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Roundtable on Sustainable Palm Oil

Annual Surveillance Audit Report Report no.: ASA1-06470

Surveillance assessment against the

RSPO Principles & Criteria National Interpretation Indonesia year 2008

Wilmar International PT Perkebunan Milano

Pinang Awan Palm Oil Mill

North Sumatera

Report prepared by: Dian S. Soeminta

(RSPO Lead Auditor)

Certification decision by: Manfred Herbert Lottig

(COO TUV Rheinland Malaysia)

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 Used 3 1.2 Type of Assessment 3 1.3 Certification Details 3 1.4 Location and Maps 3 1.5 Organisational Information / Contact Person 5 1.6 Description of Supply Base 6 1.7 Actual production volumes and project outputs. 7 1.8 Dates of Plantings and Replanting Cycles 7 1.9 Area of Plantation (Total, Planted and Mature) 8 1.10 Progress Against Time Bound Plan 8 1.11 Progress of associated smallholders or outgrowers towards RSPO compliance 10 1.12 (Revised) Approximate Tonnages Certified 10

2.0 ASSESSMENT PROCESS 11

2.1 Certification Body 11 2.2 Qualifications of Lead Assessor and Assessment Team 11 2.3 Assessment Methodology & Agenda 11

3.0 ASSESSMENT FINDINGS 12

3.1 Summary of Findings 12 3.2 Status of Previously Identified Non-conformities 22 3.3 Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions 28 3.4 Noteworthy Positive Components 32 3.5 Issues Raised by Stakeholders and Findings Pertaining to Issues 32

4.0 CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL

RESPONSIBILITY 33

4.1 Date of Next Surveillance Visit 33 4.2 Acknowledgements of Internal Responsibility and Formal Sign-Off by Client 33

APPENDICES 34

Appendix 1: List of Abbreviations 34 Appendix 2: List of Stakeholders Interviewed and Contacted 35 Appendix 3: Observations and Opportunities for Improvement 36

RSPO 1st Surveillance Assessment Report

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RSPO v1 2011-05-24 3

1.0 SCOPE OF CERTIFICATION ASSESSMENT

1.1 National Interpretation 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 of the RSPO Principles & Criteria.

1.2 Type of Assessment

The annual surveillance certification assessment was carried out on 1 mill and 3 estates under PT Perkebunan Milano owned by Willmar International. The date of certification of this unit was 2010-08-24 valid until 2015-08-23.

1.3 Certification Details

The details of RSPO certification of Pinang Awan Palm Oil Mill and PT Perkebunan Milano are as per the table below Table 1: RSPO Certification details of Awan Palm Oil Mill and PT Perkebunan Milano

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.

RSPO Certificate no.: 01 100 106470

Date of first RSPO certificate & validity: 2010-08-24 valid until 2015-08-23

Date of certification audit: November 19, 2009

Date of previous surveillance audit: -

Date of revised RSPO certificate & va-lidity (if applicable):

-

CPO tonnages claimed: 27,554 tonnes

OER for this period 22.17 %

PK tonnages claimed: 6,262 tonnes

KER for this period 5.46 %

Name of mill / es-tate

Location GPS locations

Latitude Longitude Pinang Awan Mill Desa Pinang Damai, Kec.

Torgamba, Kab.Labuhan Batu 150’34.175” 10012’11.296”

PT Perkebunan Milano – Sungai Daun Estate

Desa Pengarungan, Kec. Torgamba, Kab. Labuhan Batu Selatan

152”25.93” 10014”02.29”

PT Perkebunan Milano – Batang Saponggol Estate

Desa Batang Saponggol, Kec. Kampung Rakyat, Kab. Labuhan Batu Selatan

158”17.61” 10013”20.34”

PT Perkebunan Milano – Merbau Estate

Desa Milano, Kec. Merbau, Kab. Labuhan Batu Utara

213”28.58” 9952”06.43”



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Figure 1: Location of PT Perkebunan Milano’s estates on map of North Sumatera, Indonesia

Merbau Estate

Batang Saponggol Estate

Sei Daun Estate

Labuhan Batu

Riau Province

Straits of Malacca

Simalungun

North Sumatera



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Figure 2: Location of PT Perkebunan Milano’s Pinang Awan Mill and 3 company estates (Sei Daun Es-tate, Batang Saponggol Estate, and Merbau Estate) within the Labuhan Batu, North Sumatera, Indone-sia.

1.5 Organisational Information / Contact Person

Contacts details of the company are as follows:

Company Name: Wilmar International, PT Perkebunan Milano, PKS Pinang Awan

Address: B & G Tower , Jl. Putri Hijau No.10 Medan

PT Perkebunan Milano – Sungai Daun Desa Pengarungan, Kec. Torgamba, Kab. Labuhan Batu Selatan

Contact Person: Lim Peng Hor (Assistant General Manager)

Simon Siburat (Corporate Sustainability Coordinator)

Telephone: +62- 61- 4145777 and 41027777;

Email: + 62-61-4550260 and 80010057



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1.6 Description of Supply Base

Pinang Awan mill is one of the palm oil mills owned by Wilmar International in North Sumatera. Pinang Awan Mill was established in 1996 with a production capacity of 60 tons/hours. The company was initially a National Investment Company, but changed status to a Multinational Investment Company upon approval from the Indo-nesian Capital Investment Coordination Board (‘Badan Koordinasi Penanaman Modal’ - BKPM) in their BKPM decision letter no. 749/I/PMDN/1994 and BKPM decision letter no. 06/V/PMA/2002. Currently Pinang Awan Mill is receiving approximately 35% of its supplies of fresh fruit bunches (FFB) from 3 company-owned estates (Sei Daun Estate, Batang Saponggol Estate and Merbau Estate) and the remaining 65% from independent small-holders, and the mill has no smallholder schemes. Table 3: FFB Supply Information for Pinang Awan Palm Oil Mill

FFB Contributors

FFB supplied from January to December 2010

FFB supplied from January to June 2011

Tonnes % Tonnes %

Company owned estates:

Sei Daun Estate 51,314 18.65 23,845 18.36


44,166 16.05 19,427 14.96

Merbau Estate 24,222 8.80 10,806 8.33

Sub Total 119,701 43.50 54,078 41.65

Smallholders / out-growers:

155,467 56.50 75,763 58.35

TOTAL 275,169 100 129,841 100



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1.7 Actual production volumes, tonnages and projected outputs.

Table 4: Certified tonnages claimed, tonnages purchased or sold, total and projected CPO and PK pro-duction from Pinang Awan Palm Oil Mill

*Data from August 25, 2010 to July 26, 2011, including production from FFB supply from smallholders & outgrowers

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

1.8 Dates of Plantings and Replanting Cycles

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

Name of estate Age of Planted Areas (%) Replanting

cycle (yrs) 0-5 yrs 5-10 yrs 10-15yrs 15-20 yrs 20-25 yrs 25-30 yrs

Sei Daun 497.61 355.69 743.97 316.42 492.29 - 25

Batang Saponggol 99.1 1123.42 282.18 - 158.66 - 25

Merbau 0 668.94 84.97 - 108.29 45 25

Total area 596.71 2148.05 1111.12 316.42 759.24 45 4976.54

Table 6: Planned and actual oil palm replanting activities for PT Perkebunan Milano

Year Total planned re-planting area (ha)

Total planned replanting area for each estate (ha) Actual total area

replanted (ha) Sei Daun

Batang Saponggol

Merbau

2014 45 - - 45 -

2015 341.9 223.61 75.20 43.09 -

2016 414.02 130.38 214.68 68.96 -

2017 755.92 138.13 - 27.05 -

Total 1511.84 492.12 289.88 139.1

Amount (MT)

CPO PK

Certified tonnages claimed 27,554 6,262

Certified tonnages sold* 22,130** -

Certified tonnages purchased* none none

Actual Production* 54,222 13,361

Projected output for next 12 months (year 2011) 66,675 15,875



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1.9 Area of Plantation (Total, Planted and Mature)

Table 7: Oil Palm Planted Area Summary, FFB Production and Average yield/ha for PT Perkebunan Mi-lano

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

Sei Daun Es-tate

2493.19 2408.81 2408.81 - 51,314.160 21.30


1749.43 1627.50 1627.50 - 44,166.131 27.14

Merbau Es-tate

974.77 907.20 907.20 - 24,221.911 26.70

TOTAL 5217.39 4943.51 4943.51 119,701.202 24.21

*Data from period January to December 2010

Table 8: Land use data for PT Perkebunan Milano

Estate Name Total area (ha) Oil Palm

Planted Area (ha)

HCV/

Potential HCV are-

as* (ha)

Other purposes (Road, housing,

etc.)

Sei Daun Estate 2493.19 2408.81 0.4 84.38 Batang Saponggol Estate

1749.43 1627.50 35.67 86.26

Merbau Estate 974.77 907.20 18.122 67.57

TOTAL 5217.39 4943.51 54.192 238.21

Note: * include in planted area

1.10 Progress Against Time Bound Plan

Table 7: 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 Pre-Assessment completed

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

tan14,995 2011

Planned



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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

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 Main Assess-ment complet-

edPT Buluh Canang Plantations South Sumatra 33,800 2011 Planned



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PT Agro Nusa Investama (Sambas) West Kaliman-tan

17,600 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 timebound plan resulting in the company deciding to post-

pone the certification audits for these management units due to the following reasons:

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 reso-lution process 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 Pinang Awan mill has 91 independent outgrowers that supplied FFB to their mill. All independent outgrowers have no permanent contract with Pinang Awan mill, and free trade market is now applied for all independent outgrowers that supplied for Pinang Awan mill. However, the company does not have a plan to identify FFB suppliers with whom they wish to have a long-term contract with, for future planning of associated smallhold-ers to become part of the 3 year programme of compliance to the RSPO P&C. This was raised as a non-conformity.

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) : 27,554 tonnes Palm Kernel (PK) : 6,262 tonnes



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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 490 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 Validations and Verifications. TUV Rheinland Malaysia’s office is lo-cated 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) Carol Ng New assessment team members that were not part of the previous assessment team are as per the table be-low:

Name Position Qualifications / Experience

Irpan Kadir

Auditor

Education: Bachelor of Agriculture, Department of Social and Economic of Agricul-ture, Bogor Institute of Agriculture.

