Audit Report

App./Cert. Date

RSPO20009 04/02/2012 Rev. 26 Sep. 2012

PUBLIC SUMMARY REPORT

Client: Site Address:

Standard(s):

PT. Tapian Nadenggan, Hanau Mill and Its Supply Bases Hanau Mill: Kecamatan Hanau, Kabupaten Seruyan, Kalimantan Tengah Its Supply Bases: Hanau Estate: Kecamatan Hanau, Kabupaten Seruyan, Kalimantan Tengah Tasik Mas Estate: Kecamatan Hanau, Kabupaten Seruyan, Kalimantan Tengah Tanjung Paring Estate: Kecamatan Hanau, Kabupaten Seruyan, Kalimantan Tengah Langadang Estate: Kecamatan Hanau, Kabupaten Seruyan, Kalimantan Tengah

National Interpretation of RSPO Principles and Criteria for Sustainable Palm Oil Production, Republic of Indonesia, May 2008 RSPO Supply Chain Certification System, November 2011 and RSPO Supply Chain Certification Standard, Module E – CPO Mill: Module E Mass Balance November 2011

DISCLAIMER: This report has been prepared by SAI Global Indonesia (SAI Global) in respect of a Client's application for assessment by SAI Global. The purpose of the report is to comment upon evidence of the Client's compliance with the standards or other criteria specified. The content of this report applies only to matters, which were evident to SAI Global at the time of the audit within the audit scope. SAI Global does not warrant or otherwise comment upon the suitability of the contents of the report or the certificate for any particular purpose or use. SAI Global accepts no liability whatsoever for consequences to, or actions taken by, third parties as a result of or in reliance upon information contained in this report or certificate.

ACTIVITY ID: QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report Table of contents Executive Overview Abbreviations Used

Page

1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13

SCOPE OF THE CERTIFICATION ASSESSMENT Introduction Audit Objective Scope of Certification Location of Mill and Estates Description of Supply Base Date of Plantings Other Certificates Held Organisational Information/Contact Person Time Bound Plan for Other Management Units Area of Plantation Approximate Tonnages Offered for Certification (CPO and PK) Partial Certification Requirements Date of Issue of Certificate and Scope of Certification

2.0 2.1 2.2 2.3 2.4 2.5

AUDIT PROCESS Certification Body Audit Methodology Qualification of the Lead Auditor and Audit Team Members Stakeholder Consultation Date of Next Surveillance Visit

3.0 3.1 3.2 3.3

AUDIT FINDINGS Summary of findings Recommendation Environmental and Social Risk for this scope of certification for planning of the surveillance audit Acknowledgement of Internal Responsibility and Formal Sign-off of Assessment Findings

3.4

Page List of Tables 1 2 3 4 5 6 7 8

Mill and Estates GPS Locations Organisation FFB Production Age Profiles of Planted Palms Other Certificates Held by Mill and Estates RSPO Certification Time Bound Plan of Estates and Area Planted Plantation Hectare Statement List of internal and external stakeholder

List of Figures 1 Map of Mill and Estates Location

Page

List of Appendices A Audit Record B Nonconformities, Corrective Actions and Observations Summary C Stakeholder‟s issues and comment D Definition of, and action required with respect to audit findings

Page

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Audit Report Executive Overview SAI Global has audited PT. Tapian Nadenggan operations comprising one mill, four oil palm estates, support services and infrastructure. PT. Tapian Nadenggan Operation was found complies with the requirements of the National Interpretation of RSPO Principles and Criteria for Sustainable Palm Oil Production, Republic of Indonesia, May 2008 and the RSPO Supply Chain Certification System, November 2011 and RSPO Supply Chain Certification Standard, Module E – CPO Mill: Module E Mass Balance November 2011. As relevant data regarding partial certification requirements have also been completed in June 2012.The recommendation from this audit is that PT. Tapian Nadenggan, Hanau Mill and Its Supply Bases be approved as a producer of RSPO Certified Sustainable Palm Oil and Palm Kernel.

Abbreviations Used AAA AMDAL BHL BKM BLH BOD BPN CEO CO COD CPO CSR D&L EFB FFB GAR GPS HCV HGB HGU HNAE HNAM HPH IDR IMT IPM ISO IUP KCP KUD kWH LD LNGE LOTO MAA MCAR MSDS MT NGO OHS

Agronomy Advisory Audit Environmental and Social Impact Analysis (Analisis Dampak Lingkungan) Daily basis paid workers (Buruh Harian Lepas) Log book of group leader activity (Buku Kegiatan Mandor) Local Agency of Environmental (Badan Lingkungan Hidup) Biological Oxygen Demand National Land Agency (Badan Pertanahan Nasional) Chief Executive Officer Carbon Monoxide Chemical Oxygen Demand Crude Palm Oil Corporate Social Responsibility Document and Legal Empty fruit bunches Fresh Fruit Bunch Golden Agri-Resources Limited Global Positioning High Conservation Value Building Use Title (Hak Guna Bagunan) Land Use Title (Hak Guna Usaha) Hanau Estate Hanau Mill Forest Authority Concession (Hak Penguasaan Hutan) Indonesian Rupiah PT. Ivo Mas Tunggal Integrated Pest Management International Standards Organisation Plantation Operation Permit (Izin Usaha Perkebunan) Kernel Crushing Plant Village Unit Cooperatives (Koperasi Unit Desa) Kilo Watt Hour Lethal Dosage Langadang Estate Lock out tag out Mill Advisory Audit Management Committee Agronomy and Research Material Safety Data Sheet Metric Ton Non Government Organisation Occupational Health and Safety

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Audit Report OIA P2K3 PK PKB PKWT POM POME PP PPE PSM RABQSA RKL RPL RSPO SA SCCS SHM SIA SKU SMD SMARTRI SOP SPM TLV TMSE TPRE TSS VPA

Operation Internal Audit Safety Commitee Palm Kernel Mutual Working Agreement (Perjanjian Kerja Bersama) Contracted worker (Pekerja Waktu Tertentu) Palm Oil Mill Palm Oil Mill Effluent Company Regulation (Peraturan Perusahaan) Personal Protective Equipment Sinar Mas Estate (Perkebunan Sinar Mas) Quality Society of Australia Environmental Management Plan (Rencana Pengelolaan Lingkungan) Environmental Monitoring Plan (Rencana Pemantauan Lingkungan) Roundtable on Sustainable Palm Oil Social Accountability Supply Chain Certification System Land Own Title (Surat Hak Milik) Social Impact Assessment Permanent worker (Syarat Kerja Utama) Senior Managing Director SMART Research Institute Standard Operation Procedure Independent Worker Union (Serikat Pekerja Mandiri) Threshold Limit Value Tasik Mas Estate Tanjung Paring Estate Total Suspended Solid Vice President of Agronomy

1.0

SCOPE OF THE CERTIFICATION ASSESSMENT

1.1

Introduction

SAI Global conducted an audit of PT. Tapian Nadenggan Hanau Mill and Its Supply Bases on 30/01/2012 to 04/02/2012. The purpose of this audit report is to summarise the degree of compliance with relevant criteria, as defined on the cover page of this report, based on the evidence obtained during the audit of your organisation. SAI Global audits are carried out within the requirements of SAI Global procedures that also reflect the requirements and guidance provided in the international standards relating to audit practice such as ISO/IEC 17021, ISO 19011, RSPO Certification System and other normative criteria. SAI Global Auditors are assigned to audits according to industry, standard or technical competencies appropriate to the organisation being audited. Details of such experience and competency are maintained in our records. The audit team is detailed in the attached audit record. In addition to the information contained in this audit report, SAI Global maintains files for each client. These files contain details of organisation size and personnel as well as evidence collected during preliminary and subsequent audit activities (Documentation Review and Scope) relevant to the application for initial and continuing certification of your organisation. Details of your primary contact persons and their contact details and site addresses are also maintained. Please take care to advise us of any change that may affect the application/certification or may assist us to keep your contact information up to date, as required by QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report SAI Global Terms and Conditions. Please note that this report is subject to independent review and approval. Should changes to the outcomes of this report be necessary as a result of the review, a revised report will be issued and will supersede this report.

1.2

Audit Objective

Certification Audit To determine the implementation of your organization‟s RSPO system; the capability and effectiveness of the RSPO system in ensuring continual compliance with the requirements of the National Interpretation of RSPO Principles and Criteria for Sustainable Palm Oil Production, Republic of Indonesia, May 2008 and in meeting its specified objectives (indicator); and the conformity of the RSPO system to stated principles, criteria and indicator. The audit also conducted to verify the volumes of certified and uncertified FFB entering the mill and volume sales of RSPO certified producers‟ inline with the requirements of RSPO Supply Chain Certification System, November 2011 and RSPO Supply Chain Certification Standard, Module E – CPO Mill: Module E Mass Balance November 2011.

1.3

Scope of certification

The scope of certification is the CPO production from one (1) Palm Oil Mill and FFB supply bases comprising four (4) companies owned by PT. Tapian Nadenggan. One supply base owned by PT. Tapian Nadenggan – Medang Sari Estate is excluded from scope of certification. Hanau Mill PT. Tapian Nadenggan Kecamatan Hanau, Kabupaten Seruyan, Central Kalimantan, Indonesia Capacity (annual MT CPO): CPO: 94,051.64 ton in 2011, PK: 21,553.50 ton in 2011 Hanau Estate PT. Tapian Nadenggan Kecamatan Hanau, Kabupaten Seruyan, Central Kalimantan, Indonesia Tasik Mas Estate PT. Tapian Nadenggan Kecamatan Hanau, Kabupaten Seruyan, Central Kalimantan, Indonesia Tanjung Paring Estate PT. Tapian Nadenggan Kecamatan Batu Ampar, Kabupaten Seruyan, Central Kalimantan, Indonesia Langadang Estate PT. Tapian Nadenggan Kecamatan Batu Ampar, Kabupaten Seruyan, Central Kalimantan, Indonesia

1.4

Location of mill and estates

PT. Tapian Nadenggan mill and estates are located in Central Kalimantan Province. The geographical coordinate of the mill and estates are shown on Table 1. Table 1: Mill and Estates GPS Locations QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report MILL AND ESTATE

EASTING

NORTHING

HNAM

112° 6' 35"

2° 21' 39"

HNAE

112° 6' 33"

2° 24' 41"

TMSE

112° 5' 34"

2° 20' 29"

TPRE

112° 7' 57"

2° 16' 49"

LNGE

112° 6' 28"

2° 14' 5"

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Audit Report Figure 1 Map of Mill and Estates Location

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Audit Report 1.5

Description of supply base

The FFB is sourced from five (5) Estates owned by PT. Tapian Nadenggan. One Estate is excluded from scope of certification. The FFB is also sourced from the third parties who excluded from scope of certification. The areas and FFB production of the plantations are shown on Table 2. Table 2: FFB Production of the supply base ESTATE

TOTAL AREA (HA)

PLANTED AREA (HA)

FFB (TON/YEAR)

HNAE

4,562.19

4,299.37

125,981.00

TMSE

4,857.30

4,286.72

118,745.18

TPRE

4,418.34

3,966.12

97,855.57

LNGE

2,216.71

2,054.07

49,300.09

Source: Data from PT. SMART Tbk. in March 2012

1.6

Date of plantings Table 3: Age Profiles of Planted Palms HNAE (HA)

YEAR 1995 1996 1997 1998 1999 2000 2004 2005 2006 Total Prime Mature (7-18) 2007 2008 Total Young Mature (3-6) Total Planted Area

179,61 2.398, 03 1.621,73

TMSE (HA) 652,81 2.263,44 1.161,39 209,08

TPRE (HA)

378,20 559,36 1.706,13

597,60 4.199,37

4.286,72

LNGE (HA)

3.241,29

129,85 903,55 348,65 657,91 2.039,96

724,83

179,1 3.050,84 4.263,37 1.720,75 1.915,21 129,85 903,55 946,25 657,91 13.767,34

% OF PLANTED AREA 1,24 21,05 29,42 11.87 13.22 0.90 6,23 6,53 4.54 95,00

724,83

5,00

14.492,17

100

SUM (HA)

724,83 4.199,37

4.286,72

3.966,12

2.039,96

Source: Data from PT. SMART Tbk. in March 2012

1.7

Other certificates held Table 4: Certificates Held by Mill and Estates MILL/ESTATE

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OTHER CERTIFICATION HELD © SAI Global Indonesia Copyright 2009

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Audit Report HNAM

Green Level of PROPER (Compliance assessment from Ministry of Environment)

HNAE

Nil

TMSE

Nil

TPRE

Nil

LNGE

Nil

Source: Data from PT. SMART Tbk. in March 2012

1.8

Organizational information/contact person

PT. SMART Tbk Plaza BII, Tower 2, 10th floor Jl. MH. Thamrin No. 51 Kav. 22, Jakarta 10350 Phone : (+62-21) 3181388 Fax : (62-21) 3181389 CP: Mr. Ismu Zulfikar Head of Environmental Department Email: [email protected]

1.9

Time bound plan for other management units

PT. SMART Tbk is committed to RSPO certification of all its Management Units located in North Sumatera, Jambi, Bangka, South Kalimantan, Central Kalimantan, and East Kalimantan. Time bound plan for all its Management Units to 2015 has been developed to achieve the RSPO certification. The plan is detailed on Table 5. The time bound plan was updated on January 16, 2012. Several Management Units was delayed in obtaining RSPO certification due to RSPO Grievance Panel Process. Joint statement by GAR, SMART, IMT and RSPO Grievance Panel issued 28 October 28, 2010 mentioned that until 31 March 2011, RSPO will postpone approval of SMART and IMT certification. SAI Global accepted the reason of the delay.

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Audit Report Table 5: RSPO Certification Time Bound Plan

Source: Data from PT. SMART Tbk. in February 2012

1.10

Area of plantation

The areas details for organisation owned estates are shown on Table 6.

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Audit Report Table 6: Estates and Area Planted ESTATE

MATURE (HA)

IMMATURE (HA)

HNAE

4.199,37

0

TMSE

4.286,72

0

TPRE

3.966,12

0

LNGE

2.039,96

0

Source: Data from PT. SMART Tbk. in March 2012

Table 7: Plantation Hectare Statement AREA

HECTARES

Mature area

14.492,17

Immature area

0

Total area planted

14.492,17

Emplacement, Mill, Road, etc

582,80

River, Ditch and Swamp

655,80

Other area (quarry, reservoir and reserve area)

279,77

Total leased area

17.062,11

Source: Data from PT. SMART Tbk. in March 2012

1.11

Approximate tonnages offered for certification (CPO and PK)

The approximate tonnages certified are: CPO/year: 94,051.64 ton and PK/year: 21,553.50 ton

1.12

Partial Certification Requirements

The British Standards Institution (BSI) was engaged in verifying the SOP and implementation against the National Interpretation of RSPO Principles and Criteria for Sustainable Palm Oil Production, Republic of Indonesia, May 2008 across all of SMART operation, i.e. PT. SMART Tbk. in South Kalimantan (15-16 June 2012), PT. Leidong West Indonesia in Bangka (3-6 May 2011), PT. Tapian Nadenggan in Central and East Kalimantan (19-23 December 2011), PT. Kresna Duta Agroindo in East Kalimantan and Jambi (8-12 August 2011 and 19-21 July 2011) and PT. Satya Kisma Usaha in Jambi (28 March – 1 April 2011). The verification was conducted in 2011. The assessment team included Technical Expert of Ecology and Wildlife Management, Technical Expert of Social Aspects and Technical Expert of Environmental Management System. SOP and documents verified were among others: AMDAL (Environmental and Social Impact Analysis), report of RKL RPL implementation, SOP of HCV Assessment, SOP of Peat Conservation, SOP of Community Engagement, SOP of New Planting Procedure. Some of the verification reports were issued in February and March 2012. According to verification report:  No replacement of primary forest or any area identified as containing HCVs or required to QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report maintain or enhance HCVs in accordance with RSPO criterion 7.3. No new planting in several areas and new planting procedure has been implemented in several areas.  Land dispute was found in PT. Tapian Nadenggan and PT. Kresna Duta Agroindo. These cases have been followed up and closed out.  No labour dispute.  Minor nonconformities were found in legal compliance, e.g. environmental monitoring was not conducted inline with RKL RPL document in PT. Tapian Nadenggan and PT. Kresna Duta Agroindo. Action plan has been established and action taken is verified during internal audit. Action plan to all nonconformities has been established and communicated to each organisation. Peat Restoration Team (PRT) for the deep peat restoration project led by the Bogor Agricultural Institute (IPB) and assisted by the Indonesian Center for Agriculture Land Resource Research and Development (Balai Besar Penelitian dan Pengembangan Sumberdaya Lahan Pertanian) was engaged. The project has been completed. The report “Mitigation Plan and Mitigation Action on Oil Palm Plantation in Peat Lands of Central and West Kalimantan” was completed in April 2011. The report has been submitted to RSPO Panel on May 31, 2011 and has not been published by the organisation. Tanjung Pura University (UNTAN), Faculty of Agriculture, West Kalimantan and Palangka Raya University, Faculty of Agriculture, has been engaged to conduct the social research. The research study was conducted to 8 organisations across of GAR and SMART operation in 2011. Report of research study was finished in June 28, 2011. The report concluded that:  Criterion 2.3: Land acquisition did not diminish the legal rights or customary rights of other users without their free, prior and informed consent. However, the negotiation process was not well recorded in writing.  Criterion 7.3: Land preparation for plantation development was not carried out in primary forest but in secondary forest, degraded land, shrub land, former logging sites or forest concessions, land previously cleared by natural fire and land left by shifting cultivators.  Criterion 7.5: New plantings were conducted with prior approval from the local people.  Criterion 7.6: Identification and evaluation of land ownership based on legal and traditional land rights were already conducted. Compensation payment was discussed in negotiations between the organization and traditional land owners witnessed by local government representatives. The presence of the organization in the rural area creates positive impacts on surrounding areas, such as creating new jobs for the local community, increasing the local community‟s income, increasing the circulation of cash in the rural market and stimulating the growth of businesses.  CSR: The organization had conducted various activities with their CSR projects in the sectors of infrastructure, health, education, disaster relief and local economy empowerment. The report of research study is published in GAR website. PT. SMART Tbk. and Faculty of Forestry, IPB performed historical HCV assessment in 2011. The report was submitted to RSPO Panel on June 28, 2011 and has not been published by the organisation. GAR and PT. SMART Tbk. established Social and Community Engagement Policy on November 10, 2011. The policy was established to ensure that operations of palm oil can improve the living of communities in its operational area. The policy covers commitment to FPIC to indigenous and local communities, responsible for complaints handling, To attain an accountable resolution of the conflict, an open and constructive role of local, national and international stakeholders, empowerment of the community development program, respect for human rights, recognize, respect and strengthen worker‟s rights, comply with all relevant laws and regulations and principles and criteria of international recognise certification. The organisation committed to used multistakeholder approach in developing and implementation Social and Community Engagement Policy. QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report SAI Global concluded that partial certification requirements have been fulfilled.

1.13

Date of issue of certificate

The scope of certification is the CPO production from one (1) palm oil mill and four (4) companies owned by PT. Tapian Nadenggan. Date of issue of certificate will be the date on approval of this Assessment Report by the RSPO Secretariat.

