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Roundtable on Sustainable Palm Oil

Annual Surveillance Audit Report no.: ASA 1-106469

Surveillance assessment against the

RSPO Principles & Criteria [Indonesia National Interpretation 2008]

PT Mustika Sembuluh

Jl. Tanah Abang 111/14 Jakarta 10160

Branch Office: Jl.H.M Arsyad No.100, Central Kalimantan

PT Mustika Sembuluh Mill,

Bangkal Village, Danau Sembuluh Sub-District,

Kotawaringin East District, Central Kalimantan, Indonesia.

Report prepared by: Dian Susanty Soeminta

Certification Body: TUV Rheinland Malaysia Sdn. Bhd.

No. 26 – 32, Jalan Perindustrian USJ 1/6, Taman Perindustrian USJ 1,

47600 Subang Jaya, Selangor Darul Ehsan, Malaysia.

Tel: +6 03 8024 2400 Fax: +6 03 8023 1505

www.tuv.com

TABLE OF CONTENTS

1.0 SCOPE OF CERTIFICATION ASSESSMENT 3

1.1 National Interpretation / Standard Used 3 1.2 Scope of Assessment 3 1.3 Certification Details 3 1.4 Location and Maps 3 1.5 Organisational Information / Contact Person 6 1.6 Description of Supply Base 6 1.7 Actual production volumes, tonnages and projected outputs. 7 1.8 Dates of Plantings and Replanting Cycles 8 1.9 Area of Plantation (Total, Planted and Mature) 8 1.10 Progress Against Time Bound Plan 9 1.11 Progress of associated smallholders or outgrowers towards RSPO compliance: 11 1.12 Approximate Tonnages Certified 11 2.0 ASSESSMENT PROCESS 12

2.1 Certification Body 12 2.2 Qualifications of Lead Assessor and Assessment Team 12 2.3 Assessment Methodology & Agenda 12 3.0 ASSESSMENT FINDINGS 14

3.1 Summary of Findings pertaining to RSPO Principles & Criteria 14 3.2 Status of Previously Identified Non-conformities 23 3.3 Identified Non-conformances against RSPO P&C Requirements, Corrective Actions Taken and Auditors Conclusions 29 3.4 Noteworthy Positive Components 33 3.5 Issues Raised by Stakeholders and Findings Pertaining to Issues 33 4.0 CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY 35

4.1 Date of Next Surveillance Visit 35 4.2 Acknowledgements of Internal Responsibility and Formal Sign-Off by Client 35 APPENDICES 36

Appendix 1: List of Abbreviations 36 Appendix 2: List of Stakeholders Interviewed and Contacted 36 Appendix 3: Observations and Opportunities for Improvement 37

RSPO 1st Annual Surveillance Assessment Report

- PT Mustika Sembuluh – Central Kalimantan -

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RSPO v1 2011-05-26 3

1.0 SCOPE OF CERTIFICATION ASSESSMENT

1.1 National Interpretation / Standard Used

The operations of the palm oil mill(s) and its supply base of FFB were assessed against the National Interpreta-tion Indonesia year 2008.

1.2 Scope of Assessment

The annual surveillance certification assessment was carried out on 1 mill and 3 estates under PT Mustika Sembuluh Palm Oil Mill owned by Wilmar International Ltd. The date of certification of this unit was 19 to 23 Oc-tober 2009.

1.3 Certification Details

The details of RSPO certification of PT Mustika Sembuluh (PT MS) are as per the table below Table 1: Certification details of PT Mustika Sembuluh

1.4 Location and Maps

Table 2: GPS locations for all estates and mills included in annual surveillance assessment

RSPO Membership no.: 2-0017-05-000-00.

Child numbers of each certification unit:

-

Certificate no.: 01100 106469

Date of original certification: August 11, 2010

Date of certification audit: October 19-23, 2008

Date of previous surveillance audit: None, this is 1st surveillance audit.

Name of mill / es-tate

Location GPS locations

Latitude Longtitude PT MS POM Pondok Damar Village, Mentaya

Hilir Utara Subdistrict, Kotawar-ingin Timur District.

0235’28” 11230’45”

PT MS Estate 1 Pondok Damar Village, Mentaya Hilir Utara Subdistrict, Kotawar-ingin Timur District.

0235’10” 11230’32”

PT MS Estate 2 Pondok Damar Village, Mentaya Hilir Utara Subdistrict, Kotawar-ingin Timur District. Bangkal Village, Danau Sembu-lu Subdistrict, Seruyan District.

0239’56” 11232’18.5”

PT MS Estate 3 Tanah Putih Village, Telawang Subdistrict, Kotawaringin Timur District.

0230’16.9” 11230’36.6”



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RSPO v1 2011-05-26 4

Figure 1: Location map of PT Mustika Sembuluh within Central Kalimantan, Indonesia

PT Mustika Sembuluh



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Figure 2: Map of PT MS Estates 1, 2 and 3, and PT MS Palm Oil Mill

PT MS Estate 2

PT MS Estate 1 & Mill

PT MS Estate 3



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1.5 Organisational Information / Contact Person

Contacts details of the company are as follows:

1.6 Description of Supply Base

Table 3: FFB Supply Information for PT Mustika Sembuluh Palm Oil Mill for year 2010

FFB Contributors

FFB supplied Jan-Dec 2010

FFB supplied since cer-tification to surveil-

lance audit*

Tonnes % Tonnes %

Company owned estates:

Mustika Sembuluh I 162,760.696 45.75 148,077.26 42.74

Mustika Sembuluh II 92,814.648 26.08 127,295.32 36.74

Mustika Sembuluh III 46,315.105 13.01 44,551.81 12.86

Company Name: PT Mustika Sembuluh

Address:

Contact Person

Head office:

Jl. Tanah Abang 111/14 Jakarta 10160.

Branch office: Jl.H.M Arsyad No.100, Central Kalimantan

PT Mustika Sembuluh mill:

Bangkal Village, Danau Sembuluh Sub-district, East Kotawaringin Timur District, Central Kalimantan

PT Mustika Sembuluh Estate 1 :

Pondok Damar Village, North Mentaya Hilir Sub-district, East Kotawaringin District.

PT Mustika Sembuluh Estate 2:

Pondok Damar Village, North Mentaya Hilir Sub-district, East Kotawaringin District.

Bangkal Village, Danau Sembulu Sub-district, Seruyan District

PT Mustika Sembuluh Estate 3 : Tanah Putih Village, Telawang Sub-district, East Kotawaringin District

Mr.Tan Tong Sin

Telephone: Tel. (021) 3853625

Fax. (021) 3853628

Email: [email protected]

Company Name: PT Mustika Sembuluh



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RSPO v1 2011-05-26 7

Sub Total 301,890.45 84.85 319,924.39 92.34

Wilmar’s group estate

PT Kerry Sawit Indonesia 10,476.866 2.94 18,040.11 5.21

PT Sarana Titian Permai 148.557 0.042 148.56 0.04

PT Bumi Sawit Kencana 26,819.255 7.54 5,166.31 1.49

PT Mentaya Sawit Mas 5,547.979 1.56 280.74 0.08

PT Karunia Kencana PS 1 9,154.051 2.57 468.90 0.14

Sub Total 52,146.71 14.65 24,104.61 6.96

Smallholders:

Koperasi Bita Maju Bersama (Sub Total)

1,356.065 0.38 2,119.16 0.61

Outgrowers

1. I Wayan 236.177 0.066 251.24 0.07

2. Aliansyah 38.288 0.01 - -

3. Darmo Sumarto 108.112 0.03 90.45 0.03

Sub Total 382.577 0.106 341.69 0.1

TOTAL 355,775.802 100 346,489.85 100.00

* Data from RSPO certification on August 10, 2011 until surveillance audit on July 21, 2011

1.7 Actual production volumes, tonnages and projected outputs.

Table 4: Certified tonnages claimed, certified tonnages purchased or sold, total and projected CPO and PK production from PT Mustika Sembuluh Palm Oil Mill.

*Data from date of RSPO certification on August 10, 2011 until surveillance audit on July 21, 2011

** The certified tonnages of CPO were sold through the International Sustainability Carbon Certification stand-ard, not through the RSPO IT system.

Amount (MT)

CPO PK

Certified tonnages claimed 81,350 16,640

Certified tonnages sold* 76,897.12** -

Certified tonnages purchased* - -

Actual Production* 83,227.78 17,330.82

Projected output for next 12 months 74,328 15,350

OER for this period 24% -

KER for this period - 5%



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RSPO v1 2011-05-26 8

1.8 Dates of Plantings and Replanting Cycles

The company follows a replanting cycle of 25 years. Information on the dates of plantings are as per the table below. Table 5: Age and year of plantings of company estate supplying to PT Mustika Sembuluh Palm Oil Mill

Age & Year of Plant-ings

Oil palm planted area at each estate(ha)

MS 1 MS2 MS3

0 – 5 yrs (2006 – 2011) 94.92 1864.97 2828.59

5-10 yrs (2001 – 2005) 5948.48 3865.76 1750.53

10-15 yrs (1996 – 2000) 59.44 - -

TOTAL 6,102.84 5730.73 4579.12

There is no oil palm replanting activities planned until year 2025 since all palms are less than 15 years old.

1.9 Area of Plantation (Total, Planted and Mature)

Table 6: Oil Palm Planted Area Summary, FFB Production and Average yield/ha for PT Mustika Sem-buluh estates

Estate Name Total area

(ha)

Oil Palm Planted area

(ha)

Mature (Production)

area (ha)

Immature (Non-production)

area (ha)

FFB Production*

(tonnes)

Average yield/ ha

MS 1 6589.64 6,102.84 6,007.92 94.92 162,760.696 27.09

MS 2 6107.19 5,730.73 5,730.73 - 92,814.648 16.19

MS 3 7900.00 4,579.12 4,041.35 537.77 46,315.105 11.46

TOTAL 20,596.83 16,412.69 15,780.00 632,69 301,890.45 19.13

* after grading at mill

Table 7: Land use data for PT Mustika Sembuluh Plantation

Estate Name Total area

(ha)

Oil Palm Planted Ar-

ea (ha)

HCV/

Potential HCV

areas* (ha)

Land clear-ing area (ha)

Land used for other purposes (ha)

NurseryLand oc-cupation

Road, housing/ Drainage/

POM

Unplanted and non Plantable

MS 1 6589.64 6,102.84 - 0.37 - 81.82 348.01 56.60

MS 2 6107.19 5,730.73 - - - 158.41 215.88 2.17

MS 3 7900.00 4,579.12 - 27.92 - 576.97 176.92 2539.07

TOTAL 20,596.83 16,412.69 28.29 - 817.20 740.81 2,597.84



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1.10 Progress Against Time Bound Plan

Table 8: Time Bound Plan of the Other Management Units

Name of Holding/ Plantation Location Area (ha)

