Climate Change Data

Environmental Metrics

ESG Focus Areas

• wide-ranging environmental responsibility
• healthy and responsibly produced food
• animal welfare
• wellbeing and competence development of the people involved in our operations

Environmental Achievements

• Lost Time Injury (LTI) frequency decreased significantly. The number of incidents decreased by over 30% from 2018.
• In Finland and Sweden, HKScan actively promoted material efficiency and recycling by abandoning the use of non-recyclable black plastics in the packages of its branded products. In Sweden all packages made of black plastics were abandoned. In Finland HKScan stopped using black plastic trays.
• In Denmark, HKScan renewed all product packaging sold under its Rose® brand and moved to packaging made of recycled raw materials.
• For three years, HKScan has invested in reducing antibiotics use in its Baltic poultry production. In 2019, we did not use any antibiotics in poultry production.

Social Achievements

• Introduced the Agrofood Ecosystem® network in Finland. Its goal is more effective management of the food value chain and increasingly responsible food production.
• HKScan’s producer services support and promote the business of producers and wellbeing in rural areas as well as increase their professional expertise and the development of their professional skills.

Governance Achievements

• HKScan updated its Code of Conduct, which covers human rights, employee rights, ethical business principles, such as the prevention of corruption and bribery, open and credible communications, and responsibility for the environment, animals and product safety.
• In 2019, 11 reports of possible non-compliance or regulation violations were made via the Fair Way reporting channel. All reports were investigated.

Climate Goals & Targets

Environmental Challenges

• Significant uncertainty factors in HKScan Group’s business are related to sales and raw material prices.
• The demand-driven market situation of pork creates pressure for the increase of animal raw material prices.
• risks of animal diseases, such as the African Swine Fever (ASF), or any international or regional food scandals impacting the overall consumption outlook cannot be fully excluded.
• risks related to food safety.
• risks related to impairment of assets will increase and have an effect on the financial position of the company if the Group is not able to improve its financial performance.
• Unexpected delays related to the efficiency improvement of the Rauma poultry unit may impact the Group’s short-term financial performance.
• various unexpected actions potentially taken by tax authorities, other authorities or pressure groups, which may cause restrictions to the business, volatility in demand, or significant increases of taxes or other fees.
• Public discussion related to consumption of red meat and climate change may also have a negative impact on demand.
• HKScan’s potential involvement in juridical proceedings and potential breaches of business principles and the Group’s Code of Conduct may pose operational risks.

Mitigation Strategies

• The company also recognises risks relating to food safety.
• Due to the successful share issue and improved financial performance, the risk for breaching financial covenants of loan agreements has clearly decreased.
• HKScan’s new responsibility programme is based on leading and promoting responsibility throughout our long value chain from farms to consumers.
• Wide-ranging environmental responsibility, healthy and sustainably produced food, animal welfare as well as wellbeing and competence development of all the people involved in our operations are at the heart of our responsibility work.
• Our responsibility work develops as a systemic change guiding all our operations.
• Together with our partners, we will build an ecosystem that improves profitability and sustainability footprint across our value chain.

Supply Chain Management

Responsible Procurement

• Supplier Guidelines

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI standards (2016)

Certifications: FSSC 22000, IFS, BRC (except Jelgava plant), ISO 22000 (Jelgava plant), ISO 14001 or ISO 50001

UN Sustainable Development Goals

• SDG 3
• SDG 8
• SDG 12
• SDG 13
• SDG 15

Environmental Metrics

ESG Focus Areas

• Climate change
• Animal welfare
• Healthy food

Environmental Achievements

• Zero waste to landfill
• 77% of suppliers (excluding contract farmers) compliant with Supplier Guidelines by the end of 2020
• 100% of animal purchases comply with HKScan’s animal sourcing principles

Social Achievements

• Number of lost time accidents declined for the third year in a row in 2020
• Small-scale community engagement (e.g., donating food to charities and sponsoring sporting teams)

Governance Achievements

• Compulsory Code of Conduct e-learning for all personnel, covering anti-corruption issues
• Establishment of a whistle-blower channel ('Fair Way')

Climate Goals & Targets

Environmental Challenges

• Exceptional weather conditions and climate change affecting energy prices and raw material availability and prices
• Changes in consumer behavior (e.g., red meat consumption)
• Possible environmental non-compliances in production

Mitigation Strategies

• Adapting and renewing operations by anticipating consumer needs and reducing climate emissions
• Managing environmental non-compliances as part of the ISO 14001 environmental management system
• Focusing on improving energy efficiency and energy recovery, increasing renewable energy use

Supply Chain Management

Supplier Audits: Regular audits based on risk assessment

Responsible Procurement

• Supplier Guidelines (77% compliance in 2020, goal of 100% by 2025)

