rspo audit report · opp 3 tungku estate lahad datu, sabah, malaysia e 117.699927 n 5.599875 3,404...

RSPO Principles & Criteria Annual Surveillance Assessment Report

Report Number CU821295

RSPOPC-SUM-REPORT.F01 JULY2013 Page 1 of 38

Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia.

Tel: +603-3377 1600 / 1700

RSPO PRINCIPLES & CRITERIA PUBLIC SUMMARY REPORT

ANNUAL SURVEILLANCE ASSESSMENT 4

Malaysia

LUNGMANIS PALM OIL MILL Kuala Lumpur-Kepong Berhad

2014

Report prepared by: Mahaswaran Maliyappan (Lead Assessor)

Certification decision by: Nur Hadi (Certifier)

Certifying Office

Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa,

Off Jalan Sg Bertih, Teluk Gadong, 41100 Klang, Selangor, Malaysia [email protected]

Tel: +603-3377 1600 / 1700

Control Union Certifications Control Union Certifications is a member of the Control Union World Group - an international

inspection and certification body. CUC performs assessments and certification in many agricultural

based fields such as FSC, RSPO, and Organic production, Sustainable Textile Production, Organic

Exchange, GLOBALGAP, HACCP, BRC, GMP and GTP.

CUC is accredited by the Dutch Council of Accreditation (RVA) on the European quality standard EN 45011 for the inspection and certification of CUC Organic program (according to the EU regulation 2092/91) and GLOBALGAP program. When requested a copy of the accreditation certificate can be

obtained from CUC.

RSPO Membership Number 8-0025-06-000-00

RSPO Approval Date 12/01/2006

Affiliate Membership http://www.rspo.org/en/member/339

mailto:[email protected]://www.rspo.org/en/member/339





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Table of Contents

PART 1: SCOPE OF THE CERTIFICATION ASSESSMENT AUDIT .............................................................. 4

1.1 COMPANY AND CONTACT DETAILS ...................................................................................................... 4 1.2 RSPO MEMBERSHIP & CERTIFICATION DETAILS .................................................................................... 4 1.3 ANNUAL SURVEILLANCE ASSESSMENT DETAILS ...................................................................................... 4 1.4 ASSESSMENT TYPE ............................................................................................................................ 4 1.5 LOCATION OF THE PALM OIL MILL ....................................................................................................... 4 1.6 PALM OIL MILL OUTPUT AND APPROXIMATE TONNAGES CERTIFIED ........................................................... 4 1.7 GENERAL DESCRIPTION OF SUPPLY BASE .............................................................................................. 5

1.7.1 Location of the Supply Base ............................................................................................... 5 1.7.2 Statistics of the Supply Base and Estimated Tonnes of FFB produced per year ............... 5 1.7.3 Conservation and HCV Area (Ha) ....................................................................................... 5 1.7.4 Percentage of Planted Oil Palm by different Age Ranges ................................................ 5 1.7.5 Calculation of the Number of Production Units (N) to Sample for the Mill ..................... 5

1.8 PROGRESS OF ASSOCIATED SMALLHOLDERS OR OUT-GROWERS, IF APPLICABLE TO THIS ASSESSMENT ............. 6 1.9 LOCATION MAP FOR THIS CERTIFICATION UNIT (SEE APPENDIX 1) ........................................................... 6

PART 2: PARTIAL CERTIFICATION ........................................................................................................ 6

2.1 MANAGEMENT STRUCTURE ............................................................................................................... 6 2.2 NON-COMPLIANCE IDENTIFIED WITH 2.1 ABOVE ................................................................................... 6 2.3 SUMMARY OF THE TIME BOUND PLAN ................................................... ERROR! BOOKMARK NOT DEFINED. 2.4 UN-CERTIFIED UNITS OR HOLDINGS ...................................................... ERROR! BOOKMARK NOT DEFINED. 2.5 SUMMARY OF THE FINDINGS FOR PARTIAL CERTIFICATION ..................................................................... 11 2.6 PARTIAL CERTIFICATION AUDIT AGENDA ............................................................................................ 11

PART 3: AUDIT PROCESS ................................................................................................................... 12

3.1 ABOUT THE CERTIFICATION BODY ..................................................................................................... 12 3.2 AUDIT TEAM ................................................................................................................................. 12

3.2.1 Qualifications of the Lead Auditor ......................................................................................... 12 3.2.2 Qualifications of the Assessment Team ................................................................................. 13

3.3 AUDIT METHODOLOGY.................................................................................................................... 15 3.3.1 General Overview ............................................................................................................ 15 3.3.2 Assessment agenda for this Audit ....................................... Error! Bookmark not defined.

PART 4 ASSESSMENT FINDINGS ........................................................................................................ 18

4.1 LEAD ASSESSOR’S SUMMARY AND RECOMMENDATION FOR CERTIFICATION ............................................. 18 4.2 SUMMARY OF THE FINDINGS BY PRINCIPLES AND CRITERIA .................................................................... 19

Principle 1: Commitment to Transparency ..................................................................................... 19 Principle 2: Compliance with Applicable Laws and Regulations .................................................... 19 Principle 3: Commitment to Long-Term Economic and Financial Viability ..................................... 20 Principle 4: Use of Appropriate Best Practices by Growers and Millers ......................................... 21 Principle 5: Environmental Responsibility and Conservation of Natural Resources and Biodiversity ........................................................................................................................................................ 25 Principle 6: Responsible Consideration of Employees and of Individuals and Communities by Growers and Millers ........................................................................................................................ 27 Principle 7: Responsible Development of New Plantings ................................................................ 30 Principle 8: Commitment to Continuous Improvement in Key Areas of Activity ............................. 30

4.3 SAMPLE CRITERIA APPLIED DURING ANNUAL SURVEILLANCES ONLY & NOT APPLICABLE FOR THE MAIN ASSESSMENT ............................................................................................... ERROR! BOOKMARK NOT DEFINED. 4.4 NON-CONFORMITY RAISED DURING THIS AUDIT AND ANY FROM THE PREVIOUS YEAR, IF APPLICABLE ......... 31

4.4.1 Non-Conformities Identified during this Audit ...................................................................... 31 Non-were raised during this audit. or................................................. Error! Bookmark not defined. 4.4.2 Non-Conformity Identified during the last ASA, not applicable for MA .. Error! Bookmark not defined.





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Non-were raised during the last audit as this is the Main Assessment. or ...... Error! Bookmark not defined.

THE FOLLOWING NC’S WERE RAISED DURING THE LAST AUDIT AND THE STATUS WAS REVIEWED AS INDICATED BELOW. ................................................................................................................. ERROR! BOOKMARK NOT DEFINED.

4.4.2 Observations Raised During this Audit ...................................... Error! Bookmark not defined. 4.5 ISSUES THAT WERE RAISED DURING THE STAKEHOLDER CONSULTATION, IF ANY ......................................... 33

PART 5: RSPO SUPPLY CHAIN CERTIFICATION ................................................................................... 33

5.1 POM INCLUDED IN THE SCOPE OF THE AUDIT ..................................................................................... 33 5.2 CONFIRMATION OF THE COMPANY’S SUMMARY OF ANNUAL CERTIFIED VOLUME OF RSPO CERTIFIED PALM OIL AND PALM KERNEL OVER A SPECIFIED PERIOD ...................................................................................... 33 5.3 SUMMARY REPORT INCLUDING A BRIEF DESCRIPTION OF THE SCOPE OF CERTIFICATION ............................. 33 5.4 MONTHLY RECORDS OF CERTIFIED AND UNCERTIFIED FFB RECEIVED SINCE THE LAST AUDIT ........................ 34 5.5 MONTHLY RECORDS OF CERTIFIED CPO AND PK PRODUCED SINCE THE LAST AUDIT ................................... 34 5.6 RECORDS OF CERTIFIED CPO & PK SOLD UNDER GREENPLAM TO BUYERS SINCE THE LAST AUDIT, IF ANY ...... 35 5.7 RECORDS OF CERTIFIED CPO & PK SOLD UNDER UTZ ETRACE TO BUYERS SINCE THE LAST AUDIT, IF ANY ...... 35 5.8 NON-CONFORMITIES IDENTIFIED DURING THIS AUDIT ............................................................................ 35 5.9 DESCRIPTION OF THE ORGANIZATIONAL MANAGEMENT SYSTEMS ............................................................ 35 5.10 FINAL CERTIFICATION DECISION BY CONTROL UNION FOR THE RSPO SCCS AUDIT OF THE POM .............. 35

