HELPING CITIES GROW SUSTAINABLY

Sustainability Report 2018 CONTENTS KONE IN BRIEF

At KONE, our mission is to improve the flow of urban life. As a global leader in the elevator and escalator industry, SUSTAINABILITY AT KONE KONE provides elevators, escalators and automatic building doors, as well as solutions for modernization and KONE in brief...... 3 maintenance to add value to buildings throughout their life cycle. KONE’s equipment moves over 1 billion 2018 sustainability highlights...... 4 users each day. Through more effective People Flow®, we make people’s journeys safe, convenient and reliable in taller, smarter buildings. Letter from our Chairman and our President and CEO...... 6 We serve more than 450,000 customers across the globe, and have 1.3 million elevators and escalators in our Strategy and megatrends...... 7 service base. Key customer groups include builders, building owners, facility managers and developers. The Value creation...... 8 majority of these are maintenance customers. Architects, authorities and consultants are also key influencers in the decision-making process regarding elevators and escalators. In 2018, KONE had annual net sales of EUR 9.1 billion, Managing sustainability...... 10 and at the end of the year over 57,000 employees. KONE class B shares are listed on the Nasdaq Helsinki Ltd. Stakeholder engagement and communications...... 11

SUSTAINABILITY FOCUS AREAS Sustainability focus areas and material topics...... 12 Driving innovation and improving resource efficiency...... 14 Providing the most sustainable offering...... 24 Being the best employer and attracting talent...... 32 Enabling our partners and societies to prosper...... 38

REPORTING SCOPE AND GRI INDEX Reporting Scope...... 44 Independent assurance statement...... 45 GRI and SDG indices...... 46

Sustainability at KONE At KONE, sustainability is embedded in our organizational culture. It is how we treat each other and our stakeholders, how we take the environment into account in all of our actions, and how we foster economic performance now and in the future. Our vision is to deliver the best People Flow® experience. Sustainability is a source of innovation and a competitive advantage for us. KONE is committed to conducting our business in a responsible and sustainable way and we expect the same commitment from our suppliers.

Read more about our approach to sustainability on KONE.com/sustainability 2018 sustainability highlights KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT 2018 sustainability highlights

2018 SUSTAINABILITY HIGHLIGHTS

KONE operates worldwide and employs over 57,000 people

Americas EMEA Asia-Pacific 7,465 (13%) 22,645 (39%) 27,249 (48%) Among top climate change Ranked as one of the Included in the performers according to Carbon world’s most innovative FTSE4Good Index Series Disclosure Program with A or A- score companies by Forbes for the sixth consecutive year

Elevator models with KONE’s current volume elevator A-class ISO 25745 highest is up to 90% more energy energy efficiency ratings 90% 14 R&D center efficient than in the 90s and three escalator models with the Production site best A+++ classification Head office KONE is present

33% of all electricity Overall relative consumption at KONE operational carbon facilities comes from footprint renewable sources -4.0% How KONE added economic value in 2018 Value distributed Wages and salaries MEUR 2,113 (2,030) Sales to Purchases from Added Employment- customers suppliers value related costs and taxes MEUR 947 (984) Recognized on Forbes' 2018 Global The number of employees has grown steadily MEUR MEUR MEUR Creditors MEUR -47 (-58) 2000: World's Best Employers list over the past 10 years 9,071 - 5,210 = 3,861 Shareholders MEUR 851 (849) Economic value retained in (8,797) (4,880) (3,917) MEUR -4 (111) 60,000 the company

2017 figures in brackets. 17% of director level positions 50,000 held by women 40,000

Signed the European Round Table 30,000 of Industrialists' Diversity and 20,000 94% 97% 2.1 Inclusion Pledge completion rate for the new of strategic supplier Industrial Injury Frequency 10,000 Code of Conduct e-learning, factories ISO 9001 certified Rate remained low at 2.1; rolled out in 16 countries as and 90% strategic suppliers average lost days per 4,000 employees received face- 0 at Dec 2018 ISO 14001 certified incident improved to 27.4 to-face compliance training 2009 2012 2016 2018

4 5 LETTER FROM OUR CHAIRMAN AND OUR PRESIDENT AND CEO KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT STRATEGY AND MEGATRENDS

CREATING VALUE FOR OUR CUSTOMERS WINNING WITH CUSTOMERS – WITH SUSTAINABILITY OUR STRATEGY AND MEGATRENDS

One of our strategic targets is to be a downtime, fewer faults and better overall burdening the earth’s resources. Our Win- At KONE, our vision is to deliver the best We want to deliver better value and meet Customer-centric solutions and services leader in sustainability and we strive to energy usage and performance. ning with Customers strategy continues People Flow® experience by providing their individual needs. To do this, we are Customers choose partners who best under- shape today’s and tomorrow’s cities for We have made good progress in to help our customer’s businesses become ease, effectiveness and experiences to investing more than ever in new technol- stand their changing needs and help them the better. Reducing the impact on the improving the energy efficiency of our more sustainable, as well as contributing equipment users and customers over the ogies, connectivity and new solutions. succeed. We understand these needs and environment remains among our top pri- products and services, which is especially to more functional and user-friendly build- full life cycle of the buildings. Our mission With new ways of working, partnering offer flexible solutions and services which orities and we firmly believe that sustain- important as local authorities routinely stip- ings, over their entire life cycle. is to improve the flow of urban life. Our and co-creation, we help our customers benefit customers and users in the best way. able business practices are a requirement ulate BREEAM and LEED ratings as part of Our sustainability progress this year is job is to make the best of the world’s cities, improve their businesses. for long-term growth and success. planning conditions. In manufacturing, we the result of the hard work by everyone at buildings and public spaces. It is by under- Fast and smart execution Just as sustainable business and the cir- continue to focus on manufacturing excel- KONE. Sustainability in its various forms standing urbanization and focusing on sus- Bringing our strategy to life with four Customers want their partners in con- cular economy have become more signif- lence through robotics and automation. has been crucial to our success for sev- tainable development that we can create Ways to Win struction projects and building services icant for our customers and stakeholders, Our innovation work has been rec- eral decades. And it will continue to be, better buildings, better low-carbon cities Our Ways to Win have a number of practical to be professional, fast and reliable. They so too have curbing the effects of climate ognized globally and in 2018, KONE was in order to help us bring further benefits and a better world for people to live in. development programs within them. KONE choose partners that continuously improve change and meeting new needs for build- again ranked as one of the world’s most to our customers and strengthen our abil- Way is our operating model and defines how and focus on what is essential. We increase ings and infrastructure. innovative companies by the business ity to deliver an ever better People Flow EVERYTHING STARTS WITH THE we implement the Ways to Win and run our speed and work smarter to focus on what Sustainable business also goes beyond magazine Forbes. We have also been rec- experience. CUSTOMER business with the right roles, processes, IT is valuable to the customer. creating circular, carbon-neutral econo- ognized by Forbes us as one of the best KONE’s strategic phase for 2017–2020 is tools and data. It enables us to deliver better mies. Together with our customers, we employers in the world. Antti Herlin called Winning with Customers. Our Accel- service to our customers through speed and True service mindset have a strong role in the development A large part of the progress towards Chairman erate Winning with Customers program consistency. Our four Ways to Win are: Customers value partners who strive to of cities, where, for example, well-being making this possible is the result of our speeds up the execution of our strategy and understand and take action to exceed expec- and digital services must not come at the employees’ dedication. We have contin- Henrik Ehrnrooth supports profitable growth. The objective of Collaborative innovation and new tations. We can make a difference by serv- expense of scarce resources and the gener- ued to invest in our people, with an aim to President & CEO the program is to create a faster-moving, competencies ing our customers better than anybody else. ation of excess waste. For us, sustainability make KONE a great place to work, which customer-centric organization that lever- In order to bring new solutions and ser- is also about how we conduct our business. is also a strategic target. ages scale efficiently in a rapidly changing vices to our customers more quickly, we Measuring success This is reflected in, for example, our values In our annual employee satisfac- environment. The program includes both collaborate much more with them as well We measure success with our strategic tar- and our Codes of Conduct. tion survey, Pulse, around 85% of KONE organizational adjustments, as well as the as with our partners. Our people drive our gets: the most loyal customers, great place KONE continues to pioneer the devel- employees globally stated that they feel development and further harmonization success in this change, which requires us to to work, faster than the market growth, opment of eco-efficient solutions and we they are treated with respect, which is a of roles, processes and tools. develop new competencies and innovate best financial development in our industry, are proud to see that our work leads the score is clearly above global and high-per- Every one of our customers is different. in new ways. and leader in sustainability. way in our industry and beyond. In this formance benchmarks. With respect to respect, we continuously strive to be a diversity, we aim to have 20% of women EATRENS trusted partner in the development of at director level positions occupied by ISION green buildings through the energy women by 2020; the level is currently URBANIATION KONE ELIERS TE BEST TENOLOIAL PEOPLE LO EPERIENE efficiency of our products, as well as 17%. To support our employees’ contin- ISRUPTION world-class business practices, opera- uous learning and development, in 2018, STRATEI TARETS tions, people and processes. To under- we offered over 4,700 training programs. Best financial L line this, in 2018 we exceeded the target We also paid special attention to to reduce our relative carbon footprint by diversity and in addition to training, other OUR ISSION INNIN IT USTOERS 3% annually. highlights this year included signing the IS TO IPROE 2018 was a good year in terms of our European Round Table of Industrialists' TE LO O sustainability performance. We introduced Diversity and Inclusion Pledge. URBAN LIE KONE’s digital platform that connects Safety is a crucial part of our strategy people – customers, users and employees and we continue to work toward our goal AYS TO IN KONE – to equipment and data, in a safe and of zero incidents. We will do our utmost to AY T secure manner. A number of our solutions ensure that all our employees and subcon- were awarded top ratings for their energy tractor workers return home safely at the efficiency classification and green building end of each day. We also continue to work credentials. In addition, KONE 24/7 Con- together with customers and the people nected Services continues to be taken into who use our equipment, to promote safety use more widely around the world. By con- and safe behaviour in all aspects of our ULTURE SAETY UALITY stantly analysing equipment data, we are business. ALUES E P able to bring a completely new experience To succeed for the long-term, we must for our customers, where equipment can continue to focus on the success of our be taken care of more efficiently, with less customers; doing the right thing, and not

6 7 Value creation KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Value creation

CREATING VALUE FOR THE SOCIETY

KONE provides value for the customers The key growth drivers of the new installed base and higher requirements for and modernization are more cyclical in In addition to these, KONE sees that the direct impact on society, a great deal of through the whole life cycle of the build- equipment business are urbanization and efficient people flow, safety and sustaina- nature and follow the construction cycles. life cycle business model and the existing our value is created through our large net- ing. In the new equipment business, we changing demographics. New equipment bility. Having a strong maintenance base KONE has identified strategic inputs maintenance base of 1.3 million units have work of suppliers and customers, as well offer innovative and sustainable eleva- deliveries are the main growth driver of the is crucial for the growth in modernization. crucial in creating value for customers, a crucial role in value creation. as through use of elevators, escalators, tors, escalators, automatic building doors maintenance business as the majority of KONE’s business model is capital light shareholders and the society. These are: We aim to be a leader in sustain­abil­ automatic building doors and integrated and integrated access control solutions to units delivered will end up in KONE’s main- as the working capital is negative in all • Competent and committed people ity.­ Increasing energy and resource effi- access control solutions manufactured and deliver the best people flow experience. tenance base. However, KONE also main- businesses and we work extensively with and strong leadership ciency is among our top priorities and has maintained by us. Our ultimate goal is to In maintenance, we improve the safety tains equipment manufactured by others. component suppliers to complement our • Innovative, sustainable offering and an important role in making the most sus- improve the flow of urban life. and availability of the equipment in oper- In maintenance, KONE is also boosting own manufacturing capacity. global processes and systems tainable offering a reality. KONE is commit- ation, and in modernization we offer solu- growth by introducing services that uti- The maintenance business is very stable • Best partners ted to proactive safety culture and actively tions for aging equipment ranging from lize new technologies to create value for due to high requirements for safety and reli- • Efficient manufacturing and delivery promotes safe practices among our own the replacement of components to full customers in new ways. The main growth ability. The customer relationships are also chain as well as employees, our partners and the general replacements. drivers for modernization are the aging typically long and stable. New equipment • Strong brand and solid reputation. public. Although we have a significant

Creating value by improving the flow of urban life INPUTS BUSINESS MODEL OUTPUTS IMPACT

PEOPLE AND LEADERSHIP PARTNERING WINNING WITH CUSTOMERS THE MOST SUSTAINABLE SHAREHOLDERS

OFFERING • >57,000 employees in >60 countries, • Co-creation with customers • Dividend EUR 1.65 per class B share

ca. half of them in the field • 166,000 new elevators and escalators • Partnering to develop new • Basic earnings per share EUR 1.63 ordered in 2018 • Personnel voluntary turnover technologies • Return on equity 27.7% rate 8.5% NEW EQUIPMENT • Maintenance and modernization • Collaboration with >300 universities 53% • Wide training opportunities on all and educational institutions Share of sales services, ~1.3 million units in maintenance base organizational levels around the • Distributors and agents important world • Best in class energy efficiency, SOCIETY part of go-to-market • 39 training centers ISO 25745 A-class energy rating as • Contribution to sustainable urban environment the first elevator company • 4,700 courses in 30 different Creating value for • Wages, salaries, other employment expenses and pensions

M languages MANUFACTURING AND M • Up to 70% energy savings through EUR 2.8 billion

A DELIVERY CHAIN O customers through modernization of elevators

I • Industrial Injury Frequency Rate (IIFR) 2.1 D • Management systems and N

certificates (e.g. ISO 14001, ISO 9001, • 13 manufacturing units E the whole life cycle of T • Focus on safety and accessibility

R E • Promoting diversity and non-discrimination in 9 countries N

OHSAS 18001) N

I the building A • Increased amount of skilled workforce

• Governance structures and • ~2,000 component suppliers Z N

A C

T E • Direct purchases EUR 3.6 billion

Code of Conduct • Thousands of installation suppliers

IO 3 EMISSIONS AND WASTE

3 • Income taxes EUR 241.9 million with effective tax rate 22.3% N % • Logistics network 1 • Carbon footprint from own operations 4% 318,400 tCO2e INNOVATIONS, PROCESSES FINANCIAL • Waste 46,400 tonnes ENVIRONMENT AND SYSTEMS • Waste water effluents 8 tonnes • Equity EUR 3.1 billion • >3,000 patents • 4.0% y/y reduction in operational carbon footprint relative • Interest-bearing net debt to sales • R&D spend 1.8% of sales, 9 global EUR -1.7 billion R&D units • 5.5% y/y reduction of Scope 1&2 carbon footprint relative • Net working capital EUR -0.8 billion to sales • >1,000 technology professionals in R&D • Capital expenditure • 33% of green electricity 1.2% of sales • Global KONE Way processes and • 93.5% of waste recycled or incinerated systems MOVING OVER • 100% corporate units, major manufacturing units and R&D units • Safe and efficient maintenance NATURAL RESOURCES 1 BILLION PEOPLE are ISO 14001 and ISO 9001 certified and installation methods • Materials used 776,300 tonnes EVERY DAY • 90% of strategic suppliers with ISO 14001 certification • Heating and vehicle fleet fuels 427,800 MWh BRAND AND REPUTATION • Electricity and district heat • One of the leading brands in the 80,100 MWh elevator and escalator industry • Water consumption 298,800 m3

8 9 Managing sustainability KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Shareholder engagement and communications

MANAGING SUSTAINABILITY LISTENING TO OUR STAKEHOLDERS

KONE is committed to conducting its busi- operations throughout the organization. products and services are in full compli- We work closely with our stakeholders KONE is an active participant in organ- Keeping an open and continuous dia- ness in a responsible and sustainable way, Our everyday work is guided by KONE’s ance with all codes and standards appli- on the various topics of sustainability and izations developing codes, standards and logue enables us to collaborate efficiently and we expect the same commitment Code of Conduct and various other com- cable to them. maintain an active dialogue with them. guidelines for improving safety, accessibil- and ensures a predictable business envi- from all our suppliers. Our ambition is to pany policies and guidelines, outlined The assessment and analysis of KONE’s KONE’s main stakeholders are our custom- ity, energy efficiency, cybersecurity, as well ronment for all parties. be a leader in sustainability, and in order in the table below. Sustainability and its most significant risks also covers mate- ers, employees, shareholders, suppliers, as other organizations advancing sustaina- For a list of the organizations we par- to reach this we have identified four focus management are ultimately the respon- rial non-financial risks. In line with the distributors, media, educational institu- ble development. ticipate in, see page 13. areas: Driving innovation and improving sibilities of KONE’s Executive Board and requirements of the Finnish Accounting tions, and local communities. efficiency, Providing the most sustaina- our President and CEO. Our management Act, KONE has identified the most signifi- ble offering, Being the best employer and and supervisors work to ensure that our cant non-financial risks. Read more about Stakeholder group Channels of dialogue Assessments and key topics raised attracting talent, and Enabling our partners employees are familiar with and comply KONE’s non-financial risks and their miti- KONE has over Customer meetings and events, constant dialogue Customer surveys show continued positive and societies to prosper. with the legislation, regulations, and inter- gation in our Annual Review, pages 18–19. 450,000 customers through solution support, seminars and conferences, feedback on our personnel, customer service and In order to reach these goals, we have nal operating guidelines of their respec- worldwide. Our main company reports, marketing materials, website and the quality of our products and services. integrated their management into our tive areas of responsibility, and that our customers are social media channels. construction companies, building owners, facility Focus area Material topics Management systems Management bodies managers and developers.

