Roundtable on Sustainable Palm Oil

Transcription

1 Roundtable on Sustainable Palm Oil Annual Surveillance Audit Report Report no.: ASA1_ Surveillance assessment against the RSPO Principles & Criteria Indonesian National Interpretation year 2008 PT Barumun Agro Sentosa Jl. DC Mahakam Blok C No. 14 Padang Golf, Polonia Medan Report prepared by: Dian S. Soeminta (RSPO Lead Auditor) Certification decision by: Manfred Herbert Lottig (COO TUV Rheinland Malaysia) Certification Body: TUV Rheinland Malaysia Sdn. Bhd. No , Jalan Perindustrian USJ 1/6, Taman Perindustrian USJ 1, Subang Jaya, Selangor Darul Ehsan, Malaysia. Tel: Fax:

2 TABLE OF CONTENTS 1.0 SCOPE OF CERTIFICATION ASSESSMENT National Interpretation Used Type of Assessment Certification Details Location and Maps Organisational Information / Contact Person Description of Supply Base Actual production volumes, tonnages and projected outputs Dates of Plantings and Replanting Cycles Area of Plantation (Total, Planted and Mature) Progress Against Time Bound Plan Compliance to Partial Certification Requirements Progress of associated smallholders or outgrowers towards RSPO compliance (Revised) Approximate Tonnages Certified ASSESSMENT PROCESS Certification Body Qualifications of Lead Assessor and Assessment Team Assessment Methodology & Agenda ASSESSMENT FINDINGS Summary of Findings Status of Previously Identified Non-conformities Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions Noteworthy Positive Components Issues Raised by Stakeholders and Findings Pertaining to Issues CERTIFIED ORGANISATION S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY Date of Next Surveillance Visit Acknowledgements of Internal Responsibility and Formal Sign-Off by Client 32 APPENDICES 33 Appendix 1: Details of Revised Certificate 33 Appendix 2: List of Abbreviations 34 Appendix 3: List of Stakeholders Interviewed and Contacted 34 Appendix 4: Observations and Opportunities for Improvement 34

3 1.0 SCOPE OF CERTIFICATION ASSESSMENT Page 3 of National Interpretation Used The operations of the palm oil mill(s) and its supply base of FFB were assessed against the Indonesian National Interpretation year 2008 of the RSPO Principles & Criteria. 1.2 Type of Assessment The RSPO certification assessment was carried out on 1 mill and 3 company estates supplying to this mill, which are Aek Barumun Estate, Aek Sigala-gala Estate and Aek Kulim Estate owned by PT Barumun Agro Sentosa (PT BAS), which was previously named PT First Mujur Plantation & Industry (PT FMPI). The date of certification of this unit was 13 October Certification Details The details of RSPO certification of PT First Mujur Plantation & Industry are as per the table below Table 1: RSPO Certification details of PT First Mujur Plantation & Industry (now known as PT Barumun Agro Sentosa) RSPO Membership no.: Child numbers of each certification unit: RSPO Certificate no.: Date of first RSPO certificate & validity: 13 October 2010 Date of certification audit: January 2010 Date of previous surveillance audit: - - Date of revised RSPO certificate & validity (if applicable): CPO tonnages claimed: PK tonnages claimed: - 63,000 tonnes 15,000 tonnes 1.4 Location and Maps Table 2: GPS locations for all estates and mills included in annual surveillance assessment Name of mill / estate Aek Sigala gala Mill Aek Barumun Estate Aek Sigala gala Estate Aek Kulim Estate Location Ujung Gading Jae Village, Simangambat Sub District, Padang Lawas Utara District Ujung Gading Jae Village, Simangambat Sub District, Padang Lawas Utara District Ujung Gading Jae Village, Simangambat Sub District, Padang Lawas Utara District Jambu Tonang Village, Ujung Gading Jae Village, Simangambat Sub District, Padang Lawas Utara District GPS locations Latitude Longitude " " " " " " " "

4 Page 4 of 35 North Padang Lawas District Figure 1: Map of North Sumatera Province and North Padang Lawas District in North Sumatera, Indonesia

5 Page 5 of 35 Figure 2: Map of PT First Mujur Plantation & Industry (PT FMP&I) land area Description: 1. AS : Aek Sigala gala 2. ABR : Aek Barumun 3. AK : Aek Kulim