PART 6: CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY ........... 36

6.1 DATE OF NEXT ASA ........................................................................................................................ 36 6.2 DATE FOR CLOSURE OF NON-CONFORMITIES ...................................................................................... 36 6.3 SIGNING BY THE CLIENT ................................................................................................................... 33 6.4 SIGNING BY THE LEAD AUDITOR ........................................................................................................ 36 6.5 SIGNING BY THE CERTIFIER ............................................................................................................... 36

PART 7: APPENDICIES ........................................................................................................................ 35

APPENDIX 1: LOCATION MAP FOR THIS CERTIFICATION UNIT .......................................................................... 35 FOR MALAYSIA ONLY. APPENDIX 2: LIST OF ABBREVIATIONS ........................................................................................................... 36





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PART 1: SCOPE OF THE CERTIFICATION ASSESSMENT AUDIT

1.1 Company and Contact Details

Company Name: Kuala Lumpur Kepong Sabah, Sdn. Bhd

Business Address: KLK (Sabah), Lahad Datu Region, P.O.BOX 60999, 91118 Lahad Datu, Sabah.

Contact Person: Mr. Sin Chuan Eng

Office Telephone: +6089-887240

E-Mail: [email protected]

Web Site: www.klk.com.my

Other Certifications Held: ISCC

1.2 RSPO Membership & Certification Details

RSPO Membership Number: 1-0014-04-000-00

Registered Client Name: Kuala Lumpur Kepong Berhad

Certificate Number: CU-RSPO-821295

Start Date Of Certificate: 6 July 2010

End Date Of Certificate: 5 July 2015

Date Of Original Certification: 6 July 2010

Scope: Certification of the Palm Oil Mill and Supply Bases

Type Of Certification: Single site

Duration Of Certificate: 5 Years from date of certification

1.3 Annual Surveillance Assessment Details

Dates Of This Audit: 5-9 May, 2014

Audit Number: ASA 4

1.4 Assessment Type

This is a RSPO Principles &Criteria Compliance assessment of the palm oil mill and its respective supply bases as listed in this report below.

1.5 Location of the Palm Oil Mill

Name Palm Oil Mill

Mill Capacity

Location GPS Reference

(POM) MT/Hour Address Longitude Latitude

Lungmanis POM 45 KM 29, Jalan Lahad Datu Tungku, Lahad Datu, Sabah

E 118°.58’82 N 5°.0839

1.6 Palm Oil Mill Output and Approximate Tonnages Certified

Figures below are from:

Only from certified supply bases (Y/N). YES

Combining certified with uncertified supply bases (Y/N). NO

If the Mill is receiving FFB from uncertified supply bases outside the audit scope, such uncertified sources is highlighted under the following sections as seen applicable:

a. PART 1, Section 1.7 – General Description of Supply Base, b. PART 2: Partial Certification, Section 2.4 – Uncertified Units or Holdings, c. PART 5: RSPO Supply Chain Certification of this report

Projected Production from the last 12 Months (MT)

Actual Production for this Audit Year 2013 (MT)

Projected 12 Months (MT) Forecast Certified in this Report

FFB CPO PK FFB CPO PK FFB CPO PK

213 330 31 661 12 373 161 491 35 159 8 853 213 706 48 084 12 395

mailto:[email protected]://www.klk.com.my/





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1.7 General Description of Supply Base

Lungmanis mill receives it supply of FFB from its own estates which is Lungmanis, Bukit Tabin and Tungku estates. No changes introduced in the supply base since from previous assessment and this audit has carried out to ensure full compliance with RSPO requirement.

1.7.1 Location of the Supply Base

OPP

Oil Palm Plantation

Location GPS reference Area Summary (Ha)

Name Address Longitude Latitude Total Mature

OPP 1 Lungmanis Estate

Lahad Datu, Sabah, Malaysia

E 118.602767 N 5.073939 1,613 1,613

OPP 2 Bukit Tabin Estate

Lahad Datu, Sabah, Malaysia

E 118.614312 N 5.058862 2,864 2,864

OPP 3 Tungku Estate Lahad Datu, Sabah, Malaysia

E 117.699927 N 5.599875 3,404 3,404

TOTAL 7,881 7,881

1.7.2 Statistics of the Supply Base and Estimated Tonnes of FFB produced per year

OPP Oil Palm Plantation Estimated FFB/Year (MT)

Oct’13 to Sep’14 Planting Years Cycle (Years)

OPP 1 Lungmanis Estate 46,795 95 - 97 25 to 30

OPP 2 Bukit Tabin Estate 77,395 94 - 97 25 to 30

OPP 3 Tungku Estate 89,516 92 - 94 25 to 30

TOTAL 213’886

1.7.3 Conservation and HCV Area (Ha)

OPP Oil Palm Plantation Conservation Area (Ha) HCV Area (Ha) * HCV part of Conservation

OPP 1 Lungmanis Estate - - -

OPP 2 Bukit Tabin Estate - - -

OPP 3 Tungku Estate - - -

TOTAL - - -

* Indicate if HCV area is part of the Conservation Area. If the HCV area is part of the Conservation Area, then “YES” otherwise, “No”

1.7.4 Percentage of Planted Oil Palm by different Age Ranges

OPP Planting Years by 5 year Ranges

1986-1990 1991 -1995 1996 – 2000 2001 – 2005 After 2005

OPP 1 - 63.92 % 36.08 % - -

OPP 2 - 68.96 % 31.04 % - -

OPP 3 - 100.00 % - - -

1.7.5 Calculation of the Number of Production Units (N) to Sample for the Mill

N = 0.8√Y, where “Y” is the number of units, with the result always to be rounded “up” to the next whole integer. Where only a sample of the supply base is assessed, units not previously assessed, or assessed earlier in the certification program, are to be preferred over those more recently assessed

For the Mill, how many units make up the production base?

Owned estates (Y) N = 0.8√Y Smallholders (Z) N = 0.8√Z





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3 2 0 0

Explanation as to the selection of estates sampled

Bukit Tabin Estate & Tungku Estate was assessed. [ Two of the three estates ]

1.8 Progress of associated Smallholders or Out-growers, if applicable to this assessment

Progress of associated Smallholders or Out-growers towards Compliance with relevant Standards - should be in accordance to the 3 year implementation plan, if applicable to this assessment

Not Applicable

1.9 Location Map for this Certification Unit (See Appendix 1)

PART 2: PARTIAL CERTIFICATION

The rules for partial certification allow organizations that have a majority holding in and / or management control of more than one autonomous company growing oil palm to certify individual management units and / or subsidiary companies subject to certain rules.

2.1 Management Structure

Section Criteria Yes/No If “Yes” If “No”

2.1.1 Is the certified operation (POM and supply base as detailed above) a stand-alone operation and there are no other plantations or mills owned by the same company?

No Section 2 is N/A

Go to 2.1.2

2.1.2 Is the certified operation part of a simple structure of operations owned by one company?

Yes Go to 2.1.5 Go to 2.1.3

2.1.3 Are there statements of the ultimate controlling shareholders and directors in the managing agency company/companies:

a. Explaining the legal relationship and the management arrangements with the subsidiary companies and / or with any operating groups?

- Go to 2.1.4

Go to 2.2.1

2.1.4 b. A statement of commitment to complying with the spirit of the RSPO for all companies and subsidiaries involved with the growing of oil palm and for the production of palm oil?

- Go to 2.4 Go to 2.2.2

2.1.5 Is there a time bound plan in place for all subsidiaries, estates and palm oil mills?

Yes Go to 2.3 2.2.3

2.1.6 Is the parent company or one of its majority owned and / or managed subsidiaries a member of RSPO.

Yes

2.2 Non-compliance Identified with 2.1 Above

Section Non-compliance findings NC raised Category

2.2.1 There is no explanation as to the company’s structure and therefore it Is not possible to conduct an effective audit against the rules for partial certification.