Driving • Deep understanding of ISO 9001 Quality management system, ISO Board of Directors, KONE pays wages and Performance discussions, continuous face-to-face Pulse employee survey, annual performance innovation customer needs 14001 Environmental management system, Executive Board, President salaries to over 57,000 dialogue between employees and managers, training discussions, idea management system, innovation and • Sustainable innovations and KONE’s Supplier Excellence Certification, ISO and CEO, Quality employees in over 60 events, global learning solutions, innovation creation tool. The Pulse results showed clear improvements improving business models 50001 Energy management system, KONE quality and Environmental countries. through innovation tool, European annual Employee in the perceived learning, development, and efficiency • Resource efficiency and environmental policy, KONE's Corporate Board, Supplier Quality Forum, internal social media channels, Compliance training opportunities available to employees. • Low-carbon operations Quality and Environmental Manual, Information Management team, Line, company intranet and internal employee Cross-team workgroups continued to drive further Security Policy, Personal Data Protection Policy, Solution Board, KONE publications. development of work processes and collaboration. KONE Global Facilities Policy, KONE Global Vehicle Security Council KONE pays dividends to An active and open dialogue: Financial disclosure Some of the most discussed topics with KONE’s Fleet Policy, KONE Way operating model over 62,000 shareholders, is provided through stock exchange releases, as stakeholders include current and future business Providing • Customer satisfaction ISO 9001 Quality management system, ISO Board of Directors, ranging from institutional well as financial and other company reports. In performance, KONE’s strategy, the development the most • Product and service quality 14001 Environmental management system, Executive Board, President investors and companies addition, more personal channels of dialogue include of KONE’s end markets as well as KONE’s capital sustainable • End user safety and accessibility KONE quality and environmental policy, ISO and CEO, Quality and to individuals, public management meetings with investors and analysts, allocation. We receive direct feedback from offering • Energy efficiency of solutions 25745 Energy performance of lifts, escalators Environmental Board, institutions, and non- annual general meetings, and capital markets days. financial market representatives in discussions and life cycle thinking and moving walks, LEED, BREEAM or other Solution Board profit organizations. Our dedicated investor relations team coordinates all and meetings, and we collect feedback from the green building certification systems, KONE safety of KONE’s investor relations activities. This ensures a financial community also through surveys. management system fair and equal access to company information and to its spokespersons. Being • Competence development KONE continuous learning approach, KONE policy Executive Board, President the best • Fair employment practices for supporting long-term external studies, KONE and CEO, Global KONE conducts business Continuous one-to-one dialogue, annual supplier Annual supplier survey, supplier quality audit and employer • Motivated and engaged Recruitment policy, KONE Total Reward policy, Compliance Committee, with approximately day for selected strategic suppliers, trade fairs, performance assessment with the Supplier Excel- and employees KONE Employee Performance policy, KONE Base Human Resources function 35,000 suppliers, out of steering group meetings, supplier workshops. lence Certification Program. No material concerns attracting • Diversity and non-discrimination Pay policy, KONE Roles, Grades and Evaluation which 1,500 are strategic raised. Discussions about day-to-day operational talent • Employee safety and well-being policy, KONE Code of Conduct, OHSAS 18001/ suppliers. issues, for example on how to further improve the ISO 45001, KONE safety management system logistic processes and quality.

Enabling our • Generating long-term returns Finnish Corporate Governance Code, KONE's Board of Directors, KONE collaborates with Continuous dialogue through daily contacts, regular Monitoring of sales-related activities and direct partners and • Creating wealth via taxes and tax strategy and principles, Internal control, Executive Board, President educational institutions country visits, distributors’ meetings and various feedback from distributors. No material concerns societies to employment Internal auditing, KONE Code of Conduct, and CEO, Annual General locally and globally. support tools. raised. prosper • Ethical business practices KONE’s Competition Compliance Policy, KONE Meeting, Internal KONE communicates Press releases, interviews, background briefings, visits, Surveys, media analysis, reputation studies. No • Long-term relationships with our Supplier Code of Conduct, KONE’s Supplier Audit function, Global proactively and openly press events, publications, company website and special issues raised during the reporting period. suppliers Excellence Certification, ISO 14001 Environmental Compliance Committee with representatives of social media channels. • Supporting local communities management system, ISO 9001 Quality the media. management system, KONE Distributor Code of Conduct, KONE supply chain management KONE collaborates with KONE international trainee program, CEMS global Most attractive workplace surveys, online approach, KONE safety management system educational institutions alliance of academic and corporate institutions, tracking. Efforts for deepening school locally and globally. thesis opportunities, local internships, participation collaboration and social media visibility have in recruitment fairs, common projects, guest been increased to further strengthen talent lectures, participation in research programs and acquisition and employer brand. social media platforms.

KONE pays direct taxes, Company website, stakeholder relations, reports, Sustainability surveys, reputation studies. No social security, and social media channels. special issues raised during the reporting period. employer expenses in more than 60 countries.

10 11 Material topics KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Material topics

SUSTAINABILITY FOCUS AREAS AND MATERIAL TOPICS

KONE’s sustainability reporting follows the digital environments. Therefore, we have UN GLOBAL COMPACT Memberships and positions of trust Global Reporting Initiative’s (GRI) guide- added information on cybersecurity and KONE is a committed participant of the lines. Three years ago, we conducted a data privacy. UN Global Compact and its 10 principles KONE is an active participant • United Nations Global Compact • Cleantech Finland materiality assessment to update our sus- Global governance and compliance, on human rights, labor, environment and in organizations developing • World Business Council for Sustainable • FIBS Finnish corporate responsibility network tainability focus areas and topics. Those risk management, stakeholder engage- anti-­corruption. The principles are embed- codes, standards and Development (WBCSD) and FIBS’ Diversity Charter Finland guidelines for improving safety, have been aligned with KONE’s strategy, ment and proactive communications form ded in our strategy, policies and proce- • Climate Leadership Coalition • The International Organization for accessibility, energy efficiency, Winning with Customers. the basis of our sustainability framework. dures, such as KONE’s Code of Conduct, Standardization (ISO) cybersecurity, as well as other • World Alliance of Low Carbon Cities (WALCC) The identified topics are ranked in These topics cut across all four focus areas, Competition Compliance Policy, and our organizations advancing • European Round Table of Industrialists’ Energy • The European Committee for Standardization regards to their impact on our value reflecting our continuous efforts towards Environmental Excellence Program, as well sustainable development. In and Climate Change Working Group (ERT) (CEN) chain, business implications and stake- effective global enforcement and trans- as processes related to these. 2018, KONE continued to be a • Council on Tall Buildings and Urban Habitat • Standardization Administration of China (SAC) holder interest. This report is structured parency in our communications. member or joined the following (CTBUH) • Standardization committees at the American organizations: to correspond with the focus areas, and UN SUSTAINABLE DEVELOPMENT GOALS • Green building councils in the United States, Society of Mechanical Engineers (ASME) the results of the materiality analysis and KONE supports the Sustainable Devel- Finland, India, Italy, Romania, Singapore, the • International Trade Associations, such as the prioritization are presented in the chart opment agenda and its goals. We have Netherlands, Sweden, and Vietnam European Lift Association (ELA), the Pacific below. selected the goals where KONE has the • Smart & Clean Foundation: Smart & Clean Asia Lift and Escalator Association (PALEA), Today, cybersecurity plays a critical Please see KONE.com/sustainability for biggest impact through its own opera- Helsinki Metropolitan and the National Elevator Industry, Inc. (NEII) more detailed information about how we in North America role in our technologies, products, ser- tions, and mapped them to our own sus- identified the material topics. vices, supply chain management and tainability focus areas.

STRATEGIC TARGET: TO BE A LEADER IN SUSTAINABILITY

Driving innovation and improving resource efficiency Providing the most sustainable offering Being the best employer and attracting talent Enabling our partners and societies to prosper Today, more than half of the world’s population lives in urban Elevators, escalators and automatic building doors are everywhere One of our strategic targets is to make KONE a great place to work. KONE directly contributes to economic development in areas and by 2050, that number is expected to increase to 68%. in urban environments, and the safety of the millions of people We strive to maintain a safe and healthy working environment the countries where we operate. In addition, we work with Urbanization means expanding cities and ever-higher buildings with who use them is our top priority. In addition, the quality and and foster a collaborative culture, where people are motivated to approximately 35,000 suppliers who provide us with, for example, a growing number of tenants. Innovations in urban development eco-efficiency of our solutions are essential. Quality is embedded develop their competencies and deliver the best results. We see raw materials, components and modules, as well as logistics, can play an important role in advancing social inclusion, economic in everything we do, as we strive to deliver the best customer and diversity as a strength and prohibit discrimination of any kind. installation and other services. As a responsible corporate citizen and prosperity and climate action. Material consumption is predicted equipment user experience. Eco-efficient solutions are a must in business partner, we are committed to making a net positive impact • Competence development to double by 2050. Reducing the impact urban areas have on the combatting climate change and ensuring responsible consumption. for sustainable and smart urban developments. • Fair employment practices environment is essential for a more sustainable future. • Customer satisfaction • Motivated and engaged employees • Generating long-term returns • Deep understanding of customer needs • Product and service quality • Diversity and non-discrimination • Creating wealth via taxes and employment • Sustainable innovations and business models • End user safety and accessibility • Employee safety and well-being • Ethical business practices • Resource efficiency • Energy efficiency of solutions and life cycle thinking • Long-term relationships with our suppliers • Low-carbon operations • Supporting local communities

Corporate governance & compliance Risk management Stakeholder engagement Proactive communications

Sustainable social, environmental and economic performance

12 13 Driving innovation and improving resource efficiency KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Driving innovation and improving resource efficiency

INNOVATION Continuous search for new ideas large corporations, is an important way DRIVING INNOVATION At KONE, innovation today means putting We have made systematic, long-term for us to foster innovation and encourage the customer and the equipment user at investments into research and develop- finding new ways of serving our customers. AND IMPROVING the center and involving them in the crea- ment (R&D) capabilities. Today, we have We also organize and participate in hack- tive work. Innovation methods that allow over 1,000 dedicated technology profes- athons to this end. We collaborate with co-creation with our customers and partners sionals working for R&D in Finland, China, universities, startups and startup accelera- RESOURCE EFFICIENCY are at the core of KONE’s research, concept- Italy, India, United States, Netherlands, tor programs as well as big corporations. ing, as well as new products and services cre- Germany, Mexico and the Czech Republic. KONE also participates in publicly funded ation. This applies to mechanical concepts, Our R&D process involves a continuous research projects in order to learn more Today, more than half of the world’s population new user experiences and digital solutions. search for new ideas and opportunities. Our about new emerging technologies relating lives in urban areas and by 2050, that number Innovations can have an impor- starting point encompasses a wide variety of to phenomena in urban environments and tant role in addressing climate change. sources, the most important ones being our people’s behavior. is expected to increase to 68%. Urbanization Increasing resource efficiency is among customers, equipment users, and the data In addition to learning from each other means expanding cities and ever-higher buildings our top priorities with regards to both our we gather from the equipment we service. in internal hackathons, we organize weekly solutions and our operations. Our solution We also gather and analyze market and cus- internal Technology talks. In these globally with a growing number of tenants. Innovations in design contributes to the circular econ- tomer trends in different parts of the world. shared sessions, our experts from differ- urban development can play an important role in omy with a long lifetime and modularity Over half of KONE’s 57,000 employees ent fields share their insights and findings advancing social inclusion, economic prosperity as key features of our products, supported are in the field serving customers in more with their R&D colleagues. Bi-annually, by our maintenance and modernization than 60 countries. These daily interactions we organize a workshop where in-house and climate action. Material consumption is services. To combat climate change and are important sources for both our new experts and business representatives are predicted to double by 2050. Reducing the impact increase our resource efficiency, KONE solution and service creation, as well as for brought together to innovate on selected is committed to further exploring the the continuous development of our oper- topics. urban areas have on the environment is essential opportunities of the circular economy. ations. We also systematically collect cus- for a more sustainable future. Our innovation focus areas are in line tomer feedback from the different phases Recognition for innovative with universal needs for sustainable and of the customer relationship. offering smart urban development. We develop In 2018, KONE was ranked KONE'S KEY IMPACT AREAS RELATED TO THE UN solutions and services for the whole life Collaborative approach and stakeholder as one of the world’s most SUSTAINABLE DEVELOPMENT GOALS cycle of buildings and the built environ- engagement innovative companies by ment with eco-efficiency, safety and qual- We want to expand our offering with value the business magazine Forbes. KONE Infrastructure investments ity as the foundation of our work. adding products and services in a smart ranked 59th. KONE was the only elevator Environmental investments For example, our eco-efficient People and sustainable way. In order to create cus- and escalator company on the list. Eco-efficient operations Flow® solutions address the needs of sus- tomer value, we make use of service design One of the highlights of the year in Research and development tainable urban living. We use new inte- and design thinking methods and take a terms of new launches was the intro- Technological legacies grated technologies and connectivity to collaborative approach to innovation. In duction of a new KONE digital platform set new standards for customer service. 2018, we organized over 300 co-creation which uses state-of-the-art technologies Access to affordable housing KONE 24/7 Connected Services bring sessions with our customers. Visiting cus- and is open to third-party solutions. Infrastructure investments intelligence, safety and transparency to tomer sites enables us to jointly develop KONE’s digital platform strengthens our Access to public spaces an increasing number of customers. The tailored solutions for our customers’ build- focus on customer-centric innovation as Sustainable buildings solution uses IBM Watson and IBM cloud ings with their own research and develop- it connects customers, equipment users to bring added value to customers and ment teams, architects, and other partners. and employees to equipment and data to enable elevator and escalator data to Engaging in dialogue and joint activ- transforming the People Flow experi- Sustainable sourcing be monitored and analyzed, improving ities with a wide variety of stakeholders, ence in buildings and cities. In connec- Procurement practices equipment performance. such as universities, startups and other tion with the launch of the platform, we Resource efficiency of products and services Materials recycling Needs for sustainable and smart living

Providing innovative, Improving living standards Smart cities are evolving, buildings and Energy efficiency affordable vertical housing and convenience, especially complexes are getting bigger and more Environmental investments to facilitate better living for as the global middle classes complicated; so for instance, heating, Greenhouse gas emissions aging populations as well as the increase their income and develop cooling and utilities all need to work together. Digital changing needs of inhabitants. increased expectations. technologies and connectivity can also enable better Risks and opportunities due to climate change public services for citizens, better use of resources and increased comfort and reliability.

To keep things running smoothly for its 45 million annual passengers, Maintaining safe and reliable Putting more of a premium on Addressing the growing value placed on Kunming Changshui International Airport in China opted for KONE 24/7 Connected Services, cutting-edge technology that enables the infrastructure. As populations eco-efficiency and sustainability, well-being and better living standards, real-time monitoring and analysis of a range of critical parameters grow, the design of infrastruc- to reduce energy consumption, enabling people to live in better harmony that impact the condition and operation of the elevators and auto ture needs to be modernized and manage waste and pollution and use with their surroundings. walks. The sustainable, energy-efficient solutions meet the airport’s made more efficient. materials smartly. LEED benchmarks.