6 Page 6 of Organisational Information / Contact Person & Updates on Company Profile Contacts details of the company are as follows: Company Name: Address: Contact Person: PT Barumun Agro Sentosa Main office: Jl. DC Mahakam Blok C No. 14, Padang Golf, Polonia, Medan 20157, Plantation office: Desa Aek Sigala-gala, Kec. Simangambat, Kab. Padang Lawas Utara, Provinsi Sumatera Utara. Husin Salim Telephone: husin_salim@yahoo.com PT Barumun Agro Sentosa was previously certified under the company name PT First Mujur Plantation & Industry, which was established in year The change of company name was agreed by the company s shareholders according to Act no. 303 dated 28 December 2010 from the Humberg Lie SH, SE, Mkn Notary and approved by the Republic of Indonesia Ministry of Law and Human Rights as per decision letter no. AHU AH year 2011, regarding the change of the company s statutes. The company was initially entitled to govern a concession area of 12,319 ha and as stated in the certification report for PT FMPI, the mill is also receiving FFB supply from another small estate area within Aek Kulim estate which is owned by the company but the company has yet to receive the land use certificate (Hak Guna Usaha HGU) for this area which covers 1500 ha. At time of certification, the company had the location permit no. 503/0398/K/ (dated 24 Sept 2009) from the North Padang Lawas government head for 1,500 ha of land located in Jambu Tonang, Menanti, Huta Raja, Pasir Lancat and Ujang Batu Jae Village, located on Simangambat sub-district, North Padang Lawas District of North Sumatera. The company has since received the Plantation Operation Permit no. 5.03/157/KPTS/2011 for this 1,500 ha of land on 28 May As such, the total company s area is now 13,819ha and the company is now in process to obtain the land use permit (Hak Guna Usaha HGU) for the area of 1,500 ha. Fresh fruit bunches(ffb) from the company s own estates are processed independently by Aek Sigala-gala Palm Oil Mill with an initial installed capacity of 30 tonnes per hour, but had now been increased to 50 tonnes per hour. The company has 3 estates i.e. Aek Sigala-gala Estate, Aek Barumun Estate and Aek Kulim Estate. Each estate consists of 5 divisions, and is managed by an estate manager, while each division is managed by a field assistant along with division assistant for transport and office. 1.6 Description of Supply Base Table 3: FFB Supply Information for Aek Sigala-gala Mill from Oct 2010 to Sept 2011 FFB Contributors FFB supplied from Oct 2010 to Sept 2011 Tonnes % Company owned estates: Aek Kulim 99, Aek Sigala-gala 96, Aek Barumun 110, TOTAL 305,

7 Page 7 of Actual production volumes, tonnages and projected outputs. Table 4: Certified tonnages claimed, certified tonnages purchased or sold, total and projected CPO and PK production from Aek Sigala-gala Mill CPO Amount (MT) PK Certified tonnages claimed in certificate 63,000 15,000 Certified tonnages sold* 11, Actual Production** 67,870 15,125 Projected output for year ,431 14,072 *Data from 4 May 2011 to 8 September 2011 and based on no. of certificate sold through Greenpalm. No sale of certificates before 4 May **Actual production from October 2010 to September Dates of Plantings and Replanting Cycles The company follows a replanting cycle of 25 years. Information on the dates of plantings are as per the table below. Table 5: Age and year of plantings of company estate supplying to Aek Sigala-gala Mill Year of Plantings Mature Area Oil palm planted area at each estate (ha) Aek Kulim Aek Sigala-gala Aek Barumun Total planted area (ha) , , , , TOTAL ,301

8 Table 6: Planned and actual oil palm replanting activities for PT Barumun Agro Sentosa No replanting activities have been carried out. The first round of replanting is planned for year Page 8 of 35 Year Total planned replanting area (ha) Estate where replanting is to be carried out Actual total area replanted (ha) Aek Kulim Aek Kulim Aek Kulim, Aek Barumun Aek Sigala-gala ,105 Aek Sigala-gala, Aek Kulim Area of Plantation (Total, Planted and Mature) Table 7: Oil Palm Planted Area Summary, FFB Production and Average yield/ha for PT Barumun Agro Sentosa Estate Name Total area (ha) Oil Palm Planted area (ha) Mature (Production) area (ha) Immature (Non-production) area (ha) FFB Production* (tonnes) Average yield (tonnes/ ha)* Aek Kulim 4,490 4,435 4,435-92, Aek Sigalagala 4,642 4,204 4,204-92, Aek Barumun 4,687 4,662 4, , TOTAL 13,819 13,301 13, , * Data is based on total FFB production for year 2010 Table 8: Land use data for PT Barumun Agro Sentosa Oil Land used for other purposes (ha) Total Rubber Palm Occupied Estate Name area Planted Planted by (ha) Area (ha) Area Housing Mill communiti (ha) es Enclaved Others Aek Kulim 4,490-4, Aek Sigalagala 4,642-4, Aek Barumun 4,687-4, TOTAL 13,819-13, Progress Against Time Bound Plan As the company only has one mill and no other management units, the company is not required to have a timebound plan 1.11 Compliance to Partial Certification Requirements The company is not required to comply with partial certification requirements as the company has no other management units Progress of associated smallholders or outgrowers towards RSPO compliance Aek Sigala-gala mill does not receive FFB supply for any smallholder, outgrowers or other sources asides from the company own estate, hence this requirement is not applicable.

9 Page 9 of Revised Approximate Tonnages Certified The tonnages certified have been revised from the previous amount stated in the RSPO certificate issued in October 2010, as projected production in year 2012 has increased and this was corroborated with records of actual production (refer to Table 4). The revised approximate tonnages certified (as per Appendix 1), based on production in 2011 are as follows: Crude Palm Oil (CPO) Palm Kernel (PK) : 67,431 tonnes : 15,000 tonnes

