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RSPO Principles & Criteria Main Surveillance Assessment Report Report Number CU819969 RSPOPC-SUM-REPORT.F01 OCT2013 Page 1 of 40 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700 RSPO PRINCIPLES & CRITERIA PUBLIC SUMMARY REPORT MAIN ASSESSMENT Malaysia MILL 2 Kuala Lumpur Kepong Berhad 2013 Report prepared by: Simon Selvaraj (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. Control Union (Malaysia) Sdn Bhd is a registered affiliate member of RSPO and is a private limited company owned by the Control Union World Group based in Malaysia. Control Union (Malaysia) Sdn Bhd is authorized to conduct and issue certification on behalf of RSPO and Control Union Certifications. RSPO Membership Number 8-0025-06-000-00 RSPO Approval Date 12/01/2006 Affiliate Membership http://www.rspo.org/en/member/339

Transcript of RSPO audit Report...RSPO Principles & Criteria Main Surveillance Assessment Report Report Number...

Page 1: RSPO audit Report...RSPO Principles & Criteria Main Surveillance Assessment Report Report Number CU819969 RSPOPC-SUM-REPORT.F01 OCT2013 Page 2 of 40 Control Union (Malaysia) Sdn. Bhd.

RSPO Principles & Criteria Main Surveillance Assessment Report

Report Number CU819969

RSPOPC-SUM-REPORT.F01 OCT2013 Page 1 of 40

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

Tel: +603-3377 1600 / 1700

RSPO PRINCIPLES & CRITERIA

PUBLIC SUMMARY REPORT MAIN ASSESSMENT

Malaysia

MILL 2 Kuala Lumpur Kepong Berhad

2013

Report prepared by: Simon Selvaraj (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.

Control Union (Malaysia) Sdn Bhd is a registered affiliate member of RSPO and is a private limited company owned by the Control Union World Group based in Malaysia. Control Union (Malaysia)

Sdn Bhd is authorized to conduct and issue certification on behalf of RSPO and Control Union Certifications.

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

RSPO Approval Date 12/01/2006

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

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RSPO Principles & Criteria Main Surveillance Assessment Report

Report Number CU819969

RSPOPC-SUM-REPORT.F01 OCT2013 Page 2 of 40

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

Tel: +603-3377 1600 / 1700

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 MAIN SURVEILLANCE ASSESSMENT DETAILS ..................................................................................... 4 1.4 ASSESSMENT TYPE ...................................................................................................................... 4 1.5 LOCATION OF THE PALM OIL MILL .................................................................................................. 4 1.6 PALM OIL MILL OUTPUT AND APPROXIMATE TONNAGES CERTIFIED ........................................................ 4 1.7 GENERAL DESCRIPTION OF SUPPLY BASE .......................................................................................... 5

1.7.1 Location of the Supply Base........................................................................................... 5 1.7.2 Statistics of the Supply Base and Estimated Tonnes of FFB produced per year .............. 5 1.7.3 Conservation and HCV Area (Ha) ................................................................................... 5 1.7.4 Percentage of Planted Oil Palm by different Age Ranges .............................................. 6 1.7.5 Calculation of the Number of Production Units (N) to Sample for the Mill..................... 6

1.8 PROGRESS OF ASSOCIATED SMALLHOLDERS OR OUT-GROWERS, IF APPLICABLE TO THIS ASSESSMENT ............. 6 1.9 LOCATION MAP FOR THIS CERTIFICATION UNIT (SEE APPENDIX 1) ......................................................... 6

PART 2: PARTIAL CERTIFICATION ........................................................................................................ 7

2.1 MANAGEMENT STRUCTURE .......................................................................................................... 7 2.2 NON-COMPLIANCE IDENTIFIED WITH 2.1 ABOVE ............................................................................... 7 2.3 SUMMARY OF THE TIME BOUND PLAN ............................................................................................ 7 2.4 UN-CERTIFIED UNITS OR HOLDINGS ................................................................................................ 9 2.5 SUMMARY OF THE FINDINGS FOR PARTIAL CERTIFICATION.................................................................. 12 2.6 PARTIAL CERTIFICATION AUDIT AGENDA ........................................................................................ 12

PART 3: AUDIT PROCESS .................................................................................................................... 13

3.1 ABOUT THE CERTIFICATION BODY ................................................................................................. 13 3.2 AUDIT TEAM............................................................................................................................ 13

3.2.1 Qualifications of the Lead Auditor ..................................................................................... 13 3.2.2 Qualifications of the Assessment Team ............................................................................. 14

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

PART 4 ASSESSMENT FINDINGS ........................................................................................................ 18

4.1 LEAD ASSESSOR’S SUMMARY AND RECOMMENDATION FOR CERTIFICATION........................................... 18 4.2 SUMMARY OF THE FINDINGS BY PRINCIPLES AND CRITERIA ................................................................. 20

Principle 1: Commitment to Transparency ................................................................................. 20 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 ................................................................................................................................................. 24 Principle 6: Responsible Consideration of Employees and of Individuals and Communities by Growers and Millers .................................................................................................................. 26 Principle 7: Responsible Development of New Plantings ............................................................. 28 Principle 8: Commitment to Continuous Improvement in Key Areas of Activity ............................ 28

4.3 NON-CONFORMITY RAISED DURING THIS AUDIT AND ANY FROM THE PREVIOUS YEAR, IF APPLICABLE ......... 31 4.3.1 Non-Conformities Identified during this Audit ................................................................... 31 4.3.2 Non-Conformity Identified during the last ASA, not applicable for MA............................... 32 Non-were raised during the last audit as this is the Main Assessment. ....................................... 32 4.3.3 Observations Raised During this Audit .............................................................................. 32

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

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

Tel: +603-3377 1600 / 1700

PART 5: RSPO SUPPLY CHAIN CERTIFICATION ................................................................................... 35

5.1 POM INCLUDED IN THE SCOPE OF THE AUDIT ................................................................................. 35 5.2 CONFIRMATION OF THE COMPANY’S SUMMARY OF ANNUAL CERTIFIED VOLUME OF RSPO CERTIFIED PALM

OIL AND PALM KERNEL OVER A SPECIFIED PERIOD................................................................................... 35 5.3 SUMMARY REPORT INCLUDING A BRIEF DESCRIPTION OF THE SCOPE OF CERTIFICATION ............................ 35 5.4 MONTHLY RECORDS OF CERTIFIED FFB, CPO AND PK SINCE THE LAST AUDIT ......................................... 36 5.5 RECORDS OF CERTIFIED CPO & PK SOLD UNDER GREENPLAM TO BUYERS SINCE THE LAST AUDIT, IF ANY ...... 36 5.6 RECORDS OF CERTIFIED CPO & PK SOLD UNDER UTZ ETRACE TO BUYERS SINCE THE LAST AUDIT, IF ANY ...... 36 5.7 NON-CONFORMITIES IDENTIFIED DURING THIS AUDIT ........................................................................ 36 5.8 DESCRIPTION OF THE ORGANIZATIONAL MANAGEMENT SYSTEMS ......................................................... 37 5.9 FINAL CERTIFICATION DECISION BY CONTROL UNION FOR THE RSPO SCCS AUDIT OF THE POM .................. 37

PART 6: CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY ........... 37

6.1 DATE OF NEXT ASA ................................................................................................................... 37 6.2 DATE FOR CLOSURE OF NON-CONFORMITIES .................................................................................. 37 6.3 SIGNING BY THE CLIENT .............................................................................................................. 38 6.4 SIGNING BY THE LEAD AUDITOR ................................................................................................... 38 6.5 SIGNING BY THE CERTIFIER .......................................................................................................... 38

PART 7: APPENDICIES ........................................................................................................................ 39

APPENDIX 1: LOCATION MAP FOR THIS CERTIFICATION UNIT ....................................................................... 39 APPENDIX 2: LIST OF ABBREVIATIONS ...................................................................................................... 40

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

Tel: +603-3377 1600 / 1700

PART 1: SCOPE OF THE CERTIFICATION ASSESSMENT AUDIT

1.1 Company and Contact Details

Company Name: KL – KEPONG (SABAH) SDN BHD (Tawau Region)

Business Address: KL – KEPONG (SABAH) SDN. BHD. LOCKED BAG NO.3, 91009 TAWAU, SABAH

Contact Person: Mr. Sin Chuan Eng

Office Telephone: +60127621582

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: C819969CU-RSPO-01.2013

Start Date Of Certificate: 04/03/2009

End Date Of Certificate: 03/03/2014

Date Of Original Certification: 04/03/2009

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 Main Surveillance Assessment Details

Dates Of This Audit: 2nd – 5th Dec 2013

Audit Number: Re- Main Assessment

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 (S) MILL 2 45 Mile 42, Tawau - Semporna

Highway, Tawau, Sabah N4.46562 E118.22367

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 Dec 2012 – Nov 2013 (MT)

Projected 12 Months (MT) Forecast Certified in this Report

Oct 2013 – Sept 2014

FFB CPO PK FFB CPO PK FFB CPO PK

270,608 46,698 9,277 197,762.98 46,672.53 7,219.76 207,492 49,799 8,300

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

Tel: +603-3377 1600 / 1700

*The figures for previous 12 months were projected with the inclusion of Jatika Estate during ASA 4, whereby now, Jatika Estate has been excluded as part of the supply base for this Mill 2.

