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Social impacts

Employment

401-1 New employee hires and employee turnover

In April 2016 Kesko acquired Suomen Lähikauppa Oy, in June 2016 Onninen Oy and in December 2016 Oy Autocarrera Ab. Suomen Lähikauppa Oy (currently K-Market Oy) has been consolidated into Kesko Group as of 12 April 2016, Onninen Group as of 1 June 2016 and Oy Autocarrera Ab as of 1 December 2016 (excluding Saele og Holleviks Trading AS and TM Christensen VVS Detajer).

In 2016, Kesko had an average of approximately 22,476 (2015: 18,955) full-time equivalent employees in nine countries: Finland, Sweden, Norway, Estonia, Latvia, Lithuania, Poland, Russia and Belarus. 48% of the personnel were based in Finland and 52% were in the other operating countries.

Distribution of Kesko personnel by division at
31 Dec. 2016, %

Changes in the number of Kesko employees
2016 2015 2014
Finland at 31 Dec. 14,845 10,081 12,180
Other operating countries at 31 Dec. 12,811 11,854 11,614
Total at 31 Dec. 27,656 21,935 23,794
Finland, average 10,714 8,300 9,580
Other operating countries, average 11,762 10,655 10,396
Total, average 22,476 18,955 19,976
Fixed-term and part-time employments at Kesko
2016 2015 2014
Fixed-term employees of total personnel at 31 Dec., %
Finland 12.0 11.5 13.9
Companies in other operating countries 6.1 6.1 7.2
Whole Group, total 9.2 8.6 10.7
Part-time employees of total personnel at 31 Dec., %
Finland 43.9 39.4 43.6
Companies in other operating countries 6.7 8.1 7.1
Whole Group, total 26.7 22.5 25.8
Kesko’s personnel statistics for 2016 analysed by operating country
Finland Sweden Norway Estonia Latvia Lithuania Poland Russia Belarus
Total number of personnel at 31 Dec. 14,845 1,165 424 714 627 4,170 846 1,981 2,884
Average number of personnel in 2016 10,714 1,028 299 632 521 3,442 486 2,992 2,362
Number of new employments1
- women 3,055 113 14 96 76 1,038 16 1,006 408
- men 2,052 184 33 133 203 1,448 55 800 622
Number of terminated employments1 4,696 269 102 187 191 3,330 26 1,585 701
Terminated by employer, % 5.3 10.4 0.0 2.7 2.6 9.3 69.2 8.5 0.4
Total turnover rate, %2 20.2 23.1 23.3 17.1 22.8 78.0 3.1 80.0 24.3
1 Including summer employees
2 Excluding summer employees
When calculating the number of terminated employments, each employee is included only once, whereas one person may have several new employments included in the total number.

Recruits, age distribution 2016, %

401-2 Benefits provided to full-time employees that are not provided to temporary or part-time employees

The Kesko Group offers benefits to its personnel in all of the countries in which it operates. In Finland, employees on permanent, fixed-term and part-time contracts are offered the following:

  • Occupational health care
  • Insurance against occupational injuries and occupational diseases
  • Parental leave
  • Retirement benefits

In all of the operating countries, Kesko supports its employees’ leisure activities in different ways. The Finnish companies, for example, provide vouchers for physical exercise and cultural benefits. Some of the companies operating in Russia, Estonia, Latvia and Lithuania also give financial support to their employees through different situations in life, such as when a child is born, during a child's first year at school, in the event of the death of a close relative and in other special situations. Employees are also provided with a diverse range of shopping benefits that apply in K Group stores and staff shops. A company phone and car are also provided if required for the job.

Performance bonuses and share remuneration plan

The performance bonus schemes cover the entire personnel, with the exception of sales assistant jobs and jobs covered by other types of bonus or commission systems. The indicators of the performance bonus scheme include, for example, the Group’s and the division’s total profits, the sales and profit of the employee’s own unit, and customer satisfaction. The job satisfaction of personnel also affects supervisors' performance bonuses. In spring 2016, around €11.5 million (€12.4 million in 2015) was paid in Finland in bonuses under the 2015 performance bonus schemes, accounting for approximately 3.7% (4.0% in 2015) of the total payroll.

In 2016, the total remuneration paid in the form of performance bonuses, sales commissions and other corresponding monetary remuneration was as follows:

  • In Finland, €14.5 million (€13.1 million in 2015)
  • In the other operating countries, €8.3 million (€5.0 million in 2015)

Kesko Group’s management and key personnel (approximately 150 individuals) are participants in a performance-based bonus scheme. The maximum bonus amounts vary depending on the profit impact of the person’s role and are equivalent to 3–8 months’ salary. Kesko operates the 2014–2016 share remuneration scheme covering approximately 150 members of management personnel and other named key individuals. The share remuneration plan has three vesting periods: the 2014, 2015 and 2016 calendar years. The shares awarded as bonuses have a commitment period of three calendar years following each vesting period. During the commitment period, the shares cannot be transferred. In February 2016, the Board decided to grant a total of 140,365 Company B shares to 142 members of management personnel and other named key individuals based on the fulfilment of the vesting criteria for the 2015 vesting period of the share remuneration plan.

