SYNERGY for. Sustainability Report

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Sustainability Report SYNERGY for Sustainability PT Pupuk Indonesia (Persero) Kantor Pusat Head Office Jalan Taman Anggrek, Kemanggisan Jaya, Jakarta 11480, Indonesia Phone (hunting):

1 Sustainability Report SYNERGY for Sustainability PT Pupuk Indonesia (Persero) Kantor Pusat Head Office Jalan Taman Anggrek, Kemanggisan Jaya, Jakarta 11480, Indonesia Phone (hunting): Facsimile: Website: Layanan Informasi For further information (Toll Free)

2 Sustainability Report SYNERGY for Sustainability

3 Sustainability Report SYNERGY for Sustainability PT Pupuk Indonesia (Persero)

8 SYNERGY for Sustainability Sustainable development is the biggest challenge to human beings today. Would we be able to meet the current needs without diminishing the next generation s capability to do the same for their needs? This is a fundamental question to us in growing the company based on three aspects in Sustainability Principles Profit, People, Planet. The implementation of Sustainability Principles requires a synergy in the business chain of the Company and the stakeholders. We optimize the resources, create productive cooperation with the communities and partner with the government, as well as involving the stakeholders for the purpose of sustainability. PT Pupuk Indonesia (Persero) Sustainability Report 1

9 About the Report PROFILE LAPORAN KEPADA PEMANGKU KEPENTINGAN SUSTAINABLE GOVERNANCE STAKEHOLDERS economies TABEL OF CONTENTS 2 TABEL OF CONTENTS 4 PERFORMANCE OVERVIEW 6 SIGNIFICANT EVENT award and certification 40 SUSTAINABLE GOVERNANCE 42 General Meeting of Shareholders 42 Governance Structure 43 Structure of the Board of Commissioners and Directors 44 Directors 44 Board of Commissioners 44 Anti-Corruption 14 About the Report 15 GRI Standard 16 Reporting Period and Boundaries 16 Determining Report Content 17 Principles of Determination of The Content of The Report 17 List of Material Topics and Boundary 18 Materiality Level 19 Independent Assurance 45 Anti-Corruption Communications and Trainings 45 Political Contributions 46 Adoption and Support for International Initiatives 46 Membership in Indus trial Associations and Other Organizations 46 Stakeholder Involvement 47 Implementation of Sustainable Conception Suppliers 50 STAKEHOLDERS economies 20 PROFILE 22 Company Profile 24 Milestone 26 List of Subsidiaries and Operational Area 28 Scale of Organization 29 Vision, Mission and Values 52 Revenues 53 Profitability 53 Consumers 53 Production 54 Employee Awards 54 Contribution to the Government Income 55 Contributions to the Public 56 Investment in Infrastructure and Services 54 Contributions to Local Suppliers 32 REPORT TO STAKEHOLDER 35 Report of The Board of Commissioners 37 Report of Board of Directors 54 Production use in Country 56 Financial Assistance from the Government 59 Challenges from Climate Change and Loss of Land 60 Corporate Synergies 2 PT Pupuk Indonesia (Persero) Sustainability Report

10 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS 64 COMPETENT HUMAN RESOURCES OF 65 Employee Demography 66 Employee by Employment Status 68 Recruitment 69 Employee by Age Group 70 Permanent Employees By Education Level 72 Freedom to Unionize 72 Skills Development 74 Workplace Equality, Diversity, and Opportunity 76 Employee Benefit 77 Retirement Preparations 98 EXCELLENT ENVIRONMENTAL PERFORMANCE 102 Optimization of Production Resources 102 Challenges Ahead 105 Energy Consumption 108 Management of Water Utilization 109 Standards and Methodologies 110 Water Recycling 110 Maintaining Biodiversity 111 Emission Control 116 Waste Management 123 Policy Supervision 123 Environmental Related Complaints 124 Environmental Investment Compliance with Environmental Regulation Social Responsibility Program of Pupuk Indonesia 82 Partnership Program 84 Community Development Program 88 Testimony of Pkbl Pupuk Indonesia Beneficiaries 90 Awards 126 Top-Notch PRODUCTS 127 Prioritizing Customer Health and Safety 129 Responsibility of Product Information and Communication 130 Product Packaging Information 134 Commitment to Complying with Regulations 136 ASSURANCE STATEMENT 92 Attaining A Healthy Work Atmosphere 93 Occupational Health and Safety 94 Safe Working Hours 138 Statement GRI Standards Core in Accordance Check 139 Index standard gri 146 sdg s link in gri standard 97 OHS Targets 97 Employee Representation in Ohs Issue 98 Contractors and Occupational Safety 98 Ohs Training and Meetings 98 Healthcare for Employees PT Pupuk Indonesia (Persero) Sustainability Report 3

11 About the Report PROFILE LAPORAN KEPADA PEMANGKU KEPENTINGAN SUSTAINABLE GOVERNANCE STAKEHOLDERS economies PERFORMANCE OVERVIEW 2017 ECONOMIC PERFORMANCE 2015 Consolidated Revenue Rp66.23 trillion 2016 Rp64.16 trillion 2017 Rp58.94 trillion Profit for The Year Rp3.39 trillion Rp3.53 trillion Rp3.08 trillion Contribution to the State (Tax) Rp4.61 trillion Rp5.50 trillion Rp4.94 trillion PSO Fertilizer Sales 8,881 ribu ton 9,181 thousand ton 9,298 thousand ton Non-PSO Fertilizer Sales 2,882 thousand ton 2,913 thousand ton 3,207thousand ton Gas Consumption Ratio Natural Gas Consumption Ratio The factory revitalization program, which is aimed to boost efficiency and competitive power amid the plummeting prices of ammonia and urea, has brought success for the Company in reducing urea gas consumption rate: at 2.5% (CAGR ) and 1.79% (CAGR ) respectively mbtu/ton PT Pupuk Indonesia (Persero) Sustainability Report

12 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS ENVIRONMENT PERFORMANCE Pupuk Indonesia gained Proper Gold award for the first time in 2017 through its subsidiary, PT Pupuk Kalimantan Timur, who has successfully demonstrated excellence in sustainable environmental management. Meanwhile, the other subsidiaries managed to maintain the Proper Green awards. PROPER GOLD PT Pupuk Kalimantan Timur PROPER BLUE PT Pupuk Iskandar Muda PROPER GREEN Pt Pupuk Sriwidjaja Palembang Pt Pupuk Kujang Cikampek Pt Petrokimia Gresik SOCIAL PERFORMANCE Rp billion Realization of Partnership and Community Development Program Financing Rp66.58 billion Realization of CSR Financing OCCUPATIONAL HEALTH PERFORMANCE Corporate Safe Working Hours 5,460,859 safe working hours PT Petrokimia Gresik 4,923,428 safe working hours PT Pupuk Kujang Cikampek 6,774,477 safe working hours PT Pupuk Kalimantan Timur 3,569,493 safe working hours PT Pupuk Iskandar Muda 6,319,427 safe working hours PT Pupuk Sriwijaya Palembang PT Pupuk Indonesia (Persero) Sustainability Report 5

STAKEHOLDERS economies SIGNIFICANT EVENTS

Bogor to discuss Corporate Performance In

26 April 2017 Inauguration of the Pusri IIB

The plant is able to produce 907,500 tons of

13 About the Report PROFILE LAPORAN KEPADA PEMANGKU KEPENTINGAN SUSTAINABLE GOVERNANCE STAKEHOLDERS economies SIGNIFICANT EVENTS January 2017 General Meeting of Shareholders (GMS) to discuss the 2017 Budget & Business Plan, held in Jakarta. 9 March 2017 On March 9, 2017, Pupuk Indonesia Group held Coordination Meeting in Bogor to discuss Corporate Performance In 2016 and its plans for April 2017 Inauguration of the Pusri IIB urea and ammonia plant on April 26, The plant is able to produce 907,500 tons of urea and 660,000 tons of ammonia per year. 6 PT Pupuk Indonesia (Persero) Sustainability Report

COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP

valued at Rp3.57 trillion on June 12, 2017. The unsecured securities are rated AAA by FitchRatings.

signed a Memorandum of Understanding on Development, Implementation, and Strengthening Good Corporate

14 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS 12 June 2017 Pupuk Indonesia issued the Shelf Registration Bond I (PUB I) Tranche I 2017 valued at Rp3.57 trillion on June 12, The unsecured securities are rated AAA by FitchRatings. 15 May 2017 Pupuk Indonesia held the General Meeting of Shareholders for FY 2016 on May 15, 2017 in Jakarta. 19 June Mey 2017 Pupuk Indonesia and the National Audit and Development Supervisory Body (BPKP) signed a Memorandum of Understanding on Development, Implementation, and Strengthening Good Corporate Governance in PT Pupuk Indonesia on May 26, Pupuk Indonesia took part in the Mudik Bersama BUMN organized by the Ministry of State-owned Enterprises on June 19, PT Pupuk Indonesia (Persero) Sustainability Report 7

community assistance through the Bedah Rumah Veteran (Veteran House Renovation) and Siswa Mengenal Nusantara programs.

15 About the Report PROFILE LAPORAN KEPADA PEMANGKU KEPENTINGAN SUSTAINABLE GOVERNANCE STAKEHOLDERS economies 15 May At the summit of the BUMN Hadir Untuk Negeri (SOE for the Nation) event, Pupuk Indonesia along with SOEs namely PT Kawasan Berikat Nusantara (Persero), PT Sarinah (Persero), PT Jakarta Industrial Estate Pulogadung (Persero), and PT Perusahaan Pengelola Aset (Persero) gave a community assistance through the Bedah Rumah Veteran (Veteran House Renovation) and Siswa Mengenal Nusantara programs. 14 September 2017 Pupuk Indonesia held the Extraordinary General Meeting of Shareholders (RUPS-LB) on September 14, 2017 in Jakarta. The General Meeting appointed former President Director of PT Inalum (Persero) Winardi as Director of Human Resources and Governance of PT Pupuk Indonesia (Persero). The former incumbent of the post, Achmad Tossin Sutawikara, was appointed as Director of Marketing in the same occasion. 8 PT Pupuk Indonesia (Persero) Sustainability Report

COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS 14 September 2017 Pupuk Indonesia issued

8 Desember 2017 On December 8, 2017, Pupuk Indonesia, PT Bukit Asam (Persero), PT Pertamina (Persero), and PT Chandra Asri Petrochemical signed the Head of

16 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS 14 September 2017 Pupuk Indonesia issued the Shelf Registration Bond I (PUB I) Tranche II 2017 valued at Rp4.38 trillion on November 9, The unsecured securities are rated AAA by FitchRatings. 8 Desember 2017 On December 8, 2017, Pupuk Indonesia, PT Bukit Asam (Persero), PT Pertamina (Persero), and PT Chandra Asri Petrochemical signed the Head of Agreement on Cooperation in Gasification of Coal to Syngas for Raw Material of Urea, Polypropylene, and Dimethyl Ether Products PT Pupuk Indonesia (Persero) Sustainability Report 9

17 About the Report PROFILE LAPORAN KEPADA PEMANGKU KEPENTINGAN SUSTAINABLE GOVERNANCE STAKEHOLDERS economies AWARD AND CERTIFICATION AWARD 1 SOLO, 24 FEBRUARY Best Sustainability Report 2016 Category Manufacture 2 JAKARTA, 22 MARCH Indonesia Corporate Secretary Communication Award II ST Place Category of SOE 3a BALI, 24 MARCH Public Relation Indonesia Awards 2017 Gold Winner Category of Video Profile Subcategory of SOE 3b BALI, 24 MARET 4 JAKARTA, 5 APRIL 5 JAKARTA, 31 OcTOBER Public Relation Indonesia Awards 2017 Silver Winner Category of Website Subcategory of SOE Top CSR Award 2017 TOP IT & TOP TELCO Award PT Pupuk Indonesia (Persero) Sustainability Report

18 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS 6 JAKARTA, 6 NOVEMBER BUMN Performance Excellent Award 7 JAKARTA, 12 DECEMBER LHKPN Award Institution with Best E-LHKPN Implementation Year 2017(D1) 8 JAKARTA, 21 DECEMBER The Best CFO 2017 (D4) 9 7 December 2017 Runner Up Asean Risk Awards 2017 Category of Asean GRC Awards PT Pupuk Indonesia (Persero) Sustainability Report 11

19 About the Report PROFILE LAPORAN KEPADA PEMANGKU KEPENTINGAN SUSTAINABLE GOVERNANCE STAKEHOLDERS economies CERTIFICATION Company Name of Certification Validity Issued By Pupuk Iskandar ISO Quality 4 June 2018 Sucofindo ICS Muda Management System ISO Environment 4 June 2018 Sucofindo ICS Management System Pusri ISO Quality 10 April 2018 SGS Management System ISO Environment 28 Maret 2018 SGS Management System ISO Juli 2019 Komite Akreditasi Nasional General requirements for the competence of testing and calibration laboratories Pupuk Kujang ISO Quality 4 Januari 2019 Sucofindo ICS Management System ISO Environment 4 Januari 2019 Sucofindo ICS Management System ISO 17025:2008 General 22 Juli 2018 Komite Akreditasi Nasional requirements for the competence of testing and calibration laboratories Petrokimia Gresik ISO Quality 23 April 2018 Sucofindo ICS Management System ISO Environment 23 April 2018 Sucofindo ICS Management System ISO General requirements 17 November 2019 Komite Akreditasi Nasional for the competence of testing and calibration laboratories Pupuk Kaltim ISO Quality 25 Mei 2019 TUV Rheinland Management System ISO Environment 25 Mei 2019 TUV Rheinland Management System ISO 17025:2008 General 19 September 2021 Komite Akreditasi Nasional requirements for the competence of testing and calibration laboratories Certificate of Environment 19 September 2024 Kementerian Lingkungan Hidup Laboratory Competence Registration Rekind OSHAS 18001: November 2019 DNV ISO 9001: Desember2019 DNV ISO : 2015 Environmental 31 Juli 2019 DNV Management System 12 PT Pupuk Indonesia (Persero) Sustainability Report

20 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS PT Pupuk Indonesia (Persero) Sustainability Report 13

21 About the Report PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies About the Report 14 PT Pupuk Indonesia (Persero) Sustainability Report 2017

22 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Reporting Period and Boundaries Determining Report Content Principles of Determination of The Content of The Report List of Material Topics and Boundary Materiality Level Independent Assurance Pupuk Indonesia presents this sustainability report as a realization of our responsibility to the stakeholders. This report elucidates Pupuk Indonesia s and Subsidiaries activities throughout It is compiled based on transparency and accountability in order to meet sustainability goals. Welcome to the 2017 Sustainability Report of PT Pupuk Indonesia (Persero), (hereafter referred to as Pupuk Indonesia or We or the Company ). This report is our communication media to stakeholders; it contains Pupuk Indonesia s performance in sustainability sector comprising three aspects -- economic, environmental, and social. Through this report, our stakeholders can know further about Pupuk Indonesia s contribution to the realization of Sustainable Development Goals (Sustainable Development Goals/ SDGs). GRI Standards This report has been prepared in accordance with GRI Standards: Core Options. [GRI ] To assist the readers in finding the GRI disclosures that are applied in this report, we the specific numbers of the relevant GRI disclosures have been provided on the content pages with red font and in brackets. The complete of the GRI Standards disclosures is presented on page 139. [GRI ] Pupuk Indonesia publishes a sustainability report annually since Sustainability Report of 2016 was published in July [GRI, GRI ] PT Pupuk Indonesia (Persero) Sustainability Report

23 About the Report PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies REPORTING PERIOD AND BOUNDARIES This report concerns the activities of the Head offices and 10 subsidiaries for the period from 1 January to 31 December [GRI , GRI ] There has not been any fundamental change in the organization or the supply chain in Neither has there significant change in the scope nor the boundary of report compared to the previous year. As a result, there is no restatement of last year s information. [GRI , GRI , GRI ] DETERMINING REPORT CONTENT [GRI ] We determine the content of this report in four steps as follows. First Step; Identification, namely identifying the material topics in the context of sustainability. In addition, the location or boundary of the aspect must also be identified. This identification process is carried out in Focus Group Discussion (FGD) where the Pupuk Indonesia Sustainability Report team was present. The FGD is then followed up by representatives of stakeholder groups In the forum, went on materiality test into all the important topics as per the GRI Standards, where all the attending participants fill the worksheet to determine the material topics along with the boundary. The FGD took place at Mega Anggrek Hotel, Arjuna Selatan no 4A Tanjung Duren Selatan, Jakarta Barat on 15 Jakarta March Second Step; Priority, namely determining the priority of sustainability topics or issues identified in the previous step in order to the know the materiality level of these important issues that will be reported. This process is performed using the same worksheet as in the first step by posing the questions regarding the impacts and the how aspect impact the stakeholders and the company. Then the important topics are grouped into several issues and then a survey is carried out to determine the level of materiality through sending questionnaires to stakeholders including internal party of the company. This process is carried out based on the principles of materiality and stakeholder inclusiveness. The survey results are presented in the graphic on page 19. Third Step; Validation, namely validating the material topics based on the principles of completeness and stakeholder inclusiveness. Through this process we can also identify the specific disclosures topics of GRI Standards to be reported, as well as the Management Approach (see page 139). Fourth Step; Review, namely considering the feedback and result of review on the previous report so as to ameliorate this report (see Flowchart of Report Content Determination Process). This report is our communication media to stakeholders; it contains Pupuk Indonesia s performance in sustainability sector comprising three aspects economic, environmental, and social. 16 PT Pupuk Indonesia (Persero) Sustainability Report 2017

24 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Flowchart of Report Content Determination Process step 1 Identification step 2 Prioritization step 3 Validation Sustainability Context Materiality Completeness Stakeholder Inclusiveness step 4 REVIEW Sustainability Context Stakeholder Inclusiveness Principles of DETERMINATION of the CONTENT of the REPORT [GRI ] In accordance with GRI Standards, we apply 4 (four) key principles in determining the report content: 1. Stakeholders Inclusiveness; this principle requires the stakeholders being involved in the report compilation process, starting from determining the report content to giving input/feedback on the published report. 2. Materiality; this principle requires that the report contain the issues or topics that are important or material, that are necessary to stakeholders in making decisions. 3. Sustainability Context; this principle requires that the report contains issues in the context of sustainability that are relevant to the Pupuk Indonesia. 4. Completeness; this principle requires that the report be made with a clear scope for a particular reporting period and is supported by comprehensive data for the scope and period of such reporting. LIST OF MATERIAL TOPICS AND BOUNDARY The process of determining the content of the report as discussed above results in the important topics, boundary and disclosure of GRI Standards as follows: PT Pupuk Indonesia (Persero) Sustainability Report

25 About the Report PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies List of Material Topics and Boundary Material Topic [GRI ] Why Material [GRI 103-1] GRI Standar Number GRI Standards Disclosure Boundary Within Pupuk Indonesia PI PKG PKC PKT PIM PSP REKIND ME PILOG PIE PIP Outside Pupuk Indonesia Economic Economic Performance Poses significant affects towards stakeholders 201-1, 201-2, Indirect Economic Impacts Procurement Practice Anti-Corruption Environmental Material Poses significant affects towards stakeholders Poses significant affects towards economic growth Poses significant affects towards development Poses significant affects towards sustainability 203-1, , Energy Poses significant affects towards sustainability 302-1, 302-3, Water Poses significant affects towards sustainability 303-1, Emissions Poses significant affects towards sustainability 305-1, 305-2, 305-4, 305-5, Effluents and Waste Poses significant affects towards sustainability 306-1, 306-2, Environmental Compliance Social Employment Poses significant affects towards sustainability Compliance towards law and regulations , Occupational Health and Safety Poses significant affects towards employees 403-1, 403-2, 403-3, Training and Education Poses significant affects towards employees 404-1, 404-2, Diversity and Equal Opportunity Local Communities Public Policy Customers Health and Safety Marketing and Labeling Socio Economic Compliance Poses significant affects towards employees and local communities Poses significant affects towards stakeholders Poses significant affects towards communities Poses significant affects towards consumers Poses significant affects towards consumers Poses significant affects towards economic growth 405-1, , MATERIALITY LEVEL Below is an overview of materiality level of the topics contained in this report. Materiality level is concluded in the workshop and the Focus Group Discussion (FGD) with the stakeholders. 18 PT Pupuk Indonesia (Persero) Sustainability Report 2017

26 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS The Level of Materiality Topics Economic Performance Low Medium High Occupational Health and Safety Greenhouse Gas Emissions Procurement /Purchasing Water Usage Donation for the Community Employee Welfare Product Responsibility Energy Efficiency and Conservation Anti-Corruption and Bribery Infrastructure Development for Communities Outsourcing Biodiversity Solid and Toxic Waste Respect for Human Rights Stakeholder Low Medium High Company Independent Assurance [GRI ] We have assigned Moores Rowland Indonesia, Independent Assurer, to conduct limited assurance into this report. The appointment the assurer was preceded by assurance provider selection and has been approved by the Board of Directors, represented by the corporate secretary. Considerations in determining the assurer are professional experience and capability of assurer. The independent assurer s report is presented on page 136. We hereby state that we do not have any other professional ties with Moores Rowland Indonesia aside from the aforementioned assurance service. To ensure that this report has been prepared in accordance with the GRI Standards, we have requested the National Center for Sustainability Reporting (NCSR) to provide GRI Standards In Accordance Check. The NCSR s Report is presented on page 138. For the purpose of improving the quality of future reports, we hope that the readers would provide input, idea and criticism about this Sustainability Report to: [GRI ] PT Pupuk Indonesia (Persero) Head Office Jalan Taman Anggrek, Kemanggisan Jaya, Jakarta 11480, Indonesia Phone (hunting): Facsimile: , info@pupuk-indonesia.com Website: Layanan Informasi For further information (Toll Free) PT Pupuk Indonesia (Persero) Sustainability Report

27 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies PROFILE OF PUPUK INDONESIA 20 PT Pupuk Indonesia (Persero) Sustainability Report 2017

28 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Company Profile Milestone Scale of Organization Vision, Mission and Values List of Subsidiaries and Operational Area Pupuk Indonesia Group is the largest fertilizer producer in Southeast Asia and operates throughout Indonesia. Our commitment is to the support of Indonesia s food security for the prosperity of the nation. PT Pupuk Indonesia (Persero) Sustainability Report

29 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies COMPANY PROFILE COMPANY NAME [GRI 102-1] Perusahaan Perseroan PT Pupuk Indonesia (Persero) founded on January 3, HEAD OFFICE [GRI 102-3] Jl. Taman Anggrek, Kemanggisan Jaya Jakarta 11480, Indonesia Telephone: Facsimile: Website: Pupuk LEGAL FORM AND OWNERSHIP [GRI 102-5] Legal form: State-Owned Enterprise in the form of Limited Liability Company (PT) Articles of Association: Deed No. 4 dated 3 January 1970, drawn before Soeleman Adjasasmita, Notary in Jakarta, as amended a number of times with the latest one amended based on Deed No. 14 dated 26 April 2013 drawn before Nanda Fauz Iwan, SH, Notary in South Jakarta. OPERATIONAL LOCATION [GRI 102-4, GRI 102-6] PT Pupuk Indonesia (Persero) operates in Indonesia. Plant Location: Gresik (East Java), Cikampek (West Java), Bontang (East Kalimantan), Lhokseumawe (Nanggroe Aceh Darussalam), Palembang (South Sumatra). Marketing location: Throughout Indonesia Ownership 100% Government of Indonesia 22 PT Pupuk Indonesia (Persero) Sustainability Report 2017

30 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS BUSINESS LINE & PRODUCTS [GRI 102-2] Implement corporate management services, trading and services in fertilizer, petrochemicals, agrochemicals, and other chemicals, agro industries and other services. The products offered include: Fertilizers, including Urea, NPK, SP-36, ZA, ZK, and Organic. By-products, including cement retarder, aluminum fluoride, gypsum, liquid CO2, and hydrochloric acid. Basic chemicals, including ammonia, sulphuric acid, and phosphoric acid. Innovative products such as bio-fertilizer, seeds, decomposers, pesticides, etc. 1 Subsidized Urea 2 Subsidized NPK Phonska 3 Subsidized SP-36 4 Subsidized ZA 5 Subsidized Organic PT Pupuk Indonesia (Persero) Sustainability Report

