Business model 

Ponsse Plc is a company specialising in the sales, production, servicing and technology of forest machines designed for the cut-to-length method. It is driven by genuine interest in its customers and their business. Ponsse develops and manufactures sustainable and innovative harvesting solutions based on customers’ needs.

The Ponsse Group comprises the parent company Ponsse Plc, its subsidiary Epec Oy in Finland, as well as subsidiaries in Sweden Norway, Russia, France, the United Kingdom, Ireland, the United States, Brazil, Uruguay and China. The purpose of the foreign subsidiaries is to operate as local servicing and sales companies of forest machines. Epec Oy operates as an independent technology company that develops, manufactures and produces products and services related to control systems.

The company’s headquarters and main operations are located in Finland, in Vieremä. The company’s forest machine factory is located in Vieremä, and most of its product development takes place there. Furthermore, most of its auxiliary activities such as financial administration, personnel management, information management, quality control, communications and product lines are located in Vieremä. Besides Vieremä, there are product development sites in Kajaani, Seinäjoki and Tampere. The company's centralised stock for replacement parts is located in Iisalmi. It serves the service business sites in Finland, the company's resellers around the world as well as the company's foreign subsidiaries.

The company's factory operates as a final assembly location for both forest machines and harvester heads and, to a large extent, as the manufacturing location of essential forest machine components. These main components include, among other things, forest machine structures, cabins and loaders. 77% of the company’s suppliers come from Finland. The company does not carry out direct procurement from so-called low-cost countries to any significant extent. Besides Finland, the most technologically challenging and most expensive components come from Germany and Sweden, among others.

Socially responsible practices

Ponsse sees corporate social responsibility as a continuum, underlying its value-based operations in which sustainable development plays an important role. Throughout Ponsse’s history, its strong values have steered its employees towards honest work, respect for other people and collaboration, and the aspiration to improve the company’s operations and the surrounding community. The strong focus on sustainable development has contributed to the emergence of innovative product, service and operational solutions that help protect the environment and save natural resources. Furthermore, in keeping with its operating principles, Ponsse has always supported the vitality of local communities by conducting far-sighted financial management, investing in operations and facilities, and offering jobs and co-operation opportunities. Based on these values, Ponsse’s CSR efforts and goals focus on the following:

• Fair and ethical practices

• Supporting well-being and life-long learning

• Sustainable, innovative, natural resource-saving operations and R&D activities

• Sustainable business and finances management, supporting stakeholder continuity

Our CSR work is conducted within the framework of national and international legislation, employer obligations and commitments. At Group level, the guideline for our CSR efforts is our Code of Conduct approved by the Company Board at the end of 2016. The Code of Conduct addresses the following topics: compliance with laws and regulations, human and employee rights, equality and non-discrimination, health and safety, the environment, integrity, money laundering, fair competition, company assets, and feedback. The purpose of the Code of Conduct is to foster increasingly uniform principles and practices throughout the Group and to improve operations.

In terms of social responsibility, our stakeholders are customers, employees, partners, owners, public
authorities, financial institutions, local communities, society and the media. The expectations of these stakeholders have influenced the definition of our CSR focus areas, development targets and communication solutions. We work with our stakeholders to achieve a better understanding of their expectations and opinions on the responsibility of Ponsse’s products, services and operations. Apart from responding to our stakeholders’ expectations, further focus areas in CSR include responsibility based on compliance with laws and norms, as well as ethical and moral responsibility.

We strive to improve our CSR performance by paying equal attention to all these three levels.

Administration and management system

Management of Ponsse Plc is based on existing legislation, Ponsse's articles of association and policies set by the company's administrative bodies. The company complies with the rules of Nasdaq Helsinki Ltd (the stock exchange rules), including the 2015 Corporate Governance Code for Finnish listed companies approved by the Securities Market Association. Ponsse’s corporate governance principles are guided by the Corporate Governance Code.  The company also complies with the regulations and guidelines issued by the Financial Supervision Authority.

The purpose of management systems is to standardise activities throughout the Group and to ensure continuous development. Our internal audits are based on international standards for quality management (ISO 9001), environmental management (ISO 14000), health and safety management (OHSAS 18001/ISO 45001), as well as accounting. Ponsse Plc is ISO 9001- and ISO 14000-certified. Ponsse has not implemented the CSR management standard, but instead operates according to its values, sustainable development perspectives and the EU’s CSR reporting requirements. Every subsidiary is responsible for implementing and observing the applicable local standards with the support of the Group’s quality department. As part of our development efforts, we want to make sure that our CSR management targets are included in the existing auditing systems and practices.

