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SOCIAL IMPACTS

Employees

Indicators: LA1–LA2, LA4–LA6, LA9–LA13

LA1 Employee turnover

In 2015, Kesko had an average of 18,955 (19,976 in 2014) full-time equivalent employees in eight countries: Finland, Sweden, Norway, Estonia, Latvia, Lithuania, Russia and Belarus. 44% of the employees worked in Finland and 56% in other countries. Around three quarters of all employees worked in retailing.

 

Changes in the number of Kesko employees
201520142013
Finland at 31 Dec.10,08112,18012,776
Other operating countries at 31 Dec.11,85411,61411,087
Total at 31 Dec.21,93523,79423,863
Finland, average8,3009,5809,805
Other operating countries, average10,65510,3969,683
Total, average18,95519,97619,489
Fixed-term and part-time employments at Kesko
201520142013
Fixed-term employees of total personnel at 31 Dec., %
Finland11.513.912.9
Companies in other operating countries6.17.27.0
Whole Group, total8.610.710.2
Part-time employees of total personnel at 31 Dec., %
Finland39.443.645.4
Companies in other operating countries8.17.18.0
Whole Group, total22.525.828.1
Kesko’s personnel statistics for 2015 analysed by operating country
FinlandSwedenNorwayEstoniaLatviaLithuaniaRussiaBelarus
Total number of personnel at 31 Dec.10,0818152255674703,8693,6412,267
Average number of personnel in 20158,3007852035384783,4923,1492,010
Number of new employments13,175279541791862,2432,1371,475
- women1,72685147946231,223758
- men1,4491944010014093914717
Number of terminated employments12,9662082171662092,2511,8861,419
Terminated by employer, %4.66.730.04.89.114.711.038.0
Total turnover rate, %220.625.595.120.136.257.251.828.1
1 Including summer employees
2 Excluding summer employees
3 Excluding Senukai, Lithuania
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.

LA2 Benefits provided to employees

Kesko Group provides its employees in all of its operating countries with employee benefits. In Finland, benefits provided to both permanent as well as fixed-term and part-time employees include

  • Occupational health services
  • Insurance against occupational injuries and 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 various life stages, such as when a child is born, during the 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.

Bonus payments and share-based payment plan

The performance bonus schemes cover the entire personnel, with the exception of sales assistants and jobs covered by other types of bonus and commission systems. The indicators in the performance bonus scheme include the total performance of Kesko Group and the division, the sales and performance of the employee’s own unit and customer satisfaction. The job satisfaction of personnel also contributes to supervisors' bonuses. In spring 2015, around €12.4 million (€12.7 million in 2014) was paid in Finland in bonuses under the 2014 performance bonus schemes, accounting for some 4.0% (3.6% in 2014) of the total payroll.

In 2015, the total amount of bonuses paid ─ consisting of bonuses, sales commissions and other similar monetary remuneration ─ was as follows:

  • €13.1 million (€13.4 million in 2014) in Finland
  • €5.0 million (€6.2 million in 2014) in other operating countries

Kesko Group’s management and key people – comprising around 150 people – are covered by a performance-based bonus scheme. The maximum bonus amounts vary depending on the profit impact of the person’s job and are equivalent to 3–8 months' salary. Kesko has a share-based payment system for 2014–2016 covering around 150 Kesko management personnel and other named key personnel. The share-based payment system has three vesting periods: the calendar years 2014, 2015 and 2016. A commitment period of three calendar years follows each vesting period. During this period, shares must not be transferred. In February 2016, the Board of Directors decided to grant a total of 140,365 of the company’s series B shares to 142 Kesko management personnel and other named key personnel based on the fulfilment of the vesting criteria for the 2015 vesting period in the share-based payment system.

Pensions

In Finland, new pensions were granted to 168 employees (155 in 2014) who retired from Kesko Group. In addition to old-age and disability pensions, this figure also includes employees retiring on part-time pension or partial pension and those receiving cash rehabilitation benefit. Cash rehabilitation benefit is a fixed-term disability pension and the aim is that the employee can eventually be rehabilitated and return to work. Rehabilitation allowance was granted for vocational retraining or trials for 50 (40 in 2014) employees with an obvious risk of incapacity for work in the next few years. In 2015, the average retirement age of employees was 59 (59 in 2014). In other operating countries, a total of 15 (14 in 2014) employees retired.

 

Labour/management relations

LA4 Minimum notice periods regarding operational changes

In all of its operating countries, Kesko complies with local legislation. The key statutes governing restructuring are included in the Act on Co-operation within Undertakings, according to which the employer has to communicate the decisions under consideration on the basis of the negotiations within a reasonable period of time. Minimum notice periods regarding operational changes have not been defined in the trading sector collective agreement.

In Sweden, the statutory minimum notice period in the event of organisational changes is between 8 and 24 weeks depending on the nature of the change. The collective agreement observed in Sweden does not define a minimum notice period for operational changes.

In Norway, there is no minimum notice period in the event of organisational changes. However, legislation and the collective agreement demand that employees be notified of any organisational changes at the earliest possible stage.

In Russia, notifications of operational changes must be made 8.5 weeks before the changes take effect. In the event of major organisational changes that concern more than 20% of the employees, the authorities must also be notified 8–12 weeks in advance. In Estonia and Latvia, the minimum notification period regarding operational changes is 4 weeks. In Belarus, the corresponding notification period is 8 weeks. There are no collective agreements in these countries.

