RSPO Principles & Criteria Main Assessment Report Report Number CU820909

RSPO PRINCIPLES & CRITERIA PUBLIC SUMMARY REPORT MAIN ASSESSMENT Kuala Lumpur Kepong Berhad CHANGKAT CHERMIN POM 2013 Report prepared by: Simon Selvaraj (Lead Assessor) Certification decision by: Hari Naveen Christopher (Certifier) Certifying Office Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100 Klang, Selangor, Malaysia [email protected] Tel: +603-3377 1600 / 1700

Control Union Certifications Control Union Certifications is a member of the Control Union World Group - an international inspection and certification body. CUC performs assessments and certification in many agricultural based fields such as FSC, RSPO, and Organic production, Sustainable Textile Production, Organic Exchange, GLOBALGAP, HACCP, BRC, GMP and GTP. CUC is accredited by the Dutch Council of Accreditation (RVA) on the European quality standard EN 45011 for the inspection and certification of CUC Organic program (according to the EU regulation 2092/91) and GLOBALGAP program. When requested a copy of the accreditation certificate can be obtained from CUC. RSPO Membership Number 8-0025-06-000-00 RSPO Approval Date 12/01/2006 Affiliate Membership http://www.rspo.org/en/member/339

RSPOPC-SUM-REPORT.F01 JULY2013

Page 1 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Table of Contents PART 1: SCOPE OF THE CERTIFICATION ASSESSMENT AUDIT .............................................................. 4 1.1 COMPANY AND CONTACT DETAILS ...................................................................................................... 4 1.2 RSPO MEMBERSHIP & CERTIFICATION DETAILS .................................................................................... 4 1.3 MAIN ASSESSMENT DETAILS ............................................................................................................. 4 1.4 ASSESSMENT TYPE ............................................................................................................................ 4 1.5 LOCATION OF THE PALM OIL MILL ....................................................................................................... 4 1.6 PALM OIL MILL OUTPUT AND APPROXIMATE TONNAGES CERTIFIED ........................................................... 4 1.7 GENERAL DESCRIPTION OF SUPPLY BASE .............................................................................................. 5 1.7.1 Location of the Supply Base ............................................................................................... 5 1.7.2 Statistics of the Supply Base and Estimated Tonnes of FFB produced per year ............... 5 1.7.3 Calculation of the Number of Production Units (N) to Sample for the Mill ..................... 6 1.8 PROGRESS OF ASSOCIATED SMALLHOLDERS OR OUT-GROWERS, IF APPLICABLE TO THIS ASSESSMENT ............. 6 1.9 LOCATION MAP FOR THIS CERTIFICATION UNIT (SEE APPENDIX 1) ........................................................... 6 PART 2: PARTIAL CERTIFICATION ........................................................................................................ 7 2.1 2.2 2.3 2.4 2.5

MANAGEMENT STRUCTURE ............................................................................................................... 7 NON-COMPLIANCE IDENTIFIED WITH 2.1 ABOVE ................................................................................... 7 SUMMARY OF THE TIME BOUND PLAN ................................................................................................. 7 UN-CERTIFIED UNITS OR HOLDINGS .................................................................................................... 8 SUMMARY OF THE FINDINGS FOR PARTIAL CERTIFICATION ..................................................................... 11

PART 3: AUDIT PROCESS.................................................................................................................... 12 3.1 ABOUT THE CERTIFICATION BODY ..................................................................................................... 12 3.2 AUDIT TEAM ................................................................................................................................. 12 3.2.1 Qualifications of the Lead Auditor ......................................................................................... 12 3.2.2 Qualifications of the Assessment Team ................................................................................. 13 3.3 AUDIT METHODOLOGY.................................................................................................................... 14 3.3.1 General Overview ............................................................................................................ 14 3.3.2 Assessment agenda for this Audit ................................................................................... 15 PART 4 ASSESSMENT FINDINGS ........................................................................................................ 17 4.1 LEAD ASSESSOR’S SUMMARY AND RECOMMENDATION FOR CERTIFICATION............................................. 17 4.2 SUMMARY OF THE FINDINGS BY PRINCIPLES AND CRITERIA .................................................................... 17 Principle 1: Commitment to Transparency ..................................................................................... 17 Principle 2: Compliance with Applicable Laws and Regulations .................................................... 18 Principle 3: Commitment to Long-Term Economic and Financial Viability ..................................... 21 Principle 4: Use of Appropriate Best Practices by Growers and Millers ......................................... 21 Principle 5: Environmental Responsibility and Conservation of Natural Resources and Biodiversity ........................................................................................................................................................ 24 Principle 6: Responsible Consideration of Employees and of Individuals and Communities by Growers and Millers ........................................................................................................................ 25 Principle 7: Responsible Development of New Plantings ................................................................ 27 Principle 8: Commitment to Continuous Improvement in Key Areas of Activity ............................. 27 4.3 NON-CONFORMITY RAISED DURING THIS AUDIT AND ANY FROM THE PREVIOUS YEAR, IF APPLICABLE ......... 28 4.3.1 Non-Conformities Identified during this Audit ...................................................................... 28 4.3.2 Observations Raised During this Audit .................................................................................. 37 4.4 ISSUES THAT WERE RAISED DURING THE STAKEHOLDER CONSULTATION, IF ANY......................................... 38 PART 5: RSPO SUPPLY CHAIN CERTIFICATION ................................................................................... 40 5.1 POM INCLUDED IN THE SCOPE OF THE AUDIT ..................................................................................... 40 5.2 CONFIRMATION OF THE COMPANY’S SUMMARY OF ANNUAL CERTIFIED VOLUME OF RSPO CERTIFIED PALM OIL AND PALM KERNEL OVER A SPECIFIED PERIOD ...................................................................................... 40 RSPOPC-SUM-REPORT.F01 JULY2013

Page 2 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

5.3 5.4

SUMMARY REPORT INCLUDING A BRIEF DESCRIPTION OF THE SCOPE OF CERTIFICATION ............................. 40 FINAL CERTIFICATION DECISION BY CONTROL UNION FOR THE RSPO SCCS AUDIT OF THE POM ................... 40

PART 6: CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY ........... 41 6.1 6.2 6.3 6.4 6.5

DATE OF NEXT ASA ........................................................................................................................ 41 DATE FOR CLOSURE OF NON-CONFORMITIES ...................................................................................... 41 SIGNING BY THE CLIENT ................................................................................................................... 41 SIGNING BY THE LEAD AUDITOR ........................................................................................................ 41 SIGNING BY THE CERTIFIER ............................................................................................................... 41

PART 7: APPENDICIES ........................................................................................................................ 42 APPENDIX 1: LOCATION MAP FOR THIS CERTIFICATION UNIT .......................................................................... 42 APPENDIX 2: LIST OF ABBREVIATIONS........................................................................................................... 44

RSPOPC-SUM-REPORT.F01 JULY2013

Page 3 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

PART 1: SCOPE OF THE CERTIFICATION ASSESSMENT AUDIT 1.1 Company and Contact Details Company name: Kuala Lumpur Kepong Berhad Business address: Wisma Taiko, 1, Jalan S. P. Seenivasagam, 30000 Ipoh, Perak. Parent Company: Kuala Lumpur Kepong Berhad Contact person: Mr Sin Chuan Eng Office telephone: +6052417844 Fax: +6052535018 e-mail: [email protected] Other Certifications Held: RSPO SCCS, ISCC 1.2 RSPO Membership & Certification Details RSPO Membership Number: 1-0014-04-000-00 Registered Client Name: Kuala Lumpur Kepong Berhad Certificate Number: C820909CU-RSPO-01.2013 th Start Date Of Certificate: 10 September, 2013 th End Date Of Certificate: 9 September, 2018 th Date Of Original Certification: 10 September, 2013 Scope: Certification of the Palm Oil Mill and Supply Bases Type Of Certification: Single site Duration Of Certificate: 5 Years from date of certification 1.3 Main Assessment Details Dates Of This Audit: Audit Number:

th

th

26 to 30 November 2012 Main Assessment (1)

1.4 Assessment Type This is a RSPO Principles &Criteria Compliance assessment of the palm oil mill and its respective supply bases as listed in this report below. 1.5 Location of the Palm Oil Mill Name Mill Palm Oil Mill Capacity (POM) MT/Hour KLK Changkat 60 Chermin POM

Location Address Batu 13 ½, 32400 Ayer Tawar, Perak

GPS Reference Longitude

Latitude

N 4.288974

E 100.765152

1.6 Palm Oil Mill Output and Approximate Tonnages Certified Figures below are from:  Only from certified supply bases (Y/N). YES  Combining certified with uncertified supply bases (Y/N). NO  If the Mill is receiving FFB from uncertified supply bases outside the audit scope, such uncertified sources is highlighted under the following sections as seen applicable: a. PART 1, Section 1.7 – General Description of Supply Base, b. PART 2: Partial Certification, Section 2.4 – Uncertified Units or Holdings, c. PART 5: RSPO Supply Chain Certification of this report Projected Production from the Actual Production for this Audit Year Projected 12 Months (MT) last 12 Months (MT) 2011/12(MT) Forecast Certified in this Report FFB CPO PK FFB CPO PK FFB CPO PK NA NA NA NA NA NA 242,303 46,448 9,595 RSPOPC-SUM-REPORT.F01 JULY2013

Page 4 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

1.7 General Description of Supply Base There are 10 plantations which are owned by the company which supplies FFB to above said mill. The productions of FFB are tabulated as below. 1.7.1

Location of the Supply Base Oil Palm Location Plantation OPP Name Address Changkat Batu 13 ½, 32400, Ayer OPP 1 Chermin Tawar, Perak Estate Batu 12, 32020 Sitiawan, OPP 2 Lekir Estate Perak Raja Hitam Bt 18, Kg Jering, 32400 OPP 3 Estate Ayer Tawar, Perak Jalan Si Putih – Batu Glenealy OPP 4 Hampar, 32800 Parit, Estate Perak OPP 5 Allagar Estate Ladang Allagar, 34800 Trong, Perak. OPP 6 Serapoh Ladang Serapoh, 32800 Estate Parit, Perak Ladang Kuala Kangsar, Kuala Kangsar OPP 7 33700 Padang Rengas, Estate Perak Ladang Pinji, P.O.Box OPP 8 Pinji Estate 1027, 30820 Ipoh, Perak Ladang Batu Dua, Batu Dua OPP 9 P.O.Box Estate 1027, 30820 Ipoh, Perak Ladang Menglembu d/k No. 1, Hala Kledang Menglembu OPP 10 4, Estate Taman Kledang, 31450 Menglembu, Perak Total

GPS reference

Area Summary (Ha)

