Responsible purchasing and sustainable selections

We purchase and sell responsibly and support our customers in making sustainable choices

We develop our product selections while listening to customers.
We ensure responsibility in the supply chain.
We are accountable for the safety and quality of products.

Topic	Objective	Progress of objectives 2017
Supply chain	The social responsibility of the production of own direct imports from high-risk countries has been assured. GRI 414-1, 414-2	A total of 157 of Kesko’s suppliers' factories or plantations underwent full amfori BSCI audits. In addition, 146 suppliers’ factories or plantations underwent amfori BSCI follow-up audits. At the beginning of 2018, Kesko’s suppliers in high-risk countries had a total of 423 valid social responsibility audits. Two responsibility trainings were arranged for the ICA Global Sourcing (IGS) suppliers: 24 suppliers took part in the Hangzhou training in China and 23 suppliers in the Delhi training in India. As part of our cooperation with Plan International Finland, three amfori BSCI supplier trainings were arranged in Bangkok, Thailand. A total of 25 suppliers from the Thai fishing industry took part in the trainings. Continuing our human rights assessment we conducted a review of working conditions in the supply chain of grapes in collaboration with the Trade Union Solidarity Centre of Finland (SASK).	210 BSCI full audits and 60 BSCI re-audits were conducted in the factories and farms of Kesko’s suppliers in high-risk countries. At the beginning of 2017, Kesko’s suppliers in high-risk countries had a total of 386 valid social responsibility audits. The social responsibility of the production of Kesko’s grocery trade's own direct imports from high-risk countries was 100% assured. Kesko Onninen Purchasing Office (KOPO) started operations in Shanghai, China. Kesko’s grocery trade and ICA Global Sourcing launched a sourcing cooperation in the home and speciality trade. As part of the human rights assessment, we conducted a human rights survey at factories in high-risk countries in cooperation with the Trade Union Solidarity Centre of Finland (SASK). The country-specific reports by SASK provided valuable information for the development of our operations. We forwarded the information received to BSCI in order to develop the audit procedure.	Kesko's suppliers in high-risk countries had 200 factories or farms within the scope of the BSCI process. 107 BSCI full audits and 80 BSCI re-audits were conducted in the factories and farms of suppliers in high-risk countries. The social responsibility of the production of Kesko's grocery trade's own direct imports from high-risk countries was 100% assured. We continued our work related to the human rights impact assessment. We published the manufacturing plants of private label and own import clothes, accessories, shoes and bags operating in high-risk countries on our website.
	We assure the responsibility of the ingredients (Tier 2) of private label Pirkka and K-Menu food products. GRI 414-1, 414-2	The responsibility of ingredients used in 150 new Pirkka and K-Menu food products was assessed using our own risk analysis tool. Based on the risk analysis, 20 products contained ingredients which require further investigation in terms of the social responsibility of the producer. Our analysis of ingredients in our own brand products received recognition at the annual meeting of amfori (previously Foreign Trade Association, FTA). Thanks to the risk analysis, Kesko was elected among the top three finalists of the FTA member of the year award.	We continued work in order to assure the responsibility of ingredients in the own-brand grocery products. We conducted ingredient risk assessments on 160 new Pirkka or K-Menu food products. Among these, 29 products contained ingredients which require further investigation in terms of responsibility.	Using the risk assessment tool, we started the process of assuring the responsibility of the ingredients of Pirkka and K-Menu products. We established the origin of the ingredients of 1,923 own-brand grocery products. Among these, 233 contained ingredients which require further investigation concerning the responsibility of the ingredient manufacturer based on the risk assessment.
	We identify and take account of water risks in our supply chain.	Our water risk assessment work continued and we aim to use the results to plan actions.	The water risk assessment is in progress and the aim is to use the results to plan actions.	We initiated a water risk assessment for our own brand products in order to identify the water basins most affected by water scarcity and contamination issues in our supply chain. The target is to conclude the water risk assessment in 2016.