Trainings attended: Sustainable Natural Production Forest Management (Pengel-olaan Hutan Alam Produksi Lestari - PHAPL) assessor training (May 2003); Forest Plantation Management (August 2003) training - Indonesian Ecolabel Institute (LEI). Working experience: Experienced as external auditor of PT. TUV International In-donesia for Sustainable Forest Management and RSPO Principles & Criteria. Has experience in conducting assessments of performance and social mapping for min-ing and forestry companies. He is a senior researcher and trainer at A + CSR Indo-nesia

Aswan Hasibu-an

Auditor

Education: Bachelor of Agriculture, University of North Sumatera. rainings attended: ISO 9000:2000 Series Auditor / Lead Auditor Training - PE In-ternational (Jakarta), IEMA Advanced EMS Auditor (IEMA / EARA ISO 14001) Au-ditor / Lead Auditor Training Course - PE International (Jakarta), OHSAS 18001 Lead Auditor Training Course - PE International (Jakarta). Working experience: Experienced in Quality Control from 1994-2004. Auditor for Quality Management System since 2004 – present. Auditor for Environmental Man-agement System since 2005 – present. Auditor for OHSAS 18001 since 2007 - pre-sent. Conducted over 100 Quality Management System audits since 2004, over 50 Environmental Management System audits since 2006 , and over 25 OHSAS audits since 2007

2.3 Assessment Methodology & Agenda The surveillance assessment was conducted between 26 and 29 July 2011 as per the assessment program be-low. The assessment was carried out in accordance with TUV Rheinland Malaysia’s RSPO audit procedure as well as the RSPO Certification Systems document. During assessment, the qualified TUV Rheinland assessors used the RSPO standard as endorsed for Indonesia 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 all the 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.



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The company proposed the correction and corrective action for all identified non conformities raised to the certi-fication body 15 days after the closing meeting. Verification of closure of major non-conformances was con-ducted 2 months after the closing meeting of the surveillance and implementation of corrective actions for minor non-conformities will be verified during the next surveillance audit. The certification assessment agenda is as explained below. Surveillance Assessment Agenda.

3.0 ASSESSMENT FINDINGS

3.1 Summary of Findings

Date Location/ Main sites

Main activities

26 July 2011

Merbau Es-tate

Opening Meeting - Field checking for Best Practice implementation - Verification previous audit findings - Long term management, document checking

26 July 2011

Rantau Parapat Ramp

-FFB Supply mechanism from independent outgrowers - Interview with FFB supplier, pricing mechanism

27 July 2011

Pinang Awan Mill

- Verification of previous audit findings - Incoming FFB verification - Interview with mill workers. - Good Agricultural Practices - Field visit to land application site for mill effluent - Waste management - Pollution prevention control - Water management

28 July 2011

Sei Daun es-tate

- Verification of previous audit findings - Good Agricultural practices - Interview with villager - Waste management - OSH implementation in plantation - Water management

29 July 2011


- HCV area, management and monitoring - Good Agriculture practice - Interview with villagers of Panggarungan village - Document review: Checks of documents pertaining to all RSPO Principles & Criteria - Worker Interviews (spraying, harvesters): Wages, OSH, sexual harassment is-sues, first aid, housing facilities, labour unions, gender issues, communication procedures, handling of complaints. - Housing amenities inspection: Facilities, sanitation, water supply, children day-care centre, landfills for organic and inorganic wastes and other facilities Chemical stores inspection: Storage, MSDS, chemical mixing areas, PPE, venti-lation, security. - Workshop: Hazardous waste storage, first aid kit, OSH - Clinic inspection: Medical staff, medical facilities, documentation - Sei Daun Village & Tempel Village: Interview with villagers, housing, children daycare - Block 109 (estate land previously illegally occupied by villagers) to confirm that previous land dispute has been resolved and land is now managed by the com-pany

29 July 2011

Sei Daun Estate

- Auditor team report and preparing for closing meeting - Closing meeting and present findings.



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The following is a summary of findings during this surveillance audit 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: During this surveillance audit, the company’s policy on transparency of information requested by stake-holders is still applicable. The company also has a documented procedure for maintenance of the rec-ords pertaining to request information which has been applied since 1st March 2009. The procedure states that information requested and responses will be maintained for 3 years for administrative re-quests, 1 year for quality and environment related requests, and 5 years for request made by company personnel. All incoming information is recorded on a book to record all correspondences with stake-holders including complaints, suggestions or requests for assistance, information requests through formal and informal methods (written /verbal). The source of information requested, person in charge to respond, and response status (closed or not closed) is also recorded. During surveillance audit, the auditor found records of information requested from August 2010 to June 2011 made to the company’s estates and Pinang Awan mill. The company has also made some documents publicly available such as the company profile, general corporate policy, company license as well as the company’s social and environmental impact assess-ment (‘Analisis Dampak Lingkungan & Sosial’ - AMDAL) document, land cultivation rights titles (‘Hak Guna Usaha’ – HGU), company activity report to the local government, social and environment survey report, planting and production report, community development activities report, and manpower report as stated on a company letter no. 044/ED-MLN/Ext/VII/09 sent to relevant stakeholders The company has a documented procedure for maintenance of incoming request of documents stated above which has been applied since 1st March 2009. The procedure states that records of requests to view these management documents shall be maintained for 5 years. Compliance status: Full Compliance

Principle 2: Compliance with applicable laws and regulations

Criteria assessed: CR2.1, CR2.2, CR2.3 Criteria not assessed: Findings: All legal documents required to demonstrate ownership of land still same with the documents that showed during main assessment, i.e: 1. HGU year 1996 for Merbau Estate and Decree Letter from the Head of the National Land Agency

(‘Badan Pertanahan Nasional’ - BPN) No. 20/HGU/BPN/96 dated 31 May 1996, which is valid for 35 years for 974.77 ha.

2. HGU year 1988, for Sei Daun estate located at Panggarungan Village, with State Minister’s Decree No. 8/HGU/DA/88 for 2500 Ha, valid until 31 December 2013,

3. HGU for Batang Saponggol estate, with decree letter from the BPN Head No. 83/HGU/BPN/95 for 1749.43 Ha, valid since April 11, 1996 until April 11, 2021.

4. HGU for Pinang Awang mill located at Aek Batu Village for area 190.900 ha valid for 20 years until February 14, 2016, with decree from the Labuhan Batu District Land Head Office No. 460/31/1375-IL/XII/1994.

Other legal documents checked and found to be still valid include: 1. Permit for conversion of rubber plantation to oil palm plantation, permit no. 503/431/F dated 29

April 2009 for Merbau, Batang Saponggol, Sei Daun Estate 2. Approval letter from the Capital Investment Coordination Board (‘Badan Koordinasi Penanaman



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Modal’ - BKPM) no. 749/I/PMDN/1994 and BKPM Approval letter No. 06/V/PMA/2002 regarding approval for PT Perkebunan Milano to change from a National Investment Company to Multina-tional Investment Company)

3. Industrial Business Permit (Ijin Usaha Industri) no. 142/T/Industri/2004. 4. Permit for extension of mill capacity from 30 ton/hour to 60 ton/hour, letter no. 90/II/PMA/2004 dat-

ed June 09, 2004. 5. BKPM Decree letter No. 935/I/industri/2006 valid until January 2035. 6. The mill’s license no. 503.660.3/86/BLH/2010 for temporary storage of hazardous wastes is dated

29 October 2009 and valid for 5 years 7. The license of the company’s contractor for collection of scheduled wastes, PT Horas Miduk, is

dated 22 October 2009 and valid for 5 years. During the last main assessment, the company had not yet obtained their Plantation Operation Permit or ‘Ijin Usaha Perkebunan’ (IUP), however during the surveillance audit company already received their plantation operation permit such as:

1. Plantation Operation Permit (IUP-B) no. 525.26/04/PEM/2010 dated 14 January 2011 for Merbau es-tate for total area of 974,77 Ha.

2. Plantation Operation Permit no: 525.26/45/2010 dated 24 February 2010 for Batang Saponggol es-tate

3. Plantation Operation Permit No: 525.26/44/2010 dated February 2010 for Sei Daun Estate for a total area of 2,493.19 ha

From field inspections, it was confirmed that boundary stones are maintained to identify estate land boundaries. There are 10 boundary stones located in Merbau estate made in concrete located around the estate, and the estate office has GIS locations for each boundary stone. For Sei Daun estate, there are 8 concrete boundary stones demarcating the estate area. All boundary stones are well maintained and clearly visible. In addition the company made the trenches as a border between the estate land and pub-licly owned land or other existing company land around the company's estates. The trench has a width of 2 meters and is 1 meter deep. There is no more identified land conflict since 2008, due to the company has undergone several cases of land conflicts with surrounding communities, but these disputes were resolved through a conflict res-olution process that was acceptable to all parties (as explained in the certification audit report). The company still maintains a documented procedure on conflict resolution and compensation, document no. PRO-BM.GEN-007, applied since 01 July 2009, which contains a flowchart on the company’s con-flict resolution mechanism, as well as a sample form for recording complaints, suggestions or requests for information or assistance received from local communities (dated 1st May 2009). The company has not carried out their operations in a manner that diminished the legal or customary rights of other users especially the local community’s surrounding the company’s area. As explained in the Social Impact assessment document there are some existing traditional rights of local communities were identified at Merbau Estate, Batang Saponggol Estate and Sei Daun Estate, such as grazing, fish-ing, gathering and sale of mushrooms and vegetables, access to roads, and maintenance of grave-yards. All these are activities allowed under agreed conditions between the company and the local communities, and as founded during main assessment audit, the company has documented meeting minutes of an event conducted by the company on August 14th 2009 at Merbau Estate in order to in-form regarding the results of the company’s social impacts assessment as well as discuss the tradition-al rights of the land users, Maps of appropriate scale showing the traditional rights of the land users were developed with the participation of the invited local communities. During surveillance assessment, this agreement between the company and the local communities was confirmed as still being imple-mented. The company together with FORKAS (communication forum) held an event July 02, 2011 to discuss with villagers of Pangarungan village regarding social impacts, their traditional right and other traditional activities. There is a memorandum of agreement (MoU) between the company and local communities regarding cattle grazing activities, however no appropriate map indicating the agreed locations for graz-ing activities was provided to communities. This is raised as a non conformity. Compliance status: Non Compliance 1. An operator of the mill steam boiler has operator certificate no: 213/PNK3-PUBT/OB-I/II/08, however



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his certificate expired on February 11th , 2011 and no effort was made to renew the certificate 2. According to the decision letter from the Government Head of South Labuhan batu, the company is required to monitor community health that is affected by land application and company required to monitor and compare production of oil palm estates where land application is carried out and non-land application area. However during surveillance audit, this information was not available. 3. There is an MoU between Batang Saponggol estate and community members who carry out cattle grazing activities inside the estate such as with communities from Kampung Lalang and Banten village, and the company has maps for grazing locations which are allocated for each village, however the map has not been distributed to the communities that already signed the MoU.