31 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies milestone For the purpose of cooperation with ASEAN countries, the following joint ventures have been established: PT Asean Aceh Fertilizer (AAF), where Pupuk Indonesia owns 60% shares. Asean Bintulu Fertilizer (ABF), where Pupuk Indonesia owns 13% shares PT Pupuk Sriwidjaja (Persero) was transformed into Strategic and Investment Holding and PT Pupuk Sriwidjaja Palembang was established based on Deed No. 56 dated 24 December PT Pupuk Sriwidjaja was established based on Deed No. 177 dated 24 December The issuance of Government Regulation (PP) Number 28 of 1997 and PP Number 34 of 1998 transformed PT Pupuk Sriwidjaja (Persero) into the Operating Holding which oversees five companies (PT Pupuk Kalimantan Timur, PT Petrokimia Gresik, PT Pupuk Kujang, PT Pupuk Iskandar Muda and PT Mega Eltra) PT Pupuk Sriwidjaja (Persero) changed its name to PT Pupuk Indonesia (Persero) based on Deed No. 3 dated 3 April PT Pupuk Indonesia (Persero) Sustainability Report 2017

COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS 2013 On 23 December 2013, PT Pupuk Indonesia (Persero) established a

32 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS 2013 On 23 December 2013, PT Pupuk Indonesia (Persero) established a subsidiary, PT Pupuk Indonesia Logistik On 30 April 2015, PT Pupuk Indonesia (Persero) established a subsidiary, PT Pupuk Indonesia Pangan. 2. Revitalization of Plant PKT 5 3. Construction of Plant NPK of PT Pupuk Kujang Revitalisasi Pabrik Pusri 2B Revitalization Mulainya Pembangunan of Plant Pusri 2B 2. The Pabrik commencement NPK Fusion II dalam of Plant rangka program pencanangan NPK proyek Fusion NPK 2,4 II Juta construction, TPY part of the declared NPK of Million Revitalisasi Tons Pabrik a Year Pusri program. 2B 2. Mulainya Pembangunan Pabrik NPK Fusion II dalam rangka program pencanangan proyek NPK 2,4 Juta TPY 2014 On 18 August 2014, PT Pupuk Indonesia (Persero) established a subsidiary, PT Pupuk Indonesia Energi Construction of Plant NPK Fusion I of PT Pupuk Sriwidjaja Palembang. PT Pupuk Indonesia (Persero) Sustainability Report

33 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies LIST OF SUBSIDIARIES AND OPERATIONAL AREA PT PUPUK ISKANDAR MUDA Lhokseumawe Jalan Raya Medan - Banda Aceh, Krueng Geukeuh, Lhokseumawe Nanggroe Aceh Darussalam Phone : (62-645) Fax : (62-645) info@pim.co.id Website : 1 (one) Urea Prill Plant 570,000 tons 1 (one) Urea Granule Plant 57,000 tons PT PUPUK SRIWIDJAJA PALEMBANG PALEMBANG Jalan Mayor Zen, Palembang Phone : (62-711) , Fax : (62-711) , info@pusri.co.id/humas@pusri.co.id Website : 4(four) Urea Prill Plants 2,617,500 tons 1 (one)npk Fusion Plant 100,000 tons PT PUPUK KUJANG Cikampek Jalan Jenderal A. Yani No. 39 Cikampek, Karawang 41373, Jawa Barat Phone : (62-264) , , , Fax : (62-264) , , info@pupuk-kujang.co.id Website : 2 (two) Urea Prill Plants 1,140,000 tons 1 (one) NPK Blending Plant 100,000 tons 1 (one) NPK Fusion Plant 200,000 tons. PT REKAYASA INDUSTRI JAKARTA Jalan KalibataTimur I No. 36 Kalibata, Jakarta Selatan Phone : (62-21) , Fax : (62-21) , corpsec@rekayasa.co.id Website : PT MEGA ELTRA JAKARTA Jalan Menteng Raya No. 27 Jakarta Pusat Phone : (62-21) (Hunting), Fax : (62-21) , pr@megaeltra.com Website : PT LOGISTIK JAKARTA Gedung Pusri 101, lantai 2 & 3 Jl. Letjend S. Parman Kav. 101 Jakarta Barat Phone : (62-21) Fax : (62-21) info@pi-logistik.com Website : 26 PT Pupuk Indonesia (Persero) Sustainability Report 2017

34 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS PT PUPUK KALIMANTAN TIMUR BONTANG Jalan James Simandjuntak No. 1 Bontang 75313, Kalimantan Timur Phone : (62-548) 41204, 41202, 41203, Fax : (62-548) 41616, corsec@pupukkaltim.com, Website : 2 (two) Urea Prill Plants - 1,140,000 3 (three) Urea Granule Plants - 2,290,000 tons 1 (one) NPK Blending Plants 150,000 1 (one) NPK Fusion Plant 200,000 tons PT ENERGI JAKARTA Gedung Petrokimia Gresik Jl. Tanah Abang III No.16 Jakarta Phone : (62-21) info@pi-energi.com Website : PT PANGAN JAKARTA Gedung Petrokimia Gresik Jl. Tanah Abang III No.16 Jakarta Phone : (62-21) info@pi-pangan.com Website : PT PETROKIMIA GRESIK GRESIK Jalan Jend. A. Yani, Gresik 61119, JawaTimur Phone : (62-31) , , , Fax : (62-31) , pkg@petrokimia-gresik.com Website : 1 (one)urea Prill Plant 460,000 tons 3 (three)za Plants 750,000 tons 1 (one) SP-36 Plant 500,000 tons 9 (nine)npk Plants 286,000 tons 1 (one) Phosphate Plant 500,000 tons 1 (one) ZK Plant 10,000 tons PT Pupuk Indonesia (Persero) Sustainability Report

35 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies SCALE OF ORGANIZATION 10,179 employee 10 Subsidiaries NUMBER OF EMPLOYEES IN 2017 OWNING 10 SUBSIDIARIES Rp58.94 trillion Rp62.60 trillion TOTAL NET REVENUE TOTAL CAPITAL AS AT 31 DECEMBER 2017 Rp40 trillion Rp12.90 trillion AUTHORIZED CAPITAL ISSUED AND FULLY PAID CAPITAL million ton TOTAL FERTILIZER PRODUCTION IN PT Pupuk Indonesia (Persero) Sustainability Report 2017

COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS VISION, MISSION AND VALUES VISION To become an integrated, sustainable, and

36 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS VISION, MISSION AND VALUES VISION To become an integrated, sustainable, and world-class agrochemical and foodstuff company. MISSION Developing main businesses in the fields of fertilizer, chemical, and energy, along with associated infrastructure Developing businesses that support food security Developing investment portfolio to enhance the Company s added value Providing high quality and competitive products and services VALUES 1. Stakeholder Satisfaction 2. Innovation and Total Value Added 3. Integrity and Ethics 4. Teamwork and Synergy 5. Environmentally Friendly The dissemination of the Company s Vision, Mission, and Values in 2016 took place through the following activities: 1. Dissemination through internal publication media, i.e. TV Media, , in-house magazine and other media. 2. Dissemination through Company website. 3. Dissemination to new hires through Employee Onboarding activity. PT Pupuk Indonesia (Persero) Sustainability Report

37 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies FURTHER INFORMATION ON THE VISION, MISSION AND VALUES [GRI ] The Vision, Mission, and Values are stated in the Company s Blue Print for , which hasobtained approval from the Minister of State-Owned Enterprises with the Letter No. S-265/MBU/05/2015 dated 7 May SUPPLY CHAIN [GRI 102-9] What is meant by suppliers is partners that produce organic fertilizers. These partners produce organic fertilizers in accordance with the Company s requirements as set forth in cooperation contract. In 2017, there were 182 organic fertilizer partners with total production of 686,871 tons and total sales of Rp billion. A total of 1,570 workers were employed in these organic fertilizer partners. MARKET SHARE [GRI 102-6] Our customers make up the most important part in our entire business. PT Pupuk Indonesia (Persero) is committed to maintaining and improving its strong relationships with all customers and to living up to its social responsibility towards all stakeholders. Our customers are divided into two segments: farmers and farmers collectives, and farming and plantation companies. VALUE CHAIN Production process consists of liquid, solid, and gas phase in high temperature and very high pressure using high tech process. The Company s products are distributed in 4 levels (Provinces, District, and Other Groups) to various regions and provinces in Indonesia to support the production of food crops and Pupuk Indonesia Group s participates in supporting food security. The Company has been involved in various efforts and strategies to ensure the continuity of supply of fertilizers with competitive price schemes, among others by: 1. Revitalizing or replacing energy-intensive old plants with new plants that are more energy efficient, 2. Substituting the use of natural gas with coal, as the main energy supply, 3. Revamping old plants, 4. Conducting joint procurement involving all subsidiaries for the raw materials for compound fertilizers, 5. Engaging in cooperations with owners of phosphate mines. 30 PT Pupuk Indonesia (Persero) Sustainability Report 2017

COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS DISTRIBUTION MECHANISM Procurement and Distribution Flow: : 1.

15/2013 Pupuk Indonesia regulates the procurement and distribution of subsidized fertilizers at the local scale, from Line 6 to Line IV based on six principles, which are the Right Type, Right

38 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS DISTRIBUTION MECHANISM Procurement and Distribution Flow: : 1. In accordance with the Regulation of the Minister of Commerce No.15/2013 Pupuk Indonesia regulates the procurement and distribution of subsidized fertilizers at the local scale, from Line 6 to Line IV based on six principles, which are the Right Type, Right Amount, Right Price, Right Location, Right Time and Right Quality. 2. The produces are obliged to assure smooth distribution of subsidized fertilizers based on the six principles above and to have/control warehouse at Line III in respective area they are in charge of. 3. Distributors are to execute subsidized fertilizer distribution from Line III to Line IV. 4. Retailers distribute subsidized fertilizers based on the six principles to farmers and/or farmers groups in line with the Farmer Group Needs (RDKK). 5. Distribution of fertilizers to farmers/farmers groups starts from the gradual proposal from Retailer through to Producer. LINE I Regulation of the Ministry of Agriculture (Allocation per Province) LINE II Regent Regulation (Allocation per sub-district) LINE III Regent Regulation (Allocation per Sub- District) LINE IV Plant Definitive Plan of Farmer Group Needs (RDKK) Lini II/UPP Line III warehouse Distributor Retailer warehouse PT Pupuk Indonesia (Persero) Sustainability Report

39 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies REPORT TO SHAREHOLDER 32 PT Pupuk Indonesia (Persero) Sustainability Report 2017

40 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Report of Board of Commissioner Report of Board of Directors For tens of years has Pupuk Indonesia dedicated itself to the nation, to bring prosperity through food security. We continue making improvements and innovations to develop Pupuk Indonesia into an enterprise that prioritizes profit, people, planet. This sustainability report embodies our commitment and responsibility to the stakeholders, to report on economic, social and environmental performance. PT Pupuk Indonesia (Persero) Sustainability Report

BOARD OF COMMISSIONER Bungaran Saragih 34 PT

41 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies BOARD OF COMMISSIONER Bungaran Saragih 34 PT Pupuk Indonesia (Persero) Sustainability Report 2017

42 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS REPORT OF THE BOARD OF COMMISSIONERS [GRI ] The Board of Commissioners gives its utmost appreciation to the management for their unremitting efforts to improve sustainable performance in the pursuit of advancing the public s wellbeing for a prosperous nation. The Government has successfully improved the sustainability of production and productivity of strategic staple crops such as rice, corn, soy, and sugarcane, among others. That success in with staple crops is no less attributable to the availability and affordability of production means including fertilizers and a host of other factors. Still, we must endeavor to increase Pupuk Indonesia role and contribution towards further improvements in the production and productivity of commodity crops a prerequisite of national food selfsufficiency. In 2017, Indonesia is successfully rice self-sufficient for the first time in 32 years. Moreover, production of other food crops such as corn is also on the rise. We are right to be proud for achieving this milestone and highly grateful that Pupuk Indonesia, along with farmers and other food crop producers, is successful in meeting the Government s mandate of advancing public wellbeing for a prosperous nation. The year 2017 is a year of challenges and opportunities. The Board of Commissioners gives its utmost appreciation to the management s performance in 2017 for giving their level best, tackling challenges, and advancing to take advantage of opportunities. Indeed, the strategy of upstream and downstream synergy to secure fertilizer supply for national food self-sufficiency is a masterstroke. Furthermore, the management has executed another equally important strategy: promoting the principle of sustainability to grow the company, recording profits while building its people and preserving the planet. The strategy is aligned with the principle of Sustainable Development, an idea that is front and center in the global public to ensure the wellbeing of the people of today and the future. The Board of Commissioners is highly grateful for the management s efforts to create conducive working environments for our employees. The same goes to their attention to raise the quality of life of the poor through the Partnership and Environmental Sustainability Programs. We believe that such programs enable the company to grow with the support from the surrounding population. We are also highly appreciative of the management s priority on environmental conservation. Several Subsidiaries succeeded in reaching Gold Rating (PT Pupuk Kalimantan Timur), Blue Rating (PT Pupuk Iskandar Muda) and Green Rating (PT Petrokimia Gresik, PT Pupuk Sriwidjaja Palembang and PT Pupuk Kujang Cikampek) Rating in the PROPER Awards organized by the Ministry of Environment and Forestry of Indonesia. The Board of Commissioners encourages all subsidiary companies to participate in the PROPER Awards. In relation to this, the Board of Commissioners mandates that corporate activities ought to be carried out in an environmentallyfriendly manner. Environmental impacts must be detected as early as possible so that their symptoms can be tackled using strategic policies to ensure its conservation. The Board of Commissioners would like to express its utmost gratitude to the directors, management, and every Pupuk Indonesia individuals across Indonesia for their hard work and dedication for a successful and sustainable performance. We would also like to extend our mark of gratitude to our stakeholders for their support and contribution throughout Last but not least, we are thankful to the Government for entrusting us with the noble duty of preserving and building this country of ours through food self-sufficiency. Jakarta, April 2018 BOARD OF COMMISSIONER Bungaran Saragih PT Pupuk Indonesia (Persero) Sustainability Report

BOARD OF DIRECTORS Aas Asikin Idat 36 PT Pupuk

43 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies BOARD OF DIRECTORS Aas Asikin Idat 36 PT Pupuk Indonesia (Persero) Sustainability Report 2017

44 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS REPORT OF BOARD OF DIRECTORS [GRI ] The availability of fertiliser one of the driving factors of food security realisation a significant condition for Indonesia s economic stability. Development in agriculture sector can no longer undermined, bearing in mind that it is the spearhead for attaining prosperity of the nation and reducing poverty. Pupuk Indonesia holds the honor to be one of the main partners of the Government and supporters in improving agricultural production in Indonesia. To that end, Pupuk Indonesia continues giving its commitment to the success of the national food security program through the assurance of supply of fertilizer in Indonesia. This report embodies our commitment to such effort, apart from reporting our significant involvement in sustainability efforts. We believe that a world-class organisation would not be detached from the care and concern over three key elements of sustainability, namely profit, people, planet. SUSTAINABILITY PERFORMANCE The year 2017 is a milestone, for Pupuk Indonesia has booked profits totalling Rp3.08 trillion. The Company has recorded the highest fertizer production in its history, with a total production of million tons. In addition to the highest production record throughout the history of the Company, the total sales in 2017 reached million tons. In the context of sustainability, performance is measured not only from financial aspect, but also achievement in environmental aspects, social aspects, and th corporate governance application. The award is conferred to excellent and innovative companies and business players. CHALLENGES AND OPPORTUNITIES One of the largest challenges in 2017 was the plummeting prices of fertilizer in the international marketing; this scaled down competitive power as the gas price went up. The price of gas, a raw material, accounts for 70% of the cost of goods sold. Gas price in Indonesia was US$6 per MMBTU, while in other countries gas price for industry cost between US$1 to US$3 per MMBTU. To tackle this issue, Pupuk Indonesia took efficiency steps as a strategy to stay in the market. Also we will replace steam unit, change fuel energy from gas to coal, as well as developing less-gas-consuming fertilizer products, such as the type NPK. We also revitalise our factories. There are three factories to revitalise, one of which is our oldest and historical factory that has supported Indonesia s food security for 50 years, i.e. Pupuk Sriwijaya (Pusri). We built the Pusri 2B factory to replace the old and inefficient factory. This new factory applies the latest technology that allows gas fuel saving up to 14 MMBTU per ton of Urea, thus reduces the cost of goods sold and eventually bring us in the competition. PT Pupuk Indonesia (Persero) Sustainability Report

45 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Another challenge is world s over supply fertilizer. The world s fertilizer supply is currently 240 million tons, while the usage is only 180 million tons. Therefore, Pupuk Indonesia actively performs changes to address this, by producing a derivative fertilizer products so that dependence on Urea can be suppressed. We are also exploring the possibilities of developing other petrochemical products as an effort to increase corporate productivity. In spite of these challenges we face, we remain being optimistic, believing that fertilizer and petrochemical industry has a bright future, because domestic fertilizer needs--especially for NPK--are ever increasing. NPK fertilizer has been proven having brought optimum results in increasing plant productivity, be it food plants or plantation Looking ahead, we aware that research development is a key to the growth of fertilizer industry and related industries in the efforts to support national food security. To that end, Pupuk Indonesia cooperates in research with Sepuluh Nopember Institute of Technology (ITS). Research and development department as an important investment for the future. This cooperation demonstrates our serious efforts to develop the company into an advanced company with high profitability. NOURISHING SUSTAINABILITY ACHIEVEMENTS Pupuk Indonesia does not only focus on the Company performance that is related to profit gaining, but we also care about the community and environment around our operational locations. Social responsibility and environmental conservation efforts are important aspects to us, as these directly or indirectly support the continuity of our business. We are also constantly developing efforts to improve occupational health and safety (OHS). However, with deep regret, we reported that there was a fatal accident occurred in one of our subsidiaries. However, a thorough evaluation has taken place, and improvements have been applied to prevent this from reoccurring. This is evidenced by the decrease in Total Recordable Injury Rate (TRIR) in 2017, that decreased at 26% from the previous year. In terms of environment responsibility, in 2017 PT Pupuk Iskandar Muda received an administrative penalty from the Ministry of Environment and Forestry. This issue has been settled as the Letter Number S.1093/PHLHK/PPSA/ GKM.O/11/2017 on Administrative Penalty Settlement in Environment and Forestry has been issued. ENVIRONMENT CONSERVATION EFFORTS Environment conservation efforts that we have taken are, among others, the program of planting 1000 bamboo seedlings and training of bamboo processing technology transfer. Bamboo cultivation contains high economic value, when the bamboo is processed into different types of products and consecutively being sold at national and even international markets. Furthermore we perform activity of planting 1,500 trees in the complex area of PT Pusri Palembang. Other members of our holding also carried out environmental conservation efforts, such as PT Pupuk Kalimantan Timur who conducted the rehabilitation of coral reefs with the laying of 500 units of artificial reef in Bontang, and PT Petrokimia Gresik who planted 5,000 seeds trembesi seedlings. These ongoing programs are in line with our commitment to the protection of the environment and reduction of global warning impacts. These efforts is a part of the our striving to maintain the earth for the next generations. We continue increasing employee competence through quality education and training programs. Not only focusing on professional performance, we also provide motivation training and mentoring/coaching support. The mandays of training in 2017 totalled work days. 38 PT Pupuk Indonesia (Persero) Sustainability Report 2017

46 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS We are highly committed to the compliance of regulations concerning the environment and to the environment management that is even beyond compliance. One of the members of our holding managed to obtain Proper Gold rating and other members obtained Proper Blue and Green from the Ministry of Environment and Forestry of Indonesia. The achievement of Proper Gold, the highest rating, indicates that our company has environmental excellence, thanks to the innovations in the use of natural resources and community development. Proper Gold achieved by PT Pupuk Kaltim becomes a pride and, at the same time, a challenge for all our subsidiaries to achieve equivalent level. We are aware that the success in 2017 would not have been realised without the support and participation of the Board of Commissioners, Board of Directors, the staff and all stakeholders of Pupuk Indonesia. Therefore, I would like express my deepest gratitude to you all. Let us work harder in the coming years to book a better achievement in growing Pupuk Indonesia Group. Jakarta, April 2018 BOARD OF DIRECTORS Aas Asikin Idat PT Pupuk Indonesia (Persero) Sustainability Report

47 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies SUSTAINABLE GOVERNANCE 40 PT Pupuk Indonesia (Persero) Sustainability Report 2017

48 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS General Meeting of Shareholders Governance Structure Structure of the Board of Commissioners and Directors Directors Board of Commissioners Anti-Corruption Anti-Corruption Communications and Trainings Political Contributions Adoption and Support for International Initiatives Membership in Industrial Associations and Other Organizations Stakeholder Involvement Implementation of sustainable conception Suppliers Good governance has not only built the public trust, but also developed Pupuk Indonesia into a world-class company. Optimum sustainability performance could not have either been realized without strong support of the internal system and good corporate governance practice. Sustainable governance is the main foundation in running an environmentally and socially- responsible Company. Under this governance umbrella, decisions are made in accordance to the principles of 3P: Profit, Planet, and People. Each of the tenets of the principles are equally significant; not one deserves precedence over the other. We expect that due consideration to the principles will result in: a company that is able to create optimum economic value in the long-run; stakeholders that reap maximum benefits from the Company s operations; positive corporate image and reputation in the longterm; and, first-class employee competence and professionalism. Under the guidelines of Sustainable Governance, we are highly committed to give due respect to integrity and embed the principles of 3P in its business activities. The main organs responsible to implement governance are shareholders/general Meeting of Shareholders (RUPS), Board of Commissioners and Directors, and supporting organs such as the Audit Committee, GCG &Risk Management Committee, Secretary of the Board of Commissioners, Corporate Secretary, Internal Oversight, and Corporate Governance Compartment. The Board of Commissioners are supported by Board Committees, consisting of the Audit Committee and GCG &Risk Management Committee. As an organ that supports the Board of Commissioners, the GCG & PT Pupuk Indonesia (Persero) Sustainability Report

49 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Risk Oversight Management Committee oversees the Corporate Governance Compartment and advises it on matters in good corporate governance. In addition, the Committee identifies items that require attention from the Board of Commissioners, particularly in general governance and regulatory compliance. Governance Structure [GRI ] In accordance with Law No. 40 Year 2007 on Limited Liability Companies, corporate governance bodies primarily consist of the General Meeting of Shareholders, the Board of Commissioners, and Directors. The governance structure of PT Pupuk Indonesia (Persero) involves both primary and supporting organs and designed to ensure the independence of each corporate organ in carrying out its duties. The GCG structure in place in PT Pupuk Indonesia (Persero) is as follows: General Meeting of Shareholders (RUPS) Board of Commissioners Directors Audit Committee Internal Oversight Unit GCG & Risk Management Secretary of the Board of Commissioners Corporate Governance Compartment Corporate Secretary General Meeting of Shareholders (RUPS) RUPS, both Annual General Meeting of Shareholders (RUPST) and Extraordinary General Meeting of Shareholders (RUPSLB), is the highest corporate organ and the formal forum in which shareholders resolve strategic decisions. Both RUPST and RUPSLB are held in accordance with the Company s Articles of Associations (AD), various corporate policies, and prevailing legislation. The General Meeting allows shareholders to exercise their rights: raise opinions and vote on important and strategic decisions in an independent and balanced manner. In this case, balanced refers to impartial decisions that takes due consideration the interests of other shareholders and the Company. The General Meeting allows shareholders to formally exercise their rights and raise their opinions, give suggestions, and offer recommendations to the Directors. Decisions resolved in the General Meeting are binding 42 PT Pupuk Indonesia (Persero) Sustainability Report 2017

COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS to both the Commissioners and Directors.

