Roundtable on Sustainable Palm Oil Kencana Sawit _TUV Rheinland_RSPO... · Taman Perindustrian USJ 1, 47600 Subang Jaya, Selangor Darul Ehsan, Malaysia. Tel: +6 03 8024 2400 . Fax:

Roundtable on Sustainable Palm Oil Public Summary Report

Report no.: 117288

Certification assessment against the

RSPO Principles & Criteria [Indonesia year 2008]

Name of client Wilmar International Limited

PT Kencana Sawit Indonesia Plantation and Mill

Location of client’s holding Jorong Sei Kunyit, Sangir Balai Janggo Sub-District,

Solok Selatan District, West Sumatera Indonesia

Report prepared by:

Dian Susanty Soeminta

Malaysian office: TUV Rheinland Malaysia Sdn. Bhd. No. 26 – 32, Jalan Perindustrian USJ 1/6, Taman Perindustrian USJ 1, 47600 Subang Jaya, Selangor Darul Ehsan, Malaysia. Tel: +6 03 8024 2400 Fax: +6 03 8023 1505 www.tuv.com

Indonesian office: PT TÜV International Indonesia Menara Karya 10th Floor Jl. H.R. Rasuna Said Block X-5 Kav 1-2 Jakarta 12950 Tel : +62 (0)21 – 579 44 579 Fax : +62 (0)21 – 579 44 575 www.tuv.com

TABLE OF CONTENTS

1.0 SCOPE OF CERTIFICATION ASSESSMENT 3

1.1 National Interpretation Used 3 1.2 Type of Assessment 3 1.3 Location and Maps 3 1.4 Description of Supply Base 4 1.5 Dates of Plantings and Replanting Cycles 5 1.6 Other Achievements and Certifications Held 5 1.7 Organisational Information / Contact Person 6 1.8 Description of Company History and Environment 6 1.9 Time Bound Plan for Other Management Units 7 1.10 Area of Plantation (Total, Planted and Mature) 8 1.11 Approximate Tonnages Certified 9 1.12 Recommendation for Certification 9 1.13 Date of Certificate Issued and Scope of Certificate 9 2.0 ASSESSMENT PROCESS 10

2.1 Certification Body 10 2.2 Qualifications of Lead Assessor and Assessment Team 10 2.3 Assessment Methodology 11 2.4 Stakeholder Consultation and Stakeholders Contacted 14 2.5 Date of Next Surveillance Visit 14 3.0 ASSESSMENT FINDINGS 14

3.1 Summary of Findings 14 3.2 Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions 40 3.3 Noteworthy Positive Components 44 3.4 Issues Raised by Stakeholders and Findings Pertaining to Issues 44 3.5 Acknowledgements of Internal Responsibility and Formal Sign-Off by Client 48 APPENDICES 49

Appendix 1: Details of Certificate 49 Appendix 2: Certification Audit Plan 50 Appendix 3: List of Abbreviations 52 Appendix 4: List of Stakeholders Interviewed and Contacted 53 Appendix 5: Observations and Opportunities for Improvement 54

RSPO Certification Assessment Report - Kencana Sawit Indonesia – West Sumatera

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1.0 SCOPE OF CERTIFICATION ASSESSMENT 1.1 National Interpretation Used

The operations of the palm oil mill(s) and its supply base of FFB were assessed against the National Interpre-tion Indonesia year 2008] of the RSPO Principles & Criteria.

1.2 Type of Assessment

The main certification assessment was carried out on one mill and one (1) estate with three (3) divisions under PT Kencana Sawit Indonesia owned by Wilmar International Indonesia.

1.3 Location and Maps

Figure 1: Location map of PT Kencana Sawit within the West Sumatra Province, Indonesia

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Table 1: GPS locations for all estates and mills included in certification assessment

1.4 Description of Supply Base PT Kencana Sawit mill is one of the palm oil mills owned by Wilmar International in West Sumatera. PT Ken-cana Sawit Indonesia mill was established in July, 2001 with a production capacity of 45 tons/hours. The com-pany was initially a National Investment Company owned by Tidar Kerinci Agung group, and the company then changed status to a Multinational Investment Company i.e PPBOP Sdn. Bhd, based on “Surat Keputusan Menteri Negara Agraria No. 1-VIII-1998 regarding Land Use Right transfer Permit from PT Tidak Kerinci Agung to PT Tidar Sungkai Sawit. Based on notarial decree letter no. 96 (Notaris Buntario Tigris SH, SE, MH), the name of PT Tidar Sungkai Sawit was changed to PT Kencana Sawit Indonesia (PT KSI). This was confirmed by a decree letter from Minister of Justice and Human Rights Republic of Indonesia No. C-14 718 HT.01.04.TH.2006 about approval of company’s charter (Anggaran Dasar) changing of PT Tidar Sungkai Sawit to PT Kencana Sawit Indonesia. Currently PT Kencana Sawit Indoneia Mill is receiving approximately 80% of its supplies of fresh fruit bunches (FFB) from 1 company-owned estates comprising of 3 divisions (KSI 1, KSI 2 and KSI 3) and the remaining 20% from the company’s smallholder schemes, a neighbouring plantation, PT Perke-bunan Nusantara IV, and independent outgrowers surrounding the Solok Selatan District. The company has 2 smallholders groups supplying FFB to PT Kencana Sawit Mill i.e. KKPA (Koperasi Kredit Primer Anggota) Sei Talao and KKPA Sei Kunyit, while the mill only purchases FFB from independent outgrow-ers that have already signed a contract with PT Kencana Sawit Indonesia mill, and are commited to supplying only legal and responsible FFB to PT Kencana Sawit Indonesia Mill. Details of the mill’s supply base are as per the table below: Table 2: FFB Supply Information for PT Kencana Sawit Indonesia Palm Oil Mill

FFB supplied 2009 FFB supplied 2010 FFB Contributors

Tonnes % Tonnes %

Company owned estates:

PT KSI Division 1 63,669.85 28.6 55,542.96 24.0

PT KSI Division 2 66,619.34 29.9 65,085.25 28.1

PT KSI Division 3 49,259.76 22.1 54,746.99 23.7

Sub Total 179,548.95 80.7 175,375.20 75.8 Smallholders / outgrowers:

Smallholders (KKPA Sei Kunyit & Talao) 7,984.98 3.6 7,170.05 3.1

Others PT Perkebunan Nusantara VI 33,987.25 15.3 46,147.19 19.9

GPS locations Name of mill / estate Location Latitude Longtitude

PT KSI Mill Sei Kunyit, Sangir Balai Jinggo sub-district, Solok Selatan District, West Sumatera, Indonesia

01° 99’ 46” 101° 37’ 48”

KSI Estate, Division 1

Sei Kunyit, Sangir Balai Jinggo sub-district, Solok Selatan District, West Sumatera, Indonesia

01° 26’ 20.32” 101° 32’ 24.54”



01° 29’ 27.5” 101° 27’ 06.6”



01° 29’ 23.86” 101° 31’42.23”

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Independent Smallholders 1,037.98 0.5 2,644.30 1.1

Sub Total 43,010.21 19.3 55,961.54 24.2

TOTAL 222,559.16 100 231,336.74 100

1.5 Dates of Plantings and Replanting Cycles The company follows a replanting cycle of 25 years. Information on the dates of plantings are as per the table below. Table 3: Age and year of plantings of company estate supplying to PT Kencana Sawit Indonesia Mill

Oil palm planted area at each estate(ha) Age & Year of Plant-ings PT KSI Division 1 PT KSI Division 2 PT KSI Division 3

0 – 5 yrs (2005 – 2009) 70 - 100

5-10 yrs (1999 – 2004) 884.97 912.56 525.92

10-15 yrs (1994 – 1998) 1577.02 1941.01 1716.94 TOTAL 2531.99 2853.57 2342.86

Table 4: Planned and actual oil palm replanting activities for PT Kencana Sawit Indonesia Total planned replanting area for

each estate (ha) Year

Total planned re-

planting area (ha)

PT KSI Division 1

PT KSI Division 2

PT KSI Division 3

Actual total area replanted

(ha)

2020 783.98 - 39.01 744.97 - 2021 607.89 - 274.04 333.85 - 2022 749.58 138.93 571.36 39.29 - 2023 1354.03 553.39 517.70 282.94 - 2024 1739.49 884.70 538.90 315.89 -

1.6 Other Achievements and Certifications Held Table 5: Details of other certifications or awards held by PT Kencana Sawit Indonesia

Name of mill /

estate

Certification Standard / Award achieved

Certification Body / Awarder

Date Achieved

Proper (blue level) (Award from Ministry of Environment for good Environmental Performance, a National standard)

Local Government West Sumatera

2004/2005

Proper (blue level) Local Government West Sumatera

2007/2008

Investment company Local Government Solok Selatan

2009

PT KSI Mill & Estate

Proper (blue level) Local Government West Sumatera

2009

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1.7 Organisational Information / Contact Person

Contacts details of the company are as follows:

1.8 Description of Company History and Environment 1.8.1 Company’s History

The history of PT Kencana Indonesia Palm plantation started in 1995, when the company was named PT Tidar Kerinci Agung owned by Tidar Kerinci Agung Group. The company has the land use right for a total land area of 10,216.1 hectares based on their HGU (Land Use Right) certificate no. 4/HGU/BPN/1997 valid for 35 years commencing on 22 January 1997. In the Year 1998 there was the transfer of land use right ownership of PT Tidar Kerinci Agung to PT Tidar Sungkai Sawit (TSS), a company owned by Malaysian businessman Robert Kuok under PPB Oil Palms Malaysia Sdn. Bhd., based on “Surat Keputusan Menteri Negara Agraria No. 1-VIII-1998 regarding Land Use Right transfer Permit from PT Tidak Kerinci Agung to PT Tidar Sungkai Sawit. Based on notarial decree letter no. 96, Notaris Buntario Tigris SH, SE, MH the name of PT Tidar Sungkai Sawit was changed into PT Ken-cana Sawit Indonesia (PT KSI). This was confirmed by a decree letter from Minister of Justice and Human Rights Republic of Indonesia No. C-14 718 HT.01.04.TH.2006 about approval of company’s basic budget (‘anggaran dasar’) for changing of the name of PT Tidar Sungkai Sawit to PT Kencana Sawit Indonesia. The land use rights certificate (HGU) for company’s area was issued based on decree letter from the Minister of Agrarian Affairs / Head of BPN on 22 January 1997, no. 4/HGU/BPN/97. HGU decree letter includes 2 measurement books (buku ukur)/, which are maps showing the areas within the company’s land whch legally belong to other parties. In this case, measurement book no. 1 covers an area of 7222.5 ha belonging to the community of Sei Kunyit Village, while measurement book no. 02 covers an area of 2993.6 ha belonging to the community of Talao Village, both of which are located within PT KSI’s HSU area in Sangir Sub-District, Solok Selatan District, West Sumatera. In 2007 when PPB Oil Palms Sdn. Bhd merged with Wilmar Group to become Wilmar International, the PT Kencana Sawit Indonesia was then automatically included as part of Wilmar International Group.

1.8.2 Description of Estate Environmental Parameters

On its operation, PT Kencana Sawit Indonesia estate is divided into 3 divisions to facilitate their estate management, namely PT KSI division 1, PT KSI division 2 and PT KSI division 3. The total area owned by PT KSI is 10,216 ha, with the area of mature plantation area covering 7728.42 ha. All FFB produced by the 3 PT KSI’s plantation division are processed at PT Kencana Sawit Indonesia Palm Oil Mill which is been located in PT KSI 1 estate. PT KSI mill has an installed capacity of 45 tons per hour of FFB processed. The mill receives FFB supply from PT KSI’s owned estate divisions, smallholder schemes, and independent outgrowers from within the communities’ oil palm plantation surrounding the Solok Selatan District. Table 6: General information on PT Kencana Sawit Indonesia

Company Location PT Kencana Sawi Indonesia (Estate 1, 2 and 3), Sangir Balai Janggo Sub District, Solok Selatan District, West Sumatera Province, Indonesia

Geographical location 1010 30’ 50.3” BT ; 10 28’ 17.7” LU Location of local government admin office

Solok Selatan District

1.

Location of plantation administra-tion office

Dinas Perkebunan Solok Selatan

Company Name: PT Kencana Sawit Indonesia

Sei Kunyit, Sangir Balai Jinggo sub-district, Solok Selatan district, Address:

West Sumatra, Indonesia.