14 15 Driving innovation and improving resource efficiency KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Driving innovation and improving resource efficiency

KONE digital platform – how does it work? As important elements in guiding our own KONE's Environmental Excellence Long-term environmental targets operations and those of our partners, we program 2017–2021 Products and services: TECHNOLOGY BUILDING MANAGEMENT set out environmental requirements in Our Environmental Excellence program A leader in low-carbon People Flow® PLATFORMS SYSTEMS the KONE Code of Conduct, our Supplier for 2017–2021 supports the ongoing solutions for smart eco-cities API API KONE and Distributor Code of Conducts, KONE green transformation of the urban envi- DIGITAL PLATFORM ­Quality and Environmental manual, and ronment into smart eco-cities, low-car- Operations: KONE's Global Facilities and Vehicle Fleet bon communities, and net zero energy To have efficient low-carbon operations REAL-TIME DATA COLLECTED FROM THE EQUIPMENT, API MAINTENANCE OPERATIONS AND PEOPLE FLOW API Policies. buildings. PARTNER SOLUTIONS KONE APPLICATIONS

View the KONE's Environmental Excellence Solutions for tenants and Solutions for customers and users, 2017–2021 video on KONE.com/sustainability equipment users e.g. KONE Mobile, KONE Flow

ELEVATORS ESCALATORS DOORS & MAINTENANCE & AUTOWALKS TURNSTILES OPERATIONS KONE's Environmental Excellence program 2017–2021 KONE’s digital platform connects people – customers, users and employees – to equipment and data, in a safe and secure manner. As our equipment Key initiative Achievements in 2018 Target 2017–2021 is connected to the cloud, sensors and partner solutions through application programming interfaces (APIs), they are easy to update and upgrade. Solutions Best possible A classifications according to the ISO 25745 energy efficiency standard for KONE Further reduction introduced a renewed products and ser- also able to keep our solutions updated trainings and 24 workshops on resource Our solutions are 3000 TranSys™ and a high-rise KONE 3000 MiniSpace™ elevators. in energy consumption vices portfolio that brings together our throughout their lifespan. efficiency and sustainable materials for highly eco-efficient Singapore Green Building Product (SGBP) certificates awarded for four additional KONE and contribute to ® core equipment and services, Advanced We are committed to protecting every- KONE employees and over 250 suppli- solutions: KONE TransitMaster™ 140 escalator, KONE 3000 S MonoSpace , KONE 3000 S green building MiniSpace™ and KONE 3000 TranSys™ elevators. People Flow Solutions and People Flow one’s right to data privacy in all that we do. ers globally. ratings. planning and consulting. This allows for We actively participate in standardization Approved Byggvarubedömningen (BVB) assessments for KONE MonoSpace® 500 and KONE more responsive and tailored solutions initiatives for cybersecurity requirements KONE’s environmental policy MonoSpace® 700 elevators and KONE TravelMaster™ 110 and KONE TransitMaster™ 140 to our customers’ needs. related to our industry. We provide innovative, safe, high-quality escalators in Sweden as the first company in the industry. During 2018, we continued to The human element plays a role in and environmentally efficient products and KONE's first Health Product Declaration published for KONE MonoSpace® 700. develop our offering, launching both many cybersecurity incidents. We continu- services. We strive for continuous improve- KONE solutions delivered to LEED, BREEAM and other certified green buildings globally. a number of new solutions as well as ously educate our employees to better rec- ment in all our business operations. In enhancements to existing ones. The ognize and combat cybersecurity threats addition to complying with, or exceeding Operations In 2018, KONE's overall operational carbon footprint relative to net sales decreased by 4.0% 3% annual KONE 24/7 Connected Services was with learning paths designed for each of applicable laws, rules, and regulations, we We do business compared to 2017, with sales growth calculated at comparable exchange rates. In 2018, reduction of CO2 made available for escalators after having our employee groups. work with our suppliers and customers to by developing our Scope 1 and 2 carbon footprint relative to net sales decreased by 5.5%. KONE's carbon relative to net sales been launched for elevators in 2017. In increase circular economy opportunities, resource efficiency footprint data is externally assured. Advanced People Flow Solutions, KONE environmental awareness and minimize and minimizing the RESOURCE EFFICIENCY KONE Australia installed solar panels in two regional offices. Residential Flow was made available for KONE aims to be a leader in sustainability our operational carbon footprint as well carbon footprint of KONE Australia and KONE Singapore and Asia-Pacific regional head offices moved to green most of the modernization offering in the and contribute to the sustainable develop- as to improve energy, material, and water our operations and services. building certified offices. residential segment in Europe offering ment of the built environment. Support- efficiency. seamless people flow to building users ing our customers in the transition to a KONE aims to maximize the positive KONE Finland now sources green electricity for the majority of its facilities. and higher building value for the owners. low-carbon economy is a significant oppor- environmental impacts and minimize the KONE Italy now sources green electricity for all its facilities. For a more complete list of our tunity for KONE. Our pioneering eco-effi- adverse ones throughout the life cycle of KONE Norway purchased over 40 new electric vehicles and several electric bicycles. launches, please refer to our Annual Review cient solutions and intelligent services help our solutions. This extends from raw mate- 2018, as well as our quarterly Interim address the challenges created by urbaniza- rial extraction to end-of-life treatment such Culture KONE recognized among the top climate change performers by CDP with a leadership score of CDP Leadership reports, available on KONE.com/investors. tion, climate change, demographic change, as recycling the materials. We build eco- A- for the sixth consecutive year. We were also included in the FTSE4Good ESG Index Series and ISO 14001 and increased safety demands. In our solution creation and opera- culture together awarded the Ecovadis gold medal for our sustainability performance being in the top 2% of all Cybersecurity as an essential part of Increasing resource efficiency is tions, we focus on: with customers and companies assessed. connected technologies among the top priorities in our opera- • Developing smart and sustainable suppliers. KONE Austria achieved carbon neutrality for 2018. As our offering grows more digital, our tions and we aim to minimize natural technologies for People Flow® KONE France won the Low Carbon Trophy by the French building developer Nexity. commitment to cybersecurity and data resource use throughout the value chain. • Being the best green building partner privacy is driven by our desire to deliver Resource efficiency offers us significant • Reducing energy consumption KONE New Zealand maintained the carboNZero™ certification and listed among the top 20 innovative products and services that make economic opportunities, brings down • Reducing material use, including reducers in New Zealand by Enviro-Mark Solutions. people’s journeys safe and reliable. Cyber- costs and boosts productivity. Through packaging KONE’s corporate units, all major manufacturing units, excluding our small manufacturing unit security is an essential part of all our tech- savings in materials, emissions, or time, • Improving circularity; maxi­mizing in Sweden, and R&D units are ISO 14001 and ISO 9001 certified. During the year, these units nologies, products, services, supply chain we create extra value for our customers material durability, non-toxicity, were recertified according to the latest 2015 versions of the standards. management and digital environments. by operating in smarter ways. ­recycled content and recyclability In total, 25 of our country organizations are ISO 14001:2015 certified (2017: 20), and KONE’s We follow secure software develop- We manage and mitigate environ- • Avoiding the use of hazardous manufacturing units in the Czech Republic and Italy ISO 50001 certified. ment processes when designing new mental risks as part of our ISO 14001 substances A total of 90% of our strategic suppliers are ISO 14001 certified (2017: 94%). innovations. With these best practices environmental system requirements and • Minimizing waste Extensive trainings and 24 workshops for KONE employees and over 250 suppliers globally and controls we ensure that our products management activities. A core part of • Minimizing water consumption. for the sustainability and transparency of material use, resource efficiency and green building and solutions are developed with security this is training our employees and sup- requirements. in mind from the start and that we are pliers. In 2018, we organized extensive

16 17 Driving innovation and improving resource efficiency KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Driving innovation and improving resource efficiency

Commitment to global We work together with our suppliers due to volume shifting to shorter lanes Green electricity goals and customers to minimize greenhouse especially for shipments from China 100% As a member of the UN gas emissions and other adverse environ- • Decrease in road freight emissions KONE countries that purchase green of the electricity consumed at KONE’s corporate head offices electricity: Global Compact, KONE mental impacts in our entire supply chain. in India and China due to shorter (excluding temporary office spaces) and our manufacturing and R&D • Austria supports the Sustainable Development To this end, we also measure the environ- distances. • Belgium agenda addressing the social, economic, mental impact of our solutions during sites in Finland, Italy, and the Netherlands is green electricity. • Denmark and environmental dimensions of sustain- their entire life cycle. See more informa- On the other hand, our road freight emis- • Finland ability. KONE also reports on its sustaina- tion about the environmental impact of sions in Europe and Americas increased • Germany bility performance annually in line with the our volume elevator, MonoSpace® 500, due to longer distances and higher number 33% • Italy Communication of Progress process of the and our volume escalator, Travel Master™ of shipments. • The Netherlands of all electricity consumption at KONE facilities is green • Norway UN Global Compact. 110, on page 30. KONE’s logistics operations are based electricity produced from renewable sources. • Sweden KONE has also signed the Paris Pledge on accurate and timely information at all • Switzerland for Action climate initiative, showing cli- Reducing our long-term carbon footprint phases of the delivery chain, and on using mate leadership and commitment to lim- KONE’s objective is to reduce our carbon distribution models that take eco-effi- Relative operational carbon footprint trend iting global warming to under 2 degrees footprint relative to net sales by 3% annu- ciency into account. We prefer material Data assured externally Celsius in accordance with the Paris Cli- ally supporting the UN Sustainable Devel- suppliers located close to our manufac- mate Agreement. We are further evaluating opment Goal for climate action. In 2018, turing units and distribution centers, and Target: 3% annual reduction relative to net sales* 2016 2017 2018 On-site renewable energy production our target setting to align with the recent after set-backs in logistics in 2017, we a large part of the modules are delivered Overall operations (Scope 1, 2, 3) -4.0% -0.2% -4.0% IPCC report urging to limit global warming exceeded this target as our overall opera- directly from suppliers to KONE distri- KONE has on-site renewable energy with stronger actions. In addition, KONE tional carbon footprint relative to net sales bution centers. KONE has strict require- Scope 1, 2 -4.2% -2.6% -5.5% production in: • Australia works towards increasing awareness for decreased by 4.0% compared to 2017, ments concerning the eco-efficiency of * Calculated at comparable exchange rates. KONE has applied new IFRS 15 and IFRS 9 standards • China environmental responsibility and climate with sales growth calculated at compara- its service providers’ operations. In 2018, from Jan 1, 2018 onwards. Figures until then are not fully comparable. • Finland action. For example, during the report- ble exchange rates. In 2018, our Scope 1 KONE launched the transformation pro- • Italy ing year, KONE units from over 30 coun- and 2 carbon footprint relative to net sales gram of KONE logistics operations to • Norway tries participated in World Wildlife Fund’s decreased by 5.5% compared to 2017. offer more seamless material flow to our public transport and on foot to reduce • The United States Earth Hour. As member of the Climate The highlights of the positive develop- customers. emissions and to ensure accessibility Leadership Coalition in Finland, KONE ment during 2018 are significant reduc- to our client locations. In 2018, KONE was involved in increasing awareness for tions in our electricity and district heat Vehicle fleet Norway purchased several electric bicycles climate action with high school students emissions, as well as in our business air KONE vehicle fleet accounted for 31% of for their maintenance operations. KONE is KONE’s operational during the global Zero Emissions day. travel emissions. However, we cannot be our operational greenhouse gas emissions collaborating closely with its leasing part- greenhouse gas emissions fully satisfied with the development of the in 2018. The total size of KONE’s fleet ners to anticipate the development of low High score on climate carbon footprint of our vehicle fleet. during 2018 was approximately 16,900, emission zones, especially in European KONE units from over 30 change performance out of which 15,100 (90%) were in the cities. Our aim is to shift from fuel cars countries participated DISCLOSURE INSIGHT ACTION In 2018, KONE was rec- Logistics scope of KONE’s environmental reporting to electric vehicles in our fleet as soon as ognized for its actions Logistics amounted to 51% of KONE's oper- globally. Service vehicles made up in total the leasing contract renewal periods allow in World Wildlife Fund’s and strategies in response to climate ational greenhouse gas emissions in 2018. two thirds of the fleet while benefit cars and the required infrastructure is in place. Earth Hour. change. We received a leadership score of Our logistics operations cover the trans- accounted for the rest. The carbon foot- As an example, KONE Norway ordered 40 A- on climate action in the CDP 2018 list of portation of products from KONE’s man- print of KONE vehicle fleet increased by new electric vehicles during the reporting the world's businesses leading on environ- ufacturing units to our customers and the 2.7% in absolute terms and by 1.4% rela- year along with other European coun- mental performance. KONE has disclosed transportation of modules delivered straight tive to our maintenance base compared to try organizations, such as France and the through CDP since 2009 and has continu- from our suppliers to our distribution centers 2017. The main reason for the increased Netherlands ordering both electric and ously been listed among the top perform- and onward to customers. In 2018, we deliv- carbon footprint related to the vehicle hybrid vehicles. ers: KONE has received an A or A- score ered over 3.7 million packages to new instal- fleet is the increase of kilometers driven, Electricity Logistics 51% for six consecutive years. The score ranges lation sites, and around 1.5 million packages which in turn results from an increased Business air travel KONE is committed to reducing electric- Vehicle fleet 31% from A to D, and is based on independent of spare parts to existing customer sites. The number of elevators, escalators and auto- In order to reduce the need for travel and ity consumption in its operations and, in Electricity and district heat 10% assessment against the scoring criteria of weight of the 3.7 million packages amounts matic building doors under KONE main- to facilitate global virtual collaboration, 2016, has set a long-term target to increase Business air travel 4% CDP, an international not-for-profit organi- to 1,440 million kilograms, and the volume tenance contracts. KONE continues to invest in better online the share of green electricity to more than Heating fuels and cooling gases 3% zation that runs a global disclosure system to 3.5 million cubic meters. With the unsatisfactory development meeting solutions and video conferencing 50% by 2021. In 2018, 33% of all our Waste 1% that enables companies, cities, states and In 2018, we clearly improved our per- in 2018, we recognize the need to speed equipment. We carefully consider the need electricity consumption was green elec- regions to measure and manage their envi- formance relative to 2017, when we did not up our transition to a more sustainable for travel, and optimize the locations of tricity, produced from renewable sources. ronmental impacts. More than 7,000 com- meet our targets. The logistics carbon foot- vehicle fleet. We continuously search for meetings and conferences. The vast major- The reported electricity/district heat emis- panies disclosed through CDP in 2018, and print relative to units delivered decreased new and innovative ways to reduce the ity of meetings already take place online, sions 32,100 tCO2e (2017: 34,000) take the reporting companies represent more by 1.1% compared to 2017. carbon footprint of our vehicle fleet, and and virtual meeting time continues to rise. into account our usage of green electricity than 50% of global market capitalization. The biggest contributors to the our target is an annual reduction of 1.5% In 2018, we reduced our greenhouse gas produced using renewable sources (mar- decreased logistics carbon footprint in in terms of absolute emissions. We are emissions from business travel by 14%. ket-based calculation method). Without LOW-CARBON OPERATIONS 2018 were: planning for the long-term restructur- General travel restrictions continued simi- the use of green electricity (location-based KONE’s operational environmental work • Significant reduction in air freight and ing of our vehicle fleet composition. For larly to 2017 and are also reflected in the method), our electricity/district heat focuses on resource efficiency and mini- courier emissions in all continents example, our urban maintenance person- reduction of our 2018 greenhouse gas carbon footprint would have amounted mizing our carbon footprint. • Decrease in ocean freight emissions nel is increasingly moving around with emissions from business air travel. to 36,900 tCO2e (2017: 38,100).

