RSPO audit ReportRSPOPC-ASAREPORT.F01 EN (02) FEB2012 Page 3 of 31 Control Union Certifications...

RSPO Principles & Criteria Annual Surveillance Assessment Report 3

Report Number CU808656

RSPOPC-ASAREPORT.F01 EN (02) FEB2012 of 31

Control Union Certifications Meeuwenlaan 4-6, 8011 BZ Zwolle, P.O. Box 161, 8000 AD Zwolle, Netherlands

Tel: +31 (0)38 - 426 0100, Fax: +31 (0)38 - 423 7040, E-mail: [email protected]

Annual Surveillance Assessment Report 3

PUBLIC SUMMARY

KL-Kepong (Sabah) Sdn Bhd

Tawau Region

Palm Oil Mill

KLK (S) PINANG POM

This public summary has been prepared in accordance with RSPO requirements and the information included is the result of a full RSPO assessment of the Mills and supply base as included in the scope

of the certificate.

Report prepared by: Name: David Ogg FIC For (Lead Assessor)

Certification decision by: Name: Gerben Stegeman (Certifier)

Control Union Certifications (Head office)

Meeuwenlaan 4-6, P.O. Box 161.

8000 AD Zwolle. The Netherlands.

[email protected] Phone: 0031 38436 0100

Control Union (Malaysia) Sdn Bhd Persiaran Raja Muda Musa,

Off Jalan Sg Berith, Teluk Gadong, 41100, Klang, Selangor.

Malaysia. [email protected]

Phone 03-3377 1600 / 1700

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

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

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

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

CU is accredited by the Dutch Council of Accreditation (RVA) on the European quality standard EN

45011 for the inspection and certification of CU Organic program (according to the EU regulation

2092/91) and GLOBALGAP program. When requested a copy of the accreditation certificate can be

obtained from CU.

www.controlunion.com

mailto:[email protected]

mailto:[email protected]

http://www.controlunion.com/






Table of Contents

Table of Contents

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

1.1 COMPANY AND CONTACT DETAILS ....................................................................................................... 4 1.2 RSPO MEMBERSHIP DETAILS ............................................................................................................. 4 1.3 ANNUAL SURVEILLANCE ASSESSMENT DETAILS ...................................................................................... 4 1.4 ASSESSMENT TYPE. (MILL, ESTATE AND MILL, PLANTATION ONLY, ETC.).................................................... 4 1.5 LOCATION OF THE PALM OIL MILL ....................................................................................................... 4 1.6 PALM OIL MILL OUTPUT AND APPROXIMATE TONNAGES CERTIFIED ............................................................ 4 1.7 GENERAL DESCRIPTION OF SUPPLY BASE............................................................................................... 5

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

1.8 PROGRESS OF ASSOCIATED SMALLHOLDERS OR OUTGROWERS TOWARDS COMPLIANCE WITH RELEVANT

STANDARDS - SHOULD BE IN ACCORDANCE TO THE 3 YEAR IMPLEMENTATION PLAN ................................................ 6 1.9 LOCATION MAP FOR THIS CERTIFICATION UNIT ...................................................................................... 6

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

2.1 MANAGEMENT STRUCTURE ................................................................................................................ 7 2.2 NON-COMPLIANCE IDENTIFIED WITH 2.1 ABOVE .................................................................................... 7 2.3 SUMMARY OF THE TIME BOUND PLAN ................................................................................................. 7 2.4 UN-CERTIFIED UNITS OR HOLDINGS ..................................................................................................... 8 2.5 SUMMARY OF THE FINDINGS FOR PARTIAL CERTIFICATION ..................................................................... 11 2.6 PARTIAL CERTIFICATION AUDIT AGENDA. (APPLICABLE TO ADDITIONAL SITE VISITS). .................................. 11

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

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

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

3.3 AUDIT METHODOLOGY .................................................................................................................... 14 3.3.1 General Overview ............................................................................................................ 14 3.3.2 Audit Agenda ................................................................................................................... 15

PART 4 ASSESSMENT FINDINGS ......................................................................................................... 16

4.1 LEAD ASSESSOR’S SUMMARY AND RECOMMENDATION FOR CERTIFICATION.............................................. 16 4.2 SUMMARY OF THE FINDINGS BY PRINCIPLE AND A SAMPLE OF THE CRITERIA .............................................. 17

Principle 1: Commitment to Transparency ..................................................................................... 17 Principle 2: Compliance with Applicable Laws & Regulations ........................................................ 17 Principle 3: Commitment to Long-Term Economic & Financial Viability ........................................ 18 Principle 4: Use of Appropriate Best Practices by Growers & Millers ............................................. 18 Principle 5: Environmental Responsibility & Conservation of Natural Resources & Biodiversity ... 21 Principle 6: Responsible Consideration of Employees & of Individuals and Communities by Growers & Millers .......................................................................................................................................... 22 Principle 7: Responsible Development of New Plantings ................................................................ 23 Principle 8: Commitment to Continuous Improvement in Key Areas of Activity ............................. 23

4.3 SAMPLE CRITERIA FOR INCLUSION IN THIS REPORT ON AN ANNUAL BASIS DURING THE LIFETIME OF THE

CERTIFICATE ............................................................................................................................................ 24 4.4 NON-CONFORMITY REGISTER AND REPORTS ON PREVIOUS NCS .............................................................. 24

4.4.1 Annual Audit NC Summary ..................................................................................................... 24






4.4.2 Status of non-conformities (both Minor and Major) previously identified, even if already Closed Out ....................................................................................................................................... 24

4.5 NON-CONFORMITY REPORT FOR NC IDENTIFIED DURING THIS ASA ............................................................. 25 4.6 OBSERVATIONS .................................................................................................................................. 29 4.7 ISSUES THAT WERE RAISED DURING THE STAKEHOLDER CONSULTATION AND COMPANY RESPONSES .............. 29

PART 5: RSPO SUPPLY CHAIN CERTIFICATION ................................................................................... 29

PART 6: CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY .............. 30

6.1 DATE OF NEXT ASA......................................................................................................................... 30 6.2 DATE FOR CLOSURE OF NON-CONFORMITIES ....................................................................................... 30 6.3 SIGNING BY THE CLIENT ................................................................................................................... 30 6.4 SIGNING BY THE LEAD AUDITOR ........................................................................................................ 30 6.5 SIGNING BY THE CERTIFIER ............................................................................................................... 30

PART 7: APPENDICIES ......................................................................................................................... 31

APPENDIX 1: LIST OF ABBREVIATIONS ........................................................................................................... 31






PART 1: SCOPE OF THE CERTIFICATION AUDIT

1.1 Company and Contact Details

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

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

Group name if applicable: Not applicable

Office telephone: +605 2417844

Contact person: Mr Sin Chuan Eng

Mobile telephone: +60127621582

Fax: +6052535018

e-mail: [email protected]

Web site: www.klk.com.my

1.2 RSPO Membership Details

RSPO membership number: 1-0014-04-000-00

Parent company as applicable: Not applicable

Date of original certification: 4 March 2009

Certificate number: CUC808656 RSPO – 1.2009 Notes: The existing certificate scope includes both the PINANG POM and MILL 2 POM. From 2012 onwards, individual certificates will be issued for each palm oil mill in accordance of RSPO’s requirements. While the certificate number for the PINANG POM shall remain the same, a new certificate will be issued for MILL 2 (Certificate #: CU819969RSPO) and follows the same cycle from the original date of certification.

Date of last audit: 4th

to 8th

March 2011

1.3 Annual Surveillance Assessment Details

Dates of this audit: 13th

to 16th

February 2012

ASA number (1 to 4): 03

1.4 Assessment Type. (Mill, Estate and Mill, Plantation only, etc.)

Palm Oil Mill and estates owned by KL – KEPONG (SABAH) SDN BHD (Tawau Region)

1.5 Location of the Palm Oil Mill

Palm Oil Mill (POM) Location Address

GPS Reference

Name Longitude Latitude

Pinang Palm Oil Mill Mile 45, Tawau - Semporna Highway, Tawau, Sabah N4.432593 E118.270937

1.6 Palm Oil Mill Output and Approximate Tonnages Certified

The 12 month output is the average over any 12 month period and the actual production for the 12 months from the date of certification will be included in the first annual summary. These figures exclude any output product from non-certified suppliers.