10 Page 10 of ASSESSMENT PROCESS 2.1 Certification Body TUV Rheinland Malaysia Sdn. Bhd. is member of Group TÜV Rheinland Group, a global leader in independent testing and assessment services. The TÜV Rheinland Group was established in 1872 with offices located in over 490 locations in 62 countries on all five continents. TUV Rheinland Malaysia offers certification for a wide range of management systems according to established international standards including ISO 9001, ISO 14001, OHSAS 18001, SA 8000, as well as CDM Validations and Verifications. TUV Rheinland Malaysia s office is located in Subang Jaya. 2.2 Qualifications of Lead Assessor and Assessment Team The assessment team members of this surveillance audit that were part of the same assessment team for the certification audit are as follows: 1) Dian S. Soeminta 2) Agus Salim Alfat 3) Carol Ng New assessment team members that were not part of the previous assessment team are as per the table below: Name Position Qualifications / Experience Octavianus Rusmin Social Auditor Education: Bachelor of Anthropology, Department of Anthropology- Hasanuddin University, Makassar. Trainings attended: Sustainable Forest Management (SFM) for FSC Standard (April 2006), Environmental Management System ISO (February 2007), Verification Log Legalities System (March 2011). Working experience: Lecture Assistant at Department of Anthropology Hasanuddin University-Makassar, Officer & Field Researcher at Center of Anthropology Studies University of Indonesia-Jakarta, Social Advisor at Tropical Forest Trust (TFT) - Indonesia, External Auditor of Social Aspects for RSPO Standard. 2.3 Assessment Methodology & Agenda The surveillance assessment was conducted between 6 and 8 October 2011 as per the assessment program below. The assessment was carried out in accordance with TUV Rheinland Malaysia s RSPO audit procedure as well as the RSPO Certification Systems document. During assessment, the qualified TUV Rheinland assessors used the RSPO standard as endorsed for the country in which the assessment took place and recorded their findings. Due to the location and proximity of the estates, combined with common management systems, it was possible to carry out both field and document assessments of all estates and the mill within the time frame without compromising the integrity of the assessment in anyway. All 3 estates and 1 mill were visited and the assessment team carried out field and document assessments of compliance to all the RSPO principles and criteria. Common systems were identified and specific evidence was recorded for individual estates. Interviews were conducted at all estates and the mill. The company proposed the correction and corrective action for all identified non conformities raised to the certification body 15 days after the closing meeting. Implementation of corrective actions for major nonconformities was verified while implementation of corrective actions for minor nonconformities will be verified during the next surveillance audit. The certification assessment agenda is as explained below.

11 Page 11 of 35 Surveillance Assessment Agenda Date Location/ Main sites Main activities 6 Oct Aek Kulim Opening meeting 2011 estate Document verification for all previous audit findings Interviews with workers Document checks for following aspects: - FFB production records - Legal requirements register and compliance to legal requirements - Licenses and land permits - Environmental aspects and impacts - Chemical and fertilizer usage records - Agricultural best practices - AMDAL and environmental monitoring records - Social aspects - Workforce, payment - Gender committee Aek Sigalagala mill Document checks for following aspects: - CPO & PK production records - Occupational safety and health - Training records - AMDAL and Environmental monitoring records 7 Oct Oct 2011 Aek Sigalagala estate Aek Sigalagala mill Aek Kulim estate Aek Barumun estate Aek Kulim estate - Hazardous wastes records Visit to following locations: - Morning muster and interviews of workers - River water sampling sites and mill effluent pond 16 sampling site - River buffer zones - Local community (Ujong Gading Julu Village) - Boundary stones Document checks for the following aspects: - Chemical and fertilizer usage records - Agricultural best practices - Occupational safety and health - Training records - Land application records - Social aspects - Workforce, payment records - Social Impact Assessment and plan Interview with mill workers and office staff Site visit to mill effluent treatment ponds, sampling points, chemical store, workshop, laboratory, construction site for palm kernel oil refinery and Jatropha mill Visit to following locations: - Hazardous waste store - Workshop - Oil store - Chemical store - Housing and waste collection area Visit to following locations: - Chemical warehouse - Workshop - Field visit to interview harvesters Document checks for: - Chemical and fertilizer usage - Occupational safety & health - Training records Consolidation of findings Closing Meeting

12 3.0 ASSESSMENT FINDINGS Page 12 of Summary of Findings During the surveillance assessment, 2 nonconformities were assigned against Major Compliance indicators while 5 nonconformities were assigned against Minor Compliance Indicators. 7 observations or opportunities for improvement were identified. Further explanation of the non-conformities raised and corrective actions taken by the company are provided in Section 3.2. The observations & opportunities for improvement are listed in Appendix 5. The following is a summary of findings made for the criteria listed in the RSPO Principles & Criteria Indonesian National Interpretation year Principle 1: Commitment to transparency Criteria assessed: CR1.1 Criteria not assessed: CR1.2 Findings: There is no change on company commitment to transparency, which is documented in their communication procedure which was issued since April 1, Every request is categorized by the type of information required, and the replied by Head of Administration in the estate and mill, e.g. number of workers employed by the Labor department. All incoming letters are recorded in a log book used to record information about stakeholders who send these letters, such as date of the letter or request, name, organization, and the information or type of assistance requested. The company also maintains records of their responses to letters and requests received by stakeholders. Compliance status: Full Compliance Principle 2: Compliance with applicable laws and regulations Criteria assessed: CR2.1, CR2.2, Criteria not assessed: CR2.3 Findings: CR2.1: The change of name of the company resulted in a change in the numbering system include forms, such as form FMP & I / ADM to F-LGI-01 to form List of Identification and Evaluation of Environmental Regulations & Legislation. In an effort to comply with Legal and other requirements, the organizations established procedures for Identification and Evaluation of Regulatory Compliance & Regulations SOP- LGL-01 dated April 1, The organization has already evaluated the fulfilment of existing legal and other requirements and documented on Form F-LGI-01. The evaluation was carried out last on April 1, 2011, which when viewed from the recording evaluation there are still some applicable legal and other requirements are not evaluated, so it is not clear whether the relevant regulations and has been met or not in the organization. There is evidence of a documented system that contains information about applicable legal and other requirements that must be met by the company have been documented under thee Form F-LGI-01 dated April 1, 2011, which includes a list of existing regulations and relevant provisions of the legislation relating with operations in the Plantation and Mill, currently operational control and the planning for future, as well as the current compliance status. In addition, the organization established an evaluation mechanism for the implementation of and compliance with related legal and other requirements which are documented in the SOP-LGL-01, but the mechanism only includes evaluation of compliance with legal requirements related to the environment only, not does not include the evaluation of legal and other requirements related to OHS, plantations and mill operations. CR2.2: The company has new document Decision Letter of Head Regency Padang Lawas Utara No.