Contact Person: Michael Tay

Telephone: +62-81278204888

Email: [email protected]

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Boundary area Stakeholders located at north boundary of estate

PT PN Nusantara 6 and PT Tidar Kerinci Agung

Stakeholders located at east boundary of estate

Talao Village and PT Tidar Kerinci Aung

Stakeholders located at south boundary of estate

PT Tidar Kerinci Agung

2

Stakeholders located at west boundary of estate

Sungai Kunyit Village

3 Watershed areas & other waterways

Juhjuhan watershed and Kulai River

4. Total Land Area 10,216 ha 5. Land Condition Dry land and Volcanic soil 6. Soil type Podzolic 7. Climate condition Type A

1.9 Time Bound Plan for Other Management Units

The time frame laid out below is considered to be both challenging and realistic. The company will be using the experience of this main assessment to ensure that the other management units conform to the RSPO Princi-ples & Criteria. The audit team is satisfied that the company conforms to the RSPO requirements for partial certification as laid out in Clause 4.2.4 of the RSPO Certification Systems document. Table 7: Time Bound Plan of Wilmar International Group

Name of Estates Location Land area (ha) Year of Audit PT Milano (SDE, BSE & MBE) North Sumatra 4975 2009 PT Mustika Sembuluh Central Kalimantan 15,897 2009 PT Tania Selatan (BT & BB) South Sumatra 3775 2010 PT Kerry Sawit Indonesia Central Kalimantan 14,980 2010 PT Kencana Sawit Indonesia West Sumatra. 7,728 2010 PT Bumi Sawit Kencana Central Kalimantan 7,266 2011 PT AMP Plantation West Sumatra 7,541 2011 PT Primatama Muliajaya West Sumatra 1,397 2011 PT Sarana Titian Permata Central Kalimantan 14,995 2011 PT Buluh Canang Plantations South Sumatra 223 2011 PT Tania (Bamboo Kuning) South Sumatra 1800 2011 PT ANI (Sambas) West Kalimantan 9,095 2011 PT Daya Labuhan Indah North Sumatra 5,010 2012 PT Milano (CDE) North Sumatra 618 2012 PT Citra Riau Sarana Riau 2,268 2012 PT Gersindo Minang Plantations West Sumatra 3,146 2012 PT Permata Hijau Pasaman West Sumatra 2,363 2012 PT Mentaya Sawit Mas Central Kalimantan 7,120 2012 PT Asiatic Persada Jambi 15,223 2012 PT Pratama Prosentindo West Kalimantan 3423 2012 PT Putra Indotropical West Kalimantan 3133 2012 PT Sinarsiak Dianpermai Riau. 1,114 2012 PT ANI (Landak) West Kalimantan 4281 2013 PT Murini Sam Sam Riau 1,288 2013 PT Agro Palindo Sakti South Sumatra 872 2013

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PT Musi Banyuasin Indah South Sumatra 4473 2013 PT Karunia Kencana Permaisejati Central Kalimantan 8,070 2013 PT Agro Palindo Sakti West Kalimantan 5033 2013 PT Daya Landak Plantation West Kalimantan 3774 2013 PT Indoresins Putra Mandiri West Kalimantan 3730 2013 Total 164611

Name of Palm Oil Mills Location CPO output (mt) Year of Audit

PT Milano (Pinang Awan) North Sumatra 27,554 2009 PT Mustika Sembuluh Central Kalimantan 81,350 2009 PT Tania Selatan South Sumatra 12,800 2010 PT Kencana Sawit Indonesia West Sumatra. 37,200 2010 PT Kerry Sawit Indonesia Central Kalimantan 51,335 2010 PT Bumi Sawit Kencana Central Kalimantan 27,700 2011 PT AMP Plantation West Sumatra 37,900 2011 PT Buluh Canang Plantations South Sumatra 33,800 2011 PT Agro Nusa Investama (Sambas)

West Kalimantan 17,600 2011

PT Sarana Titian Permata Central Kalimantan 37,800 2011 PT Sinarsiak Dianpermai Riau 6,400 2012 PT Daya Labuhan Indah-2 North Sumatra 25,800 2012 PT Citra Riau Sarana (ML) 1 + 2 Riau 46,300 2012 PT Gersindo Minang Plantations West Sumatra 35300 2012 PT Mentaya Sawit Mas Central Kalimantan 28,800 2012 PT Asiatic Persada Jambi 57,300 2012 PT Agro Nusa Investama (Landak)

West Kalimantan 30,600 2013

PT Murini Sam Sam Riau 7,500 2013 PT Musi Banyuasin Indah South Sumatra 35,400 2013 PT Karunia Kencana Permaisejati Central Kalimantan 41,400 2013 PT Agro Palindo Sakti 1 West Kalimantan 19,400 2013 PT Citra Riau Sarana 3 Riau 20000 2013

Total Total 719,239

1.10 Area of Plantation (Total, Planted and Mature)

Table 8: Oil Palm Planted Area Summary, FFB Production and Average yield/ha for PT Kencana Sawit Indonesia for 2010

Estate Name Total area (ha)

Oil Palm Planted area

(ha)

Mature (Production)

area (ha)

Immature (Non-production)

area (ha)

FFB Production

(tonnes)

Average yield/ ha

KSI Division 1 3,446.92 2,531.99 2,531.99 - 55,542.96 21.94 KSI Division 2 3,263.32 2,853.57 2,853.57 - 65,085.25 22.81 KSI Division 3 3,505.76 2,342.86 2,342.86 - 54,746.99 23.37

TOTAL 10,216.00 7,728.42 7,728.42 175,375.20 22.69

Table 9: Land use data for PT Kencana Sawit Indonesia

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Land used for other purposes (ha)

Estate Name Total area (ha)

Oil Palm Planted

Area (ha)

HCV/ Potential

HCV areas* (ha)

Local Government

office Nursery Cleared

Area Other uses

KSI Division 1 3,446.92 2531.99 800.92 - - - 114.0 KSI Division 2 3263.32 2853.57 321.17 - - - 88.6 KSI Division 3 3,505.76 2342.86 1,107.50 - - - 55.4 TOTAL 10,216.00 7,728.82 2,229.59 257.99

* data from the HCV assessment document prepared by AKSENTA (2010)

1.11 Approximate Tonnages Certified The approximate tonnages certified, based on average crop production of 177,462 tonnes of FFB from 2009 and 2010, is as follows: Crude Palm Oil (CPO) : 37,888 tonnes/year (OER 21.35%) Palm Kernel (PK) : 8,074 tonnes/year (KER 4.55%)

1.12 Recommendation for Certification PT Kencana Sawit Indonesia has established and maintains an effective system to ensure compliance with the RSPO principles and criteria. The audit team has confirmed through the audit process that the company’s prac-tices complies with, adequately maintains and implements the requirements of RSPO Principles and Criteria National Intrepretation Indonesia version 2008. TUV Rheinland Malaysia recommends that PT Kencana Sawit Indonesia be approved as a producer of RSPO Certified Sustainable Palm Oil.

1.13 Date of Certificate Issued and Scope of Certificate

The scope of the certificate covers production of palm oil from PT Kencana Sawit Indonesia mill and its supply base, which includes PT KSI estate. The date of certificate issued is 21 April 2011. Further details of the certifi-cate are as per Appendix 1.

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2.0 ASSESSMENT PROCESS 2.1 Certification Body

TUV Rheinland Malaysia Sdn. Bhd. is member of Group TÜV Rheinland Group, a global leader in independent testing and assessment services. The TÜV Rheinland Group was established in 1872 with offices located in over 420 locations in 61 countries on all five continents. TUV Rheinland Malaysia offers certification for a wide range of management systems according to established international standards including ISO 9001, ISO 14001, OHSAS 18001, SA 8000, as well as CDM Project Validations. TUV Rheinland Malaysia’s office is located in Subang Jaya, Selangor, Malaysia.

2.2 Qualifications of Lead Assessor and Assessment Team

Name Position Qualifications / Experience

Dian S. Soeminta

Lead Auditor

Education: Bachelors Degree in Forestry - Bogor Agriculture Institute. Indonesia, (1990 to 1995). Trainings attended: ISO 9001:2000 lead assessor course 1996 - Neville Clark; ISO 14001 lead assessor course - PE International; OSHAS: 2007 training, Sustainable Forest Management (SFM) - Forest Stewardship Council (FSC) system training; Chain of Custody training for FSC System. Working experience: Professional forester since 1995 to 2000. Lead Auditor for Forest Stewardship Council (FSC), Sustainable Forest Certification (SFC) and Chain of Custody (COC) Certification, Lead auditor for Environmental Management System (EMS) and Quality Management System (QMS) audits. Conducted sustainable forest management certification audits on FSC and Indonesian Ecolabel Institute (Lembaga Ecolabel Indonesia - LEI) standards for 20 companies, 50 COC FSC/LEI audits, and EMS and QMS audits at more than hundred companies for TUV Rheinland Indonesia. Instrumental in the preparation of TUV Rheinland Indonesia for Sustainable Forest Management Certification System and TUV Rheinland Malaysia for RSPO Certification. Member of Task Force for Indonesian National Interpretation (Guidance on scheme smallholder RSPO certification). Developed TUV Rheinland RSPO Gap Assessment Checklist and report template.

Fadli Auditor

Education: Bachelor of Anthropology, Department of Anthropology - Univer-sity of Indonesia, Jakarta. Trainings attended: Sustainable Natural Production Forest Management (Pengelolaan Hutan Alam Produksi Lestari - PHAPL) assessor training (May 2003); Forest Plantation Management (August 2003) training - Indonesian Ecolabel Institute (LEI), Forest Management and Agriculture Auditor Train-ing; ISO 9001:2008, ISO 14000:2004, OHSAS 18001:2007 trainings - Smartwood/Rainforest Alliance; SA8000 training - SA International; RSPO Lead Auditor Training -Indonesian Palm Oil Commissions. Working experience: Experienced as lecturer for D3 Tourism programme, University of Indonesia. Social Aspect Auditor of PT. TUV International Indo-nesia for Sustainable Forest Management and RSPO Principles & Criteria. Researcher of Stakeholder Mapping With CSR Indonesia.

Agus Salim Alfat Auditor

Education: Bachelor Degree of Chemistry - Bandung Institute of Technol-ogy, Indonesia (1988 to 1993); Master Degree of Quality, Safety and Envi-ronment - Otto Von Geuricke, Magdeburg University, Germany (2001 - 2002). Trainings attended: ISO 9000:2000 Series Auditor / Lead Auditor Training - PE International (Jakarta), IEMA Advanced EMS Auditor (IEMA / EARA ISO 14001) Auditor / Lead Auditor Training Course - PE International (Jakarta), OHSAS 18001 Lead Auditor Training Course - PE International (Jakarta). Working experience: Experienced in Quality Control from 1994-2004. Audi-tor for Quality Management System since 2004 – present. Auditor for Envi-

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ronmental Management System since 2005 – present. Auditor for OHSAS 18001 since 2007 - present. Conducted over 100 Quality Management Sys-tem audits since 2004, over 50 Environmental Management System audits since 2006 , and over 25 OHSAS audits since 2007

Rahmawati Noor Auditor

Education: Bachelor of Chemical Engineering, Sriwijaya University Palem-bang and Master of Occupational Health and Safety, Univerity of Indonesia, Jakarta. Trainings attended: RSPO, Jakarta, 13-18 July 2009, Komisi Minyak Sawit Indonesia. Lead Auditor for ISO 9001, ISO 14001 and OHSAS 18001 Working Experience: Joined PT. TUV International Indonesia in 2001, and has audited more than 100 companies. Involved in ISO 9001, ISO 14001 and OHSAS audits for several palm oil plantations and mills. Since 2007, involved in CDM validation projects for several palm oil mills in Indonesia. Had 5 years experience as environmental consultant for PT. Dames and Moore Indonesia, prior to working for PT. TUV International Indonesia.

Riena Widiyanti

Aziz Auditor

Education : Bachelor of Forestry, Gadjah Mada University Trainings attended: ISO 14001 Auditor training, Sustainable Forest Man-agement (SFM) Working Experience: In a Consultant Company since 1998, and then joined PT. FOCUS QE in 2004 as a Quality and Environmental Consultant (ISO 9001, ISO 14001) and as an assessor for Sustainable Forest Management (SFM). Since 2009, joined PT. TUV Rheinland Indonesia as SFM auditor, le-gal verificator for Wood Industry. Has audited several Forest Management companies and Wood Industries especially environmental audits

2.3 Assessment Methodology The certification assessment was conducted betwen 22 to 25 November 2010 as per the assessment pro-gramme below. The assessment was carried out in accordance with TUV Rheinland Malaysia’s RSPO audit procedure as well as the RSPO Certification Systems document. During assessment, the qualified TUV Rheinland assessors used the RSPO standard as endorsed for the country in which the assessment took place and recorded their findings. Due to the location and proximity of the estates, combined with common management systems, it was possible to carry out both field and document assessments of all estates and the mill within the time frame without com-promising the integrity of the assessment in any way. All 3 KSI estate divisions and 1 mill were visited and the assessment team carried out field and document as-sessments of compliance to all the RSPO principles and criteria. Common systems were identified and specific evidence was recorded for individual estates. Interviews were conducted at all estates and the mill. The company proposed the correction and corrective actions for all identified non conformities raised to the cer-tification body 10 days after the closing meeting. Verification and documentation of closure of major non-conformances was conducted 15 days after the closing meeting of the main assessment and implementation of corrective actions for minor non-conformities will be verified during the next suriveillance audit. The certification assessment agenda is as explained below. Main Assessment Agenda

Date Location / Main sites Main activities

21.11.2010 Traveling to Muara Bungo, Jambi

22.11.2010 Muara Bungo Ho-tel

Stakeholder Consultation

23.11.2010 Estate Office Division 1, 2 and 3 and Plant Tour

Principle 2 and Criteria 2.1 and Principle 6. • Interview personnel in charge of identifying and checking compliance

to all relevant legal and other requirements such as those associated with environmental, labor, OHS, and Plantation Regulation.