Longitude

Latitude

Total

Mature

N 4.27527

E100.78498

2540

1720

N 4.12290

E 100.7818

3285

2538

N 4.35439

E 100.7799

1545

1545

N 4.45861

E 100.9305

616

557

N 4.59934

E 100.7357

805

776

N 4.52087

E 100.8917

667

651

N 4.79709

E 100.8677

177

158

N 4.55194

E 101.0666

465

433

N 4.50194

E 101.0724

101

89

N 4.62953

E 101.0354

42

42

10,243

8,410

1.7.2 Statistics of the Supply Base and Estimated Tonnes of FFB produced per year OPP Oil Palm Plantation Estimated FFB/Year (MT) Planting Years OPP 1 Changkat Chermin Estate 45,164 2001-2011 OPP 2 Lekir Estate 78,281 1989-2011 OPP 3 Raja Hitam Estate 47,115 2002-2007 OPP 4 Glenealy Estate 16,489 1984-2012 OPP 5 Allagar Estate 17,263 1989-2012 OPP 6 Serapoh Estate 17,179 1996-2011 OPP 7 Kuala Kangsar Estate 4,377 2002-2006 OPP 8 Pinji Estate 12,500 1985-2011 OPP 9 Batu Dua Estate 2,675 2000-2010 OPP 10 Menglembu Estate 1,260 1999 TOTAL 242,303 RSPOPC-SUM-REPORT.F01 JULY2013

Cycle (Years) 25 25 25 25 25 25 25 25 25 25

Page 5 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

1.7.4 Percentage of Planted Oil Palm by different Age Ranges Planting years by 5 year ranges (Ha) CU Code Pre 1990 1991~1995 1996~2000 2001~2005 2006~2010 OPP 1 0 0 0 488 1538 OPP 2 329 495 57 1649 298 OPP 3 0 0 0 901 645 OPP 4 124 100 49 238 46 OPP 5 36 0 263 239 175 OPP 6 0 0 199 337 115 OPP 7 0 0 0 119 58 OPP 8 29 17 207 140 40 OPP 9 0 0 43 46 12 OPP 10 0 0 42 0 0

2011~2015 466 457 0 59 63 16 0 32 0 0

Total (ha) 2492 3285 1545 616 776 667 177 465 101 42

1.7.3 Calculation of the Number of Production Units (N) to Sample for the Mill N = 0.8√Y, where “Y” is the number of units, with the result always to be rounded “up” to the next whole integer. Where only a sample of the supply base is assessed, units not previously assessed, or assessed earlier in the certification program, are to be preferred over those more recently assessed For the Mill, how many units make up the production base? Owned estates (Y) N = 0.8√Y Smallholders (Z) N = 0.8√Z 10 3 0 0 Explanation as to the selection of estates sampled Total supply bases are per listed above table 1.7.1 is 10, and square root of 10 is 3. However, the totals sampled during this assessment are 6 which contain 3 of larger estate and another 3 of smaller estates. The estates visited are as per the audit plan below. 1.8 Progress of associated Smallholders or Out-growers, if applicable to this assessment Progress of associated Smallholders or Out-growers towards Compliance with relevant Standards - should be in accordance to the 3 year implementation plan, if applicable to this assessment No associated smallholders are attached to the mill. 1.9 Location Map for this Certification Unit (See Appendix 1)

RSPOPC-SUM-REPORT.F01 JULY2013

Page 6 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

PART 2: PARTIAL CERTIFICATION The rules for partial certification allow organizations that have a majority holding in and / or management control of more than one autonomous company growing oil palm to certify individual management units and / or subsidiary companies subject to certain rules. 2.1 Management Structure Section Criteria 2.1.1 Is the certified operation (POM and supply base as detailed above) a stand-alone operation and there are no other plantations or mills owned by the same company? 2.1.2 Is the certified operation part of a simple structure of operations owned by one company? 2.1.3 Are there statements of the ultimate controlling shareholders and directors in the managing agency company/companies: a. Explaining the legal relationship and the management arrangements with the subsidiary companies and / or with any operating groups? 2.1.4 b. A statement of commitment to complying with the spirit of the RSPO for all companies and subsidiaries involved with the growing of oil palm and for the production of palm oil? 2.1.5 Is there a time bound plan in place for all subsidiaries, estates and palm oil mills? 2.1.6 Is the parent company or one of its majority owned and / or managed subsidiaries a member of RSPO.

Yes/No No

If “Yes” Section 2 is N/A

If “No” Go to 2.1.2

Yes

Go to 2.1.5

Go to 2.1.3

N/A

Go to 2.1.4

Go to 2.2.1

Yes

Go to 2.4

Go to 2.2.2

Yes

Go to 2.3

2.2.3

NC raised -

Category Major

Yes

2.2 Non-compliance Identified with 2.1 Above Section Non-compliance findings 2.2.1 There is no explanation as to the company’s structure and therefore it Is not possible to conduct an effective audit against the rules for partial certification. 2.2.2 There is no statement of commitment to complying with the spirit of the RSPO for all companies within the company structure. 2.2.3 There is no time bound plan in place for the certification for all subsidiaries, estates and mills. 2.2.4 No applicable membership of the RSPO.

-

Major

-

Major

-

Major

2.3 Summary of the Time Bound Plan Section Requirement Findings and any action required 2.3.1 Does the plan All subsidiaries, estates and mills are included. include all subsidiaries, estates and mills? 2.3.2 Is the time bound A revision has taken place since there was an isolated lapse in implementation plan challenging? of the plan which a NC was raised during Lahad Datu region assessment.  Age of Therefore, the plan was reviewed to fit to their initial goal and there are some plantations. new inclusions to be certified. Revised time bound plan as attached below.  Location.  Mill development.  Infrastructure. RSPOPC-SUM-REPORT.F01 JULY2013

Page 7 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909



2.3.3

Compliance with applicable law. Have there been any changes since the last audit? Are they justified?

The time bound plan has been thoroughly reviewed by the company and the areas of the estates that have rubber, are highlighted with (*) on below time bound plan. There are 4 units has been pushed for certification for the next following year which the year is highlighted in red.

Section 2.3.4

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

2.3.5

Have there been any stakeholder comments?

2.3.6

Have there been any newly acquired subsidiaries?

2.3.7

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

2.3.8

Has there been any systematic failure to proceed with the implementation of the plan? General statement as to progress made since the last audit?

2.3.9

Findings and any action required Due to the isolated lapses in the implementation the company made the adjustment to realize the targeted achievement. No comments received regarding other units as of this audit period. However, comments received for this unit which undergone main assessment has been captured at table 3.4. The company has recently signed an MOU with the seller prior to the official acquisition of 40,000 Ha in Papua New Guinea which is still under due diligence. This delay causes the isolated lapses in the implementation for the targeted year of 2012 which had led to raise a Minor NC in previous assessment conducted at Lahad Datu Region. With the revised time bound plan, the actual implementation effectiveness will be reviewed within the next surveillance assessment of any unit. The company is now on target to have all their properties audited and / or certified by the end of 2015.

2.4 Un-Certified Units or Holdings NOTE: Companies may demonstrate compliance by clear evidence of a self-audit (i.e. an internal audit for all subsidiaries, estates and Palm Oil Mills) Section Requirement Findings and any action required 2.4.1 Did the company Positive assurance statement provided are still same as of year 2011, conduct an internal which does not include the new mill found in the revised time bound audit? If so, has a plan. Furthermore, insufficient records to demonstrate that the internal positive assurance audit has took place for all its subsidiaries. This is raised as minor nonstatement been compliance. produced? 2.4.2 No replacement after The company has conducted HCV assessment by Jump Consulting in dates defined in NIs January – February 2012 for all subsidiaries where the assessment report Criterion 7.3 of: confirms that there was no replacement of primary forest or containing HCV. The new mills and newly acquired land are still under consultant  Primary forest.  Any area identified preliminary report. as containing High Conservation Values (HCVs).  Any area required to maintain or enhance HCVs in accordance with RSPO criterion 7.3. RSPOPC-SUM-REPORT.F01 JULY2013

Page 8 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

2.4.3

2.4.4

2.4.5

2.4.6

Any new plantings since st January 1 2010 must comply with the RSPO New Plantings Procedure. Any Land conflicts are being resolved through a mutually agreed process, e.g. RSPO Grievance procedure or Dispute Settlement Facility, in accordance with RSPO criteria 6.4, 7.5 and 7.6. Any Labor disputes are being resolved through a mutually agreed process, in accordance with RSPO criterion 6.3. Any Legal noncompliance is being resolved in accordance with the legal requirements, with reference to RSPO criteria 2.1 and 2.2.

No new planting reported for existing units. However, the newly acquired lands will adhere to the NPP procedures when it is ready. PT Anugerah Surya Mandiri which was acquired last year is planned for NPP in near future. SIA conducted reported that there are land conflicts at some of the uncertified units and the company is handling through FPIC and grievance procedures. PT Karya Makmur Abadi – 2000Ha and PT Riau – 2,554Ha under dispute.

None noted. No stakeholder comments or complaints received.

None noted. No stakeholder comments or complaints received.

TIME BOUND PLAN FORECAST FOR RSPO CERTIFICATION OF ALL PALM OIL MILLS & SUPPLY BASES Supply Bases (estates, Targeted RSPO Current Certification Palm Oil Mill Country plantations, associations) Certification Year Status as per this Audit Kebun Malindomas Berau, Kaltim, Perkebunan Berau 1 POM By 2014 Pending Indonesia Kebun Hutan Hijau Mas Kebun Jabontara Ekakarsa Steelindo Belitung, Kebun Steelindo Wahana Wahana By 2013 Pending Indonesia Perkasa Perkasa POM Kebun Parit Sembada Parit Sembada Belitung, Kebun Alam Karya By 2014 Pending POM Indonesia Sejahtera Riau, Mandau POM Sumatera, Kebun Mandau Oct 2012 Certified Indonesia Riau, Nilo 1 POM Sumatera, Kebun Nilo Timur By 2013 Pending Indonesia Riau, NIlo 2 POM Sumatera, Kebun Nilo Barat By 2013 Pending Indonesia Audited on 17/12Riau, Tapung Kanan Kebun Sekarbumi 21/12/2012 and Sumatera, By 2013 POM Alamlestari waiting for certification Indonesia process RSPOPC-SUM-REPORT.F01 JULY2013

