Climate change and the circular economy

Climate change affects everyone and everything – including S Group and our 2.3 million co-op members. For this reason, we want to do everything we can to reduce our environmental effects and make climate-friendly choices easy for our customers.

Climate was one of our key sustainability themes for 2018. In the spring, we announced our emission reduction targets for 2030 and invited our partners to join the Big Deal campaign, which seeks to reduce emissions by a million tonnes. In the international CDP climate performance assessment, our score was A-. The score equals the Leadership level among climate work pioneers.

We mitigate climate change and reduce emissions by using energy more efficiently and investing in renewable energy. Efficient recycling of materials and management of food waste also play an important role.

S gROUP'S CLIMATE TARGETS

BIG DEAL CAMPAIGN TO REDUCE EMISSIONS

-1,000,000 TONNES

Energy consumption

In 2018, our locations in Finland consumed 292 kWh of energy per gross m2, which represents a decrease of 4% compared with 2015. Compared with 2017, the efficiency of our relative energy consumption has improved by nearly 5%. Since 2010, we have reduced our relative energy consumption by 34% by adding doors to refrigeration cabinets and switching to LED lighting.

SPECIFIC ENERGY CONSUMPTION, FINLAND

Renewable electricity

In 2018, a total of 56% of the energy we used in Finland was emission-free wind and solar energy produced by S Group.

Climate emissions

In 2018, emissions from our own operations decreased by 14% year-on-year. Since 2015, our emissions have decreased by 38% due to improved energy efficiency and investments in our own production of renewable energy. Emissions generated by our value chain decreased by 2% on 2017. Our partners in S Group's Big Deal climate campaign have decreased their climate emissions by 18,000 tonnes during 2016 and 2017.

EMISSIONS FROM S GROUP'S OWN OPERATIONS

Recycling and reuse rates 

Of the waste we generated, 72% was recycled to produce new products or packaging and 27% was used to produce energy in 2018. We updated our recycling rate target to 80% in 2018, as we had already exceeded our goal for 2020, which was 70%, in 2016 and 2017.

Recycling rate and waste utilisation rate

Food waste

We have reduced our relative food waste by 16% between 2014 and 2018, and have achieved the goal we set for 2020. However, our amount of food waste increased slightly in 2018 compared with the previous year. This was due to the acquisition of the Food Market Herkku stores and the warm summer.

Food waste

We have made significant investments in our own production of renewable energy in order to achieve our goal for 2025, which is to produce 80% of the energy we use through wind and solar power. Increasing the production of renewable energy significantly supports the achievement of our emission reduction targets and the overall goal of reducing emissions by a million tonnes.

We consume more than 1% of the electricity used in Finland. We have more than 1,600 locations, which need electricity for refrigeration equipment and lighting in particular. Of the electricity we use, nearly 60% is produced using Finnish wind power supplied by TuuliWatti Oy, a company owned by S Group and St1, and our own solar power. We will increase the share of solar power in the future.

Finland's largest solar power project

In April 2018, we announced the largest rooftop solar power project in the Nordic countries. With the project, S Group will become one of Finland's largest producers and consumers of solar power. At the end of 2019, solar panels will be found on the roofs of around 40 S Group locations. A total of around 37,000 solar panels will be installed on the roofs of Prisma Stores, S-markets and ABC service stations across Finland. A total of 27,500 panels were installed during 2018, and the rest will be installed during 2019. The panels produce electricity for the locations.

Our stores' electricity consumption is highest in the summer, when energy is needed for refrigeration equipment and cooling in particular. During the sunny hours of summer, it will be possible to use solar power to produce all the energy that the property needs. On the annual level, solar power can be used to cover around 10% of the electricity used by the properties.

As well as being climate-friendly, solar power reduces costs. With the project, our electricity bill will decrease by hundreds of thousands of euros on the annual level. The next solar power project is already being planned.

