood Luomu were K- is virtually over with the exception of some minor fi nishing work. stores. The winners were K-citymarket K-environmental stores at 31 December 2005 Jumbo of Vantaa in the large store catego- ry and K-market Härmälä of Tampere in Chain Share of K-environmental New K-environmental the medium-sized store category. K-environmental stores out of the stores in 2006 Most producers of the fruit and vegeta- K-environmental store diplomas stores chain’s total sales, % (target) bles imported by Kesko Food – represent- K-citymarket 53 100 **) ing around 91% of total imports of these K-supermarket 146 97 **) products – have obtained EurepGAP certi- K-market 92 25 100 fi cation, granted by an independent agen- K-pikkolo 1 *) *) cy for fulfi lling the traceability, product K-rauta 17 54 *) safety, and environmental requirements Rautia ***) 22 28 *) set for production by EUREP (Euro-Retail- K-maatalous 13 39 *) er Produce Working Group). The acronym K-environmental store diplomas, total 343 GAP refers to good agricultural practices. The remaining 9% of imports come from ISO 14001 certificates Polish, Hungarian, and Egyptian produc- Anttila/Kodin Ykkönen department stores 33 100 **) ers, who have started preparing for certi- *) no data available fi cation. **) all stores of the chain Kesko Food’s Finnish suppliers of vege- ***) 4 Rautia environmental stores also operate as K-maatalous stores tables must belong to the Finnish Horti- 44 Environmental performance Environmental performance 45

eight in the Rautia chain, and by four in ments can be saved and sent in electronic keskusta ry (Living Downtown Associa- has supported a professional skills com- Case the K-maatalous chain during 2005. form. tion in Finland), and producer communi- petition for young Estonian farmers, a Rautakesko started planning the intro- Kesko’s offi ces used 6 million sheets of ties responsible for recycling packaging similar competition for farms in Lithua- looking for new ways of saving energy duction of the K-environmental store con- A4 paper (19 tons) and 5.2 million enve- materials and electrical and electronic nia, and cooperated with the Latvian A ‘K-environmental Store of the Year’ competition was organised among the various cept in its operations outside Finland at lopes in 2005. One third of all paper was scrap. farmers’ advisor organisation and a chains of Kesko Food in 2005 around the theme of energy conservation. The competi- the beginning of 2006. No exact timetable used for copying and two thirds for print- Cooperation also continued with sup- university agricultural faculty. tion was designed to highlight the best energy-saving practices in store chains and has yet been decided. Plans have also ing. Waste paper included 44 tons sent for pliers to promote organic foods and vari- motivate stores to continuously develop their work for a better environment. The title been made by Rimi Baltic, drawing on the recycling, 134 tons sent for secure dispos- ous recycling systems. Environmental risks, damage, of ‘Energy Saver of the Year 2005’ was awarded to K-citymarket Kotka, K-supermarket fact that the company’s other owner, ICA al, and 34 tons of offi ce paper. A total of Kesko continues to be a supporting and incidents Toijala, and K-market Härmälä in Tampere. Each of the winners received €1,000 to use AB, has an environmental store concept some 30 million email messages were re- member of the Finnish Association for The Group’s environmental systems in- for general recreational purposes. similar to the Finnish K-concept in use in ceived and sent. Given that the annual Nature Conservation. Kesko cooperated clude an environmental risk management Participants described measures that they have taken to save energy on the com- Sweden. No decisions have yet been made consumption of envelopes at Kesko was with WWF Finland in ‘Operation Mer- capability fully compliant with the ISO petition form, after which Kesko Food reviewed the progress the stores in question had at Rimi Baltic. 10-11 million at the end of the 1990s, it maid’, a programme for protecting the 14001 standard. Managing environmental made in energy usage since 2003 and in using the EnerKey energy monitoring system. can be seen that emails today account for Baltic Sea, and WWF arranged a training risks is also part of Kesko’s security plan. When the results of this analysis were in, two fi nalists were selected from each chain, Environmental office work more than half of mail needs. event for Kesko personnel on REACH The greatest risk to a company operating and on-the-spot audit visits carried out. programmes chemical regulations. Kesko continued to in the trading sector is fi re, and Kesko In selecting the winners, particular attention was given to the specifi c energy- The ’ViherNokka’ environmental pro- Stakeholder cooperation have a representative on the Executive has provided all its personnel with in- saving measures that each store has implemented, and to the proactive input of retail- gramme for offi ce work has been in use at and communications Committee of WWF Finland. structions and training needed to meet ers, department store managers, and personnel in developing environmental work. The Kesko’s main offi ce building in Helsinki Kesko continued to maintain close con- K-food retailers continued the pro- this contingency. Risks relating to soil savings achieved in energy consumption have largely been generated in day-to-day since 2003, together with the ‘ViherHak- tacts with its stakeholder groups in the gramme of cooperation with teachers of contamination are discussed on page 33. procedures and operations. Air conditioning and interior lighting, for example, have kila’ programme at Kesko Food’s central area of environmental activities during biology and geography started in 2004. Kaukomarkkinat Oy’s terminal opera- been programmed to coordinate with opening hours more effectively, spot lighting has warehouses. The programme was extend- 2005. The ‘Let’s Recycle’ project for grade 7 tions in Hamina include intermediate been reduced, and the brightness of general space lighting reduced during cleaning ed to the Turku distribution centre in Contacts with the Finnish and EU comprehensive school pupils involved warehousing of industrial raw materials, and shelving, while lights in storage and staff areas are turned on only when needed. 2004, where it is known as ‘ViherTurku’. authorities were primarily maintained approximately 9,000 participants. some of which are classifi ed as hazardous Observing maximum fi ll levels in frozen food cabinets has also been underlined, as well The target has been to create uniform in- through the Environmental Committee of Representatives of Kesko’s Corporate to the environment. In accordance with as the need to defrost this equipment regularly. Cleaning chilled cabinets and radiators structions and practices for waste segre- the Federation of Finnish Commerce and Responsibility Unit gave around 50 lec- the SEVESO directive, the terminal has regularly, and using water with an eye to avoiding waste are also important. All of the gation, energy savings, paper consump- Trade (now the Federation of Finnish tures on Kesko’s work in the areas of envi- been defi ned as an installation involving winning stores had carried out these measures in an exemplary way. tion, and offi ce purchases. Both of the Commerce). Kesko had a representative ronmental and corporate responsibility at major accident hazards, and it submits Good examples of the original energy-saving practices implemented by the fi nal- two programmes include a written manu- on the Advisory Committee of the Finnish universities, institutes of higher educa- regular reports on its operations to the ists in the competition include eliminating cold drink displays that are not part of a al and material on Kesko’s intranet. Environmental Institute, on the Executive tion, polytechnics, and other organisa- authorities. store’s concept, more appropriate lighting of exterior areas at night, reducing excessively Environmental programmes have an Group of Environmental Labelling (Minis- tions. No environmental emissions occurred high water temperatures in hot water systems, turning off PC displays at night, and established position in offi ce work. Re- try of Trade and Commerce and SFS), on Kesko’s overall reporting was judged at the Hamina terminal in 2005 that using automatic lighting in toilets. ducing waste volumes did not meet expec- the Environmental Committee of Euro- the best in Finland in the annual compari- would have required a statutory report tations in Kesko’s main offi ce building in Commerce, and on the energy and envi- son of corporate responsibility reports ar- under the facility’s environmental permit. K-market Härmälä in Tampere outshone itself in coming up with numerous ways 2005, due to numerous repairs and re- ronmental committee of the International ranged by the Association of Environmen- No environmental damage or accidents of working designed to promote a more sustainable environment in 2005. It was movals at the premises. More than 5,000 Chamber of Commerce. tal Management and others for the fourth were reported by Kesko’s subsidiaries out- awarded a K-environmental store diploma, won the ‘Organic Store of the Year Competition’ in its category of medium-sized grocery outlets, and was named folders were sent for recycling in the Kesko representatives participated in time. In 2003, Kesko was ranked second. side Finland. ‘K-environmental Shop of the Year’ in the K-market category. Retailer Ritva Greater Helsinki area, and a truckload of the work of several organisations and as- Kesko’s ratings in sustainability index- Salonen and Markku Pönkä, responsible for environmental affairs, are been here surplus offi ce equipment was sent for re- sociations in Finland, including the Finn- es and other comparisons are presented checking temperatures in the fruit and vegetable department. cycling as part of offi ce reorganisation. ish Food Marketing Association, the Finn- on page 20. The practice of sending recycled maga- ish Standards Association SFS, the Finn- Subsidiaries outside Finland also zines to hospitals, health centres, and re- ish Packaging Association, the Finnish maintained contacts with their local tirement homes continued. Society of Refrigeration, Elävä kaupunki- stakeholders. Kesko Agro, for example, A multi-function offi ce equipment project was started in the main building in summer 2005 to assess printers and methods. This revealed that equipment was aging and that both personal printers and copiers were underutilised. The goal is to continue centralising printing by re- ducing the number of personal printers and replacing dedicated copiers on each fl oor with multi-function equipment in- corporating printing, copying, scanning, and telefax capabilities. The volume of material should be reduced, thanks to the adoption of duplex printing and copying as standard features. Scanning will also reduce printing needs, as more docu- 46 Social performance Social performance 47

Employment and employee turnover was 24.2%, excluding summer employees Number of Kesko Group employees Kesko Group had 24,779 or 91.8% perma- (the difference in relation to the number of nent employees and 2,199 or 8.2% fi xed- personnel at the end of the year), which is 30,000 Social term employees as of the end of 2005. approximately the same as in 2004 (23.9%). 1,374 people on long-term leave, 1,124 of The average turnover rate outside Finland 25,000

whom were on parental leave, are includ- was 33.3%, but the differences between 12,271 ed as permanent employees. Due to the companies were large, varying between 20,000 performance Christmas season, the proportion of 11% and 48%. Turnover rates were not 8,544 10,351

fi xed-term employees is higher at the end available for Norgros AS or Rimi Baltic AB. 6,815 15,000 of the year than at other times. The most common reason for terminat- 7,221 2,193 3,060

Part-time employees accounted for ing employment with Kesko in Finland 5,360 14,707 1,551 2,497 24.3% of all Group personnel. The majori- was a fi xed-term contract, accounting for 10,000 13,602 12,792 12,596 12,152

ty of these worked for retail companies in about 46% of departures. Elsewhere, the 11,252 9,993 9,859 9,720 10,307 Key social Finland. Approximately three quarters of reason for approximately 55% of depar- 5,000 all Group employees work in retailing. tures was employees leaving the company 14,988 - Employment trends in Finland and of their own volition. About 6% (256) of 11,544 15,212 12,217 19,411 15,219 22,146 17,528 26,978 21,603 performance + 0 • Fixed-term and part-time employees • Number of employment contracts foreign subsidiaries are presented in the employment contracts in Finland and 2001 2002 2003 2004 2005 in 2005 accounted for a smaller proportion of terminated for production- and table on page 48, which shows that the about 19% (123) elsewhere were terminat- Finland at 31.12. Other countries at 31.12. personnel in Finland and the entire financial-related reasons increased proportion of both fi xed-term and part- ed for production and fi nancial reasons Finland, average Other countries, average time employees has remained unchanged or other reasons based on the Contracts Group. on 2004. in foreign subsidiaries and continued to of Employment Act. During 2005, 177 • Job satisfaction improved in Estonia • Number of summer employees declined decrease in Finland, and consequently in persons retired in Finland and one else- and Latvia, remained unchanged in in Finland, and increased elsewhere. the Group as a whole. where. Details are not available for Pikoil, The Group employed 4,522 new people Norgros AS, Rimi Baltic AB, or Senukai. Finland and Sweden, and declined in • Kesko’s attraction as an employer The Kesko Group had 748 summer Lithuania. in Finland and 4,046 in other countries remained unchanged among students during 2005. A total of 4,302 employees employees in Finland and 244 in other • Employees’ satisfaction with equality and declined among young left the Group in Finland, and 2,753 in countries, the majority in retailing and improved. professionals. other countries. Staff turnover in Finland warehousing. • Number of sick days as a proportion of • Average retirement age dropped. Personnel statistics for 2005, breakdown by country working hours dropped. • Proportion of women in middle • Number of accidents and their management took a slight downward Finland Estonia Latvia Lithuania Russia Sweden Norway seriousness decreased. turn after increasing for many years Total personnel at 31.12. 14,707 443 654 4,410 266 744 612 • Money spent on occupational health but continued to increase in senior In 2005, average 11,252 415 515 4,009 111 518 258 positions, however. service increased by 6% per employee. New employees, number 4,522 121 502 2,735 300 388 *)

