Performance for 2005 mainly good Kesko's good economic performance contributed to the wellbeing of its employees, suppliers, shareholders and public authorities in Finland and Kesko's other market areas. Economic benefits generated in Finland totalled ¤5.5 billion (of which ¤2.5 billion outside the Uusimaa region), compared with ¤770 million in the Baltic countries and ¤500 million in the other Nordic countries.
In the area of environmental responsibility, proportion of renewable energy of all electricity purchased increased to over 50%, relative transportation-related emissions decreased and the waste recovery rate remained high. Specific consumptions of electric and heat energy per square metre increased, and foreign companies generated considerably more waste ompared with the volume of operations than the Finnish ones.
The average number of employees during the year increased by a fifth or 4,075 over 2004 - in Finland the increase was 945. The proportion of fixed-term and part-time employees continued to decrease in Finland and throughout the Group. Job satisfaction remained unchanged in Finland and Sweden, improved in Estonia and Latvia, and decreased in Lithuania. The number of sick days per employee decreased. The number of training days increased, but money spent on training decreased.
Kesko among top-of-the-world companies in sustainable development Kesko was named by Dow Jones the leading company in the world in the retailing sector in its sustainability index for 2006 and listed among the Global 100 Most Sustainable Corporations by the World Economic Forum in January 2006. The Innovest Strategic Value Advisors Inc, which prepared this assessment, also rated Kesko Food Ltd the best company in its global analysis of food and drug retailers. Kesko also continued to be included in other corresponding index listings revised during the year.
Further information: Kesko Corporation/Corporate Responsibility, Jouko Kuisma, Head of the Unit, tel. +358 1053 23140 or +358 50 5143 043, firstname.lastname@example.org and Ulla Rehell, Senior Manager, tel. +358 1053 22464 or +358 50 383 9426, email@example.com
Attachment: Kesko's performance in corporate responsibility in 2005
Kesko's profit remained at the level of the previous year, the market value of its shares increased by one third, and its dividend yield remained high in 2005. Investments reached an all-time-high, 5.4% of net sales, totalling ¤454 million, of which 60% were invested in operations outside Finland.
The number of K-stores increased slightly
At the end of 2005, there were 1,041 K-food stores in 376 cities and municipalities, a decrease of 43 on the previous year. 44.7% of all Finns lived less than one kilometre from a K-food store. In 2000 the corresponding figure was 47.3%. In 2003-2005 shopping distances have slightly shortened in the provinces of Western Finland and Lapland.
There were 748 K-speciality stores, an increase of 80 on 2004. The change was mainly attributable to the transfer of the Asko and Sotka chains into Kesko's ownership. In all, the number of K-stores had grown by 37 over the previous year.
Foreign operations expanded considerably during the year. Kesko Food's and ICA AB's Baltic operations were combined at the beginning of the year into Rimi Baltic AB, which operates a total of 177 food stores in the Baltic countries. At the beginning of July, Rautakesko acquired Norgros AS of Norway, which owns 20 stores in the Byggmakker chain and has 113 retailer entrepreneurs with a chain agreement. The Stroymaster chain which comprises five DIY stores in the St. Petersburg area was also acquired in July.
Economic benefits to Finland totalled over ¤5.5 billion
In 2005, Kesko had 25,000 active suppliers of goods and services, of whom 11,000 were in Finland, 8,000 in other operating countries of Kesko and 6,000 in countries outside Kesko's operating area. Kesko's purchases of goods and services from suppliers operating in Finland totalled ¤4.7 billion, from other operating countries ¤920 million and from outside the operating area ¤1,460 million.
Kesko's Finnish companies made 81.3% of their purchases from suppliers operating in Finland. As approximately 15% of these were purchases from import companies, imports accounted for 31.5% and domestic purchases for 68.5% of operations in Finland. The figures are only indicative, as such product-level statistics are impossible to compile. Finnish products accounted for 62.5% of the sales of Pirkka products.
The economic benefits from Kesko's and K-retailers' operations across Finland totalled over ¤5.5 billion, of which nearly ¤2.5 billion was directed outside the Uusimaa region. K-retailers' direct purchases from local suppliers totalled ¤360 million. Economic benefits to the Baltic countries totalled ¤770 million and to the other Nordic countries ¤500 million.
Kesko at the top in international comparisons In September, Dow Jones named Kesko the leading company in the world in the retailing sector in its sustainability index for 2006. In January 2006 and 2005, the World Economic Forum has published a list of the Global 100 Most Sustainable Corporations, prepared by Innovest Strategic Value Advisors Inc on the basis on the leading indexes. Kesko has been on the list in both years. In the business sector comparison drawn up by Innovest, Kesko Food was rated the best company in the global analysis of food and drug retailers by sustainability standards.
