rspo public summary report sou25 darby segaliud (sou 25... · public summary report ‐ rspo...

PUBLIC SUMMARY REPORT

INITIAL RSPO CERTIFICATION ASSESSMENT

SIME DARBY PLANTATION Sdn Bhd Management Unit SOU25

Sandakan, Sabah, Malaysia

Report Author

Charlie Ross – Revised March 2010 [email protected]

Tel: +61 417609026

BSi Group Singapore Pte Ltd (Co. Reg. 1995 02096‐N) BSi Management Systems Malaysia Sdn Bhd (Co.Reg. 804473 A) 460 Alexandra Road Suite 19.05 Level 19 Wisma Goldhill #08‐01/02 PSA Building 65, Jalan Raja Chulan SINGAPORE 119963 50200 Kuala Lumpur Tel +65 6270 0777 MALAYSIA Fax +65 6270 2777 Tel +03 2032 2252 (Hunting Line) www.bsi‐asia.com Fax +03 2032 2253 Soon Leong Chia: [email protected] Teo Chin Siong: [email protected]

ii

TABLE of CONTENTS Page No SUMMARY ............................................................................................................................................................... 1

ABBREVIATIONS USED ............................................................................................................................................. 1

1.0 SCOPE OF CERTIFICATION ASSESSMENT ..................................................................................................... 1–6 1.1 National Interpretation Used .................................................................................................................... 1 1.2 Certification Scope .................................................................................................................................... 1 1.3 Location and Maps .................................................................................................................................... 1 1.4 Description of Supply Base ........................................................................................................................ 1 1.5 Date of Plantings and Cycle ....................................................................................................................... 1 1.6 Other Certifications Held .......................................................................................................................... 1 1.7 Organisational Information/Contact Person ............................................................................................. 6

1.8 Time Bound Plan for Other Management Units ........................................................................................ 6 1.9 Area of Plantation ............................................................................................................................... ...... 6 1.10 Approximate Tonnages Certified ............................................................................................................... 6 1.11 Date Certificate Issued and Scope of Certificate ........................................................................................ 6

2.0 ASSESSMENT PROCESS .............................................................................................................................. 7–8 2.1 Certification Body ............................................................................................................................... ...... 7 2.2 Assessment Methodology, Programme, Site Visits .................................................................................... 7 2.3 Qualifications of Lead Assessor and Assessment Team ............................................................................. 7 2.4 Stakeholder Consultation and List of Stakeholders Contacted .................................................................. 8 2.5 Date of Next Surveillance Visit .................................................................................................................. 8

3.0 ASSESSMENT FINDINGS ............................................................................................................................ 8–20 3.1 Summary of Findings ................................................................................................................................. 8 3.2 Detailed Identified Nonconformities, Corrective Actions and Auditor Conclusions ...................................................................................... 17 3.3 Noteworthy Positive Components .......................................................................................................... 19 3.4 Issues Raised by Stakeholder and Findings with Respect to Each Issue ................................................................................................................ 19 3.5 Acknowledgement of Internal Responsibility .......................................................................................... 20 3.6 Formal Sign‐off of Assessment Findings .................................................................................................. 20 LIST of TABLES 1 Mill GPS Locations ................................................................................................................................................ 1 2 Mill Supply Base ................................................................................................................................................... 1 3 Age Profile of Palms ............................................................................................................................................. 1 4 Estates and Areas Planted .................................................................................................................................... 6 5 Approximate Tonnages Certified .......................................................................................................................... 6 LIST of FIGURES 1 SOU25 Location Map ............................................................................................................................... ............ 2 2 Cadastral Map of SOU25 Division Locations ......................................................................................................... 3 3 Segaliud Division Layout......................................................................................................................... .............. 4 4 Mengaris and Pertama Divisions Layout .............................................................................................................. 5 5 LTAs/Lost Days 2005 – 2008 ............................................................................................................................... 19 LIST of PLATES 1 Orang utan Observed in Forest Reserve Adjacent to Estate Access Road ........................................................... 14 2 Humana School Students ............................................................................................................................... .... 19 3 Jerdon’s Baza Aviceda jerdoni Observed at Lungmanis Forest Reserve Beside the Access Road to Pertama Division ................................................................................................ 19 List of Appendices A Sime Darby Time Bound Plan B SOU25 RSPO Certificate Details C Certification Assessment Program

Public Summary Report ‐ RSPO Certification Assessment Management Unit SOU25 Page 1

Prepared by BSi Group Singapore Pte Ltd for Sime Darby Plantation Sdn Bhd

SUMMARY

BSi Group Singapore Pte Ltd (BSi) has conducted an assessment of Sime Darby Plantation Sdn Bhd Management Unit SOU25 (SOU25) operations comprising One (1) mill, supply base, support services and infrastructure. Sime Darby Plantation Sdn Bhd is a wholly owned subsidiary of Sime Darby Plantation Sdn Bhd. BSi concludes that SOU25 operations comply with the requirements of RSPO Principles & Criteria: 2007 and MY‐NI Indicators and Guidance : 2008.

BSi recommends that SOU25 be approved as a producer of RSPO Certified Sustainable Palm Oil, subject to resolution of the HCV offset and the land compensation issues at PT Minamas, Indonesia.

ABBREVIATIONS

AMESU All Malayan Estates Staff Union BOD Biological Oxygen Demand CAR Corrective Action Request (for a Nonconformity) CDA Controlled Droplet Application CHRA Chemical Health Risk Assessment CPO Crude Palm Oil DOE Department of Environment DOSH Department of Occupational Safety & Health EFB Empty Fruit Bunch EMS Environmental Management System ERP Emergency Response Plan ESH Environment Safety and Health FFB Fresh Fruit Bunch HCV High Conservation Value HDPE High Density Poly‐ethylene HIRAC Hazard Identification Risk Assessment Control JCC Joint Consultative Committee LCC Legume Cover Crop LTA Lost Time Accident MAPA Malayan Agricultural Producers Association MSDS Material Safety Data Sheet MY‐NI Malaysian National Interpretation NUPW National Union of Plantation Workers OSH Occupational Safety & Health OSHAS Occupational Safety & Health Assurance System PCD Pollution Control Device PK Palm Kernel POME Palm Oil Mill Effluent PPE Personal Protective Equipment QMS Quality Management System R&D Research and Development SIA Social Impact Assessment SOP Standard Operating Procedure SPIEU Sabah Plantation Industry Employees Union TQEM Total Quality Environmental Management TSS Total Suspended Solids

1.0 SCOPE OF CERTIFICATION ASSESSMENT

1.1 National Interpretation Used

The operations of the mill and its supply base of FFB were assessed against the Malaysian National Interpretation (MY‐NI : 2008) of the RSPO Principles and Criteria : 2007.

1.2 Certification Scope

The scope of certification is the production from the Segaliud Palm Oil Mill that is sourced from One (1) company owned oil palm estate.

1.3 Location and Maps

The SOU25 Mill and Estate are located at Sandakan, Sabah, Malaysia (Figure 1). Additional maps are included (Figures 2, 3 and 4) showing the estate boundary and layout of infrastructure. The Estate consists of 2 main adjoining Divisions (Segaliud and Mengaris) and the small outlying Pertama Division. The Segaliud and Mengaris Divisions are surrounded by other oil palm plantations and Pertama Division adjoins the Lungmanis Forest Reserve. The GPS location of the Mill is shown in Table 1.

Table 1: Mill GPS Location

MILL EASTING NORTHING

Segaliud 117∙75° E 5∙72° N

1.4 Description of Supply Base

The supply base consists of FFB from one Company owned Estate that supplies 70% of the FFB processed at the Mill and FFB that is purchased from external suppliers. The FFB production from the Company owned Estate and External Suppliers for the 01 July 2007 to 30 June 2008 reporting period is listed in Table 2.

Table 2: Mill Supply Base

Supplier FFB Production (t)

Segaliud 108,999

External Suppliers* 47,525

Total 156,524

* The FFB production from External Suppliers is excluded from the RSPO Certificate.

1.5 Date of Plantings and Cycle

The Company owned Estate was developed to oil palm in 1982 and the palms are in their first cycle. The age profile of the palms is shown in Table 3.

Table 3: Age Profile of Palms

AGE (years) % of PLANTED AREA

0 – 3 0.00

4 – 10 10∙79

11 – 20 78∙07

21 – 30 11∙14

1.6 Other Certifications Held

SOU25 holds no other Certifications.

Public Summary Report – RSPO Certification Assessment Management Unit SOU25 Page 2


Figure 1: SOU25 Location Map



Figure 2: Cadastral Map of SOU25 Division Locations



Figure 3: Segaliud Division Layout



Figure 4: Mengaris and Pertama Divisions Layout



1.7 Organisational Information / Contact Person

Sime Darby Plantation Sdn Bhd Management Unit SOU25 WDT No 250 Sandakan Sabah 90009 MALAYSIA

Contact Person: Mr Mohd Zulkifli bin Mohd Isa SOU Chairman/Estate Manager Phone: +(6089) 247197 Fax: +(6089) 565625 Email: [email protected]

1.8 Time Bound Plan for Other Management Units

Sime Darby owns and operates 61 palm oil mills for processing the crop from its 208 oil palm estates located in Malaysia and Indonesia, as well as the fruit that it purchases from Outgrowers. Sime Darby has developed a Time Bound Plan to achieve RSPO Certification for all of its production by 30 June 2011. A copy of the Time Bound Plan is included as Appendix A.