13 Page 13 of /157/KPTS/2011 about Ijin Usaha Perkebunan (IUP) & expanded area of Ha of PT. First Mujur Plantation & Industry, May 26, Based on observation results at plantation boundaries of PT. Barumun Agro Sentosa, it was seen that the company use signs to demarcate these borders. Some boundary stones visited during the main assessment include: Boundary stone no 19 in Block N.1, Division 5 Boundary stone no 20 in Block N.9, Division 5. Boundary stone no 21 in Block N. 11, Division 5. Those boundaries are clearly demarcated and visibly maintained and signboard was built at the several borders area between the area belonging to the company and areas belonging to the local communities or other plantation There is no significant conflict between company and local farmer. Based on interview results of two local farmers who have a plantation located on PT. Barumun Agro Sentosa Plantation, they clearly know the boundaries. CR2.3: The company still maintains a good relationship with local communities, hence this criteria was not assessed. Compliance status: Non-Compliance of 07, of 07 1) Evaluation of compliance to applicable legal and other requirements relate to the operations of the organization that was evaluated under form F-LGI-01 in effort to comply with its applicable legal and requirements have not been covered all applicable legal and other requirements was identified. There were some legal requirements for which fulfillment were not evaluated during the last evaluation on April 1, (Major, 2.1.2, Legal) 2) The organization established an evaluation mechanism for the implementation of and compliance with related legal and other requirements which are documented in the SOP-LGL-01, but the mechanism only includes evaluation of compliance with legal requirements related to the environment only, not does not include the evaluation of legal and other requirements related to OHS, plantations and mill operations (Minor, 2.1.2, Legal) Principle 3: Commitment to long-term economic and financial viability Criteria assessed: CR3.1 Criteria not assessed: - Findings: The mill has a detailed budget and management plan for year 2011, as well as 2012 to The documents consist of detailed information about cash flow and budget plans for all mill stations and estimated materials used, salaries of staff and non-staff, office and housing expenses, expenses for application/extension of licenses, transportation and travel, training and education, medical, festivals, recreational and social activities, inventory maintenance, equipment maintenance, and so on. The plans also include estimated crop production and CPO and PK projections for each respective year, estimated cost price. The mill has estimated their overhead cost and profit per kg FFB, based on the current cost of processing one kg of FFB, which is less than Rp400 per kg of palm product. The company made a 5-year replanting program for the 3 estates, from year 2014 to The replanting program will start in 2014 for 760 ha in Division III of Aek Kulim Estate, year 2015 for 900 ha in Divisions II, IV and IV of Aek Kulim estate, year 2016 for 900 ha in Division III of Aek Barumun Estate, year 2017 for 822 ha in Divisions I, IV and V of Aek Sigala-gala estate, and year 2018 for 1105 ha in Divisions I, II IV of Aek Kulim estate, and Divisions I and II of Aek Sigala-gala estate. The company applies a 26 year replanting cycle to ensure good seed quality and easy maintenance. The oldest plantings in Aek Kulim estate are 23 years now and the average productivity of the estate is still high at tonnes of FFB per ha. Compliance status: Full Compliance

