Economic responsibility 

At HKScan, economic responsibility means that we safeguard the profitability and competitiveness of our business both in the short and long term. A sound economic foundation also forms the basis for our other areas of responsibility, i.e. social and environmental responsibility, and animal health and welfare. It also allows us to invest in developing the value chain on a long-term basis. Through our operations, we also create financial value widely directly and indirectly to various different stakeholder groups.

HKScan follows EU and national legislation in its business and operations. The Group’s economic responsibility is led by the following internal Group policies: Treasure policy, Governance policy, Finance policy and Risk policy. The Group President and CEO and the Board of Directors share the responsibilities as legally stipulated. The Group Leadership Team is responsible for the financial result and for the work contributing to it.

Financial value created to stakeholders in 2017

As one of the largest food companies in Northern Europe, our operations have big financial impact on many stakeholders. For example, we pay wages to personnel, dividends to shareholders, and taxes to the Governments of our operating countries. Our business and operations have also an important impact on our contract producers, sub-contractors and suppliers of raw materials, products and services.

We employ directly over 7 000 people. We buy animals from close to 10 000 local producers in our home markets and thus enable business for local primary production. HKScan is also an important buyer of services such as cleaning, maintenance, logistics, facility management, health care and catering. Therefore, our indirect impact on employment is important especially in the regions, where our production units are located.

HKScan creates financial value widely among its stakeholder groups as described in the table below.

Economic value created for stakeholders in 2017

Example

HKScan offered over 1 300 summer jobs out of which 750 in Finland (link in Finnish) and 580 in Sweden (link in Swedish).

Taxes are part of economic responsibility

The most significant tax-items for HKScan are withholding tax from salaries paid to employees, VAT and income taxes. HKScan is committed to compliance with tax law and practices in the countries where we operate. It involves disclosing all relevant facts and circumstances to the tax authorities. The location of group entities is driven by business reasons, such as the location of customers, suppliers, raw material and know-how.

Every transaction must have a solid business rationale without compromising tax compliance principles. Given the scale of our business and volume of tax obligations, risks will inevitably arise from time to time in relation to the interpretation of complex tax law. We actively seek to identify, evaluate, monitor and manage these risks to ensure they remain in line with our objectives. Where there is significant uncertainty or complexity in relation to a risk, external advice may be sought.

Management of tax risks, as any other financial risk, is on Group CFO's responsibility area and they are identified, assessed, managed and monitored under HKScan Enterprise Risk Management. We emphasise transparency in all our activities, including our relationship with tax authorities. We are collaborating with local tax authorities according to local laws and practices. We engage with local tax authorities with honesty, integrity, respects and fairness and in a spirit of co-operative compliance. Wherever possible, we do so on a real time basis, to minimise tax risks.

Investments and exports contribute to value creation

HKScan is implementing its strategy for example by investing in growing product categories such as poultry and meals. Investments enable the development of new branded products for growing product segments and added-value product groups. Additionally, they will improve product quality, occupational safety and working conditions while decreasing environmental impacts. In parallel with these investments, HKScan is improving efficiency by simplifying its production structure and centralizing its production technologies.

HKScan currently exports meat to nearly 50 countries. The company exports pork to many EU countries and outlying markets such as New Zealand and Japan. HKScan has also started preparations to begin exporting pork from Finland to China. Read more here.

Examples

1. HKScan made its most significant production plant investment to date in Rauma, Finland. The unit specialises in poultry products. The construction work started in 2016 and was completed at the end of 2017. The new plant helps to preserve food industry jobs in Western Finland. The new production plant will replace the existing plant in Eura.

2. HKScan decided to invest in the growing meals business by developing the Estonian Rakvere unit. The eight-million euro investment consists of modernisation of the frying department, installation of new cooking and packaging lines and expansion of the building. The investment allows HKScan to implement new technologies and packaging solutions, which will strengthen its position in the meals business. Construction is to commence in May 2018.

3. The Group has invested in primary production for example in Estonia by renovating the Tallegg Rannamõisa broiler farm with over two million euros. The investment will result in more environmentally friendly production and improve the welfare and housing conditions of the birds as ventilation, lighting, feeding and watering systems will be improved. Computer systems will be installed to monitor the indoor climate in real time. The new technology allows HKScan also to monitor and analyse the feed and heating costs of the farm complex, which in turn ensures a more efficient and economic production process. On top of this, the farm’s biosecurity measures will be enhanced, which helps to mitigate risk for animal diseases such as Avian Flu.

4. In 2017, the Chinese and Finnish food authorities signed an agreement allowing HKScan’s Forssa plant to start exports to China. Exports are scheduled to commence during the first half of 2018. HKScan products exported to China will be targeted at retail customers, industrial customers and the HoReCa sector.

5. HKScan launched Finnish poultry exports to Japan. Export customers appreciate responsibly produced, high-quality, "No antibiotics ever" antibiotic-free meat.

Producers and HKScan collaborate to boost productivity

HKScan’s animal sourcing is based on long-term contract production and close collaboration with producers. In Estonia HKScan has own farms. A responsible, transparent supply chain and efficient and high-quality primary production can only be achieved through seamless collaboration with our producers.

Collaboration is conducted on many levels: our regional animal sourcing teams and producer service specialists work directly with the farms in operative matters while we also have special strategic cooperation groups working on issues common to HKScan and our farmers.

Examples

1. Demand for responsible produced, high-quality beef has increased. At the same time, self-sufficiency in beef has decreased significantly for example in Finland. HKScan strengthened its foothold in the Finnish beef market by starting a beef development programme. The aim is to increase Finnish beef meat rearing and guarantee the availability of high quality domestic beef also in the future. The target is to have 3 200 new cows in the production chain by the end of 2025. This represents a 15 per cent increase in HKScan's suckler cow stock and a nationwide increase of five per cent. The producers participating in the programme get investment support for the new cows.

2. HKScan is committed to support primary production on a long-term-basis. This is symbolised by a partnership agreement between the Finnish Central Union of Agricultural Producers and Forest Owners (MTK) and HKScan. In 2017 HKScan was the main partner on MTK’s 100-year anniversary year. 

3. HKScan offers various services to producers to support their profitability and competitiveness. Examples include advisory services related to animal feeding and health. Additionally, HKScan offers producers advice on the design and construction of new facilities (find out more in HKScan Agri magazine in Swedish here and here), and regarding starting production, as well as financial advice and financial services.

4. One of HKScan’s beef producers invested in enlarging their beef breeding operations by 800 new places for beef cattle.