BSi has reviewed Sime Darby’s Time Bound Plan and considers the programme to be very challenging to implement as it will require a uniform, high standard of performance across the wide geographic spread of its operations. BSi will monitor and report on Sime Darby’s progress with implementation of the Time Bound Plan at the time of the Annual Surveillance Assessment of SOU25.

In December 2009, the Indonesian NGO Sawit Watch notified BSi of the existence of land compensation issues at PT Minamas that Sime Darby acquired when it merged with Guthries and Golden Hope at the end of 2007. BSi has requested information from Sime Darby on these issues, which are currently under investigation. The land compensation issues have important implications for Partial Certification.

Sime Darby has provided BSi with details of all new development carried out at its landholdings since November 2005. There has not been any new development at the landholdings in Malaysia. Following the December 2007 amalgamation of three plantation companies to form Sime Darby Plantation Sdn Bhd, Sime Darby has acquired plantation companies in Indonesia where new development has been carried out since November 2005. In order to evaluate this issue, reference has been made to Criterion 7.3 of the Indonesian National Interpretation of the RSPO principles and Criteria, 2008. Of particular importance is the Guidance associated with Criterion 7.3, which distinguishes between new development carried out between November 2005 and November 2007 (the RSPO Trial Implementation Period), and new development since November 2007.

Sime Darby has advised that during 2009 it completed HCV Assessments at all of its operations in Indonesia

that it acquired at the end of 2007 and where new development had been carried out since November 2005. This led to the discovery of an area of land in West Kalimantan where HCVs had been lost. Sime Darby has provided details of the loss of HCVs to RSPO and has proposed an HCV offset for the affected area.

Sime Darby has advised that there are no labour disputes and that there are no known legal noncompliances at its non‐certified oil palm operations.

BSi considers that the Time Bound Plan meets the requirements for Partial Certification, provided that Sime Darby can satisfactorily resolve the HCV offset and the land compensation issues at PT Minamas.

1.9 Area of Plantation

The area of palms at Segaliud Estate is listed in Table 4.

Table 4: Estate and Area Planted

Estate Mature (ha) Immature (ha)

Segaliud 4,587 –

1.10 Approximate Tonnages Certified

The approximate tonnages certified on the basis of July 01 2007 to 30 June 2008 production from SOU25 Segaliud Estate are detailed in Table 5.

Table 5: Approximate Tonnages Certified

MILL CPO PK

Segaliud 22,091 6,371

1.11 Date Certificate Issued and Scope of Certificate

Scope of the Certificate is for the production from the Segaliud Palm Oil Mill and the supply base from one company owned estate. Certificate details are included as Appendix B.

The Certificate issue date will be the date of the RSPO approval of the Assessment Report.



2.0 ASSESSMENT PROCESS

2.1 Certification Body

BSI Group Singapore Pte Ltd 460 Alexandra Road #08–01/02 PSA Building Singapore 119963

Product Manager: Mr Soon Leong Chia Phone: +65 6270 0777 Ext 115 Fax: +65 6270 2777 Email: [email protected]

BSi is a leading global provider of management systems assessment and certification, with more than 70,000 certified locations and clients in over 100 countries. BSi Standards is the UK’s National Standards Body. BSi Group Singapore provides independent, third party certification of management systems. BSi has a Regional Office in Singapore and an Office in Kuala Lumpur.

2.2 Assessment Methodology, Programme, Site Visits

BSi conducted a Stage I Certification Assessment between 23 and 25 February 2009 against the RSPO MY‐NI : 2008. The scope of the Stage I Assessment included the estate, mill and support infrastructure and focussed on site inspections, a review of management systems and documentation.

Stage II Certification Assessment was conducted between 06 and 08 April 2009. The Certification Assessment Program is included as Appendix C.

The approach was to audit the Mill together with the Estate, so that a range of environmental and social factors were covered. These factors included consideration of topography, soils, age of palms and proximity to local communities and areas with HCVs. All Divisions of Segaliud Estate were inspected.

The methodology for collection of objective evidence included physical site inspections, observation of tasks and processes, interview of staff, workers and their families and external stakeholders, review of documentation and monitoring data. Checklists and questionnaires were used to guide the collection of information.

The assessment was based on random samples and therefore nonconformities may exist which have not been identified.

Mr Allan Thomas, BSi Lead Auditor EMS, QMS and OHSAS has reviewed this report for conformance with RSPO Certification System requirements and technical content.

Mr Soon Leong Chia, BSi Product Manager RSPO, has reviewed this report for conformance with BSi Procedures and the RSPO Certification System requirements.

2.3 Qualifications of the Lead Assessor and Assessment Team

BSi Group Singapore holds copies of educational qualifications, certificates and audit logs for each of the audit team members. BSi has evaluated the qualifications and experience of each audit team member and has registered the following designations for conducting RSPO Assessments.

Charlie Ross – Lead Assessor B.App.Sc. M.Sc (Env.Studies) Lead Auditor EMS RABQSA Cert N

o 012364

Iman Nawireja – Social Assessor B.Ag.Sc. M.Sc. (Comm) Jarwadi Hernowo – Technical Expert Ecology and Impact

Assessment – M.ScF Robyn Ross – Social Assessor Junecel Maloloy – Interviewer/Assistant Charlie Ross is an independent environmental auditor who has extensive fieldwork experience in conducting environmental and social assessments of oil palm projects over the past 16 years in Indonesia, Malaysia, Nigeria, Papua New Guinea and Solomon Islands. He has participated in fieldwork for HCV assessments since 2004. He has completed lead auditor training in ISO 9001 Quality Management Systems, lead auditor training in OSHAS 18001 Occupational Health and Safety Assurance Systems, auditor training in Environmental Management, SA8000 Social Accountability and RSPO P&C. He has been involved in the RSPO process since RT1 and has conducted Certification audits of oil palm plantation companies against the RSPO P&C in Indonesia, Malaysia and PNG. Iman Nawireja graduated with a Bachelor of Agricultural Science from the University of Bogor in 1997 and a Masters Degree in Communications from the University of Indonesia in 2002. He is a Lecturer in social statistics at the University of Bogor and has more than 10 years experience in conducting social impact assessments of agriculture, mining and forestry projects. He has assisted with field studies on the effect of resource development projects on farmer and community incomes, health status and household division of labour. He has completed Lead Auditor training in ISO 14001 Environmental Management Systems. He has assisted in conducting environmental and social assessments of oil palm projects during the past 5 years. He has assisted with conducting Certification audits of oil palm plantation companies against the RSPO P&C in Indonesia and in Malaysia. Jarwadi Hernowo graduated with a BSc in Forest Ecology form the University of Bogor in 1985 and an MSc in Wildlife Ecology from the Faculty of Forestry Science, Georg August Universitat, Geottingen, Germany in 1995. He is a lecturer in ecology at the University of Bogor with more than 20 years fieldwork experience in forest ecology and has carried out research on the habitats, distribution and population of wildlife. He has extensive fieldwork experience in the assessment of flora and



fauna biodiversity and HCVs. He has assisted in conducting independent environmental assessments of 4 oil palm projects during the past 5 years. He has assisted with conducting Certification audits of oil palm plantation companies against the RSPO P&C in Indonesia and in Malaysia. Robyn Ross has a background in company administration and supporting women with mental health and physical disabilities by assisting them to develop skills for living independently in the community. She has assisted with fieldwork in conducting environmental and social assessments of oil palm projects over the past 5 years in Indonesia and Nigeria. She has completed auditor training in SA8000 Social Accountability. She has assisted with conducting Certification audits of oil palm plantation companies against the RSPO P&C in Indonesia, Malaysia and Papua New Guinea. Junecel Maloloy is a Teacher with Borneo Child Aid Society and is fluent in Bahasa Malaysia, Sabah Baku (Sabahan language) and English. Mrs Maloloy grew up on an oil palm plantation in Sabah and has a good understanding of the issues facing workers and families living in remote locations. Mrs Maloloy assisted Robyn Ross during interview of female staff and workers and families.

2.4 Stakeholder Consultation and List of Stakeholders Contacted

Stakeholder consultation involved internal and external stakeholders. External stakeholders were notified by placing an invitation to comment on the RSPO, BSi and Sime Darby websites. Individual stakeholders were contacted to discuss SOU25s environmental and social performance. BSi did not receive any responses in writing from stakeholders in relation to SOU25. Meetings were held with stakeholders to seek their views on the performance of the company with respect to the RSPO requirements and aspects where they considered that improvements could be made. Stakeholders included those immediately linked with the operation of the company, such as employees, FFB Supplier and contractors, as well as organisations that may have an interest in SOU25 operations or adjacent areas.

Stakeholder consultation took place in the form of meetings, interviews and discussion by telephone. The interviewer explained the purpose of the audit at the outset followed by an evaluation of the relationship between the stakeholder and the company before discussions proceeded. The interviewer recorded comments made by stakeholders and these have been incorporated into the assessment findings.