Time bound plan for certi-

fication/ Year of Audit

Certification status

PT Perkebunan Milano North Sumatra 4975 2009 Certified

PT Mustika Sembuluh Central Kali-mantan

15,897 2009 Certified

PT Tania Selatan South Sumatra 3775 2010 Certified

PT Kerry Sawit Indonesia Central Kali-mantan

18,994 2010 Certified

PT Kencana Sawit Indonesia West Sumatra. 7,728 2010 Certified

PT Bumi Sawit Kencana Central Kaliman-tan

7,266 2011 Planned

PT AMP Plantation West Sumatra 7,541 2011 Certification audit complet-

edPT Primatama Muliajaya West Sumatra 1,397 2011 Planned PT Sarana Titian Permata Central Kaliman-

tan14,995 2011

Planned

PT Buluh Canang Plantations South Sumatra 223 2011 Planned PT Tania (Bamboo Kuning) South Sumatra 1800 2011 Planned PT ANI (Sambas) West Kaliman-

tan9,095 2011

Planned

PT Daya Labuhan Indah North Sumatra 5,010 2012 Planned PT Milano (CDE) North Sumatra 618 2012 Planned PT Citra Riau Sarana Riau 2,268 2012 Planned PT Gersindo Minang Plantations West Sumatra 3,146 2012 Planned PT Permata Hijau Pasaman West Sumatra 2,363 2012 Planned PT Mentaya Sawit Mas Central Kaliman-

tan7,120 2012

Planned

PT Asiatic Persada Jambi 15,223 2012 Pre-Assessment completed

PT Pratama Prosentindo West Kaliman-tan

3423 2012 Planned

PT Putra Indotropical West Kaliman-tan

3133 2012 Planned

PT Sinarsiak Dianpermai Riau. 1,114 2012 Planned PT ANI (Landak) West Kaliman-

tan 4281 2013 Pre Assess-

ment complet-ed

PT Murini Sam Sam Riau 1,288 2013 Planned PT Agro Palindo Sakti South Sumatra 872 2013 Planned PT Musi Banyuasin Indah South Sumatra 4473 2013 Planned PT Karunia Kencana Permaisejati Central Kaliman-

tan8,070 2013

Planned

PT Agro Palindo Sakti West Kaliman-tan

5033 2013 Planned



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PT Daya Landak Plantation West Kaliman-tan

3774 2013 Planned

PT Indoresins Putra Mandiri West Kaliman-tan

3730 2013 Planned

Total 164611

Palm Oil Mills Location

Annual CSPO

production (mt)

Year of Audit

Certification status

PT Milano (Pinang Awan) North Sumatra 27,554 2009 Certified, 1st surveillance audit com-

pletedPT Mustika Sembuluh Central Kali-

mantan81,350 2009

Certified

PT Tania Selatan South Sumatra 12,800 2010 Certified PT Kencana Sawit Indonesia West Sumatra. 37,200 2010 Certified PT Kerry Sawit Indonesia Central Kali-

mantan51,335 2010

Certified

PT Bumi Sawit Kencana Central Kaliman-tan

27,700 2011 Planned

PT AMP Plantation West Sumatra 37,900 2011 Certification audit

completedPT Buluh Canang Plantations South Sumatra 33,800 2011 Planned PT Agro Nusa Investama (Sambas) West Kaliman-

tan17,600 2011

Planned

PT Sarana Titian Permata Central Kaliman-tan

37,800 2011 Pre Assess-ment complet-

edPT Sinarsiak Dianpermai Riau 6,400 2012 Planned PT Daya Labuhan Indah-2 North Sumatra 25,800 2012 Planned PT Citra Riau Sarana (ML) 1 + 2 Riau 46,300 2012 Planned PT Gersindo Minang Plantations West Sumatra 35300 2012 Planned PT Mentaya Sawit Mas Central Kaliman-

tan28,800 2012

Planned

PT Asiatic Persada Jambi 57,300 2012 Pre Assess-ment complet-

edPT Agro Nusa Investama (Landak) West Kaliman-

tan30,600 2013

Planned

PT Murini Sam Sam Riau 7,500 2013 Planned PT Musi Banyuasin Indah South Sumatra 35,400 2013 Planned PT Karunia Kencana Permaisejati Central Kaliman-

tan41,400 2013

Planned

PT Agro Palindo Sakti 1 West Kaliman-tan

19,400 2013 Planned

PT Citra Riau Sarana 3 Riau 20000 2013 Planned

Total 719,239

There are several changes to the company’s timebond plan due to some reason such as:



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1. For PT Bumi Kencana Sawit, some social issues are still not resolved and community still have not agreed with the company’s proposed Memorandum of understanding regarding conflict resolution pro-cess according to RSPO criteria.

2. For PT Buluh Canang Plantation/ PT Tania Selatan (Bamboo Kuning estate), PT Sinarsiak Dian Permai, PT Daya Labuhan Indah-2, PT Citra Riau Sarana, PT Gersindo Minag Plantations, PT Mentaya Sawit Mas due to some ongoing social issues and the units are in process to obtain all necessary documents to fully demonstrate ownership of the land.

3. For PT ANI Sambas, delayed due to internal decision to engage another certification body 4. For PT Sarana Titian Permai, delayed due to internal decision to engage another certification body 5. For PT Asiatic Persada, some significant land conflicts are in process of being resolved

1.11 Progress of associated smallholders or outgrowers towards RSPO compliance:

The company has a smallholder scheme, that is managed under Koperasi Bina Maju Bersama. PT Mustika

Sembuluh also buying from 3 permanent outgrowers, i.e. Iwayan, Aliansyah and Darmo Sumarto. The com-pany is developing a planning for all smallholders under their management to work towards achieving RSPO compliance in 2013, as defined in a documented Work Program for Smallholder - PT Mustika Sembuluh, is-sued on July 2011.

1.12 Approximate Tonnages Certified

The approximate tonnages certified shall be the same as per the original certificate, which is as follows Crude Palm Oil (CPO) : 81,350 Mt Palm Kernel (PK) :16,640 Mt



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2.0 ASSESSMENT PROCESS

2.1 Certification Body TUV Rheinland Malaysia Sdn. Bhd. is member of Group TÜV Rheinland Group, a global leader in independent testing and assessment services. The TÜV Rheinland Group was established in 1872 with offices located in over 360 locations in 62 countries on all five continents. TUV Rheinland Malaysia offers certification for a wide range of management systems according to established international standards including ISO 9001, ISO 14001, OHSAS 18001, SA 8000, as well as CDM Project Validations. TUV Rheinland Malaysia’s office is located in Subang Jaya.

2.2 Qualifications of Lead Assessor and Assessment Team The assessment team members of this surveillance audit that were part of the same assessment team for the certification audit are as follows: 1) Dian S. Soeminta 2) Fadli New assessment team members that were not part of the previous assessment team are as per the table be-low:

Name Position Qualifications / Experience

Rieska Melani

Auditor

Education: Bachelor Degree of Chemical Engineering, Jayabaya University, In-donesia. Trainings Attended: IRCA Auditor/ Lead Auditor Training ISO 9001:2008 version, IRCA Auditor/ Lead Auditor Training ISO 14001:2004 version, IRCA Auditor/ Lead Auditor Training ISO 18001:2007 version, IRCA Auditor/ Lead Auditor Training ISO 22000:2005 version, Laboratory Training ISO /IEC 17025:2005, Sampling Techniques (for Air and Water Analysis) ISO/IEC 17025:2005, Designing Labora-tory Personnel Competency ISO/IEC 17025:2005, HYSIS Program Training, Eco-Hotel Training, Eco-Industry Training. Working Experience: Document Controller of SO 9001:2000 in Furukawa Su-preme Optical Cable, Deputy of QA Manager in PT Mitralab Buana, Chemical Compliance Officer in PT Asmara Indonesia, Trainer of Professional Training of QMS, EMS, OHSAS, FSMS, Eco-Hotel, Eco-Industrial for Management and Tech-nical Staff in TUV Rheinland Indonesia and QMS Auditor in TUV Rheinland Indone-sia.

2.3 Assessment Methodology & Agenda

The surveillance assessment combined with supply chain certification assessment was conducted on 19 to 23 July 2011 as per the assessment program below. The assessment was carried out in accordance with TUV Rheinland Malaysia’s RSPO audit procedure as well as the RSPO Certification Systems document and RSPO Supply Chain Certification Systems document. During assessment, the qualified TUV Rheinland assessors used the RSPO standard as endorsed for the country in which the assessment took place and recorded their findings. Due to the location and proximity of the estates, combined with common management systems, it was possible to carry out both field and document assessments of all estates and the mill within the time frame without com-promising the integrity of the assessment in anyway. All 3 estates and 1 mill were visited and the assessment team carried out field and document assessments of compliance to selected RSPO principles and criteria. Common systems were identified and specific evidence was recorded for individual estates. Interviews were conducted at all estates and the mill. The company proposed the correction and corrective action for all identified non conformities raised to the certi-fication body 30 days after the closing meeting. Verification of closure of major non-conformances was con-ducted through document checked which is submitted to certification body 20 days after the closing meeting of the 1st surveillance audit and implementation of corrective actions will be verified during the next surveillance audit. The surveillance assessment agenda is as explained below.



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Annual Surveillance Audit Agenda.

Date Location/ Main sites

Main activities

19 July2011

Regional of-fice

- Opening meeting - Verification of documents for all previous audit findings - Interview personnel in charge of identifying and checking compliance to all

relevant legal and other requirements such as those associated with land, en-vironment, labour, OHS, and Plantation Regulations.

- Checking of related documented procedures and records 20 July2011

MS 3 - Field checking for : - HCV area - Chemical waste storage - Housing area - Sandy soil treatment - Riparian watercouses and wet land area. - Interview personnel responsible for handling of agrochemicals and usedchem-

ical containers (warehouse operator) - Interview division assistants and estate managers responsible for application

of agrochemicals (best practice).Tanah Putih Village

- Interviews with Head of Tanah Putih Village and community leaders - Interview with Tarang and Umbung (for conflict resolution progress) - Interview with the owner of sandy soil mining local community (Edward)

21 July2011

MS Mill - Document checked for Previous audit findings - Interview personnel in charge of identify and checking compliance to all rele-

vant legal and other requirements such as those associated with environment, labor, OHS, and mill regulations.