• Checking of related documented procedures and records

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Principle 3, Criteria 3.1 Document checks of company budget, forecasted replanting plan document, finance report. Principle 4, Criteria 4.1, 4.2, 4.3,4.4, 4.5 4.6, 4.7 and 4.8 • Interview personnel (estate manager and division manager) associ-

ated with SOP and implementation and also monitoring activities. • Interview personnel responsible for handling of agrochemicals and

used chemical containers (warehouse operator) • Interview division assistants and estate managers responsible for ap-

plication of agrochemicals (best practice) • Interview personnel that are responsible for training of workers (opera-

tors) • Interview doctor responsible for health checks of operators • Checking of all documents related to criteria 4.6 & 4.7 • Plant Tour / checking of actual condition of chemical warehouse (es-

tate), and hazardous waste store (estate). • Interview personnel responsible for OHS and First Aid monitoring • Interview personnel responsible to handle training of OHS and First

Aid • Plant tour to Head Office area, Warehouse, Workshop, and Clinic to

check availability of OHS and First Aid equipment and fulfillment of OHS requirements

• Document Check of records of regular soil, leaf, and visual analysis. • Document Check of records of efforts to maintain and increase soil

fertility (e.g. use of fertilizer, leguminous cover crops, compost, and land applications of POME or EFB)

• Checking related document procedures • Document Check to identify of Maps of fragile soils • Interview personnel (estate manager and division manager) to check-

ing a management strategy for plantings on slopes above a certain limit (needs to be soil and climate specific).

• Checking related document procedures and records of implementation and monitoring activities.

• Document Check to related procedures and records of implementation of protection of watercources

• Interview personnel responsible for maintaining and restoring appro-priate riparian buffer zones at or before replanting. Principle 6.

• Interviews with Head of Talao village and community leaders 24.11.2010 Division 2, Divi-

sion 3, Housing, Generator Set, Harvesting Col-lection Point

• Site visit to division 2 and division 3 to check the implementation OHS and First Aid and also handling of agrochemicals.

• Interview worker (harvesters, manurers and sprayers) • Interview FFB transporters • Interview to road maintenance contractor • Checking availability of PPE, OHS and first aid equipment to worker

and in vehicles and fulfillment of OHS requirements • Checking of generator set, use of diesel and handling of waste • Visit to housing at Division 2 and 3 and make sure all waste handling

follow RSPO requirements • Checking the landfill for wastes (organic and inorganic) at Division 2 • Checking of chemical handling, management of chemical waste and

other hazardous waste handling at divisions, and housing. • Interview contractors (transportation) • Checking all documents and records related to the implementation of

these aspects • Site visit to marginal soil area as identified on maps of fragile soils at

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Field 068, 069, 188, 189, 190, 191, 020, 021 Principle 5, criteria 5.1, 5.2 and 5.3 • Site visit to areas with steep slopes (fields 190, 189, 173) and im-

plementation of land erosion treatment (e.g Silt Pit, Tapak Kera, Cover Crop planting)

• Site visit to all HCV areas Principle 1, Criteria 1.1, 1.2 , 2.1 and Principle 6 Interview of workers & observation of housing condition and facilities at Salo block and other housing areas. Interview with Head of Sei Kunyit Village and community leaders, inter-view with head of KUD Swamata (plasma) and Nagari Talao Sei Kunyit Interviews with female workers and the contractors Visit to housing of temporary workers

25.11.2010 Palm Oil Mill Principle 4, Principle 5, Principle 6 and Principle 8 • Plant tour to the whole area of POM to checking the implementation of

PPE, OHS and waste handling. • Interview worker, contractors and suppliers • Checking of actual condition of chemical storage and hazardous waste

storage Principle 2 and Criteria 2.1 about law and regulation. • Interview personnel in charge of identify and checking compliance

to all relevant legal and other requirements such as those associ-ated with environment, labor, OHS, and mill regulations.

• Checking related document procedures and records. .

Principle 4, Criteria 4.1, 4.7 • Interview personnel (operational head) associated with the SOP

and implementation and also monitoring activities. • Interview personnel responsible for OHS and First Aid monitoring • Interview personnel responsible for training of OHS and First Aid • Interview doctor responsible for conducting regular health checks

for operator • Checking of documents related to above Principle 5, Criteria 5.2 (HCV areas) • Riparian (Reservors/Quarries/Streams) Rivers (Ganeh River, Kulai

River, Jujuhan River, Suwir River) • Bukit Harimau (Bukit Kerdil). • Bukit Tengah Pulau. • Bukit Salo • Embung (Field 107/108, Div. II) • Rawa Kodok (Field 30, Div. I) • Gua Kelelawar (Field 30, Div. I) Site visit to fields 133, 134, 135, 136, 137 for verification of road main-taining works (gravelling, road service, resurfacing) Document checks and interviews with workers • Preparation of Closing Meeting • Closing meeting

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2.4 Stakeholder Consultation and Stakeholders Contacted The stakeholder consultation involved both external and internal stakeholders. External stakeholders were noti-fied to make comments on the certification assessment by placing an invitation to comment on the RSPO web-site. Stakeholders included those immediately linked with the operations of the company such employees, out-growers, the local government, NGO’s, trade and labour unions and local communities. The stakeholder consultation took place in the form of meetings and interviews. Meetings with stakeholders were held to seek their views on the performance of the company with respect to the sustainability practices outlined in the RSPO Principles & Criteria, and to comment on aspects where improvements could be made. Meetings with local communities were held at their respective premises within and near the company’s area. A stakeholder consultation meeting was also held at Bungo Plaza Hotel on 22 November 2010. Letters inviting individual stakeholders to the stakeholder consultation meeting were prepared and sent to the individual stake-holders, while electronic mail and telephone calls were made to arrange the meetings. In all the interviews and meeting, the objectives of the RSPO and the purpose of the assessment was clarified at the outset followed by an evaluation of the relationship between the stakeholders and the company before discussion proceeded to obtain the stakeholders feedback on the company’s compliance to different aspects of the RSPO Principles & Criteria. Although several stakeholders were not familiar with RSPO but they agreed with its objective and expressed their willingness to collaborate in the promotion of sustainable palm oil in West Sumatera province. In all interviews and meeting, the assessment team did not restrict discussion of both the positive and negative aspects of operations conducted by PT Kencana Sawit Indonesia estates and mill. The stakeholder consultation meeting held with stakeholders during the audit was extensive and productive, with an attendance of more than 30 participants. This was followed by site inspections, including visits to the lo-cal communities, interviews with land claimants and contractors, and inspections of worker amenities and infra-structure. All stakeholder issues raised were recorded and forwarded to the management for their written reponse, and this is summarized in Section 3.4.The list of stakeholders that attended the stakeholder consulta-tion meeting and stakeholders interviewed during the assessment is included as Appendix 4.

2.5 Date of Next Surveillance Visit

The next surveillance visit is planned for February 2012.

3.0 ASSESSMENT FINDINGS 3.1 Summary of Findings

Since the company became a member of RSPO in September 2005, the company’s management has commit-ted to comply to all RSPO principles and criteria in all company operations activities. As implementation of its commitment, the company applied to TUV Rheinland Malaysia to conduct the assessment of their compliance to all RSPO requirements for Kencana Sawit Indonesia mill and the 3 estates of PT Kencana Sawit Indonesia which supply their palm oil mill. A pre - assessment was conducted in July 19 to 23, 2010 and the company has worked hard to address all identified non conformities raised during the pre-assessment. There is evidence of a considerable effort on behalf of all staff in the preparation of manuals, standard operat-ing procedures and other documents not only to conform to RSPO requirements, but for company’s improve-ment of process effectiveness and efficiency. The stakeholder consultation meeting held before main audit was an extensive and productive meeting at-tended by more than 35 persons including local community representatives, suppliers, local government per-sonnel, NGOs, and FFB transporters. The stakeholder consultation was follows by site inspections of infra-structure and social amenities. The management responded to all of the issues raised and this is summarized in section 3.4.

PT Kencana Sawit Indonesia has allocated a total 2,229.59 ha HCV area, including conservation zone in some protected area such as Bukit Harimau, Bukit Lipai 1 & 2, Bukit tengah, Bukit Salo, and a riparian zone along rivers that flow through PT KSI’s area. A HCV assessment of PT Kencana Sawit Indonesia has been conducted by a consultant (AKSENTA) as reported on HCV identification document. The HCV areas identified included wet lands, streams and flood control areas as well as habitats of protected birds, riparian river buffer zones and some other company locations as explained on section 3.2 of HCV assessment document. The company made a plan for HCV management and monitoring to ensure that existing values from identified HCV could be sus-tained.

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Most applicable legal and other requirements related company’s operation have been fulfilled by PT Kencana Sawit Indonesia Plantation and Industry including those pertaining to environmental and social aspects, and-worker issues. However, the company has not yet complied to certain regulations and this was raised as a ma-jor non conformity (nonconformity 1 of 12 under Section 3.2). The company has a good relationship with local communities and also has many Corporate Social Responsibilities (CSR) programmes. Evaluation of compli-ance to legal requirements is regularly conducted according to the relevant standard operation procedure and evidence of efforts made to comply with other legal requirements is well maintained, e.g. an environmental monitoring report is submitted to relevant authorities every six months. The company has a worker agreement approved by local government, and minimum wages for worker is increased every year according to regulations from local government. As the company already implements a quality management system and environmental management system, the company has SOP’s covering all plantation and mill activities which are well implemented. A social impact assessment has been conducted by consultant (AKSENTA) that was prepared with the participation of affected parties and local communities, although a documented management plan that encompasses social impact as-sessments in accordance with existing RSPO requirements was still not established yet at the time of audit. Requests for information made by stakeholders were recorded in one document as required by company’s pro-cedure. The company has a documented procedure for communication and consultation with the communities and the stakeholders and maintains all records of meetings held with the stakeholders and requests raised by the local communities are recorded together with follow-up actions and responses of the company to these re-quests. The company has established a communication procedure for periodic meetings to create awareness of com-pany regulations, grievances mechanism, procedure for complaints and suggestions, sharing of information and so on. This procedure has been shared to the communities through events in every village, however not all vil-lagers are very aware of this procedure. The company recognizes that this procedure needs to be more inten-sively informed to the company stakeholders. The company provides facilities for their employees such housing facilities for employees at all estates, polyclin-ics, educational facilities, places of worship, a sports hall, and a sports club. The company has an equal oppor-tunities policy, which is well implemented. No child labour was found in company’s estates and mill during the main assessment. A documented company policy on sexual harassment and violence is available as part of company’s Management's RSPO Policy signed by Plantation Head on August 2009 and stated in a working agreement for the period of 2008-2010. The company’s sexual harassment policy is also a part of the Working Agreement ("Perjanjian Kerja Bersama") with the Workers Union. The company has a specific grievance and violence mechanism. The company has a good relationship with local communities and also has many Corporate Social Responsibili-ties (CSR) programmes. The company’s contributions through CSR programmes for local communities are documented by the General Affairs Department. The company's budget for local communities is allocated for education, economic, social and health, sports, environment, places of worship, and infrastructure programmes. However the company’s CSR programme was not developed based on social impact assessment results, and this should be improved by the management of PT Kencana Sawit Indonesia. Continuous improvement is evident throughout all of PT Kencana Sawit Indonesia and it is apparent that im-provements have been since the pre assessment conducted in July 2010. In general, objective evidence was obtained from each of PT Kencana Sawit Indonesia estates as well as its mill. The results from the assessment of each site within the certification unit have been aggregated to provide an assessment of overall conformance of the company’s to each criterion. During the certification assessment, 1 nonconformance was assigned against a Major Compliance indicator while 11 nonconformities were assigned against Minor Compliance Indicators. 8 observations or opportunities for improvement were identified. Further explanation of the non-conformities raised and corrective actions taken by the company are provided in Section 3.2. The observations & opportunities for improvement are listed in Appendix 5. The following is a summary of findings made for the criteria listed in the RSPO Principles & Criteria Indonesia National Interpretation year 2008.

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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.

Findings: The company has a written commitment to transparency on information requested, as long as informa-tion provided does not result in significant negative impact on the company. The company’s commit-ment to transparency was documented in their communication procedure. The procedure is about re-ceiving and handling information from external parties, no doc: Dok. KSI-Pro-BNM-03 issued on 15 June 2010. The document also includes the procedure for receiving and responding to stakeholder re-quests for the provision of information related to the company’s operations (including the estates and palm oil mill). All incoming and outgoing information both letter or telephone comunication will be re-corded on communication log book, controlled by company’s Relationship Development (‘Bina Mitra’) department. To date, most letters received by the company are requests for assistance and funding from the sur-rounding communities. There has so far been no requests for information related to environment, social and legal aspects from stakeholders. All incoming letters are recorded in a log book used to record in-formation about stakeholders who send these letters, such as date of the letter or request, name, or-ganization, and the information or type of assistance requested. The company also maintains records of their responses to letters and requests received by stakeholders. Sample letters requesting assis-tance from the company, as well as the company’s responses, are as follows: - Letter on March 01, 2010 no: 420/DP.07/SD 04/2010 from Sei Gading 04 Elementery School regard-

ing invitation on training to increase competency of school teachers. The company responsed with a management instruction for Mr. Zamrud, who works as a teacher in company’s school, to attend the seminar, with evidence in SPPD (Surat Perintah Perjalanan Dinas) letter dated March 18, 2010

- Letter on March 23, 2010 no. DP/MTQN/IV/2010 from MTQ organizer (Musabaqoh Tilawatil Quran) regarding donation for the MTQ activities. Company can not response this letter since there is no clear information about the event organizer, no address or details of the contact person.