In all of its operating countries, Kesko applies the notice periods specified in local labour legislation. In Finland, the notice period is between two weeks and six months, depending on the duration of the employment relationship. Employees can ask questions, give feedback or development proposals on issues related to the operations of Kesko or its subsidiaries anonymously via the 'Direct Line' available on the Keskonet intranet. Answers are published for all to see on Keskonet. Employees can also send their wishes, comments and proposals directly to the President and CEO through the feedback channel available on Keskonet.

 

OCCUPATIONAL HEALTH AND SAFETY

LA5 Percentage of total workforce represented in formal health and safety committees

Labour protection activities are arranged separately by each company or place of business in compliance with local legislation. Outside the Nordic countries, labour protection matters are dealt with in workplace committees.

Kesko’s HR functions provide occupational safety training for Kesko employees and K-retailers. Different companies also arranged training sessions tailored to their needs.

LA6 Rates of injury, occupational diseases, lost days, absenteeism and work-related fatalities

At Kesko Group, the counselling and guidance of employees, appraisal and prevention of work-related health risks and illnesses, including treatment of serious illnesses, in cooperation with the primary and specialised health care providers are part of the normal operations of the Occupational Health Service.

In Finland, approximately 10,200 (10,500 in 2014) Kesko Group employees were covered by Kesko’s in-house Occupational Health Service. In Finland, occupational health services for employees outside the Greater Helsinki area are mainly procured from other service providers. Centralised procurement and target-oriented management enable uniform contents and operating practices in occupational health care. In other countries, occupational health care is arranged according to local practice and legislation. A total of around €3.7 million (€5.2 million in 2014) was spent on occupational health care in Finland in 2015. The Social Insurance Institution of Finland compensated Kesko for around €2.0 million (€2.5 million in 2014) of this amount. In 2015, Kesko’s Occupational Health Service spent €359 (€412 in 2014) per covered employee on maintaining employees’ working capacity and providing medical care.

Kesko’s contribution to occupational health care, Finland
201520142013
€/person359412481
Injuries and occupational diseases in Finland
201520142013
Fatal injuries000
Occupational injuries, excl. commuting injuries93124116
Commuting injuries353243
Injury rate¹ /million working hours666
Average degree of injury severity, days16.917.618.3
Suspected occupational diseases4114
Occupational diseases009
Sick days due to occupational injuries, commuting injuries and occupational diseases2,1662,7512,902
Per employee0.270.290.30
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 2015
FinlandSwedenNorwayEstoniaLatviaLithuaniaRussiaBelarus
Total number of sick days93,5107,8652,4143,5373,88635,44631,54821,485
Per employee11.310.011.96.68.110.210.010.7
Per million working hours5,9745,6946,7553,2404,0235,0255,0595,260
The calculation method: sick days per employee have been calculated on the average number of employees during the year.
Data of Konsoma JLLC, Belarus not included.

 

The statistics on injuries in Finland and the analysis of sickness days by country are presented in the above tables. In other countries, there were a total of 45 injuries resulting in sickness absence of more than three days in 2015. In Finland, the corresponding number was 93. In 2015, the sickness absence rate in Finnish companies was 4.4% (4.5% in 2014) of hours worked. Around 77.4% (78% in 2014) of the sickness absences were short-term absences (paid sick days). In other countries, the sickness absence rate was 3.7% (3.7% in 2014). The figures do not include the data for Konsoma JLLC.

 

TRAINING AND PERSONNEL DEVELOPMENT

LA9 Average hours of training per employee, LA10 programmes for skills management and lifelong learning

Systematic, business-driven development of personnel and management is a critical factor for future success. The sea change in the trading sector and the increase in the number of electronic transactions has created needs for new competencies. The implementation of the strategy in all divisions included a survey of digital competencies as part of performance and development reviews. The first K Digital Academy training programme was developed and implemented for those working in marketing. An online training programme in digital marketing was created for all K-Group employees. Several regional training sessions on social media were organised for retailers.

Other core competence development areas include

  • Sales and service competence
  • Product line specific competence advantage projects
  • Safety and responsibility
  • Immediate leadership
  • Management

The Master Sales Assistant training, which is intended for all sales assistants in the K-Group, focuses on providing sales and service training. Vocational training and an opportunity to take specialist vocational qualifications are also available to retail store staff.

Specified career paths were created for supervisors and the first training programmes for new supervisors were piloted in the autumn. At the same time, an extensive common training offering was developed for supervisors and specialists for competence development.

In-house job rotation provides an extensive selection of career alternatives. In Finland, there were around 1,800 (1,900 in 2014) internal transfers to new jobs, while the corresponding total figure in other countries was around 2,900 (2,500 in 2014).

In Finland, recruitment in the K-Group is supported by the K-trainee and retailer training programmes. 11 K-trainees graduated from the fifth K-trainee programme, which ended in September 2015. In 2016, the focus will be on digital activities and the programme will be entitled ‘K-digital trainee’.

Future K-retailers are trained in the retailer training programmes. 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.

Training days and costs in 2015
201520142013
Training days1
Finland6,8919,0839,021
Other countries214,61414,28516,848
Training days per employee1
Finland0.80.90.9
Other countries21.41.41.7
Training costs, € million
Finland2.52.92.0
Other countries0.90.80.9
Training costs per employee, €
Finland299298205
Other countries878094
1 2015: Excluding Konsoma JLLC, Belarus and OOO Kesko Real Estate, Russia
2 2013 and 2014: Excluding Konsoma JLLC, Belarus

LA11 Performance and career development reviews

Performance and development reviews and performance assessment of key personnel are carried out in all Kesko Group companies and operating countries. In the performance and 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. Performance and development reviews apply to all employees and in 2015 they were carried out twice: in the spring and in the autumn. The realization of the discussions was asked in the personnel survey that was conducted in the beginning of 2016. The response rate of the survey was 85%. 79% of female and 82% of male employees that answered the survey had their reviews carried out during 2015.