Statements and policies	Fish and shellfish: The selections of Kesko’s grocery trade and K-food stores do not include species on the red list of the WWF’s fish guide. Kesko’s grocery trade and K-food stores promote green list species in their selections. When making decisions concerning selections, we favour sustainable stocks of fish and MSC and ASC certified suppliers. K Group's fish and shellfish policy has been in effect since 2008.	The retail selection of Kesko’s grocery trade included 196 MSC-certified fish products, of which 41 were Pirkka products and 1 K-Menu product. Our selections had 7 ASC-certified products, of which 4 were Pirkka products. Kespro’s HoReCa selection had a total of 304 MSC-certified products, of which 30 were Menu products. Kespro's selection had 10 ASC-certified products, of which 2 were Menu products.	The retail selection of Kesko’s grocery trade included 178 MSC-certified fish products, of which 37 were Pirkka products. Kespro was granted MSC and ASC traceability certificates. All stages of Kespro’s fish and shellfish supply chain have been audited, and Kespro and its certified customer restaurants can use the MSC and ASC ecolabelling in their marketing. Kespro’s HoReCa selections included nearly 300 MSC- and ASC-certified products, and the number continues to grow. Kespro's Menu range had more than 25 MSC-certified products and 2 ASC-certified ones.	The Pirkka range included 41 MSC-certified fish products.
	Palm oil: By 2020, all palm oil in our own brand groceries will be responsibly produced (CSPO).	Some 82% of the palm oil in Kespro’s Menu food products sold in 2017 was sustainably produced (CSPO), of which 0.2% was Identity Preserved, 74.3% Segregated, 20.7% Mass Balance, and 4.9% RSPO credits. Some 43% of the palm oil in Pirkka and K-Menu food products sold in 2017 was sustainably produced (CSPO), of which 19% was Segregated, 79% Mass Balance, and 2% RSPO credits.	Approximately 34% of the palm oil in our own brand groceries (Pirkka, K-Menu and Kespro’s Menu) was certified sustainable palm oil (CSPO).	Approximately 20% of the palm oil in the Pirkka food products was certified sustainable palm oil (CSPO).
	Soy: By 2020, all soy used in the production chain of our own brand products will be responsibly produced, and be either RTRS or ProTerra certified. The policy concerns ingredients of soy origin in grocery trade’s own brand food products and soy fodder used in the production of products of animal origin.	We reviewed the share of responsibly produced soy in our own brand food products and their supply chain. The soy used in our own brand food products (Pirkka, K-Menu and Kespro’s Menu) sold in 2017 and their supply chain was not yet responsibly produced.	We were a founding member in the Finnish soy commitment group, which started operations in February 2016. 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. The commitment covers both the Finnish production chain and sourcing from other countries. We joined the Round Table on Responsible Soy (RTRS) and thereby committed to promote responsibility in the production chain of soy on a long-term and target-oriented basis.	The objective was added in 2016.
	Timber and paper: By 2025, there will be only sustainable origin timber and paper products in Kesko's product range. Timber and paper products will be FSC or PEFC certified or made of recycled materials. In the grocery trade, the policy applies to our own brand products.	In 2013, Kesko’s building and technical trade was awarded the PEFC certificate, which covers sawn pine and spruce timber and processed timber as well as the wholesale distribution of MDF boards in Finland (percentage-based method). The average PEFC certification percentage in 2017 was 89.7% for pine and 85.5% for spruce. Of the timber and paper products in the grocery trade’s Pirkka and K-Menu ranges, 54% contained sustainable raw material. In Kespro’s Menu range, 14% of timber and paper products contained sustainable raw material.	The average PEFC certification percentage was 91.2% for pine and 84.6% for spruce. We are investigating the opportunities to expand the timber policy to cover the entire Group.	The PEFC certification percentage is announced monthly at Kesko's web pages.
	Plastic: We promote the recycling and reuse of plastics. We create operating models that prevent plastics from ending up in the environment. We seek alternatives to plastic as a packaging material. By means of consumer communications, we will increase the sales share of alternative shopping bags (cotton bags, reusable bags and jute bags) and cardboard boxes to 10% by 2025. We look for solutions to replace PVC as a material.	