Structured worker interviews with male and female workers and staff were held in private at the workplace in the mill and the estate. Fieldworkers were interviewed informally in small groups in the field. Separate visits were made to each of the local communities to meet with the village head and

residents. In addition, the wives of workers and staff were interviewed in informal group meetings at their housing. Company officials were not present at any of the interviews.

List of Stakeholders Contacted

Contractors

Transport Contractor Contractor Workers FFB Supplier

Local Communities

Kampung Segaliud Residents

Government Departments

Labour Department Department of Environment Department of Occupational Safety and Health Land and Survey Department Department of Forestry Division of Wildlife, Sabah Tourism Department

NGOs and others

Tenaganita PACOS Trust, Sabah Sabah Plantation Industry Employees Union Humana School Teacher

2.5 Date of Next Surveillance Visit

The next surveillance visit is planned to be carried out within the twelve months following initial RSPO Certification.

3.0 ASSESSMENT FINDINGS

3.1 Summary of Findings

As outlined in Section 2.2, objective evidence was obtained separately for each of the RSPO Indicators for the mill and the estate and an assessment made of conformance of the Company’s operations with each Criterion. A statement is provided for each of the Indicators to support the finding of the assessment team. Four (4) Nonconformities were raised against Minor Compliance Indicators. Twenty (20) Observations / Opportunities for improvement were identified. Details of the Nonconformities are given in Section 3.2 (Page 17). SOU25 has prepared a Corrective Action Plan that was reviewed and accepted by BSi. Progress on implementation of corrective action will be checked during the Surveillance Audit scheduled to be carried out within twelve months of SOU25 receiving initial RSPO Certification.



BSi has conducted an assessment of the SOU25 operations comprising 1 mill, 1 company owned estate, support services and infrastructure. BSi concludes that SOU25 operations comply with the requirements of RSPO Principles & Criteria: 2007 and MY‐NI Indicators and Guidance : 2008. BSi recommends that SOU25 be approved as a producer of RSPO Certified Sustainable Palm Oil, subject to resolution of the HCV offset and the land compensation issues at PT Minamas, Indonesia. Criterion 1.1: Oil palm growers and millers provide adequate information to other stakeholders on environmental, social and legal issues relevant to RSPO Criteria, in appropriate languages & forms to allow for effective participation in decision making.

Requests are received by the Mill and Estate verbally as well as in writing. Records have been maintained of incoming calls relating to requests for information or assistance, with details available since February 2003. In addition, the Estate has a Log Book for recording requests from workers. Requests that are received in writing are held on file, together with a copy of the response. Records indicated that the Manager responded to requests within 1 week. (1.1.1) Criterion 1.2: Management documents are publicly available, except where this is prevented by commercial confidentiality or where disclosure of information would result in negative environmental or social outcomes.

The Mill and Estate hold copies of each of the management documents that are required to be publicly available, as detailed below. The Estate is on government leasehold land and copies of the leases are held on site. (1.2.1)

The Estate and Mill have a Safety and Health Plan for the 2008/09 year. (1.2.2)

The Mill has prepared an Environmental Aspects and Impacts Register and an Environmental Action Plan (January 2009). The Estate has prepared an Environmental Aspects and Impacts Register 5 March 2009 using a risk assessment process that identifies the significant impacts. (1.2.3)

The Mill has included some items of pollution prevention in the Environmental Action Plan. The Estate Pollution Prevention Plan is included in the Environmental

Improvement Plan prepared 19 March 2009. (1.2.4)

The Mill has a system for recording and responding to complaints from customers. The Estate has detailed records of complaints and responses that are recorded in a log book. (1.2.5)

Negotiation procedures are documented in Sime Darby Procedures for Handling Social Issues – in Sustainable Plantation Management System. (1.2.6)

The Continuous Improvement Plan is described in a series of documents – Environmental Improvement,

Pollution Prevention and Social Action Plans that are held on site. (1.2.7) Criterion 2.1 – There is compliance with all applicable local, national and ratified international laws and regulations.

Mill Boiler Emissions testing was carried out 14 August and 10 September 2008 – confirmed compliance. The mill Smoke Density Meter was operational and calibrated by STS instruments 12 March 2009 and monitoring records indicate compliance with regulations. POME is treated to achieve an internal target of BOD <100 mg/L. Review of monitoring results for the previous 12 months showed a maximum BOD of 56 mg/L, which is well within the licence limit for land application. The Mill and Estate hold copies of licences and certificates, such as the Mill Boiler Certificate Number 094426 valid to 28 October 2009. The most recent DOSH Report 10 March 2009 confirmed there were no outstanding safety issues. The DOE site visit 26 February 2009 confirmed no issues raised. The Mill holds a copy of licenced operator certificates, such as boiler operator.

The Estate conducts defensive driver training to assess competency but drivers do not drive outside the Estate. The existing houses built between 1982 and 1985 do not meet the minimum standard. However, a budget has been approved to replace all Estate houses over the next three years, commencing with 30 units in 2009/10 with Pertama Division given priority. Drinking water quality sampled at Segaliud Division housing in 22 January 2009 and Mengaris and Pertama Divisions 26 March 2009 confirmed compliance with WHO drinking water quality standard. Observation 01 – refer Section 3.2 Page 18 for details

The Mill has Labour Department approval of an extension for overtime hours that was due to expire in April 2009. Inspection of Mill Pay records confirmed that overtime hours were within the approved limit. (2.1.1) Observation 02 – refer Section 3.2 Page 18 for details

The Mill has legal requirements documented in a Register and copies of the relevant Acts and Regulations were held on site. Estate holds a list of legal requirements and a copy of the relevant Acts and Regulations. Copies of the applicable Licences and Permits are displayed in the workplace. (2.1.2)

The Estate has checklists for assessment of Legal Compliance and the Assistant Manager carried out an Internal Audit on 15 February 2009. The Mill Engineer carried out an internal audit of Mill Legal Compliance on 4 March 2009, which indicated compliance with applicable permits and regulations. (2.1.3)

MPOA Sabah and Sime Darby Sabah Regional Office provide legal updates on changes to labour laws and worker pay and conditions. TQEM Standards and Compliance Unit provide legal updates on all applicable legislation throughout Sime Darby. (2.1.4)



Criterion 2.2 – The right to use the land can be demonstrated and is not legitimately contested by local communities with demonstrable rights.

The Estate is on Government Lease Number 10947, Sandakan (issued in 1953 for a period of 999 years) and Country Lease Number 095310393, Sandakan (issued 1978 for a period of 98 years). Copies of the Land Titles are held at Segaliud Estate. (2.2.1)

SOU25 operations are consistent with the terms of the leases for “agricultural crops of economic value”. (2.2.2)

The Estate has commenced a programme to locate and maintain boundary stones. This was confirmed by inspection of a sample of boundary markers along the Electricity Transmission Line Reserve. (2.2.3) Observation 03 – refer Section 3.2 Page 18 for details

In 2006 a local person claimed the Estate had encroached on his land and had planted oil palm on 3∙38 ha. The Estate holds records of the process involving negotiation of a lease of the land from the local person and payment of a monthly rental for its use. In December 2006 the landowner agreed to rent his land for a monthly fee. In April 2007 Sime Darby asked landowner if he would sell the land to the company. In August 2007 landowner advised he wanted to rent the land for the previously agreed monthly fee. In October 2007, Sime advised the landowner of the content of the proposed agreement. In April 2008 landowner asked his lawyer to speed up the preparation of the agreement. On 24 October 2008 the landowner signed the land lease agreement. Landowner called on the company 23 December 2008 and 23 March 2009 to collect rental payment. (2.2.4) A nonconformity was assigned this Minor Compliance Indicator – CAR01 refer Section 3.2 Page 17 for details Criterion 2.3 – Use of the land for oil palm does not diminish the legal rights or customary rights of other users without their free, prior and informed consent.

The SOU25 operations are all on Government Leases originally issued in 1953. (2.3.1)

Interview of local Kampong Segaliud Head confirmed there are no customary land claims or disputes over the estate land. A representative of the NGO PACOS Trust Sabah confirmed there were no disputes over the Segaliud Estate land. (2.3.2)

The SOU25 operations are all on Government Country Leases. There have been no negotiated agreements in relation to customary rights. SOU25 does not restrict access through the Estate, except in relation to trucks. (2.3.3) Criterion 3.1: There is an implemented management plan that aims to achieve long‐term economic and financial viability.

The Estate has an annual budget for the current 2008‐09 year with projections for three years. The budget includes production targets and cost projections. The mill has an annual operating and capex budget with

projection for four years and was revised December

2008. (3.1.1)

The Estate has a Replanting Programme that is projected for ten years, and was revised April 2008. (3.1.2) Criterion 4.1: Operating procedures are appropriately documented and consistently implemented and monitored.