• More time was spent on training, but Contracts of employment less money. terminated, number 4,302 148 208 2,142 55 200 *) terminated by employer 256 5 4 *) 7 91 *)

Summer employees of the total 748 61 34 47 0 102 *)

Turnover rate, % 24.2 19.6 26.6 46.9 22.3 13.2 *)

Sick days 142,163 3,089 4,973 39,116 1,051 4,032 *) per person 9.7 7.0 7.6 8.9 4.0 5.4 *) per million working hours 7,180 3,685 4,782 4,854 4,782 4,422 *) Introduction Kesko has direct social responsibility for the wellbeing of its own personnel and indirect Salaries paid, € million 326 5.3 25.6 33.0 1.5 ***) 15.8 12.6 responsibility for the wellbeing of the people working in its purchasing chain. Indicators average annual salary, € 28,944 8,741 **) 7,988 13,072 28,473 48,746 of social responsibility refl ect the state and development of the working community from Vocational training, % 59 45 68 *) 27 *) *) a number of viewpoints. Kesko’s job satisfaction survey assesses the opinions of employees Higher education with degree, % 19 49 28 24 59 *) *) about the company, the performance of their superiors, their working conditions, salaries and social benefi ts, equality, job enjoyment, and many other issues. Statistics on the Training days per person 1.8 2.1 3.6 0.4 1.3 1.9 *) duration of employment contracts, turnover of personnel, sickness, workplace accidents, expenses, € per person 370 325 187 48 26 254 *) supplementary training, and retirement complement the picture on how successful Unionisation rate, % 33.7 - - - - 38.0 29.0 management has been. *) data has not been collected or is inaccurate **) Kesko’s share of Rimi Baltic AB’s salaries has been recognised in Latvia, and it was not possible to calculate the average salary in Latvia ***) Personnel numbers and salary data for Russia also include ZAO Kestroy. In other respects the data is for the Stroymaster chain only. Data for Rimi Baltic AB and Keswell subsidiaries outside Finland is not available, except for salaries. 48 Social performance Social performance 49

Breakdown of Kesko Group A total of some 500 vacancies were ad- Management quality employer profi le among top decision-mak- employees by division vertised on the Kesko Group’s internal ers and other infl uential people in society. Employees regard ‘We create a good work- Case at 31 December 2005 labour market via the company’s intranet. Five studies in all were carried out in ing community’ as Kesko’s most impor- 2005: two surveyed student opinion (Uni- tant value. promoting best workplace practices Average age and duration versum and Talentum), two surveyed the A good physical, mental, and social The job satisfaction survey carried out among Kesko Group employees annually forms of employment general working population (Universum working environment is a prerequisite for part of Kesko’s indicators of management quality, and its results are used in develop- The age breakdown of Group personnel in and Talentum), and one decision-makers the wellbeing and good performance of ing the workplace and the wellbeing of employees across the Group. Job satisfaction Finland is presented in the chart below. (Taloustutkimus). employees. Kesko believes that job satis- has been monitored and measured since 1996. The survey was updated in 2004, to Nearly half of employees are now younger In the student surveys, Kesko’s rank- faction surveys are the most important improve comparability with studies on Kesko’s external employer profi le. than 36, while those over 55 account for ing remained at 2004 levels. Respondents and versatile tool for evaluating manage- The role and importance of managers, and the way they do their job, are impor- only 9%. The average age of personnel has ranked Kesko 30th (30th) out of the 100 ment quality and the development of the tant factors in determining the quality of employees’ working lives. The job satisfac- Kesko Food 29.8% dropped in parallel with the increase in companies included in the Universum sur- working environment. Kesko’s annual Kesko Food's joint tion survey measures employees’ empirical experience, however, and translating this the role of retailing in Group employ- vey, and 32nd (34th) in the Talentum sur- ventures 17.3% survey measures people’s satisfaction information into numerical data is diffi cult. The need for statistical reliability also Rautakesko 25.9% ment, although this was no longer the vey. Students considered Kesko a reliable, with their job, their superiors’ perform- means that hundreds of replies are needed, which is not always feasible in every Keswell 16.3% case in 2005. stable, and relatively interesting employ- ance, the operations of their units, and of workplace. Numerical results are not an end in themselves, however, and job satis- Kesko Agro 4.4% Employees are, on average, even younger er, which offers versatile jobs, but not in a Kesko as a whole. The survey that was Kaukomarkkinat 2.9% faction studies should be seen as one tool among many for developing the working in subsidiaries outside Finland: under 34 very dynamic sector. Some described Kes- carried out during autumn 2005 in all the VV-Auto 1.5% environment. To establish how the results of job satisfaction surveys are used in prac- years of age in Estonia, 32 in Lithuania, 31 ko as slightly old-fashioned and too large. countries where Kesko operates was im- Other Group companies 2.0% tice, and how well they serve the needs of managers in running their teams, 20 Kesko in Latvia, and under 28 in Russia. Young professionals (with a polytech- plemented by TNS Gallup Oy/Retail in Food managers were interviewed in spring 2006 as part of the company’s wellbeing The average duration of employment nic or university education in economics Finland and by Fontes Latvija in other at work programme. The interviews were carried out by Kesko’s Occupational Psychol- contracts in Finland was just over 9 years or technology) were generally more criti- countries. ogist, Janne Riste. The interviews were treated confi dentially and have not been at the end of 2005, unchanged from 2004. cal towards companies than students. reported on separately. A breakdown of the duration of employ- Kesko’s position among young profes- Job satisfaction unchanged in Finland The role of the occupational psychologist in the interviews was to assist manag- Age breakdown of personnel ment contracts is presented in the chart sionals (Universum / career of 4–5 years) Job satisfaction has remained relatively ers in interpreting the results of the job satisfaction survey, help them identify signifi - in Finland in 2005 on this page, which shows that 1,847 or was ranked 26 (14), and 42 (34) among unchanged during the past fi ve years. cant information, and recognise areas that call for development work. His job was 14% of employees had worked for the senior white-collar employees (Talentum). However, as the survey was revised in also to act as a sounding board for managers and as someone with whom managers Group for over 20 years. Kesko’s position in terms of employer pro- 2004, the results are not fully compara- could discuss their view of things and their own feelings, and to test various ways of The short history of subsidiaries out- fi le dropped slightly among young profes- ble with those from previous years. working together and feedback options. side Finland means that the longest em- sionals in 2005 but the overall image of The results are presented in the table Although respondents to the job satisfaction survey believe that progress has ployment contracts current there are less Kesko as an employer has developed posi- on page 50. been made in making use of its results in the Kesko Group over the years, they also than 10 years. Over 50% of employees tively since 2000. Young professionals In Finland, 8,598 employees, account- feel that there is still room for improvement. A summary report of recognised best have worked for the Group for less than consider Kesko a stable, reliable, trust- ing for 69.9% of all, responded to the sur- practices has been produced, and its fi ndings are reviewed at Kesko Food’s Manage- two years, and only 14% for more than fi ve worthy, and effi cient company, but also as vey, which was slightly more than in 2004 under 26 yrs 19.7% ment Workshop in April 2006, with the aim of enhancing managers’ capabilities, years. large and infl exible, in the same way as (68.3%). The survey did not include em- 26-35 yrs 29.4% providing managers with better tools, and thereby promoting the wellbeing of the Statistics are not available for Pikoil, students. ployees on long-term leave or Pikoil Oy, 36-45 yrs 25.3% entire working community. Norgros AS, Rimi Baltic AB, or Senukai. In the VIP survey that assessed the which was transferred to Kesko Food in 46-55 yrs 16.6% opinions of managers in large companies, full in November 2005. Tuulikki Markkula, Customer Relationship Director of K-Plussa, and Janne Riste, over 55 yrs 9.0% Kesko’s profile as an attractive organisations, municipalities, and govern- Employees’ satisfaction with their jobs Occupational Psychologist, analysing the results of the job satisfaction survey. employer ment agencies, Kesko’s reputation as an has slightly improved over the years in Kesko monitors how it is perceived as an employer fell slightly short of the average Finnish companies, whereas satisfaction employer in Finland through a number of rate, both in the comparison of large com- with Kesko’s operations has slightly de- surveys conducted among students and panies (40 in all) and that covering trad- creased since 2002. The changes have Duration of employment the young, working population. Regular ing sector companies. The estimates re- been very small, however. The strengths in Finland in 2005 surveys are also conducted into Kesko’s mained relatively unchanged from 2004. listed in 2005 were the positive develop- ment in superiors’ performance, people’s satisfaction with their work and their unit’s targets, the high perceived level of Fixed-term and part-time employment in 2002-2005 customer satisfaction, and the Group’s fo- cus on environmental issues. Satisfaction 2002 2003 2004 2005 with internal mobility opportunities has Fixed-term employees as a % of all personnel at 31.12. decreased for several years, and was now Finland 17.3 18.6 16.2 14.1 rated at 3.05. Employees’ confi dence in under 2 yrs 27.5% other countries 1.4 3.1 1.1 1.0 Kesko’s future outlook decreased from 2-5 yrs 18.6% entire Group 14.1 12.9 10.2 8.2 3.91 to 3.75. 5-10 yrs 18.3% The results of the job satisfaction 10-15 yrs 8.5% Part-time employees as a % of all personnel at 31.12. survey contribute to the bonuses paid 15-20 yrs 12.7% Finland 41.1 41.3 40.1 37.1 to management in Group companies in over 20 yrs 14.4% other countries 9.9 8.8 8.7 9.0 Finland. entire Group 34.9 29.8 27.8 24.3 50 Social performance Social performance 51

All foreign subsidiaries not included tion. An evaluation of managerial practic- fi ve management representatives and in the survey es and related development plans at sen- meets regularly to consider complaints Outside Finland, the response rates ior executive level started in autumn and problems presented by employees. Case dropped slightly, except for Sweden, and 2002, and has also been introduced for varied between 51% and 74%. The survey managers at other levels. Health and safety cutting sickness absence levels was not carried out in Senukai in Lithua- It was concluded that the system of Statistics on sickness absence are com- Kesko Food launched the H.Y.M.Y. programme in its logistics operations nia or in Rautakesko’s new subsidiaries electing an ‘Employee of the Month’, in piled for all Group companies. Informa- towards the end of 2004 in response to higher levels of repeat sickness acquired during the year (Norgros AS, use for many years, had come to the end tion covering the reasons for absence is absence and general absence from work. This type of absence has a direct Stroymaster). Rautakesko aims to extend of its useful life in 2005. The number of not as accurate for companies outside impact on profi tability and process effi ciency, and creates extra work for the survey to include all its foreign sub- proposals had declined, and it was decid- Finland as it is for those in Finland, those who have to cover for their absent colleagues. Cases of repeated sidiaries in autumn 2006. A correspond- ed to discontinue the practice in spring however. absence from work affect around 15% of logistics personnel, and account ing survey has been carried out in Rimi 2005. The intention is to identify new – for over 25% of all absence from work. Baltic AB, but this was not comparable but not necessarily corresponding – ways Sick leave in Finland The H.Y.M.Y. acronym means Smile in Finnish, and is an abbreviation with Kesko’s survey. In 2003, Kesko of recognising this type of action during The total number of sick days in Finland of the Finnish for ‘A Happy Workplace Motivates All of Us’. The programme Food’s then subsidiaries in Estonia and 2006. The practice of selecting a ‘Manag- in 2005 was 142,163, or 9.7 days per em- will run between 2005 and 2007 and is aimed at improving employee Latvia were included in Kesko’s survey. er of the Year’ continues. ployee calculated from the number of wellbeing and job satisfaction in Kesko Food’s logistics operations and Job satisfaction improved in all areas in Some Group companies outside Fin- employees at year-end (9.9 days in 2004) – cutting sickness absence to 2000 levels. A special four-stage capability the Group’s Estonian and Latvian compa- land have a similar ‘Employee of the or 7,180 days per million working hours. development tool has been developed for the programme, covering moti- nies, decreased in Lithuania, and remained Month’ system. In terms of working hours, the fi gure rep- vational discussions, two job capability discussions, and a dedicated health unchanged in Sweden on average. Personnel can give feedback on opera- resented a decrease of 2.8%. The most ac- check-up. Employees are not expected to go through all four stages if the

