PUBLIC SUMMARY REPORT. SIME DARBY PLANTATION Sdn Bhd Management Unit SOU25 Sandakan, Sabah, Malaysia

Transcription

1 PUBLIC SUMMARY REPORT ANNUAL SURVEILLANCE ASSESSMENT (ASA2) SIME DARBY PLANTATION Sdn Bhd Management Unit SOU25 Sandakan, Sabah, Malaysia Report Author Charlie Ross Prepared July 2012 Tel: BSi Group Singapore Pte Ltd (Co. Reg N) BSi Services Malaysia Sdn Bhd (Co.Reg A) 3 Lim Teck Kim Road #10-02 B-08-01, Level 8, Block B, PJ8 Genting Centre No. 23, Jalan Barat, Seksyen 8 SINGAPORE Petaling Jaya Tel SELANGOR MALAYSIA Fax Tel (Hunting Line) Aryo Gustomo: Aryo.Gustomo@bsigroup.com Fax

2 ii TABLE of CONTENTS Page N o SUMMARY... 1 ABBREVIATIONS USED SCOPE OF SURVEILLANCE ASSESSMENT Identity of Certification Unit Production Volume Certification Details Description of Fruit Supply Base Progress against Time Bound Plan Progress of Associated Smallholders/Outgrowers towards RSPO Compliance Organisational Information/Contact Person ASSESSMENT PROCESS Assessment Team Members Assessment Programme Stakeholder Consultation ASSESSMENT FINDINGS Summary of Findings Identified Nonconformities and Noteworthy Positive and Negative Observations (ASA2) Status of Nonconformities (Major and Minor) Identified during Previous Assessments Issues Raised by Stakeholders CERTIFIED ORGANISATION S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY Date of next Surveillance Visit Date of Closing Nonconformities (Major and Minor) Sign-off of Surveillance Assessment Findings LIST of TABLES 1 Mill GPS Location Production Tonnages FFB Production a Age Profile of SOU25 Palms b SOU25 Estates and Areas Planted Status of Nonconformities LIST of FIGURES 1 SOU25 Location Map Cadastral Map of SOU25 Division Locations Segaliud Division Layout Mengaris and Pertama Divisions Layout BOD (mg/l) of Treated Mill Effluent May 2011 March Average Annual FFB Yield (t/ha/yr) Average Annual OER (%) Annual Mill Water Usage (t/t FFB) LTA Index Mill Energy Usage (kwhr/t FFB) LIST of APPENDICES A B C D E Supply Chain Assessment Sime Darby Time Bound Plan ASA2 Programme List of Stakeholders Contacted Evidence for Closing Nonconformity CR08

3 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 1 SUMMARY BSi Group Singapore Pte Ltd (BSi) has conducted the Second Annual Surveillance Assessment (ASA2) of Sime Darby Plantation Sdn Bhd Management Unit SOU25 (SOU25) operations comprising Segaliud Mill, supply base, support services and infrastructure. BSi concludes that SOU25 operations comply with the requirements of RSPO Principles & Criteria: 2007; MY-NI Indicators and Guidance : 2010; and RSPO Supply Chain Certification Standard : November 2011 (Mass Balance Mechanism). BSi recommends the continuation of the approval of SOU25 as a producer of RSPO Certified Sustainable Palm Oil. ABBREVIATIONS BOD Biological Oxygen Demand CHRA Chemical Health Risk Assessment CPO Crude Palm Oil DOE Department of Environment DOSH Department of Occupational Safety & Health EFB Empty Fruit Bunch ERP Emergency Response Plan ESH Environment Safety and Health FFB Fresh Fruit Bunch HCV High Conservation Value HIRAC Hazard Identification Risk Assessment Control IPM Integrated Pest Management JCC Joint Consultative Committee LTA Lost Time Accident MPOA Malaysian Palm Oil Association MPOB Malaysian Palm Oil Board MSDS Material Safety Data Sheet MY-NI Malaysian National Interpretation OER Oil Extraction Rate OSH Occupational Safety & Health PK Palm Kernel POME Palm Oil Mill Effluent PPE Personal Protective Equipment R&D Research and Development SIA Social Impact Assessment SOP Standard Operating Procedure SPIEU Sabah Plantation Industry Employees Union TSS Total Suspended Solids 1.0 SCOPE OF SURVEILLANCE ASSESSMENT 1.1 Identity of Certification Unit The SOU25 Segaliud Mill and Segaliud Estate are located at Sandakan, Sabah, Malaysia (Figure 1). Additional maps are included (Figures 2, 3 and 4) showing the Segaliud Estate boundary and layout of infrastructure. The Estate consists of 2 main adjoining Divisions (Segaliud and Mengaris) and the small outlying Pertama Division. The Segaliud and Mengaris Divisions are surrounded by other oil palm plantations and Pertama Division adjoins the Lungmanis Forest Reserve. The GPS location of the Mill is shown in Table 1. Table 1: Mill GPS Location MILL EASTING NORTHING Segaliud (40t/hr capacity) 1.2 Production Volume E 5 72 N The production tonnages for CPO and PK for the period from the start of the Certificate (20/05/2010) through to the 30 April 2012 and projected for the next twelve months are listed in Table 2. Table 2: Production Tonnages Segaliud Palm Oil Mill CPO PK Estimate at Certification 22,091** 6,371** Actual 20/05/10 19/05/11 18,152** 4,571** Actual 01/05/11 30/04/12 Projected 01/05/12 30/04/13 * Includes Outside Crop ** = Certified Production 1.3 Certification Details 20,778 * 16,336** 21,586* 15,482** Sime Darby RSPO Membership No: (O) BSi RSPO Certificate No: SPO Initial Certification Assessment: April 2009 Date of Certification: 20/05/ Description of Fruit Supply Base 5,296 * 4,211** 5,569 * 3,760** The supply base is Segaliud Estate that supplied 78 9% of the FFB processed at the Mill in 2011/12. In addition FFB is purchased from KHY, an external supplier. The FFB production tonnages from the Company owned Estate and External Supplier for the period of the Initial Certificate 20 May 2010 to 19 May 2011, the 12 months prior to ASA2 and projected for the 2012/13 year are listed in Table 3. FFB production is projected to decrease in 2012/13 year due to replanting of approximately 500 ha of palms at Segaluid Estate. SOU25 plans to make up the shortfall with FFB from the outside supplier.