1.7 General Description of Supply Base

The supply bases are the 5 estates located near Tawau in Sabah, East Malaysia. All supplying estates listed below are owned by KL-Kepong Berhad and no FFB is sourced from independent suppliers. Details of other certifications and awards held: Central KDC laboratory is certified for ISO 17025 (Located in Tawau Region).

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 5 Ldg. Pang Burong

KM 60, Jalan Tawau – Semporna

E118.209243 N04.446629 2,548 2,372

OPP 6 Ldg. Tundong KM 60, Jalan Tawau – Semporna

E118.232259 N04.458831 1,834 1,800

OPP 7 Ldg. Sri Kunak KM 60, Jalan Tawau – Semporna

E118.195872 N04.493133 2,770 2,052

OPP 8 Ldg. Ringlet KM 60, Jalan Tawau – Semporna

E118.452103 N04.438001 2,155 1,175

TOTAL 9,307 7,399

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 5 Ladang Pan Burong 66,999 1991 – 2010 25

OPP 6 Ladang Tundong 28,673 1987 – 2010 25

OPP 7 Sri Kunak Estate 57,142 1990 – 2010 25

OPP 8 Ringlet Estate 54,678 1990 – 2008 25

TOTAL 207,492

1.7.3 Conservation and HCV Area (Ha)

OPP Oil Palm Plantation Conservation Area (Ha) HCV Area (Ha) * HCV part of Conservation

OPP 5 Ladang Pan Burong 87 0 No OPP 6 Ladang Tundong 21 0 No OPP 7 Sri Kunak Estate 98 0 No OPP 8 Ringlet Estate 0 0 No

TOTAL 206 0

* Indicate if HCV area is part of the Conservation Area. If the HCV area is part of the Conservation Area, then “YES” otherwise, “No”

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

Tel: +603-3377 1600 / 1700

1.7.4 Percentage of Planted Oil Palm by different Age Ranges

OPP Planting Years by 5 year Ranges

1986-1990 1991-1995 1996-2000 2001 -2005 2006 – 2010 2011 – 2015 Total

OPP 5 0 81ha (3%) 771ha (33%)

655ha (28%)

865ha (36%)

0 2,372ha (100%)

OPP 6 214ha (10%)

0 0 0

961ha (47%)

886ha (43%)

2,061ha (100%)

OPP 7 20ha (1%) 112ha (4%)

413ha (16%)

553ha (21%)

954ha (36%)

586ha (22%)

2,638ha (100%)

OPP 8 81ha (4%) 532ha (30%)

677ha (38%)

447ha (25%)

63ha (3%) 0 1,800ha (100%)

1.7.5 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

4 2 - -

Explanation as to the selection of estates sampled

All 4 estates selected in this is reassessment.

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

No smallholder supplying FFB to this mill.

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

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

Tel: +603-3377 1600 / 1700

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?

N/A 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?

Yes Go to 2.4 Go to 2.2.2

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

Yes Go to 2.3 2.2.3

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

Yes

2.2 Non-compliance Identified with 2.1 Above Section Non-compliance findings NC raised Category

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

- Major

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

- Major

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

- Major

2.2.4 No applicable membership of the RSPO. - Major

2.3 Summary of the Time Bound Plan

Section Requirement Findings and any action required

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

New inclusion of supply base and mill has been updated in below time bound plan.

2.3.2 Is the time bound plan challenging? Age of plantations. Location. Mill development. Infrastructure. Compliance with applicable law.

Existing time bound plan has been included with new supply base and mill.

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

The time bound plan reviewed by CUC and changes such as new inclusion is updated and accepted.

Section Requirement Findings and any action required

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

Tel: +603-3377 1600 / 1700

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

New inclusion of mill and supply base. No changes on the targeted time line.

2.3.5 Have there been any stakeholder comments?

Recent stakeholder comment on acquired land in Papua New Guinea on the credibility on land obtained has been raised by OCEAN-Program Officer Collingwood Bay Community Representative, Mr. Adelbert Gangai has sent comments to KLK on a letter dated 5th December 2013 and kept RSPO & other parties in copy. Currently, KLK has leased a piece of a land to park all the machineries temporarily. As of 09 December 2013, this matter is being handled with RSPO and currently KLK is in progress to reply to RSPO. Wild Asia had been appointed since April 2013 to undertake SEIA assessment and subsequently 1st meeting at Wanigela district on 25th Nov 2013 and community and representative attended was recorded. Pending official assessment report.

On PT Menteng Jaya Sawit Perdana IUP for 7,400Ha approval no: 525.26/153/II/EKBANG/2007 dated on 13 February 2007 and Izin Lokasi(IL) is renewed and documented no: 188.45/359/HUK-BPN/2013 dated: 1st August 2013 which includes an approval clause 1a that this IL will remain in force until land swap process is finalised.

2.3.6 Have there been any newly acquired subsidiaries?

No new acquisition other than Papua New Guinea.

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

No lapses.

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

No.

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

The target to certify all the units within year 2015 remain same.

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

Tel: +603-3377 1600 / 1700

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

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

The internal control points have included all the requirements to validate the compliance against uncertified units or holdings as per partial requirements and assurance statement has been generated by KLK has a list of subsidiaries inspected and dated 30th Nov 2013.

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

Primary forest.

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

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

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

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

PT Anugerah Surya Mandiri has undergone NPP and published in RSPO website on 1st April 2013.

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.

For PT Karya Makmur Abadi, a total land of 4,745.13Ha has been compensated. PT Adei Plantation land conflicts around 2,544Ha are still in progress of negotiation.

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

None noted. No stakeholder comments or complaints received.

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

None noted. No stakeholder comments or complaints received.

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

Tel: +603-3377 1600 / 1700

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 Buntar Estate

2013 Certified

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

Supply base consisting of smallholders

2015 Pending

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

2013 Certified

Tuan Mee Sungai Buloh, Selangor, Malaysia

Tuan Mee Estate 2013 Certified

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

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

Tel: +603-3377 1600 / 1700

Rimmer Lahad Datu, Sabah, Malaysia

Rimmer Estate Sg. Sibalukan

July 2010 Certified

Bornion Kinabatangan, Sabah, Malaysia

Bornion Estate Segar Usaha Estate

July 2010 Certified

Changkat Chermin

Manjung. Perak, Malaysia

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

2013 Certified

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 Audited on 30/9-04/10/2013. 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 Approved by RSPO, pending certificate issuance.

NIlo 2 Riau, Sumatera, Indonesia

Kebun Nilo Barat By 2013 Approved by RSPO, pending certificate issuance.

Tapung Kanan Riau, Sumatera, Indonesia

Kebun Sekarbumi Alamlestari

By 2013 Certified.

Gohor Lama

Langkat, Sumatera Utara, Indonesia

Kebun Basilam Kebun Gohor Lama Kebun Tanjung Beringin (New inclusion)

By 2014 Pending

Padang Brahrang

Sumatera Utara, Indonesia

Kebun Padang Brahrang Kebun Bukit Lawang Kebun Tanjung Keliling Kebun Bekiun Kebun Maryke (New Inclusion)

By 2014 Pending

MAP March 2013

Kalimantan tengah, Indonesia

Kebun Karya Makmur Abadi Kebun MAP Kebun Menteng Jaya Sawit Perdana

By 2015 Pending

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

Tel: +603-3377 1600 / 1700

With reference to time bound plan, the following issues were reviewed openly with the Control Union audit team during the assessment and which may be in conflict with the rules for partial certification, if applicable

Name of Mill or Plantation *Area of concern (See examples below)

PT Karya Makmur Abadi Land disputes

PT Adei Plantation Land Disputes

Include any known concerns, media reports and major issues both present and from the past covering, for example:

Replacement of primary forest or any area containing HCV’s since November 2005.

