Download - RSPO audit Report...Dec 01, 2006 · RSPO Principles & Criteria Annual Surveillance Assessment Report Report Number CU816254 RSPOPC-SUM-REPORT.F01 JULY2013 Page 1 of 38 Control Union

RSPO Principles & Criteria Annual Surveillance Assessment Report

Report Number CU816254

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 2

Malaysia

KLK KEKAYAAN PALM OIL MILL 2013

Report prepared by: Viknesvaran Paramasivan (Lead Assessor)

Certification decision by: Hari Naveen Christopher (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





Tel: +603-3377 1600 / 1700

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 Percentage of Planted Oil Palm by different Age Ranges ................................................................................... 6 1.7.4 Calculation of the Number of Production Units (N) to Sample for the Mill ........................................................ 6

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 ........................................................................................................ 7

2.1 MANAGEMENT STRUCTURE................................................................................................................................. 7 2.2 NON-COMPLIANCE IDENTIFIED WITH 2.1 ABOVE ..................................................................................................... 7 2.3 SUMMARY OF THE TIME BOUND PLAN .................................................................................................................. 7 2.4 UN-CERTIFIED UNITS OR HOLDINGS...................................................................................................................... 9 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 .................................................................................................................................... 14 3.3.1 General Overview .............................................................................................................................................. 14 3.3.2 Assessment agenda for this Audit ..................................................................................................................... 15

PART 4 ASSESSMENT FINDINGS ........................................................................................................ 17

4.1 LEAD ASSESSOR’S SUMMARY AND RECOMMENDATION FOR CERTIFICATION ................................................................ 17 4.2 SUMMARY OF THE FINDINGS BY PRINCIPLES AND CRITERIA ...................................................................................... 17

Principle 1: Commitment to Transparency .......................................................................................................................... 17 Principle 2: Compliance with Applicable Laws and Regulations .......................................................................................... 18 Principle 3: Commitment to Long-Term Economic and Financial Viability .......................................................................... 19 Principle 4: Use of Appropriate Best Practices by Growers and Millers .............................................................................. 19 Principle 5: Environmental Responsibility and Conservation of Natural Resources and Biodiversity .................................. 23 Principle 6: Responsible Consideration of Employees and of Individuals and Communities by Growers and Millers .......... 24 Principle 7: Responsible Development of New Plantings ..................................................................................................... 26 Principle 8: Commitment to Continuous Improvement in Key Areas of Activity .................................................................. 26

4.3 NON-CONFORMITY RAISED DURING THIS AUDIT AND ANY FROM THE PREVIOUS YEAR, IF APPLICABLE ............................. 27 4.3.1 Non-Conformities Identified during this Audit ........................................................................................................... 27 4.3.2 Non-Conformity Identified during the last ASA, not applicable for MA ..................................................................... 29 4.3.3 Observations Raised During this Audit ....................................................................................................................... 31

4.4 ISSUES THAT WERE RAISED DURING THE STAKEHOLDER CONSULTATION, IF ANY ............................................................ 32

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

5.1 POM INCLUDED IN THE SCOPE OF THE AUDIT ...................................................................................................... 33 5.2 PROJECTION 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 FFB RECEIVED AND CPO AND PK PRODUCED SINCE THE LAST AUDIT ............................ 33 5.5 RECORDS OF CERTIFIED CPO & PK SOLD UNDER GREEN PALM TO BUYERS SINCE THE LAST AUDIT, IF ANY ......................... 33 5.6 RECORDS OF CERTIFIED CPO & PK SOLD UNDER UTZ ETRACE TO BUYERS SINCE THE LAST AUDIT, IF ANY .......................... 33 5.7 NON-CONFORMITIES IDENTIFIED DURING THIS AUDIT .............................................................................................. 35 5.8 DESCRIPTION OF THE ORGANIZATIONAL MANAGEMENT SYSTEMS............................................................................... 35 5.9 FINAL CERTIFICATION DECISION BY CONTROL UNION FOR THE RSPO SCCS AUDIT OF THE POM ...................................... 35





Tel: +603-3377 1600 / 1700

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 .................................................................................................................................... 36 6.4 SIGNING BY THE LEAD AUDITOR ......................................................................................................................... 36 6.5 SIGNING BY THE CERTIFIER ................................................................................................................................ 36

PART 7: APPENDICIES ........................................................................................................................ 37

APPENDIX 1: LOCATION MAP FOR THIS CERTIFICATION UNIT ............................................................................................. 37 APPENDIX 2: LIST OF ABBREVIATIONS ............................................................................................................................. 38





Tel: +603-3377 1600 / 1700

PART 1: SCOPE OF THE CERTIFICATION ASSESSMENT AUDIT

1.1 Company and Contact Details

Company Name: Kuala Lumpur Kepong Berhad

Business Address: 1, Jalan S.P. Seenivasagam, 30000 Ipoh, Perak.