- Checking related document procedures and records. - Interview personnel (operational head) associated with the SOP and imple-

mentation and also monitoring activities. - Interview personnel responsible for OHS and First Aid monitoring - Interview personnel responsible for training of OHS and First Aid - Interview doctor responsible for conducting regular health checks for operator - Checking of documents related to above

22July 2011

MS 1 - Interview doctor responsible for conducting regular health checks for operator - Checking of documents related to above. - Document Check of records of regular soil, leaf, and visual analysis. Document

Check of records of efforts to maintain and increase soil fertility (e.g. use of fer-tilizer, leguminous cover crops, compost, and land applications of POME or EFB)

- Checking of documented procedures - Document Check of maps of fragile soils. - Verification previous audit findings

MS2 - Interview doctor responsible for conducting regular health checks for operators - Checking of documents related to above. - Document check of records of regular soil, leaf, and visual analysis. Document

check of records of efforts to maintain and increase soil fertility (e.g. use of ferti-lizer, leguminous cover crops, compost, and land applications of POME or EFB)

- Checking related documented procedures - Document Check of maps of fragile, soils. Verification previous audit findings

Pondok Da-mar Village

- Interviews with Head of Pondok Damar Village and community leaders

23 July2011

RO Office - Document checks and interviews with workers representatives - Additional document check to complete information - Preparation of Closing Meeting - Closing meeting



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3.0 ASSESSMENT FINDINGS

3.1 Summary of Findings pertaining to RSPO Principles & Criteria During the surveillance assessment, 12 nonconformities were assigned against Major Compliance indicators while 4 nonconformities were assigned against Minor Compliance Indicators. 8 observations or opportunities for improvement were identified. Further explanation of the non-conformities raised and corrective actions taken by the company are provided in Section 3.2. The observations & opportunities for improvement are listed in Ap-pendix 5. The following is a summary of findings made for the criteria listed in the RSPO Principles & Criteria Indonesian National Interpretation year 2008.

Principle 1: Commitment to transparency

Criteria assessed: CR1.1, CR1.2 Criteria not assessed: Findings: The management has a documented commitment to transparency stated in management letter dated 16 March 2009 on transparancy of company information. Documents of all information requests are available. There are some evidences that the company maintains record of information requests, for example: 1. Letter on July 13, 2011, no: 560.566/109/WAS-KK/VII/2011 from Manpower and Transmigration De-

partment (‘Dinas Tenaga Kerja dan transmigrasi’) of Kotawaringin Timur, regarding equipment reverifi-cation and calibration

2. Letter on September 27, 2010, no: 560.566/-/WAS.KK/2010 from Manpower and Transmigration De-partment of Kotawaringin Timur, regarding equipment reverification and calibration

3. Letter on January 11, 2011 no: 560.566/08/WAS-KK/I/2011 from Manpower and Transmigration De-partment of Kotawaringin Timur, regarding training and certification of pressure vessel operator on Feb-ruary 24 – March 4, 2011.

4. Letter on November 25, 2010 no: 0244/Mgr-PowerEng/XI/10, from PT Excelcomindo Pratama, Balik-papan, regarding proposed electricity connection for telecommunication equipment.

5. Letter on October 26, 2010 nomor: 930/675/KEU/2010 from Plantation Agency of Kotawaringin Timur, regarding third party donation contribution of PT Mustika Sembuluh

Responses from the company to the letters are also maintained. Compliance status: Full Compliance

Principle 2: Compliance with applicable laws and regulations

Criteria assessed: CR2.1, CR2.2, CR2.3 Criteria not assessed:

Findings: Several evidences of compliance with all applicable local, national and ratified international laws and regu-lations found during onsite visit. PT Mustika Sembuluh’s estates and mills has a list of applicable legal and other requirements documented under “Register of Environmental Laws and Regulations” (“Daftar Ke-tentuan Hukum & Peraturan & Perundangan Bidang Lingkungan Hidup”) dated 1-9-2009. The company al-so carries out evaluations of compliance to applicable local, national dan ratified international laws. The company has made good efforts to comply with changes in the regulations such as ensuring minimum wage for workers is revised yearly according to changes to government regulation for minimum wage. The current total land area under Mustika Sembuluh's operation is 20,596.83 ha and the area that included in their land use permit (HGU) area is 19448.69 ha, the remaining area is under HGU certificate pro-cessing. The land use licenses (HGU) currently belonging to the company are as listed below: 1. HGU certicate No. 14 with SK No.2-HGU-BPN-RI-2007 dated 4 June 2007 to 7 February 2037 for an area of 1,990 ha. 2. HGU certificate No. 36 with SK No. 3-HGU-BPN-RI-2007 dated 7 February 2007 valid for 25 years for area of 5,169.280 ha in East Kotawaringin district.



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3. HGU certificate No. 10 with SK No.8/HGU/BPN/2005 dated 18 February valid for 25 years for area of 5227.00 Ha in Seruyan District. 4. HGU certificate No. 16 with SK No.01/540/HGU/BPN/.42/2000 dated 29 May 2009 valid for 25 years with area 166.5055 Ha in East Kotawaringin District. 5. HGU certificate No. 20 with SK No.03/540/HGU/BPN.42/2000 dated 30 December 2000 valid for 25 years for area of 144.88 ha. There is new decision letter from head of National Land Agency (BPN) No. 30/HGU/BPN RI/2011 regarding granting of land use right for PT Mustika Sembuluh for land in Kotawaringin Timur for total 563.674 ha lo-cated in Tanah Putih village (MS 3 estate), Telawang sub-district, Kotawaringin Timur district, for 35 years dated on June 27, 2011. And letter from head of National Land Agency (BPN) No. 29/HGU/BPN RI/2011 regarding approved HGU area of PT Mustika Sembuluh 6,188.804 ha valid for 35 years since June 27, 2011 The company has a mill effluent land application permit from the Regional Head (Bupati) of Kotawaringin Timur no: 660/216/BLH/III/2010 which is valid for 5 years since 21 June 2010. However, there is also evidence of non-compliance to certain regulations, as follows:

- Three monthly reporting of occupational, health and safety (OSH) activities to government should be consistently implemented as required by regulation of Permenaker No. 03/MEN/1998

- There were accidents in January and November 2010 which were not reported in the three monthly re-port the government, as follows:

One (1) accident in January 2, 2010 involving one worker, accident location: Kernel Plant, accident cause: Fan Belt, Working days lost: 40 hours.

Two (2) accidents in November, 2010. The first was on Nov. 9, 2010 involving one worker, acci-dent location: Kernel Plant, accident cause: Conveyor, Working days lost: 112 hours. The second accident was on Nov. 21, 2010 involving one worker, accident location: Sterilizer, accident cause: Condensate, Working days lost: 42 hours

- According to the land application permit no. 660/216/BLH/III/2010 from the head of East Kotawaringin

Timur, company required to send land application implementation reports to the local government for water quality and soil quality in a defined timeframe but this is not done.

- There is found hazardous waste kept more than 90 days, i.e. oil filter, used oil, chemical container, etc, both in MS mill or MS estate 1, which has exceeded the maximum timeframe permitted for storage of hazardous wastes.

The progress of land disputes between the company and Mr. Umbung and Mr. Tarang (as described in the certification audit report) is as follows: 1. There is a letter from the Commission I regional parliament (‘Dewan perwakilan rakyat daerah’ or DPRD)

regency of East Kotawaringin dated October 20, 2010, number: Kom I/77/005/2010 regarding assis-tance required. In this letter stated that the Commission I DPRD will conduct field visits to the location of land conflicts in the village of Tanah Putih, Telawang subdistrict. There is a photo documentation of the implementation of the field visit conducted on October 23, 2010.

2. There is a hearing invitation letter from the Commission I Parliament on 4 December 2010 to the leader of PT Mustika Sembuluh, number: Kom I/86/005/2010. In this invitation stated that a hearing will be held on 14 December 2010 in the meeting room of East Kotawaringin regency, with an agenda to solve the problems of land disputes between Umbung bin Jahun and Tarang bin Udil by PT Mustika Sem-buluh estate III.

3. Based on the results of a hearing on December 14, 2010, chairman of the parliament issued a letter of recommendation to the mayor of East Kotawaringin number: DPRD/257/005/2010 dated December 20, 2010, recommending Tarang bin Jahun and Umbung bin Udil with PT Mustika Sembuluh to take legal action

4. There is a letter from the leaders of PT Mustika Sembuluh dated May 25, 2011 no. 13/BM.MS/V/2011, to the mayor of East Kotawaringin. In this letter stated that the management of PT Mustika Sembuluh re-ally hopes that the Regent can provide direction for resolution of this problem.

Based on information from Umbung, he together with Tarang are collecting funds to carry out the resolution process through legal course of action. According to him, the legal method is the only solution now be-cause no agreement is has been reached regarding the settlement of the dispute with the company. At the



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last meeting with company and the DPRD, the value of compensation requested by Umbung is Rp. 750 million for a complex consisting of six cemetery graves, which he claimed were displaced by the company including compensation for destroyed crops, while demands from Tarang is Rp. 350 million for the dis-placement of his father's grave. Mr. Tarang and Umbung engaged two external persons (i.e. advocate/ lawyer) to assist and provide consultation in their negotiation process with the company. There are records of any negotiated agreements between traditional owners of land and plantation compa-nies. There is a memorandum of understanding (MOU) between the company and villagers of Desa Tanah Putih’s community field. Example: MOU between the landowner of enclaved area, Mr. Eduwar Johan no.: 111/MoU/BM-PR/XI/2009, dated December 1, 2009. At point 9 of the MOU it states that the first party (company) give freedom to the second party (Mr Johan) to use the area including sand mining activities outside the company concession. The MOU was signed by the head of the village as an endorsement. There is also documented evidence in the form of MOUs / memorandum of understanding for managing of areas of high conservation value (HCV) and the management of indigenous rights in the plantation of PT Mustika Sembuluh. Example: MOU with the management of HCV area with Mr. Yusnel the villagers of De-sa Tanah Putih, dated October 16, 2009. In this MOU stated that the company and the community agreed to maintain and manage the HCV areas and rights of indigenous people within the company with some provisions. PT Mustika Sembuluh has a monitoring program to periodically identify some other users in PT Mustika Sembuluh site, entitled “Management Plan Summary” for monitoring of HCV areas including enclaved are-as, and areas where local communities have customary rights or are carrying out other activities. In this management plan summary stated that monitoring activities will be held throughout the MS1 to MS3 in en-claved areas inside of HGU, riparian zones, HCV area and other blocks. The company also has a HCV management plan no. doc. RP 2/CKP MS/(0)/1009, rev. 0 is dated on October 23, 2009 titled as Mustika Sembuluh 1, 2,3 HCV monitoring and action plan, including HCV area map ref. no. No: HD 158 dated on October 22,2010 which areas as below:

1. block 075/D4B as HCV 5-6 which is 4,8 Ha. 2. block 117/H ½ B as HCV 5-6 which is 20,18 Ha 3. block 136/ J2,3,4 T as HCV 5-6 which is 12,51 Ha. 4. block 141/ J15,16 T as HCV 6, which is 6,34 Ha. 5. block 142/ J17, 18 T as HCV 4, which is 2,07 Ha.