Pensions

New pensions were granted to 271 (168 in 2015) people in the Kesko Group in Finland. The figure includes employees retiring on part-time pensions, partial disability pensions and rehabilitation benefits in addition to those who retired on old-age pensions and disability pensions. Rehabilitation benefit is a form of fixed-term disability pension granted with the aim that the employee is rehabilitated and returns to working life. Rehabilitation benefits were granted for the purpose of retraining or work trials to 87 (50 in 2015) people who were at a clear risk of losing their working capacity within a few years. The average retirement age of employees in 2016 was 60 (59 in 2015). In the other operating countries, 28 (15 in 2015) employees retired.

Labour/management relations

402-1 Minimum notice periods regarding operational changes

Kesko complies with local legislation in all of its operating countries. In Finland, the key statutes governing restructuring situations are included in the Act on Co-operation within Undertakings, which stipulates that the employer must provide reasonable notice of decisions for consideration on the basis of negotiations. The collective agreement for the trading sector does not specify any minimum notice periods applying to restructuring situations.

In Sweden, the statutory minimum notice period in the event of organisational changes is 8–24 weeks depending on the nature of the change. The collective agreement applying to operations in Sweden also does not specify minimum notice periods for restructuring situations. No specific minimum notice period for organisational changes is defined in Norway, but both legislation and the collective agreement stipulate that personnel shall be informed of organisational changes at the earliest opportunity.

Russian legislation states that personnel must be informed of restructuring 8.5 weeks before the new structure takes effect. For major organisational changes concerning more than 20% of the personnel, the authorities must also be informed 8–12 weeks prior to the change. In Estonia and Latvia, the minimum notice period in restructuring situations is four weeks. The corresponding notice period in Belarus is eight weeks. There are no collective agreements in these operating countries.

In all its operating countries, Kesko applies the notice periods specified in local labour legislation. In Finland, the notice period is from two weeks to six months depending on the duration of employment.

Employees can ask questions, give feedback and suggest ways to develop matters related to the operations of Kesko or its subsidiaries anonymously using the Direct Line feedback channel on Keskonet, Kesko's intranet. Responses are published on Keskonet for all to see. The Mail for the President and CEO feedback channel on Keskonet also enables the personnel to send their greetings, comments and suggestions directly to the President and CEO. Confidential feedback can also be given via the SpeakUp reporting channel.

Occupational health and safety

403-1 Workers representation in formal joint management-worker health and safety committees

Labour protection activities are arranged separately for each company, region or place of business in compliance with local legislation. Outside the Nordic countries, labour protection matters are handled by OHS (Occupational Health and Safety) committees. Kesko's HR functions arrange occupational safety training for Kesko employees and K-retailers. Group companies also arranged training sessions tailored to their specific needs.

403-2 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism and number of work-related fatalities

Within Kesko Group, the occupational health service's normal operations include providing advice and counselling related to employees’ health and wellbeing at work, analysing health risks related to work and preventing illnesses, and providing treatment – even in the event of serious illnesses – in collaboration with primary health care practitioners and specialist health care providers. In Finland, 15,000 (10,200 in 2015) employees were covered by Kesko’s own occupational health services. Kesko's occupational health service purchases occupational health care from various service providers for employees in Finland outside Greater Helsinki. Centralised purchasing and target-oriented management enable consistent contents and operating methods in occupational health service. In other countries, occupational health care is arranged in compliance with local legislation and practice. A total of € 7.5 million (€3.7 million in 2015) was spent on occupational health care in Finland in 2016. Kela (the Social Insurance Institution) reimbursed Kesko for approximately €3.7 million (€2.0 million in 2015) of this sum. In 2016, Kesko’s occupational health service spent €499 (€359 in 2015) per employee on maintaining employees’ working capacity and providing medical care.