50 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS to both the Commissioners and Directors. The interests of minority shareholders are represented by the Independent Commissioner. The General Meeting is also a forum to assess the performance of two other major corporate organs, i.e. the Board of Commissioners and Directors, in attaining operational targets set at the start of the year. Director s performance is measured by the number of Key Performance Indicators (KPI) it has achieved before being evaluated and accounted for in the General Meeting. TheKPI is determined every year and adjusted with the risks and opportunities faced by the Company. Aspects of performance that must be achieved and accounted for consist of, among others, economic, environmental, and social. In addition to evaluating the performance of Commissioners and Directors, the General Meeting resolves important decisions concerning various proposed corporate actions, such as: a. appointment and dismissal of Commissioners and Directors; b. establishment of a subsidiary and/or joint venture; c. merger, consolidation, acquisition, spin-off, and dissolving of subsidiaries and/or joint ventures; d. release and write-off of the Company s fixed assets, except fixed mobile assets whose industrial economic life is conventionally 5 (five) years; and e. issue bonds and other debt instruments. Structure of the Board of Commissioners and Directors Pursuant to Indonesian legislation, PT Pupuk Indonesia (Persero) adopts a two-tiered board system consisting of the Board of Commissioners and Directors whose duties are clearly outlined in the Company s Articles of Association and prevailing legislation. The Board of Commissioners and Directors are mutually responsible to maintain the going concern of PT Pupuk Indonesia (Persero). To prevent conflicts of interest, a Commissioner is not permitted to concurrently hold office as a Director. Likewise, a Director is not permitted to assume an office one level below except in emergencies. Responsible to elect, appoint, and dismiss Commissioners and Directors is the General Meeting of Shareholders. The controlling shareholder reserves the right to initiate a proposal to appoint and dismiss a Commissioner and Director in the General Meeting of Shareholders. As a State-owned Enterprise, the holder of the controlling Series A share is the Government of Indonesia and exercises such rights by proxy of the Minister of State-owned Enterprises. The current structure and constituent organs of PT Pupuk Indonesia (Persero) are outlined in the Decree of Directors No. SK/DIR/011/2016 dated April 1, PT Pupuk Indonesia (Persero) Sustainability Report

51 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies The primary functions of the Directors and Board of Commissioners of PT Pupuk Indonesia (Persero) are as follows: Directors PT Pupuk Indonesia (Persero) is managed by one President Director and 5 (five) Directors. The directors are authorized and assume full responsibility in managing the Company. They also represent PT Pupuk Indonesia (Persero) both inside and outside of a court of law pursuant to the Articles of Association and prevailing legislation. The Directors perform their duties and assume collective responsibilities. Nonetheless they may act and take decisions in accordance to each of their duties and authorities, including on environmental and social matters.. Board of Commissioners The main duty of the Board of Commissioners is to oversee corporate policies executed by the Directors that concerns both the Company and its business activities. The Board also advises the Directors in the Company s interests. In its daily duties, the Board of Commissioners forms supporting committees to enhance its oversight functions in accordance with GCG principles. These committees are Audit Committee and GCG &Risk Management Committee. If so necessary, the Board may establish additional committees depending the Company s circumstances and needs. Each committee is chaired by a Commissioner and may have at most 2 (two) non-company members that are deemed competent to handle for the Committee s tasks.. We are committed to prevent corruption by implementing various Company-wide systems and policies, such as establishment of a Fraud Risk System, signing of the Integrity Pact, Guidelines on Control of Grafts, Guidelines on Reporting of Assets of Officials, Guidelines on Conflicts of Interest, and Guidelines on the Whistleblowing System (WBS). We have implemented various corruption/fraud prevention systems, such as by annual signing of the Integrity Pact, signing of the Integrity Pact when executing corporate actions, and signing of the Integrity Pact in every procurement process. Internal corporate policies underline that Pupuk Indonesia individuals are prohibited from receiving selfserving grafts for himself and his family, either presented from an offshore or domestic entity, sent through either electronic or non-electronic means. The commitment to prevent grafts is shown in our implementing of the Guidelines on Control of Grafts set out by the Decree of Directors No. SK/DIR/023A/2015 and renewed by the Guidelines on Control of Grafts No. PI-TKK-PD-002 Rev. 0 enacted on September 8, Raising awareness on the forms of corruption/fraud, we have implemented a mandatory reporting of assets for Commissioner, Director, and Grade I and II officials. The mandatory reporting of assets was first enacted in 2014 by the Decree of Directors No. SK/DIR/020/2014 signed on May 20, The decree was then renewed by the Guidelines on Reporting of Assets of Officials No. PI-PD- TKK-003 Rev. 0 enacted on August 2, Anti-Corruption [GRI 205-2] Pupuk Indonesia have taken strategic measures to prevent corruption or fraud and has communicated those measures to our employees, Directors, and Board of Commissioners and its committees. The communication channels we used include, among others, meetings between the Directors and Board of Commissioners, GCG awareness activities, trainings, workshops, and coordinating meetings. 44 PT Pupuk Indonesia (Persero) Sustainability Report 2017

52 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Furthermore, we raise awareness on all forms of corruption/ fraud by implementing an online whistleblowing system that can be accessed by every employee. Reports sent through the system are made anonymously. Other efforts to increase anti-corruption awareness is by implementing policies on managing conflicts of interest and developing the Fraud Control System. One of the aims of the latter system is to detect risks and mitigate corruption/fraud. As part of the efforts to anticipate corruption, we have identified areas of operations that are susceptible to corruption.[gri 205-1] An audit by SPI found no evidence to indicate acts of corruption within Pupuk Indonesia. This finding is further reinforced by zero complaints or investigations of corruption cases within Pupuk Indonesia Group in In 2017, there were zero cases of fraud carried out by work units or employees, zero reports of corruption recorded to the WBS, zero termination of employment or disciplinary sanctions due to corruption, zero termination or nonextension of contracts with business partners due to corruption, and zero legal complaints. Anti-Corruption Communications and Trainings Pupuk Indonesia has, in the spirit to align perception, intent, and effectiveness of corruption prevention, held special trainings and workshops on anti-corruption/antifraud practices. In addition, we held awareness campaigns on transparent practices and anti-graft measures by implementing the Reporting of Assets of Officials and Control of Grafts for the Board of Commissioners, Directors, and employees of Pupuk Indonesia. The series of activities, organized by our Corporate Governance Compartment, featured speakers from the Corruption Eradication Commission (KPK) of the Republic of Indonesia. The training was held on June 15, 2017 and attended by some 35 functionaries of the Governance Departments in the Pupuk Indonesia Group, who were then tasked with transferring knowledge from the training to the Board of Commissioners, Directors, and employees of each company group. Following this training, we expect that the importance of transparent practices and anti-graft measures are highlighted effectively to establish a corruption-free corporate governance within Pupuk Indonesia Group.. Political Contributions [GRI 415-1] Pursuant to the provisions on contributions to political parties set out in Law No. 2 Year 2008 on Political Parties and Law No. 10 Year 2009 on General Elections, the Board of Commissioners, Directors, and officials of State-owned Enterprises are prohibited from contributing to political parties. We are compliant to such legislative provisions and have established a Code of Conduct that prohibits contributions made using Company-owned funds, goods, and facilities to support any political party and its candidates, except otherwise permitted by prevailing legislation. Throughout the reporting period, Pupuk Indonesia has never handed over any sums of funds as political contributions, financial or otherwise, and has never offered such contribution, either directly or indirectly, to any organization in any country and to any recipient/ beneficiary to any organization. PT Pupuk Indonesia (Persero) Sustainability Report

53 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Adoption and Support for International Initiatives [GRI ] Pupuk Indonesia recognizes the importance of minimizing environmental impacts due to our operations. We participate in improving the quality of life of local residents in accordance with the goals of sustainable development. We recognize that the main challenges in achieving sustainable development are climate change and global warming. We participate in the global effort to mitigate global warming by adopting several international initiatives on global warming, such as ISO 9001, ISO 14001, SDG, and the UN Global Compact.. Membership in Industrial Associations and Other Organizations [GRI ] Pupuk Indonesia Group has initiated a number of activities that are aimed to support Indonesia s economic growth through the fertilizer, petrochemicals and agri chemicals, steam and electricity, transport and distribution, trade, and EPC (Engineering, Procurement, and Construction) industries. In addition, we are active in a number of associations to expand our business network and enhance stakeholder involvement in resolving operational issues. At the end of 2016, Pupuk Indonesia actively participated in the following organizations: 1. International Fertilizer Association (member) 2. Indonesia Fertilizer Producer Association (Presidium Council) 3. Institute of Certified Professionals of the Indonesian Fertilizer Industry (Management Board) Stakeholder Involvement [GRI , GRI , GRI , GRI ] Stakeholders are those who are affected or affects corporate policies, decision making, and operations. We believe that stakeholders plays a strategic role in our growth and that our performance are on our stakeholders. As such, we strive to maintain and cultivate a harmonious relationship with our stakeholders. The following table describes stakeholder relationship and interactions in PT Pupuk Indonesia (Persero) Sustainability Report 2017

54 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Stakeholder [GRI ] Basis for Determining Inclusion [GRI ] Engagement Approach [GRI ] Frequency of Engagement [GRI ] Topics/Issues Addressed [GRI ] Shareholders - Influence - Rresponsibility General Meeting of Shareholders Twice a year Supervision and evaluation of the Company s performance Determination and payment of dividends Accuracy and ratification of financial statements of The Company Payment of taxes and non-tax state revenue Customers of Subsidized Fertilizers: Farmers and Farmers Collectives Influence Meeting and Mentoring Throughout the planting season Guaranteed supply and prices Guaranteed fertilizer quality Customer satisfaction survey Customers of Non-Subsidized Fertilizers Influence Customer Service 56 times Guaranteed supply and prices Guaranteed fertilizer quality Customer satisfaction survey Employees Presentation Establishment of Labor Unions Meeting with the Management Suppliers/Distributors Dependency Meeting Work Contract CSMS Implementation Public Proximity CSR programs and PKBL Media Presentation Press release Press conference At least twice a year At least twice a year At least twice a year Guaranteed freedom of association and expression Health and work safety insurance Equality, welfare, and certainty of career paths Information on opportunities for cooperation Equality of opportunity for cooperation Contract Fulfillment of rights and obligations Compliance with regulations Social assistance Mentoring of business partners Corporate policies and actions The Company s performance Implementation of Sustainable Conception Suppliers Pupuk Indonesia recognizes that the lifecycle of our products may impact and contribute to the environment, starting from our goods/services suppliers, production, and usage. Suppliers are part of our supply chain and operate on our behalf. Pupuk Indonesia s image may be damaged by negative actions conducted by our suppliers as they their operations are conducted to our specifications and requirements. Examples of suppliers are Organic Fertilizer Producers and Fertilizer Distributors. Goods/services suppliers also affect our reputation and image. For those reasons, we conduct a rigorous selection process for our suppliers that is benchmarked to the sustainability criteria set out in the General Guidelines on the Procurement of Goods and Services in PT Pupuk Indonesia (Persero) Group No. PI-PD-ADA-002 Rev. 0 enacted on May 29, Only suppliers that fulfill the sustainability criteria may partner with us. The criteria assessed, among others, compliance to employment regulations such as minimum regional wages, occupational health and safety, and respect for human rights. In addition, suppliers have to comply with environmental regulations. PT Pupuk Indonesia (Persero) Sustainability Report

55 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies PRESIDENT DIRECTOR Finance Director Investment Director Head of Corporate Communication Corporate Secretary Head of Internal Audit Unit SVP Finance & Treasury SVP Corporate Performance SVP Accounting SVP Corporate Research SVP Corporate Planning SVP Corporate Development 48 PT Pupuk Indonesia (Persero) Sustainability Report 2017

56 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Marketing Director Human Capital & Government Director Technology Director SVP Commerce SVP Distribution SVP Human SVP Information Capital General SVP SVP Corporate Governance SVP Manufacture Head of Training Technology Technology Center SVP Procurement PT Pupuk Indonesia (Persero) Sustainability Report

57 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies STAKEHOLDERS ECONOMIES 50 PT Pupuk Indonesia (Persero) Sustainability Report 2017

58 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Revenues Profitability Consumers Production Employee Awards Contribution to the Government Income Contributions to the Public Investment in Infrastructure and Services Contributions to Local Suppliers Financial Assistance from the Government Challenges from Climate Change and Loss of Land Corporate Synergies As a producer and supplier of the national fertilizer needs, Pupuk Indonesia is a leader in national economic entities in supporting food security programs. In addition to supporting food security, the economic impacts arising from the company s operations are also a direct economic value that are channeled to the state and stakeholders. As a State-owned Enterprise (BUMN), we support and implement the Government s policies and programs designed to meet self-sufficiency in food, including fertilizer subsidies for farmers that in turn increases their farm s production. wages and rewards to our employees, dividends, and taxes to the Government, interests to lenders, and investments to the public through various community development programs, such as the Partnership and Environmental Sustainability Program and CSR campaigns. We strive to deliver well-rounded benefits in our operations, among which is by creating economic benefits for our stakeholders. As a company, we generate an economic value that is then channeled to our stakeholders, such as Thus, Pupuk Indonesia plays a vital role in developing the economic interests of both our internal and external stakeholders. Our net income is always given back to our stakeholders. PT Pupuk Indonesia (Persero) Sustainability Report

59 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Direct Economic Value Generated and Distributed [GRI 201-1] Description Direct Economic Value Generated a. Sales b. Interest Receivables c. Dividends d. Royalties e. Property Leases f. Asset Sales 64,617, ,604 14, ,460 66,230, ,725 9, ,098 64,164, ,092 6, ,253 58,942, ,313 4, ,168 Total Economic Value Generated 65,209,676 66,532,867 64,368,382 59,154, Economic Value Distributed a. Operational Costs Revenue Costs Sales Costs Administrative and Sales Costs 49,419,254 1,111,318 1,976,744 52,250, ,614 2,108,740 49,929, ,666 1,828,578 43,696, ,489 1,813,664 Subtotal Operational Costs 52,507,316 55,110,594 52,607,373 46,247,832 b. Employee Salaries and Allowances Revenue Costs Sales Costs Administrative and Sales Costs 1,963, ,346 1,318,960 1,906, ,352 1,448,455 2,043, ,431 1,501,557 2,754, ,480 1,556,946 Subtotal Employee Salaries and Allowances 3,726,577 3,738,350 4,036,066 4,910,008 c. Payment to Lenders Interests Dividends 1,829,036 1,869,016 1,823,840 2,100,000 2,186,846 1,527,550 3,784,879 1,070,874 Subtotal Payment to Lenders 3,698,052 3,923,840 3,714,396 4,855,753 d. Payment to the Government 1,590,614 1,559,210 1,318,703 1,483,483 e. Investments to Community Partnership Programs Environmental Sustainability Programs CSR 114,204 30, ,182 31,563 30, ,274 34,700 96, ,568 54,293 66,575 Subtotal Investments to Community 144, , , ,436 Total Economic Value Distributed 61,646,893 64,502,881 61,948,163 57,747, Economic Value Retained (1-2) 3,562,783 2,029,986 2,420,219 1,406,981 Revenues In 2017, the Company recorded revenue in amount of Rp58.94 trillion or 89% of the Budget and Business Plan (RKAP). The achievement was 8% less compared with Rp64.16 trillion recorded in The reduction in revenues was due to: 1. Reduction in commodity prices in 2017, particularly ammonia, compared with previous years. 2. Reduction in subsidy revenues due to reduction in production costs, In that the costs of producing fertilizer and ammonia are reduced in line with the Company s cost-efficiency programs and reduction in prices of raw materials. 52 PT Pupuk Indonesia (Persero) Sustainability Report 2017

60 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS 3. Reduction in Revenues from Services and Trade, particularly due to delays in Engineering, Procurement, and Construction (EPC) projects caused by slow recovery of investments in the petroleum industry. Profitability The Company has successfully recorded a profit of Rp3.08 trillion or 150% higher than the target set by its Shareholders. The achievement was 13% less compared with Rp3.53 trillion recorded in One of the Company s efforts to increase profitability is by implementing a Cost Reduction Program (CRP) and building synergies among its subsidiaries. By assets, the Company increased its assets by 1% with a value of Rp trillion in In 2016, the Company assets was trillion. Production As the largest fertilizer producer in Asia, our main product is fertilizer used to improve fertility and enrich nutrients in agricultural land. The total fertilizer production in 2017 was million tons or 8% higher than million tons produced in The increase in fertilizer production is due to operations of a number of new plants and improvements to the reliability of existing plants to ensure that every plant operates at optimum levels. Operational Highlights, (in millions of tons) Description Fertilizer Production 10,684 10,902 10,459 11,417 Non-fertilizer Production Ammonia 5,058 5,524 5,239 5,422 Sulfuric Acid ,160 1,198 Phosphoric Acid Aluminium Fluoride Others Total Non-fertilizer Production 6,543 7,669 6,756 6,954 Fertilizer Sales 12,229 11,763 12,095 12,505 Non-Fertilizer Sales 1,907 2,121 1,443 1,323 CONSUMERS The primary consumers of Pupuk Indonesia are: 1. Farmers and farmer groups; 2. Industrial agriculture and plantations. Domestic demand for NPK in the commercial market is sufficiently at a higher ratio compared with current NPK production capacity. The national demand for NPK is projected to reach 7.2 million tons per year, significantly higher than the production capacity of 3.1 million tons per year. Demand for fertilizer in the agriculture sector is currently very high. Indeed, based on data from the Ministry of Agriculture, demand for fertilizer in the food crop sector exceeded 14 million tons per year whereas current supply can meet only 9.5 million tons per year. PT Pupuk Indonesia (Persero) Sustainability Report

61 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies In the domestic non-subsidized market, the competitiveness of our products decreased somewhat. The sales of non-pso fertilizers in 2017 was 2,198,088 tons or 98% of the target set in the Budget and Business Plan (RKAP) of 2,244,935 tons. The slight competitive decline is primarily caused by uncompetitive prices due to a rise in natural gas prices, which in turn affects production costs. Furthermore, an increase in assigning NPK products for PSO resulted in the Company to prioritize demands by the food crop sector. This decision impacted NPK sales in the non-pso sector. In terms of market potential, Asia has the capacity and demand for urea, not to mention it being its largest importer. The urea export market in 2017 suffered a decline in demand from overseas consumers. The sales of export urea in 2017 were 756,215 tons or 56% of the target set in the Budget and Business Plan of 1,360,000 tons. The reduction in export orders was due to earmarking of fertilizer inventory in Quarter I for the subsidized market in preparation for the growing season. However, due to a decline in urea prices in Quarters II and III, we prioritized the non-pso market for its higher selling prices. In addition, the subpar sales achievements were as result of limited fertilizer inventory due to a reduction in urea production. Employee Rewards In 2017, the total economic value distributed to employees increased to Rp6,641,486 per employee, an 8% rise compared with 2016, due to merit and promotion increases. Contributions to the Government Income Pupuk Indonesia contributed to the state income by paying taxes, consisting of Income Tax (from Pupuk Indonesia Group and its employees), Value-added Tax, and other taxes. Taxes Payable by Pupuk Indonesia Group, (in millions of Rupiah) Tax Corporate Income Tax 348, , , ,783 Employee Income Tax 691, , , ,339 Value-added Tax 1,029,566 1,771,583 2,008,167 2,620,589 Other Taxes 2,332,635 1,874,053 2,557,695 1,486,055 Total 4,402,680 4,613,924 5,504,135 4,943, PT Pupuk Indonesia (Persero) Sustainability Report 2017

62 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS In our areas of operations, we contribute to Regional Governments and the Central Government by paying our Regional Taxes and Central Taxes. In 2017, Pupuk Indonesia and its subsidiaries paid a total of Rp4.94 trillion in taxes, a 10% decline compared with Rp5.50 trillion paid in Contributions to the Public We believe that a good company contributes positively to its surroundings and they benefitted from the company s operations. We demonstrate our intent by channeling funds for the public through social investments that we Regional Taxes and Central Taxes Paid, (in millions of Rupiah) Regional Business Units Regional Taxes Central Taxes Total Taxes Paid PT Pupuk Indonesia (Persero) 8,376 69,621 77,997 PT Petrokimia Gresik 26,469 1,252,201 1,278,670 PT Pupuk Kujang 6, , ,329 PT Pupuk Kalimantan Timur 80,673 1,707,776 1,788,449 PT Pupuk Iskandar Muda 3, , ,726 PT Pupuk Sriwidjadja Palembang 27, , ,371 PT Rekayasa Industri 1, , ,857 PT Mega Eltra ,008 42,282 PT Pupuk Indonesia Logistik 0 51,177 51,177 PT Pupuk Indonesia Energi 14,407 14,210 28,616 PT Pupuk Indonesia Pangan 0 1,290 1,290 Total 168,726 4,775,039 4,943,766 In addition to taxes, Pupuk Indonesia Group contributed dividend payments to State Income. As a State-owned Enterprise, shares of PT Pupuk Indonesia (Persero) is wholly-owned by the Government of the Republic of Indonesia with a paid-up capital of Rp12.90 trillion and an authorized capital of Rp40 trillion. Thus, we pay dividends to the Ministry of State-owned Enterprises on behalf of the Government of Indonesia every year. In 2017, Pupuk Indonesia Group paid Rp1.07 trillion in dividends to its shareholders in accordance with the Directorate General of Budgets of the Ministry of Finance Letter No. S-63/MK.2/2017 dated June 7, 2017 for its performance in the 2016 fiscal year. The profits are paid to the Government as dividends as resolved by the Annual General Meeting of Shareholders. The Government sets the sum of dividends by means of the Ministry of Stateowned Enterprises as its Proxy in the General Meeting of Shareholders. hope can provide positive and far-reaching benefits for locals in our areas of operation. In 2017, the direct economic value distributed by Pupuk Indonesia Group for the public was Rp billion. The social investments consisted of Partnership Programs, Environmental Sustainability Programs, and CSR. Our flagship programs were aimed at developing coastal residents, maintaining urban forests, funding small businesses, and assisting youths through education funding and scholarship awards. PT Pupuk Indonesia (Persero) Sustainability Report

63 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Social Investments by Pupuk Indonesia Group, (in millions of Rupiah) Type of Investments Partnership Programs (PK) 119, , , ,968 Environmental Sustainability Programs (BL) 4,860 14,644 41,751 55,148 CSR - 44,288 96,304 66,575 Total 124, , , ,691 Investments in Infrastructure and Services [GRI 203-1] Pupuk Indonesia is focused on expanding benefits to all of its stakeholders. As such, economic contributions may be expanded to have an even greater reach by touching on the benefits of each business activity. In 2017, Pupuk Indonesia Group has invested in development projects such as the Amurea II Project in Gresik and in the Gresik Gas Cogeneration Plant independent power producer (IPP Gresik/GGCP). In 2017, the total investments made in development projects were Rp3.29 trillion. We have made certain that there are no projects that violated any one person s human rights. Our commitment is backed by zero legal claims or complaints concerning human rights violations from employees. Contributions to Local Suppliers We strive to benefit our supply chain through a series of programs designed to improve the quality of our distribution chain in terms of human rights, environment, labor, and public as outlined in our goods and services procurement policy. We are committed to assist the development of local residents by preferring to partner with local suppliers in our value chain through auctions/tenders. Our commitment is outlined in the General Guidelines on the Procurement of Goods and Services in PT Pupuk Indonesia (Persero) Group No. PI-PD-ADA-002, Item 6.8 on the Utilization of Domestic Products. [GRI 204-1] Production use IN Country [GRI 204-1] From a corporate perspective, local suppliers are defined as companies that are based in or carry out production in the country. On the other hand, subsidiaries define local suppliers as companies that are based in or carry out production in the local city/regency/province in which the subsidiary operates. In 2017, Pupuk Indonesia Group procured 53.78% of its needs from local suppliers at a total value of Rp11 trillion. Maximum involvement of local suppliers is proof of our effort to stimulate popular economic growth for mutual wellbeing. To improve the quality of our suppliers, we have a set of requirements when selecting the most suitable suppliers. These are based on criteria such as labor, public, and environmental aspects. For example, suppliers have to be and comply with Occupational Health, Safety, and Environment regulations set out by each of our subsidiary. In addition, prospective suppliers have to comply with each subsidiary s guidance policies on local labor, regional wages, and ban on child labor, among others. Fertilizers produced by Pupuk Indonesia Group are distributed to consumers through two supply chains: Non-subsidized Fertilizer The transaction is stipulated in the Sales Contract (SPJB) with buyers of non-subsidized fertilizer. The contract stipulates, among others, sales volume, selling price, mutual agreements, contract duration, mechanisms of payment, and product delivery/ collection. 56 PT Pupuk Indonesia (Persero) Sustainability Report 2017