Risks and trends

We have identified trends prevailing in our operating environment, as well as risks and opportunities related to these trends. We found that the most significant trends influencing CSR management were the operating environment’s susceptibility to change, digitalisation and the increasing importance of social responsibility and sustainable development.

The accelerating pace of changes in the operating environment will further emphasise the importance of knowing our global customer network and the corporate cultures within it, listening to customers’ needs and maintaining good customer relations. Furthermore, staying up-to-date with all applicable regional and national laws and regulations in the global operating environment is a major challenge for all companies. These factors create pressure when it comes to retaining enough resources and experts as well as distributing information throughout the organisation. There is a risk that we might not recognise stakeholder expectations or changes in the operating environment in time. Our strength lies in our significant investments in the sales and service network, closeness to the customer and recognising customer needs in different market regions. We have allocated responsibility for monitoring laws and regulations across various functions in our organisation, and external experts are used, when required.

Digitalisation means that an increasing proportion of information and service is provided in electronic format. In the field of forest machinery, digitalisation is manifested in the form of automated functions supporting the machine operator, as well as increasing efficiency in the operation of harvesting companies. Forest machines can, when necessary, transmit information on defects or service needs across the world. However, people and regions are very different, and in some market regions, the abilities and possibilities of utilising digital services are still relatively poor. Digitalisation also involves increasing data security risks, and this must be taken into account when processing business, customer and personal information in electronic services. Risks related to digitalisation have been identified, and are managed from the perspectives of data, operations, products and services.

Corporate social responsibility and sustainable development have become increasingly important, and the awareness and expectations of our customers and stakeholders in this respect have also increased. PONSSE forest machines have always been developed with environmental values in mind. The biggest risk in this area of operation is related to ensuring coherent responsibility practices in the global workplace and cooperation. In order to minimise these risks, we deploy Group-, function- and location-specific guidelines and auditing tools. Although our criteria are even stricter than before, most of the service centres have been able to improve their quality through investments, training and operational changes. As part of our CSR efforts, we will particularly focus on achieving a Group-wide culture and reaching our common goals.

Despite the new challenges, increasing transparency and goal orientation in our CSR activities presents a great opportunity for us, as we can proceed towards these goals together with our entire supplier and customer network.

Development in 2017

In 2016, the company compiled some CSR principles and practices and defined its priorities. In 2017, the company started to communicate these topics to its offices in Finland and foreign subsidiaries.

A) Environmental affairs

Environmental impact of our products

Supporting sustainable forestry, product life-cycle management and the sustainable use of natural resources are key focus areas in our environmental responsibility efforts. Environmental management is embedded in the strategy process, in which we have defined our environmental requirements and targets.

The environmental impact of our products are mainly related to the products’ emissions during use, as well as the consumption of fluids and parts. The long service life and high recyclability of our products support our sustainable development goals. Thanks to technical advances, we have been able to extend the service interval of our forest machines, reduce oil consumption and the emission of oils into nature and enable the use of biodegradable hydraulic oils in our products. Our product range includes 8-wheel harvesters and 10-wheel forwarders with low surface pressure, which is gentler on the terrain. Refurbished machines and parts are further manifestations of achieving our sustainable development goals. At the moment, we have placed a particular focus on reducing fuel consumption, minimising harvesting damage and extending the service life of our products and parts. We have identified and photographed the environmental impact of our products and have updated related development targets and indicators. We have outlined an environmental programme and have begun implementing it.

Posse focuses on manufacturing forest machines designed for the cut-to-length method. Benefits of the cut-to-length method include high work productivity and environmental awareness compared to other types of mechanised wood harvesting. Fuel consumption per harvested cubic metre is significantly lower with the cut-to-length method than with the tree-length method because the machines are fewer and generally lighter. With the cut-to-length method, the nutrition-rich leaves, needles, branches and tops remain in the forest. In nutrient-poor soil in particular, this ensures that the trees left growing or the regeneration seedlings draw enough nutrients from the soil. Moreover, in logging sites with fragile terrain, the harvester leaves branches cluttering the logging road over which the forwarder must drive, so logging damage to the terrain is considerably less. With the cut-to-length method, the timber is directly delivered for further processing, reducing unnecessary logistics.