4 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 2 Figure 1: SOU25 Location Map

5 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 3 Figure 2: Cadastral Map of SOU25 Division Locations

6 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 4 Figure 3: Segaliud Division Layout

7 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 5 Figure 4: Mengaris and Pertama Divisions Layout

8 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 6 Source SOU25 Estate Segaliud Sub-total External Supplier* KYH Sub-total OVERALL TOTAL Table 3: FFB Production Estimate at Initial Certification 108, ,999 47,525 47,525 Actual 01/05/11 30/04/12 80,619 80,619 21,858 21,858 Projected 01/05/12 30/04/13 72,735 72,735 33,730 33, , , ,465 * The FFB production from the External Supplier is excluded from the RSPO Certificate. The Company owned Estate was developed to oil palm in 1982 and the palms are in their first cycle. The age profile of the palms is shown in Table 4a. Table 4a: Age Profile of SOU25 Palms AGE (years) % of PLANTED AREA The areas planted are shown in Table 4b. The area planted ASA2 is less than at ASA1 due to 279 ha being declared Riparian Buffer Zone or areas >25 o slope and these areas have been excluded from replanting. Table 4b: SOU25 Estates and Areas Planted Estate Mature (ha) Immature (ha) Total Segaliud 3, ,308 Supply Chain SOU25 uses the mass balance mechanism for the supply chain. All deliveries of FFB to the Mill are issued with a weighbridge docket that records the details of the supplier, truck registration number, driver s name and the tonnage. The contractual arrangements for purchase of FFB from outside suppliers as well as the sales of CPO and PK are managed centrally from within Sime Darby Head Office. The weighbridge system is computerised and the FFB delivery and product despatch records are used as the basis for payment for deliveries and invoicing for shipments, respectively. The weighbridge operator simply enters the Supplier or the Buyer name and the computer automatically generates the documents for receipt (purchase of crop) or despatch (sale of product). Inspection of documents confirmed that SOU25 maintains all of the documentation required for verification of implementation of the RSPO Supply Chain Certification Standard : November 2011, for Palm Oil Mill, Mass Balance Mechanism Refer to Appendix A for details. 1.5 Progress against Time Bound Plan Sime Darby Time Bound Plan (updated March 2012) is included as Appendix B. Sime Darby has achieved RSPO Certification for all 39 of the Management Units in Malaysia, and 12 of the 23 in Indonesia. Sime Darby has completed the Initial Certification Assessments for the remaining 11 Management Units in Indonesia and the assessment reports are pending review by the RSPO. Upon certification of the remaining 11 Management Units, Sime Darby will have achieved the Time Bound Plan. BSi has continued involvement with assessments of 14 of the Sime Darby Management Units during the 2011/12 period. During this time, Sime Darby has kept BSi informed of issues and claims made against it, as indicated in Appendix B. At the time of preparation of this Report, BSi is not aware of: (1) any unresolved significant land disputes; (2) any replacement of primary forest or loss of HCVs; (3) any labour disputes that are not being resolved through an agreed process; (4) any evidence of noncompliance with any law at any of the landholdings. BSi considers that Sime Darby meets the RSPO requirements for Partial Certification. 1.6 Progress of Associated Smallholders/ Outgrowers towards RSPO Compliance SOU25 purchases crop from an FFB Supplier who sources FFB from small plantations. Interview of the FFB supplier indicated he had only a basic understanding of RSPO and the production therefore has been excluded from the SOU25 Certificate. 1.7 Organisational Information / Contact Person Sime Darby Plantation Sdn Bhd Management Unit SOU25 WDT No 250 Sandakan Sabah MALAYSIA Contact Person: Mr Ghazali Bin Said Manager Segaliud Palm Oil Mill Phone: +(6089) Fax: +(6089)