64 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Subsidized Fertilizer Consumers of subsidized fertilizers are farmers who are members of a farmers group. These are farmers who engage in food plant sub-sector, plantation subsector, and horticulture sub-sector as well as farmers in aquaculture sector.. We cooperate with appointed distributors and retailers to distribute fertilizers to farmers/farmer groups. Both distributors and retailers are responsible for purchase, storage, sales, and marketing of subsidized fertilizers. Both are bound by the fertilizer SPJB. We have conducted a supplier satisfaction survey to improve the quality of service to suppliers and, at the same time, enhance sustainable development processes in our internal and external supply chains. The satisfaction survey, conducted in December 2017, produced 3 (three) assessment results: supplier satisfaction index of 1.51 ( satisfied ); supplier dissatisfaction index of 2.31 ( satisfied ); and supplier loyalty of 4.23 ( loyal ). At the end of the reporting period, we are partnered with 1,542 distributors and 45,005 retailers. Since these businesses create employment opportunities, our business impacted the community s economy indirectly. [GRI 203-2] Financial Assistance from the Government [GRI 201-4] According to the Road Map designed by the Ministry of Agriculture, domestic demand for urea is predicted to increase at an average of 6.3% annually. This projection gave us the opportunity to strengthen our market share. The fertilizer industry is predicted to enjoy excellent prospects in the future, partly in relation to the government-subsidized public service obligation (PSO) that we participate in. The PSO is a cost borne by the state for disparities in selling prices set by state-owned enterprises and private producers for certain goods/ services that the Government wishes to remain affordable to the better part of the public. The PSO is grounded in Article 66 paragraph 1 of Law No. 19 Year 2003 on State-owned Enterprises, in that the Government may designate SOEs to carry out public welfare functions that align with their purposes and objectives. If such designations are deemed to be financially infeasible, the Government must compensate the cost spent by the SOE plus a reasonable margin on that cost. The current model for subsidized fertilizer is price subsidies, where farmers purchase fertilizers for less than commercial market prices. Subsidized fertilizers for farmers must meet 6 (six) principles of Right (type, amount, price, place, time, and quality). Fertilizers that are subsidized are urea and nonurea fertilizer (NPK, ZA, SP-36, and organic). Legislation concerning subsidized fertilizer in 2017 is as follows: a. Law Number 8 Year 2017 on the Amendment to Law Number 18 Year 2016 on the National Budget for the 2017 Fiscal Year (State Gazette of the Republic of Indonesia Year 2017 Number 186, Supplement to the State Gazette of the Republic of Indonesia Number 6111); b Regulation of the Minister of Agriculture Number 69/Permentan/SR.310/12/2016 on the Allocation and Maximum Retail Price of Subsidized Fertilizer for the Agriculture Sector for the 2017 Fiscal Year in conjunction with Regulation of the Minister of Agriculture Number 04/Permentan/SR.310/3/2017 on the Amendment of the Regulation of the Minister of Agriculture Number Regulation of the Minister of Agriculture Number 69/Permentan/SR.310/12/2016 on the Allocation and Maximum Retail Price of Subsidized Fertilizer for the Agriculture Sector for the 2017 Fiscal Year and PT Pupuk Indonesia (Persero) Sustainability Report

65 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies c. Decree of the Minister of Agriculture Number 17/ KPTS/SR.310/B/11/2017 on Amendment to the Allocation of Subsidized Fertilizer for the Agriculture Sector for the 2017 Fiscal Year. d. Supply Agreement between the Ministry of Agriculture cq. DG of Infrastructure and Agricultural Facility with PT Pupuk Indonesia (Persero) Number: 001/SR.320/B.5/ and 001/SP/DIR-C10/2017 which was amended with Addendum I Supply Agreement No. 03/MoU/SR.320/B/05/2017 and 051/ SP/DIR-C10/2017 and subsequently reopened with Addendum II Supply Agreement with No.604/MoU/ SR.320/B/12/2017 and 123/SP/DIR- C10/2017. Revenue from Government Subsidies, (in millions of Rupiah) Year Total ,218, ,412, ,140, ,281, ,899,027 In the table above, our revenues and payments of subsidized fertilizer increase consistently at an average rate of 12% every year (CAGR ). Some 73% of our Group s total fertilizer sales volume is dedicated to meet demands from the PSO sector. In other words, profit from 73% of our sales volume is guaranteed by law. The remaining 27% of our sales volume is allocated for the non-pso sector (commercial segment) where our margins are greater than 8%. Distribution of subsidized fertilizer is carried out pursuant to the Regulation of the Ministry of Trade Number No.15/M-DAG/PER/4/2013. The technical mechanism to manage subsidized fertilizer is set out in the Circular of the President Director of PT Pupuk Indonesia (Persero) No. SE-07/IV/2013 and supply agreements between PT Pupuk Indonesia (Persero) and its subsidiaries on PSO management in subsidiaries. The regulation is the basis of managing subsidized fertilizer as goods whose procurement and distribution is controlled by the Government to meet demands from farmers and farmer groups. 58 PT Pupuk Indonesia (Persero) Sustainability Report 2017

66 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS To ensure that urea fertilizers are distributed as intended without any irregularities, the Regulation of the Minister of Agriculture No. 69/Permentan/SR.310/12/2016 on Allocation and Maximum Retail Price of Subsidized Fertilizer for the Agriculture Sector for the 2017 Fiscal Year was passed to enforce a closed-loop distribution system for subsidized fertilizers. Farmers or farmer groups can only have access to subsidized fertilizer after submitting a Definitive Plans for Group Activities (RDKK), with assistance from field workers, to appointed kiosks.. Challenges from Climate Change and Loss of Land [GRI 201-2] One of the challenges that we face is global climate change, a phenomenon that affects global and national food resilience. Climate change changes pattern and intensity of rain, raises temperatures of air and sea, and increases frequency and intensity of natural disasters. Especially in the agricultural sector, such changes cause the pattern and calendar of the growing season to change, not to mention the widespread of pests and plant diseases that reduce agricultural production. In Indonesia, climate change causes no less than 50% of farmable land to suffer from later rainy seasons and advanced dry seasons, resulting in a shorter growing season. Furthermore, rising the temperature by 1 C is predicted to increase rainfall by 2-3% annually. Data from the Ministry of Agriculture s Strategic Plan (RENSTRA) showed that in the last 5 years, 29,743 hectares of farmland suffered from floods and 82,472 hectares from drought. Climate change may affect our operations and financial position in the past few years, in that it shifted the growing season, which accordingly affects the timeliness of fertilizer demand from farmers and its distribution. Consequently, farmer demand for fertilizer shifted compared with previous years. We have to consider the fertilizer accumulation in inventory since timely distribution is not possible. For now, we have to construct additional warehouses to store excess inventory. To anticipate overstocking that could lead to overflow in retail warehouses, we have constructed concrete-walled warehouses that are able to withstand overstock. Another challenge that could financially affect Pupuk Indonesia the loss of agricultural land. Some 100 thousand hectares of agricultural rate is converted each year. The Government s production of 40 thousand hectares of new agricultural land per year could not keep up with the current conversion rate. The majority (80%) of agricultural land conversion took place in Java, the center of national food production. The conversion is bound to affect the issue food resilience, unless supported by the availability of productive land. On the other hand, as the largest consumer of fertilizer, farmers suffers the brunt of loss of agricultural land reducing farming efficiency and affecting their wellbeing. In 2012, the arable land in hectares per person is 0.22 hectares. It is predicted that by 2050, the arable land per farmer decreases to 0.18 hectares. We respond to loss of agricultural land by increasing productivity to achieve the goal of national food resilience. For our part, we strive to ensure supply of fertilizer and improve fertilizer technology. PT Pupuk Indonesia (Persero) Sustainability Report

67 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Corporate Synergies 2% 2% 1%1% SYNERGY SERVICE RP4,7 Trillion 10% 5% 10% 3% 4% Group Synergy PI 2017 Synergy Achievement (Percentage) 40% Ammonia Urea Transportation NPK Others Electricity and Electrical Integration Coal Steam and Water Plastic bag NPK Raw Material Other fertilizer 22% We maintain the continuity of our operations by synergizing our group s subsidiaries and other SOEs. These in-group synergies include matters in common procurement practices, common insurance policies, common management of materials, transport, and finance. For 2017, we have carried out 20 synergies worth Rp4.7 trillion. As for synergies with other SOEs, we synergize in matters such as procurement, services, distribution, finance, construction, and others. The synergies are expected to give added value to Pupuk Indonesia and our stakeholders. 60 PT Pupuk Indonesia (Persero) Sustainability Report 2017

68 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS No SOE Synergies Parties Involved 1 Procurement of natural gas PI - Subsidiary of Pertamina 2 Procurement/sale of excess electricity PI PLN 3 Cooperation in surveys PI - PT Sucofindo & PT Surveyor Indonesia 4 Professional certification in radiography PI BATAN 5 Procurement of Virtual Private Network (VPN) PI PT Telekomunikasi Indonesia Tbk. 6 Procurement of fertilizer transport PI PT BGR 7 Lease of laptops and computers PI PT Sinergi Informatika Semen Indonesia 8 Procurement of Urea and NPK Fertilizer packaging PI PT Rajawali Citramass & PT Dasaplast Nusantara 9 Consulting Service for Construction Management of PI Tower PI PT Virama Karya (Persero) 10 Supply of Gypsum and ALF3 PI SOE in concrete and aluminium production 11 Appointment of fertilizer distributors PI PT PPI, PT BGR & PT Pertani 12 Procurement/supply of fertilizer PI SOE specializing in plantations 13 Procurement of call center systems and farming digitalization trials PI PT Telkom 14 Trials of Kartu Tani PI BRI, BNI, Mandiri, BTN 15 Appointment of Financing Distributors PI BRI, BNI dan Mandiri 16 Storage and management of regional fertilizer inventory PI PT BGR & PT Varuna Tirta Prakasya 17 Use of port and warehousing facilities PI SOE in port management & its subsidiaries 18 Distribution of fertilizer PI SOEs in rail and logistics 19 Financing of investments and working capital PI BRI, BNI dan Mandiri 20 Underwriting for PT Sang Hyang Seri PI BRI 21 Capital market financing to issue 2017 Bonds PI Mandiri Sekuritas, Danareksa, Bahana Sekuritas, and BNI Sekuritas 22 Development of Kartu Tani PI SOE Banks 23 Application of fertilizer for palm oil & cocoa PI Riset Perkebunan Nusantara SOE 24 Research and development among fertilizer manufacturers PI UGM, Unpad, and ITB Research Centers 25 Procurement of Internet connection PI PT Telkom PT Pupuk Indonesia (Persero) Sustainability Report

69 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies No SOE Synergies Parties Involved 26 Purchase of EPC materials PI Krakatau Steel & Wika Beton 27 Purchase of electricity in Mamuju PI PLN 28 Provision of transmission construction services PI PLN 29 Lubricant agent PI PT Pertamina Lubricant 30 Construction of PKG urea plant, jetty, and PSP urea bulk storage PI PT Adhi Karya 31 Construction of PIE power plant PI PT PP 32 Construction of USB PKT PI PT Krakatau Engineering 33 Construction of coal gasification project PI PTBA 34 Management of Employee Health Insurance PI BPJS Kesehatan 35 Management of JHT, Work Accidents, and Death programs PI BPJS Ketenagakerjaan 36 Post-retirement programs for Directors and Commissioners PI SOE in insurance 37 Bank at work (payroll, ID Card) PI SOE Banks 38 Provision of pledged deposit as collateral PI PT Sang Hyang Seri & BRI 62 PT Pupuk Indonesia (Persero) Sustainability Report 2017

70 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS PT Pupuk Indonesia (Persero) Sustainability Report

71 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies COMPETENT HUMAN RESOURCES OF 64 PT Pupuk Indonesia (Persero) Sustainability Report 2017

72 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Employee Composition Employee by Employment Status Recruitment Employee by Age Group Permanent Employees By Education Level Freedom to Unionize Skills Development Workplace Equality, Diversity, and Opportunity Employee Benefit Retirement Preparations Pupuk Indonesia s most valuable asset is its employees. We strive to retain the best talents by offering competitive remuneration packages, listening to their aspirations, and providing avenues to develop their talents further. Pupuk Indonesia expresses its heartfelt thank you to our individuals for their hard work and utmost dedication. It goes that well-cared employees lead to a well-cared company. Pupuk Indonesia is highly committed towards care and development of its employees alongside development of the company. EMPLOYEE COMPOSITION Pupuk Indonesia strives to employ the ideal number of individuals, thus ensuring that every project is completed efficiently by competent individuals. We recognize employees who have dedicated their best to Pupuk Indonesia. Our commitment is to provide a conducive working environment to allow our employees conduct their duties in good spirits and grow together with the company. In 2017, Pupuk Indonesia employs a total of 10,179 people. In addition to permanent employees, Pupuk Indonesia employs 3,107 contract employees. The number of permanent employee declined slightly compared with 2016, where we employed 10,439 people. The decline, caused mostly by retirement, was felt in Pupuk Indonesia s subsidiaries, such as PT Pupuk Kalimantan Timur s loss of 149 people, PT Pupuk Sriwidjaja Palembang s 110 people, and PT Mega Eltra s loss of 98 people. Employee diversity in terms of gender, age, and education are expressed in the tables on the following pages. PT Pupuk Indonesia (Persero) Sustainability Report

73 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies EMPLOYEE BY EMPLOYMENT STATUS [GRI 102-8] The majority of our employees are full-time permanent employees with the Petrokimia Gresik employing the most at 3,226 people. Appointing employees to permanent status creates a retention effect as they can feel secure and enjoy benefits and facilities offered by the company. Composition of Employees by Employment Status, Company Permanent Contract Total PT Pupuk Indonesia PT Petrokimia Gresik 3, , PT Pupuk Kujang 1, , PT Pupuk Kalimantan Timur 2, , PT Pupuk Iskandar Muda , PT Pupuk Sriwidjaja Palembang 2, , PT Rekayasa Industri PT Mega Eltra PT Pupuk Indonesia Logistik PT Pupuk Indonesia Energi PT Pupuk Indonesia Pangan Total 10,439 10,179 3,010 3,107 13,449 13,286 Number of Employee by Employment Status, ,439 10,179 3,010 3,107 Permanent Employees Contract 66 PT Pupuk Indonesia (Persero) Sustainability Report 2017

74 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Number of Permanent Employees, [GRI 102-8] Company PT Pupuk Indonesia PT Petrokimia Gresik 3,251 3,198 3,129 3,226 PT Pupuk Kujang 1,183 1,175 1,154 1,135 PT Pupuk Kalimantan Timur 2,447 2,375 2, PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang 2,435 2,434 2, PT Rekayasa Industri PT Mega Eltra PT Pupuk Indonesia Logistik PT Pupuk Indonesia Energi PT Pupuk Indonesia Pangan Total 11,098 10,739 10,439 10,179 Permanent Employees ,256 11,098 10,739 10,439 10, PT Pupuk Indonesia (Persero) Sustainability Report

75 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Permanent Employees by Gender, Company Male Female Total Male Female Total Male Female Total PT Pupuk Indonesia PT Petrokimia Gresik PT Pupuk Kujang PT Pupuk Kalimantan Timur PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang PT Rekayasa Industri PT Mega Eltra PT Pupuk Indonesia Logistik PT Pupuk Indonesia Energi PT Pupuk Indonesia Pangan RECRUITMENT [GRI 401-1] We understand that recruiting the right person for the right position the key to our success. To fill vacancies and meet demand for fresh talent, Pupuk Indonesia recruited 246 people in The figure was less by 18% compared with 2017, where we recruited 291 people. New Recruits in Pupuk Indonesia Group, 2017 Location Jumlah Recruitment Grade Head Office 32 Bachelor Subsidiaries 214 Graduate, Diploma, and High School Total 246 Recruitment in Pupuk Indonesia Group Description Pension Death Violation Resign Total Turnover rate 7.22% 8.60% 5.23% 6.66% 68 PT Pupuk Indonesia (Persero) Sustainability Report 2017

76 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS EMPLOYEE BY AGE GROUP [GRI 405-1] To build a cohesive dynamic in our performance, Pupuk Indonesia recruited employees from various backgrounds and age groups. We combine the experienced, seasoned employees with youthful, young employees in accordance with their competence and skills. In 2017, a total of 7,001 employees, or 69%, is in the productive age group (under 50 years old). The number of employees in the above 50 age group in 2017 decreased compared with the previous year, mainly due to retirement. Indeed, the regeneration is warmly welcomed as it paved the way for new leaders and enabled the transfer of technology and skills to the younger age group. Employees by Age Group, Company Grade I Grade II Grade III Grade IV Grade V-VII Total PT Pupuk Indonesia PT Petrokimia Gresik ,025 2,097 3,129 3,226 PT Pupuk Kujang PT Pupuk Kalimantan Timur PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang , ,150 2, ,452 1,375 2,364 2,254 PT Rekayasa Industri PT Mega Eltra PT Pupuk Indonesia Logistik PT Pupuk Indonesia Energi PT Pupuk Indonesia Pangan Jumlah ,868 2,785 5,907 5,764 10,439 10,179 PT Pupuk Indonesia (Persero) Sustainability Report

77 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Permanent Employees by Age Group >50 >45-50 >40-45 >35-40 >30-35 >25-30 s/d PERMANENT EMPLOYEES BY EDUCATION LEVEL [GRI 405-1] Pupuk Indonesia employs various experts in its ranks to support its growth. We employ 434 individuals holding master s (S2) and doctorate (S3) degrees. Nonetheless, we are also readily welcoming to employees at other education levels who are keen to contribute to the company. Permanent Employees by Education Level Company Graduate/ Postgraduate Bachelor Diploma High School Total PT Pupuk Indonesia PT Petrokimia Gresik ,432 2,439 3,129 3,226 PT Pupuk Kujang ,154 1,135 PT Pupuk Kalimantan Timur , ,150 2,001 PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang ,197 1,090 2, PT Rekayasa Industri PT Mega Eltra PT Pupuk Indonesia Logistik PT Pupuk Indonesia Energi PT Pupuk Indonesia Pangan Total ,797 2,837 1,000 1,009 6, ,439 10, PT Pupuk Indonesia (Persero) Sustainability Report 2017

78 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Employees by Education Level, ,211 2, ,797 2, SLTA D3 S1 S2/S Employee Composition by Grade, Company Grade I Grade II Grade III Grade IV Grade V-VII Total PT Pupuk Indonesia PT Petrokimia Gresik ,025 2,098 3,129 3,227 PT Pupuk Kujang PT Pupuk Kalimantan Timur PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang , ,150 2, , ,364 2,255 PT Rekayasa Industri PT Mega Eltra PT Pupuk Indonesia Logistik PT Pupuk Indonesia Energi PT Pupuk Indonesia Pangan Total , ,907 5,765 10, PT Pupuk Indonesia (Persero) Sustainability Report

79 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Employee Composition by Grade, , ,490 2,868 6,480 5,907 Grade I Grade II Grade III Grade IV Grade V FREEDOM TO UNIONIZE One of the ways we foster work satisfaction is by building excellent and open communication channels for employees to voice their aspirations. To that end, Pupuk Indonesia established the Federation of Pupuk Indonesia Workers Union to allow our employees to have their voices heard. SKILLS DEVELOPMENT [GRI 404-1, GRI 404-2] The most important asset for a company is not technology, equipment, or information, but the very individuals who wield that technology, operate that equipment, and process that information. As such, Pupuk Indonesia are always improving the skills and competence of our employees and encouraging them to take part in trainings held continuously throughout To develop this competence-based human capital, Pupuk Indonesia and its subsidiaries have held trainings and courses for every level of employees. In 2017, the total mandays training was 227,368 work days. The following table is overall training days held in Pupuk Indonesia s subsidiaries. Achievements of Training Mandays Mandays Target 2017 Realization up to December 2017 Percentage from Target PT Pupuk Indonesia (Persero) 2,590 4, % (Persero) & Subsidiaries 233, , % 72 PT Pupuk Indonesia (Persero) Sustainability Report 2017

80 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Mandays Trainings Company 2017 Target Realization up to December 2017 Percentage from Target PT Pupuk Indonesia 2,590 4, % PT Petrokimia Gresik 155, , % PT Pupuk Kujang 9,389 10, % PT Pupuk Kalimantan Timur 40,150 40, % PT Pupuk Iskandar Muda 9,632 10, % PT Pupuk Sriwidjaja Palembang 12,951 10, % PT Rekayasa Industri 5,180 4, % PT Mega Eltra % PT Pupuk Indonesia Logistik % PT Pupuk Indonesia Energi 84 1, % PT Pupuk Indonesia Pangan % Total 236, , % IN-HOUSE TRAINING. In-house trainings are highly beneficial as it tackles everyday challenges and issues. Participants can interact and share specific information regarding their duties. Topics that have been discussed during in-house trainings were, among others: Energy Planning Training, KPKU Assessor Training, SNI ISO31000:2011 Training & Certification, Process Safety Management Training, Anti-fraud Training, Leadership Development Program, Training Of Trainers, Turnaround Master Class Workshop, Problem Solving & Decision Making, and PKBL Accounting Guideline Training. CERTIFICATIONS. Pupuk Indonesia is committed to ensure that its employees have professionally-recognized skills. To that end, we have held certification trainings, especially for employees who work with urea, ammonia, utility, and maintenance. Furthermore, the certifications are aimed to foster a culture of occupational health and safety. Our commitment is reflected through establishment of the Professional Certification Institute (LSP) under Pupuk Indonesia s umbrella. OUTPLANT TRAINING. We often send our employees and management to participate in external trainings in specialist areas such as gasification, leadership, marketing, fertilizer, research, ISO 31000:2011 Certification, law, SAP, and human resources. The external trainings enable our individuals to observe current trends and updates, in addition to building professional, collegial networks. COACHING AND COUNSELLING. Coaching and counselling are effective strategies to improve productivity by analyzing the challenges faced by our employees and offering on-point solutions for their problems. The two-pronged strategy was proven effective in improving employee morale and motivation. SOFT SKILLS TRAINING. Soft skills are skills that relate to how a person carries herself towards others, such as social and communication, character, optimism, and initiative. The skills are indeed important, but often overlooked by employers. Recognizing its importance, Pupuk Indonesia held training sessions to develop such skills through sessions such as Leadership Development Program, Leader as Coach, Problem Solving, and Communication Skills. LEARNING ASSIGNMENT. As part of our lookingforward vision and the desire to improve the quality and professionalism of our employees, Pupuk Indonesia offers its employees temporary leave to study either domestic or abroad. Learning assignments is offered for disciplines in oil & gas management, marketing, soil science, chemical engineering, business administration, instrumentation, and agriculture. In 2017, a total of 33 employees went on study leave; 24 of whom studied in Indonesia and 11 abroad. The following table is a breakdown of learning assignments in Pupuk Indonesia: PT Pupuk Indonesia (Persero) Sustainability Report

