rspo audit report · 4.1 lead assessor ’s summary and r ... dates of this audit: 17 – 21 june...

RSPO Principles & Criteria Annual Surveillance Assessment Report

Report Number CU815394

RSPOPC-SUM-REPORT.F01 JULY2013 of 35

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

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RSPO PRINCIPLES & CRITERIA PUBLIC SUMMARY REPORT

ANNUAL SURVEILLANCE ASSESSMENT 3

Malaysia

KLK BORNION PALM OIL MILL 2013

Report prepared by: Viknesvaran Paramasivan (Lead Assessor)

Certification decision by: Hari Naveen Christopher (Certifier)

Certifying Office

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

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

Tel: +603-3377 1600 / 1700

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

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

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

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

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

obtained from CUC.

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

RSPO Approval Date 12/01/2006

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

mailto:[email protected]

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





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Table of Contents

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

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

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

1.8 PROGRESS OF ASSOCIATED SMALLHOLDERS OR OUT-GROWERS, IF APPLICABLE TO THIS ASSESSMENT .................................. 5 1.9 LOCATION MAP FOR THIS CERTIFICATION UNIT (SEE APPENDIX 1) .............................................................................. 5

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

2.1 MANAGEMENT STRUCTURE................................................................................................................................. 6 2.2 NON-COMPLIANCE IDENTIFIED WITH 2.1 ABOVE ..................................................................................................... 6 2.3 SUMMARY OF THE TIME BOUND PLAN .................................................................................................................. 6 2.4 UN-CERTIFIED UNITS OR HOLDINGS...................................................................................................................... 7 2.5 SUMMARY OF THE FINDINGS FOR PARTIAL CERTIFICATION ....................................................................................... 10 2.6 PARTIAL CERTIFICATION AUDIT AGENDA.............................................................................................................. 11

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

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

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

3.3 AUDIT METHODOLOGY .................................................................................................................................... 15 3.3.1 General Overview .............................................................................................................................................. 15 3.3.2 Assessment agenda for this Audit ..................................................................................................................... 16

PART 4 ASSESSMENT FINDINGS ........................................................................................................ 19

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

Principle 1: Commitment to Transparency .......................................................................................................................... 19 Principle 2: Compliance with Applicable Laws and Regulations .......................................................................................... 20 Principle 3: Commitment to Long-Term Economic and Financial Viability .......................................................................... 21 Principle 4: Use of Appropriate Best Practices by Growers and Millers .............................................................................. 21 Principle 5: Environmental Responsibility and Conservation of Natural Resources and Biodiversity .................................. 25 Principle 6: Responsible Consideration of Employees and of Individuals and Communities by Growers and Millers .......... 26 Principle 7: Responsible Development of New Plantings ..................................................................................................... 28

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

4.4 ISSUES THAT WERE RAISED DURING THE STAKEHOLDER CONSULTATION, IF ANY ............................................................ 30

PART 5: RSPO SUPPLY CHAIN CERTIFICATION ................................................................................... 31

5.1 POM INCLUDED IN THE SCOPE OF THE AUDIT ...................................................................................................... 31 5.2 CONFIRMATION OF THE COMPANY’S SUMMARY OF ANNUAL CERTIFIED VOLUME OF RSPO CERTIFIED PALM OIL AND

PALM KERNEL OVER A SPECIFIED PERIOD ...................................................................................................................... 31 5.3 SUMMARY REPORT INCLUDING A BRIEF DESCRIPTION OF THE SCOPE OF CERTIFICATION ................................................ 31 5.4 MONTHLY RECORDS OF CERTIFIED FFB RECEIVED AND CPO AND PK PRODUCED SINCE THE LAST AUDIT ........................... 31 5.5 RECORDS OF CERTIFIED CPO & PK SOLD UNDER GREEN PALM TO BUYERS SINCE THE LAST AUDIT, IF ANY ......................... 31 5.6 RECORDS OF CERTIFIED CPO & PK SOLD UNDER UTZ ETRACE TO BUYERS SINCE THE LAST AUDIT, IF ANY .......................... 31 5.7 NON-CONFORMITIES IDENTIFIED DURING THIS AUDIT .............................................................................................. 31 5.8 DESCRIPTION OF THE ORGANIZATIONAL MANAGEMENT SYSTEMS ............................................................................. 32 5.9 FINAL CERTIFICATION DECISION BY CONTROL UNION FOR THE RSPO SCCS AUDIT OF THE POM ................................... 32





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PART 6: CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY ........... 33

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

PART 7: APPENDICIES ........................................................................................................................ 34

APPENDIX 1: LOCATION MAP FOR THIS CERTIFICATION UNIT ............................................................................................. 34





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PART 1: SCOPE OF THE CERTIFICATION ASSESSMENT AUDIT

1.1 Company and Contact Details

Company Name: Kuala Lumpur Kepong Sabah, Sdn. Bhd

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

Contact Person: Mr. Sin Chuan Eng

Office Telephone: +6089-887240

E-Mail: [email protected]

Web Site: www.klk.com.my

Other Certifications Held: ISCC

1.2 RSPO Membership & Certification Details

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

Registered Client Name: Kuala Lumpur Kepong Berhad

Certificate Number: C815394CU-RSPO-01.2013

Start Date Of Certificate: 6 July 2010

End Date Of Certificate: 5 July 2015

Date Of Original Certification: 6 July 2010

Scope: Certification of the Palm Oil Mill and Supply Bases

Type Of Certification: Single site

Duration Of Certificate: 5 Years from date of certification

1.3 Annual Surveillance Assessment Details

Dates Of This Audit: 17 – 21 June 2013

Audit Number: ASA 3

1.4 Assessment Type

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

1.5 Location of the Palm Oil Mill

Name Palm Oil Mill

Mill Capacity

Location GPS Reference

(POM) MT/Hour Address Longitude Latitude

KLK Bornion POM

80 KM 101, Jalan Lahad Datu – Sandakan, Kinabatangan, Sabah

E 118.7899 N 5.6090

1.6 Palm Oil Mill Output and Approximate Tonnages Certified

Figures below are from:

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

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

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

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

Projected Production from the last 12 Months (MT)

Actual Production for this Audit Year 2013 (MT)

Projected 12 Months (MT) Forecast Certified in this Report

FFB CPO PK FFB CPO PK FFB CPO PK

171,243 37,331 8,905 169,647 35,208 8,732 205,000 47,150 12,300

1.7 General Description of Supply Base

The Bornion Palm Oil Mill (POM) and supply base owned by the company, there are 2 estates supplies FFB to

mailto:[email protected]

http://www.klk.com.my/





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Bornion POM which are Bornion estate and Segar Usaha estate as well as less than 30% of FFB from outside. No changes introduced in the supply base since from previous assessment and this audit has carried out to ensure full compliance with RSPO requirement.