9 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page ASSESSMENT PROCESS 2.1 Assessment Team Members Charlie Ross Lead Assessor RSPO B.App.Sc. M.Sc (Env.Studies) Topics assessed: Legal, Environment, Agricultural Practices, Social, Sustainability Iman Nawireja Assessor RSPO B.Ag.Sc. M.Sc. (Comm) Topics assessed: Legal, Environment, Agricultural Practices, Social, Sustainability Robyn Ross Social Assessor RSPO Topics assessed: Legal, Social, Women and Families, Sustainability Junecel Maloloy Facilitator (Women and Families) 2.2 Assessment Programme The ASA2 was carried out May Assessment Programme is included as Appendix C. The The Programme included assessments of the Mill and Segaliud Estate against all of the RSPO P&C and applicable indicators, and Supply Chain Standard : 2011 for Mass Balance mechanism. The Nonconformities that were assigned and the Observations that were identified during previous assessments were followed up to check the effectiveness of corrective actions refer Section 3.3 Page 15. The methodology for collection of objective evidence included physical site inspections, observation of tasks and processes, interviews of staff, workers and their families and external stakeholders, review of documentation and monitoring data. Checklists and questionnaires were used to guide the collection of information. This report is structured to provide a summary for each Principle, together with details for selected indicators. The assessment was based on random samples and therefore nonconformities may exist that have not been identified. Mr Aryo Gustomo, BSi RSPO Scheme Manager, has reviewed this report for conformance with BSi Procedures and the RSPO Certification System requirements. 2.3 Stakeholder Consultation Internal and external stakeholders were consulted to obtain their views on SOU25 environmental and social performance and any issues of concern that they may have. External stakeholders were interviewed at their premises where practical or they were invited to the Mill or the Estate. Internal stakeholders were interviewed in groups in the workplace or at their housing. Company officers were not present at any of the meetings. A list of stakeholders contacted is included at Appendix D. 3.0 ASSESSMENT FINDINGS 3.1 Summary of Findings During this ASA2 Nonconformities were assigned against Major Compliance Indicator and Minor Compliance Indicator (CR08 and CR09). Eight (8) Observations/Opportunities for improvement were identified refer Section 3.2 Page 14 for details. SOU25 prepared a Corrective Action Plan for addressing the identified Nonconformities, which BSi reviewed and accepted. Refer Section 3.2 Page 14 for details of Nonconformities and Corrective Actions. Review of the Nonconformities assigned during previous Assessments (CR01 to CR05) found the corrective actions were being effectively and consistently implemented and the nonconformities remain closed. In addition, the Nonconformities that were assigned to Minor Compliance Indicators and (CR06 and CR07) and the four (4) Observations/Opportunities for Improvement identified during ASA1 were followed up to check the effectiveness of corrective actions. Refer Section 3.3 Page 15 for details. BSi recommends continuation of Certification for SOU25 as a producer of RSPO Certified Sustainable Palm Oil. PRINCIPLE 1: Commitment to Transparency SOU25 has kept the policies, procedures and management plans up to date for provision of information to the public on request. SOU25 received only several requests for information from MPOB and Government that were handled locally and in a timely manner. Criterion 1.1: Oil palm growers and Millers provide adequate information to other stakeholders on environmental, social and legal issues relevant to RSPO Criteria, in appropriate languages & forms to allow for effective participation in decision making. Requests are received by the Mill and Estate verbally as well as in writing. For example, the Mill received a request from MPOB on 02 May 2012 to provide information in Oil Losses and Recovery Systems, which was responded to on 07 May Criterion 1.2: Management documents are publicly available, except where this is prevented by commercial confidentiality or where disclosure of information would result in negative environmental or social outcomes. The Mill and Estate hold up to date copies of each of the management documents that are required by the RSPO to be publicly available. The Estate is on government leasehold land and copies of the leases are held on site.

10 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 8 PRINCIPLE 2: Compliance with Applicable Laws and Regulations Legal compliance was assessed by review of internal audit reports, documents and monitoring data. SOU25 has maintained the systems for documentation, checking and assessment of legal compliance with applicable laws and regulations. Inspection of records confirmed that the Mill and the Estate have maintained legal compliance with statutory requirements, such as the Factories and Machinery Act 1967, the OSH Act 1994, the Environmental Quality (Clean Air Regulation) The exception was the exceedance of the license limit of 50 mg/l for treated mill effluent applied to the palms in furrows and a Major Nonconformity was assigned. The boundaries of the Estate are well defined by boundary stones that have been maintained so they are clearly visible. Interview of local community representatives did not identify any land tenure issues. Criterion 2.1 There is compliance with all applicable local, national and ratified international laws and regulations. Mill Boiler Emissions testing was carried out twice yearly, with the most recent by Chemsain Konsultant Sdn Bhd on 19 December 2011, and the report indicated dust emission from Boiler #1 exceeded the Environmental Quality (Clean air) Regulations, The mill arranged for re-testing which was carried out on 09 February 2012 and confirmed dust emission was within the limits. The Mill has prepared an Action Plan for improving operational control of emissions by better control of fuel and combustion. The Mill Smoke Density Meter was operational and calibrated by STS Instruments 10 February POME is treated to achieve an internal target of BOD <100 mg/l. Review of monitoring results for the previous 12 months (Figure 5) showed a maximum BOD of 193 mg/l, which occurred during November 2011, but exceeded the licence limit for land application. The Mill plans to de-silt two of the effluent ponds during 2012 and received approval from DOE in a letter dated 21 November 2011 (Ref:ASSN (B) 31/15/000/0560. CR08 A Nonconformity was assigned to this Major Compliance Indicator because the BOD of treated mill effluent exceeded the Environment Permit condition relating to the limit of 50mg/L during 2012 refer Section 3.2 Page 14. The Mill and Estate hold copies of licences and certificates, such as the Mill Boiler Certificate that was renewed on 04 April 2012 and the MPOB Certificate that is current to 30 May The most recent DOSH Report was 21 February 2012 and the Mill is in the process of carrying out corrective actions for the issues raised. The DOE site visit 18 March 2011 did not raise any issues. The Mill has recently received a membrane filtration plant transferred from Seri Intan Palm Oil Mill that is in the process of being installed. The Mill holds copies of licences, such as the Grade 1 Boilerman Certificate No: SB/10/EIS/01/10 Issued 12 February 2010 at Kota Kinabalu. SOU25 is implementing a programme to replace the existing houses built between 1982 and 1985 that do not meet the minimum standard. At the time of the visit 8 new houses had been built for the Mill housing and 40 at Segaluid Division. Drinking water quality sampled 14 February 2012 for the Mill Housing and on 03 April 2012 at Estate housing confirmed compliance with the Malaysian drinking water quality standard. The Estate has completed in 2011 the installation of an upgraded water treatment plant at Pertama Division. Inspection of a sample of Mill pay records showed that overtime hours of workers all were within the approved limit detailed in letter from Labour Department dated 20 January The Mill and Estate maintained up to date copies of the applicable Licences and Permits and these were displayed in the Mill and the Estate Offices. MPOA Sabah and Sime Darby Sabah Regional Office provide legal updates on changes to labour laws and worker pay and conditions. Sime Darby Standards and Compliance Unit provide legal updates on all applicable legislation throughout the company. Criterion 2.2 The right to use the land can be demonstrated and is not legitimately contested by local communities with demonstrable rights. The Estate has continued the programme to locate and maintain boundary stones, focusing on the replanting areas at Segaliud and Pertama Divisions. The Estate had encroached on land and had planted oil palm on 3 38 ha of land belonging to a local person. The Estate has maintained the status quo of the lease of the land from the local person and payment of a monthly rental for its use. Criterion 2.3 Use of the land for oil palm does not diminish the legal rights or customary rights of other users without their free, prior and informed consent. The SOU25 operations are all on Government Leases originally issued in 1953 and, similar to ASA1, interview of the local Kampung Segaliud Head confirmed there are no customary land claims or disputes over the Estate land. Figure 5: BOD (mg/l) of Treated Mill Effluent May 2011 to March 2012