Kesko’s contribution to occupational health care, Finland
2016 2015 2014
€/person 499 359 412
Injuries and occupational diseases in Finland
2016 2015 2014
Fatal injuries 0 0 0
Occupational injuries, excl. commuting injuries 227 93 124
Commuting injuries 81 35 32
Injury rate¹ /million working hours 10 6 6
Average degree of injury severity, days 15.8 16.9 17.6
Suspected occupational diseases 1 4 11
Occupational diseases 2 0 0
Sick days due to occupational injuries, commuting injuries and occupational diseases 5744 2166 2751
Per employee 0.5 0.3 0.3
The calculation method: small injuries, i.e. those leading to absence of less than three days, are not included in the figures. Statistics do not include contractors or the following companies: Vähittäiskaupan Takaus Oy, Vähittäiskaupan Tilipalvelu VTP Oy, the Agricultural Foundation of Trade.
¹ Excl. small injuries and commuting injuries, calculated with actual working hours
Sickness absences by country in 2016
Finland Sweden Norway Estonia Latvia Lithuania Poland Russia Belarus
Total number of sick days 133,211 6,931 4,412 4,105 5,164 33,494 5,258 28,664 27,890
Per employee 12.4 6.7 14.8 6.5 9.9 9.7 10.8 9.6 11.8
Per million working hours 6,592 3,831 8,384 3,199 4,907 4,817 5,201 4,838 5,811
The calculation method: sick days per employee have been calculated on the average number of employees during the year.

Trend in number of sick days

Statistics on injuries in Finland and breakdowns of sickness absences by country are presented in the tables above. In the other countries, a total of 71 injuries occurred resulting in sickness absences of more than three days in 2016. The corresponding figure in Finland was 227. In 2016, the sickness absence rate in the Group companies in Finland was 4.4% of hours worked (4.4% in 2015). Approximately 74.6% (77.4% in 2015) of sickness absences were short-term absences (paid sick days). In the other countries, the sickness absence rate was 4.2% (3.7% in 2015).

Training and education

404-1 Average hours of training per year per employee,

404-2 Programmes for upgrading employee skills and transition assistance programmes

Systematic, business-driven development of personnel is a critical factor for future success. The transformation of the trading sector and the increase in electronic transactions have created needs for new competencies. The revised supervisor training programmes have already reached a large proportion of supervisors, and a separate training programme for middle managers was launched in the autumn. Further investments were made in digital thinking as the K Digital Academy training programme was executed for the third time and the K Digital Trainee programme offered trainee placements for recent graduates with a digital orientation. In addition, a mindfulness training course was piloted with good results. Numerous regional social media training courses were held for retailers. Updated and uniform electronic tools for induction were adopted.

Other core areas of competence development included:

  • Immediate supervisory work
  • Leadership
  • Digitality
  • Project management
  • Interaction and negotiation skills
  • Safety and responsibility
  • Customer experience; sales and service competences

The updated gamified Master Sales Assistant training course offers store personnel a colourful and interesting way of developing their sales skills. Store personnel were also offered vocational training and the opportunity to obtain vocational qualifications. In addition, we trained 91 new workplace instructors for K-stores.

In-house job rotation provides an extensive selection of alternative careers. In Finland, approximately 4,837 (1,800 in 2015) internal transfers took place, while the total figure for the other operating countries was 2,923 (2015 in 2,900).

In Finland, the K Group's recruitment is supported by the K Trainee and retailer coaching programmes. The sixth K Trainee programme ended in October 2016, and five K-trainees graduated from the digitally-oriented programme to take on permanent employments in the K Group. In 2017, a dozen or so talented young people will be sought for inclusion in the K Trainee programme.

Future K-retailers are trained in the retailer coaching programmes. The coaching involves online studies and on-the-job training under a mentor retailer, as well as regional and national on-site training periods. Those completing the programme are qualified to start a career as independent K-retailers. Investments were made in the continuous development of existing retailers' competences by updating the supplementary training for retailers, which includes several targeted training sessions and the more extensive Success Factors training entity, which forms part of the MBA degree.

Training days and costs in 2016
2016 2015 2014
Training days1
Finland 7,421 6,891 9,083
Other countries2 11,033 14,614 14,285
Training days per employee1
Finland 0.7 0.8 0.9
Other countries2 0.9 1.4 1.4
Training costs, € million
Finland 2.9 2.5 2.9
Other countries2 0.9 0.9 0.8
Training costs per employee, €
Finland 268 299 298
Other countries2 79 87 80
1 2015: Excluding Konsoma JLLC, Belarus and OOO Kesko Real Estate, Russia
2 2014: Excluding Konsoma JLLC, Belarus. 2015: Excluding Konsoma, Belarus and OOO Kesko Real Estate, Russia

Distribution by education at
31 Dec. 2016, %

Byggmakker, Norway and K-Rauta, Sweden not included.

