Audit Report - Roundtable on Sustainable Palm Oil · 2.3 Qualification of the Lead Auditor and Audit Team ... (Koperasi Unit Desa) Audit Report ... The purpose of this audit report

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ACTIVITY ID :Activity_ID QEF08C.10 / Issue Date: 2012-Jan-15 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 1 of 73

Audit Report

Surveillance Audit for PT. Tapian Nadenggan, Hanau Mill and Its Supply Bases RSPO20009 RSPO Membership number: 100.190.500000 Audited Address: Hanau Mill:

Kecamatan Hanau, Kabupaten Seruyan, Kalimantan Tengah

Its Supply Bases:

Hanau Estate:


Tasik Mas Estate:


Tanjung Paring Estate:

Kecamatan Batu Ampar, Kabupaten Seruyan, Kalimantan Tengah

Langadang Estate:

Kecamatan Batu Ampar, Kabupaten Seruyan, Kalimantan Tengah

Date of audit: 27/07/2013

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QEF08sa.RSPO.01 / Issue Date: 2013-May-31 © SAI Global Indonesia Copyright 2009 Page 2 of 73

Table of contents Page

Executive Overview 3

Abbreviations Used 3

1.0 SCOPE OF THE CERTIFICATION ASSESSMENT

1.1 Introduction 5

1.2 Audit Objective 5

1.3 Scope of Certification 5

1.4 Location of Mill and Estates 6

1.5 Description of Supply Base 8

1.6 Date of Plantings 8

1.7 Other Certificates Held 9

1.8 Organisational Information/Contact Person 9

1.9 Time Bound Plan for Other Management Units 9

1.10 Area of Plantation 11

1.11 Approximate Tonnages Offered for Certification (CPO and PK) 11

1.12 Partial Certification Requirements 11

1.13 Date of Issue of Certificate 13

2.0 AUDIT PROCESS

2.1 Certification Body 13

2.2 Audit Methodology 14

2.3 Qualification of the Lead Auditor and Audit Team Members 14

2.4 Stakeholder Consultation 15

2.5 Date of Next Surveillance Visit 16

3.0 AUDIT FINDINGS 16

3.1 Action taken on previous audit issues 16

3.2 Claim and use of certification mark and or logo 16

3.3 Summary of findings 16

3.4 Recommendation 48

3.5 Environmental and social risk for this scope of certification for planning of the surveillance audit

48

3.6

Acknowledgement of Internal Responsibility and Formal Sign-off of Assessment Findings

49

List of Tables

Page

1 Mill and Estates GPS Locations 6

2 Organisation FFB Production 8

3 Age Profiles of Planted Palms 8

4 Other Certificates Held by Mill and Estates 9

5 RSPO Certification Time Bound Plan of 10

6 Estates and Area Planted 11

7 Plantation Hectare Statement 11

8 List of internal and external stakeholder 15

9 Certified FFB received, CSPO and certified PK produced, CSPO and certified PK sold (under GreenPalm and UTZ system) 2012

46

10 Certified FFB received, CSPO and certified PK produced, CSPO and certified PK sold (under GreenPalm and UTZ system) until May 2013

46

11 Certified FFB received, CSPO and certified PK produced estimation June to December 2013

46

List of Figures Page

1 Map of Mill and Estates Location 7

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List of Appendices Page

A Audit Record 50

B Previous nonconformities, corrective actions and status 52

C Nonconformities, Corrective Actions and Observations Summary 63

D Stakeholder‟s issues and comment 66

E Definition of, and action required with respect to audit findings 70 Executive Overview

SAI Global has audited PT. Tapian Nadenggan Hanau Mill and Its Supply Bases operations comprising one mill, four oil palm estates, support services and infrastructure. PT. Tapian Nadenggan Hanau Mill operation was found complies with the requirements of the National Interpretation of RSPO Principles and Criteria for Sustainable Palm Oil Production, Republic of Indonesia, May 2008 and the RSPO Supply Chain Certification System, November 2011 and RSPO Supply Chain Certification Standard, Module E – CPO Mill: Module E Mass Balance November 2011. The recommendation from this audit is that continuation of certification for PT. Tapian Nadenggan Hanau Mill and Its Supply Bases as a producer of RSPO Certified Sustainable Palm Oil and Palm Kernel is issued. Abbreviations Used

AAA Agronomy Advisory Audit AMDAL Environmental and Social Impact Analysis (Analisis Dampak Lingkungan) BHL Daily basis paid workers (Buruh Harian Lepas) BKM Log book of group leader activity (Buku Kegiatan Mandor) BLH Local Agency of Environmental (Badan Lingkungan Hidup)

BOD Biological Oxygen Demand BPN National Land Agency (Badan Pertanahan Nasional) CEO Chief Executive Officer CO Carbon Monoxide COD Chemical Oxygen Demand CPO Crude Palm Oil CSR Corporate Social Responsibility D&L Document and Legal EFB Empty fruit bunches FFB Fresh Fruit Bunch GAR Golden Agri-Resources Limited GPS Global Positioning HCV High Conservation Value HGB Building Use Title (Hak Guna Bagunan) HGU Land Use Title (Hak Guna Usaha) HNAE Hanau Estate HNAM Hanau Mill HPH Forest Authority Concession (Hak Penguasaan Hutan)

IDR Indonesian Rupiah IMT PT. Ivo Mas Tunggal IPM Integrated Pest Management ISO International Standards Organisation IUP Plantation Operation Permit (Izin Usaha Perkebunan)

KCP Kernel Crushing Plant KUD Village Unit Cooperatives (Koperasi Unit Desa)

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kWH Kilo Watt Hour LD Lethal Dosage LNGE Langadang Estate LOTO Lock out tag out MAA Mill Advisory Audit MCAR Management Committee Agronomy and Research MSDS Material Safety Data Sheet MT Metric Ton NGO Non Government Organisation OHS Occupational Health and Safety OIA Operation Internal Audit P2K3 Safety Commitee PK Palm Kernel PKB Mutual Working Agreement (Perjanjian Kerja Bersama) PKWT Contracted worker (Pekerja Waktu Tertentu)

POM Palm Oil Mill POME Palm Oil Mill Effluent PP Company Regulation (Peraturan Perusahaan)

PPE Personal Protective Equipment PSM Sinar Mas Estate (Perkebunan Sinar Mas)

RABQSA Quality Society of Australia RKL Environmental Management Plan (Rencana Pengelolaan Lingkungan) RPL Environmental Monitoring Plan (Rencana Pemantauan Lingkungan)

RSPO Roundtable on Sustainable Palm Oil SA Social Accountability SCCS Supply Chain Certification System SHM Land Own Title (Surat Hak Milik) SIA Social Impact Assessment SKU Permanent worker (Syarat Kerja Utama)

SMD Senior Managing Director SMARTRI SMART Research Institute SOP Standard Operation Procedure SPM Independent Worker Union (Serikat Pekerja Mandiri)

TLV Threshold Limit Value TMSE Tasik Mas Estate TPRE Tanjung Paring Estate TSS Total Suspended Solid VPA Vice President of Agronomy

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1.0 SCOPE OF THE CERTIFICATION ASSESSMENT

1.1 Introduction

SAI Global conducted an audit of PT. Tapian Nadenggan Hanau Mill and Its Supply Bases on 21/06/2013, 24/06/2013 to 27/06/2013. The purpose of this audit report is to summarise the degree of compliance with the relevant criteria, as defined on the cover page of this report, based on the evidence obtained during the audit of PT. Tapian Nadenggan Hanau Mill. SAI Global audits are carried out within the requirements of SAI Global procedures that also reflect the requirements and guidance provided in the international standards relating to audit practice such as ISO/IEC 17021, ISO 19011, RSPO Certification System, relevant RSPO Supply Chain Certification System and other normative criteria. SAI Global Auditors are assigned to audits according to industry, standard or technical competencies appropriate to the organisation being audited. Details of such experience and competency are maintained in our records. The audit team is detailed in the attached audit record. In addition to the information contained in this audit report, SAI Global maintains files for each client. These files contain details of organisation size and personnel as well as evidence collected during preliminary and subsequent audit activities (Documentation Review and Scope) relevant to the application for initial and continuing certification of your organisation. Details of your primary contact persons and their contact details and site addresses are also maintained. Please take care to advise us of any change that may affect the application/ certification or may assist us to keep your contact information up to date, as required by SAI Global Terms and Conditions. Please note that this report is subject to independent review and approval. Should changes to the outcomes of this report be necessary as a result of the review, a revised report will be issued and will supersede this report. 1.2 Audit Objective

The purpose of this audit was to determine continuing compliance of your organization‟s management system with the audit criteria; and it‟s effectiveness in achieving continual improvement and system objectives.

Also to verify the volume of certified and uncertified FFB entering the mill and volume sales of RSPO certified producers 1.3 Scope of certification

The scope of certification is the CPO and PK production from one (1) Palm Oil Mill and FFB supply bases comprising four (4) estates owned by PT. Tapian Nadenggan. One supply base owned by PT. Tapian Nadenggan – Medang Sari Estate is excluded from scope of certification. Hanau Mill PT. Tapian Nadenggan Kecamatan Hanau, Kabupaten Seruyan, Central Kalimantan, Indonesia Annual production: CPO/year: 90,941.832ton and PK/year: 21,871.273ton Hanau Estate PT. Tapian Nadenggan

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Kecamatan Hanau, Kabupaten Seruyan, Central Kalimantan, Indonesia Tasik Mas Estate PT. Tapian Nadenggan Kecamatan Hanau, Kabupaten Seruyan, Central Kalimantan, Indonesia Tanjung Paring Estate PT. Tapian Nadenggan Kecamatan Batu Ampar, Kabupaten Seruyan, Central Kalimantan, Indonesia Langadang Estate PT. Tapian Nadenggan Kecamatan Batu Ampar, Kabupaten Seruyan, Central Kalimantan, Indonesia 1.4 Location of mill and estates

PT. Tapian Nadenggan mill and estates are located in Central Kalimantan Province. The geographical coordinate of the mill and estates are shown on Table 1.

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Table 1: Mill and Estates GPS Locations

MILL AND ESTATE EASTING NORTHING

HNAM 112° 6' 35" 2° 21' 39"

HNAE 112° 6' 33" 2° 24' 41"

TMSE 112° 5' 34" 2° 20' 29"

TPRE 112° 7' 57" 2° 16' 49"

LNGE 112° 6' 28" 2° 14' 5"

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Figure 1 Map of Mill and Estates Location

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1.5 Description of supply base

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

Table 2: FFB Production of the supply base 114313.46

ESTATE TOTAL AREA (HA) PLANTED AREA (HA) FFB (TON/YEAR)

HNAE 4,552.19 4,199.37 114,313.46

TMSE 4,857.30 4,286.72 118,745.18

TPRE 4,418.34 3,966.12 97,855.57

LNGE 2,215.71 2,039.07 49,300.09

Source: Data from PT. Tapian Nadenggan in July 2013

1.6 Date of plantings

Table 3: Age Profiles of Planted Palms

YEAR HNAE (HA)

TMSE (HA)

TPRE (HA)

LNGE (HA)

SUM (HA)

% OF PLANTED

AREA

1995 179.61 179.1 1.24

1996 2,398. 03 652.81 3,050.84 21.05

1997 1,621.73 2,263.44 378.20 4,263.37 29.42

1998 1,161.39 559.36 1,720.75 11.87

1999 209.08 1.706.13 1,915.21 13.22

2000 129.85 129.85 0.90

2004 903.55 903.55 6.23

2005 597.60 348.65 946.25 6.53

2006 657.91 657.91 4.54

Total Prime Mature (7-18)

4,199.37 4,286.72 3.241.29 2,039.96 13,767.34 95.00

2007 724.83 724.83 5.00

2008

Total Young Mature (3-6)

724.83

Total Planted Area 4,199.37 4,286.72 3,966.12 2,039.96 14,492.17 100

Source: Data from PT. Tapian Nadenggan in March 2012

1.7 Other certificates held

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Table 4: Certificates Held by Mill and Estates

MILL/ESTATE OTHER CERTIFICATION HELD

HNAM Green Level of PROPER (Compliance assessment from Ministry of Environment) , period 2011 – 2012

ISCC by GutCert, Certification number: EU-ISCC-Cert_DE104-07781213, Expired date: 31 July 2013

HNAE Nil

TMSE Nil

TPRE Nil

LNGE Nil

Source: Data from PT. Tapian Nadenggan in April 2013

1.8 Organizational information/contact person PT. SMART Tbk Sinar Mas Land, Tower 2, 4th floor Jl. MH. Thamrin No. 51 Kav. 22, Jakarta 10350 Phone : (+62-21) 3181388 Fax : (62-21) 3181389 CP: Mr. Ismu Zulfikar Head of Environmental Department Email: [email protected] 1.9 Time bound plan for other management units

PT. SMART Tbk is committed to RSPO certification of all its Management Units located in North Sumatera, Jambi, Bangka, South Kalimantan, Central Kalimantan, and East Kalimantan. Time bound plan has been developed to achieve the RSPO certification for all its Management Units by 2015. The time bound plan is realistic and challenging. The plan is detailed on Table 5. The time bound plan was updated on 31 January 2013. Several Management Units was delayed to obtain RSPO certification due to RSPO Grievance Panel Process, certification audit of ISPO as requirement mandatory of Indonesian Government and ISCC. Joint statement by GAR, SMART, IMT and RSPO Grievance Panel issued 28 October 28, 2010 mentioned that until 31 March 2011, RSPO will postpone approval of SMART and IMT certification. Several Management Units planned obtaining RSPO certificate year 2013 has been audited for Stage-1 audit and several of them have not been audited yet. SAI Global accepted the reason of the delay.

Table 5: RSPO Certification Time Bound Plan

NO NAME OF MILL SUPPLY BASE COMPANY OF MILL

LOCATION ORI RSPO TIME

BOUND 2009

REVISED RSPO TIME

BOUND 2013

1 Batu Ampar Mill Batu Ampar Estate PT. SMART South 2010 2012

mailto:[email protected]

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Batu Mulia Estate Sungai Panci Estate Sungai Panci KKPA

Tbk. Kalimantan

2 Tanah Laut Mill Tanah Laut Estate Kintapura Estate

PT. SMART Tbk.

South Kalimantan

2010 2012

3 Langga Payung Mill Langga Payung Estate Paya Baung Estate Normak Estate

PT. Tapian Nadenggan

North Sumatera

2010 2012

4 Hanau Mill Hanau Estate Tasik Mas Estate Tanjung Paring Estate Langandang Estate


Central Kalimantan

2010 2012

Medang Sari Estate 2012 2015

5 Leidong West Mill Leidong West Utara Estate Leidong West Selatan Estate Bukit Intan Estate Bukit Mas Estate

PT. Leidong West Indonesia

Bangka 2011 2013

6 Semilar Mill Semilar Estate Sei Rindu Estate Mandang Estate Puri Estate


Central Kalimantan

2012 2013

7 Jak Luay Mill Pantun Mas Estate Pantun Mas KKPA Jak Luay Estate Jak Luay KKPA Long Buluh Estate Bukit Subur Estate Bukit Subur KKPA


East Kalimantan

2012 2014

8 Gunung Kombeng Mill/Muara Wahau Mill

Gunung Kombeng Estate Gunung Kombeng KKPA Muara Wahau Estate Rantau Panjang Estate Rantau Panjang KKPA

PT. Kresna Duta Agroindo

East Kalimantan

2012 2013

9 Jelatang Mill Batang Merangin Estate Kubang Ujo Plasma Pamenang Plasma


Jambi 2012 2013

20 Pelakar Mill Pelakar Estate Tiga Serumpun Estate Bukit Bungkul KKPA


Jambi 2012 2013

11 Langling Mill Bangko Inti Estate Bangko Plasma


Jambi 2012 2013

12 Sungai Bengkal Mill Sungai Bengkal Estate Batang Gading Estate Sungai Bengkal KKPA Batang Gading KKPA Kilis Estate Kilis KKPA

PT. Satya Kisma Usaha

Jambi 2012 2013

13 Bukit Kapur Mill Sungai Cantung Estate Bukit Kapur Estate

PT. SMART Tbk.

South Kalimantan

2014 2015

Source: Data from PT. SMART Tbk. in June 2013 1.10 Area of plantation

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

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Table 6: Estates and Area Planted

ESTATE MATURE (HA) IMMATURE (HA)

HNAE 4,199.37 0

TMSE 4,286.72 0

TPRE 3,966.12 0

LNGE 2,039.96 0


Table 7: Plantation Hectare Statement

AREA HECTARES

Mature area 14,492.17

Immature area 0

Total area planted 14,492.17

Emplacement, Mill, Road, etc 582.80

HCV 1,420.07

Other area (quarry, reservoir and reserve area) 131.31

Total leased area 16,043.55


1.11 Approximate tonnages offered for certification (CPO and PK)

The approximate tonnages certified are: CPO/year: 55,480.00 ton, PK/year: 13,432.00 ton 1.12 Partial Certification Requirements In general there were no new issues regarding partial certification requirements in management units which have not been certified since last SAI Global audit. One issue regarding report “Mitigation Plan and Mitigation Action on Oil Palm Plantation in Peat Lands of Central and West Kalimantan” is still in process for RSPO approval. Meeting with RSPO and growers including PT. SMART Tbk. called “RSPO Biodiversity HCV Working Group” is conducted on 17-19 June 2013 to discuss the issue. The other issues were remained the same: The British Standards Institution (BSI) has been engaged to verify the SOP and implementation against the National Interpretation of RSPO Principles and Criteria for Sustainable Palm Oil Production, Republic of Indonesia, May 2008 across all of SMART operation, i.e. PT. SMART Tbk. in South Kalimantan (15-16 June 2012), PT. Leidong West Indonesia in Bangka (3-6 May 2011), PT. Tapian Nadenggan in Central and East Kalimantan (19-23 December 2011), PT. Kresna Duta Agroindo in East Kalimantan and Jambi (8-12 August 2011 and 19-21 July 2011) and PT. Satya Kisma Usaha in Jambi (28 March – 1 April 2011). The verification was conducted in 2011. The

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assessment team were among other: Technical Expert of Ecology and Wildlife Management, Technical Expert of Social Aspects and Technical Expert of Environmental Management System. SOP and documents verified were among others: AMDAL (Environmental and Social Impact Analysis), report of RKL RPL implementation, SOP of HCV Assessment, SOP of Peat Conservation, SOP of Community Engagement, SOP of New Planting Procedure. Some of the verification reports were issued in February and March 2012. According to verification report:

No replacement of primary forest or any area identified as containing HCVs or required to maintain or enhance HCVs in accordance with RSPO criterion 7.3. There were new planting in several areas and new planting procedure has been implemented.

Land disputes were found in PT. Tapian Nadenggan and PT. Kresna Duta Agroindo. These cases have been followed up and closed out.

No labour dispute.

Minor nonconformities were found in legal compliance, e.g. environmental monitoring was not conducted inline with RKL RPL document in PT. Tapian Nadenggan and PT. Kresna Duta Agroindo. Action plan has been established and action taken is verified during internal audit.

Action plan to all nonconformities has been established and communicated to each organisation. Nonconformities have been corrected and its correction was verified during Environment Department visit to each Unit Management. Tanjung Pura University (UNTAN), Faculty of Agriculture, West Kalimantan and Palangka Raya University, Faculty of Agriculture, has been engaged to conduct the social research. The research study was conducted in 2011 to 8 organisations across of GAR and SMART operation. Report of research study was finished on June 28, 2011. The report concluded that:

Criterion 2.3: Land acquisition did not diminish the legal rights or customary rights of other users without their free, prior and informed consent. However, the negotiation process was not well recorded in writing.