11 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 9 PRINCIPLE 3: Commitment to Long Term Economic and Financial Viability SOU25 has continued to operate the management system for monitoring and reporting of performance against production targets. Reports were available showing the details of production and costs. SOU25 has continued its commitment to sustainability by funding improvements at the Mill and Estates, including housing. The replanting programme provides an example of the company commitment to reinvestment for improvement of performance. Criterion 3.1: There is an implemented management plan that aims to achieve long-term economic and financial viability. The Mill and Estate have an annual budget and management plans that include targets to improve efficiency of production and cost control so that financial viability is maintained. The Estate has a Replanting Programme that is projected for ten years, and was revised April The FFB Yields (Figure 6) have been decreasing since 2006/07 due to the replanting programme and were negatively affected by a very wet season in 2010/11. The relatively low yields were explained to be related to the hilly terrain and the poor standard of planting on terraces and close density of planting, which makes crop evacuation difficult. These issues are being addressed during the progressive replanting of the Estate. Figure 6: Average Annual FFB Yield (t/ha/yr) The Mill OER (Figure 7) has decreased due to poor FFB quality, loss of fruitlets that have not been delivered to the mill and the long harvesting rounds. PRINCIPLE 4: Use of Appropriate Best Practices by Growers and Millers SOU25 has maintained the management systems for monitoring and control of best practice implementation at its Mill and Estate. This includes a programme of regular internal audits by the Mill Advisor, the Plantation Inspector and Agronomists for assessing performance and improving production. The Estate has maintained the marking of riparian buffer zones for reinstatement during the replanting programme. The Estate made progress with the expansion of beneficial plants along roadsides for the IPM programme. The storage, handling and application of chemicals were well controlled and the company has maintained pesticide storage and disposal of used chemical containers in accordance with regulatory requirements. SOU25 has increased the level of training and awareness for workers and a positive outcome is the reduction of the LTA Rate at the Estate, which was maintained at a relatively low level for the year to date. Criterion 4.1: Operating procedures are appropriately documented and consistently implemented and monitored. The Mill and Estate have continued to use the Sime Darby reference manuals and SOPs for guidance and for training purposes. Inspection of Mill work-stations confirmed operators have filled in shift log sheets accurately for recording operating parameters. The Assistant Mill Engineer reviews shift log sheets daily. The Mill Advisor carries out inspections at least twice yearly and records are held on file of the March 2012 Visit Report and the Mill Manager s response to issues raised by the Mill Advisor. The Estate Assistant Managers monitor implementation of field practices through daily inspections. The Plantation Advisor visits the Estate at least twice yearly, with the most recent visit January 2012, and carries out inspections of field conditions and assessment of implementation of work practices. Criterion 4.2: Practices maintain soil fertility at, or where possible improve soil fertility to, a level that ensures optimal and sustained yield. Sime Darby Agronomy Section of R&D Department carries out annual inspection of the palms and leaf sampling to monitor nutrient status, with the most recent sampling in December 2011 for development of the 2012 fertiliser programme. The information from the foliar sampling and palm inspections is used to make annual recommendations for fertiliser applications. Criterion 4.3: Practices minimise and control erosion and degradation of soils. Field inspection showed groundcover vegetation was well established at recently replanted areas in Segaliud Division. Vegetation was well established on terraces Figure 7: Average Annual OER (%)