18 19 Driving innovation and improving resource efficiency KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Driving innovation and improving resource efficiency

Optimizing material use and and waste water is released into municipal In 2018, KONE Singapore and Asia- How KONE reduces the environmental impacts of its operations minimizing waste waste water treatment systems that abide Pacific regional head offices moved to Development action Impact on eco-efficiency KONE aims to maximize the opportunities by local regulations. Out of our major a Green Mark certified building. Our presented by resource efficiency and circu- manufacturing units, three have their own Australian headquarters relocated to a Logistics lar economy in our operations and deliv- waste water treatment systems with regu- NABERS and Green Star certified green Optimized use of transportation networks. Optimal routing of material through distribution center network and selection ery chain. In order to contribute positively lar monitoring and permits in place. building. Solar panels were installed of suppliers located close to distribution centers. to the UN Sustainable Development Goal As with material management, our aim into two Australian regional offices and Waterway and railway transportation prioritized over air Less CO2 emissions per tonne-kilometer. for responsible production, we prioritize is to improve our water data collection warehouses. freight. the smart use of resources and materials capabilities together with our suppliers by Improved space utilization ratio in loading. Better load planning of outbound trucks and containers resulting in improved recycling, for example by: extending the data collection to our supply container space utilization, optimization of transportation units used and more products delivered per shipment. • Optimizing manufacturing material chain. In our Supplier Code of Conduct, we use by effective use of robotics and also specify that our suppliers are expected Centralized volumes to main suppliers, convenient Fewer transportation routes and improved transportation efficiency ratio. Targets location of suppliers close to distribution centers. automation to monitor, control and appropriately treat • Recycling waste wherever possible waste water. Reduce facility-related carbon Use of more eco-efficient transportation equipment. Truck equipment selection from eco-efficiency perspective. Requirement for Euro 4 trucks for European logistics service providers (European emission • Reusing for example packaging footprint by 15% by 2022 standard for vehicles). materials. Continuously improving the compared to 2017 Improved logistics reporting. Continuous development of reporting methods and tools in collaboration with eco-efficiency of facilities logistics service providers for optimal use of logistics data. As an example, as part of our day-to-day KONE operates in over 1,000 facilities Increase share of green logistics process, packages for specific com- globally, including office spaces and instal- electricity to 50% by 2021 Vehicle fleet ponents are reusable and circulate between lation and service operation hubs. Our Compliance with KONE Global Vehicle Fleet Policy. Maximum CO2 emission limits defined, employees encouraged to select benefit Achieve 0% landfill waste at our cars with lower CO emissions. our manufacturing units and suppliers. The facilities account for approximately 13% 2 majority of our packaging materials can be of our operational carbon footprint. manufacturing units by 2030 Selecting fuel-efficient vehicles. Vehicle renewals guided by the main criteria of fuel-efficiency and compactness, recycled, and some parts of the packaging KONE's Global Facilities Policy outlines cooperation with suppliers who comply with the Euro 6 emission standard for light passenger and commercial vehicles. are also designed to be used as tools for the our approach in the selection and installation of our equipment. management of our facilities, developing Driving performance and route optimization. Increased driver safety and fuel efficiency through the monitoring of driving performance, including fuel efficiency and driving behavior. Increased use of We also encourage our suppliers to fit-for-purpose facilities and eco-efficient telematics systems, remote monitoring and mobile tools. develop their resource efficiency and sus- operations, and providing a safe and secure THE MAJORITY OF THE PACKAGING Planning for the long-term mobility solutions of our Reduced CO2 emissions and agile services through extended pilots of full elec- tainability in their operations and supply work environment for KONE employees. MATERIALS FOR OUR VOLUME service fleet. tric and hybrid vehicles, as well as through vehicle sharing and electric bicycles. chains. For example, we request renewable According to the policy, our objective ELEVATOR ARE RECYCLABLE energy use and recycled content in eleva- is to reduce our facility-related carbon foot- How KONE reduces packaging-related emissions and waste tor and escalator components. print by 15% by 2022 (base year 2017). KONE MonoSpace® 500 elevator We aim to reduce the waste gener- In 2018, we reduced our facility-related Optimized packaging to better fit into logistics chain. More products delivered per transportation unit. ated by our manufacturing processes and carbon footprint by 4.8% compared to Optimized use of packaging materials. Less packaging material used, more effective waste management, increased offices. Our long-term target for waste 2017. Examples of ways to achieve this recyclability of materials. management, set in 2016, is 0% landfill target are: Management and development of suppliers’ packaging. Less packaging material used, more effective waste management, improved waste at our manufacturing units. Waste • Improving space efficiency logistics efficiency. is always handled according to applica- • Optimizing energy usage in heating, ble laws and regulations, and we aim to ventilating, air conditioning and light- exceed legal requirements. ing systems by using proximity sensors, During 2018, our waste amount LED lighting, power-saving practices for increased slightly, mostly due to improved IT and office equipment data quality. We also added two countries • Increasing the share of green electricity to our waste data collection scope. The pro- to a minimum of 50% portion of recycled and incinerated waste is • Setting up onsite renewable energy pro- Wood 77.3% on the rise, amounting to 93.5% of the total duction at manufacturing units Cardboard 17.1% waste generated (2017: 92.2%). In the 13 • Promoting investments to electric Plastics 5.6% manufacturing units in our data collection vehicle charging infrastructure in our Metals 0.1% scope, the share of recycled or incinerated facilities waste is 97.8% (2017: 97.9%). Only 0.6% • Improving material efficiency (manu- (2017: 0.8%) was landfilled. facturing/warehousing/office activities) Read more about resource effi- • Reducing waste and improving reuse ciency and circular economy at KONE on and recycling ­KONE.com/sustainability. • Preferring eco-efficient service suppliers.

Optimizing already minimal water usage Our objective is to have new KONE build- Water consumption in KONE’s produc- ings designed according to LEED, BREEAM tion and maintenance processes is mini- or other green rating systems. Green build- mal, and we aim to further optimize our ings should also be favored when relocat- water usage. KONE uses municipal water, ing KONE facilities to existing buildings.

20 21 Driving innovation and improving resource efficiency KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Driving innovation and improving resource efficiency

Absolute operational carbon footprint trend per category, tCO e 2 Environmental impacts of KONE's operations Data assured externally Carbon footprint, energy consumption and waste data for all KONE and water consumption at KONE's manufacturing units assured by Mitopro Oy.

Carbon footprint of KONE’s operations, tCO2e 2016 2017 2018 350,000 +5.2% +2.1%

Carbon footprint of KONE’s operations, tCO2e 300,000 Direct energy (Scope 1) Vehicle fleet 92,000 96,600* 99,200 250,000 Heating fuels 9,400 9,700* 9,700

200,000 Cooling gases 300 400* 200 +9.1% +5.2% Indirect energy (Scope 2) Electricity consumption and district heat, market-based 34,100 34,000* 32,100 150,000 (location-based 2018: 36,900 tCO e) +2.9% +2.7% 2 100,000 Other relevant Logistics 140,000* 152,700* 160,600 -0.3% -14.0% +18.2% +7.7% indirect (Scope 3) 50,000 -5.6% -13.8% +4.1% -2.0% Business air travel 18,600 16,000 13,800 0 Waste 2,200 2,600 2,800 Vehicle fleet* Heating fuels and Electricity and Logistics* Business air travel Waste* Total cooling gases* district heat* Total 296,600* 312,000* 318,400

2016 2017 2018 % (change) Energy consumption, MWh

* 2017 figures revised due to improved data accuracy, logistics emissions for 2016 and 2017 restated due to a revision in emission factor source. Direct Heating and vehicle fleet fuels (heating oil, natural gas, liquid 399,500* 417,500* 427,800 petrolium gas, petrol, diesel, biodiesel, and diesel with biofuel * Increased waste emissions in 2017 and 2018 largely due to improved data collection and extended Scope of data collection. blend)

Indirect Green electricity (purchased and on-site production) 21,500 20,200* 22,300 Relative operational carbon footprint trend Other than green electricity 49,500 48,500* 44,900 Data assured externally District heat 14,700 12,500 12,900 Vehicle fleet (Scope 1)* Electricity (Scope 2)* Business air travel (Scope 3) Logistics (Scope 3)* Total 485,200* 498,700* 507,900 Waste, tonnes Recycled waste 24,300 33,700 39,500 Incinerated waste 2,800 4,000 3,900 Landfill waste 1,900 2,200* 1,800 Hazardous waste 1,000 1,000 1,200 Total 30,000 40,900 46,400 1,200 +7.0% -1.1% 1,050 Water consumption, m3 1,030 1,019 Municipal water 327,000 295,800* 287,600 900 963 750 -5.7% Ground water 10,000 11,400* 11,200 -9.2% 600 Total 337,000 307,200* 298,800 655 617 -18.7% 450 560 Waste water effluents from manufacturing units, tonnes -17.5% 300 13 9 8 357 150 +0.8% +1.4% 290 240 * Restated due to improved data accuracy or changes in calculation methodology, logistics emissions for 2016 and 2017 restated due to a revision 0 72.7 73.3 74.3 in emission factor source.

kgCO2e / unit in service kgCO2e / headcount kgCO2e / headcount kgCO2e / delivered unit

2016 2017 2018 % (change)

* 2017 figures revised due to improved data accuracy, logistics emissions for 2016 and 2017 restated due to a revision in emission factor source.

22 23 Providing the most sustainable offering KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Providing the most sustainable offering

QUALITY qualify to be released to production. This to KONE, they need to inform KONE about PROVIDING THE MOST Quality is an integral part of KONE’s culture process is applied to all products from these changes. and is embedded into all our processes. We electrification, mechanics and software, On a case-by-case basis, KONE’s sup- SUSTAINABLE OFFERING work continuously to improve the quality to higher level systems and solutions. We plier quality engineers evaluate what kind of of our products and services throughout are continuously improving our engineer- evidence is requested in order to check that the equipment and building life cycle. We ing excellence and operating model to be the change is made in a controlled manner. want to deliver consistent high quality to more agile and effective. During the reporting year, we imple- Elevators, escalators and automatic building make people’s journeys safe, convenient mented a mistake proofing method doors are everywhere in urban environments, and reliable. Ratings show that quality is Continuous improvement of which helps us prevent and detect mis- among the top reasons for choosing KONE manufacturing and delivery quality takes before they impact our customers. and the safety of the millions of people who as a partner. KONE continuously improves its delivery We also spent time at our installation sites use them is our top priority. In addition, the Together with safety, quality is a top pri- chain in terms of quality, responsiveness, with our suppliers in order to help them ority for us, and we encourage a “quality and efficiency. better understand our customers’ require- quality and eco-efficiency of our solutions are starts with me” attitude. To ensure that our In 2018, we expanded our manufac- ments. We continued our KDA supplier essential. Quality is embedded in everything we employees have the skills to resolve quality turing execution system (MES) to our ele- audit programs. do, as we strive to deliver the best customer issues in the most effective way possible, we vator component factory in Finland. The In 2018, 60 third party audits following give them practical guidance and provide roll-out continues in 2019. We also con- the German automotive industry quality and equipment user experience. Eco-efficient them with effective and easy-to-use prob- tinued our zero-defect factory program to standard (VDA6.3) were carried out on solutions are a must in combatting climate lem solving tools. further enhance the quality of our in-house our suppliers, bringing the total number Our employees are also encouraged production, and to support process control of audits to 340. change and ensuring responsible consumption. to take part in improving the quality of our harmonization activities in our produc- products and processes through our idea tion lines. Read more about KONE’s supply Ensuring maintenance quality management system as well as Kaizen con- chain operations on pages 40–42. In maintenance we aim to enhance the tinuous improvement practices. KONE pays special attention to ensur- quality of our equipment in service, ensure Should there be any issues regarding ing that our suppliers have excellent man- equipment user safety, and minimize the quality, we investigate the root causes and ufacturing processes and process controls interruptions caused to customers’ people KONE'S KEY IMPACT AREAS RELATED TO THE UN take immediate action to solve them. in place. We audit all the main suppliers flow. KONE defines a unique maintenance SUSTAINABLE DEVELOPMENT GOALS We monitor our digital environments that deliver direct materials to KONE dis- plan for each piece of equipment. Each around the clock to catch and fix any tribution centers or factories on a regu- technical module is maintained at appro- Environmental investments cybersecurity issues. We regularly practice lar basis. priate intervals. This enhances quality and Research and development handling cybersecurity incidents to make KONE’s installation process quality ena- equipment user safety, and minimizes Technological legacies sure our processes are robust and our bles us to monitor the installation quality equipment downtime. employees competent. In 2018, our annual at different stages of the process, and to KONE 24/7 Connected Services mon- major cyber simulation focused on KONE take any necessary corrective actions. We itors equipment data and analyses it in Residential Flow, our intelligent solution for conduct thorough quality tests to monitor real-time to improve equipment perfor- Infrastructure investments residential buildings. the installation outcome. mance. With the service, KONE can pre- Access to public spaces dict potential equipment breakdowns and Sustainable buildings Positive feedback Developing quality together with our avoid downtime. This cloud-based service At KONE, we systematically collect cus- suppliers enables us to deliver faster, smarter and tomer feedback through an annual KONE’s Supplier development and supplier more personalized support for our cus- customer loyalty survey as well as trans- quality management function continuously tomers, and we are already seeing the first Energy efficiency actional surveys. In our annual survey, our coaches our suppliers to implement best tangible benefits in terms of equipment Environmental investments net promoter score has developed favora- practice quality management methods in availability as well as improved customer Greenhouse gas emissions bly for several years. In our transactional their factories. This includes the implemen- satisfaction. Risks and opportunities due to climate change surveys, we closely follow feedback on tation of process quality control points in To support the maintenance techni- installation, modernization and mainte- manufacturing lines to check specific prod- cians in the field and to ensure prompt nance quality. uct and process characteristics that are repair, our Technical Helpdesk (THD) is the Additionally, to ensure the high quality considered critical to the end product’s technician’s first point of contact in case of of our equipment, we measure for example quality. unsolvable issues on site. With the help of the ride comfort of our equipment, and the When new KONE products or changes real-time, detailed equipment data, THD percentage of defect-free units. We closely to our products are implemented, KONE’s helps technicians remotely to solve prob- follow the accuracy and timeliness of our supplier operations project managers follow lems during the site visit. THD has been deliveries. Insight collected from customers up the implementation with the suppli- rolled out in 34 countries, and the roll-out and connected equipment has enabled us ers’ quality and production managers. This continues in 2019 and 2020. to focus our efforts on improving quality. helps ensure that aspects related to prod- uct and process quality are taken care of Safety is a top priority for KONE. We support our customers Ensuring quality of new solutions and KONE’s requirements are met. When and building owners in promoting the safe use of elevators, KONE’s new solutions go through several suppliers make changes to their products escalators and automatic building doors. quality and reliability gates before they or processes affecting products delivered

24 25 Providing the most sustainable offering KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Providing the most sustainable offering

END USER SAFETY AND ACCESSIBILITY help them recognize and prevent situations as EN 81-20:2014 and EN115-1:2017 for SAFETY THROUGHOUT are certified to ISO 9001, 14001 and with educational materials to our cus- Millions of people use elevators, escalators that could lead to safety risks. Building elevators and escalators respectively. THE VALUE CHAIN OHSAS 18001 standards. tomers and the general public to help and automatic building door equipment owners and maintenance service provid- The aging of urban infrastructure sys- We enhance the safety of our products and We make sure that all our production equipment users stay safe. Our safety mas- every day. The safety of those people, as ers are responsible for ensuring equipment tems in cities around the world is a major services through rigorous attention to our sites are safe places to work, for example, cots, Max and Bob, help teach children well as that of our employees and every- is professionally maintained and kept in concern for our industry. Many countries design, manufacturing, installation, and by using the 5S* methodology and by con- about the safe use of equipment through one we work with is our top priority. Every good condition. Building owners should, have adopted strict standards for improv- maintenance processes. Our policies, pro- ducting regular safety training. events, leaflets, and an animated video day, in every part of our organization, we for example, inform service providers if ing safety through modernization of the cesses, and tools enable all our business and games. work toward our goal of zero incidents: we they identify any recognizable hazards, existing equipment. activities to be organized and conducted in 4 Offices want everyone to return home safely at the such as abnormal noises or debris on the Elevator modernization enhances a structured and globally harmonized way. KONE promotes safety awareness among 7 Modernization end of each day. equipment. safety, for example, by improving leveling its employees through health and safety KONE develops modernization solu- Everyone who uses an elevator or esca- accuracy to prevent tripping and falling. It 1 R&D training as well as safety-related internal tions for upgrading or replacing exist- Consistent approach on safety lator needs to be conscious of their own also includes adding electronic sensors to Safety is embedded in the product devel- communication. ing equipment with new solutions that management behavior. For example, they need to hold doors to prevent collision, and providing opment process. Potential safety hazards Building managers promote and main- meet or exceed the latest safety stand- Safety is an integral part of our strategy the handrail and the hand of any young a voice link to the service center to assist affecting the products’ full life cycle are sys- tain safe and healthy working environ- ards, improving equipment reliability and and we work systematically to develop a children when riding escalators, refraining passengers in case of emergencies. tematically identified and eliminated before ments in KONE premises. user safety. culture where people look after each other from blocking closing elevator doors, and As a technology provider, KONE man- products are introduced to the market. Products are installed by professional and actively promote safety. With a proac- stepping away from the doors when they ufactures equipment that meets applicable Existing products are continuously 5 Installation technicians following strict modernization tive approach to safety, we have success- are opening or closing. codes and standards, and often includes developed to further improve their safety KONE’s processes and certified installa- processes. fully reduced workplace and equipment additional safety features that exceed the and functionality. tion methods are designed to enhance the user injuries. Active contributor to standard regulatory requirements. safety of installers and third parties whilst 8 Maintenance During the reporting year, we started development 2 Suppliers enabling product quality and reliability. KONE maintains the safety of elevators, the implementation of a new global The safety requirements of elevators, esca- Enabling accessibility KONE has defined clear quality require- KONE constantly improves the safety, escalators, and automatic doors using pre- safety management system, KONE Way lators, and automatic building doors are As populations age, the demand for acces- ments which are continuously measured quality and efficiency of its installation pro- ventive maintenance methods. for Safety. It is a consistent safety man- largely determined by national and inter- sible, safe and convenient People Flow® and followed. cesses, for example, by using the Kaizen We train our maintenance technicians agement framework that harmonizes the national safety codes and standards. KONE solutions increases. Buildings and transpor- In addition, our quality professionals methodology. regularly to ensure they have the required safety management practices across KONE. is a strong contributor to the development tation hubs need to be designed and built regularly audit key suppliers to monitor the We use continuous training, installation competence to perform their work safely of codes and standards that aim to fur- in a way that enables people with impaired safety and quality of delivered components safety and method passport, site audits, and and provide them with mobile tools to Safety is a collaborative effort ther improve equipment safety. We also mobility to move around easily. With our and products. risk-assessed methods to control site safety. have digital access to the latest up-to-date Safety is a joint effort that involves every- promote safety through our involvement elevator solutions, we also help improve KONE’s Supplier Code of Conduct information. Our supervisors continually one, from technology and maintenance in industry trade associations around the accessibility. For example, increased ele- requires all of our suppliers to protect the 6 Equipment use coach and audit technicians to assure that service providers to building owners and world. Our experts have, for example, vator cabin size improves building access health and safety of their employees. KONE supports customers and building processes are followed and needed com- equipment users. been involved in the planning and devel- for people with baby strollers and those owners in promoting the safe use of ele- petences exist. We work closely with our customers to opment of the main safety standards such using wheelchairs. 3 Production sites vators, escalators and automatic building KONE enhances the quality and safety doors. of all components used in production by We actively communicate about safety 5 ways to improve elevator safety 5 ways to improve escalator safety 5 ways to improve accessibility carefully controlling raw materials and pro- with our customers and equipment users. duction processes. We organize activities in different parts * 5S methodology: sort, stabilize, shine, All of KONE’s major production sites of the world and provide training along standardize, and sustain.