404-3 Percentage of employees receiving regular performance and career development reviews

Performance and career development reviews and performance assessment of key personnel are carried out at all Kesko Group companies and operating countries. In the performance and career development reviews, the performance of the past period is evaluated and targets are set for the upcoming period, including a discussion on the development of the employee, supervisory work and the working community. Every member of personnel has a performance and career development review, and in 2015, they were carried out twice: in the spring and the autumn. The implementation of performance and career development reviews was surveyed in conjunction with the personnel survey conducted at the beginning of 2016. The response rate to the personnel survey was 85%. 79% of the women who responded to the survey and 82% of the men who responded had had a performance and career development review in 2015. In 2016, they were conducted at least once: in the spring and/or the autumn.

The objective of performance evaluation is to give feedback on performance in the previous year, support the person's development and encourage enhanced performance. Uniform evaluation criteria enable equitable evaluation of performance and competence for all employees. Systematic and effective performance reviews provide important information and form a strong basis for other HR processes.

Job satisfaction

The personnel survey is one of the key tools for developing internal operating practices and developing the quality of supervisory work. The personnel survey is conducted in Kesko Group and some K-stores in Finland at the same time as in other countries. The survey seeks to identify the commitment of personnel to the organisation, the operating methods that enable good work performance, the implementation of our shared operating principles, the occupational wellbeing of personnel, and satisfaction with the work of immediate supervisors and management. The survey results are used as the basis for agreeing upon development measures, which are integrated into the annual operational and personnel plan and the implementation of which is monitored.

Diversity and equal opportunity

405-1 Diversity of governance bodies and employees

Equal opportunities, justice, non-discrimination and equality are important principles that are observed at Kesko. Kesko Corporation and its division parent companies and subsidiaries in Finland draw up statutory company-specific HR, training, equality and non-discrimination plans and define objectives for improvement. At the beginning of 2017, Kesko established the TASY gender equality working group in accordance with the non-discrimination plan, tasked with handling matters related to non-discrimination and equality within the Group. The working group includes representatives of the employer, personnel and labour protection functions. The working group analyses recruitment, career development and training, remuneration and the reconciliation of work and family life.

  • Of Kesko employees in Finland, 60% were women and 40% were men. In the other operating countries, the figures were 48% and 52% respectively.
  • In Finland, the average age of employees was 41.8 years in 2016. In the other countries, the average age of employees varied from 36 to 46 years.
  • Lengths of employee careers: under 10 years: 67% and over 10 years: 33% in Finland and 87% and 13% respectively in the other countries. Long careers are not rare: 1,438 employees have worked at Kesko for over 25 years.
  • Two of the seven members of Kesko’s Board of Directors were women.
  • Two of the nine members of the Group Management Board were women.
  • In the subsidiaries engaging in retailing in Finland, the proportion of women in supervisory duties was significant: 87% of the department managers at K-Citymarket hypermarkets were women.
  • At the end of 2016, 46% of all supervisors in Finland (51% in 2015) were women and 54% (49% in 2015) were men.

 

In recent years, the K Group has initiated projects to employ members of special groups:

  • In 2012, the K-Retailers' Association started a project named ‘Many kinds of performers’ in collaboration with the Finnish Association on Intellectual and Developmental Disabilities (FAIDD). A permanent operating model was created for employing people with developmental disabilities. Many of the people with developmental disabilities who were employed as part of the project are still working at the K Group.
  • In 2013, Kesko and the K-Retailers’ Association launched the ‘Youth Guarantee in K Group’ programme, which aimed to provide a job, a work trial or an apprenticeship in the K Group by the end of 2014 for 1,000 young people under 30, who were at high risk of social exclusion. The target group also included young immigrants and young people with disabilities. By the end of 2015, when the Youth Guarantee in K Group programme ended, more than 2,500 young people had found a position with the help of a work trial, pay subsidy or apprenticeship training.
  • The employment of young people and special groups continues as a permanent operating model. In 2016, the K-Retailers' Association had a youth guarantee coordinator who provided K-retailers and Kesko's supervisors with advice on employing and training young people and special groups and acted as a liaison to the authorities and associations. By the end of 2016, more than 3,200 young people from the target group had received a position in the K Group with the help of a work trial, pay subsidy or apprenticeship training.

 

Equal opportunity for men and women

405-2 Ratio of basic salary and remuneration of women to men

The average annual salary of Kesko employees was €38,794 in Finland, €40,313 in the other Nordic countries, and €10,113 in the Baltic countries, Russia, Poland and Belarus. As the Kesko Group operates in many lines of business, the average salary is not a good indicator of salary level or structure. The wage groups and tables specified in the collective agreement are applied to jobs covered by the agreement, such as sales assistants and warehouse workers. Salaries are also influenced by role-based responsibility bonuses, years of experience and the cost-of-living category of the locality. Besides the role and its requirements, the salary of a senior clerical employee is determined by competence, experience, performance and results. Equality in remuneration is considered as part of annual company-specific equality plans. Gender is not a factor which influences remuneration, and no significant differences between comparable jobs have been detected. Equality plans strive to promote pay equality in jobs where comparisons can be made.