- Major

2.2.2 There is no statement of commitment to complying with the spirit of the RSPO for all companies within the company structure.

- Major

2.2.3 There is no time bound plan in place for the certification for all subsidiaries, estates and mills.

- Major





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2.2.4 No applicable membership of the RSPO. - Major

2.3 Summary of the Time Bound Plan

Section Requirement Findings and any action required Compliance

2.3.1 Does the plan include all subsidiaries, estates and mills?

New inclusion of supply base and mill has been updated in below time bound plan.

Yes

2.3.2 Is the time bound plan challenging? Age of

plantations. Location. Mill

development. Infrastructure. Compliance

with applicable law.

Existing time bound plan has been included with new supply base and mill.

Yes

2.3.3 Have there been any changes since the last audit? Are they justified?

The time bound plan reviewed by CUC and changes such as new inclusion is updated and accepted.

Yes

2.3.4 If there have been changes, what circumstances have occurred?

New inclusion of mill and supply base. No changes on the targeted time line.

Yes

2.3.5 Have there been any stakeholder comments?

Recent stakeholder comment on acquired land in Papua New Guinea on the credibility on land obtained has been raised by OCEAN-Program Officer Collingwood Bay Community Representative, Mr. Adelbert Gangai has sent comments to KLK on a letter dated 5

th December 2013 and

kept RSPO & other parties in copy. Currently, KLK has leased a piece of a land to park all the machineries temporarily. As of 09 December 2013, this matter is being handled with RSPO and currently KLK is in progress to reply to RSPO. Wild Asia had been appointed since April 2013 to undertake SEIA assessment and subsequently 1

st meeting

at Wanigela district on 25th

Nov 2013 and community and representative attended was recorded. Pending official assessment report.

On PT Menteng Jaya Sawit Perdana IUP for 7,400Ha approval no: 525.26/153/II/EKBANG/2007 dated on 13 February 2007 and Izin Lokasi(IL) is renewed and documented no: 188.45/359/HUK-BPN/2013 dated: 1

st

August 2013 which includes an approval clause 1a that this IL will remain in force until land swap process is finalised.

Yes

2.3.6 Have there been any newly acquired subsidiaries?

No new acquisition other than Papua New Guinea. Yes

2.3.7 Have there been No lapses. Yes





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any isolated lapses in the implementation of the plan?

2.3.8 Has there been any systematic failure to proceed with the implementation of the plan?

No. Yes

2.3.9 General statement as to progress made since the last audit?

The target to certify all the units within year 2015 remain same. Yes

2.4 Un-Certified Units or Holdings

NOTE: Companies may demonstrate compliance by clear evidence of a self-audit (i.e. an internal audit for all subsidiaries, estates and Palm Oil Mills)

Section Requirement Findings and any action required Compliance

2.4.1 Did the company conduct an internal audit? If so, has a positive assurance statement been produced?

The internal control points have included all the requirements to validate the compliance against uncertified units or holdings as per partial requirements and assurance statement has been generated by KLK has a list of subsidiaries inspected and dated 30

th Nov 2013.

Yes

2.4.2 No replacement after dates defined in NIs Criterion 7.3 of:

Primary forest.

Any area identified as containing High Conservation Values (HCVs).

Any area required to maintain or enhance HCVs in accordance with RSPO criterion 7.3.

The company has conducted HCV assessment by Jump Consulting in January – February 2012 for all subsidiaries where the assessment report confirms that there was no replacement of primary forest or containing HCV. The new mills and newly acquired land are still under consultant preliminary report.

Yes

2.4.3 Any new plantings since January 1

st

2010 must comply with the RSPO New Plantings Procedure.

PT Anugerah Surya Mandiri has undergone NPP and published in RSPO website on 1

st April 2013.

Yes

2.4.4 Any Land conflicts are being resolved through a mutually agreed process, e.g. RSPO Grievance

For PT Karya Makmur Abadi, a total land of 4,745.13Ha has been compensated. PT Adei Plantation land conflicts around 2,544Ha are still in progress of negotiation.

Yes





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procedure or Dispute Settlement Facility, in accordance with RSPO criteria 6.4, 7.5 and 7.6.

2.4.5 Any Labor disputes are being resolved through a mutually agreed process, in accordance with RSPO criterion 6.3.

None noted. No stakeholder comments or complaints received Yes

2.4.6 Any Legal non-compliance is being resolved in accordance with the legal requirements, with reference to RSPO criteria 2.1 and 2.2.

None noted. No stakeholder comments or complaints received. Yes

TIME BOUNDP PLAN FORECAST FOR RSPO CERTIFICATION OF ALL PALM OIL MILLS & SUPPLY BASES

Palm Oil Mill Country Supply Bases (estates,

plantations, associations) Targeted RSPO

Certification Year Current Certification

Status as per this Audit

Batu Lintang Serdang, Kedah, Malaysia

Pelam Estate Batu Lintang Estate Subur Estate Buntar Estate

2013 Certified

Kekayaan Paloh, Johor, Malaysia

Landak Estate Kekayaan Estate Voules Estate Sg Penggeli Estate New Pogoh Estate Fraser Estate Paloh Estate Sg Bekok Estate Ban Heng Estate See Sun Estate

Oct 2011 Certified

Paloh Paloh, Johor, Malaysia

Supply base consisting of smallholders

2015 Pending

Jeram Padang Bahau, Negeri Sembilan, Malaysia

Ayer Hitam Estate Batang Jelai Estate Jeram Padang Estate Kombok Estate Ulu Pedas Estate Sg Pertanian Estate Sg Kawang Estate Renjok Estate Tuan Estate

Sept 2012 Certified

Tanjung Malim Tanjung Malim, Perak, Malaysia

Changkat Asa Estate Kerling Estate Sg Gapi Estate

2013 Certified





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Tuan Mee Sungai Buloh, Selangor, Malaysia

Tuan Mee Estate 2013 Certified

Kuala Pertang Kuala Krai, Kelantan, Malaysia

Kerilla Estate Pasir Gajah Estate Sg Sokor Estate

By 2013 Pending

Mill 1 Tawau, Sabah, Malaysia

100% independent smallholders, not to be included in the scope of the certification

N/A N/A

Mill 2 Tawau, Sabah, Malaysia

Pang Burong Estate Sri Kunak Estate Tundong Estate Ringlet Estate

March 2009 Certified

Pinang Tawau, Sabah, Malaysia

Jatika Estate Sigalong Estate Pangeran Estate Pinang Estate

March 2009 Certified

Lungmanis Lahad Datu, Sabah, Malaysia

Tungku Estate Bukit Tabin Estate Lungmanis Estate

July 2010 Certified

Rimmer Lahad Datu, Sabah, Malaysia

Rimmer Estate Sg. Sibalukan

July 2010 Certified

Bornion Kinabatangan, Sabah, Malaysia

Bornion Estate Segar Usaha Estate

July 2010 Certified

Changkat Chermin

Manjung. Perak, Malaysia

Lekir Estate Changkat Chermin Estate Raja Hitam Estate Glenealy Estate Serapoh Estate Kuala Kangsar Estate Allagar Estate

2013 Certified

Berau 1 Berau, Kaltim, Indonesia

Kebun Malindomas Perkebunan, Kebun Hutan Hijau Mas, Kebun Jabontara Ekakarsa

By 2014 Pending

Steelindo Wahana Perkasa

Belitung, Indonesia

Kebun Steelindo Wahana Perkasa

By 2013 Audited on 30/9-04/10/2013. Pending.

Parit Sembada Belitung, Indonesia

Kebun Parit Sembada Kebun Alam Karya Sejahtera

By 2014 Pending

Mandau Riau, Sumatera, Indonesia

Kebun Mandau Oct 2012 Certified

Nilo 1 Riau, Sumatera, Indonesia

Kebun Nilo Timur By 2013 Approved by RSPO, pending certificate issuance.

NIlo 2 Riau, Sumatera, Indonesia

Kebun Nilo Barat By 2013 Approved by RSPO, pending certificate issuance.





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Tapung Kanan Riau, Sumatera, Indonesia

Kebun Sekarbumi Alamlestari

By 2013 Certified.