5 4 • Adequate lighting prevents accidents • Anti-fall and anti-ride barriers provide • By modernizing an elevator, the space and makes people feel safer additional balustrade height and inside the car can be increased by 50% • A two-way voice communication system prevent passengers from climbing on • Wide-opening doors make entry and improves safety and passengers’ peace the handrail and falling from height exit easier for passengers using a 7 of mind • Directional lighting and signage provide wheelchair or pushing a stroller • Interior doors and automatic landing visual guidance to improve building • Accessories such as handrails and doors prevent accidents and improve navigation mirrors provide support and help to 6 accessibility • Colored or lit areas provide passengers improve visibility 1 • Accurate stopping prevents people from with a clear understanding of interface • Braille signalization and audio stumbling on the door sill areas increasing safety levels announcements help people with 2 3 8 • An emergency system includes an alarm • Multiple horizontal steps reduce trips hearing and vision impairments with two way phone and an emergency and falls prior to entry or exit • An elevator can be installed in a power supply • Easy accessible labeled emergency stop building previously without one, in the buttons, bring the unit to a controlled stairwell or attached to an outside wall stop in the event of an incident

26 27 Providing the most sustainable offering KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Providing the most sustainable offering

THE FUTURE IS IN SMART, The most significant environmental expected to increase from 2.2 million units Eco-efficiency throughout a KONE escalator models currently have the A-class energy efficiency GREEN BUILDINGS impact of KONE’s business relates to the to 3.2 million by 2020, representing 60% of building's life cycle best A+++ classification in the escalator and according to VDI 4707* Green buildings support the overall sus- amount of electricity used by KONE’s solu- the European equipment base. Full replace- We provide services that help our custom- autowalk category. tainable development of the built environ- tions during their lifetime. KONE is pioneer ment can cut elevator energy consumption ers achieve their eco-efficiency goals in Our revolutionary KONE UltraRope® ment by changing the way facilities and in developing eco-efficient solutions in the by as much as 60–70% depending on the every phase of their buildings’ life cycle – high-rise hoisting technology cuts the communities are designed, constructed elevator and escalator industry. The KONE configuration. The Energy Efficiency of Ele- from designing and constructing buildings energy consumption of a 500-meter ele- A and operated. They help boost health MonoSpace®500, our current machine- vators and Escalators (E4) study supported to maintaining and modernizing them. We vator ride up to 15%. For higher buildings, KONE EcoSpace® and well-being, and reduce resource room-less volume elevator, is up to 90% by the European Commission concluded pay careful attention to the way our ser- the energy saving is even bigger. KONE MonoSpace® 500 consumption and the overall carbon foot- more energy efficient than KONE’s eleva- that energy savings of up to 63% can be vices are produced and delivered to ensure KONE MonoSpace® 700 print of buildings. The increasing interest tors from the 1990s. achieved by modernizing elevators installed that they are environmentally efficient. New Singapore Green Building Product KONE N MonoSpace® in achieving green building certifications There is also a growing number of aging in 1985 or earlier with the best available tech- certificates KONE S MonoSpace® such as LEED and BREEAM is one of the elevators and escalators currently in oper- nology. On a European level, this translates to Top-class energy efficiency In 2018, four additional KONE solutions, KONE E MiniSpace™ factors driving the growing demand for ation, especially in Europe. The number 11.6 TWh of saved energy. KONE was the first company to achieve the the KONE TransitMaster™ 140 escala- KONE N MiniSpace™ our eco-efficient elevators and escalators. of equipment that is over 20 years old is best A-class energy efficiency classifications tor, and the KONE 3000 S MonoSpace®, KONE S MiniSpace™ for a number of our installations according KONE 3000 S MiniSpace™ and KONE 3000 KONE MiniSpace™ to the international ISO 25745 standard TranSys™ elevators received the Singapore KONE Double Deck for the energy performance of lifts, esca- Green Building Product (SGBP) certificates. Eco-efficiency in every phase of a building’s life cycle lators and moving walks. In total, KONE Based on the new criteria released this year currently has 14 A-class ratings for eleva- for vertical transportation, the solutions * VDI 4707 is a guideline published by the tors. In 2018, the KONE 3000 ­TranSys™ received the highest possible “Excellent” Association of German Engineers (Verein Deutscher Ingenieure), which classifies elevators 1. Trusted partner in green building development 2. Eco-efficient installation and a high rise KONE 3000 MiniSpace™ and “Leader” ratings in their respective cat- based on their energy consumption. Ensuring healthy materials, helping to reduce on-site Considering the environment when installing elevators received the A-class rating. Three egories. In both categories, KONE is the first energy consumption and reducing the carbon footprint new equipment. Our well-planned and efficient of the building. We publish the environmental impact installation processes minimize the adverse of KONE products and contribute to developing global environmental impacts of installation work and Best-in-class energy efficiency according to ISO 25745 energy management standards. our systems ensure we reduce our chemical use and handle waste efficiently on site. Elevator Building type Load (kg) Speed (m/s) Energy efficiency class (A to G)

KONE EcoSpace® Office 630 0.63 A Up to 70% energy savings 3% annual carbon footprint by modernizing an elevator reduction target relative to net sales KONE MonoSpace® 500 Residential 630 1.0 A

KONE E MonoSpace® Residential 1,000 1.75 A

4. Eco-efficiency through modernization 3. Efficient maintenance processes KONE Z MiniSpace™ Residential 1,000 2.0 A Applying a range of solutions to make the Using smart technologies and a green ­vehicle fleet biggest difference with the lowest possible to minimize emissions and maximize ­efficiency. KONE E MiniSpace™ Residential 1,000 2.0 A environmental impact. Our modernization Remote monitoring solutions reduce unnecessary A solutions range from retrofitting LED lights technician callouts. By carrying optimized spare KONE S MiniSpace™ Residential 1,000 2.0 to a completely new elevator with energy­- part stocks in our vehicles, we reduce warehouse KONE N MiniSpace™ Hotel 1,000 2.5 A regeneration technology. visits, further decreasing emissions.

KONE MiniSpace™ Office 1,000 2.5 A

KONE N MonoSpace® Retail 1,150 1.75 A

KONE's current volume elevator is up to 90% more energy KONE S MonoSpace® Office 1,150 2.5 A efficient than in the 90s A Annual energy consumption (kWh/year) How KONE MonoSpace® 500 saves energy KONE MiniSpace™ Hotel 1,200 4.0 • KONE EcoDisc® hoisting machinery is highly efficient and KONE MiniSpace™ Observation tower 2,500 5.0 A reduces the energy consumption of the elevator. 8,000 • Eco-efficient regenerative drive enables energy to be reused KONE 3000 MiniSpace™ Office 1,600 6.0 A 7,000 within the building and cuts energy consumption up to 35%. • Long-lasting LED lighting lasts 10 times longer and is 80% more 6,000 KONE 3000 TranSys™ Retail 2,000 1.0 A efficient than halogen lighting. 5,000 • More advanced standby solutions power down the equipment 4,000 when not used and provide substantial energy savings, especially Escalator Building type Rise (m) Inclination° Step width (mm) Speed (m/s) Energy efficiency 3,000 in residential buildings with low or medium traffic. class (A+++ to E) 2,000 KONE TravelMaster™ 110 Retail 5.0 30 1,000 0.5 A+++ 1,000 Calculation is based on: Speed: 1 m/s, load: 630 kg. Since 2008 KONE TravelMaster™ 115 Retail 5.0 12 1,000 0.5 A+++ 0 also: 150,000 starts per year, travel height 9 m, 4 floors. Due to 90s KONE 1996 KONE 2008 KONE 2012 KONE Current KONE historical reasons, the data for starts, travel height and floors is not KONE TransitMaster™ 140 Public transportation 5.0 30 1,000 0.65 A+++ elevators MonoSpace MonoSpace MonoSpace MonoSpace® 500 available for the 1990s elevators.

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90% Environmental impacts of KONE's products ordered during the reporting year of the metals used in KONE Carbon footprint of KONE’s products, tCO e* 2016 2017 2018 solutions can be recycled. 2 Production of materials for products (calculated) 2,364,000 3,041,000 3,208,000

Lifetime energy consumption of products ordered from KONE during the reporting year (calculated) 5,034,000 4,624,000 5,071,000 elevator and escalator company to achieve of our solutions. Producing EPDs is a LIFE CYCLE ENVIRONMENTAL these ratings. Three other KONE solutions continuous process and a core part of our IMPACT* OF KONE'S VOLUME * 2016 figures not fully comparable with previous years due to emission factor revision and other changes in calculation methodology. have previously been granted SGBP cer- solution creation process and operational ELEVATOR AND ESCALATOR tificates. Through the certification, these environmental work. KONE MonoSpace® 500 elevator solutions are recommended for Green Mark The biggest environmental impact of Materials used, tonnes Materials 2016 2017 2018 certified green buildings. Green Mark is a our solutions stems from materials manu- Manufacturing (calculated) Metals (steel, aluminum, copper) 604,100 612,500 646,200 green building certification scheme of the facturing and energy consumption during Electronics 29,400 33,600 36,000 Singaporean Building and Construction the use phase. Therefore, our focus is on Authority, promoting sustainability in the manufacturing excellence through robot- Miscellaneous 2,900 10,300 10,800 construction and real estate sectors. ics and automation, as well as best in class Plastics 3,900 4,800 5,000 energy efficiency of our solutions. Glass 5,500 4,800 4,700 Design for environment In 2018, we also published our first Rubber 700 700 700 In 2018, KONE used 776,700 tonnes Health Product Declaration (HPD) for Wood 37,100 51,800 54,400 (2017: 737,200) of materials for producing KONE MonoSpace® 700. Through the Packaging (calculated) and packaging its elevators, escalators, and HPD, we are transparently communicating Plywood 14,800 14,300 14,800 building doors (figures calculated based about the material content of the product Plastics 1,100 1,300 1,300 on life cycle assessment data). In order and the associated human and environ- Cartonboard 700 1,500 1,400 Materials manufacturing 55% to increase resource efficiency, KONE is mental health information. By providing Miscellaneous 400 700 900 systematically harmonizing elevator and HPDs for our customers, we are respond- Energy consumption 30% Office consumables (actual data) Paper 600 900 500 escalator product selection and the corre- ing to a growing need and value placed Transport from manufacturing to building site 6% Total 701,200 737,200 776,700 sponding component families. on healthier and better living standards. A key element in our design for envi- In-house manufacturing 3% Calculations are based on life cycle assessment data and products ordered from KONE. ronment solution creation process is work- Carbon handprint of our solutions Maintenance 2% ing together with our suppliers in selecting In 2017–2018, KONE participated in a two- Installation 2% sustainable and healthy materials, as well as year project run by VTT technical research Transport to manufacturing site 1% avoiding the use of restricted substances. center of Finland, with the aim of devel- Waste processing 1% For example, we organized 24 workshops oping a new methodology for measuring MATERIAL SUMMARIES OF KONE'S VOLUME ELEVATOR AND ESCALATOR on sustainable materials for over 250 sup- the carbon handprint of a company’s solu- pliers globally. We continuously improve our tions. A carbon handprint indicates the ben- KONE TravelMaster™ 110 escalator KONE MonoSpace® 500 elevator KONE TravelMaster™ 110 escalator data collection capabilities together with our eficial environmental impacts of a solution suppliers in order to provide transparent compared to a baseline product, and how and reliable information about the material a company’s solution can help in reduc- content and environmental impacts of our ing the carbon footprint of others. As a products to our customers. result of the project, a carbon handprint During the year, we also received sev- guide was published by VTT in 2018. KONE eral approved Swedish BVB assessments plans to utilize the results from the project and Singapore Green Building Product in its product development for low carbon certificates proving that our solutions solutions. meet the most stringent green building In 2018, together with industry repre- requirements. sentatives, KONE was involved in defining the baseline for the energy efficiency of ele- Materials manufacturing 7% Ferrous metals 65.5% Ferrous metals 80.7% Environmental and vators as part of the Ecodesign preparatory Energy consumption 91.7% Inorganic materials 29.2% Inorganic materials 5.7% Health Product Declarations study by the European Commission. The KONE’s environmental responsibility covers study will be concluded in 2019. Transport from manufacturing to Electric and electronical equipment 3.4% Electric and electronical equipment 0% building site 0% the full life cycle of its products from Non-ferrous metals 1.2% Non-ferrous metals 10.5% In-house manufacturing and transport design and manufacturing to installation, Plastics 0.6% Plastics 1.0% to manufacturing site 1% maintenance, modernization, and end- Others 0% Others 2.0% Maintenance 0.1% of-life treatment. In order to illustrate the Installation 0% environmental impact during the entire Waste processing 0.1% lifetime of our solutions, we publish Environmental Product Declarations * Global warming potential i.e. carbon (EPD) on the environmental impacts footprint

30 31 Being the best employer and attracting talent KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Being the best employer and attracting talent