Projected Production from last 12 Months (MT)

Actual Production 2011/2012 (MT) Projected Production for next 12

Months (MT)

FFB CPO PK FFB CPO PK FFB CPO PK

227,958 49,007 10,941 191,594* 39,852* 7,740* 226,397* 49,807* 10,867*

Notes: * FFB received includes supply from Ladang Jatika (82.8% of total production):

Ladang Jatika supplies FFB to both PINANG POM and MILL 2 POM.

Actual production for 2010/11, 82.8% of their FFB was sent to the PINANG POM and 17.2% to Mill 2.

For 2011/12, the forecast assumes the supply from Ladang Jatika to remain approximately at 82.2% of its total production.

See 1.7.2 below.






1.7 General Description of Supply Base

The supply base is the 4 estates located near Tawau in Sabah, East Malaysia. About 4% of unplanted land comprises natural reserves and biodiversity areas, line sites, workshops, roads, mills and office complexes. There are no plans to expand the land holding and therefore Principle 7 is not applicable to this Annual Surveillance Assessment (ASA03). All 4 estates are owned by KL-Kepong Berhad and no FFB is sourced from independent suppliers. Details of other certifications and awards held: Central KDC laboratory is certified for ISO 17025 (Located in Tawau Region) “Prime Ministers Safety and Health Excellence Merit Award”, First place awarded to Pang Burong Estate (Plantation category) and Pinang Palm Oil Mill (Industry standard) 2008.

1.7.1 Location of the Supply Base

Oil Palm Plantation (OPP) Location Address GPS Reference

CU Code Name Longitude Latitude

OPP 1 Ladang Pinang Mile 45, Tawau-Semporna Highway N4.432661 E118.271034

OPP 2 Ladang Pangeran Mile 45, Tawau-Semporna Highway N4.441993 E118.267749

OPP 3 Ladang Jatika * Mile 42, Tawau-Semporna Highway N4.558002 E118.290937

OPP 4 Ladang Sigalong Mile 45, Tawau-Semporna Highway N4.445970 E118.297922

Note: * Ladang Jatika supplies FFB to both MILL 2 POM and PINANG POM

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

CU Code Name Area of Oil Palm (ha) Actual Annual

Output (2010/11) (MT)

Estimated Annual Output (2011/12)

(MT)

Planting Years Total Mature**

OPP 1 Ladang Pinang 2,340 1,647 33,254 38,497 1983 – 2011

OPP 2 Ladang Pangeran 2,704 1,682 33,802 38,044 1980 - 2011

OPP 3 Ladang Jatika * 3,262 3,015 64,083 79,239 1983 – 2011

OPP 4 Ladang Sigalong 2,770 2,770 74,940 83,114 1985 – 2000 Notes: * Ladang Jatika:

Ladang Jatika supplies FFB to both PINANG POM and MILL 2 POM.

Actual annual output for 2010/11, 82.8% (53,060.7 MT) of their FFB was sent to the PINANG POM and 17.2% (11,022.3 MT) to Mill 2.

For 2011/12, the estimated output assumes the annual output supply from Ladang Jatika for PINANG POM to remain approximately at 82.8% or 65,609.9 MT from the estimated total figure above.

** Mature area excludes immature and current replants

1.7.3 Percentage of Planted Oil Palm by different Age Ranges

CU Code

Planting Years by 5 year Ranges

Pre 1990 1991 – 1995 1996-2000 2001 – 2005 2006 -2010 2011-2015 Total (%)

OPP 1 25.25 1.67 1.07 21.32 43.64 7.05 100

OPP 2 27.86 0 0 18.15 43.97 10.02 100

OPP 3 18.92 42.48 24.96 8.53 0 5.11 100

OPP 4 8.20 36.96 54.84 0 0 0 100






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

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

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

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

4 2 Not applicable Not applicable

Explanation as to the selection of estates sampled

Ladang Jatika and Ladang Sigalong were included in ASA1. Ladang Pinang and Ladang Pangeran were included in ASA2. Ladang Jatika and Ladang Sigalong are therefore re-selected for ASA3.

1.8 Progress of associated Smallholders or Outgrowers towards Compliance with relevant Standards - should be in accordance to the 3 year implementation plan

There is no FFB supply from associated smallholders and outgrowers.

1.9 Location Map for this Certification Unit






PART 2: PARTIAL CERTIFICATION

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

2.1 Management Structure

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

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

No Section 2 is N/A

Go to 2.1.2

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

Yes Go to 2.1.5 Go to 2.1.3

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

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

- Go to 2.1.4

Go to 2.2.1

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

- Go to 2.4 Go to 2.2.2

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

Yes Go to 2.3 2.2.3

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

Yes

2.2 Non-compliance Identified with 2.1 Above

Section Non-compliance findings NC raised Category

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

n/a Major

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

n/a Major

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

n/a Major

2.2.4 No applicable membership of the RSPO. n/a Major

2.3 Summary of the Time Bound Plan

Section Requirement Findings and any action required

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

All subsidiaries, estates and mills are included.

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

Indonesia: 2014. Malaysia: 2014. The company presented a table showing how the certification audits are planned to fit into the period ending December 2014 and it is considered to be challenging plan.

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

The time bound plan has been thoroughly reviewed by the company and the areas of the estates that have rubber, are highlighted with * below.







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

As above.

2.3.5 Have there been any stakeholder comments?

No comments received.

2.3.6 Have there been any newly acquired subsidiaries?

No recent acquisitions but the company has taken over the controlling interest of some properties in Indonesia.

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

The plans have been delayed by between 12 and 24 months due to a combination of lengthy peer review procedures slowing the agenda and uncertainty in the markets for RSPO certified products.

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

No.

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

The company is now on target to have all their properties audited and / or certified by the end of 2014.

2.4 Un-Certified Units or Holdings

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


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

Yes.

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

Primary forest.

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

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

No replacement. Confirmed through site visits in previous years and the status of licences. Additionally, we have not received any new stakeholder comments.

2.4.3 Any new plantings since January 1st

2010 must comply with the RSPO New Plantings Procedure.

Not applicable, given that no new plantings have taken place since January 1

st 2010.

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

None noted. No stakeholder comments or complaints received.

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


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







KLK TIMELINE FORECAST FOR RSPO CERTIFICATION OF BUSINESS ENTITIES IN INDONESIA (2011/2012)