81 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Number of Recipient Task Force Workers 2017 Learning Assignment Company domestic overseas Total PT Pupuk Indonesia PT Petrokimia Gresik PT Pupuk Kujang PT Pupuk Kalimantan Timur PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang PT Rekayasa Industri Total In 2017, Pupuk Indonesia has invested a total of Rp101,226,899,126 in the studies and trainings of its employees. The figure was a 13.9% increase compared with Rp88,849,125,023 invested in Human Resources Development Costs (in million rupiah) Description Realization of Employee Development Pupuk Indoonesia do a performance management on all employees of Pupuk Indonesia and its subsidiaries using Performance Management System (SMK) which is objective and comprehensive. The results of this assessment are discussed with the workers as a further basis for personal development and employee career improvement. The results of this assessment are also used to determine the advanced training required by the employee, in addition to determining the rotation, transfer or promotion (RMP). Each Pupuk Indonesia worker is assessed by: [GRI 404-3] a. Soft Competency Assessment 360o. Each worker is judged by their boss, two co-workers, and self-assessment. The results of this assessment are discussed with the boss, as feedback that is beneficial to the employee. b. Performance assessment using KPI (Key Performance Indicator), ie targets that have been established and agreed by employees within a period of one year. Further assessments are made within three years, as a follow-up evaluation for employees to obtain promotion or position movement. WORKPLACE EQUALITY, DIVERSITY, AND OPPORTUNITY [GRI 405-1] Pupuk Indonesia is committed to provide equal opportunities for qualified applicants without regard for sex, ethnicity, religion, and race. Diversity offers a unique sense of strength which Pupuk Indonesia protects closely. The nondiscrimination policy is enforced in every aspect, such as is in matters of salaries and remuneration. Pupuk Indonesia does not discriminate basic salaries and allowances offered to its male and female employees. We calculate an employee s basic salary and remuneration against her performance and position. Thus, the ratio of basic wages and remuneration for our female and male employees is 1:1. [GRI 405-2] 74 PT Pupuk Indonesia (Persero) Sustainability Report 2017

COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS The non-discrimination policy is enforced at every step of employment, from

82 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS The non-discrimination policy is enforced at every step of employment, from initial recruitment to training, remuneration, and promotion. We offer equal opportunities to male and female employees to grow with and contribute to the company. Nonetheless, due to the inherent nature of the manufacturing sector, male employees outnumber female employees. We promote religious diversity by facilitating our employees to observe their religious beliefs. At various Pupuk Indonesia sites, we have prepared facilities for worship and celebrate religious festivities as a team. In 2017, there has been no incidents or complaints of discrimination against Pupuk Indonesia. [GRI 406-1] In terms of employment opportunity, Pupuk Indonesia extends its welcome to employees working in our subsidiaries. We show our token of appreciation for locals by offering higher salaries than the statutory minimum, wherever we operate. [GRI 202-1] Employee Profile by Gender in Pupuk Indonesia Group Description Female Male 10,219 9,872 9,537 9,263 Total 11,098 10,739 10,439 10,179 PT Pupuk Indonesia (Persero) Sustainability Report

83 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies EMPLOYEE BENEFIT [GRI 401-2] Pupuk Indonesia shows concern for its employees wellbeing by offering a competitive benefit package. Good remuneration and benefit packages have been proven to attract potential high-talents and retain employees with proven track-records. Pupuk Indonesia fringe benefits are prepared not only with due consideration to our employees, but also to their families. The wellbeing program is founded on the principles of fairness, appropriateness, and compliance to prevailing legislation, in particular Law No. 13 Year 2013 on Employment. We offer the following in our well-being program: Pupuk Indonesia s basic salary is highly competitive. The minimum salaries provided by Pupuk Indonesia s subsidiaries exceed the statutory minimum pay set by regional governments. Position allowances are provided for employees who undertake certain duties or responsibilities in accordance with their functional or structural positions. Working facilities allowance are facilities provided to enhance an employee s work, such as uniforms, shoes, computers Religious Holiday Allowance (THR) is provided to assist employees celebrate religious holidays. Leave allowance is given to employees who have worked at least 1 (one) year in the company. Long-service Leave is provided to employees who have worked for a certain period at the company. BPJS Ketenagakerjaan is protection provided to employees, consisting of Occupational Injury Insurance (JKK), Old-age Savings (JHT), Life Insurance (JKM), and Pension Funds (JP). Bereavement assistance is provided to employees and their employees in case of accidents. Pension fund program is prepared by the company for employees nearing retirement age. This program is described further in the Retirement Preparations section below. Benefit Packages by Employment Status [GRI 401-2] Benefits Form Permanent Employee Contract Worker Basic Salary Position Allowance - Working Facilities Allowance Holiday Allowance Health Program Leave Allowance Long Leave Allowance - * For contract workers who work more than one year. All permanent employees and contracts are covered by health care. 76 PT Pupuk Indonesia (Persero) Sustainability Report 2017

COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Pupuk Indonesia does not discriminate benefits that it offers to permanent and

84 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Pupuk Indonesia does not discriminate benefits that it offers to permanent and non-permanent employees. Both receive remuneration, wages, and allowances in accordance with their position and competence. For expecting mothers, Pupuk Indonesia offers maternity leave for both childbirth and miscarriage, in accordance with the provisions of Law No 13 Year 2013, Corporate Policy, and Collective Bargaining Agreement. Pupuk Indonesia also offers a three month maternity leave for childbirth whereas miscarriages are offered the right to paid leave for 45 calendar days. RETIREMENT PREPARATIONS [GRI 404-2] As a token of gratitude for the contributions of employees nearing retirement, Pupuk Indonesia has prepared a comprehensive retirement package. Furthermore, Pupuk Indonesia provides a competitive retirement allowance in the hopes that retirees can enjoy their later years in comfort following their productive years with Pupuk Indonesia. The retirement package consists of a preretirement mental preparation training and a financial package. Pupuk Indonesia policy mandates a retirement age of 56 years old. Prior to retirement, Pupuk Indonesia holds a pre-retirement seminar for our employees and their spouses. The seminar discusses issues that are faced by retirees, such as: Mental preparation prior to retirement Financial management after retirement Entrepreneurship training Life views and challenges after retirement The seminars are led by experts in their respective fields. Thus far, participants of the retirement preparation program have expressed positive feedback. Pupuk Indonesia prepares the following financial package for its retiring employees: Defined-contribution Pension Program (PPIP), a retirement savings contributed and the remainder contributed by the company. BPJS Ketenagakerjaan s program consisting of Old Age Guarantee and Pension Guarantee. PT Pupuk Indonesia (Persero) Sustainability Report

85 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies 78 PT Pupuk Indonesia (Persero) Sustainability Report 2017

86 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Social Responsibility Program of Pupuk Indonesia Partnership Program Testimony of Pupuk Indonesia Beneficiaries Awards Community Development Program Community welfare and environment conservation are two fields of concern for Pupuk Indonesia. This is because we aware that this company grows in parallel with the growth and support of the community as well as a wellpreserved environment. We commit to the development of Pupuk Indonesia as a company that cares about and prioritizes sustainability principles while remaining profit oriented. People, planet, profit are our focus as a company which accepts and bears its responsibility. Not only directed to gaining profits, Puuk Indonesia has also formulated strategic policies to increase the welfare of marginal communities. We believe that if the Company does not take these issues seriously, it will not survice in the long run. That is why we orient well-designed programs in the fields of social and community affairs. Pupuk Indonesia s social responsibility policies and programs are mainly stipulated in the Code of Conduct on Society and Environment. The Company also refers to Minister of State-Owned Enterprises (SOE) Regulation No. PER-09/MBU/07/2015 dated 3 July 2015 on the Partnership and Community Development Program of SOEs, and its amendments No. PER-03/MBU/12/2016 dated 16 December 2016 and PER-02/MBU/7/2017 dated 5 July Meanwhile, the application procedures are to be decided by each Pupuk Indonesia subsidiary, bearing in mind that community conditions and needs are different from one location to another. Pupuk Indonesia CSR is aiming to meet four strategic goals as follows: 1. Nature-related. Pupuk Indonesia strives to conduct greening and environmental conservation activities. 2. Welfare-related. Pupuk Indonesia strives to conduct activities that can improve both internal and external welfare. 3. Community-related. Pupuk Indonesia strives to engage in activities that have impacts that improve the community surrounding its operation locations. 4. Economy-related. Pupuk Indonesia always strives to generate profits to support the state economy PT Pupuk Indonesia (Persero) Sustainability Report

87 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies SOCIAL RESPONSIBILITY PROGRAM OF [GRI 413-1] We aware that the communities surrounding the Company s operational areas are not an external party, but rather a part of a our large family that have also played a role in Pupuk Indonesia s operational success. For that reason, we seriously dedicate our attention to our social responsibility programs. The objective of Pupuk Indonesia s corporate social responsibility (CSR) program is to improve the surrounding communities welfare, either through providing employment or developing the local economy. It is expected that through this approach, the surrounding communities will receive positive impact from Pupuk Indonesia s business activities. To demonstrate its commitment social responsibility, Pupuk Indonesia established a Partnership and Community Development Program (PKBL) Division, assigned to execute, supervise and evaluate PKBL and CSR program application. Pupuk Indonesia s entities also have their respective special unit for effective application of PKBL and CSR, as detailed below: 1. CSR Unit of PT Petrokimia Gresik (Gresik, East Java) 2. PKBL Unit of PT Pupuk Sriwidjaja Palembang (Palembang, South Sumatera) 3. PKBL Unit of PT Pupuk Kujang (Kujang Cikampek, West Java) 4. PKBL Unit of PT Pupuk Iskandar Muda (Lhokseumawe, North Aceh, Aceh) 5. CSR Unit of PT Pupuk Kalimantan Timur (Bontang, East Kalimantan) 6. PKBL & Comdev Unit of PT Rekayasa Industri (East Kalibata, South Jakarta). Pupuk Indonesia Group PKBL Fund Distribution (in million rupiah) Company PT Pupuk Sriwijaya Palembang 6,867 12,962 44,307 38,542 PT Petrokimia Gresik 65,478 67,275 64,206 74,635 PT Pupuk Kujang 31,022 31,667 31,645 29,698 PT Pupuk Kalimantan Timur 29,661 20,074 21,873 32,826 PT Pupuk Iskandar Muda 3,766 1, ,569 PT Rekayasa Industri 7,563 5,141 5,319 5,590 The objective of Pupuk Indonesia s social responsibility program is to improve the welfare of surrounding communities, both through employment and local economic development. 80 PT Pupuk Indonesia (Persero) Sustainability Report 2017

88 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Pupuk Indonesia PKBL funds realized in 2017 amounted to Rp billion, up 9% from that in 2017 of Rp167.97million. A large portion of PKBL funds were allocated for Partnership Programs, amounting to Rp million, aimed at increasing the well-being of the community through employment and revenue increases. The remaining Rp54.29 million was realized to finance community development programs. Pupuk Indonesia Group PKBL Fund Distribution (in million Rupiah) PKBL PKBL Funding by Entity (in million Rupiah) Partnership Program 114, , , ,568 Community Development 30,153 31,563 34,700 54,293 Total 144, , , ,861 Social Performance (in billion Rupiah) Partnership and Community Development Program Financing CSR Financing Realization Customer Satisfaction Index 2016 Customer Satisfaction Index 2016 (commerce) Social Investment Fund Distribution of Pupuk Indonesia Group (in million Rupiah) Investment Activity Type Partnership Program (PK) 114, , , ,568 Community Development (BL) Program 30,153 31,563 34,700 54,293 CSR Program - 30,930 96,304 66,575 Total 144, , , ,436 PT Pupuk Indonesia (Persero) Sustainability Report

89 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies PARTNERSHIP PROGRAM One objective of the partnership programs is to develop small-scalled entrepreneurs in expanding employment and business opportunities, building and encouraging entrepreneurs in various sectors. The strategies and partnership programs of Pupuk Indonesia include: 1. Developing Micro-, Small- and Medium-Scalled Enterprises to become independent and solid businesses. 2. Providing soft loans to create employment opportunity and social independence. 3. Providing skills training to locals so that they can earn more revenue and consequently improve their livelihoods. The loans are channeled to partners in the partnership programs as it is deemed that they can not access banksourced capital, as under the un-bankable status. These loans had a very low interest rate, i.e. 6% flat per year. However, since the government regulation number PER-02/MBU/7/2017 has been put into effect on July 5, 2017 the interest became 3% per year of the initial loan balance for partners with new loans. Furthermore, Pupuk Indonesia provides capacity building programs free of charge in the forms of training, promotion of business output and provision of tools or equipment for business start ups. The partnership program loan funds are sourced from loan repayment funds which are recycled back into use. In 2017, the partnership program funds disbursed amounted to Rp 128,568 million, comprising small-scaled business loans amounting to Rp122,000 million and partnership development funds of Rp6,562 million. Partnership Program Funding Distribution 2017 (in million Rupiah) Small-scaled business loans 122,005 Partnership development funds 6,562 Total 128,568 There are 1,422 development partners throughout the operation locations of subsidiaries, where the agriculture sector accounts for the largest loan disbursement area. Partnership Funds Distribution of Pupuk Indonesia Sector-Wise (in million Rupiah) No Company Development Partner Loan Amount 1 Industry 63 3,393 2 Trading ,208 3 Agriculture ,662 4 Plantation 75 2,804 5 Fishery 29 2,579 6 Farming ,609 7 Services ,751 Total 1, , PT Pupuk Indonesia (Persero) Sustainability Report 2017

90 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Total of Pupuk Indonesia Group Development Partners Sector-Wise No Company Industry Trade Agriculture Plantation Fishery Farming Service Total 1,379 1,712 1,422 Total of Pupuk Indonesia Group Development Partners No Company PT Petrokimia Gresik PT Pupuk Kujang PT Pupuk Kalimantan Timur PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang PT Rekayasa Industri Total 1,379 1,712 1,422 As of the commencement of development partnership program in each entity, by year end 2017 total development partners over the years number 58,197, distributed in subsidiary operational locations with details as follows: Accumulated Number of Pupuk Indonesia Group s Development Partners as of 2017 No Company s.d Total s.d PT Petrokimia Gresik 7, ,864 2 PT Pupuk Kujang 4, ,681 3 PT Pupuk Kalimantan Timur 27, ,700 4 PT Pupuk Iskandar Muda 4, ,153 5 PT Pupuk Sriwidjaja Palembang 11, ,811 6 PT Rekayasa Industri 1, ,988 Total 56,775 1,422 58,197 PT Pupuk Indonesia (Persero) Sustainability Report

91 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Community Development Program The Community Development Program embodies the Company s social responsibility of improving the social condition of communities living in Pupuk Indonesia Group s surrounding areas. Funds distributed include grants in eight sectors as follows: 1. Assistance for natural disaster victims; 2. Education and training assistance; 3. Health improvement assistance; 4. Assistance for infrastructure and public facilities development 5. Religious facility assistance; 6. Environmental conservation assistance; 7. Social assistance in the form of poverty eradication; Community development funding distribution in 2017 amounted to Rp54,293 million, of which the largest portion was allocated to education and training as well as poverty eradication. education quality for the surrounding communities. This is based on the view that education is one of the essential issues in the improvement of the community welfare. That is why from 2007 to 2016, Pupuk Kalimantan Timur conducted the PKTPP scholarship program addressed to the communities in East Kalimantan. The beneficiaries of this program are basically senior high school students of Bontang and East Kalimantan with good academic records, yet not able to afford the tuition. The scholarships fully cover the enrollment fee of university up to graduation; this is aimed so that the students can obtain undergraduate degrees and eventually, find a job to improve the family s livelihood. The objectives of PKTPP implementation are: 1. Improving human resources quality of young people in East Kalimantan, particularly Bontang (education sector) 2. Providing opportunity for students with good academic records to be able to continue their education to university. Community Development Fund Distribution (in million Rupiah) No Usage of funds Percentage 1 Natural Disaster Victims 2, (77%) 2 Education/Training 9,611 11,210 17% 3 Health Improvement 2,678 3,773 41% 4 Infrastructure/Public Facilities 5,122 9,994 95% 5 Religious Facilities 5,810 7,789 34% 6 Environmental Conservation 1,220 0,925 (24%) 7 Poverty Eradication 4,106 20, % 8 Partnership Development 3,823-0% Total 34,700 54,293 56% Social Community Responsibility Program In 2017, PI Group conducted a number of activities related to economic and social community empowerment in accordance with the CSR program pillars of PI Group, including: 3. Fostering moral ties between Pupuk Kaltim and the communities surrounding the Company s operational areas. 4. As a concrete approach of Pupuk Kaltim s support, to create positive image in the eyes of the communities. Pupuk Kalimantan Timur Peduli Pendidikan Program Pupuk Kaltim Peduli Pendidikan (PKTPP) is a manifestation of the Company s concern with improving 84 PT Pupuk Indonesia (Persero) Sustainability Report 2017

92 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Total Scholarship Program Assistance of PKTPP No Total Students University Total Assistance 1 14 Universitas Gadjah Mada Rp85,525, Institut Teknologi Bandung Rp14,602, Institut Pertanian Bogor Rp83,570, Institut Teknologi Sepuluh Nopember Rp105,058, Universitas Airlangga Rp165,049, Universitas Padjajaran Rp78,502, STEI Tazkia Bogor Rp80,745, Institut Teknologi Kalimantan Rp26,510, Universitas Mulawarman Rp8,000,000 Total Rp647,563,154 Petro Scholarship (Bestro) Since 2012, Petrokimia Gresik has played an active role in distributing scholarships for senior high school and undergraduate students. The scholarships are given to the local people of Gresik and have assisted minimum 200 promising students who resided in the Ring 1 area to pursue their education at higher levels. In the first year of the Bestro program, the Company provided full coverage scholarships to graduated senior high school students to continue education to the tertiary level. The financing covers fees of public university selection (SNMPTN), registration fee, education contribution fee, pocket money, accomodation cost, tuition, school operational costs and cost to return to home. The scholarship is provided in stages every year. The cost is directly transferred to Bestro recipient s bank accounts, with clear details. The Company has set clear criteria for reference of the selection team in reviewing documents. The selected scholarship recipients are those deemed having above-average academic achievement and having the targeted economic condition. 1. Full Cover Undergraduate (S1) Scholarship The undergraduate scholarship distribution amounting to Rp1.92 billion is detailed as follows: - Cost for 29 students selected in 2014 totaled Rp816.3 million - Cost for 29 students selected in 2015 totaled Rp758.3 million - Cost for 8 students selected in 2016 totaled Rp191 million - Cost and university enrollment fee of 12 students selected in 2017 totaled Rp161.7 million [ed. Living cost is only food and apartment money. The title is Full Scholarship. This needs addressing.] 2. Full Cover Senior High School (SMA) Scholarship The senior high school scholarship distribution amounting to Rp 1.08 billion is detailed as follows: - Cost for 47 students selected in 2014 amounting to Rp211.5 million. - Cost for 50 students selected in 2015 amounting to Rp487.5 million. - Cost for 25 students selected in 2016 amounting to Rp225 million. - Cost for 25 students selected in 2017 amounting to Rp162.5 million. Kampung Sehat ( Healthy Kampong ) Petrokimia Gresik Kampung Sehat is one of the regular programs that demonstrate the Company s concern for the surrounding communities. In the provision of health assistance, PT Petrokimia Gresik cooperates with Petrokimia Gresik Hospital. Free medicines are provided monthly to the residents of eight villages in Ring 1 are the Company, PT Pupuk Indonesia (Persero) Sustainability Report

93 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies namely Ngipik, Sukorame, Karangturi, Karangpoh, Tlogopojok, Kroman, Lumpur, Roomo, Trate, Kebungson and Sukomulyo, as well as for nine villages in Ring 2.. The Kampung Sehat 2017 activity distributed Rp679 million for health assistance for communities in the Ring 1 area. their limitations. In addition to salary to participants in the productive phase, it is expected that business activities in Inkubator Bisnis Permata Bunda will be able to become additional financing sources for the operational of the Permata Bunda SLB (Special School), the majority students of which are qualified as coming from pre-prosperous families. Patient Visit Data Month Number of Villages Number of Patients January Feb March April May June July August September October November Decembe Number of Patients 9,166 Inkubator Bisnis Permata Bunda Inkubator Bisnis Permata Bunda (Women s Business Incubator Program) facilitates children with special needs to prepare them for independent life in the future. The program implemented under Inkubator Bisnis Permata Bunda is based on Sustainable Entrepreneurship Program for Those with Disabilities, namely continuous training of entrepreneurship skills. Inkubator Bisnis Permata Bunda does not only enable children with special needs to earn livelihoods by working, it also, with an integrated approach, empowers them to be able to maximize their potentials to be able to be creative by doing entrepreneurship. The goals of Inkubator Bisnis Permata Bunda program are that these children become independent and to make the children more acceptable in community s social life. These are realized through a productivity and creativity-based approach, so that the communities no longer see children with special needs remaining in a marginal position, or focusing only on Malahing Village Program A village situated over-looking the sea nearby Bontang City did not have any special attraction; now it possesses a unique charm that leads to a better hope. Malahing village is home to 52 families, whose livelihood had been far from the government s or the Company concern. In those days, the children had difficulties to access surrounding schools as the facilities and infrastructure were insufficient, and the locals knowledge and work skills were limited. PT Pupuk Kaltim (PKT) came in with its Partnership Program and Environmental Development (PKBL) Division and is striving to bring changes to Malahing Village, to become a place where the locals would have a better social and economic life. 86 PT Pupuk Indonesia (Persero) Sustainability Report 2017

94 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS From 2014 until present, PT Pupuk Kaltim, coordinated with the local government and has been actively involved the community to understand the challenges and needs they face. A variety of infrastructure development assistance projects were delivered by Pupuk Kalimantan Timur. Starting from assistance for SD (primary school) YPPI Malahing building renovation, school equipment, drying of seaweed, village gateway, garbage drum and seedling provision, floating deck, and public toilet, to name just a few. Activities of community empowerment such as training for capacity building have been organized. These include training in seaweed cultivation, repair of vessel machinery, culinary skills to process and package seaweed, sewing, entrepreneurship, online-based marketing and training for obtaining a household food industry certificate number. Out of these programs, the locals stopped seeing their life individually, but rather as communal living. In 2017, the Better Living in Malahing program achieved the first place in national-level CSR Awards category of social initiative organized by CSR Indonesia Magazine and Meprindo Communications. Better Living in Malahing is also one of the programs that brought PT Pupuk Kaltim to achieve Proper Emas awards in the Proper Awards Conferring 2017 by the Ministry of Forestry and the Environment. Kampung Hortikultura of Pusri Palembang Kampung Hortikultura, or Holticultural Village, covers two sub-districts, nine local districts and 26 neighborhood associations, with 377 beneficiaries, leading to the formation of five farming groups comprising 208 people. This program contributes to food security as the locals can produce their own food and even sell it to other communities. Fresh vegetables and fruits produced in Kampung Hortikultura have twice the vitamin and micro-nutrition compared to the products sold at supermarkets at the same prices. The food resulted from Kampung Hortikultura Kebumen Palembang is also proven safer, compared to industrial agriculture products, which undergo long travel to reach the market in the cities. Apart from that, Kampung Hortikultura Kebumen Palembang, located at the heart of Palembang City, preserves the natural resources and contributes to a healthy environment. Activities in Kampung Hortikultura Kebumen Palembangmay are regarded as a form of Urban Farming that balances the availability of healthy food. Besides, the activities have helped the Palembang habitants economy, with the 3E-based concept: ecology, education and economy. Bumn Hadir untuk Negeri For the SOE Success For the Country 2017 program in Jakarta Province, PT Pupuk Indonesia was trusted to hold the position as Chief State-owned enterprise (PIC); the four Co-PICs are PT Jakarta Industrial Estate Pulogadung, PT Kawasan Berikat Nusantara (Persero), PT Perusahaan Pengelola Aset (Persero) and PT Sarinah (Persero). The funds realized totaled Rp4,766 million, with implementation in four activities as follows: Republic of Indonesia Independence Day Commemoration sponsoring the flag ceremony Healthy Walk of 5 Km Veteran House Renovation for 48 homes Student exchange for 20 senior high schools and special schools from East Kalimantan to Jakarta. Bumn Hadir di Kampus PT Pupuk Indonesia collaborated in synergy with other state-owned enterprises (SOEs) in organising the SOE Success on Campus activity on October 28, 2017 at Sepuluh Nopember Technology Institute (ITS) Surabaya. This activity was aimed at providing an overview to the academic circles regarding national economic condition and SOEs strategic roles in the development of the national economy; and to bridge the SOEs and public universities who have professional human resources. The number of participants was 1,732 people. In the event, Pupuk Indonesia provided CSR assistance for Training Center of ITS Campus Surabaya amounting to Rp500 million and scholarship assistance amounting[ed. If this amount is part of the above scholarship detailed money, this should be stated here.] to Rp1,878 million from Pupuk Kaltim and Rp417 million from PT Petrokimia Gresik. PT Pupuk Indonesia (Persero) Sustainability Report

