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PUBLIC SUMMARY REPORT

INITIAL RSPO CERTIFICATION ASSESSMENT

SIME DARBY PLANTATION Sdn Bhd Management Unit SOU 9a

Sepang, Selangor, Malaysia

Report Author

Charlie Ross – February 2009 [email protected]

Tel: +61 417609026

BSi Management Systems Singapore Pte Ltd (Co. Reg. 1995 02096-N) BSi Management Systems Malaysia Sdn Bhd (Co.Reg. 9942MX) 460 Alexandra Road Suite 19.05 Level 19 Wisma Goldhill #08-01/02 PSA Building 65, Jalan Raja Chulan SINGAPORE 119963 50200 Kuala Lumpur Tel +65 6270 0777 MALAYSIA Fax +65 6270 2777 Tel +03 2032 2252 (Hunting Line) www.bsi-asia.com Fax +03 2032 2253 Soon Leong Chia: [email protected] Teo Chin Siong: [email protected]

mailto:[email protected]�

http://www.bsi-asia.com/�



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TABLE of CONTENTS Page No SUMMARY ................................................................................................................................................................... 1

ABBREVIATIONS USED ................................................................................................................................................. 1

1.0 SCOPE OF CERTIFICATION ASSESSMENT ........................................................................................................ 1–5 1.1 National Interpretation Used ....................................................................................................................... 1 1.2 Certification Scope ....................................................................................................................................... 1 1.3 Location and Maps ....................................................................................................................................... 1 1.4 Description of Supply Base ........................................................................................................................... 1 1.5 Date of Plantings and Cycle .......................................................................................................................... 1 1.6 Other Certifications Held .............................................................................................................................. 1 1.7 Organisational Information/Contact Person ................................................................................................ 5

1.8 Time Bound Plan for Other Management Units........................................................................................... 5 1.9 Area of Plantation ........................................................................................................................................ 5 1.10 Approximate Tonnages Certified ................................................................................................................. 5 1.11 Date Certificate Issued and Scope of Certificate .......................................................................................... 5

2.0 ASSESSMENT PROCESS.................................................................................................................................. 6–7 2.1 Certification Body ......................................................................................................................................... 6 2.2 Assessment Methodology, Programme, Site Visits ...................................................................................... 6 2.3 Qualifications of Lead Assessor and Assessment Team ............................................................................... 6 2.4 Stakeholder Consultation and List of Stakeholders Contacted .................................................................... 6 2.5 Date of Next Surveillance Visit ..................................................................................................................... 7 3.0 ASSESSMENT FINDINGS ............................................................................................................................ 7 – 15 3.1 Summary of Findings .................................................................................................................................... 7 3.2 Detailed Identified Nonconformities, Corrective Actions and Auditor Conclusions ........................................................................................ 14 3.3 Noteworthy Positive Components ............................................................................................................. 15 3.4 Issues Raised by Stakeholder and Findings with Respect to Each Issue ................................................................................................................... 15 3.5 Acknowledgement of Internal Responsibility ............................................................................................ 15 3.6 Formal Sign-off of Assessment Findings ..................................................................................................... 15 LIST of TABLES

1 Mill GPS Locations ................................................................................................................................................... 1 2 Mill Supply Base....................................................................................................................................................... 1 3 Age Profile of Planted Palms ................................................................................................................................... 1 4 Estates and Areas Planted ....................................................................................................................................... 5 5 Approximate Tonnages Certified ............................................................................................................................. 5 LIST of FIGURES

1 SOU 9a Location Map ............................................................................................................................................. 2 2 Sepang Estate Location Map ................................................................................................................................... 3 3 Sepang Estate Detailed Layout ................................................................................................................................ 4 LIST of PLATES

1 Worker Housing ..................................................................................................................................................... 15 List of Appendices

A Time Bound Plan for other Management Units B SOU 9a RSPO Certificate Details C Certification Assessment Plan D Stakeholder Letter from Both ENDS E Sime Darby Response to Letter from Both Ends

Public Summary Report - RSPO Certification Assessment Management Unit SOU 9a Page 1

Prepared by BSi Management Systems Singapore Pte Ltd for Sime Darby Plantation Sdn Bhd

SUMMARY

BSi Management Systems Singapore Pte Ltd (BSi) has conducted an assessment of Sime Darby Plantation Sdn Bhd Management Unit SOU 9a (SOU 9a) operations comprising One (1) mill, supply base, support services and infrastructure. BSi concludes that SOU 9a operations comply with the requirements of RSPO Principles & Criteria: 2007 and MY-NI Indicators and Guidance : 2008.

BSi recommends that SOU 9a be approved as a producer of RSPO certified sustainable palm oil.

ABBREVIATIONS

CPO Crude Palm Oil DOE Department of Environment DOSH Department of Occupational Safety & Health EFB Empty Fruit Bunch EIA Environmental Impact Assessment EMS Environmental Management System FFB Fresh Fruit Bunch HA Hospital Assistant HCVs High Conservation Values HDPE High Density Polyethylene HIRAC Hazard Identification and Risk Assessment IPM Integrated Pest Management ISO International Standards Organisation LTA Lost Time Accident MAPA/ Malayan Agricultural Producers Association/

AMESU All Malayan Estates Staff Union MSDS Material Safety Data Sheet MY-NI Malaysian National Interpretation NUPW National Union of Plantation Workers/ OHSAS Occupational Health & Safety Assurance System OSH Occupational Safety & Health PCD Pollution Control Device PK Palm Kernel POME Palm Oil Mill Effluent PPE Personal Protective Equipment PQMS Plantation Quality Management System QMS Quality Management System R&D Research and Development RSPO Round Table on Sustainable Palm Oil SEIA Social and Environmental Impact Assessment SIA Social Impact Assessment SOPs Standard Operating Procedures SOU Strategic Operating Unit TQEM Total Quality Environmental Management

1.0 SCOPE OF CERTIFICATION ASSESSMENT

1.1 National Interpretation Used

The operations of the mill and its supply base of FFB were assessed against the Malaysian National Interpretation (MY-NI : 2008) of the RSPO Principles and Criteria : 2007.

1.2 Certification Scope

The scope of certification includes the production from the palm oil mill that is sourced from Two (2) company owned oil palm estates.

1.3 Location and Maps

The SOU 9a mill is located on Sepang Estate at Sepang, Selangor, Malaysia (Figures 1 and 2). The GPS location of the mill is shown in Table 1. In addition to Sepang Estate, SOU 9a includes the small remaining area of 94 ha at Semenyih Estate which has been sold for commercial and residential development. The small remaining area of palms at Semenyih Estate will be maintained until the redevelopment occurs. A detailed map of Sepang Estate is included (Figure 3). Sepang Estate is bordered by oil palm, a main road and an airport.

Table 1: Mill GPS Locations

MILL LONGITUDE LATITUDE

Sepang Mill 101° 43’ 55∙04”E 2° 40’ 42∙55”N

1.4 Description of Supply Base

The supply base consists of FFB from the Company owned SOU 9a Estates that supply 46.5% of the FFB processed at the mill; Company owned Non-certified Estates (39.8%) and Smallholders (13.7%), as listed in Table 2 for the 01 July 2007 – 30 June 2008 period.

Table 2: Mill Supply Base

Estate FFB Production (t)

Sepang 51,187

Semenyih 1,986

Sime Darby Non-certified Estates

45,544*

Smallholders 15,663*

TOTAL 114,380

* The FFB production from the Non-certified Sime Darby Estates and Smallholders is excluded from the RSPO Certificate.

1.5 Date of Plantings and Cycle

The Company owned Estates were developed for commercial agriculture in the 1920s. Oil palms were first planted in the 1960s and are in their second and third cycle. The age profile of the planted palms is shown in Table 3.

Table 3: Age Profile of Planted Palms

AGE (years) % of PLANTED AREA

30 – 35 – 20 – 30 16∙3 10 – 20 57∙6 0 – 10 26∙1

Public Summary Report - RSPO Certification Assessment Management Unit SOU 9a Page 2


Figure 1: SOU 9a Location Map

Public Summary Report – RSPO Certification Assessment Management Unit SOU 9a Page 3


Figure 2: Sepang Estate Location Map



Figure 3: Sepang Estate Detailed Layout



1.6 Other Certifications Held

SOU 9a holds the following Certifications:

ISO 9001: 2000 Certificate No AR0382 Sepang Palm Oil Mill Original Date of Certification: 21/7/1994 Certificate Expiry Date: 21/07/2010

ISO 14001: 2004 Certificate No 0508 Sepang Palm Oil Mill Date of Original Certification: 21/07/1997 Certificate Expiry Date: 20/07/2009

1.7 Organisational Information / Contact Person

Sime Darby Plantation Sdn Bhd Management Unit SOU 9a Sepang, Selangor MALAYSIA Contact Person: Mr Musa B Salami SOU 9a Chairman/Manager Sepang Phone: 03-3142 1388 Fax: 03-3142 1854 Email: [email protected]

1.8 Time Bound Plan for Other Management Units

Sime Darby owns and operates 65 palm oil mills for processing the crop from its 208 oil palm estates located in Malaysia and Indonesia, as well as the fruit that it purchases from Outgrowers. Sime Darby has developed a Time Bound Plan to achieve RSPO Certification for all of its production by 30 June 2011. A copy of the Time Bound Plan is included as Appendix A.