1.7.1 Location of the Supply Base

OPP

Oil Palm Plantation

Location GPS reference Area Summary (Ha)

Name Address Longitude Latitude Total Mature

OPP 1 Bornion Estate Jalan Kinabatangan, Sandakan, Sabah, Malaysia

E 117.783336 N 5.615277 3,181 3,181

OPP 2 Segar Usaha Estate

Jalan Kinabatangan, Sandakan, Sabah, Malaysia

E 117.699927 N 5.599875 2,756 2,756

TOTAL 5,937 5,937

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

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

OPP 1 Bornion Estate 95,763 1994 - 1997 25

OPP 2 Segar Usaha Estate 75,480 1988 and 1991-1994 25

TOTAL 171,243

1.7.3 Percentage of Planted Oil Palm by different Age Ranges

OPP Planting Years by 5 year Ranges

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

OPP 1 - 1,010 (31.75%) 2,171 (68.25%) - -

OPP 2 205 (6.44%) 2,551 (92.56%) - - -

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

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

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

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

2 2 0 0

Explanation as to the selection of estates sampled

Two of the three estates were assessed.

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

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

Not Applicable

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





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PART 2: PARTIAL CERTIFICATION

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

2.1 Management Structure

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

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

No Section 2 is N/A

Go to 2.1.2

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

Yes Go to 2.1.5 Go to 2.1.3

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

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

- Go to 2.1.4

Go to 2.2.1

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

- Go to 2.4 Go to 2.2.2

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

Yes Go to 2.3 2.2.3

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

Yes

2.2 Non-compliance Identified with 2.1 Above

Section Non-compliance findings NC raised Category

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

- Major

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

- Major

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

- Major

2.2.4 No applicable membership of the RSPO. - Major

2.3 Summary of the Time Bound Plan

Section Requirement Findings and any action required Compliance

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

All subsidiaries, estates and mill are included Yes

2.3.2 Is the time bound plan challenging? Age of

plantations. Location. Mill

development. Infrastructure. Compliance

A revision has taken place since there was an isolated lapse in implementation of the plan which a NC was raised during Lahad Datu region assessment. Therefore, the plan was reviewed to fit to their initial goal and there are some new inclusions to be certified. Revised time bound plan as attached below.

Yes





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with applicable law.

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

The time bound plan has been thoroughly reviewed by the company and the areas of the estates that have rubber, are highlighted with (*) on below time bound plan. There are 4 units has been pushed for certification for the next following year which the year is highlighted in red.

Yes

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

Due to the isolated lapses in the implementation the company made the adjustment to realized the targeted achievement

Yes

2.3.5 Have there been any stakeholder comments?

No comments received regarding other units as of this audit period. However, comments received for this unit which undergone main assessment has been captured at table 3.4

Yes

2.3.6 Have there been any newly acquired subsidiaries?

In Dec 2012, KLK signed a joint- ventured agreement with Collingwood Plantation. KLK holds 51% and is the majority shareholder. This new subsidiary has leased approximately 40,000Ha’s in Papua New Guinea. No land development has taken since the venture and any future land developments will only occur after executing the NPP notification. At present, KLK is in the process of carrying out all the necessary HCV and SEIA assessments which is set to take place between Q2 to Q4, 2013. Progress and status updates will be reviewed and reported in subsequent annual surveillance assessments.

Yes

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

This delay causes the isolated lapses in the implementation for the targeted year of 2012 which had led to raise a Minor NC in previous assessment conducted at Lahad Datu Region.

Yes

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

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

Yes

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

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

Yes

2.4 Un-Certified Units or Holdings

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

Section Requirement Findings and any action required Compliance

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

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

No

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

Primary

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

Yes





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forest.

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

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

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

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

Yes

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

SIA conducted reported that there are land conflicts at some of the uncertified units and the company is handling through FPIC and grievance procedures. PT Karya Makmur Abadi – 2000Ha and PT Riau – 2,554Ha under dispute.