NO ESTATE LOCATION LICENSES AREA (HA) PLANTED (HA) RSPO TARGET

IND

ON

ESIA

KA

LTIM

1 Kebun Malindomas Perkebunan

Berau, KALTIM HGU & IUP 7,971 7,341

BY 2014

2 Kebun Hutan Hijau Mas Berau, KALTIM HGU & IUP 7,343 6,926

3 Kebun Jabontara Eka Karsa

Berau, KALTIM HGU & IUP 14,086 4,524

KA

LTEN

G

1 Kebun Karya Makmur Abadi

Mentaya Hulu, KALTENG

IL & IUP 13,127 10,209

2 Kebun Menteng Jaya Sawit Perdana

Mentaya Hilir Utara KALTENG

IL & IUP

6,399 5,502

3 Kebun Mulia Agro Permai

Baamang, KALTENG HGU & IUP 9,056 8,036

RIA

U,

SUM

ATE

RA

1 Kebun Mandau * Riau, Sumatera HGU & IUP 14,799 7,284

BY 2012

2 Kebun Nilo Riau, Sumatera HGU & IUP 12,860 12,197

3 Kebun Sekarbumi Alamlestari

Riau, Sumatera IUP & HGU 6,200 5,256

4 Kebun Mutiara Riau, Sumatera IL & IUP 1,800 1,662

BEL

ITU

NG

1 Kebun Steelindo Wahana Perkasa

Belitung HGU & IUP 14,065 13,658 BY 2012

2 Kebun Parit Sembada Belitung HGU & IUP 3,990 3,809 BY 2013

3 Kebun Alam Karya Sejahtera

Belitung IL & IUP 6,012 3,639 BY 2014


IND

ON

ESIA

SUM

ATE

RA

UTA

RA

1 Kebun Basilam * Langkat, SUMUT IUP & HGU 2,337 1,565

BY 2014 2 Kebun Gohor Lama * Langkat, SUMUT IUP & HGU 7,464 6,660

3 Kebun Padang Brahrang Langkat, SUMUT IUP & HGU 5,004 4,385

4 Kebun Bukit Lawang * Langkat, SUMUT IUP & HGU 4,299 3,756

5 Kebun Tanjung Keliling * Langkat, SUMUT IUP & HGU 2,369 1,739

TOTAL (INDONESIA) 139,181 108,148

Note: * areas with Rubber

KLK TIMELINE FORECAST FOR RSPO CERTIFICATION OF BUSINESS ENTITIES IN MALAYSIA (2011/2012)


MA

LAY

SIA

PEN

INSU

LAR

M’S

IA

1 Pelam Estate * Kulim, Kedah Land Title 2,526 1,954

BY 2012

2 Batu Lintang Estate * Serdang, Kedah Land Title 3,482 3,316

3 Ghim Khoon Estate Kulim, Kedah Land Title 434 417

4 Lekir Estate Manjung, Perak Land Title 3,332 3,280

5 Changkat Chermin Estate Manjung, Perak Land Title 2,541 2,494

6 Raja Hitam Estate Manjung, Perak Land Title 1,490 1,490

7 Subur Estate Batu Kurau, Perak Land Title 1,290 1,261

8 Glenealy Estate * Parit, Perak Land Title 1,063 616

9 Serapoh Estate * Parit, Perak Land Title 936 670

10 Kuala Kangsar Estate * Padang Rengas, Perak

Land Title 847 177 BY 2012

11 Allagar Estate Trong, Perak Land Title 805 780

12 Tuan Mee Estate Sg Buloh, Selangor Land Title 3,048 2,876 BY 2012

13 Changkat Asa Estate * Tg Malim, Perak Land Title 1,544 1,114

BY 2013 14 Kerling Estate * Kerling, Selangor Land Title 619 223

15 Sg Gapi Estate Serendah, Selangor Land Title 603 580







MA

LAY

SIA

PEN

INSU

LAR

M’S

IA

16 Ayer Hitam Estate Bahau, Negeri Sembilan

Land Title 2,640 2,609

By 2012

17 Batang Jelai Estate * Rompin, Negeri Sembilan


18 Jeram Padang * Bahau, Negeri Sembilan


19 Kombok Estate * Rantau, Negeri Sembilan


20 Ulu Pedas Estate * Pedas, Negeri Sembilan

Land Title 923 855

21 Gg Pertanian Estate Simpang Durian, Negeri Sembilan

Land Title 686 681

22 Kerilla Estate * Tanah Merah, Kelantan

Land Title 2,191 627

BY 2013 23 Pasir Gajah Estate Kuala Krai, Kelantan Land Title 2,108 1,868

24 Sg Sokor Estate *

Tanah Merah, Kelantan

Land Title 1,603 232

25 Landak Estate Paloh, Johor Land Title 4,452 4,298

CERTIFIED IN OCT Y2011

26 Kekayaan Estate Paloh, Johor Land Title 4,437 4,290

27 Voules Estate * Tenang, Johor Land Title 2,977 1,266

28 Fraser Estate Kulai, Johor Land Title 2,934 2,809

29 Paloh Estate Paloh, Johor Land Title 2,029 1,961

30 New Pogoh Estate * Tenang, Johor Land Title 1,560 1,196


MA

LAY

SIA

PEN

INSU

LAR

M’S

IA 31 Sg Penggeli Estate Bandar Tenggara,

Johor Land Title 950 950

32 Sg Bekok Estate Bekok, Johor Land Title 636 631

33 Ban Heng Estate Pagoh, Muar, Johor Land Title 631 623

34 See Sun Estate Renggam, Johor Land Title 589 579

35 Sg Kawang Estate * Lanchang, Pahang Land Title 1,890 1,306

BY Y2012 36 Renjok Estate * Telemong, Pahang Land Title 1,579 259

37 Tuan Estate * Telemong, Pahang Land Title 1,354 897

SAB

AH

1 Jatika Estate Tawau, Sabah Land Title 3,508 3,262

CERTIFIED IN MAR Y2009

2 Sigalong Estate Tawau, Sabah Land Title 2,864 2,770

3 Pangeran Estate Tawau, Sabah Land Title 2,855 2,704

4 Sri Kunak Estate Tawau, Sabah Land Title 2,770 2,638

5 Pang Burong Estate Tawau, Sabah Land Title 2,548 2,385

6 Pinang Estate Tawau, Sabah Land Title 2,420 2,340

7 Tundong Estate Tawau, Sabah Land Title 2,094 2,061

8 Ringlet Estate Tawau, Sabah Land Title 1,834 1,800


MA

LAY

SIA

SAB

AH

9 Bornion Estate Kinabatangan, Sabah Land Title 3,233 3,181

CERTIFIED IN JULY Y2010

10 Segar Usaha Estate Kinabatangan, Sabah Land Title 2,792 2,756

11 Tungku Estate Lahad Datu, Sabah Land Title 3,418 3,405

12 Bukit Tabin Estate Lahad Datu, Sabah Land Title 2,916 2,864

13 Rimmer Estate Lahad Datu, Sabah Land Title 2,730 2,730

14 Sg Silabukan Estate Lahad Datu, Sabah Land Title 2,654 2,636

15 Lungmanis Estate Lahad Datu, Sabah Land Title 1,656 1,613

TOTAL (MALAYSIA) 107,634 92,947

Note: * areas with Rubber






Country Region Area (Ha) Planted (Ha)

Malaysia P.M’sia 67,342 53,802

Sabah 40,292 39,145

Indonesia

KALTIM 29,400 18,791

KALTENG 28,582 23,747

Belitung 24,067 21,106

Sumatera 57,132 44,504

GRAND TOTAL 246,815 201,095

Name of Mill Locations Target yr for RSPO

Berau POM Berau, KALTIM BY Y2014

Steelindo Wahana Perkasa POM Belitung BY Y2012

Parit Sembada POM Belitung BY Y2013

Mandau POM Riau, Sumatera

BY Y2012 Nilo POM Riau, Sumatera

T.Kanan POM Riau, Sumatera

Gohor Lama POM Langkat, SUMUT BY Y2014

P. Brahrang POM Langkat, SUMUT

Batu Lintang POM Serdang, Kedah BY Y2012

Kekayaan POM Paloh, Johor Certified – Oct Y2011

Paloh POM Paloh, Johor [outside crop]

Jeram Padang POM Bahau, Negeri Sembilan BY Y2012

Tg Malim POM Tg Malim, Perak BY Y2013

Tuan Mee POM Sg Buloh, Selangor BY Y2012

Kuala Pertang POM Kuala Krai, Kelantan BY Y2013

Changkat Chermin POM Manjung, Perak BY Y2012

Mill I POM Tawau, Sabah [outside crop]

Mill II POM Tawau, Sabah Certified – Mar Y2009

Pinang POM Tawau, Sabah

Lungmanis POM Lahad Datu, Sabah

Certified – Jul Y2010 Rimmer POM Lahad Datu, Sabah

Bornion POM Kinabatangan, Sabah

2.5 Summary of the findings for Partial Certification

The audit team assessed compliance with the above requirements during this audit. Failure to address any non-compliance identified may lead to certification suspension. The company is owned principally by one family by way of an investment company and the structure is not considered to be complex. As part of a pre-assessment process in 2007, the lead auditor and the head of the KLK sustainability department visited all of the Indonesian properties and determined at that time that the company was in compliance with the rules for partial certification as published by the RSPO and applicable in 2007 / 2008. The company has 8 managers who are trained as RSPO internal auditors. They have visited all the properties in Malaysian Peninsular and Indonesia and, to the best of their knowledge, they are confident that there are no areas of non-compliance. Indonesia target: 2014. All Malaysian properties: 2013. The conclusion is that the company is in compliance with the rules for partial certification.