27,500

New wind park without state subsidies

In May 2018, TuuliWatti decided to invest in building a wind park in Ii, Finland. The Viinamäki wind park project is the first wind park investment in Finland to be completed without state subsidies. Our project proves that wind power is one of the most cost-effective ways to produce energy.

Wind power technology has progressed rapidly. Higher wind power plants make it possible to make use of wind over a larger area. In the long term, the price of the electricity we use must be competitive, and the electricity must be produced sustainably.

Preventing and reducing emissions that cause climate warming are an important part of our ambitious climate work over the long term. Since 2015, we have reduced emissions from our own operations by 38%.

In spring 2018, we set a science-based target for our own operations: to reduce emissions by 60% by 2030, compared with 2015. In setting this goal, we made use of the methods of the Science Based Targets initiative in order to ensure that the target is sufficient in terms of the Paris Agreement.

In addition, we aim to reduce emissions by a million tonnes. This target covers not only our own operations, but also the emissions generated by our value chain, such as emissions from the manufacture of the products we sell. To accelerate the achievement of this goal, we launched the Big Deal climate campaign, which invites our goods suppliers and service providers to join the undertaking to reduce emissions. By the end 2018, a total of 87 goods suppliers and service providers had joined the campaign, and had committed to the emission reduction targets and the measures to help the climate.

Emissions from S Group's own operations 2018

Most of the climate emissions from our own operations are generated by the production of electricity and heat for our locations. Electricity is needed for lighting and refrigeration equipment. Emissions also arise from refrigerant leakages, for example. Our emissions have been calculated in accordance with the GHG Protocol standard.

Scope 1

Scope 1 emissions are greenhouse gas emissions arising directly from S Group's own operations. In practice, the emissions are generated by the fuel used for heating S Group's properties and by refrigerant leakages.

Refrigerants are cooling gases that circulate in the pipes of refrigeration equipment. When released into the atmosphere, refrigerants behave in the same manner as carbon dioxide and warm the climate. However, depending on the agent, their warming effect is nearly 4,000 times more intense than that of carbon dioxide. If a pipe in the refrigeration equipment is dented or has even a minor puncture, refrigerant may leak into the atmosphere. For this reason, the equipment is monitored closely for any leakages.

Scope 2

Scope 2 emissions are greenhouse gas emissions generated by the production of purchased electricity, district heating and cooling.

SCOPE 3

Scope 3 emissions, or other indirect emissions, include emissions from products and services purchased by S Group during their life cycle, such as the primary production of raw materials and the manufacture, packaging and transport of products, as well as customer traffic and the use of the products. In addition, indirect emissions are caused by commuting and business travel by S Group's personnel, final processing of S Group's waste, S Group's investments and the emissions generated by energy production and distribution waste.

S Group's direct and indirect emissions, %

Reducing emissions

Key factors in reducing emissions from our own operations include improving the efficiency of energy use, increasing the share of renewable energy, minimising refrigerant leakages and replacing old refrigeration equipment with equipment that uses carbon dioxide.

Thanks to increased wind power production, carbon dioxide emissions decreased by 180,000 tonnes in 2018 compared with the specific emissions in accordance with the residual mix of electricity production in Finland in 2017.

More than 90% of our emissions arise from our value chain, such as the manufacture of the products we sell. In terms of fuel, emissions are generated when products are used in transport.

Emissions from the fuel we sell are reduced by increasing the share of biofuel mixed in the fuel. In addition, the high-level ethanol blend (Eko E85) sold to customers reduces emissions in relation to fossil fuels. In 2018, the computational emission reduction for biofuels purchased by S Group in relation to fossil fuels was around 200,000 carbon dioxide tonnes. Of the raw materials of purchased biofuels, 68% were based on waste or residue, and part of the biowaste used as raw material is collected from S Group's own locations. The sales of the Eko E85 fuel increased by 24%, or by more than EUR 1.4 million, from the previous year.