Criterion 7.3: Land preparation for plantation development was not carried out in primary forest but in secondary forest, degraded land, shrub land, former logging sites or forest concessions, land previously cleared by natural fire and land left by shifting cultivators.

Criterion 7.5: New plantings were conducted with prior approval from the local people.

Criterion 7.6: Identification and evaluation of land ownership based on legal and traditional land rights were already conducted. Compensation payment was discussed in negotiations between the organization and traditional land owners witnessed by local government representatives. The presence of the organization in the rural area creates positive impacts on surrounding areas, such as creating new jobs for the local community, increasing the local community‟s income, increasing the circulation of cash in the rural market and stimulating the growth of businesses.

CSR: The organization had conducted various activities with their CSR projects in the sectors of infrastructure, health, education, disaster relief and local economy empowerment.

The report of research study is published in GAR website. GAR and PT. SMART Tbk. established Social and Community Engagement Policy on November 10, 2011. The policy was established to ensure that operations of palm oil can improve the living of the communities in its operational area. The policy covers commitment from FPIC to indigenous and local communities, responsible for complaints handling, to attain a responsible resolution of any conflicts, an open and constructive role of local, national and international stakeholders, empowerment of the community development program, respect for human rights, recognize, respect and strengthen worker‟s rights, comply with all relevant laws and regulations and principles and criteria of international recognise certification. The organisation committed to use multi-stakeholder approach in developing and in the implementation of Social and Community Engagement Policy. Besides that, Environmental Department of Head Office performs internal audit to all Management Units regularly. Action plan to all nonconformities has been established by each Management Units

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and corrective action taken was verified by Environmental Department of Head Office. SAI Global concluded that partial certification requirements have been fulfilled. 1.13 Date of issue of certificate

Date of issue of certificate: 26 September 2012 Date of previous audit: 30 January – 4 February 2012 2.0 AUDIT PROCESS 2.1 Certification body PT. SAI Global Indonesia

Graha Iskandarsyah, 4th floor Jl. Iskandarsyah Raya No. 66 C Kebayoran Baru, Jakarta 12160, Indonesia Phone : +62 21 720 6186, 720 6460 Fax : +62 21 720 6207 Contact person : Ms. Inge Triwulandari Technical Manager Email : [email protected] SAI Global is one of the world‟s leading business providers of independent assurance. SAI Global provides organisations around the world with information services and solutions for managing risk, achieving compliance and driving business improvement. We provide aggregated access services to Standards, Handbooks, Legislative and Property publications; we audit, certify and register your product, system or supply chain; we facilitate good governance and awareness of compliance, ethics and policy issues and provide training and improvement solutions to help individuals and organisations succeed. The SAI Global business is driven by two equally important client needs - the mandated need for organisations to conform to regulations, standards and legislation in all their locations, and the operational need for organisations to improve business processes and procedures as well as corporate culture. As we are a global company, we can meet these needs for any client - those operating within one country's borders and in one language or those operating across borders and in many languages.

There are three business units/divisions within SAI Global namely the Information Services Division, the Compliance Division, and the Assurance Division. The Assurance Division helps organisations manage risk, achieve process or product certification and drive improvement by providing training, registration audits and supplier management programs that can improve business performance. We provide independent audits, assessments and certification of your products or business processes to ensure they comply with industry standards or customer specific requirements. We understand how compliance with those standards can improve the efficiency, economy and profitability of your operation. With auditing and assessment staff located around the world, our clients include large global corporations as well as single site organisations. 2.2 Audit methodology

mailto:[email protected]

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The Surveillance Audit was performed on 21, 24 to 27 June 2013. The audit programme was included in the body of report. The audit methodology for collection of objective evidences is site inspection, documentation and record review and interview with staffs, workers, and other stakeholders. Objective evidences from documentation/record review in one area may also be cross checked with other objective evidences in other areas and with the evidence of implementation on site during the audit. During the audit, particular attention has been paid to previous non-conformities. The previous minor non-conformities were checked for being closed. Assessments plan has included but not be limited to areas of potential environmental and social risk. Considering previous audit findings, the mill and all supply bases were audited during this surveillance audit. Audit has paid special attention on some potential risks in the following areas:

- All environment aspects in P&C (HNAM, TMSE and LNGE) - All social aspects in P&C (HNAM, TMSE and LNGE) including progress of conflict handling

with KUD Sawit Bangkit regarding legal boundaries - All HVC aspects in P&C (HNAM, TMSE and LNGE)

2.3 Qualification of the lead auditor and audit team member Ria Gloria – Lead Auditor

Ria Gloria graduated with Bachelor of Chemical Engineering degree from Bandung Institute of Technology in 1994. She has working experience as Environmental Consultant for many years. She has completed ISO 14001 (1995), ISO 9001 (2004), RSPO P&C (2009) lead auditor training courses, RSPO SCCS (2010) and ISPO (2012) lead auditor training courses. For the last 9 years she has been involved in quality (ISO 9001) and environmental (ISO 14001) management system audits for very broad industrial and in the palm oil sector since 2003 for several plantations and mills. She has received training for good agricultural practices including integrated pest management and high conservation value (2008-2009). Eko Purwanto – Audit Team Member Eko Purwanto graduated with Bachelor degree of Forestry from Forest Conservation Department, Faculty of Forestry, Bogor Institute of Agriculture (IPB) in 2001. He has working experience at Palm Oil Plantation in East Kalimantan since 2003 to 2012 with the last position was Estate Manager. He has implementing good agricultural practice including integrated pest management and limited pesticides uses. He has completed RSPO endorsed Palm GHG Calculation training (June 2013) and lead auditor training courses for RSPO P & C (May 2013), ISO 14001 (July 2013) ISO 9001 (2012), ISPO (2012) and RSPO SC (2012). He has also completed training course of ISO 14001 (2012), Minaut Indonesia (2011) and Introduction to HCV Toolkit (2011). For the last 1 year he has been involved in quality (ISO 9001) management system audits for very broad industrial and involved in Indonesia Sustainable Palm Oil (ISPO) audit for several plantations and mills since October 2012. Anwarsyah Harahap – Audit Team Member

Anwarsyah Harahap graduated with Bachelor of Natural Forest Resource Conservation from Bogor Agriculture Institute in 2004. He has working experience as biodiversity researcher at palm oil plantation on 2007. Since 2008 to 2013, He has work experiences in palm oil plantation on Sumatra as a team member of sustainable certification task force (such as: Biodiversity and HCV management, RSPO, ISCC, ISO 14001 and ISPO) and his last position as a sustainable and Environment Officer. He has completed ISO 9001 (2013), RSPO (2013) and ISPO (2013) lead auditor training courses.

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Eri Pradhana Bharata – Audit Team Member

Eri Pradhana Bharata graduated with Bachelor of Environmental Engineering degree from Trisakti University in 2001. He has working experience as Environmental Health and Safety supervisors for many years. He has completed ISO 14001 (2011), ISO 9001 (2011) lead auditor training courses and ISPO (2012) lead auditor training courses. For the last 2 years He has been involved in quality (ISO 9001) quality management system audits for very broad industrial and ISPO audit. 2.4 Stakeholder consultation Stakeholder consultation was performed to internal and external stakeholders. Internal stakeholders included staffs and workers. External stakeholders were selected by considering that they have an interest in the organisation activities, directly border with organisation, area which the workers live. External stakeholders included governments and civil societies. Letters were also sent to external stakeholders to invite for comment or Group discussion. Group discussion with stakeholders was conducted during audit, to verify compliance against relevant criteria and indicator related to land status and conflict, environmental, social aspect and HCV. Surrounding Village of estate and mill has been chosen to represent societies. Group discussion was conducted for two sessions. First session especially for stakeholder directly affected on estate and mill around, i.e. community leaders, village heads, youth leaders and religious leader. Second session is especially for labour union, gender committee and representative worker. One on one interview was conducted for worker and its family to verify compliance against relevant criteria and indicator related to infrastructure facility, labour, social aspect (discrimination and sexual harassment), environment and HCV.

Table 8: List of internal and external stakeholder

STAKEHOLDERS METHOD OF CONSULTATION

Internal stakeholder

Head of SPM Group discussion

Head of Gender Committee Group discussion

Representative of worker (pesticides sprayer, harvester, mechanical and process section on Mill)

Group discussion

Nurse and care worker One on one Interview

External Stakeholder

Village Head/Regulatory agency of Village, Religion Leader, Young Leader, Society Leader of around village of mill and estate

Group discussion

Social, Labour and Transmigration Agency

Sending an invitation letter to comment

Forestry and Plantation Agency Sending an invitation letter to comment

Environment Agency of Seruyan Sending an invitation letter to comment

National land Agency – Badan Pertanahan Nasional (BPN) Seruyan


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District Police of Hanau Sending an invitation letter to comment

Orangutan Foundation International (OFI)


Camat Batu Ampar Sending an invitation letter to comment

Camat Danau Seluluk


Camat Hanau Sending an invitation letter to comment

See appendix C for detail of stakeholder issues and comment. 2.5 Date of next surveillance visit The next surveillance visit will be conducted around July 2014 three months before datum month of the certification period. 3.0 AUDIT FINDINGS 3.1 Action taken on previous audit issues

Minor non conformances from the previous audits have been followed up by taking corrective actions. Corrective actions have been implemented and verified. All corrective actions were considered as closed satisfactorily. No recurrence of non conformances. 3.2 Claim and use of certification mark and or logo No claim and use of certification mark and or logo 3.3 Summary of findings

PRINCIPLES 1: COMMITMENT TO TRANSPARENCY

Criterion 1.1 Oil palm growers and millers provide adequate information to other stakeholders on environmental, social and legal issues relevant to RSPO Criteria, in appropriate languages & forms to allow for effective participation in decision making. Criterion 1.1 Indicator Major 1 and 2 - Compliant

Information request and their respond were determined in a documented procedure (SOP/SPO/SMART/LH-01). Communication procedure was established and implemented by the organization. Communication procedure described follow up of information request from interested party. All information except confidential commercial information or information which has a negative impact on the environment and social can be provided by the organization. All information requests from stakeholder and their respond were listed and recorded by Mill and Estate on logbook “Record of information request and responses”. Most of requests were an invitation to follow the event held by the stakeholders, for example: invitation for memorial of

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religious holidays, invitation for area meeting from Camat, etc. And also some request from Labour Department (Dinas Tenaga Kerja), Mining and energy Department (Dinas Pertambangan dan

Energi) and District Police of Hanau. Some requests were pertinent to information labour data from Labour Department, monthly consumption of non-subsidized fuel from Mining and energy Department, labour data request from District Police of Hanau. Overall the requests from stakeholder were directly responded by the organization. Criterion 1.1 Indicator Major 3 - Compliant

Record of information and response was kept by the organisation. Retention time for records was determined minimum 5 years as mentioned in the procedure SOP/SPO/SMART/LH-02. Criterion 1.2 Management documents are publicly available, except where this is prevented by commercial confidentiality or where disclosure of information would result in negative environmental or social outcomes. Criterion 1.2 Indicator Major 1 - Compliant List of management documents are publicly available such as: Site Permit (Izin Lokasi), Land Use

Title (HGU), Plantation Operation Permit (IUP), Environmental and Environment Impact Analysis document (AMDAL), environmental management and monitoring report (RKL and RPL implementation reports), HCV Assessment report, Social Impact Assessment (SIA) Report, Implementation report of land application, report of hazardous waste, Occupational Health and Safety Management Plan, Corporate Social Responsibility (CSR) and Program Continuous Improvement Plan. Those documents were accessible and shown during this audit. Mechanism for response SOP/SPO/SMART/LH-01 information has been established. The procedure stated that company documents were publicly available. Confidential information request such as financial data, cost and revenue was described in the procedure. Top Management in Head Office Jakarta will review each request whether or not it could be followed up. When there are query from the party mentioned in the register, permit must be gained by authorised personnel indicated in the register. Criterion 1.2 Indicator Major 2 - Compliant The records of information request and its response are maintained for 5 years. Retention time of sustainable palm oil document is described in SOP/SPO/SMART/LH-02 - Control of document. PRINCIPLES 2: COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS Criterion 2.1 There is compliance with all applicable local, national and ratified international laws and regulations. Criterion 2.1 Indicator Major 1 - Compliant

The Mill and Estates have evaluated their compliance with applicable laws and regulations including valid permits (hazardous waste temporary storage and land application permit), provision of required infrastructure (waste water treatment ponds, hazardous waste temporary storage), availability of MSDS, periodic environmental parameter monitoring (stationary emission, ambient emission and ambient noise, moving source emission, waste water discharge quality and surface water quality), pesticide management, system of plant cultivation, oil palm plantation, list of flora and fauna protected, management of guard area, minimum wage, labour law, occupational safety, employee social benefit. Status of compliance with laws and regulations were evaluated, and evaluation of compliance result indicated that compliance status was justified with reference to the objective evidence of compliance. The records were sighted for period 1st and 2nd semester 2012 and 1st semester 2013.

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PROPER evaluation by Ministry of Environment has concluded that Hanau Mill granted for Green award which indicated status of their environmental legal compliance for period 2011 – 2012. Currently, employment agreement for a certain period (PKWT) was register to Labour Department on 25 June 2013. As a Noted: Progress of employment agreement register status and its implementation would be checked for next audit. Quality of surface water that used in housing at TMSE and LNGE has not been analyzed in accordance with RKL and RPL documents, immediate action has been conducted by sending samples to external laboratory for analyzing. Evaluation of compliance result indicated that compliance status was justified with reference to the objective evidence of compliance. Example: employment agreement, social Security, training programs, employment list, CSR program and its implementation, list of employees, payroll and overtime calculations, menstruation leave, result of environmental monitoring and measurement, hazardous waste manifest, etc. It was evident that the applicable laws and regulations were implemented by the organisation. Interview was conducted with the SPO Officer and related personnel at Mill and Estate to review the implementation of regulations. Criterion 2.1 Indicator Major 2 - Compliant

The Mill and Estates is being developed draft procedure SOP/SMART/CERS-EHSD/SADV/I/002 (Regulatory and Other Requirements Compliance) for revision of procedure SOP/SPO/SMART/LH-03. Procedure describes mechanism for updating latest laws and regulations and requires regular access to regulatory bodies to update information of laws and regulations. The list of regulatory bodies was covered in the list of stakeholder and its contact person. Evidence of efforts made to comply with changes in the regulations was sighted, i.e. regular contact to the government institution within the register, Environment Department of Head Office and follow up of new legal information. There were new regulations identified, e.g. PP 27/2012, PP 81/2012 and Per.MenLH 16/2012. The compliance of these new regulations has been evaluated. Evidence of efforts made to comply with these regulations was sighted, e.g. all environmental permits were obtained and wastes were segregated according to the regulations. Criterion 2.1 Indicator Minor 1 - Compliant

Valid applicable laws and regulations were registered including detail requirement applied to which Mill and Estates. Applicable legal and other requirements were registered and updated in June and December 2012 and June 2013. Criterion 2.1 Indicator Minor 2 – Compliant

Mechanism for ensuring compliance with all applicable local, national and ratified international laws and regulations was described in procedure SOP/SPO/SMART/LH-03. The procedure requires application of legal requirements to be verified every 6 months. Mechanism for ensuring compliance with all applicable local, national and ratified international laws and regulations was described in draft procedure SOP/SMART/CERS-EHSD/SADV/I/002 (Regulatory and Other Requirements Compliance). It is revision against procedure SOP/SPO/SMART/LH-03. The procedure requires application of legal requirements to be verified every 6 months. Opportunity for improvement for criterion 2.1 Mill and all Estates

It could be considered to improve report of RKL RPL implementation by conducting evaluation against initial environmental condition not just regulations as conducted in report of RKL RPL implementation 2nd semester 2011, e.g. river water quality.

It could be considered to conduct and describe worker appointment mechanism available with related law and regulations since starting work as a BHL/PKWT (contract employee to

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be SKU (permanent employee).

It could be considered to review evaluation result of compliance with regulation by not mentioning irrelevant regulation to avoid the writing mistake evaluation result of compliance.

Criterion 2.2 The right to use land can be demonstrated, and is not legitimately contested by local communities with demonstrable rights. Criterion 2.2 Indicator Major 1 - Compliant This surveillance audit was conducted to TMSE and LNGE. Document and License Department of the PT. Tapian Nadenggan keeps the original license documents. The copies of licenses are kept by Estates. Licenses document were available at Estates audited. The HGU and pertinent license were remain same for estate audited (TMSE and LNGE). Following are legal licenses reviewed during this audit. TMSE and LNGE (including TPRE):

Site permit #1016-460.42, dated 18 October 1995, +/- 15,920 Ha, permit was given to PT. Lestari Unggul Jaya (same as for HNAE) minus 4,890 Ha for HNAE become 11,030 Ha. This site permit was revised and updated with site permit #14 year 2003, this site permit mentioned that permit was transferred from PT. Lestari Unggu Jaya to PT. Tapian Nadenggan, and also mentioned in this permit that since some area are in the form of sand and then the area given in the permit was 9,100 Ha. This permit was also revised by Head of Seruyan District (Bupati Seruyan) with issuance of new site permit #45 year 2004 for a total of 12,178.308 Ha.

IUP #500/193/EK/2004, dated 22 January 2004, a total of 12,178.308 Ha for oil palm plantation.

Forest releases permit (IPKH): #19/Kpts-II/2001, dated 30 January 2001, a total of 11,860 Ha.

HGU #11, dated 15 September 2005, for a total of 12,172.111 Ha. The land owns certificates were sighted during this audit and all evident. Criterion 2.2 Indicator Major 2 – Compliant

Signboard was available at all sites audited, indicated HGU number and operation area and land title. Legal boundaries were clearly demarcated. A review to legal boundaries maintenance records at Estates audited and survey to a number of legal boundaries demonstrated that the legal boundaries were well maintained by Estates. Regular inspection of the boundary pegs had been established to be conducted every 6 months. It was also sighted that estate supervisors monitored the boundary pegs condition and reported in their log book (Buku Kegiatan Mandor – BKM).