tions in their units, and directly to senior curate indicator would be the percentage reasons for their problems can be identifi ed at an early stage. Other evaluation practices management, through the Kesko intranet, of the total hours of absence of the total Management quality is also evaluated which features a ‘direct channel’, ‘mail to planned number of working hours. In In addition to this development tool, the H.Y.M.Y. programme also regularly through many other surveys. the President and CEO’ and a discussion Kesko’s statistics, sick days of part-time relies on recognising the key roles played by individuals, jobs, the work- Kesko’s annual customer satisfaction sur- channel, where employees can comment employees are entered as full days. If they place, individual competence, and management in shaping how people vey indicates how both external and inter- and make proposals on matters related to could be entered in hours, the indicators experience their workplace. All these issues will be discussed with em- nal customer relations are developing. All Kesko, either openly or anonymously. for sickness absence would be slightly ployees during the course of the programme. Particular areas discussed in Group units carry out annual team-based Management replies to feedback are pub- smaller than those now given. 2005 included employees’ potential for infl uencing developments at self-evaluations, using the criteria devel- lished via the intranet’s ‘direct channel’, The graph on page 52 shows the rea- work, the general ground rules affecting the workplace, and the potential oped by the Finnish Quality Award. An while the President and CEO replies per- sons for sickness absence. Compared to for fl exibility. Special theme issues of the programme’s special employee in-house quality competition, arranged sonally. Outside Finland, Senukai has an 2004, the major changes were a 10.5% publication, which appears around four times a year, are to be produced. every other year, is linked to this evalua- ‘Ethical Committee’, which consists of decrease in the number of paid sick days, Two issues of a second employee publication were produced under the and a 32.2% increase in the number of umbrella of the programme in 2005, reviewing progress made to date. sick days resulting from unpaid, long A total of 120 job capability discussions had been held with em- illnesses, both calculated on the basis of ployees by the end of 2005, focusing on various factors linked to the Job satisfaction of personnel in Finnish companies (scale 1-5) working hours. physical stress associated with people’s work. These have been addressed

Three employee wellbeing projects con- by improving such things as workplace ergonomics and introducing new 2001 2002 2003 2004 2005 tributed to the decline in the number of ancillary equipment. New types of fl exibility have also been introduced, Own job 3.73 3.72 3.71 3.79 3.82 short sick leaves, the most important of by extending employees’ opportunity for switching shifts with their Superior’s performance 3.82 3.82 3.79 3.80 3.84 which was Kesko Food Logistics’ H.Y.M.Y. colleagues, doing alternative work, or working a shorter week. The Unit’s operations 3.73 3.78 3.76 3.76 3.78 programme (see the case on page 51). programme succeeded in reducing sickness absence levels in 2005, when Kesko’s operations 3.60 3.71 3.70 3.68 3.64 Long sickness allowance periods related the relevant index fell to 141, from 146 in 2004. The number of acci- dents at work also fell, with 32 fewer accidents of this type in logistics in 2005 than in 2004. As the total number of hours worked fell by 14%, the number of accidents per million hours worked was 5% lower than in Job satisfaction of personnel in companies outside Finland (scale 1-5) 2004, and the level of related absences from work was 16% lower.

Sweden Estonia Latvia Lithuania 2003 2004 2005 2003 2004 2005 2003 2004 2005 2003 2004 2005 Back exercise groups organised by the Occupational Health Care Own job 3.56 3.91 3.97 3.84 3.97 4.09 4.10 4.00 4.14 4.17 4.08 3.88 Unit are popular at the Hakkila Central Warehouse in Vantaa. Superior’s performance 3.73 3.87 3.74 3.90 3.84 3.96 3.93 3.83 3.98 4.08 3.94 3.71 Participants receive information on factors affecting their health Unit’s operations 3.68 3.74 3.79 3.92 3.79 3.95 4.00 3.79 3.99 4.20 3.93 3.71 and how best to maintain their physical fi tness. Exercises are Chain’s operations 3.67 3.75 3.76 4.06 3.80 4.01 4.17 3.74 4.02 4.25 4.03 3.65 designed to teach people how to know their bodies better and carry out their work safely, particularly with regard to lifting and Average 3.65 3.81 3.82 3.89 3.87 4.00 4.01 3.87 4.03 4.14 3.99 3.73 carrying loads. Janne Ristekallio, Marko Kanerva, and Kimmo Number of respondents 230 261 380 1,198 342 377 576 226 398 71 101 116 Virtanen can be seen here at one of the sessions. % of employees 49.5 48.6 51.0 62.1 79.0 74.0 60.6 67.7 60.0 75.5 70.1 68.0 Sweden: K-rauta AB, Asko Möbler Estonia and Latvia: Rautakesko, Kesko Agro, Anttila, Indoor Group Lithuania: Kesko Agro 52 Social performance Social performance 53

Sickness absence in 2005 to employees transferred to disability approximately equal to the number of ¤34,323 in the other Nordic countries, approved by Kesko Corporation’s Board of 900 rental fl ats to Mutual Insurance (Finnish operations) pension as a result of rationalisation in- sick days in Kesko in Finland. and ¤6,926 in the Baltic countries – based Directors, in which maximum bonuses Company Pension Fennia and to the VVO creased the number of unpaid sick days. on the Group’s average number of person- vary, depending on the profi t impact of Group in 2004. Rental contracts contin- The number of paid and unpaid sick days Prevention of workplace accidents nel. Although fringe benefi ts are taxable each person’s job, equivalent to sums ued unchanged, however. No statistics are used for rehabilitation increased by Kesko has devoted particular effort to income for employees, they are not in- corresponding to between two and six available on fringe benefi ts in companies 38.4%. Rehabilitation focused on the preventing workplace accidents in logis- cluded in salaries but recognised as other months’ salary. outside Finland. ‘ASLAK’ courses (an abbreviation for vo- tics warehousing operations involving expenses. Company car-related expenses, The Kesko Staff Club arranges a wide cation-specifi c early rehabilitation). Six physical three-shift work in busy environ- for example, are booked as car expenses. Share options range of recreational activities for per- new groups began in 2005, and some of ments in recent years. Thanks to training Because the operations of the Kesko Kesko had two share option schemes in sonnel, and contributes to enhancing the the fi ve courses started in 2004 contin- for ‘safety at work’ cards, the ‘Zero acci- Group are very diverse, with around 650 2005. When the share option scheme for working environment for Kesko employ- Paid sick days 68.7% ued in 2005. Occupational diseases pre- dent’ programme and the wellbeing at different job titles, average salary is not a top and middle management for 2000 ees. The annual budget of the Club is Unpaid sick days 23.0% (long illnesses) sented in the graph with rehabilitation work project, the total number of acci- very good indicator of employees’ salary was announced, it covered nearly 600 em- about ¤0.5 million, and activities are di- Care for sick children 3.2% resulted in only 14 sick days. dents in the Group’s Finnish companies level and structure. Comparisons between ployees. The scheme’s share subscription vided between the main club and 11 dis- Workplace and commuting The table alongside shows how the dropped by 8.2% at the workplace and by the salaries of men and women are not period ended on 31 March 2006. The 2003 trict clubs. The club at Katajanokka in accidents 2.9% number of sick days per million working 4.9% during commuting, Their serious- very meaningful, either, due to the differ- Annual General Meeting approved a new Helsinki, for example, runs 17 leisure cir- Occupational diseases and hours has developed between 2001 and ness declined from 7.4 sick days to 6.8 ent nature of people’s duties. The Group share option scheme, mainly for top man- cles, ranging from culture, music, glass rehabilitation 2.2% 2005. The accuracy of the statistics has days. There were no fatal accidents in structure has also changed so much, both agement (the current 50 executives and art, and porcelain painting to many types Total number of sick days improved over the years, which has in- 2005. in Finland and elsewhere, that compari- possible new employees recruited to simi- of physical activities. A total of seven hol- in Finland: 142,163 creased the number of sick days to some sons with previous years do not illustrate lar positions). The subscription period for iday cottages are available for rent to em- extent, while making comparisons be- Occupational health service trends in salaries. As Rimi Baltic AB has this scheme will end, depending on share ployees, and their occupancy rate was vir- tween years more diffi cult. Accuracy in- Kesko’s in-house Occupational Health not divided its total amount of salaries by option, at the end of April 2008, 2009, tually 100% in 2005. Subsidiaries outside creased in the recognition of unpaid sick Service Unit served approximately 5,900 country, the fi gure used here is the aver- or 2010. Both option schemes can be con- Finland spent approximately ¤260,000 days in 2005. Kesko Group employees in 2005, over age for all the Baltic countries (see the sulted at www.kesko.fi (Investors/Share on staff leisure and recreational activi- Trends in the number of sick days, 5,300 of whom were seen at the Group’s table on page 47). information). ties. sick days per million working hours Sick leave in other countries own health clinics. The Unit employs six Personnel expenses in the fi nancial Subsidiaries outside Finland recorded company doctors, 13 occupational heath Bonuses statements for 2005 included share op- Pensions 52,261 sick days, equivalent to 8.0 days nurses, three occupational physiothera- About ¤5.5 million was paid in spring tions granted to the value of ¤3.1 million. A total of 177 people (169 in 2004) retired 8,000 per person (10.5 days in 2004) or 4,703 pists, and three secretaries/receptionists. 2005 in the form of bonuses under the from the Group in 2005. Of these, 87 (74)

6,000 7,487 days (6,846 days) per million working Kesko also has an occupational psycholo- profi t-sharing system for 2004, account- Fringe benefits were members of the Kesko Pension 7,382 7,180 6,846