2.6 Partial Certification Audit Agenda. (Applicable to additional site visits).

Date Location Agenda

Within the audit agenda given in table 3.4 below.






PART 3: AUDIT PROCESS

3.1 About the Certification Body

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

3.2 Audit Team

Lead auditor: David Ogg FICFor

Team member 1: Simon Subramaniam (CUC Malaysia)

Team member 2: Kongpichit Na Nakhonphanom (CUC Thailand)

Team member 3: Mr Ganapathy Ramasamy (Independent Social & legal expert from Kuala Lumpur)

3.2.1 Qualifications of the Lead Auditor

Requirement Qualifications

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

OND Forestry. Fellow of the Institute of Chartered Foresters.

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

Forest management from 1981 to 2006. Oil Palm audits from 2006 to date.

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

RSPO lead auditors training course, Sept 2011. Self-trained in all RSPO procedures and conducts training for CUC auditors as well as training seminars for the industry.

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

Completed in 2007.

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

Extensive audit experience since January 1998. RSPO P&C audits covering over 1 million ha. Malaysia, Indonesia, The Ivory Coast, Gabon, Colombia and Guatemala. RSPO Supply Chain Certification. FSC forest management. FSC and PEFC chain of custody. Global Organic Textile Standard. Organic Exchange. Green Gold Label. (Bio-fuels). Successful accreditation process as Managing Director of TimberCheck (Forest Certification) Ltd. UKAS / PEFC.

RSPO endorsed lead auditors course. Completed and passed September 2011.

Signed code of conduct. Signed with CUC.

General knowledge of:

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

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

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

Lead auditor role. ISO 9001. Prepared an ISO 19011 training course and






conducts internal training on auditing techniques.

Report writing. Extensive experience in report writing.

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

Certification decision process. Full understanding.

RSPO SCCS program manual. Full understanding.

CUC filing systems. Full understanding.

Correct use of RSPO trademarks. Full understanding.

History and objectives of RSPO. Full understanding.

CV available. Upon request.

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

Fluent in main local languages and English.

Simon Subramaniam Citizen of Malaysia. Fluent in Bahasa.

Selvanathan Grapragasem Citizen of Malaysia. Fluent in Bahasa.

David Ogg Fluent in English.

Kongpichit Na Nakhonphanom Fluent in English.

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

David Ogg Forest management which includes silvicultural practices similar to the agronomic practices of the oil palm industry.

Kongpichit Na Nakhonphanom Involve in RSPO auditing since 2009.

Simon Selvaraj Working experience in palm oil plantation. Involve in RSPO auditing since November 2010.

Selvanathan Grapragasem Working experience in palm oil plantation. Involve in RSPO auditing since March 2010.

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

David Ogg Forest management which includes silvicultural practices similar to the agronomic practices of the oil palm industry.

Kongpichit Na Nakhonphanom RSPO auditing experience in palm oil sector since October 2009. Fully trained in other similar programmes such as Global Gap, GMP and Organic farming.


Selvanathan Grapragasem Working experience in palm oil plantation. Involve in RSPO auditing since March 2010.

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

David Ogg Forest management which includes H&S. Extensive audit experience.



Selvanathan Grapragasem Involve in RSPO auditing since March 2010. Involve in OHSAS 18001:2007 auditing since 2009

Workers welfare issues and social auditing

David Ogg Social auditing of forest management systems, organic textile social criteria and oil palm






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

auditing.



Selvanathan Grapragasem Auditing against Labour Standards. Working conditions and payment of wages.

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

David Ogg Forest management which includes environmental assessments and extensive oil palm audits.



Selvanathan Grapragasem Involve in EMS 14001 auditing since 2009

Economic issues. David Ogg Managing director of previous companies.

Kongpichit Na Nakhonphanom RSPO audit experience.

Selvanathan Grapragasem Working experience in palm oil plantation. Involve in RSPO auditing since November 2010.

3.3 Audit Methodology

3.3.1 General Overview

The Audit was carried out in conformity with the procedures as laid down in the CUC Procedure Manual and the RSPO Program Manual for the assessors and Certifier. During the Audit the qualified CUC assessors used the RSPO standard as endorsed for the country in which the Audit took place and recorded their findings. For each estate and smallholder identified to be included in the sample for this audit, the original main Audit checklist was used, which includes any updates from previous Annual Surveillance Audits (ASA). Workers and local communities were interviewed and evidence sought to confirm ongoing compliance to include:

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

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

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

Re-planting sites. Zero burn.

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

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

Water management. Water courses. Water monitoring.

Road maintenance. Run off.

Social amenities. Social Impact Audits.

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

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

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

Documentation review.






Palm Oil Mill audits include:

Mill and workshop inspections. Documentation. Worker interviews.

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

OSH. Training. Management structure. First aiders.

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

Worker interviews. OSH. Sexual, religious, racial harassment. Pay and contracts. Verification: Verification of implementation was done through field observations, workshop and chemical store inspections, worker and community interviews and mill inspections as summarised above.

3.3.2 Audit Agenda

Monday 13th

February 2012

Location: KDC Club

Time: 0830 - 0930

Auditors: Purpose:

Complete audit team

Opening meeting. An agenda is followed, which includes:

Introduction by lead auditor.

Introduction of team members and others.

Discussion / confirmation of audit agenda.

Confirmation of confidentiality.

Time and place of closing meeting. Followed by:

Presentations by the KLK managers.

Location Pinang POM

Time: 0830 – 1700

Auditors: Purpose:

David and Selva To conduct a full audit of the POM against the applicable RSPO P&Cs. To conduct a full audit against the applicable RSPO SCC P&Cs. Selva to conduct worker interviews and to consider Principle 6. He then joins the other team.

0830 – 1700

Auditors: Purpose:

Simon and Konpichit. Ladang Jatika estate audit. All principles. Selva joins to audit principle 6.

Tuesday 14th

February 2012

Time: 0830 – 1700

Auditors: Purpose:

All auditors. (David and Selva – field audits) Ladang Pang Burong Estate audit.

Auditors: Purpose:

All auditors. (David and Selva – field audits) Tundong Estate audit.

Wednesday 15th

February 2012

Location: Main office

Time: 0830 – 0930

Auditors: Purpose:

David Rules for partial certification.

Time: 0830 – 1700

Auditors: Purpose:

Simon, Selva and Kongpichit. (David and Selva – field audits) Ladang Sigalong estate audit.

Thursday 16th

February 2012

Location: KLK Mill 2






Time: 0830 – 1300

Auditors: Purpose:

All auditors. (Simon and Selva mill inspection) To conduct a full audit of the POM against the applicable RSPO P&Cs. To conduct a full audit against the applicable RSPO SCC P&Cs.

Location: KDC Club

Time: 1500

Auditors: Purpose:

All auditors. Closing meeting. An agenda is followed.