Evidence of non-compliance with the law

Legal issues

Compensation payments

Social relations

Burning

Labor disputes

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 and a minor non-compliance raised has been closed with an assurance statement. The 6 estates which have been excluded from time bound plan previously is included now with a target date. Out of the two mill in Kalimantan Timur, a new palm oil mill named Berau 2 POM is yet to commission. Stabat POM in Medan & KMA POM in Sampit has not commissioned and will be included in the time bound plan once ready. The company has also made decision to include Paloh Mill into certification by year 2015. Mill 1 which consists of 100% of independent smallholders will be shut down within 3 years from 2012.

2.6 Partial Certification Audit Agenda

Date Location Agenda

09/12/13 KDC Club, Tawau, Sabah

Partial verification audit on all subsidiaries in accordance 4.2.4 rules.

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

Tel: +603-3377 1600 / 1700

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.

Control Union (Malaysia) Sdn Bhd is a registered affiliate member of RSPO and is a private limited company owned by the Control Union World Group based in Malaysia. Control Union (Malaysia) Sdn Bhd is authorized to conduct and issue certification on behalf of RSPO and Control Union Certifications.

3.2 Audit Team

Lead auditor: Mr. Simon Selvaraj

Team member 1: Mr. Mohd Rizal Kassim

Team member 2: Mr. Mahaswaran Maliyappan

Team member 3: Ms. Asidartorn Team member 4: Mr. Selvanathan

Team member 5: Mr. Jamalul Arif

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;

Post graduate qualification in agriculture with more than 5 years working experience in plantation.

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 5 years working experience in plantation. Involved in RSPO auditing since November 2010. Fully trained in similar agriculture certification programs such as RSPO SCCS, Global Gap, ISCC and GMP.

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

Involved in RSPO assessment since November 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 July 2011. Successfully completed RSPO Lead Auditor Course

Training in the practical application of RSPO certification systems.

Post graduate qualification in agriculture with more than 5 years working experience in plantation.

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

RSPO endorsed lead auditors course. Completed RSPO Lead Auditor training in 2011

Signed code of conduct. Signed with CUC

General knowledge of:

RSPO P&C standards. Sound knowledge of the P&Cs, Nis and Local Interpretations.

CUC organizational structure. Sound understanding and has prepared training documents for others.

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

Tel: +603-3377 1600 / 1700

CUC quality systems. Sound understanding and has prepared training documents for others.

Lead auditor role. ISO 9001. Prepared an ISO 19011 training course and conducts internal training on auditing techniques.

Report writing. Extensive experience in report writing.

Stakeholder consultation. The process and need for this is fully understood.

Certification decision process. Full understanding.

RSPO SCCS program manual. Full understanding.

CUC filing systems. Full understanding.

Correct use of RSPO trademarks. Full understanding.

History and objectives of RSPO. Full understanding.

CV available. Upon request.

Completion of CUC RSPO lead auditor training. Completed & Passed RSPO Lead Auditor training in 2011

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

Fluent in main local languages and English.

Rizal Kassim Fluent in local and English

Mahaswaran Fluent in local and English

Iamsirisanthong Asidarton Fluent in English

Selvanathan Fluent in local and English

Mohd. Jamalul Arif Fluent in local and English

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

Mohd Rizal 5 Year experience in forestry and manufacturing sector

Iamsirisanthong Asidarton Global gap experience and agriculture background

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

Jamal Involved in RSPO auditing since November 2010. Auditing experience in GMP and Globalgap.

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

Mohd Rizal 5 Year experience in forestry and manufacturing sector

Iamsirisanthong Asidarton Global gap experience and agriculture background

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

Jamal Involved in RSPO auditing since November 2010. Auditing experience in GMP and Globalgap.

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

Mahaswaran Experience as OHSAS auditor

Mohd Rizal Experience as safety officer in Malaysia manufacturing firm

Iamsirisanthong Asidarton Complete lead auditor ISO 14001

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

Workers welfare issues Mahaswaran Master in Bussines,experience in social auditing

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Tel: +603-3377 1600 / 1700

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

Iamsirisangthong Asidatorn Involved in group audit in organic farming since 2010. Global GAP in 2011 and RSPO in early 2012

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

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

Mohd Rizal

Experience in Forestry firm

Iamsirisantong Asidarton

Complete lead auditor 14001

Mahaswaran

Complete and experience as lead auditor for EMS and ISO14001

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

Economic issues. Mahaswaran Master in Business Administration, Experience as several manufacturing company

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

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.

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Tel: +603-3377 1600 / 1700

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

OSH. Training. Management structure. First aiders.

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

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

Compliance against the RSPO SCCS certification scheme. Verification: Verification of implementation was done through field observations, workshop and chemical store inspections, worker and community interviews and mill inspections as summarized above.

3.3.2 Assessment agenda for this Audit

Date Location Main activities

02/12/2013 KLK Staff Club 08.30 Opening meeting- Centralized for Mill 2 & Pinang Mill complex 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 Mill 2 POM Supply Chain Certification Assessment of the POM (RSPO SCCS)

Mill inspection

Workshops

Stores

POM application

Document review Auditors: Simon, Mahas, Selva, Jamal & Rizal

03/12/2013 Pang Burong Estate

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental Auditors: Simon, Rizal

Tundong Estate

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental Auditors: Mahas, Selva & Jamal

04/12/2013 Sri Kunak Estate

Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

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Tel: +603-3377 1600 / 1700

Local communities

Environmental Auditors: Simon, Rizal & Jamal

Ringlet Estate Field operations.

Worker interviews

Chemical stores

Workshops

Housing

Medical

Schools

Local communities

Environmental Auditors: Mahas, Selva

05/12/2013 KLK Staff Club 09.00 – 13.00pm - Centralized Stakeholder Meeting for both Mill 2 & Pinang Mill Complex

KLK Staff Club 09.00 – 15.00pm – Partial verification audit on all subsidiaries in accordance 4.2.4 rules.

10/12/2013 KLK Staff Club 08.00am – 14.00pm - Preparation for closing meeting Additional field visits and meetings with managers as necessary 15.00pm - 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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Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia.

Tel: +603-3377 1600 / 1700

PART 4 ASSESSMENT FINDINGS

4.1 Lead Assessor’s Summary and Recommendation for Certification

The mill and supply base are as per the above table 1.5 and 1.7.1 visited was assessed at field, office, facilities, stores and document review carried out in accordance to the RSPO principles and criteria. Partial Requirements audit were conducted for all KLK subsidiaries. Please refer to whole of Part 2 for more details. Common systems were identified and specific evidence was recorded for individual estate and mill. Interviews with Estate Managers, Mill Manager, and members of workers representatives took place in both formal and informal environments and worker interviews were conducted in all estates and in the mill. Subsequent to the stakeholders’ interview, the surrounding communities were visited so as to capture more feedback from the stakeholders. There were no complaints received during the field assessment and during interview with the external stakeholders. Up to the time of writing this report, there were neither feedbacks nor comments received from the other external stakeholders and community leaders. A separate interview with key personnel from top management was carried out to evaluate the implication and achievement. A summary of the interview is as per below.

Among the greatest challenges that the company faced in past 5 years by the estate is to make the ground

people to understand of the RSPO requirements as majority are foreign workers. Another challenge during the

early stage was in documenting and communicating the requirements to middle management. The

management also felt, getting the involvement of the external stake holders thru meetings and trainings,

needed more time and even some time less responds received from involved parties. In the initial stage limited

knowledge of RSPO requires by executives in Tawau region required the support from other operating unit

within KLK. As illiteracy rate is high among workers and also of different culture especially foreign workers, it

remained very challenging training and educating them on RSPO.

In generally 75 – 80% of the RSPO objective achieved in the past 5 years as well the employees’ awareness

increase from top to low level employees. Even to certain extend, low level workers do provides inputs in their

continuous improvement programs. The management continuously employing key people [managers] for

certain areas as there are short coming in the core area [HCV, Environment, social].

When interviewed the Mill Adviser on whether the RSPO objectives achieved and timely, he mentioned that

intended objectives has been achieved, majority of employees could understand the importance of RSPO and in

acceptance. He believes the RSPO has to be cultured and not just mere compliance. Continuity plans are

imperative and the same time resources have made available to maintain the system.

Since the RSPO certification, the management adequately practicing the respect of human rights and as

evidence, there isn’t discrimination of workers at work place and no land disputes and issues with local

communities.