BSi has reviewed Sime Darby’s Time Bound Plan and considers the programme to be very challenging to implement as it will require a uniform, high standard of performance across the wide geographic spread of its operations. BSi will monitor and report on Sime Darby’s progress with implementation of the Time Bound Plan.

Sime Darby has notified BSi of the existence of land tenure issues at oil palm estates in West Kalimantan and at Sarawak. Sime Darby has engaged independent consultants to investigate the land issues and has initiated dispute resolution that is consistent with the consultant’s recommendations. Sime Darby has advised BSi and BSi Assessors have visited two of the properties and confirmed that work on the smallholders’ land and the company estates is continuing without disruption, which indicates a constructive relationship, whilst working towards dispute resolution.

Sime Darby has provided BSi with details of all new development carried out at its landholdings since November 2005. There has not been any new development at the landholdings in Malaysia. Following the December 2007 amalgamation of three plantation companies to form Sime Darby Plantation Sdn Bhd, Sime Darby has acquired plantation companies in Indonesia where new development has been carried out since November 2005. In order to evaluate this issue, reference has been made to Criterion 7.3

of the Indonesian National Interpretation of the RSPO principles and Criteria, 2008. Of particular importance is the Guidance associated with Criterion 7.3, which distinguishes between new development carried out between November 2005 and November 2007 (the RSPO Trial Implementation Period), and new development since November 2007.

BSi has requested Sime Darby to provide information on the HCV status of the land in Indonesia prior to new development. In accordance with the RSPO Guidance, where new development has been carried out between November 2005 and November 2007 and the HCV status is uncertain, the affected Sime Darby estates have been excluded from the RSPO Certification programme until the status has been determined or an acceptable HCV compensation solution developed. Sime Darby has made a commitment to progressively assess and report on the HCV status of all new development carried out since November 2005.

Post November 2007, Sime Darby has carried out new development at one SOU in Sumatra totalling 263 ha and at 4 SOUs in Kalimantan totalling 1,270 ha. The BSi RSPO audit team has examined satellite images and information from SEIA reports on vegetation, fauna, drainage, land use and cultural heritage sites relating to each of these new development areas. The available information indicates that there has been no replacement of primary forest or any area containing HCVs since November 2007. This initial assessment will be checked when field audits are carried out at each of the SOU.

Sime Darby has advised that there are no labour disputes and that there are no known legal noncompliances at its non-certified oil palm operations. BSi considers Sime Darby’s Time Bound Plan to conform to the RSPO requirements for Partial Certification.

1.9 Area of Plantation

The areas of planted palms at Company owned Estates are listed in Table 4.

Table 4: Estates and Area Planted

Estate Mature (ha) Immature (ha)

Sepang 2190 269

Semenyih 94 0

TOTAL 2284 269

1.10 Approximate Tonnages Certified

The approximate tonnages certified on the basis of 01 July 2007 – 30 June 2008 production from SOU 9a estates are detailed in Table 5.




Table 5: Approximate Tonnages Certified

MILL CPO PK

Sepang 11194 t 2762 t

1.11 Date Certificate Issued and Scope of Certificate

Scope of the Certificate is for the production from the palm oil mill and the supply base from the company owned SOU 9a estates. Certificate details are included as Appendix B.

The Certificate issue date will be the date of the RSPO approval of the Assessment Report.

2.0 ASSESSMENT PROCESS

2.1 Certification Body

BSI Management Systems Singapore Pte Ltd 460 Alexandra Road #08–01/02 PSA Building Singapore 119963

Product Manager: Mr Soon Leong Chia Phone: +65 6270 0777 Ext 115 Fax: +65 6270 2777 Email: [email protected]

BSi is a leading global provider of management systems assessment and certification, with more than 70,000 certified locations and clients in over 100 countries. BSi Standards is the UK’s National Standards Body. BSi Management Systems provides independent, third party certification of management systems. BSi has a Regional Office in Singapore and an Office in Kuala Lumpur.

2.2 Assessment Methodology, Programme, Site Visits

A Stage I Certification Assessment was conducted 28 – 30 October 2008 against the RSPO MY-NI : 2008. The scope of the Stage I Assessment included estate, mill and support infrastructure and focussed on a review of management systems and documentation and physical inspection of mill and estate operations. The Stage I Assessment identified a number of nonconformities. SOU 9a prepared a Corrective Action Plan and has implemented corrective actions since October 2008.

The Stage II Certification Assessment was conducted between 20 and 22 January 2009. The Assessment Programme is included as Appendix C.

The approach was to audit the mill and Sepang Estate, such that a range of environmental and social factors were covered. These factors included consideration of topography, soils, age of palms and proximity to local communities and areas with HCVs. The audit also checked the implementation of corrective actions since the October 2008 Stage I audit.

The methodology for collection of objective evidence included physical site inspections, observation of tasks and

processes, interview of staff, workers and their families and external stakeholders, review of documentation and monitoring data. Checklists and questionnaires were used to guide the collection of information.

The assessment was based on random samples and therefore nonconformities may exist which have not been identified.

Mr Allan Thomas, BSi Lead Auditor EMS, QMS and OHSAS has reviewed this report for conformance with RSPO Certification System requirements and technical content.

Mr Soon Leong Chia, BSi Product Manager RSPO, has reviewed this report for conformance with BSi Procedures and the RSPO Certification System requirements.

2.3 Qualifications of the Lead Assessor and Assessment Team

BSi Management Systems Singapore holds copies of educational qualifications, certificates and audit logs for each of the audit team members. BSi has evaluated the qualifications and experience of each audit team member and has registered the following designations for conducting RSPO Assessments.

Charlie Ross – Lead Assessor B.App.Sc. M.Sc (Env.Studies) Lead Auditor EMS RABQSA Cert No14370 Jarwadi Hernowo – Technical Expert Ecology and Impact

Assessment – B.Sc. M.Sc (Ecology) Robyn Ross – Social Assessor Junecel Maloloy – Interviewer/Assistant (Teacher Borneo Child Aid Society) Charlie Ross is an independent environmental auditor who has extensive fieldwork experience in conducting environmental and social assessments of oil palm projects over the past 16 years in Indonesia, Malaysia, Nigeria, Papua New Guinea and Solomon Islands. He has completed lead auditor training in ISO 9001 Quality Management Systems, lead auditor training in OSHAS 18001 Occupational Health and Safety Assurance Systems, auditor training in Environmental Management, SA8000 Social Accountability and RSPO P&C. He has been involved in the RSPO process since RT1 and has conducted audits of oil palm plantation companies against the RSPO P&C in Indonesia, Malaysia and PNG. Jarwadi Hernowo graduated with a BSc in Forest Ecology form the University of Bogor in 1985 and an MSc in Wildlife Ecology from the Faculty of Forestry Science, Georg August Universitat, Geottingen, Germany in 1995. Jarwadi is a lecturer in ecology at the University of Bogor with more than 20 years experience in forest ecology and has carried out research on the habitats, distribution and population of wildlife. He has extensive fieldwork experience in the assessment of flora and fauna biodiversity and HCVs. He has assisted in conducting independent environmental assessments of 4 oil palm projects during the past 5 years. He has assisted with conducting an audit of an oil palm plantation company against the RSPO P&C in Indonesia. Robyn Ross has a background in company administration and supporting women with mental health and physical disabilities by assisting them to develop skills for living independently in the community. She has assisted with




fieldwork in conducting environmental and social assessments of oil palm projects over the past 5 years in Indonesia and Nigeria. She has completed auditor training in SA8000 Social Accountability. She has assisted with conducting audits of oil palm plantation companies against the RSPO P&C in Indonesia, Malaysia and Papua New Guinea. Junecel Maloloy is a Teacher with Borneo Child Aid Society and is fluent in Bahasa Malaysia, Sabahan, Pilipino and English. Mrs Maloloy grew up on an oil palm plantation in Sabah and has a good understanding of the issues facing workers and families living in remote locations. Mrs Maloloy assisted Robyn Ross during interview of female staff and workers and families.

2.4 Stakeholder Consultation and List of Stakeholders Contacted

Stakeholder consultation involved internal and external stakeholders. External stakeholders were notified by placing an invitation to comment on the RSPO, Sime Darby and BSi websites. Individual stakeholders were contacted by email and telephone, using the comprehensive stakeholder list prepared by SOU 9a. Mobile phone networks provide very good coverage in the Sepang area and phone calls were made to arrange meetings and to discuss issues on SOU 9a ’s environmental and social performance.

BSi did not receive any responses in writing from stakeholders in relation to SOU 9a. One response was received in relation to progress with land dispute resolution at the Sime Darby PT MAS Estate in Sanggau, West Kalimantan, Indonesia.

Meetings were held with SOU 9a stakeholders to seek their views on the performance of the company with respect to the RSPO requirements and aspects where they considered that improvements could be made. Stakeholders included those immediately linked with the operation of the company such as employees, out growers and contractors, as well as organisations that may have an interest in SOU 9a operations or adjacent areas.

Stakeholder consultation took place in the form of meetings, interviews and discussion by telephone. The interviewer explained the purpose of the audit at the outset followed by an evaluation of the relationship between the stakeholder and the company before discussions proceeded. The interviewer recorded comments made by stakeholders and these have been incorporated into the assessment findings.

Interviews with male and female workers and staff were held in private at the workplace in the mill and the estates. Fieldworkers were interviewed informally in small groups in the field.