Field visit was conducted to BPN pegs, e.g. #045, #110 and #135 that located in latitude 2º19‟48.617” longitude 112º10‟15.311”, latitude 2º12‟55.049” longitude 112º6‟21.151” and latitude 2º12‟59.669” longitude 112º5‟57.384”. Criterion 2.2 Indicator Major 3 – Compliant It was confirmed from the group discussion on 25 June 2013 with Regulatory body of Village- Badan Pengawas Desa (BPD) (Derangga, Tanjung Paring, Pembuang Hulu I, Tanjung Hara, Kalang), Society/religion/youth leaders, and enclave owner that there were no land conflict at all land within estate and mill. Based on previous audit, A part of LNGE was under conflict and occupied by the KUD Sawit Bangkit and therefore the marking of legal boundaries at this area as stated in the land use title could not been maintained and verified during this audit. Efforts to maintain legal boundaries at part of LNGE have been conducted by the organization. Communication and meeting have been conducted by KUD Sawit Bangkit and local government (Desa Sukorejo, Camat Seruyan Tengah and BPN). However KUD Sawit Bangkit still did not allow the organization to maintain legal boundaries in the area. Currently based on letter from Camat

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Seruyan Tengah, the conflict was handed over to Bupati Seruyan for permit of maintain legal boundaries. The organization is in process to follow up letter from Camat Seruyan Tengah to Bupati Seruyan to conduct mapping of conflict area for completing the data. Criterion 2.2 Indicator Minor 1 – Compliant

Evidences of land acquisition before 2000 were sampled and verified during this audit; it was sighted that land acquisition was completed with documents approved by two parties with witnessed by local authority and/or community leader. No land acquisition after 2005. Criterion 2.2 Indicator Minor 2 – Compliant

A mechanism to resolve conflict which is accepted by all parties was described in the procedure for complaint and grievances (SOP/NP/SMART/XIV/MCAR 001) and in the procedure (SOP/NP/SMART/VII/D&L002) to identify and determine calculation method to provide fair compensation due to loss of land and customary rights where identified. Awareness for procedure introduction was evident and documented. It was communicated to related parties (community leaders, and religious figures and youth leaders). Last awareness for procedure was conducted on 5 June 2013. Criterion 2.3 Use of land for oil palm does not diminish the legal rights, or customary rights, of the other users, without their free, prior and informed consent. Criterion 2.3 Indicator Major 1 - Compliant It was confirmed during group discussion that no land within mill and estates are encumbered by legal or customary rights. Land compensation had been made before the land use concession (HGU) processing. Maps have been owned indicating legal demarcation and planted areas according by HGU. Based on SIA report there are no customary right in estate area. And also according to HCV assessment report, there are no identified HCV 5 and HCV 6. There are only enclave on TPRE, TMSE and HANE. Land status of enclave is private property. Moreover, enclave areas are old rubber. Organization has been dissemination about use of road access to enclave owners on 4 December 2012. It was indicated there are no customary right in HNAM, TMSE and LNGE PRINCIPLES 3: COMMITMENT TO LONG-TERM ECONOMIC AND FINANCIAL VIABILITY

Criterion 3.1 There is an implemented management plan that aims to achieve long-term economic and financial viability. Criterion 3.1 Indicator Major 1 – Compliant

Management plan for period 2013-2020 was established in order to achieve long-term economic and financial viability. This plan was in line with the certification scope i.e. covering all supply bases. The parameters stated in the management plan includes revenue and profit, crop projection (FFB yield trends), CPO and PK extraction rate; estimated estate cost (upkeep, manuring, harvesting, transport, overhead and depreciation) as well as mill cost (processing, repair and maintenance, overhead and depreciation). This plan was established by considering economical parameters/assumptions such as inflation, US Dollar and Indonesian Rupiah (IDR) rate, CPO price, and FFB price. The management plan is reviewed annually and revised as appropriate; based on the achievement against the plan and other parameters may change. HNAM has Palm Kernel processing plant. Profitability study 2013 – 2020 was made for HNAM including Palm Kernel processing plant, but also simulated for HNAM without Palm Kernel processing plant. Financial indicator displayed including: profit/loss, net profit, and Net Present Value. The financial shown for period 2013-2020 that the organization has ensured its economic

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and financial viability. Criterion 3.1 Indicator Minor 1 – Compliant

There is no replanting plan for next five years. The first planting was performed in 1995 which the age is now around 18 years. Normally replanting is necessary for the age around 25 years.

PRINCIPLES 4: USE OF APPROPRIATE BEST PRACTICES BY GROWERS AND MILLERS Criterion 4.1 Operating procedures are appropriately documented and consistently implemented and monitored. Criterion 4.1 Indicator Major 1 – Compliant

Standard Operating Procedures for Estates were developed in SOP (Standard Operating Procedure) which revised in 1 September 2012 (SOP/SMART/MCAR/ I to XVI). The SOPs consist of procedures for several processes including land clearing, preparation before planting, fertilising, road maintenance, peat land management, drainage system, mature and immature upkeep, integrated pest management and harvesting. Furthermore there were also Work Instructions that defined technical method of each work. Hardcopy of procedure are available and controlled. Interviews with the employees indicate satisfactory level of understanding and implementation in relation to their respective job function. Criterion 4.1 Indicator Major 2 – Compliant

Procedure of best practice operation of HNAM is available in document of MCMD #1-2010, Standard Operational Procedure of Palm Oil Operation revision #4 issued by Head Office. The procedure describes operation instruction from FFB receiving through production, processing and dispatch of CPO and PK. Quality control check, sampling methods including its reporting from reception of FFB up to dispatch of CPO and PK was mentioned in the procedure. Work Instructions has been developed and posted at work stations within the mill. Records of receiving FFB, sterilization, pressing, clarification and delivery (January – May 2013) and maintenance activity (January – May 2013) was found appropriate. Criterion 4.1 Indicator Minor 1 – Compliant The organisation has well implemented internal checking and monitoring processes that check and report on the implementation of the Management Guidelines. These include independent checks of the Estates by the corporate internal audit. Mill Advisory Audit (MAA), Agronomy Audit & Advisory (AAA) and Operation Internal Audit (OIA) are performed twice a year. The last occasion for HNAM, TMSE and LNGE were done in 1st semester 2013. Findings were addressed, follow up and documented accordingly. Criterion 4.1 Indicator Minor 2 – Minor NC

Estates activities were carried out based on Division Work Program which generated from annual budget. Activities program are such as weeding, circle and path spraying, manuring, pest and diseases detection and census, maintenance of beneficial plant and road maintenance. Field observation was performed during audit to some activities: harvesting, spraying and manual weeding. Interview with employees working in those activities showed that procedures were implemented. Activities have been performed at defined interval and records of activities were sighted, e.g. PKD (Pedoman Kerja Divisi – Division Work Programme) and BKM (Buku Kegiatan Mandor - Log book of group leader daily activity). PKD and BKM of several activities was reviewed, e.g. manual weeding, circle and path spraying, manuring, manual road maintenance, census of pest and diseases. Agriculture practice in peat land was conducted based on memorandum from VPA (top management). The memorandum was based on RSPO Manual on BMPs for Existing Oil Palm Cultivation on Peat, June 2012. Peat land activities such as circle weeding and path were only performed manual upkeep, no chemical weeding in peat land.

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HNAM processed FFB from its own Estates (HNAE, TMSE, TPRE and LNGE) and other FFB sources (Medangsari Estate and the third parties). The third parties were not included in the scope of certification. All of the FFBs are processed in same facility (HNAM). See the capacity on scope certification above. HNAM maintained records of monitoring reports, such as shift log sheets with records of operating conditions at each of the mill work stations. A review operation daily report (January – May 2013) and site observation found that in general the documented procedures described above has been consistently implemented and monitored. CPO and PK are delivered to “Bumi Harjo” bulking terminal and Surabaya fractionation and refinery. A brief tour to processing facility was made during audit to review work station of receiving and grading, sterilizing, threshing, pressing, clarifying, nut and kernel and dispatch. Interview with employees working in those work stations showed that procedures were implemented. Processes were monitored appropriately as required by the procedure and records of processes log sheet was sighted including: FFB receiving and grading, sterilizing, threshing, pressing and digesting, clarifying, nut and kernel, boiler, quality control (in process, CPO and PK). Preventive maintenance of processing machine and equipment was done according to weekly and monthly preventive maintenance program. Preventive maintenance realization was documented including its check items. Records of maintenance activity (January – May 2013) was found appropriate. Minor nonconformity against criterion 4.1 indicator minor 2 HNAM

Temperature gauge in sludge tank #1 mentioned below the standard (80oC, standard: 90-95oC). Based on corrective action taken of MAA, temperature gauge has been corrected however it appeared that temperature was still below the standard.

Opportunity for Improvement for criterion 4.1 LNGE

During field visit it was seen weeds Penisitum palustris in some places, especially curbside

both Collection Roads and Main Roads, it is recommended to make and implement sustainable programs to eradicate the weed.

HNAM

It could be considered to improve chemical handling, e.g. mentioning date of first chemical use, monitoring expire date of chemical, etc to ensure that there was no expired chemical was used in laboratory.

Criterion 4.2 Practices maintain soil fertility at, or where possible improve soil fertility to, a level that ensures optimal and sustained yield. Criterion 4.2 Indicator Minor 1 – Compliant

Soil and leaf sampling was analysed regularly by SMARTRI to determine the nutritional status of soil, to assist and to be guided in the preparation of annual fertilising programme recommendation. Soil is analysed when the age of the plant is 3, 5, 8 years and continued with age of the plant is added by 5 years. Leaf was analysed annually. Soil and leaf sampling was taken from each division. This surveillance audit was conducted to TMSE and LNGE.

TMSE: The soil analysis was in 2012 for plant 1999 however analysis result has not been finished yet. The leaf analysis was in May 2012 to 127 samples.

LNGE: The soil analysis was in 2012 for plant 1999 however analysis result has not been

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finished yet. The leaf analysis was in May 2012 to 49 samples Leaf and soil visual analysis was conducted by agronomy staff to identify leaf deficiency and drainage or pyrite problem. Criterion 4.2 Indicator Minor 2 – Compliant

Annual fertilizer recommendation has been implemented and monitored. Fertilizer/manuring programme was developed by SMARTRI for all Division in TMSE and LNGE (area audited during this surveillance audit) based on result of soil and leaf sampling analysis. Manuring programme covers type of soil application, area and time of application, method of application and type and dosage of fertiliser. Manuring was performed manually, mechanically (using tractor and fertilizer spreader) or aerial using airplane. Aerial fertilising was performed in some area of LNGE and only for Urea, MOP and TSP. Aerial manuring was performed to mineral soil, far from housing and village and river. The memo with regards to aerial application mentions that fertilising is prohibited over a 5-palm wide buffer strip along the river and the main drain, swamp area was evident. Mapping of aerial manuring was made prior aerial manuring was performed to ensure that housing, village, river, riparian buffer zone and swamp area was not affected by aerial manuring. Procedure of aerial manuring was established in SOP/SMA/Pupuk pesawat on December 01, 2011. No aerial manuring in peat land. There was permit to operate airplane from Ministry of Transportation, Directorate General of Civil Aviation – Air Operator Certificate #AOC/137-001 dated 19 June 2011 and valid for three years. Result of fertilising was well recorded including areal fertilized, amount of fertilizer and date of application. It was noted that manuring schedule of January to May 2013 has been applied. Legume cover crops (LCC) were grown to protect soil from erosion, improve soil fertility and control weed. The LCC grown was Mucuna bracteata. The LCC was grown in LNGE. Since oil palms in

LNGE were mature oil palm, then no planting or maintenance of LCC performed, however the growth of LCC can still be seen at the location. Empty fruit bunches (EFB) were applied as nutrients. EFB were applied based on the recommendation from SMARTRI in terms of dosage per ha and location. EFB were applied in TMSE by manually and mechanical using tractor. EFB were not applied nearby housing and water spring. Realisation of EFB application was well recorded. Good evidence of EFB application. Palm Oil Mill Effluent (POME) is applied in TMSE. The organisation has had permit of land application from Bupati Seruyan to TMSE #448/2012 on 27 December 2012 and valid for 2 years. POME was only applied in several blocks based on permit obtained by the organization from government which then being distributed to several ponds with depth 35 cm by pipeline. Flow rate of land application is 375 m3/ha/year with three time rotation for each block. Flow rate and quantity of POME and area applied are recorded daily. Land application is reported to government institution every six months including quality of POME applied, quality of “well monitoring” and quality of soil around land application. Opportunity for improvement for criterion 4.2 TSME

It could be considered to establish recommendation of EFB application according to actual condition. Recommendation year 2013 still mentioned EFB application in Block P24 was conducted in all area of that block whereas there is HCV 4.1 in that block. Although in actual the area was not applied.

Criterion 4.3 Practices minimise and control erosion and degradation of soils. Criterion 4.3 Indicator Minor 1 – Compliant Maps of soils survey from Plantation Monitoring and Planning Division were available for TMSE and LNGE. The maps included maps of fragile soils.

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TMSE: Slopes 0-15%. Mineral soil.

LNGE: Slopes 0-21%. Mineral soil and 27.92 fragile soil (0.85% peat soil 60-150 cm, 0.93% peat soil 150-300 cm and 26.14% peat soil >300 cm)

Criterion 4.3 Indicator Minor 2 – Compliant

The procedure SOP/SMART/MCAR/I/TA-PPA “Preparation of new area planting” describes procedure for minimising and controlling erosion, and peat land management. The organisation does not recommend plantings on slopes >40% or >22º. When the slope area was planted, system for planting on slopes area was provided by considering soil and climate specific through terracing, determining of base line, levelling of terrace, and determining of planting space. To minimise and control erosion in slope area, several practices have been implemented such as terracing, growing of legume cover crops (LCC). Procedure 03/VPA-RSPO/03/2010 “Management of Riparian Area” has been established to control area around riparian. Planting of “vetiver” grass and natural riparian plant have been performed to minimize stream and river bank erosion. Water level management was performed in LNGE. Criterion 4.3 Indicator Minor 3 – Compliant

Procedure for road maintenance has been established. TMSE and LNGE have established road maintenance programme for main road, collection road and access road by manual and mechanical maintenance. Road maintenance includes manual, grading & compact and road hardening. Road hardening budget for 2013 has been observed including the realisation. Manual road maintenance programme was provided in Division Work Programme. Manual road maintenance was implemented based on Division Work Programme or road condition. Mechanical road maintenance uses heavy equipment – motor grader and compactor. The mechanical road maintenance programme was provided for all division and detailed in Blocks. Manual and mechanical road maintenance realisation was recorded including complex area maintained, distance of road maintained, diesel fuel consumption and quantity of gravel. During audit it was observed that road passed was in good condition. Criterion 4.3 Indicator Minor 4 – Compliant

There was peat soil in LNGE (more than 3 m deep). Peat soil management was described in MCAR chapter 3.2 point 3.2.7 to 3.2.9. Water management was conducted to control water table within range of 50-70 cm below ground surface. Dike which were made from sand sacks are constructed to maintain water level in main drain and collection drain. Water level was monitored by checking the level meter which was provided in main and secondary drain and piezometer which was provided in peat land block. Piezometer and level meter were checked weekly including status of water level (below or above the range). Condition of piezometer and level meter were checked regularly including cleanliness of piezometer, condition of sand sacks, and identification of piezometer and level meter. During site visit it was observed the condition of piezometer and level meter in Block Z14 (Planted year 2004) Division 2. It was observed that the condition was good. Condition of dike (flush or intake) was according to water level result. Criterion 4.3 Indicator Minor 5 – Compliant

There is fragile soil in TMSE and LNGE (sandy). Fragile soil was well managed. Manuring to fragile soils was performed twice in 1st semester while manuring to mineral soil was only performed once in 1st semester. The dosage, frequency and quantity of fertiliser were recommended by SMARTRI. It was noted that manuring schedule of January to May 2013 has been applied. Criterion 4.4 Practices maintain the quality and availability of surface and ground water. Criterion 4.4 Indicator Major 1 – Compliant

Procedure SOP/SPO/SMART/LH-05 has been established to maintain the quality and availability of water. Procedures SOP/SPO/SMART/LH-06 and SOP/SPO/SMART/LH-07 was also established for protection and management of riparian buffer zones at or before replanting. Procedure mentioned that in 50 m on the left and right side of riparian buffer zones, Estates are prohibited to

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apply agrochemical, used manual manuring and river bank was planted by erosion barrier crop (planting of “vetiver” grass). The organisation also has policy “Memo #002/SMD Ops/I/2009” that prohibits Estates for planting in 50 m on the left and right side of riparian buffer zones at or before replanting. Warning board placed regarding prohibition to apply agrochemicals and fertiliser in the buffer zone. Procedure 03/VPA-RSPO/03/2010 “Management of Riparian Area” has been established to control area around riparian. Riparian buffers of small natural water courses were 50 metres wide on both sides of the rivers. Several evidence of maintaining quality and availability of water were evident, such as plan and realisation of riparian management, installation of warning boards, planting erosion prevetion plan (e.g. Swietenia sp. and vetifer grass) and checking of water

quality. Program to manage wetland covered cleaning of main and collection drain and making of field drain. The program was provided in LNGE. Ditch was managed based on programme or ditch condition which was monitored regularly. Programme of ditch management using heavy equipment was established for LNGE includes cleaning of main and collection drain and making of field drain. Result of ditch management using heavy equipment was recorded. Program and realization of cleaning of main drain, collection drain and making of field drain was clear to which block area cleaned. Criterion 4.4 Indicator Minor 1 - Compliant

Water management procedure was established (SOP/TN/WMAG dated 1 July 2011) to control water table within range of 50-70 cm below ground surface. This procedure was only implemented in LNGE peat land area. Water gates and dike which were made from sand sacks are constructed to maintain water level in main drain and collection drain. Water level was monitored by checking the level meter which was provided in main and secondary drain and piezometer which was provided in each peat block. Piezometer and level meter were checked weekly. The main source of water for HNAM activity is surface water abstracted from Tarus River and collected in 330,000 m3 water ponds. Water abstraction from Tarus River has been measured through a flow meter. Year 2012 - 2013 water management plan has been established and implemented by HNAM. Water management plan of HNAM observed during audit included:

Communication of efficiency of water consumption to all employees in January 2013.

Install automatic floating switch in raw water tank to prevent water overflow from water tank in 2012.

Reuse condensate water to sokhlet process in 2012.

Provide profile tank with automatic floating valve in staff housing in May 2013.

Recycle vacuum dryer and cooling turbine water for decanter flushing, planned in December 2013.

Recycle of water of sedimentation pond, planned in December 2013. Surface water quality was monitored six monthly. Surface water quality was analysed both for upstream and downstream. Monitoring result of surface water quality of Tarus River was reviewed for 1st and 2nd semester of 2012 against Government Regulation #82/2001 class II. Quality of river water was inline with Government Regulation #82/2001 class II. There were also three “monitoring wells” which were monitored six monthly to ensure that POME used in land application did not affect the quality of ground water. Monitoring result of “monitoring wells” was reviewed for 1st and 2nd semester of 2012 against Degree of Health Ministry #416/MENKES/PER/IX/1990 in PHLE. Quality of “monitoring well” was inline with Degree of Health Ministry #416/MENKES/PER/IX/1990. Criterion 4.4 Indicator Minor 2 – Compliant POME was monitored monthly as required by permit of land application by external laboratory. The result of POME monitoring were reviewed including measurement of BOD for period 1st and 2nd semester of 2012 and January to May 2013. The Ministry of Environment #29/2003 and permit of land application required that BOD of POME flowed to land application is less than 5,000 mg/litre. The result of POME quality during this period was under 5,000 mg/litre.