We also comply with the ISO 14001 environmental system, which has been certified. In addition, our environmental responsibility relies on our sustainable development targets related to saving natural resources.

The greatest risks with regard to environmental responsibility are cases of unexpected environmental damage related to our products or service business. We conduct continuous research and development aimed at preventing environmental damage caused by our products, and active feedback from customers and observing our operating environment play a key role in this work. We also provide each customer with comprehensive training on the use and functionality of the machines, proactively preventing damage and solving problems. There has been no damage so far.

In 2017, we developed functions for measuring fuel consumption and are attempting to gain more information on this topic in 2018.  In 2017, the Boost & Save programme was launched. Several measures were taken, one of which was improving the machine's hydraulic flow in order to reduce fuel consumption.  More than 90% of the weight of our forest machines consists of recyclable material.

Environmental impacts of the supply chain

Production is the main source of environmental impact in the supply chain. The environmental impact of production comes from the consumption of energy and raw materials, VOC emissions generated in surface processing, handling and storage of chemicals, and emissions generated during product testing. Due to our production methods, water consumption is not a significant environmental factor. From our follow-up figures, we identified the factors that influence electricity consumption: production volumes, operating hours of production machinery and number of personnel. The greatest environmental impact of procurement and logistics comes from transport emissions. We are tackling this by minimising transport distances, optimising delivery schedules and developing better packaging solutions. We replace our transport equipment regularly, achieving environmentally friendlier vehicles. The service life of our vehicles is approximately five years. 

The primary goal of logistics is the efficient use and circulation of stock, which can also influence energy consumption and other such factors through the use of space. Another goal is to minimise packaging waste, recycle and reuse it as efficiently as possible. Ponsse has outsourced its packaging-related producer responsibility to producer communities operating in this field. Thanks to a cost-effective, company-financed producer responsibility system, just a fraction of the total amount of used packaging is not reused. Annually this amounts to just a few per cent.

In facility management, environmental values are taken into account when planning investments. We invest in optimal building system control, energy-efficient and water-saving solutions and preventive maintenance of our machinery.

In late 2016, we decided to only purchase electricity based on renewable energy generation for our production plant. All Ponsse’s sites in Finland use electricity generated by renewable sources. While carrying out renovations and constructing new buildings, we have also used intelligent LED lighting that works with motion sensors. LED lights replacing all lighting account for as much as 5% of our total electricity consumption. In 2017, the factory roof was equipped with electricity-producing solar cells. Annually, they produce approximately 169,000kWh of electricity, which corresponds to the amount of electricity used in about a hundred flats in high-rise buildings annually. The roof of the new factory area was covered with bitumen roofing felt that neutralises harmful traffic and industry emissions, improving air quality. Thanks to this roofing, the air is cooler on the roof, and its use with air conditioning helps reduce energy consumption.

All in all, we strive to develop and choose solutions that improve our energy efficiency and reduce natural resource consumption.

Environmental impact of our services

Ponsse’s service business aims at providing the customer with a well-functioning, productive machine that has a long service life so that the customer can focus on its own core business. From the environmental perspective, the goal is to minimise environmental impact related to the use and servicing of the machine and maximise its service life. The choice of parts and servicing products can also influence the environmental impact generated during the life cycle of the product. Offering factory-reconditioned parts and products (Reman Parts), second-hand parts (Budget Parts) and classic parts of machines that are no longer in production (Classic Parts) also promotes a long service life and material efficiency. The greatest environmental impact of our service business is related to the machine servicing measures and products, processing of waste, trips made by servicing personnel and customers, and the transport of machines. In the actual servicing situation, the most substantial environmental factors are the water used for washing and problem waste generated during servicing. Ponsse’s service network deploys a common waste processing procedure and uniform requirements for servicing premises. This also concerns our retail and contractual servicing partners.

Our service contracts provide customers with improved reliability, predictable maintenance and good value retention for the machine. As the result of our R&D efforts, we have been able to extend our machines’ service intervals, which has led to a reduction in the use of oil and fluids, as well as reduced fuel consumption in transport. When Ponsse assumes responsibility for the servicing of a machine, it also assumes responsibility for the appropriate processing of the related waste. The service contracts, as well as our 24/7 digital services and customer support, have helped us reduce unnecessary logistics. We monitor the service level of all members of our service business network through service audits, in order to ensure continuous, consistent development. In order to improve the responsibility of our services and activities in the coming years, we aim to update the service audits also to include our set environmental targets. We have started to engage our reliable and responsible partners.