Age distribution of Kesko personnel in Finland in 2016, %

Age distribution of Kesko personnel in the other operating countries in 2016, %

Years of service in Finland in 2016, %

Years of service in the other operating countries in 2016, %

Percentage of women by employee category, Finland
2016 2015 2014
Top management 24.1 20 15.6
Middle management 20.0 21.1 18.6
Supervisors and specialists 41.9 46.4 48.2
Workers and white-collar employees 64.4 57.8 61.5
Total 60.1 55.4 58.8
The figures also include those called to work on demand
Percentage of women by employee category, other countries
2016 2015 2014
Top management 0.0 0 0.0
Middle management 49.1 47.7 46.8
Supervisors and specialists 48.4 54.4 54.7
Workers and white-collar employees 47.2 47.8 46.2
Total 47.8 50.5 51.5
2014 and 2015: Excluding Senukai, Lithuania

Non-discrimination

406-1 Incidents of discrimination and corrective actions taken

In 2016, there was one case in the Finnish courts of law in which a Kesko Group company was ordered to pay compensation under the Non-Discrimination Act.

Freedom of association and collective bargaining

407-1 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk

In Kesko’s operations in the EU countries (Finland, Sweden, Norway, Estonia, Latvia, Lithuania and Poland), the freedom of association or the right to collective bargaining is not seen to be at risk.

Out of the total personnel, 50% are covered by collective agreements.

So far, no binding industry-wide collective agreements have been drawn up in Russia.

The control of the association of suppliers’ employees in high-risk countries and corrective actions are included in social responsibility audits.

 

Human rights assessments

412-1 Operations that have been subject to human rights reviews or impact assessments

In September 2016, Kesko published its statement of commitment on human rights and impact assessment in compliance with the UN's Guiding Principles on Business and Human Rights.

The extensive survey involved listening to the views of customers, personnel and high-risk country factory workers on human rights and on the implementation of human rights in K Group's operations. The survey covered the customers of all of Kesko’s lines of business, and personnel in Finland. Surveys in high-risk countries were carried out in China, India, Bangladesh and the Philippines.

Read more about Kesko’s commitment and impact assessment

Find out more about Kesko's collaboration with SASK

412-2 Employee training on human rights policies or procedures

The K Code of Conduct operating guidelines include a section on human rights.  The K Code of Conduct eLearning programme targeted at the entire personnel had been completed by 3,159 people by the end of 2016.  A plan for the year 2017 was drawn up with actions promoting awareness of the K Code of Conduct, such as communications and training events scheduled for each quarter of the year.

The training events in 2016 focused on human rights and their implementation in international purchasing chains. Nine events were arranged for people working in purchasing and sales in different divisions, as well as for the Product Research Unit. The training sessions discussed the assurance process in purchasing from high-risk countries, the BSCI Code of Conduct principles and the social responsibility assessment systems approved by Kesko. Trainings in responsible purchasing will continue in 2017.

Supplier social assessment

414-1 New suppliers that were screened using social criteria,

414-2 Negative social impacts in the supply chain and actions taken

 

Purchasing from high-risk countries

In 2016, direct purchases by Kesko's Finnish companies from suppliers in high-risk areas totalled €85 million (€90 million in 2015) and accounted for 1% (1.2%) of Kesko's total purchases. Direct imports from high-risk countries accounted for 11.9% (14.8%) of Kesko's total imports into Finland. The most significant high-risk countries of import of Kesko’s Finnish companies are presented in the table below. No statistics are available on direct imports from high-risk countries by Kesko's subsidiaries in other countries.

High-risk countries typically produce clothing and home textiles, shoes and other leather goods, furniture, carpets, interior decoration items, tools, sports equipment, toys, agricultural products (such as coffee, tea, cocoa, fruit, vegetables, wines) and canned fish, fruit and vegetables.

Since 2015, Kesko has published on its website a list of factories that operate in high-risk countries manufacturing Kesko’s own-brand clothing and shoes to be directly imported by Kesko. The list is updated once a year, most recently on 21 June 2016.

Kesko’s own direct imports from high-risk countries, 10 largest countries in 20161
Country Value of imports, € million
China 42.6
India 8.5
Vietnam 7.3
Turkey 6.9
Thailand 6.1
Bangladesh 2.9
Ukraine 1.7
Indonesia 1.6
South Africa 1.0
The Philippines 0.9
1 CIF, direct imports forwarded by Kesko Logistics and Onninen Finland only, excluding imports by VV-Auto
Social responsibility audits of our suppliers in high-risk countries

Kesko recommends the use of BSCI audits and SA8000 certification in the assessment of social responsibility of suppliers in high-risk countries. Kesko also accepts other social responsibility assessment systems, if their criteria correspond to those of BSCI auditing and the audit is conducted by an independent party. As part of the sourcing cooperation between Kesko’s grocery trade and ICA Global Sourcing, Kesko also accepts the ICA Social Audit. In that case, however, suppliers are required to adopt BSCI auditing after a maximum of two ICA audits. The social responsibility auditing systems accepted by Kesko are listed under ‘Management models and systems’. Some of Kesko’s suppliers are themselves members of BSCI and thus promote audits in their own supply chains.