PART 4 ASSESSMENT FINDINGS

4.1 Lead Assessor’s Summary and Recommendation for Certification

This audit was shadowed by the ASI as part of the developing accreditation process being implemented by the RSPO. As the lead auditor, I determined to include 2 audits at the same time: KLK Mill 2 and Pinang POM and their associated supply base. I also decided to include all the principles and criteria in both audits instead of auditing and reporting on a sample as would be normal for an ASA. The intention was to give the ASI the maximum opportunity to evaluate the performance of the audit team. This report was developed for the KLK Pinang POM and its supply base. During this surveillance audit I reviewed the capacity of KLK Pinang POM's management systems to manage any change in scope of the certificate, as well as specific issues that are required by RSPO to be audited during an ASA:

- complaints received; - accident records; - training records; - operational plan(s) for the next 12 months; - inventory records; - harvesting records; - chemical use records; - records of sales of RSPO certified products (copies of invoices, bills, shipping docs)

Specific findings on these issues are recorded in the checklist. Additionally, KLK Pinang POM’s compliance with all conditions (corrective actions) on which certification is based was evaluated, including:

review of any complaints, disputes or allegations of non-compliance with any aspect of the applicable RSPO Standards;

evaluation of a sample of sites and records, and if necessary interviews with affected stakeholders sufficient enough to verify that management systems are working effectively and consistently in practice, in the full range of management conditions present in the area under evaluation.

The audit resulted in 4 major NCs, 8 minor NCs and 3 observations. 2 minor NCs raised at the previous ASA. Evidence was shown that allowed one NC to be closed. However, the other NC relating to diesel bunding was not closed and is now raised to a major NC. See 4.4 below. KLK continue to manage their estates in a highly professional and caring manner and whilst 11 non-compliances were noted, these are primarily concerned with documented procedures. The detailed findings of the audit are presented in a checklist / format report format and a summary of each principle and applicable criterion is given in table 4.2 below. The company has demonstrated compliance with 90% of the principles and criterion of the RSPO P&C (NI MY).

It is therefore the recommendation of the lead assessor that:

A certificate of compliance is maintained. Signed:






Name: David Ogg FICFor. Date: 16

th February 2012.

4.2 Summary of the findings by principle and a sample of the Criteria

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

Identified Non-Conformities and noteworthy Positive and Negative Observations.

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

Sample Criterions used during this Annual Surveillance Assessment

The following sample criterions were audited during this Annual Surveillance Assessment

Principle 1: Commitment to Transparency

Criterion Sampled by Surveillance

Summary The Mill and all estates have an open policy for the provision of information to any person who makes an enquiry.

ASA 1,2,3 & 4 1.1 The Mill and Estates use a combination of forms and a log book to record “Who” came, “When” they came, “What” they wanted and “How” their request was dealt with.

ASA 1,2,3 & 4 1.2 All management documents are publicly available in accordance with the RSPO requirements.

Principle 2: Compliance with Applicable Laws & Regulations


Summary There was no evidence of non-compliance with the applicable laws in the Mill or any of the Estates.

ASA 3 2.1 The mill has a Law Books Register which includes The Document name, The

Regulatory Authority / Summary of the law, The Requirements and Remarks.

There are a series of SOPs that include legal requirements for example: SOP 15

delegates responsibilities to individuals. SOP 16 covers Permits, licenses and

Reports. SOP 17 covers contracts. SOP 18 for complaints and Grievance

procedure. A list of all applicable licences is prepared to show expiry dates for 28

licences covering all mill operations. The licences are all valid and copies are

included in the file.

The estates have a Law book register for all the requirements for local, national

and regional laws and regulations. These are listed together with law name

Regulatory authority / summary, requirements and remark.

SOP 15: Compliance with the law. The first step is that the company has an

arrangement with MDC Publishers SDN BHD. They will supply all amendments to

the Malaysia Employment Handbook, to the Trade Unions Act Jan 2005, The

Industrial Regulations Act and Regulations April 2005, Environmental quality Act

and Regulations April 2006, Pesticides Act and Regulations January 2005, Food

Act and Regulations October 2006, Employees’ Social Security Act and

Regulations January 2006 and Occupational Safety and Health Act and

Regulations August 2005.

The second step is that KLK Head Office will update the Executive in Charge of all

operating centres through circulars and meetings. Managers are required to

track changes in the law on line at least once a year.

Licenses and permits were inspected at all estates and the mill.

ASA 3 2.2 The original land titles and subsequent amendments are in place for the mill and






the estates and the terms are complied with. No land disputes were noted and boundary stones are maintained to an adequate level.

ASA 3 2.3 There were no customary rights issues raised and maps are available and clear of the area usage, grower understands their rights.

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


Summary The Mill and Estates have a clear commitment to long-term viability as shown in the company annual reports.

ASA 2 & 4 3.1 Very detailed budgets are available which include the total hectares of the

supply base, the annual FFB production, the OER, production costs, gross and

net income. All expenditure is broken down into departments and includes

maintenance and replacement costs. The forecast for a 5 year period form 2012.

The estates have annual budget for three consecutive years and projected

budget for 7 years. The budgets include capital expenditure with detailed cost of

all aspects. The projected FFB, OER, estimated CPO price, indirect cost,

depreciation, mature area upkeep, collection/harvesting and external transport.

Replanting programme available and projected for at least 5 years.

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


Summary

The Mill and Estates demonstrated that they endeavor to implement best practice. A safe working environment is demonstrated in the mills and the estates. However, poor training matrices and poor training were noted and the findings of HIRARC were not fully reflected in the training and PPE distribution.

ASA 1 4.1 The company has an RSPO Standard Operating Procedures manual which covers

27 aspects of mill and estate management and how operations are conducted to

demonstrate compliance with the applicable principles and criteria relating to

social and environmental imperatives. The mill has a Safe Operating Procedure

manual covering all operations form reception, through processing to POME

treatment. It has 9 chapters and each chapter gives clear instructions on how to

operate the machinery. The mill also has an SOP covering all machinery and

stations and includes OSH requirements. An extra guideline has been prepared

for the mill workers summarising the RSPO P&Cs and OSH requirements.

Monitoring records are maintained.

The following are monitored in addition to FFB inputs and CPO production:

Electrical safety, Oil traps, diesel tank, fire extinguishers, Waste disposal, HCV

water catchment area, smoke emissions, BOD and COD levels of POME, ph, OER,

scheduled waste, energy use, water use, water quality and chemical use.

The estates have a master list of documents where the time period for retention is stated very clearly on each type of records. The retention time differs from one record to another depending on the type of confidentiality. Anyway the time for disposal is from 3-7 years and some for further notice such as levy, agronomist and so on.

ASA 2 4.2 Annual tissue samples are taken and an annual program for fertiliser application is put forward for each field number. Actual fertiliser applications conform to the recommendations. POME is applied by the mill in compliance with legal requirements. EFB is applied at a rate of 30mt / ha.

ASA 3 4.3 There is no clear documented system for minimizing soil erosion. Whilst the

EIA plan classifies soil erosion as a low risk, areas of soil erosion were noted in

some riparian zones. The following practices were noted: Frond placement.






Road side drain cut offs and silt traps. Terracing. It was noted that over

spraying has resulted in bare or exposed soils throughout most estates and no

appropriate conservation practices have been adopted.

Road maintenance programs are divided into Grading, gravelling, upkeep of culverts, upkeep of bridges. Progress of the maintenance is also been captured. There is no peatland to consider. No fragile or problem soils noted. Soil maps for all estates.

ASA 4 4.4 The mill has no associated water courses or wetlands and POME is used for land

irrigation purposes and does not discharge any water into natural waterways.

Various points are monitored through water analysis. At water catchment,

sampling is taken and the result for E-Coli is negative.

The mill has a water management plan covering 6 aspects: Environmental policy,

Identification of water source, construction of water reservoirs and water

harvesting, Protection of water courses and wetlands, Monitoring of water

quality and usage, piped water supply and emergency response plan.

Estates: For each aspect, a detailed policy is given and these policies are

supported by documentary evidence. Riparain zones have been identified and

non-maintenance regimes introduced. Water quality test includes microbial

count annually according to water sampling program (E-Coli test). The program

identifies the location and frequency of monitoring at 11 sites.