Based on the assistant general manager interview, the benefits by having RSPO, such as EIA introduced created

the environmental awareness, productivity increase thru best practices which increase the yield, safety concern

increase, welfare of workers well taken care which influence workforce stability, CSR for internal / external

stakeholders, more training programs as an added value and all level of workers feel more happy to work in

safer environment / long standing with company / living standard improve. As part of concern on bio diversity,

more concern on riparian zones developed and both internal and external stake holders briefly understand on

HCV needs.

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Tel: +603-3377 1600 / 1700

Based on the information shared by the Mill Advisor, RSPO implementation literally changed the mind set of

both, the management and workers at large. HUMANA / school facilities established for the worker’s children,

better medical facilities, and greatest awareness on health, safety and environment. Employee salaries have

increased since the RSPO implementation and there is no wage discrimination among male and female

employees.

RSPO also fostered closer working relationship between the management and stake holders, both internal and

external. Since the implementation of RSPO mill is also experiencing lesser absenteeism and workers appear

happier with the cleaner and safe working environment. To enhance on environmental consciousness, mill

management has initiated tree planting program, one tree per employee in year 2013 is expected to complete

by year 2014.

The next plan in 5 years, sourcing into key personal to train existing staff, to create more training sessions, get more involvement from external stake holders and more CSR programs that can create impact to KLK. The Mill Adviser mentioned that the next 5 years, Mill 2 will be undergoing revamping using modern concepts

so as to reduce manpower and improve on plant efficiency. Mill management is currently testing NOR

spectrometers for quality and quantitative analysis with objective of reducing chemical usage in the mill

laboratories. The equipment will be considered for all mill laboratories if proven reliable and effective.

Mill 2 already has biogas power generation plant and works are in progress to extend power to own estates so as to reduce fossil fuel usage in estates. Plans are also in pipeline to install biogas plants in Pinang mill in next five years. To reduce on raw water treatment chemicals, mill management will focus on mechanical means and larger reservoir to reduce raw water turbidity while the same time review on treatment plant operations. Since this Mill 2 & Estates has completed 1st cycle of RSPO certification and going into 2nd cycle, where it is addressed as Re-Assessment, a complete assessment carried out with regards RSPO Principle & Criteria. Further to it, Principle 8 was assessed for its continuous improvement where the findings have been captured in below findings. The mill is fully verified for RSPO SCCS system verification and it is found to be in full compliance. Refer the whole of Part 5.

It is therefore the recommendation of the lead assessor that:

A new certificate of compliance to be award… Signed:

Name: Simon Selvaraj Date: 10 Dec 2013

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Tel: +603-3377 1600 / 1700

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

The company has all the copies of requests & responses which are more to internal request and local authority bodies. Such records are kept and available for viewing. As a whole, the business units have common system with parent company KLK on publicly available documents which have been listed in their SOP. However, as per the requirement, the details of complaints & grievances are not publicly available but need to request. (Refer to 1.2 below).

MA 1.1 The company in overall has revised its SOP on request & response procedures by including revised form to be hand over to the party requesting any information with regards the company’s operation and its system. The form is used for all party regardless the information requested. For example, request to take effluent sampling by DOE will need to fill in the request form and further will be divert to DOE log book for the outcome. All previous records for the past 5 years available. The review of records confirmed that any requests are attended promptly and actions propose and action taken is recorded with evidence and acknowledgement of the requesting party.

MA 1.2 The company holds all the 8 types of documents that are available to the interested parties upon request. However, details of complaints & grievances and its procedures were unable to demonstrate as how it is available publicly. Therefore, a minor NC is raised. Refer table 4.3.1, NC No: 01/2013

Principle 2: Compliance with Applicable Laws and Regulations

Criterion by Audit

Summary

The audit team confirmed that the inspected records of the business units have maintained legal compliance with statutory requirements such as Employment Act, Employees Provident Fund Act 1991 Estates Hospital Assistants (Registration) Act 1965, Environment Quality Act 1974, Immigration Act 1959, Workers minimum Standards of Housing and Amenities Act 1990, Occupational Safety Health Act 1994, Factories & Machineries Act 1967 and so on. Though, the company does have agreement with the contractor to ensure the contractor complies with legal requirement, the company have overlooked to ensure the contractor’s workers holds a valid license to operate the heavy machineries( Refer 2.1 below). The mill is within the estates boundary and an estate holds valid land titles. The boundaries are well demarcated and visible. An interview with local community confirms that there are no land disputes.

MA 2.1 The mill has a Law Books Register which includes The Document name, The Regulatory Authority / Summary of the law, The Requirements and Remarks. There are a series of SOPS that include legal requirements for example: SOP 15 gives delegates responsibilities to individuals. SOP 16 covers Permits, licenses and Reports. SOP17 covers contracts. SOP 18 for complaints and Grievance procedure. A list of all applicable licences is prepared to show expiry dates for all licences covering all mill operations. The licences are all valid and copies are included in the file. Work permits for foreign workers employed by KLK are checked and verified. However, the contractor’s workers appointed for replanting works had failed to demonstrate the valid license to operate the

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Tel: +603-3377 1600 / 1700

machineries used for replanting. Therefore, a minor NC is raised in accordance with 2.1.3 requirements where the mechanism to implement is not evident. Refer table 4.3.1, NC No: 02/2013 The estates have Law book register for all the requirements for local, national and regional laws and regulations. These are listed together with law name Regulatory authority / summary, requirements and remark. The KLK Head Office will update the Executive in Charge of all operating centres through circulars and meetings. Both the Estate and Mill Managers are the officials responsible for all compliance monitoring. Evidence of compliance was noted during the interview as the person in charge was well informed and updated on the compliance requirements for the various relevant laws and regulations.

MA 2.2 The company holds all the land titles for all estates visited and copy of each land title is kept by the individual operating unit. The site visit and review of land titles confirms that the validity of the land titles and terms for use is consistent with the land title for agriculture. Most of the estates boundaries are adjacent with other plantation companies and forest area. Field inspection on all estates confirmed that the legal boundary stones are well maintained to identify the boundaries which are adjacent with forest and other plantation. Where legal boundary stone was unable to locate, the company had engaged a surveyor to survey the land and pole has been erected and maintained.

MA 2.3 The mill & estates of these complexes are all on legal land title. Currently no disputed land and therefore there has no negotiated agreements in relation to the customary rights for the past 5 years.

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

Criterion by Audit Summary

KLK head quarter has continued funding the mill and estates for improvements and implementing sustainability. The annual budget of the business units has detail breakdown as per below findings.

MA 3.1 The annual budget for Mill 2 Palm Oil Mill is available in the booklet ‘Mill 2 Palm Oil Mill Estimates 2013/2014’. The annual budget details the OER and KER of the mill, its revenue and expenditures and breakdown of costs. The 2 years financial projection for the mill for financial year 2014/2015 and 2015/2016 is available in the file ‘OER and Budget Projection’. The annual budget for the estates for 2013/2014 is contained in the booklet ‘2013/2014 Estimates’. Details of financial expenditures and cost of production is available. Crop projection for the next 10 years until 2022 is also available in the same document. The estates which is going for replanting has a replanting programme with next 5 year projection. The programme is reviewed annually, during the budget preparation process, with the last review in Sept 2013.

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

Criterion by Audit Summary

The company best agricultural practice ensures the management systems are always being monitored by having regular internal audits by the sustainable team. All the respective estates manager and mill manager, including the top

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

Tel: +603-3377 1600 / 1700

management and agronomist involved in this process of evaluation. The mill has kept the OER within the trend from the past years. The estates have continually implementing best agricultural practices together integrated pest management system. Please refer to each criterion below for findings and principle 8 for more detail.

MA 4.1 KLK has developed best practice SOPs that are “Group Policy – Agriculture Oil Palm” for all of its operations from land clearing through production and processing of palm oil. The developed SOPs have included environmental management system. Work instructions are posted at the relevant work stations. Records are being monitored by the respective mill & estate manager through implemented internal process that check and report the outcome. The records are available at the respective operating units. The daily operating records are well maintained for the past 12 months and other sustainable records are retained from last 5 years.

MA 4.2 KLK’s R&D Department, Applied Agricultural Resources (AAR) has a research station at Sri Kunak which carries out the sampling of leaf tissue and soils and analysis. Data of the nutrient analysis & visual inspection is recorded in their recommendation of fertilizers and trend record for 5 years is kept by the station and information’s are retrievable. Audit team has sighted AAR’s report which includes the leaf analysis result, soil analysis, recommendation to apply fertilizers for each estate. EFB generated from the mill is sent to the estates to be utilized for mulching. The EFB records generated from mill was verified against the EFB delivered amount to the respective estates. Thus, the areas of applied EFB were monitored through the nutrient analysis by the R&D Department.