Climate-Related Risks & Opportunities

Physical Risks

• Exceptional weather conditions affecting raw material availability and prices

Transition Risks

• Changing consumer behavior, changes in demand for red meat

Opportunities

• Growing interest in locally produced food and food chain transparency
• Continuing strong growth in poultry demand
• Emission reductions from industrial production, transport, and packaging

Reporting Standards

Frameworks Used: UN Global Compact

Certifications: ISO 14001

Environmental Metrics

ESG Focus Areas

• climate
• packaging
• biodiversity
• safety and wellbeing of employees

Environmental Achievements

• Improved energy consumption: 0.71 MWh/sold product tonne in Q1 2023 (0.78 MWh in Q1 2022).
• Improved carbon intensity: 0.075 tCO2e/sold product tonne in Q1 2023 (0.067 tCO2e in Q1 2022).
• 73% of packaging recyclable in 2022 (72% in 2021).
• 59% renewable or recycled materials in 2022 (47% in 2021).

Social Achievements

• Launched 'We Are Valuable' award to encourage employees to act according to company values.
• More than half of employees completed online training course on Blue Rules safe working guidelines.
• Number of safety observations by staff increased by one fifth year-on-year.
• Lost-time accident rate (LTIR) improved to 15.5/million working hours (19.1 in 2022).
• Personnel absences 7.6% (7.5% in 2022).
• Next Generation training programme for young contract farmers started in Finland.

Governance Achievements

• Completed human rights impact assessment for own personnel and others working in HKScan's production units.
• Preparing for the EU's Sustainability Reporting Directive (CSRD).

Climate Goals & Targets

Environmental Challenges

• High inflation, especially in energy, food, and transport prices.
• Weakening consumer demand due to high inflation and interest rates.
• High cost inflation.
• Uncertainty about the availability and price of inputs.
• Potential breach of covenants due to weak profitability and increased working capital.
• Changes in consumer behavior towards lower-priced products.
• Risk of animal diseases (African Swine fever and avian flu).
• Risk of cyber-attacks.
• Weakened global logistics chains.

Mitigation Strategies

• Cost savings and efficiency improvements.
• Working capital management.
• Negotiated temporary waivers to net debt covenants.
• Negotiated new covenant limits for net debt to EBITDA ratio.
• Continuous assessment of the position of each business within the Group.
• Sale of Baltic business to improve profitability and strengthen balance sheet.
• Investments to improve profitability and competitiveness (e.g., Rauma poultry unit).

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: EU's Sustainability Reporting Directive (CSRD)

Certifications: ISO 45001 (aiming for certification by end of 2025)

Environmental Metrics

ESG Focus Areas

• Climate change
• Employee wellbeing and safety

Environmental Achievements

• Revised climate target to reach net zero for all greenhouse gas emissions by 2050.
• Reduced greenhouse gas emissions by up to 38 tCO2e per year at the Danish business unit's Vinderup wastewater treatment plant.
• Replacing black packaging boxes with recyclable green boxes made from at least 80% recycled PET plastic.

Social Achievements

• Continued to promote employee wellbeing through the Group-wide Better Together programme, with Inclusion as the theme for 2024.
• Offered jobs within the company to 19 persons in Eura affected by the centralization of poultry packing activities.

Governance Achievements

• Updated the climate emissions calculation, climate target and timeline of its responsibility programme to better align with international climate work guidelines, calculations guidance and reporting standards.
• Annual General Meeting approved the change of the company name from HKScan Corporation (HKScan Oyj) to HKFoods Plc (HKFoods Oyj).

Climate Goals & Targets

Environmental Challenges

• High cost levels between January and March 2024 due to inflation, high costs of external services, general wage increases, and contingency arrangements for political strikes.
• Political strikes in March negatively impacted exports.
• Uncertainty about the availability and price of inputs and raw materials.
• Possible weakening of consumer demand due to high lending rates and economic uncertainty.
• Risk of impairment losses if financial performance does not improve as planned or if long-term interest rates rise again.
• Risk of animal diseases (African Swine fever and avian flu) reducing export potential.
• High risk of cyber-attacks.

Mitigation Strategies

• Tightly managing costs, improving production efficiency, optimizing product portfolio, and carrying out commercial efforts to improve profitability.
• Strengthening the balance sheet through the sale of the Baltic, Swedish, and Danish businesses.
• Negotiations to refinance debt maturing in January–March 2025.
• Investments in Forssa and Rauma to generate total annual cost savings of around EUR 6 million.
• Investment of approximately EUR 8 million in a production line for ready-to-eat products at the Eura unit.
• Development investment in the Rauma poultry cutting unit to achieve total annual savings of around EUR 3 million.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GHG Protocol, SBTi

Third-party Assurance: Ernst & Young Oy (sustainability auditing assurer)

Sustainable Products & Innovation

• Ready-to-eat products