14 Page 14 of 35 Principle 4: Use of appropriate best practices by growers and millers Criteria assessed: CR4.1, CR4.2, CR4.3, CR4.4, CR4.6, CR4.7, CR4.8 Criteria not assessed: CR4.5 Findings: CR4.1: The new revision of SOP for Plantation began to be applied on April 1, 2011 is well documented, including: SOP Land Survey, Preparation of Road Network, Drainage of land, Palm Nurseries, Palm Planting, Weed Control, Fertilizing, Pruning, Harvesting Palm Oil, Land Opening, replanted, Plant Pest Control, Delivery to Plant Production. SOPs are distributed properly to all estate, with good control. Results of operational activities are documented such as manuring activities carried out according to fertilizer recommendations in 2011 from PT. Sarana Inti Pratama (Salim Group). For example, fertilizer recommended for Aek Kulim Estate is Urea, RP Gafsa, MOP, Super Dolomite, and HGFB. Dose of fertilizer use per tree per year is also recommended as the Kulim Aek Estate consisting of 6 Divisions where the average use of urea is 2.31 kg / tree / year, RP Gafsa 1.61Kg/tree/year, MOP 2.64 Kg / tree / year, Super Dolomite 1.44 Kg / tree / year, and HGFB Kg / tree / year. Activity of Urea fertilizer was applied two times a year i.e. in March and August 2011 with a total dose applied as recommended. Records of other operational activities such as spraying, and road maintenance are also being maintained. The current revision for mill s SOP applied on1 April 2011 covers SOP the processing palm oil mill which covers the activities of the receiving process of the FFB, weighing, loading ramp, sterilizer processes, threshing processes, pressing processes, clarification processes, depericarper station, the kernel station, water treatment, boiler, power house, and effluent treatment. SOP for preparation of palm oil mill, SOPs laboratory and so on. Operational activities are recorded on the daily report, such as daily report dated October 5, 2011, where the FFB received from the Aek Kulim Estate about Kg, Aek Sigala-gala Estate about Kg and Barumun Estate about Kg where the FFB processed is as many as 1,055,460 kg and production of CPO about kg with 22.2% yield, FFA is 3.36 and moisture of content is The Organizations conduct inspections and monitoring of operational activities by conducting the internal audits that conducted periodically 2 times a year. In accordance with Internal Audit Procedure SOP-MR-07 dated April 1, Second semester of the internal audit activity in 2010 performed on 12 to 20 November 2011, where the results of the inspection and monitoring of the existing discrepancies found 2 findings and 2 observations that have been followed up with correction and corrective action. For the first semester of 2011 internal audit conducted on the 9th to 14th May 2011, 4 nonconformities and 2 observations were found. Ccorrections and corrective actions on findings were done and verification and evaluation of the effectiveness of corrective actions were taken. CR4.2: The estates conducts soil analysis once every 5 years, and most recent soil analysis results were sighted for Aek Sigala-gala estate for 18 samples and results dated 9 December Records of leaf analysis and fertilizer recommendations are also available in a report prepared for all estates. This report is produced annually by the Research Department of PT Sarana Inti Pratama for all estates, and the latest report is dated February As viewed from actual fertilizer application records compared to planned fertilizer application records, actual application were done according to the recommendations, except for application of 768,600 tonnes of urea up to August 2011 which exceeded the planned amount for application of 661,324 tonnes), while actual application of Borate (HGFB) was 64,801 tonnes up to August 2011, which exceeded the recommendations of 19,010 tonnes. As explained by management, the application of urea was done one month earlier than planned to take advantage of the good weather, while additional application of borate was because some palms displayed signs of boron deficiency. A request letter was sent to the general manager on 4 May 2011 to request permission to apply additional Borate, and this was approved. Land application of mill effluent is carried out at Aek Sigala-gala estate at blocks H16, 17, 18 and19 and I19 and monthly reports of the land application carried out is available, including information on hectarage and volume of effluent applied. In addition, empty fruit bunches are applied to the field, and records of amounts applied are maintained, e.g. for Aek Sigala-gala estate, application up to August

15 Page 15 of was 9,440,020 tonnes. CR4.3: The company has a soil map of all estates made to scale 1:25,000 which shows that three main soil types found within the estates are podzolic soils (74.1% or 8,628 ha), latosols (23.9% or 2,784 ha) and Alluvial soils (2.0% or 238 ha), with no fragile, marginal or peat soils identified. Road maintenance programs are developed on monthly basis and include planned area and road length for road maintenance compared to actual maintenance carried out and types of mechanical work carried out (i.e. using graders, compactors, excavators, bulldozers, backhoe loader, etc). Road maintenance program for Aek Sigala-gala estate was sighted and it was seen that work is carried out according to plan. During field visits, it was seen that roads are maintained in good condition. CR 4.4: As found in the certification audit, the company has a plan for planting of various species of plants along river banks, including rambutan, durian, oranges, guava, noni, soursop, jackfruit, mangos, kedondong, jengkol, cempedak, duku, meranti and sukun. As sighted from the planting plan for Aek Sigala-gala estate, they plan to plant 3075 of these trees along rivers, and to date, 1104 trees have been planted. The company has established targets for water usage for mill operations, which states that target for water usage for mill processing activities is 1.5m 3 /tonnes of FFB. The mill also records daily water usage per tonne of FFB as well as tonne of CPO produced. As sighted from mill water usage records for process from July to September 2011, there has been no exceedance of water usage target. Water usage targets are also established by the estates for staff and workers housing, estate division offices, warehouses, and other estate facilities where the standard is stated as 600 litres per family per day. Monthly records of water usage records at housing and other locations are maintained and show that overall water usage is within the specified target for water usage. The mill has 16 effluent treatment ponds, from which samples for monthly BOD analysis are taken from the inlet (1 st pond) and the outlet (16 th pond), as well as from an adjacent river (upstream and downstream of the mill discharge point). Mill effluent and river water testing results for April to June 2011 were sighted, and results showed that BOD of outlet samples for all 3 months is about 27ppm, and downstream river water sample results are about 24 to 27ppm. These results are below the legal limit of 100ppm for rivers according to the Environmental Ministry s Regulation No. 51/MENLH/10/1995. In July and August, there was an increase in the BOD levels to 79ppm and 65ppm respectively (still below the legal standard). The mill has noted this increase and making efforts to reduce it by recirculating the mill effluent into treatment. However, the mill also carries out land application to 8 blocks at Aek Sigala-gala estates with effluent from pond 5. However, no analysis of BOD from the discharge point at this pond is being done. CR 4.6: During 2010 to now the organization only uses some types of chemicals include: Sime RB pheromone (insecticide / active ingredient ethyl-4 methilloctanoate) used to eradicate the pest beetles, Meta Prima (the active ingredient Methyl Metsulfuron 20%) was used for broadleaf weeds such Melastoma, tromolena, etc.. Prima Up (active ingredient Isopropylamina glyphosate 480 g / l) is used for narrowleaved weeds, reeds (inpreta sylindrica), and Hamador (insecticide / active ingredient lambda cyhalothrin 25g / l). The organization no longer uses chemicals that contain the active ingredient paraquat for weed exterminator. The use of chemicals for each block is planned for 3 times per year with a predetermined dose according to supplier recommendations, e.g. dose Meta Prima (Metsulfuron methyl) is used for circle spraying at Division 5 was 70 g / ha which is according to the supplier recommendations g / ha, and for Prima Up (Isopropylamina glyphosate), only 1.20 l / ha was used, which is less than the recommendations of the supplier 2-3 l / ha. Usage of Meta Prima at Division I of Aek Barumun estate was less than Aek Sigala-gala estate, where only 50 g / ha was used, and also the use of Pima up only 0.7 l / ha (from chemical usage data for 2011 of Division I Aek Barumun Estate). Spraying applications are carried out by experts in which the worker is still done by the same workers who have years of experience, including workers who were at main assessment of RSPO at Based on interviews with sprayers from Division 1, regular instructions for proper chemical spraying still being done by the foreman. The organization's efforts in reducing the use of chemicals are shown by using only two types of chemicals for the year 2011.