MA 4.3 Topographic map and soil map surveyed and produced by AAR were used to identify erosion risk area. Soil erosion control includes terracing of slopes and maintenance of ground cover crop was practiced. Implementation of pruned frond stacking, spraying of palm circles, planting of ground cover crop were sighted during field inspection. Road maintenance programme has been established at each operating units and budget has been allocated. The yearly programme includes types of maintenance, target of completion with planned and realized date. During field inspection, it was observed that the roads are well maintained. There are no peat soils and verified through soil analysis report. The supply bases are largely covered by mudstone, basic igneous rocks and sandstones and fractions of other series of soils.

MA 4.4 The mill has constructed pollution prevention devices at workshops, chemicals used areas and POME discharge points to protect water quality. Monitoring records shows mill effluent discharge complied with the local requirement for the past 1 year. The estates which has river passing through have implemented riparian buffer zones. The buffer zones are marked on the palm and only circle spraying is permitted. The harvesting will continue until replanting. Efforts taken to plant trees such as Calophyllum inophyllum (Bintangor), Syzygium campanulatum, Heritiera littoralis, Gmelina arborea, Acacia mangium, Ficus sp, Peltophorum dasyrachis to rehabilitate the buffer zones. Most of the land is flat and drainages are manmade. No natural stream passing through the estates. The estates have sampling points mapped for upstream and downstream to monitor the pollution level. Such analysis is carried out on monthly basis and summaries of the results are produced. Review of the analysis and records of the previous 12 months confirms that there is no significant difference.

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

Tel: +603-3377 1600 / 1700

The estates record the rainfall and data is used for water management which includes the planning for replanting, manuring and forecasting of crops. The rainfall data for the past 10 years for both mill & estates showed that in this region the rainfall is as high as 2,588mm in average per year. The mill is using water that extracted from the river and further treated to process the FFB. Water usage is monitored on daily basis and approximately 1.14 ton of water is used to process 1 ton of FFB. Refer to principle 8 on reduction and continuous improvement plan. Drainage into protected areas will be monitored through the upstream and downstream water sampling analysis and mill effluent is discharged after POME treatment and reduction of BOD as per local limit is monitored.

MA 4.5 One of the best practices of the company includes IPM program where monitoring of pests & diseases were monitored and control measures are taken based on census records when necessary. Efforts made on breeding of barn owl in this region as one of the company’s continuous improvement plan to reduce the rat bait usage. However, the rat baits are used as control measure as rats are the major pests in these estates. The estates continue planting of beneficial plants such as Turnera subulata along the roadside. The estates monitor the effectiveness of the IPM techniques for controlling the targeted pests. The records are well maintained and retrievable since main assessments. Information on the locations where the baits are applied is recorded in the estates costing book. Pesticides were used to control other pest such as rhinoceros beetle especially during replanting.

MA 4.6 Field and facility visits by the audit team confirmed that only approved chemicals were used. The stores inspection confirmed pesticides are stored safely meets the regulatory requirements by having ventilation, spill containment, separation and labelling of chemicals and security by kept locked by the assigned responsible staff. Shower, PPE washing area was provided for the sprayers. In the stores all the work instruction and MSDS are available in local language. Sign boards in illustrating pre-cautions for safe handling were sighted. Interviews with pesticide store keeper and workers confirmed that good understanding of safe working practices are being used. In addition, training records were checked for continuous monitoring. Annual program and medical check of the pesticide operators are in accordance with the CHRA requirement. Medical officer confirmed all pesticide workers are fit to work. Use of paraquat is eliminated and replaced with Glyphosate. Inspection of the stores and interviews with workers confirmed zero usage of paraquat. Chemicals used are in accordance of Pesticides Act.

MA 4.7 OSH plans will be reviewed each year which includes safety targets, meetings and training. HIRARC on all activity of the mill and estates was reviewed on January each year. Both mill and estates training records includes task instruction with trainer’s name and attendee’s signature. Sighted training plan and attendance records for “Chemical handling, spraying Techniques and Safety Aspects” dated 25/09/13 that were attended by 25 sprayers. This was attached with assessment comments by the trainer [Mr. Imran – OHS Officer]. During mill inspection, the audit team sighted the workers using ear plugs and signage of noise area was noted. Noise mapping available in the mill. Overall, in both mill & estates provides appropriate PPE to all workers which includes safety boots, safety helmet, gloves, apron, safety goggles and masks. Records of PPE issuance for individual workers were sighted. Mill manager & Estate manager is the nominated OSH coordinator for their respective operating units. Minutes of safety meetings were sighted and meetings are conducted every 3 months where worker representatives, supervisor and staff have attended. The most recent meeting held is date on

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

Tel: +603-3377 1600 / 1700

08-10-2013 verified document no. M2/2013/277. The minutes include details on hazards identified, accidents, corrective action and progress. The emergency response plan has been revised according to the recent changes of task intensity and personnel. The emergency response plan has been posted on notice boards and work stations of the mill and estates. First aid kits are located at each store, workshops and at 5 locations in the

mill. The first aid kits were checked and replenished. The supervisor in the

field holds a set of first aid kit which will be assigned to him during morning

muster ground and return it after work and kept in the office. First aid

training is conducted on 25 June 2013 and attended by 17 workers. Both mill

& estates maintain the records of all accidents including investigation. The

Lost Time Accident Rate shows variation over the past 5 years for all

operating units. For Pangeran Estate, 0/970,424, as there were no accidents.

All local workers are covered under SOCSO and foreign workers are covered

under AXA insurance. Policy LWX/91076030/37/09/HHT for period

01/10/2013 – 30/09/2014.

MA 4.8 The mill & estates have developed a training programme for your year 2013-2014 which includes work stations in the mill and each task in the estate. Trainings are conducted to improve or develop skills. The training records of each individual was sighted which records training information and trainer’s name and followed by competency assessment of the trainee.

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

Criterion by Audit

Summary

The operating units review the environmental improvement plans every January. The mill improvement plan was given importance to reduce water usage and for the estates is to control through biological such as barn owls and beneficial plants as stated in IPM above. Separation of waste has improved and more recycling method adopted.

MA 5.1 Both mill & estates has identified Environmental Aspects & Impacts and being

reviewed every January. This assessment is based on risk assessment

identified from each process and activity of the mill and estates. The format

used inclusive of points such as activities, types of operation, input, volume,

output, impact and evaluation criteria. Based on the assessment conducted, a

significant impact register list established with mitigation measures identified

for those activities with scores up to 25 point. Environmental improvement

plan includes reducing water usage and maximizing recycling for the mill and

estates to rehabilitate the riparian zones by planting jungle trees.

MA 5.2 Continued implementation of HCV management as per the recommendations by the previous assessment done by Koh Lian Pin is evident. As continuous improvement plan, the company has engaged another comprehensive assessment to re-assess the existing & potential new HCV area for any habitants for all the relevant estates. SOP-11.0 [High Conservation Value / Conservation Area Management] established. Short and long term HCV management plan available for erosion control measure, monitoring established riparian zones and demarcated boundaries. Field inspection confirmed estates have continually monitoring all the erected signage which prohibits illegal hunting and fishing. As per SOP 11.0 issue 1/0, Dated: 01/10/13, on implementation & monitoring point no: 7, to give awareness training on the importance of protection & conservation of HCV area.

MA 5.3 The mill has identified the waste that contributed from offices, mill operations and engineering works such Schedule Waste; Spent Lubricant SW 305, Spent Wet Battery SW 102, Spent Filter SW 410, Used Leather Glove.

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

Tel: +603-3377 1600 / 1700

There is sufficient waste collecting bins in the mill that enable employees to dispose the waste according to the label [glass, paper, plastic]. For the estates, SOP 11 Management of Waste Generated dated 1.2.2012 and identification of waste along with 3R program was sighted. Type of waste are as follow:

Scheduled Waste

Used Oil filter SW410

Used Hydraulic Oil SW 306

Used Lubricants SW 305

Empty container pesticide [HDPE]

Battery SW 102

Fertilizer bags

Plastic/Paper box.