Gohor Lama

Langkat, Sumatera Utara, Indonesia

Kebun Basilam Kebun Gohor Lama Kebun Tanjung Beringin (New inclusion)

By 2014 Pending

Padang Brahrang

Sumatera Utara, Indonesia

Kebun Padang Brahrang Kebun Bukit Lawang Kebun Tanjung Keliling Kebun Bekiun Kebun Maryke (New Inclusion)

By 2014 Pending

MAP March 2013

Kalimantan tengah, Indonesia

Kebun Karya Makmur Abadi Kebun MAP Kebun Menteng Jaya Sawit Perdana

By 2015 Pending

With reference to time bound plan, the following issues were reviewed openly with the Control Union audit team during the assessment and which may be in conflict with the rules for partial certification, if applicable

Name of Mill or Plantation *Area of concern (See examples below)

N/A N/A

Include any known concerns, media reports and major issues both present and from the past covering, for example:

Replacement of primary forest or any area containing HCV’s since November 2005.

Evidence of non-compliance with the law

Legal issues

Compensation payments

Social relations

Burning

Labor disputes

2.5 Summary of the findings for Partial Certification

The audit team assessed compliance with the above requirements during this audit. Failure to address any non-compliance identified may lead to certification suspension.

Overall findings are satisfactory and a minor non-compliance raised has been closed with an assurance statement. The 6 estates which have been excluded from time bound plan previously is included now with a target date. Out of the two mill in Kalimantan Timur, a new palm oil mill named Berau 2 POM is yet to commission. Stabat POM in Medan & KMA POM in Sampit has not commissioned and will be included in the time bound plan once ready. The company has also made decision to include Paloh Mill into certification by year 2015. Mill 1 which consists of 100% of independent smallholders will be shut down within 3 years from 2012. For final conclusion, please refer to table 3.1.

2.6 Partial Certification Audit Agenda

Date Location Agenda

7.5.2014 Lungmanis POM

Documentation review





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PART 3: AUDIT PROCESS

3.1 About the Certification Body

Control Union Certifications is a member of the Control Union World Group – an international inspection and certification body. CUC performs Audits and certification in many agricultural based fields such as FSC, RSPO, and Organic production, Sustainable Textile Production, Organic Exchange, GLOBALGAP, HACCP, BRC, GMP and GTP. CUC is accredited by the Dutch Council of Accreditation (RVA) on the European quality standard EN 45011 for the inspection and certification of CUC Organic program (according to the EU regulation 2092/91) and EUREPGAP program. When requested a copy of the accreditation certificate can be obtained from CUC.

3.2 Audit Team

Lead auditor: Mahaswaran Maliyapan

Team member 1: Selvanathan Grapragasem

Team member 2: Muhd. Jamalul Arif

Team member 3: Asidatorn Iamsirisangthong

Team member 4: Andreas Budi Rahutomo

Team member 5: Jaruwat Boonrod

3.2.1 Qualifications of the Lead Auditor

Requirement Qualifications

A minimum of post high school (post-secondary school) training in either agriculture/forestry, environmental science or social sciences;

Post graduate qualification in agriculture with more than 5 years working experience in plantation.

At least 5 years professional experience in area of work relevant to the assessment (e.g., palm oil management; agriculture/forestry; ecology; social science);

More than 5 years working experience in plantation. Involved in RSPO auditing since November 2010. Fully trained in similar agriculture certification programs such as RSPO SCCS, Global Gap, ISCC and GMP.

Training in the practical application of the RSPO criteria, and RSPO certification systems;

Involved in RSPO assessment since November 2010. Member of CUC RSPO audit team. Involved in audits conducted in Malaysia and Indonesia.

Successfully completion of an ISO 9000:19011 lead auditors course;

Completed ISO 9001:2008 lead auditor course in July 2011. Successfully completed RSPO Lead Auditor Course

Training in the practical application of RSPO certification systems.

Post graduate qualification in agriculture with more than 5 years working experience in plantation.

A supervised period of training in practical auditing against the RSPO criteria or similar sustainability standards, with a minimum of 15 days audit experience and at least 3 audits at different organizations.

Involved in RSPO assessment since November 2010. Member of CUC RSPO audit team. Involved in audits conducted in Malaysia and Indonesia.

RSPO endorsed lead auditors course. Completed RSPO Lead Auditor training in 2011

Signed code of conduct. Signed with CUC

General knowledge of:





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RSPO P&C standards. Sound knowledge of the P&Cs, Nis and Local Interpretations.

CUC organizational structure. Sound understanding and has prepared training documents for others.

CUC quality systems. Sound understanding and has prepared training documents for others.

Lead auditor role. ISO 9001. Prepared an ISO 19011 training course and conducts internal training on auditing techniques.

Report writing. Extensive experience in report writing.

Stakeholder consultation. The process and need for this is fully understood.

Certification decision process. Full understanding.

RSPO SCCS program manual. Full understanding.

CUC filing systems. Full understanding.

Correct use of RSPO trademarks. Full understanding.

History and objectives of RSPO. Full understanding.

CV available. Upon request.

Completion of CUC RSPO lead auditor training. Completed & Passed RSPO Lead Auditor training in 2011

3.2.2 Qualifications of the Assessment Team RSPO Requirement Team Member Name Qualifications

Fluent in main local languages and English.

Selvanathan Grapragasem Fluent in both English and Bahasa Malaysia

Muhd. Jamalul Arif Fluent in both English and Bahasa Malaysia

Asidatorn Iamsirisangthong Fluent in English. Has understanding of Bahasa Malaysia

Jaruwat Boonrod Fluent in English. Has understanding of Bahasa Malaysia

Andreas Budi Rahutomo Fluent in both English and Bahasa Malaysia

Field working experience in the palm oil sector, or a demonstrable equivalent.

Selvanathan Grapragasem SA 8000 advanced auditor, QMS, EMS & OHSAS Lead Auditor, Working experience in oil palm plantation.

Muhd. Jamalul Arif Involved in RSPO auditing since November 2010. Auditing experience in GMP and Globalgap.

Asidatorn Iamsirisangthong Global gap experience and agriculture background

Jaruwat Boonrod Working in Quality laboratory for produce minimal process vegetable and fresh fruit for control fruits shelf life.

Andreas Budi Rahutomo Forest Carbon Partnership Facility Project with the Ministry of Forestry Republic of Indonesia. Involved in RSPO auditing since 2014.

Good agricultural practices (GAP), integrated pest management (IPM), pesticide and fertilizer use.



Asidatorn Iamsirisangthong Global gap experience and agriculture background

Jaruwat Boonrod Performed audit observation of GMP+FSA, USDA-NOP and EU organic, Global-GAP





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standard.


Health and Safety auditing on the farm and in processing facilities. (For example OHSAS 18001 or occupational. Health and safety assurance system).



Asidatorn Iamsirisangthong Complete lead auditor ISO 14001

Jaruwat Boonrod Certified Lead Auditor for ISO 9001 and ISO 14001.


Workers welfare issues and social auditing experience. (For example with SA8000 or related social or ethical accountability codes).



Asidatorn Iamsirisangthong Involved in group audit in organic farming since 2010. Global GAP in 2011 and RSPO in early 2012

Jaruwat Boonrod Nil

Andreas Budi Rahutomo Nil

Environmental and ecological auditing. (For example experience with organic agriculture, ISO 14001 or environmental management systems).



Asidatorn Iamsirisangthong Complete lead auditor 14001

Jaruwat Boonrod Certified Lead Auditor for ISO 9001 and ISO 14001.

Andreas Budi Rahutomo Bachelor of Forestry. Forest Carbon Partnership Facility Project with the Ministry of Forestry Republic of Indonesia. Involved in RSPO auditing since 2014.

Selvanathan SA 8000 advanced auditor, QMS, EMS & OHSAS Lead Auditor, Working experience in oil palm plantation.





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3.3 Audit Methodology

3.3.1 General Overview

The Audit was carried out in conformity with the procedures as laid down in the CUC Procedure Manual and the RSPO Program Manual for the auditors and Certifier. During the Audit the qualified CUC auditors used the RSPO standard as endorsed for the country in which the audit took place and recorded their findings. Workers and local communities were interviewed and evidence sought to confirm ongoing compliance to include:

Chemical stores. Storage, MSDS leaflets, Herbicide mixing areas, PPE, Ventilation, Security.