CONTINUOUS LEARNING actively encourage all employees to prepare FAIR EMPLOYMENT PRACTICES BEING THE BEST KONE’s strategy, Winning with Customers, individual development plans. At KONE, creating a great place to work focuses on putting the needs of our cus- In 2018, we introduced a new global means treating every employee fairly and EMPLOYER AND tomers and users at the center of all devel- tool which provides our employees mobile providing a safe working environment. A opment at KONE. People are key to the access for documenting their performance local HR professional manages the local strategy’s success, which requires us to discussions and personal as well as career personnel-related policies and ensures that ATTRACTING TALENT develop and obtain new competences in development. The tool also enables asking we comply with local legislation and labor the fields of digitalization, understanding for and giving feedback throughout the union practices in each country we oper- customers’ businesses, consultative selling year. Mobile access allows also employees ate in. Through our renewed HR operating and leading transformations. in the field to view their goals, develop- model and people processes we can ensure One of our strategic targets is to make KONE KONE supports its employees in devel- ment, feedback and career development the consistent guidance and alignment of a great place to work. Our personnel strategy oping their competencies with over 4,700 information at any time. our practices in the HR organization. As a training programs and online modules. In addition to using these discussions result of our HR transformation all employ- aims to ensure the availability, engagement, Over 14,500 employees had the to set goals and review job content, KONE ees and managers can now get harmonized motivation and continuous development of chance to try out new learning methods managers are advised to discuss employee support from our centralized HR services such as virtual reality, gamification and well-being, as well as career development teams and get better visibility to their own our employees. We strive to maintain a safe mobile learning methods. Over 25% of and growth opportunities. data as well as take direct action with the and healthy working environment and foster our learning centers are using new learning KONE has mentorship programs both help of our self-service tools. a collaborative culture, where people are methods and we are increasing the cover- on global as well as on local levels. On a age of the new equipment significantly in global level, KONE facilitates mentoring as Equal pay and rewarding performance motivated to develop their competencies and the coming years. part of global talent programs. Approxi- Our total reward framework consists of deliver the best results. We see diversity as a KONE’s global learning management mately 140 top managers have mentees easy-to-understand policies, guidelines, system, konelearning.com makes train- at KONE, cascading to country level men- and practices that are aligned with our strength and prohibit discrimination of any kind. ing options more visible and simplifies toring programs. business strategy. We invest significantly the management of certifications, train- in a range of monetary and non-monetary ing requirements, and personnel devel- Attracting top talent rewards offered to employees. This frame- KONE'S KEY IMPACT AREAS RELATED TO THE UN opment. Mobile learning is in active use KONE recognizes that work focuses on pay for performance and SUSTAINABLE DEVELOPMENT GOALS in several countries. people are fundamen- by communicating it clearly we can make We continued to deliver global talent tal to its success. To the fairness and equality of the approach Occupational health and safety programs for example for global top per- attract the best candi- visible to all KONE personnel. While reward formers, general managers, operations dates, our employer value proposition and policies are consistent across KONE, the managers and senior leaders. During the employer branding concept was refreshed practices are flexible to meet local needs. reporting year, there were participants in 2018 to promote KONE in a system- Employee agreements are managed on from 33 countries in these programs; 23% atic way. We organized several training a national level, and there are differences of participants were women. sessions for our talent acquisition teams in national legislations. A total of 63% of Education for sustainable development We have renewed our 360 assess- globally focusing on targeting new com- KONE’s employees are covered by collec- Capacity buidling ment content with our new leadership petencies and increasing diversity through tive bargaining agreements. Indirect impact on job creation competences in 2017, which include recruitment. The compensation and other benefits Youth employment themes such as collaboration, inclusion, KONE’s apprentice programs in key of the Board of Directors, President and and developing talent. The assessment countries are an opportune way for us to CEO, and the Executive Board are disclosed is part of all our key leadership training recruit new professionals. We also collab- in KONE’s Annual Review 2018 (p. 92-93). Equal remuneration for women and men programs on all manager and leader- orate actively with educational institu- Diversity and equal opportunity ship levels, and the assessment should tions. In 2018, we continued to further Dialogue between top management and Workplace violence and harassment be conducted at least every three years. strengthen our collaboration with schools employee representatives Women in leadership We offer an adjusted 360 assessment also as well as our promoters’ program to pro- KONE organizes a European Employee for all leadership and management team vide information about KONE in schools, Forum every year to bring together members. Our target is that all employ- universities, and other relevant institutions. employee representatives and top man- Employment ees in leadership and management team The KONE International Trainee agement to discuss issues ranging from Non-discrimination positions would conduct these renewed Program offers students and graduates safety to business development. A smaller Capacity building assessments by end of 2019. opportunities to work on projects at working group meets two to four times Occupational health and safety different KONE units around the world. a year to ensure continuous consultation Facilitating professional growth KONE also offers various summer and communication on important devel- At KONE, we strive to have the best possible traineeships and thesis opportunities in opments affecting KONE employees. professionals with the right competencies in several countries. In 2018, the theme of the Employee each position. We facilitate this and increase In 2018, KONE was recognized as one Forum was sustainability, and 22 employee the motivation, engagement and continu- of the best employers in the world by Forbes representatives from 16 EU countries par- In 2018 KONE was recognized as one of the best employers in the world by Forbes business magazine for the second year running. ous development of our employees through business magazine for the second year run- ticipated in it. KONE ranked 105th on Forbes' 2018 Global 2000: World's Best regular performance discussions which take ning. KONE ranked 105th on Forbes' 2018 Employers list. place at least twice a year. In addition, we Global 2000: World's Best Employers list.

32 33 Being the best employer and attracting talent KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Being the best employer and attracting talent

Personnel by country Dec 31, 2018 We have employees in over 60 countries, with a majority in Asia-Pacific Employees 10 largest countries (2017 figures in brackets) Employees by market, 2018 Total number of employees, year end 57,359 39 Share of women in employees 11% China 17,676 (16,505) training centers Share of women in director level positions United States 5,264 (5,325) (Out of 589 director positions) 17% India 4,702 (4,514) Americas: 13% (13%) Share of women in the Executive Board 7% France 2,990 (2,930) Asia-Pacific: 48% (47%) Share of women in the Board of Directors 38% 4,700 Voluntary turnover rate, compared to 12 month average headcount 8.5% Finland 2,427 (2,345) EMEA:39% (40%) training programs and online Germany 2,250 (2,093) (2017 figures in brackets) modules available Voluntary turnover rate* Italy 1,980 (1,925) Region United Kingdom 1,772 (1,889) APA 10% Australia 1,438 (1,432) Americas 8% 226,000 Canada 1,103 (968) EMEA 6% e-learning courses completed on In our employee engagement survey, Fostering diversity and inclusion Gender High ethical principles guide all our activi- Pulse, 85% of KONE employees globally konelearning.com Female 9% Average workforce tenure in years ties. As an employer, KONE is committed to feel that they are treated with respect. This 10 largest countries (2017 figures in brackets) an equal opportunity approach that places score is clearly above the external global and Male 8% people in the positions that best suit their high-performance benchmarks. Age group China 4.4 (4.4) abilities. We respect and value differences, Altogether, 76% of employees also 30 and under 13% and believe in an inclusive workplace that consider KONE as an employer that values United States 7.1 (7.6) 31–50 7% empowers individuals. We have created a employee diversity. This score exceeds the India 5.7 (5.9) 51 and above 4% diversity and inclusion roadmap for 2019 global external benchmark clearly. France 11.6 (12.2) including review of existing policies and In 2018, KONE India was included on * Calculated from 12 month average headcount Finland 11.4 (12.1) practices. the Working Mother & AVTAR Best Compa- We value diversity in all forms and nies for Women list. The study recognizes Age distribution –30 31–50 51– Germany 9.2 (10.6) welcome new perspectives to our busi- initiatives undertaken by companies to All KONE employees 31% 53% 15% Italy 16.2 (15.7) ness. We seek out innovative ideas and increase women’s workforce participation. Executive Board 0% 50% 50% United Kingdom 9.5 (9.4) new approaches to customer solutions and Board of Directors 13% 13% 75% believe that our future success depends Taking a stand Australia 7.9 (8.7) on our collective ability to build diverse During the reporting year, we paid special Canada 6.7 (8.0) and inclusive teams, communities and net- attention to diversity. Highlights of the Gender distribution per market Men Women works. To strengthen our global approach year included offering diversity training EMEA 86% 14% and deepen our insights on customers to talent acquisition teams globally, Asia Pacific 91% 9% Over half of our employees are in and markets, we have set goals for cul- continuing the trainings given to hiring Americas 89% 11% the field every day tural diversity in our global teams. managers in 2017, signing the European Employees by job category, 2018 We also have a target of 20% of direc- Round Table of Industrialists' Diversity and tor level positions occupied by women by Inclusion Pledge, as well as taking part in Employees per contract type 2020. We are currently at 17%. the global Girls Takeover event, organized Employees with permanent contract 95% During the reporting year, KONE’s by Plan International. Girls Takeover Females with permanent contract 97% workforce included 139 nationalities. In brings attention to the opportunities and Males with permanent contract 95% 2018, 80% of external hires into leader- discrimination that girls face today. By ship positions globally were filled by local participating in the event, we wanted to candidates. highlight KONE as an equal opportunity New hires gender distribution per market Men Women KONE has conducted several studies employer and showcase the career options EMEA 83 17 on gender diversity and equality in the past we offer to professionals in different fields. Asia Pacific 92 8 and results have shown no significant bar- Read more about the day on KONE.com. Americas 91 9 riers or discrimination of gender or age in terms of compensation or career opportuni- Open two-way communication to engage Maintenance and modernization 58% ties. Comparing the average salary position employees New hires age distribution per market –30 31–50 51– (56%) against market on a global level, gender pay At KONE, we believe employee engage- EMEA 48 46 6 New equipment, sales and installation 25% gap has decreased in 2018 to 1 percentage ment is built on open and timely commu- Asia Pacific 73 25 2 (26%) point from an already low level of 4 percent- nication about the company’s goals and Americas 37 51 12 Manufacturing 8% (9%) age points in the previous study in 2013. ways of doing business. The average salary position against market We use multiple channels to inter- Administration, IT and R&D 9% (9%) was calculated by comparing the KONE act with employees, motivate them, and (2017 figures in brackets) salary to the market level for each position. encourage collaboration. KONE’s global

34 35 Being the best employer and attracting talent KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Being the best employer and attracting talent

intranet, for example, acts as both a news the necessary environment for working learned and took actions to prevent any awareness of actions which maintain and channel for all the latest news and events safely. They lead by example, make sure re-occurrence. The relevant details were improve well-being. as well as a virtual teamwork site. that their people are consulted and trained shared across our global safety network and During the reporting year we intro- The latest KONE news is also shared and drive safety improvements. business units. We will continue to do our duced a learning package for leaders to through internal video news broadcasts Managers perform regular audits to utmost to ensure that all our employees and increase their competence in managing and newsletters. measure compliance with KONE’s policies, subcontractor workers return home safely the well-being of their teams. This included rules, and defined working methods. Cor- at the end of each day. We continue focus an e-learning, a toolkit and short guides. Measuring engagement rective actions are taken if deviations are on promoting safe behavior as well as the We monitor medical insurance data The most important metric for employee identified. KONE’s Supplier Code of Con- development of safer procedures, in order and carry out in-depth reviews on spec- engagement at KONE is the Pulse duct requires all our suppliers, including to reach our goal of zero incidents. ified locations. The aim of these reviews employee survey. The survey offers our subcontractors, to protect the health and is to benchmark existing well-being pro- people an opportunity to give feedback safety of their employees. Improving safety performance grams and provide recommendations that and provides insights into employee At KONE, we recognize and reward In order to remind our field personnel will improve the well-being of employees. engagement. safe behavior and share best practices. We about the main risks in our work and the Our efforts were recognized in 2018 The Pulse survey covers topics such as train our employees to assess the safety ways to mitigate them we developed an when KONE India's supply unit was employee engagement and enablement, of their tasks and they are empowered to interactive learning application, Safety in awarded the Indian Association of Occu- leadership, learning and growth, corpo- stop work and ask for support should they Mind. The application uses 3D photo- pational Health Award for Best Occupa- rate responsibility, customer centricity, suspect a safety risk. graphs, animations and interactive hot- tional Health Centre of 2017–18. innovation and drive, and diversity and Safety is a key element in all our prod- spots to provide an engaging learning inclusion. In addition, the survey exam- uct and operations training. A wide vari- experience. Safety in Mind modules can ines how respondents view their team ety of training solutions are used, from be studied on mobile phones, tablets or Industrial Injury Frequency Rate effectiveness, managers and performance classroom based training and e-learning computers. development among KONE employees reviews. to on-the-job training. Toolbox talks are The roll-out of the KONE Safety Solu- KONE’s 12th global employee survey used to communicate short trainings and tion, a mobile tool for reporting and 4 was carried out in May-June 2018. The safety messages to field operatives. managing near misses and incidents, con- survey results were published in July 2018 Each year, KONE organizes a global tinued in 2018. Incidents, lost days per 3 and action plans were made in teams safety week. The week presents KONE incident, and near misses are part of each based on the results. employees with training, special events unit’s monthly reporting to global func- 2 A total of 48,564 employees pro- and activities. Many countries also organ- tions. The number of near miss reports vided feedback in the Pulse survey and we ize events and trainings together with increased slightly. 1 reached a response rate of 91% (based on customers and subcontractors during Local safety personnel promptly the number of employees in April 2018). the week. The theme of the 2018 safety analyze the reported data and use it to Our next Pulse survey is planned to be week was Take care, and it focused on improve safety. In 2018, we focused on 0 organized during first half of 2020. preventive safety work and improving improving the quality, analysis and inves- 2014 2015 2016 2017 2018 well-being. tigation of these reports. As key safety performance indicators, KONE Organizational changes to foster In our employee engagement survey, Lessons learned from incidents and tracks the number of lost time injuries of one day customer-centricity Pulse, 94% of KONE employees glob- near misses are shared in quarterly organ- or more per million hours worked, as well as the KONE is developing and further harmo- ally agreed that KONE is committed to ized safety network meetings. In addition, average number of lost days per incident. nizing roles, processes and tools. During employee safety. safety managers gather monthly to dis- In 2018 our Industrial Injury Frequency Rate the reporting year, we undertook organ- cuss concerns and to share best practices. (IIFR) was 2.1 (2017: 1.9). The IIFR covers KONE’s own employees. The average lost days izational changes in several functions, Safety performance per incident improved to 27.4 days (2017: 28.9). including Finance, Customer Solutions A safe working environment is the foun- Global program for employee well-being Engineering and Sourcing, in order to dation of all our operations. As key per- KONE has a global framework and pro- create a faster-moving, customer-centric formance indicators, KONE tracks the gram for employee well-being. For us, organization that leverages our scale more number of lost time injuries of one day employee well-being is being physically, efficiently. or more per million hours worked, as well mentally and socially healthy. In the con- 94% as the average number of lost days per text of work and career, it is about leading of KONE employees EMPLOYEE SAFETY AND WELL-BEING incident. a balanced life. At KONE safety is our top priority. This In 2018 our Industrial Injury Fre- KONE’s Elevate your health program recognize that the company means making sure each of our employees quency Rate (IIFR) remained at a low is in place in all our units. It covers topics is committed to employee have the necessary competence, tools and level of 2.1 (2017: 1.9). The average lost ranging from taking care of joints and safety instructions to perform their work profes- days per incident improved to 27.4 days muscles to weight loss initiatives, the sionally and safely. (2017: 28.9). importance of sleep, nutrition, increas- These results were overshadowed by ing physical activity and strengthening Managing workplace safety the loss of three KONE employees who your mental well-being. KONE Way for Safety, our safety man- died as a result of separate fatal incidents. The program is structured around agement system guides us in continually KONE employees had 36 high-conse- a global calendar with regular intranet improving workplace safety. Every leader quence work-related injuries. For each inci- news articles and suggested activities for is responsible for providing their team with dent, we identified the causes, the lessons countries to deploy. The aim is to increase

36 37 Enabling our partners and societies to prosper KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Enabling our partners and societies to prosper