We removed environmentally harmful microbeads from all our own brand cosmetic products. During 2018, microplastics will be removed from all our own brand detergents. The Pirkka ESSI circular economy bags were introduced to K-food stores' shopping bag selections at the start of 2017. The bags are made of over 90% recycled materials, around half of which is plastic packaging separately collected from households. By the end of 2017, small thin plastic bags were only available at checkouts by request for e.g. flowers. We reduced the consumption of small plastic bags by 20% in 2017. We successfully piloted the new wood fibre-based EcoFishBox produced by Stora Enso in K-food stores. Since 2017, K Group gift cards have been made from PVC-free materials. In Onninen Express stores in Finland, regular customers have been handed shopping baskets that the customers can use to carry products to their construction site and bring back the next time the visit the store.	We published our plastics policy in October 2016 and pledged to implement measures aiming at reducing the use of plastic bags. Plastic bags have been subject to a charge in the K Group's grocery stores as well as building and home improvement stores, and, at the beginning of 207, they became subject to a charge in the agricultural and machinery stores as well as in furniture stores. By the end of 2017, thin small plastic bags will no longer be available at the checkout. Our selections offer alternatives to plastic bags; reusable bags, cotton bags, jute bags as well as paper bags and bags made of recycled plastic. The share of paper bags in the sales of all different shopping bags was approximately 1.5% and that of reusable bags was approximately 1.5%. In spring 2017, we included the Pirkka ESSI circular economy bags made by Amerplast Oy in our selections. They are manufactured from plastic packaging waste recycled by households through the Rinki eco-points. We will discontinue the use of microplastics in our private label cosmetics brand products in 2017. The packaging of our private label cosmetics does not contain PVC. We will discontinue using PVC as the material for Kesko’s gift cards in 2017. We will work to eliminate PVC from the material of the K-Plussa card in 2017.	More reusable bag alternatives were added to the grocery store selections: a new Vallila design, a Summer Day bag, and a Red Nose Day bag.
Own brands with responsibility labelling	We offer an extensive selection of own brand products with responsibility labelling.	The Pirkka range had 37 Pirkka Fairtrade products, 116 Pirkka Organic products, 41 Pirkka MSC-certified fish products, 35 UTZ-certified products, 76 Nordic Swan label products, 137 products with the Key Flag symbol, 88 Seed leaf label products, 220 Hyvää Suomesta (Produce of Finland) products, and 5 products with the Finnish allergy label (Allergiatunnus). Kespro’s Menu range had 4 Fairtrade products, 5 organic products, 30 MSC-certified products, 2 ASC-certified products, 15 products with the Nordic Swan ecolabel, 10 UTZ-certified products, 21 products with the Key Flag symbol, 4 Hyvää Suomesta (Produce of Finland) products and 23 Seed leaf label products. In the building and technical trade, the Cello range had 411 Key Flag products, 30 Nordic Swan label products, 35 M1 label products, and 116 products with the Finnish allergy label (Allergiatunnus).	The Pirkka range included 36 Pirkka Fairtrade products, 118 Pirkka Organic products, 37 Pirkka MSC-certified fish products, 32 Pirkka UTZ-certified products and 65 Nordic Swan label products. All Pirkka and K-Menu coffees are Fairtrade or UTZ-certified. The Pirkka range includes 15 Fairtrade or UTZ-certified chocolate and baking chocolate products. In 2017, all Pirkka range chocolates will be Fairtrade or UTZ-certified. Kespro’s Menu range included 7 Fairtrade products, 5 organic products, 25 MSC-certified products, 2 ASC-certified products, 13 products with the Nordic Swan ecolabel, and 5 UTZ-certified products. All interior and exterior paints in the K-Rauta's Cello range carry the Nordic Swan ecolabel. 62 Cello products carried the M1 label and 105 Cello products had the Allergy Label. 15 products in the PROF range carried the M1 label.	The Pirkka range included 40 Pirkka Fairtrade products, 134 Pirkka Organic products, 41 Pirkka MSC-certified fish products, and 17 Pirkka UTZ-certified products.
Product safety	The product safety of K Group’s selections has been verified. The Product Research Unit's laboratory monitors the product safety and quality of the own brand products and own imports in the grocery trade. All of our food product operations have a self-control plan in place. GRI 416-1, 416-2, 417-1	The Product Research laboratory analysed 7,350 product samples and conducted 15,076 analyses. In total, 522 suppliers of Kesko’s own brands of food products have international audit certifications that assure product safety. The number of own audits was 59.	The Product Research laboratory analysed 7,770 product samples and conducted 17,176 analyses. The product safety of 503 suppliers was verified by means of a certified auditing procedure. The number of own audits was 58.	The Product Research laboratory analysed 8,037 product samples and conducted 20,396 analyses. Seven audits were performed.