6,364 hours. The details by country are present- gist employed by another unit in the or- ing for nearly 1.9% of the total payroll. As Fringe benefi ts increased slightly in Fin- Fund, while 90 (95) were insured by Var- 6,067 5,661 4,000 5,606 ed in the table on page 47. The number of ganisation. Occupational health services bonuses are now paid at the end of March, land. A total of 748 (669 in 2003) employ- ma-Sampo. The fi gure includes employees 4,703 annual working hours per employee is for retail personnel are mainly bought in no information on the bonuses for 2005 ees had a company car, and 2,760 (2,694) on partial retirement and partial disabili- 2,000 2,030 in Estonia, 2,020 in Latvia and from outside providers. could be included in this report. The employees had a company telephone. The ty pensions. Occupational retraining was *) 0 Lithuania, 1,980 in Russia, and 1,760 in Kesko’s occupational health service fo- Group’s bonus system applies to all per- Group had no company housing, as the arranged for 16 employees who were una- 2001 2002 2003 2004 2005 Sweden. cuses on wellbeing at work and on activi- sonnel of Kesko Corporation and its Finn- Kesko Pension Fund, the major lessor of ble to continue in their previous jobs or Finland Other countries Relative sickness absence fell in 2005, ties that maintain employees’ work capa- ish subsidiaries, with the exception of dwellings to Kesko employees, sold over whose working ability was at risk due to *) data has not been collected but the fi gures for different years are not bilities. These activities have accounted retail stores, where bonuses are only paid completely comparable. Kesko Food’s Bal- for over 40% of the unit’s total volume in to managers in Anttila department stores tic operations included in the 2004 statis- recent years. Kesko’s occupational health and K-citymarkets. Indoor Group also has Gender by employee category in Finland at 31 December 2005 tics were combined with Rimi Baltic in service spent ¤427 per person in Finland a system of its own. The key factors con- 2005, and the 4,000 Senukai employees in 2005 on promoting employees’ work tributing to the payment of a bonus are Women Men Total in Lithuania were included in the statis- capabilities and health care. This sum has the overall performance of the Group and number % number % number Kesko’s spending on occupational health tics for 2005. been steadily increasing in recent years the division, sales and performance with- Top management 7 14.3 42 85.7 49 service in Finland, € per person According to the breakdown of rea- (see the table on page 52). in a person’s unit or their development, Middle management 119 23.6 384 76.4 503 sons of absence, care for sick children ac- Where required, Kesko’s occupational and customer satisfaction. The job satis- Superiors, specialists 655 54.8 541 45.2 1,196 counted for more days in overseas compa- health service participates in care and faction of personnel is another contribut- 500 Workers, office workers 6,720 63.4 3,879 36.6 10,599 nies than in Finland, varying from 4.8% treatment guidance for employees abus- ing factor for managers. Total 7,501 60.8 4,846 39.2 12,347 400 in Latvia to 17.0% in Sweden. Absence due ing intoxicants and, in cooperation with In addition to the Group’s profi t-shar- 427 300 402 359 to accidents was higher in the Baltic the Group’s occupational psychologist, ing system, subsidiaries in Finland and 340 328 200 countries than in Finland and lower in trains managers to handle problematic elsewhere have their own bonus systems. Percentage of women by employee category in Finland in 2001-2005 100 Russia. Accidents caused no absence in situations involving intoxicants, with pre- Companies outside Finland paid nearly Sweden. Due to the small number of per- vention being the primary target. HIV ¤3.4 million in bonuses in 2005 for 2004, 0 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 sonnel there, however, the fi gures are not tests are only made in connection with accounting for about 5.9% of the total Top management 10.2 10.4 8.9 13.3 14.3 directly comparable to the Finnish ones. medical treatment, not during initial or payroll. Due to payment dates, no infor- Middle management 19.1 22.2 23.9 24.1 23.6 Norgros AS and Rimi Baltic AB are not normal employment health check-ups. mation on the bonuses paid for 2005 Superiors, specialists 55.8 56.8 58.2 55.4 54.8 included in these statistics. Rimi Baltic could be included in this report. Workers, office workers 64.8 65.5 64.3 63.7 63.4 has started calculating sick days in Esto- Salaries and other benefits Senior management – comprising Total 62.1 62.8 61.9 61.1 60.8 nia and Lithuania. Absence accounted for The average annual salary of Kesko em- some 50 executives of the Kesko Group – 5.5% of working days in 2005, which is ployees in Finland was ¤29,944 in 2005, have a performance-based bonus system, Pikoil Oy and 1,084 employees, mainly part-timers for the Christmas season, are not included. 54 Social performance Social performance 55

illness. Only one person retired in a com- equal application of women and men to Training Food’s trading practices development and in the Baltic countries, and no binding, Unions for Academic Professionals in pany outside Finland. vacant positions, equal opportunities for Statistics are available for Kesko employ- introduction of an operations control sys- collective agreements covering any indus- Finland, have a registered association The number of employees who retired training and advancement, equality in ees’ basic training in Finland with the tem, and the chains’ ‘K – a sign of some- tries have yet been concluded. that acts as their cooperative organ and on full pension on health grounds in- reaching different organisational levels, exception of retailing companies. Of the thing better’ training events organised Kesko’s President and CEO is a mem- promotes their interests. Their collective creased by 8 to 66 in 2005. The number of and equality in salaries and other terms 5,004 people included in Kesko’s statis- for the Group’s chains. ber of the Confederation of Finnish Indus- bargaining organisation at AKAVA is the early retirement pensions granted by De- of employment. tics, 59% have a medium-level vocational A total of 15,258 students, of whom 811 tries EK’s Board of Directors and its Delegation of Professional and Managerial partment A of the Pension Fund on pro- As of the end of 2005, a total of 60.8% qualifi cation and 19% have a degree from were Kesko employees (including person- Working Committee as one of the Confed- Employees (YTN). duction- or economic-related grounds to- (61.1% in 2004) of Kesko Group employees an institution of higher education. The nel from Kesko’s retailing companies), eration’s three Deputy Chairman. National cooperation meetings are talled 24, in line with the average over the in Finland were women, and 39.2% (38.9%) proportion of the latter has increased an- participated in the Master Assistant arranged twice a year. Representatives of past fi ve years. were men. The fi gures for Pikoil Oy and nually by approximately one percentage training arranged by the K-Retailers’ As- Cooperation with employee three new EU countries – Estonia, Latvia, The average retirement age of employ- some fi xed-term employees are not includ- point. The corresponding fi gures for 2001 sociation, mainly through distance learn- representatives and Lithuania – participated in interna- ees covered by pension decisions made by ed here. In companies outside Finland, were 59% and 15%. ing. As in previous years, the programme A total of 33.7% (36.5% in 2004) of Kesko tional Group-level cooperation (European the Kesko Pension Fund dropped to 56.3 employee statistics became male-dominat- The percentage of employees with a was also offered in about 100 business Group employees in Finland were union- Works Council, EWC) for the fi rst time in years (56.8), and in Varma-Sampo deci- ed in 2005 – the proportion of men was higher education degree was higher in colleges and polytechnics, most often ised in 2005, mainly as members of Serv- 2005. A representative from Sweden has sions to 54.7 years (57.4). This decrease in 64.8% – as food store employees were the Baltic countries and Russia than in during the fi nal year courses. Some 5,500 ice Union United PAM. The statistics cover attended the meetings in 2004 and 2005. average age can be attributed to some transferred under Rimi Baltic AB. No fi g- Finland – 40% in Estonia, 28% in Latvia, students from educational establish- only those employees whose membership Finnish district courts had four cases young people retiring on disability pen- ures for Norgros AS are available. 26% in Lithuania and 64% in Russia. ments took part in training in 2005, and fees are charged from their salaries. In (fi ve in 2004) and the Court of Appeal sions and, in the case of Varma-Sampo, There were seven women in top man- No fi gures are available for Sweden, the best average results were achieved at Sweden, unionisation was 38% (33.1%), three cases (two) pending in 2005 con- the new Pension Act that enables employ- agement in 2005, equivalent to 14.3% of Norway, and Rimi Baltic AB. the Häme Polytechnic Wetterhoff. and 29% in Norway. Only a few employees cerning disputes at Finnish companies in ees to retire at their own discretion be- the total. In 2005, one of the seven mem- A total of 19,833 working days, or 1.8 belonged to trade unions in the Baltic the Kesko Group related to termination of tween the age of 63 and 68. The average bers of the Board of Directors was a wom- days per employee - based on the average Activities in employer organisations countries and Russia. employment and changes in discounts retirement age of people in the Finnish an, and there were two women on the number of personnel - were spent on sup- Kesko is a member of the Federation of The Kesko Group has a company-spe- granted to employees. All cases at the dis- national employee pension scheme has nine-member Corporate Management plementary training in Finland. A total of Finnish Commerce (established as a re- cifi c shop steward system in place at all trict courts in 2005 were decided in Kes- been 57.8 – 58.0 years (2004). Board. ¤4.2 million or ¤370 per employee was sult of the merger of the Federation of major subsidiaries in Finland. Kesko Food ko’s favour, and in one case the plaintiff The average pension paid by the Kesko Women accounted for 23.7% (24.1% in spent on training. As the fi gures for 2004 Finnish Commerce and Trade and the Ltd’s and Kesped Ltd’s site-specifi c shop abandoned the claim. The Court of Appeal Pension Fund – ¤49.6 million to 3,284 2004) of middle management in Finland. were 1.2 days and ¤543 per employee, the Commercial Employers’ Association in stewards also represent the employees of found completely in Kesko’s favour in one people in all – was ¤1,259 per month in Except for 2005, this proportion has in- input in terms of duration increased in Finland), the Swedish Commercial and other division parent companies in their case, and virtually completely in the 2005. creased every year since 2000, when cor- 2005, but declined in fi nancial terms. Service Employers’ Association, and NHO sites. Senior white-collar employees have Group’s favour in another. porate responsibility statistics were fi rst Around 77% of training was internal, – the Confederation of Norwegian Enter- elected authorised representatives in There were no employment disputes Equality published and the fi gure was 19.1%. The including training at the K-instituutti. prise. Rautakesko’s and Kesko Agro’s sub- Kesko Food Ltd, Rautakesko Ltd, and leading to legal proceedings in Group Kesko’s equality plan was drawn up in proportion of women in management and The number of training days in compa- sidiaries were not members of any organi- Kesko Agro Ltd. companies elsewhere. 1996, and its implementation is reviewed specialist positions dropped slightly to nies outside Finland totalled 6,100 or 1.0 sations in the Baltic countries. The organ- Kesko managers and experts belong- annually. Company-specifi c equality 54.8% (55.4%). There are no correspond- days per employee, costing ¤590,000 or isation and unionisation rate is very low ing to AKAVA, the Confederation of plans were prepared in late 2005, based ing statistics available for companies out- ¤99 per employee. Internal training ac- on the Act on Equality amended on 1 June side Finland. counted for 44%. Rimi Baltic AB and Nor- 2005. Targets include promoting the The number of women in supervisory gros AS are not included in these fi gures. positions is signifi cant in retail subsidi- Rimi Baltic started an internal trainee Number of students aries. 82% of department managers in K- programme for its young employees with at the K-instituutti 2001-2005 citymarket hypermarkets and 74% of de- an academic degree in 2005, with the aim partment managers in Anttila depart- of increasing the company’s in-house po- 25,000 ment stores are women. tential for future managerial duties. The Kesko’s implementation of equality company also granted 29 scholarships to 20,000 24,438 was rated at 3.60 (3.57) on a scale of 1-5 in its employees for continuing their aca- 22,349

15,000 20,556

19,096 the annual job satisfaction survey. This demic studies and signed an agreement 18,106 10,000 rating has improved every year since with the Tallinn University of Technology 1996, except for 2004. to launch a new study programme focus- 5,000 10,965 9,180 8,570 Kesko has produced no statistics on ing on retailing. Under this, Rimi Baltic 6,147 5,981 0 equality on other grounds than gender. will provide training jobs for 75 of the 2001 2002 2003 2004 2005 programme’s students. Number of Number of students study days The K-instituutti training centre pro- vided courses for 10,965 Kesko employ- ees, K-retailers, and K-store staff in 2005. This compares to 5,981 in 2004. The Expenditure on supplementary training in Finland number of study days totalled 24,438 2001 2002 2003 2004 2005 (18,106). Student numbers vary from year Training days per person 1.9 1.5 1.6 1.2 1.8 to year, depending on whether large train- ing programmes are offered. Two such Euros spent on training per person 598 445 528 543 370 programmes were organised in 2005: the Shop stewards held an European Works Council meeting on 7 March 2006. Participants included (clockwise in front from the No data on training days is available for Pikoil SAP training events related to Kesko right) Monica Klavsjö, Petri Järvinen, Helena Nenonen, Pekka Kankaanrinta, Pirjo Roti (interpreter), and Asta Mockuviene. 56 Social quality control Social quality control 57