A separate visit was made to the local community to meet with the village head and residents. In addition, the wives of workers and staff were interviewed in informal group meetings at their housing. Company officials were not present at any of the interviews.

List of Stakeholders Contacted

Contractors & Consultants

Transport Contractor Labour Supply Contractor FFB Supplier

Local Communities

Kampung Batu Empat Residents

Government Departments

Labour Department Department of Health and Safety Department of Environment

NGOs & Others

WWF Malaysia (KL Office) Tenaganita NUPW

2.5 Date of Next Surveillance Visit

The next surveillance visit is planned to be carried out within 12 months from the date of the RSPO approval of the Initial Certification.

3.0 ASSESSMENT FINDINGS

3.1 Summary of Findings

As outlined in Section 2.3, objective evidence was obtained separately for each of the RSPO Indicators for the mill and the estate. The results for each indicator from each of these operational areas have been aggregated to provide an assessment of overall conformance of the Company’s operations with each Criterion. A statement is provided below for each of the Indicators to support the finding of the assessment team. One (1) Nonconformity was identified against a Minor Compliance Indicator. Nine (9) Observations / Opportunities for improvement were identified. Details of the Nonconformity and Observations are given in Section 3.2 (Page 14). SOU 9a has prepared a Corrective Action Plan that was reviewed and accepted by BSi. The audit team will review progress on action taken for the nonconformity against Minor Compliance Indicator 4.4.7 during the Surveillance Audit scheduled during 2010. BSi has conducted an assessment of the SOU 9a operations comprising 1 mill, 2 oil palm estates, support services and infrastructure. BSi concludes that SOU 9a operations comply with the requirements of RSPO Principles & Criteria: 2007 and MY-NI Indicators and Guidance : 2008. BSi recommends that SOU 9a be approved as a producer of RSPO Certified Sustainable Palm Oil.



Criterion 1.1: Oil palm growers and millers provide adequate information to other stakeholders on environmental, social and legal issues relevant to RSPO Criteria, in appropriate languages & forms to allow for effective participation in decision making.

The Estate has implemented a system for recording requests for information and assistance on file. The majority of requests relate to seeking assistance in the form of donations for schools and places of worship. Examination of records indicated the estate responded promptly to requests. The mill maintains records of communications with customers and stakeholders as part of the ISO 9001 Quality Management System. (1.1.1) Criterion 1.2: Management documents are publicly available, except where this is prevented by commercial confidentiality or where disclosure of information would result in negative environmental or social outcomes.

The Estate and Mill hold copies of the documents that are required by RSPO to be publicly available. The Estates and Mill are located on Freehold Land and copies of the Land Titles are held at Sepang Estate and were sighted during Certification Assessment. (1.2.1)

The Mill and Estates have a yearly OSHA Programme for 2008/09 that has details of policy, inspections, training and targets. (1.2.2)

The Standards and Compliance Unit of TQEM Department assisted Sepang Estate to carry out an Environmental Impact Assessment using a risk assessment approach – updated 19 December 2008. The Plantation Sustainability – RSPO Unit of TQEM Department facilitated a Social Impact Assessment (SIA) at the Estate in October 2008 and a report was produced in January 2009. In addition, the mill has an Environmental and Impacts Register – ISO 14001. (1.2.3)

The Estate has prepared a Pollution Prevention Plan (24 December 2008) for mitigation of environmental impacts. The Mill Pollution Prevention Plan is documented as Environmental Objectives and Targets in the EMS. (1.2.4)

The Estate and Mill maintain logbooks for registering details of complaints from both internal and external stakeholders, together with person responsible, action taken and completion date. (1.2.5)

Negotiation Procedures are documented in Article 5 of the MAPA Agreement and the Sime Darby “Procedures for Handling Social Issues” - Sustainable Plantation Management System. (1.2.6)

The Mill Improvement Plan is documented in the EMS as Objectives and Targets. The Estate Improvement Plan (31 December 2008) lists details of the environmental and social issues where action is planned to be carried out in 2009. (1.2.7) Criterion 2.1 – There is compliance with all applicable local, national and ratified international laws and regulations.

At the time of the audit, there were no known legal actions against SOU 9a. The Standards and Compliance Unit of the Sime Darby TQEM Department conducts internal legal compliance audits of plantations based on Plantation Quality Management System (PQMS). The Internal Environmental Audit 8 September 2008 indicated legal compliance. The

DOSH inspection (20 October 2008) confirmed machinery compliance at the mill and the inspection on 19January at the Estate did not identify any nonconformities. The Estate holds records of checks of tractor and drivers’ licences on file. The housing is of good standard and exceeds Government regulations. A check of payroll records at the estate and the mill confirmed overtime hours worked during the previous 12 months were in compliance with Labour Laws. (2.1.1)

The Estate holds copy of applicable legal requirements. The mill has legal requirements documented in Section E-RELR of the EMS. (2.1.2)

Checks are carried out on compliance by Chief Clerk and Executive Manager. TQEM OSH Unit conducts an annual audit of, for example, pesticide regulation compliance – most recent audit 24 September 2008. The mill conducts monthly legal compliance audits with most recent carried out January 2009. (2.1.3)

TQEM Department monitors and disseminates legal updates to all SOUs. Most recent advisory was 13 May 2008 relating to Environmental Quality (Schedule Wastes Amendment) Regulations 2007. (2.1.4) Criterion 2.2 – The right to use the land can be demonstrated and is not legitimately contested by local communities with demonstrable rights.

The company operations are on Freehold land. The Estate holds copies of Freehold Titles that were issued between 1908 and 1913. The history of the Tenure is endorsed on the back of each Title Document. (2.2.1)

The SOU 9a cultivation of oil palm is in compliance with the terms of the Land Title for agriculture. (2.2.2)

The locations of boundary stones are recorded on a survey map. SOU 9a has carried out work since the Stage I Audit to locate and paint all boundary stones. The Estate failed to locate a number of boundary stones and these are being reinstated. A sample check confirmed that only some boundary stones were in place. (2.2.3) Observation O1 – refer Section 3.2 Page 15 for details

At the time of the Assessment there were no land disputes at SOU 9a. Records are held at the estate relating to Government compulsory acquisition of land for a graveyard. (2.2.4) Criterion 2.3 – Use of the land for oil palm does not diminish the legal rights, or customary rights, of other users without their free, prior and informed consent.

The SOU 9a operations are all on Freehold land. SOU 9a does not restrict access through the estates, except in relation to trucks. (2.3.1)

At the time of the Assessment there were no land disputes. (2.3.2)

The SOU 9a operations are all on Freehold land therefore indicator 2.3.3 is not applicable to this Assessment (2.3.3)



Criterion 3.1: There is an implemented management plan that aims to achieve long-term economic and financial viability.

SOU 9a has a long term business plan that includes for the Estate an annual budget with a three year projection and for the mill with capital expenditure projected for 5 years. The budget includes production forecasts and performance targets for improving efficiency. (3.1.1)

The Estate has an annual replanting programme projected for five years that was reviewed and revised in December 2008. (3.1.2) Criterion 4.1: Operating procedures are appropriately documented and consistently implemented and monitored.

The Estate holds a copy of the Sime Darby Agricultural Reference Manual Oil Palm – Edition Number 1 - 1 December 2007. The Manual has detailed SOPs that cover all work activities. In addition, SOPs are documented in the oil palm estates integrated management system – 1 April 2008. The mill has a Quality Management System SOP Manual issued December 2007. In addition, there are Work Instructions for each station in Bahasa Malaysia eg steriliser issue No 3 11 February 2003. (4.1.1) Observation 02 – refer Section 3.2 Page 15 for details

The Sime Darby Synergy and Transformation Department has issued checklists to the Estates for assessment of compliance with SOP implementation. The Plantation Advisor and Zone Head conduct annual field checks of compliance and make recommendations for improvement on the “Estate Best Practices Implementation Status”, which includes corrective action taken by the estate. Environmental Work Instructions have been issued 15 May 2006. Mill Work Stations are inspected daily against “Environmental Work Instructions Checklist” and corrective actions noted for production areas. Checks during the mill inspection showed that Inspection Log Sheets were being filled in consistently. (4.1.2) Criterion 4.2: Practices maintain soil fertility at, or where possible improve soil fertility to, a level that ensures optimal and sustained yield.

Sime Darby Agronomy Section of R&D Department makes annual recommendations for fertiliser applications. Executive Manager checks that the fertiliser application matches the recommendation. (4.2.1)

Sime Darby Agronomy Section of R&D Department carries out annual inspection of the palms and leaf sampling to monitor nutrient status. Sime Darby R&D Department carries out detailed soil sampling prior to replanting. The tissue and soil nutrient sampling program design are based on approximately 50 years of monitoring data. The Estate holds a summary of the results of tissue and soil sample analyses and the detailed records are maintained by R&D Department. (4.2.2)

The Agronomy Section selects the fields and recommends the rates of EFB application and monitors nutrient status. Estate keeps records of the quantities applied. Field inspection of replanted areas at the estate confirmed the felled palms had been chipped and zero burning has been implemented. (4.2.3)

Criterion 4.3: Practices minimise and control erosion and degradation of soils.