Contact Person: Mr. Sin Chuan Eng

Office Telephone: +605 2417844

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: C816254CU-RSPO.01.2013

Start Date Of Certificate: 27 October 2011

End Date Of Certificate: 26 October 2016

Date Of Original Certification: 27 October 2011

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: 1st – 5th July 2013

Audit Number: ASA 2

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

Kekayaan POM 120 HS(D) 519, Block 5, Mukim

Nyior, 86609 Paloh, Kluang, Johor

E 103º16’

N 2º 12’

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 2012/2013 (MT)

Projected 12 Months (MT) Forecast Certified in this Report

FFB CPO PK FFB CPO PK FFB CPO PK

421,769 98,549 23,292 435,702 94,431 21,384 447,949 107,508 26,877

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





Tel: +603-3377 1600 / 1700

1.7 General Description of Supply Base

The mill receiving 100 % of crops from their own estates. Detail of supply base as below.

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 Landak Estate

K/B 108, KM11, Jalan Paloh, 86609 Paloh, Johor.

E 103 ̊ 17’ N 2 ̊16’ 4,308 3,885

OPP 2 Kekayaan Estate

K/B 107, KM11, Jalan Paloh, 86609 Paloh, Johor.

E 103 ̊ 28' N 2 ̊ 18' 4,059 4,059

OPP 3 Paloh Estate K/B 106, KM11, Jalan Paloh, 86609 Paloh, Johor.

E 103 ̊ 11.98’ N 2 ̊ 12.09’ 1,943 1,752

OPP 4 Voules Estate

K/B 506, KM1, Tenang Station, Jalan Segamat, 85009 Segamat, Johor.

E 102 ̊ 49' N 2 ̊ 30'

1,266 1,224

OPP 5 Fraser Estate

K/B 102, KM 7, Jalan Inas, 81000 Kulai, Johor.

E 103 ̊ 36’ N 1 ̊ 42’ 2,802 2,034

OPP 6 Ban Heng Estate

K/B 102, Batu 24, KM38, Jalan Pagoh, Labis, 84600 Pagoh, Johor.

E 102 ̊ 49’ N 2 ̊ 13’

621 577

OPP 7 New Pogoh Estate

K/B 505, KM1, Tenang Station, Jalan Segamat, 85009 Segamat, Johor.

E 102 ̊ 49’ N 2 ̊ 30’

1,194 1,142

OPP 8 Sg. Bekok Estate

KM2.5, Jalan Haji Eskanin, 86500 Bekok, Johor.

E 103 ̊ 07’ N 2 ̊ 18’ 631 631

OPP 9 See Sun Estate

K/B 108, KM4 Rengam, 86300 Rengam, Johor.

E 103 ̊ 38' N 1 ̊ 55' 577 545

OPP 10 Sg. Penggeli Estate

K/B 108, KM32 Kulai, 81440 Kulai, Johor.

E 103 ̊ 58' N 1 ̊ 54' 965 965

TOTAL 18,366 16,814

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

OPP Oil Palm Plantation Estimated FFB/Year (MT) Planting Years Cycle (Years)

OPP 1 Landak Estate 106,042 1988-2009 25

OPP 2 Kekayaan Estate 113,836 1996-2008 25

OPP 3 Paloh Estate 47,948 1988-2011 25

OPP 4 Voules Estate 31,875 1996-2009 25

OPP 5 Fraser Estate 49,223 1988-2011 25

OPP 6 Ban Heng Estate 13,797 1988-2008 25

OPP 7 New Pogoh Estate 28,123 1992-2009 25

OPP 8 Sg. Bekok Estate 16,911 1992-2009 25

OPP 9 See Sun Estate 14,014 1988-2008 25

OPP 10 Sg. Penggeli Estate 26,180 1987-1989 25

TOTAL 447,949





Tel: +603-3377 1600 / 1700

1.7.3 Percentage of Planted Oil Palm by different Age Ranges

CU CODE

Planting years by 5 year ranges ( % )

Pre 1990 1991-1995 1996 -2000 2001 – 2005

2006 – 2010

2011 - 2015 Total (Ha)

OPP 1 0.35 0.12 38.47 47.07 13.99 -

3,885 [23.11%]

OPP 2 - - 34.83 54.70 10.47 -

4,059 [24.14%]

OPP 3 9.37 23.78 32.27 20.07 9.83 4.68

1,752 [10.42%]