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

Criteria assessed: CR3.1 Criteria not assessed: - Findings: The company has an existing management plan which included a budget and expenditure plan for a 3 year period i.e. year 2011, 2012 and 2013. The management plan includes information about planning for company’s revenue from product selling and analysis. In addition, to close the non-conformity raised during the certification audit, the company also formed a long-term overall business plan of company’s activities to achieve long term economic and financial viability based on analysis of profit and loss for at least the past 3 years. This is a part of company’s improvement from main audit condition. PT Perkebunan Milano has a revised replanting program, as during the last audit it was stated that re-planting will begin in 2011. After company reevaluated the productivity of estate, the replanting program will begin in 2014 at Merbau estate for a total of 45 ha at 2 blocks, i.e block 29 for total area of 21.43 ha and block 52 for total area of 23.57 ha. Replanting for Sei Daun and Batang Saponggol estate will begin in year 2015. Total planned replanting area from 2014 to 2017 is 1511.84 ha in all estates. Compliance status: Full Compliance

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

Criteria assessed: CR4.1, CR4.2, CR4.4, CR4.5, CR4.6, CR4.7, CR4.8 Criteria not assessed: CR4.3 Findings: SOPs for all estate and mill activities are available. The mill also carries out internal audits focused on quality, environmental and safety aspects based on ISO, RSPO and ISCC requirements. There are rec-ords of internal audits conducted on 22 June 2011 and 8 March 2011 with records of corrective actions taken by the mill. However, the mill has not conducted internal audits for checking or monitoring of imple-mentation of SOPs pertaining to mill operations. There is evidence that the estates are implementing their plan to protect watercourses and maintain river buffer zones. During site visit to Merbau estate, it was sighted that the trees along the field drain buffer zone (about 3 m from the drain) have been marked with yellow paint to indicate that these palms cannot be sprayed or undergo fertilizer application. Weeding at the marked palms is done manually. Based on interviews with chemical sprayers it was confirmed that they are aware that they are not to carry out spraying of palms located at the drain or nearby river buffer zones. Merbau estate carries out water sampling of upstream and downstream river water samples once every 6 months and results are reported in their implementation report for UPL and UKL (Environmental Monitoring & Management Plan). As viewed from the UPL and UKL implementations report dated August 2010 for Merbau estate, the upstream and downstream river samples for Merbau river were 2.86 and 2.91 respectively while in the



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report dated March 2011, the upstream and downstream samples both had a BOD of 0.49. This is with-in the legal BOD standard of 3 according to the Government Decree 82 dated 14 December 2001 on Water Quality Monitoring and Water Pollution Management. The mill also carries out monthly monitor-ing of effluent BOD and reports this in their report on implementation of UPL and UKL document once every 6 months. The BOD analysis results for Jan to June 2011 are all within the legal standard for mill effluent land application, which is 5000ppm. This is a part of company improvement from main audit condition. The mill has documented Environmental Objectives, Targets and Improvement for year 2011, which in-cludes plans for to reduce water usage through installation of ceramic cantilevers at the sterilizer, press and clarification, usage of conveyor for dust disposal, reuse of water at the turbine cooler, and mainte-nance of distribution valves according to schedule. There is evidence of implementation of biological methods for management of common oil palm pests. During field visits to Merbau estate and Batang Saponggol estate, plantings of beneficial plants such as Turnera subulata and Antigonen leptopus were sighted along the roads of the estates. These are plants used to attract natural predators of leaf eating pests (nettle caterpillars and bagworms). Merbau estate and Batang Saponggol estates also have installed a number of barn own boxes for housing of barn owls (natural predators of rat pests). The estate carries out regular census of leaf eating pests and rats as well as census on barn owl box occupancy rates. There is evidence as seen from chemical is-suance records that no chemicals used for treatment of pests has been issued in year 2011 due to low pest attacks. For example, Merbau estate has stock of Cymbush, used for chemical treatment of cater-pillars, however there was no issuance of this chemical in year 2011, while at Batang Saponggol es-tate, there is some stock of Dipel WP (form of biological treatment of caterpillars using the bacteria Ba-cillus thuringiniensis) but also no issuance of this chemical in year 2011. The estates carry monitoring of pesticide toxicity units. As viewed from data from Batang Saponggol estate, the estate records usage of chemicals Glisat and Winson in active ingredient (a.i.) per hectare. Records show that usage of Glis-at in a.i. per ha for year 2010 ranged from 82.80 to 92.52 litres of a.i. per ha, while for Winson, it ranged from 1.07 to 1.13grams of a.i. per ha. Estates use chemicals that are registered, i.e. for Merbau estate, chemicals used include Glisat 480SL (active ingredient glyphosate isopropyl amine), Winson 20WG (methylsufuron), Garlon, Agristicker, and Cymbush (used for treatment of caterpillar pests, but there has been no issuance of this chemical in year 2011 due to low levels of pest attacks), while at Batang Saponggol, it was found that that only Glisat 480SL and Winson 20WG is used for herbicide spraying. Other chemicals found in stock at Batang Saponggol include Agristick and Dipel WP (bacillus thuringiniensis, used as biological treatment of cater-pillars), however records show that these chemicals have not been used in year 2011 due to low pest at-tacks. The estates are no longer using Gramoxone or other chemicals containing paraquat, and there is no evidence of usage of WHO Type 1A or 1B chemicals. Estates maintain records of amounts of pesti-cides used, active ingredients used, area treated, amount applied per ha and number of applications and based on sample checks, and applications do not exceed recommendations as per product label. Based on sample checks at Merbau estate and Sei Daun estate, medical checks are conducted once a year for all workers handling chemicals. For example, the last check for Merbau estate workers was con-ducted on 4 June 2011 for 48 sprayers and manurers, and included checks of symptoms for 25 types of diseases, physical checks of heart and liver condition, skin allergies, kidney function, reproductive system and nervous system. However, the medical checks do not include blood tests of the workers to check for low blood cholinesterase levels (indicator of possible poisoning) although in records of medical checks of workers, there is a recommendation that haematology tests be conducted. This was raised as noncon-formity. Based on interviews conducted with female sprayers at Merbau estate, they are not permitted to carry out spraying or work with agrochemicals if they are pregnant or breastfeeding. Merbau clinic has records of pregnancy checks and a letter issued notifying if a female sprayer is found to be pregnant so she will be transferred to perform other work. During main audit was found the oxygen tank at Batang Saponggol polyclinic is empty and not ready for use in case of emergency. Company has improved this condition; it was found that all oxygen tanks in the company’s clinic have been maintained in good condition in case of emergency including the ox-ygen tank in Batang Saponggol. Noise analysis results at mill engine room, boiler room and kernel room, which were found to have ex-



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ceeded the legal standard (99.7 dbA at engine room, 93.3 dBA at boiler room and 97.9 dBA at kernel room). The mill provides the mill workers with ear protection, i.e. workers at engine room and kernel sta-tion wear ear muffs, while workers at boiler room wear ear plugs. The mill has also carried out health checks for 25 mill workers with a report on medical check results from the Manpower and Transmigration Department of Medan, dated June 2009. The checks were for lung function and hearing, and based on the results, it was seen that 8 mill workers had reduction in hearing in both ears and 4 workers had reduc-tion in hearing in both ears. There is evidence that the mill has taken action to prevent further loss of hear-ing in some mill workers, as there are records of three workers with hearing reduction that was shifted to other carry out work at FFB sorting. However, one engine room operator was also found to have hearing loss in both ears but there has been no action taken to transfer him to perform other work. This was raised as an observation. Some mill workers were found to have not undergone any medical check-up, such as a boiler operator that has been working at the mill for 12 years. Compliance status: Non-compliance 1. The mill has not conducted internal audits for checking or monitoring of implementation of SOPs

pertaining to mill operations. 2. Some record of operational activities is not available such as:

i) Procedure No. PROCEDURE-GEN-013, emergency response revision 02, dated on 14 July 2011, includes emergency procedures for earthquake but training on the procedure was not done at Pinang Awan POM.

ii) Report for HCV management plan is not available at Batang Saponggol estate, which is required for reference and implementation of management plans

3. At Merbau and Sei Daun estate, medical checks are conducted once a year for all workers han-dling chemicals. However, the medical checks do not include blood tests of the workers to check for low blood cholinesterase levels (indicator of possible poisoning) although in records of medical checks of workers, there is a recommendation that hematology tests be conducted.

4. Some mill workers were found to have not undergone any medical check-up, including hearing test, such as a boiler operator that has been working at the mill for 12 years.