The Estate holds a copy of Estate Quality Management System Standard Operating Procedures issued 1 November 2008. The Mill holds a copy of Quality Management System Standard Operating Procedures issued 1 November 2008. SOPs are displayed at each work station in the mill and are in Bahasa Malaysia. A simplified Work Instruction has been prepared and is posted at the effluent treatment plant for operation of the new membrane polishing equipment for POME treatment. (4.1.1) Observation 04 – refer Section 3.2 Page 18 for details

Inspection of mill work‐stations confirmed operators have filled in shift log sheets accurately for recording operating parameters. The Assistant Mill Engineer reviews shift log sheets daily. The Mill Advisor carries out inspections at least twice yearly, with the most recent visit 17‐18 February 2009. Records are held on file of the Mill Manager’s response to issues raised by the Mill Advisor.

The Estate Assistant Managers monitor implementation of field practices through daily inspections. The Plantation Advisor visits the estate at least twice yearly and carries out inspections of field conditions and implementation of work practices. The most recent visit was 15‐18 September 2008. The next Plantation Advisor visit is scheduled for April 2009. (4.1.2) Criterion 4.2: Practices maintain soil fertility at, or where possible improve soil fertility to, a level that ensures optimal and sustained yield.

Sime Darby Agronomy Section of R&D Department makes annual recommendations for fertiliser applications. The Executive Manager checks that fertiliser application matches the recommendation and reports progress in the Estate Monthly Report. (4.2.1)

Sime Darby Agronomy Section of R&D Department carries out annual inspection of the palms and leaf sampling to monitor nutrient status, with the most recent sampling on 6 August 2008. The estate holds a summary of the results on file. Records also are maintained by R&D Department. Sime Darby has reviewed soil monitoring and an SOP for taking soil samples was prepared and issued 01 August 2009, which describes soil sampling on a 5 yearly basis. SOU25 has commenced soil sampling in accordance with the SOP. (4.2.2)

R&D Department monitors the areas where POME and EFB are applied and results from the foliar sampling are used to advise on the annual fertiliser requirement. (4.2.3)



Criterion 4.3: Practices minimise and control erosion and degradation of soils.

The topography of the estate is rolling to hilly with significant areas that have been terraced. There are no planted areas exceeding 25 degrees slope. The Estate has identified areas that require specific measures to minimise the risk of erosion, such as at road crossings of watercourses. The identified areas are being stabilised by planting Vetiver grass and LCC. Field inspection confirmed that groundcover vegetation is well established on terraces where growth of Nephrolepis spp has been encouraged on the inter‐slope. Additional soil conservation practices that appeared well implemented were u‐shaped stacking of pruned fronds. (4.3.1)

Groundcover vegetation appeared to be consistently maintained at the majority of blocks that were inspected. The exception was at several areas in Mengaris Division along harvesting paths where over‐spraying with herbicide appeared to have occurred. (4.3.2) A nonconformity was assigned to this Minor Compliance Indicator – CAR02 refer Section 3.2 Page 17 for details

The Estate has a documented road maintenance programme, using its own grader, compactor and back‐hoe for maintaining road surfaces. Inspection of roads indicated they were well‐formed with adequate water management using “turn‐out” drains at regular intervals. (4.3.3)

There are no peat soils at SOU25. (4.3.4)

The Estate soils are Class 1 and Class 2. There are no sandy, low organic matter or acid sulphate soils. (4.3.5) Criterion 4.4: Practices maintain the quality and availability of surface and groundwater

The Estate has identified the streams that require a buffer zone to be reinstated at future replanting. The palms adjacent to Sg Segaliud have been identified for future removal and marked using paint. Inspection confirmed that the buffer zone was consistent with the Sabah requirement of 20 m width on both sides of the stream. The Estate has prepared a map showing details of all streams, including those <1m width that originate in the Estate. Riparian strips will be established at all streams during future replanting. To date SOU25 has implemented initial action by prohibiting the application of chemicals within the marked buffer strips and allowing the growth of groundcover. Palms within the buffer strips are weeded manually. (4.4.1) Observation 05 – refer Section 3.2 Page 18 for details

No weirs, dams or bunds have been constructed on waterways. (4.4.2)

The Estate has commenced a water quality monitoring program and has sampled Water Quality once (10 January 2009) at the Sg Segaliud inflow to and outflow from the Estate. The sampling results showed Class I water quality (DOE Water Quality Index Classes) at the inflow and Class II at the outflow due to increased TSS.

The estate plans to collect additional samples in accordance with the Sime Darby Monitoring Policy.

The Mill samples water quality monthly from the treated effluent before transfer to land application, as well upstream and downstream from the mill location along Sg Segaliud. The results are displayed graphically using a spreadsheet for the previous 12 months and showed no significant change in water quality between upstream and downstream samples. (4.4.3) Observation 06 – refer Section 3.2 Page 18 for details

Daily rainfall has been measured at the estate since 1982. Rainfall information is used for crop forecasts and for scheduling fertiliser application and field upkeep tasks. (4.4.4)

The Mill does not have meters installed for measurement of water consumption, but purchase of meters is planned. Water usage has recently been estimated using information derived from pump operating hours. The estimated water usage includes water supplied to housing and indicates high usage per tonne of crop processed. (4.4.5) A nonconformity was assigned to this Minor Compliance Indicator – CAR03 refer Section 3.2 Page 17 for details

The topography of the estate is rolling to hilly and field drains have not been necessary to improve the drainage. There are no protected areas adjacent to the main estate. Although Pertama Division shares a boundary with the Lungmanis Forest Reserve, the estate has not discharged drainage into the reserve. The Mill is replacing a section of the previous open drain beside the boiler with an underground pipe to prevent boiler ash and fibre from entering the monsoon drain. In addition, the mill will extend the fibre conveyor beyond the monsoon drain system to prevent material from entering the drain. (4.4.6) A nonconformity was assigned to this Minor Compliance Indicator – CAR04 refer Section 3.2 Page 18 for details

The Mill and Estate have recently prepared Water Management Plans that list the sources, uses and waste‐water generated, together with methods of treatment and disposal. The segregation, treatment and disposal of high BOD mill wastes was well managed. For example, drainage from the EFB loading bay is collected and transferred to the effluent ponds. POME treatment by the Mill has consistently achieved BOD below the internal target value of 100 mg/L. Additionally the land application of treated POME was well managed by the Estate. (4.4.7) Observation 07 – refer Section 3.2 Page 18 for details Criterion 4.5: Pests, diseases, weeds and invasive introduced species are effectively managed using appropriate integrated Pest Management (IPM) techniques.

IPM is documented in Section 16 of the Agriculture Reference Manual. IPM involves regular monitoring of field conditions and pest numbers and assessment against threshold levels. The main focus of IPM at the



estate is the establishment of beneficial plants for control of Nettle Caterpillar and Bagworm. (4.5.1)

The estate carries out monthly census to assess damage to palms and pest numbers. To date there have been no outbreaks of leaf eating insects and it has not been necessary to apply chemicals for control. Rats have been a problem in the past, although rat baits have not been used since December 2006. Barn Owls have been introduced although numbers are low as the nearby Lungmanis Forest Reserve provides a more attractive habitat. (4.5.2)

The estate maintains records of areas where pesticides have been applied, using information from the daily stores issues. (4.5.3)

Pesticide usage units have been calculated, with data available since July 2006. The information shows overall a reduction in pesticide usage units per hectare since 2006‐07. (4.5.4) Criterion 4.6: Agrochemicals are used in a way that does not endanger health or the environment. There is no prophylactic use of pesticides, except in specific situations identified in national Best Practice guidelines. Where agrochemicals are used that are categorised as World Health Organisation Type 1A or 1B, or are listed by the Stockholm or Rotterdam Conventions, growers are actively seeing to identify alternatives and this is documented.

The quantity of chemical and treatment required is documented in Section 16∙5 of the Sime Darby Agricultural Reference Manual. Field conditions are checked prior to application of chemicals in order to assess the treatment required. Inspection of the chemical mixing area showed that the quantity of chemical to be measured for the various spray applications was displayed in a Work Instruction for use by the operator. (4.6.1)

Head Office Central Purchasing Unit identifies the suppliers of chemicals and the estate manages purchasing of chemicals. Inspection of the chemical stores and chemical stock records confirmed only Pesticide Board approved chemicals were held. (4.6.2)

Inspection of the chemical stores confirmed appropriate storage areas for chemicals that met the regulatory requirements such as security, ventilation, spill containment, separation of chemicals, labelling and safety signage. (4.6.3)

A Work Instruction in Bahasa Malaysia was displayed at the chemical mixing area. Chemical labels and all MSDSs

were displayed in Bahasa Malaysia. (4.6.4)

A medical surveillance in accordance with CHRA requirements was carried out 18 March 2009 for 19 pesticide operators and all were deemed medically fit. The remaining operators are scheduled to undergo CHRA medical surveillance during April 2009. (4.6.5)

When a female pesticide operator is confirmed pregnant and wishes to continue working she is transferred to other duties. Female sprayers are not able to return to

spraying duties whilst breast‐feeding. Detailed records have been maintained since 2005 for female pesticide workers. (4.6.6)

Examination of chemical stores stock records confirmed that Class 1 chemicals have not been used at the estate. Records also confirmed that Paraquat usage ceased in 2005 and there has been nil stock since that time. (4.6.7)

Aerial spraying has not been carried out. (4.6.8)

No buyer has yet requested CPO testing for chemical residues. (4.6.9)

Pesticide usage is recorded daily in the Cost Book, including the quantity, active ingredient and the field where applied. The Estate holds Cost Book records for the previous three years and computerised records for one year. (4.6.10) Criterion 4.7: An occupational health and safety plan is documented, effectively communicated and implemented.