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Monitoring of water consumption has been conducted for Mill processing, as well as raw water and domestic water supply. HNAM management has set internal target for water efficiency which was 1.20 m3/ton FFB, however year 2012 performance only indicated 1.96 m3/ton FFB. It was noted that water consumption 2012 was decreased compare with 2011 (2.24m3/ton). It was expected, that finalization of recycle of ex-vacuum pump and ex-turbine cooling water could increase water efficiency level. Criterion 4.5 Pests, diseases, weeds and invasive introduced species are effectively managed using appropriate Integrated Pest Management (IPM) techniques. Criterion 4.5 Indicator Major 1 – Compliant Procedures SOP/SMART/MCAR/VII/TA-HPT and SOP/SMART/MCAR/VIII/TA-PGM have been established to confirm that Integrated Pest Management (IPM) to control pests, diseases, weeds and invasive introduced species. The procedures include setting out of technique to be implemented, chemical to be used, locations to be applied, and time frame for implementation. TMSE and LNGE established Division Work Program annually for IPM in each division. Division Work Program for IPM 2013 was established for each division. IPM programme includes detection and census of pest and diseases, weeds controlling, planting and upkeep of beneficial plant, use of pesticide and herbicide. IPM programme was performed based on determined frequency in a year. Criterion 4.5 Indicator Minor 1 – Compliant The implementation of IPM was monitored. Detection of caterpillar (Setora nitens, Darna trima, Metisa plana) was performed two monthly. When caterpillar was detected, census of caterpillar

was performed. Census of rodent was conducted quarterly. Result of census determined further controlling. Controlling was performed when the caterpillar and rodent attack were higher than the critical point. Application of Rodenticide during rodent attack was monitored by campaign baiting method. Application of other agrochemical during pests and diseases controlling was also monitored. The barn owls and boxes were monitored to check availability of owl for rodent control. Last monitoring to barn owls and boxes was conducted in June 2012 due to there were no barn owls anymore. Beneficial plant (Turnera subulatta, Casia cobanensis and Antigonon leptopus)

upkeep was performed by cleaning from weeds and inserted if there are dead beneficial plants. Results of these activities were well recorded. Chemical was used if attack was uncontrolled. Routine use of chemicals was programmed including area applied, dosage and rotation. Training of IPM was performed to TMSE employees on 14 December 2012 and 13 March 2013 and LNGE employees on 14 and 17 March 2013. The workers who involved in IPM technique were attended the training. List of participant attendance was sighted. Criterion 4.5 Indicator Minor 1 – Compliant Pesticide toxicity units (a.i. / LD 50 / FFB tonnage) were monitored to Paraquat dichloride, Isopropilamine Glyphosate, Methyl metsulfuron and Fluroksifir. The records were provided for 2011, 2012 and 1st semester 2013. Opportunity for improvement for criterion 4.5 LNGE

During field visit, in some places already seen a host of natural enemies of pests, which also comes with planting and maintenance records, considering plant in LNGE is young mature plant (planted years 2004 to 2006) it is suggested to increase the volume of beneficial plants crops, such as Turnera subulatta, Casia tora, Antigonon leptopus, etc.

Audit Report


Criteria 4.6 Agrochemicals are used in a way that does not endanger health or the environment. There is no prophylactic use of pesticides, except in specific situations identified in national Best Practice guidelines. Where agrochemicals are used that are categorised as World Health Organisation Type 1A or 1B, or are listed by the Stockholm or Rotterdam Conventions, growers are actively seeking to identify alternatives, and this is documented. Criterion 4.6 Indicator Major 1 – Compliant

Agrochemicals used by TMSE and LNGE plantation has been approved and registered by Agriculture Department, e.g. Rolixone 276 SL – license RI 2467/6-2011/T expired on 23 June 2016, Erkafuron 20 WG – license RI 2405/6-2011/T expired on 23 June 2016, Starare 200EC – license RI-854/7-2009/T expired on 10 August 2014, Roll up 480 SL – license RI 2133/4-2009/T expired on 30 April 2014, Klerat – license RI 666/9-2008/T expired on 6 October 2013, Rolikum – license RI 01120120113993 expired on 23 June 2016. It was noted that there were no agrochemicals being used which were not registered during this audit. Agrochemicals use and their register number refer to Pesticide Commission Book “Buku Komisi Pestisida” year 2012. Criterion 4.6 Indicator Major 2 – Compliant

Agrochemicals use was well recorded in “Recapitulation of agrochemical use” including active ingredients used, area treated, amount applied per ha and number of applications. The documents were also recorded dosage of agrochemical use, target species. The records were sighted in TMSE and LNGE. It was noted that dosage applied and application rotation was in accordance to budget. Criterion 4.6 Indicator Major 3 – Compliant

The audit was conducted visits to the Block O8 Division 2 TMSE and Block Z16 (planted year 2004) Division 2 LNGE for circle and path spraying. Personnel interviewed can clearly explain the type of work including work methods and goals, materials used (pesticides) including the dosage and danger, personal protective equipment and first aid. Several BKM of circle weeding spray using agrochemicals was sighted. It was noted that agrochemicals (roll up, rolixon and erkafuron) use were approved and registered agrochemical. Dosage of agrochemical use, target species was in line with the procedure (SOP/SMART/MCAR/ XII/TA-PTM “Mature Upkeep” and SOP/SMART/MCAR/VIII/TA-PGM “Control of Weeds”). BKM recorded target species, dosage and trained spraying officer. PPE used during spraying of pesticides are boots, apron, safety glass, respiratory mask and hand gloves. Agrochemicals have been applied by trained spraying workers who have received usage of limited pesticide training. Training was delivered by Pesticide Commission of Agriculture Department and Man Power Department Kabupaten Seruyan, Central Kalimantan Province and agrochemical supplier, on 26 May 2012 and 13 June 2012. Training record and certificates were sighted for all sprayers in TMSE and LNGE. Training covered handling of concentrate agrochemical and spraying method including pesticide hazard.

Agrochemicals were stored in the determined area separated from fertiliser and other chemicals. Agrochemicals storage was provided in each Division of TMSE and LNGE. Agrochemicals storage was locked areas with limited access. The storage was ventilated. MSDS and hazard symbol label were provided nearby of agrochemicals. Emergency shower and eyewash were also provided to anticipate in case of an emergency of agrochemical handling. PPE for handling of chemicals were provided including boots, apron, safety glass, respiratory mask and hand gloves. The possible spill was managed. Secondary containment was provided around the chemical storage area. Spill kit was also provided in the area. Prior being used in the field, agrochemical was diluted in designated area of mixing which was completed with roof, secondary containment and information of agrochemical hazard. Notice was displayed in the area treated with highly toxic pesticides, e.g. pesticides warehouse and facility to mix agrochemical. All applications of agrochemicals were in accordance with the product label and storage instruction.

Audit Report


Criterion 4.6 Indicator Major 4 – Compliant

Handling of agrochemical containers was described in work instruction IK/SMART/LBH/01. All agrochemical containers were triple rinsed and then returned to supplier PT. Rolimex Kimia Nusamas. Based on letter from Ministry of Environment #B-5381/Dep/IV/LH/PDAL/05/2012 on 25 May 2012 to optimize agrochemical use by PT. SMART Tbk. and effort for extended producer responsibility PT. Rolimex Kimia Nusamas for refilling, every six months the organisation is required to submit, i.e.: data of location, coordinates and area for optimise agrochemical use, optimise activity and reuse of water from optimise activity at site, receipt note of agrochemical containers to supplier and measurement result of quality of water from optimise activity. Last returning of agrochemical containers to supplier was performed on June 8, 2013. Records of chemical containers quantity that has been rinsed and disposed to supplier were evident. Criterion 4.6 Indicator Minor 1 – Compliant Paraquat is still used in the Estates. Data of paraquat used has been provided since 2011. Budget of paraquat is decreased every year. It was observed that paraquat use was under the target in 2011 and 2012. Paraquat use 2012 was below compare with 2011. To reduce paraquat use, Estates implement S4 (Selective Spraying and Site Specific) which agrochemical is only used in targeted weeds, no spraying in riparian buffer zones. Criterion 4.6 Indicator Minor 2 – Compliant The provisions for medical check up was described in the procedure SOP/SMK3/LH-23 which covers pre employment medical check up, regular medical check up and special medical check up. Implementation of medical check up was also verified during this audit; records December 2012. It was noted that medical check up has been implemented to workers who apply agrochemicals. Special medical check up for estates‟ workers has been properly performed. Criterion 4.6 Indicator Minor 3 - Compliant

Based on list of worker (December 2012 and May 2013) and focus group discussion with several worker, No female pesticide-sprayer working in LNGE, but there were 6 female sprayers in TMSE. The Pregnancy analyze was conducted by organization to ensure that there are no pregnancy sprayers. It was carried out based on monthly menstruation leave records. It was observed that menstruation leave was taken overall female sprayer. According to pregnancy analyze result was indicate that there are no pregnancy female pesticide-sprayer. Opportunity for improvement for criterion 4.6 All Estates:

The organization has measured quality of used water from cleaning of Rolixone and Roll up packaging. It could be considered to measure quality of used water from cleaning of several packaging, e.g. Erkafuron.

Criterion 4.7 An occupational health and safety plan is documented, effectively communicated and implemented. Criterion 4.7 Indicator Major 1 – Compliant

It was a good system when auditor team provided an OHS induction by Safety Officer. With this induction, auditor team was made aware on the situation of mill and estates, the risk may exist, the basic OHS rules at mill and estate and emergency preparedness and response procedure, etc. Audit was then performed both on documentations/records and site visit/observations. Occupational health and safety policy has been established by respective Mill Manager and Estate Managers. The policy was displayed at strategic locations of Mill and Estates and communicated to employees including contractor workers. The occupational health and safety program 2012/2013 has also been established among other consist of training activity, safety committee meeting, medical check up, etc.

Audit Report


The boilers, sterilisers, steam vessel, air compressor, generator set, electrical installation, heavy equipment, lightning arrestor already have been inspected by local authority, the permits were evidence. Boiler operation monitored its parameters including pressure, temperature and water level, these parameters were recorded. Boiler was completed with automatic water feeding to prevent over heat and explosion in case of less water level. Records of internal inspection and maintenance to the equipment were sighted e.g. electrical inspection, compressor inspection and welding equipment and heavy equipment. There was also safety patrol/inspection activity conducted monthly to identify any unsafe acts and conditions; findings were followed up as appropriate; based on verified reports May and June 2013. Safety valve of air compressors at Mill and Estates were tested during this audit; it was observed safety valves were working properly and then re-setting was done and after that, they worked properly. The procedure for critical activities was established, SOP/PSMK3/SMART/LH-21. The procedure was covering OHS control for working in confined space (e.g. cleaning of storage tank), working at height and welding. Work permit system was established and implemented for these works. It was noted that measurement of adequacy of oxygen and availability of dangerous gas were required before entering confined space and it was mentioned in the work permit; the portable gas detector was sighted during this audit. It was also noted that working at more than 2 meters from land or platform has been classified as working at height; this was mentioned in the procedure. Lock out tag out (LOTO) procedure has also been established and implemented especially intended for risk control of maintenance activities. Moving parts of machine/equipment generally has been covered. Safety sign was provided to make workers aware on this hazard and risk. In general, electrical installation was improving from previous SAI Global audit even though some substandard electrical installation immediately corrected. Electrical hazard symbol was provided at electrical panel. In general, housekeeping at Mill and Estates (office estate, storage, and workshop) was good. Access for workers to workplace in general also good e.g. stair was provided with hand rail and platform at height was provided with border to prevent fall risk. Vertical stair in general has been provided with cover as well, e.g. chimney vertical stairs at mill and water torn vertical stair at estates. Opportunity for improvement was given below in regard to design of harvesting bridge (titian panen) has been established. Noise level has been measured by third party and used as justification for using ear plug/muff (mill, generator set area). It was noted that noise level at mill and generator set area was generally higher than TLV. Safety sign for using PPE was provided at these areas. It was noted here that workers appear to have a good discipline in wearing this PPE. Chemical factors measurement at workplace has been measured for mill; the sample taking location was properly performed. Chemical factors measurements for estates have been performed e.g. chemical store and fertilizer store. The procedure for management of PPE has been established. The PPE for each activity has been established, e.g. working at mill, working at generator set, welder, working at laboratory, harvester, sprayer, fertilizer storage, chemical storage, etc. Observation during this audit generally concluded that PPE has been well provided and implemented. Workers were interviewed during this audit and generally they understood the risk of their work and the purpose of using PPE. Criterion 4.7 Indicator Major 2 – Compliant

The safety committee (P2K3) for Mill and Estates has been established and had approval from local authority – Labour Department of Seruyan District (Dinas Tenaga Kerja Kabupaten Seruyan).

The chairman of safety committee is Mill Manager or Estate Manager. The secretary of safety committee is an OHS expert as required by local regulation; OHS expert has responsibilities and authorities as OHS Officer. The members of safety committees are representing each area or function within Mill and Estates. Monthly safety committee meeting was held to review the OHS programme and performance. Records were sighted for January, February, March, April and May

Audit Report


2013 for Mill and Estates. Quarterly reports were submitted to local authority as required by local regulation. Criterion 4.7 Indicator Minor 1 – Compliant Accident insurance was provided to workers including daily base workers, under the scheme “Jamsostek” as required by local regulation. Samples of workers for Mill and Estates were taken during this audit and found satisfactory-all sample taken have been provided with accident insurance. The contractor workers were also provided with “Jamsostek” as mentioned in the contract agreement between company and contractors. Criterion 4.7 Indicator Minor 2 – Compliant The provisions for medical check up was described in the procedure SOP/SMK3/LH-23 which covers pre employment medical check up, regular medical check up and special medical check up. Implementation of medical check up was also verified during this audit; records December 2012. It was noted that medical check up has been implemented to workers of Mill and Estates. This covers general medical check up test for all workers. Special medical check up for workers of Mill has been performed which including audiometric test for workers exposed to noise and spirometry test for workers exposed to chemicals and dust. Criterion 4.7 Indicator Minor 3 – Minor Nonconformity

OHS risk assessment procedure SOP/SMK3/SMART/LH-02 was established and implemented for Mill and Estates activities both routine and non-routine activities. Hierarchy of control was considered for planning of risk control. According to the procedure, at least OHS risk assessment document must be reviewed once a year. OHS risk assessment records 2012-2013 were sighted for all Mill and Estates. Some activities were examined in regard to risk assessment including for boiler operation, sterilizer operation, generator set operation, loading ramp activity, cleaning of CPO storage tank, chemical mixing, fertilizer warehouse, herbicide and pesticide sprayer, harvesting, road maintenance, waste water treatment, etc. Criterion 4.7 Indicator Minor 4 – Compliant

Training record and programme related to OHS were sighted and verified during this audit, e.g. boiler certificate and licence for boiler operator, licence for operator of generator set, licence of heavy equipment operator, pesticide training for sprayers, “hyperkes” training for medical doctor and paramedics, welder certificate and basic OHS training performed internally. OHS training has been programmed and provided appear balanced with OHS hazard and risk at Mill and Estates. Criterion 4.7 Indicator Minor 5 – Compliant

Emergency preparedness and response procedure has been established, SOP/SMK3/SMART/LH-09. The emergency conditions have been identified including general fire, land fire, explosion, chemical spillage, and flood and earth quake. The team to handle emergency conditions has been established, consists of fire fighting team, hydrant team, medical team/first aid, evacuation team, external relation, etc. Portable fire extinguishers have been sufficiently provided at Mill and Estates, fix hydrant was provided at Mill, mobile water tank was provided at Estates, first aid kits were provided sufficiently at each location of Mill and Estates and ambulance was provided at Mill and Estates. Regular inspection and maintenance of this emergency equipment were sighted. Simulation of emergency preparedness and response plan was scheduled once a year, result of simulation evaluation was sighted e.g. 28 November 2012, 21 January 2013 for HNAE, TMSE and LNGE. Evaluation reports were sighted. Criterion 4.7 Indicator Minor 6 – Compliant

Emergency shower and eyewash in general has been provided at chemical warehouse, fertilizer warehouse and chemical mixing area both at Mill and Estates, only some locations of emergency shower/eyewash were not appropriate, i.e. too far from the chemical. The content of emergency kits and the function of emergency shower/eyewash is regularly checked, checklist was sighted. Clinic was available at Mill and Estates, provided with paramedics and one medical doctor to cover Mill and Estates.

Audit Report



First aid kits were sufficiently provided at Mill and Estates including each assistant at Estates. Sufficient training in regard first aid treatment has been provided by company doctor to assistant at Mill and Estates. During the audit, assistant was able demonstrating the use of first aid kit. Criterion 4.7 Indicator Minor 8 – Compliant Accident statistic was reported and reviewed on monthly basis. Quarterly accident statistic is also reported to local authority. The procedure SOP/SMK3/SMART/LH-10 has been established to report accident and to perform accident investigation. Statistic accidents of Mill and Estates for 2012-13 were sighted during this audit, no fatality accident was reported so far; and in general the accidents have been followed up with investigation. The level of investigation needs to be improved, see opportunity for improvement below. Opportunities for improvement for criteria 4.7 HNAM

It could be considered to verify the result of internal tested related thickness steriliser to local authority (Disnakertrans).

Criterion 4.8 All staff, workers, small holders and contractors are appropriately trained. Criterion 4.8 Indicator Major 1 – Compliant The training needs and programme have been well identified and recorded on personnel competency matrix “Matrix of personnel competency identification”. All functions were included in this training identification from mill manager, estate manager, assistant head, group leader, operator at mill, sprayer, welder, boiler operator including for contractor (civil, mechanic and transporter). The training needs identified appear sufficient and complete, this including training related to OHS, SCCS, environmental, social, training required by regulations, training related to operation of Mill and Estates. Training programme 2012 and 2013 were sighted, the training programme was established based on the training needs identification. Realization of training programme 2012 were sighed, e.g. first aid training, SCCS training, social impact assessment workshop, risk assessment, etc. Criterion 4.8 Indicator Major 2 – Compliant

Evidence of training for key persons were verified and sighted, including for boiler operator, sprayer, and chemical mixing operator, assistant of estates, SCCS training for loading ramp operator and for mill assistant, pesticide and herbicide training, etc. The system to record personal training was established-in this record; the training which has been completed by each person was recorded and updated. Criterion 4.8 Indicator Major 3 – Compliant

Occasionally, Mill and Estates hired contractor, e.g. for civil and mechanical contractor. The requirements for experienced and trained contractor were included in the contract agreement. This was in line with the competency matrix as mentioned above. Opportunities for improvement for criteria 4.8 Mill and Estate

It could be considered to monitor competence of contractor regularly, e.g. driver‟s license of FFB contractor, license of FFB contractor vehicle.

It could be considered to make assessment contractor mechanism that will be used for organization, especially related competencies.

Audit Report


PRINCIPLES 5: ENVIRONMENTAL RESPONSIBILITY AND CONSERVATION OF NATURAL RESOURCES AND BIODIVERSITY Criterion 5.1 Aspect of plantation and mill management, including replanting, that have environmental impacts are identified, and plant to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement. Criterion 5.1 Indicator Major 1 – Compliant

Initial Environmental Impact Assessment documents for PT Tapian Nadenggan: HNAM, HNAE, TMSE, TPRE and LNGE were approved by Governor of Central Kalimantan on December 26, 2006 as indicated in the approval note #430/2006 (Environmental Impact Analysis – ANDAL, Environmental Monitoring Plan – RPL and Environmental Management Plan – RPL). The AMDAL document indicated that the document issued as replacement of previous AMDAL under PT Lestari Unggul Jaya approved on 1997 (#017/ANDAL/RKL-RPL/BA/VIII/1997). HNAM, TMSE and LNGE identified environmental aspect and evaluated its impact. The result of environmental aspect and impact identification and evaluation was documented within “List and Evaluation of Environmental Aspect”. Control measures of each environmental impact were defined and implemented to ensure that negative environmental impact were prevented and mitigated. Criterion 5.1 Indicator Major 2 – Compliant

Implementation of RKL RPL was reported six monthly. Report for 1st and 2nd semester of 2012 was sighted and sent to Ministry of Environment, Environmental Agency of Central Kalimantan Province (Badan Lingkungan Hidup Propinsi Kalimantan Tengah), Environmental Agency of Seruyan District (Badan Lingkungan Hidup Kabupaten Seruyan), Estate Agency of Central Kalimantan Province (Dinas Perkebunan Propinsi Kalimantan Tengah) and Forestry Agency of Seruyan District (Dinas Kehutanan Kabupaten Seruyan).