There are maps of land enclaved in the area of PT MS1 in scale 1: 45.000, dated July 29, 2009. This map de-scribes 17 locations enclaved and owned by Mino Jinal, Yurias, Mawan, Eyo Balai, Canui, Enjek, Jendi, Sati-no ali, ihing, Oncon. However, there is no map indicating the enclaved areas owned by Yuriasas well as other individuals, such as Mr. Mawan, Eyo Balai, Enjek, Satino Ali, Ihing, and Oncon. Compliance status: Non Compliance NCR No. 2011-01 of 08 There is evidence of non-compliance to certain regulations, as follows:

- Three monthly reporting of occupational, health and safety (OSH) activities to government shall be consistently implemented as required by regulation of Permenaker No. 03/MEN/1998

- There were accidents in January and November 2010 which were not reported in the three monthly re-port the government, as follows:

One (1) accident in January 2, 2010 involving one worker, accident location: Kernel Plant, accident cause: Fan Belt, Working days lost: 40 hours.

Two (2) accidents in November, 2010. The first was on Nov. 9, 2010 involving one worker, acci-dent location: Kernel Plant, accident cause: Conveyor, Working days lost: 112 hours. The second was on Nov. 21, 2010 involving one worker, accident location: Sterilizer, accident cause: Conden-sate, Working days lost: 42 hours

- According to the land application permit no. 660/216/BLH/III/2010 from the head of East Kotawaringin

Timur, company required to send land application implementation reports to Bupati for water quality and soil quality in a defined timeframe but this is not done.



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NCR No. 2011-02 of 08 There is an MoU between company and community to enclave land farming, however maps indicating en-claved land areas have not been provided to the land owners such as Yurias, Mawan, Eyo Balai, Enjek, Satino Ali, Ihing, and Oncon.

Principle 3: Commitment to long-term economic and financial viability

Criteria assessed: CR3.1 Criteria not assessed: - Findings: The company has made financial projections for year 2011 to 2016, including information about cash flow, cash surplus(deficit) from operation, milling process, capital and revenue expenditure, average yield per hectare e.g for 2011 is 24.9 tonnes per ha, and including information about total capex of plantation and mill. The company has plans for development of 1960 ha of area in PT MS III, however some of this land still undergoing land compensation process to local communities and the company stated that will only com-mence planting once the negotiation and compensation process is completed. For all land that is included in company’s HGU, this will be planted gradually. The company has developed replanting programs for the next 20 years. Replanting programs will be start in year 2025, with 54 ha replanted in those areas previously planted in the year 2000, 1087 ha in year 2026, 461 ha in year 2027, in 574 ha in year 2028, 3463 ha in year 2029, and 4237 ha in year 2030. Compliance status: Full Compliance

Principle 4: Use of appropriate best practices by growers and millers

Criteria assessed: CR4.1, CR4.2, CR4.3, CR4.4, CR4.5, CR4.6, CR4.7, CR4.8 Criteria not assessed: Findings: Peat soil distribution map was available at the MS3 estate office, as seen as per document named ‘Invento-ry Survey Peat Soil June 2009’. There are 6 subsidence monitoring points. A peat monitoring program has been made it is conducted once every 6 months. During surveillance audit company already monitored 2 times i.e May 17, 2010 and November 23, 2010. From monitoring result it was found that subsidence level for deep peat area > 3 m (field No. 041) is 7cm per year, this is in the maximum subsidence limit defined by government. On the company’s “SOP for Management and Monitoring of Peat Land for Correct Oil Palm Planting” (SA 03/EMU/(2)/1210) it was determined that water level limit from soil surface should be main-tained in the range of 50-75cm especially during dry season, which shall be maintained at a level of 75 cm from the soil surface. However from the monitoring result, it was seen from the records of daily water level monitoring that water levels were very low, only 42 to 36 cm for all 12 monitoring points. The company has no good water management program for peat soil area in MS3 estate. There is no action taken by company to counter this condition. There are records of efforts to maintain and increase soil fertility., The company applies empty fruit bunch-es (EFB) to maintain soil condition as determine from the company’s SOP, EFB Mulching rate is 35 to 40 ton per ha. As seen from the field and relevant records, the procedure is consistently implemented i.e. 40



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ton per ha e.g. in block 75 in year 2011. Palm oil mill effluent (POME) generated from mill processing is used for land application (another method for maintaining soil fertility), and the company monitors POME quality every month, as required by government. Regular monitoring of water quality in control well is also conducted six months once as seen from “Test results report” No 6426/LHP/XII/2010 for control well no. 1. According to “Surat Ijin Bupati Kotawaringin Timur” No. 660/216/BLH/III/2010, company required to monitor soil quality for field trench, land application, and control land every year with specified 10 parameter (Ph, C-organic, N Total, P, KTK, etc). Soil quality monitoring has been done for year 2010, records of soil quality monitoring results are maintained by the EMU (Environmental Management Unit) regional office. Monthly tests for effluent BOD are conducted by external labs. According to the latest monitoring report, BOD level for mill effluent is within the legal governement standard, i.e. < 5000 ppm. The last BOD monitor-ing was conducted on July 15, 2001 as seen on "Test results report" No. 010/LHU/BBTKL-BB/VI/2011. There is no changes on the PT Mustika Sembuluh's Occupational Health and Safety (OHS) Policy which is still same as Wilmar International's OHS policy, since PT. Mustika Sembuluh is one of the companies un-der Wilmar Group. The OHS policy was established and approved by top management. PT MS has an Oc-cupational Safety and Health (OSH) Team responsible for occupational health and safety programmes. the structure has recently been changed and reapproval by the Labour Department is in progress. Each estate has its own OSH team which holds a regular safety meeting once every 3 months. Medical expenses of employees are covered by the company. The company provides Social Security in-surance (JAMSOSTEK) for permanent daily workers, both at the estate and mill, which covers accidents and annuity. The company also provides accident insurance for temporary workers under JAMSOSTEK, with evidence in the form of a valid Jamsostek card for all existing employees and workers The company conducts medical check ups for all new workers prior to starting work for the company both for permanent and temporary workers. Periodic physical medical checkups are conducted for workers who work in high risk areas such as sprayers, manure applicators, mill workers, workshop workers and para-medics. Currently the company’s clinic at CKP (Central Kalimantan Plantation) has just obtained new equipment to measure blood cholinesterase levels and company paramedics/nurses are being trained to use the tool kit, however as some paramedics recently resigned from the company, blood tests were de-layed. Trial test was conducted however the result still not satisfactory. The company should make a schedule to conduct the blood tests should as soon as possible, to monitor and prevent potential health impacts from spraying activities by workers. Several sprayers that interviewed during surveillance audit stated that they have no problem with their health. However, according to information from interviewed sprayer, the company is not providing shower rooms for their sprayers and all contaminated clothes are still brought to sprayer’s home. This is inconsistent with company’s OSH policy, which states commitment to prevention of health problems caused by working activities. This was raised as a non conformity. The documented OHS risk assessment has been updated according to existing company’s operation. The mill's risk assessment is documented in 'Environmental and OSH Aspects and Impacts'. Risk Assessments for building/housing/facilities construction are already conducted by Safety Officer. A documented Hazards Identification and Risk Assessment (HIRA) is available in document ‘Risk Analysis and Control im Imple-mentation of Occupational Safety & Health for PT Mustika Sembuluh CKP Year 2010-2011’. There are records of trainings conducted for staff and contractors. OSH Training for construction contrac-tors was conducted on June 11, 2011 and attended by 9 contractors. OSH Induction training for new con-tractors, including construction contractor, was done on Feb. 24, 2011. Training programs for year 2011 for contractors are already scheduled (refreser trainings) in January and July 2011. Control for contractors re-lated to OSH implementation also included in working agreement G-6 housing development, example: be-tween PT Mustika Sembuluh with CV Maju Bersama (a contractor) The company has conducted first aid training for all group coordinators and field conductors at the estates, and field conductors are required to bring first aid kits to worksites, however during surveillance audit there is no first aid kit available on the Jon deer FFB transporter truck, this was raised as a non conformity. Compliance status: Non Compliance NCR No. 2011-03 of 08



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As seen from peat subsidence monitoring results which is conducted on November 23, 2010, there is found that subsidence level for plot at field 041 MS 3 estate is 7 cm/year, however no action was taken to rectify this condition. This is not in compliance to government regulation PP 150 year 2000 regarding maximum peat subsidence limit. NCR No. 2011-04 of 08 The company is not providing shower room for their sprayer and all contaminated clothes are brought home by the sprayers for washing NCR No. 2011-05 of 08 There is no first kit provided in Jon deer FFB transporter vehicles.

Principle 5: Environmental responsibility and conservation of natural resources and biodiversity

Criteria assessed: CR5.1, CR5.2, CR5.3, CR5.4, CR5.6 Criteria not assessed: CR5.5 Findings: The company’s last Environmental Monitoring and Management report (RKL and RPL) was done for period semester II year 2010 (Period of July to December 2010), from the monitoring report it was seen that noise levels inside mill location is above the threshold level especially in the generator room, and the company pro-vides PPE such as ear muff for all workers working at generator set area in Mustika Sembuluh mill. Ambient noise level outside mill area still within the government standard. Analysis results for other environmental pa-rameters as reported in the RKL and RPL are within legal standards There is evidence that the company is planning to have their Social and Environmental Impacts Assess-ment (AMDAL) document revised due to changes in operations, i.e Mustika Sembuluh mill plans to in-crease their mill capacity from 60 tons/hour into 120 tons/hour and extend the company’s estate area from 15,990 ha to 19,950 ha. The company has developed EIA Terms of Reference in 2010, in accordance with the Central Kalimantan Governor decision letter no. 188.44/373/2010 regarding AMDAL revision approval. However there is a letter from Environmental Agency No. 660/546/Ii/BLH/2011 informing that the TOR was canceled and the company is required to make a different document, termed as the Environmental Evalua-tion Document (Dokumen Evaluasi Lingkungan Hidup – DELH) and Environmental Management Document (Dokumen Pengelolaan Lingkungan Hidup – DPLH) document in accordance with requirements of regula-tion Permenlh No. 14 year 2010. The are monitoring activities carried out by conducting patrol in the estate perimeter to ensure company activi-ties does not have negative impacts on identified HCV areas as part of implementation of the HCV manage-ment program for year 2009-2011, i.e monitoring activities carried out by patrol at MS 2 estate where there is area categorized as HCV 5 i.e. in block LOT-L14T and M08TM14T covering total of 117,7 ha, and HCV 2.2 in block K27T-L27T with area 7.0 ha is heath forest adjacent to the wetland, and HCV 4.2 area which is riparian river buffer zone covering an area of 127.93 ha. The company manages this area by conducting felling of the palm trees that grows in the range of 2.5m inside riparian buffer zones and replanting these areas with cover crops. In year 2010, a total of 403 oil palm trees have been removed, and up to May 2011, 180 trees have been removed. The HCV officers for all estates make monthly monitoring reports as recorded in a Monthly HCV Findings Summary form CKP/HCV/FRM/(2)CKP/(0)12010. Sample reports for April, Mei and June 2011 in MS 3 estate were sighted and made by an estate staff that was trained regarding HCV on June 20, 2011. Sign boards on the prohibition of hunting in areas categorized as areas of HCV has been placed in front of estate office, housing area, and HCV area, including warning sign boards on prohibition of ilegal fishing such as using poison has been placed in the riparian riper such as Sungai Pukun Hulu and Sungai Pen-yang. All waste and pollutions sources from the mill are identified and documented as recorded on waste man-agement document including press station contaminated fiber, used rough mops, oil spillage in Kernel sta-tion, calcium carbonate (CaCO3) spillage, Boiler emissions, etc. Waste management activities are done through separation between hazardous waste and non hazardous waste. Hazardous waste collected in the workshop warehouse include used oil, used batteries,used rough mops, used filter oil, copy toner etc, while