Field inspections. Herbicide application programs. Harvesting sites and efficiency. Fertilizing operations. SOP’s. Soil maps. Land preparation. Ground cover. IPM. First aiders and boxes. Ground cover. Soil erosion. Field observations of all operations.

Worker interviews. OSH. Sexual, religious, racial harassment. Pay and contracts. Child labor. First aid. Awareness.

Re-planting sites. Zero burn.

HCV’s. Identification. Management plans. Environmental Impact Assessments. Implementation.

Riparian zones. Width. Current and future management. Non maintenance regimes.

Water management. Water courses. Water monitoring.

Road maintenance. Run off.

Social amenities. Social Impact Audits.

Local communities. Contributions made. Employment opportunities. Social impacts. Complaints procedures.

Workshops. Oil traps. Safe working environment. PPE. Diesel tanks. Environmental waste management.

Line sites. Interviews with householders. Inspection of water discharge points. Water improvement plans. Waste disposal.

Documentation review. The Palm Oil Mill audit verification included the following activities:

Mill and workshop inspections. Documentation review & worker interviews.

Mill. SOP’s. Safe working environment. Gen sets. Walk ways. Signs. EFB. POME treatment. Emissions. Mass balance. Diesel tanks. PPE. Fire extinguishers. First aiders and boxes. Fuel and water usage.

OSH. Training. Management structure. First aiders.

Full document review. Completion of the checklist. Review and documentation of evidence. All aspects of RSPO P&C’s applicable.

Worker interviews. OSH. Sexual, religious, racial harassment. Pay and contracts.

Compliance against the RSPO SCCS certification scheme. Verification: Verification of implementation was done through field observations, workshop and chemical store inspections, worker and community interviews and mill inspections as summarized above.

3.3.2 Assessment agenda for this Audit

Date Location Auditors Main activities

05/05/2014 [Mon]

Lahad Datu Regional

Office Mahas

08.30 Opening meeting Chaired by the audit team leader

Introduction by team leader

Presentation by respective managers

Presentation of Palm Oil Mill source of FFB by respective managers

Rimmer

Andreas Mill inspection





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POM Mahas

Selva

Workshops

Stores

POM application

Document review Field operations

Worker interviews

Housing

Medical

Schools

Local communities

Environmental

Silabukan Estate

Jamal

Asidatorn Jaruwat

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

06/05/2014 [Tue]

Lungmanis POM

Mahas

Andreas Mahas

Selva

Supply Chain Certification Assessment of the POM (RSPO SCCS) Mill inspection

Workshops

Stores

POM application


Worker interviews

Housing

Medical

Schools

Local communities

Environmental

Tungku Estate

Jamal

Asidatorn Jaruwat

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

07/05/2014 [Wed]

Bornion POM

Mahas

Partial Certification Review with client representatives Mill inspection





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Andreas

Mahas

Workshops

Stores

POM application


Worker interviews

Housing

Medical

Schools

Local communities

Environmental

Bornion Estate

Jamal Asidatorn

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

Segar Usaha Estate

Selva Jaruwat

08/05/2014 [Thu]

Bukit Tabin Estate

Jamal Simon

Jaruwat Asidatorn

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

Rimmer Estate

Mahas Selva

Andreas

09/05/2014 [Fri]

Lahad Datu Regional

Office

All auditors

Preparation for closing meeting Additional field visits and meetings with managers as necessary Closing meeting Chaired by the audit team leader

Welcome and introduction by the team leader

Presentation of findings by the audit team

Questions and answers

Final summary by team leader End of assessment





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PART 4 ASSESSMENT FINDINGS

4.1 Lead Assessor’s Summary and Recommendation for Certification

The mill and supply bases visited (as per the above Tables 1.5 and 1.7.1) and were assessed at field, office, facilities, stores and a document review was carried out in accordance to the RSPO principles and criteria. The subscribed RSPO management system’s documentations seen with minor changes that due to internal external influenced factors that in relation to scope of certification. Specific evidence was recorded for estates and mill. Interviews with Estate Managers, Mill Manager, members of workers union and committee took place in both formal and informal environments and worker interviews were conducted at the supply base and the mill. The management is highly committed in maintaining the RSPO system by adopting to continuous improvement programs. There was no complaint or feedback received during the audit or during the field assessment when interviewing with the external stakeholders. Under partial certification rules, there is a time-bound plan established. For further clarification on Partial Certification, see PART 2 above. The management continually monitoring the established KPI / objectives that significantly rules the achievement of company’s corporate policy on RSPO. The mill is fully verified for RSPO SCCS system verification and it is found to be in full compliance. See PART 5 below.

It is therefore the recommendation of the lead assessor that:

A certificate of compliance is maintained. Signed:

Name: Mahaswaran Maliyappan Date: 09/05/2014





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4.2 Summary of the findings by Principles and Criteria

Over the 5 year period of the life of the certificate, there will be 4 annual surveillance audits

Identified Non-Conformities and noteworthy Positive and Negative Observations.

The RSPO require that this report contain findings by each principle and some example criteria. Please see table below.

Principle 1: Commitment to Transparency

Criterion by Audit

Summary

Requests made by stakeholder were responded to and all these are well documented. Relevant documents are made publicly available. Adequate information in the requests and responses logbook and the other with regards to some confidential information being listed as publicly available.

ASA4 1.1 The mill and estates all have a Request and Responses logbook that records

all requests made and the corresponding action that was taken. Records are

maintained and it details the date of request, person who made the request

and what was the nature of the request. Record of action that has been taken

to fulfill the request and acknowledgement by the person who made the

request and an estate or mill executive is also recorded in the logbook.

Master SOP document issue no. 5 (01-02-2012), SOP no. 23 Stakeholder

Consultation clearly states what needs to be done to handle any form of

requests. All records are kept for at least 7 years.

ASA4 1.2 The following documents were made publicly available in the mill and estate offices:

Land titles / user rights

Safety and health plan

Plans and impact assessments relating to environmental and social impacts

Pollution prevention plans

Details of complaints and grievances

Negotiation procedures

Continuous improvement plan

All these documents were sighted in the mill and estate offices. All requests for documents through the estate or mill offices will have to go through the mill or estate managers. They will make the decision as to whether the information can be shared to or viewed by the person requesting the information or document. The RSPO Master List of Documents stipulates the documents that can be made publicly available and documents that should be kept confidential.

Principle 2: Compliance with Applicable Laws and Regulations

Criterion by Audit

Summary

The mill and estates have demonstrated compliance to all applicable local, national and international laws. Legal ownership of land and its land use is clearly demonstrated through the respective land titles. Boundaries have been clearly demarcated. There have been no land disputes or claims involving the mill and estates.





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ASA4 2.1 The mill and estates have a register of all applicable laws and regulations and this includes among others:

OSHA and regulations 1994 (Act 514)

Factories and Machinery Act with regulations (Act 139)

Pesticides Act and Regulations (Act 149)

Poison Act and Regulations 1952 (Act 366)

Malaysia Palm Oil Board (MPOB) Regulations

Employees Provident Fund Act 1991

Employment Act 1955 All applicable permits and licenses for the mill and estates are clearly displayed in the respective offices. Records of expiry of these permits and licenses are kept in the office and monitored through Licenses Renewal Monitoring Record to ensure that they are renewed well before the expiry dates to ensure no lapses in the compliance to Malaysian government laws and regulations. The person responsible for monitoring the compliance to applicable laws and regulations are the respective estate and mill managers.

They are also responsible for the tracking of the changes in the laws and regulations. All operating units will also receive an official letter from the Personnel and Administration Department informing them regarding any changes or amendments in laws and regulations from time to time. Among the changes in the law is the implementation of the new minimum wage for plantations workers and it was determined through document review and interviews that these changes have been fully implemented in all estates and mills. An observation was issued: The specific system to track changes of the

regulation lacking, the management only list the regulations and checked

whether they are changes or not. There should be in the future a kind of

matrix to track changes if any.