Yes

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

None noted.no stakeholder comments or complaints received Yes

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

None noted. No stakeholder comments or complaints received. Yes

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

Palm Oil Mill Country Supply Bases (estates,

plantations, associations) Targeted RSPO

Certification Year Current Certification

Status as per this Audit

Batu Lintang Serdang, Kedah, Malaysia

Pelam Estate Batu Lintang Estate Subur Estate

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





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Buntar Estate

Kekayaan Paloh, Johor, Malaysia

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

Oct 2011 Certified

Paloh Paloh, Johor, Malaysia

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

N/A N/A

Jeram Padang Bahau, Negeri Sembilan, Malaysia

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

Sept 2012 Certified

Tanjung Malim Tanjung Malim, Perak, Malaysia

Changkat Asa Estate Kerling Estate Sg Gapi Estate

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

Tuan Mee Sungai Buloh, Selangor, Malaysia

Tuan Mee Estate By 2012

Audited on 22/10-25/10/2012 and waiting for certification process

Kuala Pertang Kuala Krai, Kelantan, Malaysia

Kerilla Estate Pasir Gajah Estate Sg Sokor Estate

By 2013 Pending

Mill 1 Tawau, Sabah, Malaysia

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

N/A N/A

Mill 2 Tawau, Sabah, Malaysia

Pang Burong Estate Sri Kunak Estate Tundong Estate Ringlet Estate

March 2009 Certified

Pinang Tawau, Sabah, Malaysia

Jatika Estate Sigalong Estate Pangeran Estate Pinang Estate

March 2009 Certified

Lungmanis Lahad Datu, Sabah, Malaysia

Tungku Estate Bukit Tabin Estate Lungmanis Estate

July 2010 Certified

Rimmer Lahad Datu, Sabah, Malaysia

Rimmer Estate Sg. Sibalukan

July 2010 Certified

Bornion Kinabatangan, Sabah,

Bornion Estate Segar Usaha Estate

July 2010 Certified





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Malaysia

Changkat Chermin

Manjung. Perak, Malaysia

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

By 2012


Berau 1 Berau, Kaltim, Indonesia

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

By 2014 Pending

Steelindo Wahana Perkasa

Belitung, Indonesia

Kebun Steelindo Wahana Perkasa

By 2013 Pending

Parit Sembada Belitung, Indonesia

Kebun Parit Sembada Kebun Alam Karya Sejahtera

By 2014 Pending

Mandau Riau, Sumatera, Indonesia

Kebun Mandau Oct 2012 Certified

Nilo 1 Riau, Sumatera, Indonesia

Kebun Nilo Timur By 2013 Pending

NIlo 2 Riau, Sumatera, Indonesia

Kebun Nilo Barat By 2013 Pending

Tapung Kanan Riau, Sumatera, Indonesia

Kebun Sekarbumi Alamlestari

By 2013


Gohor Lama

Langkat, Sumatera Utara, Indonesia

Kebun Basilam Kebun Gohor Lama

By 2014 Pending

Padang Brahrang

Sumatera Utara, Indonesia

Kebun Padang Brahrang Kebun Bukit Lawang Kebun Tanjung Keliling

By 2014 Pending

2.5 Summary of the findings for Partial Certification

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

Overall findings are satisfactory; however, there are still room for improvement especially on internal audit procedures for all uncertified subsidiaries and new acquisition to ensure the requirements are met. Concerning the potential overlook of the implementation of the internal audit procedure, a minor non-compliance is raised. There are 6 estates currently sending the crops to the outside mill where these estates have not been included in the time bound plan. There will be a new POM in Berau, Kalimantan Timur as of the company’s plan on expansion of milling capacity and 2 new POMs in Medan and Sampit respectively under construction which will eventually added in the time bound plan when it is ready for commissioning. The company has also made decision to include Paloh Mill into certification by year 2015 and Mill 1 which consists of 100% of independent smallholders will be shut down within 3 years from now to adhere to the rules of partial certification.





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The land conflicts are well documented and details are available and cited. More investigation will be carried out during next surveillance audit to monitor the progress. For final conclusion, please refer to table 3.1.

2.6 Partial Certification Audit Agenda

Date Location Agenda

19/06/13 Lungmanis POM

Documentation review





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PART 3: AUDIT PROCESS

3.1 About the Certification Body

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

3.2 Audit Team

Lead auditor: Viknesvaran Paramasivan

Team member 1: Mohd. Rizal bin Md. Kassim

Team member 2: Muhd. Jamalul Arif

Team member 3: Asidatorn Iamsirisangthong

Team member 4: Mahaswaran Maliyapan

Team member 5: Selvanathan Grapragasem

3.2.1 Qualifications of the Lead Auditor

Requirement Qualifications

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

Degree in Chemical Engineering and experience in palm oil mills.

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

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

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

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

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

Completed ISO 9001:2008 lead auditor course in June 2009

Training in the practical application of RSPO certification systems.

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

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

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

RSPO endorsed lead auditors course. Completed RSPO Lead Auditor training in April 2010

Signed code of conduct.

General knowledge of:

RSPO P&C standards. Yes

CUC organizational structure. Yes

CUC quality systems. Yes

Lead auditor role. Yes

Report writing. Yes

Stakeholder consultation. Yes

Certification decision process. Yes

RSPO SCCS program manual. Yes





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CUC filing systems. Yes

Correct use of RSPO trademarks. Yes

History and objectives of RSPO. Yes

CV available. Yes

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

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

Fluent in main local languages and English.

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

Muhd. Jamalul Arif Fluent in both English and Bahasa Malaysia

Asidatorn Iamsirisangthong Fluent in English. Has understanding of Bahasa Malaysia

Mahaswaran Maliyapan Fluent in both English and Bahasa Malaysia

Selvanathan Grapragasem Fluent in both English and Bahasa Malaysia

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

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

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

Asidatorn Iamsirisangthong More than 7 years of auditing experience for agricultural standards such as RSPO, Organics, Textiles, Recycle, Global Gap and GMP.

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

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

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





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

Health and Safety Mohd. Rizal bin Md. Kassim More than 5 years working experience in





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

forestry and manufacturing firm. Involved in FSC auditing since 2008. Fluent in local languages.




Selvanathan Grapragasem SA 8000 advanced auditor, QMS, EMS &

OHSAS Lead Auditor, Working experience in oil palm plantation.

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







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











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






3.3 Audit Methodology

3.3.1 General Overview

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

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

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

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

Re-planting sites. Zero burn.

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

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

Water management. Water courses. Water monitoring.

Road maintenance. Run off.

Social amenities. Social Impact Audits.

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

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

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

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

Mill and workshop inspections. Documentation review & worker interviews.

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

OSH. Training. Management structure. First aiders.

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

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

Compliance against the RSPO SCCS certification scheme.





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Verification: Verification of implementation was done through field observations, workshop and chemical store inspections, worker and community interviews and mill inspections as summarized above.

3.3.2 Assessment agenda for this Audit

Date Location Auditors Main activities

17/06/2013 [Mon]

Lahad Datu Regional

Office Viknes

08.30 Opening meeting Chaired by the audit team leader

Introduction by team leader

Presentation by respective managers

Presentation of Palm Oil Mill source of FFB by respective managers

Rimmer POM

Viknes Rizal

Selva Mahas

Mill inspection

Workshops

Stores

POM application

Document review Field operations

Worker interviews

Housing

Medical

Schools

Local communities

Environmental

Rimmer Estate

Jamal

Asidatorn

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

18/06/2013 [Tue]

Lungmanis POM

Viknes

Jamal Viknes

Selva Mahas

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

Workshops

Stores

POM application


Worker interviews

Housing

Medical

Schools

Local communities

Environmental

Lungmanis Estate

Rizal

Field operations.

Worker interviews





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Asidatorn Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

19/06/2013 [Wed]

Bornion POM

Viknes

Jamal Viknes

Selva Mahas

Partial Certification Review with client representatives Mill inspection

Workshops

Stores

POM application


Worker interviews

Housing

Medical

Schools

Local communities

Environmental

Bornion Estate

Rizal Asidatorn

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

20/06/2013 [Thu]

Bukit Tabin Estate

Viknes Rizal

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

Segar Usaha Estate

Jamal Selva

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental

Sungai Silabukan

Mahas

Field operations.

Worker interviews

Chemical stores





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Asidatorn Workshops

Housing

Medical

Schools

Local communities

Environmental

21/06/2013 [Fri]

Lahad Datu Regional

Office

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

Welcome and introduction by the team leader

Presentation of findings by the audit team

Questions and answers

Final summary by team leader End of assessment





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PART 4 ASSESSMENT FINDINGS

4.1 Lead Assessor’s Summary and Recommendation for Certification

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

It is therefore the recommendation of the lead assessor that:

A certificate of compliance is maintained. Signed:

Name: Viknesvaran Paramasivan Date: 21 June 2013

4.2 Summary of the findings by Principles and Criteria

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

Identified Non-Conformities and noteworthy Positive and Negative Observations.