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used agrochemical containers are placed in MS 1 estate waste store. Since company has no licensed waste collector, all hazardous waste is kept more than 90 days, although according to government regula-tion no. 18 year 1999 hazardous waste cannot be stored more than 90 days except under certain condi-tions. This is raised as a non conformity related to criteria 2.1 above. Fiber and shell which is waste from FFB processing is used as boiler fuel. 100% of fiber and shell for Mus-tika Sembuluh mill is used for mill internal consumption, even there are still deficient to fulfill the need of fi-ber and shell in Mustika Sembuluh mill. Sometime mill buys shell from other mills. Fossil fuel consumption has been monitored, and records shows that total consumption from the last 6 months is 56,957 litres, compared with the same month last year, when fossil fuel consumption wasonly 22,600 litres. The increase in fossil fuel consumption is due to increase of amount of FFB to be processed. Considering the defined budget by Mustika Sembuluh management which states that maximum fuel cost shall be 1.98 Rp/kg of FFB produced, the mill achieved only 0.88 Rp/kg of FFB produced, which is higher compared with last year fossil fuel costs which was only 0.44Rp/kg of FFB produced. This is due to in-crease of fuel prices from Rp 6000 to Rp 9200 per liter. Identification the sources of pollution and emissions has been done, however only for emissions from boiler operations. There is no identification of Green House Gas (GHG) emission generated both for mill and es-tates activities such as transportation, fertilizer consumption etc. The company has no action plan to reduce greenhouse gases emission, and this was raised as a non conformity. The biggest GHG emission from mill activities is methane gas emission from effluent ponds. Monitoring of methane gas from the effluent pond and EFB composting area has been done by external laboratory I.e. PT Unilab as seen on the testing re-port No. 2726/LHP/V/2011 for effluent pond with the result is 151 /Nm3, composting area is 157 /Nm3, and EFB area is 137 /Nm3. Compliance status: Non Compliance NCR No. 2011- 06 of 08 Sources of GHG emissions have not been identified for mill and plantation activities. The company has no program to minimize GHG emissions except for boiler emissions.

Principle 6: Responsible consideration of employees and of individuals and communities affected by growers and mills

Criteria assessed: CR6.1, CR6.2, CR6.5, CR6.6, CR6.7, CR6.8, CR6.9, CR6.10, CR6.11. Criteria not assessed: CR6.3, CR6.4 Findings: During the certification audit it, the company had not yet developed a plan for monitoring and management of social impacts. During surveillance, it was found that there is a social impact management plan of PT Mustika Sembuluh for year 2010-2015. There is evidence regarding stakeholder participation to make so-cial impact management and monitoring plan establishement as seen on list of participant in the event held on 21 July 2011 that was attended by 37 participants inlcuding company’s workers and 5 community leader of each village. There is photo documentation of this event. There are records of communication with stakeholders in the form of reports of participatory discussions with Tanah Putih village Leader about man-agement plans and plan of monitoring of social impact assessment of PT Mustika Sembuluh dated June 3, 2011. The company also has a schedule for planned meetings with surrounding communities as follow: 1. Meeting with Pondok Damar village planned in August concerning clean water facility 2. Meeting with Bangkal village in September, concerning village community hall building preparation 3. Meeting with Tanah Putih village in October, concering village community hall building preparation. There are provisions written in the decree of the Governor of Central Kalimantan No. 31 of 2010 concern-ing the minimum wage counties and sectoral minimum wage (UMSK) in 2011 in the districts of East Kota-waringin effective from January 1, 2011. In this provision, it is stated that UMSK for plantation sector is Rp. 1,244,135 or Rp. 49,765 per day for 25 working days in a month. There is evidence that the company com-



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plies with legal requirements for minimum wage, based on Wilmar Group's internal memorandum no. 002/WIP-HRD/Int-I/2010 on 3 January 2010 which states that daily wages for employee is revised to Rp. 1,244,250 per month or Rp. 49,770 per day. Sample records of workers pay slips show they are paid ac-cordingly, for sample a permanent employee, worked for 7 days with a payment of Rp. 348 390 or Rp. 49,770 per day. Overtime pay was Rp. 546, 607 for 36 hours of overtime.

There is evidence of progress in the implementation of the preparation of the formation of workers union of PT Mustika Sembuluh which was held in February and March 2011, as seen from a report on briefing on employees' social security. The briefing was also conducted to inform about anti-drugs, salary payment for workers who can not reach defined working hours, and procedures for complaints. The briefing activities were carried out for workers during morning roll call. The company explains in the meetings that they give freedom to employees to establish a workers union. The company’s management stated their commitment to provide facilities or accommodation for the formation of workers union.

There is no presence of child workers found in this company. The youngest workers were two male work-ers born in 1992 who worked for a year. Thus, when entering work, their age was 18 years old. There is no evidence of discrimination in this company. Workers come from various ethnic groups in Indo-nesia such as Java, Dayak, Malay, Batak, and others. The workers also come from various religions. There is evidence of information provided to workers regarding the company’s policy against sexual har-assment and violence carried out during morning roll call. There are documented FFB purchase agreements with FFB suppliers, e.g. agreement no. 007/WS-MS/TBS/VI/2010 dated June 14, 2011 between PT Mustika Sembuluh mill (first party) with a supplier (se-cond party) that both parties are willing to sell the FFB to the first party and first party will buy FFB from the second party. Payments by the first (company) to the second party are made by cheque each month after the first shipment of fruit is received. Total payment by the first party to the second party is based on FFB weight received by the mill of the first party after sortation. There are attachments in this agreement that contains the pricing formula of FFB pur-chases of oil palm farmers and calculation of the index K according to the decision of the Minister of Forest-ry and Plantations number: 627/Kpts-II/1998. The provisions set forth in this agreement are clearly stated and are regarding FFB quality standards, pric-ing, payment, term of the agreement, the environmental aspects of occupational health and safety, first-party guarantees, force majeure, dispute, RSPO audit, addendum, and closing. Rate translation There is evidence that FFB payments are made on time in cash, e.g. payment made to a supplier as below: 1. Rp. 27,406,935 on January 8, 2011 . 2. Rp. 26,893,539 on February 9,i 2011 3. Rp. 29,372,079 on March 17, 2011 4. Rp. 34,186,795 on April 7, 2011 5. Rp. 38,736,02 on May 7, 2011 6. Rp. 51,391,559 on June 9, 2011. There is evidence that the company assists in Community Development of surrounding communities. For example, the company purchases mats produced by the community of Tanah Putih village, as a business opportunity for the community. There is evidence of the mat purchases made by the company from March to May 2011 in a documented report. In April, 150 sheets with a total price of Rp. 2.25 million. (@ 15,000) 2x1 Meter size were bought. There is a receipt dated 13 April 2011 for this purchase. There is an official report dated January 26, 2011 about the results of meetings between companies and mats craftsmen in the village of Tanah Putih. In this meeting the community had proposed a purchase price increase from Rp 13,000 mat to Rp 15,000 per mat. There is evidence of oil palm cultivation training & farmers coaching on 4 December 2010 in Sampit Train-ing Center for Pondok Damar village community. The training was attended by 47 farmers from the group Hapakat and Teheta. There is a petition from the group leader and secretary of the Hapakat group, dated October 29, 2010 to the chairman PT MS to have the training conducted.



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Training/ awareness sessions conducted about the right of all personnel to form and join trade unions of their choice and to bargain collectively has been done but not fully understood. Some of bipartite members do not understand the company’s policy regarding rights to freedom of association and collective bargain-ing. Compliance status: Non Compliance NCR No. 2011-07 of 08 Training/ awareness sessions conducted about the right of all personnel to form and join trade unions of their choice and to bargain collectively has been done but not fully understood. Some of bipartite members do not understand the company’s policy regarding rights to freedom of association and collective bargain-ing.

Principle 7: Responsible development of new plantings

Criteria assessed: CR7.1, , CR7.3, CR7.5, CR7.7 Criteria not assessed: 7.2; 7.4; 7.6 Findings: There is no evidence that the newly developed areas have replaced any primary forests or HCV areas. The company has made efforts to comply with applicable regulation pertaining to development of new plantings, such as by conducting an Environmental Impact Assessment as well as an assessment to identi-fy existing HCVs, even though the HCV assessment was conducted only after new development areas were opened, but based on information from satelite images, most of the areas that have already been opened were not covered by forests but by degraded forests. As such, the company decided to designate these areas as HCV areas, as explained in Criteria 5.2. A documented SIA that includes the expansion of existing areas and plantations of MS3 is available. The company has also revised their EIA document to include the expansion of existing areas under MS3 estate and this revised document is pending approval from Government of Central Kalimantan Province. The re-vised EIA document would replace the last Mustika Sembuluh EIA document that was already approved by Indonesian Government cq. Ministry of Agriculture on 7 June 1995 as well as the Government of East Ko-tawaringin District cq. BAPEDALDA (Regional Body for Management of Environmental Impacts) on 10 April 2003. The company has a zero burning policy which has been trained to all levels of the company, and there was no evidence that the company used fire during land preparation of the new development area. Sign boards are posted in the estate area stating prohibition of burning requirements. A Standard Operation Procedure was established for handling emergency responses to land burning. Fire extinguishers & facilities are avail-able at all estates and the mill Compliance status: Full Compliance

Principle 8: Commitment to continuous improvement in key areas of activity

Criteria assessed: CR8.1 Criteria not assessed: - Findings:

The company regularly monitors all identified environmental parameters as defined by relevant agencies, such as air emissions monitoring to minimize the impact of air pollution generated from activities in POM, noise, liquid waste. Every 6 months, monitoring results will be reported to the Regional Body for Manage-ment of Environmental Impacts (Bapedalda). For example, the company has available the UKL and UPL report for the period of 2nd semester 2010. the company routinely conducts internal audits to ensure that environmental performance is done is in accordance with established standards. Based on the results of in-ternal audits, the management of company will conduct a review / evaluation of the company's overall per-formance both in terms of environmental as well as fulfillment of product quality. These reviews are routine-ly performed once a year; for example, the last review was conducted on June 9 to 11, 2011 with result



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was 46 nonconformities (NCs).