The future of transport

Our fuel business plays an important role in achieving S Group's climate targets. The future of transport, as well as alternative fuels and vehicle types, is attracting a great deal of interest and provoking debate, and the main challenge for the sector is to predict the pace of the transition towards low-emission transport. The ABC service stations are already offering options for conscious motorists through a comprehensive charging point network for electric cars and in the form of the Eko E85 bioethanol fuel. In addition, four ABC service stations have biogas stations for cars.

The popularity of ethanol as a fuel is increasing in Finland. In 2018, sales of Eko E85 fuel increased by 24% on the previous year, and its sales have increased by 55% since 2016. The increasing popularity of electric cars in Finland is reflected in the number of recharging events at the recharging points at ABC service stations. The number of recharging events in 2018 was nearly 17,000. This represents an increase of 95% on 2017. The amount of electricity recharged equals nearly 1 million kilometres of driving calculated based on average consumption.

In the near future, the fuel sold at the ABC service stations will gradually produce lower and lower emissions as the share of biofuel mixed in the fossil fuel increases. The share of biofuel was 10% on average in 2018. In early 2019, the Parliament of Finland approved a new obligation that aims to increase the share of biofuel to 30% by 2030. NEOT, the joint fuel procurement company of S Group and ABC, is responsible for ensuring that this obligation can be fulfilled as cost-effectively as possible and that the cost incurred by co-op members with cars are minimised.

Please see the map for the Eko E85 refuelling points and electric car recharging points at ABC service stations.

Big Deal climate campaign

Our Big Deal climate campaign aims to reduce emissions causing climate warming by a million tonnes by 2030 in cooperation with our goods suppliers and service providers. We set the goal for reducing the climate effects of our value chain and launched the Big Deal campaign because more than 90% of the total climate impact of our operations arises from the value chain; for example, from the manufacture of the products we sell, even before they arrive at our stores.

With the campaign, we want to encourage and inspire our partners to reduce their emissions and achieve more effective results. A million tonnes is equal to as many as 8 million trips by car from Rovaniemi to Helsinki or the annual emissions generated by more than 100,000 Finns.

The Big Deal campaign was launched in April 2018, and 87 major companies and smaller operators and producers from around Finland have already joined the campaign. The companies participating in the campaign reduced their emissions by nearly 17,700 carbon dioxide tonnes during 2016 and 2017. Combined with the reduction of emissions from S Group's own operations and the increase in biofuel in fuel sales, around 6.5%, or 66,600 thousand tonnes, of the million-tonne target had been achieved by the end of 2018.

Liquefied biogas for maritime transport

In November 2018, NEOT, the joint fuel procurement company of SOK and St1, became the first Finnish company to try liquefied biogas in its maritime transport operations. Liquefied biogas is a completely fossil-free fuel made from renewable raw materials.  Liquefied biogas is made, for example, from organic waste generated by the food industry and the processing of grains. Its chemical composition is similar to that of liquefied natural gas, which allows for a flexible transition to using fossil-free liquefied biogas. At the moment, limited availability is the greatest challenge in expanding the use of liquefied biogas.

Liquefied biogas is the latest addition to NEOT's selection of more sustainable fuel solutions. Two of the company's time-chartered vessels have been using liquefied natural gas as fuel since 2016. Despite being a fossil fuel, liquefied natural gas is a better option than heavy fuel oil, which is typically used in maritime freight transport.

We compensated for the emissions from our business flights for the first time

In 2018, we compensated for the climate emissions from our employees' business flights for the first time. The compensation was targeted at an Ethiopian forest planting project verified by a third party and certified in accordance with the Gold Standard. Forests are natural carbon sinks and bind carbon from the air during photosynthesis. For compensation, the World Wide Fund for Nature (WWF) recommends projects certified in line with the Gold Standard, as the requirements of the standard ensure that actual reductions in emissions are achieved through the projects. In 2018, our employees made 11,850 business flights, flying a total distance of more than 15 million kilometres, which generated climate emissions of 1,500 carbon dioxide tonnes. The number of business flights decreased by 500 from 2017, with the emissions from business flights decreasing by 2% year-on-year.