16 Page 16 of 35 Agrochemical packaging waste handling is according to the company s SOP-TAB-03 regarding Handling of Hazardous Waste in which each department to collect the waste in the warehouse and then delivered to the main hazardous waste storage at Aek Kulim which has a waste storage permit from the government. Hazardous waste shipments from the warehouse every estate was recorded, e.g. sighted record of submission no. 02/BAPB/KAS/V/2011 dated 27 May 2011 for delivery of 50 pcs former Prima Up packaging waste. The last periodic checks for agrochemical operators has been done on March 15, 2011 by Thamrin Clinic laboratory, the cholinesterase results of 22 sprayer from Aek Sigala-gala estate 4 workers who indicated intoxicates pesticide levels above the normal value (Men U / L ; Women U / L), namely Mr. Aidil Hendy ( U / L), Mr. Mangampu ( U / L), Mr. Yorlin ( U / L), Ms. Leli ( U / L). Action taken was to move the 4 workers into department that are not associated with chemicals such as Mr. Aidol Hendy was assigned to be a foreman, Mr. Mangampu was assigned to be a census operator, Mr. Yorlin was assigned to transport, and Ms. Leli was assigned to be a manual maintenance operator. Each month of pregnancy examination to female workers associated with agrochemical conducted by the company's doctor, to ensure that no worker who is pregnant women associated with agrochemicals. And at morning briefing from foreman convey information related to the ban on pregnant and breastfeeding women do the work associated with agrochemicals. The organization provides a washing area for equipments that contaminated by chemicals in every department office in each estate, which at the time of completion of all workers spraying equipment such as sprayers washing the aprons, gloves, mask, goggles, and knapsack before workers return to their homes for later use return the next day. CR4.7: Health and safety policy set by the management on the date of April 1, 2011 is integrated with quality and environmental policies. Policies relating to health and safety include a commitment to minimize or eliminate occupational injuries, avoiding the possibility of personal injury, property damage and the harmful effects to the environment. The organization is also committed to monitor the health and safety performance in all activities of products and services on a regular basis and programmed by specifying the party responsible for OHS in strategic organizational structure by forming a committee of Occupational Safety and Health (OSH), in accordance with the decision of the head of social department of manpower and transmigration district Padang Lawas Utara with the number: 560/657/2011 by the Department of Social Welfare Manpower and Transmigration of District Padang Lawas Utara dated 13 September 2011 by chairman Mr. B.M. Saragih and Mr. RI Tambunan as Secretary shown with a Certificate of Occupational Safety and Health Experts No. 1311/AK3/U/VI/2011 dated June 20, However, there are no records of regular meetings results to discuss issues of health, safety, and welfare of workers. This was raised as a nonconformity. A heath examination was conducted on March 15, 2011 by Thamrin Clinic laboratory, for agrochemical operators at plantation only for sprayers and workers dealing with chemicals which are at highest health risk. However, periodic health examinations for workers who work at high risk stations at the Mill have not been implemented since the last checked on January 2010, such as workers at the station boilers and the kernel (where dust levels are high), and the noisy engine room station. Iidentification of potential hazards and risks for all activities has been conducted by the organization. Risk analysis is done according to the SOP-MR-01 effective date 01 July However, determination of the classification and assessment of risks set forth in SOP-MR-01 effective date 01 July 2011 should be reviewed for the category defined as non-acceptable risk where the risk value of more than 9 or less than 9 is assigned to identified risks where there are regulations that govern them. This resulted in a high number of identified risks obtained from the risk assessment for all activities begin assigned a risk level of not acceptable, because of all the risks arising from activities in the organization are governed by regulations, but in actuality, the risk level is less than 9. Therefore it is advisable to revise the status of compliance with the regulation and effectiveness of control of operations. This was raised as an observation Occupational accident reports documented on Form F-HSE-02 is effective dated 01 January 2011, as well as accident investigation using Form F-HSE-01 effective date April 1, Data reporting occupational accidents in Mill , signed by the Mill Manager on 30 September 2011 informed that there were 24 accidents at the Mill for the year 2010 and there were nine accidents that occurred in However, accidents reports were not done for all accidents, as there were only 6 occupational accident reports, for accidents that occurred in January 2011, March 2011 and 4 accidents in April Occupational accidents in Aek Barumun Estate was high in June 2010 and June 2011, where