95 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies TESTIMONY OF PKBL BENEFICIARIES Partnership Program Mrs. Napsiyah, Amplang Aiko, Development Partner of Pupuk Kaltim I can live from this amplang business, thanks to the PKBL assistance of Pupuk Kalimantan Timur. The company has paid attention to me as a Development Partner situated in its buffer zone. Thank you Pupuk Kalimantan Timur. Mrs. Sri Rahayu, from Tondo Roso chips becoming goat farmer, development partner of Pupuk Kaltim At first I didn t have any idea of developing a business; but by becoming a Development Partner of PT Pupuk Kaltim I can finally have the capacity. Thanks to PT Pupuk Kaltim who has supported by providing work capital loans, training and production equipment assistance. Mrs. Painah, batik Sari Kenongo, development partner of Petrokimia Gresik Due to work capital loans from PT Petrokimia Gresik, with relatively longer period of repayment and affordable administration fee, I gain more profits. In addition, I received support in the training of financial management, production, intellectual property rights and e-commerce for Development Partner, also invited to participate in exhibitions both local and national level. Intan Sari, Intan Songket Mitra Binaan Pusri Palembang The assistance funds helped us a lot in increasing the number of fabric produced and marketing areas 88 PT Pupuk Indonesia (Persero) Sustainability Report 2017

96 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS Nasir Laka da, Chief of RT 30 Malahing We the villagers of Kampung Malahing, living directly on top of the sea, used to only think of how we can feed ourselves to survive. But with the presence of PT Pupuk Kalimantan Timur s PKBL program, we have been substantially assisted. We have received significant public facilities and broadening of knowledge so that we may develop ourselves with it. Siti Muzayah, Ketua Kelompok Kampung Holtikultura Kebumen From the aspect of CSR, the assistance distribution program of PT Pupuk Sriwidjaja Palembang for the residents of Kelurahan 2 Ilir Palembang for building Kampung Hortikultura is beneficial. CSR is a part of corporate responsibility which consists of social, economic and environmental aspects. As a form of community empowerment, this activity increases revenues for our households. Ngipik Headman, Kampung Sehat Kampung Sehat (Healthy Village) is very much needed by the communities living near the company, particularly in terms of medical treatment. Some examples of diseases that the habitants suffer from are acute upper respiratory tract infections and itches. Yet, these health problems can be addressed by Petrokimia Gresik. With the existence of free medical treatment on a routine basis, the locals can get to know the condition of their health and treat the disease suffered. It is expected that this activity will continue and be improved. PT Pupuk Indonesia (Persero) Sustainability Report

97 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies AWARDS Not only the communities that benefit from CSR programs convey their appreciation to Pupuk Indonesia, but also the government, the media and the general public. We could not have achieved these awards without a good cooperation between Pupuk Indonesia People and the many groups within the community. Therefore, Pupuk Indonesia would like to express a thank you for their recognition of Pupuk Indonesia. No Company Awards Date Organization Location Keterangan 1 PT Pupuk Sriwidjaja Palembang UNS Small Medium Enterprise s (SME S) Award Jul-17 UNS Research and Community Service Institution and Ministry of Cooperative & MSMEs SEBELAS MARET UNIVERSITY, Solo PKBL Implementing Agency The Best MSME Developer 2 PT Pupuk Indonesia (Persero) TOP CSR 05-Apr-17 Majalah Business News Indonesia Balai Kartini, Jakarta TOP CSR Improvement 2017 and TOP Leader CSR Commitment Awards PT Petrokimia Gresik TOP CSR on Nawacita 7: Regeneration Award PT Pupuk Sriwidjaja Palembang TOP CSR 2017 on Fertilizer Sector Award 90 PT Pupuk Indonesia (Persero) Sustainability Report 2017

98 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere EXCELLENT ENVIRONMENTAL PERFORMANCE TOP -NOTCH PRODUCTS No Company Awards Date Organization Location Keterangan 3 PT Pupuk Kaltim CSR Award 23-Feb-17 MEPRINDO (Media Pribumi Indonesia) 4 PT Pupuk Kaltim Proper Daerah 13-Jun-17 Pemprov. Kalimantan Timur Ballroom Golf Pondok Indah, Jakarta Gedung Olah Bebaya, Samarinda 2nd place for Cipta Guna Sehati Category, 3rd place for Cipta Karsa Mandiri Category, 1st place for Reka Karsa Sosial Category, 1st place for Didaktika Pratama Unggul Category, 1st place for Daya Karsa Pratama Category, 1st place for Karsa Budaya Prima Category Proper Daerah Tingkat Emas 5 PT Pupuk Kaltim ANRI Award 17-Agt-17 ANRI Hotel Mercure, Ancol - Jakarta 1st and 3rd place of Arsiparis Teladan Nasional Non-PNS 6 PT Pupuk Kaltim Anugerah Proper 2017 Award 18-Dec-17 Ministry of Forestry and the Environment Vice President Palace Gold Proper Title 7 PT Petrokimia Gresik Nusantara CSR 06-Sep-17 The La Tofi School of CSR Hotel Indonesia Kempinski, Jakarta Awards in 3 Categories: Community Economy Elevation, Community Education Level Improvement, Community Health Quality Improvement 8 PT Petrokimia Gresik Indonesia s Best SOE Subsidiary Aug-17 Indonesian Embassy in Singapore Organised by: Economic Review Magazine, Perbanas Institute, IPMI International Business School, Daya Makara UI, Indonesia-Asia Institute, Ideku Group 9 PT Petrokimia Gresik Anugerah Proper 2017 Award 18-Dec-17 Ministry of Forestry and the Environment Vice President Palace Green Proper Title 10 PT Petrokimia Gresik Green Industry Award 21-Dec-17 Ministry of Industry Gedung Kemenperin Level-5 Green Industry PT Pupuk Indonesia (Persero) Sustainability Report

99 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies ATTAINING A HEALTHY WORK ATMOSPHERE 92 PT Pupuk Indonesia (Persero) Sustainability Report 2017

100 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS Occupational Health and Safety Safe Working Hours OHS Targets Employee Representation in Ohs Issue Contractors and Occupational Safety Ohs Training and Meetings Healthcare for Employees Our objective is creating a healthy, safe and conducive work atmosphere. The highest standards of occupational health and safety are necessary to support company performance, reduce unnecessary loses and protect the Company s most valuable asset - its workers. Every type of business is exposed to risks. Manufacturing companies, including Pupuk Indonesia, are particularly exposed to risks, as the business involves chemical processing and machinery. We are committed to maintaining a healthy and safe work environment for each of our workers. Prioritize safety, is our slogan. That is the reason why we provide full-fledged health equipment and maintain this in good condition, to ensure good functioning upon needed usage Apart from that, through a variety of training practices, we build a culture of health and safety among the workers, emphasizing the importance of all workers taking good care of each other, so that they come home safe every day. OCCUPATIONAL HEALTH AND SAFETY Most of accidents during work are due to a human factor. For this reason, Pupuk Indonesia upholds high standards of Occupational Health and Safety (OHS). We set strict procedures and apply management of OHS in all subsidiaries of Pupuk Indonesia. These procedures meet the standards set by the Indonesian government, alongside the best practices that we apply such as Behavioral Based Safety and Process Safety Management. Behavioral Based Safety (BBS) is a proactive accident prevention effort that focuses on preventing dangerous behavior that may trigger an accident. BBS uses PT Pupuk Indonesia (Persero) Sustainability Report

101 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies psychological approach to promote occupational safety culture by involving all employees. This includes encouraging employees to make a list and collect data on safe and non-safe practices that are on-going in the Company. Based on the results of such observations, a team comprising employees performs analysis and builds an action plan, all aimed to continue increasing occupational health and safety practices towards zero accidents. Process Safety Management (PSM) refers to management principles and systems which identify and control the danger due to production processes, as part of the protection efforts in work areas. While Bila Behavioral Based Safety (BBS) focuses on human factors of the employees, PSM is directed more to work processes. PSM contains guidelines on work processes such as the process of hazardous substance handling, proper equipment maintenance and operations, and work procedure change management. Every subsidiary of Pupuk Indonesia also undertakes periodic measurement, evaluation and reporting on OHS performance. We run leading indicator measurements, i.e. periodic proactive measurement and reporting on specific actions taken to prevent occupational accidents. We furthermore measure the lagging indicator, that is a measurement on assessing past safety performance. [ed. the definition of lagging indicator does not match, if lagging indicator is the English term.] Such effective measurement and evaluation is beneficial in the efforts to improve OHS system and management and ensure compliance with OHS regulation. It is expected that, being in a safe and comfortable work environment, the employees will perform their work without undo worry [ed. It is required that employees have some worry, as no concern itself leads to accidents.] and in turn will perform their tasks well. SAFE WORKING HOURS [GRI 403-2] In 2017, Pupuk Indonesia recorded one fatal occupational accident, occurring at subsidiary PT Petrokimia Gresik. Pupuk Indonesia deeply regrets this accident and the OHS team addressed the situation immediately, evaluated thoroughly the causes of the accident, and provided recommendations of improvements to prevent similar accident from occurring in the future. In order to overcome this, Pupuk Indonesia has taken improvement efforts, namely more intensive briefs to employees, to ensure that BBS and PSM, as well as all OHS procedures, are internalized and well-observed by the employees. Hazard Operability Studies (HAZOP) are applied to identify and map potential dangers arising from any changes that take place in the factory or in modified or improved processes. A Job Safety Analysis (JSA) lists the tasks, the dangers and the measures to control them reemphasizes the need for vigilance. Not only does JSA help prevent occupational accidents, but it also protects work equipment from damage, and consequently improves work productivity. Pupuk Indonesia also ensures the availability of all required APD, or Personal Protective Equipment, and that every employee works with the proper work permit. In addition, the Company also rigorously and consistently holds training and communicates regarding dangers in the work environment. In terms of occupational accidents, the Company meets all obligations to the workers and families. 1. Compensation for 60% x 80 months of wages 2. Compensation of Rp200,000/month for 24 months 3. Funeral cost of Rp2,000, Additional work accident-related severance pay in accordance with the Collective Bargaining Agreement in the pertinent business unit. 94 PT Pupuk Indonesia (Persero) Sustainability Report 2017

102 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS All coverage are in accordance with PP No. 84/2010, paid through BPJS Ketenagakerjaan. On top of the compliance to the government regulations, the Company provides additional severance pay to alleviate the burden of the affected family. Information on safe working hours is as follows. Safe Working Hours Unit Bisnis PT Petrokimia Gresik 13,257,604 17,335,631 5,460,859 PT Pupuk Kujang 20,086,145 1,071,082 4,923,428 PT Pupuk Kalimantan Timur 16,216,380 7,925,132 6,774,477 PT Pupuk Iskandar Muda 17,804,920 3,066,262 3,569,493 PT Pupuk Sriwidjaja Palembang 43,960,974 8,365,597 6,319,427 Key Performance Indicators K3 Pupuk Indonesia Group in 2017 Unit Bisnis LTI LTIFR Medical Treatment RWDC TRIR PT Petrokimia Gresik PT Pupuk Kujang PT Pupuk Kalimantan Timur PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang Number of Accident Events in Subsidiaries of PT Pupuk Indonesia (Persero) Unit Bisnis Low Middle Heavy Fatality Total 2017 Head Office PT Petrokimia Gresik PT Pupuk Kujang PT Pupuk Kalimantan Timur PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang Kantor Pusat PT Petrokimia Gresik PT Pupuk Kujang PT Pupuk Kalimantan Timur PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang Kantor Pusat PT Petrokimia Gresik PT Pupuk Kujang PT Pupuk Kalimantan Timur PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang PT Pupuk Indonesia (Persero) Sustainability Report

103 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Injury Rate in PT Pupuk Indonesia (Persero) Subsidiaries [GRI 403-2] PT Petrokimia Gresik PT Pupuk Kujang PT Pupuk Kalimantan Timur PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang Note: Injury rate: Number of hours lost per 1 million working hours Compared to last year, generally speaking, the level of low, middle and heavy injury at Pupuk Indonesia s subsidiaries in 2017 went up at 50%. As per its definition, low injury is an accident that only requires minor aid, or first aid, and does not cause lost day. Middle injury is an accident that causes lost days not more than 21 calendar work days and does not inflict the lost of body function. While heavy injury is accident that causes lost days more than 21 calendar work days, or that causes the lost of body parts of function. 96 PT Pupuk Indonesia (Persero) Sustainability Report 2017

104 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS OHS TARGETS Not setting clear targets would make a company unable to create an appropriate and effective strategy. Pupuk Indonesia is committed to the establishment of clear OHS targets every year. For 2017, our main OHS targets is achieving zero accidents. EMPLOYEE REPRESENTATION IN OHS ISSUE In relation to the monitoring of OHS application, the Company along with its employees joined in the formation of Committees for the Development of HSE (P2K3), working together to ensure compliance with OHS systems, procedures and strategies. A P2K3 team is formed in every subsidiary of Pupuk Indonesia and is comprehensively coordinated by Pupuk Indonesia head office. Employee Representation in P2K3 Company Representation PT Pupuk Iskandar Muda 12% PT Pupuk Sriwidjaja Palembang 12% PT Pupuk Kujang 12% PT Petrokimia Gresik 12% PT Pupuk Kalimantan Timur 12% PT Rekayasa Industri 12% earing in mind the importance of OHS to the employees, the Company ensures the inclusion of OHS articles in the Collective Bargaining Agreement. Therefore both the Company and the employees fully participate in OHS application and monitoring. This active participation will expectedly bring about good OHS application and monitoring. Pupuk Indonesia and its employees also agree to enter into a Collective Bargaining Agreement (PKB) to ensure the representation and protection of all employees of the Company. The percentage of employees represented by P2K3 may vary from time to time in every subsidiary. The representation percentages for 2017 are as follows: [GRI 403-1] Of all the 72 articles of the PKB, six, or about 8%, concern OHS issues. The subjects discussed are core subjects regarding occupational safety related to employees, including: [GRI , GRI 403-4] Aspects of OHS Collective Bargaining Agreement Article in PKB OHS Aspects Chapter XII Article 52 Chapter XII Article 53 Chapter XII Article 54 Chapter XII Article 55 Chapter XII Article 56 Chapter XII Article 57 General HSE Aspects Working Attire Working Equipment Health and Safety Protective Equipment Inspection of Safety Equipment Work Health PT Pupuk Indonesia (Persero) Sustainability Report

105 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies CONTRACTORS AND OCCUPATIONAL SAFETY In carrying out its operations, Pupuk Indonesia involves workers coming from labor suppliers. However, we ensure that each contractor has the same Occupational Health and Safety standards as those of Pupuk Indonesia. Every contractor must meet the requirements stated in the Contractor Safety Management System (CSMS), which comprises health, safety and environment issues. Some of the issues we focus on are: 1. Contractors have official permits as a valid company and have skills in the relevant fields. 2. Contractors meet the occupational health and safety requirements and are compliant with the applicable OHS rules and regulations. 3. Contractors meet the required technical requirements and all workers have certifications in their jobs. Pupuk Indonesia regularly holds OHS campaigns for all workers, including those from the contractors. We organize training with the aim to raise contractor awareness of and commitment to OHS. OHS TRAINING AND MEETINGS In order to ensure OHS application, in 2017, Pupuk Indonesia held training and meetings to discuss OHS application and evaluation. Training sessions are held at every subsidiary of Pupuk Indonesia at management level and worker level. Meanwhile, meetings on OHS are held at every subsidiary, with presence of the Committee for the Development of HSE (P2K3), and ideally once a month. The P2K3 meeting frequency at each subsidiary of Pupuk Indonesia is as follows: Frequency of P2K3 Centralized Meetings in Company PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang PT Pupuk Kujang PT Petrokimia Gresik PT Pupuk Kalimantan Timur PT Rekayasa Industri Notes: P2K3 meetings discuss Health, Safety and Environment where the workers and the management s representatives are present and is chaired by a P2K3 chief. It is conducted once every three months at a minimum. In addition, to coordinate all OHS activities, Pupuk Indonesia holds joint meetings at its Head Office in Jakarta, where representatives of every subsidiary are present. One meeting was held in 2017, and issues like occupational accident rate, OHS application programs and accident prevention programs were discussed. HEALTHCARE FOR EMPLOYEES [GRI 403-3] The work environment of Pupuk Indonesia s subsidiaries is related to intensive contact with chemicals that may provoke health problems. That is why Pupuk Indonesia provides full-fledged health facilities for all Pupuk 98 PT Pupuk Indonesia (Persero) Sustainability Report 2017

COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS Indonesia s employees. One of the facilities is annual medical check-up for all employees.

106 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS Indonesia s employees. One of the facilities is annual medical check-up for all employees. In addition, for employees working under condition of being exposed to loud noise and chemical substance, audiometry and spirometry examinations are taken. Pupuk Indonesia Group provides a clinic in every Pupuk Indonesia factory, which contain facilities at generalclinic standards such as examination bed, first aid, ambulance and certified medical professionals. These clinics are for handling minor injury and for first aid in emergency situation. In case of necessity of further treatment and more advanced equipment, the clinics will refer the patients to hospitals nearby, with which they cooperate. Frequency of Medical Check-Up at PT Pupuk Indonesia High Risk Jobs Frequency of Medical Check-Up Coverage of Medical Check-Up Employee health examination Once a year Medical check up Employees exposed to loud noise Once a year Audiometry Employees exposed to air pollution Once a year Spirometry Pupuk Indonesia provides health security to all employees and their families in accordance with applicable company rules, including: 1. Corporate health insurance for emergency, in-patient and out-patient treatment 2. Vaccination and Immunisation 3. BPJS Kesehatan, or Workers Social Security Agency, service in accordance with governmental regulations. Employees are valuable assets to Pupuk Indonesia Group. Thus, their health is an important element that optimally supports the Company s performance. PT Pupuk Indonesia (Persero) Sustainability Report

107 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies EXCELLENT ENVIRONMENTAL PERFORMANCE 100 PT Pupuk Indonesia (Persero) Sustainability Report 2017

108 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS Optimization of Production Resources Challenges Ahead Energy Consumption Management of Water Utilization Standards and Methodologies Water Recycling Maintaining Biodiversity Emission Control Waste Management Policy Supervision Environmental Related Complaints Environmental Investment 2017 Compliance with Environmental Regulation Pupuk Indonesia Group has always been committed to the minimizing of external impacts of its activities by complying with all the applicable requirements and standards in the environment sector. Pupuk Indonesia is also committed to taking a part to protect Indonesia s biodiversity richness; this is one of the important aspects in the Company s production chain. All the commitment in environment sector is realized through a number of programs -- a concrete contribution to the Sustainable Development Goals. We recognize the impacts on the environment that are caused by the company. Therefore, we always strive to comply with the provisions and standards, norms and best practices that apply in the environment field. In addition, we also use beyond compliance approach primarily related to resource use efficiency, waste minimization, biodiversity protection, and community development. The development of each project is carried out by first fulfilling an environmental permit that requires an Environmental Impact Assessment (AMDAL) or Environmental Monitoring and Management (UKL UPL) documents. [GRI ] We have made various efforts to improve the environment quality, among others through the implementation of the following policies: Implementing Environmental Management System (ISO 14001); Applying the principle of reuse, reduce, recycle (3R) in operational activities; Prioritizing the choice of environmental friendly and energy-efficient process technology; PT Pupuk Indonesia (Persero) Sustainability Report

109 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Protection of Biodiversity; Following the Proper Program of the Ministry of Environment and Forestry as a means of evaluating the achievement of environmental performance. petrochemical products. Meanwhile, the construction of new urea plants is prioritized in increasing the efficiency of raw material consumption, rather than the addition of production capacity. Consistent efforts to implement these policies have been implemented so that several Subsidiary Companies of Pupuk Indonesia successfully obtained GREEN rating in the PROPER held by the Ministry of Environment and Forestry of the Republic of Indonesia. Pupuk Kaltim successfully achieved PROPER Gold rating. While Pupuk Sriwidjaja, Pupuk Kujang and Petrokimia Gresik scored PROPER Green. Optimization of Production Resources Policies of Pupuk Indonesia Group related to sustainability, particularly related to materials and energy, are implemented through eco-efficiency and plant revitalization. Business development is focused on improving efficiency and development to non-urea products, whether in the form of NPK fertilizers or other Challenges Ahead The main challenge we face especially in the energy field is the condition of the old plants which causes the high demand of gas consumption. This has an impact on higher production costs, resulting in less competitive product prices. To overcome this, the Company operates an efficiency program in factory operations and factory revitalization programs. The eco-efficiency program is, among other things, done by ensuring that each plant is operating well and getting regular maintenance so there is no unscheduled shutdown that can lead to energy wastage. Raw Materials - Natural Gas [GRI 301-1] Raw materials used in the production of fertilizers include natural gas (non renewable), air, and water (renewable). Total volume of gas used in the reporting period was 137,405 mmscf. Use of Gas Raw Materials No Company Pupuk Iskandar Muda 15, , , , Pupuk Sriwidjaja 33, , , , Kujang 14, , , , Petrokimia Gresik 9, , , , Pupuk Kalimantan Timur 53, , , , Total 127, , , , PT Pupuk Indonesia (Persero) Sustainability Report 2017

110 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS NPK product raw materials Pupuk Indonesia Group produces Nitrogen-based raw materials Urea (Carbonic diamide)and ZA (Amonium Sulfate) while P and K-based (Potassium) raw materials such as DAP, Phospate rock and KCL must be imported,asthey are not available domestically. Pupuk Indonesia has an NPK Plant which covers two processes:the NPK steam granulation process and NPK chemical process. NPK steam granulation is operated by PSP, PKC, PKG and Pupuk Kalimantan Timur; while the NPK Chemical process is operated by PKG. NPK Steam Granulation I. Petrokimia Gresik No Type of raw materials Use of NPK Raw Materials Number of NPK Raw Material (Ton) Urea 85, , , , ZA 60, , , , DAP 100, , , , Rock Phos 20, , , , KCl 143, , , , Clay 11, , , , II. Pupuk Kalimantan Timur No Type of raw materials Use of NPK Raw Materials Number of NPK Raw Material (Ton) Urea 36,483 32,759 20,107 24,569 2 ZA - 21,717 29,638 29,450 3 DAP 30,837 55,507 52,394 57,111 4 Rock Phospate (steam Granul) 15,555 6, ,739 6 KCl 37,723 50,913 48,102 49,985 7 Clay 21,095 30,833 25,321 22,306 III. Kujang No Type of raw materials Use of NPK Raw Materials Number of NPK Raw Material (Ton) Urea 12,085 25,737 21,551 35,924 2 ZA 1, ,678 3 DAP 13,146 30,992 30,806 58,355 4 Rock Phospate (steam Granul) 2, KCl 13,971 28,288 22,782 44,200 7 Clay 7,508 21,235 18,094 30,203 PT Pupuk Indonesia (Persero) Sustainability Report