ASA4 2.2 The mill and estates have demonstrated legal ownership of their land by having legal land titles to the land. All land titles demonstrate the right to use the land and clearly mentions the fact that the land is to be used for palm oil cultivation only. The land titles are kept in the estate office and were sighted during the audit. Evidence of annual payment of land tax to the state government is available in the form of receipts. The estate boundary is well demarcated with boundary stones surrounding the land. The boundary stone clearly states the GPS coordinate of that particular point. Maps clearly showing the estate boundary were also sighted in the estate office.

ASA4 2.3 There is no customary land in or surrounding all the estates. There are also no land disputes or claims involving these estates.

Principle 3: Commitment to Long-Term Economic and Financial Viability

Criterion by Audit Summary

The annual budget and 2 years projections for the mill and estate that details revenue and costs are available. Replanting programme for the estates for the next five years is also available.

ASA4 3.1 Annual financial plan 2013/2014 & Estimate POM is available.

OER Target:

2013/14 : 22.50 %

2014/15 : 22.50 %

2015/16 : 22.50 %

FFB Receiving Target:

2013/14 : 213,706 MT





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2014/15 : 213,526 MT

2015/16 : 211,573 MT

Oil Production Target:

2013/14 : 48,083.85 MT

2014/15 : 48,043.35 MT

2015/16 : 47,603.93 MT

There are 2 supply bases [Tungku estate and Bukit Tabin estate]. Annual financial plan 2013/2014 & Estimate is available. In totaling of 2 estates:

Estate Bukit Tabin:

Hectarage (matured) 2864

Hectarage (immature) 0

FFB yield (mt/ha) 27.02

FFB crop (mt) 77,395

Production cost (RM/mt FFB) 215.52

Revenue (RM) 18,110,434

Replanting – NA

Estate Tungku:

Hectarage (matured) 3,404

Hectarage (immature) 0

FFB yield (mt/ha) 26.30

FFB crop (mt) 89,516

Production cost (RM/mt FFB) 212.54

Revenue (RM) 20,112,321

Replanting: 2014/2015:1992A, 83 Ha; 2016/2017:1992C, 151 Ha; 1992D, 147

Ha; 2017/2018: 1992 E, 131 Ha,1993D 111 Ha, 1993F, 96 Ha; 2018/2019:

1992B, 150 Ha, 1993C, 105 Ha, 1993E, 98 Ha, 2019/2020 : 1992 F, 102 ha,

1993A, 85 Ha, 1993B, 125 Ha

Principle 4: Use of Appropriate Best Practices by Growers and Millers

Criterion by Audit

Summary

The mills and estates have a complete set of SOPs which is being strictly adhered to and continuously monitored. Soil fertility is being maintained in the fields and erosion prevention is continuously carried out. IPM is being implemented in all the estates and the use of chemicals are in accordance with the regulations. There is a comprehensive OSH policy and is being implemented throughout the estate and mill. Improvement sighted in the identification and assessment with HIRARC. Trainings are being carried out as per the Annual Training Plan.

ASA4 4.1 The mill has all its SOPs in place and these SOP covers all mill operations from FFB reception right until mill effluent treatment. These SOPs details the procedures to run each mill operation in an efficient and safe manner. The implementation of these SOPs is done through maintenance and record keeping of forms and data for, FFB incoming records, boiler smoke density records, sterilizer temperature and time records, steam flow record, water usage records, chemical test records, process control and production report and CPO stock inventory, spare parts inventory records and so on.

The estates have the ‘Good Agricultural Practices’ which is their guide in





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ensuring efficient and optimal field operations. These SOPs cover all estate operations from nursery until delivery of FFB to the mill and includes among others land clearing, land conservation, distance of planting, field maintenance, pest control, fertilizer application and harvesting. All SOPs are reviewed periodically or when there is a new technique of operation being introduced, records and data are kept for a period of seven years.

ASA4 4.2 Soil surveys and foliar sampling were carried out by Applied Agricultural

Resources (AAR) Sdn. Bhd. which is a subsidiary of Kuala Lumpur Kepong

Berhad on an annual basis. Records of these were sighted in the estate

offices. Through these surveys and analysis, the optimum fertilizer to be used

is recommended to cover the nutrient deficiencies that may exist for the

palms. Application of EFB is also recommended to reduce the usage of

inorganic fertilizers. Annual Fertilizer recommendation AA Resources: Oil

palm recommendation 2013/14, by Shea Chan Loong for recommendation of

fertilizer usage per field recommended

Checks on the records of fertilizer application indicate the fertilizer application is done based on the recommendation of AAR. Soil maps such as the general soil map, slope classes map and elevation map are also available and were sighted. These maps are used to provide general recommendations for soil and water management practices and to identify solutions to overcome soil limitations including regeneration of ground covers and soft grasses. Stacking of cut fronds by spreading in and L shape configuration or placing across the slopes in hilly terrain will minimize surface run-off. Total Nitrogen is satisfactory.

ASA4 4.3 Soil erosion is prevented through the following methods:

The planting of cover crops such as Mucuna bracteata and Pueraria javanica. The areas being planted with these cover crops are recorded in the monthly record books and marked on maps.

The presence of road maintenance programme. These road maintenance programme detail the type of road maintenance works to be carried out in each estate block and the cost involved in doing so. Budgets and actual expenditure for road maintenance works were sighted.

The application of EFB and frond stacking on slopes. This not only minimizes erosion but also enhances soil fertility.

Control of soil erosion is in accordance with the guidance stipulated in SOP 8 – Erosion Control. Soil maps and topography maps that clearly state the elevation and types of soil are also available in the estate offices.

No peat area identified in both the estates.

ASA4 4.4 The estates have maintained the riparian buffer zones along rivers in

accordance with the national and local regulations. There are 2 rivers, and 20

meters riparian zones have been established for Sungai Silabukan and Sungai

Matamba. Maps of buffer zone maintaining available including construction

of culvert on certain river area. Estate has implement policy for no spraying at

buffer zone area. There are no bunds, weirs nor dams that have been

constructed along waterways in the estates. Field visits to the estates

confirmed this fact.

SOP 6- Quality of ground and surface water dated 01-02-2012 and records on

the Effluent Running Hour and Flowmeter evident. Effluent produced from

the mill will be treated to reduce BOD and COD (tested by KDC Lab). The flow





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meter log book is maintained by the Mill Laboratory. Effluent test report for

BoD, CoD and Suspended solid Water sampling points from 6 areas; Upstream

Sungai Silabukan: 1)95M, 2)96C, 3)96A, 4)96B and Downstream Sungai

Matamba: 5) 95J and Line site: 6)94A. Results from KDC laboratory for

Upstream & downstream points 1-5, report no. R14/3/228, 12/3/14 pH 6.2-

6.6, BOD 3-5, COD 20-29, SS 2-12, DO 90.7%-95.6%, Clean. Line site report no.

R14/3/229, 18-03-14, BOD 13 mg/l

.

Water sampling points from 4 areas [ water pump, bulking tank-treated

water, Line site wastewater & outlet drain] with Results from KDC laboratory

report no. R14/1/185, 29/1/14

No.1) pH 7, BOD 4, COD 49, SS 89, DO 83.2%, Clean

No. 2)E coli negative

No.3) BOD 21

No.4) BOD 18

Rainfall monitoring done on monthly basis. Documented water management

plan updated January 2014 under SOP 5. Each area of management (e.g. river

banks, domestic waste water) has specific water management plan. Verified

Department of Health visit report and has no comments were made.

Water for the mill’s operation also comes from near by river, i.e. Matamba

River. The records shows total volume of water used for FFB Process, Boiler,

Domestic (e.g. settlements), and the total usage. Records are kept from

2010/11 until 2013/14. All line site water is supplied from the Lungmanis mill.

The oil palm is basis on rainfall. Use of water from the water way, treated and

put into tank. Water test report available.

ASA4 4.5 IPM plan is documented as per the Good Agricultural Practices which includes beneficial planting and the use of biological control as opposed to chemical control of pests. Planning and realization of IPM programmes were monitored by mapping the beneficial plant to be planted with types of plant. The plans are monitored by daily completion of planting, expressed in meter of plants planted. Trainings are given to all staff on IPM.

GAP manual policy no. GAP/AGRIC/OP4: Pest & disease-Rat damage control in

oil palm dated 16-05-2005 referred. No barn owl box. This area seem not to

be suitable for owls to live naturally in this area Pesticide was recorded

included type of chemical, a.i, litre chemical, area applied by daily records.