Principle 5: Environmental responsibility and conservation of natural resources and biodiversi-ty

Criteria assessed: CR5.1, CR5.2, CR5.3, CR5.4, CR5.6 Criteria not assessed: CR5.5 Findings: The mill has their environmental management and monitoring document known as the UKL and UPL doc-ument which was last revised on Sept 08 and approved by the Head of Labuhan Batu Regional Body for Management of Environmental Impacts on 24 October 2008 for production capacity of 60 tonnes of FFB per hour. This document includes details of the mill's activities pertaining to oil palm processing and pro-duction, and CDM project, and also analysis results for air quality, NO2, SO2, particulate, carbon monox-ide, land water quality, biological components and so on. The mill prepares a report on implementation of the UPL and UKL document once every 6 months, and most recent reports were prepared for July 2011 and January 2011. The report includes the analysis results for ambient air, genset and boiler emissions quality, monthly mill effluent quality analysis results and noise quality. All results were found to be within legal standards, except noise analysis results at engine room, boiler room and kernel room, which were found to have exceeded the legal standard (99.7 dbA at engine room, 93.3 dBA at boiler room and 97.9 dBA at kernel room). The mill took action by providing the mill workers with ear protection, i.e. workers at engine room and kernel station wear ear muffs, while workers at boiler room wear ear plugs. Merbau, Sei Daun and Batang Saponggol estates also all have their UKL/ UPL document which was last revised on October 2008 and approved by the Head of Labuhan Batu Regional Body for Management of Environ-mental Impacts according to their decree letter no. 660/937/BPDL-LB/AP/2008 dated 24 November 2008. The UKL and UPL document includes details on the estate activities, usage of natural resources, climate, air and water quality, geography and other environmental aspects, social aspects, potential environmental impacts, and monitoring. Merbau estate prepares their UPL and UKL implementation reports once every 6 months as per the legal requirements, and latest reports were sighted for March 2011 and August 2010,



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and these includes the reports on all aspects required (including water and air quality analysis, job oppor-tunities and total number of workers (once a year), and road damage) except no. of workers, which is re-ported separately to the local manpower department once a year. There are no changes to Merbau es-tate’s UPL and UKL document dated October 2008 as there have been no changes in operations. The mill and estates have also conducted their Identification of Environmental and Occupational Safety Aspects and Impacts (Identifikasi Aspek/Bahaya K3 dan Dampak/Resiko K3) for year 2011. These documents were prepared according to the company's SOP-GEN-002 pertaining to Completion of Aspects and Im-pacts Register (Petunjuk Pengisian Aspect-Impact Register; dated 10 Jan 2009). The document covers environmental and safety aspects and impacts for estate work activities (e.g. manual treatment, mechani-cal treatment, harvesting and tree maintenance), office activities, housing, management of scheduled wastes and domestic wastes, usage of natural resources, warehouse operations, transport, and housing etc. The company has developed a HCV management and monitoring plan to ensure that conservation val-ues of identified HCV areas are preserved, e.g. riparian buffer zones at rivers were established to pre-vent erosion, and the company will focus on monitoring the quality of watercourses and plant vertiver grass to reduce erosion at river banks, as well as prohibit agrochemical application at all river banks, maintain clear boundary markings and conduct regular patrol program. However, the company should improve their patrol programs, so these are not only focused on monitoring company's assets and ille-gal activities but also to monitor identified HCV areas and ensure no wildlife hunting is carried out. To improve quality of HCV 1.4 and its value in Batang Saponggol estate, the management conducted some enrichment planting activities of several mangrove species inside the area. The company has a program to monitor mangrove growth, in order to increase biodiversity, prevent erosion, and also to prevent flooding of community areas. All identified HCV 6 areas were enclaved and excluded from be-ing planted, and boundaries of these areas have also been marked. All damaged graves were recon-structed, and the company assigned a worker to clean the graves every day. The company has taken actions to protect identified HCV areas or identified potential HCV areas. On their HCV management plan document it is stated that all identified HCV areas will not be developed into plantation areas, and the boundaries of HCV areas have been marked with yellow paint for easy identification. Company em-ployees are prohibited from hunting and taking of fauna from the plantation and adjacent land. Efforts are being taken by the company to protect these areas, for example, sign boards prohibiting hunting and illegal hunting have been posted adjacent to boundaries of HCV areas. Posters and signs warning of the presence of protected species were produced and distributed in all Milano estates and strategic locations such main roads. The poster contains information about all protected species within PT Perkebunan Milano areas, and restrictions on hunting activities. Formal events to inform villagers re-garding prohibition to illegal hunting, and fishing were conducted on January to August 2009 in Batang Saponggol Village, Teluk Panji Village and Perkebunan Teluk Panji Village. As correction for main audit findings, company was assigned some officer to monitor implementation of HCV management plan. For example, two officers were assigned for Merbau estate and for Batang Saponggol estate and they were trained on February 21 to 23, 2011. All estates have a Standard Operating Procedure available for management of domestic wastes gener-ated from housing & offices, plastic wastes as well as for hazardous wastes which defines the require-ments for identification, handling, storage, management & verification of the wastes generated from various activities. It was seen on-site that Merbau and Batang Saponggol estates carries out good management of domestic waste according to work instructions. There are separate waste bins for or-ganic wastes such as food scraps and cut grass, inorganic wastes such as plastics, and scheduled waste such as broken lamp glass, and oil containers. The organic and inorganic wastes is collected and disposed at separate landfill areas located away from housing or rivers and, and the landfills are closed with soil when full. However, there was sighted evidence of small area of burnt waste near the crèche at Merbau estate, even though the company has placed signs and informed workers that no burning of waste is permitted. This was raised as an observation. Medical waste at Merbau estate’s clinic is sent to the nearby general hospital for incineration and records of amounts of clinical wastes sent and received by the hospital are maintained. Pinang Awan mill has a license for storage of haz-ardous wastes dated 29 October 2009 and valid for 5 years for maximum storage time of 180 days if amount produced daily is less than 50kg, and the mill has a licensed contractor for collection of sched-uled wastes. Inventories of incoming and outgoing amounts of hazardous wastes are maintained for oil containers, used batteries, neon lamps, chemical containers, paint containers, and filters. It was found that the last collection of hazardous wastes from the mill was on 26 July 2011, while the previous col-lection was on 25 October 2011, which is a storage period of more than 180 days are permitted in the mill’s license. This was raised as an observation. Sei Daun estate and Batang Saponggol estates send



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their hazardous waste to the mill for collection by the contractor. It was sighted at Batang Saponggol estate that inventories of all types of hazardous wastes produced are maintained and there are records of amounts of each type sent to the mill. As Merbau estate is located farther away from the mill, the es-tate has obtained its own license for temporary storage of hazardous wastes for maximum storage pe-riod of 180 days (oil containers and batteries only) dated 16 March 2011 and valid for 3 years. As the license is new, there has been no collection of hazardous wastes directly from the estate at the time of audit (previously was sent to the mill for collection by supplier named PT Wira Budi Gautama). It was found that Merbau estate had not yet prepared a report on their hazardous waste inventory to the local government once every 3 months as required in their license, however, this report was prepared im-mediately during the audit and sent to the local Environmental Department of Labuhan Batu Utara. This was raised as an observation. As corrective action for main audit finding, company made inventories for all hazardous wastes produced at Batang Saponggol estate such as lubricant oil containers, petrol containers, filters, used batteries, and grease trap wastes. All pollution and emission sources at the mill have been identified in their Identification of Environmental and Occupational Safety Aspects and Impacts. Pollution & emissions sources identified include gas emis-sions from mill activities (e.g. boilers, ETP), spillage of CPO or oil, land or water contamination due to dropped EFB, etc. Sources of greenhouse gas emissions have also been identified as part of requirement for ISCC certification. The mill has documented Environmental Objectives, Targets and Improvement for year 2011, which includes plans to reduce pollution and emissions through: 1) Preventing of overflow and pollution resulting from land application of palm oil mill effluent to the field

by increasing area of land application and continuous monitoring of effluent quality, soil quality, am-bient air and air emissions

2) Maintain maximum usage of petrol at 0.79%/ ton FFB by using EFB as boiler fuel, having a pelleting system for EFB, reuse methane gas as a fuel, and usage of static crane to lift EFB to trucks (without the use of loader), etc

The mill is also implementing a CDM project for methane recovery in wastewater treatment. The project was registered on 3 December 2008 with an estimated emissions reduction of 2783 tonnes per month. In addition, the mill has implemented a system to convert fibre into pellets. This reduces amount of space required for transport of fibre to other locations, and hence is a method to reduce utilization of fossil fuels for transport of fibre. The company monitors all fuel consumption such as diesel oil and other fossil fuel, as recorded on records, for year 2010 company expenses were between 0.17 and 0.65 % for total pro-duction cost per ton FFB processed, this is still within the company’s target i.e. 0.79% per ton FFB pro-cessed. Water consumption for year 2010 is between 1.19 to 1.75 tonnes of water per tonne FFB processed, this is still below the company’s defined target i.e.1.80 tonnes of water per tonnes of processed FFB. The company has an environmental program to achieved defined target especially to reduce fossil fuel consumption such as, pelleting machine operation and EFB transporter. In year 2011 there are some activities will be conducted i.e.: 1. Installing EFB management unit. 2. EFB usage as boiler fuel. 3. Methane gas reactor installation for methane capture from effluent ponds. 4. The usage of methane as genset biomass 5. The usage of static crane for transport of EFB to dump trucks.

Compliance status: Compliance with observations

Principle 6: Responsible consideration of employees and of individuals and communities af-fected by growers and mills

Criteria assessed: CR6.1, CR6.2, CR6.3, CR6.4, CR6.5, CR6.6, CR6.7, CR6.8, CR6.9, CR6.10, CR6.11 Criteria not assessed: Findings: As found during certification audit, the company has a final documented Social Impact Assessment (SIA) made by a consultant, Aksenta in 2009, but a nonconformity was raised because this report does