2.0

AUDIT PROCESS

2.1

Certification body

PT. SAI Global Indonesia Graha Iskandarsyah, 4th floor Jl. Iskandarsyah Raya No. 66 C Kebayoran Baru, Jakarta 12160, Indonesia Phone : +62 21 720 6186, 720 6460 Fax : +62 21 720 6207 Contact person : Mr. Joko Prayitno Certification Manager Email : [email protected] SAI Global is one of the world‟s leading business providers of independent assurance. SAI Global provides organisations around the world with information services and solutions for managing risk, achieving compliance and driving business improvement. We provide aggregated access services to Standards, Handbooks, Legislative and Property publications; we audit, certify and register your product, system or supply chain; we facilitate good governance and awareness of compliance, ethics and policy issues and provide training and improvement solutions to help individuals and organisations succeed. The SAI Global business is driven by two equally important client needs - the mandated need for organisations to conform to regulations, standards and legislation in all their locations, and the operational need for organisations to improve business processes and procedures as well as corporate culture. As we are a global company, we can meet these needs for any client - those operating within one country's borders and in one language or those operating across borders and in many languages. There are three business units/divisions within SAI Global namely the Information Services Division, the Compliance Division, and the Assurance Division. The Assurance Division helps organisations manage risk, achieve process or product certification and drive improvement by providing training, registration audits and supplier management programs that can improve business performance. We provide independent audits, assessments and certification of your products or business processes to ensure they comply with industry standards or customer specific requirements. We understand how compliance with those standards can improve the efficiency, economy and profitability of your operation. With auditing and assessment staff located around the world, our clients include large global corporations as well as single site organisations.

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Audit Report 2.2

Audit methodology

SAI Global performed a pre-audit to RSPO Principles and Criteria on 3 to 4 May 2011 to review PT. Tapian Nadenggan‟s RSPO system, confirm the scope for certification, determine organisation‟s preparedness for Stage 2 (Certification) Audit; review the adequacy of the SAI Global audit program and resources for Stage 2 (Certification) Audit including confirming and preparing the draft audit plan. The Certification Audit was performed on 30 January to 4 February 2012. The audit programme was included in the body of report. The audit methodology for collection of objective evidences is site inspection, documentation and record review and interview with staffs, workers, and other stakeholders. Objective evidences from documentation/record review in one area may also be cross checked with other objective evidences in other areas and with the evidence of implementation on site during the audit. Inputs from stakeholders via letter, email, or other communication media were also considered for this certification audit. Stakeholder consultation is described in section 2.4.

2.3

Qualification of the lead auditor and audit team member

Ria Gloria – Lead Auditor Ria Gloria graduated with Bachelor of Chemical Engineering degree from Bandung Institute of Technology in 1994. She has working experience as Environmental Consultant for many years. She has completed ISO 14001 (1995), ISO 9001 (2004), and RSPO (2009) lead auditor training courses, and SCCS (2010). For the last 8 years she has been involved in quality (ISO 9001) and environmental (ISO 14001) management system audits for very broad industrial and in the palm oil sector since 2003 for several plantations and mills. She has received training for good agricultural practices including integrated pest management and high conservation value (2008-2009). Inge Triwulandari – Audit Team Member Inge Triwulandari graduated with Bachelor of Chemical Engineering degree from Bandung Institute of Technology in 1996. She has completed ISO 9001 (2000), ISO 14001 (1997) lead auditor training courses, RSPO auditor (2008), and SCCS (2010). For the last 12 years she has been involved in quality (ISO 9001) and environmental (ISO 14001) management system audits including in the palm oil sector since 2006 for several plantations and mills. She has received training for good agricultural practices including integrated pest management and high conservation value (2008-2009). Sigit Yulianto – Audit Team Member Sigit Yulianto graduated with Bachelor of Metallurgical Engineering degree from University of Indonesia in 1993 and Master of Occupational Health and Safety from the same university in 2006. He has working experience in the manufacturing industry for many years. He also certified OHS Expert in Indonesia. For the last 14 years he has been involved in quality (ISO 9001) and occupational health and safety management system audits for very broad industrial and service sectors including in the palm oil sector since 2008 for several plantations and mills. He has received training for good agricultural practices including integrated pest management and high conservation value (2008-2009). Bayu Abirowo – Audit Team Member QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report He is a Bachelor of Electrical Engineering from Trisakti University, Jakarta. He has joined with SAI Global since 2004 as Lead Quality Auditor for ISO 9001:2008 and registered in IRCA. He has working and auditing experiences in manufacturing companies with large scale manpower and deals with various kind and positions of interviewed peoples. He is also SA 8000 auditor certified by Social Accountability International since 2011. He has received training for legal requirements of land acquisition, customary rights, HCV (High conservation value) and social impact management in palm forestry. He is also trained for RSPO principles and criteria (P&C).

Irawan Y Bawono– Audit Team Member Irawan Y Bawono graduated with Bachelor of Food Technology from Gadjah Mada University on 1992. He has completed ISO 9001 (2008), ISO 22000 (2005) lead auditor training courses, RSPO auditor (2008), and SCCS (2010). For the last 5 years he has been involved in quality (ISO 9001) and food safety management system (ISO 22000 and HACCP) audits including in the palm oil sector since 2007 for several plantations and mills. He has received training for good agricultural practices including integrated pest management and high conservation value (2008-2009). Resit Sözer – Technical Specialist for HCV Issues Dutch nationality Biologist, since 1994 active in Indonesia in the field of Endangered Species research (Bornean Peacock Pheasant, Javan Hawk-eagle), Endangered Species surveys (Sumatran Rhino, Orang Utan, Javan Tiger), habitats surveys (conservation areas, HPH, oil palm plantations), wildlife trade surveys, wild animal rescue, reintroduction and restocking of wildlife, endangered species breeding programs (Bornean Peacock Pheasant, Javan Warty Pig, Blackwinged Starling), scientific publications and community involvement.

2.4

Stakeholder consultation

Stakeholder consultation was performed to internal and external stakeholders. Internal stakeholders included staffs and workers. External stakeholders were notified by placing an invitation to comment on the RSPO, PT. SMART Tbk. and SAI Global websites and sending an invitation letter to comment. Letters were also sent to external stakeholders to invite for comment or one on one interview. External stakeholders were selected by considering that they have an interest in the organisation activities, directly border with organisation, area which the workers live. External stakeholders included governments, and civil societies. One on one interview with stakeholders was conducted during audit, to verify compliance against relevant criteria and indicator related to land status and conflict, environmental, social aspect and HCV. Pembuang Hulu I, Pembuang Hulu II, Derangga Village has been chosen to represent societies affected by HNAE, Tanjung Hara and Tanjung Paring Village has been chosen to represent societies affected by TMSE and HNAM, Kallang Village has been chosen to represent societies affected by LNGE, and Sandul Village has been chosen to represent societies affected by TPRE. Table 8: List of internal and external stakeholder STAKEHOLDERS Internal stakeholder Head of SPM Head of Gender Committee QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

METHOD OF CONSULTATION One on one interview One on one interview © SAI Global Indonesia Copyright 2009

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Audit Report Representative of worker

One on one interview and group discussion

External Stakeholder Environmental Agency of Seruyan District Plantation Agency of Seruyan Distric Labour Agency of Seruyan Distric National Land Agency Police Office of Kotabaru District Camat Batu Ampar Camat Hanau Kepala Desa Sandul

Kepala Desa Panimbang Raya

Kepala Desa Pembuang Hulu I Kepala Desa Pembuang Hulu II Kepala Desa Derangga Kepala Desa Tanjung Hara Kepala Desa Tanjung Paring Society leader of Desa Pembuang Hulu I Religion leader of Desa Pembuang Hulu II Youth leader of Desa Derangga Religion leader of Desa Kallang Society leader of Desa Kallang Youth leader of Desa Kallang Society leader of Desa Sandul Religion leader of Desa Sandul Youth leader of Desa Sandul Society leader of Desa Tanjung Hara Religion leader of Desa Tanjung Hara Youth leader of Desa Tanjung Paring Enclave owner

Sending an invitation letter to comment Sending an invitation letter to comment Sending an invitation letter to comment Sending an invitation letter to comment Sending an invitation letter to comment Sending an invitation letter to comment Sending an invitation letter to comment Sending an invitation letter to comment and one on one interview Sending an invitation letter to comment and one on one interview Sending an invitation letter to comment Sending an invitation letter to comment Sending an invitation letter to comment Sending an invitation letter to comment Sending an invitation letter to comment One on one interview One on one interview One on one interview One on one interview One on one interview One on one interview One on one interview One on one interview One on one interview One on one interview One on one interview One on one interview One on one interview

Letter from Head of Environmental Agency of Seruyan District (Kepala Badan Lingkungan Hidup Kabupaten Seruyan) (#660/39/BLH/I/2012 dated January 19, 2012) gathered during public consultation for this audit indicated several feedback and request. SAIG requested SMART to follow up charges from Head of Environmental Agency of Seruyan District. See appendix C for detail of stakeholder issues and comment. QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report

2.5

Date of next surveillance visit

The next surveillance visit will be conducted 9 to 10 months after approval of this report by RSPO and issuance of certificate by SAI Global.

3.0

AUDIT FINDINGS

3.1

Audit findings

PRINCIPLES 1: COMMITMENT TO TRANSPARENCY

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. Criterion 1.1 Indicator Major 1 and 2 Information request and how to manage the respond were defined in a documented procedure (SOP/SPO/SMART/LH-02). Communication procedure was established and implemented by the organisation. Communication procedure described follow up of information request from interested parties. All information request from stakeholder was listed and recorded by Mill and Estates. Records of information request from stakeholder were kept by Mill and Estates. Most of request was initiated from community around Estates (School Principal, Village Head, and Religion Leader) and also some request from Labour Department (Dinas Tenaga Kerja). Some requests are pertinent to information labour data from Labour Department, donation request from Village Head, Youth and Religion Leader where fund (donation) is used for social activity for community around Estates. Most of the requests from stakeholder were directly responded by the organization. Criterion 1.1 Indicator Major 3 Record of information and respond was kept by the organisation. Retention time for records was determined minimum 5 years.

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. Criterion 1.2 Indicator Major 1 Site Permit (Izin Lokasi), Plantation Operation Permit (IUP), Land Use Title (HGB), Environmental and Social Impact Analysis document (AMDAL), environmental management and monitoring report (RKL and RPL implementation reports), Occupational Health and Safety Management Plan and Corporate Social Responsibility (CSR) Program were available at Mill and Estates. Continuous improvement plans – i.e. innovations, management programs were also available. Those documents were accessible and shown during this audit. Procedure for response for information querry has been issued. The procedure stated that company documents were publicly available.There was a register of documents and maybe requested by any relevant stakeholders. When there are querry from the party mentioned in the register, permit must be gained by authorised personnel indicated in the register. Log book of information querry and its response have been reviewed during audit. The log book have been used since March 2011. It was indicated that so far no querry from stakeholders in QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report regard to ANDAL, RKL and RPL, as well as RKL and RPL implementation reports. Criterion 1.2 Indicator Major 2 The record of information requests and its responses is kept within 5 years.

PRINCIPLES 2: COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS

Criterion 2.1 There is compliance with all applicable local, national and ratified international laws and regulations. Criterion 2.1 Indicator Major 1 During audit, evidence of compliance with all applicable local, national and ratified international laws and regulations by Mill and Estates have been provided, including valid permits (RKL RPL documents and implementation reports, land application permits and reports, hazardous waste storage permit and management reports), provision of required infrastructure (waste water treatment ponds, hazardous waste storage, boiler stack sampling points), availability of MSDS, environmental parameter monitoring (stationary emission, ambient emission and ambient noise, moving source emission, waste water discharge quality), pesticide management, system of plant cultivation, oil palm plantation, list of flora and fauna protected, management of guard area, minimum wage, labour law, occupational health and safety, employee social benefit. The records were sighted for period 1st and 2nd semester of 2010 and 1st semester of 2011. PROPER evaluation has concluded that Hanau Mill granted for Green award which indicated status of their environmental legal compliance. Formal feedback from Kepala Badan Lingkungan Hidup Kabupaten Seruyan (letter #660/39/BLH/I/2012 dated January 19, 2012) gathered during public consultation for this audit indicated environmental legal compliance by Hanau Mill up to 2011, in regard to water pollution management (waste water treatments operation and monitoring of waste water quality, land application with three monitoring well, reporting of waste water quality and land application activity), air emission management (boiler stack sampling point, boiler emission monitoring and reporting, work environment noise monitoring and reporting, ambient air quality monitoring and reporting), soil quality monitoring, hazardous waste management, conservation of natural resources and biodiversity (application of water management in peat land, high conservation value management), RKL RPL implementation reporting, Corporate Social Responsibility (CSR) program implementation. Criterion 2.1 Indicator Major 2 Mill and Estates implemented procedure SOP/TN/PPL to ensure information of all applicable local, national and ratified international laws and regulations were accessed, reviewed and applied. Mill and Estates has maintained a register of contact for accessing and updating information of all applicable local, national and ratified international laws and regulations. Evidence of efforts made to comply with changes in the regulations was sighted, i.e. regular contact to the institution within the register and follow up on new legal information. One of the efforts sighted was that Seruyan District (Kabupaten Seruyan) recently has just informed new legal requirements Local Regulation of Central Kalimantan Province #7/2010 which include requirements for surface water abstraction (to install flow meter and record volume of water abstracted). It was observed that Hanau Mill has already installed flow meter and record the volume of water abstracted, from 2010 up to January 2012. Criterion 2.1 Indicator Minor 1 As mentioned previously, Mill and Estates implemented procedure SOP/TN/PPL to ensure that all applicable local, national and ratified international laws and regulations were accessed, reviewed and applied. Applied legal and other requirements and how the legal requirements applied were documented in the legal register and its compliance status. The register was dated on December 26, 2011. QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report Criterion 2.1 Indicator Minor 2 Mechanism for ensuring compliance with all applicable local, national and ratified international laws and regulations was described in procedure SOP/TN/PPL. The procedure requires application of legal requirements to be verified every 6 months. Evidence of compliance with all applicable local, national and ratified international laws and regulations which concern the operation of Mill and Estates was already evaluated internally as required by the procedure SOP/TN/PPL. Last evaluation of compliance was performed on December 26, 2011. Minor nonconformity against criterion 2.1 HNAE, TPRE, LNGE, TMSE  Some items as mentioned in the status of compliance form? were not complete or accurate, e.g. Government Regulation #82/2001 and Environment Ministry Degree #28 and #29/2003 evaluated compliance with land application whereas there was no land application in LNGE. Government Regulation #82/2001 evaluated compliance with fiber and EFB handling in HNAE.  Some inaccurate evaluation of compliance against OHS regulations were found, i.e. the result of evaluation of compliance stated already complies but actually not fully complies, e.g. in regard to physical factors at workplace and chemical factors at workplace which have not been measured (noise of generator set and heavy equipment has not been measured, chemical factors at warehouse sterilizer and chemical warehouse has not been measured) HNAM  Mechanism for conducting evaluation for compliance was not described in the SOP for legal and other requirements SOP/TN/PPL: how, who, when.  The result of evaluation of compliance was not accurately presented in the record, e.g. RKL-RPL and Land Application Report 1st semester 2011 indicated gaps in several issues, however all evaluation score period December 2011, 26 indicated “0” which means full compliance: water biota Seluluk Lake downstream, BOD and COD of Tarus River downstream, Carbon Monoxide (CO) level from diesel electricity generator #2 emission, TSS of sediment ponds outlet.  Some of the methodology for evaluating compliance only based on “one visit conclusion”, e.g. for hazardous waste management (traceability of waste disposal and completeness of hazardous disposal manifest) and hazardous material management (the use of hazard symbol, availability of MSDS, handling of material according to MSDS). There was no periodic monitoring scheme to support compliance status. Fuel bund wall valve still found in open condition during audit.  Within RKL RPL implementation 1st semester report, evaluation of compliance for river water quality was only against Government Regulation #82/2001. The RPL requires that evaluation to be performed against Government Regulation #82/2001 and initial environmental condition. Opportunity for improvement  It was unclear whether original or copy of training certificate will be distributed to employee instantly once a course was completed whilst training procedure does not clearly mention who will keep the original/ copy of certificates. Note: the original certificate shall be accessible or provided to employee at any time if no course certificate lodged agreement being undertaken. Refer Ministry Degree #Kep 261/MEN/XI/2004 for such requirement.

Criterion 2.2 The right to use land can be demonstrated, and is not legitimately contested by local communities with demonstrable rights. Criterion 2.2 Indicator Major 1 QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report The availability of legal documents for use of land and operation of Mill and Estates were verified. Evidences were mentioned as follows: HNAE:  Site permit #1016-460.42, dated 18 October 1995, +/- 15,920 Ha, permit was given to PT. Lestari Unggul Jaya.  IUP dated 30 March 2001, +/- 4,890 Ha.  Forest releases permit (Ijin Pelepasan Kawasan Hutan), IPKH #48/Kpts-11/1994, dated 5 February 1994.  HGU #22 dated 1 October 2003, +/- 3,448 Ha. TMSE, TPRE and LNGE:  Site permit #1016-460.42, dated 18 October 1995, +/- 15,920 Ha, permit was given to PT. Lestari Unggul Jaya (same as for HNAE) minus 4,890 Ha for HNAE become 11,030 Ha. This site permit was revised and updated with site permit #14 year 2003, this site permit mentioned that permit was transferred from PT. Lestari Unggu Jaya to PT. Tapian Nadenggan, and also mentioned in this permit that since some area are in the form of sand and then the area given in the permit was 9,100 Ha. This permit was also revised by Head of Seruyan District (Bupati Seruyan) with issuance of new site permit #45 year 2004 for a total of 12,178.308 Ha.  IUP #500/193/EK/2004, dated 22 January 2004, a total of 12,178.308 Ha for oil palm plantation.  Forest releases permit (IPKH): #19/Kpts-II/2001, dated 30 January 2001, a total of 11,860 Ha.  HGU #11, dated 15 September 2005, for a total of 12,172.111 Ha. HNAM:  Site permit: No. 03.460.42 for a total of 90 Ha dated 29 April 2000.  HGB #01, dated 21 September 2004, for a total of 6,1891 Ha.  Building construction permit (IMB) No. 647/121/UPPT/CK-PU/2000, dated 29 September 2000. Criterion 2.2 Indicator Major 2 Legal boundaries are indicated with the marking at the map as attached in each land use title permit and land own title permit. Marking of legal boundaries were regularly maintained and verified during this audit and it was evidence for all estates and mill except for LNGE. Some areas of land within land use title of LNGE were under conflict with farmers and occupied by them, see finding below. Criterion 2.2 Indicator Major 3 It was confirmed from the public consultation that there were no land conflict at all land within estate and mill. Criterion 2.2 Indicator Minor 1 Evidences of land acquisition before 2000 were sampled and verified during this audit; it was sighted that land acquisition was completed with documents approved by two parties with witnessed by local authority and/or community leader. No land acquisition after 2005. Criterion 2.2 Indicator Minor 2 A mechanism to resolve conflict which is accepted by all parties was described under criterion 6.3 and 6.4. Minor nonconformity against criterion 2.2 LNGE  A part of LNGE was under conflict and occupied by the farmers and therefore the marking of legal boundaries at this area as stated in the land use title could not been maintained and verified during this audit. The major finding was reduced to minor since an immediate QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report

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action was taken by the management. A meeting was held by the estate representatives and the representatives of farmers to solve the conflict. An action plan was also established by the management to follow up this meeting. Result to be verified during SAI Global surveillance audit. A few of legal boundary markings (# 46, # 47 and # 48) could not been maintained and also could not been verified during this audit since the boundary markings located in difficult field to be accessed.