The objective of performance assessment is to support employees' development and encourage them to improve their performance. Uniform evaluation criteria enable systematic assessment of key personnel and management resources and support job rotation between Group companies.

Personnel survey

The personnel survey is one of the key tools in developing internal working practices and the quality of supervisory work. The survey is conducted simultaneously in Kesko Group and some of the K-stores in Finland and other countries. It looks into employee engagement in the organisation, practices that enable good performance, employee wellbeing and satisfaction with the performance of their immediate supervisors and management.

Based on the results, the supervisor and the employee agree on development activities, which are linked to the annual action and HR plan and are monitored. In 2015, all of the divisions focused on implementing the action plans drawn up on the basis of the personnel survey in 2014. The next personnel survey was carried out at the beginning of 2016.  

DIVERSITY

LA12 Composition and diversity of governance bodies and employee categories

Equality, fairness and non-discrimination are important principles observed at Kesko. Kesko Corporation and its Finnish division parent companies and subsidiaries draw up statutory company-specific HR and equality plans and define objectives for improvement. The plans cover recruitment, career development and training, compensation, and the reconciliation of work and family life.

  • Of Kesko Group employees in Finland 55% were female and 45% were male. In other operating countries, the figures were 50% and 50% respectively.
  • In Finland, the average age of employees was 36.2 years in 2015. In other countries, the average age of employees varied from 28 to 42 years.
  • Lengths of employee careers: under 10 years: 68% and over 10 years: 32% in Finland and 91% and 9% respectively in other countries. Long careers are not rare: 911 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 engaged in retailing in Finland, the proportion of women in supervisory duties is high: 83% of the department managers in K-citymarket hypermarkets are women
  • At the end of 2015, 51% of all supervisors in Finland (54% in 2014) were women and 49% (46% in 2014) were men

In recent years, the K-Group has launched many projects to provide employment to special groups:

  • In 2012, the K-Retailers’ Association started a project called ’Many kinds of performers’ in cooperation with the Finnish Association on Intellectual and Developmental Disabilities (FAIDD). A permanent operating model was created based on this. Most of the disabled people employed during the project still work at the K-Group.
  • In 2013, Kesko and the K-Retailers’ Association launched the ‘Youth Guarantee in the K-Group’ programme, which aimed to provide a job, a work trial or an apprenticeship in the K-Group for 1,000 young people threatened by social exclusion by the end of 2014. The target group also included young immigrants and young people with disabilities. By the end of 2015, more than 2,500 young people had found employment in the form of a work trial, through wage support and apprenticeship training.
  • Employment of the young and special groups continues as a permanent operating model. The K-Retailers’ Association has a Youth Guarantee coordinator, who gives K-retailers and Kesko’s supervisors advice related to the employment and training of these groups and acts as a liaison to the authorities and associations.

EQUALITY OF MEN AND WOMEN

LA13 Ratio of basic salary of men to women

The average annual salary of Kesko employees was €37,478 in Finland, €37,506 in the other Nordic countries, and €9,524 in the Baltic countries, Russia and Belarus. As 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 trading sector labour agreement are applied to jobs covered by the agreement, such as sales assistants and warehouse workers. Salaries are affected by job-based responsibility bonuses, work experience and the cost-of-living category, which depends on locality. Besides the role and job requirements, the salary of a senior white-collar employee is determined by competence, work experience, performance and results. Because of the diversity of job descriptions, it is not possible to comprehensively compare the salaries between genders at the Group level.

Equality in compensation is considered as part of annual company-specific equality plans. Gender is not a factor in determining pay levels, and no significant differences in comparable jobs have been detected. Company-specific equality plans strive to promote pay equality in jobs where comparisons can be made.

Percentage of women by employee category, Finland
201520142013
Top management20.015.616.7
Middle management21.118.619.8
Supervisors and specialists46.448.247.7
Workers and white-collar employees57.861.561.9
Total55.458.859.3
The figures also include those called to work on demand
Percentage of women by employee category, other countries
201520142013
Top management0.00.00.0
Middle management47.746.848.6
Supervisors and specialists54.454.752.6
Workers and white-collar employees47.846.248.9
Total50.551.550.2
2013: Excluding Senukai, Lithuania and Byggmakker, Norway
2014 and 2015: Excluding Senukai, Lithuania

Human rights

Indicators: HR3–HR4, HR9–HR11, LA14–LA15

Non-discrimination

HR3 Total number of incidents of discrimination and corrective actions taken

In 2015, there was one case in the Finnish courts of law in which a company belonging to Kesko Group was sued for compensation on grounds of alleged discrimination. The proceedings will continue in 2016.

 

Freedom of association

HR4 Operations and suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk

A total of 41.8% (41.8% in 2014) of Kesko Group employees in Finland were members of trade unions, mainly the Service Union United PAM. This statistic includes the employees whose trade union membership fees are deducted at source from pay.

In Norway, the unionisation rate was 23.1% (25.7% in 2014). Statistics on employee unionisation in the other operating countries are not available. In the Baltic countries, Kesko’s subsidiaries have workplace committees composed of management and employee representatives.

The National Works Council meets twice a year. The international Group-level European Works Council (EWC) meets once a year.

Collective agreements cover all of Kesko's employees in Sweden and Norway, and around 81% (83%) in Finland. So far, no binding industry-wide collective agreements have been drawn up in the Baltic countries or Russia.