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not explain what were the positive and negative social effects identified during the assessment. The company’s company consultant has since identified positive impacts (direct and indirect) and the nega-tive impacts (direct and indirect) and included this in the final version of the SIA. The positive impacts include employment opportunities, business opportunities, accessibility, monetary, economic ability, whereas the negative impacts such as clean water, and decreasing of villager’s lands. Also, during the certification audit, it was found that monitoring and management plan of social impacts was not pre-pared. During this surveillance audit, it was found that a management and monitoring plan has been made for the years 2010-2012, and the company has conducted social impact management and regu-lar monitoring for the impact. The mill has a documented Social Impacts Management Report for PT Perkebunan Milano Pinang Awan made in July 2011. The company held a meeting with villagers Pulo Bargo and Sipare- Pare Tengah on 13-14 June 2011 to obtain feedback related to community devel-opment program activities and social impacts of corporate activity. The results of the meeting subse-quently included in the monitoring plan and management of social impacts in 2011. However there is no clear information about schedule for completion, location and person incharge for these activities. This was raised as a new non-conformity. There are open and transparent methods for communication and consultation between growers and/or millers, local communities and other affected or interested parties, for example, Pinang Awan mill has a mechanism to accommodate the complaints, requests for information from employees and other stake-holders, the company put a suggestion box near the security post which is scheduled to be checked once a week. To date, accordingly to management, there has been no incoming mail obtained from the suggestion box. Communication through the SB-KBP (Workers Union of Pinang Awan Mill) states have got socialization procedures of communication, consultation and Internal coordination (PRO-HRD-003, rev. 0 effective date July 20, 2011). Although the company already has communication procedures and problem resolution, today both parties are devising mutually agreed procedures. There are minutes of meetings drafting the settlement procedures of communication, consultation and internal coordination dated July 20, 2011. The document comes with a photo and list of attendees. There is a mutually agreed and documented system for dealing with complaints and grievances, which is implemented and accepted by all parties, as it was founded during surveillance audit. The Company has recorded the implementation of the settlement of complaints from stakeholders. There is some evi-dence of settlement of the complaint i.e. There is a letter from the Ombudsman Indonesia No. 22/konfirmasi/omb-LBS/vi/2011 dated July 4, 2011 regarding claimed sewage pollution. It was stated in the letter that there were reports of pollution from the Bunut village of District Torgamba thought to have come from waste through the River Mill Milano Pinang Awan. The mill has conducted an investigation on the same date and no such waste pollution was found. There was also a verbal request by phone from the Village Sigambal II on 26/10/2010 for the company to conduct road watering. The request was fulfilled and road watering was carried on the same date when the request was made. Any negotiations concerning compensation for loss of legal or customary rights are recorded with through a documented system. For example, the company has land claim settlement documents for a case that emerged in 2008 between the company and several farmers group. Confirmation was made to the Head of Sungai Daun Village that no claims arose after the settlement of this dispute. Out the court, the company made a policy to give money to the 556 tenants amounting to Rp1 million for the demolition of shacks and transportation money. Salary paid and conditions for employees and for employees of contractors were found to meet at least legal or industry minimum standards, e.g. According to interview result with head of SPSI (Workers un-ion) in Milano Ramp at Rantau Prapat, Komarsyah Ray, loading and unloading workers receive wages Rp80, - for every kg of FFB are loaded / unloaded. In one day, a worker can handle up to 6 tons, so it the income of a worker is calculated to be around Rp48,000. This amount is in accordance with the minimum wage set by the government (Decree No. Governor of North Sumatra. 188.44/607/KPTS/Tahun 2011) for Rp1,205, 000 per month. This was confirmed through checks of pay slips for the month of July 2011, for example, an employee at the Mill Pinang Awan had a total payroll of Rp1,505,895 and salary deductions of Rp73,257 for that month, so nett salary received was Rp1,432,638. The number is still above the minimum wage. The company respects the right of all personnel to form and join trade unions of their choice and to bargain collectively. Pinang Awan mill has encouraged the formation of a Workers Union (Serikat Pekerja-Kesatuan Buruh Perjuangan or SP-KBP), and on March 1, 2011 the union was founded. On May 26, 2011 the company invited the SP-KBP to draft a Collective Labour Agreement. At the time of audit, the agreement has not yet been completed. The company has a policy on child labour, however the company does not maintain adequate worker information to ensure the implementation of this policy. For example, for workers at the at the Rantau Parapat FFB ramp contracted for loading and unloading of FFB, data lists of workers only include the



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names of the workers with no date of birth, there is no clear information to on the age of workers to en-sure that hiring of workers is done according to company policy and labour laws on minimum age of employees. The agreement of cooperation between the contractor for FFB loading-unloading (PUK F. SPTI) and the mill has not been included any requirements to comply with the company’s policy on minimum worker’s age. As stated by representatives of trade unions in Pinang Awan mill, the company has a policy against discrimination and provides equal opportunity for every employee. The Collective Labor Agreement document in Milano Estate and a statement under article 14 regarding promotions. Promotions are open to all employees. There has been no complaint from company’s worker regarding discrimination treatment from management of the estates or Pinang Awan mill. Company has a policy to prevent sexual harassment and all other forms of violence against women and to protect their reproductive rights, which is implemented. There is recorded evidence that the company has undertaken the responsibility to safeguard women's reproductive rights. For example: there is a documented request for maternity leave from a female employee of Sei Daun Estate on 11 January to 1 April 2011 (90 days) in accordance with company regulations regarding the provision of maternity leave. The company has documents from the General Hospital which lists patients that are employees of PT Perkebunan Milano who obtained maternity leave between August 23 and October 6, 2010. As corrective action from main audit finding, company provide some daycare facilities for em-ployees’ children such as in front of security office at Pinang Awan mill, Batang Saponggol estate, Merbau estate and Sei Daun estate. The company has good cooperation with smallholders and other local businesses. Status of the busi-ness relationship between the outgrower and agents with the mill is a free sale transaction, so there is no bond for them to sell FFB only to the mill. Price becomes the deciding factor for whether suppliers sell to PT Perkebunan Milano or to another mill. While it is free sale, mill using a form for sale and pur-chase agreements to be signed by the suppliers to ensure suppliers comply with safety regulations and certainty of the origin of FFB. The mill and the estates have provided training to the outgrower in 2010 and 2011. Materials provided include trainings on techniques for cultivation, maintenance and harvest-ing. The company has contributed to the local communities and implements the Community Development Program. Example: the company assisted to repair public roads, repair classrooms and renovate of public toilets in primary schools at Sigambal, and provide material donations for the mosque Ar Raudha. A contribution recognized by the Communication Forum (Forkas) of Tempel Sub-Village, is that the company has provided sewing training for residents in 2011. These contributions were made as a result of consultation with local communities and implementation of the company’s Community Development Program. This is correction from non conformity found during main audit. Compliance status: Non Compliance 1. The company has conduct social impact management and regular monitoring for the identified social impacts, however there is no clear information about the schedule for completion, location and person in charge for these activities. 2. The company does not maintain complete information on workers age and identity to ensure that there are no under aged workers working at the Rantau Parapat FFB loading ramp. Only a list of work-ers names is maintained, without information on date of birth and start date of work. The agreement of cooperation between the contractor for FFB loading-unloading (PUK F. SPTI) and the mill has not been included any requirements to comply with the company’s policy on minimum worker’s age.

Principle 7: Responsible development of new plantings

Criteria assessed: - Criteria not assessed: All Findings: There is no development of new planting in PT Perkebunan Milano, all plantations are mature plantations. Compliance status: Not Applicable



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

Criteria assessed: CR8.1 Criteria not assessed: - Findings: The mill has a documented Environmental Objectives, Targets and Improvement for year 2011, which in-cludes plans for reduction of environmental impacts, waste production, pollution and emissions through: 1) Preventing of overflow and pollution resulting from land application of palm oil mill effluent to the field

by increasing area of land application and continuous monitoring of effluent quality, soil quality, ambi-ent air and air emissions

2) Maintain maximum usage of petrol at 0.79%/ ton FFB by using EFB as boiler fuel, having a pelleting system for EFB, reuse methane gas as a fuel, and usage of static crane to lift EFB to trucks (without the use of loader), etc

3) Reduce water usage at the mill through installation of ceramic cantilevers at the sterilizer, press, and clarification, usage of conveyor for dust disposal, reuse of water at the turbine cooler, and mainte-nance of distribution valves according to schedule.

The estates have environmental monitoring and management plans in the form of their UKL/UPL plans, which includes plans pertaining to management of natural resources, air and water quality, and other environmental aspects, social aspects. Monitoring reports of implementation of this plan is prepared once every 6 months as required by Indonesian law. Aspects reported, as seen in the most recent re-port for March 2011 and August 2011 include water and air quality analysis results (twice a year), job opportunities and total number of workers (once a year), and road damage. The company has also im-plemented their plan to reduce usage of paraquat, as found during this surveillance audit; the estates are no longer using Gramoxone or other chemicals containing paraquat. Compliance status: Full Compliance

3.2 Status of Previously Identified Non-conformities

A total of 13 nonconformances were identified during the main certification assessment. These consisted of 4 major non-conformities and 9 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 (Major indicator 1): Documents showing ownership or lease of the land in accord-ance with relevant laws.

Non-conformance No 1 of 13 : The company has yet to receive their Plantation Operation Permit (‘Ijin Usaha Perkebunan’ - IUP) which the company applied for in March 2008, but has not followed up on the application request. Corrective Action: The company has re-applied for this IUP for all estates to the relevant authorities depending on estate location. PT Perkebunan Milano made a list of operational permits available for all estates. The company shall ensure that monitoring and measurement of evaluation legal and other regulation will be conducted periodically as stated on the procedure. Verification from 1st surveillance audit findings: The IUP for all 3 estates have been approved with details as follows: 1. IUP-B no. 525.26/04/PEM/2010 for total area of 974.77 ha in Milano village, Merbau, Labuhan Batu

Utara district dated 14 January 2011. Registratrion renewal application no. 004/BMR I Sumut Ekst/I/2011 was accepted by the Department of Forestry and Plantation, Labuhan Batu district as



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stated in a letter dated January 17, 2011. 2. Decree letter no. 525.26/45/2010 from Head of Labuhan Selatan stating approval for IUP-B for oil

palm estate area located in Batang Saponggol village, kampong Rakyat, District of South Labuhan Batu. Renewal of application registration for IUP B No. 007/BMR I Sumut Ekst/II/2011 dated Febru-ary 24, 2011 was accepted by the Forestry and Agriculture officer on February 24, 2011.

3. Decree letter no. 525.26/44/2010 from Head of Labuhan Selatan District, stating approval for IUP-B for total area of 2,493.19 ha located in Pangarungan village Torgamba sub district. Renewal applica-tion letter no. 008/BMR I SUMUT Ekst/II/2011 for Izin Usaha Perkebunan (IUP B) on behalf of PT Perkebunan Milano to Bupati Labuhan Batu Selatan was accepted by Forestry and Agriculture local officer on February 24, 2011.

Auditor Conclusions: Closed

Criterion 3.1 (Minor indicator 1): A documented working plan of the company for a minimum of 3 years period.

Non-conformance 2 of 13: The company has no documented management plan that aims to achieve long-term economic and fi-nancial viability. Corrective Action: The company has completed their management plan for 2010 until 2012 including information on reve-nue, budget, and description of programs planned to ensure economic and financial viability. The com-pany will revise the content of their management plan as required. Verification from 1st surveillance audit findings: Both estates and the mill have developed a 3 year budget and revenue plan for year 2012 to 2013. However the company did not consider actual profit and loss in year 2010 in preparation of their plan for year 2011 (this was raised as an observation). Auditor Conclusions: Closed with observations

Criterion 4.4 (Minor indicator 1): An implemented water management plan.