Criterion 2.3 Use of land for oil palm does not diminish the legal rights, or customary rights, of the other users, without their free, prior and informed consent. Criterion 2.3 Indicator Major 1 It was confirmed during public consultation that no land within mill and estates are encumbered by legal or customary rights.

PRINCIPLES 3: COMMITMENT TO LONG-TERM ECONOMIC AND FINANCIAL VIABILITY

Criterion 3.1 There is an implemented management plan that aims to achieve long-term economic and financial viability. Criterion 3.1 Indicator Major 1 Management plan for period 2012-2020 was established in order to achieve long-term economic and financial viability. It was sighted that factors outside the management control such as inflation, US Dollar and Indonesian Rupiah (IDR) rate, CPO price, and FFB price were also taken into consideration. The management plan is reviewed and updated annually based on actual sales/revenue, actual expenditure for each estate and inflation, e.g. from 2011 plan realization and estimated inflation, CPO price and FFB price for year 2012. The management plan 2012 – 2020 was established based on several inputs centralized by CEO. The inputs were gathered from Management Committee Agronomy and Research (MCAR) such as crop projection (FFB yield trends); from Mills such as CPO and PK extraction rate; estimated estate cost (upkeep, manuring, harvesting, transport, overhead and depreciation); as well as mill cost (processing, repair and maintenance, overhead and depreciation). Other cost taken into account was toll in, FFB purchase from other supply bases. HNAM has Palm Kernel processing plant. Profitability study 2012 – 2020 was made for HNAM including Palm Kernel processing plant, but also simulated for HNAM without Palm Kernel processing plant. Financial indicator displayed including: profit/loss, net profit, and Net Present Value. The financial shown for period 2012-2020 that the organization has ensured its economic and financial viability. Criterion 3.1 Indicator Minor 1 There was no replanting activity planned for period 2012-2020. It was also noted that there was no new planting activity planned for period 2012-2020 four supply bases covered during this certification audit (HNAE, TMSE, TPRE and LNGE). There was new planting activity for Medang Sari Estate, however it was still excluded from the certification unit. As described elsewhere in this report, Medang Sari Estate is covered in the Time Bound Plan for certification.

PRINCIPLES 4: USE OF APPROPRIATE BEST PRACTICES BY GROWERS AND MILLERS

Criterion 4.1 Operating procedures are appropriately documented and consistently QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report implemented and monitored. Criterion 4.1 Indicator Major 1 Standard Operating Procedures for Estates were developed in MCAR Book SMA/MCAR/06/05-07 dated 1 May 2007. The SOPs consist of procedures for several processes including land clearing, preparation before planting, fertilising, road maintenance, peat land management, drainage system, mature and immature upkeep, integrated pest management and harvesting. Other than there were also other procedures. Criterion 4.1 Indicator Major 2 HNAM has developed best practice SOP for all of its operations from receiving of FFB through production, processing and despatch of the CPO and PK. SOP describes quality control including its reporting from reception of fresh fruit bunch up to dispatch of CPO and palm kernel. The SOP includes reference to the corporate best practice SOP. Work Instructions in the local language has been developed and are posted at work stations in the mill. Criterion 4.1 Indicator Minor 1 The organisation has well implemented internal checking and monitoring processes that check and report on the implementation of the Management Guidelines. These include independent checks of the Mill and Estates by the corporate internal audit. Mill Advisory Audit (MAA) and Agronomy Advisory Audit (AAA) are performed twice a year. The findings including its follow up were well documented. Criterion 4.1 Indicator Minor 2 Estates activities are programmed in Division Work Program annually. Activities program are such as pest and diseases detection and census, weed controlling, maintenance of beneficial plant, fertilising, spraying and road maintenance. Site observation was performed during audit to some activities: spraying, land application, manuring and harvesting. Activities have been performed at defined interval and records of activities were sighted, e.g. BKM (Buku Kegiatan Mandor - Log book of group leader activity). BKM of several activities was reviewed, e.g. manuring, manual road maintenance, manual weeds control, census of diseases, spraying. FFB that processed by HNAM is received from own Estate (HNAE, TMSE, TPRE and LNGE) and other FFB sources (Medangsari Estate, Binasawit Seruyan Estate and Buana Artha Sejahtera Estate). The third party was not included in the scope of certification. The proportion of FFB from owns Estate is more that 82% in 2011. All of the FFBs are processed in same facility (HNAM). See the capacity on scope certification above. HNAM maintains records of monitoring reports, such as shift log sheets with records of operating conditions at each of the mill work stations. A review operation daily report (November 2011 – January 2012) and site observation found that in general the documented procedures described above has been consistently implemented and monitored. CPO and PK are delivered to “Tarjun” bulking terminal and Surabaya fractionation and refinery. A review to December 2011 to current delivery records found that it has been conducted according to defined arrangement. Minor nonconformity against criterion 4.1 HNAM  Sterilization and vacuum drier is controlled by its pressure. However some of the pressure gauge has not been calibrated.  Calibration for analogue thermometer used in the mill has been calibrated. A number of thermometers showed high deviation compare to the standard. No justification has been made.

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Audit Report Criterion 4.2 Practices maintain soil fertility at, or where possible improve soil fertility to, a level that ensures optimal and sustained yield. Criterion 4.2 Indicator Minor 1 Soil and leaf sampling is analysed regularly by SMART Research Institute (SMARTRI) to determine the nutritional status of soil, to assist and to be guided in the preparation of annual fertilising programme recommendation. Soil is used to analyse every 3 years. Since 2012 soil is analysed when the age of the plant is 3, 5, 8 years and continued with age of the plant is added by 5 years. Leaf is analysed annually. Soil and leaf sampling was taken from each division.    

HNAE: The soil analysis was in September 2007 to 756 samples. The leaf analysis was March 2011 to 86 samples. TMSE: The soil analysis was in October 2008 to 279 samples. The leaf analysis was April 2011 to 127 samples. TPRE: The soil analysis was in January 2010 to 567 samples. The leaf analysis was March 2011 to 68 samples LNGE: The soil analysis was in February 2010 to 234 samples. The leaf analysis was February 2011 to 20 sample

in in in in

Last analysis of soil in HNAE was in 2007. Soil was not analysed in 2010 due laboratory activity was full. Soil analysis program 2012 has been established. Soil analysis is performed in TMSE, TPRE and LNGE in April and May 2012. Leaf and soil visual analysis was conducted by agronomy staff to identify leaf deficiency and drainage or pyrite problem.

Criterion 4.2 Indicator Minor 2 Manuring programme was developed by SMARTRI for all Division of Estates based on result of soil and leaf sampling analysis. Manuring programme covers type of soil application, area and time of application, method of application and type and dosage of fertiliser. Manuring is performed manually, mechanically using tractor or aerial using airplane. Aerial manuring is performed in some area of LNGE and TPRE and only for Urea, MOP and TSP. Result of fertilising was well recorded including date of application. It was noted that all of fertilising activity in 2011 has been applied. Mapping of aerial manuring was made prior aerial manuring was performed to ensure that housing, village, river, riparian buffer zone and swamp area were not affected by the aerial spraying. Result of aerial manuring was completed with map of airplane. Based on sample map of airplane route there was no aerial manuring along the housing, village, river riparian buffer zone and swamp area. Procedure of aerial manuring was established in SOP/SMA/Pupuk pesawat on December 01, 2011 and ITDV – System Standard Policy and Procedure, 2007. There was permit to operate airplane from Ministry of Transportation, Directorate General of Civil Aviation – Air Operator Certificate #AOC/137-001 dated 19 June 2011 and valid for three years. Empty fruit bunches (EFB) are applied as nutrients. EFB was applied based on the recommendation from SMARTRI in terms of dosage per ha and location. . EFB were applied in HNAE and TMSE by manually and mechanical using tractor. Realisation of EFB application was well recorded however EFB was not applied in all area recommended due to some reason, e.g. broken road. Palm Oil Mill Effluent (POME) is applied in TMSE. The organisation has had permit of land application from local government to TMSE #113/2011 on April 4, 2011 and valid until December 31, 2012. POME was only applied in several blocks based on permit obtained by the organization from government which then being distributed to several ponds with depth 12.5 cm by pipeline. Flow rate of land application is 375 m 3/ha/year with three time rotation to each block. Flow rate and quantity of POME and area applied are recorded daily. Blocks applied were Q13, Q14, P17, P18, O17, O18, M8, M10, M11, M12, M13, M14, N,8, N9, N13, N14, Total area applied was 984.60 ha. QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report Minor nonconformity against criterion 4.2 TMSE  There was the different block application of POME between permit of land application and actual land application. Only 1 of 17 blocks was not allowed to be applied. POME was applied in block O17 however permit of land application allowed to apply POME in block M9. The difference has been informed to local government. However the government has not replied the letter. Opportunity for improvement HNAE  It could be considered to improve with regard toEFB application based on consideration of importance. It was found EFB was not applied in G10 however EFB application in G08 exceeded. Criterion 4.3 Practices minimise and control erosion and degradation of soils. Criterion 4.3 Indicator Minor 1 Maps of soils survey from Plantation Monitoring and Planning Division year 2005 were available for all estates.  HNAE: Slopes 0-16%. Mineral soil and 16.74% fragile soil (peat soil 60-150 cm and sandy soil)  TMSE: Slopes 0-16%. Mineral soil.  TPRE: Slopes 0-21%. Mineral soil and 21.23% fragile soil (1.31% sandy soils, 0.72% peat soil 60-150 cm, 4.04% peat soil 150-300 cm and 15.16% peat soil > 300 cm).  LNGE: Slopes 0-21%. Mineral soil and 27.92 fragile soil (0.85% peat soil 60-150 cm, 0.93% peat soil 150-300 cm and 26.14% peat soil >300 cm) Criterion 4.3 Indicator Minor 2 MCAR chapter 3 “Preparation before Planting” describes procedure for minimising and controlling erosion, peat land management. The organisation does not recommend plantings on slopes >40% or >22o. When the slope area was planted, system for planting on slopes area is provided by considering soil and climate specific through terracing, determining of base line, levelling of terrace, and determining of planting space. To minimise and control erosion in slope area, several practices have been implemented such as terracing and growing of legume cover crops. Criterion 4.3 Indicator Minor 3 Procedure for road maintenance is described in MCAR chapter 4.5. Estates have established road maintenance programme for main road, collection road and access road by manual and mechanical maintenance. Road maintenance includes road hardening. Manual road maintenance programme was provided in Division Work Programme. Manual road maintenance was implemented based on Division Work Programme or road condition. Mechanical road maintenance uses heavy equipment – grader and the mechanical road maintenance programme was provided for all division. Manual and mechanical road maintenance realisation was recorded including complex area maintained, distance of road maintained and quantity of gravel. Criterion 4.3 Indicator Minor 4 TPRE and LNGE have peat soil (more than 3 m deep). Peat soil management was described in MCAR chapter 3.2 point 3.2.7 to 3.2.9. Water was managed to control water table within range of 50-70 cm below ground surface. Dike which were made from sand sacks are constructed to maintain water level in main drain and collection drain. Water level is monitored by checking the level meter which was provided in main and secondary drain and piezometer which was provided in peat land block. Piezometer and level meter are checked weekly including status of water level (below or above the range). Condition of piezometer and level meter are checked regularly including cleanliness of piezometer, condition of sand sacks, and identification of piezometer and QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report level meter. During site visit it was observed that condition of piezometer and level meter was good. Condition of dike (open or close) was according to water level result. Criterion 4.3 Indicator Minor 5 Fragile soils were well managed. Manuring to fragile soils was performed twice in 1 st semester while manuring to mineral soil was only performed once in 1st semester. Dosage of EFB application in fragile soils was twice more than mineral soils. The dosage of fertiliser and EFB was recommended by SMARTRI. Opportunity for improvement LNGE  Piezometer is monitored weekly. It could be considered to improve recording the piezometer monitoring. Several inconsistencies of piezometer monitoring were found, e.g. at piezometer A20 and A21.

Criterion 4.4 Practices maintain the quality and availability of surface and ground water. Criterion 4.4 Indicator Major 1 MCAR section 3.2 describe drainage system in Estates including requirement for making ditches of main drain, collection drain, and field drain, and its dimension. The MCAR also describe ditch maintenance. Procedure SOP/SPO/SMART/LH-06 and SOP/SPO/SMART/LH-07 was established for protection and management of riparian buffer zones at or before replanting. Procedure mentioned that in 50 m on the left and right sight of riparian buffer zones, Estates are prohibited to apply agrochemical, used manual manuring and river bank was planted by erosion barrier crop (planting of reed grass). The organisation has policy “Memo #002/SMD Ops/I/2009” with regard to “Watershed Protection” from SMD Operation on 6 January 2009. The policy prohibits Estates for planting in 50 m on the left and right side of riparian buffer zones at or before replanting. Based on sampled BKM of manuring activities, it was noted that manual manuring was performed on 50 m of riparian buffer zones and no application of agrochemical. Controlling of weeds was performed manually or by using mowing machine. Vetiver grass was planted to prevent erosion. Warning board also placed regarding prohibition to apply agrochemicals in the buffer zone, dispose waste to the river and poison fish.

Criterion 4.4 Indicator Minor 1 The main source of water for HNAM activity is surface water abstracted from Tarus River and collected in 330 ton m3 water pond. Water abstraction from Tarus River has been measured through a flow meter. Year 2011 water management plan has been established and implemented by HNAM. Water management plan of HNAM observed during audit included:  Re-vegetation at surrounding water pond and water intake point area in Tarus River finished by January 2011.  Condensate dilution (utilizing sterilizer condensate) replacing water dilution in the Mill, finished by January 2011.  Recycle of cooling water in the laboratory from oil content analysis, replacing once through cooling water practice; finished by February 2011.  Installation of submersible pump in the water intake point replacing surface pump by September 28, 2011.  Provision of profile tank for domestic water supply for better monitoring and supply, finished by November 2011.  Maintenance of water intake point, water pond and its vegetation, planned every 2 weeks.  Daily water treatment plant quality monitoring for better water supply quality (raw water and outlet of clarifier). QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Recycle of ex-vacuum dryer and ex-turbine cooling water. The project was still in progress, about 30% of the overall steps by January 2012 to be continued in 2012.

Monitoring wells around land application in TMSE have been established to monitor quality of ground water. The ground water from monitoring wells is monitored six monthly to ensure that POME used in land application did not affect the quality of ground water.

Criterion 4.4 Indicator Minor 2 Monthly monitoring of effluent BOD have been conducted, records sighted for the period of January to December 2011. Effluent BOD analysis has been performed by internal party (SMARTRI) as well as external parties (Unilab Perdana/Palangkaraya University Laboratory) for ensuring valid results. Criterion 4.4 Indicator Minor 3 Monitoring of water consumption has been conducted for Mill processing, as well as raw water and domestic water supply. HNAM management has set internal target for water efficiency which was 1.20m3/ton FFB, however year 2011 performance only indicated 2.68m 3/ton FFB. It was expected, that finalization of recycle of ex-vacuum pump and ex-turbine cooling water could increase water efficiency level. Minor nonconformity against criterion 4.4 HNAM  Calibration/verification has not been conducted for water flow meters.  Record of water pond and intake maintenance was not evident. Mill water management program indicated that maintenance to be conducted every 2 weeks; however coverage of the maintenance and maintenance realization was not clear. Opportunities for improvement  It could be considered to improve electricity installation for water pump supply from water pond to water treatment plant. During audit, it was observed that water supply pump still operated, although that water tank was full, so that water was overflew from the water tank. Potential water and electricity conservation should be considered.  Based on site observation in regard to the feedback from (Environmental Agency of Seruyan District (Dinas Lingkungan Hidup Kabupaten Seruyan), consideration should be taken for: o Improvement of lay out and construction of rain water drainage and waste water drainage, especially those with parallel lay out. They have the same level and only separated less than 0.5 m wide. Therefore during housekeeping and heavy rain cross contamination between two separated drainage highly potential. o Rain water separation from sedimentation ponds and rain water utilization. Boiler blow down, clarifier outlet and Mill housekeeping still went to rain water drainage and processed in 7 steps of sedimentation ponds. Therefore the volume load of sedimentation ponds was higher due the additional of rain water, especially on the last 12 months when rain fall is very high. Also potential for returning rain water drainage to the water pond for rain water utilization.

Criterion 4.5 Pests, diseases, weeds and invasive introduced species are effectively managed using appropriate Integrated Pest Management (IPM) techniques. Criterion 4.5 Indicator Major 1 Procedure for IPM to control pests, diseases, weeds and invasive introduced species has been established in MCAR chapter 6. This includes setting out of technique to be implemented, chemical to be used, locations to be applied, and time frame for implementation. Estates establish Division QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report Work Program annually for IPM in each division. IPM programme includes detection and census of pest and diseases, weeds controlling, planting and upkeep of beneficial plant, use of pesticide and herbicide. IPM programme is performed based on determined frequency in a year. Criterion 4.5 Indicator Minor 1 The implementation of IPM is monitored. Detection of caterpillar is performed two monthly. When caterpillar was detected, census of caterpillar was performed. Census of rodent is conducted quarterly. Result of census determined further controlling. Controlling was performed when the caterpillar and rodent attack were higher than the critical point. Application of rodenticide during rodent attack was monitored. Beneficial plant upkeep was performed by cleaning from weeds and inserted if there are dead beneficial plants. Results of these activities were well recorded. Records were provided for period January to December 2011. Chemical is used if attack is uncontrolled. Routine use of chemicals is programmed including area applied, their dosage, and rotation. Training of IPM was performed to HNAE, TMSE, TPRE and LNGE employees (group leader and worker who conduct IPM) on May 3, 2010, November 1, 2011 by SMARTRI. List of participant attendance was sighted. Criterion 4.5 Indicator Minor 1 Pesticide toxicity units (a.i. / LD 50 / FFB tonnage) were monitored to Paraquat dichloride, Isopropilamine glyphosate, methyl metsulfuron and fluroksifir. The records were provided for 2010 and 2011. Minor nonconformity against criteria 4.5 LNGE  Some employees to conduct IPM have not obtained IPM training yet, e.g. Sugiono Division I, Parima Division 2 and Sugiono Division 3. It was informed that these employees were accompanied with trained employees. However there was no evidence that the trained employees accompanied the IPM activities.