- Letter on June 14, 2010, letter no. 001/103/bang/VI/2010, from the Village Development Body (Badan Pembangunan Desa, or BPD) Sei Kunyit regarding the location permit for the company’s micro hydro dam project development. The company’s response was to give the permit to BPD, although it was observed that there is no record in the company’s log book of this request.

- Letter on August 2, 2010, letter no021/YNI/PP HUT RI/VIII-2010, from Islamic school (leader M. Natsir) regarding request of donation, company give donation for IDR 200,000. Company response and give donation as seen on the transmittal note on September 1, 2010, received by Mr. Zainal from Islamic School Alahan Panjang

- Letter on September 30, 2010, no. 900/305/DPPKAD-2010 from the Solok Selatan Government Head, regarding request information of RAB (Renacana Anggaran Biaya), which is not recorded in the log book, however company responded through letter no. 43/BM-Ext/XI dated November 24, 2010 to Solok Selatan Government Head.

- Log books records on a telephone communication on October 5, 2010, regarding request for ambu-lance service from a Talao villager. The company provided an ambulance to villagers as recorded on the log book.

As stated on the SOP about records control no doc: KSI-PRO-BNM-03, issued June 15, 2010 the re-tention time for records keeping is at least for 3 years for administrative documents, where requests for information and the responses made are included, except financial and accounting records for which the retention time is 10 years. In KSI mill there is another procedure for records control i.e PRO-Mill-008 dated January 1, 2010, in the procedure stated that all incoming and outgoing records will be main-tain for 4 years except finance records which shall be maintained for 10 years and personnel records are to be retained for 7 years. Records maintained beyond the stated retention time will be destroyed upon approval by the general manager. Notes on destroyed records are maintained. Compliance status: Compliance with observations

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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 envi-ronmental or social outcomes.

Findings: On the procedure KSI-PRO-BNM-03, there is a statement regarding information or company docu-ments that are made publicly available and can be accessed by stakeholders (except commercially confidential documents). Documents made publicly available include the company’s Environmental and Social Impact Assessment (AMDAL), annual company report, company policies, land use certificates (HGU) and related permits, monthly production reports of estates and the mill, estate and mill opera-tional hectarage and related maps, map of rivers inside estate areas, the standard operational proce-dures of estates and the mill, company organisation structure, and High Conservation Value (HCV) as-sessment report. There is a signed document from stakeholders stating that they have received the let-ter sent by the company. Checks with local communities’ surrounding the company's area confirmed that they already received written information from the company about the publicly accessible documents; these included villagers from Sei Kunyit and Talao villages. The company has a regulation to maintain all records for a minimum of 3 years, as stated in their re-cords control procedure no doc: KSI-Pro-BNM-03. To date, there have been no requests made by stakeholders to view any of the documents stated above. The mill manager issued a public memorandum on June 01, 2010, which states the company’s list of confidential documents which are not to be published or made publicly available, i.e: - Salary payment slips of company workers and staff - Management plans for staff promotion - Management plans for salary increment for workers and staff - Company annual budget Compliance status: Full Compliance

Criterion 2.1: There is compliance with all applicable local, national and ratified international laws and regulations.

Findings: The company provides a mechanism for evaluation of implementation and compliance to applicable le-gal requirements in a procedure KSI-PRO-BNM-01 rev.00 dated 15 September 2010. There are also procedures which defines the mechanism of evaluation of compliance to regulations related to the company's plantation (KSI-BNM-FRM-13), legislation related to the environment (KSI-FRM-GEN-21), legislation relating to labour (KSI-FRM-HR- 40), and regulations related to health and safety (KSI-FRM-HR-41). The SOP states that the identification and evaluation is to be carried out 2 (two) times a year and conducted by the staff, to be assisted by the EHS Binamitra officer and PGA (Personnel and Gen-eral Affairs) and supported by the Head of Operations / field and other departments within the company organization. The company maintains a list of all applicable legal requirements relating to environmental, occupa-tional safety and health, company plantations, and employment as well as records of internal compli-ance checks to legal requirements. The company’s list of applicable rules and regulations is as below: For PT KSI plantation : -> List of List of Legal and other requirements of Environment-EHS-002 FRM -> List of Legal and other requirements of Plantation Regulation KSI-FRM-13-BNM -> List of Legal and other requirements of Labor FRM-003-MILL -> List of Legal and other requirements of Occupational Health and Safety-EHS-001 FRM For PT KSI mill : -> List of List of Legal and other requirements of Environment-EHS-002 FRM -> List of Legal and other requirements of Plantation Regulation KSI-FRM-13-BNM -> List of Legal and other requirements of Labor FRM-003-MILL -> List of Legal and other requirements of Occupational Health and Safety-EHS-001 FRM

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The lists of legal requirements is update with according to changes in regulatons and also includes in-formation on status of the company’s fulfillment of applicable clauses and articles within the listed legal and other requirements, as part of internal compliance checks by the company. Other evidence that the company has made efforts to comply legal regulations/requirements is as fol-lows: - All operators of heavy equipment, lifting equipment and boilers are certified by the department of

manpower and transmigration of Indonesia e.g. 1. Alkusnadi, a Class I boiler operator, holding a certificate no. 08.0170/PNK3-PUBT/OB-I/III/2008

dated March 18, 2008 2. Samsuar, a Class I boiler operator, holding a certificate no. 07.0140/KMP/OB-I/VIII/07 August 27,

2007 3. Jasman, as a Class I boiler operator, holding a certificate no. 111/PNK3-PUBT/OB-I/II/2009 dated

February 6, 2009. - The company’s contractor for hazardous waste collection, PT. Wirasasta Gemilang Indonesia (PT.

WGI) has the required permit for hazardous waste collection in accordance with the decree from the Minister of Environment No. 490 years, 2009 and is only permitted to collect waste in the form of used lubricating oils B3. As PT WGI has not branch office in West Sumatra region, the contractor appointed another company, CV Arwana, to collect hazardous waste from PT KSI on their behalf. CV Arwana has an appointment letter from PT. WGI, letter no. 02/SP/WGI/JB/IV-01 dated 24 April 2001.

- CV Arwana is using a vehicle licensed for hazardous waste collection by the relevant authorities ac-cording to license no. AJ.309/54/010/DJPD/2009/31004098 dated 24 June 2010 to 24 November 2010, for vehicle with license number BA 9372 JN. The vehicle was originally owned by the previous hazardous waste contractor for PT KSI, which is PT. Nirmala Tipar (appointment letter for waste transportation no. 005/NTS-SP/XII/2006.)

- Training for operators of lifting equipment and heavy equipment has been done on 17 May - 21 May 2010 for all operators and Operator Permit Licenses (SIO – Surat Izin Operator) were already issued and received by all operators.

There is evidence that PT KSI has made efforts to comply with changes in applicable legal and other requirements. For example, there is decision letter of the West Sumatra Governor concerning regional minimum wage of West Sumatera Selatan Province valid since January 1, 2010 which states that minimum wages for workers in industries such as agriculture, animal husbandry, hunting and fisheries is IDR 940,000 per month or IDR 37,600 day, and the company has revised their workers salaries to comply with this regulation. Other examples of the company’s efforts to comply with changes in the regulation include evidence of application for license to temporarily store hazardous waste. However the company has not complied to certain legal requirements, for example: - Although CV Arwana is collecting all types of hazardous wastes from PT KSI, CV Arwana’s hazardous waste collection permit from the Ministry of Environment only states permission to collect wastes in the form of used lubricating oils, not other types of hazardous wastes. This was seen from sample hazard-ous waste collection manifest No. 0000991 for collection of 13 drums of used oil, 11 pieces of used bat-tery containers, 96 Glisat containers, 8 Gramoxone containers, and 291 pcs of used oil filters by CV Arwana. - PT KSI is storing their collected hazardous wastes temporarily in a warehouse at their central work-shop which is not licensed for storage of hazardous wastes by the Environmental Department (Bapedalda). As stated in the appendix of the company’s permit for temporary storage of hazardous wastes from the Ministry of Environment (license no. 254 of 2009 dated June 10, 2009), temporary storage of hazardous wastes is only permitted at the palm oil mill. Compliance status: Major Non Compliance, See NCR No. 1 of 13 The company has not complied to certain legal requirements, such as: 1) CV. Arwana’s permit for hazardous waste collection only states permission for collection of used lubricating oils and used oil, but not other types of hazardous wastes, although the contractor is collecting other types of hazardous wastes. 2) The company is temporarily storing hazardous waste in a central warehouse that has not been approved for temporary waste storage by the Ministry of Environment or Bapedalda.

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Criterion 2.2: The right to use the land can be demonstrated, and is not legitimately contested by local communities with demonstrable rights.

Findings: The company can demonstrate the right to use land, documents showing ownership of the land in ac-cordance with relevant laws, such as follows: The company has the land use right for a total land area of 10,216.1 hectares based on their HGU (Land Use Right) certificate no. 4/HGU/BPN/1997 valid for 35 years commencing on 22 January 1997. In the Year 1998 there was the transfer of land use right ownership of PT Tidar Kerinci Agung to PT Tidar Sungkai Sawit (TSS), a company owned by Malaysian businessman Robert Kwok under PPB Oil Palms Malaysia Sdn. Bhd., based on “Surat Keputusan Menteri Negara Agraria No. 1-VIII-1998 re-garding Land Use Right transfer Permit from PT Tidak Kerinci Agung to PT Tidar Sungkai Sawit. Base on notarial decree letter no. 96, Notaris Buntario Tigris SH, SE, MH the name of PT Tidar Sungkai Sawit was changed into PT Kencana Sawit Indonesia (PT KSI). This was confirmed by a decree letter from Minister of Justice and Human Rights Republic of Indonesia No. C-14 718 HT.01.04.TH.2006 about approval of company’s basic budget (‘anggaran dasar’) for changing of the name of PT Tidar Sungkai Sawit to PT Kencana Sawit Indonesia. Base on a decision letter from the National Land Agency(BPN) head dated January 22, 1997, no 4/HGU/BPN/97, HGU decree letter includes 2 measurement books (buku ukur)/, which are maps showing the areas within the company’s land whch legally belong to other parties. In this case, measurement book no. 1 covers an area of 7222.5 ha belonging to the community of Sei Kunyit Village, while measurement book no. 02 covers an area of 2993.6 ha belonging to the community of Talao Village, both of which are located within PT KSI’s HSU area in Sangir Sub-District, Solok Selatan District, West Sumatera. The plantation boundary was delineated by a black line on a map of the estate. The company uses a colouring system to identify each estate block on the map. Boundary stones are used in the field to identify HGU border area (BPN boundaries) and borders with other plantations, such as communities or plasma plantation. Estate boundaries are clearly identified and demarcated on the field with markers made by the National Land Agency (Badan Pertanahan Nasional), initially there was 130 BPN bound-ary stone (as seen on a cadastral map) however due to poor maintenance programme, there are only 38 remaining BPN boundary stones. To develop clear boundaries with land not located in the com-pany’s HGU area, the company installed wooden boundary markers temporarily until the BPN officers replaced the broken boundary stones with new ones. All boundaries have been marked on the map with GIS coordinate. Boundary stone no. 25 located at S.01º28' 46.3" dan E 101°25' 39.5" was viewed on-site and GIS coordinates were checked and found to be accurate as per the company’s map. The company has a Geographic Information System (GIS) Department responsible for conducting pe-riodic boundaries monitoring programme. As informed by communites from both Talao and Sei Kunyit village during interviews, the villagers are happy with PT Kencana Sawit Indonesia, because they are now not isolated anymore since PT KSI opened the road and allows communities to using the road for their activities, and communities can get increase in monthly income from the Plasma Programme. The change of name of the company from PT Tidar Kerinci Agung to PT Sawit Kencana Indonesia was informed to relevant parties by the regents of South Solok region. Following recommendations from the regents, the community provided their land to the company for development of oil palm plantations, and received land compensation. There is no evidence that the villagers were forced or coeirced in to performing this land transfer. The following is evidence of land compensation conducted: 1) Payment records and letter regarding claim deduction made to Limin Adis with total value IDR 2,210,000 for total land area of 2.1 Ha dated 23 May, 2008. 2) Records of payment of IDR 680,000 made to Ajiah for 0.68 ha, and payment of IDR 680,000 made to Mariah for 0.68 ha. There are records of land compensation made for plasma (smallholders) area in Talao Village dated 26 May, 2008 for 107 community members. There is no more land compensation issues in PT Kencana Sawit Indonesia both in Talao village and Sei Kunyit village. And no land conflict between the company and surrounding communities. The company has a conflict mechanism procedure i.e. KSI-PRO-BNM-04, and even though the development of the conflict mechanism procedure did not involve the local communities, the company’s Binamitra department held an event on October 16, 2010 to inform the communities on the content of procedure as well as to inform them on the company’s RSPO system. The agenda of the event was to

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inform on the company’s mechanism for stakeholders to provide information to PT KSI, mechanism for receive complaints and disputes, mechanism for communication, consultation and coordination, discussion of activities and traditional rights, as well as to establish a communication forum (FORKAS). The minutes of the meeting was signed by the estate manager, Mr. Wali Nagari Sei Kunyit, as well as community leaders (Rush Dt R. Basa, Muslim Spd, H. Matt Moses, Walid Gani Arise (PGA). There are minutes of this meeting stating that both parties have approved the procedures of the company, and also accommodates community input for conflict resolution before any cases are escalated to the government or to court. Compliance status: Full Compliance

Criterion 2.3: Use of land for oil palm does not diminish the legal rights, or customary rights, of other users, without their free, prior and informed consent.