12 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 10 where Nephrolepis spp is the dominant species on the inter-slope. Observation 01 At Field 2003 Block 6, there were minor areas of over-spraying of Nephrolepis spp on the edge of the palm inter-row, which resulted in areas of bare soil refer Section 3.2 Page 15. The Estate carries out road maintenance throughout the year using its own grader, compactor and back-hoe for repairing and maintaining road surfaces. Despite recent wet conditions, all of the roads were accessible during the inspection. Criterion 4.4: Practices maintain the quality and availability of surface and groundwater The Estate has demarcated the buffer zones that will be reinstated during future replanting. Inspection showed that the buffer zones were consistent with the Sabah requirement of 20 m width on both sides of streams and had been implemented at Fields 2011 A & B. The buffer zones have been marked on a map and the Estate has ceased applying herbicide to palm circles within the areas that will become future buffer zones. The water quality has been sampled at the Sungai Segaliud inflow to, and outflow from, the Estate. Review of the results showed Class I water quality (DOE Water Quality Index Classes) at the inflow and Class II at the outflow due to increased TSS. Sampling carried out during high streamflow conditions following heavy rain in April 2012 showed elevated TSS and Class II water quality at both the inflow and outflow from the Estate. The Mill installed water meters in January 2010 for measurement of water consumption at the Mill and housing separately. Records showed Mill water usage has doubled (Figure 8) to more than 3 0 t/t FFB in 2011 because of the under-utilisation of the mill which has received less than 50% of the budgeted crop. The mill is frequently shut down and the additional cleaning has resulted in increased water consumption. Observation 02 The occurrence of a leaking tank tap and pressure water pump at the Estate workshop indicated awareness of water conservation needs improving refer Section 3.2 Page 15. Figure 8: Annual Mill Water Usage (t/t FFB) Inspection of the Mill drains found the drains and sediment traps had been cleaned consistently, as indicated by the records on log sheets. The segregation, treatment and disposal of high BOD Mill wastes continued to be well managed. Water conservation is an important issue and each of the new houses has been fitted with roof guttering and tanks for collecting rainwater. Criterion 4.5: Pests, diseases, weeds and invasive introduced species are effectively managed using appropriate integrated Pest Management (IPM) techniques. The Estate has continued to expand the establishment of beneficial plants along roadsides for control of Nettle Caterpillar and Bagworm. The monthly census of pests has been maintained and to date there has been no outbreak of leaf eating insects and it has not been necessary to apply chemicals for control. Rat damage has occurred due to the long harvest rounds and it was necessary to use rat baits in The Estate continues to use Barn Owls although occupancy rates are low (<20%). Records are available of the quantity and type of pesticide applied to the Estate. Criterion 4.6: Agrochemicals are used in a way that does not endanger health or the environment. There is no prophylactic use of pesticides, except in specific situations identified in national Best Practice guidelines. Where agrochemicals are used that are categorised as World Health Organisation Type 1A or 1B, or are listed by the Stockholm or Rotterdam Conventions, growers are actively seeking to identify alternatives and this is documented. The Estate has continued to maintain close control over the storage and use of pesticides. The selection of the type and the quantity of pesticide used is based on the Sime Darby Agricultural Reference Manual. The Estate uses only Pesticide Board approved chemicals, which were stored safely, with adequate spill containment, separation of chemicals and safety signage. Observation 03 The control of empty pesticide containers at Pertama Division could be improved by maintaining records of the numbers transferred to the Mengaris Division scheduled waste store refer Section 3.2 Page 15. All chemicals and MSDSs are labelled in Bahasa Malaysia, together with work instructions and safety signs. A medical surveillance in accordance with CHRA requirements was carried out by Klinik Mansor Sdn Bhd on 19 May 2012 for 52 pesticide operators but at the time of the ASA2 visit, a Report had not yet been received by SOU25. Review of the 2011 Report confirmed all workers were found fit to work with pesticides. Inspection of records of pesticide use confirmed the Estate has not used Class 1 Chemicals for control of palm pests and paraquat is not used for weed control. Criterion 4.7: An occupational health and safety plan is documented, effectively communicated and implemented.

13 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 11 The Mill and Estate communicate information on health and safety to staff and workers during morning musters and shift briefings. The ESH Management Plans are revised each year to update the calendar of meetings, workplace inspections and training. Inspection of workplaces at the Mill and Estate indicated safe work practices were being implemented. The Estate and Mill HIRAC were reviewed for example at the Estate on 01 January 2012 for each of the tasks at all work stations. The Safety Training Matrices for the Mill and Estate were updated in June 2011 and the schedule of training prepared for the 2011/12 year. The Estate arranged training for sprayers on safe work practices, such as the correct use of PPE (03 April 2012), maintenance of spray equipment (09 May 2012) and spraying technique for spot spraying (30 January 2012). Field inspection of spraying during the assessment showed the operators were working safely and understood the precautions when handling pesticides, such as during refilling knapsacks. The Mill and Estate issue appropriate PPE to workers and observation of tasks showed that PPE was being worn correctly. Observation 04 At Pertama Division, safety awareness could be improved by posting appropriate signage at the water treatment plant, genset and pesticide mixing area and ensuring an adequate supply of appropriate PPE is always available refer Section 3.2 Page 15. The Health Assistant is the designated ESH Coordinator for both the Estate and the Mill. The Mill and Estate hold Safety Committee Meetings quarterly, and the recent Safety Committee Meeting for the Estate was held in February 2012 and attended by 19 persons. The Estate and Mill ERPs were revised 04 October The Mill has an emergency shut-down procedure for the boiler that was displayed at the boiler work station. First Aid refresher training was carried out by the Hospital Assistant in April First Aid kits are available at work stations in the Mill and are provided to mandores for fieldwork in the Estate. SOU25 investigates all accidents and reports these to Sime Darby Head Office and to DOSH. Considerable progress has been made in improvement of safety over the past 5 years. The LTA Indices (number of Lost Time Accidents per 200,000 hours worked) for the Mill and Estate have reduced since 2006/07, although an accident at the Mill in August 2011 adversely affected the trend (Figure 9). Malaysian workers are covered by Social Security Organisation (SOCSO) Insurance. Foreign workers are covered by RHB Insurance Berhad under Master Policy D08WFWC KL current to 30 June Figure 9: LTA Index Criterion 4.8: All staff, workers, smallholders and contractors are appropriately trained. The Mill and Estate have annual Training Plans and keep records of training for individual staff and workers. The Training Plans include a Matrix of training needs that shows SOP training/skills for each task. PRINCIPLE 5: Environmental Responsibility and Conservation of Natural Resources and Biodiversity The Mill and Estate reviewed and updated the Environmental Improvement Plans for the 2011/12 year. The Estate Improvement Plan included expansion of beneficial plants in the IPM Programme and rapid establishment of groundcover vegetation at replanting areas for minimising soil erosion. The priority improvements for the Mill continue to be the reduction of water usage and diesel fuel for electricity generation. Field inspection and review of documents indicated that progress was being made with the Improvement Plan implementation. The Mill and Estates continued to provide consistent control of scheduled waste storage and disposal. The Mill improved the storage and containment of excess fibre and nut-shell to prevent it from entering the adjacent monsoon drain. The company s zero burn policy has been consistently applied at replanting areas, although improvement of awareness of the policy is required at Pertama division.. Criterion 5.1: Aspects of plantation and Mill management, including replanting, that have environmental impacts are identified, and plans to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement. The Mill and Estate have reviewed the Aspects and Impacts Register, with the most recent February 2011, based on a risk assessment process. The Register considers each of the operations and potential impacts. The Mill and Estate have revised Environmental Improvement / Pollution Prevention Plans for the 2012 calendar year. For example, the Estate plans to construct a new pesticide mixing area for improved control of chemicals.