Supplier social assessment

414-1 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 2017, direct purchases by Kesko's Finnish companies from suppliers in high-risk areas totalled €106 million (2016: €85 million) and accounted for 1.2% (2016: 1%) of Kesko's total purchases. Direct imports from high-risk countries accounted for approximately 13.9% (2016: 11.9%) of Kesko's total imports into Finland. The most significant high-risk countries of import for Kesko’s Finnish companies are presented in the map below. No statistics are available on direct imports from high-risk countries in Kesko's other operating countries.

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

Kesko annually publishes 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 31 August 2017.

Social responsibility audits of suppliers in high-risk countries

Kesko is a member of amfori, a leading global association dedicated to promoting open and sustainable trade. Kesko takes part in amfori BSCI and recommends the use of amfori BSCI audits in the assessment of social responsibility of suppliers in high-risk countries. Kesko also accepts other assessment systems of social responsibility if their criteria correspond to those of amfori BSCI auditing and if 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 a third-party auditing approved by Kesko after a maximum of two ICA audits.

The social responsibility auditing systems accepted by Kesko are listed in the section Monitoring and control systems. Some of Kesko’s suppliers are themselves amfori members and thus promote amfori BSCI audits in their own supply chains.

At the beginning of 2018, the factories and farms of Kesko’s suppliers in high-risk countries had:

291 (start of 2017: 274) valid amfori BSCI audits
15 (start of 2017: 13) valid SA8000 certifications
30 (start of 2017: 24) valid SMETA audits
45 (start of 2017: 24) valid ICA Social Audits
22 (start of 2017: 22) valid SIZA audits
11 (start of 2017: 11) valid Fairtrade certifications
2 (start of 2017: 5) valid ICS audits
5 (start of 2017: 11) valid ICTI CARE certifications
1 (start of 2017: 2) valid WRAP certification
1 valid WIETA certification

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 the cooperation begins. 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.

Suppliers' social responsibility audits in Kesko's 10 largest high-risk countries of import¹

Results of amfori BSCI audits

In 2017, a total of 157 (2016: 210) of Kesko’s suppliers' factories or plantations underwent full amfori BSCI audits. In addition, 146 (2016: 60) suppliers’ factories or plantations underwent amfori BSCI follow-up audits.

The results of the 2017 amfori BSCI audits of Kesko’s suppliers’ factories and farms 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 the amfori BSCI 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 2017, Kesko decided to terminate cooperation with six factories due to ambiguities related to social responsibility. A consensus could not be reached with the factories regarding necessary corrective actions.

Kesko's amfori BSCI audit results in 2017, full audits

Kesko's amfori BSCI audit results in 2017, follow-up audits

Kesko's amfori BSCI audit results, distribution in different areas in 2017, full audits

Kesko's amfori BSCI audit results, distribution in different areas in 2017, 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 store level.

In 2017, Kesko's grocery trade selections included 300 (2016: 367) Fairtrade products, of which 37 (2016: 36) were Pirkka products and 4 (2016: 7) were Kespro's Menu products.
In 2017, the products sold by Kesko's grocery trade generated Fairtrade premiums for social development projects amounting to €719,225 (2016: €649,459).

In 2017, the products generating the largest Fairtrade premiums were Fairtrade flowers (€271,672), coffee (€224,537) and fruit (€142,975). According to Faitrade statistics, the Fairtrade coffees sold by Kesko grocery trade in 2017 employed approximately 800 small-scale coffee farmers on Fairtrade's terms.

Kesko and Plan’s collaboration in Thailand

Kesko and Plan International Finland, an organisation promoting children’s rights, cooperate to improve the responsibility of the Thai fishing industry and the position of migrant workers. The collaboration has been agreed for the period of 2015-2018, and it is part of a larger project funded by the Swedish International Development Cooperation Agency (SIDA) and the American Richard and Helen DeVos Foundation in Thailand and Cambodia.

The project aims to improve the working conditions of Cambodian migrant workers, as well as education and protection for their children in Thailand. The collaboration with Plan also improves the transparency of the supply chain of Kesko’s fish products.