Page 9 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Gohor Lama POM

Padang Brahrang POM

Langkat, Sumatera Utara, Indonesia Langkat, Sumatera Utara, Indonesia

Batu Lintang POM

Serdang, Kedah, Malaysia

Kekayaan POM

Paloh, Johor, Malaysia

Paloh POM

Paloh, Johor, Malaysia

Jeram Padang POM

Bahau, Negeri Sembilan, Malaysia

Tanjung Malim POM

Tanjung Malim, Perak, Malaysia

Tuan Mee POM

Sungai Buloh, Selangor, Malaysia

Kuala Pertang POM

Kuala Krai, Kelantan, Malaysia

Changkat Chermin POM

Manjung. Perak, Malaysia

Mill 1 POM

Tawau, Sabah,

RSPOPC-SUM-REPORT.F01 JULY2013

Kebun Basilam Kebun Gohor Lama

Kebun Padang Brahrang Kebun Bukit Lawang Kebun Tanjung Keliling Pelam Estate Batu Lintang Estate Subur Estate Buntar Estate Landak Estate Kekayaan Estate Voules Estate Sg Penggeli Estate New Pogoh Estate Fraser Estate Paloh Estate Sg Bekok Estate Ban Heng Estate See Sun Estate 100% independent smallholders, not to be included in the scope of the certification Ayer Hitam Estate Batang Jelai Estate Jeram Padang Estate Kombok Estate Ulu Pedas Estate Sg Pertanian Estate Sg Kawang Estate Renjok Estate Tuan Estate Changkat Asa Estate Kerling Estate Sg Gapi Estate Tuan Mee Estate Kerilla Estate Pasir Gajah Estate Sg Sokor Estate Lekir Estate Changkat Chermin Estate Raja Hitam Estate Glenealy Estate Serapoh Estate Kuala Kangsar Estate Allagar Estate 100% independent smallholders, not to be

By 2014

Pending

By 2014

Pending

By 2013

Audited on Q1, 2013 and waiting for certification process

Oct 2011

Certified

N/A

Sept 2012

By 2013

By 2012

N/A

Certified

Audited on 21/123/1/2013 and waiting for certification process Audited on 22/1025/10/2012 and waiting for certification process

By 2013

Pending

By 2012

Audited on 26/1130/11/2012 and waiting for certification process

N/A

N/A

Page 10 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Malaysia

Mill 2 POM

Tawau, Sabah, Malaysia

Pinang POM

Tawau, Sabah, Malaysia

Lungmanis POM

Rimmer POM

Bornion POM

Lahad Datu, Sabah, Malaysia Lahad Datu, Sabah, Malaysia Kinabatangan, Sabah, Malaysia

included in the scope of the certification Pang Burong Estate Sri Kunak Estate Tundong Estate Ringlet Estate Jatika Estate Sigalong Estate Pangeran Estate Pinang Estate

March 2009

Certified

March 2009

Certified

Tungku Estate Bukit Tabin Estate Lungmanis Estate

July 2010

Certified

Rimmer Estate Sg. Sibalukan

July 2010

Certified

Bornion Estate Segar Usaha Estate

July 2010

Certified

2.5 Summary of the findings for Partial Certification The audit team assessed compliance with the above requirements during this audit. Failure to address any noncompliance identified may lead to certification suspension. Overall findings are satisfactory; however, there are still room for improvement especially on internal audit procedures for all uncertified subsidiaries and new acquisition to ensure the requirements are met. Concerning the potential overlook of the implementation of the internal audit procedure, a minor non-compliance is raised. There are 6 estates currently sending the crops to the outside mill where these estates have not been included in the time bound plan. There will be a new POM in Berau, Kalimantan Timur as of the company’s plan on expansion of milling capacity and 2 new POMs in Medan and Sampit respectively under construction which will eventually added in the time bound plan when it is ready for commissioning. The company has also made decision to include Paloh Mill into certification by year 2015 and Mill 1 which consists of 100% of independent smallholders will be shut down within 3 years from now to adhere to the rules of partial certification. The land conflicts are well documented and details are available and cited. More investigation will be carried out during next surveillance audit to monitor the progress. For final conclusion, please refer to table 3.1.

RSPOPC-SUM-REPORT.F01 JULY2013

Page 11 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

PART 3: AUDIT PROCESS 3.1 About the Certification Body Control Union Certifications is a member of the Control Union World Group – an international inspection and certification body. CUC performs Audits and certification in many agricultural based fields such as FSC, RSPO, and Organic production, Sustainable Textile Production, Organic Exchange, GLOBALGAP, HACCP, BRC, GMP and GTP. CUC is accredited by the Dutch Council of Accreditation (RVA) on the European quality standard EN 45011 for the inspection and certification of CUC Organic program (according to the EU regulation 2092/91) and EUREPGAP program. When requested a copy of the accreditation certificate can be obtained from CUC. 3.2 Audit Team Lead auditor: Team member 1: Team member 2: Team member 3: Team member 4:

Simon Selvaraj Jan Franse Mohd Rizal Kassim Iamsirisanthong Asidhatorn Mahsawaran

3.2.1 Qualifications of the Lead Auditor Requirement A minimum of post high school (post-secondary school) training in either agriculture/forestry, environmental science or social sciences; At least 5 years professional experience in area of work relevant to the assessment (e.g., palm oil management; agriculture/forestry; ecology; social science); Training in the practical application of the RSPO criteria, and RSPO certification systems; Successfully completion of an ISO 9000:19011 lead auditors course; Training in the practical application of RSPO certification systems.

A supervised period of training in practical auditing against the RSPO criteria or similar sustainability standards, with a minimum of 15 days audit experience and at least 3 audits at different organizations. RSPO endorsed lead auditors course. Signed code of conduct. General knowledge of:  RSPO P&C standards.  CUC organizational structure.  CUC quality systems.  Lead auditor role.  Report writing.  Stakeholder consultation.  Certification decision process.  RSPO SCCS program manual. RSPOPC-SUM-REPORT.F01 JULY2013

Qualifications Post graduate qualification in agriculture with more than 5 years working experience in plantation. More than 5 years working experience in plantation. Involved in RSPO auditing since November 2010. Fully trained in similar agriculture certification programmes such as RSPO SCCS, Global Gap, ISCC and GMP. Involved in RSPO assessment since November 2010. Member of CUC RSPO audit team. Involved in audits conducted in Malaysia and Indonesia. Completed ISO 9001:2008 lead auditor course in July 2011. Successfully completed RSPO Lead Auditor Course. Member of CUC RSPO audit team since November 2010. Involved in audits conducted in Malaysia and Indonesia since November 2010 in 10 different companies in Malaysia and Indonesia. Post graduate qualification in agriculture with more than 5 years working experience in plantation.

Completed RSPO Lead Auditor training in 2011 Yes. Yes Yes Yes Yes Yes Yes Yes Yes

Page 12 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

 CUC filing systems.  Correct use of RSPO trademarks.  History and objectives of RSPO.  CV available. Completion of CUC RSPO lead auditor training.

Yes Yes Yes Yes Completed & Passed RSPO Lead Auditor training in 2011

3.2.2 Qualifications of the Assessment Team RSPO Requirement Team Member Name

Qualifications

Fluent in main local languages and English.

Mohd Rizal Kassim Mahaswaran Iamsirisanthong Asidatorn Jan-Frans Bastianse

Fluent in Local and English Fluent in Local and English Fluent in English Fluent in English

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

Mohd Rizal Kassim

Experience in forestry and manufacturing company Workers welfare issues and social auditing experience. Environmental and ecological auditing Master in Business Administration, environment and OHSAS auditor. Working experience in manufacturing firm. Involved in group audit in organic farming since 2010. Global GAP in 2011 and RSPO in early 2012

Jan-Frans Bastianse

Mahaswaran

Iamsirisanthong Asidatorn

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

Iamsirisanthong Asidatorn Jan-Frans Bastianse

Mahaswaran

Mohd Rizal Kassim

Involved in group audit in organic farming since 2010. Global GAP in 2011 and RSPO in early 2012 Workers welfare issues and social auditing experience. Environmental and ecological auditing. Master in Business Administration, environment and OHSAS auditor. Working experience in manufacturing firm. Have safety background. Training in Chemical handling.

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

Iamsirisanthong Asidatorn

Completed OHSAS 18001 training

Jan-Frans Bastianse Mohd Rizal

Environmental and ecological auditing. Experience as Safety officer in Malaysia manufacturing firm Master in Business Administration, environment and OHSAS auditor. Working experience in manufacturing firm.

Workers welfare issues and social auditing experience. (For example with SA8000 or related social or ethical accountability codes).

Simon Selvaraj Jan-Frans Bastianse

Complete SA800 course Workers welfare issues and social auditing experience. Environmental and ecological auditing.

Mahaswaran

Master in Business Administration, environment and OHSAS auditor. Working experience in

Mahaswaran

RSPOPC-SUM-REPORT.F01 JULY2013

Page 13 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

manufacturing firm.

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

Mahaswaran

Economic issues.

Mahaswaran

Jan-Frans Bastianse

Iamsirisanthong Asidatorn

Master in Business Administration, environment and OHSAS auditor. Working experience in manufacturing firm. Workers welfare issues and social auditing experience. Environmental and ecological auditing.

Master in Business Administration, environment and OHSAS auditor. Working experience in manufacturing firm. Experience in investment and economic issue

3.3 Audit Methodology 3.3.1 General Overview The Audit was carried out in conformity with the procedures as laid down in the CUC Procedure Manual and the RSPO Program Manual for the auditors and Certifier. During the Audit the qualified CUC auditors used the RSPO standard as endorsed for the country in which the audit took place and recorded their findings. Workers and local communities were interviewed and evidence sought to confirm on-going compliance to include:  Chemical stores. Storage, MSDS leaflets, Herbicide mixing areas, PPE, Ventilation, Security.  Field inspections. Herbicide application programs. Harvesting sites and efficiency. Fertilizing operations. SOP’s. Soil maps. Land preparation. Ground cover. IPM. First aiders and boxes. Ground cover. Soil erosion. Field observations of all operations.  Worker interviews. OSH. Sexual, religious, racial harassment. Pay and contracts. Child labour. First aid. Awareness.  Re-planting sites. Zero burn.  HCV’s. Identification. Management plans. Environmental Impact Assessments. Implementation.  Riparian zones. Width. Current and future management. Non maintenance regimes.  Water management. Water courses. Water monitoring.  Road maintenance. Run off.  Social amenities. Social Impact Audits.  Local communities. Contributions made. Employment opportunities. Social impacts. Complaints procedures.  Workshops. Oil traps. Safe working environment. PPE. Diesel tanks. Environmental waste management.  Line sites. Interviews with householders. Inspection of water discharge points. Water improvement plans. Waste disposal.  Documentation review. The Palm Oil Mill audit verification included the following activities:  Mill and workshop inspections. Documentation review & worker interviews.  Mill. SOP’s. Safe working environment. Gen sets. Walk ways. Signs. EFB. POME treatment. Emissions. Mass balance. Diesel tanks. PPE. Fire extinguishers. First aiders and boxes. Fuel and water usage.  OSH. Training. Management structure. First aiders.  Full document review. Completion of the checklist. Review and documentation of evidence. All aspects of RSPO P&C’s applicable.  Worker interviews. OSH. Sexual, religious, racial harassment. Pay and contracts.  Compliance against the RSPO SCCS certification scheme. RSPOPC-SUM-REPORT.F01 JULY2013