The topography at the estate is flat to undulating and there is limited terracing. Field inspection indicated appropriate practices, terracing and U stacking of pruned fronds are consistently implemented. Road maintenance has been carried out to improve drainage by road grading, cambering and compacting. The Estate has a soil map with information on the soil series. (4.3.1)

Field inspection indicated groundcover is generally well maintained. Groundcover within the older palms has significantly improved since the Stage I Assessment following the cessation of spraying of harvesting paths. Rotary slashers are used for maintaining harvesting paths within mature palms, except on terraced areas. (4.3.2)

The Estate engages contractors for grading and resurfacing of roads with laterite. The Estate owns a backhoe for cleaning silt pits and roadside drains as part of the road maintenance program. (4.3.3)

There are no peat soils at the estates. (4.3.4)

Approximately 300ha of acid sulphate soils occur at Sg Linau Division. A system of Watergates is used to manage water levels in accordance with industry practice. An operator checks the water levels daily and adjusts the height of the weirs and watergates as necessary to maintain the water level 60 cm below the ground surface. (4.3.5) Observation 03 – refer Section 3.2 Page 15 for details Criterion 4.4: Practices maintain the quality and availability of surface and groundwater

Watercourses are limited to small streams (approximately 1m wide) that originate within the estate and drain to join Sg Linau outside of the Estate. The Peninsula Malaysia regulation for the width of river reserves does not require the implementation of a buffer zone for streams less than 3m wide. (4.4.1)

There are no main rivers or waterways that pass through the estate. Inspection confirmed that bunds, weirs or dams have not been constructed across small streams that originate within the estates, except for the Watergates at the acid sulphate soil area. (4.4.2)

The Estate carries out monthly sampling of water draining from the acid sulphate soil area and the mill carries out monthly sampling of surface water upstream and downstream from the mill monsoon drain discharge. Records examined for the preceding 12 months indicated the downstream water quality was similar to upstream samples. (4.4.3)

The Estate has measured rainfall daily and records are held since 1995. Rainfall data are used for determining the timing of fertiliser application and crop forecasting. (4.4.4)

Water usage is monitored by means of a meter at the water treatment plant. The target usage is < 1∙5 t/t FFB. Trend information is available for 5 years and showed a decrease in water consumption until 2007 when it increased due to boiler tube failures. Consumption has decreased from 1∙67 t/t FFB in 2007 to 1∙59 t/t FFB in 2008. (4.4.5)

Mangroves occur along Sg Air Hitam, approximately 2km downstream from the estate boundary. The system of



Watergates is used to minimise the risk of adverse impacts on water quality due to drainage from the acid sulphate soils. The mill effluent is treated in anaerobic digestors and recycled to the field using a furrow system. Inspection of the land application system showed the Estate has commenced a program of de-silting the furrows to improve nutrient infiltration and the operation was well controlled. (4.4.6)

Water Management Plans for the Estate are documented in the Agricultural Reference Manual, eg water conservation on terraces. Field inspection of the replanting area confirmed water infiltration pits have been dug between every second palm on terraces, as well as stop bunds every ten meters. A Water Management Plan for acid sulphate soils is documented in Agricultural Reference Manual Section 4 and inspection confirmed that it is well implemented. The Mill has prepared a document describing emergency measures related to the water supply, but has not yet documented a Water Management Plan with objectives and targets for wastewater quality and quantity. Greater attention to water management is required to identify opportunities for recycling wastewaters and would provide focus for reducing consumption. (4.4.7) Nonconformity raised against this Minor Compliance Indicator – refer Section 3.2 Page 14 for details Criterion 4.5: Pests, diseases, weeds and invasive introduced species are effectively managed using appropriate integrated Pest Management (IPM) techniques.

A Sime Darby Research General Circular issued 31 October 2007 on “Integrated Pest Management in Oil Palm” details techniques for integrated pest management and natural control of palm pests. Additional detailed information is contained in Section 16 of the “Agricultural Reference Manual”. The IPM includes monitoring of pest numbers and the use of triggers for initiation of control measures. (4.5.1)

The major palm pest at Sepang is Bagworm. Beneficial plants have been established along approximately 40% of the estate boundary and roadsides. Barn Owl boxes are located throughout the mature palms. Census is carried out monthly to monitor pest numbers and to provide information on the effectiveness of the biological controls. (4.5.2)

Records are maintained at Sg Linau Division Office on a field by field basis of the quantity of chemical applied, eg trunk injection for control of bagworm. (4.5.3)

The Estate has recently (November 2008) commenced calculation of active ingredient used per hectare. (4.5.4) Criterion 4.6: Agrochemicals are used in a way that does not endanger health or the environment. There is no prophylactic use of pesticides, except in specific situations identified in national Best Practice guidelines. Where agrochemicals are used that are categorised as World Health Organisation Type 1A or 1B, or are listed by the Stockholm or Rotterdam Conventions, growers are actively seeing to identify alternatives and this is documented.

The quantity of chemical and treatment required is documented in Section 16∙5 of the Agricultural Reference Manual. (4.6.1)

Purchase of pesticides is controlled by Sime Darby Head Office Central Purchasing Unit. Inspection of the Store confirmed only chemicals approved by the Pesticides Board were held in stock. (4.6.2)

There is a separate Pesticide Store that is secure, well ventilated with appropriate safety signage, labelling, separation of chemicals, and spill containment. Facilities are provided at the pesticide mixing area for sprayers to take a shower and to wash their PPE upon return from the field. (4.6.3)

All estate and mill chemicals are labeled in Bahasa Malaysia. MSDSs are available in both English and Bahasa Malaysia. The Estate has recently hired contract workers from Bangladesh, most of who are illiterate. Inspection of spraying being carried out in the field and interview of the sprayers confirmed they understood the hazards and precautions associated with the chemical being used. (4.6.4)

Spraying is carried out by Bangladesh contract workers whose period of employment is limited to three months. Interview of sprayers and check of records at the clinic confirmed the HA carries out monthly health check of pesticide sprayers. An annual medical surveillance by DOSH registered Doctor was carried out on 13 November 2008 for all pesticide workers employed at that time. (4.6.5)

Recent inception of the Gender Committee has resulted in female sprayers requesting that they be transferred to alternative duties. The Estate Management agreed to this request in October 2008 and transferred all female sprayers to Census and Supervisory positions. (4.6.6)

Paraquat has not been used at the estates since 1996. “Methamidophos” a Class 1 Chemical, is used for control of Bagworm. The need to apply a chemical is made on the basis of pest census results. Inspection of the chemical store and records confirmed that Methamidophos is the only Class I chemical used. (4.6.7)

Aerial spraying is not carried out. (4.6.8)

Testing for chemical residues in CPO has not been requested by any buyers to date. (4.6.9)

The Estate maintains records of chemical usage on a field basis daily in the “Field Costbook” and data are entered to computer and stored on spreadsheet. Computer records are available for 10 years. (4.6.10) Criterion 4.7: An occupational health and safety plan is documented, effectively communicated and implemented.

(a) The Occupational Health & Safety Policy was signed by Top Management April 2008 and is displayed at the estate and mill offices and muster areas. Awareness of safety is communicated to workers at morning muster and during on the job training for specific field tasks. Interview of workers and inspection of tasks in the field and at the mill confirmed a good level of understanding and adherence to safe work practices.

(b) The Estate maintains a Hazard Identification and Risk Assessment Control Register that covers the field operations and was last revised 17 November 2008. The Mill maintains a HIRAC Register for tasks associated with each work station that was last revised in May 2007.



(c) i The Mill has a documented Safety Awareness and Training Programme that details monthly training for the year 2008-09 and was last reviewed 8 November 2008. The mill carries out safety inductions for all new hires and contractors before work commences on site. The Estate has a documented programme for training and safety awareness. The estate training programme includes safe handling of pesticides for staff and workers. The estate and mill maintain records of training carried out for staff, individual workers and contractors. Inspection of records confirmed training was consistent with the training programme.

ii Interview of pesticide operators and observation of tasks confirmed products were being handled in accordance with product precautions during mixing, transport and application.

(d) i The mill supplies PPE to workers appropriate for the safety risks associated with the task being carried out. All mill workers are issued with safety shoes, helmet and hearing protection. Estate workers similarly are issued with PPE appropriate for the task. Pesticide operators are issued with boots, apron, gloves, eye protection, respirator and a sun hat.

(e) At the Estate the Hospital Assistant is the designated person responsible for health & safety. The Mill Assistant Engineer is the designated responsible person.

(f) The Estate and Mill maintain records of quarterly safety meetings. There are 5 worker representatives from different stations at the Mill and the NUPW Representative, with the most recent meeting held 17 November 2008). The Estate has changed the frequency of safety meetings to monthly, with the most recent held 16 January and attended by 10 worker representatives and the NUPW Representative.

(g) An Estate Emergency Response Plan is documented and includes emergency contact numbers, evacuation plans and locations of safety equipment. An emergency drill was carried out at the main office in October 2008. The Mill has a documented Emergency Response Plan with evacuation plans posted at each Work Station. An emergency drill for a fire emergency was carried out in December 2008.

h) The HA carried out instruction in first aid on 15 November 2008 for the Estate for workers and supervisors. First aid training has been conducted for 54 persons at the mill on 12 and 19 March 2007.

i) At the Estate first-aid kits have been purchased and distributed to each office and workshop. Additional kits have been purchased and have been supplied to each tractor driver and team leader. The mill has 6 first aid kits located at work stations, laboratory and the Office and has implemented a system of monthly checks to maintain stocks. Records of inspections are kept on file “First Aid Box Records”. (4.7.1)

The Estate and Mill maintain records of accidents. Accident Reports are sent to Head Office and to DOSH. TQEM Department and OSH Unit carry out a monthly review of accidents. The most recent LTA at the Estate was 9 November 2008. The Mill maintains records of accidents on “Accident Report and Investigation”. Last LTA recorded at the mill was 16 April 2008. (4.7.2)

Local workers are covered by SOCSO and foreign workers are covered by FWCS – Policy No CWF-L0086476-W1 current to September 2009. (4.7.3) Criterion 4.8: All staff, workers, smallholders and contractors are appropriately trained.