As part of the project, two learning centres were established for children of migrant workers in the Rayong and Trat provinces in 2015. The learning centres provide the children with the skills they need to attend public schools in Thailand and support them in continuing their studies. In 2017, 50 girls and 38 boys aged between 4 and 17 were registered at the learning centres. The project helped 40 girls and 60 boys move onto public schools in Thailand. Between 2015 and 2017, a total of 944 children have registered at the learning centres and 212 children have moved onto public schools.

Amfori BSCI training for suppliers continued in 2017: there were two general training sessions and one advanced-level training in Bangkok. A total of 25 suppliers from the Thai fishing industry took part in the trainings. The general training covered the amfori BSCI Code of Conduct, UN and ILO human rights and labour conventions, and the Thailand national labour protection legislation. The advanced training gave the suppliers tools for their own promotion and supervision of social issues. Supplier training will continue in 2018.

Read more about our collaboration with Plan.

Supplier training in China and India

Kesko and the Swedish ICA have worked together on sourcing via ICA Global Sourcing (IGS) in Asia since 2016. The cooperation concentrates on the sourcing of home and speciality goods sold at K-food stores. Assuring the social responsibility of suppliers’ factories and securing product quality form a central part of the purchasing process. IGS has offices in China, Hong Kong, Vietnam, Bangladesh and India. The local IGS corporate responsibility team is, together with Kesko, in charge of assuring the social responsibility of factories.

In 2017, responsibility training was arranged for IGS suppliers in Hangzhou, China and Delhi, India. The training covered Kesko’s social responsibility requirements for suppliers, the factory auditing process, and requirements related to product quality and safety. Questions from the suppliers concerning responsibility were also addressed.

24 suppliers took part in the Hangzhou training and 23 suppliers in the Delhi training. Representatives of IGS and Kesko’s responsibility unit were also present.

Read more about our cooperation with IGS.

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

Kesko’s objective is to identify the entire supply chain of products and to assure the social responsibility of their ingredients. The work to analyse the origins of the ingredients of Pirkka and K-Menu food products and related risk analysis began in 2015 and continued in 2017.

The responsibility of ingredients used in 150 new Pirkka and K-Menu food products was assessed in 2017 using our own risk analysis tool. Based on the risk analysis, 20 products contained ingredients which require further investigation in terms of the social responsibility of the producer. Between 2015 and 2017, a risk analysis has been conducted on the ingredients of 2,233 own brand food products.

In summer 2017, Kesko’s risk analysis of ingredients in its own brand products received recognition at the annual meeting of amfori (previously Foreign Trade Association, FTA). Thanks to the risk analysis, Kesko was elected among the top three finalists of the FTA member of the year award.

The study of the ingredients of own brand food products will continue in 2018. Based on the results, we intend to decide upon ingredient-specific follow-up measures to promote the sustainability of the supply chains of Pirkka and K-Menu products.

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. Manufacturers of Kesko’s own brand food products must have international certifications that assure product safety. The standards approved by Kesko’s grocery trade include: BRC, IFS, FSSC 22000 and GlobalGAP. In 2017, the total number of certified suppliers was 581 (561 in 2016). This number also includes old audits conducted according to Kesko’s grocery trade’s own audit guidelines.

A total of 7,350 product samples were analysed (7,770 in 2016). Most of them were related to the product development of own brands. A total of 2,395 own control samples were analysed (2016: 2,387).

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.

The National Nutrition Council of Finland published its nutrition commitment operating model in June 2017. The nutrition commitment is the Finnish contribution to the EU Roadmap for Action on Food Product Improvement framework’s reformulation programme.

K Group joined the nutrition commitment by making a vegetable commitment, which encourages K-food store customers to increase their use of vegetables through the following actions, which extend to year 2020:

By 2020, at least 400 K-food stores will have dedicated ‘veggie shelves’ for vegetable protein products. In 2017, some 250 K-food stores had a veggie shelf.
We will organise at least 250 vegetable-related campaigns at K-food stores each year (2018–2020). In 2017, K-food store chains organised 240 vegetable campaigns.
We will add at least 50 new fruit or vegetable products to our selections by 2020. In 2017, we added 55 new fruit and vegetable products to our selections.

In 2016 and 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.