Report for 1nd semester of 2013 has not been prepared yet, waiting for complete result of environmental monitoring by external laboratory. Criterion 5.1 Indicator Minor 1 – Compliant No changes to the Mill capacity, Mill and Estates activity since 2006 that requires change of the AMDAL document. For internal environmental aspect and evaluated its impact document, as required by the procedure SOP/SPO/SMART/LH-11, the information of environmental aspect and impact was reviewed and updated at least once a year. Last review and update of environmental aspect and impact register was performed in January 2013. There was several new environmental aspects identified, e.g. environmental aspect of replanting. Criterion 5.2 The status of rare, threatened or endangered species and high conservation value habitats, if any, that exist in the plantation or that could be affected by plantation or mill management, shall be identified and their conservation taken into account in management plans and operations Criterion 5.2 Indicator Major 1 - Compliant An HCV area assessment has been carried out on February 2011 by the HCV Team of the Environment Department of PT. SMART Tbk. The report has been commented on by a reviewer, and a Peer Review has been carried out by an HCV discipline specialist from the Agricultural Institute of Bogor (IPB). Moreover, organization has been conducted public consultation on 25 March 2011. It had intended to get aspiration and responses from stakeholders related identification result of HCV and its management. HCV identified including:

Audit Report


TMSE:

- HCV 1.1 & 4.1, were identified: Tarus 1 River (77,95 ha), Tarus 2 River (68,36 ha), Palimbung River(14,26 ha), Blok P River (15,48 ha), Blok N River (30, 36 ha)

- HCV1.2, were identified : Kucing hutan (Felis bengalensis), Kengkareng (Antrococeros malayana), Raja Udang Meninting (Alcedo meninting), Monyet Ekor Panjang (Macaca fascicularis)

- HCV 1.3 & 4.1 were identified : freshwater swamp- rawa air tawar (190,07 ha)

- HCV6 : cemetery/graves (0,002 ha)

LNGE

- NKT 1.1 & 4.1, were identified: Langadang 1 River (52,18 ha), Langadang 2 River (20,87 ha), Langadang 3 River (45,03 ha), Langadang 4 River (11,82 ha),

- NKT 1.2, were identified : Macan Akar (Felis bengalensis), Raja Udang Meninting (Alcedo meninting),

- NKT 3 & 4.1: peatland ecosystems (106,82 ha),

- NKT 4.1: freshwater swamp- rawa air tawar (9,09 ha).

Criterion 5.2 Indicator Major 2 - Compliant The management of HCV areas was presently based on the management recommendations in the HCV report and on the company‟s SOP of Identification and HCV area management (SOP/NP/SMART/IV/LH001). HCV management areas maps were established. Organization has been review and carrying out HCV management program, effective date on 01 January 2012.. HCV management programs were described HCVA management plan for each HCV and time plan of each HCV management implementation. HCV management program including:

Setting of boundaries and the tagging of river buffer zone.

Planting areas of prone erosion to river bank and planting native species.

Setting of river protection signboards, including: prohibition to fish poison, prohibition to illegal logging on protected area, boundaries of pesticide application,

Organization was also developed and established monitoring program to ensure condition and the continuing existence of HCVA, including:

Routine patrol to protect HCV area from destruction activities, example: illegal logging. It was intended to conflict mitigation between humans with wildlife, if any.

Existences monitoring of HCV 1.2 and HCV 1.3 using list species method. Circular form SMD Operation #002/SE-SMD Ops/IX/2010 was developed with regards to protected species.

Monitoring condition and the existence of HCV boundaries, and sign boards. During audit, record of HCV management implementation was sighted. Consistencies of HCV management implementation would be checked for next surveillance audit. Monitoring activities was well conducted. Its records was documented and sighted. HCV management and monitoring report was indicated that management implementation was effective. Based on previous audit, Peat Swamp Forest was found in the eastern part of LNGE and in the north-east part of TPRE. It was only identified as HCV 4 area and has not been identified as HCV 3 area. Organization was conducted change and analysis of value against peatlands Ecosystem in the eastern part of LNGE and in the north-east part of TPRE, Analysis result was identified there are HCV 3 in Peat Swamp Forest, however HCV 4.1 which has been previously determined was eliminated. Auditee information (HCV Officer), Eliminate of HCV 4.1 was conducted base on interpretation againts previous audit result. However, during audit it was observed HCVA 4.1 has been weel managed to protection availability of water. For example: setting of boundaries and tagging of buffer zone, setting of protection signboards including: prohibition to fish poison, prohibition to illegal logging on protected area, boundaries of pesticide application , and also Routine patrol to protect HCV area. During audit, organization is being revision against HCV assessment report. Revision of report HCV identification of Peat Swamp Forest would be checked

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for next surveillance audit. Criterion 5.2 Indicator Major 3 - Compliant

HCV management and monitoring plan described measures taken for each HCV and its monitoring. Relevant laws were taken into account for determining appropriate measure including UU #5/1990 about Natural resources conservation, PP#7/1999 about List of protected plan and wildlife, Kepres #32/1990, and PP26/2008. Criterion 5.2 Indicator Minor 1 - Compliant

Besides the erection of sign boards and the production of posters, Commitment to discourage any illegal or inappropriate hunting, fishing or logging activities or to develop responsible measures to resolve human wildlife conflicts has been provided. Posters and sign boards concerning HCV areas and protected species were available in the necessary places. Public Consultation and dissemination of information to local communities has been carried out on 25 March 2011. Communication about HCV areas and protected species to employees was conducted on 26 September 2012. In according interview indicate that staff and employees wereinformed in regard HCV areas and ERT species. Criterion 5.2 Indicator Minor 2 - Compliant

Organization has been appointed HCV Officer (SK #001/RC/PTTN/SK/VI/2013 for Langadang Estate and SK #264/EM/TMSE/SK/VI/2013 for Tasik Mas Estate). The responsibility of HCV area management is part of the job description of the HCV Officer. These ”HCV Officers” have no particular background for HCV management, however they has been trained in regard identification, management and monitoring of HCV on 2 April 2013. Opportunity for improvement for criterion 5.2

It highly recommended explaining program objectives and implementation status of HCV management as part of analyses of HCV management effectiveness, Especial for HCV 4.1 management. Example: Total number of native species to be planted, identification of river bank erosion and its planted plan, number and fixing of HCV boundary mechanism and buffer zone marking mechanism.

It could be to develop field guide of flora and fauna identification which are potentials found in protected areas. Currently, it was observed that the skill of HCV Officer related to identification of flora and fauna are still substandard.

Criterion 5.3 Waste is reduced, recycled, re-used and disposed of in an environmentally and socially responsible manner. Criterion 5.3 Indicator Major 1 – Compliant The Mill and Estates have identified and documented all wastes and sources of pollution from their activities. Result of identification was recorded in “List and Evaluation of Environmental Aspect”. The list was updated in January 2013. Criterion 5.3 Indicator Major 2 – Compliant

Procedure waste handling was established and implemented, SOP/SPO/SMART/LH-09. Waste management by reduce, reuse and disposal and zero burning was described in the procedure to avoid and reduce pollution. The organisation also established waste management program which covered handling of organic, non organic, domestic and hazardous waste. Fibre and shell from HNAM were used for boiler feed. EFB was used for fertiliser in TMSE. The quantity of EFB generated is recorded daily and estimated about 21 % of FFB. Waste water from clay bath, blow down boiler water, softener regeneration water and backwash of WTP was sent to sedimentation pond. There are 7 sediment ponds. Waste water from the last sedimentation pond was flowed to surface water. Permit of waste water disposal has been obtained by organisation

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from Bupati Seruyan #183/2013 on 1 May 2013 and valid until 12 April 2015. Quality of waste water was monitored every 3 months. Report for 2nd, 3rd and 4th quarter of 2012 and 1st quarter of 2013 was sighted and sent to BLH Kabupaten Seruyan. Measurement result was inline according to Ministry of Environmental Decree #51/1995 attachment IVB. Sample waste from laboratory was returned to process in fat pit. Chemical container from laboratory was returned to supplier. Receipt note of returning chemical container to supplier was sighted. It was observed that organic and non organic waste was segregated at point of source. Organic waste from housing was disposed to hole located at the backyard of each house. Inorganic wastes from Mill and Estates including housing were disposed to landfill in the Estates area. Areas of inorganic wastes disposal was far from housing, in the flood-free area and not in swamp area. Criterion 5.3 Indicator Minor 1 – Compliant Management plan of hazardous waste and instruction of disposal was described in procedure SOP/SPO/SMART/LH-18. Hazardous wastes were segregated from point of source prior being transferred to temporary storage of hazardous waste. Temporary storage of hazardous waste was provided in HNAM, TMSE and LNGE (area audited during this surveillance audit) to collect hazardous waste prior being disposed to licensed vendor. The organisation had permit of temporary storage of hazardous waste for used oil, used oil filter, used battery, used fuel, used grease tap and contaminated goods from Bupati Seruyan #117/2011 on 6 April 2011 and valid for 5 years. Hazardous wastes such as used oil, used battery, used oil filter and contaminated rags have been handled properly as hazardous wastes. The hazardous wastes from TMSE and LNGE activities were sent to HNAM temporary hazardous waste storage prior being disposed to authorised institution. These hazardous wastes were managed by licensed vendor: PT. Nazar as transporter and collector and PT. Tenang Jaya Sejahtera as processors. Disposal of hazardous waste was completed with manifest. Manifest of disposal were sighted for February, May, September and November 2012, January, April and June 2013. Medical wastes were disposed to hospital to be burnt in the incinerator. Handling of agrochemical containers was described in work instruction IK/SMART/LBH/01. All agrochemical containers were triple rinsed and disposed in the temporary hazardous waste at HNAM. Agrochemical containers from TMSE and LNGE were transferred to HNAM, and the supplier of agrochemical will collect that agrochemical that has been triple rinse. Last disposal of agrochemical containers to supplier was performed on June 8, 2013. Records of chemical containers quantity that has been rinsed and disposed to supplier were evident. Fertiliser sacks were cleaned prior being reused for collecting loose fruit during harvesting. Estates have been completed with area to clean agrochemical containers and fertiliser sacks. Liquid waste from cleaning was reused for agrochemical dilution during spraying or gardening. Hazardous waste was reported to Environmental Agency of Kabupaten Seruyan, Environment Agency of Central Kalimantan, Centre of Ecoregion Management Kalimantan and Ministry of Environment. Receipt note was also sighted. Criterion 5.3 Indicator Minor 2 – Compliant

Quantity of hazardous wastes was recorded. The hazardous wastes balance was made for each type of hazardous waste: used oil, used battery, used oil filters, contaminated rags, used lamp, agrochemical containers and fertiliser sacks. Opportunity for improvement for criterion 5.3 HNAM

Although gutter around EFB area was drained to sedimentation pond, it could be considered to monitor condition the gutter, e.g. through existing environmental patrol.

Audit Report


Criterion 5.4 Efficiency of energy use and use of renewable energy is maximised. Criterion 5.4 Indicator Minor 1 – Compliant Fibre and shell was used for boiler feed. Volume of fibre and shell used for boiler feed was estimated monthly. The quantity fibre generated from the mill was estimated about 12.5% of FFB and shell about 5.75% of FFB. Total energy generated by steam turbine generator was recorded as total energy (kCal) per ton CPO. Efficiency level was 1,721,284 kCal/ton CPO. Criterion 5.4 Indicator Minor 2 – Compliant

Fossil fuel was used for heavy equipments and emergency diesel generator in HNAM. Monitoring of fossil fuel use for operational reason and its efficiency analysis was recorded monthly as kCal/ton CPO. Record was sighted for January to December 2012 and indicated actual level consumption of diesel fuel in the level 16,591 kCal/ton CPO.

Diesel fuel in the Estates was used for operation of heavy equipments, vehicles and diesel electricity generator to supply electricity for office and housing. FFB from Estates to Mill was transported by contractor. The consumption of diesel fuel was recorded monthly however efficiency of diesel fuel has not been evaluated. The consumption of diesel fuel for FFB transportation has not been recorded. Criteria 5.5 Use of fire for waste disposal and for preparing land for replanting is avoided except in specific situations, as identified in the ASEAN guidelines or other regional best practice. Criterion 5.5 Indicator Major 1 - Compliant

Since last SAI Global audit, there was no preparing land for replanting. Criterion 5.5 Indicator Major 2 - Compliant The organisation has policy of zero burning documented in circular letter #071/SMD Ops/IX/2007 form SMD Operation. Zero burning activities were also required in MCAR chapter 5. MCAR mentioned that land preparation was performed by overthrowing and chipping. Criterion 5.5 Indicator Major 3 and Minor 1 - Compliant

The procedure for land fire emergency preparedness and response was established, SOP/SMART/XI/LH-02. The facilities to handle land fire have been provided including portable fire extinguishers, mobile water tank completed with pump, fire cloth, etc. The provision of the fire fighting facilities appeared to be inline with the risk assessment. Regular inspection on this equipment was sighted (checklist monitoring). The simulation to handling land fire has been performed to all estates, evaluation records were sighted It was observed for TMSE, during the audit, the simulation of land fire has not been performed and immediately they performed the simulation on 3 February 2012. Evaluation reports were sighted. Criterion 5.6 Plans to reduce pollution and emissions, including greenhouse gasses, are developed, implemented and monitored. Criterion 5.6 Indicator Major 1 – Compliant Identification of pollution and emission sources at HNAM activities was evident. The source of pollution and emission was recorded within “List and Evaluation of Environmental Aspect” including ambient air, boiler emission, diesel electricity generator emission, vehicle and heavy equipments emission. Identification of pollution and emission sources at TMSE and LNGE activities was evident. The

Audit Report


source of pollution and emission was recorded within “List and Evaluation of Environmental Aspect” including diesel electricity generator emission, vehicle and heavy equipments emission. Diesel electricity generator was used for electricity in housing and nursery. Criterion 5.6 Indicator Major 2 – Compliant

Monitoring of pollution and emission quality of sources identified were performed inline with RKL RPL. Monitoring and measurement results for 1st and 2nd semester of 2012 were sighted in HNAM, TMSE and LNGE for boiler emission against Environment Ministry Decree #07/2007, diesel electricity generator against Environment Ministry Regulation #21/2008, vehicle and heavy equipment emission against Environment Ministry Regulation #05/2006, odour emission against Environment Ministry Decree #50/Menlh/11/96, also ambient air quality against Government Regulation #41/1999. Monitoring and measurement results for 1st semester 2013 have not been finished yet. Criterion 5.6 Indicator Minor 1 – Compliant

Efforts and strategies employed to reduce pollution and emissions were sighted, e.g. substitute diesel fuel to fibre and shell to operate boiler, planting of several vegetations around WWTP and water pond, implementation of RKL RPL which reported every six months, environmental management program (i.e. segregation of organic and non organic waste, providing of septic tank in each employee house), each boiler has been completed with chimney and multi-cyclones for managing its emission, electricity generator has been also completed with stack and preventive maintenance of boiler and electricity generator. Criterion 5.6 Indicator Minor 2 – Compliant POME was processed in 10 parallel anaerobic waste water processing ponds. POME from each pond was collected in collection pond to be applied in the TMSE according to permit of land application from Bupati Kota Baru #448/2012 on 27 December 2012 and valid for 2 years. The operation of waste water treatment ponds is described in procedure MCMD #1/2010. Process parameter monitoring and maintenance of the ponds were sighted. POME is monitored by HNAM laboratory for parameter pH, Volative Fatty Acid and Total Alkalinity and monitored monthly as required by permit of land application by external laboratory. The result of POME monitoring were reviewed including measurement of BOD for period 1st and 2nd semester of 2012 and January to May 2013. The Ministry of Environment #29/2003 and permit of land application required that BOD of POME flowed to land application is less than 5,000 mg/litre. The result of POME quality during this period was under 5,000 mg/litre. Report of land application is reported to Environmental Agency of Kabupaten Seruyan, Environment Agency of Central Kalimantan and Ministry of Environment every six month. Receipt note was also sighted. Opportunity for improvement for criterion 5.6 HNAM

Although maintenance of WWTP pond has been conducted, it could be considered to maintain the other area, e.g. sedimentation pond, area around sedimentation pond.

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

Criterion 6.1 Aspects of plantation and mill management including replanting that have social impacts are identified in a participatory way, and plans to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement. Criterion 6.1 Indicator Major 1 - Compliant

Social Impact Assessment (SIA) was conducted on December 2010 by the Environment Department of organisation. Public consultation was conducted against SIA report on 12 October 2010. Scope of assessment covered villages where external stakeholder lives, including: Tanjung

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Paring, Tanjung Hara, Derangga, Kalang,Pembuang Hulu I and Pembuang Hulu II Villages. Negative impacts and positive were identified during assessment. Negative impacts were identified such as: Concerns of river pollution due to overtopping from water of residual CPO production, the lack of information about job vacancies in the estate, and the lack of organization contribution to village around the plantation. Positive impacts were identified such as: Regional development of the village economy, ease of road access, economy and welfare level of the surrounding community is increase. Criterion 6.1 Indicator Minor 1 - Compliant

Action plan to implement and monitor social impact with community has been determined. Positive impacts were maintained with organisation and necessary action was planned by the organization. Overall of negative impacts were followed up with corrective action. According to public interview, they explained that the organisation has done some positive actions in regard with SIA result. Evidence of participatory action from local communities was also sighted in related SIA documentation including photo and also management and monitoring social impact report which is verified by head village of around estate and mill. Effectiveness analysis of negative impact management was conducted by organization and described in the report of Social management and monitoring plan (RKS-RPS). Its report for November 2011 – November 2012 period was sighted and it was indicated that SIA management program has effective to manage negative impact. Criterion 6.1 Indicator Minor 2 - Compliant

There were no changes to organisation‟s operation scope which cause revision of ANDAL, RKL and RPL that encompasses social impact assessment. Criterion 6.1 Indicator Minor 3 - Compliant Sampling reports was sighted, indicated that commitment for social monitoring in the Social Management and Monitoring Plan- Rencana pengelolaan dan pemantauan social (RPS) has been

conducted for Nov 2011- Nov 2012 Period by social officer. Report of social aspects management implementation was reported together with the RKL-RPL. Implementation of Environment management and monitoring plan- Rencana Kelola dan Pemantauan Lingkungan (RKL- RPL) is

reported six monthly. Receipt note was also sighted. Report for 1st (14 December 2012) and 2nd (4 April 2013) semester of 2012 sent to Plantation Agency (Dinas Perkebunan) and District Environmental Agency (Badan Lingkungan Hidup),

Criterion 6.1 Indicator Minor 4 – Not Applicable

In according interview with unit head during audit, there are no out grower schemes in TMSE and LGNE. Criterion 6.2 There are open and transparent methods for communication and consultation between growers and/or millers, local communities and other affected or interested parties. Criterion 6.2 Indicator Major 1 - Compliant

Documented procedure for communication and consultation with public was established procedure SOP/NP/SMART/XIV/MCAR003. Stage of communication and consultation with public was described in the procedure and it was communicated to stake holder. This procedure was communicated during RSPO session on 5 June 2013. Communication and consultation can be done using suggestion box (kotak saran), verbal or using letter. Result of communication and consultation was recorded in the „log book‟, e.g. road maintenance, donation, facilities support, invitation for memorial, etc. Most of requests were an invitation to follow the event held by the stakeholders, for example: invitation for memorial of religious holidays, invitation for area meeting from Camat, etc. Communication and consultation has considered differential access to information for male/ female, workers, villagers representative both old and new villagers including ethnics.