Page 14 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Verification: Verification of implementation was done through field observations, workshop and chemical store inspections, worker and community interviews and mill inspections as summarized above. 3.3.2

Assessment agenda for this Audit Date Location Main activities 26/11/2012 Changkat  08.00am-Opening Meeting  Opening meeting. Introduction by team leader. Introduction of team Chermin members and assessment agenda. Estate Presentation by Estate and Palm oil mill Changkat Chermin POM

27/11/2012

Changkat Chermin Estate

28/11/2012

Kuala Kangsar Estate

RSPOPC-SUM-REPORT.F01 JULY2013

         

10.00 am-Plant & Field Operation(Jan-Frans, Rizal, Mahas & Asidatorn Workers interviews Chemical Stores Workshops Housing Medical School Local Communities Environmental Document Review

Mill SCCS verification audit-Simon  Previous 12 Months FFB received, processed (Production) & CPO  Sold. PK produced, Sold. (Uncertified)  Chosen SCCS module and model and its procedures.  Verification of other procedures if any. 09.00am - Open stakeholder meeting. Simon & Rizal Capture any issues rose during the open stakeholder meeting. After Meeting, discussion with KLK Management. 09.30am- Jan-Frans ( Other estate on his call, ex: Lekir, Raja Hitam & Glenealy) Environmental audit ( Field visit & Document review) 09.30am – Asidatorn & Mahas - P&C  Worker interviews.  Chemical stores.  Workshops.  Housing  Medical.  Schools.  Local communities. 09.00am- Jan Frans & Simon( Other estate on his call, ex: Serapoh, Allagar) Environmental audit ( Field visit & Document review) 09.00am – Asidatorn , Mahas, Rizal - P&C  Worker interviews.  Chemical stores.  Workshops.  Housing  Medical.  Schools.

Page 15 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

29/11/2012

Pinji Estate

Batu Dua

Mengelembu Estate

30/11/2012

Pinji Estate

 Local communities.  Environmental.  Document review Mahas & Simon  Worker interviews.  Chemical stores.  Workshops.  Housing  Medical.  Schools.  Local communities.  Environmental. Document review Asidatorn  Worker interviews.  Chemical stores.  Workshops.  Housing  Medical.  Schools.  Local communities.  Environmental. Document review All audit ends at 18.00pm Jan Frans & Rizal  Worker interviews.  Chemical stores.  Workshops.  Housing  Medical.  Schools.  Local communities.  Environmental. Document review 08.00am - Preparation for closing meeting. (All Auditor) 10.0

•

Am -Closing meeting. Chaired by the assessment team leader. Welcome and introduction by the team leader. Presentation of findings by the assessment team. Questions and answers. Final summary by team leader

Number of assessors participating: 5 Number of days spent for the assessment on site: 5 Total number of person days used for the assessment on site: 25

RSPOPC-SUM-REPORT.F01 JULY2013

Page 16 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

PART 4 ASSESSMENT FINDINGS 4.1 Lead Assessor’s Summary and Recommendation for Certification The mill and supply bases are as per the above table 1.2 and 1.3 and were assessed in the field, offices, facilities, stores and document reviews were carried out in accordance to the RSPO principles and criteria. Common systems were identified and specific evidence was recorded for individual estate and mill. Interviews with Estate Managers, Mill Manager, committee and members of workers’ union took place in both formal and informal environments and worker interviews were conducted in both estates and in the mill. Subsequent to the stakeholders’ meeting which was conducted without the presence of the management staffs, the surrounding communities were visited so as to capture more feedback from the stakeholders. The stakeholders meeting feedback indicated no negative feedback and in fact more positive comments were received. The details are as per table 3.4, below. There were no complaints received during the field assessments and during interviews with the external stakeholders. Up to the time of writing this report, there were neither feedbacks nor comments received from the other external stakeholders and community leaders nor from the public announcement in the RSPO website. The mill is fully verified for RSPO SCCS system verification and it is found to be in full compliance as all the necessary procedures are in place. Since there is no production as certified products, more verification will be st carried out during the 1 surveillance audit. See table 3.4.1 to 3.4.4 for current recommendation and status. However, some major and minor NC was found on this assessment. Detail NC as per table 3.3 below. With full commitment towards RSPO P&C and RSPO SCCS implementation and compliance towards rules of partial certification and successful closure of major non-compliance, it is therefore the recommendation of the lead assessor is that: To award the certificate of compliance. Signed:

Name: Simon Selvaraj Date: 12/4/2013 4.2   

Summary of the findings by Principles and Criteria Over the 5 year period of the life of the certificate, there will be 4 annual surveillance audits Identified Non-Conformities and noteworthy Positive and Negative Observations. The RSPO require that this report contains findings by each principle and some example criteria. Please see table below.

Principle 1: Commitment to Transparency Records of requests and responses are available. Complaints and requests are registered well. All documents that are to be made publicly available is stated Criterion by clearly in the SOP. However at Pinji Estate not all stakeholder requests are Summary Audit documented although responses to complaints have made. The land title for Pinji estate the land is also kept confidential. A Major NC was raised under this principle. MA 1.1 The system allows any stakeholder to request information required in order RSPOPC-SUM-REPORT.F01 JULY2013

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

to commit to transparency except confidential documents which another process involved by redirecting to the head quarter where the top management involve in reviewing of the specific request and subject to final approval. The request and response book are well maintained and are available upon request at the respective supply base and mill. This, the staff will invite the person to put in writing of the requested information. At the same time the staff also helps to write down if the requester were unable to write. These request will be redirected to the in charge person to analyse the time frame of the requested information and will inform the manager on actions needed. Finally, this will be response with appropriate manner to requester immediately or with a time frame needed. However at Pinji Estate not all stakeholder requests are documented although responses to complaints have made. An observation was raised for this matter.

MA

1.2

Company have a procedure to receive and response to the request by providing a specific form which records the requester’s detail and information requested. At the same form, there is a section for acknowledgement of the in charge person who receives the form. Further to it, time frame, action taken, approval and feedback are also recorded. There is a 7 year retention period for these documents. Documents that can be made publicly available are clearly stated. However, Pinji estate has not fully documented all the stakeholder comments and requests however they did follow up. The estate should maintain all the records. Raised Observation. All individual documents are according to its subject and legally required documents and land titles are available. Some procedures have been merged under one SOP where the SOP are divided into section and linked to another records. This looks complicated; however, the management has given a clear demonstration on how it is being used and what are the related documents. All visited sites have a clear overview of publicly available documents. This is all in line with the KLK policy of transparency of documentation. However at two places, the POM and Pinji estate, the land title documents are not publicly available. They are kept confidential. 1 major NC was raised. Licences, land titles, safety and health plan, EIA and SIA, pollution prevention plans, complaints and grievances, negotiation procedures and continuous improvement plan are available for public. Apart from above documents, other documents also available except confidential documents. Some of the mentioned documents are merged into one but will then be handled according to the specific content.

Land lease is for 99 years beginning from 1981. Original land title was found confidential and file is marked confidential. Principle 2: Compliance with Applicable Laws and Regulations Criterion by The company has a comprehensive system for ensuring all estate and mill Audit managers are up to date with the applicable laws and they have an internal monitoring system to ensure compliance. Applicable licenses and permits Summary have been displayed where appropriate. A complete set of relevant national law and regulation books are available and systematically documented at point of audit. The system that implemented within relevant legal RSPOPC-SUM-REPORT.F01 JULY2013

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

MA

2.1

department of the company to ensure changes are tracked need further enforcement. Mill and estate land titles are clearly designated for oil palm mill operation and no restrictions in the terms of the land titles noted as being abused. No disputes been recorded at both mill and estates. The mill has a Law Books Register which includes The Document name, The Regulatory Authority / Summary of the law, The Requirements and Remarks. There are a series of SOPs that include legal requirements for example: SOP 15, allows the delegation of responsibilities to individuals. SOP 16 covers Permits, licenses and Reports. SOP17 covers contracts. SOP 18 for complaints and Grievance procedure. A list of all applicable licences is prepared to show expiry dates for all licences covering all mill operations. The licences are all valid and copies are included in the file. The estates have Law book register for all the requirements for local, national and regional laws and regulations. These are listed together with law name Regulatory authority / summary, requirements and remark. The KLK Head Office will update the Executive in Charge of all operating centres through circulars and meetings. Managers are required to track changes in the law on line at least once a year. List of laws available and recognized as below :                        

RSPOPC-SUM-REPORT.F01 JULY2013

OSHA and regulations 1994 (Act 514) Factories and Machinery Act with regulations (Act 139) Pesticides Act and Regulations (Act 149) Poison Act and Regulations 1952 (Act 366) Ministry of Trade. Malaysia Palm Oil Board (MPOB) Road Transport Act 1987 (Act 333) Employees Social Security Act and Regulations (Act 4) Food Act and Regulations (Act 281) Industrial Relations Act and Regulations (Act 177) Trade Union Act and Regulations Employees Provident Fund Act 1991 Human Rights Commission of Malaysian Act. Wetlands and climate Change 1999 The UN Convention on Biological Diversity Stockholm Convention On Persistent Organic Pollutants (2001) Rotterdam Convention on Prior and Informed Consent Procedure for certain hazardous chemicals. International Labour Organisation Convention 98(1949) Aboriginal Peoples Act 1954 (Act 134) Arms Act 1960 Children and young person (employment) act 1966 Commercial vehicles(Licensing Board Act 1987) Electricity Supply Act 1990 Employment Act 1955

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

       

                            

Immigration Act 1959/63 Internal Security Act 1960 Irrigation Areas Act 1953 Land and Conservation Act 1960 National Forestry Act 1984 CSDS Guidelines for first aid in the workplace Occupational Safety and Health ( packaging, control of industrial major accidents hazards, employers safety and health general policy, committee, OSH officer and exposure of chemicals Hazardous to Health Factories and Machinery 1986 Environment Quality Act 1974 Estate Hospital Assistants (Registration) act 1965 Act 645 National Heritage Act 2005 Act 302 Petroleum (Safety Measures) Act 1984) Act 344 Police Act 1967 Anti-Corruption Act 1997 Act 246 Private employment Agencies Act 1981 Act 76 Protection of Wild Life Act 1972 Act 208 Sewerage Services Act 1993 Act 133 Street, Drainage and Building Act 1974 Wages Councils Act 1974 Waters Act 1920 Workers minimum Standards of Housing and Amenities Act 1990 Workmen’s Compensation Act 1952. Pesticides Act 1974 Occupational Safety and Health Act 1994 Factories and Machinery Act Environmental Quality Act Destructions of Disease Bearing Insects Act Employment Act 1955 Aboriginal Act 1954 National Forestry Act 1984 Internal Security Act 1960 Arms Act 1960 Employment Provident Fund Act Drainage Works Act 1954. Workers minimum Standards of Housing and Amenities Act 1990 Electricity Supply Act 1990.