Paper

Domestic waste

Prune fronds

Scrap iron

Used tyre

Line-site Waste Water Both mill & estates maintain the scheduled waste records. This is being collected by a valid licensed collector, Petrojadi Sdn Bhd. This collector is listed in the Scheduled Waste Contractors in Malaysia for Sabah from Jabatan Alam Sekitar (DOE). The residues such as fiber and shell are used for boilers and field inspection confirmed that EFB is sent to the estates for mulching as recycling. EFB mulching program is derived with approximately 30MT / Ha. The estates holds the EFB mulching records.

MA 5.4 Renewable & non-renewable energy used are monitored and reported to the management. The mill has monthly generated kWh Gas engine where the usage is recorded automatically. Inspection shows that the biogas plant is supplying electricity to Mill 2 & Tundong Estate. Sample evidence; On Sept 2013, 204101.2 kWh is generated from 15,978.0 m3 POME at the biogas plant. As for Tundong estate, the management is adequately assessing the energy use including fuel, diesel and electricity on monthly basis. Sighted the records for monitoring of fossil fuel in term of kWhr/Li diesel used for gen-set as follows:

Year kWhr Diesel [Lt]

2007/08 7’763 66’800

2008/09 7’518 67’000

2009/10 6’996 67’238

2010/11 5’893 62’270

2011/12 5’639 54’400

Sighted the records for monitoring of fuel in term of kWhr/Li diesel used for transport:

Year FFB produced Diesel [Lt]

2007/08 35’295 97’098

2008/09 26’419 99’855

2009/10 24’071 88’109

2010/11 26’079 52’649 2011/12 22’553.85 86’639

MA 5.5 Field visit confirmed that there is no open burning being used for waste

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

Tel: +603-3377 1600 / 1700

disposal during replanting and palms that felled and chipped were placed in trenches for decomposition. Site visit to planned operating units confirmed no fire is used for domestic waste disposal.

MA 5.6 The assessment of polluting activities has been conducted and this is incorporated in the EIA. It covers: 1) The environmental aspects and impact of an activity or operation 2) The severity of the impact - normal, abnormal or emergency 3) Measures taken to mitigate the risks and impacts The monitoring and mitigation plan for all negative impacts are available and this is based on the requirements of the Department of Environment of Malaysia.

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

Criterion by Audit

Summary

The sustainability team continuously visits the mill & estates stakeholders for review of social issues. Subsequent information was unable to extract as the analysis data is not sufficient. Therefore, a minor NC raised as per 6.1 below. Interviews with stakeholders confirmed that the internal & external consultation did take place. Stakeholders did not raise any issues relating to the company and appeared to have a good relationship.

MA 6.1 The mill & estates has reviewed the social assessment conducted in 01/01/2013 following consultation with stakeholder. This assessment only includes internal stakeholder and for the mill, only 7 workers was surveyed out of 125 employees. The issues discussed are on working policy of 18 years above and minimum wage impact. No data analysis is evident for the conclusion made in the assessment. Therefore, a minor non-conformity is raised as the existing social assessment has not been analyzed or reviewed where the timetable for possible mitigation measure neither positive nor negative were not demonstrated. Refer table 4.3.1, NC No: 03/2013.

MA 6.2 Procedure SOP 23 Stakeholder Consultation dated 1.2.2012 sighted as Consultation and Communication and all operating units have updated their list of stakeholders. The weekly site meeting is the main platform for internal communication besides the display of memos on notice boards. Communication and consultation process is also communicated through training programs and the records with attendance lists were sighted. For external communication the management takes the effort to reach out to the community neighboring the estate during stakeholder meetings. List of stakeholder is also complete up to date for both mill and estate.

MA 6.3 All complaints, grievances, consultations and negotiations are documented in a log book. Details of the nature of the complaints and its resolution are clearly spelt out. The respective Mill and estate managers are responsible for the handling of all consultation and negotiation with stakeholders. Procedure SOP 18 dated 1.2.2012 relates to the documentation of which a dispute was resolved and the outcome is recorded. Complaint and Grievances record in Stakeholder Logbook was maintained. Action was taken by responsible person and will acknowledge the complainant. Complaints are mostly on housing repairs and last complain registered on 5.10.2013 by Hermawan [ Engine Driver ] on speeding at living quarters was lodged to the respective manager and decision made to construct hump where appropriate as action plan. Acknowledged done on 16.10.2013 by Hermawan. No grievance registered as per this audit period.

MA 6.4 Procedure of handling land compensation is available and this is part of the Stakeholder Engagement Procedure (SOP 1.0). There were no negotiations concerning land disputes and compensation for loss of legal or customary rights to the land for all the estates and mill assessed.

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

Tel: +603-3377 1600 / 1700

MA 6.5 Pay and conditions are documented in the appointment letter of the staff and workers. Interview with both mill & estates staff and workers and with both male and female confirmed that they understand the terms and conditions of their employment. However, sample reviewed of one worker have been sighted that the worker’s annual and sick leave entitlement is not evident and time out is not recorded for most of the sprayers. Therefore, a minor non-conformity is raised. Refer table 4.3.1, NC No: 04/2013. The company provides a good standard of housing for workers and staff. Constructing of new house and plan available. Most of the complaints on housing repairs have been attended to and action taken to repair with a timeline depending on the severity of the repairs. Immediate action taken to repair or relocate the family to another house if the repair is significantly serious. Housing meets the requirement and well maintained at all locations. Clinics continue to provide the medical assistance at company’s cost. Water and electricity are provided. Drinking water analysis result available and no E-coli or Coliform detected. Worship places are well maintained and donations are still being provided. Crèche are available with caretaker and basic facilities are provided with a small playground. Transport to school is provided for all schooling children. The company has built a HUMANA school and contributed as when necessary according to the teacher’s requests.

MA 6.6 Interviews with workers confirmed that meetings are held with worker representatives and the company upholds the freedom to form and join trade unions through established company’s policy. Last meeting held on 11/9/2013. The policy clearly spell out “the right of freedom association of employees” is displayed in every estate’s office and in the mill.

MA 6.7 The company has created and implemented minimum age policy and no child labor noted during this audit period. Interviews with workers and staff confirmed that there is no child labor employed neither in estates nor in the mil.

MA 6.8 An Equal Opportunities policy has been established by the company, communicated, displayed and publically available at all assessed operation for both mill and estate. There has been no evidence of discrimination of workers and staff based on gender, nationality, age, race or religion.

MA 6.9 The company has a policy regarding sexual harassment and violence and this has been communicated to the staff and workers. Workers that were interviewed are aware of this policy. The workers that were interviewed confirmed that there were no incidents of sexual harassment and violence in both the estates and mill. This was also verified through the document review of monthly checklist filled up by women workers. A grievance mechanism is also in place and this is clearly stated in the flow chart “Handling of Sexual Harassment”. Allegations will be channeled to the members of the Gender Committee and this information will be passed to the chairperson of the Gender Committee. The chairperson of the Gender Committee will inform the manager of the operating unit and an investigation will be launched. A representative from the health and safety department may be called in to assist with the investigation. The Gender Committee also conducts regular meetings with the company and minutes of meeting were sighted.

MA 6.10 The FFB pricing is in accordance with the MPOB pricing system and the company head quarter is in charge for the pricing system. However, the mill do not receives any FFB from smallholders. Contractors and suppliers had good relationship with the company and confirmed that the payments are made in time.

MA 6.11 Each operating unit planned to contribute to their own local communities. Current infrastructure and services are well maintained. They also contribute

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

Tel: +603-3377 1600 / 1700

donations and assistance to local schools and worship places. Following are samples: • Contributions for the education of school going children • Contributions to the family of an employee in the event of a death of employee • Donations to the local kindergarten • Donation to the local primary school of dated on 09/10/2012 which

Principle 7: Responsible Development of New Plantings

Criterion by Audit

Summary There are no new plantings or expansion made or planned for the estates stated in above table 1.7.4 and the figure denotes re-planting.

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

Criterion by Audit

Summary

During this re-assessment, it was noted that the company has improved significantly by demonstrating the compliance towards the requirements of whole RSPO Principle & Criteria apart from the area concerned and where non-conformity were issued. It was necessary to provide some findings below in point form to be precise on the continuous improvement plan and the achievement since first main assessment. In overall, the audit team satisfies with their continuous improvement plan and has subsequently checked in all the units visited.