The company does not have a system to identify root cause and corrective action to eliminate the root cause of nonconformities found in internal audit, during security patrols and other activities.In the Mustika Sembuluh mill, corrections to eliminate the non conformities (NCs) found in in previous internal audit dated on June 9-11, 2011 was done but corrective action to prevent recurrence of non conformities was not done yet, i.e. for the following non-conformities no. 6 (3 and 4), and NC number 9 (1-4): - Ministry of Health regulation decree letter No. 261 year 1998 regarding Environmental Healthy require-ment required for working condition testing, such as working permit in high level building. The company has deadline to re-monitor the condition by the end of year 2011. - It was shown from graphic trend the number of accidents happened in Tri-Monthly Reports (PT MS) is in-creasing (First three months of 2011 = 77 accidents, Second three months of 2011 = 97 accidents). Compliance status: Non Compliance NCR No. 2011-08 of 08 The correction taken for identified non conformities found during Internal audit, patrol and other operational activities.is not effective to eliminate its non conformities, because company has no have system to identify the root cause and make the corrective action to eliminate the root cause of nonconformities found during internal audits, patrol and other operational activities. The last company internal audit was conducted on June 9 to 11, 2011 with result of 46 NCs, but there is inconsistency of monitoring of correction taken for some NCs, for example: NC number 6 (3 and 4), NC number 9 (1-4).

3.2 Status of Previously Identified Non-conformities

A total of 12 nonconformances were identified during the main certification assessment. These consisted of 4 major non-conformities and 8 minor non-conformities. During this surveillance assessment, it was found that there was sufficient evidence for closure of all non-conformities. The following is a description of the evidence of action taken to close the non-conformities raised during the previous assessment, as well as auditor’s con-clusions on the status of the non-conformities.

Criterion 2.2: Where there are, or have been, disputes, proof of resolution or progress towards resolution by conflict resolution processes acceptable to all parties are implemented.

Non-conformance No 1 of 12 (Major): The company’s conflict resolution process is not accepted by all affected parties, due to the existence of a land dispute case between MS3 estates and Mr Tarang and Mr. Umbung (ie. The Tarang-Umbung case) from MS3 estate, both of whom have not accepted the resolution mechanism of the company. Corrections : 1.The negotiation between Tarang – Umbung and Mustika Sembuluh is ongoing and making good pro-gress 2. A mechanism for resolving the issues has been established and agreed by Tarang- Umbung and the management of Mustika Sembuluh

Corrective Action: The company will improve their communications with the local communities and design new social pro-grams to improve relationships between the company and the local communities. In addition, the com-pany will also invite local communities to participate in activities that may have an impact on the liveli-hood of local communities. The company will conduct regular meetings with stakeholders to enhance communication and relationships. A similar approach will be carried out by the management to resolve any other conflicts that may arise in the future. Verification findings 2011: Verified, there is an official recommendation letter from the legislative branch of Regional Head of Ko-tawaringin Timur no. DPRD/257/005/2010 dated December 20, 2010, recommending Mr. Tarang bin Jahun and Umbung bin Udil and PT Mustika Sembuluh to take legal course of action to resolve the land dispute with PT MS.



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Tarang bin Jahun and Umbung bin Udil are preparing to go to the court for the best solution based on the recommendation. According to explaination from MS management, the company agreed to have the case go to court. Auditor Conclusions: Closed

Criterion 2.3: Records of any negotiated agreements between traditional owners of land and plantation companies (if any), supplemented with maps in appropriate scale.

Non-conformance No 2 of 12 (Major): Records of negotiated agreements between traditional owners of land or other community users and PT Mustika Sembuluh are available, but insufficient, as explained below: 1. The legal and customary rights of several users from various communities were not identified, and

there are no records of negotiated agreements on use of land (eg. For “sand mining” activity at MS3 estate) between these land users and the company.

2. There is no documented evidence to show that activities carried out by these communities are for-malized or prohibited by the company management.

Correction:- 1. The identification and determining of legal right, customary right, others user for the use of land in MS 3 will be made available with the consent from affected parties (owners of enclaved land) 2. A documented notice prohibiting or allowing any activities within the concession area of PT Mustika Sembuluh will be produced once participatory mapping and the consent from effected parties have been obtained. Corrective Action :- The company will make monitoring program periodically to identify the legal or customary rights of other users in all of PT Mustika Sembuluh estates that were not identified and will take appropriate action to de-velop a MoU with these users. Verification findings 2011: Verified, there is a mutual agreement between community member and the company concerning legal right, customary right, others user for the use of land in MS1-3 including sand mining and there is peri-odically monitoring program to identify community activities inside of concession area. Auditor Conclusions: Closed

Criterion 2.3: Maps of an appropriate scale showing extent of recognised customary rights.

Non-conformance No. 3 of 12 (Major): Maps of traditional rights or other uses of the land by the community, and maps showing enclaved are-as, or HCV areas at MS3 estate are insufficient or lacking. Correction:- 1. The preparation of maps of traditional rights or other uses of the land by the community, and maps showing enclaved areas, or HCV areas at MS3 estate has been completed. Traditional rights maps will be prepared through participatory mapping. Local communities need to be informed about the maps with de-tails on their traditional rights or other land uses. This is to ensure that all interested parties are aware of these maps. Corrective Action :- 1. Similar maps will be produced for MS1 and MS2. 2. The maps shall be produced in accordance to FPIC procedures. Verification findings 2011: Verified, the company already established maps showing of traditional rights or other uses of the land by the community, and maps showing enclaved areas, or HCV areas at MS1-3 estate has been com-



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pleted and endorsed by the community through consultation events held with them. However, maps in-dicating enclaved land areas have not been provided to the individual land owners such as Yurias, Mawan, Eyo Balai, Enjek, Satino Ali, Ihing, and Oncon. Auditor Conclusions: Closed, but new non-conformity under CR 2.3 raised (see NC 2011-02 of 8 in Section 3.3)

Criterion 2.3: Copies of negotiated agreements detailing process of consent.

Non-conformance No. 4 of 12 (Major): Copies of negotiated agreements detailing process of consent regarding traditional rights or other uses of the land by the community are not available yet.

Correction:- The process of preparing Memorandums of Understanding that detail the process of consent with regard to traditional rights or other land uses by the community has been completed for villagers of Tanah Putih, Bangkal and Pondok Damar villages.

Corrective Action : All matters regarding traditional rights or other land uses by the community will be negotiated through the FPIC procedure.

Verification findings 2011: It was verified with the company and the communities that there is memorandum of understanding con-cerning traditional rights or other land uses in the three villages Auditor Conclusions: Closed

Criterion 4.7: Evidence of OHS and first aid equipments available at worksites

Non-conformance No. 5 of 12 (Minor): The company has established an SOP related to identification of PPE used at estates and the mill. However, it was found that the company has not provided appropriate PPE for harvesters at MS2, and this is not in line with regulation UU No.1/1970, article 14.

Correction: 1. SOP No. 3/EHS/(1)/0909 shall be revise to define suitable PPE for harvesters. 2. All harvesters at MS 2 shall be provided with proper shoes as part of their PPE, as well as working equipment. Corrective Action :- 1. All SOPs related to occupational safety and health will be based on the risk assessment and hazard identification. Data from the occupational injury rates will also be used for determining the right PPE to be used at all operations in all estates. Verification findings 2011: 1. New version of SOP No. 03/EHS/(2)/1109, 16 November 2009 regarding PPE is available. 2. Verified through checks onsite at MS2 Div.1 Block 023, all harvesters were provided with proper shoes

as part of their PPE as well as working equipment. Auditor Conclusions: Closed

Criterion 4.7: A documented risk assessment for Occupational Health and Safety (OHS).

Non-conformance No. 6 of 12 (Minor): The company has conducted a risk assessment related to activities at the estates and mill. However hazards and risks from construction of buildings/housing/facilities either by the company or hired con-



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tractors have not been assessed yet, for example, construction of new housing at MS2 and facilities at new mess at MS1. Due to this, controls of hazards and risks have not been implemented yet, and it was found that several construction workers were not using appropriate PPE, such as helmets and safety belts. Correction:- 1. A risk assessment for construction of buildings/housing/facilities will be conducted (by the Safety Of-ficer) Corrective Action :- 1. Using the results of risk assessment evaluations, proper monitoring and control measures will be car-ried out to minimize or eliminate any hazards and risks. 2. Risks and hazards related to all new activities and operations will be evaluated. 3. Training will be conducted to all contractors in order for them to observe implementation of the OSH policy in PT Mustika Sembuluh. Verification findings 2011: Risk Assessments for building/housing/facilities construction are already conducted by Safety Officer. A documented Hazards Identification and Risk Assessment (HIRA) is available in document ‘Risk Analysis and Control im Implementation of Occupational Safety & Health for PT Mustika Sembuluh CKP Year 2010-2011’. Based on checks onsite at MS 2 (housing construction at Bedeng S 129) contractors who are doing the construction wear complete PPE as per required (helmet, safety boots and hand gloves), but they didn’t wear the helmet properly (they wore the helmet on top of a hat, and a worker wore his helmet the wrong way round). This is raised as observation. Auditor Conclusions: Closed with observations Criterion 5.2: Posters and signs warning of the presence of protected species are to be pro-duced, distributed, and made visible to all workers and the community, including guidelines in handling them. Non-conformance No. 7 of 12 (Minor): There are no warning signs against illegal fishing activities in MS 3 estate, although from patrol records, evidence of illegal fishing activities using poison at river riparian zone were found and recorded. Correction:- Warning signs prohibiting illegal fishing will be erected at strategic areas within MS3. Corrective Action :- To prevent or minimize illegal fishing/hunting activities, the management of MS1, MS2 and MS 3 will im-plement the following:- 1. More warning signs will be erected at all strategic places prohibiting illegal fishing/hunting. 2. Conduct training of prohibition of illegal fishing/hunting activities to all workers. 3. Conduct regular patrolling of all rivers in accordance with the HCV Monitoring and Action Plan. Verification findings 2011: Warning signs prohibiting illegal fishing or fishing using poison has been made, as seen at some ripari-an river areas e.g. Pondok Batu River block C 11 TU, block 033 Divisi A .1, and riparian of Pondok Kulit River block 325, 326, etc. Auditor Conclusions: Closed Criterion 5.2: Companies are to appoint dedicated and trained officers to monitor any plans and activities as above.

Non-conformance No. 8 of 12 (Minor): Officers appointed and dedicated to conduct monitoring of plans and activities relating HCV areas or protected areas have not received appropriate training related to these activities.



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Correction:- Training related with monitoring and implementation of HCV action plans will be conducted for all relevant personnel of PT Mustika Sembuluh Estate & Mill by our conservation and biodiversity manager. Corrective Action:- This is part of an ongoing process to enhance the capability of the Mustika Sembuluh personnel on pro-tecting the HCV areas identified inside PT Mustika Sembuluh. Such training will be conducted 2 times a year and this training will be part of the training program for PT Mustika Sembuluh 1, 2, 3 and PT Mustika Sembuluh Palm Oil Mill. Verification findings 2011: Appointed and dedicated officer in MS 1 is Muhammad Indra according to Notification letter (SK No. 001/EM-MSI 1/SK VI/2001) as field conductor RSPO PT MSI 1. HCV training was done on June 20, 2011 to June 22, 2011. There are two other HCV officers, i.e. Dandi Priadi and Santo, appointed with appointment letter including job description and responsibilities. Auditor Conclusions: Closed Criterion 6.1: Regular monitoring and management of social impact, with the participation of lo-cal communities.