However the following was also observed: 

RSPOPC-SUM-REPORT.F01 JULY2013

Latest applicable list of laws are available but there needs to be control on the establishment information [date/rev] as well the approval process and to address only the applicable laws.

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909



MA

2.2

Insufficient records are available to demonstrate the conformity that applicable laws are made aware to stakeholders.

 No evidence of the applicable laws discussed internally. Reviewing process by those responsible PIC need further enhancement. Thus raised minor NC. Land title is available for mill and it is kept in the Changkat Chermin estate. All the estates have their own land title. Altogether there are 25 land titles. Estate boundaries are not clearly defined. Approval is sought from KLK management to hire a land surveyor for mapping all the estate areas. Observation raised.

There is a mechanism in place to resolve any land conflicts. However, there is no land disputes noted and this is verified through surrounding land owners interviews. MA 2.3 Maps are clearly available to demonstrate land ownership. There were no customary rights issues raised by internal and external stakeholders during the open stakeholder meeting and during the visit to surrounding communities. Principle 3: Commitment to Long-Term Economic and Financial Viability The company is committed to the long term economic and financial viability as described in annual budgets covering FFB and CPO Production, OER, KER, Criterion by Summary Projected cost and covering vehicles maintenance, Human Resources, etc. Audit Annual replanting included in annual budget for 10 years programme which also includes size of hectarage, yield projection, and annual reviews. MA 3.1 The company is committed to the long term economic and financial viability as described in annual budgets covering FFB and CPO Production, OER, KER, Projected cost and covering vehicles maintenance, Human Resources, etc. Annual replanting included in annual budget for 10 years programme which also includes size of hectarage, yield projection, and annual reviews. Principle 4: Use of Appropriate Best Practices by Growers and Millers The company have implemented the best practices in their operations. Full SOP system are in used and practiced. Monitoring of fertilizer and agrochemical is based on soil and tissue sampling. Water management is kept maintained by observing buffer zones and water analysis is carried out periodically. Safety and health is implemented in all operations. Training is conducted for all workers and contractors. Criterion by Summary Audit However, during the assessment it is found that there is still a need for improvement. Annual medical surveillance for sprayers were not carried out within the one year stipulated time frame. There was also no risk assessment done for a newly used fertilizer. Implementation of what is stipulated in the SOP especially with regards to water sampling was not adhered to. As such, 2 Major NCs and 1 minor NC were raised under this principle. MA 4.1 The Group Plantations Procedures from seeding land preparation and through to harvesting Policy no. GP/AGRIC/OP, updated on 29-03-2010, forms the Standard Operating Procedure manual that covers land development and covering all aspects of preparing, planting and maintaining oil palm. It also covers field operations for immature crops, planting, mulching, manuring, pruning, and selective harvesting and covers all operations for mature plantations. Similarly, the mill too has an SOP which covers receiving of FFB, best mill management & operation system right up to deliveries of CPO and PK. Master list of document and version updated available and verified. RSPOPC-SUM-REPORT.F01 JULY2013

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Monitoring of implementation is conducted thru internal audit and conducted on 25-27/7/2012. Production record for monitoring performance is available for past 12 month. However, with regards to the implementation of SOP, the following was also observed: Changkat Chermin Estate: The Standard Operating Procedure for water sampling was established on 01-04-2013. The sampling of river water, raw & treated water as well as domestic waste water is to be conducted at a frequency of once in every 4 months and water analysis will be done by TQCC. However, the first water sampling was conducted in Nov-2012, 7 months after the establishment of the SOP. This was verified through the official letter sent by Ladang Changkat Chermin to TQCC on 16-11-2012. The result of analysis is still not available on the date of this audit.

MA

4.2

MA

4.3

MA

4.4

MA

4.5

RSPOPC-SUM-REPORT.F01 JULY2013

Pinji estate: Based on the water treatment results on 05-07-12, it was verified that the raw water, treated water and waste water from the line site was tested for pH, Total Coliform and E-coli and the results within the standard limit. However, the waste water from the line site was not tested for the BOD parameter. Observation raised. Monitoring of fertilizer usage is according the recommendation which issued by Applied Agriculture Resources Sdn Bhd. The record of fertilizer that was applied the field is matched with the recommendations made. Fertilizer recommendation is made based on soil and leaf analysis. Records of fertilizer used is available for each block, including the type of fertilizer used and its quantity. A procedure to prevent erosions called, “Soil erosion and fertility and road maintenance” no. 4.0, dated 01 April 2012 was sighted. Planting of mucuna is practised. Frond staking to stop surface run off was applied. Flat and accessible area is maintained with grass cutting at harvesting path and road side. No blanket spray but only selective and circle spray with the right choice of chemicals is applied. Road maintenance programs were done with the guide of maps and in accordance with the time table. This was verified in Kuala Kangsar estate, Changkat Chermin and Batu Dua estate. There are no peat lands in the concession Water course is identified based on maps. In Kuala Kangsar estate there is a river that passes through the estate area. Buffer zone and riparian zone is identified with markings. No activities are carried out at the riparian zone area. Estate river water analysis is carried out once in 4 months. The sampling point and parameter is identified. BOD, COD, TSS, Ammonical Nitrogen and Dissolved Oxygen is used to determine level of pollution in the river. Result for water analysis is carried out by TQCC and all the results are within the standards. Rainfall monitoring is available. Monitoring of water used at mill is available. The mill used on average 0.58m3 of water/MT FFB IPM system according the procedure of Pest and Disease in GP/Agric/OP4 that was last updated on 1 July 2006 is applied in Changkat Chermin estate. This covers all the documented IPM for major pest, use of biological control, cultural control, surveillance, evaluation and record keeping. Tunera subulata is extensively planted. Barn owl boxes erected at the rate of 1/20ha. Use of biological control, manual control and monthly census for bagworm is

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

MA

4.6

MA

4.7

MA

4.8

RSPOPC-SUM-REPORT.F01 JULY2013

conducted. The procedure of agrochemical use is mentioned in “Safe use of Agrochemical” rev. 5, dated 1 February 2012. High toxic agrochemicals are replaced by less toxic ones. Agrochemical used is based on the specificities. Evidence to eliminate pesticides categories 1A and 1B is apparent. Paraquat is being eliminated and replaced by glyphosate. Chemicals used are in compliance with Pesticide Act 1974 and oil palm (Food Act 1983) and within the allowable dose. List of chemicals used is available and according to the USECHH 2000 regulation and Pesticides Act 1974. MSDS is available in both English and Bahasa Malaysia. PPE distribution based on job description and based on recommendation the by supplier of pesticides. Record of distribution of PPE is available and maintained. Storage of pesticide and herbicide was verified during site visit. There was good ventilation and the stores were in good condition. MSDS is clearly visible in the store. Training is given to the all workers in the mill and estate especially for handling of chemical and pesticides used. Training records were verified. Pregnant women are not allowed to handle chemicals.. The last annual medical surveillance for sprayers was carried out on 11-04-11 in MEDICLINIC SINARAN. The following sprayers, Ms. Kaliyamah A/P Palanisamy and Mr. Selamat Abdul Ghani last received medical check-up on that day. The next annual medical surveillance program for FY2011/12 for the same sprayers has been scheduled in December 2012, which is 7 months exceeding the one year period specified by the law and the RSPO standard. This is a non-compliance against USECHH 2000 regulations and also the RSPO standard and as such a major NC has been raised. An occupational Safety and Health Policy is in place for all assessed operations, clearly communicated, implemented and publically available. The company has a set of generic SOPs for the estates and mill. The record of training shown that the company has carried out training sufficiently. Safety and Health Programme was sighted for the year 2012. A safe working environment is demonstrated in the mills and the estates by utilizing a checklist that is to be used during safety audits. However, it was found during the audit that:  The adverse risk for the newly introduced fertilizer [Taiko 61] was not identified through risk assessment. 

All PPE is provided by office staff. However an inventory list of PPE to monitor the stock level is not maintained.



MSDS is not understood by local workers at chemical storage area as it was not available in the local language [Bahasa Malaysia].



First aid kit needs to be equipped with an inventory list.

It was also verified that latest accident record occurred on 22/10/2012. The incident involved a harvester by the name of Mr. Ahmad Baidi [employee number AR 467812] whose motorbike fell on his feet. The 22 man-days that was lost as a result of this accident was not tabulated in the LTA calculations. Here, an observation is raised. The training schedule for 2012 is available for the mill and estate. Contractor training is verified in the contract between the company and the contractor

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

need to comply with safety requirement in the mill. Training records are maintained. Training attendance record that is signed by the participants was sighted. Principle 5: Environmental Responsibility and Conservation of Natural Resources and Biodiversity While the EIA has been carried out in the mill and estates, it was not comprehensive in the sense that not all impacts were identified and Criterion by stakeholder input was limited. HCV areas and ERT were also not properly Summary Audit identified and as a result proper management plans cannot be put in place. Waste identification is also incomplete. 1 Major NC and 4 Minor NCs were raised under principle 5. MA 5.1 All visited sites have an EIA. However, stakeholder consultation was not done in relation to input for the EIA. Stakeholders were informed about the results and were asked to respond. The Stakeholder processes are documented. The stakeholder input in the process is limited. In all cases the only input for the EIA is the knowledge of staff and employees of the company. The EIA is limited in for example the hazards description: 1) Water pollution is mentioned in relation to the workshop, but it is not clear whether it relates to oil, chemical pesticides or other sources of pollution. 2) Human activities cause water and air pollution but how it is causing an impact not specified. The root cause is not clearly detected. 3) In most cases the landfill is not included. When interviewing the staff, it is clear that there is far more information available than presented in the EIA.