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

Principle 1: Commitment to Transparency

Criterion by Audit

Summary

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

ASA3 1.1 The mill and estates all have a ‘Request and Responses’ logbook that records all requests made and the corresponding action that was taken. Records are maintained and it details the date of request, person who made the request and what was the nature of the request. Record of action that has been taken to fulfill the request and acknowledgement by the person who made the request and an estate or mill executive is also recorded in the logbook. ‘SOP 24 – Stakeholder Requests and Responses’ clearly states what needs to be done to handle any form of requests. All records are kept for at least seven years.

ASA3 1.2 The following documents were made publicly available in the mill and estate offices:

Land titles / user rights

Safety and health plan





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Plans and impact assessments relating to environmental and social impacts

Pollution prevention plans

Details of complaints and grievances

Negotiation procedures

Continuous improvement plan

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

Principle 2: Compliance with Applicable Laws and Regulations

Criterion by Audit

Summary

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

ASA3 2.1 The mill and estates have a register of all applicable laws and regulations and this includes among others:

OSHA and regulations 1994 (Act 514)

Factories and Machinery Act with regulations (Act 139)

Pesticides Act and Regulations (Act 149)

Poison Act and Regulations 1952 (Act 366)

Ministry of Trade.

Malaysia Palm Oil Board (MPOB) Regulations

Road Transport Act 1987 (Act 333)

Employees Social Security Act and Regulations (Act 4)

Trade Union Act and Regulations

Employees Provident Fund Act 1991

Human Rights Commission of Malaysian Act.

Electricity Supply Act 1990

Employment Act 1955

Immigration Act 1959/63

Act 246 Private employment Agencies Act 1981

Act 76 Protection of Wild Life Act 1972

Act 208 Sewerage Services Act 1993

Act 133 Street, Drainage and Building Act 1974

Wages Councils Act 1974

Waters Act 1920

Workmen’s Compensation Act 1952.

Pesticides Act 1974

Destructions of Disease Bearing Insects Act

Employment Act 1955

Internal Security Act 1960

Employment Provident Fund Act

Drainage Works Act 1954.

Workers minimum Standards of Housing and Amenities Act 1990

All applicable permits and licenses for the mill and estates are clearly displayed in the respective offices. Records of expiry of these permits and licenses are kept in the office and monitored to ensure that they are renewed





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well before the expiry dates to ensure no lapses in the compliance to Malaysian government laws and regulations. The person responsible for monitoring the compliance to applicable laws and regulations are the respective estate and mill managers.

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

ASA3 2.2 The mill and estates have demonstrated legal ownership of their land by having legal land titles to the land. All land titles demonstrate the right to use the land and clearly mentions the fact that the land is to be used for palm oil cultivation only. The land titles are kept in the estate office and were sighted during the audit. Evidence of annual payment of land tax to the state government is available in the form of receipts. The estate boundary is well demarcated with boundary stones surrounding the land. The boundary stone clearly states the GPS coordinate of that particular point. Maps clearly showing the estate boundary were also sighted in the estate office.

ASA3 2.3 There is no customary land in or surrounding all the estates. There are also no land disputes or claims involving these estates.

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

Criterion by Audit

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

ASA3 3.1 There are 2 supply bases [Bornion estate Segar Usaha estate] and 127 external crop suppliers, inclusive of surrounding small holders. Annual financial plan 2013/2014 & Estimate is available. In totaling of 3 estates: • Hectare[matured]: 5‘937 • Hectare[immature]: 0 • FFB Yield [Mt/T] : 58.59 • FFB crop [MT] : 174‘421 • OER [%ge] : 21.80 • Oil produced [%]: 37‘499 • Prod. Cost FFB [RM/Mt FFB} : 321.10 • Prod. Cost CPO [RM/Mt FFB} : 210.00

Replanting – NA.

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

Criterion by Audit

Summary

The mills and estates have a complete set of SOPs which is being strictly adhered to and continuously monitored. Soil fertility is being maintained in the fields and erosion prevention is continuously carried out. IPM is being implemented in all the estates and the use of chemicals are in accordance with the regulations. An observation was raised as in-concrete justification for the non-usage of biological control to mitigate rat attack. There is a comprehensive OSH policy and is being implemented throughout the estate and mill. There are some inconsistencies with HIRARC and an observation was raised for this aspect. Trainings are being carried out as per the Annual Training Plan.

ASA3 4.1 The mill has all its SOPs in place and these SOP covers all mill operations from FFB reception right until mill effluent treatment. These SOPs details the





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procedures to run each mill operation in an efficient and safe manner. The implementation of these SOPs is done through maintenance and record keeping of forms and data for, FFB incoming records, boiler smoke density records, sterilizer temperature and time records, steam flow record, water usage records, chemical test records, process control and production report and CPO stock inventory, spare parts inventory records and so on.

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

ASA3 4.2 Soil surveys and foliar sampling were carried out by Applied Agricultural Resources (AAR) Sdn. Bhd. which is a subsidiary of Kuala Lumpur Kepong Berhad on an annual basis. Records of these were sighted in the estate offices. Through these surveys and analysis, the optimum fertilizer to be used is recommended to cover the nutrient deficiencies that may exist for the palms. Application of EFB is also recommended to reduce the usage of inorganic fertilizers. Verified the EFB log book record for June 2013. Crossed check of the weigh bridge found satisfactory.

Checks on the records of fertilizer application indicate the fertilizer application is done based on the recommendation of AAR. Soil maps such as the general soil map, slope classes map and elevation map are also available and were sighted. These maps are used to provide general recommendations for soil and water management practices and to identify solutions to overcome soil limitations.

ASA3 4.3 Soil erosion is prevented through the following methods:

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

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

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

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

ASA3 4.4 The estates have maintained the riparian buffer zones along rivers in accordance with the national and local regulations. Maps of buffer zone maintaining available including construction of culvert on certain river area. Estate has implement policy for no spraying at buffer zone area. There are no bunds, weirs nor dams that have been constructed along waterways in the estates. Field visits to the estates confirmed this fact.

Monthly Effluent Treatment Plant inspection checklist made available that acknowledged by mill staff & executives. Verified DOE log book with last visit acknowledged on 27/02/2013. Mill throughput for June 2013 is about 51.25 at average.