Non-conformance 3 of 13: From Merbau estate's UKL and UPL report for July 2009, it was found that the BOD of the river within Merbau estate was above the legal standard. The upstream sample had a BOD of 4.2 while the down-stream sample had a BOD of 6.4, which are both above the legal BOD standard of 3 according to the Government Decree 82 dated 14 December 2001 on Water Quality Monitoring and Water Pollution Management. The estate has yet to prepare a management plan to reduce the BOD of this river. Corrective Action: The company has marked their river sampling points at Merbau river from which future water sample will be taken, and competent surveyors are invited to take new water samples from these sampling points and sent for analysis to determine if BOD5 and COD levels were exceeded. The company will regularly monitor the results of their environmental analysis measurements and follow up if any devia-tions from legal standards occur. Verification from 1st surveillance audit findings: Merbau estate carries out water sampling of upstream and downstream river water samples once every 6 months and results are reported in their implementation report for UPL and UKL (Environmental Mon-itoring & Management Plan). As viewed from the UPL and UKL implementations report dated August 2010 for Merbau estate, the upstream and downstream river samples for Merbau river was 2.86 and 2.91 respectively while in the report dated March 2011, the upstream and downsteam samples both had a BOD of 0.49. This is below the legal BOD standard of 3 according to the Government Decree 82 dated 14 December 2001 on Water Quality Monitoring and Water Pollution Management.



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Auditor Conclusions: Closed

Criterion 4.7 (Minor indicator 6): Evidence of OHS and first aid equipments available at worksites

Non-conformance 4 of 13: It was found the oxygen tank at Batang Saponggol polyclinic is empty and not ready for use in case of emergency Corrective Action: The estate management has taken action to ensure all oxygen tanks at the Batang Saponggol estate polyclinic are periodically refilled. The estate will also conduct monthly routine inspections to determine readiness of oxygen tanks at all company polyclinics. This will be conducted concurrently with monthly inspections of fire extinguishers. The company will provide at least 2 oxygen tanks for each polyclinic within all PT Perkebunan Milano estates. Verification from 1st surveillance audit findings: It was found that all oxygen tanks in the company’s clinic have been maintained in good condition in case of emergency. Auditor Conclusions: Closed . Criterion 5.2 (Minor indicator 2): Companies are to appoint dedicated and trained officers to monitor any plans and activities as above.

Non-conformance 5 of 13: Officers have been appointed to monitor any plans and activities relating to HCV areas or other pro-tected areas, however, these dedicated officers have no received appropriate training related to these activities. Corrective Action: The company has provided training on protection and conservation of HCV areas to their appointed HCV management officers. Monitoring of progress of the HCV management program is conducted rou-tinely and recorded for reporting purposes. Verification from 1st surveillance audit findings: The company was assigned some officer to monitor implementation of HCV management plan. For ex-ample, two officers were assigned for Merbau estate and for Batang Saponggol estate and they were trained on February 21 to 23, 2011. Auditor Conclusions: Closed Criterion 5.3 (Minor indicator 1): Management plan of hazardous waste and instruction of dis-posal of agrochemicals and their containers waste in accordance with the product label and ex-isting regulations. Non-conformance 6 of 13: Batang Saponggol estate does not maintain records or inventory of each type of scheduled wastes re-ceived and stored at their scheduled waste store prior to sending to the mill. Corrective Action: The company has prepared a form for recording outgoing and incoming hazardous wastes, and will en-sure proper inventories of hazardous wastes are maintained. The company has conducted briefings for mandors and workers on how to maintain records of hazardous waste inventories. Verification from 1st surveillance audit findings:



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Inventories of all hazardous wastes produced at Batang Saponggol estate such as lubricant oil containers, petrol containers, filters, used batteries, and grease trap wastes are maintained Auditor Conclusions: Closed

Criterion 5.3 (Minor indicator 2): Records of waste monitoring/analysis.

Non-conformance 7 of 13: Manifest records of hazardous wastes from the mill sold to the contractor (PT Wira Gautama) do not contain sufficient information to track amount of wastes collected, i.e. from manifest no. 0000326 pre-pared on 12 Nov 09, the specific types of scheduled wastes collected and their amounts, and vehicle identification number of collector were not recorded. Corrective Action The company is now taking steps to ensure all required information on manifest notes for hazardous wastes are completed, and completeness of information on manifest notes will be checked prior to sale of wastes to the contractor. The company has also re-trained the logistics personnel on the working in-structions on how to fill the manifest documents. Verification from 1st surveillance audit findings: There is evidence of action taken to provide training on waste management, as follows: - Meeting minutes on training on waste management conducted at Pinang Awan Mill on December 20,

2009. - New Standard Operating Procedure for recording waste information in manifest documents (SOP-

Mill-044) - Pictures of training activities conducted on December 20, 2009. Samples of recently completed manifest documents with all complete information, including all specific types of hazardous wastes collected and their amounts, and the vehicle identification number of the waste collector’s vehicle. For example, mill manifest record no. 4412 dated 26 July 2011 and previ-ous manifest no. 0189 dated 25 October 2010 were sighted and all required information, including amount collected of each type of hazardous waste and vehicle identification number was record-ed. Auditor Conclusions: Closed Criterion 6.1 (Major indicator 1): Aspects of plantation and mill management including replant-ing that have social impacts are identified in a participatory way, and plans to mitigate the nega-tive impacts and promote the positive ones are made, implemented and monitored, to demon-strate continuous improvement. Non-conformance 8 of 13: The company has a social impact assessment report but this report does not explain what were the positive and negative social effects identified during the assessment. Corrective Action: To coordinate with the independent social impact assessment team to conduct a quantitative and quali-tative analysis of positive and negative social impacts identified during the assessment and include this in the social impact assessment report. Verification from 1st surveillance audit findings: The final revised SIA document was made by Aksenta in 2009 which includes identification of positive impacts (direct and indirect) and the negative impacts (direct and indirect). The positive impacts include employment opportunities, business opportunities, accessibility, monetary, economic ability, whereas the negative impacts such as clean water, and decreasing of villager’s lands. Auditor Conclusions: Closed



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Criterion 6.1 (Minor indicator 1): Regular monitoring and management of social impacts, with the participation of local communities.

Non-conformance 9 of 13: The company has yet to carry out regular and scheduled monitoring and management of social impacts with the participation of local communities, and has not completed their monitoring and management plan of social impacts for PT Perkebunan Milano and Pinang Awan mill. Corrective Action: The company has completed the plan for management and monitoring of social impacts based on the results of the social impact assessment. The company will also provide training to specific personnel on management and monitoring of social impacts as well as monitor the progress of the social impact management program through activities report and regular reporting. Verification from 1st surveillance audit findings: A social impact management and monitoring plan has been made for the years 2010-2012. The com-pany held a meeting with villagers at Pulo Bargo and Sipare- Pare Tengah on 13-14 June 2011 to ob-tain feedback related to community development program activities and social impacts of corporate ac-tivity. The results of the meeting were subsequently included in the monitoring plan and management of social impacts for year 2011. However there is no clear information about schedule for completion and location for its implementation (this was raised as a new non-conformity. Auditor Conclusions: Closed Criterion 6.1 (Minor indicator 4): Particular attentions paid to the impacts of outgrower schemes (where the plantation includes such a scheme).

Non-conformance 10 of 13: The social impact assessment report of the company does not include identification of the social im-pacts of 22 suppliers and 20 farmers that have short-term transactional contracts with the mill. Corrective Action: Identification of the social impacts of the suppliers and farmers that have short-term transactional con-tract with the mill was conducted with their participation as well as with the participation of the local communities, and the results were included in the social impact assessment report. Follow up and evaluation of the social impacts identified will be conducted regularly. Verification from 1st surveillance audit findings: The final documented social impact assessment of the company which was carried out by AKSENTA as an independent consultant includes an identification of the social impacts resulting from the activities of the supplier and farmers that have short-term transactional FFB contracts with the mill. Effectiveness of the company’s management of these social impacts will be verified during the next surveillance au-dit. Auditor Conclusions: Closed

Criterion 6.5 (Major indicator 2): A company working regulations and work contracts, in accord-ance with existing regulations.

Non-conformance 11 of 13: Clauses defined in the company’s contracts with temporary workers do not comply with the regulation from the Government of Indonesia “Decree of the Minister of Manpower and Transmigration RI No. 100/Men/VI/2004 regarding Provisions for Implementation of Certain Working Hour Agreements (“Keputusan Menteri Tenaga Kerja dan Transmigrasi (Kepmen Naker) RI No. 100/Men/VI/2004 about Ketentuan Pelaksanaan Perjanjian Kerja Waktu Tertentu”). This is because documented work contracts with temporary workers are not appropriate, as the contracts state that worker are not allowed to work more than 20 days. However, according to the regulation, temporary workers are permitted to work more than 20 days if their work exceed 20 days, but after which, the company must change their status



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to permanent worker and not temporary worker. Corrective Action: The company revised their internal memo in relation to working hours of daily temporary workers in or-der to comply with the local regulation, and also revised the working agreement of daily temporary workers. These changes were publicized to all daily temporary workers and the changes in their con-tract for temporary workers were also informed to the minister of manpower for approval. The workers were also informed of their rights in accordance to the legal requirement Kepmenaker RI No. 100/Men/VI/2004. Verification from 1st surveillance audit findings: From document checks during surveillance audit, it was confirmed that the company issued an internal memo no 012/MLN-HRD/XI/2009 signed by the Human Resources Department head of Wilmar and dated November 24, 2009, which stated that all temporary workers working more than 21 days contin-uously will assigned as permanent daily workers, and will gain the same benefits as permanent workers such as minimum wage as per government standard, 12 days annual leave, maternity leave, and health insurance (Jamsostek). The company’s working agreement related to temporary daily workers was revised and has been registered to the Ministry of Manpower of South Labuhan Batu and North Labuhan Batu with approval letter no 171/HRR/Ext/XI/2009 dated November 30, 2009. The implemen-tation of this memo can be seen during onsite audit, such as one of member sprayer group, Mrs. Suni-ah has been promoted as Permanent Daily Worker after 3 months of work. Auditor Conclusions: Closed Criterion 6.5 (Minor indicator): Growers and millers provide adequate housing, water supplies, medical, educational, and other facilities for employees where such facilities are not available or accessible. Non-conformance 12 of 13: The company does not provide adequate day care facilities as needed for female workers with young children at all estate and the mill. Corrective Action: The company has provided new baby and child care facilities for each estate and provided personnel to manage these facilities at each estate. Verification from 1st surveillance audit findings: There are now some daycare facilities for employees’ children such as in front of security office at Pinang Awan mill, Batang Saponggol estate, Merbau estate and Sei Daun estate. Auditor Conclusions: Closed

Criterion 6.1 (Minor indicator 1): Growers and millers contribute to local sustainable develop-ment wherever appropriate.