Findings: The only group that has traditional rights within the company’s areas was just newly identified as “Orang Rimba”, a community of indigenous people sometimes also known as “Suku Anak Dalam”, which are nomads that occasionally enter PT KSI’s location to fish, gather fruits and hunt animals. There are no other groups that are claiming traditional rights within in PT KSI’s area. There were no formal negotiations with the “Orang Rimba” community regarding their traditional 'rights, but the management has issued an internal memo to all staff and employees, signed by the General Manager Estate on November 10, 2010, No: 16/MEMO-GEM/XI/2010, regarding a policy on “Orang Rimba” i.e : - The “Orang Rimba” is permitted to carry out activities in all PT KSI area to maintain the livelihood for their group such as looking for food, hunting and fishing. Other activities are not allowed. - All workers and staff were informed not to disturb the “Orang Rimba” during their activities withiin PT KSI’s area. There is a copy of minutes dated on November 25, 2010 as evidence that an internal memorandum pertaining to the “Orang Rimba” and a location map of “Orang Rimba” activities was provided to all employees, including harvesters, section heads, assistant managers, division managers and estate managers. This policy has not been communicated to contractors and communities surrounding the company’s area, to ensure that their activities do not interfere with the traditional rights of the existing “orang rimba” within PT KSI plantation. This was raised as an observation under Appendix 5. Compliance status: Compliance with observations

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

Findings: The company has a long term management plan for a 5 years period i.e. budget for 2010 and projec-tion for 2011 to 2015 with information on this document consisting of company activities such profit and loss information from Total Revenue and Total Operating Cost, including information about gross oper-ating cost, profit/loss before tax and profit and loss after tax. The company has a financial schedule for yearly budget. Information on document consist of general routine operational activities such plantation maintenance, harvesting, fertilizer, investment plans such enrichment planting (planting of various plant species to enhance biodiversity), mill activities such FFB processed, projected oil extraction rate (OER) and kernel extraction rate (KER), projected crude palm oil (CPO) and palm kernel (PK) production, CSR programmes and environmental monitoring, HCV management plan and other activities to fulfil RSPO requirements. The company has also developed a medium term plan for a 5-year period (2011-1015), containing information on the budget for each activity (including activities for environmental management programmes and all CSR related expenses, legal compliance and RSPO P & C compli-ance) and revenue from company's production including all company's liabilities. The amount of profit estimated to be achieved each year was clearly calculated. The company has implemented SAP pro-grammes for financial controlling. The company has also developed annual plans that included detailed information about the company's activities, expenses and revenue. e.g. "Detailed Expenditure for year 2010" is made for year 2010 in PT Kencana Sawit Indonesia. From the information stated on the

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document, the company will gain positive profit with range 32 to 36% from the total cost every year per year for period of 2010 to 2015, it is estimated that company will gain good profit for long term period at least for 5 years period and economic viability. Financial projections on the company’s 5 year plan is stated in the document as below:

• Year 2011 total cost IDR186,294,470,449 and total revenue IDR 346,933,125,000 • Year 2012 total cost IDR 192,922,871,357 and total revenue IDR 358,467,525,000 • Year 2013 total cost IDR 154,002,256,570 and total revenue IDR 321,104,179,125 • Year 2014 total cost IDR 196,508,431,532 and total revenue IDR 372,949,613,010 • Year 2015 total cost IDR 199,523,665,866 and total revenue IDR 376,994,681,890

Projected Yield FFB per ha/year is 23.5 tonnes/ha; projected OER is 21.5%, and projected KER is 4.5%. The oldest mature plantation in PT Kencana Sawit Indonesia was planted in 1994 covering a total area of 783 ha and the youngest was planted in 2003 covering a total area of 7728 ha. Plantation rotation is 25 years and replanting will commence in 2019 for the 1994 planted areas. Due to this, PT KSI does not have a detailed replanting plan but only estimation of total area and locations. Compliance status: Full Compliance

Criterion 4.1: Operating procedures are appropriately documented and consistently imple-mented and monitored.

Findings: The SOPs for estates are available at the main office and all estates, and includes SOPs for nursery management, land clearing, spraying, fertilizer application, pruning, harvesting and FFB loading. The company also has more detailed procedures for conducting estate operations such as the nursery, land clearing, planting, treatment, harvesting and usage of pesticides, for example: - Land Clearing without burning KSI-SOP-EST-01, rev.0 dated May 1, 2010 - Nursery (Nursery), KSI-SOP-EST-02, dated May 1, 2010 rev.0 - Planting KSI-SOP-EST-03, dated May 1, 2010 rev.0 - Harvesting KSI-SOP-EST-04, dated May 1, 2010 rev.0 - Integrated Pest Management (IPM), KSI-SOP-EST-05, rev.0 dated May 1, 2010, by means of

chemical, biological and manual methods - Circle and Path spraying, KSI-SOP-EST-06, rev.0 dated May 1, 2010 - Selective / spot spraying KSI-SOP-EST-07, rev.0 dated May 1, 2010 - Weeds spraying KSI-SOP-EST-08, dated May 1, 2010 rev.0 - Slashing KSI-SOP-EST-09, rev.0 dated May 1, 2010, for control of weeks using machetes The SOPs for the mill is available on file at the main office and at the mill e.g.:

- Procedure for reception of FFB, PRO-001-Mill rev.0 January 1, 2007. - FFB Sorting Procedure, KSI-PRO-EST-02, dated May 1, 2010 rev.0 with FFB sorted into unripe,

mengkal, ripe, over ripe, empty fruit bunches (EFB), and rotten. - Loading Ramp SOP-07-Mill rev.0 January 1, 2010. - Sterilizer SOP-10-Mill, rev.0 January 1, 2010, - Press SOP-Mill-15 rev.0 date January 1, 2010, which states hydraulic pressure to be 40 to 50 Bar,

hot water levels in the cylinder shall be 30 s / d 40%, and screw press shall be at 42 Ampere to 50 Ampere.

- Digester SOP-16-Mill rev.0 January 1, 2010, in which the digester temperature shall be set between 60-95 degree.

- Vibrating Screen SOP-17-Mill, rev.0 January 1, 2010. - Crude Oil Tank-COT, SOP-18-Mill rev.0 January 1, 2010 - Storage tanks SOP-26-Mill rev.0 1 January 2010, in which the temperature in the storage tank is to

be maintained at 45-55oC Checking or monitoring of operations in each Estate is so far only performed for harvesting and main-tenance activities in every estate with daily reports of internal audit produced, e.g. internal audits re-ports dated October 9, 2010 for field 066, 132, 158 for findings on aspects such as uncollected loose fruits (whether in the circular area of trees, paths or FFB collection areas), unharvested FFB, deliv-ered FFB, pruning, frond stacking arrangement, and presence of weeds. There has been no evidence of inspection or monitoring activities carried out on other operations asides from harvesting and main-tenance activities at the estate.

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In the mill. The last internal audit was conducted on September 28, 2010 by appointed internal audi-tors i.e. Mr. Rahman, Mr. Hasroni Noverdo, Mr. Dwi Hari, and Mr. Runadi. The internal audit included inspection or monitoring of operational activities on environmental, health and safety, and quality as-pects. The internal audits results were documented and followed up by the company. Internal audits to inspect and monitor operational activities should also be focused on day-to-day operations across all departments based on the SOP that has been established for each department.

Compliance status: Non Compliance, See NCR No. 2 of 12 There is no evidence that checking or monitoring for all estate operations activities (i.e. internal audit) to ensure compliance with the company’s SOPs for estates has been carried out.

Criterion 4.2: Practices maintain soil fertility at, or where possible improve soil fertility to, a level that ensures optimal and sustained yield.

Findings: A soil analysis report for PT KSI’s 3 estates is available and documented in report entitled ‘Soil Verifica-tion Study with Special Reference to oil Palm Estate West Sumatera, PBB Oil Palms Berhad, Agromac SDN.BHD, February 2006’. According to the report, the main soil types identified at the estate (accord-ing to the Malaysian Soil Series) are the Typic Kandiudox (80.5%), Xanthic Kandiudox (19%), Aquic Kandiudox (0.3%). As explained on the soil analysis report the soils are categorized as podsolic with a high content of volcanic soils, which are all soils of medium to high fertility status and medium to well drainage. The report includes recommendations to provide good fertilizer inputs for most soils, with irri-gation if possible during dry season. Leaf analysis results for sampled fields of PT KSI’s estate are also available with test parameters for nitrogen (N), phosphorus (P), potassium (K), magnesium (Mg), cal-cium (Ca), & boron (B), with results dated June 2010 by the Eco-Management Unit Central Kalimantan Project. The result of leaf nutrient status was as follows: N Deficient, P Probably Deficient, K Deficient, Mg Deficient, B Probably Excessive. PT KSI estate has records of fertilizer application programme for year 2010 and actual fertilizer applica-tions for Urea, NPK, MOP, Kieserite, RP, Dolomite, and Borate. The fertilizer application programme was developed internally by Willmar’s Research & Development Department, based on the results of the leaf and soil analysis reports. Records of actual fertilizer applications shows that applications are carried out according to the recommended amounts. Land application of EFB and POME is also re-comeded for PT KSI estate, as per the soil analysis report recommendations. To prevent erosion and maintain soil fertility, the company carries out fertilizer application, planting of leguminous cover crops, and composting. PT KSI still has not carried out land application yet, the proc-ess is ongoing to get recommendation from relevant institution currently. In addition, decanter cakes made from palm oil mill waste is applied as fertilizer for land areas with slope more than 20% as re-quired the the company’s SOP for Application of Solid Decanter Cake (Solid) - SOP-EST-024. Informa-tion from the estate’s ‘Fertilizer Usage Register’ dated November 24, 2010 and monthly report ex-plained that for 2010, PT KSI fertilizer utilization for all fertilizer types (Borate, Dolomite, Kieserite, MOP/KCL, NPK Super K, Urea, Rock Phospate, Boiler dust) was as follows: Division I: 2.151.380 tonnes Division II: 2.217.720 tonnes Division III: 1.922.700 tonnes Until now, soil fertility in PT KSI estate remains quite good with no apparent reduction in soil fertility as evident through the estate’s good FFB yield per ha i.e. 22.70 tonnes/ha by end of 2010 Compliance status: Full Compliance

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

Findings: PT KSI has done an identification of soil types within the estate, including identification of available marginal soils within PT KSI’s area. A soil map for PT KSI estate, which includes fragile soil, is avail-able. Based on soil identification, there were areas of sandy soil identified in several locations i.e. Block 065, 066, 067, 068, 069 and Block 017, 019, 020, 021 with 261.98 with 172.93 ha, and these were also mapped on a marginal soil map dated November 19, 2010 (source: map done by Tanah Agromac Sdn.Bhd, 2005). However, during site visits to these blocks, the soil types observed at these

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areas are not sandy soils. PT KSI should make a detailed analysis about the soil to determine whether these are marginal soils or not. As seen from the company’s contour map (topographic map), some part of the estate area is hilly with a slope of more than 25% which is plantable. Areas identified with slope more than 25% are blocks 051, 069, 068, 067 of Division I and blocks 172, 173, 188, 189, 190, and 191 of Division III. Areas with more than 40% slope cannot be planted and are designated as conservation areas. The company has a management strategy for plantings on slopes above a certain limit, i.e. more than 25%, such line terracing and “Tapak Kuda” (hoof method, which is a technique to level only the areas where individual trees are planted, in order to reduce soil erosion), as referred to Agriculture Manual and SOP for Oil Palm tahun 2008, as well as SOPs for the “Tapak Kuda” method and silt pits. Since the company has planted in slope area > 20%, the risk for erosion is very high, however there is no information about erosion levels since PT KSI has not conducted any monitoring of this. This is raised as a non-conformity. PT KSI has a monthly road maintenance programme for year 2010 made by each estate manager as stated on the estate’s SOP for road maintenance (KSI-SOP-GEN-17), which includes the budget for road maintenance activities for each estate, and records of actual road maintenance activities con-ducted such graveling, road service, and re-surfacing. The Assistant Road Superintendant is responsi-ble for ensuring road maintenance activities are carried out according to plan. Records of actual road maintenance activities conducted shows that maintenance is regularly carried out, according to planned and actual costs were above the planned budget for Jan to July 2010 e.g. field 133, 134, 135, 136, 137. From site visits, it was observed that estate roads are well maintained, and has good drainage to ensure minimum erosion. Some roads within PT KSI estate were in poor condition due to high rainfall in 2010, especially sloped areas, such as in field 069, 071, 021, 022 However, during stakeholder consultation, there were comments from surrounding villages that FFB trucks travelling on the roads produce a lot of dust and damaged the road and the company was re-quested to help reduce this problem. The estates have an improvement plan for year 2010 in which air pollution from the road dust and damaged roads was identified as significant issues, but there was no activity listed in the company’s action plan to deal with this issue. This was raised as an observation. No peat land is present within PT KSI estate. Compliance status: Non Compliance, See NCR No. 3 of 12 and 4 of 12 • Identified fragile soil areas as per the company’s soil map is not the same with actual fragile soil dis-

tribution in the field • The company does not monitor erosion levels for land which has more than 25% slope

Criterion 4.4: Practices maintain the quality and availability of surface and ground water.