The purpose of the circular economy is to save natural resources and reuse materials efficiently and sustainably. The circular economy is also seen as a new economic model that increasingly creates value through immaterial methods and in which products are replaced with new types of services.

S Group's study on the opportunities offered by the circular economy in the coming years was completed in 2018. Based on the study, we decided, for example, that the packaging of all of our private label products will be recyclable by the end of 2022. Our paperboard, metal and glass packaging, as well as many of our plastic packages, already meet the criteria. Packaging made from several materials, such as plastic coffee bags with aluminium foil, continues to be challenging in this respect. We also decided to increase the use of packaging made from renewable raw materials and recycled materials for our private label products. In addition, we are exploring opportunities to reduce the amount of packaging material without loss of product quality.

As a continuation of our circular economy study, we prepared guidelines on the use of plastic for all of our business areas, and decided to invest in the further development of product care and maintenance services in the department store trade, for example, as well as expanding our sales service for second-hand clothes and expanding our collection service for used nail polish to cover the entire country. In 2017, we started an experiment to collect textile waste at HOK-Elanto's Sokos stores. In 2018, we decided to discontinue this service for the time being, until we find new partners for the reception of textile waste that are able to reuse it as a raw material for new materials.

There are

430

recycling stations

We further clarified our goals for using plastic

Completed in 2018, our guidelines on using plastic include a set of measures to reduce the unnecessary use of plastic and promote the recycling of plastic within our group of stores.

All of our business operations contribute to the more sensible use of plastic. Our grocery stores are paying particularly close attention to the packaging of private label products and their recyclability. Our hotels will no longer use plastic toys and are replacing plastic pens with pens made from recycled plastic. We intend to replace the plastic in take-away packaging with a recyclable, bio-based or compostable material at our ABC service stations, restaurants and cafés. We have already banned the use of microplastics in our private label cosmetics products and detergents.

We make recycling plastic easier for our customers by means of clearer instructions and labels, for example. In conjunction with updating packaging, we will add easy-to-follow sorting instructions to S Group's private label products. In addition, our locations have recycling stations, of which around 200 can also be used to recycle plastic.

The use of plastic bags is decreasing

Finns are rethinking their use of bags. The popularity of light-weight plastic bags and plastic shopping bags has decreased as a result of committed work. At the end of 2016, we joined a commitment to reduce the generation of plastic waste and the pollution of the oceans. For example, we made a commitment to start charging for all plastic bags, promote the sales of reusable bags and no longer make free-of-charge light-weight bags available to customers at checkouts. The main purpose of this nationwide commitment is for Finns to use no more than 40 plastic bags per year by the end of 2025. Today, our co-op members purchase around 65 plastic bags per person per year at our grocery stores.

The consumption of plastic bags has decreased steeply since we started charging our customers for them. The consumption of plastic bags at Sokos stores decreased by 40% in 2018, which means a reduction of more than 1 million plastic bags.

At grocery stores, the use of small light-weight bags for packing fruit and vegetables decreased by around 10%, or by 216 million bags, on the previous year. At the same time, the use of compostable light-weight bags for fruit and vegetables increased by 27%.

All of our grocery stores offer biodegradable bags for fruit and vegetables, and the amount of reusable fruit and vegetable bags is also increasing. In addition, customers are choosing alternatives to conventional plastic bags at checkouts. The popularity of environmentally smart choices is increasing. In 2018, the demand for biodegradable plastic bags increased by 55%, that of reusable bags by more than 30%, and that of paper bags by 36%. Bags made from recycled plastic continue to be the most popular bags purchased at our stores. These generate the least emissions among the bag alternatives. Their climate impact is 60% smaller than that of a bag made from virgin plastic.