Water management plans for the estates cover:

1. Formulate Environmental Policy- It is being communicated through briefing.

2. Identification of water source water catchment area.

3. Protection water courses and wetlands.

4. Monitoring Water quality.

5. Piped water supply.

6. Emergency response plan covers drought time and the plan to overcome.

ASA 1 4.5 SOP3 is the documented IPM system for all estates. The major pests are listed

and steps for their detection and control are given.

Step 1. Detection by way of census.

Step 2. Identification of pest and cost analysis.

Step 3. Chemical control if the pest population is above an economic threshold.

Pesticides may be used when other controls fail.

The use of biological controls are emphasised and the planting of beneficial

crops is detailed. There are records of the number of beneficial plants planted

each month.

The audit team noted that the use of rat bait is preferred over biological

methods of controlling rats and the estates should consider how to encourage

natural predators. It was also noted that there appears to be no system for

deciding how many beneficial plants should be planted although it was noted

that there has been zero pesticide use for 2 years.

The regular census identifies any attacks and more beneficial plants will be put into a block if considered necessary. Rhinoceros Beetle. Rats. Leaf eating insects.

ASA 2 4.6 There is written justification for all agrochemical use and pesticides selected for use are approved. The list of herbicides recorded as being in stock was compared with the physical stock records. All chemical stores are well ventilated, secure and chemicals are stored neatly on shelving. First aid kits and emergency showers are available and MSDS leaflets are provided for each and every






chemical. Empty containers are either used for taking pre-mixed herbicide to the fields or they are triple rinsed, pierced and sold for recycling. MSDS leaflets are available and used and interviews with workers and supervisors confirmed that they are understood at operating level. The annual medical surveillance records are neither clear nor complete and the audit team were not able to verify compliance against this requirement. There is demonstrably no work with pesticides for pregnant or breast feeding woman. There is no aerial application. No testing of CPO has been requested by customers and each estate has a comprehensive recording system of pesticide applications.

ASA 3 4.7 A safe working environment was noted in the mill and all estates.

The Occupational Safety and Health (OSH) Policy of the company is applicable to

all mills and estates and states that:

“There is a clear obligation to the legislative objectives and moral obligations in

order to create build and promote a safe and healthy work environment and

culture. This is achieved by:

Compliance with all laws and regulations related to OSH.

Ensuring that standards and safe working procedures are clary defined, applied

and updated.

Providing adequate training, information and instructions on safety and health

aspects to all employees.

Ensuring that every employee understands his / her responsibility for working

safely to prevent injury to himself / herself and fellow employees”.

This policy is published in both English and Bahasa and once a week the

importance of OSH is emphasised to all workers.

OSH (HIRARC) in relation to mill and estate activities. For the mill these include

FFB intake (sub-divided into 5 activities), FFB Sterilisation (4 activities). Oil room,

Press station, Nut fibre separator, Boiler room (2 activities), Engine room and

EFB ramp. For each activity, the hazard associated is identified and evaluated in

terms of risk. Control actions are given and training requirements included. The

current HIRARC is dated 11/2/2012 and replaces the old version.

For the estates, HIRARC concentrates on occupational safety and does not

consider “health” in an adequate way. Both routine and non-routine tasks

must be considered and it is noted that (for example) the carrying of

harvesting sickles and chisels on motor bikes are not covered. There is no clear

link between the HIRARC, the training requirements and PPE requirements and

an example of this is safety boots for harvesters.

Awareness training for pesticide workers ensures that they are aware of the

importance of wearing the correct PPE and field observations confirmed that

PPE is worn, the supervisors are familiar with the active ingredients and first aid

kits and trained first aiders are always available.

All PPE required for all activities is listed in the PPE file. For the mill there are 16

activities and PPE required includes: Safety Helmet, Safety glasses, Dust mask,

Ear plug, leather glove, safety shoes, safety face shield, ear muff, welding mask,

lab apron and lab coat. All PPE is provided free of charge and a distribution list is

maintained.

It was noted that PPE is distributed and recorded in an inconsistent way.






Protective dust and chemical masks are not replaced before they become

ineffective and helmets are not replaced in accordance with supplier

recommendations.

The mill and estate managers are responsible for the implementation of the Health and Safety policy. It is normal for these managers to be the chairman of the OSH committees. Every 3 months once, an OSH committee and gender committee meeting is held. The OSH committee (typically) comprises a Chairman with management and worker representatives and is typically about 18 in number. If there has been an incident that needs urgent discussion, an interim meeting is held. The accident and emergency procedures are included as part of the OSH training and conveyed to workers as part of the on-going awareness training. Head of departments in the mill and selected key workers are first aid trained. This training is an annual one day event. First aid boxes are located throughout the mill and are checked at least every month. If anything is used, it is the responsibility of the head of that department to replenish the box. First aid boxes are located at key points throughout the estate, workshop and store complexes and are carried by supervisors in the field. Records of all accidents are maintained and the objective is to maintain zero serious accidents which are rated as lost time of 4 days or more. Records for the mill show zero man days lost in 2010 and 2011. The estates and mill are covered by a workmen compensation insurance policy issued by AXA. It is valid form 01/10/2011 to 30/09/2012.

ASA 4 4.8 The training matrices for all estates are inadequate. They do not clearly specify the training required for all workers and there are often periods of over 18 months between training for a specific task. The training is not clearly linked to HIRARC findings. The training records also evaluate the understanding of the trainee and almost all of the assessments given throughout all records are “average”. Very few “Good” and no “Poor”. An explanation of the assessment process is required. It is further noted that training records and personnel files are not well organized.

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


Summary The company demonstrated clear considerations for the environment by way of riparian zone management, assessment of all risks and the implementation of mitigating measures.

ASA 2 5.1 The mill has an environmental Hazards Identification and Risk Assessment which

identifies 22 processes. For each process, a number of activities are identified

and the hazard listed. Hazards include Air Pollution, Water Pollution, Noise, Dust,

Chemical spillage, scheduled waste or none. The risk to the environment is

ranked and mitigating measures given with target dates and responsible person.

This plan is also an action plan.

The Environmental impacts identification and risk assessment in relation to estate activities (pollution Prevention Plans 2012) identify each operation process and all aspect, major activity, impact, risk level, mitigating measures, target date, PIC and status. The process including Mature maintenance, harvesting FFB, FFB collection, Transport FFB to mill, Maintenance workshop, diesel, petrol, chemical, fertilizer and lubricant storage, supply electricity, mitigate pollution at line site.

ASA 3 5.2 The mill has identified the water catchment area as an HCV5. A checklist is used

to monitor erosion, wildlife, sign board status, pollution and if any unauthorised

persons are entering the catchment area. Maintenance is carried out.

Identification of the HCV habitat and protected area are shown in management






plan for HCV habitats (incl. ERTs) and their conservation. The identification for Location Biodiversity in HV area, activities, person responsible, target date and status. Checklists are used to monitor HCV in accordance with the HCV report and hunting and other illegal activities are actively discouraged.

ASA 4 5.3 Mill waste is identified and listed in Principle 5 file. 16 sources of waste and

pollution are identified by nature and source. Mitigation methods are given with

targets and the person responsible. Workshop, mill, office and linesite waste is

covered.

The main drain at the linesite at Landang Tundong has a concrete silt trap that

is full and a steep out-fall into a minor drain. Erosion is evident and remedial

action is required to correct this situation.

The storage areas for scrap metal are not always appropriate. They include

other (non-metal) scrap and not all are in a secure area.

The estates have also identified all waste products and there is an operational

plan to reduce pollution and to maximize recycling. 10 different waste products,

source of pollution, mitigation measures, target, person in charge, and status.

E.g. spent lubricating, Oil filters, batteries, empty pesticide and chemical

containers.

Scheduled waste is removed by licensed schedule waste operators. For each

consignment of waste, a schedule is prepared showing the type of waste and the

quantities. A record of all waste that enters the store is maintained.