Environmental responsibility Like in previous years, Kesko's environmental system in Finland was based on the ISO 14001 standard. K-stores' own environmental system - the K-environmental store diploma - had been adopted by 343 K-stores by the end of 2005. The environmental system was not yet in use in all the foreign subsidiaries, but drawing up energy, transportation, emission and waste statistics had started in nearly all companies. Energy consumption increased The combined electricity consumption of Kesko and the K-retailers operating in properties managed by Kesko was 734 GWh, an increase of some 8% per square metre over 2004. The total consumption of heat was 286 GWh and specific consumption increased by 3%. Specific consumption of water also increased by 3% and totalled 604,000 m3. Foreign subsidiaries purchased a total of 157 GWh of electricity and distant heat.
The combined electricity consumption of Kesko and the K-retailers accounted for 0.8% and that of heat for 0.9% of the total consumption in Finland, and the greenhouse gas emissions generated - 233,000 CO2 tons - approximately 0.2% of the total emissions in Finland. Renewable energy accounted for more than half of Kesko's electricity purchases in 2004-2005, compared with the previous figure of 10-20%. Relative transport-related emissions decreased In Finland the kilometres driven by Kesped Ltd, Kesko's transport company, per load and cubic metre delivered decreased by one third, which can mainly be attributed to the increase in the outsourced pallet transportation and other structural changes. As a result, the emissions generated reduced correspondingly. No reliable calculation of emissions can be presented, because it has not been possible to prepare statistics of all kilometres driven in outsourced transportation. The environmental impacts of the changes are, however, assumed to be positive, as Kesko's assignments have generally increased the volumetric efficiency of transport companies' loads and only seldom required additional loads to be driven.
Kesko Group's combined transportation emissions - foreign countries included - totalled nearly 24,000 CO2 tons.
Waste management improved further
The amount of mixed waste generated by Kesko Food's warehouses decreased from 0.39 kilos to 0.36 kilos per cubic metre delivered. The waste recovery rate in the Finnish distribution centres averaged 89.8%, compared with 97.5% for Anttila. The amount of waste generated in relation to the volume of operations was considerably higher in foreign operations than in Finland. The share of the packaging imported by Kesko out of the total import volume dropped from 10.3% to 9.4% in Finland. Kesko Food's return logistics transported 33 million aluminium cans and 8 million other packages for recovery and reuse.
The Group had 21,603 employees (+ 4,075) at the end of 2005. The increase in Finland was 945, of whom 690 can be attributed to the acquisition of Indoor Group and some 100 to the expansion in VV-Auto's retail operations. The proportion of both fixed-term and part-time employees continued to drop in Finland and throughout the Group. Staff turnover in Finland was 24.2%, and varied between 11% and 48% in other countries.
Short sickness absences decreased
Paid sickness absences, in terms of working hours, decreased in Finland by 10.5%. Contributing factors included three wellbeing projects implemented during the year. The number of accidents and their seriousness also decreased. Investment in rehabilitation increased. The amount of funds used in occupational health in Group companies in Finland totalled ¤427 per person - an increase of one third during the past five years. The number of sick days dropped in foreign companies even more than in Finland but due to the considerable expansion in operations, the years are not fully comparable.
The average retirement age decreased again as the number of disability pensions increased slightly. The number of training days increased in Finland to 1.8 days per employee - student days at the K-instituutti training centre increased by one third over 2004. Job satisfaction remained unchanged in Finland - satisfaction with equality improved slightly. The proportion of women in top management was 14.3%, in middle management 23.7%, and in other management and specialist positions 54.8%.
New system for social quality control
At the beginning of 2005, Kesko joined the Business Social Compliance Initiative, BSCI, established by European trade chains to promote a uniform auditing practice among suppliers in developing countries. By the end of the year BSCI had 50 trading chains as members, and had 2,700 suppliers in the common database with the BSCI audit completed or under way. The suppliers mainly include clothing, shoe, home textiles and toy factories. BSCI audits will be expanded to cover food production in 2006.
According to the statistics compiled by BSCI, initial audits revealed several deviations from BSCI requirements in many companies, for example in respect of salaries, working hours, and occupational health and safety. Most of the deficiencies were corrected by the time of re-audits, but it is clear that companies in developing countries still need plenty of time and support to meet all international standards of the working life.
Kesko's direct purchases from suppliers in risk areas totalled ¤84 million (¤110 million in 2004). They accounted for 1.4% of Kesko's total purchases and 7.7% of Kesko's total imports into Finland. 42 of Kesko's suppliers had been entered in the BSCI database; in addition Kesko had 23 suppliers with SA 8000 certification.