MA 8.1 Minimise use of certain pesticides (C4.6) As for the mill, a Continuous Improvement Plan that consisted of 18 activities as mentioned in the Appendix 1 dated on 22/10/2013 established in-line with the requirement of SOP – 16.0, Management Review was sighted. Observed the “Register of Chemical Hazardous to Health – DOSH Registration No. H/K/0502” that also captured in the CHRA dated 22/08/2013 that registered of a few types of chemicals as below:

I. Boiler water treatment – 5 types II. Laboratory – 12 types

III. Store – 13 types IV. Workshop – 6 types V. Biogas plant – 3 types

As for the estates, sighted a “Continuous Improvement Plan 2013” that divided into environment, social and safety dated on Jan 2013 established in-line with the requirement of SOP – 16.0, Management Review. Observed the “Register of Chemical Hazardous to Health – DOSH Registration No. SB/07/04/1050” that also captured in the CHRA that registered of a few types of chemicals as below:

VI. Herbicide usage – 5 types VII. Pesticide usage – 4 types

VIII. Rodenticide usage – 1 type

The Paraquat usage been banned since 28/10/2008. Sighted a memo on the same date approved by the than Regional Director Mr. Yap Mun yew. Observed the monthly financial transaction record of chemical purchase for Nov and Dec 2013.

Part of the continuous plan of planting beneficial plants, Turnera Subulata has reduced the attack of leaf eating caterpillar. There are records shows on estate affected severely by Setora / Darna infestation. The Bugster [pesticide] amounts reduce from 3089 Lt in 2010-2011 to 1813 Lt in 2012-2013.

The importance of prompt census for early detection and control of pest also helped much in reduction of chemical usage. Observed records for Oct, Nov and Dec 2013.

The other improvement plan is planting jungle tree along riparian zone. Observed the records and log book that consisted of tree types, planted date, planted area and monthly monitoring results.

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

Tel: +603-3377 1600 / 1700

Environmental impacts (criterion 5.1) Sighted the “Environmental Impact Assessment” dated on 21/10/2013 in line with requirement to SOP – 10. The assessment was reviewed and revised for adequacy from Jan 2013 to Oct 2013 due to the revision in the completion date of particular mitigation measures.

There are 3 continuous improvement plans relates to environment as resulted from EIA dated in 2013.

I. Water recycling system in biogas plant II. Monitoring sedimentation pond at line site

III. Construction of belt press for BOD reduction

There is “Water Management Program” developed at mill 2 on 30/10/2013. The program inclusive of monitoring of treated water [E-Coli] as to ensure the water is safe to be consuming for drinking or daily use, line site waste water and mill waste water is to ensure no contaminated water is discharge respectively. Sighted the “Environmental Impact Assessment” dated on 01/10/2013 in line with requirement to SOP – 10. The assessment was reviewed and revised for adequacy from Jan 2013 to Oct 2013 due to the revision in the mitigation measures and the risk level.

Sighted water quality monitoring & water sampling programe was established at downstream in Oct 2012 - Oct 2013 as there was replanting 217 HA. The result was related into the continuous improvement plan.

As for riparian buffer zone, programs are available to avoid soil erosion, no accidental release of chemicals into river and compliance to legal requirement. Planting of jungle trees effectively since 2007 and sighted a log book detailing the date of planted and number of trees, such as Gmerlina Arborea, Casuarina Variegata, Albizia Falcataria etc. As Tundong Estate is neighbour to Mill 1, therefore the water source is from Mill 1. Sighted a copy of the “Water Management Program” of mill 1. The program inclusive of monitoring of treated water [E-Coli] as to ensure the water is safe to be consuming for drinking or daily use, line site waste water and mill waste water is to ensure no contaminated water is discharge respectively.

Waste reduction (criterion 5.3) EFB are being sent to estates for mulching that is a part of continuous improvement program on fertilizer usage at estates.

As for the air pollution monitoring program, sighted records [twice / year] of stack monitoring and maintenance of dust collector cyclone.

Biogas plant was commissioned in Dec 2010 and gas engine was in Mar 2012. Before commissions of the biogas plant, the entire effluent was treated in the open ponding system. As for the water pollution monitoring program, sighted records [4 x / year].

Domestic waste management being 1 of the continuous improvement programe, whereby training on awareness and spot checks done by the estate field supervisor regularly.

Since April 2013, Tundong Estate getting the CDM [Clean development Mechanism] power supply from Mill 2 Biogas plant which was commissioned in Dec 2010. Sighted the monitoring records of fossil fuel [diesel for gen-set] for:

Mar 2013 = 5522 Lt Apr 2013 = 5299 Lt

May 2013 = 357 Lt

Jun 2013 = 83 Lt

July 2013 = 23 Lt

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

Tel: +603-3377 1600 / 1700

Pollution and emissions (criterion 5.6) With biogas plant, all the effluent is treated via Anaerobic Digester Tank system and only the treated effluent is released to the ponds.

As for the Tundong estate, the pollution prevention programes are linked to the environmental impact assessment.

For water pollution, training programes are in place for triple rinse method, storage and safe use of chemical, correct spraying manner and establishing riparian zone. As for air pollution, regular maintenance of company own vehicles to reduce to emission of carbon, zero burning policy, banned on open burning etc.

Social impacts (C6.1)

`Social Impact Assessment updated on 25/11/2013. Some of the sighted activities are:

I. Platform with railing at loading ramp for ramp cleaning.

II. Mosque renovations

III. Worker’s personal locker

IV. Landscaping and up keeping mill facilities Social Impact Assessment updated on 25/11/2013.

Observed there are 8 activities stated in the continuous improvement plan for year 2013 as improvements resulted from SIA. Some of the sighted activities are:

I. Inspection of worker’s quarters

II. Immunization of children related to social aspects

CDM power supply to worker’s line site

Sighted the budget and expenditure for both social & environment captured on annual basis.

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

Tel: +603-3377 1600 / 1700

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

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

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

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

4.3.1 Non-Conformities Identified during this Audit

The following NC’s were raised for this audit.

NON CONFORMITY REPORT

NC number: 01/2013

Client name: Mill 2 Date raised: 10th December 2013

Major or Minor: Minor

Raised by: Simon

Aspect of standard : 1.2.1 Documents that must be publicly available.

Evidence of non-conformity: The company has listed 8 types of documents as publicly available documents upon request. However, details of complaints & grievances and its procedures were unable to demonstrate as how it is available publicly. Auditors signature:

Date: 10th Dec 2013

NON CONFORMITY REPORT NC number: 02/2013

Client name: Mill 2

Date raised: 10th December 2013

Major or Minor: Minor

Raised by: Simon

Aspect of standard : 2.1.3

A mechanism for ensuring that they are implemented. Evidence of non-conformity: There was two contractor’s workers (Ilham & Sharil) interviewed, the audit team found that they are not in possession of valid heavy machinery license to operate. The company does not have control check point towards the appointed contractor’s legal compliance through the established mechanism.

Auditors signature:

Date: 10th Dec 2013

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Tel: +603-3377 1600 / 1700

NON CONFORMITY REPORT

NC number: 03/2013

Client name: Mill 2

Date raised: 10th December 2013

Major or Minor: Minor

Raised by: Simon

Aspect of standard: 6.1.3 Aspects of plantation and mill management that have social impacts are identified in a participatory way, and plans to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement.

Evidence of non-conformity: Existing social assessment has not been analysed or reviewed where the timetable for possible mitigation measure neither positive nor negative were not demonstrated. Auditors signature:

Date: 10th Dec 2013

NON CONFORMITY REPORT

NC number: 04/2013 Client name: Mill 2

Date raised: 10th December 2013

Major or Minor: Minor

Raised by: Simon

Aspect of standard: 6.5.2 Labour laws, union agreements or direct contracts of employment detailing payments and conditions of employment (e.g. Working hours, deductions, overtime (maximum of 90 hrs per month), sickness, holiday entitlement, maternity leave, reasons for dismissal, period of notice, etc) are available in the language understood by the workers or explained carefully to them by a plantation management official in the operating unit..

Evidence of non-conformity:

Samples reviewed on a sprayer’s contract does not match against KLK circular dated 01/10/2013 for annual & sick leave entitlement and time out is not recorded for most of the sprayers.

Auditors signature:

Date: 10th Dec 2013

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

Non-were raised during the last audit as this is the Main Assessment.

4.3.3 Observations Raised During this Audit

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

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Tel: +603-3377 1600 / 1700

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

Mr. Andi Muhd Ariffin –

- Working opportunities to surrounding people, no discrimination. Environmental issue enhance.

- Observe workers children

still didn’t go to school even HUMANA school was provided.

KLK agrees Company has taken action to give a consultation to the parents and will take necessary action to parents if there is case they children didn’t go to school. KLK have a programme to provide nutritious food to workers children.