OPP 4 0.32 - 43.05 45.02 11.61 -

1,224 [7.28%]

OPP 5 34.55 20.45 11.96 14.88 11.17 6.99

2,034 [12.10%]

OPP 6 6.00 13.00 20.00 32.00 29.00 -

577 [3.43%]

OPP 7 - 6.40 53.00 32.00 8.60 -

1,142 [6.79%]

OPP 8 - 29.32 31.22 25.36 14.10 -

631 [3.75%]

OPP 9 46.97 - 29.63 11.61 11.79 -

545 [3.24%]

OPP 10 100.00 - - - - -

965 [5.74%]

Total 16’814 [100%]

1.7.4 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

10 4 0 0

Explanation as to the selection of estates sampled

4 out of the 10 estates namely Landak, New Pogoh, Sg. Penggeli and Sungai Bekok were assessed.

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

N/A

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





Tel: +603-3377 1600 / 1700

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

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

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

All subsidiaries, estates and mill are included

2.3.2 Is the time bound plan challenging? Age of

plantations. Location. Mill

development. Infrastructure. Compliance

The minor NC raised in Lahad Datu region assessment has been closed as the revised time bound plan has been adhered to. Therefore, the remaining units in the time bound plan will be monitored closely.





Tel: +603-3377 1600 / 1700

with applicable law.

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

The time bound plan has been thoroughly reviewed by the company and the areas of the estates that have rubber, are highlighted with * below.


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

Due to the isolated lapses in the implementation the company has made the adjustments to realize the targeted achievement.

2.3.5 Have there been any stakeholder comments?

The recent allegations in media of PT Adei Plantation Industry (KLK’s subsidiary) being involved in the forest fires in Sumatera from 17th – 30th June 2013, has been verified accordingly via a site visit from 15 – 16 August 2013. All hotspots were inspected and a separate verification report has been produced.

It is demonstrably proved and confirmed that these hotspots were not within PT Adei Plantation’s palm oil concessions except that the hotspot is in conservation area. There are 2 hotspots that have been found to be non-existence while the remaining were spotted in the areas of neighbouring smallholders.

The fire in the conservation area had eventually spreaded into a small area in this plantation despite all the control measures due to the strong wind and light weight of the debris. Thus, by having visited the hotspots and with the evidence provided, it has been concluded that PT. Adei Plantation was not involved in any burning activity in its plantation. It has been also noted that the company had invested significantly on preventive measures, e.g: manpower, equipment and other resources to ensure all controls are in place should there be any wild fire in the future.

2.3.6 Have there been any newly acquired subsidiaries?

In Dec 2012, KLK signed a joint- ventured agreement with Collingwood Plantation. KLK holds 51% and is the majority shareholder. This new subsidiary has leased approximately 40,000Ha’s in Papua New Guinea. No land development has taken place since the venture and any future land developments will only occur after executing the NPP notification.

At present, KLK is in the process of carrying out all the necessary HCV and SEIA assessments which is set to take place between Q2 to Q4, 2013. The processes are still in progress.

2.3.7 Have there been any isolated lapses in the implementation of the plan?

After the Lahad Datu region NC, there is no any lapse identified in the plan.

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

With the revised time bound plan, the actual implementation effectiveness will be reviewed within the next surveillance assessment of any unit from time to time.

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

The company is now on target to have all their properties audited and / or certified by the end of 2015.





Tel: +603-3377 1600 / 1700

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)


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

Positive assurance statement provided are still same as of year 2011, which does not include the new mill found in the revised time bound plan. Furthermore, insufficient records to demonstrate that the internal audit has took place for all its subsidiaries. This is raised as minor non-compliance.

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.

2.4.3 Any new plantings since January 1st 2010 must comply with the RSPO New Plantings Procedure.

No new planting reported for existing units. However, the newly acquired lands will adhere to the NPP procedures when it is ready. PT Anugerah Surya Mandiri which was acquired last year is planned for NPP in near future.

2.4.4 Any Land conflicts are being resolved through a mutually agreed process, e.g. RSPO Grievance procedure or Dispute Settlement Facility, in accordance with RSPO criteria 6.4, 7.5 and 7.6.

SIA conducted reported that there are land conflicts at some of the uncertified units and the company is handling through FPIC and grievance procedures. PT Karya Makmur Abadi – 2000Ha and PT Riau – 2,554Ha are under dispute. Also, currently there are some issues being addressed pertaining to 2.3.6 above and which is being planned to engage a third party assessor where the process and outcome is yet to be finalized by the company.

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.

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.