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Criterion 6.2 Indicator Minor 1 - Compliant

Stakeholder list was made and mentioned interested party. Stakeholder list covered District Head, Forestry and Plantation Department, Environmental Agency, Labour, transmigration and social department, National Land Agencies, NGO National (Orangutan Foundation International), Camat, Village Head, Community Leaders, Koperasi Harapan Makmur, Religious Figures and Youth Leaders around estate and mill. Stake holder list was made detail, address and phone numbers were mentioned in the list. It was update on May 2013. Criterion 6.2 Indicator Minor 2 - Compliant

Community aspirations were kept and recorded by the RSPO Officer, e.g. road maintenance, donation, facilities support, invitation for memorial, etc. Most of requests were an invitation to follow the event held by the stakeholders, for example: invitation for memorial of religious holidays, invitation for area meeting from Camat, etc. Records and interview result indicated that aspiration from community was followed up by the organisation. Criterion 6.2 Indicator Minor 3 - Compliant In according with decision letter from Top Management (including : decision letter #20/PC-SRGM/11/2010 for HANM, #24/RC-RSPO/11/2010 for LGNE and #015/RC-Kalteng-1/02/2012 for TMSE), Estate/Mill Unit Head was responsible to coordinate communication and consultation with community. Criterion 6.3 There is a mutually agreed and documented system for dealing with complaints and grievances, which is implemented and accepted by all parties Criterion 6.3 Indicator Major 1 - Compliant

Procedure for complaints and grievances was determined on SOP/NP/SMART/XIV/MCAR 001. Procedure was made without compulsion from other interest parties and was documented. It was communicated to related parties (community leaders, and religious figures and youth leaders) during RSPO procedure session. Last communicated was conducted on 5 June 2013. All feedback can be informed to organisation and recorded in the Log book “Complaint and grievances record”. On 9 July 2012, there was complaint from Independent Union-Serikat Pekerja Mandiri (SPM),

about request to adjust the rice quality with rice pieces per month (Letters No.02/SPP/EM-LNGE/VII/2012. Based on the letter from Head Unit, dated 31 July 2012, the quality of rice has been adjusted with the amount of pieces monthly. Record of complaint and its response was sighted and well documented. Based on group discussion with stakeholders, there is complaint from society leader of Hanau. It was also related criteria 6.11. Organization response to stakeholder complaints was described in Appendix 3 this report. Criterion 6.3 Indicator Minor 1 - Compliant

Based on Log book “Complaint and grievances record”, there are no complaints or grievances since last audit to June 2013. And also, there are no significant complaints from related stakeholders as also confirmed through group discussion with stakeholders during the audit. Criterion 6.3 Indicator Major 2 - Compliant

Procedure for complaint and grievances was documented. It was determined (SOP/NP/SMART/XIV/MCAR 001). It was communicated to related parties (community leaders, and religious figures and youth leaders) during RSPO procedure awareness. Last communicated was conducted on 5 June 2013. Opportunity for Improvement for criterion 6.3

According public consultation result, several stakeholders was less understood

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organizations‟ mechanism among others: access for information, complaints and grievances mechanism. Based on mention above, it could be considered to communicate access for information mechanism, complaints and grievances mechanism to the stakeholder.

Criterion 6.4 Any negotiations concerning compensation for loss of legal or customary rights are dealt with through a documented system that enables indigenous peoples, local communities and other stakeholders to express their view through their own representative institutions. Criterion 6.4 Indicator Major 1 - Compliant

The procedure was described in the documented procedure (SOP/NP/SMART/VII/D&L002) to identify and determine calculation method to provide fair compensation due to loss of land and customary rights where identified. Awareness for procedure introduction was evident and documented. It was communicated to related parties (community leaders, and religious figures and youth leaders). Last awareness for procedure was conducted on 5 June 2013. Criterion 6.4 Indicator Minor 1, 2 and 3 - Compliant

It was noted that there was no ongoing progress of new land acquisition during interview with sampled villager‟s representative, all previous land acquisition was solved before Land Use Title-Hak Guna Usaha (HGU). Criterion 6.5 Pay and condition for employees and for employees of contractors always meet at least legal or industry minimum standards and are sufficient to provide decent living wages Criterion 6.5 Indicator Major 1 - Compliant Documentation of employees‟ pay rates was made by the organization. Workers were classified into permanent employees - SKU (Permanent worker – Syarat Kerja Utama), PKWT (Contracted worker – Pekerja Waktu Tertentu) and BHL (daily basis paid workers – Buruh Harian Lepas). Evidence that the workers have received wage according regulation could be shown. From pay checks received was proved that the pay conformed to the minimum wages refers to latest Central Kalimantan Governor‟s Decree Letter # 27 on 2012, about Sectoral Minimum Pay Central Kalimantan Province‟s on 2013. Payments for workers were determined according daily absence. Daily absence for workers was recorded and controlled by the Assistant through manual records and finger print system for mill and estate office. It was evident that the wage was paid according working hours and daily absence. According to pay list of employee and interview result with worker, it was assumed that wage received by the workers was complied with the determined regulations. Criterion 6.5 Indicator Major 2 - Compliant

PP (company regulation) for 2012-2014 periode has been established by organization in line with national labour law and has been registered to Labour, transmigration and social Department of Seruyan District (Letter #560/896/Disnakertranspar/V/12). Company regulation described about minimum age, time work, payment, calculation of overtime, training and development, social security of employee, assistance of care and medicine, leave, Occupational health and safety, etc. Currently, organization together with Independent labour union-Serikat Pekerja Mandiri (SPM) has

been arrange mutual working agreement (PKB) that emphasize rights and obligations between two parties in more clearer ways and method. It was observed, there are some meeting between SPM with organization discuss and arrange PKB among others: 1st discuss on 8 January 2012, 2sd discuss was conducted on 15 February 2013 and 3th discuss was conducted on 17 May 2013. In

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according with minutes of meeting last discuss, PKB is in final draft. Approval and registration of PKB to Labour, transmigration and social Department of Seruyan District would be check for next surveillance audit. Criterion 6.5 Indicator Minor 1 - Compliant

Public facilities were provided by the organisation i.e. residential facilities, day care (Balai Penitipan Anak-BPA), medical facilities (clinics), schools at nearby residences, school bus, clean water and electricity supply (free of charge) and also sports facility (e.g. volley ball, badminton, futsal, and tennis). Water and electricity supply for residences are provided at daily scheduled time basis. Clean water was taken from river through sequential treatment processing or directly taken from wells. Residential facilities were seems under proper maintenance and met with basic requirements. If any damage against infrastructure facility, employee can make a complaint to an assistant in accordance with procedures SOP/NP/SMART/XII/MCAR 001. Repairs will be done in accordance with stock material conditions on warehouse. Criterion 6.5 Indicator Minor 2 - Compliant

Local contractors were used by organization for several activities, such as CPO transportation, shuttle of employee transportation and FFB transportation. Agreement contract with local supplier was evident. For example:

- Contract with Hartani, # EST/TMSE-LKL/03/2013/012-AKTBS for FFB transportation. - Contract with Budiardi, # EST/TMSE-LKL/03/2013/020-HJK for shuttle of employee

transportation. - Contract with Ariyanto, # EST/LNGE-LKL/XII/12/002-AKTBS for FFB transportation. - Contract with Yayasan Miftahussalam,Pembuang Hulu I # 001/TN/04/11, up to 31 March

2013 for CPO transportation. During audit, observed that payment made in accordance with the contract. Working agreement with contractors could be shown that also require all contractors shall abide national labour laws was no limited to the following: payment, minimum age, personal protected equipment. Criterion 6.6 The employer respects the right of all personnel to form and join trade unions of their choice and to bargain collectively. Where the right to freedom of association and collective bargaining are restricted under law, the employer facilitates parallel means of independent and free association and bargaining for all such personnel. Criterion 6.6 Indicator Major 1 - Compliant A published statement in local languages recognizing freedom of association was stated in “Circular Letter/Surat Edaran #169/HR-OPS/08/10 and approved by the top management.

Memorandum stated that the organisation respect to comply with regulation pertinent to freedom of association. Also PP (Company Regulation) stated that freedom of association can be conducted by the worker through Labour Union. Criterion 6.6 Indicator Minor 1 - Compliant SPM (Serikat Pekerja Mandiri – Independent Worker Union) was established for Mill and each

Estate. Worker representative was elected independently among workers. Worker Union has been registered on Labour Department of Seruyan District (Decision letter # 560/1098//Disnakertranspar for Langadang Estate, #560/1101/Naktran/VIII/2010 and #560/1105/NAKTRAN/VIII/2010 for mill). Periodic meeting was also held to discuss any issues as necessary and recorded in minutes of meeting. Several issues discussed at meetings were not limited to labour issues. Meetings here also discussed cleanness, safety of housing areas and work equipment.

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Criterion 6.7 Children are not employed or exploited. Work by children is acceptable on family farms, under adult supervision, and when not interfering with education programmes. Children are not exposed to hazardous working conditions. Criterion 6.7 Indicator Major 1 - Compliant Organisation has policy for minimum age for worker and mentioned in the „Circular Letter/Surat Edaran #002/SE-HRD/03/09‟‟ and also was described in PP (Company Regulation). Minimum age

for worker is 18 years. In according to list of worker and related document was verified and there is no worker under 18 years old. According to observation in the estates and mill, there is no worker under 18 years old. Criterion 6.7 Indicator Minor 1 - Compliant Job opportunities were communicated and given to surrounding villagers at first priority where no discrimination found observed during interview and related records of workers being employed. All workers are treated equally in accordance with company regulation including rights of worker as well. The compliance in accordance with national laws has been evaluated by the organisation as described in criterion 2.1. Criterion 6.8 Any form of discrimination based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation, or age, is prohibited. Criterion 6.8 Indicator Major 1 - Compliant Policy for against discrimination was determined by the organisation. All discriminations are prohibited for all area in Mill and Estates. “Circular Letter” (SE 262/HR-OPS/08/2010) also mentioned ban of discrimination for all workers in the organisation. Criterion 6.8 Indicator Minor 1 – Compliant

Worker list of Mill and Estate mentioned that all workers came from different back grounds (race, religion, gender). Worker proportion based on ethnic among others: Javanese, Sundanese, Nias, Flores (Sikka & Lio), Batak, Dayak and Bugis. Ethnic diversity of worker and also during interview with workers, no discrimination was identified based on religion, ethnic, gender. During interview with workers (local worker and migrant worker), no discrimination was identified based on religion, ethnic, gender. Organization has been also conveying job vacancies information through the village head and it was also placed on information boards of village office. Letter to Head of villages around mill and estate, among others: #018/HNAM-EXT/06/2012, June 2012; #001/LNGE-EXT/II/2013, February 2013. Based on Employee data for 2012 and 2013 period, there are additional local employees as 1 person after the job notification to surrounding villages. Criterion 6.9 A policy to prevent sexual harassment and all other forms of violence against women and to protect their reproductive rights is developed and applied. Criterion 6.9 Indicator Major 1 - Compliant

Policy for sexual harassment and violence was determined in the “Circular Letter” (SE #114/HR-PSM-6/08/2011). Based on workers interview and group discussion, it was concluded that there was no sexual harassment and violence within the organisation. Criterion 6.9 Indicator Major 2 - Compliant

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Policy to protect women reproduction rights has been also stated in “Circular Letter/Surat Edaran” (SE #.266/HR-OPS/08/2010). Menstruation leave are given to female worker for 2 days-off without any salary deduction. Criterion 6.9 Indicator Minor 1 and 2 - Compliant

Gender committee was established by the organisation. Each estate and mill has appointed representative for gender committee. The committee consider matters such as; socialization on women‟s rights, child care facilities to be provided by the growers and millers, women to be allowed to breastfeed up to nine months before resuming chemical spraying or usage tasks, and women to be given specific break times to enable effective breastfeeding. Organization has also setting several signboards about breastfeed up to nine months before resuming chemical spraying or usage tasks. It was observed that has been assembled on main access road and crowd locations such as: division office and housing area. List of menstruated female workers was established and monitored. 2 days-off are given to those women in the list without any salary deduction. Pesticide female workers are checked periodically and recorded in the medical record. Pesticide female workers are prohibited to do their job during pregnancy as stated in company policy while no mother with breast feeding period was identified during the audit. In that case, those workers are relocated to another job station with low risk level. No negative case was found in regard with reproduction rights of female workers during past years as interviewed with female workers and gender committee. Criterion 6.9 Indicator Minor 3 - Compliant

Procedure documented SOP/NP/SMART/XII/MCAR001 was established. A flowchart of complaint mechanism for sexual harassment was also determined. All complaints can be issued verbal and or written and informed to all administrator, gender committee and Mill/Estate Manager. During interview with female workers and gender committee, no sexual harassment and violence case was identified. Criterion 6.10 Growers and mills deal fairly and transparently with smallholders and other local business. Criterion 6.10 Indicator Major 1 and 2 – Compliant

Pricing mechanisms for FFB was described in FFB purchase procedure. Price mechanism of FFB, CPO and palm kernel was determined by province government and reviewed in monthly basis. The price was applied for all growers in the province. The company updates the information on the FFB pricing formula that includes details of transport, milling and shipping costs, each month and provides it to out growers. Annual contract are made between FFB suppliers and mill, describing FFB specification required, contract period, determination of FFB pricing, and term of payment. Information of FFB set was available to the FFB suppliers and the commitment was stated in the procedure. Criterion 6.10 Indicator Minor 1 – Compliant

Annual contract were made between FFB suppliers and mill, describing FFB specification required, contract period, determination of FFB pricing, and term of payment. Information of FFB set was available to the FFB suppliers and the commitment was stated in the procedure. The selection and evaluation of supplier/vendor was based on capability of supplier and vendor to supply required inputs and or services. Specification of inputs and or services required was communicated to the supplier/vendor through tender document or request for quotation. Criterion 6.10 Indicator Minor 2 – Compliant

A review to the current FFB purchase records (January to May 2013) shows that the price set was consistently used as recorded in the record of FFB receiving. The payment of FFB received were planned and executed in timely manner in line with term of payment agreed within the contract.

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Criterion 6.11 Growers and millers contribute to local sustainable development wherever appropriate. Criterion 6.11 Indicator Minor 1 - Compliant Records of organisation contribution to regional development was evident as also integrated with CSR program. Such contributions comprises of Tzu zi program (medical aid, giving glasses, freely cleft of cleft lip and cataract), facilities and building development (school and mosques), maintance of village road, support teacher salaries, scholarships,extracurricular assistance, funding to social and religious activities, low cost cooking oil products sale, etc. Some activities were conducted by the local contractors such as worker transport, FFB transportation and CPO transportation. Empowerment of local contractors related to criterion 6.5 Another local business was supported for growers and mills, main supports were pertinent to procurement spare parts and vehicle maintenance. The local business is assigned and controlled by central purchasing in Head Office. Currently, organization also encourages the land village treasury-tanah kas desa (TKD) development as a partner. However, in according with group discussion there is complaint form stakeholder related with status of land village treasury-tanah kas desa (TKD) development realization as a partner. Organization response to stakeholder complaints was described in Appendix 3 this report. Opportunity for Improvement for criterion 6.11

It could be conducted to approach and communicate to surrounding community related to CSR program and its implementation and also long-term plan which was planned by organization. Especially, status of land village treasury-tanah kas desa (TKD) development realization as a partner

PRINCIPLES 7: RESPONSIBLE DEVELOPMENT OF NEW PLANTINGS Criteria 7.3 New plantings since November 2005, have not replaced primary forest or any area required to maintain or enhance one or more High Conservation Values. Plantation in HNAE, TMSE, TPRE and LNGE was performed in 1995, 1996, 1997, 1998, 1999, 2000, 2004, 2005, 2006 and 2007. Plantation in 2005 to 2007 was performed in TPRE and LNGE. A loss of HCV area occurred after November 2005. Remaining parts show that this peat land area was covered with secondary forest, bushes and shrubs (potentially HCV 3 and HCV 4). After thorough examination it was found that a historical HCV assessment has already been carried out in Estate, during which this area had already been identified and reported to the RSPO to joint a compensation scheme.

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

Criterion 8.1 Growers and miller regularly monitor and review their activities and develop and implement action plans that allow demonstrable continuous improvement in key operations Criterion 8.1 Indicator Major 1 - Compliant

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The commitment for continual improvement was shown through innovation system involving all levels within the organization. There were several events for innovation system including Regional conference and PSM conferences. Innovation projects from Assistant Level were reviewed and evaluated to be nominated to the higher conference level. The innovation project then shared to other estates. Regular management review meeting was held to evaluate the adequacy and effectiveness of the management system. Several rounds of audit were done which covers all operation areas including operation (Operation Internal Audit – OIA), agronomy (AAA) and manufacturing (MAA) for all the estates and mill. Findings identified during audit appeared has been followed up, verified and monitored by Region Controller, Production Controller and Vice President Agronomy and Vice President Manufacturing. Evidences of application of the innovation project and environmental management program were sighted for the mill and estates:

TMSE: o Minimize use of herbicide by making equipment to wiping lalang o Effectiveness of EFB application by making three angel in the EBS (Empty Bunch

Spreader)

LNGE: o Minimize use of herbicide by making equipment to wiping lalang and making baby

owl cage (gupon bayangan)

HNAM: o Reuse water ex socklet to reduce water consumption in laboratory o Double function of OST manhole to store sounding equipment

Criterion 8.1 Indicator Minor 1 - Compliant

RSPO internal audit has been conducted in 25-28 March 2013 for the mill and all estates, the auditors assigned from Environmental Department of PT. SMART Tbk. Internal audit report was generated, and internal audit findings were followed up by the mill and all estates. A list of negative findings and its corrective action plan was used for monitoring their status. Internal verification has been taken prior to this surveillance audit.