The mills send the EFB back to the estates for use a fertiliser and daily records

are maintained by weight and to which estate it is delivered. A recycling program

is now in place for glass, paper, cardboard, plastics and aluminium.

The EFB mulching programme for year 2011/2012 by field number, division, and the proposed hectare to be done starting from Oct to September each year.

ASA 3 5.4 The kWhr produced from the steam turbines is recorded daily and a monthly

summary produced. The mill records daily use of all diesel consumption for the

genset and for all tractors and other machinery. A monthly summary is produced

and the consumption is rated as kWhr/litre. The efficiency has improved

between 2009 and 2012.

Estates monitor fossil fuel for transport in terms of kWhr/litre diesel and diesel per mt FFB for each year. For the past 3 years an improving trend is noted.

ASA 2 5.5 All workers are trained to avoid open burning and no burning was noted for any operations. Group agricultural practice policy avoids burning at replant.

ASA 1 5.6 The mill is operating a continuous automatic monitoring system of the density of

the smoke emissions and there is alive feed to the department of the

environment. Records show that the emissions are within the legal parameters.

(Max of 15 minutes in a 24 hr period of a density greater than 40%). A CDM

project is now in planning phase.

Riparian zones are managed with a non-maintenance regime and no fertilising or herbicide application takes place in these zones. Diesel tanks are correctly bunded and there is good provision to prevent environmental pollution by having fuel and chemical traps at appropriate places. There is no peatland.

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


Summary The company demonstrates social awareness and is continuously improving in all areas.

ASA 3 6.1 A documented social impact assessment is in place and was prepared with the input from affected parties. No Timetable of possible mitigation measures






[Negative nor positive].

ASA 4 6.2 Documented procedures but no evidence of a nominated person.

ASA 3 6.3 Complaints and grievance procedure in place. The mechanism for the procedure is not fully understood at all worker levels. Grievances may not be raised for a lack of awareness training.

ASA 2 6.4 No need for negotiations or loss of customary right at the time of the audit.

ASA 1 6.5 Pay and conditions are documented and workers have a contract. Contracts for Foreign Workers are only valid for 3 years, but sighted that there are workers who have been with the company for 5 years and more; in which their Annual Leave and Sick Leave entitlement were not indicated nor practiced.

ASA 2 6.6 Freedom of association policy.

ASA 3 6.7 Minimum age of workers is 16 and records and interviews confirmed that this is put into practice. Young people (16 to 18 yrs) are not to work more than 7 hrs per day and only to perform light work.

ASA 4 6.8 An equal opportunities policy is in place and practiced.

ASA 3 6.9 A policy on sexual harassment is in place. Reproductive rights are implemented through maternity leave and no restrictions on pregnancy, however the management has yet to make it as a policy. Awareness and Understanding of Sexual Harrasment need to be further enhance through training. See 4.8

ASA 2 6.10 Pricing mechanisms are clear for FFB when purchased from outside suppliers and contracts for other work are fair.

ASA 1 6.11 Contributions seen on many occasions.

Principle 7: Responsible Development of New Plantings


Summary Not applicable as no new planting has taken place.

ASA 1 7.1 N/A

ASA 2 7.2 N/A

ASA 1 7.3 N/A

ASA 3 7.4 N/A

ASA 4 7.5 N/A

ASA 2 7.6 N/A

ASA 1 7.7 N/A

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


Summary

There is a continuous improvement program for all estates and the mill which

cover all aspects of criterion 8.1.

1. Safety and Health aspect; Premix area, Chemical store/General Store,

Sunflower room , Fertilizer store, PPE store, Gen Set Room, workshop,

Safety signage in the field, office compound, Water treatment plant,

monitoring of minor accident and near missed, translation of CSDS from

English to Bahasa.

2. Environmental aspect; monitoring of water quality, Probase road, zero

burning signage, sedimentation ponds, road/still traps maintenance,

constructing of vehicle bay at diesoline tank, refurnish recycle bin with

steel, riparian area, HCV area, Control of Soil Erosion, Water catchment

area.

3. Social Aspect; worker quarters, crèche ayahs, Kindergarten,

Constructing futsal area, replace old water pit.

ASA 1,2,3 & 4 8.1 Continuous improvement was noted in all areas and the company is commended for their tangible improvements made since the pre-assessment conducted in 2007.






4.3 Sample Criteria for inclusion in this Report on an Annual Basis during the Lifetime of the Certificate

Criterion Year 1 Year 2 Year 3 Year 4 Criterion Year 1 Year 2 Year 3 Year 4

1.1 x x x x 6.1 x

1.2 x x x x 6.2 x

2.1 x 6.3 x

2.2 x 6.4 x

2.3 x 6.5 x

3.1 x x 6.6 x

4.1 x 6.7 x

4.2 x 6.8 x

4.3 x 6.9 x

4.4 x 6.10 x

4.5 x 6.11 x x

4.6 x 7.1 x

4.7 x 7.2 x

4.8 x 7.3 x

5.1 x 7.4 x

5.2 x 7.5 x

5.3 x 7.6 x

5.4 x 7.7 x

5.5 x 8.1 x x x X

5.6 x

4.4 Non-conformity register and reports on previous NCs

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

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

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

4.4.1 Annual Audit NC Summary

Annual Audit Date: February 2012

Number settled: 1

Number outstanding: 13

4.4.2 Status of non-conformities (both Minor and Major) previously identified, even if already Closed Out

NC number: 01/2011

Category: Minor

Aspect of standard: 5.3.2 Having identified wastes and pollutants, an operational plan should be developed and implemented, to avoid or reduce pollution.

Evidence of NC: It is noted that diesel bund is cracked. It is not clear whether operational plans developed to mitigate any leakage from the diesel bund if diesel tank is leak.

Comment at ASA: All diesel tanks were inspected on all estates and in the mill and it was noted that at Landang Jatika that the diesel bund was leaking water around the drain pipe. This NC is now raised to a major and 60 days are given for closure.

NC number: 02/2011

Category: Minor

Aspect of standard: 6.5.3 Growers and millers provide adequate housing, water supplies, medical, educational and welfare amenities in accordance with Workers’ Minimum Standard of Housing and Amenities Act 1990 (Act 446) or above, where no such public facilities are






available or accessible. (Not applicable to smallholders).

Evidence of NC: It is found that the latest drinking water analysis records are not available during the document inspection. It is the responsibility of the operating unit to conduct the water analysis.

Comment at ASA: Water analysis records are now available and e-coli is negative. Proposal: Closure of NC.

4.5 Non-Conformity Report for NC identified during this ASA

NC number: 2012/001

Client name: KL-Kepong (Sabah) Sdn Bhd

Date raised: 16th

February 2012

Major or Minor: Minor

Raised by: David Ogg. Lead auditor.

Aspect of standard: 4.3.1. Documented evidence of practices minimizing soil erosion and degradation (including maps).

Replanting on sloping land must be in compliance with MSGAP Part 2: OP (4.4.2.2) Evidence of non-conformity: There is no clear documented system for minimizing soil erosion. Whilst the EIA plan classifies soil erosion as a low risk,

areas of soil erosion were noted in some riparian zones.

Signature

Date 16th

February 2012.

NC number: 2012/002


Date raised: 16th

February 2012



Aspect of standard: 4.3.2. Avoid or minimize bare or exposed soil within estates.

Appropriate conservation practices should be adopted.

Evidence of non-conformity: It was noted that over spraying has resulted in bare or exposed soils throughout most estates and no appropriate conservation practices have been adopted.

Signature

Date 16th

February 2012.

NC number: 2012/003


Date raised: 16th

February 2012



Aspect of standard: 4.5.1. Documented IPM system.

Evidence of non-conformity: The use of rat bait is preferred over biological methods.

Signature

Date 16th

February 2012.






NC number: 2012/004


Date raised: 16th

February 2012

Major or Minor: Major


Aspect of standard: 4.6.5. Annual medical surveillance as per CHRA for plantation pesticide operators.