Findings: The company made an SOP for protection of riparian buffer zones of watercourses and wetlands, in-cluding maintaining and restoring appropriate riparian buffer zones, prohibition of agrochemical applica-tion activities nearby rivers or watercourses. To protect watercourses and wetlands within the estate area at or before replanting, PT KSI marked the riparian/buffer zones in along the river within the estate covering an area of 745.7 Ha, as follows:

• Ganeh River, 97.3 Ha • Kulai River, 234.1 Ha • Suwir River, 170 Ha • Jujuhan River, 244.3 ha

PT KSI also prepared a hydrology map. The big rivers flowing through PT KSI area include Juhjuhan River and Kulai River.The company has long term and medium term riparian zone management plans from the year 2010 to 2021, as follows

- short term planning for period October 2010-2013 - medium planning for period October 2013 to October 2014 - long term planning for period October October 2014 to October 2020

The plan explained what action will be taken for each period, such as for the short term plan, the com-pany will place boundary markers along the Ganeh River with a total of 494 boundary pegs along 1,880 m. There will be no spraying or manuring for oil palm trees along the riparian buffer zones. The com-

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pany has taken water samples from 8 sampling points to monitor water quality of all rivers flowing through PT KSI. From water analysis results in November 2010, the pH, BOD, COD, TSS, and oil & grease levels of water samples taken are within the government standard for water quality of class II rivers. There is also a wetland area in the form of a small swamp area which is also already being protected by PT KSI management. However, it was observed that the company’s management plan for water-courses does not include a management plan for wetland areas as required by the company’s SOP for management of rivers. This was raised as an observation under Appendix 5 The company has developed and implemented a documented water management plan. For supplying water at the housing area, the company has plans to develop water treatment facilities at Division 3 and 2, and well groundwater at Division 1. Currently the water treatment facility at Division 3 just has been constructed but is not in operation yet. The contractor for construction of the waste water facility at Divi-sion 2 and ground water well at Division 2 has been selected. Currently, division 2 housing area has a facility to collect and utilize rain water. Water for housing in es-tates is supplied by PT KSI mill. The mill uses water from Jujuhan River and pond. The water is treated by the mill and distributed at the boiler (28.2%), for process (47.25%), for domestic use (21.23%), and for floor cleaning (3.32%). Currently flow meters are available at water uptake points from the river and pond/dam, water intake points to clarifiers/water treatment tanks, distribution points to housing areas, and at boilers. The quality of treated water is monitored periodically and recorded in the form “Rainfall Analyses Report”. Water consumption for staff housing is also supplied by PT KSI mill. Monitoring of water quality was conducted with results as per monitoring report No. 5391/LHU/BLK-SB/VII/2009 con-ducted by the Health Laboratory Technical Unit (UPTD Balai Laboratorium Kesehatan) of West Su-matera on June 22, 2009. Each division has a facility to wash chemical spraying equipment, apron, hand gloves and other per-sonal protective equipment for sprayers. The waste water from washing activity is collected and reused for next spraying activity. Water usage is monitored every day and recorded on a daily basis, with monthly and yearly summary records available. As summarized in monthly water consumption records, it was stated that average water consumption was 1.58 m3/ tonnes FFB. Compliance status: Compliance with observation

Criterion 4.5: Pests, diseases, weeds and invasive introduced species are effectively managed using appropriate Integrated Pest Management (IPM) techniques.

Findings: The company has developed an SOP for Integrated Pest Management (IPM) and SOP for detection and pest census of oil palm trees diseases (KSI SOP-EST-05 Rev.0 01 May 2010). The company’s IPM is conducted as follows: - Chemical control is only conducted in cases of major pest outbreaks; - Biological control is through viral infection of the pest itself; - Manual control through hand picking, - Culturalcontrol using host plant (‘tanaman inang’) i.e. planting of beneficial plants (e.g. Turnera subu-

lata) to attract natural predators of leaf pests, and this plan was well implemented during field checks at both estates.

Plantings of turnera subulata were observed throughout the estates roads; To monitor levels of pest infestations, the company conducted census on a sampled area as an early warning system. For example, a full census will be conducted if evidence of leaf-eating pest attack are detected in 20% of fronds within the sampling area. Pest monitoring/detection and IPM activities commenced in September for year 2010. Monitoring is planned to be conducted for all blocks in the estate. The most common pests found include bagworms (mahesa corbetti) and termites. IPM training was conducted on 20/08/2010 for 5 workers. Training materials included information on types of pests, chemical control, biological control, cultural control and physical control methods. Training for 4 workers who conduct pest detection activities was conducted on 22/09/2010. The company monitors and records pesticide usage in 2010. In year 2010, records show that the use of pesticides is very small e.g. up to October 2010, consumption of Klerat is (rat bait with a.i. brodi-facoum 0.05%) was used and application was only 0.0000004 g of a.i. per tonne FFB or 0.000007 g of

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a.i. per ha. This amount was very small. Compliance status: Full Compliance

Criterion 4.6: Agrochemicals are used in a way that does not endanger health or the environ-ment. There is no prophylactic use of pesticides, except in specific situations identified in na-tional 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.

Findings: The organization has a list of chemicals identified as WHO Type IA, IB, and Type II, and has a permit the use and consumption of these pesticides from the Service, Manpower and Transmigration of Solok Selatan district through letter no. 560/63/DSTKT/X/2010. The permit includes permission to use the herbicides Garlon 480 EC, Glisat, Starane 200 ec, 865 U.S. Starmin, and Trap 20 WP, and the insectisides, 28 EC and BM Delta Wazary 10 FW. Fungicides used include Agristic 400 L and rodenticides include Klerat RM-B. The list of all agrochemicals used in 2010 by PT Kencana Sawit Indonesia are: 1. Glisat 480 SL (active ingredient: Isopropyl amine glyphosate) 2. Gramoxone (active ingredient: Paraquat dichloride) 3. Starmin U.S. 865 (active ingredient: 2,4-Dimethyl Amines) 4. Trap 20 WP (active ingredients: Methyl Metsulfuron) 5. 2-4D Amine (active ingredient: 2,4-Dimethyl Amines) 6. Antarlang 480 BL (active ingredient: Glyphosate Isopropylamine) 7. Kenlon 480 EC (active ingredient: Trichlopyr Butoxy Ethyl Ester) 8. Garlon 48 EC (active ingredient: Trichlopyr Butoxy Ethyl Ester) 9. Agristic (active ingredient: Alkylaryl Polyglycol Ether) The companys develops chemical spraying programmes and maintains records of actual work carried out, such as when annual spraying is applied, the amount used per hectare and the number of times of application, for example: - The company had a programme for circle spraying in 2010 using the chemicals Glisat (containing

glyphosate) and Trap. For Division I, 2010, it was planned to conduct spraying 4 times a year for each block. Circle spraying for blocks 001, 002, 005, 006, 007, and 008 was planned for January, April, July and November, while circle spraying for blocks 003, 004, 009, 010, 011, and 012 were planned in February, May, August, and December. Sample records showed that in the month of January, spraying was conducted for 204.69 ha of blocks 001, 002, 005, 007, 480 and 008 using 79.25 liters of Antarlang BL (Isopropilamina Glyphosate). Dosage used was 0.387 L / Ha, while recommended dosage by the supplier is: 1.5 to 3 L / Ha. Amount of Trap used on the same block was 3.750 Gr and the dosage used was 18.32 Gr / Ha (recommendation from the supplier is 50 g / ha for broadleaf weeds)

- The company has a programme for selective spraying using Gramoxone, planned to be conducted twice a year for each of its blocks. For example, for Division I, selective spraying of blocks 034, 037, 038, 044, 045, 046 was planned for January and July 2010. Applications carried out in February and August 2010. In February, chemical application was carried out at blocks 037, 045 and 046 covering an area of 88.58 hectares are used as much as 25 liters and the dose used was 0.282 L / Ha (recommendation of the supplier are: 1.5 to 3.0 L / Ha)

Usage of agrochemicals is appropriate for the target species, given at correct dosage and applied by trained personnel in accordance with the product label and storage instructions, such as follows: 1. Glisat 480 SL is used for wide and narrow leaved weeds such as Borreria alata, Ischaemumtimorenase, Ottochloa nodosa. 2. Gramoxone is used for broadleaf weeds such as Borreria latifolia, Agerathrum sp, Melastoma sp, Clidemia hirta 3. Starmin U.S. 865, is used for Assystasia weeds 4. Trap 20 WP, mixed together with other herbicides such as Gramoxone 5. 2-4D Amine, is used for Assystasia weeds 6. Antarlang BL 480, used for broadleaf weeds and narrow weeds like Borreria alata, Ischaemumtimorenase, Ottochloa nodosa. 7. Kenlon 480 EC, is used for woody weeds 8. Garlon 48 EC, is used for woody weeds

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9. Agristic used as an adhesive agent with Glisat. The average dosage of chemicals used during the whole of year 2010 in all divisions are as follows: 1. Gramoxone (paraquat) usage was 0.474 L / Ha (less than recommended usage of 1.5 to 3 L / Ha) 2. Glyphosate usage was 0.38 L / Ha (less than recommended usage of 1.5 to 3 L / Ha) 3. Trap usage was 30 g / Ha (less than recommended usage of 50 Gr / Ha), 4. Garlon usage was 0.072 L / Ha (less than recommended usage of 0.8 to 1.2 L / ha), 5. 2.4 D Amina usage was 0.254 L / ha (less than recommended usage of 1 to 1.5 L / ha). Gramoxone, which contains paraquat, was used until August 2010, after which the company no longer used Gramoxone in accordance with instructions as per a circular letter from the Estate General Manager. There is evidence that spraying was carried out by skilled personnel as viewed from training records which shows that training for Division III sprayers was conducted October 23, 2010 by Mr. Elizon, and training for Division I sprayers was done on 21 August 2010 by Mr. Aria Gumilang. Waste materials from agrochemicals include pesticides containers are properly disposed in accordance with the relevant regulation i.e. PerMenLH No. Jonto PerMenLH No. 18/1999. 85/1999. Agrochemical wastes produced at the estate is collected in a separate store and some of the agrochemical containers are reused for chemical mixing. Agrochemical waste is treated as hazardous waste and will be stored no more than 90 days according to relevant regulations and all hazardous waste are collected by a ha-zardous waste collector. However, as the company usually produces only a small amount of hazardous wastes after 90 days storage, the company has made an application to the Ministry of Environment to extend the company’s permitted storage time for hazardous wastes prior to delivery to waste collector. The company has permit No.254 of 2009 from the Ministry of Environment for temporary storage of hazardous waste for PT. Sawit Kencana Indonesia where permit to store hazardous wastes is granted for a period of 90 days, and the permit is valid from June 10, 2009 to June 10, 2014. The company has an SOP for Handling of Hazardous Waste KSI-SOP-GEN-05 Revision 00 dated August 1, 2010 which states that the person in charge of the hazardous waste store where hazardous is the Head of the Cen-tral Workshop and Mill workshop, which hazardous wastes include those in the form of oil, contami-nated cotton/ cloth waste, used batteries, used grease, used oil filters, used welding wires and agro-chemical wastes. The company provides medical health check-ups for those who apply agrochemicals. Health checks for sprayers and staff handling chemicals was done on 12 to 13 October 2010 by the Office of Manpower and Transmigration UPTD, Institute for Occupational Safety (Hyperkes) of Padang and the company doctor, Dr. Eric Oktomarizon. The health checks include audiometric tests to test hearing loss in mill workers, spirometry tests to test lung function, and cholinesterase blood tests to test for possible chemical poisoning in workers handling chemicals such as sprayers, manurers, spraying mandores, chemical store staff, laboratory staff and boiler operators. Cholinestrase examination results for a total of 341 workers show that blood cholinesterase levels of 15 workers were found to be low, indicating low levels of chemicals in the bloodstream, while cholinesterase levels of 2 operators were very low, indi-cating a higher level of chemicals in the bloodstream, while 324 operators showed healthy / normal cholinesterase levels. The 2 (two) operators identified to have low blood cholinesterase levels were Mr. Darmi (manurer for PT KSI Division II) and Mr. Marjodi (sprayer for PT KSI Division II), both of which had cholinestrase levels were 37.5%, which well below healthy cholinesterase levels of 75 – 100%. In accordance with the recommendations given by the Hyperkes and Safety Institute, the two workers were transferred to perform other work which does not involve handling of chemicals. Compliance status: Full Compliance

Criterion 4.7: An occupational health and safety plan is documented, effectively communicated and implemented.