17 Page 17 of 35 there are 19 accidents in June 2010 and 17 accidents in June 2011, but records of the results of investigation of workplace accidents were not available. To maintain health and prevent accidents, organizations equip workers with occupational health and safety equipment and first aid. There are 16 fire extinguisher placed in mill area and offices where checks of the fire extinguishers are carried out 1 time per month. There are 4 existing fire hydrants located in the mill equipped with nozzle and hose. First aid equipment is also provided in mill and offices according to minimum requirements set by the government. Preparedness and emergency response procedures documented in the SOP-TGD-01 effective date April 1, 2011, in which the category of emergency incidents are fire / explosion, sabotage / workplace violence, and natural disasters. Simulation of emergency fire last done on April 4, 2011 in Aek Sigala-gala Mill, reports and records are available and well documented. During visit to the mill, it was observed that mill workers were wearing appropriate PPE, such as safety helmets and safety shoes, including contractors. CR4.8: The company s latest SOP for training is documented in SOP-HRD-02 dated April 1, 2011, which states that the identification and training needs analysis is to be conducted by the head of department, estate manager and mill manager, and then documented in the "Annual Training Program" for the then proposed to the management. The Annual Training Programme 2011 for Aek Sigala-gala Estate includes: 1. Training on Sanitation and Pruning 2. Training management of rat pests 3. Introduction of land application training 4. Training on manuring of palm 5. Training on application of empty fruit bunches in oil palm plantations. No training program is done for smallholders as there is no smallholder supplying FFB to the organization. Records of training includes attendance lists and documented and available materials, such as empty fruit bunches, manuring training records conducted on 02 May 2011 and April 8, 2011, and training on Land Application system dated March 7, 2011, and so forth. Evaluation of the effectiveness of training is also done using form F-HR-005. Compliance status: Non-compliance of 07, of 07, of 07 and of 07 1) The mill has not carried out BOD analysis of mill effluent used for land application at Aek Sigalagala estate to ensure it has not exceeded the maximum permitted BOD for land application. 2) There are no records of regular meetings results to discuss issues of health, safety, and welfare of workers. 3) Occupational accidents in Aek Barumun Estate was high in June 2010 and June 2011, where there are 19 accidents in June 2010 and 17 accidents in June 2011, but records of the results of investigation of workplace accidents were not available. 4) From the mill s occupational accidents date for , there were 24 accidents at the Mill for the year 2010 and there were nine accidents that occurred in However, accidents reports were not done for all accidents. In addition, in Aek Barumun Estate, there are 19 accidents in June 2010 and 17 accidents in June 2011, but records of the results of investigation of workplace accidents were not available. Principle 5: Environmental responsibility and conservation of natural resources and biodiversity Criteria assessed: CR5.1, CR5.3, CR5.4, CR5.5, CR5.6 Criteria not assessed: CR5.2 Findings: CR5.1: The company is ISO14001:2004 certified and all estates and the mill have a documented environmental aspects and impacts register for year 2011, dated 1 April 2011, which covers all aspects of the estate operations and mill operations, and also includes identification of impacts for the PKO refinery planned for construction. However, the mill has not identified the environmental impacts of the

18 Page 18 of 35 construction of the PKO refinery and Jathropha mill in their Environmental Aspects & Impacts register for implementation of appropriate control measure to avoid environmental impacts. A Social and Environmental Impact Assessment (AMDAL) as well as Environmental Management and Monitoring Plan ( Rencana Pemantauan Lingkungan (RPL) dan Rencana Pengelolaan Lingkungan (RKL) ) for all company's estate and mill operations is available and dated December This AMDAL and RPL/RKL documents were prepared after a change in mill s operations where the mill capacity was increased from 30 tonnes per hour to 50 tonnes per hour, and the previous AMDAL was only for a max capacity of 45 tonnes per hour, but now has been revised for maximum capacity of 60 tonnes per hour. The mill has now begun construction of a Palm Kernel Oil refinery and is in process to obtain their building construction permit for the refinery, upon which the AMDAL will be revised according to the change in the company s operations. This has been noted as an observation. Significant environmental impacts were identified in the AMDAL document and the RKL/RPL documents include the plan for management and monitoring of identified significant impacts. For the mill, significant impacts include air quality, work opportunities, economic opportunities for local communities, increase in community income, community perception and attitude, community health, mill effluent quality and river water quality, and solid wastes. The mill has prepared the report implementation of their RKL/RPL document for Semester 1 (January to June) year The mill conducts monitoring of identified sources of pollution and emissions two months once, and results are recorded in their RKL/RPL implementation report, including the following: - Mill effluent and river water testing results for April to June 2011, which shows that BOD of outlet samples for all 3 months is about 27ppm, and downstream river water sample results are about 24 to 27ppm. These results are below the legal limit of 100ppm for rivers according to the Environmental Ministry s Regulation No. 51/MENLH/10/ Testing of emissions from non-moving sources, ambient air and noise done in June Results show no exceedance of applicable standards for emissions at four gensets, 3 boilers, ambient air in front of the office and genset room, noise levels in front of the office, estate genset room, boiler, engine room, security post and mill housing. Tests were done by the Medan Department of Occupational Safety and Health, and results show all parameters are within legal requirements except noise levels at the mill engine and boiler room. This is controlled by provision of hearing protection (ear plugs) to the mill workers. CR5.3: Waste and pollutions sources at the estates and mill are identified and documented in the environmental pollution and impacts register of each estate and mill, dated 01 April All hazardous wastes from the mill and estates are stored at a central hazardous wastes store at Aek Kulim estate. The mill maintains records of amounts of hazardous wastes sent to Aek Kulim estate, which mainly include used chemicals from the laboratory, while inventories of hazardous wastes received at Aek Kulim central store are maintained for all types of hazardous wastes received from the mill and other estates, which include oil containers, chemical containers, used batteries, isoprophyl alcohol, fertilizer bags, and contaminated filters. From site visit, it was observed that the mill oil store has an oil spillage containment system, but not Aek Kulim oil store (this was raised as an observation). Aek Kulim estate has an area for washing of sprayers PPE and clothes. There are separate bins located at estate and mill offices as well as housing for separation of domestic wastes between organic wastes, inorganic wastes and hazardous wastes. Organic wastes are disposed at small holes dug behind housing area. While previously inorganic wastes were disposed at an estate landfill, inorganic wastes are currently collected for transport for a government waste disposal area located in Portibi district. Aek Kulim estate has a letter from the Government Head for Crop Burning and Cleanliness of North Padang Lawas, stating that the company can send domestic waste to this waste disposal area. CR5.4: The company still continues using fibre and shell as source of renewable energy materials. According to regular monitoring report fibre and shell consumption for year 2010 i.e. for January to December 2010, shell consumption ware 1,257,485,00 kg, and fiber consumption were 2,987, kg. Electrical needed to produce 1 ton CPO is still same with last year condition i.e. 17 kwh. The company needs tonnes of shell and fiber to produce 1 ton CPO or ton shell and fiber to process 1 ton FFB. The company made efficiency analysis as informed from data January to December 2009 efficiency