The estate has an annual training programme for 2008 that is considered appropriate and covers SOPs and Occupational Health and Safety. The mill has a Training Programme for 2008-09 covering work skills as well as environmental issues. Training in SOPs is conducted informally on-the-job. The mill and estate maintain records for individuals who receive on-the-job training in SOPs and safety (4.8.1) Criterion 5.1: Aspects of plantation and mill management, including replanting, that have environmental impacts are identified, and plans to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement.

The Mill has a documented Environmental Aspects and Impacts Register that is part of the EMS and was reviewed in September 2006. The Standards and Compliance Unit of TQEM Department assisted the Estate to carry out an Environmental Impact Assessment using a risk assessment approach – updated 19 December 2008. (5.1.1)

The Mill Environmental Improvement Plan is documented in the EMS as Environmental Objectives and Targets. The Estate used the Environmental Risk Assessment to identify issues requiring improvement and prepared an Improvement Plan (31 December 2008). (5.1.2) Observation 04 – refer Section 3.2 Page 15 for details Criterion 5.2: The status of rare, threatened or endangered species and high conservation value habitats, if any, that exist in the plantation or that could be affected by plantation or mill management, shall be identified and their conservation taken into account in management plans and operations.

All of the land within the Estate, except for approximately 1 ha bordering a water supply pond, has been cleared and planted to oil palm. TQEM Department Plantation Sustainability RSPO Unit Ecologist has carried out an HCV assessment at SOU 9a and a report has been produced (January 2009). The assessment used the International HCV Toolkit method. The assessment did not identify areas containing HCVs adjacent to the Estate. The water supply pond near the main office was identified as having potential for enhancement as birdlife habitat. The BSi Ecologist recorded 38 species of birds within the Estate during the site visit. (5.2.1)

TQEM Department Ecologist has prepared a Management Plan for enhancing the small areas of remnant vegetation within the Estates, such as the water supply pond. The Plan includes a monitoring component that is habitat based. (5.2.2) Observation 05 – refer Section 3.2 Page 15 for details

The Mill and the Estate have installed signs prohibiting hunting and fishing within the property. Information has been socialised to workers during Muster briefings. Interview of staff and workers confirmed awareness of the company rules regarding fauna and habitat protection. (5.2.3)



Criterion 5.3: Waste is reduced, recycled, re-used and disposed of in an environmentally and socially responsible manner.

Wastes generated at the Estate have been identified and are documented in the Waste Management Action Plan (November 2008). The Mill has documented waste products and sources of pollution in the Environmental Aspects and Impacts Register that was reviewed and updated 14 January 2009. (5.3.1)

The Estate Waste Management Action Plan lists the types of waste and action to reduce, reuse, recycle or dispose of the material. Scheduled waste is stored securely and disposed in accordance with the National Regulations. The Estate maintains records of scheduled waste consignments to Resources Conservation Sdn Bhd (DOE Licence No 000489). Domestic refuse is collected weekly from housing and disposed in a small landfill that was consistent with government regulations.

The Mill has documented Environmental Work Instructions for waste management. Palm processing by-products fibre and nut shell are used to fuel the mill boiled. EFB is recycled to the field and treated mill effluent is applied to the palms in a furrow system. Inspection of facilities and records confirmed the Mill stores and disposes of scheduled waste in accordance with National Regulations. The Mill maintains records of scheduled waste consignments to Syntax System Solutions Sdn Bhd (DOE Licence No 000316). Medical wastes are stored in “sharps container” and medical waste bag and collected by the Visiting Medical Officer weekly and transferred to the licensed contractor Sharps & Bins Sdn Bhd (Licence No 572194 (V)) for disposal. The Clinic maintains records of medical waste disposal. (5.3.2) Observations 06 & 07 – refer Section 3.2 Page 15 for details

EFB, Mill Effluent and boiler ash are recycled to the field. Inspection confirmed that land application of mill effluent is well controlled and daily records are maintained of quantities applied. EFB application in the field has been improved since the Stage I Assessment by mechanical spreading along palm avenues. (5.3.3) Criterion 5.4: Efficiency of energy use and use of renewable energy is maximised.

The mill monitors and reports renewable energy usage to Senior Management each month. The operation of the boiler for generation of electricity has been optimised to maximise renewable energy use for the mill and office building. (5.4.1)

The mill monitors and reports fossil fuel consumption monthly to Senior Management. The operation of the diesel genset is restricted to stand-by operation in order to minimise fossil fuel use. (5.4.2) Criterion 5.5: Use of fire for waste disposal and for preparing land for replanting is avoided except in specific situation, as identified in the ASEAN guidelines or other regional best practice.

The company has a zero burn policy that has been implemented since 1989. Golden Hope was the first plantation company to be awarded a Certificate for Election to the Global 500 Roll of Honour 1992 by the United Nation Environment Programme (UNEP) for zero burning practice.

Field inspection confirmed no evidence of fire used for land preparation. (5.5.1)

Inspection of replanting areas confirmed crop residues have been chipped and mulched. (5.5.2)

The Estate and Mill have implemented zero burning policy. Inspection confirmed no evidence of fire used for waste disposal at housing or offices. (5.5.3) Criterion 5.6: Plans to reduce pollution and emissions, including greenhouse gases, are developed, implemented and monitored.

The Mill Improvement Plan for pollution prevention is documented as Environmental Objectives and Targets in the EMS. Significant improvements have been implemented at the mill since the Stage I Audit in October 2008. For example, drains have been repaired to ensure segregation of high BOD effluent from clean rainfall runoff. This has been complemented by a program of regular inspection and cleaning of oil and sediment traps to prevent discharge of entrained materials. The Estate has prepared an initial Environmental Management Plan (December 2008) to mitigate potentially polluting activities. A significant improvement since the Stage I October 2008 Audit was the de-silting of the land application system and closer supervision of day-to-day operation of the system to achieve zero discharge of treated effluent. (5.6.1) Observation 08 – refer Section 3.2 Page 15 for details

The Mill Objective and Targets were last reviewed August 2008 at an EMS Team Management Review Meeting. The Estate Environmental Management Plan is due for review in December 2009. (5.6.2)

SOU 9a does not have any peat soils. (5.6.3) Criterion 6.1: Aspects of plantation and mill management, including replanting, that have social impacts are identified in a participatory way, and plans to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement.

The Plantation Sustainability – RSPO Unit of TQEM Department facilitated a Social Impact Assessment (SIA) at the Estate in October 2008 and a report was produced in January 2009. The Report included records of meetings with stakeholders. (6.1.1)

The Assessment was carried out by informal interviews of internal and external stakeholders. The SIA Report includes a list of stakeholders interviewed and details of issues raised. The Report includes photographs of meetings and participants. (6.1.2)

A Management Action Plan has been prepared for addressing the identified social issues (January 2009). The Plan includes a description of issues, actions proposed, person responsible for implementation and expected completion date. (6.1.3) Criterion 6.2: There are open and transparent methods for communication and consultation between growers and/or millers, local communities and other affected or interested parties.



Procedures are documented for internal and external communications in Section 5 of the Mill Quality Management System Manual – April 2008. Communication Procedures are documented in Estate Quality Management System (Standard Operating Manual) Section 5.5.3. (6.2.1)

The nominated persons with responsibility for communications with stakeholders are the Executives for the Estate and the Mill Manager. (6.2.2)

The Estate and Mill hold an up-to-date list of stakeholders including Contractors, Suppliers and local community representatives, government departments and interested parties. Records of communications with stakeholders, including the company response, are held on file “Requests for Information and Assistance”. (6.2.3) Criterion 6.3: There is a mutually agreed and documented system for dealing with complaints and grievances, which is implemented and accepted by all parties.

A dispute resolution procedure is documented as a flow chart and displayed in the Estate Office and on the Muster Notice Board. A filing system is held for documentation of disputes, should one arise. The Mill handles and maintains records of disputes through its Customer Complaints System that is a component of the Quality Management System. (6.3.1)

The Estate has not experienced any disputes since the system was implemented and has not had the opportunity to test the procedure. (6.3.2)

The System is open to all affected parties. Interview of workers confirmed the system has been communicated to them. Interview of Contractors confirmed knowledge of Dispute Resolution Process. (6.3.3) Criterion 6.4: Any negotiations concerning compensation for loss of legal or customary rights are dealt with through a documented system that enables indigenous peoples, local communities and other stakeholders to express their views through their own representative institutions.