Rainfall data is collected and monitored on a daily basis. Since Oct 2012 to





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Apr 2013 the total rainfall record registered [use of rain gauge] is in an average of 200mm. There are no water drainages into protected areas. Water management plans for the mill and estates were sighted. KDC Laboratory produced effluent test reports sighted for Dec 2012 – May 2013. Deoling tank flow meter and effluent pump flow meter records verified for 01 April – 16 June 2013. Water sampling programs and maps clearly documented.

Water pump house checklist is actively used on monthly basis with water management plan well documented. Quarterly water sampling analysis report for Before Received Pond, After Received Pond and Decimation Tank with pH reading at 6.7 in average. Total [Oct 2012 – May 2013] of 228097 of water usage [MT] as a whole for total FFB processed 163’566.48 MT. POM effluent discharge is diverted to trenches to Bornion estate. Verified the report for Detection and Identification of Coliform Bacteria and Escherichia coli in water that conducted by own KDC lab.

ASA3 4.5 IPM plan is documented as per the Good Agricultural Practices which includes beneficial planting and the use of biological control as opposed to chemical control of pests. Planning and realization of IPM programmes were monitored by mapping the beneficial plant to be planted with types of plant. The plans are monitored by daily completion of planting, expressed in meter of plants planted. Trainings are given to all staff on IPM.

The locations where barn owl cages are built are also mapped in each field and monitoring carried out by census where it records the division, area size, block no, month erected, box no, development stages of the owls(eggs, immature, mature), box condition, condition around the box. Pesticide was recorded included type of chemical, a.i, litre chemical, area applied by daily records.

An observation was issued for “However, concrete justification should be given for the absence of the utilization of biological control to mitigate rat attacks on palms”.

ASA3 4.6 The mill and estates maintain a chemical register detailing the chemicals use, its purpose and classification as per the classification, packaging and labeling requirements as per the Register of Chemicals Hazardous to Health stipulated in the USECHH 2000 regulations (regulation 5). All pesticides used are in accordance with the Pesticides Act 1974 (Act 149) and the relevant provision (Section 53A) and in accordance with USECHH Regulations (2000). Parquet usage has been stopped since 2010. The estates still use two class 1B chemicals namely Monocrotophos and Warfarin for trunk injection to counter bagworm attack and to counter rat attack respectively. These chemicals will only be used in the event that the threshold of infestation in a block exceeds 5%.

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

ASA3 4.7 General OSH policy dated 10/01/2005 is in both English and Malay versions.





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The mill and estate have conducted HIRARC for their operations. The risk assessment covers all existing activities in estate. Latest HIRADC reviewed on 02/01/2013 by the mill manager. OSH plan with 2 objectives and training matrix in relation to the plan dated on 24/05/2013.

Annual machinery Inspection list attached with quarterly OSH inspection records. Verified DOSH visit log book for 21/05/2013. License renewal for machineries and other business related permits are monitored. Contractors who works in confined space been handled effectively with PTW. CHRA was last dated on 2008 and there is plan to be conducting this year-end. 22 employees been sent for medical surveillance in May 2013 which pending results from panel doctor.

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

The interval for OSH meeting is at minimum of once in 3 months. Latest meeting held on 02/04/2013. Since Jan 2013, there was an accident recorded on 31/01/13. Verified JKKP 6 & 9 letter send to DOSH. A letter to Labour department [BM/JTK/01/13] for insurance coverage. These meetings discussed workplace inspection, workers medical check-up, PPE usage and accident prevention, OSH policy, review of health hazards in selective operations, review of chemical health risk assessment (CHRA), annual medical surveillance as per CHRA, safety performance, training on safety and health, safety barriers, emergency and response plan. The person-in-charge of OSH is the estate and mill manager. Estate has Safety Committee with combining from representative from all levels of workers. There are workers who are trained in first aid by the Hospital assistants in the estates. The mill and estates have first aiders present in the mill and field. First aid boxes were available and filled with the necessary medications. Records of accidents are maintained through the JKKP 6 and JKKP 8 forms as per the requirement of DOSH. These records are maintained in the offices and sent to DOSH on a quarterly and annual basis. LTI is calculated and tabulated in the JKKP 8 form and also in the minutes the quarterly OSH meeting.

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

ASA3 4.8 The mill and estates have a comprehensive annual training plan for its staffs and workers. The training plan for 2012 and 2013 was sighted. Trainings conducted were recorded in the various trainings record books and it was complete with attendance records, training materials and photographs of the training. The mill and estates conducted trainings, among others, for:

The appropriate use of PPEs

First aid and fire drill

The implementation of SOPs for operations such as harvesting, pruning and manuring





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Safe handling of chemicals and fuels

Hazard identification, risk assessment and control (HIRARC)

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

Criterion by Audit

Summary

Environmental Impact Assessment has been carried out by the mill and estates. A comprehensive identification of all waste has been recorded and disposal of scheduled waste has been carried out by an approved and registered collector. Monitoring and analysis of waste is carried out regularly.

ASA3 5.1 The mill and estates have conducted their Environmental Impacts Assessment (EIA) for 2013. EIA last reviewed by Mill Manager on 3rd June 2013. The EIA is sighted for “Medium” rating level of risk ranging from 5 - 20. The EIA details the environmental impacts of operations and new activities as well as plans to mitigate any negative impacts should there be any. The impacts from estate operations, which covers land preparation and clearing (if any) right up till the delivery FFB to the mill is assessed through stakeholder consultation. The impacts from mill operations from reception of FFB in the mill right up till effluent treatment is also assessed in the similar way.

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

Verified Dust Emission Monitoring report that compliance to MS 1596:2003 guidelines, dated 08/11/13 CK/MO407/231(vi) – 5/12 which the reading at alarming stage, 0.389.

ASA3 5.2 The HCV assessment has identified 2 HCV areas, namely the riparian zone of a river and community area with some fruit trees. Site visit to estate evidenced of sign boards are in place for buffer zone and “No Hunting or fishing. A brief management plan established effectively since Nov 2012 and is in the primary stage. This plan is associated with a mile stone chart on activities how the estate can preserve the species. Signages are the best tool to create the awareness and serve as warning sign at all the appropriate areas within estate. Secondly patrolling at specific interval by the estate security personnel is evidenced.

ASA3 5.3 Waste and pollution mapping identifies domestic house hold wastes, agrochemical containers, used oil, battery, spoiled light, filter, clinical waste and so on. The mill and estates have procedures on how to handle wastes and their storage. The scheduled wastes handling and storage is handled in accordance to the Scheduled Wastes regulations 2005. There are sufficient wastes collecting bins mill wide that enable employees to dispose the waste according to the label [glass, paper, plastic].