MA

5.2

MA

5.3

RSPOPC-SUM-REPORT.F01 JULY2013

There are also negative impacts identified. It is not possible however to decide whether the root cause is addressed as the EIA lacks details. The EIA’s give the impression that effects are addressed, not the root cause. There is no consistent monitoring of environmental impacts. Therefore it is not clear whether negative effects are mitigated and improvements are made. In general the KLK format is in place, but not made specific enough, in some cases not completely filled in and mitigating measures are not always implemented, monitored and clearly addressing the root cause. Also all visited sites implement many improvements and mitigating measures, however the documentation and link with the EIA is missing. A minor NC is raised. In the mill itself no rare, threatened and endangered species are present. The area is covered by the HCV assessment made by the estates. All estates have not formally assessed HCV and ETR species. They used their own knowledge. No consultation with experts was done. Some estates have HCV present. The HCV is not performed according to the SOP that prescribes the use of the Malaysian interpretation on HCV. Buffer zones are put in place and clearly identifiable. All estates have guards, checkpoints and gates in place. A Major NC was raised on this criterion. In the mill, office waste and mill waste is separated into glass, paper and plastic. Different bins for different waste are in place. However the identification of all waste of the mill and estates is incomplete as it not includes among others the glass, paper and plastic. In the mill, not all waste is identified and documented and not all waste is disposed of in the prescribed

Page 24 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

way. For example: 1) Waste water that is leaving the mill is not monitored 2) Amount of recyclable waste is not registered 3) Amount of domestic waste going to landfill is unclear 4) There are wastes found in the boiler ash stored in Changkat Chermin estate Estates: Like the Mill the estates have a system in place. However most estates do not have a complete waste identification either. In most cases the recycling of glass, paper and metal is not incorporated in the plan. Some of the visited estates have evidence of inappropriate waste disposal at several locations in the estates such as: 1) The landfill of Pinji estate and Glenealy estate consists of waste that, according to company procedures, shall not be disposed of in the landfill. 2) Raja Hitam estate clearly identified 5 sampling point on water monitoring including relevant parameters. Most estates however have not sufficiently identified the water sampling point and their parameters. 3) Estates that collect rubber have not identified the outlet of this collection point as waste. Also important that the farmers in the rented area underneath the power lines produce a lot of waste (Raja Hitam, Changkat Chermin), including wastes of chemical pesticides. In general, the mill and estates implement more than they document, but the identification is not complete and an operational plan for avoiding and reducing waste is not complete, consistent, implemented and objectives are partly missing. Monitoring is only for scheduled wastes and in some estates for wastewater in place. Two minor NCs were raised under 5.3.1 and 5.3.2. MA 5.4 The use of both renewable and non-renewable energy in the mill is monitored on a monthly basis. Renewable energy is supplied by fibre and shell to the boiler for power generation. Fossil fuel use is clearly monitored for the gen-set in the mill and the estates. MA 5.5 Company was applying the guidelines from ASEAN zero burning policy. No burning was identified during the audit. Company applied felling and chipping for replanting program. MA 5.6 The pollution and emissions sources in the mill have been identified. Monitoring and analysis of the pollution risks were conducted regularly. Principle 6: Responsible Consideration of Employees and of Individuals and Communities by Growers and Millers Minutes of meeting for the communication and consultation with local community through regularly meeting were available and evident. The policy for freedom of association, equal opportunities and sexual harassment and violence are clearly stated and it was confirmed through interviews during the audit. Workers union meetings are held at operating units. OSH meeting is held quarterly to discuss and improve on issues related to safety and health. Criterion by Summary Audit Female employees are attending Gender Committee meetings to discuss their issues. Social impact assessment was done but there is no indication of assessment period and assessing personnel details. There is no review output and conclusion of the assessment done [negative / positive] in order to take appropriate action plans. There is no clear evidence of workers and scheme RSPOPC-SUM-REPORT.F01 JULY2013

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

members and affected parties being involved in the process. The assessment done as and when with no specific time frame. As such a minor NC was raised. There was also overcrowding in the labour quarters and furnishings were found to be inadequate. As such a minor NC was raised. MA

6.1

MA

6.2

MA

6.3

MA

6.4

MA

6.5

RSPOPC-SUM-REPORT.F01 JULY2013

Social impact assessment was done but there is no indication of assessment period and assessing personnel details. Non-restrictive format incorporating elements spelt out in this criterion were shown; however it was not done in participatory way. The latest social assessment was done on 22/11/2012 for awarding new worker's quarters but the assessment method and input need further enforcement with more variety of questions. There is no review output and conclusion of the assessment done [negative / positive] in order to take appropriate action plans. There is also no clear evidence of workers and scheme members and affected parties being involved in the process. The assessment was also done on an ad-hoc basis with no specific time frame. A minor Nc is raised. SOP 1.0 Stakeholder Engagement dated 1.4.2012 rev 1 is shown as a documented consultation and communication procedure. The mill and estates are using a complaint form for handling any complaint and grievances. Mill and estate maintain records of any stakeholder that effected by the mill and estates. In the estate a representative for handling complaint and grievance in nominated. However there is no clear nominated person in the mill that handles complaints and grievances. SOP 1.0 Stakeholder Engagement dated 1.4.2012 rev 1 is shown as the documented grievance procedure. The respective estate and mill managers are the appointed person to execute the task. The date, time, location, name, contact phone number, details of complaint, person who recorded the complaint and action taken are being recorded for each complaint received. Evidence sighted during the audit shows that complaints are effectively and timely resolved in an appropriate manner. The procedures on negotiation on purchase of land from the owners have been developed and document of compensation of land owner is clear and well kept. No negotiations concerning compensation for loss of legal or customary rights were carried out as there were no customary rights that were identified. The Malaysian workers are covered by Kadar Upah Pekerja Ladang (Payment rates for estate workers). RM 200 [Special Gratuitous Payment - SGP] as per circulation from MAPA [36/2011] dated on 09/09/2011 is being paid according to criteria spelled in the memo dated on 30/09/11. For local workers full payment will be paid but as for foreign workers only RM 100 paid and another RM 100 transferred to employee's account for savings. The rate of wage is determined by the collective agreement by the estate and the workers union. All wage related information is effectively mentioned in the contract agreement. Pay wages & slip are evident and employees know the content of the payslip. 1 unit of labour quarters should be occupied by 6 workers. However the audit team found 10 workers in a harvester quarter [W43] during the site visit. The quarters were also not adequately furnished. Electricity is supplied by TNB. Water is supplied by company treated and used to estate and workers use. Sanitation was found to be adequate during the field visit. Workers housing

Page 26 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

MA

6.6

MA

6.7

MA

6.8

MA

6.9

MA

6.10

MA

6.11

also provided drinking water. There was also no unauthorized extension. With this, a minor NC is raised. There are no National Union of Plantation Workers (NUPW) members but they have their own Workers Union and they do conduct internal meetings with the union representative. Minutes of meeting with worker reps are recorded. Meeting with worker representatives are also done through the various committees (e.g.: OSH Committee and Sexual Harassment Committee). The company has been created and implemented the minimum age policy as stated in “Child employees” policy. According to interviews with workers and staff and document review, it is confirmed that no children below 16 years old are working in the estate or mill. Policy of equal opportunities is publicly displayed in the office and at the linesite. Interviews with workers revealed that the company has implemented equal opportunities policy for all workers, including migrant workers. The records of pay slips of both local and foreign worker show that there is no discrimination against them as the pay rate is exactly the same. Also, it is noted that the worker can get promotion to be a staff. The company has a policy regarding sexual harassment and violence. According to the interview with workers and document review of monthly checklist for women workers, there are no cases of sexual harassment and violence that has happened. There is also a quarterly meeting for women association which, at which the policy is included on the agenda. All the calculations for FFB price is done by Head Office using a formula that is based on OER and cost of production. Procedure of FFB price calculation is evident. The prices are displayed on the notice board at the palm oil mill. Contractual agreements include contractor’s details, pricing, term and condition for work and payment which are done through HQ. Interview with suppliers during stakeholder consultation confirmed that they understand the procedure. All payments are made in a timely manner. Payments are made by head office in the first week of every month. The whole ethos is to help with the development of local communities. Schools, houses, sports facilities and medical facilities were provided. Road repair works is being done once in 3 months.

The request by neighbouring residents for furniture for the mosque was granted on 16/07/12. The company has also provided financial support for the Tamil Primary School Principle 7: Responsible Development of New Plantings Not applicable as there is no new plantings were carried out to any of the Criterion by supply bases listed above which falls within this Changkat Chermin Summary Audit certification scope. Above table on planting age denotes re-planting. Principle 8: Commitment to Continuous Improvement in Key Areas of Activity The audit team found evidence in the field, document checks and interviews Criterion by with stakeholders that estates and mill are proactive and firmly committed to Summary Audit continuous improvement in the areas of social, environment and economic viability. MA 8.1 The continuous improvement plan set by the company was verified. Among the improvements noted were: The ban of the use of Paraquat. Environmental Impact Assessment has carried out to study impact of the RSPOPC-SUM-REPORT.F01 JULY2013

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

operations towards the environment. There are mitigation plans to reduce of pollution 4.3 Non-conformity Raised During this Audit and Any from the Previous Year, if applicable This section gives an over view of new or revised non-conformities raised during this audit and of action taken to close out non-conformities raised during the previous audits, if applicable  If a minor-non-conformity raised at the last audit, is not closed out, then this will be raised to Major status and the company given 60 days to close this out.  The NC number is comprised of 2 parts to include the year in which the NC was raised as well as a sequential number. 4.3.1 Non-Conformities Identified during this Audit NON CONFORMITY REPORT NC number: 01/2012 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Major or Minor: Major (CLOSED) Raised by: Simon Selvaraj Aspect of standard: 1.2.1 Documents that must be publicly available include: Land titles/user rights (criterion 2.2). Evidence of non-conformity: The Palm Oil Mill failed to provide evidence that the original land titles are publicly available on request. They are kept in a file that is marked as ”confidential” and also in the master list it is marked as “confidential”. Pinji Estate: The land title documents are not publicly available on request. Auditors signature:

Date: 30-11-2012 Proposed corrective action / improvement action by company. The company will look into this matter and discuss with top management will revise the said document accordingly. Timeline for conformance: Since this is a main assessment, the time line agreed is 4 months, (120days).

RSPOPC-SUM-REPORT.F01 JULY2013

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Review of corrective /improvement action: Publicly available list provided and SOP on reference document list amended with revision on status or type of availability documents. Therefore, this major NC is closed.

Assessors signature:

Date: 10/4/2013

NON CONFORMITY REPORT NC number: 02/2012 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Major or Minor: Major (CLOSED) Raised by: Simon Selvaraj Aspect of standard: 5.2.1: Identification and assessment of HCV habitats and protected areas within landholdings; and attempt assessments of HCV habitats and protected areas surrounding landholdings. 5.2.2 Management plan for HCV habitats (including ERTs) and their conservation. Evidence of non-conformity: 5.2.1: Mill: In the mill itself no rare, threatened and endangered species are present. The area is covered by the HCV assessment made by the Changkat Chermin estate. Estates: All estates have not formally assessed HCV and ETR species. They used their own knowledge. There is no consultation with experts. Some estates have HCV present. The HCV assessment is not performed according to the SOP that prescribes the use of the Malaysian interpretation on HCV. 5.2.2: Mill: N/A Estates: No formal assessment was done hence there was also no management plan in place. Auditors signature:

Date:30-11- 2012 Proposed corrective action / improvement action by company. Timeline for conformance: Since this is a main assessment, the time line agreed is 4 months, (120days). Review of corrective /improvement action: HCV assessment has been carried out on 26-12-12 with stakeholder consultation.to identify if the pond in area 05C constitutes an HCV. Based on discussions with stakeholders, it was verified that the pond in area 05C is not used as an economic source and not used for drinking water. It is thus confirmed that the pond in area 05C does not make up an HCV. Thus, the major NC is closed.