The biggest risks for the service business are cases of sudden environmental damage to the machines. We maintain our high quality through the use of internal indicators, shared guidelines, training and internal audits. One of the most important coherent responsibility practices is Effective and Safe Workshop (ESW), Ponsse’s auditing system, which covers the services of Ponsse and its contractual service providers. So far 286 audits have been completed, 62 of which were carried out in 2017. 

Monitoring environmental impacts

Currently the company monitors water consumption, VOC emissions and the total amount of waste in the Vieremä factory, among other things. However, in 2018 we aim to expand this to our service business network and possibly operations in other countries as well.

In 2017, the company started monitoring energy consumption at Group level. The company's total energy consumption in 2017 was 21.4GWh, divided between different operations as follows:

-        Vieremä factory                              11.9GWh

-        Service business network                  8.4GWh

-        Epec Oy                                           1.1GWh

Heating and electricity contributed to the total energy consumption as follows:

-        electricity consumption                 11.7GWh

-        heating                                          9.7GWh

There is no comparable data from previous years, but the company intends to monitor energy consumption at Group level in the future. This way it will be possible to compare data from different years.
 

B) Social and HR affairs

We operate and communicate honestly and ethically in the spirit of collaboration

Ponsse has always valued its employees and emphasised their importance. We want our employees to be safe and healthy and feel that they have a meaningful job in which they want to continuously improve their performance. As an employer, Ponsse wants to respect international human and employee rights and offer every employee equal opportunities with regard to applying for vacant positions, enhancing their skills, belonging to trade unions and becoming members of administrative bodies. It is our principle that the best, most suitable candidate is always selected for each position.

Ponsse also values equality in communications. These principles apply to everyone within Ponsse – this is the only way to create an atmosphere based on positive, constructive collaboration. In 2017, we introduced the One Ponsse principles and management targets. The One Ponsse principles are: The customer is at the core of our operations, Co-operation and responsibility, Flexible implementation and transparency, Shared practices, and Open communication that supports taking initiative (communicating the why). One Ponsse is a practice that applies to all Ponsse employees and focuses largely on the customer. In accordance with the One Ponsse principles, we all assume responsibility for our work and shared goals across the entire organisation. Everybody in the organisation communicates openly and actively, respects each other and follows shared practices.  On the client side, this manifests as superior service and quick responses to their needs. This way we can continue to ensure our success in the future. The One Ponsse programme will continue throughout 2018. In this regard, we will provide further training for managers and organise briefings and participatory activities where One Ponsse principles can be discussed in smaller teams.

We are a developing and safe workplace

Occupational safety is essential for every Ponsse employee. Ponsse has been monitoring and enhancing occupational safety, both at Group level and at the level of various functions, based on local requirements. Ponsse employees are encouraged to assume an active role in enhancing safety and take responsibility for observing the commonly applicable practices. One goal of responsibility-related efforts is to create a common safety programme based on best practices in order to improve and unify our safety activities and enhance transparency throughout the Group.  With regard to work safety, our goal throughout Ponsse Group is a zero-accident work environment. We also have the possibility to give anonymous feedback via intranet.

Our HR management relies on active collaboration and interaction, compliance with the company values in all management and decision-making, ensuring occupational health and safety, consistent salary and remuneration systems, as well as continuous competence development. We set activity- and development-related goals at all levels for the company, its various functions and personally for every employee. The achievement of these goals is monitored and supported in different ways, such as development discussions. We deploy various competence development methods, based on each task’s requirements and also on personal wishes. We systematically develop ways to enhance occupational well-being and competencies at Group level, and monitor these activities and ensure their transparency. Employee satisfaction surveys are conducted throughout the Group on a regular basis. Our on-target earnings system applies to 100% of our personnel. We also continuously invest in training and look for ways to improve it. We provide internal training for our personnel and customers.

Above, we have included the results from health and safety surveys conducted among Vieremä factory employees in 2013, 2015 and 2017. In 2013, there were 408 respondents; in 2015, 456; and in 2017, 588. 