Managing social risks that it will favour companies that have lished the Business Social Compliance Monitoring social quality is part of Kes- obtained SA 8000 certifi cation. Certifi ca- Initiative (BSCI) in Brussels to promote ko’s risk management covering import tions can be granted by bodies, such as social audits. The BSCI operating model Social quality purchases, and embraces many countries BVQI, SGS, DNV, and Intertek that have is based on the system that was used by and product categories in which short- been approved by Social Accountability the German Import Trade Association in comings relating to working conditions International (SAI) which developed the 2002–2003. Kesko became a member of and terms of employment have been ob- standard and monitors the operations of the BSCI at the beginning of 2005 and control of suppliers served in international surveys. Kesko these bodies. has committed itself to promoting the considers this risk group as consisting of implementation of the BSCI Code of Con- 37 countries, and the product groups ac- SA 8000 certification is too slow duct in its own purchasing. A Kesko rep- tively monitored include fruit, vegetables, The use of SA 8000 certifi cation has pro- resentative was elected to the BSCI Exec- fl owers, clothing, home textiles, carpets, gressed slowly in the export industries of utive Committee at the same time. BSCI shoes, toys, and furniture. This group con- developing countries. Small and medium- membership increased from 33 to 50 com- sists of approximately 350 suppliers with sized companies have considered the re- panies during 2005. Swedish and Dutch around 300,000 employees in all. Imple- quirements of the standard regarding textile importing organisations also re- Key performance mentation of the monitoring system is management systems and minimum wag- main members. the responsibility of the purchasing units es laborious to implement, and the large The BSCI principles (see www.bsci- in social quality + - handling these product groups in Fin- number of personnel interviews required eu.org) are similar to those used by Kesko • Kesko’s direct imports from high-risk • The number of suppliers with SA 8000 land. A corresponding procedure has not has resulted in high certifi cation costs. earlier. BSCI auditing is designed to guar- control in 2005 countries decreased slightly certification did not grow, as Kesko yet been introduced for direct purchases Purchasing companies have not devel- antee the same basic rights for employees • Market strength of BSCI cooperation concentrated on promoting BSCI audits by subsidiaries outside Finland. oped joint cooperation to promote SA as the SA 8000 standard, and employs Direct purchases by Kesko’s Finnish 8000, preferring to work individually. the same auditors. If a company that increased as the number of member • BSCI audits took off slowly – the companies from suppliers in risk areas in Kesko’s small purchasing volumes have has passed the BSCI audit implements companies grew from 33 to 50 new operating system requires new 2005 totalled ¤84 million (¤110 million not been suffi cient to convince manufac- a management system complying with • The BSCI system for food production outlining in 2004). Imports accounted for 1.4% turers of the importance of certifi cation. the SA 8000 standard and the other best auditing was nearly completed – Kesko • Kesko’s suppliers must also have other of Kesko’s total purchases and 7.7% of Consequently, the results of SA 8000 cer- practice requirements, it can be granted Kesko’s total imports into Finland. tifi cation have been thin on the ground. SA 8000 certifi cation. Kesko will now has been included in the planning BSCI members as customers; no A total of 881 companies worldwide, promote primarily a BSCI audit of its sup- group In addition to its own imports, Kesko progress is possible with Kesko alone also buys goods produced in high-risk employing 508,000 employees, had SA pliers, but still recommends SA 8000 cer- • The BSCI agreed on common audit • Suppliers had many deficiencies at countries from other importers operating 8000 certifi cation as of the end of 2005. tifi cation as the ultimate goal in social targets for 2006-2008 their initial audit, according to BSCI in Finland (see page 24) and through in- Certifi cations covered 50 countries, with quality. the most in Italy (324 companies), India • Kesko has 43 Fairtrade products in its statistics ternational purchasing groups. These im- ports mainly consist of international (125), China (119), Brazil (87), Pakistan Monitoring in practice selection, four in the Pirkka range branded products that have been the sub- (52), Vietnam (30), and Thailand (16). Social quality control is part of an import ject of much attention in respect of the buyer’s job description at Kesko, in the social quality of their manufacture in re- Cooperation between European trade same way as monitoring environmental cent years. Kesko estimates that the value chains gets under way quality, products’ physical quality, and of these purchases is approximately simi- A number of other trade chains in addi- product safety are. Buyers cannot, how- lar to that of its own high-risk imports, tion to Kesko have been working for the ever, audit working conditions, rather which means that Kesko’s purchases from introduction of a joint auditing approach suppliers must carry these out using high-risk countries as a whole account for that would eliminate overlapping work – local, independent auditors and cover the about 3% of its total purchases. and this was fi nally launched in 2004, associated costs. As buyers are responsi- Introduction No reliable statistics are available on when a group of European chains estab- ble for promoting the implementation of Kesko is indirectly responsible for the working conditions and terms of employment of this. the employees that participate in the manufacture of the products it purchases. This social responsibility applies to purchases of goods from the poorest developing coun- Ethical purchasing principles tries in particular. National working condition legislation in these countries does not and tools Main elements of SA 8000 and BSCI audits meet the standards of international agreements in all respects, and the supervision of Kesko published its principles on socially existing regulations is minimal. Kesko wants to ensure that the working conditions of responsible trading (see www.kesko.fi /re- Auditing areas Corresponding ILO convention its suppliers comply, at a minimum, with national legislation or international conven- sponsibility) in spring 2000. These are Compliance with legislation and agreements tions, depending on which ensures a better position for employees. This target cannot based on the International Labour Organ- Freedom of association and collective bargaining 87, 98 and 135 be achieved rapidly. Every improvement, no matter how small, however, is a step to- isation’s key conventions and the UN Uni- Discrimination 100 and 111 wards socially sustainable development. versal Declaration of Human Rights and Compensation 26 and 131 As a buyer of home and speciality goods, Kesko is so small by global standards that Convention on the Rights of the Child. it alone cannot persuade suppliers to carry out changes. Active cooperation with other The international Social Accountability Working hours 1 and 14 European retail chains helps Kesko achieve better results in its own purchasing opera- SA 8000 standard, introduced in 1998, is Health and safety at work 154 and recommendation 164 tions and offers good opportunities for infl uencing the development of labour protec- based on these regulations, and Kesko Child labour 79, 138, 141 and 182 tion and social quality in production in developing countries more widely than through has recommended the adoption of this Forced labour 29 and 105 its own business activities alone. standard to its suppliers, and has stated Basic environmental protection 58 Social quality control Social quality control 59

BSCI auditing process self-assessment form to correct any po- Results of BSCI audits in different areas in 2005, % of audited companies tential shortfalls in advance. Audits con- sist of an interview with company man- agement, checking documentation, pro- Initial audit Re-audit A supplier accepts the BSCI principles duction, and housing premises, and staff interviews. The results and any rectifi ca- Management practices

tion needs are discussed with company Documentation management at the closing meeting of an audit, and a continuation plan for correc- Working hours tive measures, with a timetable, is drawn The supplier conducts a self-assessment Compensation up. In repeat audits, only the points iden- tifi ed for correction previously are Child labour checked. Forced labour When all the requirements have been Right of association and met, the auditor draws up a fi nal report collective bargaining BSCI’s local supplier events and sends it to the supplier and Kesko. Discrimination The supplier can also choose to give the report to other BSCI members as well. Working conditions

The time taken from starting self-assess- Social premises Audit carried out by an independent ment to completion of a fi nal report is be- Health and safety at work certifi cation body operating in the country tween six and 12 months, depending on and accredited by SAI how many changes are called for. Audits Residence halls must be repeated within three years of the fi rst audit. Environmental protection 020 40 60 80 100 020 40 60 80 100 No purchasing boycott but gradual A common database of audit information improvements. Plan of corrective actions Requirements not met (proposed by the auditor) When a supplier has requested an audit, Kesko’s BSCI contact person enters their Approved after agreed corrections identifi cation data in the common BSCI Approved New audit database. The auditing company then en- Initial audits were carried out at 755 companies, and re-audits at 171 companies. (depending on ters the supplier’s auditing progress in Percentages concerning residence halls have been calculated only for companies with residence Audits - coaching - training previous results) the database on a phased basis, and a halls. These represent 30% of all audited companies. summary of the audit report when the fi - Audits are repeated nal, approved audit has been completed. within 2-3 years BSCI members can search the data- base to see if their present or potential Database on the Internet - access by members. these audits in various areas. Initial Supplier audits documented in the database suppliers have been audited, thereby ple, will participate in a three-party devel- been entered in the BSCI database as of avoiding overlapping work. audits revealed deviations from BSCI re- opment project to be started in Vietnam the end of 2005. Of these, 22 are in China, quirements in a great many companies, in late spring 2006. Most funds for the 10 in India, fi ve in Vietnam, two in Bang- BSCI audits in 2005 particularly in respect of salaries, work- project will come from development coop- ladesh, two in Pakistan, and one in Tai- Introduction of the BSCI model started at ing hours, management practices, occu- eration aid provided by the Finnish gov- wan. The process is progressing slowly – Kesko and other BSCI members – exclud- pational health and safety, and documen- ernment. only one of the above companies has ing German members that had started be- tation. Most of the defi ciencies were cor- BSCI members agreed a joint target in passed the BSCI audit, an initial audit audits, they need to have basic informa- manual, together with Kesko’s own re- fore – in early 2005. Because the approach rected by the time of re-audits, but some autumn 2005 of persuading two thirds of has been made in one, and two have ob- tion on the relevant international stand- vised manual for import buyers, and con- was new for suppliers, the BSCI arranged problems seemed to persist with working their own direct suppliers in high-risk tained SA 8000 certifi cation. ards. When Kesko started systematic au- tact personnel were appointed in purchas- several briefi ngs during the year, to hours, salaries, and occupational health countries to carry out an initial BSCI Kesko’s objective for 2006 is to have 50 diting in 2000, basic training covering ing units to maintain Kesko’s supplier which members invited their own suppli- and safety. audit at a minimum by the end of 2008. suppliers covered by BSCI audits, includ- the ILO conventions and the SA 8000 data in the common BSCI databank. ers. Ten events arranged in China, India, Audit results suggest that suppliers in ing the 13 suppliers included in the devel- standard was arranged for buyers. Since Bangladesh, and Turkey attracted 748 developing countries still need plenty of Kesko’s BSCI results modest so far opment project in Vietnam. BSCI opera- then, training has been provided annually Self-assessment provides suppliers in all. support, training, and time to meet all the Kesko had 23 suppliers with SA 8000 cer- tions will be expanded to cover foodstuffs for new buyers through half-day courses. the foundation for an audit requirements set by BSCI members on tifi cation in 16 different countries and – both primary production and processing Buyers use Kesko’s internal handbook, The BSCI audit process starts when a sup- Many shortcomings in the first working conditions. Many developing one with the SQ certifi cate (SQ = Socially – in summer 2006, when Kesko Food will which contains detailed instructions on plier informs a Kesko buyer in writing round of audits countries already have training and con- Qualifi ed, the fl ower sector’s own social set its own objectives for food supplier cooperation between Kesko and its sup- that he accepts the BSCI principles and The BSCI database included 2,700 suppli- sulting companies, which train suppliers certifi cation equivalent to SA 8000), with audits. The fi rst related briefi ngs will be pliers to improve working conditions. requests an audit from a jointly agreed ers as of the end of 2005. Initial audits in the development of social quality, re- a total of 54,000 employees, as of the end arranged in Morocco and Spain in May When Kesko became a member of the certifi cation body. were carried out at 755 companies with cruited either by suppliers themselves or of 2005. This fi gure was unchanged from 2006. Rautakesko has started an assess- BSCI, training events were arranged for Prior to an actual audit, a supplier 340,000 employees, and the fi rst re-au- their customer companies. National and 2004. ment of high-risk suppliers as part of its buyers of imported goods covering the goes through all the BSCI requirements dits in 171 companies in 2005. The accom- intergovernmental development projects 42 Kesko suppliers, who had started or development programme covering foreign BSCI model. Buyers were given the BSCI in his company with the help of a detailed panying graphs illustrate the results of have also been started. Kesko, for exam- were about to start BSCI auditing, had purchases. After the assessment has been 60 Social quality control Social quality control 61