RSPOPC-SUM-REPORT.F01 JULY2013

Page 29 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Assessors signature:

Date: 10/4/2013 NON CONFORMITY REPORT NC number: 03/2012 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Major or Minor: Major (CLOSED) Raised by: Simon Selvaraj Aspect of standard: Criterion 4.6.5 Annual medical surveillance as per CHRA for plantation pesticide operators Evidence of non-conformity: The last annual medical surveillance for sprayers was carried out on 11-04-11 in MEDICLINIC SINARAN. The following sprayers, Ms. Kaliyamah A/P Palanisamy and Mr. Selamat Abdul Ghani last received medical check-up on that day. The next annual medical surveillance program for FY2011/12 for the same sprayers has been scheduled in December 2012, which is 7 months exceeding the one year period specified by the law and the RSPO standard. Auditors signature:

Date: 30-11-12 Proposed corrective action / improvement action by company. Timeline for conformance: Since this is a main assessment, the time line agreed is 4 months, (120days). Review of corrective /improvement action: Annual medical surveillance for Ms Kaliyamah and Mr Selamat has been carried out on 10.12.12. Based on the medical report and recommendation by the doctor, both the sprayers are fit for work. A revision took place on medical planning for all workers in order to monitor and to ensure no exceeding on time line. With this, the major NC is closed. Assessors signature:

Date: 10/4/2013

RSPOPC-SUM-REPORT.F01 JULY2013

Page 30 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

NON CONFORMITY REPORT NC number: 04/2012 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Major or Minor: Major (CLOSED) Raised by: Simon Selvaraj Aspect of standard: Criterion 4.7.1 A health and safety policy, which is implemented and monitored. Evidence of non-conformity: 

The adverse risk for the newly introduced fertilizer [Taiko 61] was not identified through risk assessment.



All PPE is provided by office staff. However an inventory list of PPE to monitor the stock level is not maintained.



MSDS is not understood by local workers at chemical storage area as it was not available in the local language [Bahasa Malaysia].

 First aid kit needs to be equipped with an inventory list. Auditors signature:

Date: 30-11-12 Proposed corrective action / improvement action by company. Timeline for conformance: Since this is a main assessment, the time line agreed is 4 months, (120days). Review of corrective /improvement action: Risk assessment was carried out to identify, assess and control the risks for the introduction of the new fertilizer (Taiko 65). PPE distribution list is available with the inventory list. MSDS is now available in both Bahasa Malaysia and English. First aid kits also have been maintained with inventory list. With that this major NC is closed. Assessors signature:

Date: 10/4/2013 NON CONFORMITY REPORT NC number: 05/2012 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Major or Minor: Minor RSPOPC-SUM-REPORT.F01 JULY2013

Page 31 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Raised by: Simon Selvaraj Aspect of standard: Criterion 6.1.1 A documented social impact assessment. Evidence that the assessment has been done with the participation of affected parties. Participation in this context means that affected parties are able to express their views through their own representative institutions during the identification of impacts, reviewing findings and plans for mitigation, and monitoring the success of implemented plans. Evidence of non-conformity: 

Social impact assessment was done but there is no indication of assessment period and assessing personnel details.



Latest social assessment was done on 22/11/2012 for awarding new worker's quarters but the assessment method and input need further enforcement.



There is no review output and conclusion of the assessment done [negative / positive] in order to take appropriate action plans.



The assessment was done on an ad-hoc basis with no specific time frame.

Auditors signature:

Date: 30 -11- 12 Proposed corrective action / improvement action by company. Timeline for conformance: To be verified during the next annual surveillance audit NON CONFORMITY REPORT NC number: 06/2012 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Major or Minor: Minor Raised by: Simon Selvaraj Aspect of standard: 5.1.1 Documented aspects and impacts risk assessment that is periodically reviewed and updated. Evidence of non-conformity: Mill/Estates: All visited sites have an EIA. However, stakeholder consultation was not done in relation to input for the EIA. Stakeholders were informed about the results and were asked to respond. The Stakeholder processes are documented. The stakeholder input in the process is limited. In all cases the only input for the EIA is the knowledge of staff and employees of the company. The EIA is limited in for example the hazards description: 4) Water pollution is mentioned in relation to the workshop, but it is not clear whether it relates to oil, chemical pesticides or other sources of pollution. 5) Human activities cause water and air pollution but how it is causing an impact not specified. The root cause RSPOPC-SUM-REPORT.F01 JULY2013

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

is not clearly detected. 6) In most cases the landfill is not included. When interviewing the staff, it is clear that there is far more information available than presented in the EIA. In general the KLK format is not made specific enough for each site and misses details on where, what, when, how, why and who. However all visited sites do have an EIA. Auditors signature:

Date: 30-11- 2012 Corrective action Taken To be verified during the next annual surveillance audit NON CONFORMITY REPORT NC number: 07/2012 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Major or Minor: Minor Raised by: Simon Selvaraj Aspect of standard: Criterion 2.1.1 Evidence of compliance with relevant legal Indicators. Evidence of non-conformity: 

Latest applicable list available but there needs to be control on the establishment information [date/rev] as well the approval process and to address only the applicable laws.



Insufficient records available to demonstrate the conformity that applicable laws are made aware to stakeholders.



No evidence of the applicable laws discuss internally.



Reviewing process by those responsible PIC need further enhancement.

Auditors signature:

Date: 30-11-2012 Corrective action Taken To be verified during the next annual surveillance audit

RSPOPC-SUM-REPORT.F01 JULY2013

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

NON CONFORMITY REPORT NC number: 08/2012 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Major or Minor: Minor Raised by: Simon Selvaraj Aspect of standard: Criterion 4.1.2 Records of monitoring and the actions taken are maintained and kept for a minimum of 12 months. Evidence of non-conformity: Changkat Chermin Estate: The Standard Operating Procedure for water sampling was established on 01-042013. The sampling of river water, raw & treated water as well as domestic waste water is to be conducted at a frequency of once in every 4 months and water analysis will be done by TQCC. However, the first water sampling was conducted in Nov-2012, 7 months after the establishment of the SOP. This was verified through the official letter sent by Ladang Changkat Chermin to TQCC on 16-11-2012. The result of analysis is still not available on the date of this audit. Pinji estate: Based on the water treatment results on 05-07-12, it was verified that the raw water, treated water and waste water from the line site was tested for pH, Total Coliform and E-coli and the results within the standard limit. However, the waste water from the line site was not tested for the BOD parameter. Auditors signature:

Date: 30-11-2012 Corrective action Taken To be verified during the next annual surveillance audit NON CONFORMITY REPORT NC number: 09/2012 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Major or Minor: Minor Raised by: Simon Selvaraj Aspect of standard: 5.1.2 Environmental improvement plan to mitigate the negative impacts and promote the positive ones is developed, implemented and monitored. Evidence of non-conformity: Mill/Estates: There are negative impacts identified. It is not possible however to decide whether the root cause is addressed as the EIA lacks details. The EIA’s give the impression that effects are addressed, not the root cause. There is no consistent monitoring of environmental impacts. Therefore it is not clear whether negative effects are mitigated and improvements are made. In general the KLK format is in place, but not made specific enough, in some cases not completely filled in and mitigating measures are not always implemented, monitored and clearly addressing the root cause. Also all visited sites implement many improvements and mitigating measures, however the documentation and link with the EIA is missing. RSPOPC-SUM-REPORT.F01 JULY2013

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Auditors signature:

Date: 30-11-2012 Corrective action Taken To be verified during the next annual surveillance audit NON CONFORMITY REPORT NC number: 10/2012 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Major or Minor: Minor Raised by: Simon Selvaraj Aspect of standard: 5.3.1: Documented identification of all waste products and sources of pollution. Evidence of non-conformity: 5.3.1: Mill: Office waste and mill waste is separated into glass, paper and plastic. Different bins for different waste are in place. However the identification of all waste of the mill and estates is incomplete as it not includes among others the glass, paper and plastic. So not all waste is identified, not all is documented and not all waste is disposed of in the prescribed way. For example waste water that is leaving the mill is not identified and recyclable waste is not identified. Estates: Like the Mill the estates have a system in place. However most estates do not have a complete waste identification either. In most cases the recycling of glass, paper and metal is not incorporated in the plan. In general: the mill and estates implement more than they document, but the identification is not complete.

Auditors signature:

Date: 30-11-2012 Corrective action Taken To be verified during the next annual surveillance audit NON CONFORMITY REPORT NC number: 11/2012 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Major or Minor: Minor Raised by: Simon Selvaraj Aspect of standard: 5.3.2: Having identified wastes and pollutants, an operational plan should be developed and RSPOPC-SUM-REPORT.F01 JULY2013

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

implemented, to avoid or reduce pollution. Evidence of non-conformity: 5.3.2: Mill: Not all waste is identified and documented and not all waste is disposed of in the prescribed way. For example: 5) Waste water that is leaving the mill is not monitored 6) Amount of recyclable waste is not registered 7) Amount of domestic waste going to landfill is unclear 8) There are wastes found in the boiler ash stored in Changkat Chermin estate Estates: Some of the visited estates have evidence of inappropriate waste disposal at several locations in the estates. 4) The landfill of Pinji estate and Glenealy estate consists of waste that, according to company procedures, shall not be disposed of in the landfill. 5) Raja Hitam estate clearly identified 5 sampling point on water monitoring including relevant parameters. Most estates however have not sufficiently identified the water sampling point and their parameters. 6) Estates that collect rubber have not identified the outlet of this collection point as waste. Also important that the farmers in the rented area underneath the power lines produce a lot of waste (Raja Hitam, Changkat Chermin), including wastes of chemical pesticides. In general: the mill and estates implement more than they document, but the identification is not complete and an operational plan for avoiding and reducing waste is not complete, consistent, implemented and objectives are partly missing. Monitoring is only for scheduled wastes and in some estates for wastewater in place.

