Helsinki (18.02.1999 - Juhani Artto) Kesko is Finland's largest importer of products from the developing countries, with annual imports for the Finnish market valued at more than a billion Finnish marks (FIM 1.00 = EUR 0.17 or USD 0.19). Kesko's third world product selection is a broad one, ranging from fruit to footwear, from tea to textiles and from toys to tools.

But are any of these imports produced by child labour? Kesko decided as long as nearly 20 years ago not to buy goods produced with the participation of child labour but what has the company done and what is it doing to ensure that this decision is honoured in practice?

Even a few years ago the company management would have been irritated by this question or would have side-stepped it by arguing that it is impossible to control long chains of production and distribution far away from Finland.

Today things are different. Kesko has joined the still small but growing club of companies which take the child labour problem seriously and try to create an effective system to audit its suppliers. The company has made a good start on this project, the credibility of which is primarily based on Kesko's willingness to be open about the gaps in its auditing system.

Creating an effective system is a vast process. Kesko's range covers 130,000 items: 10,000 foodstuffs, 50,000 utility goods and 70,000 hardware and agricultural products. The company has thousands of domestic and foreign suppliers.

A code of conduct and auditing system for the purchasing procedure are being implemented. This work is the responsibility of Mr. Jouko Kuisma, a systems manager who reports directly to Kesko's general manager.

In terms of turnover the most important product groups are fruit and coffee. To construct an auditing system for these production chains is a major undertaking and Kesko's set-up is still full of holes.

Fruit produced outside of Europe reaches Kesko through Viking Fruit. Kesko of Finland, ICA of Sweden and the Norwegian Hakon Group run Viking Fruit as a joint purchasing organisation for exotic fruit. Viking Fruit is based in Gothenburg, Sweden. "In practice it is run by the purchasing staff of Kesko and ICA", Kuisma explains.

The route taken by Chilean pears en route for Finland, for example, well describes the complexity of the business chain. "The fruit is grown both by packaging companies in their own orchards and by private family farmers who sell their produce to the packaging companies. The packer sells the pears to a shipper which also may have packaging units of its own. Viking Fruit buys the fruit from the shippers, many of whom are big multinational companies."

"Viking Fruit deals mostly only with large shippers which sell their goods all over Europe." As they have many other demanding customers, Kesko believes that the shippers observe an exemplary code of conduct.

Auditing banana production is simpler than auditing many other fruits, since large multinational companies dominate banana export production. According to Kuisma, the best known brand in Finland, Chiquita, has announced that it will not hire permanent workers under 18 years of age and that none of its employees in seasonal work will be under 15 years of age.

Kesko's roaster buys coffee both from trading companies and direct exporters. Both of these are far removed from the coffee plantations which in many countries use child labour.

"The coffee raw materials chain is so complex that Kesko's prospects for independent auditing are poor", Kuisma notes.

The US company Cargill, one of Kesko's coffee suppliers, has adopted a code of conduct. Cargill, however, is also far removed from the coffee plantations which should be covered by the auditing system.

Kesko's own product inspection unit is responsible for quality control of packaged foodstuffs. "The unit itself checks the environmental impact of suppliers and their ethical behaviour, including questions of child labour", Kuisma says.

In garment imports from the Far-East Kesko has used the services of the German-owned Sono Centra for a couple of years. This partner is based in Hong Kong. Sono Centra makes contracts with the producers and oversees their quality and operational ethics. The suppliers make written agreements including a commitment not to use child labour.

Kuisma reports that Kesko is so satisfied with Sono Centra's services that it also wants to use them in product groups other than garments. "Our co-operation with Sono Centra is a model which may become the principal way to organise third world product purchases and auditing."

"While using purchasing agents is nothing new to us, contracting technique and control have recently become more strict and their coverage of contracts has broadened. This development has reduced our risks."

Kuisma believes that local purchasing agents have better opportunities than Kesko's own purchasers to ensure that

production modes are ethically acceptable.

China, however, which is part of Sono Centra's zone of operations, is and remains difficult to audit. This is due to the vastness and complex subcontracting system of the region. "It is impossible for one company alone to achieve rapid, reliable results in China. Sufficiently thorough control demands large-scale international co-operation between both companies and countries", Kuisma explains. Such co-operation may improve international trading rules and social conditions in third world countries. Development co-operation has a role to play in this construction process.

Kesko purchases some of its sports equipment range through the global enterprise Intersport International, of which Kesko is an affiliated member.

"Intersport itself plans and orders production of its own trade-marked goods. The share of Intersport goods at Kesports (the Finnish Intersports shops) is still small but it is growing steadily", Kuisma explains.

"When seeking producers for its trade-marked goods, Intersport seeks tenders from manufacturers around the world. Intersport International makes no purchases of its own. It is the national organisations which make individual deals with the selected suppliers on the terms agreed. Intersport's organisation makes framework agreements with the suppliers, oversees the quality of goods and audits modes of production."

Intersport has its own auditing office in Hong Kong. A significant proportion of all Intersport goods are manufactured in the Far East.

Kesko is gradually extending its system of auditing the ethics of modes of production. The solutions adopted vary from one product group to another, as the examples given above demonstrate. The spectrum of methods extends from auditing performed by Kesko's own employees to purchased services of international companies and organisations. Purchasing decisions are increasingly often linked to realistic, on-the-spot knowledge of the production methods used by suppliers.

Kesko's management has realised that when it comes to ethical issues it is more profitable for the company to be one step ahead of consumers than one step behind them.

Auditing of child labour is becoming an integral part of Kesko's product quality and environmental impact control system. The guidelines are mainly based on ILO agreements and recommendations. The auditing reports are documented in an ISO 14001 -standard environmental management system. Kesko is also interested in the ethical standards which are being designed, such as SA 8000 in the USA.

Kesko believes that in a few years it will be ready to publish an annual accurate report of how it has audited the ethics of its suppliers.

In complicated production, processing and delivery chains the current system cannot provide a final guarantee of the propriety of working methods, but the objective is to block the most obvious holes in the control system at once.

Kesko could not be successful in its work unless many other companies and organisations around the world had the same goal. Auditing requires large-scale international co-operation.

Kesko plays an active role in several international organisations which nowadays emphasise the ethical responsibility of businesses. The latest example is the "Business in Society" task force set up by the International Chamber of Commerce. Jouko Kuisma is the only member of this task force representing commerce.

*Published originally in Kumppani 1-99, the Finnish language magazine of the Service Centre for Development Co-operation (Kepa)