(a) The Sime Darby Occupational Health and Safety Policy signed by top management is displayed at the Office and Muster areas. The Policy is communicated to staff and workers during morning musters and shift briefings. The Estate and Mill have ESH Management Plans 2008/09. Inspection of Mill and Estate work areas, including workshops, indicated safe work practices were being implemented. The safety record shows a reduction in the number of LTAs over the past 4 years, which confirms implementation of safety.

(b) A HIRAC has been carried out (Estate 15 April 2008) and (Mill 15 May 2008) for each of the tasks at all work stations.

(c) The Mill has prepared a Matrix for Safety Training 16 June 2008, which identifies training for each Work Station. In addition, a schedule of training has been prepared for the 2008/09 year. A recent example was the Mill Manager attended “Lock‐Out‐Tag‐Out” training at a regional workshop then carried out training for 27 staff & workers on 26 March 2009.

i Training at the Estate was carried out 17 March 2009 for 52 sprayers on the correct use of PPE, maintenance of spray equipment and spraying technique.

ii Observation of chemical mixing and spraying confirmed operators were following safety procedures consistent with product labels, including correct wearing of appropriate PPE.

(d) i. Records of Mill and Estate PPE issues are held on file, including signatures of recipients. Inspection of the Mill and Estate confirmed PPE was being worn correctly.

Observation 08 – refer Section 3.2 Page 18 for details

(e) The Health Assistant is the designated ESH Coordinator for both the Estate and the Mill.



(f) Safety Committee Meetings are held quarterly, and the most recent meeting for the Estate was held 8 January 2009 with 40 attendees. The findings of the meetings are communicated to the workers during Muster briefings. The recent Safety Committee Meeting for the Mill was 6 March 2009 attended by 20 persons.

(g) The Estate ERP was revised January 2009 and includes fire and other emergencies, such as accident, earthquake and flood. The most recent Fire Drill was carried out at Mengaris Division 23 March 2009. The Mill has prepared an ERP for fire, earthquake and landslide and was last revised December 2008. The Mill has an emergency shut‐down procedure for the boiler that was displayed at the boiler work station. The Mill carried out fire drill training and fire evacuation 12 March 2009.

h) The Health Assistant carried out First Aid training on 13 March 2009 for 10 Mill staff and workers and 17 Estate supervisors and mandores.

i) The Estate distributed First Aid kits to mandores and work stations in October 2008. Inspection of a sample of first aid kits at the Mill confirmed they had been replenished 14 March 2009. (4.7.1)

All accidents are investigated and reported to Head Office and DOSH. The Estate LTAs for the 2008‐2009 year to date numbered 3, and 33 Man days were lost. The Mill has recorded only one LTA (28 April 2007) since January 2003. The Mill has worked 374,630 man hours since the last LTA. (4.7.2)

Malaysian staff and workers are covered by SOCSO which is paid monthly. Foreign workers are covered under RHB Insurance Policy Number FW007626 current to 30/06/2009. (4.7.3) Criterion 4.8: All staff, workers, smallholders and contractors are appropriately trained.

The Estate has prepared a Training Plan ‐ Last revision July 2008. The majority of training for field workers is aimed at skills improvement and involves informal on‐the‐job instruction. Training records are held for individual trainees including names and signatures. For example the Estate carried out defensive driver training on 22 January 2009. The Mill has prepared a Training Matrix based on training needs that shows SOP training/skills for each Work Station. Records are kept of training including topic, names and signatures of attendees. (4.8.1) Criterion 5.1: Aspects of plantation and mill management, including replanting, that have environmental impacts are identified, and plans to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement.

The Mill has prepared an Aspects and Impacts Register January 2009 based on a risk assessment process. The Estate has prepared an Environmental Aspects and Impacts Register 5 March 2009 using a risk assessment

process for identifying the significant impacts. The Sime Darby TQEM Department facilitated the preparation of the Registers. (5.1.1) Observation 09 – refer Section 3.2 Page 18 for details

The Mill and Estate have prepared Environmental Improvement Plans / Pollution Prevention Plans that consider mitigation of negative impacts as well as enhancement of beneficial actions. For example the list of 28 items for the Mill includes control of emissions as well as reduction of waste and improvement of recycling. Inspection confirmed that the Estate and Mill are making progress with implementing the items on the improvement lists. (5.1.2) Criterion 5.2: The status of rare, threatened or endangered species and high conservation value habitats, if any, that exist in the plantation or that could be affected by plantation or mill management, shall be identified and their conservation taken into account in management plans and operations.

Sime Darby TQEM Ecologist has carried out an assessment of HCVs using the methodology of the HCV Toolkit. Almost all of the natural vegetation within the estate boundary was cleared during the initial land development and remnant vegetation is limited to small water supply catchments and riparian areas. HCV4 was assigned to riparian buffer zones within the estate.

The 6,735 ha Lungmanis Forest Reserve is located south‐west of Segaliud Estate and has a common border with Pertama Division. The BSi Technical Expert Ecology and Impact Assessment reported that the Lungmanis Forest Reserve has many gaps in the canopy and the structure consists of only three layers, indicating that it has been logged. The dominant species of vegetation is Pterospermum javanicum and pioneer species present at the forest included Anthocephalus cadamba and Macaranga sp.

The TQEM HCV assessment assigned HCV 1 to the Lungmanis Forest Reserve due to the presence of threatened species, including the Orang utan.

Observations during the audit recorded 12 species of mammals, 40 species of birds and 1 reptile. The majority of the sightings were made at the Lungmanis Forest Reserve. Eighteen of the fauna species are protected, comprising 9 mammals and 9 birds. Three of the species recorded are classified as “threatened” (IUCN Red List) – the Orang utan Pongo pygmaeus, the Bornean Gibbon Hylobates muelleri and the Leopard Cat Felis bengalensis. The observations during the audit confirmed the presence of HCV 1 at the Lungmanis Forest Reserve. Enquiries with Forestry Department indicated there is no site specific information available on the flora and fauna of the Lungmanis Forest Reserve. The 6,735 ha reserve is surrounded by oil palm and it is not known whether the fauna populations that have been isolated there are viable. (5.2.1) Observation 10 – refer Section 3.2 Page 18 for details

Sime Darby TQEM has prepared an HCV Management Plan that includes enhancement of habitats within the Estate and a monitoring programme. The main focus of



the Management Plan is the restoration of the riparian buffer zones within the estate. SOU25 holds a Permit to use a road through the Lungmanis Forest Reserve for transport of FFB (Permit No : JP (LK) OP 1/96, Lokasi VJR Lungmanis 45 E). The Management Plan includes specific measures related to protection of fauna along the Forest Reserve access road. (5.2.2) Observation 11 – refer Section 3.2 Page 18 for details

The Estate has erected signage at the entrance to the Forest Reserve to prohibit hunting and disturbance of fauna. Interview of workers confirmed awareness training on protection of fauna and forest habitat has been carried out at morning muster briefings. The presence of Orang utan and other fauna close to the Lungmanis Forest Reserve access road (Plate 1) indicated the importance of very good controls on fauna protection. (5.2.3) Observation 12 – refer Section 3.2 Page 18 for details

Plate 1: Orang utan Observed Near Lungmanis Forest Reserve Access Road

Criterion 5.3: Waste is reduced, recycled, re‐used and disposed of in an environmentally and socially responsible manner.

The Estate and Mill have prepared Waste Management Plans that describe the handling and methods of waste disposal for waste products generated at the office, housing, workshop, field and mill operations. (5.3.1) Observation 13 – refer Section 3.2 Page 18 for details

The Estate has constructed an appropriate Scheduled Waste Store and is in the process of obtaining DOE approval. Scheduled waste recycler MS Smart (Collection and Transport DOE Licence Number DBKK:185927 No:F/R00276/2009) (Storage and Disposal DOE Licence Number DBKK:185935 No:F/R00277/2009). HDPE pesticide containers are recycled to MS Smart.

Medical Wastes have been identified as a scheduled waste and inspection confirmed these wastes are presently being stored in appropriate containers prior to transfer to the Scheduled Waste Store. A licenced contractor (Faber Medi‐Serve Sdn Bhd) is to be engaged to collect all medical wastes.

Each Division has developed a small landfill for disposal of non‐recyclable refuse. The landfills are appropriately

located well away from water courses and in a clay soil area. Garden waste was being separated at source and composted.