At the beginning of 2017, Kesko's suppliers in high-risk countries had:

  • 274 (start of 2016: 200) valid BSCI audits
  • 13 (start of 2016: 16) valid SA8000 certifications
  • 24 valid SMETA audits
  • 11 valid ICTI CARE certifications
  • 22 valid SIZA audits
  • 11 valid Fairtrade certifications
  • 5 valid ICS audits
  • 2 valid WRAP certifications
  • 24 valid ICA Social Audits

 

As regards Onninen, the figures only include the BSCI audits of suppliers to the Kesko Onninen Purchasing Office (KOPO) in Shanghai.

Kesko’s principle in high-risk countries is to collaborate only with suppliers that are already included in the scope of social responsibility audits or that start the process when cooperation begins. Since the beginning of 2016, Kesko’s grocery trade requires all of its suppliers in high-risk countries to have been audited. It will not enter into collaboration with new suppliers unless they have passed an acceptable audit.

The map below shows the number of suppliers’ valid social responsibility audits and certifications in Kesko’s 10 largest high-risk countries of import.

Suppliers’ social responsibility audits in Kesko’s 10 largest high-risk countries of import

Direct purchases from suppliers in high-risk countries account for 1% of Kesko’s total purchases

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BSCI audit results

In 2016, suppliers' factories or plantations underwent

  • 210 (2015: 107) full BSCI audits
  • 60 (2015: 80) BSCI follow-up audits

The results of the BSCI audits of Kesko’s suppliers’ factories in 2016 are shown below. The majority of the deficiencies occurred in management practices, observance of working time regulations, and matters related to occupational health and safety. Corrective actions and monitoring are included in the audit process. In accordance with BSCI's operating model, a full audit is conducted at factories every two years to assess every sub-area of the auditing protocol. If a factory receives an audit result of C, D or E, a follow-up audit within 12 months must be arranged to assess the deficiencies identified in the full audit and the corrective measures implemented to address them.

Kesko does not terminate cooperation with a supplier that undertakes to resolve the grievances specified in the audit report. In 2016, it was decided to terminate cooperation with one supplier due to ambiguities related to social responsibility. It was not possible to reach a consensus with the supplier regarding the necessary corrective actions.

Kesko's BSCI audit results in 2016, full audits

Kesko's BSCI audit results in 2016, follow-up audits

Kesko's BSCI audit results, distribution in different areas in 2016, full audits

Kesko's BSCI audit results, distribution in different areas in 2016, follow-up audits

Fairtrade products

Kesko's grocery trade has an extensive collaboration agreement with Fairtrade Finland. The K-food trade chain concepts and K-retailers determine the selections of Fairtrade products at the store level.

  • In 2016, Kesko's grocery trade selections included 367 (2015: 212, excluding Kespro) Fairtrade products, of which 36 (2015: 40) were Pirkka products and 7 were Kespro's Menu products.
  • In 2016, the products sold by Kesko's grocery trade and Kespro generated Fairtrade premiums for social development projects amounting to €649,459 (2015: €481,405).

In 2016, the products generating the largest Fairtrade premiums were flowers (€268,358), fruit (€135,764) and coffee (€169,635). According to Fairtrade Finland’s statistics, the sales of own brand – Pirkka and Menu – Fairtrade coffee alone employed 184 small-scale coffee farmers in 2016 on Fairtrade's terms.

Risk assessment of ingredients in Pirkka and K-Menu food products

Kesko aims to identify the entire supply chain of the products and also verify the sustainability of products' ingredients. Work began in 2015 to analyse the origins of the ingredients in own-brand grocery products, and the sustainability of 1,923 ingredients in Pirkka and K-Menu food products was assessed. The project continued in 2016, when risk analyses were conducted for the ingredients in 160 new own brand food products. In 2016, 29 of the studied products contained ingredients for which additional sustainability investigation will be required. The suppliers will be requested to investigate the social responsibility of the suppliers of these ingredients.

Studies of the ingredients in own-brand food products will continue in 2017. Based on the results, Kesko intends to decide upon ingredient-specific follow-up measures to promote the sustainability of the supply chains of Pirkka and K-Menu products.