19 Page 19 of 35 made was Rupiah 1, 5 billion from renewable energy used compare with fossil fuel usage. Report of fossil fuels (Diesel oil) used in PT BAS for year 2010 is: 135,479,35 liter. Fossil Fuel Consumption for year 2010 was lowest compare with shell and fibre, this condition still same in year 2010 base on efficiency analysis company identified 60% more efficient as explained above compare with total fuel consumption. CR5.5: As per the main assessment report that the estates have not yet carried out any land clearing for replanting. The first plantings at Aek Kulim were conducted in 1988, and replanting is due only in year 2014 (760ha). As the company has a zero burning policy and also has not carried out any land clearing yet, the company has no documented assessment for use of fire for land preparation, nor do they have any records of implementation of their zero burning policy during replanting. The current revision of SOP of fire prevention for forest and land is defined and documented in the SOP-TGD-02 dated April 1, 2011, chairman responsibilities include emergency response, fire team leader of the land / forest fire tower officer, monitoring officer and chairman of the fire brigade and patrol. Procedures and mechanisms in the prevention of forest fires and land are also clearly defined. Firefighting tools that land specified in the procedure include: engine pump complete with hose and nozzle, tank cars, machetes, shovels, scratch, saws, chainsaws, fire bat. Land and forest fire equipment provided and stored in warehouse of Aek Barumun and ready to be used for all the estates. Simulated fires are planned for July 2011 has not been done until now is due to the postponement request from the Forest Service intends to attend the event simulation, and until now there is no exact date. As the successor organization to the fire simulation conducted in the office garden Aek Sigalagala on August 19, 2011 with testing of fire fighting equipment such as mobile tanks, and other fire extinguishers. Records of simulation of fires are documented and available. Fire extinguishers were observed at several locations around the mill, including the workshop, oil store, chemical store, and office. Fire extinguishers are checked monthly and records of checks are maintained. CR5.6: The source of pollution and emission still same with previous audit condition which is identified and documented on "list of waste identification and management" as documented on FMP&I/ADM.TAB/20, Wastes are managed by General Affair Department including relevant records as determined by Standard Operation procedure for waste management i.e. SOP-TAB-02 and working instruction IK-UM- 01. The company has a documented Schedule, Monitoring and Measurement Environmental Performance including schedule to monitor air emission and air quality as recorded on document FMP&I/ADM.PKS/21. This is also used to make the RKL/RPL report which has to be submitted to environmental officer in Padang Lawas every 6 months. To minimize water pollution company does not discharge all wastes to the environment such public river, meanwhile air emissions are decreased by regular boiler and generator set maintenance. All domestic waste generated from housing and office area, such organic waste separated from an organic waste. The company has a working instruction for domestic waste management as state on IK -UM-01. There are no changes in the treatment methodology for POME compare with last year audit is 100 days sedimentation cycle method using 12 pond consist of Cooling pond, De-oiling pond, Seeding Pond, Primary Anaerobic Pond, Secondary Anaerobic Pond, Aeration pond, Sedimentation and Mixing pond before discharge for Land application program (for total 30 ha). Additional 4 ponds for emergency condition was made to prevent over flow or used for dredging sludge or drainage effluent pond. Not all waste water used for land application, a part of waste water discharge to Aek Sigala gala river. Land application was applied to 180 ha or 5 block planted area in Aek Sigala-gala estate with water debit average m3 per hour. Waste water monitoring related to BOD and COD quality has been done every month conducted by environmental laboratory Bapedalda North Sumatera,e.g. monitoring record since January to May 2011, for parameter such ph, BOD5, COD, TSS, fat, oil content, and N-total, all parameter still within the defined government standard. Compliance status: Non-compliance The mill has not identified the environmental impacts of the construction of the PKO refinery and