Sime Darby has implemented a procedure for handling land disputes, including boundary and squatter issues. The SOU 9a Estates and Mill are located on Freehold Land and the boundaries are clearly marked and maintained. SOU 9a does not restrict access through the estates, except in relation to trucks. (6.4.1)

The land dispute procedure refers compensation assessments to the corporate land management department of Sime Darby who assess and advise on compensation. The SOU 9a Estates and Mill are located on Freehold Land and there has been no claim for compensation. (6.4.2)

In accordance with company Policy, any claims would be documented and made publicly available. However, SOU 9a Estates and Mill are located on Freehold Land and there has not been any claim made. (6.4.3) Criterion 6.5: Pay and conditions for employees and for employees of contractors always meet at least legal or industry minimum standards and are sufficient to provide decent living wages.

Pay and conditions are documented in the NUPW/AMESU and MAPA Agreement. Interview of workers confirmed knowledge of pay rates. (6.5.1)

Workers pay rates are displayed on Notice Board at Muster areas and updated monthly. The harvesters’ daily tallies are recorded on the Muster Notice Board for transparency in calculating their pays. Interview of workers confirmed understanding of all deductions and entitlements. The company is implementing a project to provide residents with a plot of land within close proximity to housing for cultivation of food gardens. This will be of benefit in reducing household expenditure on food. A mobile market visits the housing daily and provides competitively priced consumables. (6.5.2) Observation 9 – refer Section 3.2 for details

Inspection of housing confirmed a good standard is provided for workers and their families that exceed the Minimum Government requirement. Interview of residents and workers indicated no significant issues with all expressing satisfaction with the standard. The current underground water supply is shortly due to be replaced by Government supply. Houses are connected to the Government Electricity Supply (available 24/7) and SOU 9a provides a subsidy to workers. Adequate medical facilities are provided on site with local Government Clinics and Hospitals 2-3 km from the Estate. There are a number of schools also within close proximity (2 km from housing) of the Estates. (6.5.3) Criterion 6.6: The employer respects the right of all personnel to form and join trade unions of their choice and to bargain collectively. Where the right to freedom of association and collective bargaining are restricted under law, the employer facilitates parallel means of independent and free association and bargaining for all such personnel.

The company holds meetings with the NUPW when requested by the Union. The Estate Meeting records are held on file “NUPW Meetings” with the most recent meeting 6 June 2007. For the Mill, the most recent meeting was held in October 2005. (6.6.1)

The company Freedom of Association Policy is stated in the Social Policy approved by Top Management April 2008 in Bahasa Malaysia. A copy is displayed at the field staff office and at the Muster areas. (6.6.2) Criterion 6.7: Children are not employed or exploited. Work by children is acceptable on family farms, under adult supervision, and when not interfering with education programmes. Children are not exposed to hazardous working conditions.

The minimum working age is 16 under the Employment Act. The age of new hires is confirmed by ID Card for locals and passports for foreign workers. Inspection of records did not identify any underage workers. (6.7.1) Criterion 6.8: Any form of discrimination based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation, or age is prohibited.

The company anti-discrimination policy is detailed in the Social Policy, which is displayed at Offices and the Mill and Estate Muster Areas. (6.8.1)



During interview of staff and workers it was stated that there was no discrimination between persons of different ethnicity. A check of pay records confirmed no discrimination by gender or ethnicity. (6.8.2) Criterion 6.9: A Policy to prevent sexual harassment and all other forms of violence against women and to protect their reproductive rights is developed and applied.

The company policy on sexual harassment is stated in the Social Policy. A specific Gender Policy also has been developed and implemented. Interview of workers confirmed knowledge and participation in Gender Committee Meetings. A positive outcome of the formation of the Gender Committee was the cessation of females being employed as Pesticide Sprayers. They now have Supervisory positions and also conduct field census. (6.9.1)

Sime Darby has developed a grievance mechanism associated with sexual harassment in the Implementation Manual that was released at the launch of the Gender Policy. The Gender Committee provides a mechanism to receive and act on complaints. (6.9.2) Criterion 6.10: Growers and mills deal fairly and transparently with smallholders and other local businesses.

Sime Darby Marketing Department advises the Mill of FFB pricing. The Mill maintains records FFB pricing, including the input costs. (6.10.1)

Current FFB prices are displayed on the weighbridge window at the Mill. (6.10.2)

Contracts are managed by Head Office. Interview of Contractors confirmed an understanding of the terms and conditions. Contractors stated they had a satisfactory relationship with the company and a number of them have worked with the company for almost 20 years. (6.10.3)

Interview of Contractors confirmed that payments are made monthly and within 30 days of invoicing. (6.10.4) Criterion 6.11: Growers and millers contribute to local sustainable development wherever appropriate.

The Estate and Mill are located in an area that has well developed infrastructure and good access to government and commercial services. The company contributions to schools and places of worship are considered appropriate for the local setting. The Mill conducts site visits for secondary school students and contributes to the local fire fighting services department. The Estate has assisted local communities with donations to Temples, supplying free water to schools and repairs to school buildings. Contributions have also been made to Kemas at Sungai Linau. (6.11.1) Principle 7: Responsible Development of New Plantings

SOU 9a has not carried out any new oil palm developments and there are no plans for expansion of plantings. Principle 7 is not applicable to this Assessment. Criterion 8.1: Growers and millers regularly monitor and review their activities and develop and implement action plans that allow demonstrable continuous improvement in key operations.

The Estates ceased using paraquat in 1996. IPM techniques are well implemented to minimise the use of Class 1 Chemicals. (8.1.1)

The Estates and Mill have developed Environmental Improvement Plans for mitigation of negative impacts. Examples of environmental improvements are the enhancement of the water supply pond at the Estate for birdlife habitat and improved control of wastewater segregation at the mill for protection of water quality. (8.1.2)

The Estate and Mill have implemented programmes to maximise the recycling of palm by-products to the field. Separation of wastes at source has recently been introduced for recycling of metal, plastic and glass materials. The challenge will be to implement this effectively at housing. (8.1.3)

The Estate has developed and implemented specific pollution prevention procedures for managing the land application of treated mill effluent. A programme has been commenced to de-silt the land application furrows for improved infiltration of treated effluent. (8.1.4)

Social impacts have been identified through consultation with workers and local communities. SOU 9a has developed an action plan for addressing the issues identified by stakeholders. An example is to provide workers with access to land close to housing for cultivation of vegetables for household consumption. (8.1.5)

The Sime Darby Management Review process shares information on best practices for performance improvement. The Estates and Mill have implemented a separate budget code for recording information on expenditure related to social and environmental aspects. (8.1.6)

3.2 Detailed Identified Nonconformities, Corrective Actions and Auditor Conclusions

One (1) Nonconformity was assigned to Minor Compliance Indicator 4.4.7. SOU 9a has prepared a Corrective Action Plan for addressing the identified Nonconformity.

The Audit Team has reviewed and accepted SOU 9a’s Corrective Action Plan.

NONCONFORMITIES ASSIGNED AGAINST MINOR COMPLIANCE INDICTORS

4.4.7 Evidence of Water Management Plans

A Nonconformity was assigned as the Mill has not yet documented a Water Management Plan with details of each type of water use and wastewater generated together with specific targets for quality and quantity for each of these. A site specific Water Management Plan is necessary to provide focus for reducing water consumption.

SOU 9a has prepared a Corrective Action Plan for addressing the identified nonconformity, which is detailed below.

Corrective Action: The QA Supervisor will use the TQEM Template for preparing a site specific water management plan. Objectives and targets will be developed for managing



the quantity and quality of wastewaters. The Mill will implement the water management plan for achieving the objectives and targets for improvement, such as reducing the quantity of raw water used.

The Audit Team has reviewed and accepted SOU 9a’s Corrective Action Plan.

The effectiveness of the corrective action will be checked at the Surveillance Assessment that will be scheduled within twelve months of initial RSPO Certification.

Observations/Opportunities for Improvement

Nine (9) Observations/Opportunities for Improvement were identified. The progress with the Observations/Opportunities for Improvement will be checked at the Surveillance Assessment visit scheduled in 2010.

1. (2.2.3) The Estate has located and painted the majority of boundary stones, but has not yet engaged a surveyor to locate the missing boundary stones.

2. (4.1.1) The Mill has prepared a generic work Instruction for raw water treatment plant operation, however this does not adequately define the routine maintenance and inspections required of the Plant Operator for achieving consistent equipment operation and treated water quality.

3. (4.3.5) Inspection found that water level controls have not been marked at watergates and weirs to provide a fixed reference for indicating discharge adjustments.

4. (5.1.2) The Environmental Improvement Plan for the Estate focuses on management of negative impacts and is well implemented, but does not include promotion of positive impacts.

5. (5.2.2) The HCV Management Plan does not provide sufficiently detailed recommendations for enhancement of the water supply catchment for action by the Estate Management, eg it does not specify the increase in the width of the buffer zone or provide guidance on a list of tree species for enrichment planting.

6. (5.3.2) Although sharps are disposed of safely from the Clinic, collected weekly by the Visiting Medical Officer and transferred to a licensed contractor (Sharps & Bins Sdn Bhd (Licence No 572194 (V)) for disposal. At the time of the audit, the small amount of other medical waste such as soiled bandages was disposed in a landfill. The Estate immediately changed the practice to include all medical wastes transferred to the licenced contractor.

7. (5.3.2) The Estate retains used pesticide containers in a secure store but has not yet entered the DOE National Recycling Programme for HDPE containers.

8. (5.6.1) The Estate Environmental Management Plan focuses on readily identifiable point sources of pollution that are well controlled, but could be improved by including diffuse sources.