Non-conformance 13 of 13: The company’s contribution to local sustainable development is not appropriate, because documented community development/CSR programs of all estates showed that the company did not consider the results of their social impact assessment or consult with local communities in determining the most ap-propriate form of contributions they should provide for sustainable community development. Corrective Action: The company coordinated with an independent survey team to focus on the aspects of the company’s social impact assessment report pertaining to quantitative and qualitative analysis of negative and posi-tive social impact identified. The company has also established a program for contribution to local de-velopment based on the results of the company’s social impact assessment for year 2010 to 2012. The company will regularly assess the feasibility of contribution programs for local community devel-opment based on the result of social impact assessment, and develop plans for and management and



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monitoring social impacts to ensure an effective program for the development of the local community. Verification from 1st surveillance audit findings: There is evidence of some company’s contributions made as a result of consultation with local commu-nities and implementation of the company’s Community Development Program. Example: the company assisted to repair public roads, repair classrooms and renovate of public toilets in primary schools at Sigambal, and provide material donations for the mosque Ar Raudha Auditor Conclusions: Closed

3.3 Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions

During this surveillance assessment, a total of 8 nonconformances were identified. These consisted of 2 major non-conformities and 6 minor non-conformities. For the major non-conformances, the company has taken the necessary corrective action to close these non-conformances within 60 days of completion of the assessment, and this was verified by the audit team through documentation review submitted by the company. For the mi-nor non-conformances, the company has taken corrective action against these as well, the closure of these minor non-conformities will be assessed during the next surveillance audit. A summary of all identified non-conformances, corrective actions taken and auditor conclusions is as below:

Clause 2.2. RSPO Annual Surveillance Procedure: All associated smallholders (or Scheme smallholders), characterised as smallholders structurally bound by contract, credit agreement or by planning to a particular mill, become part of the 3-year programme of compliance to the standard for associated smallholders. Non-conformance 2011-01 of 08 (Minor non-conformity) The company does not have a plan to identify FFB suppliers with whom they can to have long-term contract with for future planning of associated smallholders to become part of the 3 year programme of compliance to the RSPO P&C. Corrective Action: The company made an SOP for identification of FFB suppliers with whom can be made a long term contract with Pinang Awan mill such as in a smallholder scheme and outgrowers. Every year com-pany will conduct reidentification of all suppliers and make program/action plan to make identified associated smallholders or outgrowers comply with RSPO standards. Auditor Conclusions: Evidence of immediate action taken accepted. Effectiveness of im-plementation to be verified during next surveillance audit. Date of closure: August 29, 2011

Criterion 2.1(Major indicator 2.1.1) Evidence of compliance with relevant legal require-ments

Non-conformance 2011-02 of 08 (Major non-conformity) Some non-compliances to legal regulations were found, i.e.:

1. An operator of the mill steam boiler has operator certificate no: 213/PNK3-PUBT/OB-I/II/08, however his certificate expired on February 11th , 2011 and no effort was made to renew the cer-tificate 2. According to the decision letter from the Government Head of South Labuhan Batu, the com-pany is required to monitor community health that is affected by land application and company required to monitor and compare production of oil palm estates where land application is carried out and non-land application area. However during surveillance audit, this information was not available.



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Correction: 1. The company has applied of renewal for all expired operator licenses, including the boiler opera-tor’s license. 2. The company made a map of communities living nearby land application area, and conducted a survey and will check periodically to monitor land application impact to communities’ health and make the report that should be sent to Labuhan Batu Environmental Department. The company will analyze and compare production results for estate area where land application is carried out with estate area in non land application area. Corrective Action 1. The company will make a list of all operators who have operating licenses from the government

and monitor the validity status. To submit a letter to government requesting for renewal of all expired operator licenses such as Boiler Operator licenses.

2. To review all law and license register and include all attached requirement from each regulation for compliances.

3. Send report of land application including information about health to Labuhan Batu Environ-mental officer. The company provided a summary of health of the communities surrounding es-tate area, dated Augustus 02, 2011.

Auditor Conclusions: Closed Company provide some records such as: - A copy of the notification letter requesting for updated licenses of the boiler operator was

provided such as for Juliadi, letter no.: G.461G T-SKlVlll2011 dated July 30, 2011. The list of operators who have received renewed operator licenses is as stated on letter no G.46/GT-SK/VII/2011 from PT Geotechnik Indonesia

- Land application location map - List of people whom live around land application area - List of communities health checking results for period of August 2011 - Letter to Labuhan Batu Selatan Environmental Department no. 011/PKS-MLN/EL/VIII/2011

with a report on results of monitoring of land application dated August 3, 2011 Date of closure: August 9, 2011 and August 12, 2011 Criterion 2.3 (Major indicator 2.3.1) Records of any negotiated agreements between tradi-tional owners of land and plantation companies (if any), supplemented with maps in ap-propriate scale. Non-conformance 2011-03 of 08 (Major non-conformity) There is an MoU between Batang Saponggol estate and community members who carry out cat-tle grazing activities inside the estate such as with communities from Kampung Lalang and Ban-ten village, and the company has maps for grazing locations which are allocated for each village, however the map has not been distributed to the communities that already signed the MoU. Correction: Each head of village has approved the map of location for animal grazing. The company provides animal grazing area maps at entry gate estate. Corrective Action To review all existing MoUs and ensure that all Mou content is right and has been distributed to rel-evant parties. Auditor Conclusions: Closed. The company provided documented evidence such as: 1. Letter regarding permitted grazing activities such as MoUs signed by the Head of Dusun

Tempel village with Batangsaponggol manager, also attached with the map of grazing loca-tion and sign board inform about grazing location in the stated area,

2. A notice letter regarding handover of the MOU which state the agreed locations for cattle grazing Panggarungan Village, Dusun Lalang Village and Tempel Village dated August 10,



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2011, including a list of cattle owners from Panggarungan Village, Tempel Village and Dusun Lalang Village.

3. Evidence of event to re-communicate regarding areas in the MoU where grazing activities are permitted, which was attended by 20 communities from surrounding villages on August 08, 2011. Evidence included a list of participants and photographs from the event.

4. Map of grazing locations for each village, dated August 04, 2011. 5. Photos of sign boards in each grazing location Date of closure: August 6, 2011 Criterion 4.1 (Minor indicator 4.1.1) Records of checking or monitoring of operations. Min-imum requirement: once a year.

Non-conformance 2011-04 of 08 (Minor non-conformity) The mill has not conducted internal audits for checking or monitoring of implementation of SOPs pertaining to mill operations. Correction: The company will conduct internal audit for checking and monitoring implementation of SOPs relat-ing to mill and estate operations. Corrective Action: The company will conduct internal audit training to ensure that all internal auditors have good competency and qualification for conducting internal audits. Auditor Conclusions: Corrective action plan accepted. Effectiveness of implementation to verified at next audit.

Criterion 4.1. (Minor indicator 4.1.2) Records of operational results.

Non-conformance 2011-05 of 08 (Minor non-conformity) Some record of operational activities is not available such as:

i) Procedure No. PROCEDURE-GEN-013, emergency response revision 02, dated on 14 July 2011, includes emergency procedures for earthquake but training on the procedure was not done at Pinang Awan POM.

ii) Report for HCV management plan is not available at Batang Saponggol estate, which is re-quired for reference and implementation of management plans

Correction: The company shall conduct retraining of SOP Procedure-Gen-013 regarding emergency and pre-paredness, and make monitoring report for implementation of HCV management plan. These rec-ords will be made available. Corrective Action: To re-identify all SOPs and implement the SOP properly. Implementation will be checked during internal audit. Auditor Conclusions: Corrective action plan accepted. Effectiveness of implementation to verified at next audit.

Criterion 4.7. (Minor indicator 4.7.2) Regular health examination by a doctor for workers in station or exposed to high risk work.

Non-conformance 2011-06 of 08 (Minor non-conformity)



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5. At Merbau and Sei Daun estate, medical checks are conducted once a year for all workers handling chemicals. However, the medical checks do not include blood tests of the workers to check for low blood cholinesterase levels (indicator of possible poisoning) although in rec-ords of medical checks of workers, there is a recommendation that hematology tests be con-ducted.

6. Some mill workers were found to have not undergone any medical check-up, including hear-ing test, such as a boiler operator that has been working at the mill for 12 years.

Correction: 1. The company shall provide cholinesterase testing for relevant workers to monitor levels of blood cholinesterase for all workers that are regularly in contact with chemical material such as sprayers and operators of agrochemical stores. 2. The company shall provide hearing tests for the boiler operator. Corrective Action: The company will check regularly, the list of workers who need regular medical check and ensure that relevant workers will be provided by sufficient medical surveillance. Auditor Conclusions: Corrective action plan accepted. Effectiveness of implementation to verified at next audit.

Criterion 6.1 (Minor indicator 6.1.3) A regular and scheduled environmental management and monitoring Report.

Non-conformance 2011-07 of 08 (Minor non-conformity) The company has conduct social impact management and regular monitoring for the identified social impacts, however there is no clear information about the schedule for completion, location and person in charge for these activities. Correction: The existing action plan was revised and improved it to make clearer according to relevant activi-ties, time, and person in charge related to its impact. Corrective Action: To check whether every action plan consists of complete information regarding schedule for com-pletion, location and person in charge for its implementation. Auditor Conclusions: Corrective action plan accepted. Effectiveness of implementation to verified at next audit.