TIME BOUND 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

Berau 1 POM Berau, Kaltim, Indonesia

Kebun Malindomas Perkebunan Kebun Hutan Hijau Mas Kebun Jabontara Ekakarsa

By 2014 Pending

Steelindo Wahana Perkasa POM

Belitung, Indonesia

Kebun Steelindo Wahana Perkasa

By 2013 Pending

Parit Sembada POM

Belitung, Indonesia

Kebun Parit Sembada Kebun Alam Karya Sejahtera

By 2014 Pending





Tel: +603-3377 1600 / 1700

Mandau POM Riau, Sumatera, Indonesia

Kebun Mandau Oct 2012 Certified

Nilo 1 POM Riau, Sumatera, Indonesia

Kebun Nilo Timur By 2013 Pending

NIlo 2 POM Riau, Sumatera, Indonesia

Kebun Nilo Barat By 2013 Pending

Tapung Kanan POM

Riau, Sumatera, Indonesia

Kebun Sekarbumi Alamlestari

By 2013

Audited on 17/12-21/12/2012 and waiting for certification process

Gohor Lama POM

Langkat, Sumatera Utara, Indonesia

Kebun Basilam Kebun Gohor Lama

By 2014 Pending

Padang Brahrang POM

Langkat, Sumatera Utara, Indonesia

Kebun Padang Brahrang Kebun Bukit Lawang Kebun Tanjung Keliling

By 2014 Pending

Batu Lintang POM

Serdang, Kedah, Malaysia

Pelam Estate Batu Lintang Estate Subur Estate Buntar Estate

By 2013 Audited on Q1, 2013 and waiting for certification process

Kekayaan POM 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 POM Paloh, Johor, Malaysia

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

N/A N/A

Jeram Padang POM

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 POM

Tanjung Malim, Perak, Malaysia

Changkat Asa Estate Kerling Estate Sg Gapi Estate

By 2013 Audited on 21/1-23/1/2013 and waiting for certification process

Tuan Mee POM Sungai Buloh, Selangor, Malaysia

Tuan Mee Estate By 2012 Audited on 22/10-25/10/2012 and waiting for certification





Tel: +603-3377 1600 / 1700

process

Kuala Pertang POM

Kuala Krai, Kelantan, Malaysia

Kerilla Estate Pasir Gajah Estate Sg Sokor Estate

By 2013 Pending

Changkat Chermin POM

Manjung. Perak, Malaysia

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

By 2012

Audited on 26/11-30/11/2012 and waiting for certification process

Mill 1 POM Tawau, Sabah, Malaysia

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

N/A N/A

Mill 2 POM Tawau, Sabah, Malaysia

Pang Burong Estate Sri Kunak Estate Tundong Estate Ringlet Estate

March 2009 Certified

Pinang POM Tawau, Sabah, Malaysia

Jatika Estate Sigalong Estate Pangeran Estate Pinang Estate

March 2009 Certified

Lungmanis POM Lahad Datu, Sabah, Malaysia

Tungku Estate Bukit Tabin Estate Lungmanis Estate

July 2010 Certified

Rimmer POM Lahad Datu, Sabah, Malaysia

Rimmer Estate Sg. Sibalukan

July 2010 Certified

Bornion POM Kinabatangan, Sabah, Malaysia

Bornion Estate Segar Usaha Estate

July 2010 Certified

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; however there are still room for improvement especially on internal audit procedures for all uncertified subsidiaries and new acquisition to ensure the requirements are met. Concerning the potential overlook of the implementation of the internal audit procedure, a minor non-compliance is raised. There are 6 estates currently sending the crops to the outside mill where these estates have not been included in the time bound plan.

There will be a new POM in Berau, Kalimantan Timur as of the company’s plan on expansion of milling capacity and 2 new POMs in Medan and Sampit respectively under construction which will eventually be added in the time bound plan when it is ready for commissioning. The company has also made decision to include Paloh Mill into certification by year 2015 and Mill 1 which consists of 100% of independent smallholders will be shut down within 3 years from now to adhere to the rules of partial certification. The land conflicts are well documented and details are available and cited. More investigation will be carried out during next surveillance audit to monitor the progress.

2.6 Partial Certification Audit Agenda

Date Location Agenda

03/07/2013 Kekayaan POM Document review





Tel: +603-3377 1600 / 1700

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: Viknesvaran Paramasivan

Team member 1: Mohd. Rizal bin Md. Kassim

Team member 2: Muhd. Jamalul Arif

Team member 3: Mahaswaran Maliyapan

Team member 4: Selvanathan Grapragasem

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;

Degree in Chemical Engineering and experience in palm oil mills.