Pest leaf eating pest Sitora, census dated 28/4/2014 found 3 out of 56 palm

representing 5% in field no. 94B verified. Rat is the critical pest. Rat bating in

field 93K/132ha, 93J/102ha, 93L/145ha. Material used Storm (a.i. 0.003%),

0.015 a.i.(g) per ha verified.

Herbicide [circle spraying] monitoring record, April 2014 in field 94a/181 ha.,

Glyphosate (a.i. 8.2) , Amine (a.i. 0.6), Ally (a.i. 0.2), with details of manday,

labour cost, hectarage treated, labour cost per ha, a.i. (lit), material cost and

total cost, with status.





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ASA4 4.6 The mill and estates maintain a chemical register detailing the chemicals use, its purpose and classification as per the classification, packaging and labeling requirements as per the Register of Chemicals Hazardous to Health stipulated in the USECHH 2000 regulations (regulation 5). All pesticides used are in accordance with the Pesticides Act 1974 (Act 149) and the relevant provision (Section 53A) and in accordance with USECHH Regulations (2000). Parquet usage has been stopped since 2008. The estates still use class 2, 3 and 4 chemicals namely Monocrotophos and Warfarin for trunk injection to counter bagworm attack and to counter rat attack respectively. These chemicals will only be used in the event that the threshold of infestation in a block exceeds 5%.

These chemicals are stored separately in the chemical store. The chemical stores were found to be in good condition with the appropriate spillage traps filled with charcoal and empty bunch. First aid kits as well as shower and washing facilities are available. Annual Medical Surveillance for 2013 was done for all the sprayers, manuring gang, storekeepers and mill laboratory workers. Medical surveillance records were sighted in the mill and estate offices. There are no pregnant workers who were handling pesticides in the estates. CHRA for the mill and estates were conducted and all recommendations of the CHRA were adhered to. The quantity of active ingredient of pesticides and herbicides used are recorded and are kept for at least 5 years.

Annual agrochemicals recommendation from AAR (Applied Agricultural

Resources Sdn Bhd.) dated 2013/2014. SOP 2: Safe use of agrochemicals

dated 01-02-2012, justification of agrochemicals used and Register of

chemical hazardous to health available. Pesticides list according to WHO with

classification and other agrochemicals according to Approved list of pesticides

registered for use in this estate. Also letter from MPOA 29/1/2008 circular no.

4/2008.

ASA4 4.7 Latest HIRADC is available dated on 10.1.2014. OSH plan for year 2014

established with 2 programs. Register of 30 Chemical Hazardous for Health

available in DOSH given format. Annual machinery Inspection list attached

with quarterly OSH inspection records. Verified DOSH visit log book for 2013.

Licence renewal monitoring for machineries verified satisfactory. Contractors

were given prior safety information on site.

OSH policy has no changes since previous audit. G e Health and safety policy

dated 10.1.2005. General safety practices are satisfactory. The HIRADC

established based on process. Mitigation plans are associated in the HIRADC

and training records sighted. First aid kit check list available with monthly

monitoring records. The interval for OSH meeting is at minimum of once in 3

months. Latest meeting held on 03/04/2013. Minute’s agenda are in

accordance to DOSH requirements.

Since Jan 2013, there is neither incident nor accident recorded. The insurance

coverage is done as group coverage, based on number of employees and not

based on staff name or ID. There is “Workmen Compensation” headed letter

available indicating the entire KLK workers being insured [Bukit Tabin -

Insurance coverage for workers policy no. LWX/91076319/37/09/HHT,

coverage from 01/10/2013 to 30/09/2013, for200 workers ]





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All local workers are covered with SOCSO insurance and proof of payment and claims in the event of an accident was sighted in the mill and estate office. The foreign workers are covered with Foreign Workers Compensation Scheme (FWCS) which is underwritten by AXA Insurance. The policy for the year 2013 was sighted and coverage was for all workers working in the mill and estates. An observation was issued: First aid items check list established and

monitoring, but cannot identify which box number has been monitored.

During site visit, some first aid box contains items less than the items listed on

the checklist

ASA4 4.8 2013 and 2014 training matrix are available. Training plan established based on the risk assessment conducted on 5/4/2014. Training plan for year 2013 was 100%, which mostly for OHS were completed and verified training records evidence for 2013 and 2014 which as below: • Chemical Handling • 1st Aid training • PPE usage training Verification of training records against with employee list of 2013.

Principle 5: Environmental Responsibility and Conservation of Natural Resources and Biodiversity

Criterion by Audit

Summary

Environmental Impact Assessment has been carried out by the mill and estates. A comprehensive identification of all waste has been recorded and disposal of scheduled waste has been carried out by an approved and registered collector. Monitoring and analysis of waste is carried out regularly. Landfills were filled with non-biodegradable wastes such as plastics and an observation was raised for this matter.

ASA4 5.1 The mill and estates have conducted their Environmental Impacts Assessment (EIA) for 2014. Has established SOP-10.0 dated on 01/10/2013 with rev 01. Sighted the latest EIA dated on 28/04/14, rev 01. EIA last reviewed by Mill Manager. The EIA is sighted for “Medium” rating level of risk ranging from 5 - 20. The EIA details the environmental impacts of operations and new activities as well as plans to mitigate any negative impacts should there be any. The impacts from estate operations, which covers land preparation and clearing (if any) right up till the delivery FFB to the mill is assessed through stakeholder consultation. The impacts from mill operations from reception of FFB in the mill right up till effluent treatment is also assessed in the similar way.

The assessment found separated into 2 categories. The 1st is identified as Environmental Impact Assessment & Pollution Prevention plan [Normal operation] and 2nd is on the as Environmental Impact Assessment & Pollution Prevention plan [Maintenance and Inspection].

Verified training records [based on SOP 10] that in line with training program. There are 3 Environmental Management Programes continued from last year. 1). Reduce BOD level in POME removing solids via belt press machine. 2). Reduce BOD level by having microbes through Bio wish trial. 3). Avoid accidental overflow at effluent pond.

Identification of Environmental Aspect & Impact [EIA] done on March 2013 by Mill assign staff. A common format used that inclusive of criterion such as legal, scale, severity, change, damage etc. The EIA is sighted for example the hazards description for example in relation to the pumping/recycling of effluent is clearly relates to oil, chemical or other sources of pollution. In general the format is made specific enough the details on where, what, when, how, why and who. There are 11 Environmental Management Programs





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developed. Focus is more on recycling program that planned throughout 2013/14. The EIA’s give the impression that effects are addressed along with the root cause[s]. The mitigation measures well associated with training programmes and

sighted the effluent treatment plant station's activities that requires cleaning

and maintenance of belt press. Seen the Mill Assistance's visit report on the

above matter.

EIA document established, but action`s not completed. Fertilizer store impact

assessment on bunds has not yet established and fertilizers bags are stored

on ground. Verified from the EIA document, the status of constructing of

bunds shows ongoing and target in Jul 2014 for completion.

ASA4 5.2 The HCV assessment has identified 2 HCV areas, namely the riparian zone of a river and community area with some fruit trees. Site visit to estate evidenced of sign boards are in place for buffer zone and “No Hunting or fishing. A brief management plan established effectively since Nov 2012 and is in the primary stage. This plan is associated with a mile stone chart on activities how the estate can preserve the species. Signage’s are the best tool to create the awareness and serve as warning sign at all the appropriate areas within estate. Secondly patrolling at specific interval by the estate security personnel is evidenced. Management plan for HCV habitats (including ERT) and their conservation,

updated 12-04-2014. Location Tabin Wildlife reserve. There are 70 mammal

species and birds. The HCV area is at the boundary with the approximate

along Tabin wild life reserve area. No HCV inside the estate area.

ASA4 5.3 Waste and pollution mapping identifies domestic house hold wastes, agrochemical containers, used oil, battery, spoiled light, filter, clinical waste and so on. Office waste and factory waste is separated in glass, paper and plastic. Different waste bins are in place. All waste [general, laboratory and engineering] is identified, documented and waste is disposed of in the prescribed way.