In 2017, there were 140 product recalls in Kesko’s grocery trade (99 in 2016). Of these, 33 were Kesko’s grocery trade’s own brand products (26 in 2016). In the other cases, Product Research assisted the manufacturers in recalls. There were 4 public recalls involving a potential health hazard resulting from product flaws or defects in Kesko’s grocery trade’s own brand products in 2017 (2 in 2016).

K-Rauta had two (1 in 2016) and Onninen three (4 in 2016) recalls in 2017. Konekesko had one public recall in 2017 (0 in 2016), which constituted the only public recall for the building and technical trade division that year.

In 2017, 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

On the product labelling of its own brand products and imports, Kesko complies with all related legislation. Key regulations include:

Food product labelling: EU food information regulation (EU) No 1169/2011 and complementary acts
Product labelling related to safe use of consumer goods: Directive 2001/95/EC on general product safety (and related corresponding national legislation in Kesko’s operating countries)
Warning labelling for chemicals: CLP regulation EC 1272/2008 on the classification, labelling and packaging of chemicals
Labelling for electrical equipment: various product segment specific directives (and related corresponding national legislation in Kesko’s operating countries)
Toy labelling: Directive 2009/48/EC on toy safety (and related corresponding national legislation in Kesko’s operating countries)
Package labelling for cosmetics: Regulation (EC) No 1223/2009 on cosmetic products

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. Country of origin is indicated on all own brand products of K-Citymarket and Kesko’s building and technical trade.

The country of origin of meat is disclosed in accordance with regulation (EU) No 1337/2013. As ingredients, meat and dairy are labelled in accordance with the national decree MMM 218/2017.

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 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 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 was identified at 53,000. The case applies to all of the brands imported by VV-Auto: Volkswagen, Audi, SEAT and Volkswagen Commercial Vehicles.

The recalls and repairs of Volkswagen, Audi and SEAT 2.0, 1.6 and 1.2 litre EA 189 diesel cars (SEAT service campaign) proceeded at the planned schedule in Finland in 2017.

By the end of the year, a software update was available for all of the approximately 53,000 cars, and some 47,000 cars (88.4%) had been fully updated.

After the corrective measures, the cars meet the requirements of the EU5 emissions standard. The corrective measures do not affect the car's fuel consumption, engine power, CO₂ emissions, driving behaviour or acoustics.

Product recalls resulting from defective product labelling

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

In 2017, there were 39 product recalls resulting from defective product labelling (24 in 2016), of which 9 (7 in 2016) were Kesko’s own brand products.

GRI management approach

Material aspects

Compliance of products and services
Customer health and safety
Assessment of suppliers’ working conditions
Human rights
Marketing communications

Policies, principles and commitments

Responsible purchasing is guided by Kesko's purchasing principles.

The principles are based on national labour protection legislation and corresponding conventions of the International Labour Organization (ILO), which are applied when national legislation does not correspond to the same level. In its operations, Kesko pays special attention to human rights issues and working conditions in its supply chain and, in monitoring these, primarily focuses on suppliers in high-risk countries. In accordance with the amfori BSCI (Business Social Compliance Initiative), high-risk countries are countries and areas where there is a risk of human rights and workers' rights violations. The classification is based on the World Bank's Worldwide Governance Indicators.

Kesko and K Group stores are responsible to the products' end-users for ensuring that the products comply with all the requirements of Finnish and EU legislation, are safe for users and meet quality and other promises. Kesko's product labelling and marketing communications comply with legislative requirements and the recommendations of authorities.

Kesko and K Group stores want to support customers in making sustainable choices and offer a wide selection of products with responsibility criteria.

Kesko's policy on chemicals applies to home textiles, clothing, leather goods, shoes and upholstered furniture. Based on EU and Finnish legislation, it lists the chemicals which are prohibited or the quantity of which is restricted in the products supplied to Kesko. In addition, for substances of very high concern, Kesko sets restrictions that are stricter than those set in legislation.

Kesko’s plastics policy promotes recycling and the reuse of plastics. The objective of the operating model is to prevent plastics from ending up in bodies of water and elsewhere in the natural environment.

Various product group-specific responsibility policies and statements, such as the palm oil policy, the fish and shellfish statement, the timber and paper policy, and the stand on the sandblasting of jeans, have been prepared to support purchasing operations.