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 8 years of working experience in the palm oil industry. Involved in RSPO auditing since 2010. Fully trained in similar agriculture certification programmes such as RSPO SCCS and RFS2

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

Involved in RSPO assessment since 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 June 2009

Training in the practical application of RSPO certification systems.

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

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 audits conducted in for many different companies in Malaysia and Indonesia.

RSPO endorsed lead auditors course. Completed RSPO Lead Auditor training in April 2010 Signed code of conduct. Yes. General knowledge of:

RSPO P&C standards. Yes

CUC organizational structure. Yes

CUC quality systems. Yes

Lead auditor role. Yes

Report writing. Yes

Stakeholder consultation. Yes

Certification decision process. Yes

RSPO SCCS program manual. Yes

CUC filing systems. Yes

Correct use of RSPO trademarks. Yes

History and objectives of RSPO. Yes





Tel: +603-3377 1600 / 1700

CV available. Yes

Completion of CUC RSPO lead auditor training. Completed and passed RSPO endorsed lead auditor training in April 2010.

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

Fluent in main local languages and English.

Mohd. Rizal bin Md. Kassim Fluent in both English and Bahasa Malaysia

Muhd. Jamalul Arif Fluent in both English and Bahasa Malaysia

Mahaswaran Maliyapan Fluent in both English and Bahasa Malaysia

Selvanathan Grapragasem Fluent in both English and Bahasa Malaysia

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

Mohd. Rizal bin Md. Kassim More than 5 years working experience in forestry and manufacturing firm. Involved in FSC auditing since 2008. Fluent in local languages.

Muhd. Jamalul Arif Undergraduate in plantation background. Involved in RSPO auditing since 2010 and experience in similar auditing field in GMP B2 and Global Gap.

Mahaswaran Maliyapan Quality, environment and OHSAS Lead auditor. Working experience in various industries. Auditing since 2007.

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

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





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









Tel: +603-3377 1600 / 1700

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





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





Economic issues. Mohd. Rizal bin Md. Kassim More than 5 years working experience in forestry and manufacturing firm. Involved in FSC auditing since 2008. Fluent in local languages.




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.





Tel: +603-3377 1600 / 1700

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

01/07/2013

AAR Paloh Conference

Room Viknes

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

Kekayaan Mill

Viknes Rizal Jamal

Selva Mahas

Mill inspection

Workshops

Stores

POM application

Document review Field operations

Worker interviews

Housing

Medical

Schools

Local communities

Environmental

02/07/2013 Landak Estate

Viknes

Rizal Jamal

Supply Chain Certification Assessment of the POM (RSPO SCCS) Field operations.

Worker interviews





Tel: +603-3377 1600 / 1700

Selva Mahas

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

03/07/2013

Kekayaan Estate office

New Pogoh Estate

Viknes

Rizal Jamal Selva

Mahas

Partial Certification Review with client representatives Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

04/07/2013

Sungai Penggeli

Viknes Rizal Jamal

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

Sungai Bekok Estate

Selva Mahas

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

05/07/2013 AAR Paloh Conference

Room 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





Tel: +603-3377 1600 / 1700

PART 4 ASSESSMENT FINDINGS

4.1 Lead Assessor’s Summary and Recommendation for Certification

The mill and supply bases visited are as per the above tables 1.5 and 1.7.1. It was assessed at field, office, facilities, store and document review was carried out in accordance to the RSPO principles and criteria. Common systems were identified and specific evidence was recorded for individual estate and mill. Interviews with Estate Managers, Mill Manager, various committees and members of workers union took place in both formal and informal environments and worker interviews were conducted at the supply bases and the mill. There were no complaints received during the field assessment and during interview with the external stakeholders. Under partial certification rules, a minor non-conformity was raised. Details of this finding can be found in table 2.5 above. For further clarification on Partial Certification, see PART 2 above. 5 minor non-conformities and 6 observations were raised. However this does not result in suspension of certification as the company has until the next surveillance audit to close the minor non-compliances. 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: Viknesvaran Paramasivan Date: 5 July 2013

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 contains 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. Some documents that are supposed to be made publicly available were listed as confidential documents in the Master List of Documents. A minor non-conformity was raised for this matter.

ASA 2 1.1 The mill and audited estates 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. ‘SOP 24 – Stakeholder Requests and Responses’ clearly states what needs to be done to handle any form of requests. All records are kept for at least seven years.

ASA 2 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





Tel: +603-3377 1600 / 1700

Details of complaints and grievances

Negotiation procedures

All these documents were sighted in the mill and estate offices. All requests for documents at the estate or mill offices will have to go through the mill manager or estate managers. They will make the decision as to whether the information can be shared with 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.