9. (6.5.2) Interview of the Bangladeshi Contract sprayers confirmed an understanding of employment terms and conditions for daily rated work. However, some workers did not understand how pays were calculated when they were transferred to piece rate work e.g. (loose fruit collection).

3.3 Noteworthy Positive Components

A positive outcome of the formation of the Gender Committee has been the cessation of females being employed as Pesticide Sprayers. They now have Supervisory positions and also conduct field census.

The company provides a good standard of housing for workers and families, which exceeds Government Minimum Standard.

Plate 1: Worker Housing

3.4 Issues Raised by Stakeholders and Findings with Respect to Each Issue

The majority of stakeholders had positive comments about SOU 9a. These are shown below. For the situations where stakeholders raised issues, the company’s response is stated.

Worker Issues

The majority of the labour workforce at the estate and mill is recruited from Indonesia. Workers did not raise any issues of concern. They were satisfied with the standard of housing and were able to send savings home regularly. Residents at housing raised concern about mosquitoes and the necessity for spraying to be carried out.

Company Response: Fogging will be carried out as agreed at the OSH Meeting on 16 January 2009.

The BSi Audit Team considered the company response appropriate.



Local Communities

Local community representatives did not raise any issues of concern that required to be addressed.

Government

Government Departments did not raise any issues in relation to SOU 9a. The Department of Safety and Health Inspector confirmed that there were no outstanding issues at the mill and the estate.

NGOs

NGOs did not raise any issues of concern in relation to the SOU 9a Estates or Mill.

Land Issue at PTMAS, West Kalimantan

Both ENDS, which is headquartered in the Netherlands requested an update on the progress with resolving the dispute between the SPKS organisation that represents smallholders and the Sime Darby subsidiary PT Mitra Austral Sejahtera (PTMAS) at Sanggau District in West Kalimantan, Indonesia. The details of the issues raised by Both ENDS are included as Appendix D.

Sime Darby has replied to the stakeholder letter from Both ENDS and is included as Appendix E.

A BSi Social Assessor made a site visit to Sanggau District in late January 2009 and held separate meetings with the SPKS Leader, SPKS members, Smallholders, Smallholder KUD representatives and PTMAS Staff. A summary of the progress with dispute resolution is outlined below, together with BSi comment on the issue and process.

Background to the dispute and Chronology

The dispute arose over land issues associated with development of oil palm, lack of transparency and understanding on credit for financing of smallholder oil palm and uncertainty about long term tenure of land that is presently used by PTMAS for oil palm estates.

An independent organisation, Serikat Petani Kelapa Sawit (SPKS) was formed to represent smallholders and to bring issues of concern to PTMAS for discussion and resolution. In 2007 SPKS, was unsuccessful in getting the company to recognise it as representative of the smallholders or to respond to a list of 14 claims. SPKS members organised a “demonstration” on 3 September 2007 at the PTMAS II plantation office in an attempt to get PTMAS to consider and respond to its list of claims. Some of the estimated 250+ demonstrators became frustrated by the lack of response from the company and occupied the office area, blockaded roads, damaged company property and locked PTMAS staff in the office without food or water for 17 hours.

The demonstration ended the next day (4 September 2007), when PTMAS Estate staff agreed to forward the 14 claims to its regional office in Pontianak and to respond to the claims within 14 days. The PTMAS staff were released from the office but the road blockade remained in place.

On 5 September, PTMAS met with sub-district government officers and three local village heads to discuss the illegal road blockade. The meeting agreed to dismantle the

blockade, initiate legal proceedings against those persons causing damage to company property and to initiate customary law proceedings against those who had breached Dayak custom.

Late the same morning police assisted by supportive local community representatives began dismantling the road blockades. Fighting broke out and police arrested four SPKS members. These persons were subsequently charged with damaging PTMAS property and assaulting a local village head and were sentenced to imprisonment.

Both ENDS met with Sime Darby Management at RT5 in November 2007 to initiate dialogue and a process for resolution of the PTMAS land issues. Sime Darby engaged Wild Asia, a Malaysian consultancy, to carry out an independent investigation of the PTMAS land issues and to report on an approach for addressing the issues. The investigation was carried out in May 2008 and a report prepared in July 2008 on a mechanism and tools for consultation with stakeholders.

Both ENDS brokered a meeting between SPKS representatives and Sime Darby Management at RT6 on 19 November 2008. Sime Darby and SPKS agreed to hold three-monthly meetings in Sanggau District to discuss the SPKS list of claims and attempt to resolve the issues.

BSi Update on Issues raised in Both ENDS letter of 19 January 2009.

The persons who were arrested, charged and imprisoned following the demonstration in September 2007 have been released, except for one who is serving a sentence on an unrelated illegal drugs charge.

Instances of intimidation of SPKS members and representatives by local authorities were stated to have occurred in 2007 following the demonstration and there is no information available to prove otherwise. BSi interview of SPKS members indicated there has been no intimidation since September 2007.

In relation the process to resolve the conflicts:

(1) Regular three-monthly meetings have been agreed and the first meeting was held on 13 January 2009 between PTMAS, SPKS representatives and smallholder co-operative (KUD) representatives.

(2) Benchmarks have not been determined against which to judge progress or lack thereof.

(3) The 13 January meeting was held at a neutral venue at a hotel in Sanggau. Interview of SPKS and KUD representatives confirmed they felt comfortable in the meeting. SPKS have proposed future meetings be held at a church in Bodok to reduce travel costs.

(4) At the 13 January meeting, both parties discussed their responsibilities and reviewed each of the original 14 issues raised by SPKS as well as additional items. The SPKS Leader Cion Alexander confirmed that a number of the issues were resolved but others need further action and will be addressed at the next meeting.

(5) The parties have not developed a time-line for addressing each of the outstanding issues.

(6) The parties indicated that on the basis of the first meeting, they did not consider it a priority to involve a



third party mediator. However this may change if they reach a deadlock on the issues.

BSi Comment on the Issue

The initial January 13 meeting marked a very positive and promising start to developing a better relationship and understanding between the parties. The SPKS list of claims has been discussed, clarified and some resolved. At this relatively early stage of building the relationship, it would be wise to involve a neutral third party in the meetings, ideally as mediator for the process, or at a minimum as an independent observer.

The three-monthly meetings should be conducted on a more formal basis, with records made of meeting minutes, which are then circulated and agreed by attendees. At the 13 January meeting, verbal agreement was reached on a number of the claims, and PTMAS prepared a record of the meeting but this had not been circulated to other attendees.

A number of the issues, such as the proposed transfer of the nucleus estate land back to local people at the end of the HGU lease, are unlikely to be resolved in the short term and are the responsibility of the National Land Agency and the Bupati. Benchmarking (refer point 2 above) would be important for reaching agreement on whether an issue can be resolved by the three-monthly meetings or referred to the appropriate authority.

The number of items on the list for discussion at the meeting has expanded from the original 14 to 17. As the issues become progressively resolved, additional ones are likely to arise and it is appropriate for these to be discussed in the three-monthly meetings. In future as trust builds between the parties, the scope of this forum should not be restricted to dispute resolution and problem solving, but there is opportunity to use it more as a stakeholder consultation forum for information sharing. Indeed, Cion Alexander the SPKS Leader has proposed that Adat Leaders should be involved in future meetings. This would help improve the communication with local communities.

The BSi Social Assessor who made the site visit confirmed that the working relationship between the smallholders, PTMAS and local communities was cordial. There had been no disruptions to company operations or smallholder farming or access through the estates since September 2007. BSi concludes that the process of initiating three-monthly stakeholder meetings should be upheld as a fine example of using dialogue to build relationships and resolve issues.

3.6 Formal Sign-off of Assessment Findings

Signed for on behalf of: Sime Darby Plantation Sdn Bhd (SOU 9a)

........................................................ Mr Musa B Salami

SOU 9a Chairman/Manager Sepang Date: 11 February 2009

Signed for on behalf of: BSi Management Systems Singapore Pte Ltd

........................................................ Mr Charlie Ross Lead Auditor Date: 11 February 2009

Appendix “A”

Time Bound Plan for other Sime Darby Management Units

RSPO PUBLIC SUMMARY REPORT SIME DARBY TIME BOUND PLAN

Prepared by BSi Management Systems Singapore Pte Ltd for SIME DARBY PLANTATION Sdn Bhd

SIME DARBY PLANTATION RSPO CERTIFICATION TIME BOUND PROGRAM Year

Name of SOU Certification Body

Remarks

2008 (January – June)

1. SOU 28 Binuang 2. SOU 29 Giram 3. SOU 30 Merotai 4. SOU 30b Mostyn 5. SOU 26 Sandakan Bay

SIRIM SIRIM SIRIM SIRIM BSi

5 SOUs ( SOU 26, 28, 29, 30 & 30b) have undergone the RSPO Certification Audit in May 2008

2008 (July - December)

8 SOUs in Malaysia and 4 SOUs in Indonesia

Will be Identified -




2009 (July – December)






2010 (July – December)



2011 (Jan – June)

5 SOUs in Indonesia Will be Identified -

Appendix “B”

SOU 9a RSPO Certificate Details

PUBLIC SUMMARY REPORT SOU 9a RSPO CERTIFICATE DETAILS


Management Unit SOU 9a Certificate Number : SPO 543536 Sepang Selangor Certificate Issue Date: (RSPO Approval Date) MALAYSIA

