Ethical Performance
inside intelligence for responsible business
 

Kesko

accompanying image

Acquiring a taste for the circular economy

More by Kesko - Back to the Winter 2015 issue

case study

Food waste is a growing scandal which now has the public’s full attention. In the United States and much of Western Europe, food scraps constitute around 19% of the waste dumped in landfills, where it ends up rotting and producing methane, a greenhouse gas. This is not only undesirable in terms of sustainability and environmental impact but costly for food retailers paying high disposal costs.

So imagine if this food waste could be turned into zero emissions energy which in turn is used to manufacture the food sold on the supermarket shelves. This is the neat solution being pioneered by the Helsinki based Finnish retail conglomerate Kesko Corporation which has more than 1,500 stores across Scandinavia, the Baltics, Russia and Belarus.

Kesko’s unavoidable edible food waste is already largely distributed to charities as food aid. Now food which is no longer fit for human consumption – is moldy or rotten or has been in some other way contaminated – and which has previously been composted or burnt, is collected and turned into 100% renewable Finnish biogas which is piped into the factories producing Kesko’s popular Pirkka own-brand foodstuffs.

In one move food waste is abolished and products on the shelves are made using zero emissions renewable energy. With this perfect example of the circular economy in action Kesko is able to push ahead with its commitment to sustainability as well as steal a march on its competitors.

“We are always looking for ways to do better, to keep reducing our environmental impact, reducing wastage and the volume of waste that ends up composted or in burning facilities,” says Matti Kalervo, vice president of Corporate Responsibility at Kesko Corporation. “Of course this is about standing out from our competitors but it also reflects our genuine commitment to the environment which I am passionate about. As a big company we are in a position to make a difference.”

Indeed, Kesko is already is a sustainability forerunner having risen to fifth place in the Global 100 Most Sustainable Corporations in the World list announced earlier this year at the Davos World Economic Forum and the company has appeared on the list every year since it was established in 2005.

In 2008, Kesko committed to save 65 GWh by the end of 2016. As much as 98% of this objective has already been achieved.
So when Kalervo presented the biogas idea to Kesko’s grocery division a year ago it was an easy sell within the company. Almost a year of negotiations followed with Gasum, which manufactures the biogas, and with the two Kesko own-brand production facilities chosen to pioneer the project.

“The negotiations mostly involved costings as biogas is slightly more expensive than the natural gas the factories were previously using,” says Kalervo. “In order not to pass the cost onto the consumer, we agreed to split the costs with the factories which meant only a small increase each and which should easily be offset by the reputational benefits both for us and for our suppliers.”
The beauty of replacing natural gas with biogas is that the switch itself is cost and hassle free as biogas is piped through existing natural gas pipelines so there are no logistical or installation demands on the customer.

Now biowaste from almost 100 K-food stores in the Uusimaa region as well as the Keslog warehouses in Hakkila, Vantaa, is taken to the Labio biogas plant in Lahti, and the biogas produced is transmitted via the Gasum gas network to the Myllyn Paras and Wursti production facilities which make Kesko’s popular own-brand Pirkka range.

Recycling waste into biogas and using this energy in the manufacturing of Pirkka products will help cut annual carbon dioxide emissions by 380 tonnes – equivalent to the emissions generated by driving a car for more than three million kilometres.
The first “made with 100% renewable Finnish energy” labelled products appeared on Kesko shelves in Finland in September – meat rice and egg rice pasties from the Myllyn Paras factory and sausages and cold cuts from Wursti – backed up by a customer education campaign.

The products appeal to customers on two levels - firstly that they are, including the energy used in their production, 100% Finnish and secondly because the use of biogas eliminates both food waste and carbon emissions. “It is hard to say which of these two they like most,” says Kalervo.

Olli Nevalainen, Product Manager for biogas at Gasum agrees. “The fact that biogas is 100% Finnish is as attractive as the fact that it has zero emissions,” he says. “Natural gas, in Finland, is imported from Russia and involves CO2 emissions. Biogas not only has zero emissions but also uses 100% Finnish waste and is produced in Finland making it local, renewable and sustainable.”
Despite being marginally more expensive than natural gas, biogas is gaining in popularity across Finland with both large companies and private householders opting to switch.

“Our upgraded biogas is as efficient to use as natural gas and can be used wherever natural gas is currently used,” says Nevalainen, “from powering industry to household heating, restaurant kitchens to transport fuel. We started producing biogas in 2011 and already have a 60% share of the Finnish transport market in gaseous fuels with buses and private drivers switching from natural gas to biogas.”

Indeed, a study (Eurobarometer 2013) shows that 84% of Finns are happy to pay 5% more for environmentally friendly products. Better news still is that the more customers who switch to biogas the cheaper the production becomes. “Obviously we have started small, with just three plants” says Nevalainen. “Production and maintenance costs are higher in a small scale operation. However we now have another plant opening soon and we are continually looking for ways to make the plants themselves more energy efficient and sustainable.”

Back at Kesko, with the initial biogas produced products selling well, Matti Kalervo and his colleagues are now negotiating with a further twenty supplier factories to make the switch to biogas. “The Pirkka brand alone offers 2,500 products and so far only 15 of these are being made with biogas so we have plenty of room to expand the initiative.

“The two factories that have already switched are delighted with the results. They have benefitted both by reducing their emissions and boosting their reputation as pioneers in sustainability initiatives. Plus, of course, the more popular the products become the more they will benefit from increased orders.

“We are all winners,” he says, “the producers, we the retailers by standing out from the competition and our customers who are able to make a positive choice in favour of zero emissions products. And most importantly, of course, the environment.” 

more about Kesko

Kesko is a Finnish listed trading sector company. Its operations include the grocery trade, home improvement and speciality goods trade, and car trade. Its divisions and chains act in close cooperation with retailer entrepreneurs and other partners.

Kesko has over 1,500 stores engaged in chain operations in Finland, Sweden, Norway, Estonia, Latvia, Lithuania, Russia and Belarus. Kesko and K-retailers form the K-Group, whose retail sales totalled about €11.3 billion (VAT 0%) in 2014. The K-Group employs around 40,000 people.

Kesko’s shares are listed on Nasdaq Helsinki and the company is domiciled with its main premises in Helsinki.

The company currently ranks fifth in the Global 100 Most Sustainable Corporations in the World list.

IBE comment

Kesko’s project is especially interesting as it highlights how a big company can put these ideas into action, engaging with a diverse range of stakeholders. A fruitful collaboration was set up with some key suppliers that agreed to pioneer the project and share the initial costs of switching to a biogas system. In light of the good results achieved in the initial phase, Kesko has planned to scale up the project working with other suppliers. The collaborative and positive environment created with the company’s stakeholders represents an encouraging support to address this challenge.

Points of note:
• Food waste represents a compelling issue that needs to be addressed. In the US and most of Western Europe, food scraps constitute around 19% of the waste dumped in landfills.
• Biowaste from almost 100 K-food stores is used to produce biogas, which in turn is used in the production process of Kesko’s popular own-brand. It is estimated that this will help cut annual emissions by 380 tonnes.
• The environment in which the company operates is highly supportive: a study shows that 84% of Finns are happy to pay 5% more for environmentally friendly products.

 

Guendalina Donde, Institute of Business Ethics
 

Membership
Sign up for Free e-news
Report Alerts
Job Vacancies
eNews
Events Updates
Best Practice Newsletter
Rina Button 2015 C&E EP eNews button