In 2018, we added a feature to our "Omat ostot" (My purchases) digital service that makes it easy for our co-op members to monitor their use of bags. Using the service, customers can monitor what types of shopping bags they choose and how many bags they use each month.

S Group joined the international New Plastics Economy Global Commitment

Launched by the Ellen MacArthur Foundation and the United Nations, the New Plastics Economy Global Commitment seeks to reduce the unnecessary use of plastic, develop reusable packaging and increase the efficiency of recycling. More than 350 companies and organisations have joined the commitment.

S Group reduces waste through prediction and communication and by listening to customers. Our evening discount was expanded to cover the entire country in 2017, and food waste has since decreased at an accelerated pace. In proportion to sales, waste at our grocery stores has decreased by 16% since 2014, while the goal was to reduce waste by 15% by 2020.

In 2018, waste represented 1.51% of sales at our grocery stores. Our relative waste increased slightly year-on-year due to our acquisition of the Food Market Herkku stores and the warm summer, among other reasons.

This also includes products donated to charity. Food waste from our grocery stores is primarily donated to charity through our network of around 400 charity partners. If it is not possible to donate food, soon-to-expire bread can be submitted to be used in the production of bioethanol, to name just one example. The remaining waste is submitted to be processed as biowaste, through composting or anaerobic digestion, for example.

An effective way to reduce waste is to sell expiring products at discounted prices. In recent years, the amount of waste has decreased at an accelerated pace as a result of the evening discount at around 900 grocery stores of the S Group. During the last opening hours of the day, the discount on food items marked with red labels is 60%. At some grocery stores, the evening discount has reduced food waste by up to 10%.

Vegetables represent around 50% of the waste at our grocery stores, with bread accounting for 20% and dairy for 6%. The remaining 24% is distributed fairly evenly between various product categories. Each product is recorded in the waste separately, so that the excess quantity can be monitored and analysed by product and by store on a daily basis.

The continuous prediction of selections and product quantities is an important aspect of waste management in order to ensure the selection at the store meets customers' needs. Food waste has also decreased as a result of extended opening hours.

S Group's restaurants and hotels also participate in reducing waste

Our restaurants also work to reduce waste by providing employees and customers with instructions, for example. Restaurants have been able to reduce food waste by up to 60% by, for example, reminding customers to only take as much as they can eat from the breakfast buffet.

In 2018, S Group's hotels and restaurants continued their work to reduce food waste. In early 2018, four of our locations – two Sokos hotels and two ABC service station stores – tried the Hävikkimestari (Master of waste management) application developed by Lassila & Tikanoja for recording and managing waste at restaurants. The results of the experiment and the related training were so positive, particularly at hotels, that we decided to continue the project and expand it to cover two new hotels. During the experiment, measured waste at the locations decreased by 17–49%, with the costs decreasing by 14–55%, depending on the location and the week in question.

In addition, each regional cooperative appointed a waste management ambassador for its hotels and restaurants. The ambassadors are responsible for monitoring waste management and encouraging and instructing regional cooperatives and their locations to record and monitor their waste more closely and reduce waste, as well as sharing best practices between chains and locations.

The ResQ Club service for keeping food from going to waste was used by seven regional cooperatives and 27 restaurants in 2018. Nearly 22,000 servings were saved through the service last year. In addition, HOK-Elanto's Coffee House cafés, as well as some other cafés of the cooperative, have an evening discount of 50% on products in the glass cabinets during the last opening hours of the day.

6,000 Year Nine students prepared meals from food waste

During Waste Reduction Week, we participated in a Food Waste Battle organised by Motiva. More than 400 groups of pupils with home economics as an optional subject and more than 6,000 Year Nine students prepared meals from food waste from our stores. During the national Waste Reduction Week, we wanted to increase the appreciation of food and remind consumers of the importance of reducing waste. This was the second year that young people were challenged to participate in the Food Waste Battle.

food Waste Battle for schoolchildren