Positive comments and suggestion. The response will be evaluated on next annual surveillance.

Mr Alvin – Food supply for KLK staf - Pangeran and Pinang

estate, salary by cheque. Risk to bring lot of money from bank

- Salary system, new method payment by cheque maybe risk of error while prepare. Rather by cash.

Company will look into it. Police also has been informed for “Polis Bantuan” to address this issue Cheque issued to make the payment easy and personalize to each employee.

Risk is to the money changer; but he gets his money when the worker use his shop for buying food materials.

Pn Murni Samsuddin – (MS Enterprise)

- No discrimination among gender issue.

KLK agrees

Positive comment

En Sulaiman - (Pang Burong Estate) - Basic facilities are provided.

School, housing

- Last time FFB stealing case

KLK agrees KLK agrees

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Tel: +603-3377 1600 / 1700

very high, since RSPO no more case.

- KLK have good relationship with stakeholders.

- No discrimination of salary

in gender aspect since 2009.

KLK agrees KLK agrees

Positive comments

Mr Kanthan - (Police Dept.)

- Since 2006-2013 from police statistics, stealing FFB case decrease.

KLK agrees

Positive comments

Daniel Wong (Bolt Engineering Sdn Bhd)

- Purpose of KLK car sticker because people have sticker also still have to report on security house gate before entering.

- KLK is the lowest FFB price in this area.

- Less sponsorship by KLK to community.

- Positive comment- Contractor safety during work increase.

- Suggest to provide skill training to children.

- Working day will mention in work contract.

Every visitor must report to guard house because of safety reason. The record also to monitor visitor if any emergency case happen in the estate. KLK follow pricing from HQ and first to publicize; other mills take advantage by increasing a little more makes KLK the lowest KLK still focused to internal community currently. Have planning to extend CSR to surrounding community in future.

Good practice Good practice Positive action. The auditor however verified and found KLK has involve in many external CSR; which are not published..

Abd. Majid – (Sri Kunak) - Domestic wastes are well

maintained by KLK.

KLK agrees

Positive comment

Latip B. Madali – (Shop rental Sri Kunak)

- Suggest security patrol including to their shop because there is case of robbery happen.

KLK agreed to extend their security patrolling to the shop.

KLK acknowledged the problem and extend to help

Puan Iszuriyani – (Shop rental Sri Kunak) - Suggest providing “Road Safety Campaign’’ for workers.

There is on-going campaign has been carried out recently.

Suggestion

Cik Hartati – (Shop rental Pinang Estate)

- Complaint her shop roof is leakage so long. Not understand Complaint

Complaint procedure will further communicated among the stakeholders.

It is noted that the procedure need further communication and relevant non-conformity has been raised under criteria

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Tel: +603-3377 1600 / 1700

Procedure.

- To increase the frequent of waste collecting/provide the big capacity bin.

KLK will increase the frequency of waste collecting.

1.2. Positive and will be evaluated during next surveillance audit.

Miss Lessa – (Sri Apas Jaya) - No gender discrimination on giving the tender to contractor.

KLK agrees

Positive comment

Positive comment: In overall, there is lot of positive issue was highlighted by the stakeholders during the meeting. Most of the stakeholders are satisfied comparing KLK before implementing RSPO; there are tremendous improvements either from environmental, social and safety aspect. Information gathered from stakeholders at surrounding community such as Mr. Andi Muhd Ariffin, mention KLK environmental program has been enhance since RSPO. Implementations of buffer zone, conserve the forest and others practice get the full support from community. Furthermore, KLK also has provided job opportunities to community and it’s directly improving the socio economic of the community. Policy of no discrimination practiced by KLK since 2009 was well communicated and implemented based on all stakeholders comment. Pn Murni Samsuddin, one of the contractor attend commented that all contract work is open to any parties not based on gender, race or individual interest. Since 2009, KLK have revised the salary for all the workers into same rate. KLK has maintained very good relationship with the stakeholders, basic facilities such as HUMANA school, housing, clinic, etc. are well provided to all workers and staff. From aspect of Safety and Health, KLK has a trained security team that patrolling 24 hours in KLK area. En Sulaiman comment case of FFB stealing has totally reduce since 2009.

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)

KLK(S) MILL 2 POM 45 Mile 42, Tawau - Semporna

Highway, Tawau, Sabah IP

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 46,672.53 7,219.76 Actual volumes between 01/12/2012 to 30/11/2013. See also 1.6 above.

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

Mill 2 palm oil mill receiving FFB from own supply base and processed into CPO and Palm Kernel as a product using RSPO SCCS SG model. The mill is able to handle certified product as all system procedures are in place. Furthermore, all the workers was trained with the RSPO SCCS requirement.A full RSPO SCCS certification audit was used during this annual assessment and the findings support the certification based on supply chain model used.

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Tel: +603-3377 1600 / 1700

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

If this is the 1st Main Assessment, the figures used are from the last 12 months. If this is an Annual Surveillance Assessment, the figures used are since the last audit.

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

1 Dec’ 2012 22,001.66 5,071.62 801.66

2 Jan’ 2013 20,996.97 4,866.89 786.22

3 Feb’ 2013 16,385.63 3,932.55 657.97

4 Mar’ 2013 15,459.73 3,867.34 623.42

5 Apr’ 2013 19,032.48 4,438.50 711.13

6 May’ 2013 13,332.73 3,097.76 468.29

7 Jun’ 2013 10,994.54 2,551.28 367.41

8 Jul’ 2013 12,741.57 2,930.73 406.85

9 Aug’ 2013 15,451.94 3,610.95 492.02

10 Sep’ 2013 16,296.29 4,008.06 619.10

11 Oct’ 2013 16,437.83 3,945.18 610.49 12 Nov’ 2013 18,631.61 4,351.67 675.20

TOTAL 197,762.98 46,672.53 7,219.76

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

If this is the 1st Main Assessment, the figures used are from the last 12 months. If this is an Annual Surveillance Assessment, the figures used are since the last audit. The transactions were sighted form the clients registered GreenPlam Account.

No Buyers Name GreenPalm Trading No Certified CPO

(MT) Sold Certified PK (MT) Sold

1 -Nil- -Nil- -Nil- -Nil-

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

If this is the 1st Main Assessment, the figures used are from the last 12 months. If this is an Annual Surveillance Assessment, the figures used are since the last audit. The transactions were sighted form the clients registered UTZ eTrace Account.

No Buyers Name UTZ eTrace Trading No Certified CPO

(MT) Sold Certified PK (MT) Sold

1 None sold as RSPO material Above table 5.4 & 5.5 quantity was produced as RSPO certified, but the product was sold as ISCC as the material carries two sustainable identity. (ISCC & RSPO)

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

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

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Tel: +603-3377 1600 / 1700

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.

<Please duplicate additional tables for every major NC identified>

NC Number: YYYY-01

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

It is the responsibility of the department heads to ensure that they and their subordinates comply with the requirements and procedures stated in SOP manual. It is their responsibility to maintain records that will allow verification of the RSPO status of the material. The MR is having the overall responsibility for and authority over the implementation of the requirements and compliance with all applicable requirements. He is having the full understanding and awareness of supply chain certification system and the facilities procedures for the implementation of the standard.

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

Recommendations made: Yes

Summary of non-compliances:

None.

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.

PART 6: CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY

6.1 Date of next ASA The provisional date for the next ASA is: Approximately March 2015

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: No Major NC raised.

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

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Tel: +603-3377 1600 / 1700

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 Cuan Eng

Position: Head of Sustainability (Plantations)

Date: 20th February 2014 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: Simon Selvaraj

Position: Lead Auditor

Date: 10th January 2014 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:

Position: Certifier

Date: DD/MM/YYYY Signature

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Tel: +603-3377 1600 / 1700

PART 7: APPENDICIES

Appendix 1: Location Map for this Certification Unit

From 1.9, the location map(s)

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

Tel: +603-3377 1600 / 1700

Appendix 2: List of Abbreviations

BRC British Retail Consortium

CHRA Chemical Health Risk Assessment

CoC Chain of Custody

CPO Crude Palm Oil

CSR Corporate Social Responsibility

CU Control Union

CUC Control Union Certifications

DOE Department of Environment

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

HCV High Conservation Value

HCVF High Conservation Value Forest

IPM Integrated Pest Management

JAS Japanese Agricultural Standard

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 Organisation

SOP Standard Operating Procedure

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

MT Metric Tonnes

WHO World Health Organization