Non-conformance No. 9 of 12 (Minor): Regular monitoring and management of social impacts, with the participation of local communities has not yet been conducted. Correction :- 1. The management will review the recommendations of the Social Impact Assessment. 2. A monitoring and management plan will be developed based on the SIA recommendations. These plans will be implemented accordingly. Corrective Action:- Continuous monitoring and implementation of the recommended community development (CD) program will be carried out. The CD programme will be implemented selectively and progressively based on the recommendations of the social impact assessment. Verification findings 2011: Verified, the company carries out continuous monitoring and implementation of their social impacts management plan with the participation of local communities based on the SIA recommendation. Auditor Conclusions: Closed

Criterion 6.1: A regular and scheduled environmental management and monitoring report.

Non-conformance No. 10 of 12 (Minor): The company produces a regular and scheduled environmental and social impact management and monitoring report, but the social impacts covered in this report are not based on the social impacts identified in the company’s social impact assessment report. Correction: 1. The report on the monitoring and schedule for social impact management based on social impact man-agement plan will be produced by the people in charge of community development. Corrective Action:- The report on monitoring of the progress of social impact management will be prepared 3 times a year. The progress report will be monitored by the General Manager of the Central Kalimantan Project. A meet-ing to monitor the progress of implementation will be held once every 4 months.



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Verification findings 2011: Verified, there is a report of monitoring of social impact management involving the community members from the villages developed based on social impacts identified in the social impact assessment report. Auditor Conclusions: Closed Criterion 6.5: Growers and millers provide adequate housing, water supplies, medical, educa-tional, and other facilities for employees where such facilities are not available or accessible.

Non-conformance No. 11 of 12 (Minor): Water supplies and toilets at housing facilities provided for workers at MS3 estate were found to be in-sufficient. Correction :- 1. Sufficient communal toilets will be provided at MS 3 2. Constructions of 3 units of tube wells are underway, while another 3 units of water treatment plants will be constructed at MS3. Corrective Action:- To ensure sufficient water supplies and toilets for worker in Mustika Sembuluh, the management of each estate will: 1. Regularly check housing conditions of their workers (once every 2 month). 2. Repair immediately any leakages or breakages. 3. Obtain feedback on workers issues through their representatives. 4. Send water samples to the Environmental Management Unit to conduct water quality checks. 5. More units of wells and water treatment plants will be constructed for MS 1 & 2 Estate. Verification findings 2011: Field checks were done at housing no. 03 MS 3 division and MS 2 division. The company now provides clean water from an artesian well, which is streamed to each water tank that provided by company, one water tank for two houses. Also now every house has toilet. The company has provided water treatment for drinking water at the estate office. Auditor Conclusions: Closed Criterion 6.11: Records of company contributions to the local development.

Non-conformance No. 12 of 12 (Minor): The company’s contribution to local sustainable development is not sufficient. There is no evidence that community development / CSR programs developed were based on results of consultation with the lo-cal communities or results of the company’s Social Impact Assessment. Correction :- Sufficient contribution to local sustainable development will be carried out based on results of consultation with local communities or based on the outcomes of social impacts identified in the SIA. Corrective Action : 1. More activities will be carried out in accordance with the recommendations of the Participatory Social Impact Management Plan 2010- 2015. 2. Monitoring and evaluation of CD programmes conducted for the local communities will be carried out. Verification findings 2011: Verified, the company already contributes to local development based on the SIA recommendation, for example: the company collect and buy all mats produced by the community as additional income for the community.



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Auditor Conclusions: Closed.

3.3 Identified Non-conformances against RSPO P&C Requirements, Corrective Actions Taken and Auditors Conclusions

During this surveillance assessment, a total of 8 nonconformances against the RSPO Principles & Criteria In-donesian National Interpretation year 2008 were identified. These consisted of 4 major non-conformities and 4 minor non-conformities. For the major non-conformances, the company has taken the necessary corrective action to close these non-conformances within 30 days of completion of the assessment, and this was verified by the audit team through documents submitted by the company. For the minor non-conformances, the com-pany has taken corrective action against these as well, and for those which could not be verified as closed through document checks, the closure of these minor non-conformities will be assessed during the next sur-veillance audit. A summary of all identified non-conformances, corrective actions taken and auditor conclu-sions is as below:

Criterion 2.1: Evidence of compliance with relevant legal requirements.

Non-conformance 2011-01 of 8 (Major non-conformity): There is evidence of non-compliance to certain regulations, as follows:

- Three monthly reporting of occupational, health and safety (OSH) activities to government shall be consistently implemented as required by regulation of Permenaker No. 03/MEN/1998

- There were accidents in January and November 2010 which were not reported in the three monthly report to the government, as follows:

One (1) accident in January 2, 2010 involving one worker, accident location: Kernel Plant, acci-dent cause: Fan Belt, Working days lost: 40 hours.

Two (2) accidents in November, 2010. The first was on Nov. 9, 2010 involving one worker, ac-cident location: Kernel Plant, accident cause: Conveyor, Working days lost: 112 hours. The 2nd was on Nov. 21, 2010 involving one worker, accident location: Sterilizer, accident cause: Con-densate, Working days lost: 42 hours

- According to the land application permit no. 660/216/BLH/III/2010 from the head of East Kotawar-

ingin Timur, company is required to send land application implementation reports to Bupati for wa-ter quality and soil quality in a defined timeframe but this is not done.


Correction: 1. The company shall prepare accident data in the OSH committee report every 3 months. The company

has revised their OSH report for January and November 2010 to include accident data which is was not reported before.

2. Environmental Health and Safety (EHS) department (Estate & mill) shall be responsible to ensure that accident data is reported in every OSH committee report. Furthermore, every reported OSH commit-tee report to manpower agency (Disnaker) shall include accident data/information. Further accident data checks shall be conducted during internal audit.

3. The company made land application report to Local Environmental Board (BLH) of Kotawaringin Ti-mur include information about quality of ground water, waste water and soil. The report will be submit-ted to BLH such as waste water quality every month, ground water quality every six months, and soil quality every year according to defined requirement.



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4. The company made a plan for hazardous waste collection by a licensed waste collector. The company is planning to have the waste collected on 2nd week of September 2011. The warehouse supervisor of the hazardous waste store follows the FIFO system (First In First Out). EHS officers will routinely check bin card to ensure no more hazardous waste stored more than 90 days.

Corrective Action: 1. Accident report shall be attached into OSH committee prepared once every 3 months.

2. EHS department of (Estate & mill) shall be responsible to ensure all accident data are included in the OSH committee meeting report.

3. The company shall make a checklist for submitted reports to government.

4. To send all hazardous waste to licensed supplier and ensure that there is no more hazardous waste stored more than 90 days. Monitoring of incoming waste to temporary storage shall be recorded on bin card.

Auditor Conclusions: Closed Evidence for verification of closure was provided as follows:

1. The company provided evidence of submission of accident report (prepare by OSH committee/P2K3 team) to the Manpower and transmigration office at Seruyan District, dated August 11, 2011.

2. Accident data has been included as agenda for OSH committee meeting as seen on August 2011.

3. The company provided evidence of transmittal of Land Applicaton report to BLH Kotawaringin Timur for year 2011. 4. The company provided an action plan to send all hazardous waste to a licensed supplier and the company worked to engage PT Maju Asri Jaya Utama as new approved hazardous waste collector. The company has since provided new evidence such a contract with licensed hazardous waste collec-tor PT Maju Asri Jaya Utama dated 1 August 2011 and sample manifests for hazardous waste collec-tion by the licensed contractor for the month of October. Date of closure: 12 September 2011

Criterion 2.3 :Maps of an appropriate scale showing extent of recognised customary rights

Non-conformance 2011-02 of 8 (Major non-conformity): There is an MoU between company and community to enclave land farming, however maps indicating enclaved land areas have not been provided to land owners such as Yurias, Mawan, Eyo Balai, Enjek, Satino Ali, Ihing, and Oncon. Correction: 1. The company planned to make and distribute the map to each land owner such as Yurias, Mawan, Eyo Balai, Enjek, Satino Ali, Ihing, and Oncon. 2. The company will make a map for each enclaved land and gave a copy of the map to the respective land owners. Corrective Action: The company made a list of enclaved land owners and ensured that enclaved land map has been re-ceived by the land owner with transmittal note. An MoU signing and map distribution to each land en-claved land owner, as stated on the company’s program, will be finished on 2nd week September 2011. Auditor Conclusions: Closed with ongoing observations The company provided a list of all traditional land owners (totally 110 persons), including Yurias, Mawan, Eyo Balai, Enjek, Satino Ali, Ihing, and Oncon, who have not been provided maps indicating enclaved land areas. An action plan for signing of MOU with timelines for completion has been pre-pared and there is evidence that the company is implementing the action plan, i.e. some stakeholders such as Mawan, Suwester, Yurias have signed the MOU and provided by the map as seen from evience of maps dated July 25, 2011.



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Date of closure: August 08, 2011 Criterion 4.3: Subsidence of peat soils should be minimised under an effective and documented water management programme.