The control of the unionisation of suppliers’ employees in high-risk countries and corrective actions are included in the SA8000 and BSCI audits.

 

Human rights assessments

HR9 Operations that have been subject to human rights reviews, HR10 Suppliers that were screened using human rights criteria, HR11 Significant negative human rights impacts in the supply chain and actions taken

Work related to the human rights impact assessment in accordance with the UN Guiding Principles on Business and Human Rights continued. In autumn 2015, we engaged in dialogue with our stakeholders, which will continue in spring 2016.

  • Consumers. TNS Gallup looked into human rights in the K-Group’s operations on the basis of small-group discussions and a web survey sent to 567 K-Group customers and 41 specialists
  • Employees in factories in high-risk countries. District coordinators of the Trade Union Solidarity Centre of Finland (SASK) interview employees of the factories manufacturing Kesko’s own-branded goods in three high-risk countries (India, Bangladesh and the Philippines). The interviews focus on human rights in the factory and the impact of Kesko’s operations.
  • Personnel. Employees were able to make themselves heard in two ways: the applicable sections in the personnel survey were made use of and a survey directed to shop stewards was carried out.

The human rights assessment is expected to be completed during the first half of 2016. It will be published on Kesko's website.

In 2014 and 2015, Kesko participated in retail round table discussions organised by the Ministry of Employment and the Economy and the Ministry for Foreign Affairs as part of the national implementation of the UN Guiding Principles on Business and Human Rights. Grocery retail companies, NGOs and authorities presented a common viewpoint on the implementation of the UN Guiding Principles on Business and Human Rights in the sourcing chains of the grocery trade. The viewpoint was published in August 2015. Read more about discussions in the grocery trade. However, discussions about preparing a corresponding recommendation for the textiles and clothing sector were discontinued.

Suppliers in high-risk countries are mainly assessed by BSCI audits. Kesko’s BSCI results for 2015 in different areas are presented in a graph in the section on supplier assessment for labour practices. Corrective actions and their monitoring are included in the audit process.

 

Supplier assessment for labour practices

LA14 Percentage of new suppliers that were screened using labour practices criteria, LA15 Significant actual and potential negative impacts for labour practices in supply chain and actions taken

SA8000 certifications and BSCI audits

Kesko mainly uses BSCI auditing and the SA8000 standard for assessing its suppliers in high-risk countries. Kesko also accepts other social responsibility systems, if their criteria correspond to those of BSCI auditing and the audit is conducted by an independent party. These systems are listed in the section entitled ‘Responsible monitoring and steering’, under ‘Responsible purchasing and sales’. Some of Kesko’s suppliers are also members of BSCI and promote audits in their own supply chains.

Kesko’s most significant high-risk countries of import are listed in the table below.

At the beginning of 2016, of Kesko’s suppliers in high-risk countries,

  • 16 (14 at the beginning of 2015) had valid SA8000 certification
  • 200 (189 at the beginning of 2015) had valid BSCI audits

In 2015, suppliers’ factories or farms had

  • 107 (88 in 2014) full BSCI audits
  • 80 (74 in 2014) BSCI re-audits

49 of the full audits were conducted in accordance with the BSCI 2014 Code of Conduct, while 58 of them were conducted in accordance with the BSCI 2009 Code of Conduct. Seven of the re-audits were conducted in accordance with the BSCI 2014 Code of Conduct, while 73 of them were conducted in accordance with the BSCI 2009 Code of Conduct.

Kesko’s principle in high-risk countries is to work only with suppliers that are already included in the sphere 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 begin working with new suppliers unless they have passed an acceptable audit.

The results of the BSCI audits of Kesko’s suppliers’ factories for 2015 are presented below. The majority of the deficiencies occurred in management practices, the observance of working time regulations and in matters related to compensation and occupational health and safety. Corrective actions and monitoring are included in the audit process. Kesko does not terminate cooperation with a supplier that undertakes to resolve the grievances specified in the audit report. In 2015, cooperation was not terminated with any supplier on the basis of an audit.

Fairtrade products

Kesko’s grocery trade has a comprehensive cooperation agreement with Fairtrade Finland and a licence for Fairtrade products in the Pirkka range. The selections of Fairtrade products at store level are determined by the K-food trade chain concepts.

  • In 2015, Kesko’s grocery trade had 212 (238 in 2014) Fairtrade products in its selections, of which 40 (44 in 2014) were Pirkka product
  • According to the statistics of Fairtrade Finland, Kesko’s grocery trade had a total of 168 Fairtrade suppliers (166 in 2014)
  • The products sold by Kesko’s grocery trade and Kespro generated €481,405 in Fairtrade premium for social development projects
High-risk countries

On 11 May 2015, Kesko published on its website a list of factories that operate in high-risk countries manufacturing clothing, accessories, shoes and bags for Kesko’s own brands or making products that are directly imported by Kesko.

Kesko aims to identify the entire supply chain of the products, while also ensuring that the ingredients are responsibly sourced. Work to assess the origin of the ingredients in Kesko’s own brands ─ Pirkka and K-Menu groceries ─ was carried out over the course of 2015. Out of 1,923 products, 233 contained ingredients which, based on risk assessment, need further clarification about the responsibility of the supplier of the ingredient. The supplier of the product is required to ensure the social responsibility of the supplier of the ingredient. In the future, an ingredient survey will be carried out whenever a new product is introduced into the selections.