Criterion 4.6 Agrochemicals are used in a way that does not endanger health or the environment. There is no prophylactic use of pesticides, except in specific situations identified in national Best Practice guidelines. Where agrochemicals are used that are categorised as World Health Organisation Type 1A or 1B, or are listed by the Stockholm or Rotterdam Conventions, growers are actively seeking to identify alternatives, and this is documented. Criterion 4.6 Indicator Major 1 Agrochemicals used by the organisation has been approved and registered by Agriculture Department, e.g. Rolixone 276 SL – license RI 01030120062467 expired in 2016, Erkafuron 20 WG – license RI 01030120062405 expired on 23 June 2016, Ally 20 WP – license RI 837/4-2009/T expired on 30 April 2014, Starare 200EC – license RI-854/7-2009/T expired in 2014,. It was noted that there were no agrochemicals being used which are not on this register during this audit. Agrochemicals use and their register number refer to Pesticide Commission Book “Buku Komisi Pestisida” year 2011. Criterion 4.6 Indicator Major 2 Agrochemicals use was well recorded in “Recapitulation of agrochemical use” including active ingredients used, area treated, amount applied per ha and number of applications. The documents were also recorded dosage of agrochemical use, target species. The records were sighted in all Estates. It was noted that dosage applied was according to budget. Criterion 4.6 Indicator Major 3 QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report Several BKM of weed spraying using agrochemicals was sighted. It was noted that agrochemicals (roll up, erkafuron) use were approved and registered agrochemical. Dosage of agrochemical use, target species was inline with MCAR section 6.3. BKM recorded target species, dosage and trained spraying officer. PPE used during spraying of pesticides are boots, apron, safety glass, respiratory mask and hand gloves. Agrochemicals have been applied by trained spraying workers who have received usage of limited pesticide training. Training was delivered by Estate Agency of Kota Waringin District on March 2, July 28, 2011. Training record including training certificate was sighted for all sprayers in all Estates. Training covered handling of concentrate chemical/agrochemical and spraying method including pesticide hazard. Agrochemicals are stored in the determined area separated from fertiliser and other chemicals. Agrochemicals storage is provided in each Division of all Estates. Agrochemicals storage is locked areas with limited access. The storage is ventilated. MSDS and hazard symbol label are provided nearby of agrochemicals. Emergency shower and eyewash are also provided to anticipate in case of an emergency of agrochemical handling. PPE for handling of chemicals are provided including boots, apron, safety glass, respiratory mask and hand gloves. The possible spill is managed. Secondary containment is provided around the chemical storage area. Spill kit is also provided in the area. Prior to be used in the field, agrochemical was diluted in designated area of mixing which was completed with roof, secondary containment and information of agrochemical hazard. Notice was displayed in the area treated with highly toxic pesticides, e.g. pesticides warehouse and facility to mix agrochemical. All application of agrochemicals were in accordance with the product label and storage instruction Criterion 4.6 Indicator Major 4 Handling of agrochemical containers was described in work instruction IK/SMART/LBH/01. All agrochemical containers were triple rinsed and destroyed prior to be disposed in the designated area and separated with organic and inorganic waste landfill. Agrochemical containers from HNAE, TMSE and LNGE were transferred to TPRE and land-filled in designated area in TPRE. Last disposal of agrochemical containers was performed on December 31, 2011. Landfill area of agrochemical containers was planted by Casia tora. Records of chemical containers quantity disposed and photograph of disposal activity were evident. The other agrochemical containers were reused for agrochemical solution container during spraying. Criterion 4.6 Indicator Minor 1 Paraquat is still used in the Estates. Data of paraquat used has been provided since 2010. Budget of paraquat is decreased every year. It was observed that paraquat use was under the target in 2010 and 2011. To reduce paraquat use, Estates implement S4 (Selective Spraying and Site Specific). Agrochemical is only used in targeted weeds. Training of S4 was delivered to all spraying workers in June 2011. Criterion 4.6 Indicator Minor 2 The provisions for medical check up was described in the procedure SOP/SMK3/LH-23 which covers pre employment medical check up, regular medical check up and special medical check up. Implementation of medical check up was also verified during this audit; records December 2011. It was noted that medical check up has been implemented to workers who apply agrochemicals. Special medical check up for estates‟ workers has not been properly performed, see minor nonconformity against criterion 4.7. Criterion 4.6 Indicator Minor 3 Female workers who apply agrochemicals are prohibited to do their job during pregnancy. In that case, those workers are relocated to another job station with low risk level. However, most of the workers are male while only few workers are female and have 1-2 children already before she‟s taking the job. No negative case was found in regard with reproduction rights of female workers QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report during past years. Opportunity for improvement All Estates  Although medical test has been performed regularly to pesticide sprayer, they were not informed about the result of the test.

Criterion 4.7 An occupational health and safety plan is documented, effectively communicated and implemented. Criterion 4.7 Indicator Major 1 It was a good system when auditor team provided an OHS induction by Safety Officer. With this induction, auditor team was made aware on the situation of mill and estates, the risk may exist, the basic OHS rules at mill and estate and emergency preparedness and response procedure, etc. Audit was then performed both on documentations/records and site visit/observations. Occupational health and safety policy has been established by respective Mill Manager and Estate Managers. The policy was displayed at strategic locations of Mill and Estates and communicated to employees including contractor workers. The occupational health and safety program 2011/2012 has also been established among other consist of training activity, safety committee meeting, medical check up, etc. The boilers, sterilisers, steam vessel, air compressor, generator set, electrical installation, heavy equipment, lightning arrestor already have been inspected by local authority, the permits were evidence. Boiler operation monitored its parameters including pressure, temperature and water level, these parameters were recorded. Boiler was completed with automatic water feeding to prevent over heat and explosion in case of less water level. Records of internal inspection and maintenance to the equipment were sighted e.g. electrical inspection, compressor inspection and welding equipment and heavy equipment. There is also safety patrol/inspection activity conducted monthly to identify any unsafe acts and conditions; findings were followed up as appropriate; based on verified reports November and December 2011. Safety valve of air compressors at Mill and Estates were tested during this audit; it was noted that not all safety valves were working properly and then re-setting was done and after that, they can work properly, see finding below. The procedure for critical activities was established, SOP/PSMK3/SMART/LH-21. The procedure was covering OHS control for working in confined space (e.g. cleaning of storage tank), working at height and welding. Work permit system was established and implemented for these works. It was noted that measurement of adequacy of oxygen and availability of dangerous gas were required before entering confined space and it was mentioned in the work permit; the portable gas detector was sighted during this audit. It was also noted that working at more than 2 meters from land or platform has been classified as working at height; this was mentioned in the procedure. Lock out tag out (LOTO) procedure has also been established and implemented especially intended for risk control of maintenance activities. Moving parts of machine/equipment generally has been covered, however see finding below, although it has been immediately rectified. Safety sign was provided to make workers aware on this hazard and risk. In general, electrical installation was improving from previous SAI Global audit even though some substandard electrical installation still found, but immediately corrected. Electrical hazard symbol was provided at electrical panel. In general, ousekeeping at Mill and Estates (office estate, storage, and workshop) was good. Access for workers to workplace in general also good e.g. stair was provided with hand rail and platform at height was provided with border to prevent fall risk. Vertical stair in general has been provided with cover as well, e.g. chimney vertical stairs at mill and water torn vertical stair at estates. Opportunity for improvement was given below in regard to design of harvesting bridge QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report (titian panen). Noise level has been measured by third party and used as justification for using ear plug/muff (mill, generator set area). It was noted that noise level at mill and generator set area was generally higher than TLV. Safety sign for using PPE was provided at these areas. It was noted here that workers appear to have a good discipline in wearing this PPE. Chemical factors measurement at workplace has been measured for mill; but the sample taking location was not proper, not inside where the workers work; see non conformity below. Chemical factors measurements for estates have not been performed, while there were several areas at estate suspected to have high chemical exposure, e.g. chemical store and fertilizer store-event tough mask already required to enter these areas; see finding below. The procedure for management of PPE has been established. The PPE for each activity has been established, e.g. working at mill, working at generator set, welder, working at laboratory, harvester, sprayer, fertilizer storage, chemical storage, etc. Observation during this audit generally concluded that PPE has been well provided and implemented. Workers were interviewed during this audit and generally they understood the risk of their work and the purpose of using PPE. Criterion 4.7 Indicator Major 2 The safety committee (P2K3) for Mill and Estates has been established and had approval from local authority – Labour Department of Seruyan District (Dinas Tenaga Kerja Kabupaten Seruyan). The chairman of safety committee is Mill Manager or Estate Manager. The secretary of safety committee is an OHS expert as required by local regulation; OHS expert has responsibilities and authorities as OHS Officer. The members of safety committees are representing each area or function within Mill and Estates. Monthly safety committee meeting was held to review the OHS programme and performance. Records were sighted for September, October, November and December 2011 for Mill and Estates. Quarterly reports were submitted to local authority as required by local regulation. Criterion 4.7 Indicator Minor 1 Accident insurance was provided to workers including daily base workers, under the scheme “Jamsostek” as required by local regulation. Samples of workers for Mill and Estates were taken during this audit and found satisfactory-all sample taken have been provided with accident insurance. The contractor workers were also provided with “Jamsostek” as mentioned in the contract agreement between company and contractors. Criterion 4.7 Indicator Minor 2 The provisions for medical check up was described in the procedure SOP/SMK3/LH-23 which covers pre employment medical check up, regular medical check up and special medical check up. Implementation of medical check up was also verified during this audit; records December 2011. It was noted that medical check up has been implemented to workers of Mill and Estates. This covers general medical check up test for all workers. Special medical check up for workers of Mill has been performed which including audiometric test for workers exposed to noise and spirometry test for workers exposed to chemicals and dust. Special medical check up for workers at Estates has not been properly performed, see minor nonconformity below. Criterion 4.7 Indicator Minor 3 OHS risk assessment procedure SOP/SMK3/SMART/LH-02 was established and implemented for Mill and Estates activities both routine and non-routine activities. Hierarchy of control was considered for planning of risk control. According to the procedure, at least OHS risk assessment document must be reviewed once a year. OHS risk assessment records 2011 were sighted for all Mill and Estates. Some activities were examined in regard to risk assessment including for boiler operation, sterilizer operation, generator set operation, loading ramp activity, cleaning of CPO storage tank, chemical mixing, fertilizer warehouse, herbicide and pesticide sprayer, harvesting, road maintenance, waste water treatment, etc. Criterion 4.7 Indicator Minor 4 QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report Training record and programme related to OHS were sighted and verified during this audit, e.g. boiler certificate and licence for boiler operator, licence for operator of generator set, licence of heavy equipment operator, pesticide training for sprayers, “hyperkes” training for medical doctor and paramedics, welder certificate and basic OHS training performed internally. OHS training has been programmed and provided appear balanced with OHS hazard and risk at Mill and Estates. Criterion 4.7 Indicator Minor 5 Emergency preparedness and response procedure has been established, SOP/SMK3/SMART/LH09. The emergency conditions have been identified including general fire, land fire, explosion, chemical spillage, and flood and earth quake. The team to handle emergency conditions has been established, consists of fire fighting team, hydrant team, medical team/first aid, evacuation team, external relation, etc. Portable fire extinguishers have been sufficiently provided at Mill and Estates, fix hydrant was provided at Mill, mobile water tank was provided at Estates, first aid kits were provided sufficiently at each location of Mill and Estates and ambulance was provided at Mill and Estates. Regular inspection and maintenance of this emergency equipment were sighted. Simulation of emergency preparedness and response plan was scheduled once a year, result of simulation evaluation was sighted e.g. 15 May 2010 and 28 October 2011for TPRE, 8 October 2011 and 11 October 2011 and for LNGE, 22 December 2011 for HNAE, 25 December 2011 and 04 January 2011 for HNAM. It was noted that for TMSE, during the audit, the simulation of land fire has not been performed and immediately they performed the simulation on 3 February 2012. Evaluation reports were sighted. Criterion 4.7 Indicator Minor 6 Emergency shower and eyewash in general has been provided at chemical warehouse, fertilizer warehouse and chemical mixing area both at Mill and Estates, only some locations of emergency shower/eyewash were not appropriate, i.e. too far from the chemical. The content of emergency kits and the function of emergency shower/eyewash is regularly checked, checklist was sighted. Clinic was available at Mill and Estates, provided with paramedics and one medical doctor to cover Mill and Estates. Criterion 4.7 Indicator Minor 7 First aid kits were sufficiently provided at Mill and Estates including each assistant at Estates. Sufficient training in regard first aid treatment has been provided by company doctor to assistant at Mill and Estates. During the audit, assistant was able demonstrating the use of first aid kit. Criterion 4.7 Indicator Minor 8 Accident statistic was reported and reviewed on monthly basis. Quarterly accident statistic is also reported to local authority. The procedure SOP/SMK3/SMART/LH-10 has been established to report accident and to perform accident investigation. Statistic accidents of Mill and Estates for 2011 were sighted during this audit, no fatality accident was reported so far; and in general the accidents have been followed up with investigation. The level of investigation needs to be improved, see opportunity for improvement below. Minor nonconformity against criteria 4.7 Mill and Estates  Some substandard conditions were found e.g. electrical panel (Mill and Estates) was accessed by unauthorized persons, opened MCB installation (Mill and Estates), transformer cable installation (Mill), secondary containment volume not sufficient (Estates), etc. These substandard conditions were immediately corrected before the closing meeting and generally can be closed. However, the effectiveness of action to be verified during SAI Global surveillance audit.  Even though the boiler, steriliser and compressor vessel have been inspected and have received the permits from local authority, however the wall thickness of vessels have never been measured to justify if the thickness still meeting the designed thickness. There have been hydrostatic test to the boiler and steriliser, however the testing was performed at design pressure while actually must be 1.5 times design pressure. The information of safety valve wasnot available (including at permit document) e.g. pressure setting for release safety valve. QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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It was found at workshop of Mill chain hoist with information of SWL (safe work load or limit) from the manufacturer. However, regular inspection that has been conducted was limited to visual inspection. Loading test has not been performed regularly. The procedure for lock out tag out (LOTO) has been established, however the identification of which stations must be provided with lock out tag out has not been performed and documented. This may lead miss understanding for the employees where locking must be given. The use of un-appropriate PPE was observed, e.g. mechanical fertilizing operators were wearing dust mask, harvesters at TSME were wearing short shoe and therefore the socks were wet (not healthy). The design of harvesting bridge currently was only considering the length of ditch and has not considered the deep of ditch. It was observed that some harvesting bridge was not well maintained, e.g. the placement/position not good/not horizontal. Hexane extraction station at laboratory of Mill was not provided with proper exhaust ducting system. The measurement of chemical factors at Mill has been performed however the location of measurement was outside of the factory, not at workplace. While for all estates, the measurement of chemical factors at workplace has not been performed, e.g. fertilizer warehouse, chemical warehouse. Risk assessment has not been performed for the activity of legal boundaries maintenance especially for locations with difficult access. (to employee). In general, medical check up has been performed. However, several key parameters were not performed during medical check up e.g. Rontgen and spyrometry test for employees exposed to chemical hazards (e.g. sprayer, chemical mixer and warehouse operator, fertilizer warehouse operator) and evaluation of musculoskeletal disorders (MSDs) to the employees with ergonomic exposed to ergonomic hazard (e.g. fertilizer warehouse operator The structure of follow up to the results of medical check up has not been established, e.g. statistical analysis, health promotion, preventive action and curative action to the employees having suspected health problem, e.g. results of audiometric test of some employees at Mill (December 2011) were suspected having hearing loss problem. The emergency preparedness and response plan for handling riot has not been established. The working pressure of mobile hydrant water tank (at estates) and fix hydrant (at mill) has not been measured its effectiveness.

Opportunity for improvement  It could be considered to review the width of harvesting bridge design. At several locations, the widths were around 25 cm-even the deep of bridge was less than 2 m.  Consider increasing the knowledge and skill for performing accident investigation and determining the immediate cause and basic cause and associated corrective action.  It could be considered to review and to improve the design of emergency shower and eyewash by referring to relevant product standards.

Criterion 4.8 All staff, workers, small holders and contractors are appropriately trained. Criterion 4.8 Indicator Major 1 The training needs and programme have been well identified and recorded on personnel competency matrix “Matrix of personnel competency identification”. All functions were included in this training identification from mill manager, estate manager, assistant head, group leader, operator at mill, sprayer, welder, boiler operator including for contractor (civil, mechanic and transporter). The training needs identified appear sufficient and complete, this including training related to OHS, SCCS, environmental, social, training required by regulations, training related to operation of Mill and Estates. Training programme 2011 and 2012 were sighted, the training programme is established based on the training needs identification. Realization of training programme 2011 were sighed, e.g. first aid training, SCCS training, social impact assessment QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report workshop, risk assessment, etc. Criterion 4.8 Indicator Major 2 Evidence of training for key persons were verified and sighted, including for boiler operator, sprayer, and chemical mixing operator, assistant of estates, SCCS training for loading ramp operator and for mill assistant, pesticide and herbicide training, etc. The system to record personal training was established-in this record, the training which has been completed by each person was recorded and updated. Criterion 4.8 Indicator Major 3 Occasionally, Mill and Estates hired contractor, e.g. for civil and mechanical contractor. The requirements for experienced and trained contractor were included in the contract agreement. This was in line with the competency matrix as mentioned above.

PRINCIPLES 5: ENVIRONMENTAL RESOURCES AND BIODIVERSITY

RESPONSIBILITY

AND

CONSERVATION

OF

NATURAL

Criterion 5.1 Aspect of plantation and mill management, including replanting, that have environmental impacts are identified, and plant to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement. Criterion 5.1 Indicator Major 1 There were two types of documented impact assessment identified during this audit: AMDAL and internal environmental risk assessment. Initial Environmental Impact Assessment documents for PT Tapian Nadenggan: HNAM, HNAE, TPRE and LNGE were approved by Governor of Central Kalimantan on December 26, 2006 as indicated in the approval note #430/2006 (Environmental Impact Analysis – ANDAL, Environmental Monitoring Plan – RPL and Environmental Management Plan – RPL). The AMDAL document indicated that the document issued as replacement of previous AMDAL under PT Lestari Unggul Jaya approved on 1997 (#017/ANDAL/RKL-RPL/BA/VIII/1997). Other than AMDAL document, Mill and Estates implemented procedure for identifying environmental aspect and evaluating its environmental impact, SOP/SPO/SMART/LH-11 and its guidance for environmental impact evaluation. The result of environmental aspect and impact identification and evaluation was documented within Identification of Environmental Aspect. Mill and Estates have ensured that activities with significant environmental impacts were managed. Control measure were defined and implemented to ensure that negative environmental impact were prevented or mitigated through engineering control and or administrative control. The implementation of those control measures were monitored during monthly environmental patrol and also round of internal audits. Criterion 5.1 Indicator Major 2 Implementation of RKL and RPL was reported every semester. For 2010 report was sighted for 1 st and 2nd semester and for 2011 was sighted for 1 st semester. Receipts of 1st semester 2011 reports were sighted to Ministry of Environment (August 2011), Environmental Agency of Central Kalimantan Province (Badan Lingkungan Hidup Propinsi Kalimantan Tengah) (November 2011), Environmental Agency of Seruyan District (Badan Lingkungan Hidup Kabupaten Seruyan) (September 2011), Estate Agency of Central Kalimantan Province (Dinas Perkebunan Propinsi Kalimantan Tengah) (November 2011) and Forestry Agency of Seruyan District (Dinas Kehutanan Kabupaten Seruyan) (September 2011). Report for the 2nd semester 2011 have not being prepared yet, waiting for complete result of QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report environmental monitoring by external laboratory. Sampling reports was sighted, indicated that commitment for environmental monitoring in the RPL has been conducted on December 06-09, 2011 by Unilab Perdana for boiler emission against Regulation of Environment Ministry #07/2007, electricity generator emission against Regulation of Environment Ministry #28/2008, vehicle emission against Decree of Environment Ministry #05/2006, waste water effluent against Decree of Environment Ministry #29/2003, sedimentation outlet against Decree of Environment Ministry #51/1995, ambient air quality against Government Regulation #41/1999, work environment and ambient noise against Decree of Environment Ministry #48/1996 and Decree of Labour Ministry #51/1999 and clean water against Regulation of Health Ministry #416/1990. Feedback received from Badan Lingkungan Hidup Kabupaten Seruyan during stakeholder consultation from this audit, indicated that RKL RPL implementation report has been received and reviewed. Criterion 5.1 Indicator Minor 1 No changes to the Mill capacity, Mill and Estates activity since 2006 that requires change of the AMDAL document. For internal environmental risk assessment document, as required by the procedure SOP/SPO/SMART/LH-11, the information of environmental aspect and impact was reviewed and updated at least once a year. Last review and update of environmental aspect and impact register was performed on December 21, 2011.