completed, the same BSCI practice will be ber of Commerce and Kesko’s chairman- Fairtrade bananas increased their market ing number of product groups. The range applied for purchases in all countries ship during 2005. The network comprised share from 5% to approximately 7%. This of Fairtrade products is expected to fur- Case where Rautakesko operates. The Finnish 19 companies, including all the country’s sales data is based on information provid- ther increase in 2006. parent company will be responsible for major food trading groups and many ed by the Finnish Fairtrade Labelling Or- from an ox-drawn cart to the shelves of a k-store most imports, however. clothing and shoe manufacturers and im- ganisation. No statistics are available on UNICEF project completed The experience gained from applying porters, as of the end of 2005. The opera- the value of these products sold through A fi ve-year Kesko project mediated by Pirkka-brand Fairtrade fresh pineapples were added to the selection of fruit on offer the SA 8000 standard is also useful in tions, principles, and members of the net- K-stores. UNICEF Finland and implemented by at K-stores in October 2005. They are grown on 280 family farms belonging to the promoting BSCI audits. Kesko alone is work can be consulted at www.kauppa- New Fairtrade products introduced in UNICEF India’s Mumbai offi ce – which Asoproagroín Association in Costa Rica. The cooperative was founded in 2001 and too small a buyer to interest its suppliers kamari.fi , International/Social Responsi- 2005 included grapes, avocados, lemons, helped approximately 10,000 children at- sold its fi rst Fairtrade pineapple in 2003. In addition to pineapples, the members of in promoting social quality and commis- bility in Importing/Member Companies. and fresh pineapple. All groups of Fair- tend school either on a part-time or a full- the cooperative also produce oranges. sioning BSCI audits. Results can be ob- The operations of the network focused trade products, 43 in all, are represented time basis instead of working in weaving Pineapple plants produce a harvest every 14 months, and Asoproagroín planta- tained only when a supplier has several on cooperation between the Finnish mem- in Kesko’s product range. Organic coffee, factories – was completed at the end of tions grow the crop year-round. Pineapples are normally harvested from individual BSCI members as customers and all of bers of the BSCI and the development and organic tea, 100% mango-orange juice, 2004. farmers once or twice a year. Following harvesting, the pineapples are shipped them make similar demands. In the fu- training project to be organised in Viet- and fresh pineapple are included in Kes- A new UNICEF project connected to weekly from the farms using a system of joint transportation to the port of Limon on ture, it will be impossible to tell exactly nam together with the Department of De- ko’s Pirkka range. The Fairtrade products Kesko’s responsibility efforts was sought Costa Rica’s Atlantic coast, an eight-hour trip away by road. The entire annual crop which BSCI members have been the cata- velopment Cooperation of the Ministry of sold at K-stores and their countries of ori- in 2005, but nothing suitable has yet been of between eight and 10 farmers is needed to fi ll one container. Emiliano Medina lyst for an audit of a common supplier – Foreign Affairs, the Trade Union Solidari- gin are shown in the table below. identifi ed. Ruiz farms pineapples on a 1.5-hectare plot of land. His pineapples travel from his the most important thing is that the so- ty Centre of Finland, and the Central Or- Suppliers of products competing with Kesko continued to participate in smallholding in the hills near the border with Nicaragua to the nearest main road by cial quality of the company has improved ganisation of Finnish Trade Unions. The Fairtrade products – typically global com- UNICEF Finland’s campaign to promote ox-drawn cart. He likes the idea of his pineapples ending up on the shelves of a K- and that all members have received infor- audit phase of the project, to be initiated panies – have also focused on developing the global education of girls. Cardholders store and in a family’s fruit dish in faraway Finland. mation through the joint system that the in spring 2006, will be made using the the environmental and social responsibil- in the K-Plussa customer loyalty pro- The Fairtrade label guarantees that farmers are paid a fair price for their pro- requirements have been met. BSCI model. The target for spring 2006 is ity of their own operations. Dutch certifi - gramme can donate money accrued for duce that always covers their farming costs and sustenance. Producers are also paid to increase the number of BSCI members cation bodies have developed social certi- their purchases in the form of Plussa a Fairtrade bonus for social projects. Costa Rican pineapples have a guarantee price Cooperation between in Finland as food sector audits start. fi cation covering the fl ower trade, for ex- points. These donations to UNICEF ex- of €0.60 a kilo. The Fairtrade bonus has been used to buy materials for 80 schools Finnish importers ample, and this has been linked with the ceeded ¤5,000 in 2005. in the region. The aim is also to develop the farmers’ agricultural methods and The ‘Network to Advance Social Responsi- Fairtrade products Fairtrade label in some European coun- Kesko, K-retailers, and Kesko staff sup- research and train them in production- and quality control-related matters. bility in Importing’ continued operations Sales of Fairtrade products worldwide in tries. Coffee, tea, and cocoa producers ported the child victims of the tsunami José Luis Bolaños, who is responsible for the Association’s pineapple exports, under the umbrella of the Central Cham- 2004 are estimated to have totalled ap- have set up their own social projects, and catastrophe in Asia by donating approxi- says that the biggest benefi t for the association of the Fairtrade system is that its proximately US 1 billion. Sales continued EUREPGAP certifi cation is gaining mately ¤50,000 to UNICEF, which was long-term buyer and seller relationships and guaranteed price enables farmers to to increase rapidly in 2005, and sales vol- ground among fruit producers (see page used to supply school boxes to Indonesia ride out the large fl uctuations in world market prices that are typical of the market umes in all the Nordic countries rose by 42). The world’s leading banana producer, and Sri Lanka. Some donations were also today. The fairtrade bonus is also an important benefi t in providing education for several tens of percent. Sales of Fairtrade Chiquita, had adopted SA 8000 certifi ca- made through the Finnish Red Cross. the young and training for farmers, he says. Examples of Kesko’s own direct imports*) products in Finland rose by about 60%, to tion and the Rainforest Alliance environ- in 2005 nearly ¤12.9 million. Sales of bananas in- mental certifi cation. Although no public Text and photo: Tuulia Syvänen, Finnish Fair Trade Association Country Value of imports, € million creased by 105%, pineapple by 104%, or- information has been provided on these anges by 31%, and coffee by 15%. Banan- projects so far, it seems clear that envi- Pirkka pineapples are grown on family farms in Costa Rica. Pickers can be 1. Germany 77.8 as, coffee, and tea continued to be the ronmental and social quality are becom- seen here on one of the farms belonging to the Asoproagroín Association. 2. China 48.8 most popular Fairtrade products, and ing key competitive factors in an increas- 3. France 39.1 4. Denmark 35.4 5. Sweden 34.6 6. Italy 33.5 7. Holland 30.2 8. Spain 22.6 9. Costa Rica 17.4 Countries of origin of the Fairtrade products sold at K-stores 10. Belgium 16.2 Coffee Mexico (Pirkka organic coffee), Bolivia, Ecuador, Honduras, Peru, Tanzania 11. Poland 11.5 Tea Tanzania (Pirkka organic tea), India, Sri Lanka, Tanzania 12. Estonia 11.0 Cocoa Dominican Republic 13. Great Britain 10.5 Chocolate Dominican Republic 14. Turkey 8.3 Honey Guatemala, Mexico 15. India 8.3 Sugar Paraguay 16. Portugal 8.2 Bananas Ecuador, Costa Rica 17. Vietnam 7.7 Oranges Egypt, South Africa 18. United States 7.3 Pineapple Costa Rica (Pirkka fresh pineapple) 19. Taiwan 5.2 Grapes South Africa 20. Thailand 5.1 Juice Cuba (Pirkka 100% orange-mango juice) *) fi gures include direct imports forwarded by Avocado Mexico, Bolivia, Ecuador, Honduras, Peru, Tanzania Kesped Ltd, no imports by VV-Auto Oy or by Muesli Brazil, South Africa, Pakistan, Uganda Kaukomarkkinat Oy 62 Kesko Corporate Responsibility Report for 2005 Kesko Corporate Responsibility Report for 2005 63

Other responsibility areas

In addition to economic, social, and envi- lated to the planning of production facili- ensure a fast simultaneous recall across quired, the unit prepares and publishes Case ronmental responsibility, GRI considers ties and hygiene. the region. There were 22 recalls in Esto- Kesko Food’s views on current issues. corporate responsibility as including A total of 8,809 (9,434) product sam- nia, 357 in Latvia, and 93 in Lithuania. In product safety and corporate security, ples were analysed. The number of prod- Latvia, nearly half of all recalls related to Risk management and balbiino ready to become a pirkka supplier compliance with marketing and competi- uct development samples of private label defective packaging information. A total corporate security The fi rst deliveries of one-litre packs of Pirkka vanilla ice cream, produced by tion regulations, privacy protection, polit- products increased, accounting for more of 13 recalls in the Baltic countries cov- Security operations within the Kesko Estonian-based Balbiino, will arrive in K-stores in Finland in April 2006. Balbiino- ical relations, and attitude to bribery. than half of all analyses. The number of ered Rimi Baltic’s private label products. Group are designed to ensure the safety brand ice cream has been available in Finland since summer 2005, and from summer new products took an upward turn; sam- and security of people, property, informa- 2006 onwards, K-stores will not only stock Pirkka-brand Balbiino ice cream, but 17 Product safety ples doubled over 2004. A total of 1,193 Detailed guidelines on tion, reputation, and the environment other Balbiino ice cream products as well. Product safety is related to all of Kesko’s (1,267) batch control and other self-con- packaging information against accidents, damage, and crime, and Located in Tallinn, Balbiino was founded in 1995 and employed over 200 people business. It is particularly important in trol samples were analysed. The Product Research Unit is also respon- to guarantee uninterrupted operations. Se- in 2005. The company has a 42% share of the Estonian ice cream market, and gener- the food trade, where safety is highlight- The laboratory conducted eight inter- sible for monitoring information on pack- curity operations support the implementa- ates net sales of some €21 million. In addition to Finland and the Baltic counties, ed both by means of legislation and statu- calibration audits, to compare analysis aging. Based on EU directives, Finnish tion of Kesko’s strategic targets and are a Balbiino exports ice cream to Germany and the UK, and produces snack-size packs tory control and by companies’ voluntary accuracy between laboratories. The re- legislation, and statutory guidelines, natural part of its business activities. Se- under the Euro Shopper and Alpenrose brands for customers in the Baltic countries, activities. Kesko Food’s Product Research sults of these were within accepted toler- Kesko Food has prepared guidelines for curity representatives have been appoint- including Kesko’s local joint venture, Rimi Baltic. Exports account for 30% of net Unit has supervised the operations of ances. its house brands and its own imports. ed to the management of Kesko’s division sales. All of Balbiino’s main ingredients – cream, butter, skimmed milk, and whey – manufacturing companies, analysed The consumer service section of the These guidelines exceed statutory re- parent companies, and the network of con- are sourced locally in Estonia. tact personnel covering the entire Group product composition and quality, and sug- Product Research Unit in Finland re- quirements in some areas. For instance, Balbiino was selected as the new supplier of Pirkka vanilla ice cream in autumn has now been completed. Kesko’s security gested improvements to manufacturers ceived 18,697 (17,131) items of feedback nutritional information is always includ- 2005, and began close cooperation with Kesko Food’s Product Research specialists organisation supports the Group’s busi- for decades. In addition to food products, during the year. Customer contacts have ed – package size and space permitting – from May the same year to ensure that it met the quality, hygiene, and safety re- ness units by providing them with expert the unit also controls the quality of some been increasing year by year, and have on house brand products. Any allergenic quirements associated with Pirkka products. Although vanilla ice cream is Balbiino’s services. The main emphasis has been on non-food products and home and speciali- more than doubled in four years. Some ingredients are indicated on house brand main product, Finnish tastes are slightly different from those in Estonia, so some increasing security awareness. ty goods. In the case of Kesko’s private 70% of contacts took the form of product goods, in addition to statutory informa- work was needed to meet Finnish product specifi cations. labels, such as Pirkka, the Product Re- complaints, and 20% questions concern- tion, even when these ingredients may In the organisational change imple- Every Pirkka product goes through a ten-point product development programme search Unit acts as a product developer ing products. Feedback also included only fi nd their way into a product acciden- mented in 2005, the then Internal Audit (see www.kesko.fi /Responsibility/Product safety). Auditing manufacturers is a key partner, working in close cooperation thanks, ideas, and suggestions. The bulk tally through cross-contamination during Unit and the Corporate Security Unit were factor in assuring the quality of Pirkka products, and the fi rst audit of Balbiino’s plant with Kesko’s buyers and product manu- of contacts took place by phone (11,125) the production process. The country of restructured, and matters related to cor- took place at the end of May 2005. This identifi ed shortcomings in the labelling and facturers. The unit, together with its and e-mail (5,279). Answers were given origin is always marked on imported porate security now come under the new handling of allergens, and product recall procedures. The need for improving the K-test kitchen, employs 20 people. to all feedback. More than 2,600 product house brand products, and the manufac- Risk Management Unit. The unit steers, training of employees in the appropriate use of protective clothing was also high- Rimi Baltic AB has product safety samples or wrappings were sent to the turer’s name and domicile on domestic develops, and supervises the K-Alliance’s lighted. As the majority of Balbiino’s employees are Russian-speaking, the plant was units in all the Baltic countries, where products. comprehensive risk management, is re- consumer service; most of these were requested to provide all work-related instructions in both Estonian and Russian. they employ 21 people in all. The company Instructions for package labelling in- sponsible for developing and maintaining analysed by the unit and fewer than A follow-up audit was carried out in February 2006 to see if the corrective meas- also has a quality team, which serves the formation also specify how different sym- the required tools, assists and trains half were sent to the manufacturer for ures had been implemented. Balbiino had carried out the changes indicated and entire Baltic sales area, supervising the bols relating to domestic origin, environ- Group units in risk management issues, analysis. had also prepared for international BRC food safety certifi cation. This requires the quality of private label products. Quality No corresponding statistics are availa- mental aspects, and recycling are to be and reports on the implementation of risk introduction of a HACCP system*, a documented quality management system, and control at distribution centres has fo- ble as yet on Rimi Baltic AB’s product re- used. These guidelines can be consulted management. Internal Audit, which be- management systems covering product, process, and personnel management in the cused on harmonising fruit and vegetable search. at www.kesko.fi (Responsibility/Product came an independent unit in the reorgan- plant environment. Balbiino passed the BRC certifi cation audit in March 2006. quality specifi cations and adopting good safety). isation, assesses and ensures the effi cien- operating practices. As part of product Increased number of recalls cy of the Group’s risk management. *HACCP: Hazard Analysis and Critical Control Point systems are designed to guarantee the safety of all stages of the food manufacturing process. For further information, see www.elintarvikevirasto.fi /english safety, Rimi Baltic AB has created compa- The Product Research Unit is also respon- Participation in the legislative process The Group established a Risk Manage- ny-wide standards for stores’ technical sible for product recalls, which numbered Representatives of the Product Research ment Steering Group at the same time. systems – refrigeration equipment in par- 35 (30) during the year. Most related to Unit participate in several legislation and This is chaired by the Group’s President The use of protective clothing ticular – packaging and cleaning opera- defective quality or taste, or a manufac- development projects concerning food and CEO, and its members include the is one of the points checked tions, and pest control. turing or packaging error. 21 (11) recalls quality and safety at the national and in- Senior Vice President, CFO; the General during plant audits. Production covered Kesko Food’s house brand prod- ternational level, including the Global Counsel; the Audit Executive; representa- Line Operative Dagmar Tintse Supplier and product audits ucts. The Product Research Unit assisted Food Safety Initiative started by CIES – tives of the Group’s divisions, and the is employed manufacturing The Product Research Unit audited 58 manufacturers in respect of the other re- the Food Business Forum, EU/Codex hy- Chief Risk Offi cer as Secretary. The steer- Alpenrose ice creams. suppliers in 2005 (63 in 2004), of which calls. One of these was a public product giene and package labelling workgroups, ing group discusses and monitors risks, 29 were Finnish and the remaining 29 recall, related to a potential health haz- the expert group on biotechnology set up and promotes the implementation of risk from 12 other countries. These companies ard. All such cases are notifi ed to the rele- by the Advisory Committee on Foodstuffs, management in all divisions as part of mainly included suppliers of Kesko’s vant national authorities. the Ministry of Agriculture and Forestry’s Kesko’s management system. house brands, and were audited in com- Rimi Baltic AB adopted uniform crisis research working group on quality strate- Kesko’s Board of Directors has defi ned pliance with Kesko Food’s audit protocol. management guidelines concerning for gy, and the working groups of the Finnish risk management as one of the responsi- The improvements suggested mainly re- the Baltic countries in 2005, designed to Food Marketing Association. When re- bilities of the Audit Committee. 64 Kesko Corporate Responsibility Report for 2005 > Other responsibility areas Kesko Corporate Responsibility Report for 2005 > Other responsibility areas 65