However, documents that needed to be publicly available were listed as confidential in the Master List of Documents and as such a minor non-conformity was raised.

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.

ASA 2 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)

Ministry of Trade.

Malaysia Palm Oil Board (MPOB) Regulations

Road Transport Act 1987 (Act 333)

Employees Social Security Act and Regulations (Act 4)

Food Act and Regulations (Act 281)

Industrial Relations Act and Regulations (Act 177)

Trade Union Act and Regulations

Employees Provident Fund Act 1991

Human Rights Commission of Malaysian Act.

Wetlands and climate Change 1999

The UN Convention on Biological Diversity

Stockholm Convention On Persistent Organic Pollutants (2001)

Rotterdam Convention on Prior and Informed Consent Procedure for certain hazardous chemicals.

International Labour Organisation Convention 98(1949)

Aboriginal Peoples Act 1954 (Act 134)

Arms Act 1960

Children and young person (employment) act 1966

Commercial vehicles(Licensing Board Act 1987)

Electricity Supply Act 1990

Employment Act 1955

Immigration Act 1959/63

Internal Security Act 1960

Irrigation Areas Act 1953

Land and Conservation Act 1960

National Forestry Act 1984

Environment Quality Act 1974

Estate Hospital Assistants (Registration) act 1965





Tel: +603-3377 1600 / 1700

Act 645 National Heritage Act 2005

Act 344 Police Act 1967

Anti-Corruption Act 1997

Act 246 Private employment Agencies Act 1981

Act 76 Protection of Wild Life Act 1972

Act 208 Sewerage Services Act 1993

Act 133 Street, Drainage and Building Act 1974

Wages Councils Act 1974

Waters Act 1920

Workmen’s Compensation Act 1952.

Pesticides Act 1974

Destructions of Disease Bearing Insects Act

Employment Act 1955

Internal Security Act 1960

Employment Provident Fund Act

Drainage Works Act 1954.

Workers minimum Standards of Housing and Amenities Act 1990

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 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.

ASA 2 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 cess and 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.

ASA 2 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.

ASA 2 3.1 The annual budgets for 2013 and 2 year projections until 2015 is available and was sighted at all operating units. The budgets and projections detail the FFB, CPO and PK to be produced, revenue and operating costs. Replanting programme for all estates for the next five years is available.

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

Criterion by Summary The mills and estates have a complete set of SOPs which is being strictly





Tel: +603-3377 1600 / 1700

Audit 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. An observation was raised for the absence of census records for barn owl after September 2009. A minor non-conformity was raised for the absence of calculations of active ingredient usage for pesticides in Sungai Bekok estate. There is a comprehensive OSH policy and is being implemented throughout the estate and mill. There is however no trained first aiders in Sungai Bekok estate and a minor non-conformity were raised for this. Trainings are being carried out as per the Annual Training Plan. However, training records should be better kept and updated and an observation was raised for this.

ASA 2 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’ in place, which they use as their guideline in 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. The records for the implementation of SOPs such a checklists, forms, monthly records and data are kept for a period of seven years.

ASA 2 4.2 Soil surveys and foliar sampling are being 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. 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.

ASA 2 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.





Tel: +603-3377 1600 / 1700

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.

ASA 2 4.4 The estates have maintained the riparian buffer zones along rivers in accordance with the national and local regulations. There are no bunds, weirs nor dams that have been constructed along waterways in the estates. Field visits to the estates confirmed this fact. The effluent discharge from the mill and water quality of the in-coming and out-going water is being monitored on a regular basis. Rainfall data is collected and monitored on a daily basis. There are no water drainages into protected areas. Water management plans for the mill and estates were sighted.

ASA 2 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.

The locations where barn owl cages are built are also mapped in each field and monitoring carried out by census where the it records the division, area size, block no, month erected, box no, type of owl(egg, immature, mature), box condition, condition around the box. The establishment of beneficial plants and barn owl breeding as measures to assist in the control of leaf pest and rat populations.

Trainings are given to all staff on IPM. Pesticide toxicity units monitored by each active ingredient and it are calculated based on LD 50(Mg/Kg), chemical usage, total ai. Used, Ha planted, FFB produced, pesticide usage (L/Ha), L/ton and finally result shown in Pesticide toxicity units monitored (Kg/LD 50/FFB) by monthly and to date.

However, records for census for barn owl for Sungai Bekok estate were only updated until September 2009. An observation was raised for this matter.

ASA 2 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). Paraquat usage has been stopped since 2010. The estates still use two types of class 1B 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.