Waste management program dated on 05/04/2013 with 17 items listed. The program divided into schedule waste, POME, smoke emission and general pollution control. Verified the Jadual 2 [notification to DOE] for SW 305, SW 306, SW 102, and SW 410, Jadual 5 [inventory of schedule waste] Jadual 6 [consignment note] still manual and by Sept 2013 will switch to e-consignment.

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





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ASA3 5.4 All energy is generated by the company itself via a boiler and gensets. Fossil fuel use for the gensets, turbine. Total FFB produced from Oct 2012 – May 2013 was 163’566.48 MT and the consumption is 20.49 KW/hr. The renewable energy usage for the mill is in the form of fibre and shell usage. The non-renewable fuel used by both mill and estates are petrol and diesel. A complete mapping of baseline value established, where the monitoring focus on fibre [MT], FFB processed, CPO produced and the linkage to fuel consumption. Monitoring every month and the figures will be compiled at the end of every year. Diesel usage for machineries sighted for 2013 at engine room, prime mover, water pump and others.

ASA3 5.5 Kuala Lumpur Kepong Berhad has zero burning policy which explicitly prohibits open burning for land clearing or any other purpose whatsoever within plantation limits. There was no evidence that open burning takes place in the mill and estates, including in areas where replanting is taking place, and this was verified during the field visits.

ASA3 5.6 Mill emissions source is identified at each operating station and the type and quantity of pollutants generated such as fibre, shell, scrap iron, EFB, effluent, schedule waste, waste oil from diesel tank, and emission from generator set, boiler ash and dust from the soot blower are well documented. Stack emissions analysis are done twice a year as per the Environmental Quality Act 1974 requirements and records of this were sighted in the mill. The effluent (POME) quantity is monitored on a daily and monthly basis and a summary is available and was sighted. Pollution from POME has been reduced with the commissioning of the biogas plant in the mill.

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

Criterion by Audit

Summary

The mill and estates have conducted the social impact assessment in a participative manner. There was evidence that participatory methods were used to conduct the SIA. The relevant policies are in place and are fully implemented across the board. Communication and consultation as well complaints and grievances procedure are well communicated and adhered to. There are no evidence of workers been discriminated against in any way and all are being paid their fair wages. The workers quarters at estate were not up to living standards. Gender committee addresses issues specific to women’s needs.

ASA3 6.1 The mill and estates have conducted their Social Impacts Assessment for 2013. The SIA details the impact of operations and new activities to the social well-being of the workers and the community and steps that need to be taken to reduce any negative impacts should there be any. The assessment was conducted through stakeholder meetings held by the mill and estates with all their stakeholders. Any negative impacts from the assessment will be mitigated within a specified time-frame. The SIA is updated on an annual basis to take into account the changes and new activities that have taken place within that time-frame.

ASA3 6.2 The mill and estates have a communication and consultation procedure in place and this was sighted in their respective offices. The procedure for communication and consultation is as follows:

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

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

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

The matter will be forwarded to the Grievances Executive Committee





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who will decide on the action to be taken.

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

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

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

ASA3 6.3 The mill and the estates have a complaints and grievances procedure that serves as the SOP for handling of complaints and grievances from both internal and external stakeholders. This procedure has been displayed in the offices and also on notice boards around the mill and estates. A complaint and grievances logbook is kept in every mill and estate and it contains the details of the complaints made, the complainant or aggrieved party, the action taken to resolved the complaint or grievance and the date the action was taken. All complaints and grievances were promptly attended to and records of this were sighted in the mill and estate offices. Workers who were interviewed confirmed that they are aware of the complaints and grievances procedure and how to channel their grievances.

ASA3 6.4 There is no customary land surrounding the estates and there are no land claims. No compensation was ever paid out for land related disputes or claims.

ASA3 6.5 All mill and estate workers are being paid wages in accordance with the Kadar Upah Pekerja Ladang (Wage Rates for Plantation Workers). Contract of service and salary slips for both local and foreign workers were checked and workers were paid the same amount of minimum wages which is currently RM800/month. All wage rates, benefits and working conditions are stipulated in the contract of service of the workers. There is a clause in the contract of service stating that whatever is not mentioned in the contract of service will be covered by the Sabah Labour Ordinance.

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

All quarters are provided with free electricity and treated water supply. Repairs to any damage in the quarters are done without any cost to the workers. Interview with workers have confirmed that they are indeed satisfied and comfortable with the quarters provided.

An observation was issued for “However in estate, the compound of the old housing quarters should still be kept clean and hygienic to a basic living standard although there are plans to move to new quarters soon”.

ASA3 6.6 The mill and estates adhere to the Kuala Lumpur Kepong Berhad Policy on The Freedom of Collective Association of Employees that recognizes and allows the freedom of association and collective bargaining of its employees.





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This policy is displayed in the mill and estates and has been communicated to all workers and staff. Mill and estate workers are free to bargain collectively by forming groupings on their own to collectively bargain with the management of the mill or estates.

ASA3 6.7 Kuala Lumpur Kepong Berhad has a Child Employment Policy that prohibits under-aged children from working in the company. All mill and estate adhere to this policy. There are no children below ages of 16 working in the mill or estates and this was proven through the checking the list of employees as well as their bio-data and through field visits.

ASA3 6.8 Kuala Lumpur Kepong Berhad has an Equal Opportunity policy dated 1 January 2008 and signed by the regional Director that is clearly displayed in the office and on the notice boards around the estates and mill. Both local and foreign workers enjoy the same scale of pay and provided with equal housing and work facilities. This was confirmed though interview with workers from both the mill and estates and also through verification of contracts of service and pay slips of workers. No evidence of discrimination based on race, skin colour, religion, gender, national origin, ancestry, disability, marital status, and sexual orientation was found in both the mill and estates.

ASA3 6.9 The Policy on Sexual Harassment, Violence and Reproductive Rights dated has been displayed at all estates and mill. This policy has also been communicated to all staff and workers and this was evident through the training records. Gender committees have been established in the mill and both the estates. A specific grievance mechanism for workers to voice their grievances with regards sexual harassment/violent nature been established.