14 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 12 Criterion 5.2: The status of rare, threatened or endangered species and high conservation value habitats, if any, that exist in the plantation or that could be affected by plantation or Mill management, shall be identified and their conservation taken into account in management plans and operations. A Sime Darby Ecologist has carried out an assessment of the Lungmanis Forest Reserve that is located south-west of Segaliud Estate and has a common border with Pertama Division. Inspections during the assessment of the Forest Reserve border with the Pertama Division did not find any signs of disturbance of the vegetation. Interviews of residents and observations at housing did not identify any evidence of the taking of fauna from the forest. The Estate Biodiversity Action Plan includes the continuation of the programme for awareness to workers of the prohibition of hunting and the taking of fauna. The company has maintained signage warning of the protection of fauna. Interviews of workers confirmed their understanding of the rules for the protection of fauna. Observation 05 Three spotted dove (Streptopelia chinensis) that were likely to have been captured in the field were kept in a cage at Pertama division, which indicates inadequate awareness of the policy that prohibits hunting or taking of fauna refer Section 3.2 Page 15. Criterion 5.3: Waste is reduced, recycled, re-used and disposed of in an environmentally and socially responsible manner. The Mill and the Estate have maintained a high level of control over the storage and disposal of scheduled wastes. The Mill and Estate have a contract with a DOE licensed scheduled waste recycler. Records are kept of consignment notes, for example, used lead acid batteries collected 09 February 2012, Vehicle No SAA841C. Used pesticide containers are recycled to MS Smart. Medical Wastes are disposed to a licenced contractor (Faber Medi-Serve Sdn Bhd), with the most recent collection of waste on 09 March The Mill and Estate have maintained records of the inventory of stored scheduled waste materials. Non-recyclable wastes are disposed in a small landfill which was appropriately located and appeared well maintained. Observation 06 Rubbish Bins are located at the Mill and Estate houses. However, inspection found that rubbish is being discarded directly beside the bins at the adjacent palms (Also an issue at Pertama Division). This indicates more awareness training is needed refer Section 3.2 Page 15. Criterion 5.4: Efficiency of energy use and use of renewable energy is maximised. The Mill reports renewable and non-renewable energy use monthly to Top Management and the annual average is shown in Figure 10. There has been an increase in usage of both forms of energy over the past 5 years, although this is affected by the reduction in Mill throughput of FFB during the past two years. Figure 10: Mill Energy Usage (kwhr/t FFB) Criterion 5.5: Use of fire for waste disposal and for preparing land for replanting is avoided except in specific situation, as identified in the ASEAN guidelines or other regional best practice. Inspection of the replanted area at Field 2011 A & B confirmed the consistent implementation of the zero burning policy. The old palms were felled, chipped and windrowed as mulch in the palm inter-row. Inspection showed no evidence of fire being used for waste disposal at the workshops or offices. Observation 07 One incident of fire being used for disposal of garden waste was observed at the Mill housing area and one at Pertama Division, despite signs displaying No Burning. This indicates more awareness training is needed refer Section 3.2 Page 15. Criterion 5.6: Plans to reduce pollution and emissions, including greenhouse gases, are developed, implemented and monitored. The Mill Pollution Prevention Plan has focused on the improvement of areas for storage of fibre and ash for containment of leachate. The reduction of water usage also is a priority at the Mill that in turn will reduce the quantity of wastewater requiring disposal. The Estate has improved the control of hydrocarbons at the workshop. PRINCIPLE 6: Responsible Consideration of Employees and of Individuals and Communities by Growers and Millers SOU25 has reviewed and updated the Social Action Plan for the Estate and the Mill. The largest improvement for the workers is the construction of new housing to replace the houses built in the 1980s. At the time of the ASA2 visit, new housing was being constructed at Segaliud, Mengaris and Pertama Divisions, with some units completed and occupied. The local community has relatively good infrastructure and government and commercial services are available. The JCC continued to operate with approximately quarterly meetings at the Mill and Estate. Interviews of workers and their families indicated they are treated fairly and there were no issues related to discrimination. Female staff and workers participated in the Gender Committee, which provided them the opportunity to