Follow-up study on the impact of a training project for Vietnamese supplier

Kesko was involved in a training project conducted by Union Aid Abroad APHEDA and the Trade Union Solidarity Centre of Finland SASK from 2006 to 2008, with the aim of improving the working conditions in the factories of selected Vietnamese suppliers shipping to Finland and supporting the factories in implementing the BSCI operating principles. The project involved 13 Vietnamese suppliers and 18 factories.

A follow-up study was conducted in autumn 2016 to gauge the long-term impacts at ten of the factories involved in the project. The aim of the impact assessment was to evaluate the effects of the project on factory working conditions eight years later in terms of occupational health and safety, relations between managers and workers, and environmental management systems.

The results of the impact assessment show that the project had long-term benefits. Almost all of the factories being assessed had continued to improve working conditions after the project finished. In eight years, the factories had made tangible improvements to their working environments, the situation of workers and their environmental systems.

Find out more about Kesko's collaboration with SASK

Collaboration with Plan

Kesko and Plan International Finland, an organisation promoting children’s rights, continue their cooperation to improve the responsibility of the Thai fishing industry and the situation of migrant workers. A collaboration agreement has been made for the period from 2015 to 2018. The joint project aims to improve the working conditions of Cambodian migrant workers, as well as education and protection for their children in Thailand. A further goal is to increase transparency in the supply chain.

As part of the project, two learning centres were established for children of migrant workers in the Rayong and Trat provinces in spring 2015. The learning centres provide children from migrant workers' families with the skills they need to attend public schools in Thailand and support them in continuing their studies. In 2016, 159 children aged between 4 and 17 were registered at the learning centres, and 99 children were admitted to school with the help of the project. BSCI training for suppliers began in November 2016. 16 suppliers from the Thai fishing industry took part in the first training event, which was held in Bangkok. The training will continue in spring 2017. Find out more about our collaboration with Plan.

Public policy

415-1 Political contributions

In election years, political parties and candidates are given equal opportunities to arrange campaign events in the yards and entrance halls of K Group stores. In addition, Kesko may participate in economic and tax policy seminars arranged by political parties, on content basis at its discretion and without indicating partiality.

Kesko does not make monetary donations to political parties. In 2016, Kesko did not participate in political parties’ seminars subject to a charge and did not publish commercial advertisements in party newspapers.

Customer health and safety

416-1 Assessment of the health and safety impacts of product and service categories,

416-2 Incidents of non-compliance concerning the health and safety impacts of products and services

The activities of the Product Research Unit of Kesko’s grocery trade include assessing the impacts of products on health and safety. It requires manufacturers of its own-brands to have certification that assures international product safety. The standards approved by Kesko’s grocery trade include BRC, IFS, FSSC 22000 and GlobalGAP. In 2016, the total number of certified suppliers was 538 (532 in 2015). This number also includes old audits conducted according to Kesko’s grocery trade’s own audit guidelines.

A total of 7,770 (8,037 in 2015) product samples were analysed. Most of them related to the product development of own brands. A total of 2,387 (2,158 in 2015) own control samples were analysed.

When developing own-brand products, Kesko’s grocery trade pays special attention, in line with its strategy, to the health aspects of the products.

As proposed in The EC White Paper on Nutrition, Overweight and Obesity-related Health Issues, sugar, saturated fat and salt were reduced in more than 150 Pirkka products during the period 2007–2013. The health aspects of new Pirkka products are taken into account at the product development stage. Kesko follows the discussion about reformulation restarted by the launch of the Roadmap for Action on Food Product Improvement in spring 2016. As the national Finnish targets are likely to be established in 2017, Kesko’s grocery trade will revise its reformulation policy statement.

In 2016 and early 2017, a study on the likelihood of food fraud was conducted and a fraud control plan was prepared (Vulnerability Assessment and Critical Control Points, VACCP). 77 threats of fraud were identified. Six of them were assessed to be critical control points, which are analytically monitored by fraud control on a regular basis, in addition to normal product and supplier assurances.

Product Research is also responsible for product recalls, which numbered 101 in 2016 (124 in 2015). Of these, 26 (27 in 2015) were Kesko’s grocery trade’s own-brands; in the other cases, Product Research assisted the manufacturers in recalls. There were two public recalls involving a potential health hazard resulting from product flaws or defects in Kesko’s grocery trade’s own-brand products in 2016 (3 in 2015).

In 2016, K-Rauta made one product recall in Finland.

Onninen made four recalls in 2016: two in Finland, one in Sweden and one in Poland.

In 2016, there were no legal proceedings or fines related to product health or safety.