Kesko’s own direct imports from high-risk countries, 10 largest countries in 20151
CountryValue of imports, € million
China49.2
India9.9
Thailand7.4
Vietnam6.9
Turkey6.2
Indonesia1.8
South Africa1.5
Bangladesh1.2
Egypt1.0
The Philippines0.9
1 CIF, direct imports forwarded by Keslog only, excluding imports by VV-Auto
Cooperation with Plan

Kesko and Plan International Finland, an organisation promoting children's rights, continue their cooperation to improve the social responsibility of the Thai fish industry and the situation of migrant workers. We have agreed on cooperation for years 2015–2018. With the help of our joint project we aim to improve the working conditions of Cambodian migrant workers and promote the schooling and protection of their children in Thailand.

Another purpose of the cooperation is to improve the transparency of the production chain. We aim to encourage a large number of fish industry firms and NGOs to join in. The government of Thailand also plays a major role in the realisation of the rights of children and migrant workers. Read more about cooperation with Plan.

 

Society

Indicators: SO3–SO8

Anti-corruption

SO3 Total number of operations assessed for risks related to corruption, SO4 Training on anti-corruption policies and procedures, SO5 Confirmed incidents or corruption and actions taken

Risks related to corruption are considered as part of Kesko Group’s risk management. Key risks, including those related to corruption, are regularly identified, assessed, managed, monitored and reported as part of business operations at the Group, division, company and unit levels in all operating countries. Rankings of Kesko’s operating countries in the Corruption Perceptions Index 2015 by Transparency International are presented below.

Kesko’s anti-corruption principles are included in the ‘Our Responsible Working Principles’ guidelines, available on Kesko’s website. A separate website with relevant animations is dedicated to responsible operating practices. The guide and the website are available in the languages of all of Kesko’s operating countries. The guidelines will be updated in 2016.

In 2015, a new online training programme was adopted to order to refresh employees’ knowledge of our responsible working principles. The training is compulsory for all Kesko people and the languages to choose from are Finnish and English. A Russian-language version will be published in 2016.

From the beginning of 2015, all of Kesko’s Russian business companies have had their own anti-corruption policies. The new policies take account of the requirements of Russian anti-corruption laws. Kesko’s Russian business companies have also introduced anti-fraud (whistleblowing) channels for reporting suspected malpractice. The Russian-language channel is intended for confidential use by the business partners of Kesko subsidiaries and other third parties including personnel for notifying any suspicions of malpractice or unethical conduct in Kesko’s Russian subsidiaries.

Kesko arranges annual Value Discussions on responsible working principles in its companies. In 2015, a value discussion event was organised in Kesko’s Belarusian company. It focused on issues related to corruption and malpractice. In 2015, one of the focus areas in Kesko’s risk management and security function was the prevention of malpractice.

There were individual cases of suspected malpractice in 2015. The Internal Audit assisted in investigating them.

In 2015, Kesko was not informed of any corruption-related lawsuits against any Kesko Group company.

Rankings of Kesko’s operating countries in the Transparency Corruption Perceptions Index in 2015
RankingCountryScore
2Finland90
3Sweden89
5Norway87
23Estonia70
32Lithuania61
40Latvia55
107Belarus32
119Russia29

Public policy

SO6 Total value of 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, at its discretion and without indicating partiality. Kesko does not make monetary donations to political parties. In 2015, the seminar attendance fees and commercial advertising in party newspapers paid by Kesko totalled €7,646.

Recipients of political contributions
RecipientCountryAmount, €
 Centre Party, newspaper advert  Finland  350
 Centre Party, seminar attendance fees  Finland  1,705
 National Coalition Party, newspaper adverts  Finland  4,591
 National Coalition Party, seminar attendance fee  Finland  500
 Social Democratic Party of Finland, newspaper advert  Finland  500

 

Anti-competitive behaviour

SO7 Legal actions for anti-competitive behaviour, anti-trust, and monopoly practices, SO8 Fines and other sanctions for non-compliance with laws and regulations

In 2015, there were no legal actions, fines or other sanctions relating to anti-competitive laws and regulations.

Product responsibility

Indicators: PR1–PR9

Customer health and safety

PR1 Product and service categories for which health and safety impacts are assessed for improvement, PR2 Incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products

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, ISO/FSSC 22000 and GlobalGAP. In 2015, the total number of certified suppliers was 532 (533 in 2014). This number also includes old audits conducted according to Kesko’s grocery trade’s own auditing guidelines.

A total of 8,037 (8,864 in 2014) product samples were analysed. Most of them related to the product development of own brands. A total of 2,158 (1,779 in 2014) 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. Sugar, saturated fat and salt have been reduced in more than 150 Pirkka products. This reformulation was completed in 2013. The health aspects of new Pirkka products are taken into account at the product development stage.

Product Research is also responsible for product recalls, which numbered 124 in 2015 (125 in 2014). Of these, 27 (24 in 2014) were Kesko’s grocery trade’s own brands; in the other cases, Product Research assisted the manufacturers in recalls. There were three public recalls involving a potential health hazard resulting from product flaws or defects in Kesko’s grocery trade’s own brand products in 2015 (0 in 2014).

In 2015, there were no lawsuits or fines concerning product health or safety.

Read more about the Product Research laboratory.

 

Product and service labelling

PR3 Product and service information and labelling

The transition period for EC regulation No. 1169/2011 on the provision of food information to consumers ended in December 2014. During the three-year transition period, Kesko’s grocery trade updated the labels of around 2,500 own brand products to comply with the requirements of the regulation. Changes continued to be made until spring 2015, which marked the end of the transition period of EC regulation No. 1337/2013, which sets out rules for the indication of the country of origin of certain meats.