The Mill has constructed a Scheduled Waste Store that has been inspected by DOE and maintains an inventory of stored materials. Boiler ash and excess fibre storage has been improved since the Stage I Certification Assessment to prevent material from entering the monsoon drain. Recycling bins are provided and labelled clearly to identify the type of waste to be stored. At the parking area outside the Mill gate, refuse bins have been provided and control of litter has improved, compared to the situation during the Stage Certification Assessment. (5.3.2) Observation 14 – refer Section 3.2 Page 18 for details

POME is treated in effluent ponds and uses a new technology “Membrane Polishing” to reduce BOD to below 50mg/L. Treated effluent is recycled to the palms by irrigation in furrows. Inspection confirmed the land application system was well managed by a full time operator who checks the system prior to and during operation. EFB is recycled to the palms as mulch. (5.3.3) Criterion 5.4: Efficiency of energy use and use of renewable energy is maximised.

The Mill reports renewable energy use monthly to Top Management and the average for the year to date was 98∙3 kWh/t CPO. (5.4.1)

The Mill reports non renewable energy use monthly and the average for the year to date was 16∙8 kWh/t CPO. Energy use is reviewed monthly against targets. (5.4.2) Criterion 5.5: Use of fire for waste disposal and for preparing land for replanting is avoided except in specific situation, as identified in the ASEAN guidelines or other regional best practice.

Replanting has not yet been carried out and there was no evidence of open burning within the Estate. (5.5.1)

Replanting is scheduled for 2010 and the Estate will follow the Sime Darby Policy of chipping, mulching and windrowing the felled palms. (5.5.2)

Sime Darby has a policy for zero burning of all wastes. Inspection showed no evidence of fire being used for waste disposal at workshop, office or housing areas. (5.5.3) Criterion 5.6: Plans to reduce pollution and emissions, including greenhouse gases, are developed, implemented and monitored.

The Mill and Estate have identified pollution prevention in the Environmental Improvement Plan that was updated March 2009. An example is the installation of a silencer to the mill sterilizer exhaust to reduce noise emission that previously affected the office and work‐stations. Work has recently been completed for concreting of the EFB storage area and collection of runoff and drainage for transfer to the POME treatment



system. This has eliminated the discharge of nutrients from the EFB storage to the monsoon drain. (5.6.1)

The Mill and Estate Pollution Prevention Plans were prepared January 2009 and are due for review in 2010. (5.6.2)

SOU 25 does not have any peat soils. (5.6.3) Criterion 6.1: Aspects of plantation and mill management, including replanting, that have social impacts are identified in a participatory way, and plans to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement.

The Sime Darby TQEM Team carried out an SIA in March 2009. The SIA process involved meetings with Kampung Segaliud residents, internal stakeholders and contractors. The SIA Report includes a summary of meetings and the topics discussed. The SIA report included the identification of both the negative impacts and beneficial outcomes of the oil palm operations. (6.1.1) Observation 15 – refer Section 3.2 Page 18 for details

The BSi audit team met with persons who participated in the SIA process. These persons included the village head, a contractor, staff and worker representatives. When interviewed these persons confirmed they had met with the TQEM Team and discussed social issues for identification of impacts. (6.1.2) Observation 16 – refer Section 3.2 Page 18 for details

The SIA process identified the issues that needed to be addressed and the TQEM Team then involved the Estate and Mill in developing Social Action Plans. The Mill had earlier prepared an initial Social Action Plan dated 30 November 2008 that focused on improvements for employees. The Estate and Mill have prepared separate Social Action Plans (March 2009) that include issues raised by external stakeholders. (6.1.3) Observation 17 – refer Section 3.2 Page 18 for details Criterion 6.2: There are open and transparent methods for communication and consultation between growers and/or millers, local communities and other affected or interested parties.

Procedures are documented for internal and external communications in Appendix 5 of the Sustainability Plantation Management System Manual – 1 November 2008. Copies of the procedures were available on site. The Mill has implemented a Customer Service Survey to identify issues associated with its products and to actively obtain feedback. (6.2.1)

The Estate Manager and Mill Manager are the nominated persons responsible for communication with external parties. (6.2.2)

The Estate has prepared a list of Stakeholders (10 March 2009) that includes Contractors, Vendors, Suppliers, Government Departments and Local Community Heads. The Mill has prepared a list of Stakeholders updated 26 February 2009 that includes suppliers, contractors, local community head and other interested parties. (6.2.3)

Criterion 6.3: There is a mutually agreed and documented system for dealing with complaints and grievances, which is implemented and accepted by all parties.

A dispute resolution procedure is documented in the Sustainable Plantation Management System Appendix 5 and is shown as a flow chart. The Mill has a system for recording complaints from customers and has implemented recording of complaints from staff & workers, for example in relation to housing. The Estate has implemented a Log Book at each Division for recording complaints from employees and other interested parties. (6.3.1)

At the time of the audit it was stated that as there had not been any disputes since the implementation of the recording and resolution process, the system has not yet been tested. Interview of female staff and workers confirmed any issues raised are dealt with in a timely and satisfactory manner. Interview of contractors and a supplier indicated there have been no recent disputes that required addressing. (6.3.2)

Interview of staff indicated that the system is available for use by any affected party. (6.3.3) Observation 18 – refer Section 3.2 Page 18 for details Criterion 6.4: Any negotiations concerning compensation for loss of legal or customary rights are dealt with through a documented system that enables indigenous peoples, local communities and other stakeholders to express their views through their own representative institutions.

Sime Darby has implemented a procedure for handling land disputes, including boundary and squatter issues. TQEM has recently socialised this to SOU25. (6.4.1)

The land dispute procedure refers the compensation assessment to the corporate Land Management Department of Sime Darby who assess and advise on compensation. (6.4.2)

The land issue that was raised in 2006 (Refer to Criterion 2.2 Page 10 for details) has been documented and information would be made available upon request. (6.4.3) Criterion 6.5: Pay and conditions for employees and for employees of contractors always meet at least legal or industry minimum standards and are sufficient to provide decent living wages.

Pay and conditions are documented in the SPIEU Agreement. (6.5.1)

Interview of female staff and workers confirmed their awareness of employment Policies and entitlements, ie annual, sick and maternity leave. Staff and workers stated they received their entitlement. All had signed a “Letter of Employment” and understood Terms and Conditions and pay slips. Interview of both male and female foreign workers confirmed that copies of their Letter of Employment were held at the Office. The audit team confirmed by means of payroll checks that correct remuneration was paid for any overtime hours worked.



Interview of residents at housing confirmed good money management as most families owned a Television, washing machine, fan, refrigerator and rice cooker. (6.5.2)

Houses were built in mid 80s and do not meet minimum Government standard. A budget has been approved to replace all Estate housing with construction of 30 units scheduled to commence during 2009. Priority will be given to replacement of Pertama Division housing.

Residents are allowed to maintain “kitchen” gardens provided they are kept neat and tidy, which is very beneficial in keeping living costs down. The Company has provided a building and basic furniture for Borneo Child Aid Society to set up a Humana School for children of foreign workers with approximately 60 children in attendance. Workers and their dependants are provided with free medical treatment at Company clinics. Electricity is supplied to Mill housing 24/7 and Estate housing between 4.30‐6am and 6‐11pm at cost RM5 per employee per month. Water is supplied to Mill and Estate houses 24/7. (6.5.3) Observation 19 – refer Section 3.2 Page 19 for details Criterion 6.6: The employer respects the right of all personnel to form and join trade unions of their choice and to bargain collectively. Where the right to freedom of association and collective bargaining are restricted under law, the employer facilitates parallel means of independent and free association and bargaining for all such personnel.

Mill and Estate workers are not members of a union. The Mill formed a Joint Consultative Committee for workers on 6 March 2008 and has held 3 meetings. Meeting minutes documented on file show meeting 6 September 2008 was attended by 16 staff and worker representatives. The Estate formed a JCC 23 November 2007. Most of the JCC representatives are members of the ESH Committee and any issues generally are raised at the quarterly ESH meeting. Records of meetings are held on file. The most recent Estate JCC Meeting was held 8 January 2009 with 54 attendees, both male and female, records include signatures of attendees. (6.6.1)

A statement on Freedom of Association is included in the Social Policy, which is displayed at Offices and Muster areas. (6.6.2) Criterion 6.7: Children are not employed or exploited. Work by children is acceptable on family farms, under adult supervision, and when not interfering with education programmes. Children are not exposed to hazardous working conditions.

The minimum working age is 18 under the Employment Act. At time of hire, age is checked by examination of ID Card for Malaysian workers and Passport of Foreign workers. During the audit, children were not observed at any workplace. (6.7.1) Criterion 6.8: Any form of discrimination based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation, or age, is prohibited.

The anti‐discrimination policy is included in the Social Policy, which is displayed at Offices and Mill and Estate Muster Areas. (6.8.1)

Interview of staff and workers and a check of payroll records confirmed that there was no discrimination between workers on the basis of ethnicity, religion or gender. (6.8.2) Criterion 6.9: A Policy to prevent sexual harassment and all other forms of violence against women and to protect their reproductive rights is developed and applied.