LONG-TERM RETURNS Our largest direct economic impacts conduct, our zero tolerance for bribery and ENABLING OUR KONE continuously develops its business come from the employment opportunities corruption, and the standards we require with a long-term focus. We have a challenger we provide. KONE is a global company from our suppliers in terms of labor and PARTNERS AND mindset and we are constantly developing with global processes and guidelines, but human rights, health and safety, and the our competitiveness in order to strengthen our operations are at the same time very environment. KONE expects its suppliers our position as one of the global leaders in local. In our subsidiaries, management and to comply with the requirements of the SOCIETIES TO PROSPER the elevator and escalator industry. field personnel are predominantly local. Supplier Code of Conduct in all their deal- In 2018, the largest KONE countries by ings with KONE, as well as with their own Progress on long-term financial targets the number of employees were China, the employees and suppliers, and third par- KONE has three long-term financial targets: United States and India. Read more about ties including government officials. KONE KONE directly contributes to economic growing faster than the market, achieving our people on pages 32–37. may terminate its contracts with suppliers development in the over 60 countries an EBIT margin of 16%, and improving if they fail to adhere to the Code. working capital rotation. ETHICAL BUSINESS PRACTICES The KONE Supplier Code of Con- where we operate. In addition, we work with KONE has consistently grown faster KONE has operations in over 60 countries duct is applied globally, is available in approximately 35,000 suppliers who provide us than the market. For the 16% EBIT margin, and collaborates with authorized distrib- over 20 languages and can be found on no target date has been set. With our life utors and agents in almost 100 countries KONE.com/suppliers. with for example raw materials, components cycle business model, the short-term focus around the world. As a global corporate As KONE’s business partners, our dis- and modules, as well as logistics, installation is on growing absolute EBIT while achiev- citizen, we are fully committed to the laws tributors are also expected to comply with and other services. As a responsible corporate ing improved relative profitability over time and regulations of the countries where we the requirements of the KONE Distribu- with growth, further differentiation and operate. tor Code of Conduct in all their dealings citizen and business partner, we are committed productivity gains. Working capital rota- KONE’s global presence makes it cru- with KONE, as well as in respect of their to making a positive impact throughout the tion improved clearly over the last decade cial for us to ensure that we have clear own employees, customers and suppli- and has remained on a good level during compliance rules and guidance in place, ers, and third parties including govern- whole value chain. the past years. which enable us to conduct business in an ment officials. The KONE Distributor KONE's strong financial performance ethically and socially responsible manner Code of Conduct is currently available has enabled steadily developing dividends throughout our entire value chain. in four languages and can be found at KONE'S KEY IMPACT AREAS RELATED TO THE UN to our shareholders. Also with a longer-term KONE.com. SUSTAINABLE DEVELOPMENT GOALS perspective, our track record on dividend The KONE Code of Conduct distribution has been sustainable. KONE The KONE Code of Conduct (the Code) New Global Trade Compliance Policy Employment had over 62,000 shareholders at the end of is an integral part of KONE’s culture and KONE is committed to full compliance with Non-discrimination December 2018 (Dec 2017: over 61,000 ). defines our standards of ethical conduct. all applicable national and international Procurement practicies The Code sets out our company’s com- trade compliance laws including trade Tax strategy and principles Creating wealth via taxes and mitment to integrity, honesty, and fair sanction, export control and customs laws, Supporting local communities employment play and addresses what is expected of rules and regulations. In 2018, KONE hired We are committed to paying all taxes that KONE employees and KONE companies. a new global trade compliance manager Infrastructure investments are legally due, and to meeting all disclo- It also explains how we conduct our busi- to proactively respond to increasing trade Sustainable buildings sure requirements in the countries where ness in a responsible and ethical manner compliance demands in the international we operate. Our objective is to ensure in order to win and retain customer trust. business environment. We also finalized predictability in all tax matters. In addi- The KONE Code of Conduct is available our new Global Trade Compliance Policy tion, every transaction must have a solid on KONE.com in over 30 languages. and further strengthened our trade com- business rationale without compromising pliance organization. Effective, accountable and transparent governance tax compliance principles. The location of KONE’s Competition Compliance Policy Compliance with laws and regulations KONE’s group entities is driven by business KONE’s Competition Compliance Policy Making it easy to report concerns Anti-corruption reasons, such as the location of customers, promotes the principles of fair competi- All KONE employees are expected to under- suppliers, raw materials and know-how. tion that are presented in the Code. The stand and abide by the Code and to report We insist on transparency in all our policy details our unambiguous position any violations using the channels available activities, including our relationships with against anti-competitive practices. It sets for this purpose. KONE’s externally hosted tax authorities. KONE has been collaborat- out the rules and principles that all KONE reporting channel, the Compliance Line, ing with the Finnish Tax ­Administration in employees must follow to ensure that we allows employees to report concerns con- promoting tax transparency since 2015. comply fully with competition laws. The fidentially 24/7, either by phone or web. KONE’s complete tax strategy can be Competition Compliance policy is available Reports can be made in the employee’s found on KONE.com. in over 30 languages. native language and the Compliance Line KONE’s income taxes globally can be used anonymously where permitted amounted to EUR 241.9 (290.2) million KONE Supplier and Distributor Codes of by local law. We also encourage employees in 2018, with the ten largest countries by Conduct to report compliance concerns through sales accounting for 70% of the corporate KONE’s Supplier Code of Conduct sets out internal channels (e.g. manager, HR, legal KONE has operations in over 60 countries. As a global corporate citizen it is crucial for us to ensure that we conduct business in an taxes. Income taxes of the Finnish KONE the ethical business practice requirements or compliance). KONE does not tolerate ethically and socially responsible manner throughout our entire companies totalled EUR 40.0 (68.6) mil- that we expect from our suppliers. It covers any form of retaliation against employees value chain. lion in 2018. areas such as legal compliance, ethical who report concerns in good faith.

38 39 Enabling our partners and societies to prosper KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Enabling our partners and societies to prosper

How KONE added economic value in 2018 During 2018, KONE took a new case INDUSTRY-LEADING SUPPLY CHAIN Better quality and productivity through Value distributed management system into use thereby fully In 2018, KONE had nine production sites learning Wages and salaries MEUR 2,113 (2,030) integrating the web, phone and other for elevators, escalators and building doors, At KONE, we employ a set of techniques Sales to Purchases from Added reporting channels to ensure a secure and 10 global distribution centers for elevators, and tools to improve the productivity and Employment- customers suppliers value related costs and taxes MEUR 947 (984) confidential system for managing cases. and five distribution centers for spare parts. quality of our operations. By applying Lean Creditors MEUR -47 (-58) KONE’s supply chain operations cover and Six Sigma philosophies, we are able to MEUR MEUR MEUR Training and awareness building new equipment production, moderni- reduce waste and control process variation 9,071 - 5,210 = 3,861 Shareholders MEUR 851 (849) All KONE employees are required to com- zation, and spares supply. We also work throughout the entire supply chain as well Economic value retained in (8,797) (4,880) (3,917) MEUR -4 (111) plete the Code of Conduct online training. closely with selected key material suppliers as in product and process transitions. the company

In 2018, we designed a new and engag- and logistics service providers. Approxi- In the supply line the trainings focused 2017 figures in brackets. ing Code of Conduct e-learning course. mately 4,600 people keep KONE’s supply on overall capability development. A large The training covers topics such as conflicts operations running. number of employees gained new skills of interest, fair competition, anti-bribery, KONE continued the implementation when they received Kaizen training as part Top 10 supplier locations* Global logistics privacy, work safety, and gifts and hospi- of a new manufacturing execution system of Kaizen events. • China tality and has a strong focus on scenarios (MES) with factories in Finland. It is a com- Each production unit completed many • Italy that reflect day to day situations employ- puterized system that is used to track and corrective actions as part of a continuous • Finland ees might face. Once globally rolled out, document the transformation of raw mate- improvement program with a greater focus • Austria In 2018, we delivered over 3.7 million packages the course will be available in over 30 lan- rials to finished goods. The MES provides on full chain activities. We have also contin- • United States to new installation sites, and around 1.5 million guages. The completion rate in 2018 was information that helps understand how cur- ued our Lean Capability Process Control & • Germany packages of spare parts to existing customer 94% of the 25,000 employees who had rent conditions on the factory floor can be Zero Defect activities by conducting regular • India sites. 3.7 million packages amount to a weight the training assigned to them, covering a optimized to improve production output assessments and setting targets and action • Czech Republic of 1,440 million kilograms, or 3.5 million cubic • Estonia total of 16 countries. Further roll-outs will and implement production quality improve- plans. All KONE supply units continue to meters in volume. • Mexico be completed in 2019. Regular face-to- ments. KONE continues the MES implemen- hold ISO 9001 and 14001 certificates. face compliance training is also provided tation in other factories – and also improves We continued implementing and main- * Suppliers that provide products for new to managers and other target groups. In its supply chain continuously. taining the 5S* method in our offices, fac- equipment to KONE distribution centers and 2018, over 4,000 employees received face- Investments in production automa- tories, installation sites and distribution factories. to-face compliance training. tion continued as well, notably in facto- centers. Furthermore, we have developed A selected group of employees is ries in Italy, Finland, the Czech Republic a Lean manual and a management model of Adjusted EBIT (MEUR) and adjusted KONE class B share dividend per also required to complete Competition and China. continuous improvement in implementing EBIT margin (%) share, 2014–2018 (EUR) Sales (MEUR) Compliance online training based on their The building phase of KONE’s newest these principles. role and position in the company. They factory in Pillaipakkam, close to Chennai in Several hundred Lean and over 100 include members of KONE’s Executive Board India, continued during 2018. The build- Six Sigma projects were also successfully 1,500 24 1.80 10,000 and employees involved, for example, in ing phase will be completed within the completed in 2018. To date, approximately 1.60 1,250 1,293 20 9,071 management, sales, sourcing, and trade first half and production ramp-up during 300 KONE employees have qualified as Six 1.40 8,000 8,784 8,797 1,206 association related activities. Individual the second half of 2019. The facility will be Sigma Green Belts and Black Belts, and the 1,000 1,112 16 1.20 business units can nominate additional certified according to Indian Green Build- training continued during 2018. 6,000 1.00 participants when necessary. The global ing Council environmental norms. 14.7% 750 13.7% 12 0.80 completion rate in 2018 was 94%. In logistics, KONE continued with pro- 12.3% 4,000 Dedicated compliance officers help gram to centralize its logistics activities. By 500 8 0.60 employees comply with KONE’s Code better processes and coordination of dif- 0.40 2,000 of Conduct, and our global and regional ferent activities the company is targeting 250 4 0.20 compliance committees advise and take to achieve savings in logistics costs as well decisions on compliance matters, including as improvements in eco-efficiency of its 0 0 0 0 investigations into allegations of employee delivery chain. 2016** 2017 2018 2014 2015 2016 2017 2018 2016* 2017 2018 misconduct as well as human rights and Adjusted EBIT* Dividend * 2016 not restated with IFRS 15 and IFRS 9 changes. corruption violations. Responding to customers’ needs Adjusted EBIT margin In 2018 KONE was approached by We adapt our supply chain to take custom- Finnwatch, a Finnish non-governmen- ers’ different requirements into account. As * In September 2017, KONE introduced a new KONE’s largest individual shareholder is alternative performance measure, adjusted Antti Herlin, Chairman of KONE’s Board of tal organization focused on global cor- an example, KONE continued to develop EBIT, to enhance comparability of the business Directors, who controls over 20% of the share porate responsibility, to discuss human packaging solutions to allow us to better performance between reporting periods capital and over 60% of votes. For KONE’s rights in India. Finnwatch, together with accommodate various customer needs and during the Accelerate program. Restructuring domestically registered major shareholders, a local NGO, Cividep, interviewed some make installation as smooth as possible. costs related to the Accelerate program are see monthly updated list on kone.com. of our subcontractor’s employees work- The first pilots of these developments are excluded from the calculation of the adjusted EBIT. ing in our factory in Chennai. Finnwatch ongoing both in Europe and China. ** 2016 not restated with IFRS 15 and IFRS 9 requested our support in raising subcon- We collect customer feedback on the changes. tractors’ workers’ general awareness of quality performance of our supply chain their rights. To this end, KONE promoted operations systematically and analyze it Read more about KONE's financial training by Finnwatch and Cividep, held using Six Sigma tools before taking cor- * 5S methodology: sort, stabilize, shine, performance in our Annual Review 2018 in December. rective action. standardize, and sustain.

40 41 Enabling our partners and societies to prosper KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT Enabling our partners and societies to prosper

SUSTAINABLE SUPPLY CHAIN We review our audit plan every year key suppliers’ factories to attain Supplier SUPPORTING LOCAL COMMUNITIES MANAGEMENT to prioritize and schedule audits accord- Excellence Certifications. KONE Centennial Foundation (KCF) is We seek to build long-term relationships ing to our business needs. The audits are KONE’s Supplier Excellence Certifica- an independent, non-profit organization with our suppliers and customers. Our sup- scheduled to check on changes in prod- tion Program assesses key suppliers’ sites, founded by KONE in celebration of its plier relationships provide business oppor- ucts or production processes, to validate examining aspects that include environ- 100th anniversary in 2010. It focuses on tunities and employment for thousands of follow-through on improvement initia- mental and quality management systems, innovative programs that advance and suppliers globally. tives, to assess quality and environmen- performance scorecards, and supplier audit support developmental, educational, and KONE only produces selected compo- tal management systems – especially results. In 2018, 97% of our strategic sup- cultural activities for children and youth nents in-house, and our own production when suppliers are not ISO certified, or plier factories were ISO 9001 certified, and around the world. KCF cooperates closely consists largely of the assembly of sourced to pre-audit the suitability of potential 90% of them had ISO 14001 certifications. with local partners and a designated pro- components. Our suppliers and their sub- suppliers. ject coordinator in each country to plan tier suppliers are a critical part of KONE’s and monitor projects, aiming to ensure supply chain. Out of our 35,000 suppliers New system for assessing supplier risks Breakdown of material and service efficient resource allocation and respect approximately 19,000 provide KONE with KONE’s sourcing risk monitoring system is purchases from our suppliers for local culture and priorities. Wherever raw materials, components, modules, as based on a thorough assessment of sup- possible, KCF chooses projects top which well as logistics and installation services. In pliers, including analyses of their financial local KONE units can contribute practical addition, there are approximately 16,000 and business viability and their depend- support and where KONE volunteers can suppliers who deliver other indirect mate- ence on business from KONE. participate in their spare time. rials and services to KONE. During the reporting year we devel- All our strategic suppliers are required oped and piloted a new risk engineering Our programs in 2018 to comply with ISO 14001 certification. audit concept that covers for example: During 2018, KCF continued supporting • Facility risks such as fire risks and risks programs in China, Finland, India, Mexico, Long-term relationships with suppliers related to the main machinery South Africa and Thailand as well as inter- We purchase approximately 80% of our • Production risks such as production national teacher exchanges in various raw materials, components, and systems transfer possibilities, buffer stocks and countries. The foundation is also prepared supply for new equipment production business continuity management to contribute matching funds to support Total MEUR 4,854.0 from approximately 170 suppliers, the • IT risks such as cyber risks local initiatives by KONE employees. majority of whom are located in the same • Natural hazards Direct materials and supplies 56.7% KCF’s longest-running project is the countries as KONE factories or distribu- • Second tier supplier risks Joy of Reading mobile library (pictured), The Westbury Youth Centre (WYC), and traditions. Its Baby Club brings toddlers Subcontracting 17.0% tion centers. • Financial risks. serving children of migrant workers in and located between downtown Johannesburg and their care-givers (usually grandparents) Our aim is to build long-term rela- Other production costs* 12.5% around Beijing and Hangzhou. Coopera- and Soweto, has been supported by KCF together to experience stimulating educa- tionships with our suppliers. We manage We also work closely with our strategic Selling, administrative and other tion with the Hangzhou Children’s Library since it opened its doors in the former tional activities. Z2H is also striving to intro- them according to a tailored approach suppliers to find competitive raw material expenses** 13.8% and the Beijing Normal University has ena- Westbury Secondary School hostel in 2012. duce proven Finnish teaching methods to that reflects their importance to KONE. price levels. bled the mobile library to deliver improved WYC serves youth in a community that the local public schools. This is done through the regular, criti- and expanded services to children with was much in the news in 2018 because of In Helsinki, KCF supports The Shortcut, * Mainly freight and packaging costs as well cal assessment of multiple factors such as Continuous development of supplier as other variable costs such as utilities, tools limited access to books and other educa- ongoing drug-related violence and lack of a community that promotes diversity as an the business scope and spend with the performance and operatives related costs. tional materials. A KCF partner school, Bei- effective police intervention. With KCF’s help, engine for growth. In particular, KCF has supplier, their innovation potential, the We monitor the performance of our main ** Related to for example administration jing’s Dandelion School, moved at the end WYC received a SAIS II grant from Finland’s provided funding for coding and entrepre- criticality of the materials or services they suppliers of our direct production materials expenses, covering IT, marketing, trainings, of 2018 into a new purpose-built facility Ministry for Foreign Affairs for 2019 and neurship programs for young asylum-seek- provide, the supply chain situation, and through a monthly KPI measurement and and insurances. that will allow it to expand enrolment. The half of 2020, which will allow the center ers and immigrants. KONE’s investment or integration level follow-up process. We also run a supplier Dandelion School is Beijing’s only middle to expand its innovative education and Although KCF is an independent entity, with the supplier. scorecard system that evaluates key sup- school catering exclusively to migrant chil- entrepreneurship programs. cooperation with KONE companies and Based on the supplier’s status, our pliers of direct materials. The results of the dren from China’s countryside. In Mexico City, KCF has focused on the participation of KONE volunteers are management and measurement techniques scorecards represent a balanced view of KCF and KONE India collaborate with helping the Xico Arte Collective in the central to its ability to meet its objectives. include audits, assessment and mitigation of quantitative and qualitative performance the Single Teacher Schools (STS) organiza- Valle de Chalco improve its administrative KCF welcomes enquiries and initiatives supplier-related risk, the use of standardized criteria from a number of angles, such as tion to support 20 micro-schools in rural capabilities. The collective’s goal has been from KONE employees and appreciates the contractual agreements that include the quality, cost and logistics. villages near Chennai. STS is also begin- to promote art as a tool against violence enthusiastic cooperation it receives from KONE Supplier Code of Conduct, the We regularly discuss performance eval- ning to bring clean water and sanitation in the area. Xico Arte maintains a local KONE companies in the countries where assessment of supplier performance, and uations with our suppliers. When their per- facilities to these communities and runs archeological museum featuring objects it supports ongoing projects. supplier certification. formance does not meet our expectations, periodic mobile medical clinics for the chil- unearthed in the region, often during con- Read more about KONE’s Supplier we initiate corrective actions or develop- dren and their families. As the participating struction projects. Its services include art Code of Conduct on page 39. ment projects and conduct follow-ups. villages are near the new KONE India fac- and history interventions in local schools tory, which opens in 2019, it will become and art workshops at the museum. The majority of strategic suppliers KONE's Supplier Excellence Certification easier for employees there to provide vol- The Zero-to-Hero Foundation (Z2H) audited Program unteer support. In the Chennai area, KCF runs an innovative child development All of the main material suppliers to KONE We aim to maintain a supply base that also provides support to the Rising Star program in the rural Na Yom region of Read more on our newly published website distribution centers and factories undergo complies with international quality and School, which serves the children of fami- North-Central Thailand, combining Finnish that makes it possible to follow the latest developments in projects we support. Visit the regular audits. In 2018, 92% of our stra- environmental standards as well as the lies in which one or more member suffers early childhood development practices with site on konecentennialfoundation.org tegic suppliers were audited. standards of KONE. We expect all of our from leprosy. a deep understanding of local Thai culture