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. In addition to statutory labelling, 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. The country of origin is indicated on all own brand products of K-citymarket and Kesko’s home and speciality goods 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 eco-labelling, as well as labelling indicating social responsibility. The selection of labelled products is discussed in the strategy report.

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 final transition period before the regulation entered into force ended on 1 June 2015, but there may still be products on the market with package labelling printed before the end of the transition period.

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

PR4 Incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling

Software adjusting NOx emissions

In September 2015, California Air Resources Board (CARB) and the Environmental Protection Agency (EPA) uncovered software that adjusts nitrogen oxide (NOx) emissions in Volkswagen Group cars with 2.0 litre diesel engines. The software detects when the car is undergoing testing and the engine control produces nitrogen oxide (NOx) readings that meet the standards. Thus the emission values conform to the test cycle, while being higher during normal driving conditions when the cycle is not in use.

Later investigation revealed that this software is fitted in EA 189 series 1.2 litre, 1.6 litre and 2.0 litre diesel engines. There are roughly 11 million such cars worldwide. As far as the brands represented by VV-Auto are concerned, the number of such cars in Finland is around 53,000 (including individual imports). The case applies to all of the brands imported by VV-Auto (Audi, SEAT, Volkswagen passenger cars, Volkswagen commercial vehicles).

Volkswagen Group has developed remedial measures for cars (in the EU-28 area) and the German authority (KBA) has approved them. In Finland, a recall campaign will begin in spring 2016, and it will be implemented phase-by-phase in various lots. 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. These measures will take between half an hour and one hour. The remedial measures will be performed by authorised brand service workshops and can also be performed in connection with a normal service visit. After the measures have been implemented, the cars will fulfil the duly applicable emission standards. The manufacturer also aims to achieve this without any impairment of engine efficiency, fuel consumption or performance.

VV-Auto has informed its customers on the web pages of each brand and sent informative letters/e-mail to the customers concerned. A separate customer service number has also been in use. Dealers have been informed through their internal channel.

The internal review of Volkswagen also aroused suspicion concerning the correctness of the determination of the CO2 emission value carried out during type approval. Re-measurements revealed that no illegal changes were found in fuel consumption and CO2 values. Deviations were found in nine Volkswagen passenger model/gearbox versions (model year 2016). VV-Auto imports five of these model/gearbox versions. Re-measurements will continue by an impartial technical service and the results are expected at the beginning of 2016. If the original values are confirmed, no consequences will follow. If deviations are detected, the values will be corrected as required in accordance with the normal type approval process. The total annual production of these nine models is roughly 36,000 cars, which corresponds to about 0.5% of the overall volume of Volkswagen passenger cars. Volkswagen Group has announced that it will take responsibility for any additional tax consequences resulting from the CO2 emission case.

All affected cars are technically safe and roadworthy.

Product labelling

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

During the year, there were 46 (40 in 2014) product recalls resulting from defective product labelling, 9 (11 in 2014) of which were Kesko’s grocery trade’s own brands.

PR5 Results of surveys measuring customer satisfaction

The recognition level and images of Kesko’s chains are regularly monitored by brand surveys targeted at consumers in all product lines. The same practice is applied to the K-Plussa customer loyalty system and the grocery trade’s own brand products. Store-level customer satisfaction is measured by customer satisfaction surveys, as well as by using the mystery shopping method in food stores and building and home improvement stores.

The chains have different channels for customer feedback, and Group-level feedback can be given on Kesko's website. All messages received via all the feedback channels are responded to.

During the year, Kesko’s grocery trade’s Consumer Service, maintained by Product Research, was contacted by customers 19,770 (20,911 in 2014) times. Approximately 80% of these were product complaints.

Results of customer satisfaction surveys in Kesko’s divisions

Monitoring customer satisfaction in Kesko’s grocery trade

Kesko’s grocery trade surveys and monitors customer satisfaction in all of its chains on a regular basis. Measuring is carried out based on each chain’s business needs with the focus on leveraging this information to improve customer experience and satisfaction.  

Results are studied at the division, chain, store and question level. Store-specific results and changes are actively monitored, with a special emphasis on leveraging the information at the store level and in the operations of each store.

Recommendation after shopping, customer pulse

The aim is to establish customer experience (willingness to recommend) using a survey sent to customers. The customer will receive the survey on the day after visiting the store. The indicator used is Net Promoter Score, ‘a net recommendation index’. The survey enquires how likely the customer is to recommend the store to their friends or acquaintances on a scale of 0–10. Customers answering the survey are also asked to give open-ended feedback on their satisfaction or dissatisfaction.

The survey is in continuous use in the following chains of the grocery trade: K-citymarket, K-supermarket and K-market. The survey is sent to K-food store customers who have an e-mail address in the K-Plussa customer register. The survey is sent to a sample of customers based on specific conditions.

The results are reported monthly on the store and chain levels. The report consists of a numerical summary and open feedback. Feedback is sent to the stores once a week and the contents are analysed on a centralised basis to enhance operations.

As the survey was introduced in late autumn 2015, it is too early to draw any conclusions about the development of the results.

Customer satisfaction survey to K-food store customers

The customer satisfaction survey looks into customer satisfaction with store departments, customer service and other operations. The aim is to help stores develop their operations by listening to customers’ opinions and wishes.

The survey was carried out for K-citymarket, K-supermarket, K-market and K-market Neste Oil stores twice in 2015. In spring, some of the stores in the K-extra chain also participated. In autumn, a separate survey was carried out for K-citymarket’s home and speciality goods trade. The source of the sample was the K-Plussa customer register. Data was collected in 2015 and, depending on the chain, the survey was either entirely electronic or partly electronic and partly on paper.