111 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies IV. Pupuk Sriwidjaja Use of NPK Raw Materials No Type of raw materials Number of NPK Raw Material (Ton) 2014* 2015* Urea ,656 16,292 2 ZA DAP ,331 29,225 4 KCl ,513 22,614 5 Clay ,432 22,713 * belum beroperasi NPK Chemical I. Petrokimia Gresik Use of NPK Raw Materials No Type of raw materials Number of NPK Raw Material (Ton) Asam Fosfat 559, , , , NH3 263, , , , Asam Sulfat 397, , , , ZA 314, , , , Urea 44, , , , KCl 523, , , , Plant Revitalization Program The revitalization of old plants is done as a saving of the raw material of natural gas. Pupuk Indonesia Group is building thepusri 2B plant in Palembang and theamurea 2 plant in Gresik,as well as planning to expand capacity of the NPK plant in East Kalimantan. In addition, we also undertook a study for the development of a petrochemical project in Bintuni. To maintain the plant performance, we have implemented Plant Integrity Management System (PIMS) and Production Management System (Sistem Manajemen Produksi/SIMPRO). In addition, preventive, predictive and corrective maintenance measures are also taken to maintain the reliability and efficiency of the plant. The Company utilizes natural gas as raw material and energy source in fertilizer production process. Other energy sources used by Pupuk Indonesia are coal, electricity and fuel oil for transportation. This report separates the calculation of the volume of gas and other energy sources as product raw materials and the utilization of gas as an energy source. Calculation of gas consumption includes subsidiaries which are producing fertilizers. 104 PT Pupuk Indonesia (Persero) Sustainability Report 2017

112 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS Energy Consumption [GRI 302-1] Gas Consumption for Heating and Steam Business Unit Unit PT Petrokimia Gresik MMSCF 11,593 12,352 12,496 13,138 PT Pupuk Kujang MMSCF 7,119 7,645 6,420 7,161 PT Pupuk Kalimantan Timur MMSCF 6,862 8,254 7,414 7,085 PT Pupuk Iskandar Muda MMSCF 3,302,93 3,572,36 4,014,15 3,835,01 PT Pupuk Sriwidjaja Palembang MMSCF 14,213 13,599 13,763 11,333 Total 43,090 45,422 44,107 42,551 Gas consumption for steam and heating needs in Pupuk Indonesia Group in 2017 decreased by 2,156 MMBTU or 4.8% 44,107 mmscf in 2016 to 42,551 mmscf in As one of the production energy resources, natural gas is one of the main obstacles of the Company in 2017 which leads to a decrease in competitiveness. Natural gas prices for fertilizer producers in Indonesia are much higher when compared to natural gas prices in other countries. The average natural gas price of the Fertilizer Industry in Indonesia is USD5.2 per MMBTU, while the average natural gas price in competing countries is around USD per MMBTU. To overcome the obstacles of high gas prices, the Company implements a comprehensive efficiency and cost reduction program on non-gas costs. Coal Consumption Business Unit Unit PT Petrokimia Gresik PT Pupuk Kalimantan Timur Total Ton 286, , , ,967 GJ 7,039,840 5,150,171 6,369,531 5,273,141 Ton 609, , , ,226 GJ 11,155,049 11,856,306 11,372,915 9,496,483 Ton 896, , , ,193 GJ 18,194,889 17,006,477 17,742,445 14,769,624 Coal is used for energy sources and gradually to replace natural gas energy use for steam and heat. Coal is chosen because it is cheaper than natural gas. The calculation of coal use is based on the coal volume used by the subsidiaries producing fertilizer. The volume of coal being used is then converted into energy unit Giga Joule (GJ). In 2017, coal consumption in Pupuk Indonesia Group in general decreases by 2,972,822 GJ or 17% from 17,742,445 GJ in 2016 to 14,769,624 GJ in PT Pupuk Indonesia (Persero) Sustainability Report

113 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Efforts to Save Electricity Usage Business Unit Unit PT Pupuk Indonesia (Persero) kwh 125, , , ,826 GJ PT Petrokimia Gresik kwh 629,937, ,353, ,376, ,986,095 GJ 2,267,776 2,485,272 2,539,354 2,599,150 PT Pupuk Kujang kwh 19,957,000 19,030,000 29,606,000 41,018,000 GJ 71,865 68, , ,706 PT Pupuk Kalimantan Timur kwh 622,425, ,081, ,977, ,762,126 GJ 2,240,732 2,689,492 2,440,720 2,321,144 PT Pupuk Iskandar Muda kwh 46,993,500 54,752, ,190,560 70,088,680 GJ 169, , , ,319 PT Pupuk Sriwidjaja Palembang kwh 240,424, ,117, ,965, ,173,717 GJ 865, , ,070 1,019,417 Total kwh 1,559,864,156 1,761,511,217 1,755,302,134 1,761,287,444 GJ 5,615,523 6,341,452 6,319,110 6,340,667 The electricityusage calculation includes the Company s Head Office in Jakarta and its subsidiaries. The calculation method is based on the meter number shown and then converted using gigajoule energy unit (GJ). Electrical energy used is sourced from PT PLN (Persero) and self-generating operations. Efforts to Save Electricity Usage The Company through its subsidiaries perform various ways to save electricity usage, including: 1. Performing the usual lamps replacements with LED light bulbs for street lighting 2. Using a solar cell 3. Modify / replace the air conditioning equipment 4. Turning off power tools while not in use, and 5. Interconnecting of power plant network. Fuel Consumption Fuel consumption Business Unit Unit PT Petrokimia Gresik Liter 529, , , ,707 GJ 20,032 17,657 15,901 10,325 PT Pupuk Kujang Liter 398, , , ,371 GJ 15,399,40 14,498,40 9,132,56 8,860 PT Pupuk Kalimantan Timur Liter 913,058 1,137, ,225 1,154,307 GJ 35,609 44,360 35,889 45,018 PT Pupuk Iskandar Muda Liter 100, , ,943 72,454 GJ 4,033 4,354 4,419 2,912 PT Pupuk Sriwidjaja Palembang Liter 362, ,379,00 328,308,00 251, GJ 14, , , , Total Liter 2,303, ,503, ,014, ,981, GJ 89, , , , PT Pupuk Indonesia (Persero) Sustainability Report 2017

114 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS The calculation of fuel consumption forvehicles includes production and support activities throughout the subsidiaries. The calculation is based on the recording of fuel purchases and is converted using gigajoule energy unit (GJ). The Company also undertakes efforts to reduce fuel usage, among other means, the application of an official vehicle fuel quota system, the replacement of old service cars with more fuel efficiency, and the use of bicycles in some work areas. Reduction of Energy Consumption [GRI 302-4] Energy Efficiency Results (GJ) Company Pusri 6,543,282 7,041,098 7,212,538 4,645,471 Kujang 815,847 1,992,606 4,668,177 4,153,186 Petrokimia Gresik 865,445 1,470,993 1,359,351 2,284,076 Pupuk Kalimantan Timur 182, , , ,661 Total Absolute Energy Efficiency 8,406,643 10,813,614 13,607,875 11,526,394 Pupuk Indonesia Group has made various efforts to save energy through modification program and interconnection between plants in the production process so that they can save energy consumption. Replacement of light bulbs with solar cell, modification and cooling arrangements and use of energy saving lamps to reduce electricity consumption and modification of means of transportation to reduce fuel consumption. Standard calculation performed by comparing between before and after modification or compared with business as usual conditions. In the field of energy consumption, in 2017, Pupuk Indonesia implemented a number of strategic policies to maintain the Company s performance and competitiveness. One of these efforts is to increase efficiency, especially the efficient use of gas raw materials, through a number of steps, among others by increasing the reliability of plants[ed. If mentioned in another section, mention should just generally be made of reduced downtime, or some other type of efficiency measure also pointing the reader to that other section.] in order to reduce gas consumption, shut down old factories reduction of wasteful consumption of gas, and continuation of the fertilizer plant revitalization program. Another efficiency program that has a significant impact is the Cost Reduction Program for non-gas costs. Energy Intensity Ratio [GRI 302-3] Intensity of Gas Usage (Ammonia) MMCTU/Ton NH3 Business Unit MMBTU/Ton NH 3 PT Petrokimia Gresik PT Pupuk Kujang PT Pupuk Kalimantan Timur PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang Total PT Pupuk Indonesia (Persero) Sustainability Report

115 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Intensity of Gas Usage (Urea) Business Unit MMBTU/Ton Urea PT Petrokimia Gresik 25,21 25,33 24,88 25,11 PT Pupuk Kujang 30,8 30,3 30,0 29,7 PT Pupuk Kalimantan Timur 28,49 26,63 26,78 26,72 PT Pupuk Iskandar Muda 31,55 32,55 34,16 34,96 PT Pupuk Sriwidjaja Palembang 31,87 35,85 35,04 30,00 Total 28,02 30,19 29,88 28,67 The average intensity of gas consumption for the production of each ton of ammonia in 2017 reached MMBTU/Tton. The amount is decreased by 1.32 mmbtu / ton or 4% compared to 2016 which reached MMBTU / Tton. The decrease was caused by the energy efficiency program implemented that is the increase of asset utilization and the reduction of unscheduled shutdown frequency. Meanwhile, the average intensity of gas consumption for the production of each ton of urea in 2017 reached mmbtu / ton. The amount is decreased by 1.22 mmbtu /ton or 4% compared to the year 2016 reaching mmbtu /ton. The calculation of the energy intensity ratio above is done by calculating all energy consumption used as raw materials and used to generate steam and generate electricity for production purposes. The type of energy included in the calculation is the use of coal, electricity and natural gas used as energy. All data reported here is the ratio of energy intensity including the boundary within the company only. We do not report energy intensity outside the company. Management of Water Utilization [GRI 303-1] The fertilizer industry consumes significant amounts of water in its production processes, both for process and for cooling. The use of desalinated seawater for cooling is only carried out in PT Pupuk Kalimantan Timur. We measure water use efficiency by evaluating processes that require high water consumption, using flow meters and compared with targets. Water utilization is used for production process and domestic need of office and plant. Required water is obtained from surface water sources including seawater through the desalination process, ground water, rainwater, and wastewater preparations from recycled products. Water Resources Utilization (m3) Water Resources Groundwater Surface water (river) 6,389,477 6,286,000 6,085,010 5,871,679 Pupuk Rainwater Iskandar Muda Utilization of processed wastewater 19,030 19,320 77,615 57,027 Seawater (desalinated) Groundwater Surface water (river) 12,563,296 11,831,716 10,892,509 12,758,581 Pupuk Sriwidjaja Rainwater Utilization of processed wastewater 872, ,499 1,208,116 1,228,710 Seawater (desalinated) PT Pupuk Indonesia (Persero) Sustainability Report 2017

COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS Pupuk Kalimantan Timur PKC Petrokimia Gresik Total Water Resources 2014 2015 2016 2017 Groundwater

116 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS Pupuk Kalimantan Timur PKC Petrokimia Gresik Total Water Resources Groundwater 4,688,170 3,881,856 3,741,504 3,890,652 Surface water (river) Rainwater 4,050 3,155 3,600 3,750 Utilization of processed wastewater 8,401,687 12,385,320 10,021,455 10,760,500 Seawater (desalinated) 1,171,107,665 1,179,224,908 1,369,092,009 1,160,473,835 Groundwater Surface water (river) 9,196,811 9,427,381 8,417,150 9,509,220 Rainwater 1,790,474 1,797,821 1,912,027 1,051,069 Utilization of processed wastewater 1,055,580 1,299,984 1,035,428 1,209,397 Seawater (desalinated) Groundwater Surface water (river) 21,111,971 24,901,470 25,829,286 29,675,300 Rainwater Utilization of processed wastewater 6,298,301 6,581,520 8,941,680 9,701,723 Seawater (desalinated) Groundwater 4,688,170 3,881,856 3,741,504 3,890,652 Surface water (river) 49,261,555 52,446,567 51,223,955 57,814,780 Rainwater 1,794,524 1,800,976 1,915,627 1,054,819 Utilization of processed wastewater 16,647,554 21,174,643 21,284,294 22,957,357 Seawater (desalinated) 1,171,107,665 1,179,224,908 1,369,092,009 1,160,473,835 Standards and methodologies In general, the volume of water from various sources used by the subsidiaries of PT Pupuk Indonesia (Persero) in 2017 or decreased by 202,739,009 m3 or 14% compared to the year 2016 a decrease was caused by the Water Efficiency Program by Pupuk Indonesia Group, especially the use of seawater for the process at PT Pupuk Kaltim. PT Pupuk Indonesia (Persero) Sustainability Report

117 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Increased river surface water intake was experienced by all but one Pupuk Indonesia subsidiaries in PKG and PSP have increased because in 2017 is being done Pusri IIB project in PSP and Amurea II in PKG. However, this is offset by increased utilization of processed wastewater by PKG and PSP over the past four years. The process of taking and utilizing water from surface water sources is carried out under strict supervision including the use of seawater through the desalination process at PT Pupuk Kalimantan Timur. Pupuk Indonesia Group meets the water harvesting threshold requirements, as well as avoids the utilization of water from sources that have high biodiversity. Water recycling [GRI 303-3] Some of the water that has been used is then processed in a wastewater treatment plant (IPAL) facility. Some of the wastewater processed water is reused for the production process, while the rest is flowed into water bodies. In 2017 the volume of recycled water reaches 22,957,357 m3 or about 1.9% of total water use is recycled water calculated based on total recycled water usage of the Company compared to total surface water, groundwater and rainwater used for the process production. Periodic monitoring is carried out to ensure waste water quality meets the quality standards set by the authorities before being discharged. This is part of the implementation of Water Conservation Policy and Wastewater Pollution Reduction to maintain the healthof water sources. Thus, wastewater treated and then discharged into water bodies will not cause pollution or disrupt the biodiversity present in water bodies. Maintaining Biodiversity Pupuk Indonesia is committed to taking the role of protecting Indonesia s biodiversity as one of the important aspects in its production chain. Pupuk Indonesia manages biodiversity by identifying biodiversity potentials and then creating programs aimed at maintaining and enhancing biodiversity status. Pupuk Indonesia periodically monitors and evaluates the status of biodiversity in accordance with the programs set by each subsidiary. Planting Mangroves and Coral Reefs Since 2010, PT Pupuk Kalimantan Timur (Pupuk Kalimantan Timur) has been planting mangrove in Kedindingan Island, Bontang. Mangrove planting is a manifestation of the Company s commitment in synergy with the Government of Bontang City in rehabilitating the marine area around Kedindingan Island. Until the end of 2017, PT Pupuk Kalimantan Timur has planted 100,000 mangroves, with an area of six hectares. Now Kedindingan Island has become the location for breeding marine biota similar starfish, klomang and shellfish. Mangrove conditions also grow well, while replanting has been done for dead mangroves so that they remain sustainable. Other environmental conservation efforts in the marine field are transplantation or building of artificial reefs in the waters of Tobok Batang, Bontang. Until 2017 it was recorded that there were XXX of artificial reefs which were transplanted to the seabed. Now the waters in TobokBatangare growing soft coral, hard corals and various types of reef fish. PT Pupuk Kujang Biodiversity Park PT Pupuk Kujang is one of the subsidiaries that also participated in deer breeding. One type of deers that became the inhabitants of PT Pupuk Kujang are Chital (Axis axis). The deer were gifts from President Soeharto when he visited PT Pupuk Kujang in Chital came all the way from Bogor Palace. Initially, there were three imported deer. Today, there are tens deer and have become part of the fauna collection. 110 PT Pupuk Indonesia (Persero) Sustainability Report 2017

118 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS PT PupukKujang has been developing thepupukkujang Biodiversity Park since 2013, in an area of47.7 ha, or 39.75% of the total green area of PT PupukKujang. In managing this Bio-Park, the Company cooperates with the West Java Environmental Management Agency. Taman KeanekaragamanHayati is an area outside the conservation area built into a reserve of local biological resources and has a conservation function in accordance with applicable standards and regulations. Establishment of TKHPK as biodiversity park of West Java is based on West Java Provincial Environmental Agency (BLH Jabar) inventory. The survey conducted by BLH Jabar found 20 species of rare trees in TKHPK. The scarcity status is based on the BPLHD Jabar Expert Team Review. The number includes 22.5% of the total 89 species of rare trees that exist in West Java province. In the TKHPK area, there are several springs and small lakes or ponds, which are natural sources of water. The existence of springs and lakes shows that this area still has a good water regulatory function. The existing springs and lakes are utilized by the community for daily household needs. Thus PT Pupuk Kujang directly plays a role in providing water for the surrounding community. Emission Control As a fertilizer and petrochemical industry, the existence of Pupuk Indonesia Group--directly or indirectly-- contributes to emissions, both green house gas (GHG) and other emissions. GHG emissions, among others, result from fertilizer production activities. In addition, the use of fertilizer also contributes to GHG emissions. We are aware of this and therefore we strive to continually control the emissions resulting from our operations. Pupuk Indonesia Group GRK Emission Group [GRI 305-1] Business Unit Source PT Petrokimia Gresik IPPU 411, , , ,157 Energi 1,171,808 1,062,990 1,111,963 1,152,864 PT Pupuk Kujang IPPU 252, , , ,135 Energi 1,035,778 1,080, ,788 1,073,836 PT Pupuk Kalimantan Timur IPPU 1,065,668,30 1,734,400,28 1,580,965,09 1,397,131,54 Energi 3,963,793,85 4,218,136,38 3,218,595,93 3,071,707,50 PT Pupuk Iskandar Muda IPPU 103,072,91 107,791,30 88,976,86 69,341,53 Energi 164,259,35 197,585,51 151,300,80 123,786,22 PT Pupuk Sriwidjaja Palembang IPPU 484, , , ,562 Energi 2,543,693 2,438,146 2,397,573 2,041,492 Total 11,196,248 12,025,909 10,695,516 10,061,013 In 2015, the Company continues its GHG emission control program by standardizing GHG emission calculation. In addition, GHG emission calculation are done computerized and no longer manual. This makes GHG emission calculation more accurate. The Tier 1 emissions calculation method is based on the IPCC method to calculate the emissions generated from production activities. The calculation is done by internal company. GHG emission calculation performed includes direct GHG emissions (Scope 1), derived from production activities in producing fertilizer subsidiaries. Total GHG emissions PT Pupuk Indonesia (Persero) Sustainability Report

119 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies (Scope 1) in 2017 reached or decreased a total of 634,503 tonnes of CO 2 eq or 5.9% from 2016 which reached ton CO 2 eq. The decrease is due to a decrease in total energy intensity in both the ammonia plant and the urea plant. Indirect GHG Emissions [GRI 305-2] Business Unit PLN Electricity Consumption kwh Ton CO 2 Eq PLN Electricity Consumption kwh Ton CO 2 Eq PLN Electricity Consumption kwh Ton CO 2 Eq PLN Electricity Consumption kwh Ton CO 2 Eq PT Petrokimia Gresik PT Pupuk Kujang PT Pupuk Iskandar Muda 97,057,611 71,920 67,722,334 50,182 95,762,921 70,960 97,768,000 72,446 19,957,000 14,469 19,030,000 13,797 29,606,000 21,464 41,018,000 29,738 3,435,690 1,590 3,817,994 2,173 3,168,000 2,619 3,435,690 2,356 Total 117,014,611 86,389 86,752,334 63, ,368,921 92, ,786, ,184 Only three of Pupuk Indonesia Subsidiaries use electricity from PT PLN, namely Petrokimia Gresik, Pupuk Kujang and Pupuk Iskandar Muda. The electricity needs of Pupuk Kaltim and Pupuk Sriwidjaja Palembang can be fulfilled by the generators themselves. The calculation of indirect GHG emission loads in Pupuk Indonesia and a number of subsidiaries is based on the use of electricity sourced from the supplier, PT PLN and measured by grid in each location. The base year used is 2010, in accordance with the agreement with the Ministry of Industry as leading emissions sector. The sources of GHG emission and emission factors used are IPCC and monitoring guidance, evaluation and reporting of BAPPENAS with GWP CO 2 = 1, CH 4 = 21, and N 2 O = 310. Emissions Intensity [GRI 305-4] GHG emission intensity is calculated as GHG emission generated for every ton of urea fertilizer production. GHG emission intensity in 2017 is 1.47 tons CO2eq / ton of urea fertilizers derived from the production process and energy use.. GHG Emission Reduction Program GRK Emission Reduction Program [GRI 305-5] Reduction Result (in tons CO 2 eq) Uses for urea raw materials 309, , , ,939 Raw Material Reduction ZA II 73,851 62,962 57,619 67,989 Liquid CO2 production 23,831 26,231 23,588 5,092,614 Total 407, , , ,020 As a follow-up to the identification of GHG emission sources and GHG emission accounting, Pupuk Indonesia Group has made various efforts to reduce GHG emissions, among others by saving energy and reusing CO 2 as a product raw material. 112 PT Pupuk Indonesia (Persero) Sustainability Report 2017

120 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS Based on the emissions reduction program results, in 2017 the company was able to reduce direct emissions generated by 13,934 ton CO2eq. The gases included in this calculation are CO2, CH4, and N2O, with the base year of calculation being 2010 as agreed with the Ministry of Industry as a leading sector of greenhouse gas emissions. The calculation is performed by taking direct measurements of raw materials with measuring instruments, as well as using the average carbon uptake assumption of each tree for calculating the yield of the greening program. Other Emission Controls [GRI 305-7] In addition to GHG emissions, Pupuk Indonesia Group also manages and controls other emissions. The emission types that are managed and controlled in accordance with Minister of Environment Decision No. 133 of 2004 on Emission Quality Standard for Fertilizer Industry Activities. Calculations based on concentration of compound with flow rate and operating time.during 2017, PI and its subsidiaries did not receive a sanction for violating limits for emissions release. I. PT Pupuk Iskandar Muda Other Air Emission No Emission Source Parameter Ton Primary Reformer NOx Ton SO2 Ton WHB / GTG NOx Ton Priling Tower/ Granulasi Total Partikulat Ton NH3 Ton Boiler Total Particulate Ton 0,00 0,00 0,76 3,23 SO2 Ton 1,04 6,44 1,77 1,37 NO2 Ton 38,75 70,89 89,71 55,11 II. PT Pupuk Kujang Other Air Emission No Emission Source Parameter Unit Primary Reformer NOx Ton SO2 Ton WHB / GTG NOx Ton Priling Tower/ Granulasi Total Particulate Ton NH3 Ton Boiler Total Particulate Ton SO2 Ton NO2 Ton Scrubber NPK Total Particulate Ton Fluor Ton Amoniak Ton PT Pupuk Indonesia (Persero) Sustainability Report

121 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies III. PT Petrokimia Gresik Other Air Emission No Emission Source Parameter Unit Primary Reformer NOx Ton WHB / GTG NOx Ton Priling Tower/ Granulasi Total Particulate Ton NH3 Ton Boiler Total Particulate Ton SO2 Ton NO2 Ton Chimney BB Total Particulate Ton SO2 Ton NO2 Ton Scrubber NPK Phonska I Total Particulate Ton Amoniak Ton Fluor Ton Scrubber NPK Phonska II Total Particulate Ton Amoniak Ton Fluor Ton Scrubber NPK Phonska III Total Particulate Ton Amoniak Ton Fluor Ton Scrubber NPK Phonska IV Total Particulate Ton Amoniak Ton Fluor Ton Scrubber NPK Granulasi I Total Particulate Ton Amoniak Ton Fluor Ton Scrubber NPK Granulasi II Total Particulate Ton Amoniak Ton Fluor Ton Scrubber NPK Granulasi Total Particulate Ton III Amoniak Ton Fluor Ton Scrubber NPK Granulasi Total Particulate Ton IV Amoniak Ton Fluor Ton Pupuk Fosfat 14 Ball mill Total Particulate ton Unit reaksi Total Particulate ton Fluor ton Unit Granulasi Total Particulate ton Fluor ton Asam Fosfat 17 Ball Mill Total Particulate ton Fume Scrubber Fluor ton Gas Scrubber (Pabrik Total Particulate ton AlF3) 20 Asam Sulfat Fluor ton SO2 ton Dust scrubber (cement Total Particulate ton retarder) Fluor ton PT Pupuk Indonesia (Persero) Sustainability Report 2017