A statement on sexual harassment and violence is detailed in the Social Policy developed in conjunction with Tenaganita, who also conducted a Training Workshop in May 2008. Interview of Female Staff and Workers confirmed their awareness of the Policy. The Gender Policy has been implemented and a Committee formed. The Health Assistant carried out socialisation of the Gender Policy to workers during Muster on 25 February 2009 with 87 attendees and signatures from each. Most recent meeting was in 26 March 2009 with 120+ attendees. Next meeting is scheduled for June 2009. The Committee includes Staff and Worker representatives from both Mill and Estate. (6.9.1) Observation 20 – refer Section 3.2 Page 19 for details

A gender grievance mechanism has been established. A copy of the Policy Manual was held on site. Interview of Staff and Workers confirmed awareness of the specific grievance procedure as the Health Assistant stated awareness has also been given during morning muster briefings but no issues have been raised to date. (6.9.2) Criterion 6.10: Growers and mills deal fairly and transparently with smallholders and other local businesses.

The Mill follows the MPOB pricing monthly in relation to purchase of outside crop from suppliers. (6.10.1)

Current MPOB and previous FFB prices are held on file and are available upon request. Interview of FFB supplier confirmed knowledge of up‐to‐date FFB prices. (6.10.2)

Interview of contractors and a supplier confirmed their understanding of agreements and that they considered the company dealt fairly with them. (6.10.3)

Interview of Contractors confirmed that payments are made within 30 days of invoicing. (6.10.4) Criterion 6.11: Growers and millers contribute to local sustainable development wherever appropriate.

Contributions are made in the form of donations to local communities and schools. SOU25 has initiated a project involving growing bananas for supply to the Sepilok Orang utan Rehabilitation Centre. Records of contributions are held by Sime Darby Sabah Regional Office. (6.11.1)



Principle 7: Responsible Development of New Plantings

SOU25 has not carried out any new oil palm developments since November 2005 and there are no plans for expansion of plantings. Principle 7 is not applicable to this Assessment. Criterion 8.1: Growers and millers regularly monitor and review their activities and develop and implement action plans that allow demonstrable continuous improvement in key operations.

Class 1 pesticides have not been used at the Estate. Inspection of store stock records confirmed use of Paraquat was ceased in July 2005. (8.1.1)

The Mill and Estate have prepared environmental Aspects and Impacts Registers based on a risk assessment process. The Mill and Estate have prepared Environmental Action Plans for mitigation of significant impacts. For example, the mill has installed a system for collection of drainage from the EFB storage area and transfer to the effluent ponds for treatment and recycling to the palms. (8.1.2)

The Mill and Estate have implemented recycling of palm by‐products (EFB, excess fibre, boiler ash and POME) to the field mulch for the palms. Programmes also have commenced for separation of wastes at the stores and workshops for sale to a recycler. (8.1.3)

The Mill and Estate have identified pollution prevention in the Environmental Improvement Plan that was updated March 2009. An example is the installation of a silencer to the steriliser exhaust to reduce noise emission that previously affected the office and work stations. The Estate has installed spill containment at workshops and fuel storage and use areas for pollution prevention. (8.1.4)

The Estate and Mill have prepared Social Action Plans for mitigation of negative impacts, using information from the SIA process. (8.1.5)

The Sime Darby Management Review process shares information on best practices for performance improvement. TQEM has requested SOUs to record information on expenditure related to social and environmental aspects. (8.1.6)

3.2 Detailed Identified Nonconformities, Corrective Actions and Auditor Conclusions

Four (4) Nonconformities (CAR) were assigned to Minor Compliance Indicators 2.2.4, 4.3.2, 4.4.5 and 4.4.6

SOU25 has prepared a Corrective Action Plan for addressing the identified Nonconformities. The Audit Team has reviewed and accepted SOU25’s Corrective Action Plan.

SOU25 has made a commitment to implement corrective action for addressing the Minor Nonconformities immediately following the Certification Audit. The effectiveness of corrective action will be checked at the Surveillance Assessment that will be scheduled within twelve months of initial RSPO Certification.

CAR01: 2.2.4 Where there are, or have been disputes, proof of resolution or progress towards resolution by conflict resolution processes acceptable to all parties are implemented. 2.3.3, 6.4.1, 6.4.2

A Nonconformity was assigned as Sime Darby has not yet signed the agreement to lease land from a local landowner (who signed the lease 24 October 2008) nor has it paid any rental for the land since 1

st September

2006, which Sime has been using for growing and harvesting oil palm. The landowner complained that the delay by Sime Darby in not yet signing the lease is unreasonable as the company has continued to benefit from harvesting oil palm grown on the land.

Discussion with SOU25 Chairman indicated that Lease Documents have been with the Company Legal Department since October 2008.

SOU25 has prepared a Corrective Action Plan for addressing the identified nonconformity. The Corrective Actions involve following up with Sime Darby Legal Department to expedite signing and settlement of the issue.

The Audit Team reviewed the proposed corrective actions and concluded that they met the RSPO requirements for Indicator 2.2.4. Progress toward resolution of the issue will be followed up at the Surveillance Audit. CAR02: 4.3.2 Avoid or minimise bare or exposed soils within estates

A Nonconformity was assigned as field inspection showed some blocks in Mengaris Division with bare soil due to over‐spraying using CDA sprayers along harvesting paths.

SOU25 has prepared a Corrective Action Plan for addressing the identified nonconformity. Corrective actions involve ceasing the use of CDA sprayers, replacing these with knapsack spray pumps and re‐training of spray operators.

The Audit Team reviewed the corrective actions and concluded that they met the RSPO requirements for Indicator 4.3.2. Follow‐up will be carried out at the Surveillance Audit. CAR03: 4.4.5 Monitoring of water usage in mills (tonnage water use/tonne FFB processed)

A Nonconformity was assigned as currently there is no information available on the actual quantity of water used by the mill and resource utilisation has not been assessed.

SOU25 has prepared a Corrective Action Plan for addressing the identified nonconformity. Corrective actions include installing a water meter and implementing monitoring and reporting of water usage, with the aim of reducing consumption.

The Audit Team reviewed the corrective actions and concluded that they met the RSPO requirements for Indicator 4.4.5. Follow‐up will be carried out at the Surveillance Audit.



CAR04: 4.4.6 Water drainage into protected areas is avoided wherever possible. Appropriate mitigating measures will be implemented following consultation with relevant stakeholders

A Nonconformity was assigned as inspection showed that although sumps on the Mill monsoon drains were stated to have been cleaned recently, sediment deposits were present along the drain base as well as a number of sumps were filled with sediment. This indicates more frequent inspection and cleaning is required, together with maintaining records of drain inspections and maintenance.

SOU25 has prepared a Corrective Action Plan for addressing the identified nonconformity. Corrective actions include cleaning the drains at least weekly, preparation of an inspection form and implementing supervisor checks and reporting.

The Audit Team reviewed the corrective actions and concluded that these met the RSPO requirements for Indicator 4.4.6. Follow‐up will be carried out at the Surveillance Audit.

Observations/Opportunities for Improvement

Twenty (20) Observations/Opportunities for Improvement were identified. The progress with the Observations/Opportunities for Improvement will be checked at the Surveillance Assessment visit scheduled to be carried out within twelve months following initial RSPO Certification.

01. (2.1.1) SOU25 has an approved budget to replace all housing over the next three years. This will rectify the existing situation with the older houses built between 1982 and 1985 that have only 2 bedrooms instead of the required 3 bedrooms.

02. (2.1.1) The Labour Department extension for Overtime hours will need to be renewed as the current extension expires during April 2009.

03. (2.1.1) The Estate has commenced a program to locate all boundary stones and aims to complete this work by 31 March 2010.

04. (4.1.1) Labelling of solutions prepared in the Mill laboratory was incomplete as it did not include preparation or expiry dates as required by the Procedures detailed in the Laboratory Manual.

05. (4.4.1) Marking of buffer zones along the small streams is in progress and is expected to be completed during April 2009.

06. (4.4.3) The Estate plans to collect additional water samples of inflows to take into account sampling in relation to rainfall and streamflow.

07. (4.4.7) The Mill and Estate could improve the water conservation aspects of Water Management Plans by implementing more rainwater harvesting at housing.

08. (4.7.1) Observation of sprayers indicated that the respirators supplied appear inappropriate for use in the hot and humid field conditions. The Estate plans to investigate the availability of a lightweight alternative that would be suitable for the spray droplet size and chemicals being applied.

09. (5.1.1) The Estate Aspects and Impacts Register did not include the important impact “overspraying of herbicide and loss of groundcover vegetation”.

10. (5.2.1) The HCV Assessment focused mainly on areas within the Estate and could be improved by additional work/information on the adjacent Lungmanis Forest Reserve that provides access to Pertama Division. This could be done in conjunction with Forestry Department or the Wildlife Division of Department of Tourism Sabah.

11. (5.2.2) The aspect of the HCV Management Plan that relates to enrichment planting of riparian buffer zones could be improved by obtaining technical input from Forestry Department on indigenous tree species recommended for planting.

12. (5.2.3) Several households at Pertama Division kept dogs as pets. This is unacceptable in relation to protection of fauna as the dogs may hunt for birds and small mammals at the adjacent Forest Reserve. SOU25 agreed to investigate this issue.

13. (5.3.1) The Mill has identified wastes and sources of pollution in the Environmental Aspects and Impacts Register, but the main focus is on scheduled waste and the list was incomplete.