In 2017, the company focused heavily on monitoring and improving aspects of occupational safety at the factory and throughout the service business network in Finland. Ponsse’s goal for 2017 was to develop its safety culture by improving standard procedures. The most important indicator for occupational safety used in the company is LTIF (Lost Time Injury Frequency). The LTIF rate refers to the number of injuries that require a person to be absent from work more than 24 hours per million hours worked. The LTIF rate was 21 in Finland in 2017.  In 2016, it was 25. In the future we will develop a system of measurement for our subsidiaries as well.

In 2017, there was an increase in positive safety observations. By reducing defects, the company has been able to improve its occupational safety.  This has led to fewer eye and finger injuries, among other things. In 2017, we made 776 safety observations in Finland. In 2016, the number was 653. These results are derived from a programme for continuous development, the purpose of which is to prevent accidents. Employees are able to observe safety issues in a dedicated app. This mobile app helps everybody at Ponsse to take photos of any defects they detect and communicate the issues to others in order to have the matter rectified. We are focusing on the following areas of occupational safety in 2018:

-        identifying and managing occupational safety risks,

-        providing guidelines for safe conduct and monitoring it

-        discussing safety matters in line organisations

-        making sure that everybody has the required know-how in safety matters

Our supply chain and customer service operate responsibly

The quality of our products and services and customer satisfaction are key factors steering our operations. We want to make the world’s greatest forest machines that promote the profitable business of our customers, as well as the health and safety of employees. We choose durable materials for our products and strive to find innovative, responsible solutions. In our service provision, particular attention is paid to the safety of service processes, the competence of our employees, and proper tools. We assume responsibility for the machine service situation and the tools required in it on behalf of our customer. We actively monitor changes in requirements and promptly respond to product development needs, while always keeping our customers’ needs in mind. One element in our development work is the better identification of our customers’ expectations concerning the responsibility of our products and services, and we seek new, innovative solutions to support our responsibility goals.

C) Respecting human rights and preventing corruption and bribery

The company's value base is strong and rich in tradition. It encourages everybody at Ponsse to act with integrity, respect other people and co-operation, and to aspire to improve our community and operations. Furthermore, the company operates within the framework of national and international laws and regulations, employer obligations and commitments, as well as its own Code of Conduct.

The company started implementing the Code of Conduct in 2017. Personnel from the financial and HR departments received training on social responsibility and the Code of Conduct. We aim to provide further training and communications for our personnel in 2018.

In accordance with our guidelines, we respect and adhere to the principles defined in the United Nations’ Universal Declaration of Human Rights. We do not tolerate the use of child labour and other forms of forced labour. We support freedom of association, and all employees have the right to join a trade union and collaborate with others at the workplace. We do not discriminate against our employees or job applicants based on their gender, nationality, religion, race, age, disabilities, sexual orientation, political opinions, membership of a trade union or social or ethnic background. We aim to create an attractive workplace where all our employees are treated with equal respect and dignity.  Furthermore, we promote a culture of equal opportunities and diversity. We do not tolerate any kind of harassment at or beyond work.

We are also committed to fighting against corruption in all forms, including blackmail and bribery. We do not give bribes or other illegal payments or authorise such payments in order to gain or retain business. We do not offer or receive services, gifts or benefits, which could be reasonably considered to affect decision-making in our company or which exceed the limits of standard representation expenses. In 2017, we were not informed of any corruption incidents.

The purpose of the Code of Conduct is to foster increasingly uniform principles and practices throughout the Group and to improve operations. All new Ponsse employees are walked through the Code of Conduct. A Group-wide feedback channel and process also form an important part of this work. Our managers and supervisors play a key role in ensuring a uniform company culture. They are responsible for making sure that every Ponsse employee knows his/her responsibility and complies with the company’s guidelines. Every Ponsse employee is obliged to act responsibly. We aim to identify potential risks and manage them. So far we have not identified any risks relating to human rights violations or corruption and bribery prevention.

Each new supplier agrees to comply with Ponsse’s Supplier Code of Conduct terms and conditions. This document provides a framework for laws, human rights, use of child labour, forced labour, freedom of association, discrimination, conditions of employment, health and safety, environment, bribery and corruption, money laundering and fair competition. These guidelines help prevent human rights violations, corruption and bribery. We aim to have all our suppliers sign the Supplier Code of Conduct gradually by 2020.