After the survey period, the results were reported at the store, chain and division level, and with different background variables. Depending on the set of statements, the results were presented either on a scale of 0–100 or as percentages.

The trend of K-food stores’ customer satisfaction was positive in all of the chains in 2015. K-food stores’ result of 67.8 in autumn 2015 was the best result in the past two years. Survey results are not comparable with the results achieved before 2013.

 

Monitoring customer satisfaction in Kesko’s home improvement and speciality goods trade

Kesko’s home improvement and speciality goods trade measures customer satisfaction in all of its operating countries and different chains on a regular basis. Measurements are based on each chain’s business requirements with an emphasis on leveraging information on customer interface. In surveys, the focus is shifting towards customer encounters and measuring customer experience at various stages of the shopping path.

The results are studied at the store and chain level. Store-specific results and changes are actively monitored. A special emphasis is leveraging the information at the store level and in the store’s own operations.

Recommendation after shopping, customer pulse

The aim is to establish customer experience (willingness to recommend) using a survey sent to the customer immediately after the purchase. The indicator used is Net Promoter Score, ‘a net recommendation index’. Customers answering the survey are also asked to give open-ended feedback on their satisfaction or dissatisfaction.

The survey is in continuous use in the following chains of the home improvement and speciality goods trade: K-rauta (Finland), Rautia, Asko, Sotka, Intersport, Budget Sport and Kookenkä. The target group consists of customers who have spent a certain sum, used their K-Plussa card and have their e-mail address in the K-Plussa register.

On the day after shopping, customers receive an e-mail survey in which they are asked about their willingness to recommend the store to their friends and acquaintances. Question: "On a scale of 0–10, if asked, how likely would you be to recommend X to your friends on the basis of your last shopping visit?" Open-ended feedback is also requested with a further question, phrased separately for those who were critical (scores 0–6) and those who were positive (scores 7–10).

Results are reported monthly at store level. The report consists of a numerical summary and open feedback. The feedback is sent to the stores at least twice a month and the contents are analysed on a centralised basis to enhance operations.

The trend in the results of all chains was positive in 2015.

The annual customer satisfaction survey to customers of building and home improvement stores and agricultural stores

The aim of the survey is to find out how the customers of the building and home improvement stores find the store’s operations and customer service. The survey helps stores to enhance their operations to better meet customers’ needs and wishes.

The survey takes the form of an e-mail enquiry, with the exception of Russia, where customers are interviewed in-store after shopping.

Contents have been defined in cooperation with different operating countries (Finland, Sweden, Norway, Estonia, Latvia, and Russia) and special local features have been taken into account. In 2015, Rautakesko’s total satisfaction was 3.9 on a scale of 1–5, which was the same as before. Results varied by country and chain and were between 3.8 and 4.1. The trend in Latvia and Norway was positive in 2015, while in other countries the results remained unchanged or decreased slightly.

Konekesko’s customer satisfaction survey for dealers and service shops

Konekesko measures customer satisfaction among dealers and in service shops on a regular basis. The survey is carried out annually in the form of an e-mail enquiry.

The results of each operation are reported separately so that the development of operations can be directed as accurately as possible. In 2015, the results in different operations varied between 3.5 and 4.1 (on a scale of 1–5).

Measuring daily customer satisfaction in stores

Measurement is carried out with the help of a questionnaire device in-store.

Budget Sport acquired devices for all of its stores over the course of 2015. The model was also piloted successfully in other chains.

The customer is asked to answer the following question: “How did we do today?” Customers who did not buy anything are also invited to give a response. All customers who leave their contact information and wish to be contacted should be contacted as soon as possible, within 24 hours at least. Responsible persons in-store analyse customer feedback on a regular basis. They take the action required or make a proposal to the store’s weekly meeting or management team.

 

Customer satisfaction monitored in Kesko’s car trade

Survey methods

VV-Auto Group Oy surveys the satisfaction of its end customers for all of the brands it represents – Audi, Volkswagen, Volkswagen commercial vehicles and SEAT – regarding the purchase and service of a new car.

This is done via a telephone interview. Questions about all the brands are, to a great extent, uniform. The questions aim to tackle the sales or service process of the car accurately and in detail. The survey takes about 10 minutes.

There are two types of questions: yes/no questions and questions that describe the level of satisfaction on a scale of very satisfied to not at all satisfied. Customers can also give open-ended feedback.

The targeted numbers of interviews vary according to the size of the dealer. Target levels are:

  • Sales: 10 or 20 interviews per month
  • Service: 10, 20 or 40 interviews per month

As for SEAT, the survey is carried out in the form of an e-mail enquiry. It is sent to all the customers who have given their e-mail address.

At the end of service visits, customers are also asked to give immediate feedback on their satisfaction with the maintenance and service.

An external research agency analyses the results and reports them via VV-Auto’s secure portal. Customer-specific answers are available only if these customers give their consent to the use of their data.

Based on the results, quality bonuses are paid to dealers.

Results in 2015

Sales: Audi, Volkswagen commercial vehicle and SEAT dealer networks reached the target level. The Volkswagen dealer network fell slightly below the target level.

Service: Audi, Volkswagen and Volkswagen commercial vehicle dealer networks reached the target level. The SEAT dealer network fell slightly below the target level.

Service/immediate feedback: Only the Audi dealer network reached the target level. The results of the others fell clearly below the target levels.