14. (5.3.2) At the time of inspection, the Mill scheduled waste store spill containment bund drain valve was left in the open position. Corrective action was taken immediately this was pointed out.

15. (6.1.1) The SIA Report includes a summary of meetings but does not include details of attendances. The report could be improved by including more detail on the issues discussed with stakeholders.

16. (6.1.2) Input from internal stakeholders was obtained by interviewing representatives of staff and workers in the office. Holding meetings at housing in the afternoons would have provided opportunity for more open discussion and participation of larger numbers of stakeholders and families.

17. (6.1.3) The SIA Social Management Plan did not include details of mitigation actions which were subsequently prepared by the Estate. The SIA Report needs to be updated to include the detailed mitigation actions with responsibilities and timetable for implementation.

18. (6.3.3) The “Complaints Log Book System” had not been implemented at Pertama Division prior to the audit and issues raised verbally by workers had not been recorded. During the audit, awareness was conducted at the Division and a log of complaints prepared that is being addressed.



19. (6.5.3) Interview of residents at Pertama division identified the following issues:

Roofs of most of the Pertama Division houses leak, which was confirmed as it was raining at the time of inspection.

There are four school‐aged children who presently are unable to attend school as they have no transport. All the women work for the company but one has to remain at the housing to look after the 12 children.

There is no clinic at Pertama and the HA only visits once each week (if a vehicle is available). Residents stated that they sometimes found it difficult to obtain medical treatment for themselves and their children as they had no transport.

Discussion with SOU Chairman indicated that the leaking roofs will be repaired immediately and all families at Pertama Division will be relocated to either Segaliud or Mengaris housing – this would resolve the above issues. The housing would only be used for single male workers.

20. (6.9.1) Female workers at Pertama Division stated that they were invited to the recent Gender Committee Meeting and very much wanted to attend but were unable to as they did not have any transport. (Refer last paragraph “italics” OBS17).

3.3 Noteworthy Positive Components

SOU25 has converted a disused store into classrooms and a school is operated by Humana to provide schooling for approximately 60 children of foreign workers. The company has provided electricity, fans, and some bench desks.

Plate 2: Humana School Students

Safety at SOU25 has improved significantly since

2006/07, with the number of LTAs for the Estate decreasing from 18 in 2006/07 to 3 in 2008/09 (Figure 5). The number of lost days also has improved from 140 in 2006/07 to 33 in 2008/09. The Mill has recorded only one LTA since January

2003 and has worked 374,630 man hours since the last LTA.

0

50

100

150

2005/06 2006/07 2007/08 2008/09

LTAs Lost Days

Figure 5: LTAs/Lost Days 2005 – 2008

The observation of Endangered, Rare and Threatened species of fauna close to the access road through the Lungmanis Forest Reserve highlights the importance of efforts to protect fauna and habitats from disturbance. Birds of prey, such as Jerdon’s Baza are important for Integrated Pest Management and control of rats.

Plate 3: Jerdon’s Baza Aviceda jerdoni (with prey) observed at

Lungmanis Forest Reserve beside the access road near Pertama Division

3.4 Issues Raised by Stakeholders and Findings with Respect to Each Issue

The majority of stakeholders had positive comments about SOU25. For the situations where stakeholders raised issues, the company’s response is stated.

Staff/Worker Issues

At Pertama housing, the residents stated that mosquitoes were a problem but they were not aware of the company carrying out spraying.

Company Response: Housing will be inspected for mosquito breeding areas and fogging carried out if necessary



Electricity supply to housing is currently between the hours of 4–6.30am and 6–11pm. Residents at Mengaris housing stated that they would like supply of electricity to be continuous from 2pm until 6am daily as residents who have refrigerators are unable to use their freezers. They also stated that they would like to use their fans during the night to assist sleep. They are aware that increase in supply will mean increase in cost but they do not mind.

Company Response: Presently there is no stand‐by genset and operation of the existing equipment needs to be used conservatively. An additional genset has been budgeted for 2009/10 and the request will be considered after installing the additional capacity. The Humana School Teacher stated that the current bench type desks and seats were uncomfortable for students to sit at for long periods. He stated that the issue has been raised previously but to date no response has been received from the Company.

Company Response: Construction of a new school building of four class‐rooms plus staff room and computer room has been approved in the 2009/10 budget. New furniture and equipment will be supplied at that time. Families with more than one child attending the Humana School find it difficult to afford the RM10 per month per child that the company deducts from their pay.

Company Response: Deduction was made previously when the company operated a school at the Estate and the deduction was continued to cover prizes and T shirts for Labour Day festivities. Deduction of RM10 will be ceased immediately.

Local Communities

The Kampong Segaliud is a settlement of houses scattered along the Segaliud River, quite some distance from SOU25 operations. The majority of the households rely on farming, although approximately 30% are fishermen. Community representatives stated that they had a good working relationship with the company and did not have any unresolved issues.

Government

Government Departments did not raise any issues in relation to SOU25.

NGOs and Others

SPIEU Sabah stated that the Collective Labour Agreement (CLA) is updated yearly, however the last Agreement expired in December 2007 and a new Agreement has not yet been signed by Sime Darby.

Company Response: This has to be negotiated and agreed by the Sime Darby Sabah Group and was indicated to be nearing conclusion. SOU25 increased wages from 1 February 2009 in anticipation of the

Agreement being finalised. Once the Agreement is finalised back payment will be made accordingly. The BSi Audit Team considered the SOU25 responses to the issues raised by stakeholders to be acceptable. The issues will be followed up during the Surveillance Audit to check on progress and satisfactory resolution.

3.5 Acknowledgement of Internal Responsibility

SOU25 acknowledges and confirms acceptance of the Assessment Report contents, including assessment findings. SOU25 accepts the responsibility for implementing the corrective actions and addressing the opportunities for improvement detailed in the Assessment Report.

3.6 Formal Sign‐off of Assessment Findings

Signed for on behalf of Sime Darby Plantation Sdn Bhd (SOU25)

Mr Mohd Zulkifli bin Mohd Isa

SOU Chairman/Manager Segaliud Estate Date: 20 May 2009

Signed for on behalf of BSi Group Singapore Pte Ltd

........................................................ Mr Charlie Ross Lead Auditor Date: 20 May 2009

Appendix “A”

Sime Darby Time Bound Plan

RSPO PUBLIC SUMMARY REPORT SIME DARBY TIME BOUND PLAN


SIME DARBY TIME BOUND PLAN

Appendix “B”

SOU25 RSPO Certificate Details

PUBLIC SUMMARY REPORT SOU25 RSPO CERTIFICATE DETAILS


Management Unit SOU25 Certificate Number : SPO 547123 WDT No 250 Certificate Issue Date: (RSPO Approval Date) Sandakan Sabah MALAYSIA

Website: http://plantation.simedarby.com Standards: RSPO Principles & Criteria : 2007; Malaysia National Interpretation : 2008

SOU25 RSPO CERTIFICATE DETAILS

All tonnages are for the reporting period 01 July 2007 to 30 June 2008

* Tonnage not included in Certificate

** The Tonnage Claimed is the proportion of total production from the Company Certified Estate

SOU 25 Segaliud Palm Oil Mill and Supply Base

Location Sandakan, Sabah, Malaysia

Address W.D.T. No. 250, 90009, Sandakan, Sabah, Malaysia

GPS Location 117∙75° E 5∙72° N

CPO Tonnage Total 31,723

PK Tonnage Total 9,148

Estate FFB Tonnage Segaliud Estate: 108,999

Smallholders FFB Tonnage* 47,525

CPO Tonnage Claimed** 22,091

PK Tonnage Claimed** 6,371

Appendix “C”

Certification Assessment Program

PUBLIC SUMMARY REPORT SOU25 CERTIFICATION ASSESSMENT PROGRAM


CERTIFICATION ASSESSMENT PROGRAM

DATE TIME ACTIVITY CR RR/ JM

IN JH

Monday 6 April MILL

AM

Opening MeetingPhysical Inspection Mill/Effluent Ponds Interview Male Workers Visit Clinic Interview Staff Interview Female Office Staff/Workers Review Pay Documentation Interview Contractors/Suppliers Inspect Riparian Buffer Zones

√ √ √

√ √

√ √

√√ √ √

√ √

PM

Mill DocumentationInspect Housing and Interview Families Review SIA Visit any Local Communities Review of HCV Assessment and Monitoring Plans

√ √

√ √ √

√ √

√

Tuesday 7 April ESTATE

AM

Physical Inspection Estate/Interview Male FieldworkersInterview Female Fieldworkers Physical Inspection Stores, Land Application, Landfill Inspect Forest Reserve Visit Division Clinic and Interview Staff Interview Female Office Staff/Workers

√ √

√ √ √

√ √

√

PM

Estate DocumentationInspect Housing and Interview Residents Interview Contractors/External Stakeholders Interview Foreign Worker Residents at Housing Interview Workers re Fauna Protection

√ √ √

√ √

√

Wednesday 8 April SOU25

AM

Visit Kampong SegaliudVisit Forest Reserve and Pertama Division Collect any outstanding data/information/clarification Preparation of IAV Report and Closing

√ √

√ √

√ √

√

1500 Closing Meeting √ √ √ √