Auditors signature:

Date: 30-11-2012 Corrective action Taken To be verified during the next annual surveillance audit NON CONFORMITY REPORT NC number: 12/2012 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Major or Minor: Minor Raised by: Simon Selvaraj Aspect of standard: Criterion 6.5.3 Growers and millers provide adequate housing, water supplies, medical, educational and welfare amenities in accordance with Workers’ Minimum Standard of Housing and Amenities Act 1990 (Act 446) or above, where no such public facilities are available or accessible. Evidence of non-conformity: 1 unit of labour quarters should be occupied by 6 workers. Nevertheless the audit team found 10 workers in a harvester quarter [W43] during the site visit. The quarters were also not adequately furnished. RSPOPC-SUM-REPORT.F01 JULY2013

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RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Auditors signature:

Date: 30-11-2012 Corrective action Taken To be verified during the next annual surveillance audit 4.3.2 Observations Raised During this Audit Observation 1 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Raised by: Simon Selvaraj Aspect of standard: Criterion 4.7.2 Recording of occupational injuries. Suggested calculation: Lost Time Accident (LTA) rate (either specify acceptable maximum, or demonstrate downward trend). Evidence of non-conformity: It was verified that latest accident record occurred on 22/10/2012. The incident involved a harvester by the name of Mr. Ahmad Baidi [employee number AR 467812] whose motorbike fell on his feet. The 22 man-days that was lost as a result of this accident was not tabulated in the LTA calculations. Auditors signature:

Date: 30-11-2012 Observation 2 Client name: Kuala Lumpur Kepong Berhad Date raised: 30-11-2012 Raised by: Simon Selvaraj Aspect of standard: Criterion 1.1.1 Records of requests and responses must be maintained.

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Page 37 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Although Pinji estate did follow up on all comments and requests, they did not fully documented all stakeholder comments and requests as well as the follow up actions. The estate should maintain all these records. Auditors signature:

Date : 30-11-2012 Observation 3 Client name: Changkat Chermin Estate Date raised: 27-11-2012 Raised by: Simon Selvaraj Aspect of standard: Criterion 2.2.3.1 Evidence that boundary stones along the perimeter adjacent to state land and other reserves are being located and visibly maintained. Growers should attempt to comply with this Indicator within 15 months from date of announcement of first audit. Refer to State Land Office for examples of other reserves.. Evidence of non-conformity: Currently, the boundary of the estate is only identified through various types of trees that have been planted along the boundaries. The management is waiting for approval for land survey to demarcate the estate boundaries from the top management of the company. This is verified through the minutes of the RSPO management review meeting dated 28/02/2012.

Auditors signature:

Date: 29-11-12 4.4 Issues that were raised during the Stakeholder Consultation, if any Stakeholders were either informed by the client or by Control Union via the RSPO website.  For Main Assessments, a 30 day Stakeholder consultation announcement is published on the RSPO website prior to the audit. The same announcement is circulated by the client prior to the audit  For subsequent Annual Assessments, it is based on stakeholders reading the approved public summary reports available on the RSPO website, the client’s procedures in receiving on-going feedback or if feedback was sent directly to Control Union prior to an audit or thorough RSPO complaints procedures. During each assessment, the audit team will review the company’s implemented procedures in receiving feedback and will execute field visits and interviews. Not limited to the following questions, any feedback received is reviewed and summarized in this summary report for either Part 2 – Partial Certification or Part 4 – RSPOPC-SUM-REPORT.F01 JULY2013

Page 38 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Assessment Findings above or noted below, if applicable: 1. Do you have any remarks on the RSPO standard? 2. What is your relation with the applicant? 3. Are there any plantation or mill management practices that affect you? 4. Do you consider any management is in conflict with the RSPO principles and criteria? 5. Do you have any suggestions for management? 6. Are you aware of any HCV in the plantations or in adjacent land? 7. Are you aware of any endangered or rare species? 8. Are there any adverse (or positive) effects on local communities? 9. Additional comments? 11. Do you have any comments about the assessment team and would you like to meet with them? 12. Do you have any comments for the client’s management of any other plantations? Subject raised Company response and Audit team findings proposed action to be taken Suppliers complained that some The company responded that Record of calibration was verified of the spraying measurement modification is done out of containers have been modified. necessity. Calibration has also been done for the containers. Internal stakeholder complained Company is aware about this Record of medical surveillance of that the new fertilizer used is issue. Content of fertilizer is not workers that have been involved in affecting workers health. in within specification. Company manuring was verified. Company has has stopped using this type of taken action on this issue fertilizer. Representatives from the local Company will arrange a meeting To be verified during the next community complained about with their workers to inform surveillance visit foreign workers abusing local them about this matter. community. There are complaints that the estate vehicles are driven exceeding the speed limit. The Agricultural Department complained that estate tractor and backhoe drivers do not have legal licence to operate those heavy vehicles. Workers complained about the main gate at Kuala Kangsar estate was locked on Sunday. Workers unable to enter estate. There were complaints that Class 1 and Class 2 pesticides were used in the estate. A worker complained about the culvert near her house that is too small and this resulted in floods near her house during heavy downpour.

RSPOPC-SUM-REPORT.F01 JULY2013

Company will arrange a meeting with their drivers to inform them about this matter. Company has given training to their tractor drivers before they can drive them. Tractor driver There is no compulsory need for legal license if the tractor is driven in the estate. Company said on Sunday the gate was closed to avoid damage to the new bridge that was being built there. Company is not using Class 1 and Class 2 pesticides.

Company will investigate the complaint and will come out with plan to mitigate flood near the workers house.

To be verified during the next surveillance visit Record of training for tractor drivers was verified.

No issue

During the site visit to the estate, it was verified through the record of purchase that Class 1 and 2 pesticides were not used. To be verified during next surveillance audit

Page 39 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

PART 5: RSPO SUPPLY CHAIN CERTIFICATION The palm mill mentioned in the scope of the audit was audited against the requirements of the following: RSPO Supply Chain Certification Systems. November 2011. RSPO Supply Chain Certification Standard. November 2011. 5.1 POM Included In The Scope Of The Audit Name Mill Location Palm Oil Mill Capacity (POM) MT/Hour Address Changkat Chermin 60 Batu 13 ½, Ayer Tawar, Perak POM

Supply Chain Model (IP or SG or MB) IP

5.2 Confirmation Of The Company’s Summary Of Annual Certified Volume Of RSPO Certified Palm Oil And Palm Kernel Over A Specified Period Product CPO (MT) PK (MT) Specified 12 month period CU Code Forecasted volumes between 1/12/2012 to 30/11/2013. POM 1 46,448 9,595 See also 1.6 above. 5.3 Summary Report Including A Brief Description Of The Scope Of Certification Changkat Chermin palm oil mill receiving FFB from own supply base and processed into CPO and Palm Kernel as a product using RSPO SCCS IP model. The mill is able to handling certified product as all system procedure is in place. Furthermore, all the workers was trained with the RSPO SCCS requirement.A full RSPO SCCS certification audit was used during this annual assessment and the findings support the certification based on supply chain model listed above. 5.4 Final Certification decision by Control Union for the RSPO SCCS Audit of the POM Recommendations made: Yes Summary of nonNo non-compliance found. compliances: Certification status of client: The POM included in the scope of this audit demonstrated full compliance with the RSPO SCCS. With effect from the certification date given in the RSPOPC certificate, this POM mentioned in the scope of this report is considered to be certified in accordance with the RSPO SCCS.

RSPOPC-SUM-REPORT.F01 JULY2013

Page 40 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

PART 6: CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY 6.1 Date of next ASA The provisional date for the next ASA is:

6.2 Date for Closure of Non-Conformities See sections above for details of NC’s, if any  All major NCs to be closed by:  All minor NCs to be closed by:

Between 9 -12 months from the certification decision date.

All Major raised is closed Before next surveillance audit

6.3 Signing by the Client I the undersigned, being the most senior relevant management representative of the operation seeking or holding certification, agree with the contents and audit findings as presented in this document . I also confirm:  Acceptance of liability in execution of the instructions given.  That this company was made aware that the findings of the audit team are tentative; pending review and decision making by the duly designated representatives of Control Union Certifications.  That during the closing meeting all agenda items was covered by the Lead Auditor. Acknowledged by: Name: Position: Date:

Mr. Sin Chuan Eng Head of Sustainability (Plantations) 29/04/2013

Signature

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

Simon Selvaraj Lead Auditor 30/04/2013

Signature

6.5 Signing by the Certifier I the undersigned, being the Certifier, confirm that the information and conclusions included in this report have been prepared in good faith and that the certification decision has been based upon this information. Acknowledged by: Name: Position: Date:

Hari Naveen Christopher Certifier 28/05/2013

RSPOPC-SUM-REPORT.F01 JULY2013

Signature

Page 41 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

PART 7: APPENDICIES Appendix 1: Location Map for this Certification Unit From 1.9, the location map(s)

RSPOPC-SUM-REPORT.F01 JULY2013

Page 42 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

RSPOPC-SUM-REPORT.F01 JULY2013

Page 43 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700

RSPO Principles & Criteria Main Assessment Report Report Number CU820909

Appendix 2: List of Abbreviations BRC British Retail Consortium CHRA Chemical Health Risk Assessment CoC Chain of Custody CPO Crude Palm Oil CSR Corporate Social Responsibility CU Control Union CUC Control Union Certifications DOE Department of Environment EFB Empty Fruit Bunch EIA Environment Impact Assessment ERT Endangered Rare or Threatened species EU European Union FFB Fresh Fruit Bunch FSC Forest Stewardship Council FSC COC Forest Stewardship Council Chain of Custody FSC FM Forest Stewardship Council Forest Management GGL Green Gold Label GMP Good Manufacturing Practice GOTS Global Organic Textile Standard GTP Good Trading Practice GPS Global Positioning System HACCP Hazard Analysis and Critical Control Point HCV High Conservation Value HCVF High Conservation Value Forest IPM Integrated Pest Management JAS Japanese Agricultural Standard MDC MDC Publishers Sdn Bhd ( Company Name) MSDS Material Safety Data Sheet NC Non Conformity OE Organic Exchange OSH Occupational Safety and Health OSHAS Occupational Safety and Health Assessment Scheme P&C Principle and Criteria PEFC Programme for the Endorsement of Forest Certification PK Palm Kernel POME Palm Oil Mill Effluent PPE Personal Protective Equipment RSPO Roundtable on Sustainable Palm Oil RSPO NI Roundtable on Sustainable Palm Oil National Interpretation SA8000 Social Accountability 8000 Sdn Bhd Sendirian Berhad SIA Social Impact Assessment SOCSO Social Security Organisation SOP Standard Operating Procedure USDA/NOP United States Department of Agriculture – National Organic Program MT Metric Tonnes WHO World Health Organization

RSPOPC-SUM-REPORT.F01 JULY2013

Page 44 of 44 Control Union (Malaysia) Sdn. Bhd. 150-A, 1st Floor, Persiaran Raja Muda Musa, Off Jalan Sg Bertih, Teluk Gadong, 41100, Klang, Selangor. Malaysia. Tel: +603-3377 1600 / 1700