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

Criterion 5.2 Indicator Major 1 An HCV area assessment has been carried out by the HCV Team of the Environment Department of PT. SMART Tbk., and consist of 6 people, three of which are RSPO approved disiplince specialist, and the report is available. The report has been commented on by a reviewer, and a Peer Review has been carried out. Criterion 5.2 Indicator Major 2 and 3 The management of HCV areas is presently based on the management recommendations in the HCV report and on the company‟s SOP of HCV area management. HCV management areas maps were established. However the plan has not address the issues (threats) present and not considered sufficient to conserve the HCV within the concession area. A rubber plantation owned and harvester by local community members was encountered inside an HCV area in the southern part of HNAE. HNAE was not yet aware of this rubber plantation inside its HCV area. During the time of audit, HNAE swiftly organized a meeting with the owners and with the rubber tapper in order to make agreements on how to safeguard this HCV area, including the mixed rubber forest, together in the future. Peat Swamp Forest was found in the eastern part of LNGE and in the north-east part of TPRE. It was only identified as HCV 4 area and has not been identified as HCV 3 area. Criterion 5.2 Indicator Minor 1 Posters and sign boards concerning HCV areas and protected species are available in the necessary places. All staff and employees are informed about HCV areas and ERT species. Public Consultation and dissemination of information to the employees and local communities has been carried out. QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report Criterion 5.2 Indicator Minor 2 The responsibility of HCV area management is part of the job description of the different Division Managers. These ”HCV Officers” have no particular background for HCV management, and knowledge and skills are still sub-standard. Minor nonconformity against criteria 5.2  Peat Swamp Forest was found in the eastern part of LNGE and in the north-east part of TPRE. It was only identified as HCV 4 area and has not been identified as HCV 3 area.  HCV management plan has been established however the plan has not address the issues (threats) present and not considered sufficient to conserve the HCV within the concession area. Opportunity for improvement  It could be considered to improve knowledge and skills of HCV Officer, e.g. give particular background for HCV management. The HCV officers have been trained internally on HCV and management, but their knowledge and skills need improvement.

Criterion 5.3 Waste is reduced, recycled, re-used and disposed of in an environmentally and socially responsible manner. Criterion 5.3 Indicator Major 1 Identification of waste and pollution sources from Mill and Estates activities was evident. Major waste and pollution sources were identified within AMDAL document. In addition, the source of pollution and type of waste was documented within Identification of Environmental Aspect as result of environmental risk assessment, last updated on December 21, 2011. Criterion 5.3 Indicator Major 2 There were several levels of Mill and Estates waste management:  RKL document which implementation already reported every 6 months.  Environmental management program to avoid or reduce environmental pollution 2011/2012.  List of significant environmental aspect management described control measure applied for each waste including engineering control and administrative control. Environmental management program 2011/2012 indicated that there were programs for segregating inorganic and organic domestic waste, improving domestic waste water management in employee housing. There was also target for waste water effluent volume for land application. Site observation of Mill and Estates indicated implementation of waste management according procedure SOP/SPO/SMART/LH-09 has been implemented, i.e.:  Fiber, dry shell and wet shell were used as boiler feed.  Boiler chamber ash and chimney ash were properly collected and used as organic fertiliser or for road maintenance.  Empty palm bunch were used as organic fertilizer in Estates. The quantity applied by estates was recorded.  Clay bath effluent was collected to allow sedimentation.  Water clarifier sludge, boiler blow down, regeneration waste water was sent to sedimentation ponds.  Outlet of fat pit was sent to waste water treatment ponds. The operation of waste water treatment ponds is described in Mill Processing Procedures section IX.  Outlet of waste water treatment ponds were applied by estate for organic enrichment.  Effort for segregating organic, inorganic and hazardous waste by Mill and Estates was evident. QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Agrochemical containers were triple rinsed and destroyed prior to be disposed in the designated area and separated with organic and inorganic waste landfill. The other agrochemical containers were reused for agrochemical solution container during spraying. Fertiliser sacks were cleaned prior to be reused for piece of FFB layer during harvesting. Implementation of hazardous waste management – described in detail under Criterion 5.3 Indicator Minor 1.

Criterion 5.3 Indicator Minor 1 Hazardous wastes were collected, stored and disposed in line with Procedure SOP/SPO/SMART/LH-18. Hazardous wastes were segregated from other wastes and kept in temporary storage prior disposal. Temporary storage of hazardous waste was available to store hazardous waste prior to be disposed to licensed vendor. Mill and Estates temporary hazardous waste storage permit: Decree of Environment Ministry #162/2009 valid for 5 years since March 30, 2009. Mill and Estates temporary hazardous storage area available for waste oil tank and solid waste compartments for used mercury lamps, waste acid battery, contaminated rags and used oil and fuel filters. Waste oil tank completed with bund wall 110% its volume as required by legal requirements. The wastes were kept with clear identity and hazard symbol. Disposal of hazardous waste around 2011 to licensed vendor was managed and completed with manifest. Disposal of hazardous waste used licensed transporter and collector: CV Nazar as transporter and hazardous waste balance was made and reported regularly as part of RKL and RPL implementation report. Medical wastes from Estates clinic were collected in HNAE clinic. Then medical waste was sent to Sampit to be burnt in Murjani Hospital. Receipt note of medical waste sending was sighted. Agreement between PT. Tapian Nadenggan and Murjani Hospital was provided including medical waste handling. Criterion 5.3 Indicator Minor 2 Record of waste monitoring was evident for ex-FFB applied to the Estates, hazardous waste generated and disposed, medical waste, agrochemical containers, fertiliser sacks, volume of waste water treated and applied, estimation of fiber and shell used for boiler feed. Minor nonconformity against criterion 5.3 HNAE, TMSE, TPRE, LNGE  Renewal contractual agreement between organisation with General Hospital in Sampit to manage medical waste mentioned that non sharp and sharp medical waste has to be separated. This requirement has not been implemented within Estate Clinic and Central Clinic. HNAM  Several activities in regard to waste water treatment pond operation have not been properly recorded to ensure proper waste treatment in line with documented procedure or reference including MSDS: o Effluent source for land application was not recorded in the log book, 90 days minimum retention time was difficult to be verified. o Laboratory waste water from wet analysis of palm oil and water analysis were disposed to waste water treatment ponds. Process control to ensure that laboratory waste water could be degradable in the ponds was not evident, i.e. hydroquinone MSDS indicated that it will be degradable within 2-20 days; however actual retention time could not be shown.  Hazardous waste disposal were not consistently recorded, e.g. o No receipt from hazardous waste collector, e.g. waste acid battery. QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report o

Transport vehicle identity was not stated in the disposal manifest.

Opportunity for improvement  For the last 12 months waste water treatment ponds inlet was less than waste water treatment outlet (volume) to land application, i.e. for December 2011 volume of effluent to land application almost twice of the inlet to waste water treatment ponds. There was indicated that high volume of rain water was captured in the ponds and sent for land application. Estimation from the rain fall December 2011 around 9,000m 3 rain water. Further study is recommended from several points of view: land application effectiveness and energy consumption for distributing high volume of water to estate for application.

Criterion 5.4 Efficiency of energy use and use of renewable energy is maximised. Criterion 5.4 Indicator Minor 1 Records of monitoring renewable energy use and its efficiency analysis were evident. Fiber, dry shell and wet shell were used as boiler feed. Quantity of fiber and shell used for boiler feed was estimated monthly. Record sighted for January – December 2011. The quantity fiber generated from the Mill was estimated about 12.50% of FFB processed and shell about 5.75% of FFB processed. Total energy generated by steam turbine generator for HNAM is recorded daily and evaluated monthly as total energy (kilo Watt Hour - kWH) per ton of CPO produced. HNAM also supplied electricity for Kernel Crushing Plant (KCP) and KCP electricity consumption was also measured. Efficiency level is 184,055 kWH/ton CPO taken into account KCP electricity consumption and 109,063 kWH/ton CPO without taken into account KCP electricity consumption. When the boiler steam already reached the maximum level of pressure, the boiler feed were bypassed, so that the mixed of fiber and shell were kept as stock. The fiber and shell stock has been estimated to generate the same amount of energy already consumed. Criterion 5.4 Indicator Minor 2 Fossil fuel used for HNAM activities were recorded in the logistic system (diesel fuel for electricity generator). Total fuel consumption is summarized monthly as liter of diesel fuel per ton of FFB processed. Record sighted for January – December 2011 and indicated actual level consumption of diesel fuel in the level 2.76 liter/ton CPO (compared to estimated 35.38 liter/ton CPO when used as single fuel for electricity generator). Diesel fuel in the Estates is used for operation of heavy equipments, vehicles and diesel electricity generator to supply electricity for office and housing. The consumption of diesel fuel is recorded and monitored monthly and evaluated for each litre of diesel fuel/FFB tonnage. It was noted that consumption of diesel fuel/FFB tonnage in 2011 was decreased compared to 2010 in LNGE. Consumption of diesel fuel/FB tonnage in 2011 was increased compared to 2010 in HNAE, TMSE and TPRE due heavy equipments were added in this Estates. Minor nonconformity against criteria 5.4 HNAM  Up to 2011 efficiency analysis for fossil fuel use was limited for diesel fuel for electricity generator however transportation activity was not yet covered including contractor activity. Opportunity for improvement  It is recommended to review electricity generator operation arrangement taken into consideration load to be fulfilled and generator efficiency. MAA report for 2 nd semester of 2011 indicated that high capacity electricity generator with lowest efficiency still being used. Internal target has been set for 3.5 kWH/liter diesel fuel and electricity generator #4 has 2 kWH/liter diesel fuel). QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report Criterion 5.5 Use of fire for waste disposal and for preparing land for replanting is avoided except in specific situations, as identified in the ASEAN guidelines or other regional best practice. Criterion 5.5 Indicator Major 1 The organisation has policy of zero burning documented in circular letter #071/SMD Ops/IX/2007 form SMD Operation. Zero burning activities were also required in MCAR chapter 5. MCAR mentioned that land preparation was performed by overthrowing and chipping. Criterion 5.5 Indicator Major 2 The requirement of zero burning was communicated to contractors who conducted land clearing activities. This was documented in contractual agreement article #2.6 between the organisation and contractor. Realisation of land clearing activities was well documented and reported. Criterion 5.5 Indicator Major 3 and Minor 1 The procedure for land fire emergency preparedness and response was established, SOP/SMART/XI/LH-02. The facilities to handle land fire have been provided including portable fire extinguishers, mobile water tank completed with pump, fire cloth, etc. The provision of the fire fighting facilities appeared to be inline with the risk assessment. Regular inspection on this equipment was sighted (checklist monitoring). The simulation to handling land fire has been performed to all estates, evaluation records were sighted e.g. 15 May 2010 and 28 October 2011 for TPRE, 8 October 2011 and 11 October 2011 for LNGE, 22 December 2011 for HNAE. It was noted that for TMSE, during the audit, the simulation of land fire has not been performed and immediately they performed the simulation on 3 February 2012. Evaluation reports were sighted. Opportunity for improvement:  It could be considered to extent the land area of simulation of land fire emergency preparedness and response plan especially to measure if the land at longest distance from station of water tank still could be reached at reasonable time.

Criterion 5.6 Plans to reduce pollution and emissions, including greenhouse gasses, are developed, implemented and monitored. Criterion 5.6 Indicator Major 1 Identification of pollution and emissions sources at HNAM was documented in ANDAL approved on 2006 and environmental risk assessment, last updated on December 2011. Criterion 5.6 Indicator Major 2 Monitoring of pollution and emission quality of the sources identified has been conducted in line with RPL document which implementation is reported every 6 months. Evidence of emission quality monitoring were sighted for 2010 1 st and 2nd semester and for 2011 for 1st semester: boiler emission against Regulation of Environment Ministry #07/2007, electricity generator emission against Regulation of Environment Ministry #28/2008, vehicle emission against Decree of Environment Ministry #05/2006, ambient air quality against Government Regulation #41/1999, work environment and ambient noise against Decree of Environment Ministry #48/1996 and Decree of Labour Ministry #51/1999. Criterion 5.6 Indicator Minor 1 Efforts and strategies employed to reduce pollution and emission were sighted in several management documentation:  RKL document which implementation is reported every 6 months. RKL action control measure to be implemented so that emission level in accordance environmental limits. QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Environmental management program to avoid or reduce environmental pollution 2011/2012. There were three programs that set for reducing emission from boilers, electricity generators and green house gases, however the indicator was not clear and no measurable target set. List of significant environmental aspect management described control measure applied for each waste including engineering control and administrative control. Each boiler has been completed with chimney and multi-cyclones for managing its emission. Electricity generator also completed with stack. SOP/TN/EMS has been established for administrative control for ensuring that emissions were managed. It requires regular maintenance of boiler and electricity generator.

Criterion 5.6 Indicator Minor 2 POME was processed in 10 paralel anaerobic waste water processing ponds. Retention time of effluent processing is set >90 days before the effluent were applied in the estate. The application of effluent was in accordance with land application permit issued by local government (Keputusan Bupati Seruyan #113/2011). The waste water were stirred prior sent to estate. The waste water processing was described in the procedure Palm Oil Mill processing 4th revision section IX final effluent. Effluent ponds outlet were monitored by Hanau Mill Laboratory for pH, Volative Fatty Acid and alkalinity. SMARTRI also monitored the effluent quality of the waste water treatment outlet every quarter according to Ministry of Environment decree #29/2003.

Minor nonconformity against criteria 5.6 HNAM  Target set for reducing emission level in regard to boiler emission, diesel electricity generator emission and green house gases emission were not measurable and has no clear indicator. Opportunity for improvement  Feedback from Environmental Agency of Seruyan District (Dinas Lingkungan Hidup Kabupaten Seruyan) requested HNAM to reduce frequency of black smoke. During audit it was confirmed that other than emission is monitored every 6 months by external laboratory, HNAM has no system for internal monitoring of black smoke occurrence. Internal visual monitoring for black smoke occurrence should be considered.

PRINCIPLES 6: RESPONSIBLE CONSIDERATION OF EMPLOYEES AND INDIVIDUALS AND COMMUNITIES AFFECTED BY GROWERS AND MILLS

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. Criterion 6.1 Indicator Major 1 Social Impact Assessment (SIA) was conducted by the organisation and documented. Assessment was conducted through involvement of few stakeholders such as villagers representatives, NGOs, local authority, subcontractor, etc through interview, visit, meeting and formal/informal communication in a survey. During audit some interviews were conducted with leaders‟ community. This assessment was conducted and recorded during period 2010. Scope of assessment covered villages where external stakeholder lives. Criterion 6.1 Indicator Minor 1 Action plan to implement and monitor social impact with community has been determined. Positive impacts (i.e. employment opportunities for local peoples) were maintained with organisation and necessary action was planned by the organization. And some of negative impacts (i.e. indecent QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report road condition) were followed up with corrective action. According to public interview, they explained that the organisation has done some positive actions in regard with SIA result. Evidence of participatory action from local communities was also sighted in related SIA documentation including photos. Criterion 6.1 Indicator Minor 2 There were no changes to organisation‟s operation scope which cause revision of ANDAL, RKL and RPL that encompasses social impact assessment. Criterion 6.1 Indicator Minor 3 Implementation of RKL and RPL is reported every semester. For 2010 report was sighted for 1st and 2nd semester and for 2011 was sighted for 1 st semester. Receipts of 1st semester 2011 reports were sighted to Ministry of Environment (August 2011), Environmental Agency of Central Kalimantan Province (Badan Lingkungan Hidup Propinsi Kalimantan Tengah) (November 2011), Environmental Agency of Seruyan District (Badan Lingkungan Hidup Kabupaten Seruyan) (September 2011), Estate Agency of Central Kalimantan Province (Dinas Perkebunan Propinsi Kalimantan Tengah) (November 2011) and Forestry Agency of Seruyan District (Dinas Kehutanan Kabupaten Seruyan) (September 2011). Feedback received from Environmental Agency of Seruyan District (Badan Lingkungan Hidup Kabupaten Seruyan) during stakeholder consultation from this audit, indicated that RKL RPL implementation report has been received and reviewed. Minor nonconformity against criteria 6.1  The 2010 SIA has not included enclave owners yet as stakeholders (HNAE, TPRE and LNGE) during survey hence positive and negative impacts have not been identified yet to those stakeholders for further actions required.

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. Criterion 6.2 Indicator Major 1 Documented procedure for communication and consultation with public was established (SOP/SPO/SMART/LH-19). Stage of communication and consultation with public was clearly described and implemented accordingly with the procedure. This procedure was also informed to stake holders for their own awareness. This procedure was established in consultation with local communities and related stakeholders which is also communicated during RSPO awareness. Result of communication and consultation was recorded in the „log book‟. Communication and consultation has considered differential access to information for male/ female, workers, villagers representative both old and new villagers including ethnics. Criterion 6.2 Indicator Minor 1 Stakeholder list was made and mentioned interested party. Stakeholder list covered head of villages, head of district, NGO, etc. Criterion 6.2 Indicator Minor 2 Community aspirations were kept and recorded by the RSPO Officer, e.g. road maintenance, donation, facilities support, etc. Records and interview result indicated that aspiration from community was followed up by the organisation. In general, interview result indicated that the communication between local society and Estate was evident where some agreements were made to improve social relationship. Criterion 6.2 Indicator Minor 3 RSPO Officer/Estate Manger was responsible to coordinate communication and consultation as QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report stated in decree letter from head office.