Tel: +603-3377 1600 / 1700

Calculations of active ingredient used/hectare were not done for pesticides used in Sungai Bekok estate. A minor non-conformity was raised for this.

ASA 2 4.7 The mill and estates adhere to the Safety and Health Policy of Kuala Lumpur Kepong Berhad that was signed by the Group Plantations Director. The mill and estate have conducted HIRARC for their operations. The risk assessment covers all existing activities in estate. The HIRARC includes identification of the hazards, its impact, risk analysis for probability and severity, recommended risk control and person in charge for implementing the recommended controls.

Trainings for workers to ensure safe working practices for the handling of chemicals and pesticides are carried out periodically and records of these trainings are recorded with the training agenda, attendance lists and photographs. PPE issuance records for each worker were complete with the type of PPE issued, date and signature of the workers upon receipt of the PPE. These records were sighted in the mill and both estates. PPE issued is in tandem with the HIRARC and company policy.

Safety and health committee meetings were held once in 3 months. These meetings discussed workplace inspection, workers medical check-up, PPE usage and accident prevention, OSH policy, review of health hazards in selective operations, review of chemical health risk assessment (CHRA), annual medical surveillance as per CHRA, safety performance, training on safety and health, safety barriers, emergency and response plan. The person-in-charge of OSH is the estate and mill manager.

Estate has Safety Committee with combining from representative from all levels of workers. There are workers who are trained in first aid by the Hospital assistants in the estates. The mill and estates have first aiders present in the mill and field. First aid boxes were available and filled with the necessary medications. Records of accidents are maintained through the JKKP 6 and JKKP 8 forms as per the requirement of DOSH. These records are maintained in the offices and sent to DOSH on a quarterly and annual basis.

LTI is calculated and tabulated in the JKKP 8 form and also in the minutes the quarterly OSH meeting. 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.

However, there were no workers or staff trained in First Aid in the entire Sungai Bekok estate. A minor non-conformity was raised for this.

ASA 2 4.8 The mill and estates have a comprehensive annual training plan for its staffs and workers. The training plan for 2012 and 2013 was sighted. Trainings conducted were recorded in the various trainings record books and it was complete with attendance records, training materials and photographs of the training. The mill and estates conducted trainings, among others, for:

The appropriate use of PPEs

First aid and fire drill

Safe handling of chemicals and fuels

Hazard identification, risk assessment and control (HIRARC)

However, records of training should be better kept and updated. As an example, it was found that pictures of training and the training dates did not match in Sungai Bekok estate. An observation was raised.





Tel: +603-3377 1600 / 1700

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. Used chemical containers were found in the landfill in Sungai Bekok estate. A minor non-conformity was raised. Landfills were filled with non-biodegradable wastes such as plastics and an observation was raised for this matter. Calculation for fossil fuel used did not take into account the petrol usage. An observation was raised for this matter.

ASA 2 5.1 The mill and estates have conducted their Environmental Impacts Assessment (ERA) for 2013. 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.

ASA 2 5.2 The HCV areas in the estate are indicated on the maps. The management and monitoring of HCV areas are done by the estate management. Signages for no hunting and trespassing are available at all HCV areas.

ASA 2 5.3 Waste and pollution mapping identifies domestic house hold wastes, agrochemical containers, used oil, battery, spoiled light, filter, clinical waste and so on. The mill and estates have procedures on how to handle wastes and their storage. The scheduled wastes handling and storage is handled in accordance to the Scheduled Wastes regulations 2005. 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.

During the field visit to Sungai Bekok estate, it was found that used chemical containers were dumped in the landfill. Used chemical containers were stored in open ground near the store. Many of it was not triple rinsed and punctured. The scheduled waste labeling was incomplete and scrap iron was also stored in the scheduled wastes store. A minor non-conformity was raised for this issue. All the landfills were filled with plastic waste which was non-biodegradable and there should be a plan to segregate these wastes and dispose it separately. An observation was raised for this matter.

ASA 2 5.4 The mill and estate have recorded and is monitoring their renewable and non-renewable fuel usage. 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.

However, the fossil fuel used did not take into account the use of fuels other than diesel. For example the use of petrol was not included in the calculations. An observation was raised for this.

ASA 2 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.

ASA 2 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,





Tel: +603-3377 1600 / 1700

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.

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. However there was no evidence that participatory methods were used to conduct the SIA. A minor non-conformity was raised for this matter. 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 all are being paid their fair wages. Meetings or discussions with NUPW were not recorded and the gender committee needs to address issues specific to women’s needs. One observation each was raised for these matters.

ASA 2 6.1 The mill and estates have conducted their Social Impacts Assessment for 2013. 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 that have taken place within that time-frame.