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

ASA3 6.10 Contractors have signed contracts with the company and payment record shown that the company pay fee to the contractors according the agreement. All the payment is made promptly every month and as per agreement. A Contract sighted between Ritajaya and KL-Kepong drawn for transport/carrier services of the company product. Terms and condition of safety, health and labor are included in the contract. The prices of FFB paid to the estates is in accordance with the prices set by the Malaysian Palm Oil Board (MPOB) and the records of past and present prices of FFB, CPO and PK are kept by the Marketing Department.

ASA3 6.11 The mill and estates are committed and have contributed to local development. The Response and Requests logbook and letters of contributions detailing the type, purpose and amount of contributions were sighted in both operating units.

Principle 7: Responsible Development of New Plantings

Criterion by Audit

Summary There were no new plantings carried out.

Criterion by Audit

Summary

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





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ASA3 8.1 For 2013, there is no plan established for reduction in use of chemicals. As for environmental impacts, there are 6 activities and for OHS 6 programs in 2013. Waste reduction more related to schedule and domestic wastes. Water management plan are documented and FFB produced comparison done against the power consumed. No other significant water conservation programme available. Monthly expenditures contributed for environmental activities generated. From Oct 2012 to May 2013 the total expenditure cost at RM 261’648.31, verified recycle scrap iron [RM 63’132.60], Effluent pond maintenance [RM 214’911.15], Rubbish collection [RM 1’544.88]. As for social aspect for the same period, it was RM 12’498.67, whereby RM 480 donated to Village head, RM 345 for 1st aid kit, RM 2’172.07 for sports activities, RM 1’825.00 for school transport, RM 121.80 for OHS training and RM 7’211.00 for worker’s clinic charges.

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

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

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

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

4.3.1 Non-Conformities Identified during this Audit

No NC’s were raised for this audit.

4.3.2 Non-Conformity Identified during the last ASA, not applicable for MA

The following NC’s were raised during the last audit and the status was reviewed as indicated below.

NC number: 2012-01

Client name: Kuala Lumpur Kepong Berhad

Date raised: 9 July 2012

Major or Minor: Minor

Raised by: Simon Selvaraj

Aspect of standard: 4.2.4 (RSPO Certifications Systems) Time-bound Plan (d) Where there are isolated lapses in implementation of a time-bound plan, a minor non-compliance is raised. Where there is evidence of systematic failure to proceed with implementation of the plan, a major non-compliance is raised.

Evidence of non-conformity: Time bound plan been revised and updated accordingly.

Assessors Signature

Date 9 August 2012

4.3.3 Observations Raised During this Audit


Date raised: 21 June 2013

Raised by: Viknesvaran Paramasivan

Aspect of standard: 6.5.3 Growers and millers provide adequate housing, water supplies, medical, educational and welfare amenities in accordance with Workers’ Minimum Standard of Housing and Amenities Act 1990 (Act 446) or above, where





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no such public facilities are available or accessible. Observations: The compound of the old housing quarters should still be kept clean and hygienic to a basic living standard although there are plans to move to new quarters soon.

Assessors Signature

Date 21 June 2013


Date raised: 21 June 2013

Raised by: Viknesvaran Paramasivan

Aspect of standard: 4.5.2 Monitoring extent of IPM implementation for major pests. Observations: Concrete justification should be given for the absence of the utilization of biological control to mitigate rat attacks on palms.

Assessors Signature

Date 21 June 2013

4.4 Issues that were raised during the Stakeholder Consultation, if any

Stakeholders were either informed by the client or by Control Union via the RSPO website.

For Main Assessments, a 30 day Stakeholder consultation announcement is published on the RSPO website

prior to the audit. The same announcement is circulated by the client prior to the audit

For subsequent Annual Assessments, it is based on stakeholders reading the approved public summary

reports available on the RSPO website, the client’s procedures in receiving on-going feedback or if feedback

was sent directly to Control Union prior to an audit or thorough RSPO complaints procedures.

During each assessment, the audit team will review the company’s implemented procedures in receiving

feedback and will execute field visits and interviews. Not limited to the following questions, any feedback

received is reviewed and summarized in this summary report for either Part 2 – Partial Certification or Part 4 –

Assessment Findings above or noted below, if applicable:

1. Do you have any remarks on the RSPO standard?

2. What is your relation with the applicant?

3. Are there any plantation or mill management practices that affect you?

4. Do you consider any management is in conflict with the RSPO principles and criteria?

5. Do you have any suggestions for management?

6. Are you aware of any HCV in the plantations or in adjacent land?

7. Are you aware of any endangered or rare species?

8. Are there any adverse (or positive) effects on local communities?

9. Additional comments?

11. Do you have any comments about the assessment team and would you like to meet with them?

12. Do you have any comments for the client’s management of any other plantations?

Subject raised Company response and proposed action to be taken

Audit team findings

refer to PART 2 and PART 4 refer to PART 2 and PART 4 refer to PART 2 and PART 4





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PART 5: RSPO SUPPLY CHAIN CERTIFICATION

The palm mill mentioned in the scope of the audit was audited against the requirements of the following: RSPO Supply Chain Certification Systems. November 2011 RSPO Supply Chain Certification Standard. November 2011

5.1 POM Included In The Scope Of The Audit

Name Palm Oil Mill

Mill Capacity

Location Supply Chain Model

(POM) MT/Hour Address (IP or SG or MB)

Bornion POM 80 KM 101, Jalan Lahad Datu – Sandakan, Kinabatangan, Sabah

MB

5.2 Confirmation Of The Company’s Summary Of Annual Certified Volume Of RSPO Certified Palm Oil And Palm Kernel Over A Specified Period

Product CPO (MT) PK (MT) Specified 12 month period

CU Code

POM 1 35,207.93 8,731.50 Actual volumes between Aug’12 to Jul’13 See also 1.6 above.

5.3 Summary Report Including A Brief Description Of The Scope Of Certification

A full RSPO SCCS certification audit was used during this annual assessment and the findings support the certification based on supply chain model listed above.