Criterion 6.7. (Minor indicator 6.7.3) Records of implementation of company policy on worker age requirements.

Non-conformance 2011-08 of 08 (Minor non-conformity) The company does not maintain complete information on workers age and identity to ensure that there are no under aged workers working at the Rantau Parapat FFB loading ramp. Only a list of workers names is maintained, without information on date of birth and start date of work. The agreement of cooperation between the contractor for FFB loading-unloading (PUK F. SPTI) and the mill has not been included any requirements to comply with the company’s policy on mini-mum worker’s age. Correction: 1. The company made a workers database for FFB loading and unloading workers under SPSI (workers union) at Rantau Parapat Ramp, and minimal information in its data base include workers age, date of birth, address, date of starting of work, and gender.



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2. Agreement between Pinang Awan mill and the contractor (PUK SPTI SPSI) has been revised to include minimum age requirement for workers, which is 18 years. Corrective Action: To revise agreement with all contractors to include minimum age requirement for workers of 18 years old and make a workers data base for all workers under subcontractors. Auditor Conclusions: Corrective action plan accepted. Effectiveness of implementation to verified at next audit.

3.4 Noteworthy Positive Components

No. Clause Comment

1 4.1 Best Agriculture Practice Implementation

2 4.2 Consistent implementation for monitoring activities such IPM, Best Agricultural Practices, and Environmental Performance

3 5.6 The mill is currently implementing a CDM project for methane capture from their palm oil mill effluent, to reduce greenhouse gas emissions.

4 5.3 Organic and an organic waste disposal system is well implemented

5 4.6 The estates are no longer carrying out spraying of agrochemicals containing para-quat as viewed from chemical usage records and there is no stock of such chemi-cals in store.

6 4.6 There is evidence of good implementation of biological pest management methods through planting of beneficial plants and barn owls, as it was seen from chemical issuance records that there is little or no usage of chemicals for treatment of pests.

3.5 Issues Raised by Stakeholders and Findings Pertaining to Issues Below is a summary of issues raised by stakeholders interviewed on-site

No. Issues Raised Audit Verification

1.

The company is requested to increase the recruit-ment of local people

It was verified on-site that harvesters and daily worker mostly come from local com-munities and Java.

2

Based on the confirmation to the Head of Dusun Sungai Daun, the area directly adja-cent to the Sei Daun Estate, the boundaries of public land and the company is a trench.

There were no reported objections from the public on the boundary ditch

3

Head of Sungai Daun and Tempel Hamlet stated that the company has provided infor-mation regarding grazing cattle area in the area of estate.

There were a records of socialization available at Sei Daun estate office and Batang Saponggol estate office

4

The company has a land claim settlement documents for the case that emerged in 2008 between the companies and some farmers groups

There are records of payment com-pensation in estate office.



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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 Perkebunan Milano …………………………………………. Simon Siburat Group Sustainability Controller Date:

Signed on behalf of TUV Rheinland Malaysia …………………………………………. Dian Susanty Soeminta Lead Auditor Date: 24 August 2011



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APPENDICES

Appendix 1: List of Abbreviations

AMDAL Analisis Dampak Lingkungan & Sosial

(Social & Environmental Impacts Assessment)BKPM Badan Koordinasi Penanaman Modal (Capital Investment Coordination Board) BOD Biological Oxygen DemandBPN Badan Pertanahan Nasional (National Land Agency)CDM Clean Development MechanismCOD Chemical Oxygen DemandCPO Crude Palm Oil Disnaker Dinas Tenaga Kerja (Labour Department)EIA Environmental Impact AssessmentERTs Endangered, Rare & Threatened speciesESH Environmental Safety & HealthEHS Environmental Health & SafetyETP Environmental Target ProgramFFB Fresh Fruit Bunches EFB Empty Fruit Bunches EMU Environmental Management UnitGIS Global Information SystemHCV High Conservation ValueHRD Human Resources DepartmentHGU Hak Guna Usaha (Land Use Rights)IPM Integrated Pest ManagementIUP Ijin Usaha Perkebunan (Plantation Operation Permit)K3 Keselamatan dan Kesehatan Kerja (Occupational Safety & Health)Kadisbun Kepala Dinas Perkebunan (Head of Plantations Department)KepMen Naker Keputusan Menteri Tenaga Kerja (Workforce Minister’s Decree)LTA Lost Time Accident LRR Legal Requirements RegisterMSDS Material Safety Data SheetsNGO Non-Government OrganizationOSH Occupational Safety & HealthPK Palm Kernel PKO Palm Kernel Oil PKS Pabrik Kelapa Sawit ( Palm Oli Mill)POME Palm Oil Mill Effluent PPE Personal Protective EquipmentPUK Perkembangan Usaha Kecil (Small Enterprises Development)RKL Rencana Pengelolaan Lingkungan (Environmental Management Plan) RPL Rencana Pemantauan Lingkungan (Environmental Monitoring Plan) SIA Social Impact AssessmentSK-KBP Serikat Pekerja-Kesatuan Buruh Perjuangan (Workers Union)SOP Standard Operating ProcedureSBSI Serikat Buruh Sejahtera Indonesia (Indonesian Labour Union)SPSI Serikat Pekerja Seluruh Indonesia (Indonesian Workers Union)SPTI Serikat Pekerja Transportasi Indonesia (Indonesian Transportation Workers Union) UKL Upaya Pengelolaan Lingkungan (Environmental Management Efforts) UMP Upah Minimum Propinsi (Provincial Minimum Wage)UPL Upaya Pengelolaan Lingkungan (Environmental Management Efforts)



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Appendix 2: List of Stakeholders Interviewed and Contacted

No. Name of Stake-

holder Institution - Address Remark

Staff Interviewed On-Site

1. Simon Siburat Corporate Sustainability Manager Wilmar 2. Andi Irawan Estate Manager Batang Saponggol Wilmar 3. Lim Peng Hor Asistan General Manager Plantation Wilmar 4. Yanti Rantau Parapat Ramp Office Wilmar 5. Wilton Simanjuntak RSPO Coordinator Wilmar 6.

Alfian Staff Regional office Community De-velopment

Wilmar

7. Balintang S Environmental Health Safety Wilmar 8.

Kartolo Ginting Environmental Health & Safety of-ficer

Wilmar

9. Eri Endrianto Wilmar 10. Lihardo Marpaung Bina Mitra Regional Wilmar 11. Arsyad General Manager Wilmar 12. Jules Sonny Staff RSPO Head Office Medan Wilmar 13. Ronny Hutabarat Staff FG (Fginished Good) Wilmar 14. E. Simanjuntak Finance Officer Wilmar 15. UUS Sudarmadi EMS PT Bulu Cawang Permai Wilmar 16. Hadiah Admin Regional Officer Wilmar 17. T Napitupulu PGS RO Wilmar 18. Ashima Nardapdap Mill Coordinator Wilmar 19. Mardani Surahsyah Purchasing - Medan Wilmar 20. Indra Sakti Purchasing - Regional Office Wilmar 21. Wahyudi Hidayat Staff Reserach Wilmar 22. Sudiyono FC Merbau Esatate Wilmar 23.

Chairul Abdi Personnel and General Affair Merbau Estate

Wilmar

24. Ali Rasidan Document Control ISO & RSPO Wilmar 25. Ihsan Rahmat Secretariat Officer Wilmar 26. Hadiah Mufti Lubis Human Resources Development Wilmar 27. J Saragih Bina Mitra Sei Daun Estate Wilmar

Stakeholder Interviewed onsite 1. Kliwon Serikat Buruh Seluruh Indonesia

Milano Head of labour union

2. Sunarso Tokoh Adat Merbau Local community 3. Gibert Batang Seponggol Village Community mem-

ber 4. M. Latif Pane Sigambal 2 Village Head Village head 5. Lasing B. Seponggol community repre-

sentative Local community

6. AKP J. Nababan Kapolsek Kampung Rakyat Police 7. Tasiman Ketua BPD Pangarungan Local community 8. Komarsyah Ray Rantau Parapat loeading Ramp Worker 9. Purmanto Pinang Awan Mill Worker

10. Poniah PGA Sei Daun Estate Worker 11. Nuraini Sriyani Polyclinic Staff 12. Sofyan S Siregar Pinang Awan mill Worker



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Appendix 3: Observations and Opportunities for Improvement

No. Observations / Opportunities for Improvement Criteria1. The company should consider management performance achievement in year 2010

as a basis for updating company’s management plan for year 2011 to 2013 3.1

2. The company should make report listing all missing boundary stones. 2.2.

3. The company’s list of regulations (law registry of Environment) does not contain the Decree of Health Ministry no. 416/1990 re: requirements and Controlling of Drink-ing Water Quality

2.1

4. Harvesters store their harvesting poles next to their houses after work. Although sleeves are provided for the harvesting knives, the estate should provide a secure store for harvesting knives to prevent accidents that may occur due to falling har-vesting poles.

4.7

5. The mill has taken action to prevent further loss of hearing in some mill workers found to have hearing loss, as there are records of three workers with hearing re-duction that was shifted to other carry out work at FFB sorting. However, one en-gine room operator was also found to have hearing loss in both ears but there has been no action taken to transfer him to perform other work

4.7

6. There was sighted evidence of small area of burnt waste near the crèche at Merbau estate, even though the company has placed signs and informed workers that no burning of waste is permitted.

5.3

7. The last collection of hazardous wastes from the mill was on 26 July 2011, while the previous collection was on 25 October 2011, which is a storage period of more than 180 days are permitted in the mill’s license

5.3

8. The mill’s Environmental and Safety Aspects and Impacts Identification document and Environmental Objectives, Target and Continuous Improvement Plan does not state the date of preparation of the document. The date should be added to the documents.

5.3

9. Prior to the audit, Merbau estate had not prepared a report on their hazardous waste inventory to the local government once every 3 months as required in their license for temporary storage of scheduled wastes. This was prepared during the audit. The estate should ensure their hazardous waste inventory is submitted once every 3 months to the local government as per their license requirements.

5.3

10. The crèche at one of the workers housing areas requires improvement as it cur-rently has no bathroom facilities, no area for proper food storage, no educational materials for the young children and no first aid kit in case of accidents. This has been raised as an observation.

6.5

11. The company should update consistently FFB price everyday, not only using SMS.

6.10.1