15 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 13 raise any issues of common concern related to gender and families. The company has a good relationship with FFB suppliers and contractors who indicated that dealings with the company were fair and transparent. Criterion 6.1: Aspects of plantation and Mill management, including replanting, 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. The Estates revised the social action plan using information from a meeting with internal and external stakeholders, but the Mill had not updated the action plan and a minor nonconformity was assigned to the indicator. CR09 A Nonconformity was assigned because the Mill Social Action Plan had not been updated since ASA1. The Estate Plan had been updated for 2011/12 but did not appear to include information from consultation of stakeholders refer Section 3.2 Page 15. Criterion 6.2: There are open and transparent methods for communication and consultation between growers and/or Millers, local communities and other affected or interested parties. SOU25 maintained the informal system of system for receiving and responding to communications from internal and external stakeholders. Interviews of stakeholders confirmed they had a good relationship with the Mill and Estates staff. Criterion 6.3: There is a mutually agreed and documented system for dealing with complaints and grievances, which is implemented and accepted by all parties. Discussions with stakeholders and inspection of records indicated there were no outstanding complaints or grievances that required addressing through the formal system. SOU25 has kept detailed records of issues raised by stakeholders. Criterion 6.4: Any negotiations concerning compensation for loss of legal or customary rights are dealt with through a documented system that enables indigenous peoples, local communities and other stakeholders to express their views through their own representative institutions. A land dispute was raised in 2006 and the resolution process has been documented in accordance with the Sime Darby Land Management Policy. There has been no other land issue raised since that time. Criterion 6.5: Pay and conditions for employees and for employees of contractors always meet at least legal or industry minimum standards and are sufficient to provide decent living wages. Pay and conditions are documented in the SPIEU Agreement. Similar to ASA1, interview of Mill and Estate male and female staff and workers confirmed they understand terms and conditions of employment and receive entitlements. Observation 08 During the interview Mill process workers stated that their contracts are in English, which they do not understand refer Section 3.2 Page 15. Construction of new housing is being carried out concurrently at each of the three Divisions. SOU25 continues to make progress with construction of replacement houses, for example, 8 houses for workers are nearing completion. Residents of the new houses at the Mill linesite stated they were very appreciative to have beautiful new homes to live in. Similar to ASA1, workers and their dependants are provided with free medical treatment at the Company clinic. Electricity is supplied to Mill and Estate housing at cost RM5 per employee per month. Water is supplied to Mill and Estate houses at no cost. The new Humana School building consisting of four class rooms and a teacher/computer room is now operating for 125 students with three teachers in attendance. The company has provided each class room with desks and chairs sufficient for all students. Criterion 6.6: The employer respects the right of all personnel to form and join trade unions of their choice and to bargain collectively. Where the right to freedom of association and collective bargaining are restricted under law, the employer facilitates parallel means of independent and free association and bargaining for all such personnel. Interview of workers confirmed they are allowed to join a union if they so wished, but they stated they are not members of a union. A Joint Consultative Committee has operated at the Mill and the Estate since 2008 and most of the JCC representatives are members of the ESH Committee. Enquiry with the SPIEU confirmed that it had not yet formed a Branch at the Mill and Estate. The SPIEU further indicated that it was not aware of any issues at the Mill and Estate. Criterion 6.7: Children are not employed or exploited. Work by children is acceptable on family farms, under adult supervision, and when not interfering with education programmes. Children are not exposed to hazardous working conditions. The minimum working age is 18 under the Employment Act. Similar to ASA1, inspection of records confirmed that at time of hire, age is checked by examination of ID Card for Malaysian workers and Passport of Foreign workers. During the ASA2 visit, children were not observed at any workplace at the Mill or Estate. Criterion 6.8: Any form of discrimination based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation, or age, is prohibited. Similar to ASA1 findings, interview of staff and workers and inspection of a sample of payroll records confirmed

16 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 14 that there was no discrimination between workers on the basis of ethnicity, religion or gender. Criterion 6.9: A Policy to prevent sexual harassment and all other forms of violence against women and to protect their reproductive rights is developed and applied. Similar to ASA1, interview of Female Staff and Workers confirmed their awareness of the Social Policy for prevention of sexual harassment and violence. A Gender Committee is operating and interview of female workers confirmed their awareness of the Committee and who their respective representatives were. Interviewees also stated that to date no issue had arisen that necessitated action through the Grievance Procedure. They advised that they used the meetings as a venue to arrange activities, such as cooking and sport days. Criterion 6.10: Growers and Mills deal fairly and transparently with smallholders and other local businesses. Interviews of an FFB supplier and contractors confirmed that they considered the SOU25 management dealt fairly with them. Contractors confirmed that they understood the content of their contracts and that payments are made within 30 days of invoicing. Criterion 6.11: Growers and Millers contribute to local sustainable development wherever appropriate. SOU25 is located in a relatively remote area and there are only two communities nearby. The company makes donations to local communities and schools and places of worship when requested, which are considered appropriate for the location. Principle 7: Responsible Development of New Plantings SOU25 has not carried out any new oil palm developments since November 2005 and there are no plans for expansion of plantings. Principle 7 is not applicable to this Assessment. PRINCIPLE 8: Commitment to Continuous Improvement in Key Areas of Activity SOU25 has continued to make progress with improvements to environmental and social performance. In addition to focus on production efficiencies, the company has worked on the environmental protection measures for reinstatement of riparian buffer zones and other issues such as the control of wastes. The company has continued to maintain a good relationship with internal and external stakeholders. A major improvement for workers is the construction of the new Humana school and new housing concurrently at each of the three Divisions. Criterion 8.1: Growers and Millers regularly monitor and review their activities and develop and implement action plans that allow demonstrable continuous improvement in key operations. SOU25 has not used any Class 1 pesticides and has not used paraquat since it was phased out more than 5 years ago. The Mill and Estate Environmental Improvement Plans were reviewed and updated. The Mill focus is on water and energy conservation, while the Estate priorities are aimed at expanding the plantings of beneficial plants and prevention of soil erosion at replanting areas. The recycling of palm by-products, such as EFB, fibre, nut shell and POME continues to be carried out consistently. However, greater attention is required to achieve consistently low BOD of treated effluent. Scheduled wastes are well controlled. The Mill improvement plan includes reducing energy losses and water usage. The Estate has made considerable progress in improving groundcover vegetation for reducing soil erosion and discharge of sediment to streams and is focusing on the replanting areas. A new Humana School has been constructed and is now operational with the main social improvements now being the construction of new houses at each of the Divisions. 3.2 Identified Nonconformities and Noteworthy Positive and Negative Observations (ASA2) Nonconformities were assigned to Major Compliance Indicator and Minor Compliance Indicator Eight (8) Observations/Opportunities for Improvement were identified SOU25 has prepared a Corrective Action Plan for addressing the identified Nonconformities, which BSi has reviewed and accepted. CR08: Evidence of compliance with legal requirements A Nonconformity was assigned to this Major Compliance Indicator because the BOD of treated mill effluent exceeded the Environment Permit condition relating to the limit of 50mg/L during SOU25 has prepared a Corrective Action Plan for addressing the identified nonconformity that involves the following: Sime Darby Engineering Department reviewed the effluent treatment system operation; Desludging of Effluent Pond #2 and Pond #3 expected completion 15 August 2012; Installing a Flyte Mixer for improving the aeration of the aerobic pond, expected completion 30 August 2012; Upgrading the Mempol membrane polishing system by installing an additional 24 units of membrane cylinders and to run the existing Mempol system at optimum condition and throughput, expected completion 30 September In addition, SOU25 advised the treated effluent monitoring results for BOD