Website: http://plantation.simedarby.com Standards: RSPO Principles & Criteria : 2007; Malaysia National Interpretation : 2008

* The Tonnage Claimed is the proportion of the total production from Company SOU 9a Estates

** Tonnage not included in Certificate

Sepang Palm Oil Mill and Supply Base

Location Sepang Estate, Sepang, Selangor, Malaysia

Address 43990 Sepang, Selangor, Malaysia

GPS Location 101° 43’ 55.04”E 2° 40’ 42.55”N

CPO Tonnage Total 24078t (2007/08)

PK Tonnage Total 5942t (2007/08)

Sepang Estate FFB Tonnage 51187

Semenyih Estate FFB Tonnage 1986

Other Non-certified Sime Darby Estates FFB Tonnage**

45544

Smallholders FFB Tonnage** 15663(Lim Boon Chuan SB – 6043 / YL Paltrade SB – 3854/ Kajang – 5766)

CPO Tonnage Claimed* 11194

PK Tonnage Claimed* 2762

http://plantation.simedarby.com/�

Appendix “C”

Certification Assessment Plan

PUBLIC SUMMARY REPORT SOU 9a ASSESSMENT PLAN


TEAM: CR: Charlie Ross; RR: Robyn Ross; JH: Jarwadi Hernowo; JM: Junecel Maloloy (Interviewer/Assistant)

DATE TIME ACTIVITY CR RR JM JH

Tuesday 20 January

AM

Opening Meeting Commence Mill Documentation

√ √

√ √

√ √

√ √

PM

Physical Inspection Mill/Effluent Ponds Interview Male Workers Housing and Interview Residents Interview Female Office Staff/Workers Interview Contractors Complete Mill Documentation

√ √

√ √ √

√ √ √

√ √

Wednesday 21 January

AM

Physical Inspection Estate/Interview Male Fieldworkers Interview Female Fieldworkers Physical Inspection Stores, Land Application, Landfill Inspect Buffer Zones Clinic and Interviews

√ √

√ √

√ √

√ √

PM

Estate Documentation Interview Female Office Staff/Workers Interview External Stakeholders Inspect Housing and Interview Residents

√ √ √ √

√ √ √

√

Thursday 22 January AM

Collect any outstanding data/information/clarification Preparation of IAV Report and Closing Meeting

√ √

√ √

√ √

1430 1530

Closing Meeting Travel to SOU8/9

√ √ √ √

Appendix “D”

Stakeholder Letter from Both ENDS

Mr Chia Soon Leong BSI Management Systems Singapore Pte. Ltd. 460 Alexandra Rd #08-01/02 PSA Bldg. Singapore 119963 Mr Norazam Abdul Hameed Sime Darby Plantations Sdn Bhd Date: 14 January 2009 Place: Amsterdam Concerns: RSPO Certification Assessment of Sime Darby Plantations Sdn Bhd, Management Units SOU

8, SOU 9 and SOU 9a. Comments submitted by Paul Wolvekamp, Both ENDS (Ordinary Member RSPO).

Dear Messrs Chia Soon Leong and Norazam Abdul Hameed: In view of the current assessment of above mentioned management units and the invitation for comments, as posted on RSPO’s website, I assume Sime Darby Plantations Sdn. Bhd. (henceforth Sime Darby) will have informed the auditors about the as yet still unresolved disputes in Sanggau district, West Kalimantan, Indonesia. In view of the pioneering role of Sime Darby Plantations, it is important to consider how resolving the Sanggau dispute relates to the assessment. Moreover, an expedient resolving of this case will offer a very positive precedent for the RSPO community. In view of RSPO P&C 2.2., 6.3., 6.4. and clause 4.2.4 (verification) it is now of the essence to understand if and how active follow up is given and can be strengthened to resolve land related disputes faced by Sime Darby Plantations Sdn Bhd in Sanggau district. Sime Darby acquired Golden Hope Plantations Bhd. and thereby inherited a number of disputes involving plasma small holder growers in Sanggau district. Sime Darby management deserves praise for taking a fresh look at the Sanggau situation. In case you may not have received feedback from local stakeholders you may consider the following resume. Conflicts in Sanggau have arisen over land, compensation and allied aspects such as credit – involving plantations PT MAS I, PT MAS II and the planned PT MAS III. Following a demonstration in 2007 in front of the then Golden Hope offices in Sanggau, 4 members of the small holders association SPKS and one employee from Golden Hope were imprisoned with sentences ranging from 1 to 2 years of detainment; these persons, I was informed, are still in jail. In relation to these disputes, there is mentioning of instances of intimidation of SPKS functionaries and small holders by local authorities and other parties. A list of grievances compiled by SPKS was presented to and discussed with Sime Darby management in 2007 and subsequently in 2008. Sime Darby has commissioned an independent assessment by the Malaysian organisation Wild Asia mid 2008. The said conflicts still have to be resolved. It is, in my view, commendable that Sime Darby has taken the step to commission Wild Asia to conduct an independent assessment. With respect to the current assessment of above stated management units, it would be relevant and helpful to understand how follow up is given (e.g. plan of action; planning) to the outcomes and recommendations of the assessment and the meeting held between SPKS and Sime Darby management on November 19th 2008 at the occasion of RSPO RT6 in Bali and previous occasions. It seems that important ingredients of a process to resolve the conflicts – as also discussed during the said meeting on 18th November 2008 - are a.o.: (i) a regular (three-monthly) dialogue to discuss and monitor progress/obstacles; (ii) benchmark’s against which to judge progress or lack thereof; (iii) that the meeting place and conditions for having the suggested 3-monthly dialogue are felt as a safe environment conductive to fruitful discussions and problem solving; (iv) that it is important that the parties establish as shared feeling about what are commonly perceived as ‘facts’ on which to build further resolving of the

disputes - thereby revisiting the earlier mentioned list of 15 grievances; (v) to reach agreement on a clear time-line; (vi) lastly, it is strongly suggested to involved a third party mediator who facilitates the dialogue and monitor progress to solve this lingering dispute. Should you wish more information, I can refer you to relevant local stakeholders. Yours sincerely, Paul Wolvekamp Deputy Director Both ENDS

Appendix “E”

Sime Darby Response to Letter from Both ENDS

From: Syed Mahdhar Syed Hussain/GHO/SIME DARBY GROUP To: Paul Wolvekamp – Both ENDS Date: 01/19/2009 02:38 PM Re: Meeting with SPKS in Nov. Bali RSPO RT6 Dear Paul, Thank you very much for bringing out issues in Sangau, Kalimantan. First and foremost, I would like to clarify what has been done. As agreed during the Bali meeting, we did have a meeting on the 13th of January 2009 consisting of management of PT Mitra Austral Sejahtera, members of SPKS (leaders and members), Managers of KUD (KUD Kapita, KUD Mayting Hija). Meeting was held at Hotel Grand Narita Sangau. The purpose of the meeting is to evaluate and confirm the 15 points raised by SPKS. The outcome of the meeting was that all 15 points were clarified and evaluated. Out of which 10 has been fully clarified and 5 has been carried out. The case is closed. Besides the clarification of the 15 points, other issues were also deliberated. The salient points are: 1. The need for closer working relationship and structured communication channel between both parties and to understand each other's accountability and responsibility. This was carried out in a very cordial and organised manner by both parties during the meeting. The main issue about road system and credit payment was explained and accepted between KUD, SPKS and Sime Darby management. 2. SPKS also provided other requests to the management of PT MAS which includes: a) To respect SPKS as a body that represent about 1,200 members. Noted and agreed. b) To ensure that the community does not lose their land title after the termination of the leasing contract. Will liaise back with the respective BUPATI law as Sime darby does not own the land. This issue will be at the discretion of the BUPATI of the district. c) Hope that PT MAS management provide technical assistance to small holders for long term agricultural objectives that will benefit the community. This practice has been carried out continuously and we assured SPKS that the policy does not change.

d) All procedures and mechanism of determining the price of crop is done in a fair and transparent

manner. Noted and agreed between PT MAS management, KUD and SPKS. e) That SPKS support this gathering to achieve collaborative direction between PT MAS, KUD and

SPKS. Noted.

f) SPKS hope that PT MAS management will be able to standardise their credit component with

that of PT SIA. This particular issue will be discussed at Sime Darby's management level as it involves local agreement and regulations.

g) SPKS propose that the management could assist them in establishing a model block so that it could be duplicated to enhance the economic value of the PLASMA land. Sime Darby management will review the proposal.

h) Lastly, SPKS hope that the management could explain to the community the basic principles of

RSPO in stages. Noted and agreed. In summary: It is hoped that all parties should not blame one another instead understand and balance the difference between their RIGHTS and their RESPONSIBILITIES. Sime Darby management and KUD accept with all sincerity comments or grievances made by SPKS regarding semi-management scheme and credit payment. This structured and documented meeting will be held once every 3 months to create a harmonious communication between all parties. The permanent members would be Sime Darby management, KUD and SPKS. Other members will be called on by invitation as and when required. Paul if you require the minutes of the meeting, it is also available. However, it is in Indonesian language. Please feel free to contact me should you need it. In future, I would appreciate if you could pass any queries to us regarding Sime Darby Plantation grievances instead of providing your comments to other certification body as it could give rise to a lot of confusion. Best Regards, Syed Mahdhar SVPII, TQEM(Group/Plantation)