Mill Supply Chain Certification Requirements

HNAM received FFB from its own Estates and from the third party supply base. All of the FFBs are processed under the same facilities; therefore the supply chain model that can be applied is Mass Balance (MB) model. Records for period January to December 2012 and January to May 2013 were reviewed. Below are the details of CPO and Kernel produced and delivered both certified and non-certified for period 2012 and 2013. January – December 2012 CPO produced (certified) : 90,941.832 MT CPO produced (non-certified) : 30,095.694 MT Kernel produced (certified) : 21,871.273 MT Kernel produced (non-certified) : 7,281.656 MT January – May 2013 CPO produced (certified) : 37,518.426 MT CPO produced (non-certified) : 7,659.552 MT Kernel produced (certified) : 9,181.935 MT

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Kernel produced (non-certified) : 1,880.284 MT

Table 9: Certified FFB received, CSPO and certified PK produced, CSPO and certified PK sold (under GreenPalm and UTZ system) 2012

Source: Data from PT. SMART Tbk. in July 2013

Table 10: Certified FFB received, CSPO and certified PK produced, CSPO and certified PK sold (under GreenPalm and UTZ system) until May 2013

January February March April May Total

Total FFB certified (Ton)

35,089.60

25,586.31

28,632.08

26,952.92

28,867.78

145,128.69

CSPO (Ton) 9,722.00

7,389.67

7,284.78

6,971.83

7,451.26

38,819.54

Certified PK produced (Ton)

2,208.87

1,893.23

1,909.02

1,721.17

1,783.00

9,515.29

CSPO and certified PK sold (Ton) Nil Nil Nil Nil Nil Nil

Source: Data from PT. SMART Tbk. in July 2013

Table 11: Certified FFB received, CSPO and certified PK produced estimation June to December 2013

June July August September October November December Total


34,127.56

36,410.53

30,241.96

30,276.24

30,810.45

29,027.39

32,413.07

223,307.20

CSPO (Ton) 8,190.61

8,738.53

7,258.07

7,266.30

7,394.51

6,966.57

7,779.14

53,593.73


1,877.02

2,002.58

1,663.31

1,665.19

1,694.57

1,596.51

1,782.72

12,281.90

Source: Data from PT. SMART Tbk. in July 2013 1. Documented Procedures – Compliant

HNAM has established and documented written procedure incorporated to the implementation of RSPO SC Standard. It is described in SOP Identification and traceability (SOP/TN/KMP) dated 1 September 2011. Receiving FFB, including the grading up to CPO and Kernel delivery were described in the procedure. The procedures were up dated and covering the implementation of all elements in RSPO SC Standard requirements. The person having overall responsibility for and authority over the implementation of RSPO SC Standard has been assigned to Mr. Fakhruddin as the KTU (Head of Administration). Assignment letter was sighted (PC of Central Kalimantan 1 & 2

January February March April May June July August September October November December Total


26,824.49

26,595.09

30,621.73

29,255.04

37,890.70

36,612.47

41,911.40

32,114.22

33,603.79

32,845.91

34,644.59

32,369.99

395,289.42

CSPO (Ton) 6,454.96

6,475.21

7,219.69

6,728.83

8,737.56

8,277.37

9,441.53

7,185.79

7,701.62

7,510.11

7,823.73

7,385.43

90,941.83


1,499.51

1,482.75

1,609.64

1,566.36

2,053.68

2,061.57

2,335.44

1,694.25

1,861.79

1,878.09

2,010.17

1,818.85

21,872.10

CSPO and certified PK sold (Ton) Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil

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Decree No. 001/HNAM-SPO/12/2011 dated 8 December 2011). During the surveillance audit, the person in charge has demonstrated awareness of the facilities procedures for the implementation of this standard. 2. Purchasing and Goods In – Compliant

HNAM has a clear system for recording FFB received from certified supply base and non certified supply base. It was verified that the receipt of FFB was traceable to the supply base unit. FFB delivery note, weighing slip and receiving report issued clearly stated weight off FFB received and its source. FFB Delivery note indicated the date, vehicle number, Estate, Division, Block number, harvesting date, quantity of bunch and weight. Two unit of Weighbridge (Avery weightronix series E1205, 50,000 kg of capacity) has been both calibrated on 28 December 2012. Both calibration certificates were evident (380/UPTD-METRO/XII/2012 and 381/UPTD-METRO/XII/2012). A review to the current record (January 2012 to May 2013) found that they were well maintained and retrievable. The mechanism for handling non-conforming material/documents include inform to certification body if there is overproduction is described in SOP/HNAM/SC. This mechanism should also be used to take appropriate steps when there is a projection of overproduction. There was no incident of overproduction since the last audit. 3. Record Keeping – Compliant A review to the records and related documentation of the implementation of the SCC found that accurate, complete and up to date records and report have been maintained by HNAM. The records and reports are easily accessible both in hard copy and soft copy. Retention time for these records and reports has been determined (5 years). Balance among all FFB, CPO and PK receipts, produced and delivered are conducted in daily basis. The record has been well maintained. The mechanism for delivering product only from positive stock was in place and the sales records reviewed (see above) compare against stock report demonstrated that the site only delivered RSPO certified product from positive stock. No outsource process for this activity. 4. Sales and Goods Out – Compliant

HNAM‟s CPO and PK are delivered to PT. Tapian Nadenggan Bumiharjo Kumai Bulking Terminal. Procedure SOP/HNAM/DO and SOP/HNAM/PK describe the process of delivery and its recording. A review to delivery records February 2013 found that result of the delivery (CPO and PK) was well recorded and maintained. The procedure explained that the sale of RSPO certified palm oil or PK have to included remarks regarding applied supply chain model (Mass Balance model) on delivery records. During audit found that delivery records have the information of who was the buyer, quantity delivered, product description and the transporter. There are four registered CPO transporter for HNAM, among others CV. Berkat Sekumpul, Yayasan Al-Miftahussalam, CV. Karya Bahtera Utama and CV. Alam Persada. 5. Training – Compliant Qualification of personnel who responsible in managing and implementing Supply Chain requirement have been defined and documented, including training requirements necessary for Supply Chain. Training for Supply Chain requirements have been delivered to personnel in HNAM. The training records were made including training material, training attendance and individual training record. Individual training record, for personnel in relation to implementation of Supply Chain requirements was sighted, e.g. Head Assistant, KTU, Processing Assistant, Laboratory Officer, Supervisors, contractors, driver and operators. The latest training for supply chain performed on 15 April 2013. 6. Claims – Compliant Claim of RSPO Certified CPO and PKO has not been applied.

Audit Report


Opportunity for improvement

It is recommended to coordinate with the Government Agency of Central Kalimantan Province (Dinas Perindustrian dan Perdagangan) related weighbridge calibration results, because the results of the calibration certificate dated December 28, 2012 (valid until 15 November 2013) says "Approved for recalibrated in 2010 under the laws of the Republic of Indonesia No. 2 of 1981 in regard Legal Metrology ".

There has been no trading claim of RSPO certified palm oil (CSPO) from HNAM, it is recommended the Mill to be registered at RSPO e-Trace to make claim of RSPO certified CPO or Kernel.

3.4 Recommendation

The recommendation from this audit is continuous as a producer of RSPO Certified Sustainable Palm and Palm Kernel.

Audit recommendations are always subject to ratification by RSPO.

This report was prepared by: Ria Gloria, Eri Pradhana Bharata, Eko Purwanto and Anwarsyah Harahap 3.5 Environmental and social risk for this scope of certification for planning of the surveillance audit

Mill and Estates: Compliance with all applicable local, national laws and regulation, waste management, SIA update and execution plan, status of worker

HNAE and TPRE: HCV management plan

HNAE and TPRE: OHS issue and Social issue including conflict with KUD Sawit Bangkit in LNGE

HNAE and TPRE: Environmental issue including peat management in TPRE, reporting of UKL UPL

Audit Report


3.6 Acknowledgement of Internal Responsibility and Formal Sign-off of Assessment Findings

Appendix “A” – Audit Record

Date Auditor Audit meetings plus functions/ processes/

areas/ *shifts audited: # Shifts*

Times* From - To

24 June 2013 Day 1

Ria, Eri, Anwar

Travelling Jakarta – Hanau Am

Ria, Eri, Anwar

Opening meeting 14.00

Ria, Eri, Anwar

Verification of corrective action on previous non conformity Mill and all Estates

Pm

25 June 2013 Day 2

Tasik Mas Estate

Ria Legal aspect, BAP and local supplier and contractor

Am-pm

Eri OHS and Environmental aspect, HRD (role and responsibilities and training)

Am-pm

Anwar Social aspect and HCV Am-pm

Anwar Interview with stakeholders Pm

26 June 2013 Day 3

Eko Travelling Jakarta – Hanau Am

Langadang Estate

Eri OHS and Environmental aspect, HRD (role and responsibilities and training)

Am-pm

Anwar Social aspect and HCV Am-pm

Anwar Interview with employees Pm

Hanau Mill

Ria Environmental aspect and BMP Am-pm

Eko SCC and local supplier and contractor Pm

27 June 2013 Day 4

Langadang Estate

Eko Legal aspect, BAP and local supplier and contractor

Am-pm

Hanau Mill

Ria Environmental aspect and BMP Am-pm

Eri OHS aspect and HRD (role and responsibilities and training)

Am-pm

Audit Report

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15 © SAI Global Indonesia Copyright 2009 Page 52 of 73

Anwar Social aspect Am-pm

Ria, Eri, Eko,

Anwar Auditor review Pm

Ria, Eri, Eko,

Anwar Closing meeting Pm

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

Appendix “B” – Previous Nonconformities and Opportunity for Improvement Summary

RSPO Principe and Criteria, Indonesian National Interpretation Nonconformity

No RSPO Criterion

Details Corrective Action PIC Completion Date

Status

1. 2.1 indicator major 1

HNAE, TPRE, LNGE, TMSE

Some items as mentioned in the status of compliance for were not complete or accurate, e.g. Government Regulation #82/2001 and Environment Ministry Degree #28 and #29/2003 evaluated compliance with land application whereas there was no land application in LNGE. Government Regulation #82/2001 evaluated compliance with fiber and EFB handling in HNAE.

It was found some non accurate of evaluation of compliance against OHS regulations, i.e. the result of evaluation of compliance stated already complies but actually not fully complies, e.g. in regards physical factors at workplace and chemical factors at workplace which have not been measured (noise of generator set and heavy equipment has not been measured, chemical factors at warehouse sterilizer and chemical warehouse has not been measured)

Compliance with law and regulations was reevaluated on 13 June 2013 in TPRE and 14 June 2013. EFB was applied in LNGE and HNAE

Evaluation of compliance against OHS regulations has been done yet, e.g. physical and chemical factors at workplace have been measured for generator, heavy equipment. Also chemical factors at warehouse sterilizer and chemical warehouse have been measured.

Environment Staff, RSPO Coordinator

Environmental Staff, Unit Head

16-02-2012

30-06-2012

Closed


and minor 1 and 2

HNAM

Mechanism for conducting evaluation for compliance was not described in the SOP for legal and other requirements SOP/TN/PPL: how, who, when.

The result of evaluation of compliance was not accurately presented in the

SOP has been revised and waiting for approval from related approver.

Compliance with law and regulations was reevaluated in June 2013 in HNAM, gaps in RKL RPL and Land Application report has been corrected: water biota Seluluk Lake

RSPO TF and Coordinator

Environment Staff, Unit Head

Environmental

31-03-2012

30-06-2012

31-03-2012

30-06-2012

Closed

AUDIT REPORT


record, e.g. RKL-RPL and Land Application Report 1

st semester 2011

indicated gaps in several issues, however all evaluation score period December 2011, 26 indicated “0” which means full compliance: water biota Seluluk Lake downstream, BOD and COD of Tarus River downstream, Carbon Monoxide (CO) level from diesel electricity generator #2 emission, TSS of sediment ponds outlet.

Some of methodology for evaluating compliance only based on “one visit conclusion”, e.g. for hazardous waste management (traceability of waste disposal and completeness of hazardous disposal manifest) and hazardous material management (the use of hazard symbol, availability of MSDS, handling of material according to MSDS). There was no periodic monitoring scheme to support compliance status. Fuel bund wall valve still found in open condition during audit.

Within RKL RPL implementation 1st

semester report, evaluation of compliance for river water quality was only against Government Regulation #82/2001. The RPL requires that evaluation to be performed against Government Regulation #82/2001 and initial environmental condition.

downstream, BOD and COD of Tarus River downstream, Carbon Monoxide (CO) level from diesel electricity generator #2 emission, TSS of sediment ponds outlet.

Checklist of hazardous waste and material packaging has been made and covered separation, condition (leak, rusty, broken, cover), potential spill, hazard symbol.

Evaluation of compliance for river water quality was also against initial environmental condition was included in RKL RPL implementation report 2

nd semester

2011.

Staff

Environmental Staff and Unit Head


LNGE

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

Efforts to maintain legal boundaries at part of LNGE have been conducted by the organization. Communication and meeting have been conducted by KUD Sawit Bangkit and local government (Desa Sukorejo, Camat Seruyan Tengah and BPN). However KUD Sawit Bangkit still did not allow the

D&L and Unit Head

Unit Head and PNMP

31-03-2012

15-07-2012

Closed

AUDIT REPORT


was held by the estate representatives and the representatives of farmers to solve the conflict. An action plan was also established by the management to follow up this meeting. Result to be verified during SAI Global surveillance audit.

A few of legal boundary markings (# 46, # 47 and # 48) could not been maintained and also could not been verified during this audit since the boundary markings located in difficult field to be accessed.

organization to maintain legal boundaries in the area. Currently based on letter from Camat Seruyan Tengah, the conflict was handed over to Bupati Seruyan for permit of maintain legal boundaries. The organization is in process to follow up letter from Camat Seruyan Tengah to Bupati Seruyan to conduct mapping of conflict area for completing the data.

Legal boundary markings (# 46, # 47 and # 48) have been maintenance. Report of maintenance was sighted including picture of the legal boundary markings.

4. 4.1 HNAM

Sterilization and vacuum drier is controlled by its pressure. However some of the pressure gauge has not been calibrated.

Calibration for analogue thermometer used in the mill has been calibrated. A number of thermometers showed high deviation compare to the standard. No justification has been made.

Pressure gauge of sterilization and vacuum drier has been calibrated

Since February 3, 2012, each calibrated thermometer has been justified.

Unit Head

Environment Staff

30-06-2012

16-02-2012

Closed

5. 4.2 indicator minor 2

TMSE

There was the different block application of POME between permit of land application and actual land application. Only 1 of 17 blocks was not allowed to be applied. POME was applied in block O17 however permit of land application allowed to apply POME in block M9. The difference has been informed to local government. However the government has not replied the letter.

Extension permit of land application from Bupati Seruyan #448 year 2012 has been obtained by the organization on 27 December 2012. Block O17 has been included in the permit.

Environment Staff and Unit Head

30-06-2012

Closed

AUDIT REPORT



HNAM

Calibration/verification has not been conducted for water flow meters.

Record of water pond and intake maintenance was not evident. Mill water management program indicated that maintenance to be conducted every 2 weeks; however coverage of the maintenance and maintenance realization was not clear.

Flow meter has been calibrated

Maintenance of water pond, intake and WWTP has been programmed. Maintenance is scheduled monthly, e.g. cutting of grass in pond, water intake, WWTP, cleaning of pump room, planting of vertiver grass, pump checking, etc. realization was evident.

Unit head

Environment Officer

31-05-2012

28-02-2012

Closed


LNGE

Some employees to conduct IPM have not obtained IPM training yet, e.g. Sugiono Division I, Parima Division 2 and Sugiono Division 3. It was informed that these employees were accompanied with trained employees. However there was no evidence that the trained employees accompanied the IPM activities.

Sugiono was moved to production administration, Parima and Sugiatno was resigned in October and November 2011

SMARTRI and Unit Head

16-02-2012 Closed


Mill and Estates

It was found some substandard conditions e.g. electrical panel (Mill and Estates) was may accessed by unauthorized persons, opened MCB installation (Mill and Estates), transformer cable installation (Mill), secondary containment volume not sufficient (Estates), etc. These substandard conditions were immediately corrected before the closing meeting and generally can be closed. However, the effectiveness of action to be verified during SAI Global surveillance audit.

Even though the boiler, steriliser and compressor vessel have been inspected and have received the permits from local authority, however the wall thickness of

The program to maintain substandard condition has been defined. Monitoring documentation or substandard checklist has been performed to control this condition.

The wall thickness of vessels have been measured, hydrostatic test to the boiler and sterilizer with 1.5 times design pressure has been performed include information of safety valve is available.

Safety Officer, Infrastructure Assistant and Unit Head

Safety Officer and Unit Head

16-02-2012

30-06-2012

Closed

AUDIT REPORT


vessels have never been measured to justify if the thickness still meeting the designed thickness. There have been hydrostatic test to the boiler and steriliser, however the testing was performed at design pressure while actually must be 1.5 times design pressure. The information of safety valve in general not available (including at permit document) e.g. pressure setting for release safety valve.

9. 4.7 Mill and Estates

It was found at workshop of Mill chain hoist with information of SWL (safe work load or limit) from the manufacturer. However, regular inspection has been conducted is limited to visual inspection. Loading test has not been performed regularly.

The procedure for lock out tag out (LOTO) has been established, however the identification which stations must be provided with lock out tag out has not been performed and documented. This may lead miss understanding for the employees where locking must be given.

Regular inspection has been conducted again especially for loading test of mill chain hoist with information of SWL.

Procedure for LOTO has been revised and accommodate with identification stations, e.g. Sterilizer, boiler, power house station.


Safety Officer

28-02-2012

28-02-2012

Closed


Mill and Estates

It was observed the use of un-appropriate PPE, e.g. mechanical fertilizing operators were wearing dust mask, harvesters at TSME were wearing short shoe and therefore the socks were wet (not healthy).

The design of harvesting bridge currently was only considering the length of ditch and has not considered the deep of ditch. It was observed some harvesting bridge was not well maintained, e.g. the

Appropriate PPE have been supply to mechanical fertilizing operators, with boots and socks.

Harvesting bridge has been repaired and documentation or checklists to maintain Haversting Bridge have been defined.


Infrastructure Assistant and Unit Head

30-06-2012

28-02-2012

Closed

AUDIT REPORT


placement/position not good/not horizontal.


Mill and Estates

Hexane extraction station at laboratory of Mill was not provided with proper exhaust ducting system.

The measurement of chemical factors at Mill has been performed however the location of measurement was outside of the factory, not at workplace. While for all estates, the measurement of chemical factors at workplace has not been performed, e.g. fertilizer warehouse, chemical warehouse.

Laboratories have been provided with proper exhaust ducting system.

Measurement of chemical factors at Mill has been performed; also for chemical factors have been performed e.g. fertilizer, warehouse and chemical warehouse.

Unit Head

Environmental Staff and Unit Head

30-06-2012

30-06-2012

Closed


and minor 1

Mill and Estates

Risk assessment has not been performed for the activity of legal boundaries maintenance especially where the locations are difficult be accessed by employee.

In general, medical check up has been performed. However, several key parameters were not performed during medical check up e.g. Rontgen and spyrometry test for employees exposed to chemical hazards (e.g. sprayer, chemical mixer and warehouse operator, fertilizer warehouse operator) and evaluation of musculoskeletal disorders (MSDs) to the employees with ergonomic exposed to ergonomic hazard (e.g. fertilizer warehouse operator

Risk assessment has been performed for activity of legal boundaries maintenance especially for location with difficult access (to employee)

Medical check up has been performed especially for employees exposed to chemical hazard e.g. sprayer, chemical mixer and warehouse operator, fertilizer warehouse operator, also evaluation of musculoskeletal disorders (MSDs) to the employees with ergonomic exposed hazard.

Safety officer

Doctor of Central Kalimantan #1 Region, Unit Head

28-02-2012

30-06-2012

Closed

13. 4.7 Mill and Estates

The structure of follow up to the results of medical check up has not been established, e.g. statistical analysis, health promotion, preventive action and

The follow up of medical check up has been established e.g. statistical analysis, health promotion and rotation for employee were suspected having hearing loss

Doctor of Central Kalimantan #1 Region, Unit

28-02-2012

30-06-2012

Closed

AUDIT REPORT


curative action to the employees having suspected health problem, e.g. results of audiometric test of some employees at Mill (December 2011) were suspected having hearing loss problem.

The emergency preparedness and response plan for handling riot has not been established.

The working pressure of mobile hydrant water tank (at estates) and fix hydrant (at mill) has not been measured its effectiveness.

problem (Mill).

Emergency preparedness and response plan for handling riot has been program to conduct end year 2013.

Working pressure of mobile hydrant water tank (at estates) and fix hydrant (at mill) has been demonstrated to measure its effectiveness.

Head

Safety Officer


Peat Swamp Forest was found in the eastern part of LNGE and in the north-east part of TPRE. It was only identified as HCV 4 area and has not been identified as HCV 3 area.

HCV management plan has been established however the plan has not address the issues (threats) present and not considered sufficient to conserve the HCV within the concession area.