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 Criterion 6.3 Indicator Major 1 Procedure for complaints and grievances was determined and agreed by related parties (head of villages). The procedure was described in the documented procedure. Awareness for procedure introduction was evident and documented during RSPO awareness briefing to stakeholders. Criterion 6.3 Indicator Minor 1 There were no significant complaints in most estates and mill. Few minor complaints have been occurred in the past and resolved at positive manner. Criterion 6.3 Indicator Major 2 Procedure was made without compulsion from other interest parties. The procedure was described in the documented procedure. including documented procedure to identify and determine calculation method to provide fair compensation due to loss of land and customary rights where identified. Awareness for procedure introduction was evident and documented during RSPO awareness briefing to stakeholders.

Criterion 6.4 Any negotiations concerning compensation for loss of legal or customary rights are dealt with through a documented system that enables indigenous peoples, local communities and other stakeholders to express their view through their own representative institutions. Criterion 6.4 Indicator Major 1 Compensation and calculation identification pertinent for loss legal or customary rights was determined in the procedure. This procedure has made based on consultation and review by associated stakeholders. Criterion 6.4 Indicator Minor 1, 2 and 3 It was noted that there was no recent acquired new land.

Criterion 6.5 Pay and condition for employees and for employees of contractors always meet at least legal or industry minimum standards and are sufficient to provide decent living wages Criterion 6.5 Indicator Major 1 Documentation of employees‟ pay rates was made by the organization. Workers were classified into Daily basis paid workers (BHL), contracted worker (PKWT) and permanent worker (SKU). Evidence that the workers have received wage according regulation could be shown. Minimum wages payment refers to latest Central Kalimantan Governor‟s Decree Letter. Payments for workers were determined according daily absence. Daily absence for workers was recorded and controlled by the Foreman. It was evident that the wage was paid according working hours and daily absence. According to interview result with worker, it was assumed that wage received by the workers was complied with the determined regulations. Criterion 6.5 Indicator Major 2 PP (company regulation) has been established and implemented for years and endorsed by local QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report authorities every 2 years in line with national labour law. However Mill and Estates plan to have mutual working agreement (PKB) where SPM (worker representative) was established recently and request to the management for further agreement that emphasize rights and obligations between two parties in more clearer ways and method. This PKB is expected to be finished by end of March 2012. Criterion 6.5 Indicator Minor 1 Public facilities were provided by the organisation and covered residential facilities, clinics, schools at nearby residences, clean water and electricity supply (free of charge). Both water and electricity supply for residences are provided at daily scheduled time basis. Clean water was taken from river through sequential treatment processing or directly taken from wells where quality from both sources is checked regularly by laboratory. Housing was provided for all workers. Housing for workers and medical facilities (clinics) were provided by the organisation with basic facilities. Criterion 6.5 Indicator Minor 2 Some of contractors were used by the organisation such as FFB transportation and civil work. Working agreement with contractor could be shown that also require all contractors shall comply with national labour laws. All employees and subcontractor have been registered with Social Security benefits, and turnover data are reported periodically (monthly) to the Department of Labour. Opportunity for improvement: All estates  According to PP clause 15 (3) that company will give donation (uang bantuan dukacita) to employee‟s family if worker passed away. It could be considered to formulate the amount of donation by any reference.  Number of employee status conversion has been reported annually (in summary) to present transparency that company do have good will to improve social degree of BHL workers to permanent worker. Consistency of such produced report will be checked again in the next audit. Criteria & requirements for BHL conversion to SKU status might be also formalised in a documented reference. TPRE  It could be considered to mention joining date information of workers in list of BHL.  It could be considered to equip with toys or any other attractive and educative environment/decorations that may entertain kids for hours while parents are working in TPA (children care house).

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. Criterion 6.6 Indicator Major 1 A published statement in local languages recognizing freedom of association was stated in “Circular Letter” (SE #169/HR-OPS/08/2010) and approved by the top management. Memorandum stated that the organisation respect to comply with regulation pertinent to freedom of association. SPM (Independent Worker Union) was established for Mill and Estates. Worker representative was elected independently among workers. Criterion 6.6 Indicator Minor 1 Periodic meeting (LKS bipartite) was also held with management to discuss any issues as necessary and recorded in minutes of meeting. QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report 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. Criterion 6.7 Indicator Major 1 Organisation has policy for minimum age for worker and mentioned in “Circular Letter” (SE #002/SE-HRDV/03/2009). Criterion 6.7 Indicator Minor 1 List of worker and related document was verified and there is no worker under 18 years old. According to observation result and interview in Mill and Estate, there was no worker under 18 years old. Local workers from surrounding villages were also employed and have similar opportunities with the others.

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. Criterion 6.8 Indicator Major 1 Policy for against discrimination was determined by the organisation. All discriminations are prohibited for all area in Mill and Estates. “Circular Letter” (SE 262/HR-OPS/08/2010) also mentioned ban of discrimination for all workers in the organisation. Criterion 6.8 Indicator Minor 1 Worker list of Mill and Estates mentioned that all workers came from different back grounds (race, religion, gender). During interview with workers, no discrimination was identified based on religion, ethnic, gender.

Criterion 6.9 A policy to prevent sexual harassment and all other forms of violence against women and to protect their reproductive rights is developed and applied. Criterion 6.9 Indicator Major 1 Policy for sexual harassment and violence was determined in the “Circular Letter” (SE #114/HRPSM-6/08/2011). Criterion 6.9 Indicator Major 2 Policy to protect women reproduction rights has been also stated in “Circular Letter/Surat Edaran” (SE #.266/HR-OPS/08/2010). Criterion 6.9 Indicator Minor 1 and 2 Gender committee was established by the organisation. The committee has representatives from all areas of work. The committee consider matters such as; trainings on women‟s rights, counselling for women affected by violence, child care facilities to be provided by the growers and millers, women to be allowed to breastfeed up to nine months before resuming chemical spraying or usage tasks, and women to be given specific break times to enable effective breastfeeding. List of menstruated female workers was established and monitored. 2 days-off are given to those women in the list without any salary deduction. Pesticide female workers are prohibited to do their job during pregnancy as stated in company policy while no mother with breast feeding period was identified during the audit. In that case, those workers are relocated to another job station with low risk level. However, most of the workers are male while only few workers are female and have 1-2 QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report children already before she‟s taking the job. No negative case was found in regard with reproduction rights of female workers during past years as interviewed with female workers nad gender committee. Criterion 6.9 Indicator Minor 3 A flowchart of complaint mechanism for sexual harassment was determined. All complaints can be issued verbal and or written and informed to all administrator, gender committee and Mill/Estate Manager. The organisation stated that there was no sexual harassment and violence in the past years. During interview with female workers and gender committee, no sexual harassment case was identified. Opportunity for improvement:  It could be considered to involve SPM in reporting mechanism (in a flowchart) of sexual harassment cases for better coordination.

Criterion 6.10 Growers and mills deal fairly and transparently with smallholders and other local business. Criterion 6.10 Indicator Major 1 and 2 Pricing mechanisms for FFB was described in FFB purchase procedure. Price mechanism of FFB, CPO and palm kernel is determined by province government and reviewed in monthly basis. The price is applied for all growers in the province. The company updates the information on the FFB pricing formula that includes details of transport, milling and shipping costs, each month and provides it to smallholders. Annual contract are made between FFB suppliers and mill, describing FFB specification required, contract period, determination of FFB pricing, and term of payment. Information of FFB set was available to the FFB suppliers and the commitment was stated in the procedure. Criterion 6.10 Indicator Minor 1 The selection and evaluation of supplier/vendor was based on capability of supplier and vendor to supply required inputs and or services. Specification of inputs and or services required was communicated to the supplier/vendor through tender document or request for quotation. Criterion 6.10 Indicator Minor 2 A review to the current FFB purchase records (December 2011 to current) shows that the price set was consistently used as recorded in the record of FFB receiving. The payment of FFB received were planned and executed in timely manner in line with term of payment agreed within the contract. Minor nonconformity against criterion 6.10 HNAM  In procedure “FFB receiving” (SOP/SMART/RCP) and “Grading” (IK MCMD) has not been clearly described how the FFB from small holder should be inspected; particularly for the sampling method. In the current agreement letter with small holder (PT Indoturba & KSU Mitra Bersama) is agreed that the grading will be done according to what describes in above procedure.  In procedure “FFB Purchase” (ITDU-System Dept 2006) par 2.5 (page 5/6) describes that agreement letter is elaborated in standard format of agreement “Agreement of sold and purchase (Perjanjian Jual Beli – PJB)”. However, the agreement with KSU Mitra Bersama and PT Indoturba Timur was made on an agreement letter that was not complied with the standard format of agreement as required by the procedure. Opportunity for improvement HNAM QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Consider to document the delivery of grading result for FFB from PT Indoturba Timur as the representative is not present during grading done. Decree of Agricultural Ministry (#345/Pkts/DT.140/11/2005) describes that grading process is done by mill employee and FFB supplier representatives. FFB purchase agreement with PT Indoturba Timur is made in 2009 and still valid. Consider to review the agreement in timely manner, i.e. once a year.

Criterion 6.11 Growers and millers contribute to local sustainable development wherever appropriate. Criterion 6.11 Indicator Minor 1 Records of organisation contribution to regional development was evident as also integrated with CSR program. Such contributions comprises of medical aid, facilities and building development, provision of additional teachers, funding to social and religious activities, low cost cooking oil products sale, etc. Public comments are welcomed for CSR program and included in annual CSR program for continuous social development.

PRINCIPLES 7: RESPONSIBLE DEVELOPMENT OF NEW PLANTINGS

Procedures regarding responsible development of new plantings are in place, e.g. Manual of Land Preparation and Cultivation PT. SMART Tbk (dated 1 July 2010). The manual covers flow process for land preparation and cultivation which completed with “Matrix of New Land Clearing Requirements”, procedures and work instructions to each stage of land preparation and cultivation. Plantation in HNAE, TMSE, TPRE and LNGE was performed in 1995, 1996, 1997, 1998, 1999, 2000, 2004, 2005, 2006 and 2007. Plantation in 2005 to 2007 was performed in TPRE and LNGE. A loss of HCV area occured after November 2005. Remaining parts show that this peat land area was covered with secondary forest, bushes and shrubs (potentially HCV 3 and HCV 4). After thorough examination it was found that a historical HCV assessment has already been carried out in Estate, during which this area had already been identified and reported to the RSPO to join a compensation scheme.

PRINCIPLES 8: COMMITMENT TO CONTINUOUS IMPROVEMENT IN KEY AREAS OF ACTIVITY

Criterion 8.1 Growers and miller regularly monitor and review their activities and develop and implement action plans that allow demonstrable continuous improvement in key operations Criterion 8.1 Indicator Major 1 Regular evaluation of plantation and mill operation was performed through several levels of audits:  Operation Internal Audit (OIA) was performed twice a year. The coverage of the audit included administration, finance and accounting, personnel including its and employee benefit payment. Report of 2nd semester of 2011 was reviewed.  MAA was performed twice a year. The coverage of the audit included production planning, production, power generation and utilization, consumable, process control, quality control – including waste water treatment, maintenance, occupational health and safety, FFB incoming and inspection, and laboratory. Report of 2 nd semester of 2011 was reviewed.  AAA was performed twice a year. The coverage of the audit included process of harvesting and its result, road condition, upkeep, manuring, spraying, condition of housing, workshop activities. Report of 2nd semester of 2011 was reviewed. QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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RSPO Internal Audit was performed minimal once a year. All application of RSPO Principles and Criteria and Indonesian National Interpretation of RSPO Principles and Criteria for Sustainable Palm Oil Production was covered in this audit. Report of internal audit period 2011 which performed on March 22-28, 2011 was reviewed. The above audit reports indicated that any gaps against standard operation procedure of plantation and operation were noted. Corrective action plan was issued and implemented to demonstrate effort for compliance as well as continual improvement. The results of those audits were brought to management‟s attention through rounds of management meeting such as Management Committee Agronomy and Research meeting and Coordination Meeting (Rapat Gabungan) Mill – KCP – Bulking of Central Kalimantan #1 and #2. Samples of minutes were sighted for period 2011. Progress and status of corrective action of audits were discussed. The commitment for continual improvement was also shown through innovation system involving levels within the organization: Assistant, Assistant Manager and Manager. There were several events for innovation system including Regional conference and PSM (Sinar Mas Estate) conferences. Innovation projects from Assistant Level were reviewed and evaluated to be nominated to the higher conference level. The innovation projects then shared to other estates and mills. Evidences of application of the innovation project were sighted for the Mill and Estates for period up to 2011, i.e.:  Reduction in use of certain chemicals: construction of resin trap and improvement of clay batch system at HNAM, improvement for fertilizer application for higher efficiency at TPRE, HNAE and LNGE.  Environmental impacts: provision of herbicides mixing facilities and herbicide transport equipment to prevent any adverse environmental impact at TMSE.  Waste reduction and emissions: utilization of wet shell for power generation to minimize use of diesel fuel.  Improvement in regard to social impact was embedded within social impact management plan, i.e. provision of clean water for village surrounding community, to construct fish cage at the downstream of Tarus River with the participation of local community. Criterion 8.1 Indicator Minor 1 Matrix of action plan has been established for negative findings rose during SAI Global RSPO preliminary audit on May 03-04, 2011. Corrective action plan has been established and implemented. The effectiveness of the corrective action taken has been internally verified. The statuses of corrective action taken were discussed during management meeting. Opportunities for improvement  It could be considered to review the current process flow and terminology used in the procedures for RSPO, e.g. o Management review. SOP of management review SOP/SPO/SMART/LH was not properly understood by relevant personnel. Actually there was several level of management review: Mill-KCP-Bulking Tank Central Kalimantan 1 meeting and Management Committee for Agronomy and Research (MCAR). o RSPO internal audit. The procedure mentioned the use of non conformance report and audit summary. However the standard format was not attached in the procedure, actually there was only one format for recording audit findings and monitoring its corrective action. o Legal and other requirements. The terminology used such as identification, updating, and verification were not clear. The statement in the procedure was still interpreted differently across the organization. The procedure mentioned identification of legal requirements to be conducted every 6 months; however other QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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part mentioned that legal and other requirements register to be updated at least annually. Several RSPO procedures were developed by Jakarta Head Office. The dissemination/training of sites personnel to ensure uniform interpretation of procedure is strongly advised.

RSPO Supply Chain Certification Standard – Module E - CPO Mill: Mass Balance HNAM received FFB from its own Estates and from the third party supply base. All of the FFBs are processed under the same facilities; therefore the supply chain model that can be applied is Mass Balance (MB) model. Records for period January – December 2011 were reviewed. Below are the detail estimation of CPO and Kernel produced (certified and non certified). CPO produced (certified) CPO produced (non-certified) Kernel produced (certified) Kernel produced (non-certified)

: 93,226 MT : 135,701 MT : 20,891 MT : 30,409 MT

E.1. Documented procedure HNAM has established and documented written procedure incorporated to the implementation of RSPO SCCS. It is described in SOP Supply Chain (SOP/SMART/SC) and written internal procedure (SOP). Receiving FFB, including the grading up to CPO and Kernel delivery are described in the procedure. The procedures were updated and covering the implementation of all elements in RSPO SCCS requirements. The person having overall responsibility for and authority over the implementation of RSPO SCCS has been assigned (Mr. Fakhrudin). Assignment letter was sighted (dated 1 December 2011).

E.2. Purchasing and goods in HNAM has a clear system for recording FFB received from certifiable supply base and non certifiable supply base. It was verified that receiving of FFB was traceable to the supply base unit. Weighing slip and receiving report issued clearly stated weight off FFB receive and its source. A review to the last two months records found that they were well maintained and retrievable. The mechanism for handling non-conforming material/documents include inform to certification body if there is overproduction is described in SOP/SMART/SC. This mechanism should also be used to take appropriate steps when there is a projection of overproduction. E.3. Record keeping A review to the records and related documentation of the implementation of the SCCS found that accurate, complete and up to date records and report have been maintained by HNAM. The records and reports are easily accessible both in hard copy and soft copy. Retention time for these records and reports has been determined (5 years). Balance among all FFB, CPO and palm kernel receipts, produced and delivered are conducted in daily basis. The record has been well maintained.

E.4. Sales and goods out HNAM‟s CPO is delivered to Bumiharjo bulking terminal and while PK is delivered to Hanau Kernel Processing Plant. Procedure SOP/SMART/DO describes the process of delivery and its recording. A review to delivery records December 2011 - January 2012 found that result of the delivery (CPO and PK) was well recorded and maintained. . QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Audit Report E.5. Training Qualification of personnel for each job function have been defined and documented, including training requirements necessary for Supply Chain. Procedure has been established and implemented for identifying training needs, programming training, delivering training, and evaluating effectiveness of training. Training for Supply Chain requirements have been delivered to personnel in HNAM. The training records were made including training material, training attendance and individual training record. Individual training record, for personnel in relation to implementation of Supply Chain requirements was sighted, e.g. production administration.

E.6. Claim Claim has not been applied while the system has been prepared. The system complies with RSPO Rules for Communication and Claims. Opportunity for improvement  System of recording of stock and delivery has been clearly separated between certified CPO (and kernel) and non-certified CPO (and kernel) in manual system; however in SAP it has not been clearly separated.

3.2

Recommendation

The recommendation from this audit is approval as a producer of RSPO Certified Sustainable Palm and Palm Kernel. Audit recommendations are always subject to ratification by RSPO. This report was prepared by: Ria Gloria, Inge Triwulandari, Sigit Yulianto, Bayu Abirowo and Irawan Bawono

3.3 Environmental and Social Risk for this scope of certification for planning of the surveillance audit    

Mill and Estates: SIA update and execution plan, BHL issues HNAM: Compliance with all applicable local, national laws and regulation, water management LNGE: Legal boundary and its maintenance, management of peat soil, HCV area, HCV area, TPRE: management of peat soil, HCV area, HCV area

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Audit Report 3.3 Acknowledgement of Internal Responsibility and Formal Sign-off of Assessment Findings Please sign below to acknowledge receipt of the assessment visit described in this report and confirm the acceptance of the assessment report contents including assessment findings. Signed for and on behalf of PT. SMART Tbk.