17 Public Summary Report RSPO Annual Surveillance Assessment (ASA2) Page 15 in May (61 mg/l) and June (28 mg/l), which was significant improvement and confirmation the existing effluent treatment system is capable of achieving the compliance limit of 50 mg/l (refer Appendix E). BSi Assessors considered the corrective actions for improving the Effluent System Performance and the laboratory results for May and June 2012 satisfactory and appropriate and the Nonconformity was closed 18 July CR09: A timetable with responsibilities for mitigation and monitoring is reviewed and updated as necessary. A Nonconformity was assigned to this Minor Compliance Indicator because the Mill Social Action Plan had not been updated since ASA1. Corrective Actions: The Social Action Plan will be updated based on consultation of stakeholders during recent stakeholders meeting. BSi Assessors considered the corrective actions satisfactory and appropriate and progress toward resolution of the issue will be followed up during the next Annual Surveillance Assessment (ASA3). Observations/Opportunities for Improvement (ASA2) The assessment team identified eight (8) Observations/ Opportunities for Improvement. The progress with these will be checked during the next Surveillance Assessment (ASA3). 01 (4.3.2) At Field 2003 Block 6, there were minor areas of over-spraying of Nephrolepis spp on the edge of the palm inter-row which resulted in areas of bare soil. 02 (4.4.7) The occurrence of a leaking tank tap and pressure water pump at the Estate workshop indicated awareness of water conservation needs improving. 03 (4.6.3) The control of empty pesticide containers at Pertama Division could be improved by maintaining records of the numbers transferred to the Mengaris Division scheduled waste store. 04 (4.7.1) At Pertama Division, safety awareness could be improved by posting appropriate signage at the water treatment plant, genset and pesticide mixing area and ensuring an adequate supply of appropriate PPE is always available. 05 (5.2.3) Three spotted dove (Streptopelia chinensis) that were likely to have been captured in the field, were kept in a cage at Pertama division, which indicates inadequate awareness of the policy that prohibits hunting or taking of fauna. 06 (5.3.2) Rubbish Bins are located at the Mill and the Estate houses. However, inspection found that rubbish is being discarded directly beside the bins at the adjacent palms (Also an issue at Pertama Division). This indicates more awareness training is needed. 07 (5.5.3) One incident of fire being used for disposal of garden waste was observed at the Mill housing area and one at Pertama Division, despite signs displaying No Burning. This indicates more awareness training is needed. 08 (6.5.2) During the interview Mill process workers stated that their contracts are in English, which they do not understand. Noteworthy Positive Components The Estate has achieved a low LTA Rate during the past 2 years, which demonstrates a very strong commitment to employee health and safety. Groundcover vegetation has been established quickly following replanting in order to reduce soil erosion. The new Humana School is now operational Progress with construction of new housing continues at the Mill, Segaliud, Mengaris and Pertama Divisions with some houses now completed and occupied. 3.3 Status of Nonconformities (Major and Minor) Previously Identified during Previous Assessments The Nonconformities that were identified and closed during previous assessments (CR01 to CR05) were followed up to check and confirm the implementation of corrective actions had been maintained and all Nonconformities remain closed. CR06: Having identified wastes and pollutants, an operational plan should be developed and implemented, to avoid or reduce pollution. A Nonconformity was assigned to this Minor Compliance Indicator during ASA1 as there was inadequate segregation of wastes at Pertama Division with workshop waste disposed with domestic refuse in the landfill. ASA2 Findings: Inspection showed the landfill had recently been closed and a new pit excavated. Inspection of the Main Division landfill showed appropriate separation of wastes. The Nonconformity was closed 22 May 2012 CR07: Growers and millers provide adequate housing, water supplies, medical, educational and welfare amenities in accordance with Workers