Evidence of non-conformity: The annual medical surveillance records are neither clear nor complete and the audit team were not able to verify compliance against this requirement.

Signature

Date 16th

February 2012.

NC number: 2012/005


Date raised: 16th

February 2012



Aspect of standard: 4.7.1.b) All operations have been risk assessed and documented.

Evidence of non-conformity: For the estates, HIRARC concentrates on occupational safety and does not consider “health” in an adequate way. Both

routine and non-routine tasks must be considered and it is noted that (for example) the carrying of harvesting sickles and

chisels on motor bikes are not covered. There is no clear link between the HIRARC, the training requirements and PPE

requirements and an example of this is safety boots for harvesters. Company must provide the PPE.

Signature

Date 16th

February 2012.

NC number: 2012/006


Date raised: 16th

February 2012



Aspect of standard: 4.8.1 A training programme (appropriate to the scale of the organization) that includes regular assessment of training needs

and documentation, including

records of training for employees are kept.

Evidence of non-conformity: The training matrices for all estates are inadequate. They do not cover all operations and do not reflect the HIRARC

findings. Records of training are haphazard and evaluation of the efficacy of the training is not qualified.

Signature

Date 16th

February 2012.






NC number: 2012/007


Date raised: 16th

February 2012



Aspect of standard: 5.3.2 Having identified wastes and pollutants, an operational plan should be developed and implemented, to avoid or reduce

pollution.

Evidence of non-conformity: The main drain at the linesite at Landang Tundong has a concrete silt trap that is full and a steep out-fall into a minor drain. Erosion is evident and remedial action is required to correct this situation.

Signature

Date 16th

February 2012.

NC number: 2012/008


Date raised: 16th

February 2012



Aspect of standard: 6.9 A policy to prevent sexual harassment and all other forms of violence against women and to protect their reproductive

rights is developed and applied.

Evidence of non-conformity: Policy on protection of reproductive rights has not been developed and applied.

Signature

Date 16th

February 2012.

NC number: 2012/009


Date raised: 16th

February 2012



Aspect of standard: 6.5.2 Contracts of employment detailing payments and conditions of employment

Evidence of non-conformity: Contracts for Foreign Workers are only valid for 3 years, but sighted that there are workers who have been with the company for 5 years and more; in which their Annual Leave and Sick Leave entitlement were not indicated nor practiced.

Signature

Date 16th

February 2012.






NC number: 2012/010


Date raised: 16th

February 2012



Aspect of standard: 6.2.2 A nominated plantation management official at the operating unit responsible for these issues.

Evidence of non-conformity: PIC personnel available; no evident that it is nominated. It is generally accepted that the Estate Manager is responsible for RSPO issues. Signature

Date 16th

February 2012.

NC number: 2012/011


Date raised: 16th

February 2012



Aspect of standard: 6.3.3 The (Complaints and grievance) system is open to any affected parties.

Evidence of non-conformity: The mechanism of the complaints and grievance flow has not fully extended to the lowest level of employee. Grievance may not occur due to no communication of the procedure { Through workers interview]

Signature

Date 16th

February 2012.

NC number: 2012/012


Date raised: 16th

February 2012



Aspect of standard: 6.1.3 A timetable with responsibilities for mitigation and monitoring reviewed and updated as necessary.

Evidence of non-conformity: Timetable of possible mitigation measure [ negative nor positive ] were not available nor updated as necessary.

Signature

Date 16th

February 2012.






4.6 Observations


Date raised: 16th

February 2012


No emergency rooms in the mills.

Signature

Date 16th

February 2012.


Date raised: 16th

February 2012

Raised by: David Ogg. Lead auditor. The storage areas for scrap metal are not always appropriate. They include other (non-metal) scrap and not all are in a secure area.

Signature

Date 16th

February 2012.


Date raised: 16th

February 2012

Raised by: David Ogg. Lead auditor. Chapter XI, Employment of Young person, 73C (1) (b), not more than 7 hours; and to perform light work; there are evidence that “youth” [above 16 to below 18 yrs old] is working for the company as harvester and sprayer; working for more than 7 hours.

Signature

Date 16th

February 2012.

4.7 Issues that were raised during the Stakeholder Consultation and Company Responses

The subjects raised and responses by the company will be reviewed at the first annual surveillance audit. Subsequent annual surveillance audit reports will include any subjects raised during the period of certification and during the annual surveillance audit.

Subject raised Company response and proposed action to be taken

Audit team findings

No subjects raised.

PART 5: RSPO SUPPLY CHAIN CERTIFICATION

The palm mill mentioned in the scope of the audit was audited against the requirements of the following: RSPO Supply Chain Certification Systems. November 2011. RSPO Supply Chain Certification Standard. November 2011. As required, a separate SCC report and recommendation for certification has been prepared.






PART 6: CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY

6.1 Date of next ASA

The provisional date for the next ASA is: February 2013

6.2 Date for Closure of Non-Conformities

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

All major NCs to be closed by: April 16, 2012

All minor NCs to be closed by: Feb 13, 2013 (Tentatively by ASA-4)

6.3 Signing by the Client

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

Acceptance of liability in execution of the instructions given.

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

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

Acknowledged by:

Name: Sin Cuan Eng

Position: General Manager

Date: 16th

February 2012 Signature

6.4 Signing by the Lead Auditor

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

Acknowledged by:

Name: David Ogg FICFor.

Position: Senior Lead Auditor

Date: 16th

February 2012 Signature

6.5 Signing by the Certifier

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

Acknowledged by:

Name: Gerben Stegeman

Position: Certifier

Date: 2nd

March, 2012 Signature






PART 7: APPENDICIES

Appendix 1: List of Abbreviations

BRC British Retail Consortium

CHRA Chemical Health Risk Assessment

CoC Chain of Custody

CPO Crude Palm Oil

CSR Corporate Social Responsibility

CU Control Union

CUC Control Union Certifications

DOE Department of Environment

EFB Empty Fruit Bunch

EIA Environment Impact Assessment

ERT Endangered Rare or Threatened species

EU European Union

EUREPGAP Euro-Retailer Produce Good Agricultural Practices

FFB Fresh Fruit Bunch

FSC Forest Stewardship Council

FSC COC Forest Stewardship Council Chain of Custody

FSC FM Forest Stewardship Council Forest Management

GGL Green Gold Label

GMP Good Manufacturing Practice

GOTS Global Organic Textile Standard

GTP Good Trading Practice

GPS Global Positioning System

HACCP Hazard Analysis and Critical Control Point

HCV High Conservation Value

HCVF High Conservation Value Forest

IPM Integrated Pest Management

JAS Japanese Agricultural Standard

KDC Kulumpang Development Corporation Sdn Bhd

KLK Kuala Lumpur Kepong

MDC MDC Publishers Sdn Bhd ( Company Name)

MSDS Material Safety Data Sheet

NC Non Conformity

OE Organic Exchange

OSH Occupational Safety and Health

OSHAS Occupational Safety and Health Assessment Scheme

P&C Principle and Criteria

PEFC Programme for the Endorsement of Forest Certification

PK Palm Kernel

POME Palm Oil Mill Effluent

PPE Personal Protective Equipment

RSPO Roundtable on Sustainable Palm Oil

RSPO NI Roundtable on Sustainable Palm Oil National Interpretation

SA8000 Social Accountability 8000

Sdn Bhd Sendirian Berhad

SIA Social Impact Assessment

SOCSO Social Security Organisation

SOP Standard Operating Procedure

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

MT Metric Tonnes

WHO World Health Organizations

RSPO audit ReportRSPOPC-ASAREPORT.F01 EN (02) FEB2012 Page 3 of 31 Control Union Certifications...

Documents

Transcript of RSPO audit ReportRSPOPC-ASAREPORT.F01 EN (02) FEB2012 Page 3 of 31 Control Union Certifications...