Marketing and competition of competition legislation themselves, Kesko’s operating countries in the associated with the transaction was made online service to Plussa.com in June version of which has been in use since regulations taking competition regulations, legal Transparency Corruption Perceptions Index to the Market Court, which dismissed the 2005. The purpose of certifi cation is to 2002. The guide, which can be consulted Kesko’s functions include deciding the practices, and competition authorities’ appeal on 21 December 2005. ensure the security and reliability of web at www.kesko.fi (Responsibility), has been basic selections of K-retailer chains, set- guidelines into account. Kesko Food Ltd’s scale 1-10 The cases that eight former K-citymar- services. published in Finnish, Swedish, English, ting the maximum retail prices for some exemption terminated on 31 December 2. Finland 9.6 ket retailers brought against Kesko con- Russian, and all the Baltic languages, and of the chain selection products sold by K- 2004, while Rautakesko Ltd’s, Kesko Agro 4. Denmark 9.5 cerning alleged unfair termination of Political relations has been distributed to all Group person- retailers, which prices the retailers are al- Ltd’s, and Keswell Ltd’s exemptions re- 6. Sweden 9.2 agreements in 2001 were still pending at Kesko plays an active role in trade and in- nel and presented at meetings arranged lowed to undercut, and planning and im- mained in force until 31 December 2005. 8. Norway 8.9 the Court of Appeal as of the end of 2005. dustry organisations in Finland and in for personnel at all levels of the Kesko or- plementing the marketing programmes In August 2004, the Finnish Competi- 15. Hong Kong 8.3 The Helsinki District Court dismissed the the European Union, contributing its ex- ganisation. The issue has been discussed for K-retailer chains. Kesko and K-retail- tion Authority sent a draft proposal to 16. Germany 8.2 cases in March 2004. There were six cor- pertise to legislative work. Kesko is par- at training events for senior manage- ers operate within a vertical relationship Kesko, suggesting that Kesko had exceed- 27. Estonia 6.4 responding contract disputes concerning ticularly active in the Finnish Central ment. The Internal Audit Department has to ensure that marketing and other coop- ed the limits for maximum pricing per- 40. Hungary 5.0 the K-market and Andiamo chains pend- Chamber of Commerce, the Federation of paid particular attention to assessing sys- eration takes place in compliance with mitted in the exemption in the K-market 44. Lithuania 4.8 ing at the District Court, brought to court Finnish Commerce and its associations, tems designed to prevent malpractices competition legislation. and K-extra store chains in the late 1990s. 51. Latvia 4.2 in 2001–2006. and the Confederation of Finnish Indus- and fi nancial losses. No cases of malprac- After the amendment of the Act on At that time, the operations of the K-Alli- 70. Poland 3.4 tries EK. The Federation of Finnish Com- tice were identifi ed during 2005. Competition Restrictions as of 1 May ance were based on mutual horizontal 78. China 3.2 Privacy protection merce is a member of EuroCommerce, Kesko’s ethical purchasing principles, 2004, the Finnish Competition Authority K-retailer cooperation. The Finnish Com- 107. Vietnam 2.6 The Plussa customer loyalty system oper- which represents trade interests to the which have been distributed mainly to no longer grants exemptions to Kesko’s petition Authority proposed to the Market 107. Belorussia 2.6 ated by K-store chains and Plussa cooper- EU Commission and the European Parlia- suppliers operating in developing coun- division parent companies to set the max- Court in February 2005 that a sanction 126. Russia 2.4 ation partners is managed by a Kesko ment. Kesko also belongs to UGAL, the tries, make a clear statement about imum retail prices in K-retailer chains of ¤100,000 be imposed on Kesko. The subsidiary, K-Plus Oy. The system is limit- EU organisation of independent retailers, Kesko’s opposition to bribery. Transparency International 2005 and determine their chain selections. Market Court had not issued its fi nding ed to Finnish operations. At the end of which promotes its members’ interests Kesko is a member of Transparency Consequently, companies are required to on the matter by the end of 2005. 2005, Plussa cards were held by approxi- both directly and through EuroCom- International, Finland. Among Kesko’s evaluate the acceptability of their agree- As Indoor Group Ltd was transferred to mately 3.2 million people in more than 1.7 merce. EuroCommerce has often appoint- operating countries listed in the Trans- ments and practices from the viewpoint Keswell Ltd in January 2005, an appeal million households. The payment and ed a Kesko expert to represent the organi- parency International Corruption Percep- credit services for Plussa cards are pro- sation on EU working groups and meet- tions Index 2005, Hong Kong, Estonia, vided by Nordea Finance Finland Ltd. ings, most recently on the conference Hungary, Lithuania, and Latvia slightly The customer information provided by dealing with corporate responsibility, improved their scores, while the scores of Plussa cardholders forms a customer da- organised by the UK when it held the Poland, China, and Russia, in particular, tabase for K-Plus Oy that is used, with chairmanship of the EU. A chart on Kes- dropped compared to 2004. customers’ permission, for customer rela- ko’s key channels of infl uence is shown tionship management, customer con- on page 12. tacts, and marketing of the Plussa pro- Trade and industry activities are not Corruption Perceptions Index 2005 gramme. Cardholders’ purchasing pat- yet as highly organised in the Baltic coun- terns are registered in the form of sum tries as in Finland. Sector and central or- totals of purchases, unless customers ex- ganisations, and chambers of commerce pressly forbid such information-gather- have been established, however, and Kes- ing. This information can be used for ko’s memberships in these are listed un- direct mail marketing purposes by the der ‘Activities in employer organisations’ companies included in the scheme, unless on page 55. Kesko has provided expert customers forbid the transfer of such assistance to ministries in the Baltic information. Companies who receive this countries, in areas such as planning the information are not allowed to pass it on implementation of EU directives concern- to third parties. ing the environment. According to the Personal Data Act, Kesko gave no political fi nancial sup- every registrar must have a register port in any country in 2005. Advertising description. The register description for of a supportive nature in Finnish party K-Plus Oy is available, in Finnish, at newspapers amounted to ¤19,700. The www.plussa.com. amount is included under ‘non-govern- As a registrar, K-Plus Oy is required to mental and environmental organisations’ ensure that the customer information it in the table entitled ‘Kesko’s support for holds is only used for the purposes speci- the public good’ on page 28. fi ed in the description. Information on individual customers is protected by in- Attitude to bribery structions given to personnel and by tech- Kesko has always opposed the giving and nical means. Customer data is only dis- taking of bribes in any shape or form. closed to third parties if required by law. Kesko’s position in this area has been in- SFS-Inspecta Sertifi ointi granted the cluded in ‘Our working practices – Ethical international Qweb certifi cate for reliable principles for personnel’, the most recent 66 Kesko Corporate Responsibility Report for 2005 Kesko Corporate Responsibility Report for 2005 67

Comparison of the report with the guidelines of the Global Reporting Initiative

GRI guidelines Kesko’s report GRI guidelines Kesko’s report

Code GRI content Included Page Report title Shortcomings/deviations Code GRI content Included Page Report title Shortcomings/deviations

Policies and management systems Vision and strategy 3.13. Addressing a precautionary Partly 62 Risk management and Information about the contents 1.1. Vision of sustainable development Yes 8 Vision of corporate responsibility approach corporate security and organisation of risk 1.1. Statement from the CEO Yes 4 Review by the President and CEO management. 3.14. Endorsement to external initiatives, Yes 16 Management systems Organisational profile charters, etc. principles 2.1-2.8 Basic information of the company Yes 5 Key facts about the Kesko Group 3.15. Memberships in associations Yes 12 Key areas of influence 2.9. List of stakeholders Yes 10 Stakeholder analysis and organisations 3.16-3.17. Supply chain management, Yes 34, 40, 56 Energy purchases, Product-related Report scope indirect impacts developments, Social quality control 2.10. Contact persons for the report Yes 69 Contact persons in corporate 3.18. Changes in operations Yes 21 Investments and store network responsibility 3.19-3.20 Management systems, certification Yes 16, 31 Management systems, 2.11. Reporting period Yes 3 Contents of the report Environmental system 2.12. Previous report Yes 3 Contents of the report 2.13.-2.16. Boundaries of report Yes 3 Contents of the report Comparison of GRI content 4.1. Identification of GRI guidelines Yes 66 Comparison of the report with Report profile the GRI guidelines 2.17. Decisions not to apply GRI principles No Kesko applies the GRI guidelines. 2.18. Criteria used in accounting for No No cost/benefit analyses have Economic performance indicators costs and benefits been made. EC1 Net sales Yes 5 Kesko’s business operations 2.19. Significant changes in Yes Environmental performance Description with each indicator. EC2 Geographic breakdown of markets Yes 19 Economic performance Further information available measurement methods applied in Kesko’s Annual Report and 2.20.-2.21. Policies and practices in Partly 3 Contents of the report Internal auditing has not been at www.kesko.fi internal and external assurance described. EC3 Goods and services purchased Yes 5, 23 Suppliers of goods and services 2.22. Obtaining additional information Yes (Internet Links in the relevant parts EC4 Payments in acc. with terms No On the basis of penalty interests, version) of the printed report. it can be estimated that 99% of invoices are paid on time. Governance structure and management systems EC5 Total payroll, pensions, etc. Yes 22, 23 Salaries, Employee pension 3.1.-3.2. Structure of organisation/board Yes 15 Corporate Governance Statement and health insurance and organisation EC6 Interests and dividends paid Partly 19 Share performance Interest paid has not been 3.3.-3.4. Board-level processes in Yes 15 Corporate Governance Statement Duties of the Board of Directors specified. Information in corporate responsibility management and organisation have been defined. the financial report. 3.5. Linkage between executive No No such indicators are EC7 Changes in retained earnings No Information in the financial compensation and corp. responsibility included in the compensation. report. 3.6. Key responsible individuals Partly 69 Contact personnel in corporate The list includes only the EC8 Taxes paid Yes 22 Salaries, social security responsibility key personnel for reporting expenses, and taxes purposes. EC9 Subsidies received No No subsidies referred to by GRI 3.7. Mission, values, operating principles Yes 14 Principles and management systems EC10 Donations to community, Yes 27 Financial support guiding our approach to civil society, etc. corporate responsibility EC13*) Indirect economic impacts Yes 25 Breakdown of economic benefits 3.8. Mechanisms for shareholder No A normal public limited recommendations or opinions company procedure – has not Environmental performance indicators been described in the report EN1 Materials use Yes 39 Use of materials Only packaging materials are reported. Stakeholder engagement EN2 Use of waste from external sources No A trading company does not 3.9.-3.12. Stakeholder identification, Yes 10 Stakeholder analysis use recycled waste in the way consultations referred to by GRI. EN3+EN4 Energy use (direct/indirect) Yes 34 Energy and water consumption EN5 Water use Yes 34 Energy and water consumption