122 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS IV. PT Pupuk Kalimantan Timur Other Air Emission Emission Source Parameter Unit Primary Reformer NOx Ton 397, ,78 537,29 75,47 SO2 Ton WHB / GTG NOx Ton 61,54 146,38 531,31 70,31 Priling Tower/ Granulasi Total Particulate Ton 136,17 295,54 556,09 666,43 NH3 Ton 462,24 707, , ,11 Boiler SO2 Ton 37,49 18,17 28,20 12,97 NO2 Ton 36,90 93,67 44,35 18,09 Chimney BB Total Particulate Ton 54,35 37,92 15,39 47,30 SO2 Ton 820, ,41 918,83 898,07 NO2 Ton 411,78 203,56 68,91 20,70 Scrubber NPK Total Particulate Ton 9,35 12,56 12,43 8,62 Fluor Ton 0,00 0,00 0,01 0,02 Amoniak Ton 32,03 46,94 65,94 31,19 V. PT Pupuk Sriwijaya Palembang Other Air Emission No Emission Source Parameter Unit Primary Reformer WHB / GTG NOx Ton 154, SO2 Ton NOx Ton Priling Tower/ Granulasi Total Particulate Ton NH3 Ton Boiler Total Particulate Ton SO2 Ton NO2 Ton PT Pupuk Indonesia (Persero) Sustainability Report

123 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Waste Management [GRI 306-4] The Company is very concerned about environmental factors in running the company s operations. Environmental management and industrial wastes are very much appreciated, and it was proven in 2017 that one of our subsidiaries had achieved Proper emas rating and our three subsidiaries have achieved the Proper Green rating from the Ministry of Environment. Both liquid waste and solid waste are inevitable waste products in the production of fertilizers, insignificant amounts and withsignificant impacts if not wellmanaged.strict supervision from the government makes this aspect especially important to the Company. Pupuk Indonesia ensures the management of liquid waste and solid waste generated remains in accordance with the quality standards and regulations set by the Government. During 2017, PI and its subsidiaries received no sanction from the government due to waste releases exceeding regulation. Pupuk Indonesia regularly monitors the quality and quantity of liquid and solid waste to ensure liquid waste and solid waste generated in accordance with the quality standards stipulated by the government. Pupuk Indonesia regularly monitors the quality and quantity of liquid and solid waste to ensure liquid waste and solid waste generated in accordance with the quality standards stipulated by the Government. The production process of Pupuk Indonesia generates B3 and Non-B3 waste. The generating waste is then managed in accordance with the provisions applicable by a third party except the following generated B3 wastes produced by PT Pupuk Kalimantan Timur: laboratory waste, laboratory packaging waste and cotton waste which are incinerated by PT Pupuk Kalimantan Timur. Waste management and processing in this report includes the producing fertilizer subsidiaries. Each subsidiary is equipped with a waste management installation. Data of Liquid Waste of PT Pupuk Indonesia (Persero) Subsidiaries [GRI 306-1] Liquid waste from each subsidiary are monitored and measured monthly. Measurements are carried out by KAN-accredited laboratories using the SNI-compliant method of sampling liquid waste and liquid waste analysis methods or other standards. I. PT Petrokimia Gresik chanelled to Java Sea Pollution Load Data (Kg / Ton) No Parameter ph 7,108 7,512 7,462 6,903 2 COD 0,086 0,088 0,027 0,015 3 TSS 0,068 0,088 0,028 0,057 4 Minyak Lemak 0,000 0,000 0,000 0,000 5 Amoniak Total 0,303 0,306 0,135 0,307 6 TKN 0,400 0,355 0,178 0,404 7 Flour 0,001 0,000 0,001 0, PT Pupuk Indonesia (Persero) Sustainability Report 2017

124 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS II. PT Pupuk Iskandar Muda - chanelled to Malacca Strait Pollution Load Data (Kg / Ton) No Parameter ph 9,134 8,908 9,508 9,308 2 COD 0,236 0,254 0,329 0,363 3 TSS 0,029 0,009 0,090 0,023 4 Minyak Lemak 0,000 0,000 0,002 0,000 5 Amoniak Total 0,285 0,105 0,287 0,336 6 TKN 0,546 0,228 0,528 0,599 III. PT Pupuk Sriwidjaja Palembang - chanelled to Musi River Pollution Load Data (Kg / Ton) No Parameter ph 8,696 8,872 8,958 9,408 2 COD 0,108 0,096 0,117 0,144 3 TSS 0,067 0,077 0,063 0,076 4 Minyak Lemak 0,009 0,010 0,017 0,027 5 Amoniak Total 0,213 0,217 0,148 0,087 6 TKN 0,393 0,507 0,368 0,426 IV. PT Pupuk Kalimantan Timur - chanelled to Makassar Strait Pollution Load Data (Kg / Ton) No Parameter ph 8,483 8,628 8,628 8,582 2 COD 0,141 0,128 0,137 0,149 3 TSS 0,005 0,007 0,007 0,004 4 Minyak Lemak 0,001 0,002 0,001 0,001 5 Amoniak Total 0,136 0,333 0,193 0,243 6 TKN 0,144 0,367 0,262 0,328 PT Pupuk Indonesia (Persero) Sustainability Report

125 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies PT Pupuk Kujang - chanelled to Cikaranggelam River Pollution Load Data Kg / Ton (except ph) No Parameter Pollution Load Data of kg / ton (except ph) ph 8,729 8,329 8,683 8,225 2 COD 0, TSS 0, Minyak Lemak 0, Amoniak Total 0, TKN 0, Toxic and Hazardous (B3) waste Pupuk Indonesia Group strives to reduce B3 waste generated and uses B3 waste that can still have economic value. The program of reducing and utilizing B3 waste is undertaken by, among others: reducing primary reformer catalysts, replacing B3 with Non-B3 materials, utilizing gypsum and coal ash and working with B3 waste users that hold license from the Ministry of Environment and Forestry. The B3 waste management is carried out in accordance with the processing permit standards of the Ministry of Environment and Forestry, including air emission standard and combustion of at least 99.99%. Initially, B3 waste generated by the company will be transported by land and sea transportation modes with a transport that already has a transport permit from the Ministry of Environment and Forestry with the assistance of the Ministry of Transportation. Then, B3 waste is processed by means of thermal / kiln using licensed B3 waste beneficiaries. In the scope of Pupuk Indonesia Group, only PT Pupuk Kalimantan Timur has thermal B3 waste processing license for certain B3 wastes, including used cotton waste, laboratory liquid waste, and chemical packaging waste. Data of B3 waste of PT Pupuk Indonesia (Persero) Subsidiaries I. PT Pupuk Sriwidjaja Palembang Total Waste B3 No. Type of B3 Waste Unit Engine lubricant waste Ton Laboratory waste Ton Laboratory waste Ton Used cartridges Ton Used cells Ton Used TL bulbs Ton Rags Ton Used resin Ton PT Pupuk Indonesia (Persero) Sustainability Report 2017

126 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS No. Type of B3 Waste Unit Used active carbon Ton Used packaging Ton Electronic waste Ton Expired chemical substances Ton Used lubricant filters Ton B3-contaminated soil Ton Used catalyst tubes Ton Used air filters Total Ton II. PT Pupuk Iskandar Muda Total Waste B3 No. Type of B3 Waste Unit Engine lubricant waste Ton Laboratory waste Ton Laboratory waste Ton Used cells Ton Used TL bulbs Ton Rags Ton Used resin Ton Total Ton III. PT Pupuk Kujang Total Waste B3 No. Type of B3 Waste Unit Engine lubricant waste Ton Used catalysts Ton Used cells Ton Used TL bulbs Ton Rags Ton Used resin Ton Used active carbon Ton Used air filters Ton Expired chemical substances Ton PT Pupuk Indonesia (Persero) Sustainability Report

127 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies No. Type of B3 Waste Unit Solvents Ton Used raw materials Ton CuAlCl4 slag Ton Glass woll Ton Gas mask filters Ton Molsieve Ton Used Battery Ton AMDEA waste Ton Total Ton IV. PT Pupuk Kalimantan Timur Total Waste B3 No. Type of B3 Waste Unit Used cells Ton Laboratory waste Ton Incinerator ash *) Ton B3-contaminated waste Ton B3 packaging/laboratory packaging waste Ton Used lubricants Ton Resin/ion exchanger waste Ton Used cartridges and toners Ton Used TL bulbs and mercury bulbs Ton Printed circuit boards Ton Used air contamination control filters Ton B3-contaminated rags Ton Active carbon Ton Used catalysts Ton Used batteries from electronic appliances Ton Isolation material containing asbestos Ton Steel slag Ton Used refractories Ton Fly ash & bottom ash Ton Total Ton PT Pupuk Indonesia (Persero) Sustainability Report 2017

128 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS V. PT Petrokimia Gresik Total Waste B3 No Type of B3 Waste Unit Engine lubricant waste Ton Laboratory waste Ton Used catalysts Ton Used cartridges Ton Used cells Ton Used TL bulbs Ton Rags Ton Fly ash & bottom ash Ton 11,531 8,049 9,675 8,281 9 Expired chemical substances Ton Contaminated sawdust Ton Gypsum Ton 561,450 1,040,338 1,720,941 1,727, Chalk Ton 154, , , , Alumina ball Ton Total Ton 727,870 1,353,725 2,242,257 1,882,069 PT Pupuk Indonesia (Persero) Sustainability Report

129 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Non-B3 Waste Non-B3 waste in the form of organic waste made compost, paper waste, and non-organic waste partly recycled and sent to landfill. [GRI 306-2] Generated non-b3 waste Business Unit Type of Waste Unit PT Petrokimia Gresik Organic waste Ton 5,271 4,508 4,020 3,464 Non-organic waste Ton 5,471 4,736 4,068 3,501 Paper waste Ton PT Pupuk Kujang Organic waste Ton 971 1, Non-organic waste Ton Paper waste Ton PT Pupuk Kalimantan Organic waste Ton Timur Non-organic waste Ton 3, ,914 4,200 Paper waste Ton PT Pupuk Iskandar Organic waste Ton 1,524 1, Muda Non-organic waste Ton Paper waste Ton PT Pupuk Sriwidjaja Organic waste Ton 1, Palembang Non-organic waste Ton 1,991 1, Paper waste Ton Business Unit PT Petrokimia Gresik PT Pupuk Kujang PT Pupuk Kalimantan Timur PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang Managed non-b3 waste Type of Waste Unit Descriptions Organic Ton 2,022 3,173 3,343 2,841 Composting waste Non-organic Ton 1,540 1,474 1,525 1,400 Recycle waste Paper waste Recycle Organic Ton Composting waste Non-organic Ton Recycle waste Paper waste Ton Recycle Organic Ton Composting waste Non-organic Ton Recycle waste Paper waste Ton Recycle Organic Ton Composting waste Non-organic Ton Recycle waste Paper waste Ton Recycle Organic Ton Composting waste Non-organic Ton Recycle waste Paper waste Ton Recycle *) A table with blank numbers means directly in the landfill to a third party 122 PT Pupuk Indonesia (Persero) Sustainability Report 2017

130 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS Policy Supervision [GRI 307-1] Survey of Environmental Satisfaction To see the public response to the role and contribution and corporate social responsibility, the assessment of environmental satisfaction, especially to the surrounding community, is conducted. The Environmental Performance Indicator or Key Performance Indicator (KPI) of Pupuk Indonesia Group management in 2017 showed the following results: Result of Environmental Satisfaction Survey 2016 Company Number of respondents Score Level of Satisfaction PT Pupuk Iskandar Muda ,30 Highly satisfied PT Pupuk Kalimantan Timur ,53 Highly satisfied PT Pupuk Sriwidjaja Palembang ,50 Highly satisfied PT Petrokimia Gresik ,10 Highly satisfied PT Pupuk Kujang Cikampek ,51 Highly satisfied PT Rekayasa Industri ,92 Highly satisfied Nilai Kepuasan PT Pupuk Indonesia (Persero) 87,98 Highly satisfied 2017 Company Number of respondents Score Level of Satisfaction PT Pupuk Kujang ,60 Highly satisfied PT Pupuk Sriwidjaja Palembang ,75 Highly satisfied PT Petrokimia Gresik ,04 Highly satisfied PT Pupuk Kalimantan Timur ,65 Highly satisfied PT Pupuk Iskandar Muda ,33 Highly satisfied PT Rekayasan Industri ,94 Highly satisfied Nilai Kepuasan PT Pupuk Indonesia (Persero) 88,22 Highly satisfied Referring to the above results exposure, the Key Performance Indicator (KPI) value of Environmental Satisfaction in Pupuk Indonesia Grop in 2017 is This value is recorded to increase compared to the value of Environmental Satisfaction Survey in 2016 amounted to With this increase, the survey results occupy a highly satisfying level. Environmental Related Complaints Pupuk Indonesia Group s commitment to and compliance with the rules and standards is also demonstrated by its receiving and managing any complaints from the public related to possible environmental disturbances. Pupuk Indonesia Group has a series of environmental related complaint management mechanisms involving at least 3 (three) functions in Pupuk Indonesia Group, i.e. Health, Safety, and Environment Department, Production Department, and Public Relations Department. PT Pupuk Indonesia (Persero) Sustainability Report

131 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies The progress of complaints filed at the Pupuk Indonesia Group during 2017 is shown in the following table: Number of Complaints and Follow-Up Company Complaint Problem Number of Complaints Number of Complaints Followed Number of Complaints Completed PT Pupuk Kujang Water pollution Other complaints PT Pupuk Iskandar Muda PT Pupuk Sriwidjaja Palembang Ammonia odor Waste Other complaints PT Petrokimia Gresik Ammonia odor PT Pupuk Kalimantan Timur Ammonia odor Other complaints Most of the environmental complaints sent by communities living around the factory are complaints about ammonia smell. If rapid action is needed in terms of the smell of ammonia, operational control is carried out responsively. Similarly, regarding the settlement of waste pollution complaints about water bodies, Pupuk Indonesia continues to accommodate and resolve every complaint from the community in deliberation with the principle of win- win solution. During the reporting period, every problems or complaints regarding environmental issues are resolved nicely and impartial to all parties fairly. Environmental Investment 2017 No Description (2017) Amount Rupiah in million 1 Environmental Preservation 12,600 2 Consulting and Licensing Services 2,811 3 B3 Waste Management 44,075 4 Awareness 291 Total 59,777 The environmental investment for environmental management in 2017 totaled Rp59.78 billion. This fund is used for environmental maintenance activities, consultancy and licensing services, waste management, and environmental awareness campaigns. Compliance with environmental regulations [GRI 307-1] PT Pupuk Indonesia Group has operated its operations by complying all laws and regulations. In 2017 we never againts the applicable laws and regulations in the environment field. In 2017 PT Pupuk Iskandar Muda get administrative sanction from the Ministry of Environment and Forestry and has been declared done by the issuance of the letter No. S.1093 / PHLHK / PPSA / GKM.0 / 11/2017 on the Fulfillment of Administrative Sanctions from the Ministry Environmental and forestry. 124 PT Pupuk Indonesia (Persero) Sustainability Report 2017

132 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS PT Pupuk Indonesia (Persero) Sustainability Report

133 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies TOP-NOTCH PRODUCTS 126 PT Pupuk Indonesia (Persero) Sustainability Report 2017

134 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS Prioritizing Customer Health and Safety Responsibility of Product Information and Communication Product Packaging Information Commitment to Complying with Regulations Customer satisfaction is determinant factor for the success of the company. We care about our customers and are committed to delivering the best products and services to them. Prioritizing Customer Health and Safety [GRI 416-2] Customers are the focus of Pupuk Indonesia, as they are the one who support the success of this company. Our mission is to efficiently produce and market primequality fertilizer and agribusiness products for customer satisfaction. Customer satisfaction and fulfillment of their needs are our focus, and we effectuate this through: Producing quality fertilizer through quality improvement efforts and emphasis on innovation. Addressing customer responses and complaints. Being on alert to provide solution and anticipate potential problems. Nurturing good relations with customers and other stakeholders. Ensuring that fertilizer is duly distributed, with the most efficient cost. Customers suggestions and feedback are important to us to improve our products quality. Therefore, Pupuk Indonesia runs a survey to know about customer satisfaction. In addition, the survey--containing current information from the field--also serves as the basis for us to make the best decisions. The survey is undertaken by independent party, with sampling method covering Indonesian territory. Our efforts of making customer satisfaction the first priority have borne fruits, reflected in customer survey result of highly satisfied and satisfied as shown in the table below. Furthermore, during the reporting period, there has not been any incident of violation related to health and safety of Pupuk Indonesia Group s product and service. PT Pupuk Indonesia (Persero) Sustainability Report

135 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies Customer Survey Respondent Category of Pupuk Indonesia Group year 2017 Subsidized Fertilizer Customers of Non-Subsidized Fertiliser Customers of Non-Fertilizer Distributor Distributor Distributor Kiosk Exporter/Trader Exporter/Trader Farmer Plantation company Industry Industry Survey Results of Customer Satisfaction Index of Pupuk Indonesia Group Year Customer Satisfaction Index Customer Dissatisfaction Index Customer Loyalty Index Customer Satisfaction Index of Non-Subsidized Fertilizer Year Description Urea NPK Ammonia Customer Loyalty Index Value Very satisfied Very satisfied Very satisfied Customer Satisfaction Index Value Very satisfied Very satisfied Very satisfied Customer Dissatisfaction Index Value Very satisfied Very satisfied Very satisfied Even though our customers are mostly under very satisfied category, we welcome suggestions, complaints and queries of customers in relation to Pupuk Indonesia s products and services. Looking into customer complaints, we have the opportunity to identify what needs to be improved, which is essential for the progress of our business. Therefore, we address each and every complaint thoroughly, in the following stages: Analysis of problems/complaints conveyed by the customers, for subsequent follow up of the complaints by related units. Identification of alternative solutions; Determination of the solution Implementation of solution Communicating the solution to customers. Documenting and evaluating all incoming complaints for follow-up, including making necessary improvements, to ensure that the same complaints do not recur and to increase customer satisfaction. Various communication channels are used to support a smooth communication between Pupuk Indonesia and its customers through official websites, s, call centers, and social media such as: Twitter, and Instagram. 128 PT Pupuk Indonesia (Persero) Sustainability Report 2017

COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS Recapitulation of Customer Complaints of Pt Pupuk Indonesia Group 2017 Type Of Complaint Number Of

136 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS Recapitulation of Customer Complaints of Pt Pupuk Indonesia Group 2017 Type Of Complaint Number Of Complaint Number Of Complaint Resolved Percentage Scarcity of Fertilizers Fertilizer Non-Compliance Complaint on Product Disruption of Distribution Issue of Service Total Responsibility of Product Information and Communication [GRI 417-2, GRI 417-3] The general public needs to have clear information on every product packaged by Pupuk Indonesia. We believe a good labeling increases efficiency and effectiveness of the use of fertilizers as well as protect the public and the environment from harmful effect as a result of excessive use. Therefore, on every packaging of fertilizer, we state clear information on the content, time of circulation, usage instruction and all other important information related to the product. We enclose this information in such a way to make it clear and comprehensible. Taking into account that fertilizer is a categorized as hazardous and toxic substances if consumed by humans, we ensure that every product is packaged in a special material that is not easily broken, in order to prevent the fertilizer from being spilled out. Therefore, the consumers would be protected from possibility of experiencing health issues when storing or using the fertilizers. Pupuk Indonesia formulated several programs to satisfy and to foster strong relationships with its customers, as follows: a. Subsidized Fertilizer Sales Territory Division. In the distribution process of subsidized fertilizer, Pupuk Indonesia refers to the Regulation of the Minister of Commerce No. 15/M-DAG/PER/4/2013 on Subsidized Fertilizers Procurement and Distribution for the Agriculture Sector. We have also mapped the regions so as to accelerate subsidized fertilizer distribution. It is expected that with this rayonization- PT Pupuk Indonesia (Persero) Sustainability Report

U-1797/A00000.UM/2015 dated 3 December 2015 on the Accountability for the Procurement and Provision of Subsidized Fertilizers for the Agriculture Sector.

137 ABOUT THE REPORT PROFILE REPORT TO STAKEHOLDER SUSTAINABLE GOVERNANCE STAKEHOLDERS economies -which allows shorter and less costly distribution route, farmers and farmers groups would be able to obtain the required fertilizer at the right time and the right price. This fertilizer rayonization applies to distribution of subsidized fertilizers, i.e. Urea and organic fertilizer, in accordance with the following regulations: Letter of the President Director of PT Pupuk Indonesia (Persero) No. U-1797/A00000.UM/2015 dated 3 December 2015 on the Accountability for the Procurement and Provision of Subsidized Fertilizers for the Agriculture Sector. Letter of the President Director of PT Pupuk Indonesia (Persero) No. U-1298/A00.UM/2016 dated 27 July 2016 on the Changes to the Zoning of Accountability for the Procurement and Distribution of Subsidized Urea for the Agriculture Sector in West Kalimantan Province. Letter of the President Director of PT Pupuk Indonesia (Persero) No. U-1674/A00.UM/2016 dated 26 September 2016 on the Changes to the Zoning of Accountability for the Procurement and Distribution of Subsidized Urea for the Agriculture Sector in Jambi Province. Letter of the President Director of PT Pupuk Indonesia (Persero) No. U-1331/A00.UM/2016 dated 30 July 2016 on the Accountability for the Procurement and Distribution of Subsidized Organic Fertilizers for the Agriculture Sector. Letter of the President Director of PT Pupuk Indonesia (Persero) rayon letter NPK No. U-1925/A00.UM/2016 dated 8 November 2016 on the Accountability for the Procurement and Distribution of Fertilizer. b. Integrated Fertilizer Outlet To increase service for farmers, Pupuk Indonesia had engaged in fertilizer trading agreement contract (SPJB) with various distributors and retailers. The number of subsidized fertilizer distributors now stands at 1,542 companies, consisting of 59 State Owned Enterprises/ Regional Government Owned Enterprises, 149 cooperatives, and 1,344 private parties. It is expected that such sales system would increase efficiency and effectiveness in fertilizer distribution to farmers. PRODUCT PACKAGING INFORMATION Call Centre Type of Fertilizer Content of Fertilizer Manufacturers SNI Logo and SNI Number Net Weight Manufacturers Address The Time of Circulation Registration Number 130 PT Pupuk Indonesia (Persero) Sustainability Report 2017

138 COMPETENT HUMAN RESOURCES OF Attaining a Healthy Work Atmosphere PUPUK INDONESIA INDIVIDUALS c. Subsidized Fertilizer Coloring In order to prevent abuse by unauthorized parties in the distribution of subsidized fertilizers, specific color indications are given. The color for urea fertilizer is now pink, whereas the color for ZA fertilizer is orange. This is intended to distinguish between subsidized fertilizer (white colored) and commercial ones. The change in color does not affect the compositions and contents. Both fertilizers remain safe for usage, have eco-friendly characteristics, and will not poison the crops as they are produced from nonhazardous materials and are soluble in water. d. One-Brand Bag Uniformity There are times when farmers prefer certain brands as they are already familiar with them. This is despite the fact that similar products can be use when certain products are not available. The Company has implemented a one-brand bag uniformity in order to optimize service to farmers. When demand rises, we would recommend farmers to be flexible in choosing similar products. Thus the supply of fertilizer of guaranteed excellence quality can be made. This also facilitates supervision. The one-brand bag uniformity methodology has been applied to subsidized urea and organic fertilizers. 1 Subsidized Urea 2 Subsidized NPK Phonska 3 Subsidized SP-36 4 Subsidized ZA 5 Subsidized Organic PT Pupuk Indonesia (Persero) Sustainability Report