Organization was conducted change and analysis of value against peatlands Ecosystem in the eastern part of LNGE and in the north-east part of TPRE, however HCV 4.1 which has been previously determined was eliminated. Basic analysis of the loss of HCV 4.1 in peatland ecosystems could not be shown.

Organization has been review and carrying out HCV management program, effective date on 01 January 2012. HCV management programs were described HCVA management plan for each HCV and time plan of each HCV management implementation. HCV management program including: Setting of boundaries and the

tagging of river buffer zone. Planting areas of prone erosion

to river bank and planting native species.

Setting of river protection signboards, including: prohibition to fish poison,

AUDIT REPORT


prohibition to illegal logging on protected area, boundaries of pesticide application,

Organization was also developed and established monitoring program to ensure condition and the existence of HCVA, including: Routine patrol to protect HCV

area from destruction activities, example: illegal logging. It was intended to conflict mitigation between humans with wildlife, if any.

Existences monitoring of HCV 1.2 and HCV 1.3 using list species method. Circular form SMD Operation #002/SE-SMD Ops/IX/2010 was developed with regards to protected species.

Monitoring condition and the existence of HCV boundaries, and sign boards.

During audit, record of HCV management and monitoring implementation was sighted. Consistencies of HCV management implementation would be checked for next surveillance audit.

15. 5.3 HNAE, TMSE, TPRE, LNGE

Renewal contractual agreement between organisation with General Hospital in Sampit to manage medical waste mentioned that non sharp and sharp medical waste has to be separated. This requirement has not been implemented within Estate Clinic and Central Clinic.

TPRE: sharp and non sharp medical waste has been separated and sent to central clinic monthly.

Central clinic: sharp and non sharp medical waste has been separated and sent to RSUD Sultan Imanudin Pangkalan Bun on 25 January and 12 April 2013, 17 June 2013.

Doctor of Central Kalimantan #1 Region

28-02-2012

Closed

16. 5.3 HNAM Effluent source for land application Closed

AUDIT REPORT


Several activities in regard to waste water treatment pond operation have not properly recorded to ensure proper waste treatment in line with documented procedure or reference including MSDS: o Effluent source for land application

was not recorded in the log book, 90 days minimum retention time was difficult to be verified.

o Laboratory waste water from wet analysis of palm oil and water analysis were disposed to waste water treatment ponds. Process control to ensure that laboratory waste water could be degradable in the ponds was not evident, i.e. hydroquinone MSDS indicated that it will be degradable within 2-20 days; however actual retention time could not be shown.

Hazardous waste disposal were not consistently recorded, e.g. o No receipt from hazardous waste

collector, e.g. waste acid battery. o Transport vehicle identity was not

stated in the disposal manifest.

has been recorded in the log book. Retention time of waste water in the pond has been counted and appeared that retention time >90 days.

Waste acid battery has been transported by PT. Nazar and processed by PT. Muhtomas. Transport vehicle identity has been stated in the disposal manifest

Environmental Officer

Environmental Staff

31-03-2012

30-04-2012


HNAM

Up to 2011 efficiency analysis for fossil fuel use was limited for diesel fuel for electricity generator however transportation activity was not yet covered including contractor activity.

Efficiency analysis for fossil fuel use has been included contractor activity

Unit Head 30-04-2012 Closed


HNAM

Target set for reducing emission level in regard to boiler emission, diesel electricity generator emission and green house gases emission were not measurable and has no clear indicator.

Measurable target for reducing emission level in regard to boiler and diesel electricity generator emission has been defined. However for GHG has not been defined.

Environmental Officer

31-03-2012

Closed

AUDIT REPORT



The 2010 SIA has not included enclave owners yet as stakeholders (HNAE, TPRE and LNGE) during survey hence positive and negative impacts have not been identified yet to those stakeholders for further actions required.

Organization has been meeting with the owner enclave and attended by Head Village of Kalang (TPRE) and Tanjung Paring (LNGE) on 27 November 2012 and 1 December 2012. It was conducted to analyze and discuss the impact of the organization against to enclave (SIA). Negative impact was identified, such as: There is community concern that the access of enclave owner was obstructed. Based on mention above, organization has been socialization about use of road access to enclave owners on 4 December 2013. SIA of Enclave on TPRE and LNGE described in the report of Social management and monitoring plan (RKS-RPS) for November 2011 – November 2012 Period. For enclave in HANE, Organization has been indemnified the land of enclave on 23 May 2013. Measurement Maps of each area was measured jointly with the land owner. Compensation payments have been made on May 23, 2013. It is known Customary Head and Camat of Hanau. Compensable area, among others: - Diyono (12,08 Ha), Minutes

#1/BAK-HNAE/V2013, - Diyono (0,94 Ha), Minutes

#2/BAK-HNAE/V2013, - M. Padli (3,91 Ha), Minutes

#3/BAK-HNAE/V2013.

Management and monitoring

Unit Head and Social Environment Department

31-03-2012

Closed

AUDIT REPORT


implementation against negative impact of SIA of enclave would be check for next surveillance audit.

20. 6.10 HNAM

In procedure “FFB receiving” (SOP/SMART/RCP) and “Grading” (IK MCMD) has not been clearly described how the FFB from small holder should be inspected; particularly for the sampling method. In the current agreement letter with small holder (PT Indoturba & KSU Mitra Bersama) is agreed that the grading will be done according to what describes in above procedure.

In procedure “FFB Purchase” (ITDU-System Dept 2006) par 2.5 (page 5/6) describes that agreement letter is elaborated in standard format of agreement “Agreement of sold and purchase (Perjanjian Jual Beli – PJB)”. However, the agreement with KSU Mitra Bersama and PT Indoturba Timur was made on an agreement letter that was not complied with the standard format of agreement as required by the procedure.

Procedure and work instruction of FFB receiving has been revised to describe method of inspection of FFB from small holder

Standard format of agreement “Agreement of sold and purchase (Perjanjian Jual Beli – PJB)” has been used in agreement with the third parties

PSM 6 SPO Coordinator and Unit Head

Unit Head and FFB Purchase

31-03-2012

30-04-2012

Closed

AUDIT REPORT


Appendix “C” – Nonconformities and Opportunity for Improvement Summary RSPO Principe and Criteria, Indonesian National Interpretation Minor nonconformity

No RSPO Indicator


1 4.1 Minor 2

HNAM Temperature gauge in sludge tank #1 mentioned

below the standard (80oC, standard: 90-95oC). Based on corrective action taken of MAA, temperature gauge has been corrected however it appeared that temperature was still below the standard.

Mill Supply Chain Certification System

No SCCS Requirements


NIL

Opportunities for improvement – RSPO Criterion 2.1 Mill and all Estates

It could be considered to improve report of RKL RPL implementation by conducting evaluation against initial environmental condition not just regulations as conducted in report of RKL RPL implementation 2nd semester 2011, e.g. river water quality.

It could be considered to conduct and describe worker appointment mechanism available with related law and regulations since starting work as a BHL/PKWT (contract employee to be SKU (permanent employee).

AUDIT REPORT


It could be considered to review evaluation result of compliance with regulation by not mentioning irrelevant regulation to avoid the writing mistake evaluation result of compliance.

Criterion 4.1 LNGE

During field visit it was seen weeds Penisitum palustris in some places, especially curbside both Collection Roads and Main Roads, it is

recommended to make and implemented sustainable programs to eradicate the weed.

HNAM It could be considered to improve chemical handling, e.g. mentioning date of first chemical use, monitoring expire date of chemical, etc to ensure that there was

no expired chemical was used in laboratory.

Criterion 4.2 TSME

It could be considered to establish recommendation of EFB application according to actual condition. Recommendation year 2013 still mentioned EFB application in Block P24 was conducted in all area of that block whereas there is HCV 4.1 in that block. Although in actual the area was not applied.

Criterion 4.5 LNGE

During field visit, in some places already seen a host of natural enemies of pests, which also comes with planting and maintenance records, considering plant in LNGE is young mature plant (planted years 2004 to 2006) it is suggested to increase the volume of beneficial plants crops, such as Turnera subulatta, Casia tora, Antigonon leptopus, etc.

Criterion 4.6 All Estates:

The organization has measured quality of used water from cleaning of Rolixone and Roll up packaging. It could be considered to measure quality of used water from cleaning of several packaging, e.g. Erkafuron.

Criterion 4.7 HNAM

It could be considered to verify the result of internal tested related thickness steriliser to local authority (Disnakertrans).

Criterion 4.8 Mill and Estate

It could be considered to monitor competence of contractor regularly, e.g. driver‟s license of FFB contractor, license of FFB contractor vehicle.

AUDIT REPORT


It could be considered to make assessment contractor mechanism that will be used for organization, especially related competencies. Criterion 5.2

It highly recommended explaining program objectives and implementation status of HCV management as part of analyses of HCV management effectiveness, Especial for HCV 4.1 management. Example: Total number of native species to be planted, identification of river bank erosion and its planted plan, number and fixing of HCV boundary mechanism and buffer zone marking mechanism.

It could be to develop field guide of flora and fauna identification which are potentials found in protected areas. Currently, it was observed that the skill of HCV Officer related to identification of flora and fauna are still substandard.

Criterion 5.3 HNAM

Although gutter around EFB area was drained to sedimentation pond, it could be considered to monitor condition the gutter, e.g. through existing environmental patrol.

Criterion 5.6 HNAM

Although maintenance of WWTP pond has been conducted, it could be considered to maintain sedimentation pond. Criterion 6.3

According public consultation result, several stakeholders was less understood organizations‟ mechanism among others: access for information, complaints and grievances mechanism. Based on mention above, it could be conducting socialization to stakeholder about access for information mechanism, complaints and grievances mechanism.

Criterion 6.11

It could be conducted to approach and communicate to surrounding community related to CSR program and its implementation and also long-term plan which was planned by organization. Especially, status of land village treasury-tanah kas desa (TKD) development realization as a partner

Opportunities for improvement – Mill Supply Chain Requirements

Opportunity for improvement

It is recommended to coordinate with the Government Agency of Central Kalimantan Province (Dinas Perindustrian dan Perdagangan) related weighbridge calibration results, because the results of the calibration certificate dated December 28, 2012 (valid until 15 November 2013) says "Approved for recalibrated in 2010 under the laws of the Republic of Indonesia No. 2 of 1981 in regard Legal Metrology ".

There has been no trading claim of RSPO certified palm oil (CSPO) from HNAM, it is recommended the Mill to be registered at RSPO e-Trace to make claim of RSPO certified CPO or Kernel.

AUDIT REPORT


Appendix “D” – Stakeholder’s issues and comment

Date and Time : 25 June 2013 at 14.30 pm – 16.30 pm Location : TMSE Hall Group Discussion : Regulatory body of Village- Badan Pengawas Desa (BPD) (Derangga, Tanjung

Paring, Pembuang Hulu I, Tanjung Hara, Kalang), Society/religion/youth leaders, and enclave owner LNGE

Information gathered during consultation:

No land conflict was reported since hand-over was done in proper settlement in the beginning.

Villagers have confirmed that organisation has done some positive CSR activities on their surroundings.

Enclave owner has proper access to their own farm inside company‟s farm without any difficulties.

Absorption of workforce from the surrounding villages was not adequate.

Status of land village treasury-tanah kas desa (TKD) development realization as a partner was not clear.

Organization has established response to the feedback from group discussion which indicated the commitment to follow up as mentioned below:

No. Feedback and or request

HANM response and action to be

taken

SAI Global audit observation

Relevant documentation

1. Absorption of educated workforce from the surrounding villages was not adequate.

- Organization has been conveying job vacancies information through the village head and it was also placed on information boards of village office.

- There was additional local employees as 1 person after the job notification to surrounding villages.

- According group discussion, community would like to work in mill or estates are only on part of office administration or security. Auditee information, there no job vacancies for those position.

- Note as: It would be checked for next surveillance audit.

- Letter to Head of villages around mill and estate, among others :

#018/HNAM-EXT/06/2012, June 2012.

#001/LNGE-EXT/II/2013, February 2013.

- Employee data of Mill and Estate for 2012 and 2013 Period.

2. Status of land village treasury-tanah kas desa (TKD) development realization as a partner was not clear.

- Implementation of Land village treasury-tanah kas desa (TKD) development has been monitored and reported in the report of Social management and monitoring plan (RKS-RPS) for November 2011 – November 2012. It has been verified by Village Head of around estate and

- SAI Global in this case issued OFI; its detail can be seen in the audit report in criterion 6.11

- Note as: It would be checked for next surveillance audit.

- Report of Social management and monitoring plan (RKS-RPS) for November 2011 – November 2012

- Letter to Village Head of Tanjung Hara and Tanjung Paring, # 211/TMSE-L/VI/2013, date 17 June 2013, about the continued development of

AUDIT REPORT


mill. - Land village treasury-tanah kas desa (TKD) development would not be proceed because there are no the law force of implementation.

- On 17 June 2013, Organization has been wrote a letter to Head Village of Tanjung Paring and Tanjung Hara so they would be ask and convey to the Bupati Kabupaten Seruyan about TKD and procedures for implementation

rural land cash

Date and Time : 25 June 2013 at 12.30 pm – 13.20 pm Location : TMSE Interviewee : Care worker and Nurse Information gathered during consultation:

Status of workers is SKU/permanent employee.

Visits to care conducted by nurses to monitor the condition of the children of employees.

Housing, clean water and electricity provided by the organisation.

Calculation of wage and overtime was determined by management in accordance with national regulation.

Overall medical expense was covered by the company.

No harassment issues reported since last year.

No discriminated.

Other than salary, employees get a ration of rice. The proportion of rice among others: 15 kg for workers, 9 kg for worker's wife. 7.5 kg for child of workers.

Started work at 7.00 am to 02.00 pm.

Date and Time : 26 June 2013 at 16.00 pm – 17.00 pm Location : TMSE Hall Group discussion : Deputy of worker representative each estate (TMSE&LNGE) and mill,

gender committee each estate (TMSE&LNGE) and mill, worker representative (harvester, sprayer, process operator of Mill, Maintenance operator) and Head of Independent Employee Cooperative - Koperasi Karyawan Mandiri

Workers

Status of workers was determined in the employment contract, and also mentions wage and working hours for workers.

Calculation of wage and overtime was determined by management in accordance with national

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regulation


Salary was paid in every 15th and end of month.

Other than salary, employees get a ration of rice. The proportion of rice among others: 15 kg for workers, 9 kg for worker's wife. 7.5 kg for child of workers.

Started work at 7.00 am to 02.00 pm.

Festive benefit was given 2 weeks before moslem‟s idul fitri celebration for overall worker. Organisation has provided protective equipment to all workers working in hazardous area

SPM Leader

SPM leader was appointed through referendum among workers and witnessed by management without any interference.

Organisation provided training for Occupational Health and Safety, personnel protective equipment were provided by organisation

Above personnel said there are no complaints to organisation related to wage and labour regulations

Trainings were given free of charge from the company.

Overall medical expense is covered by the company.

Gender Committee

Gender committee is leaded by representative elected by female workers.

Unit Head is erector of gender committee.

Some regular meeting were held as necessary to detect any female issues (if any).

No issues reported since last year.

Gender committee along with wife of staff conduct counseling related the sexual harassment to women workers.

Head of Independent Employee Cooperative - Koperasi Karyawan Mandiri

Independent Employee Cooperative was founded on the encouragement and guidance of the company.

Organization has provided building facilities for the cooperative operation. Date and Time : 26 June 2013 at 13.00 pm – 14.00 pm Location : LNGE Interviewee : Nurse, Care worker Information gathered during consultation:

Status of workers is SKU/permanent employee.

Calculation of wage and overtime was determined by management in accordance with national regulation.

Overall medical expense is covered by the company. Visits to care conducted by nurses to monitor the condition of the children of employees.


Date and Time : 26 June 2013 at 13.00 pm – 14.00 pm Location : LNGE Interviewee : Christian leader Information gathered during consultation:

Organization does not differentiate between minority and majority

Assist of fund for memorial of religious holiday, building renovation and support facilities provided by organization

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Date and Time : 27 June 2013 at 12.30 pm – 13.30 pm Location : HANM Interviewee : Family Worker Information gathered during consultation:


Domestic waste managed by organization.

Transportation for school children provided by the company

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Appendix “D” – Definition of, and action required with respect to audit findings:

Major Nonconformities occur when system is failing to meet a relevant compulsory indicator. Action required: This category of findings requires SAI Global to issue a formal NCR; to receive and

approve client‟s proposed correction and corrective action plans; and formally verify the effective implementation of planned corrections and corrective action. Correction and corrective action plan must be submitted to SAI Global for approval within 14 days of the audit. Follow-up action by SAI Global must „close out‟ the NCR or reduce it to a lesser category within 90 days or less where specified. Certificate of conformance to the RSPO Criteria cannot be issued while any major nonconformity is outstanding. Major nonconformities raised during surveillance audit shall be addressed within 60 days, or the certificate will be suspended. Major nonconformities not addressed within a further 60 days will result in the certificate being withdrawn. Minor Nonconformities occur when system is failing to meet other indicators.

Action required: This category of findings requires SAI Global to issue a formal NCR; to receive and

approve client‟s proposed correction and corrective action plans; and formally verify the effective implementation of planned corrections and corrective action. In this instance, a certificate may still be awarded providing the root cause of the problem is identified and an acceptable plan is put in place to achieve the outstanding requirements in an agreed time frame. Verification will be made at subsequent surveillance audits. Minor nonconformities will be raised to major if they are not addressed by the following surveillance audit. Opportunity for Improvement is a documented statement, which may identify areas for improvement,

but shall not make specific recommendation(s). Client may develop and implement solutions in order to add value to operations and management systems. SAI Global is not required to follow-up on this category of audit finding.

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Appendix “E” – Definition of, and action required with respect to audit findings for Supply Chain Certification System:

Major Nonconformities occur when system is failing to implement and/or maintain requirements of

Supply Chain Certification System. Action required: This category of findings requires SAI Global to issue a formal NCR; to receive and

approve client‟s proposed correction and corrective action plans; and formally verify the effective implementation of planned corrections and corrective action. When non-conformances rose after the certification, RSPO shall be informed of these non-conformances within 7 days since non-conformance rose. A maximum of one month is given to the certified client to satisfactorily address the non-conformances. The effectiveness of the action taken for the non-conformances shall be assessed before closing out the non-conformances. Should the non-conformances not be addressed within the one month maximum time frame, a suspension or withdrawal of the certificate and a full re-audit may be necessary. Where objective evidence indicates that there has been a demonstrable breakdown in the supply chain caused by the certified client‟s action or inactions, and that palm oil product that has been or is about to be shipped is falsely identified as RSPO certified product immediate action needs to be taken by SAI Global, and the RSPO Supply Chain certification shall be suspended until such time that it has been addressed. The RSPO shall be notified within 24 hours of this occurrence and further impacts on relevant supply chain certifications. Area of concern issued when there is an area of the system for which the client is required to

investigate potential non-conformity. Action required: SAI Global may require client to formulate preventive action plan for approval prior to

next planned audit/certification decision or alternatively may follow up client‟s preventive action at the next planned audit. Lack of client attention to such issues implies that a preventive action system is not working effectively. Opportunity for Improvement is a documented statement, which may identify areas for improvement, but shall not make specific recommendation(s). Client may develop and implement solutions in order to add value to operations and management systems. SAI Global is not required to follow-up on this category of audit finding.

Documents

Audit Report - Roundtable on Sustainable Palm Oil · 2.3 Qualification of the Lead Auditor and Audit Team ... (Koperasi Unit Desa) Audit Report ... The purpose of this audit report