Verified the Jadual 2[notification to DOE], 5[inventory of schedule waste] & 6 [consignment note] with proper records maintained. All crop residues are being recycled by estates. The estates collect all the residues for fertilizer purposes. The scheduled wastes handling and storage is handled in accordance to the Scheduled Wastes regulations 2005. There are sufficient wastes collecting bins mill wide that enable employees to dispose the waste according to the label [glass, paper, plastic].

A logbook is used to record all wastes generated. Shell and fibers are recycled in the mill. Domestic waste goes to landfill. EFB is being sent to the estates for mulching. Decanter solids and POME are also being applied in the field. The recycle programme term into 3R where used PPE, waste paper and plastics being incorporated into mitigation plan.

The "Identification of all waste products and operational plan to reduce

pollution" last reviewed on 28/04/14. Monthly domestic waste and sanitary

landfill checklist that adequately track the collection and pit details

ASA4 5.4 The mill is not connected to the Malaysian electricity system. All energy is generated by the company itself via a boiler and gensets. The company keeps track of all fossil fuel use for the gensets and its machines. The figures will be





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compiled at the end of every year. Monitoring every month and the figures will be compiled at the end of every year. The renewable energy usage for the mill is in the form of fibre and shell usage. The non-renewable fuel used by both mill and estates are petrol and diesel. A complete mapping of baseline value established, where the monitoring focus on fibre [MT], FFB processed, CPO produced and the linkage to fuel consumption. Diesel usage for machineries sighted for 2014 at engine room, prime mover, water pump and others. Sighted the records of the renewable energy use per tonne of CPO in the mill.

Month KW/h generated KW/h/MT FFB

Oct'13 335050 21.35

Nov'13 371850 20.76

Dec'13 368550 20.91

Jan'14 306300 21.00

Feb'14 273250 21.83

ASA4 5.5 Kuala Lumpur Kepong Berhad has zero burning policy which explicitly prohibits open burning for land clearing or any other purpose whatsoever within plantation limits. There was no evidence that open burning takes place in the mill and estates, including in areas where replanting is taking place, and this was verified during the field visits.

ASA4 5.6 Mill emissions source is identified at each operating station and the type and quantity of pollutants generated such as fibre, shell, scrap iron, EFB, effluent, schedule waste, waste oil from diesel tank, and emission from generator set, boiler ash and dust from the soot blower are well documented. Stack emissions analysis are done twice a year as per the Environmental Quality Act 1974 requirements and records of this were sighted in the mill. The effluent (POME) quantity is monitored on a daily and monthly basis and a summary is available and was sighted.

Pollution from POME has been reduced with the commissioning of the biogas plant in the mill. Source of pollution been identified in the EIA which categorized as land, water and air with proper monitoring records available. 11 management programs established as to reduce the pollution level. Sighted monitoring records for stake emission EFB disposal and effluent discharge. Document for EIA & Pollution prevention plan, program for 2014 established

with description of major activities, Pollution/impact, frequency, impact

rating, level of risk, mitigating measures, target dates and person in charge.

Year 2014 continuous improvement plan that dated on 27/04/2014. This

master list consisting of environmental, social and safety improvements. As

for environmental, observed the solid removal machine to reduce the BOD,

construction of septic tank and schedule waste management. Constructing

playground facilities is among observed as social improvement and

monitoring of treated water on quarterly as OHS improvement activities

Principle 6: Responsible Consideration of Employees and of Individuals and Communities by Growers and Millers

Criterion by Audit

Summary

The mill and estates have conducted the social impact assessment in a participative manner. There was evidence that participatory methods were used to conduct the SIA. The relevant policies are in place and are fully implemented across the board. Communication and consultation as well complaints and grievances procedure are well communicated and adhered to. There are no evidence of workers been discriminated against in any way and





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all are being paid their fair wages. The workers quarters at estate were up to living standards. The gender committee addresses issues specific to women’s needs. Workers right and welfare evidently taken care. There is transparency in contract documents and CSR is well conducted.

ASA4 6.1 The mill and estates have conducted their Social Impacts Assessment for 2013/14. The SIA details the impact of operations and new activities to the social well-being of the workers and the community and steps that need to be taken to reduce any negative impacts should there be any. The assessment was conducted through stakeholder meetings held by the mill and estates with all their stakeholders. Any negative impacts from the assessment will be mitigated within a specified time-frame. The SIA is updated on an annual basis to take into account the changes and new activities such as Newly built parking area and Pondok Makan dusty issue including the Water Catchment Pond Usage. Minimum wage impact that have taken place within that time-frame has a positive impact on the workers livelihood..

ASA4 6.2 The mill and estates have a communication and consultation procedure in place and this was sighted in their respective offices. The procedure for communication and consultation is as follows:

Receipt of communication from the stakeholder by the nominated plantation management official.

Communication will be recorded and will be attended to and resolved within 30 days.

If the matter cannot be resolved within 30 days, all the related document will be send to the company secretary for further action.

The matter will be forwarded to the Grievances Executive Committee who will decide on the action to be taken.

Action that has been decided by the Executive Committee will be carried out and outcome of the resolution will be documented and stakeholder will be informed accordingly.

Should the outcome be not resolved to the mutual satisfaction of the stakeholder and the company, it will then be dealt with under the relevant provisions of the law.

The nominated management official whom is responsible for handling matter pertaining to communication and consultation with stakeholders particularly external stakeholders are the estate and mill manager. A complete list of stakeholders covering mill and estate employees, contractors and suppliers, education and medical facilities and government agencies are available and was sighted in the mill and estate offices.

ASA4 6.3 The mill and the estates have a complaints and grievances procedure that serves as the SOP for handling of complaints and grievances from both internal and external stakeholders. This procedure has been displayed in the offices and also on notice boards around the mill and estates. A complaint and grievances logbook is kept in every mill and estate and it contains the details of the complaints made, the complainant or aggrieved party, the action taken to resolved the complaint or grievance and the date the action was taken. All complaints and grievances were promptly attended to and records of this were sighted in the mill and estate offices. Workers who were interviewed confirmed that they are aware of the complaints and grievances procedure and how to channel their grievances. Complaint and Grievances record in Stakeholder Logbook was maintained . All

complain were adhered and action was taken by responsible person and

acknowledged to the complainer back. No grievance registered as per this

audit period





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ASA4 6.4 There is no customary land surrounding the estates and there are no land

disputes. No negotiations concerning compensation for loss of legal or

customary rights are as per this assessment period [ this land where the Mill

& Estate stand s belongs to KL-Kepong Sabah.

ASA4 6.5 All mill and estate workers are being paid wages in accordance with the Kadar Upah Pekerja Ladang (Wage Rates for Plantation Workers). Contract of service and salary slips for both local and foreign workers were checked and workers were paid the same amount of minimum wages which is currently RM800/month. All wage rates, benefits and working conditions are stipulated in the contract of service of the workers. There is a clause in the contract of service stating that whatever is not mentioned in the contract of service will be covered by the Sabah Labor Ordinance.

Salary slips clearly shows the calculations of gross salary, all deductions and net salary of a worker. Workers interviewed confirmed that they are being paid more than the stipulated minimum wage and that they understand all the deductions being made. During the visit to line-site, all workers were also provided with adequate housing. Each unit of quarters will be occupied by a maximum of 2 workers per room; a 3 room quarters will house a maximum of 6 workers.

All quarters are provided with electricity and treated water supply. Repairs to any damage in the quarters are done without any cost to the workers. Interview with workers have confirmed that they are indeed satisfied and comfortable with the quarters provided. Housekeeping, rubbish collector, mosque for the majority Muslim workers, kindergarten, crèche and basic maintenance. Medical facility is available.

ASA4 6.6 The mill and estates adhere to the Kuala Lumpur Kepong Berhad Policy on The Freedom of Collective Association of Employees that recognizes and allows the freedom of association and collective bargaining of its employees. This policy is displayed in the mill and estates and has been communicated to all workers and staff. Mill and estate workers are free to bargain collectively by forming groupings on their own to collectively bargain with the management of the mill or estates.

ASA4 6.7 Kuala Lumpur Kepong Berhad has a Child Employment Policy that prohibits under-aged children from working in the company. All mill and estate adhere to this policy. There are no children below ages of 16 wor