Findings: PT Kencana Sawit Indonesia a part of Wilmar International group has a documented policy for occupational health and safety that was signed by Mr. Goh Ing Sing as Group Plantation Head as reviewed on September 2010. The company’s employees were informed on the policy during a training dated 12 November 2010 regarding Occupational, Health and Safety and Risk impacts from operational activities such as Harvesting, Fertilizing and Spraying and usage of PPE. Communication about the company’s OSH policy to contractors was done during a meeting with contractors on 01 November 2010. The company assigned a person who is responsible for health and safety programmes for the estate, in

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accordance with a decree from the Head of the Social Service Manpower and Transmigration of Solok Selatan District (No. Ratification of Trustees 560/59/DSTKT/X/2010 Safety Committee, in accordance with the Regulation of the Minister of Manpower PER.04/MEN/1987). The OSH committee for PT KSI was endorsed by the Head of Social Service Manpower, Mr. Zulfajriadi, S.Pd. M. Hum through a letter dated October 20, 2010, which set the structure of the OSH committee, with Mr. Michael Tey Ah Shao as chairman, Mr. Memed Edyos as Vice Chairman, Mr. Nazaruddin Purba as the Secretary and also OHS expert (in progress). An OSH committee was also established for PT KSI mill, based on a decree from the Head of Trans-migration of Labour Social Service District of Solok Selatan No. 560/59/DSTKS/X/2010 concerning the ratification of Trustees Committee on Occupational Safety and Health, dated October 20, 2010. The OSH committee comprises of Mr. Wansep as chairman, Mr. Sulimi A Rival as vice-Chairman, Mr. Leo-nardo Simorangkir as first secretary, and Mr. Henderson BE as assistant secretary. Records of regular OSH meetings are available e.g. at the mill, there are records of a meeting held on October 2010 where the agenda was regarding SOPs, safety management system, OHS Contractors and Social Security. The company provides occupational accident insurance for all workers, in cooperation with PT. Jam-sostek (the national social security) with evidence in the form of a valid Jamsostek card for all existing employees and workers. Regular health examinations are conducted for all employees on 12 to 13 October 2010 by the Office of Manpower and Transmigration, West Sumatra UPTD, and also by company doctor. The examination included audiometric tests and spirometric tests as well as cholinestrase monitoring in the blood serum. Test results are available, i.e. analysis report no. 564/BHP/X/2010 for audiometric test (hearing func-tion) as well as spirometry test conducted for 68 mill workers, including mill oil station room operators, loading ramp workers, laboratory staff, workshop workers, mechanics, operators of the kernel station, boiler, clarification station, generators, heavy equipment, and power house, as well as gardeners, driv-ers and workers in charge of logistics. Tests for cholinesterase levels in blood serum was done for 341 employees handling chemicals such as sprayers, manurers, spraying mandores, chemical store staff, laboratory staff and boiler operators. A documented risk assessment for Occupational Health and Safety (OHS) was available at both es-tates and the mill. A risk analysis for all activities was done and documented in hazard identification and risk analysis Rek-GEN-005, rev. 00 dated 01 May 2010 which was last reviewed on October 1, 2010. The risk analysis was for all estate activities such as manuring, spraying, harvesting, machine operation, transportation, control of pests and diseases, and landscaping. Records of company trainings related to OSH are well maintained by the Human Resource Department (HRD), such as: 1. Training done on 21 August 2010, with health and safety materials for employees and contractors, conducted by trainer Mr. Doni Arifanto. 2. Training done on 25 August 2010, regarding identification of safety & environmental aspects and im-pacts according company procedure KSI-PRO-GEN-07, and OHS programmes. 3. Training done on 24 November 2010, with regarding first aid and OHS, usage of fire hydrant, fire ex-tinguishers, and evacuation areas. 4. Training done on 24 November 2010, on usage of LPG Stoves and Kerosene Stoves in housing, done by Mr. Leonaedo Simorangkir. 5. Training done on August 24, 2010, regarding grievances and complaints procedures for employees (KSI-PRO-HRD-05) by Mr. Eka Amana 6. Training done on November 16, 2010 on fire drills, conducted by the Padang Firefighting Team 7. Training done on November 15, 2010, regarding handling of fire and fire extinguishers by DAMKAR (Fire Department) of Padang. 8. Training done on November 1, 2010 regarding OHS and Social Security Programme 9. Training done on November 12, 2010 regarding Risk Assessment, and preparation of OHS & Envi-ronmental Law Register by Mr. Henderson BE 10. Training done on October 6, 2010, regarding structure of of the Occupational Safety & Health Committee (P2K3) & and Emergency Response Team, emergency responses procedures, and training on Material Safety Data Sheets (MSDS). An accident and emergency preparedness procedure has been established, for estate i.e. doc KSI-PRO-GEN-13 Revision 00 dated August 1, 2010 which includes procedures in dealing with plantation and forest fires, factory fires, residential fires, fires in offices, oil leaks and CPO leakage from storage tanks, collision or overturned CPO oil tankers, and tipping over of fuel distribution vehicle, while for PT KSI mill there is a documented procedure for accidents i.e. PRO-EHS-016 dated March 16, 2009 re-garding emergency responses by emergency response team (TPKD) including prevention of fires, leaks / spills of chemicals / flammable materials, and explosion of mill machinery.

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Safety and Health Equipment are available at work sites, including fire extinguishers, water tanks, pumps as well as appropriate personal protective equipment (PPE) provided to workers during work. For example, sprayers are provided with appropriate masks, aprons, boots, goggles and gloves, and harvestors are provided with safety helmet and boots. However, it was found that some contracted workers are not using appropriate PPE, such as construction workers under the contractor Syamsul Ri-zal, hired to carry on construction of housing in Division II and were found not wearing safety helmets or boots. FFB transporters in Division II were also not wearing safety shoes, while trucks were not equipped with first aid kits. Construction workers at another housing area near PT KSI mill were also not wearing appropriate PPE. First aid training (PK3) was carried out for all foreman and conducted by the company physician Dr. Mr. Eric and labour officer, Mr. Nurhasidin on November 11, 2010 using training materials on first aid and first aid simulations, as seen on the record of training dated of 11/05/2010. However, PT KSI has not provided first aid training for FFB and CPO transporters as discussed with a driver from the company Surya Persada Eresindo (SPE) and S4 (under Wilmar group), which are contractors for construction of housing area G7 in Estate Division 2. Records of the occurrence of any work accidents are maintained and regularly reviewed. Where in January there were 21 cases of work-related accidents, 34 cases in February, 20 cases in March, 14 cases in April, 18 cases in May, 16 cases in June, 12 cases in July, 15 cases in August, 12 cases in September, and 9 cases in October. According to the company’s procedure for reporting and investiga-tion of accidents and environmental pollution KSI-PRO-GEN-14 Revision 00 dated May 1, 2010, the company shall investigate every accident that occurs and this is recorded on form KSI-FRM-GEN-010. However, while the company maintains records of accidents that occurred in the year 2010, there was no review of the cause of the accidents that occurred during the year i.e. for 12 cases of work accidents recorded. This is raised as non conformity. Compliance status: Non Compliance, See NCR No. 5 of 12, No. 6 of 12 and No. 7 of 12 1. Some workers are not provided with appropriate OHS equipments, for example:

1) CPO and FFB truck drivers and construction workers at housing GB 7 in Estate 2 are not pro-vided with first aid kits.

2) Some workers under Syamsul Rizal contractor that worked in housing construction at Division II not provided with PPE.

2. PT KSI has not provided first aid training for FFB and CPO transporters as discussed with a driver from the company Surya Persada Eresindo (SPE) and S4 (under Wilmar group), which are contractors for con-struction of housing area G7 in Estate Division 2. 3. A review of accidents that occurred during the year 2010 has not been done

Criterion 4.8: All staff, workers, smallholders and contractors are appropriately trained.

Findings: Training programmes for staff and employees are available and documented and established for each department. Examples of records of training conducted is as follows: 1) Estate operations: Harvesting best practices (Sept 2010), pest and disease detection and census (Oct. 2010), risk assessment (Oct. 2010), occupational safety and health (Sept. and Nov. 2010). 2) Chemical Store: Best practices in handling of agrochemicals (Jan and May 2010), emergency response procedures (July 2010). 3) Workshop: Fire drill (Feb and Aug 2010), SOPs for workshops (May and Sept 2010) 4) Polyclinic: Preparation of Risk Assessment (July 2010), SOPs for clinic (February and June 2010). 5) OHS and First Aid training records dated November 5, 2010 for 22 foremen from Division 2, and OHS and First Aid training records dated 10 november 2010 for 12 foremen from Division 3 Training programmes for smallholders are also available and documented for smallholders and communities of Talao Village and Sei Kunyit Village, such as trainings on emergency response (Sept 2010), safety and health (Sept and November 2010), land fire simulation (Oct. 2010), High Conservation Values (Sept 2010), and SOPs for communities under smallholder scheme (Sept. 2010). Training programmees pertaining to OSH were also carried out for contractors and workers of contractors. Records of training for contractors are available, e.g. record of training conducted on November 1, 2010 regarding OSH and employees' social security programme for contractors. There are 28 contractors who attended the socialization. Socialization was given by Mr. Zulferis and

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Adriansyah from PT. Social Security Branch and Mr. West Sumatra. Nurasudin Panggabean from the Department of Labour, South Solok district. PT KSI mill has a training matrix (Mill FRM-006) dated August 1, 2010 for trainings pertaining to leadership, management training, budget training, and health and safety, and an EHS training matrix for 2010 (Rek-EHS-002 April 1, 2010) which includes trainings on Environmental Occupational Safety & Health (Lingkungan Kesehatan & Keselamatan Kerja – LK3) Awareness, Identification of LK3 Aspects & Impacts, Emergency Response, first aid, and fire. Records of training at the Mill are available, such as: 1. Records dated 21 August 2010, with health and safety training materials for employees and contrac-tors, under trainer Mr. Doni Arifanto. 2. Records dated 25 August 2010, regarding procedure KSI-PRO-GEN-07 on identification of hazards, aspects and impacts and on Environmental and OSH programmes. 3. Records dated 24 November 2010, regarding first aid and training, fire hydrants, fire extinguishers, and evacuation area. 4. Records dated 24 November 2010, regarding safe usage of LPG stoves and kerosene stoves in housing by Mr. Leonaedo Simorangkir. The company uses experienced or trained contractors, all current contractors have been working with company for long time (at least 5 years). The company conducts regular evaluations of contractor per-formance, and so far the company has been satisfied with the contractors’ work with no complaints re-lated to the contractors. Compliance status: Full Compliance

Criterion 5.1: Aspects of plantation and mill management, including replanting, that have envi-ronmental impacts are identified, and plans to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement.

Findings: The company has conducted an Assessment of Environmental & Social Impacts (AMDAL) according to Indonesian regulations. This includes the social and environmental impact assessment (ANDAL) document prepared by a consultant, PT Tidar Sungkai Sawit, and it was approved by Ministry of Agri-culture Indonesia dated December 28, 1998 through latter no40/ANDAL/RKL-RPL/BA/XII/1998. The significant impacts identified in the ANDAL document were pertaining to pre-construction and construc-tion activities such as obtaining relevant licenses, land clearing, mobilization of equipment and materi-als, and development of the mill and estate infrastructure. Significant impacts identified at operational level include maintenance of plantings, FFB harvesting and FFB processing. The ANDAL document covers a total land area of 10,216 ha, i.e. 8,000 ha of plantation area, 25 ha of central housing, 80 ha of division housing, 50 ha for the mill, 245 ha for roads and drainage and 1,841 ha of conservation areas. There have been no changes in the company’s operating activities and therefore no revisions to the ANDAL document are required. Asides from the ANDAL document, the company also has prepared a documented identification of environmental aspects and impacts for all estate and mill activities as seen on document "Bagan Alir Identiifkasi Dampak Rencana Usaha atau Kegiatan Perkebunan dan Pabrik Pengolahan Kelapa Sawit, for Field and Workshop area. Besides the documented environ-mental identified aspects and impacts, the company also has risk assessment register to identify the risks associated with all environmental aspects and impacts, however at time of audit, the environ-mental risk assessment was only conducted for estate and workshop activities. It is recommended that the company conducts a risk assessment for all other company activities. Environmental impacts identified are evaluated according to the company’s procedures SOP LK3-KSI-PRO-GEN 07 rev.0 and LK3-KSI-SOP-GEN-06. The company has developed a plan for control of sig-nificant environmental impacts and the plan is being implemented by the company. The company has developed programmes to control and reduce environmental impacts, such as a Water Management Programme. The company prepares their report on environmental management based on their RPL/RKL document every 6 months according to legal requirements. The most recent reports checked were for Semester 1 Year 2010 on May 2010, and reports include monitoring results for mill effluent, gaseous emissions and soil samples. The company’s report for semester 2, 2010 was not completed at time of audit, however the company has conducted monitoring and analysis of environmental parameters such as analysis of