Non-conformance 2011-03 of 08 (Minor non-conformity): As seen from peat subsidence monitoring results which is conducted on November 23, 2010, there is found that subsidence level for plot at field 041 MS 3 estate is 7 cm/year, however no action was taken to rectify this condition. This is not in compliance to government regulation PP 150 year 2000 regarding maximum peat subsidence limit. Correction: The company made planning to have additional weirs at peat area. Peat soil management will follow existing standard operation procedure. Additional 36 weirs will be placed by December 2011. Existing weirs currently number 160 weirs, so in December 2011 total weirs will be 196. Up until August 15, 2011 there were 6 new weirs constructed. Corrective Action: Program maintenance for all weirs shall be conducted periodically. The company made a map informing about the location of weirs. Auditor Conclusions: Evidence of immediate action taken was accepted. Effectiveness of im-plementation to verified at next audit. Date of evidence provided: August 08, 2011

Criterion 4.7: Evidence of a documented occupational safety and health (OSH) policy and its implementation

Non-conformance 2011-04 of 08 (Minor non-conformity): The company is not providing shower room for their sprayer and all contaminated clothes are brought home by the sprayers for washing Correction: The company provides a place to washing contaminated clothes and provides drying area. It is informed to sprayer to not bring their contaminated clothes to their homes. They have to take showers before they go back to home in the specified washing room in each estate office. . Corrective Action: The company made a system to ensure no contaminated clothes were brought home. No more workers go back home with contaminated clothes. The field conductor shall monitor and ensure that every worker is doing the right procedure. Auditor Conclusions: Evidence of immediate action taken was accepted. Effectiveness of im-plementation to verified at next audit. Date of evidence provided: August 08, 2011

Criterion 4.7: Evidence of OHS and first aid equipments available at worksites

Non-conformance 2011-05 of 08 (Minor non-conformity): There is no first kit provided in Jon deer FFB transporter vehicles. Correction:



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The company identified all transporter vehicles which has no first aid kit and provides first aid kit in all transporter vehicles. Drivers or operators will have responsibility to control and handle first aid kit usage. The company made transmittal note as evidence that driver and operator has been received first aid kit. Corrective Action: Conduct monthly monitoring to ensure all first aid kit always available in each transporter. Auditor Conclusions: Evidence of immediate action taken was accepted. Effectiveness of im-plementation to verified at next audit. Date of evidence provided: August 08, 2011

Criterion 5.6: Evidence of identification of pollution and emissions sources at mills

Non-conformance 2011-06 of 8 (Major non-conformity): Sources of GHG emissions have not been identified for mill and plantation activities. The company has no program to minimize GHG emissions except for boiler emissions. Correction: The source of GHG emissions from all mill and estate has been identified, as seen on GHG inventory document. Company made a plan to reduce GHG emissions. Corrective Action: The company shall review identified sources of GHG periodically and if there is a new equipment including changed activities, company will consider the GHG emissions of new activities. The company plans to conduct monitoring of GHG emission production. Auditor Conclusions: Closed The company provided documented identification of sources of GHGs both for the mill and estate. Planning to reduce emissions through methane capture from Palm Oil Mill Effuent is an seen from fea-sibility study results. The company made program monitoring of GHG emission monitoring, as seen on document GHG inventory of PT Mustika Sembuluh dated August 6, 2010 (this document also used for GHG emission calculation for ISCC certification program). Date of closure: August 08, 2011

Criterion 6.6: Major indicator Documented company policy recognizing freedom of association

Non-conformance 2011-07 of 08 (Major non-conformity): Training/ awareness sessions conducted about the right of all personnel to form and join trade unions of their choice and to bargain collectively has been done but not fully understood. Some of bipartite members do not understand the company’s policy regarding rights to freedom of association and col-lective bargaining. Correction: The company made a training program about joint trade unions with the following actions:

1. Briefing about joint trade union was done. The policy about trade/ worker union was posted at a the strategic place for public viewing on July 28 to 29, 2011.

2. Information sessions were held with with LKS Bipartite on 29 July 2011 in MS 1, dated August 01, 2011 at MS 3 estate and August 02, 2011 at MS2 estate.

3. Awareness sessions were held for all workers during roll call e,g, on July 30 to August 06, 2011.

4. Briefings will be conducted every month.



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Corrective Action: The company made a schedule for training regarding freedom of association to joint workers union. During internal audit the implementation of the policy will be checked through interview with workers. Auditor Conclusions: Closed Company provided record of training which was conducted on July 30 to August 06 such as attendance list, photographs and training materials. List of participants from all estates such as MS 1, MS 2 and MS 3 have been provided. Date of closure: August 04, 2011

Criterion 8.1: Records of follow-up actions taken against RSPO audit findings, if any.

Non-conformance 2011- 08 of 08 (Minor non-conformity): The correction taken for identified non conformities found during Internal audit, patrol and other opera-tional activities.is not effective to eliminate its non conformities, because company has no have system to identify the root cause and make the corrective action to eliminate the root cause of nonconformities found during internal audits, patrol and other operational activities. The last company internal audit was conducted on June 9 to 11, 2011 with result of 46 NCs, but there is inconsistency of monitoring of cor-rection taken for some NCs, for example: NC number 6 (3 and 4), NC number 9 (1-4). Correction: 1. The company made standard operating procedure for non conforming products, activities and pro-

cesses such as: SOP 063/CKP/(0)/0811. The procedure included information about problem identifi-cation, working to prevent reoccurrence of nonconformances and how to make correction and correc-tive action.

2. Training about the Standard operation procedure SOP 063/CKP/(0)/0811 will be conducted on Au-gust 15, 2011 to all manager, OSH committee and others.

Corrective Action: The company shall evaluate all correction and corrective action taken to ensure its effectiveness periodi-cally. The company shall conduct management review to define management policy. Auditor Conclusions: Evidence of immediate action taken was accepted. Effectiveness of im-plementation to verified at next audit. Date of evidence provided: September 14, 2011

3.4 Noteworthy Positive Components

8.1 Significant improvement from last audit condition

4.4 Good clean water facilities

1.1 High commitment to implement RSPO requirement.

5.3 Good waste storage both in estate and Regional office

3.5 Issues Raised by Stakeholders and Findings Pertaining to Issues



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Below is a summary of issues raised by stakeholders interviewed on-site.

No. Issues Raised Audit Verification

1.

There is an ongoing conflict on traditional land between the company and Mr. Ta-rang and Mr. Umbung Jahun of Tanah Putih village, Telawang Subdistrict, since 2003 that has not yet been resolved by Mustika Sembuluh.

See explaination on the criteria 2.2

2.

The company any should improve the condition of the river buffer zones in order to protect the rivers.

Some riparian still not consistent with compa-ny’s planning for rehabilitation program.

3.

PT Mustika Sembuluh must recruit work-ers from people of Pondok Damar Village based on their level of education.

According to head of village Pondok Da-mar, some of local community members are hired as daily worker. Most of people in Pondok Damar prefer to open their own oil palm plantation or be smallhold-ers rather than work at PT Mustika Sem-buluh



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4.0 CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY

4.1 Date of Next Surveillance Visit

The next surveillance visit is planned for July 2012

4.2 Acknowledgements of Internal Responsibility and Formal Sign-Off by Client

It is acknowledged that the assessment visit was carried out as described in this report and we accept the as-sessment findings and report content. Signed on behalf of PT Mustika Sembuluh …………………………………………. Simon Siburat Group Sustainability Coordinator Date:

Signed on behalf of TUV Rheinland Malaysia ………………………………… Dian S. Soeminta Lead Auditor Date: 19 August 2011



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APPENDICES

Appendix 1: List of Abbreviations

AMDAL Analisis Dampak Lingkungan & Sosial

(Social & Environmental Impacts Assessment)Bapedalda Badan Pengendalian Dampak Lingkungan Daerah (Regional Body for Management of

Environmental Impacts)BLH Badan Lingkungan Hidup (Local Environmental Board) CD Community DevelopmentCPO Crude Palm Oil DELH Dokumen Evaluasi Lingkungan Hidup (Environmental Evaluation document) DPLH Dokumen Pengelolaan Lingkungan Hidup (Environmental Management document) DPRD Dewan perwakilan rakyat daerah (Regional Parliament)EIA Environmental Impact AssessmentEHS Environmental, Health & SafetyERTs Endangered, Rare & Threatened speciesESH Environmental Safety & HealthFFB Fresh Fruit Bunches EFB Empty Fruit Bunches HCV High Conservation ValueIPM Integrated Pest ManagementLTA Lost Time Accident MOU Memorandum of UnderstandingMSDS Material Safety Data SheetsNGO Non-Government OrganizationOSH Occupational Safety & HealthP&C Principls & Criteria PKO Palm Kernel Oil POME Palm Oil Mill Effluent PP Peraturan Pemerintah (Government Regulation)PPE Personal Protective EquipmentRKL Rencana Pengelolaan Lingkungan (Environmental Management Plan) RPL Rencana Pemantauan Lingkungan (Environmental Monitoring Plan)SCCS Supply Chain Certification SystemSIA Social Impact AssessmentSOP Standard Operating ProcedureUKL Upaya Pengelolaan Lingkungan (Environmental Management Efforts) UMSK Upah Minimum Sektoral Kabupaten (District Sectoral Minimum Wage) UPL Upaya Pengelolaan Lingkungan (Environmental Management Efforts)

Appendix 2: List of Stakeholders Interviewed and Contacted

No. Name of Stakeholders Institution - Address Remark

Stakeholders interviewed onsite during surveillance audit.

1 Yasmufi – Tanah Putih Community member 2 Manto, Desa Pondok Damar Community member

Stakeholders Interviewed On-Site:

1. Simon Siburat Wilmar International2. Eka AMANA, MS – Regional Office Document control

3. Robiansyah MS – Regional Office Public Relation 4. Andi Ayub MS – Regional Office Land worker5. Samsudin MS – Regional Office Bina Mitra/CD



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6. Amanto Harjono MS – Regional Office Bina Mitra/CD 7. Tan MS – Regional Office Head of Central Kalimantan

Project8. Siti Stania MS – maintenance Overseer 9. Anita MS - maintenance Overseer 10. Karnedi MS – maintenance Overseer 11. Muafirin MS - maintenance Overseer 12. Charles H. MS mill Legal 13. Endang MS – 3 operator Worker 14. Manggo MS – 3 operator Worker15. Tutuk Mahendrata MS 3 worker16. Sugiyanto MS 3 - harvesting Worker17. Meriyama MS3 - maintenance Worker18. Tiniati MS 3 – PGA Worker19. Efrida Sani CD-RO staff20. Siti Kurniawati MS 2 – Children care unit Worker21. Septa Primananda Environmental Management Unit Senior Ass. Manager 22. Denie Alfianto Environmental Management Unit AM

Appendix 3: Observations and Opportunities for Improvement

No. Observations / Opportunities for Improvement Criteria1. Cholinesterase test schedule should be defined 4.6

2. The company should determine a mechanism to ensure that no pregnant woman sprayers carry out spraying work.

4.6

3. The company should define disposal schedule for all hazardous waste to approved supplier including agrochemical waste container.

4.6 & 5.3

4. HCV monitoring activities should be appropriate with the HCV value to be conserved. 5.2

5. Since level of turn over in PT MS is high, company should improve the existing com-munication method including encouraging the establishment of a worker union.

6.5

6. There is no analysis of the cause of high turn over since some of company’s program delayed caused by employee/workers resignation.

6.6

7. Company should consider measuring employee satisfaction level, not only focus to customer satisfaction level.

6.5 & 6.6.

8. Consistency of garbage classification should be improved according to the use of separated garbage bins (for organic and for inorganic wastes). Some inconsisten-cies found on-site, for examples: In front of POM, inside organic waste garbage bins, there were plastics waste, cigarette buds, and empty drink carton package. In front of MS 3, inside the organic waste garbage bin there were cigarette buds

5.3

9. Contractor workers should be involved in fire drills conducted in estates and POM, for example: there was not found any evidence that contractors of kernel packing stations were involved in fire drills.

4.8

10. It is recommended to give regular training about First aid in regular safety talk/ roll call as reminder at all estates and POM.

4.8

11. It was found that OHS objectives was not implemented according to the plan for training, e.g. no. 7: Kegiatan Pembalikan (Composting), the activity realization (train-ing given) to the employees was different from the objectives (POM).

4.7