Monitoring and control systems

Certification and audit systems related to production in high-risk countries approved by Kesko

Certification/audit system	Product group	Coverage of criteria
amfori BSCI (amfori Business Social Compliance Initiative)	All product groups	Social, limited environmental part
SA8000	All product groups	Social
SMETA	All product groups	Social, limited environmental part
ICS	All product groups	Social
Fairtrade	Agricultural products incl. cotton	Social, environmental
Rainforest Alliance	Agricultural products	Social, environmental
Pro Terra	Agricultural products	Social, environmental
MPS-Socially Qualified	Agricultural products	Social
Soil Association Ethical Trade	Agricultural products	Social
Sustainability Initiative of South Africa SIZA	Agricultural products	Social, environmental
Sustainably Grown	Agricultural products	Social, environmental
UTZ Certified	Coffee, cocoa, tea	Social, environmental
RSPO (Roundtable on Sustainable Palm Oil)	Products containing palm oil	Economic, environmental, social
RTRS (Round Table on Responsible Soy)	Soy	Economic, environmental, social
WIETA	Wines	Social
Vinos de Chile	Wines	Social, environmental
MSC (Marine Stewardship Council)	Caught fish and shellfish	Environmental (sustainable fishing)
ASC (Aquaculture Stewardship Council)	Farmed fish and shellfish	Social, environmental
Florverde Sustainable Flowers	Flowers	Social, environmental
FLA (Fair Labor Association)	Consumer goods	Social
FWF (Fair Wear Foundation)	Clothing	Social
GOTS (Global Organic Textile Standard)	Textiles, hygiene products (organic)	Social, environmental
WRAP (Worldwide Responsible Accredited Production)	Textiles, shoes	Social
IMO Fair for Life	All product groups	Social, economic
FSC (Forest Stewardship Council)	Wood products and timber	Social, environmental
ICTI CARE	Toys	Social
PEFC (Programme for the Endorsement of Forest Certification)	Wood products and timber	Social, environmental
ICA Social Audit *	Consumer goods	Social

* Conditional approval. A maximum of two IGS audits are approved after which the supplier must adopt amfori BSCI audit or some other approved audit conducted by an independent party.

Supplier agreements require that suppliers and service provides comply with the principles of the K Code of Conduct and the BSCI Code of Conduct.

Kesko's grocery trade requires that the manufacturers and producers of its own-brand products have an international food safety certification. Kesko’s grocery trade approves the following audit procedures: BRC, IFS, ISO/FSSC 22000, SQF1000/2000 and GlobalGAP, IP basic certification for vegetables, or IP-Sigill.

The Product Research Unit's laboratory monitors the quality of products sold by K-food stores and K-Citymarket hypermarkets. It is a testing laboratory T251 which has been accredited by the FINAS accreditation services and approved to comply with the SFS-EN ISO/IEC 17025 standard.

The assessment of a store's responsible operations comprises the store's annual self-assessment, the criteria defined in the store's quality system and a responsibility audit performed by an external party on a specified sample. The auditor reports the results to the store and to Kesko.

Programmes, projects and initiatives

'Principles and Practice of Socially Responsible Trading' guide

Responsible choices are communicated to customers in stores according to the K-responsibility concept within-store communications, such as shelf labelling and product labelling. The selection and marketing policies of organic, eco-labelled and Fairtrade certified products are included in K-food stores' chain concepts. The K responsibility concept is in use in K-food stores and K-Rauta stores.

In 2016, Kesko joined the amfori BSCI Sustainable Wine Programme programme. The programme focuses on improving the social responsibility and environmental responsibility of wine production and its goal is to increase transparency and traceability in wine production.

In 2016, Kesko became a member of the Centre for Child Rights and Corporate Social Responsibility (CCR CSR) based in China. The objective of CCR CSR is to prevent and reduce child labour, improve the status of young workers at factories, and make the daily life of migrant worker parents easier. Kesko participates in the Virtual Working Group of the organisation.

Grievance mechanisms

SpeakUp reporting channel
K Consumer Service
Customer feedback systems of the chains

Boundaries

Compliance	Kesko
Product safety	Kesko - private labels and own imports
Social responsibility of procurement (1st tier)	Kesko

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