However, a documented social impact assessment was not supported with adequate evidence of the process of conducting the assessment. A minor non-conformity was raised for this matter.

ASA 2 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 that 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





Tel: +603-3377 1600 / 1700

was sighted in the mill and estate offices.

ASA 2 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.

ASA 2 6.4 There is no customary land surrounding the estates and there are no land claims. No compensation was ever paid out for land related disputes or claims.

ASA 2 6.5 Mill and estates 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 RM 900/month. All wage rates, benefits and working conditions are stipulated in the contract of service of the workers.

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. All workers were also provided with adequate housing that exceeds the requirements of the Workers minimum Standards of Housing and Amenities Act 1990.

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 free 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.

ASA 2 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 though NUPW or by forming groupings on their own to collectively bargain with the management of the mill or estates.

It was noted that discussions with NUPW representatives were done verbally but not recorded. Minutes of meeting with NUPW, if any, should be maintained. An observation was raised for this.

ASA 2 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 18 working in the mill or estates and this was proven through the checking the list of employees as well as their bio-data and through field visits.

ASA 2 6.8 Kuala Lumpur Kepong Berhad has an Equal Opportunity policy dated 1





Tel: +603-3377 1600 / 1700

January 2008 and signed by the regional Director that is clearly displayed in the office and notice boards. Both local and foreign workers enjoy the same scale of pay and provided with equal housing and work facilities.

This was confirmed though interview with workers from both the mill and estates and also through verification of contracts of service and pay slips of workers. No evidence of discrimination based on race, skin colour, religion, gender, national origin, ancestry, disability, marital status, and sexual orientation was found in both the mill and estates.

ASA 2 6.9 The Policy on Sexual Harassment, Violence and Reproductive Rights has been displayed at all estates and mill. This policy has also been communicated to all staff and workers and this was evident through the training records. Gender committees have been established in the mill and both the estates. A specific grievance mechanism for workers to voice their grievances with regards harassment of a sexual or violent nature has been established.

Under this mechanism, the aggrieved worker will lodge a complaint or grievance directly to the Chairperson of the Gender Committee and the chairperson will then bring this matter up with management of the estate or mill and this matter will be deliberated within closed doors in a meeting. Workers interviewed were aware of the policy against Sexual Harassment and Violence; the establishment of the gender committee at every operating unit and the specific grievance mechanism.

Meeting of gender committee minutes meeting were sighted. However the committee should specifically address concerns of women on matters such as the training on women’s rights, counseling for women affected by violence, breastfeeding, pregnancy and so on. The activities of the committee on this issue should be documented. An observation was raised for this matter.

ASA 2 6.10 Kekayaan mill only receives FFB from its own estates. As such there is no specific contract for the estates due to the fact that the estates will deliver 100% of its FFB to the mill. The prices of FFB paid to the estates is in accordance with the prices set by the Malaysian Palm Oil Board (MPOB) and the records of past and present prices of FFB, CPO and PK are kept by the Marketing Department.

ASA 2 6.11 The mill and estates are committed and have contributed to local development. The Response and Requests logbook and letters of contributions detailing the type, purpose and amount of contributions were sighted in both operating units.

Principle 7: Responsible Development of New Plantings

Criterion by Audit

Summary There were no new plantings carried out.

Principle 8: Commitment to Continuous Improvement in Key Areas of Activity

Criterion by Audit

Summary

All the operating units are regularly monitoring and review their activities and develop and implement action plans that allow demonstrable continual improvement in key operations such as in minimizing use of certain pesticides, environmental impacts, maximizing recycling and minimizing waste or by-products generation, pollution prevention plans.

ASA 2 8.1 The mill and estates have programmes in place to continually reduce their pesticide and herbicide usage, wastes generated and pollution. Wastes are also being converted into fertilizers such as EFB for EFB mulching in the field, old tires being used for land and garden beautification projects. Environmental and social impact assessments are conducted to ensure that negative environmental and social impacts are being reduced and mitigated.





Tel: +603-3377 1600 / 1700

4.3 Non-conformity Raised During this Audit and Any from the Previous Year, if applicable

This section gives an over view of new or revised non-conformities raised during this audit and of action taken to close out non-conformities raised during the previous audits, if applicable

If a minor-non-conformity raised at the last audit, is not closed out, then this will be raised to Major status and the company given 60 days to close this out.

The NC number is comprised of 2 parts to include the year in which the NC was raised as well as a sequential number.

4.3.1 Non-Conformities Identified during this Audit

The following NC’s were raised for this audit.

NON CONFORMITY REPORT

NC n