*) an optional additional indicator 68 Kesko Corporation responsibility report 2005 > Comparison of the report with the guidelines of the GRI Kesko Corporate Responsibility Report for 2005 69

GRI guidelines Kesko’s report Contact personnel in corporate responsibility Code GRI content Included Page Report title Shortcomings/deviations

EN6+EN7 Impact on biodiversity No No analysis has been made of land areas from the viewpoint The list below gives contact information on the personnel who primarily provide additional information on different areas of of biodiversity. the report. The list does not include all Kesko employees who have participated in editing the report. Kesko’s telephone number EN8 Greenhouse gas emissions Yes 34, 38 Environmental profile of energy from outside Finland is +358 10 5311. E-mail: fi rstname.lastname@kesko.fi Transport emissions EN9 Ozone Yes 34 Environmental energy profile Lower atmosphere ozone in C2H4 equivalents. Name Title Unit EN10 Acidification Yes 34 Environmental energy profile EN11 Waste Yes 39 Waste management and recycling Development, coordination, responsibility for editing the report EN12 Discharges to water No Not relevant in Kesko’s Jouko Kuisma Head of Corporate Responsibility Corporate Responsibility operations. Ulla Rehell Senior Manager Corporate Responsibility EN13 Spills of chemicals, oils, etc. Yes 45 Environmental risks, damage, Minor connection to Kesko’s and indicents operations. EN14 Environmental impacts of products No Kesko produces no products. Indicators of economic responsibility EN15 Reclaimable products No Kesko participates in recovery Pauli Alajoki Accounting Manager Corporate Accounting systems, but the information Suvi Vertanen Controller Corporate Accounting referred to by GRI applies to Antti Mansikka GIS Analyst Kesko Food Ltd/Retail Services manufacturers. EN16 Environmental damages Yes 45 Environmental risks, damage, Jukka Pokki Investor Relations Manager Investor Relations and incidents EN17*) Initiatives to use renewable energy Yes 32 Real estate operations Indicators of environmental responsibility sources and increase energy efficiency Jari Suuronen Building Technology Expert Kesko Food Ltd/ Retail Services EN18*) Environmental impacts of transportation Yes 38 Transport emissions Toni Pelin Environmental Logistics Specialist Kesko Food Ltd/ Supply Chain Management Social performance indicators Toni Tynkkynen Environmental Specialist Keslog Ltd LA1+LA2 Employment statistics Yes 22, 47 Job development, Employment Merja Saarinen Environmental Specialist Kesko Food Ltd/ Supply Chain Management LA3+LA4 Labour/management relations, Yes 54, 55 Activities in employer organisations, Juha Kortesalmi Environmental Manager Anttila Oy negotiation procedures Cooperation with employee Marja Ola Environmental Specialist Rautakesko Ltd/Sourcing and Logistics representatives Sari Koskinen Environmental Specialist Rautakesko Ltd/Sourcing and Logistics LA5-LA8 Health and safety Partly 50 Health and safety Assessment of compliance with ILO procedure guidelines not Virpi Kantoluoto Environmental Specialist Kesko Agro Ltd/Development included. Information on Katarina Perkkiö Project Assistant HR and Office Services subcontractors’ accidents not included. Indicators of social responsibility LA9 Training and education Yes 54 Training LA10+LA11 Diversity and opportunity Yes 53 Equality Lea Heikkinen Development Manager Human Resources LA12*) Non-mandatory employee benefits Yes 52, 53 Salaries and other benefits, Pensions Mikko Myyryläinen HR Controller Human Resources LA17*) Specific policies and programmes for Yes 54 Training Päivi Sariola Financial Manager Pension Insurance and Occupational Health skills management or life-long learning HR1-HR7 Human rights Partly 56 Social quality control Not relevant in Kesko’s operations; suppliers’ human Social quality control system rights are discussed as for Jouko Kuisma Head of Corporate Responsibility Corporate Responsibility product purchases. SO1 Operations in community Partly 10, 27 Stakeholder analysis, A description of the stake- Product safety Financial support holder process is provided but shortcomings in measuring Matti Kalervo Product Research Manager Kesko Food Ltd/Product Research results remain. SO2 Policy on bribery Partly 65 Attitude to bribery No comparison with the OECD Corporate security and risk management document included. Juha Pietarinen Chief Risk Officer Corporate Risk Management SO3,SO5*) Political contributions Yes 65 Political relations SO4*) Awards received Yes 44 Stakeholder cooperation and communications Privacy protection/customer loyalty system PR1+PR2 Customer health and safety Yes 62 Product safety Tapio Pesonen Financial Services Manager K-Plus Oy PR3 Respect for privacy Yes 64 Privacy protection

Corporate communications Also: 48 Quality of management Paavo Moilanen Senior Vice President Corporate Communications 62 Risk management and corporate security External relations *) an optional additional indicator Erkki Heikkinen Senior Vice President External Relations 70 Kesko Corporate Responsibility Report for 2005 Kesko Corporate Responsibility Report for 2005 71

Assurance statement Defi nitions of terms

At the request of the management of Separately reported information on The content of the report has further The text and graphs contain terms and indicators whose contents are defined below. Kesko Corporation we have performed the Rimi Baltic and Senukai were excluded enlarged with regard to activities of for- procedures agreed with you and enumer- from the scope of our work. eign countries. However, in the data there Return on invested ated below with respect to the Kesko are still some partial shortages, which are capital (ROI), % = profit before extraordinary items + interest expense and other finance costs Summary of our work x 100 Corporation’s Corporate Responsibility identifi ed in the report. We recommend balance sheet total – non-interest-bearing liabilities (average during the year) Report 2005 (the Report). Kesko Corpora- Our work consisted of interviews with the that the reporting of activities in differ- tion’s management has prepared the responsible persons about used practices, ent countries will be further standardised Equity ratio, % = shareholders’ equity + minority interest Report and is responsible for the collec- and procedures for data generation in and the reporting scope widened. x 100 balance sheet total - advances received tion and presentation of the information Kesko Corporation and business divi- The domestic waste statistics are in within it. This independent assurance sions. We addressed spesifi c attention to signifi cant extent based on data, which is Debt to equity ratio, % = debt + provisions report should not be used on its own as the new reporting software. Specifi c spot received from suppliers and which is han- x 100 a basis for interpreting Kesko Corpora- checks were made for Case examples dled and assured in Kesko business divi- balance sheet total - prepayments received tion’s performance in relation to its non- chosen by us and selected activities of sions. We recommend that the supplier fi nancial policies. Kesko Food, Kesped and Keswell. Inter data management will be made more effi - Gearing ratio, % = interest-bearing debt - marketable securities - cash on hand and balances with banks x 100 alia the consumption and waste data were cient by improving the instructions and shareholders’ equity + minority interest Scope of our work checked. The interviews and information standardising the procedures. Our engagement was undertaken in the received from last year’s assurance proc- Market capitalisation = share price x number of shares framework of the International Standard ess were also used as a basis of our work. Our Conclusions on Assurance Engagements 3000 (re- The assessment of the information was Based on our general review work de- vised) applicable to assurance engage- based on material of the reported func- scribed in this statement, nothing has Primary energy = available in resources in their natural state; divided into renewable and unrenewable energy ments other than audits or reviews of tions delivered to us. come to our attention that causes us to historical fi nancial information. The believe that the Kesko Corporation’s GWh = gigawatt hour = a million kilowatt hours (kWh) Global Reporting Initiative Sustainability Our most significant findings Corporate Responsibility Report 2005 in Reporting Guidelines 2002 together with Kesko Corporation has emphasised all material respects, based on the afore- 1 kWh = 3.6 MJ = 3,600 kJ (in GRI guidelines the unit for measuring energy is joule or J) the principles of AA 1000 Assurance Corporate Responsibility in its strategy, mentioned assurance criteria, is not Standard have also been used as sources which also sets requirements for the level giving balanced and appropriate view of of the criteria for the assurance of the and scope of the reporting. The processes the performance of Kesko Corporation’s CO2 = carbon dioxide = affects climate change (‘greenhouse effect’) Report. and responsibilities in corporate responsi- corporate responsibility. Nothing has

Our scope covered the assurance of the bility reporting are mainly clearly estab- come to our attention that causes us to CO2 eq. = carbon dioxide equivalent, the amount of different gases whose combined impact on the greenhouse information content of the Report. Our lished and the report concentrates on believe that the areas, covered already in effect corresponds to the amount of carbon dioxide mentioned review process involved the main steps material issues. The new integrated re- the previous years, are not comparable outlined below. porting software will make the data man- with the Report of year 2005. SO2 = sulphur dioxide equivalent (affects acidification) – Assess the data management proce- agement processes more effi cient in the dures used to compile and report infor- future and provides for utilising this in- mation presented in the Report formation in the business management C2H4 = ethene (affects the ozone content of the lower atmosphere) – Detailed assurance activities processes also on shorter time frames. We – Assess the completeness, accuracy and recommend that the role of business divi- Transbox crate = reusable transport case made of plastic comparability of the information pre- sions’ management concerning Corporate Responsibility will be widened further. sented KRESS real estate = premises in the sphere of the Real Estate and Construction Sector Energy Saving Agreement (KRESS), for which savings targets related to specific consumptions of electricity and heat have been set

Helsinki, 5 April 2006 Kesko’s Corporate Responsibility Report is available in Finnish and English and can be ordered from PricewaterhouseCoopers Oy Kesko Corporation, Corporate Communications, Satamakatu 3, FI-00016 Kesko, Finland, or Joutsenmerkki by phone from +358 1053 22404. The report can also be read and ordered at www.kesko.fi .

The report has been edited by Kesko’s Corporate Responsibility Unit (Jouko Kuisma and Ulla Rehell). Photos: Jari Härkönen, except for p. 8 Studio Blick, p. 28 Heikki Tuuli, p. 61 Tuulia Syvänen, p. 63 Ulla Rehell Layout: Spokesman Oy Pekka Nikula Sirpa Juutinen Printed by: Libris Oy, Helsinki 2006 Authorised Public Accountant Director, Sustainable Business Solutions Paper: Cyclus (100% recycled paper) The paper produced and the printers have been granted the right to use the Nordic Swan environmental label. Building for a better tomorrow

Kesko Corporation, Satamakatu 3, FI-00016 Kesko, Helsinki, Finland Telephone +358 10 5311, www.kesko.fi