Mr. Ismu Zulfikar Head of Environmental Department Date Signed for and on behalf of PT. SAI Global Indonesia

Mr. Joko Prayitno Certification Manager Date

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Audit Report Appendix “A” – Audit Record Date

Auditor

30/01/2012

Audit meetings plus functions/ processes/ areas/ *shifts audited: Day 1

Ria, Bayu, Sigit, Resit

Travelling Jakarta to Hanau Mill Day 1 – Hanau Mill (HNAM)

Ria, Bayu, Sigit, Resit

Ria

Ria & Resit

Sigit

Bayu

Clarification:  Time bond plan  Requirements for uncertified management units and/or holdings Principle 4: Criterion 4.8 Document review (all Estates): Principle 5: Criterion 5.2 HNAM: Document review and site visit: Principle 1: Criterion 1.2 (OHS, IUP and record) Principle 2: Criterion 2.1 (evaluation of compliance with OHS regulation) Principle 4: Criterion 4.7, 4.8 HNAM: Document review: Principle 1: Criterion 1.1, 1.2 (Social document and record) Principle 2: Criterion 2.1 (evaluation of compliance with Social regulation) Principle 6: Criterion 6.1, 6.2, 6.3, 6.5, 6.6, 6.7, 6.8, 6.9, 6.11 Day 2 – Hanau Estate (HNAE)

31.01.2012

Sigit

Bayu

Bayu Bayu Bayu

Ria

Ria & Resit 01.02.2012

Opening meeting

Document review and site visit: Principle 1: Criterion 1.2 (OHS, HGU & Ijin Perkebunan and record) Principle 2: Criterion 2.1 (evaluation of compliance with OHS regulation), 2.2, 2.3 Principle 4: Criterion 4.6 (4.6.2 minor) 4.7, 4.8 Principle 5: Criterion 5.5 (5.5.3 major and 5.5.1 minor) Document review: Principle 1: Criterion 1.1, 1.2 (Social document and record) Principle 2: Criterion 2.1 (evaluation of compliance with Social regulation) Principle 4: Criterion 4.6 (4.6.3 minor) Principle 6: Criterion 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.11 Site visit: Observation of Facility Interview with labour union: SP and Komisi Perempuan Interview with employees of HNAE & HNAM Interview with local community: Tokoh masyarakat, Tokoh Agama and Tokoh Pemuda Document review and site visit: Principle 2: Criterion 2.1 (evaluation of compliance with Estate regulation) Principle 4: Criterion 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 Principle 5: Criterion 5.1, 5.3, 5.4, 5.5 Principle 7 Site visit: Principle 5: Criterion 5.2 Day 3 – Langadang Estate (LNGE)

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

© SAI Global Indonesia Copyright 2009

Page 50 of 70

Audit Report

Sigit

Bayu

Bayu Bayu Bayu

Ria

Ria & Resit

Document review and site visit: Principle 1: Criterion 1.2 (OHS, HGU & Ijin Perkebunan and record) Principle 2: Criterion 2.1 (evaluation of compliance with OHS regulation), 2.2, 2.3 Principle 4: Criterion 4.6 (4.6.2 minor) 4.7, 4.8 Principle 5: Criterion 5.5 (5.5.3 major and 5.5.1 minor) Document review: Principle 1: Criterion 1.1, 1.2 (Social document and record) Principle 2: Criterion 2.1 (evaluation of compliance with Social regulation) Principle 4: Criterion 4.6 (4.6.3 minor) Principle 6: Criterion 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.11 Site visit: Observation of Facility Interview with labour union: SP and Komisi Perempuan Interview with employees of LNGE Interview with local community: Tokoh masyarakat, Tokoh Agama and Tokoh Pemuda Document review and site visit: Principle 2: Criterion 2.1 (evaluation of compliance with Estate regulation) Principle 4: Criterion 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 Principle 5: Criterion 5.1, 5.3, 5.4, 5.5 Principle 7 Site visit: Principle 5: Criterion 5.2 Day 4 – Tanjung Paring Estate (TPRE)

02.02.2012

Sigit

Bayu

Bayu Bayu Bayu

Ria

Ria & Resit

Document review and site visit: Principle 1: Criterion 1.2 (OHS, HGU & Ijin Perkebunan and record) Principle 2: Criterion 2.1 (evaluation of compliance with OHS regulation), 2.2, 2.3 Principle 4: Criterion 4.6 (4.6.2 minor) 4.7, 4.8 Principle 6: Criterion 6.4 Document review: Principle 1: Criterion 1.1, 1.2 (Social document and record) Principle 2: Criterion 2.1 (evaluation of compliance with Social regulation) Principle 4: Criterion 4.6 (4.6.3 minor) Principle 6: Criterion 6.1, 6.2, 6.3, 6.5, 6.6, 6.7, 6.8, 6.9, 6.11 Site visit: Observation of Facility Interview with labour union: SP and Komisi Perempuan Interview with employees of TPRE Interview with local community: Tokoh masyarakat, Tokoh Agama and Tokoh Pemuda Document review and site visit: Principle 2: Criterion 2.1 (evaluation of compliance with Estate regulation) Principle 4: Criterion 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 Principle 5: Criterion 5.1, 5.3, 5.4, 5.5 Principle 7 Site visit: Principle 5: Criterion 5.2 Day 4

Inge, Irawan

Travelling Jakarta to Hanau Mill Day 4 – Hanau Mill (HNAM)

Inge Irawan

Principle 3: Criterion 3.1 (HNAM and its supply bases) Principle 8: Criterion 8.1 (HNAM and its supply bases) Principle 4: Criterion 4.1 Principle 6: Criterion 6.10

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Audit Report Day 5 – Hanau Mill (HNAM)

03.02.2012

Inge

Irawan

Principle 1: Criterion 1.2 (AMDAL) Principle 2: Criterion 2.1 (evaluation of compliance with Mill regulation) Principle 4: Criterion 4.4 Principle 5: Criterion 5.1, 5.3, 5.4, 5.6 Principle 6: Criterion 6.1 (6.1.3 Minor), SCCS Day 5 – Tasik Mas Estate (TMSE)

Sigit

Bayu

Bayu Bayu Bayu

Ria

Ria & Resit 04.02.2012

Document review and site visit: Principle 1: Criterion 1.2 (OHS, HGU & Ijin Perkebunan and record) Principle 2: Criterion 2.1 (evaluation of compliance with OHS regulation), 2.2, 2.3 Principle 4: Criterion 4.6 (4.6.2 minor) 4.7, 4.8 Principle 6: Criterion 6.4 Document review: Principle 1: Criterion 1.1, 1.2 (Social document and record) Principle 2: Criterion 2.1 (evaluation of compliance with Social regulation) Principle 4: Criterion 4.6 (4.6.3 minor) Principle 6: Criterion 6.1, 6.2, 6.3, 6.5, 6.6, 6.7, 6.8, 6.9, 6.11 Site visit: Observation of Facility Interview with labour union: SP and Komisi Perempuan Interview with employees of TMSE Interview with local community: Tokoh masyarakat, Tokoh Agama and Tokoh Pemuda Document review and site visit: Principle 2: Criterion 2.1 (evaluation of compliance with Estate regulation) Principle 4: Criterion 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 Principle 5: Criterion 5.1, 5.3, 5.4, 5.5 Principle 7 Site visit: Principle 5: Criterion 5.2 Day 6

All

Team discussion

All

Verification on corrective action of findings

All

Closing meeting

All applicable requirements of relevant standards are covered during the audit of the „Functions/Processes/Areas. * Enter shift details only where applicable.

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Page 52 of 70

Audit Report Appendix “B” – Nonconformities and Opportunity for Improvement Summary

Minor Nonconformity of RSPO Principe and Criteria, Indonesian National Interpretation

No 1.

2.

RSPO Criterion 2.1

2.1

Details

Corrective Action Plan

HNAE, TPRE, LNGE, TMSE  Some items as mentioned in the status of  compliance for were not complete or accurate, e.g. Government Regulation #82/2001 and Environment Ministry Degree #28 and #29/2003 evaluated compliance with  land application whereas there was no land application in LNGE. Government Regulation #82/2001 evaluated compliance with fiber and EFB handling in HNAE.  It was found some non accurate of evaluation of compliance against OHS regulations, i.e. the result of evaluation of compliance stated already complies but actually not fully complies, e.g. in regard to physical factors at workplace and chemical factors at workplace which have not been measured (noise of generator set and heavy equipment has not been measured, chemical factors at warehouse sterilizer and chemical warehouse has not been measured) HNAM  Mechanism for conducting evaluation for compliance was not described in the SOP for legal and other requirements SOP/TN/PPL: how, who, when.  The result of evaluation of compliance was

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

  

© SAI Global Indonesia Copyright 2009

PIC

List of compliance with environmental regulation has been revised in line with actual condition in LNGE and HNAE Measurement program of physical and chemical factor at workplace for Mill and Estates has been established. However the implementation is conducted at the same time with other measurement in 1st semester 2012



SOP will be revised with related Department Program will be established and implemented in 1st semester 2012 Checklist to monitor hazard symbol



Page 53 of 70



 

Completion Date

Environment Staff, RSPO Coordinator Environmental Staff, Unit Head

 

16-02-2012 30-06-2012

RSPO TF and Coordinator Environment Staff, Unit Head Environmental

   

31-03-2012 30-06-2012 31-03-2012 30-06-2012





3.

2.2

AUDIT REPORT not accurately presented in the record, e.g. in hazardous material from receiving st RKL-RPL and Land Application Report 1 to storage inline with MSDS will be semester 2011 indicated gaps in several made. Warning to close fuel bund issues, however all evaluation score period wall valve in normal condition and December 2011, 26 indicated “0” which valve is regularly open during means full compliance: water biota Seluluk cleaning has been made Lake downstream, BOD and COD of Tarus  Initial river water quality is being River downstream, Carbon Monoxide (CO) found out. level from diesel electricity generator #2 emission, TSS of sediment ponds outlet. Some methodology for evaluating compliance only based on “one visit conclusion”, e.g. for hazardous waste management (traceability of waste disposal and completeness of hazardous disposal manifest) and hazardous material management (the use of hazard symbol, availability of MSDS, handling of material according to MSDS). There was no periodic monitoring scheme to support compliance status. Fuel bund wall valve still found in open condition during audit. Within RKL RPL implementation 1st semester report, evaluation of compliance for river water quality was only against Government Regulation #82/2001. The RPL requires that evaluation to be performed against Government Regulation #82/2001 and initial environmental condition.

LNGE  A part of LNGE was under conflict and  occupied by the farmers and therefore the marking of legal boundaries at this area as stated in the land use title could not been maintained and verified during this audit. The major finding was reduced to minor since an

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

© SAI Global Indonesia Copyright 2009



PT. Tapian Nadenggan met KUD  Sawit Bangkit on February 3, 2012 to give understanding to member of  KUD and land owner in order PT. Tapian Nadenggan can maintain the legal boundaries. PT. Tapian Page 54 of 70

Staff Environmental Staff and Unit Head

D&L and Unit Head Unit Head and PNMP

 

31-03-2012 15-07-2012



4.

5.

6.

4.1

4.2

4.4

AUDIT REPORT immediate action was taken by the Nadenggan will be met with management. A meeting was held by the community, member and leader of estate representatives and the KUD Sawit Bangkit to give representatives of farmers to solve the understanding regarding planning of conflict. An action plan was also established legal boundaries maintenance of PT. by the management to follow up this Tapian Nadenggan. meeting. Result to be verified during SAI  Try to maintain during dry season Global surveillance audit. (not wet) A few legal boundary markings (# 46, # 47 and # 48) could not been maintained and also could not been verified during this audit since the boundary markings located in difficult field to be accessed.

HNAM  Sterilization and vacuum drier is controlled by its pressure. However some of the pressure gauge has not been calibrated.  Calibration for analogue thermometer used in the mill has been calibrated. A number of thermometers showed high deviation compare to the standard. No justification has been made. TMSE  There was the different block application of POME between permit of land application and actual land application. Only 1 of 17 blocks was not allowed to be applied. POME was applied in block O17 however permit of land application allowed to apply POME in block M9. The difference has been informed to local government. However the government has not replied the letter. HNAM  Calibration/verification

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

has

not

been

 

Certified equipment to calibrate is  being made by CV. Samaco  Since February 3, 2012, each calibrated thermometer has been justified and is performed regularly

Unit Head Environment Staff

 

30-06-2012 16-02-2012



Coordinate with Environmental Agency of Seruyan District (Badan Lingkungan Hidup Kabupaten Seruyan) to revise land application permit



Environment Staff and Unit Head



30-06-2012



Flow meter will be calibrated



Unit head



31-05-2012

© SAI Global Indonesia Copyright 2009

Page 55 of 70



7.

8.

4.5

4.7

AUDIT REPORT conducted for water flow meters.  Maintenance will be conducted Record of water pond and intake regularly maintenance was not evident. Mill water management program indicated that maintenance to be conducted every 2 weeks; however coverage of the maintenance and maintenance realization was not clear.

LNGE  Some employees who conducted IPM have not obtained IPM training yet, e.g. Sugiono Division I, Parima Division 2 and Sugiono Division 3. It was informed that these employees were accompanied with trained employees. However there was no evidence that the trained employees accompanied the IPM activities. Mill and Estates  Some substandard conditions were found  e.g. electrical panel (Mill and Estates) was may accessed by unauthorized persons,  opened MCB installation (Mill and Estates), transformer cable installation (Mill), secondary containment volume not sufficient (Estates), etc. These substandard conditions were immediately corrected before the closing meeting and generally can be closed. However, the effectiveness of action to be verified during SAI Global surveillance audit.  Even though the boiler, steriliser and compressor vessel have been inspected and have received the permits from local authority, however the wall thickness of vessels have never been measured to justify if the thickness still meeting the designed thickness. There have been hydrostatic test

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

© SAI Global Indonesia Copyright 2009



Environment Officer

 

IPM training has been conducted by SMARTRI

They have been repaired and  monitored using checklist regularly Test of wall thickness of vessels, steriliser, and compressor and maximum pressure setting will be  coordinate with related institution

Page 56 of 70





SMARTRI and Unit Head

Safety Officer, Infrastructure Assistant and Unit Head Safety Officer and Unit Head

28-02-2012

 

16-022012

16-02-2012 30-06-2012

AUDIT REPORT to the boiler and steriliser, however the testing was performed at design pressure while actually must be 1.5 times design pressure. The information of safety valve in general not available (including at permit document) e.g. pressure setting for release safety valve. 9.

10.

4.7

4.7

Mill and Estates  It was found at workshop of Mill chain hoist with information of SWL (safe work load or limit) from the manufacturer. However, regular inspection has been conducted is limited to visual inspection. Loading test has not been performed regularly.  The procedure for lock out tag out (LOTO) has been established, however the identification which stations must be provided with lock out tag out has not been performed and documented. This may lead miss understanding for the employees where locking must be given.

 

Mill and Estates  The use of un-appropriate PPE was  observed, e.g. mechanical fertilizing operators were wearing dust mask, harvesters at TSME were wearing short shoe and therefore the socks were wet (not healthy).   The design of harvesting bridge currently was only considering the length of ditch and has not considered the deep of ditch. It was observed that some harvesting bridge was not well maintained, e.g. the placement/position not good/not horizontal.

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

© SAI Global Indonesia Copyright 2009

Program of test is made regularly Identification is provided in each station

 

 Mask will be according to operator risk. Proper shoes will be discussed  during hazard identification and risk control then shoes will be determined according to the risk All harvesting bridge needed has been fulfilled. When there are changes it will made according to suggestion. LNGE maintains harvesting bridges.

Page 57 of 70

Safety Officer and Unit Head Safety Officer

 

28-02-2012 28-02-2012

Safety Officer and Unit Head Infrastructure Assistant and Unit Head

 

30-06-2012 28-02-2012

11.

4.7

12.

4.7

13.

4.7

AUDIT REPORT Mill and Estates  Hexane extraction station at laboratory of Mill  Hexane extraction station will be was not provided with proper exhaust ducting installed with proper exhaust ducting system. system  The measurement of chemical factors at Mill has been performed however the location of  Measurement program of physical measurement was outside of the factory, not and chemical factor at workplace for at workplace. While for all estates, the Mill and Estates has been measurement of chemical factors at established. However the workplace has not been performed, e.g. implementation is conducted at the fertilizer warehouse, chemical warehouse. same time with other measurement in 1st semester 2012 Mill and Estates   Risk assessment has not been performed for  Location are difficult be assessed by the activity of legal boundaries maintenance employee will be included in risk especially where the locations are difficult to analysis be accessed by employee.  In general, medical check up has been  Medical check up will be conducted performed. However, several key parameters to several miss parameter were not performed during medical check up e.g. Rontgen and spyrometry test for employees exposed to chemical hazards (e.g. sprayer, chemical mixer and warehouse operator, fertilizer warehouse operator) and evaluation of musculoskeletal disorders (MSDs) to the employees with ergonomic exposed to ergonomic hazard (e.g. fertilizer warehouse operator Mill and Estates  The structure of follow up to the results of  medical check up has not been established, e.g. statistical analysis, health promotion, preventive action and curative action to the  employees having suspected health problem, e.g. results of audiometric test of some

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

© SAI Global Indonesia Copyright 2009

Follow up to the results of medical check up will be been established Handling or riot will be simulated

Page 58 of 70

 

Unit Head Environmental Staff and Unit Head

 

30-06-2012 30-06-2012

 

Safety officer Doctor of Central Kalimantan #1 Region, Unit Head

 

28-02-2012 30-06-2012



Doctor of Central Kalimantan #1 Region, Unit Head Safety Officer

 

28-02-2012 30-06-2012



 

14.

5.2





15.

16.

5.3

5.3

AUDIT REPORT employees at Mill (December 2011) were suspected having hearing loss problem. The emergency preparedness and response plan for handling riot has not been established. The working pressure of mobile hydrant water tank (at estates) and fix hydrant (at mill) has not been measured its effectiveness. Peat Swamp Forest was found in the eastern part of LNGE and in the north-east part of TPRE. It was only identified as HCV 4 area and has not been identified as HCV 3 area. HCV management plan has been established however the plan has not address the issues (threats) present and not considered sufficient to conserve the HCV within the concession area.

HNAE, TMSE, TPRE, LNGE  Renewal contractual agreement between organisation and General Hospital in Sampit to manage medical waste mentioned that non sharp and sharp medical waste has to be separated. This requirement has not been implemented within Estate Clinic and Central Clinic. HNAM  Several activities in regard to waste water treatment pond operation have not properly recorded to ensure proper waste treatment in line with documented procedure or reference including MSDS: o Effluent source for land application was not recorded in the log book, 90 days

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15



Sharp and non sharp medical waste will be separated



Doctor of Central Kalimantan #1 Region



28-02-2012



Log book of transferring waste to land application and laboratory waste water will be made by considering minimum retention



Environmental Officer Environmental Staff

 

31-03-2012 30-04-2012



© SAI Global Indonesia Copyright 2009

Recording of hazardous waste Page 59 of 70





17.

18.

19.

5.4

5.6

6.1

AUDIT REPORT minimum retention time was difficult to be disposal will be coordinated with CV. verified. Nazar o Laboratory waste water from wet analysis of palm oil and water analysis were disposed to waste water treatment ponds. Process control to ensure that laboratory waste water could be degradable in the ponds was not evident, i.e. hydroquinone MSDS indicated that it will be degradable within 2-20 days; however actual retention time could not be shown. Hazardous waste disposal were not consistently recorded, e.g. o No receipt from hazardous waste collector, e.g. waste acid battery. o Transport vehicle identity was not stated in the disposal manifest.

HNAM  Up to 2011 efficiency analysis for fossil fuel use was limited for diesel fuel for electricity generator however transportation activity was not yet covered including contractor activity. HNAM  Target set for reducing emission level in regard to boiler emission, diesel electricity generator emission and green house gases emission were not measurable and has no clear indicator. 

The 2010 SIA has not included enclave owners yet as stakeholders (HNAE, TPRE and LNGE) during survey hence positive and negative impacts have not been identified yet

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15





Unit Head



30-04-2012



Using of fossil fuel from all Mill activities will be counted



Program will be established to prevent emission



Environmental Officer



31-03-2012



Enclave owner will be included as stakeholders



Unit Head and Social Environment



31-03-2012

© SAI Global Indonesia Copyright 2009

Page 60 of 70

AUDIT REPORT to those stakeholders for further actions required. 20.