42 43 REPORTING SCOPE KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT REPORTING SCOPE

REPORTING SCOPE

KONE has chosen to report using the on ­p. 2). KONE’s approach to sustainabil- of employees working at our manufactur- facility-related environmental data has Reporting Standard and Corporate Value Department for Environment, Food & Global Reporting Initiative (GRI) guide- ity has also been described in the letter ing units. Business air travel data, cover- been collected from branch offices using Chain (Scope 3) Accounting and Report- Rural Affairs), World Resources Institute lines in order to facilitate easier comparison from the chairman and the president and ing 30 countries and approximately 90% a customized data collection spreadsheet ing Standard. The Scope 2 emissions have GHG Emission Factors Compilation, AIB of our performance with other compa- CEO on p. 6, and in the strategy descrip- of our employees, has been collected consolidated on the country level. The been calculated according to the dual (Association of Issuing Bodies) European nies and to streamline our own corporate tion on p. 7. from KONE’s five biggest travel agencies country-level data as well as the data from reporting principles of the GHG Proto- Residual Mix Report and supplier specific responsibility reporting efforts. KONE has All major local and regional organiza- and several local travel agencies. Vehi- manufacturing units and global functions col Scope 2 Guidance (market- and loca- factors for Finland. The logistics green- published a Sustainability Report annually tions and all production units are included cle fleet fuel consumption data has been has been entered into the environmental tion-based method). RES-GO guarantees house gas emissions have been restated since 2008. The previous report was pub- in the reporting Scope. All financial data collected from 26 countries, represent- performance system. The data has been of origin subject to EECS (European Energy retrospectively due to revised emission lished in April 2018. and a significant proportion of the employ- ing 90% of the total fleet. The logistics further consolidated globally. Product and Certificate System) have been acquired for factor source in 2018. This report has been prepared in ee-related data has been collected through data covers the transportation of prod- spare parts logistics data has been calcu- the purchased green electricity, as well We welcome any feedback on this accordance with the GRI Standards: Core KONE’s enterprise resource management ucts from KONE’s manufacturing units lated using an in-house logistics emission as some supplier specific instruments. report or our overall sustainability perfor- option. A table detailing how this report and financial reporting systems. All finan- to customers and the transportation of calculation system developed by KONE’s KONE’s greenhouse gas emissions and mance − please contact corporate commu- complies with the GRI guidelines is shown cial figures presented in this report are based modules that are delivered straight from global logistics team. The environmental water consumption at KONE's manufac- nications at [email protected]. on pages 46–47. We have self-declared on KONE Corporation’s consolidated and our suppliers to our delivery centers and performance has been reported in accord- turing units have been externally assured our reporting to be in accordance with audited Financial Statements. onward to customers. Spare part deliver- ance with ISO 14064 and the Greenhouse by Mitopro Oy. The emission factors are the Core level. The personnel data is provided by our ies are also within the reporting Scope. Gas Protocol Corporate Accounting and based on the data sources of DEFRA (UK The reporting period corresponds with HR organization. Inbound logistics of materials to KONE’s the calendar year and with KONE’s finan- The facility-related environmental data manufacturing sites is excluded from the cial year of January 1–December 31, 2018. has been collected from KONE’s 13 man- reporting Scope because of its insignif- INDEPENDENT ASSURANCE STATEMENT When developing the report content and ufacturing units worldwide and from 31 icant impact. The quality and coverage choosing indicators, the driver has been country organizations with sales, installa- of data provided by our logistics suppliers To the Management and Stakeholders of KONE Oyj the materiality to KONE’s operations. tion, and service operations in Asia-Pacific, has over the years continuously improved. During 2016, we conducted a material- EMEA, and North America. The collected KONE uses the environmental per- Scope and Objectives Value Chain (Scope 3) Accounting and procedures to generate, collect and ity analysis and defined the focus areas environmental data covers 84% (2017: formance software system by one of the The Management of KONE Oyj commis- Reporting, and report quantitative data on the Selected for KONE’s sustainability work (read more 85%) of all KONE’s employees and 100% world’s leading EHS system vendors. The sioned us to perform a limited third-party • Global Reporting Initiative’s GRI-standards information. assurance engagement regarding green- (2016) • Assessment of Group-level calculations house gas emissions inventory including and data consolidation procedures and KONE'S FOCUS AREAS, MATERIAL TOPICS AND TOPIC BOUNDARIES Scope 1, 2 and 3 emissions and water con- Assurance Provider’s Independence and internal controls to ensure the accuracy sumption data (“Selected information”) Competence of data. For information on identifying our sustainability focus areas, focus areas and management approach, please refer to page 12. disclosed in KONE’s Sustainability Report We have conducted our assessment • Testing the accuracy and completeness (“Report”) for the period of 1st January as independent and impartial from the of the information from original docu- KONE focus areas GRI topics Boundary to 31st December 2018. The assurance reporting organisation. We were not com- ments and systems on a sample basis. engagement was conducted in accordance mitted to any assignments for KONE that DRIVING INNOVATION AND Energy Within the organization Outside the organization with the International Standard on Assur- would conflict with our independence, nor Conclusion IMPROVING RESOURCE EFFICIENCY Water and effluents (GRI 103–1) (GRI 103–1) • Deep understanding of customer needs Emissions ance Engagements (ISAE) 3000 revised were we involved in the preparation of the Based on the work described in this report, • Sustainable innovations and business models Waste KONE operations Indirect (Scope 3) –‘Assurance Engagements other than Report. Our team consists of competent nothing has come to our attention that (13 manufacturing units energy use and GHG • Resource efficiency Environmental compliance + 31 country emission sources Audits and Reviews of Historical Financial and experienced sustainability reporting causes us to believe that the Selected infor- • Low-carbon operations organizations) Information’. experts, who have the necessary skills to mation disclosed in KONE Sustainability perform an assurance process. Report 2018 is not reliable, in all material PROVIDING THE MOST SUSTAINABLE OFFERING Materials KONE operations Customers • Customer satisfaction Energy Responsibilities respects, based on the reporting criteria. • Product and service quality Customer health & safety KONE is responsible for the collection, cal- Basis of Our Opinion • End user safety and accessibility Environmental compliance culation, and presentation of the Selected Assurance providers are obliged to plan Helsinki, Finland, 8th March 2019 • Energy efficiency of solutions and life cycle thinking information according to the reporting and perform the assurance process so as Mitopro Oy criteria. The Management of KONE has to ensure that they collect adequate evi- BEING THE BEST EMPLOYER AND Employment KONE operations Subcontractors approved the Selected information dis- dence for the necessary conclusions to be ATTRACTING TALENT Occupational health & safety closed in the Report. Our responsibility as drawn. The procedures selected depend • Competence development Training and education assurance providers is to express an inde- on the assurance provider’s judgement, • Fair employment practices Diversity & equal opportunity • Motivated and engaged employees pendent conclusion on the Selected infor- including their assessment of the risk of Mikael Niskala • Diversity and non-discrimination mation subject to the limited assurance material misstatement adhering to the Independent Sustainability Expert • Employee safety and well-being engagement. The reporting criteria used reporting criteria. for our assessment include the following Our opinion is based on the following ENABLING OUR PARTNERS AND Economic performance KONE operations Community SOCIETIES TO PROSPER Market presence suppliers / strategic guidelines and standards: procedures performed: suppliers • Generating long-term returns Anti-corruption • Greenhouse Gas Protocol. A Corporate • Interviews with KONE specialists respon- Tomi Pajunen • Creating wealth via taxes and employment Anti-competitive behavior Accounting and Reporting Standard, sible for data collection and reporting of Independent Sustainability Expert • Ethical business practices Environmental compliance • Greenhouse Gas Protocol Scope 2 the Selected information at Group level • Long-term relationships with our suppliers Supplier environmental assessment Guidance, and in selected sites. • Supporting local communities Supplier social assessment Socio-economic compliance • Greenhouse Gas Protocol Corporate • Review of Group-level systems and

44 45 REPORTING SCOPE KONE 2018 | SUSTAINABILITY REPORT KONE 2018 | SUSTAINABILITY REPORT REPORTING SCOPE

GRI AND SDG INDICES

GENERAL DISCLOSURES Related SDGs Page Further information MANAGEMENT APPROACH Related SDGs Page Further information and omissions Organizational profile 103-1 Explanation of the material topic and its Boundary 10, 12–13, 44 102-1 Name of the organization Back cover 103-2 The management approach and its components Generic DMA: p. 10, and by 102-2 Activities, brands, products, and services 3, 8–9, 28–29 www.kone.com/en/company/in-brief/ category and www.kone.com/en/products-and-services/ aspects 102-3 Location of headquarters Back cover p. 14–43 102-4 Location of operations 5, 34 www.kone.com/en/company/in-brief/ 103-3 Evaluation of the management approach Generic DMA: 102-5 Ownership and legal form 3, 11, 41 www.kone.com/en/company/organization/ p. 10, and by category and 102-6 Markets served 3, 5 www.kone.com/en/company/in-brief/ aspects 102-7 Scale of the organization 3, 5, 34, 41 p. 14–43 102-8 Information on employees and other workers 5, 34–35 TOPIC-SPECIFIC DISCLOSURES Related SDGs Page Further information and omissions 102-9 Supply chain 40-42 102-10 Significant changes to the organization and its supply chain 46-47 No significant changes ECONOMIC STANDARDS DMA: 39 102-11 Precautionary Principle or approach Annual Review, Review of Board of directors, p. 17–19. 201-1 Direct economic value generated and distributed 8 5, 8–9, 38–43 KONE is committed to the UN Global Compact's ten 201-2 Financial implications and other risks and opportunities due to climate 16, 18 Annual Review p. 18–19. Reported partly. principles. We address the precautionary principle, espe- change cially in areas involving environmental risks. 202-2 Proportion of senior management hired from the local community 8 34, 39 102-12 External initiatives 10, 12–13, 18 205-2 Communication and training about anti-corruption policies and procedures 16 39–40 Part of Code of Conduct training. Addresed also in 102-13 Memberships of associations 13, 18 Annual Review p. 15. Strategy and analysis 206-1 Legal actions for anti-competitive behavior, anti-trust, and monopoly 16 Annual Review, Review of Board of Directors, p. 17 102-14 Statement from senior decision-maker 6 practices 102-15 Key impacts, risks, and opportunities 6–9, 12–13, 16 Annual Review p. 17–19 ENVIRONMENTAL STANDARDS DMA: 19–20, 30 Ethics and integrity 301-1 Materials used by weight or volume 9, 12 31 102-16 Values, principles, standards and norms of behavior such as codes of 7, 10, 39-40 www.kone.com/en/company/vision-and-strategy/ conduct and codes of ethics 302-1 Energy consumption within the organization 9, 13 23 102-17 Mechanisms for seeking advice on ethical and lawful behavior 39–40 302-4 Reduction of energy consumption 9, 12, 13 18–23 Governance 302-5 Reductions in energy requirements of products and services 9, 11, 12, 13 28–31 303-1 Water withdrawal 9 23 102-18 Governance structure Annual Review 2018, Corporate Governance Statement, (2016) p. 90–93 305-1 Direct (scope 1) GHG emissions 9, 13 18–23 102-19 Delegating authority 10 305-2 Energy indirect (scope 2) GHG emissions 9, 13 18–23 102-20 Executive-level responsibility for economic, environmental, and social topics 10 305-3 Other indirect (scope 3) GHG emissions 9, 12, 13 18–23 102-21 Consulting stakeholders on economic, environmental, and social topics 10–11 Annual Review 2018, Corporate Governance Statement, p. 90–93 305-4 GHG emissions intensity 9, 13 22 102-22 Composition of the highest governance body and its committees Annual Review 2018, Corporate Governance Statement, 305-5 Reduction of GHG emissions 9, 13 18–23 p. 90–95 306-2 Waste by type and disposal method 9, 12 23 102-26 Role of highest governance body in setting purpose, values, and strategy Annual Review 2018, Corporate Governance Statement, 307-1 Non-compliance with environmental laws and regulations No significant fines or sanctions regarding non-compli- p. 90–93 ance with environmental laws and regulations 102-29 Identifying and managing economic, environmental, and social impacts 10–11 Annual Review 2018, Corporate Governance Statement, 308-1 New suppliers that were screened using environmental criteria 12 42 Percentage of strategic suppliers audited p. 90–93; https://www.kone.com/en/sustainability/man- aging-sustainability/materiality-assessment.aspx SOCIAL STANDARDS 102-32 Highest governance body’s role in sustainability reporting 10 Sustainability report is reviewed by KONE's management 401-1 New employee hires and employee turnover 5, 8 35 and approved by the President and CEO. 403-2 Type of injury and rates of injury, occupational diseases, lost days, and 3, 8 36–37 Industry injury frequency rate (IIFR), average lost days 102-35 Remuneration policies Annual Review 2018, Corporate Governance Statement, (2016) absenteeism, and total number of work-related fatalities, by region and by per injury, and total number of work-related fatalities p. 92–93 gender and high-consequence injuries reported for employees. All injuries, including fatalities, are reported to the local Stakeholder engagement authorities according to the local regulations. 102-40 List of stakeholder groups 11 404-2 Programs for upgrading employee skills and transition assistance programs 8, 4 33 Global guidelines exist for supporting any employees 102-41 Collective bargaining agreements 33 in transition. 102-42 Identifying and selecting stakeholders 11 404-3 Percentage of employees receiving regular performance and career devel- 8 33 80% of KONE employees have documented their career opment reviews development plans in our self-service tool. The expec- 102-43 Approach to stakeholder engagement 11 tation is that all employees have at least annual career 102-44 Key topics and concerns raised 11 development discussions with their managers. Reporting practice 405-1 Diversity of governance bodies and employees 5, 8 34–35 102-45 Entities included in the consolidated financial statements Annual Review 2018, Subsidiaries, p. 81–83 414-1 New suppliers that were screened using social criteria 8 42 Percentage of strategic suppliers audited 102-46 Defining the report content and the topic Boundaries 12, 44–45 https://www.kone.com/en/sustainability/managing-sus- 416-1 Assessment of the health and safety impacts of product and service 9, 11 27, 30 tainability/materiality-assessment.aspx categories 102-47 List of material topics 12–13 419-1 Non-compliance with laws and regulations in the social and economic area 16 No significant fines during the reporting period 102-48 Restatements of information Reported in connection with the indicators in question 102-49 Changes in reporting 44 Report has been prepared in accordance with the GRI Standards. Previous report followed GRI G4. 102-50 Reporting period 44 102-51 Date of the previous report 44 102-52 Reporting cycle 44 102-53 Contact point for questions regarding the report Back cover 102-54 Claims of reporting in accordance with the GRI Standards 44 102-55 GRI content index 46–47 102-56 External assurance 45 GHG emissions and water consumption data assured externally

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46 47 KONE CORPORATION

Corporate Offices Keilasatama 3 P.O. Box 7 Espoo, 02150 Finland

Tel.: +358 (0)204 75 1 Fax: +358 (0)204 75 4496

Business Identity Code: 1927400-1

KONE Corporation www.kone.com [email protected]

Publication Anu Sirkiä Director, Internal and Sustainability Communications

Economic performance Sanna Kaje Vice President, Investor Relations

Environmental performance Hanna Uusitalo Environmental Director

Personnel and social performance Susanne Skippari Executive Vice President, Human Resources

This publication is for general informational purposes only and we reserve the right at any time to alter the product design and specifications. No statement this publication contains shall be construed as a warranty or condition, express or implied, as to any product, its fitness for any particular purpose, merchantability, quality or representation WAN E S CO of the terms of any purchase agreement. Minor differences IC L D A B R E O between printed and actual colors may exist. KONE L N MonoSpace®, KONE EcoDisc®, KONE Care®, KONE People Flow®, KONE UltraRope® and KONE NanoSpaceTM are PEFC/02-31-175 PrintedSubtext Matter registered trademarks of KONE Corporation. 12344041 56780089 Copyright © 2019 KONE Corporation.

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