Marketing communications

PR6 Sale of banned or disputed products

During 2015, Kesko’s stakeholders raised questions and concerns regarding several products and the conditions under which they are produced.

Thailand

In June 2015, Finnwatch published a follow-up study on the tuna factories in Thailand that manufacture own brand products for the retailing sector. The study summary states that clear improvements have been seen in the working conditions of the factory manufacturing Pirkka tuna but further actions are still needed. The report encourages Kesko to continue cooperation with the factories but includes the reminder that retail chains must constantly ensure that human rights are respected.

In September 2015, Finnwatch published a report on working conditions in the chicken industry of Thailand. According to the report summary, the responsibility requirements of the companies importing chicken from Thailand are often vague and implementation is not supervised. The report states, however, that Kesko’s grocery trade carries out human rights assessments when selecting suppliers, includes responsibility requirements in its purchasing agreements and monitors the implementation of the requirements by means of third-party audits. Both of the plants producing chicken meat for Kesko’s grocery trade’s own brand products are BSCI audited.

Kesko has also actively cooperated with stakeholders in Thailand with the aim of improving conditions in purchasing chains. Examples of cooperation include participation in the ILO’s Good Labour Practices buyer reference group and the research project for 2015─2018 with Plan International Finland, an organisation promoting children’s rights, to improve social responsibility in the Thai fish industry and the position of migrant workers there.

Israeli settlements

The discussion concerning products produced in Israeli settlements took a new turn in November 2015. The European Commission published an Interpretative Notice to the effect that if the origin of a product must be stated – or if the origin is voluntarily stated – and the product originates from an Israeli settlement, the product label must state that the origin of the product is an Israeli settlement. Kesko’s grocery trade has made a policy statement and informed its suppliers that it will not accept fruit and vegetables from Israeli settlements in its selections. Imports by Kesko’s other divisions from Israel are small. These divisions verify product origins with their suppliers and, if necessary, comply with the Commission’s Interpretative Notice.

Cocoa

There has been a long-felt need in the European cocoa and chocolate industry for an international standard to help in the assurance of social responsibility and traceability of cocoa. The International Organisation for Standardisation (ISO) and the European Committee for Standardisation (CEN) decided in October 2014 to start preparing a responsibility standard for cocoa. The target timeline for its completion is three years. A monitoring group has been set up in the Finnish Standards Association (SFS) in order to influence the content of the standard. Kesko has a representative in the monitoring group.

Soy

Kesko recommends that its suppliers use responsible RTRS or ProTerra certified soy in the ingredients of soy origin of the grocery trade’s private label foods, in the production of products of animal origin and as an ingredient of the animal feed products sold by the agricultural trade. By 2020, only responsible RTRS or ProTerra certified soy will be used in these products.

Kesko is a member of the Round Table on Responsible Soy (RTRS) organisation and is thereby committed to promote responsibility in the production chain of soy on a long-term and target-oriented basis. Both economic, social and environmental considerations must be taken into account in the production of responsible soy.

Kesko is a founding member in the Finnish soy commitment group. The members of the Finnish soy commitment group pledge to ensure that by 2020 all the soy used in the production chain of their private label products will be responsibly produced, and be either RTRS or ProTerra certified soy. The commitment covers both the Finnish production chain and sourcing from other countries.

Wild berries

In December 2014, the Ministry of Employment and the Economy and the Ministry for Foreign Affairs signed a letter of intent on wild berry picking with a number of companies in the berry industry.

The aim of the letter is to improve the legal status of foreign pickers of wild berries and people in related duties as well as their ability to earn sufficient income. A further aim was to provide equal business conditions for all companies in the berry industry. The letter of intent contains 26 jointly agreed entries concerning operating practices. The companies responsible for inviting berry pickers to work in Finland commit themselves to improving the induction and advice provided to their workers. In addition, recruitment costs and other expenses charged to pickers are made more reasonable and the expenses charged are monitored more closely. Stricter quality criteria are also applied to berry pickers’ accommodation, washing and catering facilities.

During the harvest season of 2015, Kesko’s grocery trade required that all suppliers of wild berries for its own brand products complied with the letter of intent on responsible berry picking.

Fish

A working group that was set up by the Ministry of Agriculture and Forestry completed a national salmon strategy in November 2013. Kesko had a representative in the working group. The objective of the salmon strategy is to support the strengthening of the wild Baltic salmon population in a way that enables professional and recreational fishing to continue. The working group undertook to increase salmon and sea trout stocks with measures extending up to 2020. The government approved the strategy in October 2014. In February 2015, the Ministry of Agriculture and Forestry decided to set up a working group to monitor the implementation of the salmon and sea trout strategy and the fishway strategy. Kesko has a representative in the working group.

The K-Group’s fish selections are formed following the WWF's fish guide and the report by the national salmon strategy working group. The selections of Kesko’s grocery trade do not include species on the red list of the WWF’s fish guide with the exception of wild Baltic salmon, for which we observe the EU quotas in line with the national salmon strategy.

PR7 Incidents of non-compliance with regulations and voluntary codes concerning marketing communications

Kesko 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 2015, 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. The consumer ombudsman had one complaint under investigation, according to which Indoor had exceeded the maximum duration of discount sales during the year. No decision has yet been taken in the case.

Sponsorship is guided by Kesko’s sponsorship principles.

 

Customer privacy

PR8 Complaints regarding breaches of customer privacy and losses of customer data

In 2015, 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.

 

Compliance

PR9 Fines for non-compliance with laws and regulations concerning the provision and use of products and services

No significant fines in 2015.