6.10

HNAM  In procedure “FFB receiving” (SOP/SMART/RCP) and “Grading” (IK MCMD) has not been clearly described how the FFB from small holder should be inspected; particularly for the sampling method. In the current agreement letter with small holder (PT Indoturba & KSU Mitra Bersama) is agreed that the grading will be done according to what describes in above procedure.  In procedure “FFB Purchase” (ITDU-System Dept 2006) par 2.5 (page 5/6) describes that agreement letter is elaborated in standard format of agreement “Agreement of sold and purchase (Perjanjian Jual Beli – PJB)”. However, the agreement with KSU Mitra Bersama and PT Indoturba Timur was made on an agreement letter that was not complied with the standard format of agreement as required by the procedure.

Department



Procedure and work instruction of  FFB receiving will be evaluated



“Agreement of sold and purchase  Coordination will be conducted with FFB Purchase to inline with (Perjanjian Jual Beli – PJB)” according to prosedure

Mill Supply Chain Certification System No major finding

Opportunities for improvement – RSPO 1. Criterion 2.1 QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

© SAI Global Indonesia Copyright 2009

Page 61 of 70

PSM 6 SPO Coordinator and Unit Head Unit Head and FFB Purchase

 

31-03-2012 30-04-2012

AUDIT REPORT It was unclear whether original or copy of training certificate will be distributed to employee instantly once a course was completed whilst training procedure does not clearly mention who will keep the original/ copy of certificates. Note: the original certificate shall be accessible or provided to employee at any time if no course certificate lodged agreement being undertaken. Refer Ministry Degree #Kep 261/MEN/XI/2004 for such requirement. Criterion 4.2  It could be considered to improve with regards EFB application based on consideration of importance. It was found EFB was not applied in G10 however EFB application in G08 exceeded. Criterion 4.3  Piezometer is monitored weekly. It could be considered to improve recording the piezometer monitoring. Several inconsistencies of piezometer monitoring were found, e.g. at piezometer A20 and A21. Criterion 4.4  It could be considered to improve electricity installation for water pump supply from water pond to water treatment plant. During audit, it was observed that water supply pump still operated, although that water tank full, so that water overflew from the water tank. Potential water and electricity conservation should be considered.  Based on site observation in regard to the feedback from (Environmental Agency of Seruyan District (Dinas Lingkungan Hidup Kabupaten Seruyan), consideration should be taken for: o Improvement of lay out and construction of rain water drainage and waste water drainage, especially those with parallel lay out. They have the same level and only separated less than 0.5 m wide. Therefore during housekeeping and heavy rain cross contamination between two separated drainage highly potential. o Rain water separation from sedimentation ponds and rain water utilization. Boiler blow down, clarifier outlet and Mill housekeeping still went to rain water drainage and processed in 7 steps of sedimentation ponds. Therefore the volume load of sedimentation ponds was higher due the additional of rain water, especially on the last 12 months when rain fall is very high. Also potential for returning rain water drainage to the water pond for rain water utilization. Criterion 4.6  Although medical test has been performed regularly to pesticide sprayer, they were not informed about the result of the test. Criterion 5.2  It could be considered to improve knowledge and skills of HCV Officer, e.g. give particular background for HCV management. Criterion 5.3  For the last 12 months waste water treatment ponds inlet was less than waste water treatment outlet (volume) to land application, i.e. for December 2011 volume of effluent to land application almost twice of the inlet to waste water treatment ponds. There was indicated high volume of rain water captured in the ponds and sent for land application. Estimation from the rain fall December 2011 around 9,000m3 rain water. Further study is recommended from several points of view: land application effectiveness and energy consumption for distributing high volume of water to estate for application. Criterion 5.4  It is recommended to review electricity generator operation arrangement taken into consideration load to be fulfilled and generator efficiency. MAA report for 2nd semester of 2011 indicated that high capacity electricity generator with lowest efficiency still being used. Internal target has been set for 3.5 kWH/liter diesel fuel and electricity generator #4 has 2 kWH/liter diesel fuel). 

2.

3.

4.

5. 6. 7.

8.

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Page 62 of 70

AUDIT REPORT 9. Criterion 5.5  It could be considered to extent the land area of simulation of land fire emergency preparedness and response plan especially to measure if the land at longest distance from station of water tank still could be reached at reasonable time. 10. Criterion 5.6  Feedback from Environmental Agency of Seruyan District (Dinas Lingkungan Hidup Kabupaten Seruyan) requested HNAM to reduce frequency of black smoke. During audit it was confirmed that other than emission is monitored every 6 months by external laboratory, HNAM has no system for internal monitoring of black smoke occurrence. Internal visual monitoring for black smoke occurrence should be considered. 11. Criterion 6.5  According to PP clause 15 (3) that company will give donation (uang bantuan dukacita) to employee‟s family if worker has passed away. It could be considered to formulate the amount of donation by any reference.  Number of employee status conversion has been reported annually (in summary) to present transparency that company do have goo d will to improve social degree of BHL workers to permanent worker. Consistency of such produced report will be checked again in the next audit. Criteria & requirements for BHL conversion to SKU status might be also formalised in a documented reference. 12. Criterion 6.9  It could be considered to involve SPM in reporting mechanism (in a flowchart) of sexual harassment cases for better coordination. 13. Criterion 8.1  It could be considered to review the current process flow and terminology used in the procedures for RSPO, e.g. o Management review. SOP of management review SOP/SPO/SMART/LH was not properly understood by relevant personnel. Actually there was several level of management review: Mill-KCP-Bulking Tank Central Kalimantan 1 meeting and Management Committee for Agronomy and Research (MCAR). o RSPO internal audit. The procedure mentioned the use of non conformance report and audit summary. However the standard format was not attached in the procedure, actually there was only one format for recording audit findings and monitoring its corrective action. o Legal and other requirements. The terminology used such as identification, updating, and verification were not clear. The statement in the procedure was still interpreted differently across the organization. The procedure mentioned identification of legal requirements to be conducted every 6 months; however other part mentioned that legal and other requirements register to be updated at least annually.  Several RSPO procedures were developed by Jakarta Head Office. The dissemination/training of sites personnel to ensure uniform interpretation of procedure is strongly advised. Opportunities for improvement – Mill Supply Chain Requirements  System of recording of stock and delivery has been clearly separated between certified CPO (and kernel) and non-certified CPO (and kernel) in manual system; however in SAP it has not been clearly separated.

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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Page 63 of 70

Audit Report Appendix “C” – Stakeholder’s issues and comment Date and Time : 30 December 2012 at 14.00 pm – 17.00 pm Location : HNAM Interviewee :  Group interview : boiler and loader operator, worker representative leader  One on one interview : gender committee leader Workers

       

Status of workers was determined in the employment contract, and also mentions wage and working hours for workers. Calculation of wage and overtime was determined by management in accordance with national regulation Salary was paid in every 15th and end of month. Started work at 7.00 am to 02.00 pm. Organisation provided training for Occupational Health and Safety, personnel protective equipments were provided by organisation Above personnel said there are no complaints to organisation related to wage and labor regulations Housing, clean water and electricity provided by the organisation. Festive benefit is given 2 weeks before moslem‟s idul fitri celebration day.

SPM Leader (worker representative)

   

SPM leader was appointed through referendum among workers and witnessed by management without any interference ( 2010 ) Funding is collectively obtained from every member at 1000 IDR/ month. Meeting is held monthly to review any labour concerns and suggestions. A terminated employment was reported due to worker‟s sickness over 1 year. Certain amount of money was paid to the worker properly as per national labour regulation.

Gender Committee

  

Gender committee is leaded by representative elected by female workers, established in 2010. Some regular meeting were held as necessary to give awareness of women‟s rights, sexual harassment protection, etc. No issues reported since last year.

Date and Time : 31 January 2012 at 14.00 pm – 17.00 pm Location : HNAE Interviewee :  Group interview : spraying operator, harvester  One on one interview : society leader, religion leader, youth leader Workers

     

Status of workers was determined in the employment contract, and also mentions wage and working hours for workers. Calculation of wage and overtime was determined by management in accordance with national regulation Salary was paid in every 15th and end of month. Started work at 7.00 am to 02.00 pm while some others are working in a shift (2-3 shifts). Organisation has provided protective equipments to all workers working in hazardous area. Above personnel said there are no complaints to organisation related to wage and labour regulations

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  

Housing, clean water and electricity provided by the organisation. Trainings were given free of charge from the company and planned in annual basis. Festive benefit was given 2 weeks before moslem‟s idul fitri celebration.

SPM Leader (worker representative)

  

SPM leader was appointed through referendum among workers and witnessed by management without any interference ( 2010 ) Funding is collectively obtained from every member at 1000 IDR/ month. Meeting is held monthly with management to review any labour concerns and suggestions.

Gender Committee

  

Gender committee is leaded by representative elected by female workers, established in 2010. Some regular meeting were held as necessary. No issues reported since last couple years.

Society/religion/youth leaders  No land conflict was reported since hand-over was done in proper settlement in the beginning.  Villagers have confirmed that organisation has done some positive CSR activities on their surroundings such as school funding, road repair and religious activities funding.  It was told that river was contaminated in 2008 that cause many dead fishes floating in the river. However the organisation has done proper compensation with villagers as per-agreement. Waste pool construction has been also improved to prevent overflow during rainy season and no similar case occurred afterward.  Some of local residents have equal opportunities to work in the Estate.

Date and Time : 1 February 2012 at 14.00 pm – 17.00 pm Location : LNGE Interviewee :  Group interview : spraying operator, harvester, mechanic, fruit pieces picker  One on one interview : gender committee, worker representative, society leader, religion leader, youth leader, enclave owner Workers

       

Status of workers was determined in the employment contract, and also mentions wage and working hours for workers. Calculation of wage and overtime was determined by management in accordance with national regulation Salary was paid in every 15th and end of month. Started work at 7.00 am to 02.00 pm. Organisation provided training for Occupational Health and Safety, personnel protective equipments were provided by organisation Above personnel said there are no complaints to organisation related to wage and labor regulations Housing, clean water and electricity provided by the organisation. Trainings were given free of charge from the company.

SPM Leader (worker representative)

  

SPM leader was appointed through referendum among workers and witnessed by management without any interference ( 2010 ) Funding is collectively obtained from every member at 1000 IDR/ month. Meeting is held monthly to review any labour concerns and suggestions.

Gender Committee  Gender committee is leaded by representative elected by female workers, established in 2010. QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15

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 

Some regular meeting were held as necessary to detect any female issues ( if any ). No issues reported since last year.

Society/religion/youth leaders and enclave owner  No land conflict was reported since hand-over was done in proper settlement in the beginning.  Villagers have confirmed that organisation has done some positive CSR activities on their surroundings such as school funding and road repair.

 

Some of local resident have equal opportunities to work in the Estate. Enclave owner has proper access to their own farm inside company‟s farm without any difficulties.

Date and Time : 2 February 2012 at 14.00 pm – 17.00 pm Location : TPRE Interviewee :  Group interview : spraying operator, harvester, mechanic  One on one interview : gender committee, worker representative, society leader, religion leader, youth leader, enclave owner Workers

       

Status of workers was determined in the employment contract, and also mentions wage and working hours for workers. Calculation of wage and overtime was determined by management in accordance with national regulation Salary was paid in every 15th and end of month. Started work at 7.00 am to 02.00 pm. Organisation provided training for Occupational Health and Safety, personnel protective equipments were provided by organisation Above personnel said there are no complaints to organisation related to wage and labor regulations Housing, clean water and electricity provided by the organisation. Trainings were given free of charge from the company.

SPM Leader (worker representative)

  

SPM leader was appointed through referendum among workers and witnessed by management without any interference ( 2009 ) Funding is collectively obtained from every member at 1000 IDR/ month. Meeting is held monthly to review any labour concerns and suggestions.

Gender Committee  Gender committee is leaded by representative elected by female workers, established in 2010.  Some regular meeting were held regularly  No issues reported since last year. Society/religion/youth leaders and enclave owner  No land conflict was reported since hand-over was done in proper settlement in the beginning.  Villagers have confirmed that organisation has done some positive CSR activities on their surroundings such as school funding and road repair.

 

Some of local resident have equal opportunities to work in the Estate. The enclave owner inside company‟s farm has no access restriction and do not have any problems so far with the company.

Date and Time Location Interviewee



: 3 February 2012 at 14.00 pm – 17.00 pm : TMSE :

Group interview : spraying operator, manuring operator

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

One on one interview : gender committee, worker representative, society leader, religion leader, youth leader

Workers

       

Status of workers was determined in the employment contract, and also mentions wage and working hours for workers. Calculation of wage and overtime was determined by management in accordance with national regulation Salary was paid in every 15th and end of month. Started work at 7.00 am to 02.00 pm. Organisation provided training for Occupational Health and Safety, personnel protective equipments were provided by organisation Above personnel said there are no complaints to organisation related to wage and labor regulations Housing, clean water and electricity provided by the organisation. Trainings were given free of charge from the company.

SPM Leader (worker representative)

  

SPM leader was appointed through referendum among workers and witnessed by management without any interference ( 2009 ) Funding is collectively obtained from every member at 1000 IDR/ month. Meeting is held monthly to review any labour concerns and suggestions.

Gender Committee  Gender committee is leaded by representative elected by female workers, established in 2010.  Some regular meeting were held regularly  No issues reported since last year. Society/religion/youth leaders  No land conflict was reported since hand-over was done in proper settlement in the beginning.  Villagers have confirmed that organisation has done some positive CSR activities on their surroundings such as school funding and road repair.



Some of local resident have equal opportunities to work in the Estate.

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Comment from Environmental Agency of Seruyan District Letter from Head of Environmental Agency of Seruyan District (Kepala Badan Lingkungan Hidup Kabupaten Seruyan) (#660/39/BLH/I/2012 dated January 19, 2012) gathered during public consultation for this audit indicated several feedback and request. Production Controller for Central Kalimantan 1 & 2 has established response to the feedback and request from Kepala Badan Lingkungan Hidup Kabupaten Seruyan which indicated the commitment to follow up as mentioned below: No.

Feedback and or request

HNAM response and action to be taken

SAI Global audit observation

Relevant documentation

1.

HNAM to separate the rain water drainage with waste water drainage so that rain water collected could be utilized.

Rain water and waste water drainage separation is done in stages and currently still in progress

Lay out plan for separating rain water and waste water drainage

2.

HNAM need to reduce black smoke frequency

3

HNAM has not consistent in applying hazard symbol and label for hazardous waste packaging. HNAM has not established checklist for inspection although regular monitoring already performed HNAM to report solid non hazardous waste generation and utilization

Black smoke caused by boiler ash cleaning from boiler furnace chamber. HNAM will balance the temperature during ash cleaning to reduce frequency of black smoke. To establish checklist and use the checklist during inspection of hazardous waste packaging

Site observation indicated that there were separated drainage from rain water and waste water from the main processes in the mill. However the due to the current lay out and housekeeping, cross contamination still occurred. Opportunity for improvement has been issued for Criterion 4.4. Site and record observation indicated that other than emission measurement every 6 months, HNAM has no internal monitoring for black smoke/opacity. Opportunity for improvement has been issued for Criterion 5.6. Site observation indicated that hazardous waste packaging already completed with label and hazard symbol

Record of solid non hazardous waste generation and their utilization were existed but not yet covered during RKL RPL implementation report. HNAM already reported occupational health and safety performance to Dinas Ketenagakerjaan Kabupaten Seruyan.

Waste log book.

4.

5.

HNAM has not reported occupational health and safety performance to Badan Lingkungan Hidup Kabupaten Seruyan

HNAM will report log book of solid non hazardous waste generation and utilization. Occupational health and safety performance has been reported to Dinas Ketenagakerjaan Kabupaten Seruyan

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Boiler maintenance procedure

Inspection checklist of hazardous waste packaging

Receipt of report by Dinas Ketenagakerjaan Kabupaten Seruyan.

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Appendix “D” – Definition of, and action required with respect to audit findings: Major Nonconformities occur when system is failing to meet a relevant compulsory indicator. Action required: This category of findings requires SAI Global to issue a formal NCR; to receive and approve client‟s proposed correction and corrective action plans; and formally verify the effective implementation of planned corrections and corrective action. Correction and corrective action plan must be submitted to SAI Global for approval within 14 days of the audit. Follow-up action by SAI Global must „close out‟ the NCR or reduce it to a lesser category within 90 days or less where specified. Certificate of conformance to the RSPO Criteria cannot be issued while any major nonconformity is outstanding. Major nonconformities raised during surveillance audit shall be addressed within 60 days, or the certificate will be suspended. Major nonconformities not addressed within a further 60 days will result in the certificate being withdrawn. Minor Nonconformities occur when system is failing to meet other indicators. Action required: This category of findings requires SAI Global to issue a formal NCR; to receive and approve client‟s proposed correction and corrective action plans; and formally verify the effective implementation of planned corrections and corrective action. In this instance, a certificate may still be awarded providing the root cause of the problem is identified and an acceptable plan is put in place to achieve the outstanding requirements in an agreed time frame. Verification will be made at subsequent surveillance audits. Minor nonconformities will be raised to major if they are not addressed by the following surveillance audit. Opportunity for Improvement is a documented statement, which may identify areas for improvement, but shall not make specific recommendation(s). Client may develop and implement solutions in order to add value to operations and management systems. SAI Global is not required to follow-up on this category of audit finding.

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Appendix “E” – Definition of, and action required with respect to audit findings for Supply Chain Certification System: Major Nonconformities occur when system is failing to implement and/or maintain requirements of Supply Chain Certification System. Action required: This category of findings requires SAI Global to issue a formal NCR; to receive and approve client‟s proposed correction and corrective action plans; and formally verify the effective implementation of planned corrections and corrective action. When non-conformances rose after the certification, RSPO shall be informed of these non-conformances within 7 days since non-conformance rose. A maximum of one month is given to the certified client to satisfactorily address the non-conformances. The effectiveness of the action taken for the nonconformances shall be assessed before closing out the non-conformances. Should the nonconformances not be addressed within the one month maximum time frame, a suspension or withdrawal of the certificate and a full re-audit may be necessary. Where objective evidence indicates that there has been a demonstrable breakdown in the supply chain caused by the certified client‟s action or inactions, and that palm oil product that has been or is about to be shipped is falsely identified as RSPO certified product immediate action needs to be taken by SAI Global, and the RSPO Supply Chain certification shall be suspended until such time that it has been addressed. The RSPO shall be notified within 24 hours of this occurrence and further impacts on relevant supply chain certifications. Area of concern issued when there is an area of the system for which the client is required to investigate potential non-conformity. Action required: SAI Global may require client to formulate preventive action plan for approval prior to next planned audit/certification decision or alternatively may follow up client‟s preventive action at the next planned audit. Lack of client attention to such issues implies that a preventive action system is not working effectively. Opportunity for Improvement is a documented statement, which may identify areas for improvement, but shall not make specific recommendation(s). Client may develop and implement solutions in order to add value to operations and management systems. SAI Global is not required to follow-up on this category of audit finding.

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