5.4 Monthly Records of Certified FFB Received and CPO and PK Produced Since the Last Audit

No MONTH-YEAR Certified Supply Bases (MT) Certified CPO (MT) Certified PK

1 Aug 2012 10012.30 2152.77 475.90

2 Sept 2012 13110.54 2792.00 676.55

3 Oct 2012 13854.84 2927.64 720.41

4 Nov 2012 18496.25 3727.14 962.80

5 Dec 2012 19039.52 3814.72 1000.42

6 Jan 2013 15826.41 3018.58 822.71

7 Feb 2013 12356.79 2473.87 639.06

8 Mar 2013 12571.80 2653.59 644.43

9 Apr 2013 11948.90 2628.89 603.66

10 May 2013 12239.23 2527.88 615.69

11 June 2013 14692.00 3158.78 763.98

12 Jul 2013 15498.00 3332.07 805.89

TOTAL 169,646.58 35,207.93 8,731.50

5.5 Records of Certified CPO & PK Sold under Green Palm to Buyers since the Last Audit, if Any

No Buyers Name Green Palm Trading No Certified CPO

(MT) Sold Certified PK (MT) Sold

1 L’oreal - 3000.00 -

5.6 Records of Certified CPO & PK Sold under UTZ eTrace to Buyers since the Last Audit, if Any

No Buyers Name UTZ eTrace Trading No Certified CPO

(MT) Sold Certified PK (MT) Sold

1 KLKPO TR-db3d8a8b-b50e 1050.00 -

2 KLKPO 3596.92

5.7 Non-Conformities Identified during this Audit

Timeline for compliance: 1. All non-conformances observed during an audit shall be classified as ‘major’ since all requirements for





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Supply Chain certification have to be met before granting certification. 2. For Main Assessments, all non-conformances shall be addressed satisfactorily by the operation before

certification may be granted by the certification body. If non-conformances are not addressed within three (3) months of the audit, a full re-audit shall be required. The certification body shall assess the effectiveness of the corrective and/or preventive actions taken before closing out the non-conformances.

3. For Annual Surveillance Assessments, non-conformances raised after the certification are serious (i.e. must be considered as a major) and the integrity of the RSPO Supply Chain Certification is at risk. A maximum of one month is to be given to the certified client to satisfactorily address the non-conformance. The certification body shall assess the effectiveness of the corrective and/or or preventive actions taken. Should the nonconformance not be addressed within the one-month maximum timeframe, a suspension or withdrawal of the certificate and a full re-audit may be necessary.

4. If no non-conformances are observed at an audit or when the corrective action plan has satisfactorily addressed raised non-conformance(s), the client shall be recommended for (re-) certification.

Non-were raised during this audit.

NC Number: NA

Date:

Reference to standard:

Standard requirement:

Evidence of non-compliance:

5.8 Description of the Organizational Management Systems

Including organizations, management and operational systems to ensure compliance with the RSPO Supply Chain Certification Systems and Standards as detailed above

Bornion palm oil mill and its supply bases were audited against RSPO SCCS. The mill processing capacity is 80 ton FFB per hour. The mill is capable of handling MB supply chain model. However, downgrading to a lesser supply chain model is done by internal system where linking of both FFB purchasing and weigh bridge were carried out automatically.

5.9 Final Certification decision by Control Union for the RSPO SCCS Audit of the POM

Recommendations made: Yes

Summary of non-compliances:

None Found

Certification status of client: The POM included in the scope of this audit demonstrated full compliance with the RSPO SCCS. With effect from the certification date given in the RSPOPC certificate, this POM mentioned in the scope of this report is considered to be certified in accordance with the RSPO SCCS.





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PART 6: CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY

6.1 Date of next ASA

The provisional date for the next ASA is: April 2014

6.2 Date for Closure of Non-Conformities

See sections above for details of NC’s, if any

All major NCs to be closed by: 20 August 2013

All minor NCs to be closed by: Before next surveillance audit

6.3 Signing by the Client

I the undersigned, being the most senior relevant management representative of the operation seeking or holding certification, agree with the contents and audit findings as presented in this document . I also confirm:

Acceptance of liability in execution of the instructions given.

That this company was made aware that the findings of the audit team are tentative; pending review and decision making by the duly designated representatives of Control Union Certifications.

That during the closing meeting all agenda items was covered by the Lead Auditor.

Acknowledged by:

Name: Sin Chuan Eng

Position: Head of Sustainability

Date: 21 June 2013 Signature

6.4 Signing by the Lead Auditor

I the undersigned, being the Lead Auditor, confirm that this report is an accurate record of the findings and of the closing meeting. I further confirm that the summary of the findings as presented in this report are a true representation of the actual findings of the audit team.

Acknowledged by:

Name: Viknesvaran Paramasivan

Position: Lead Auditor

Date: 21 June 2013 Signature

6.5 Signing by the Certifier

I the undersigned, being the Certifier, confirm that the information and conclusions included in this report have been prepared in good faith and that the certification decision has been based upon this information.

Acknowledged by:

Name: Hari Naveen Christopher

Position: Certifier

Date: 30 August 2013 Signature





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PART 7: APPENDICIES

Appendix 1: Location Map for this Certification Unit

From 1.9, the location map(s)





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Appendix 2: List of Abbreviations

BRC British Retail Consortium

BOD Biochemical oxygen demand

CHRA Chemical Health Risk Assessment

CoC Chain of Custody

COD Chemical oxygen demand

CPO Crude Palm Oil

CSR Corporate Social Responsibility

CU Control Union

CUC Control Union Certifications

DOE Department of Environment

DOSH Department of Safety and Health

EFB Empty Fruit Bunch

EIA Environment Impact Assessment

ERT Endangered Rare or Threatened species

EU European Union

FFB Fresh Fruit Bunch

FSC Forest Stewardship Council

FSC COC Forest Stewardship Council Chain of Custody

FSC FM Forest Stewardship Council Forest Management

GGL Green Gold Label

GMP Good Manufacturing Practice

GOTS Global Organic Textile Standard

GTP Good Trading Practice

GPS Global Positioning System

HACCP Hazard Analysis and Critical Control Point

HIRARC Hazard Identification, Risk Assessment and Risk Control

HCV High Conservation Value

HCVF High Conservation Value Forest

IPM Integrated Pest Management

JAS Japanese Agricultural Standard

LTI Lost Time Injury

MDC MDC Publishers Sdn Bhd ( Company Name)

MSDS Material Safety Data Sheet

NC Non Conformity

OE Organic Exchange

OSH Occupational Safety and Health

OSHAS Occupational Safety and Health Assessment Scheme

P&C Principle and Criteria

PEFC Programme for the Endorsement of Forest Certification

PK Palm Kernel

POME Palm Oil Mill Effluent

PPE Personal Protective Equipment

RSPO Roundtable on Sustainable Palm Oil

RSPO NI Roundtable on Sustainable Palm Oil National Interpretation

SA8000 Social Accountability 8000

Sdn Bhd Sendirian Berhad

SIA Social Impact Assessment

SOCSO Social Security Organization

SOP Standard Operating Procedure

USDA/NOP United States Department of Agriculture – National Organic Program

MT Metric Tones

WHO World Health Organization