Marketing communications and product information

417-1 Requirements for product and service information and labelling

As for its own-brand products and own imports, Kesko’s grocery trade complies with Regulation (EC) No 1169/2011 on the provision of food information to consumers and the supplementary Regulation (EC) No 1337/2013 laying down rules for the indication of origin of certain meats. These regulations lay down the rules for providing information on product ingredients, among other things.

The name and location of the manufacturer are indicated on all Finnish Pirkka products and on all K-Menu products. Foreign Pirkka products carry the name of the country of manufacture. The country of origin of meat is also indicated in the list of ingredients of Pirkka products that contain meat as one of the main ingredients, although related national legislation is only planned. The country of origin is indicated on all own-brand products of K-Citymarket and Kesko’s building and technical trade.

In addition to statutory package labelling, voluntary labelling can be added to inform the consumer of matters related to corporate responsibility. Such labelling may include organic labels and ecolabelling, as well as labelling indicating social responsibility.

The packages of Kesko’s own-brand chemical products ─ such as detergents and paints ─ bear warning labelling in accordance with CLP regulation EC 1272/2008 on the classification, labelling and packaging of chemicals.

The own brand products of Kesko’s grocery trade bear material symbols on their packaging. These symbols help and guide consumers to recycle packaging materials. Chemicals that are hazardous to the environment have warning labelling in accordance with the CLP regulation.

417-2 Incidents of non-compliance concerning product and service information and labelling

Engine software adjusting nitrogen oxides

In September 2015, the California Air Resources Board (CARB) and the Environmental Protection Agency (EPA) uncovered engine software that adjusted nitrogen oxides in Volkswagen Group’s type EA 189 cars with diesel engines. This software is fitted in EA 189 series 1.2 litre, 1.6 litre and 2.0 litre diesel engines.

As far as the brands represented by VV-Auto are concerned, the number of such cars in

Finland is around 53,000. The case applies to all of the brands imported by VV-Auto (Volkswagen, Audi, SEAT and Volkswagen commercial vehicles).

In 2016, the German authority (KBA) approved all technical corrective measures for type EA 189 diesel engines. The 1.2 litre and 2.0 litre diesel engines will get a software update. The 1.6 litre diesel engines will also get a software update and have a “flow rectifier” fitted directly in front of the air mass sensor.

Earlier in the spring of 2016, the German authority confirmed that the technical measures will not impair fuel consumption, engine power, CO2 emissions, handling or acoustics. The corrective measures will not have an impact on the cars’ taxation in Finland, because nitrogen oxide emissions (NOx) are not car tax or vehicle tax bases in Finland. After the technical measures have been implemented, the cars will fulfil the applicable type approval emission standards.

In Finland, the importer has sent informative letters to the customers concerned. After receiving the letter, the customer can book an authorised repairer. The corrective measure will take from 30 minutes to one hour, most conveniently in connection with a maintenance visit or tyre change. The corrective measure can only be made at an authorised repairer and it is free of charge to the customer. The customer will be given a certificate to confirm that the corrective measure has been implemented.

If the customer has not received a recall letter before the next vehicle inspection, they can have the car inspected as usual and the corrective measure will be implemented after the inspection.

Due to the great number of different air mass sensors, the recalls will take place on a schedule agreed with KBA. For that reason, all models and engine/gearbox versions are not recalled at the same time.

By the end of 2016, the corrective solution has been available for a total of around 50,000 cars and 25% of them have been corrected.

Product recalls resulting from defective product labelling

On the product labelling of its own-brand products and imports, Kesko complies with Finnish law and EU legislation.

In 2016, there were 24 product recalls resulting from defective product labelling (46 in 2015), of which 7(9 in 2015) were Kesko’s grocery trade’s own-brands.

417-3 Incidents of non-compliance concerning marketing communications

Kesko constantly monitors the amendments to legislation and authorities’ recommendations related to marketing communications and provides information about them to the staff responsible for marketing in each unit.

In 2016, there were no advertisements by Kesko or its subsidiaries submitted for consideration by the Council of Ethics in Advertising nor were there any incidents of non-compliance with legislation or voluntary principles.

In December 2016, the Consumer Ombudsman imposed a prohibition reinforced with a penalty payment in the case concerning Indoor Group Ltd’s discount sale marketing in 2014–2015.

Customer privacy

418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data

In 2016, K-Plus Oy did not detect any leaks of information or other personal data breaches.

The company received one complaint from a customer regarding the deletion of personal data from K-Plus Oy’s customer register. The case resulted in the Data Protection Ombudsman contacting the company. The Ombudsman stated that there was no need for an order as referred to in the Personal Data Act because K-Plus Oy had deleted the customer’s personal data from its systems.

 

Socioeconomic compliance

419-1 Non-compliance with laws and regulations in the social and economic area

In 2016, there were no cases of non-compliance with laws and regulations in the social and economic area.