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water quality from the POME outlet and water sampling point at Jujuhan River, results dated 23 Octo-ber 2010 (test certificate no. 2475 s/d 2477/U/X/2010) conducted by the Research Laboratory and In-dustrial Standards of Padang. Checks of river water quality analysis results for Jujuhan river shows that the water quality parameters analysed are within the legal standards as defined by local environmental regulations. However, not all water quality parameters were analyzed as required by the Governement regulation (PP 82, year 2001). This was raised as a non-conformity. The company has also conducted analysis of water quality from deep wells used for water consumption and analysis of ambient air quality in May 25, 2010 conducted by Research Laboratory and Industrial Standards of Padang. The analysis results showed that noise levels exceeded the legal government standard, however there was no action plan to reduce noise levels to meet the standard, and this was raised as a non-conformity under CR5.6 (NC no 10 of 12) The company’s approved AMDAL document and environmental management and monitoring plan (RKL/RPL) only includes identification of environmental and social impacts for activities during planta-tion and mill construction, such as impacts from land clearing, flora and fauna disturbance, and distur-bance to local communities, which are not longer applicable since the mill and plantation are in opera-tion. Since company’s operation has been started this company still has not revised the AMDAL and RKL/RPL document to reflect current impacts, although the environmental parameters that are to be monitored as per government regulations are reported regularly as require by law. This was raised as a non-conformity as the company is required to revise its RKL/RPL document to consider all impacts from current activities. Compliance status: Non Compliance, See NCR No. 8 of 12 The company’s RPL & RKL document has not been updated to reflect changes in the company’s current environmental and social impacts, e.g in the existing AMDAL/RKL/RPL, air emissions were not identified as an environmental aspect and air pollution and noise was not identified as an impact from mill activities. From samples river water analysis results, it was found that not all water quality parameters were ana-lyzed as required by the Governement regulation (PP 82, year 2001).

Criterion 5.2: The status of rare, threatened or endangered species (ERTs) and high conserva-tion 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.

Findings: PT Kencana Sawit Indonesia has conducted an assessment and identification of protected, rare and endangered species and HCV habitats within their area. An identification of flora and fauna has been-carried out by ZSL since 2 years ago, while a HCV assessment was conducted by another consultant, Aksenta on August 2-9, 2010. The results of these assessments are documented in PT KSI’s Wildlife Identification report and PT KSI’s HCV Identification Report.

As of October 2010, based on ZSL’s report, several protected species have been found in PT KSI’s area especially in conservation zones, including the following species: agile gibbon (Hylobates agilis), pangolin (Manis javanica), slow loris (Nycticebus coucang), pigtail macaque (Macaca nemestrina), honey bear (Helarctos malayanus), siamang gibbon (Symphalangus syndactylus), leopard cat (Prionailurus bengalensis) , tapir (Tapirus indicus), and there is also suspected presence of sumatera tigers (Pantera tigris) in certain parts of PT KSI’s conservation zone. Some protected and unprotected bird species were also found i.e: Hornbill (Buceros rhinoceros), crested serpent eagle (Spilornis cheela), lesser whistling duck (Dendrocygna javanica), Wallace’s hawk eagle (Spizaetus nanus), the Great Argus (Argusianus argus), and so on.

From the HCV assessment report it was stated that 3 types of HCVs were identified in the 3 PT KSI estate divisions, i.e. HCV 1, HCV 4, and HCV 5. Identified HCV 1 areas (Forest areas containing glob-ally, regionally or nationally significant concentrations of biodiversity values) include HCV 1.2 and 1.3 areas due to identification of many wildlife species of protected and endangered status as explained above spread througout PT KSI’s area, such as at the Ganeh river riparian zone, Kulai river, Bukit Ha-rimau conservation zone, Jujuhan river, Bukit Tengah conservation zone, Bukit salo conservation zone and Bukit Lipai 1 & 2 conservation zone. These areas are became refuge for these wildlife species. HCV 4 areas identified (Forest areas that provide basic services of nature in critical situations) include HCV 4.1 areas such as water sources and water treatment reservoirs located in PT KSI’s area and

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used for daily consumpsion near PT KSI mill, and HCV 4.2 and 4.3 asreas such as riparian zones and firebreaks along Jujuhan river, Ganeh river, Kulai river, and Suir river. HCV 5 areas (Forest areas fun-damental to meeting basic needs of local communities) includes areas used by the local indigenous tribe, ‘Suku Anak Dalam’ for hunting, fishing, as water source, and other uses along riparian zone, and conservation zones as explained above. Ground water wells used by workers and communities in each estate were also identified as HCV areas in blocks 124, 134, 113, 49 and 43. In accordance with recommendations in the HCV assessment report, PT KSI’s management has allocated a conservation area covering a total of 2,229.59 ha for all identified HCVs and this area is excluded from the com-pany’s productive area.

A HCV management plan for all identified HCV areas in PT KSI’s Divisions 1, 2 and 3 has been estab-lished by PT KSI’s HCV team and this is documented in a HCV Monitoring and Action Plan. The document describes the activities planned for each identified HCV, total area to be managed and peri-odic monitoring activities for each identified HCV. The document was just recently completed, so there were no monitoring records available at time of the assessment. Company also made a specific stan-dard operation procedure to protect wild life as determined in “SOP for wildlife protection (KSI-SOP-GEN-12)”. All monitoring result will be recorded on a standard form KSI-HCV-FRM-GEN-32. This form is also used to record activities of illegal fishing, hunting and other illegal activities that found during patrols.

To prevent inappropriate hunting and collecting activities within their area, company established a mechanism for Ilegal fishing and hunting, and the company also made sign boards and has periodic patrolling programmes.

PT Kencana Sawit Indonesia has assigned a conservation team in each estate which is responsible for to handling all planned activites regarding to environmental conservation, and they will assisted by several estate officers in carrying out daily activities. All team member were trained during a training on HCVs, including management and monitoring of all HCVs, conducted at Padang Regional Office on August 2010. However there is no evaluation on the competency of HCV team members to ensure that they perform their job as required. This was raised as an observation. Compliance status: Compliance with observations

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

Findings: Wastes are identified as part of the company "Environmental Aspects and Impacts Identification" (REK-GEN-005 Rev.0, 01 May 2010), and records of wastes produced are maintained in a hazardous waste inventory list (monthly list, updated by respective representatives from every estate). The company’s method for control of wastes including hazardous & non hazardous wastes clearly explained in the company’s procedure SOP-GEN-05 Rev.0 1 August 2010 i.e. Hazardous and Non hazardous waste handling procedure and were implemented through a recycling programme (for recyclable wastes such as plastics etc), and proper storage of hazardous wastes such as empty agrochemical containers, waste oils, filters, battery, etc. A new SOP has been established for washing of empty agrochemical containers & fertilizer bags & management of waste washing water, effective since September 2009. This SOP was communicated, trained to staff & is made available at all estates. The supervisors for each estate were interviewed to test their understanding of the new SOP, including verifying the actual practice. The interview revealed that they understood clearly the instructions and potential impacts to environment. However this SOP is not being implemented by contractors, as seen from the contractor housing area. There is no action taken by the company to prevent pollution in the housing area for subcontractor (FFB collectors), as observed at the housing area, there is no waste separation carried out, and there was evidence of die-sel oil spillage directly on soil. Hazardous wastes are collected separatelly from non hazardous wastes and stored in an appropriate temporary store before being collected by a waste collector. The storage area of hazardous wastes are properly managed through provision of proper bunding with secondary containment (sump pit), allocation of proper fire extinguishers & sand for spillage mitigation, proper access controls such as locked enclosures to prevent unauthorised withdrawal of the empty chemical containers for personal use, etc. Several staff interviewed at the waste storage warehouse, PPE washing area & fertilizer bags

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washing area were found to have a good understanding of waste management, including management of other wastes such as waste water generation & waste water disposal. PT KSI mill has license for temporary storage of hazardous wastes from the Ministry of Environment based on decree letter no. 254 year 2009 valid until 2014, however this does not include permission for temporary storage at estates. The company has a contractor for collection of hazardous wastes, PT Wiraswasta Gemilang (diesel oil collector who has license as waste collector base on KepmenLH No.490 Th 2009), but as this contractor has no branch located in West Sumatra, PT WGI assigned another contractor, CV Arwana, to collect hazardous wastes from PT KSI. However, it was found that CV Arwana still does not have a license for hazardous waste collection (this was raised as a non-conformity, refer to NCR No. 1 of 13). All hazardous wastes from the company are transported by PT Nirmala Tipas Sesama, with manifest reports available, and last manifest dated November 16, 2010/ All waste disposal activities are reported periodically to local Ministry of Environmental, as seen in the company’s last report dated October 7, 2010 through letter no. 06/PKS-KSI/SL/X/2010. The company provides facilities for cleaning of PPE (Aprons, masks) however there is not enough storage room for chemical materials, no room for cleaning contaminated clothes and no washing room for spray-ers and manurers. Workers currently wash contaminated clothes at home, which will generate health and safety problems and result in environmental due to uncontrolled washing activities (see NCR No. 9). PT KSI monitors all palm oil mill effluent (POME) discharged every month to ensure that the water quality complies with the government standard KepMenLH No. 51/1995, especially for BOD and COD parameters. The company has an environemntal management programme to prevent and minimize pollution, e.g. to decrease ink cartridge consumption and volume of condensate waste. Monitoring of wastes are carried out by individual estates & mills. Records of waste monitoring/analysis are maintained at both PT KSI mill and estate. A bin card system is used for monitoring of waste generation & storage. Compliance status: Non Compliance, See NCR No. 9 of 12 The company provides facilities for cleaning of PPE (Aprons, masks) however there is not enough stor-age room for chemical materials, no room for cleaning contaminated clothes and no washing room for sprayers and manurers. Workers currently wash contaminated clothes at home, which will generate health and safety problems and result in environmental due to uncontrolled washing activities There is also no action taken by the company to prevent pollution in the housing area of subcontractors (FFB collectors).

Criterion 5.4: Efficiency of energy use and use of renewable energy is maximized.

Findings: Sources of renewable energy used for mill operations are fibre and shell. The company regularly monitors and maintains calculations for how much energy/tonne CPO or energy per tonne palm oil product is produced from fibre and shell consumption since year 2009. The average amount of fiber produced every month is 3,548 tonnes, which generates 9,578,728,000 kcal, and amount of shell produced every month is 477 tonnes which generates 2,002,462,000 kcal. The en-ergy production per total FFB and CPO produced by the mill is 672,000 kcal/ton FFB or 3,223,000 kcal/ton CPO. The company conducted an efficiency analysis using energy usage data from January to October 2010. The company uses fossil fuel (brand name: Petro 4) for limited activities such as start up of boiler and transportation purposes, and operation of generator as an electricity source. According to a report of usage of fossil fuels (diesel fuel ) used in PT KSI mill, the total fossil fuel consumption in the year 2009 was 221,363 litres as stated in a monthly report. Records of fuel consumption for year 2008 showed that consumption of fossil fuel decreased gradually, and this trend continued in year 2009. For year 2009 total consumption of diesel fuel as explained below: January’s usage of Petro 4 was 20,199 litres for processing and 3,790 litres for transportation February’s usage of Petro 4 was 19,720 litres for processing and 3,332 litres for transportation March’s usage of Petro 4 was 22,400 litres for processing and 2,295 litres for transportation April’s usage of Petro 4 was 22,050 litres for processing and 5,005 litres for transportation May ’s usage of Petro 4 was 18,850 litres for processing and 8,358 litres for transportation June ’s usage of Petro 4 was 14,400 litres for processing and 5,435 litres for transportation

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July ’s usage of Petro 4 was 12,350 litres for processing and 8,418 litres r for transportation August ’s usage of Petro 4 was 11,450 litres for processing and 10,629 litres for transportation September ’s usage of Petro 4 was 12,300 litres for processing and 6,688 litres for transportation Several years ago, PT KSI tried to use biodiesel for their operations. However, due to reduction in efficiency, the company stopped using biodiesel. PT KSI does not have specific programme for reduction of fossil fuel consumption. Compliance status: Compliance with Observation

Criterion 5.5: Use of fire for waste disposal and for preparing land for replanting is avoided except in specific situations, as identified in the ASEAN guidelines or other regional best practice.

Findings: No fire is being used for preparing land for replanting. Top management has developed a zero burning policy set by the company as an Environmental Policy which was last updated in September 2010 and signed by Mr. Goh Ing Sing as Group Head Plantation and Jeremy Goon as Group Head of CSR. Zero-burning practices are implemented in all plantation development activities and waste disposal, except in specific situations as per in the ASEAN Guidelines for Zero Burning. Publicizing of this policy has been conducted at all company levels and well implemented. There is no evidence either in documentation or from observations in the field that fire was used for land preparation in any of PT Kencana Sawit Indonesia’s areas. Sign boards are posted in the estate areas stating prohibition of burning. The harvesters & sprayers were interviewed & confirmed they understood the intention of the policy. A standard operating procedure has been established for handling emergency responses to open burning, as per an Emergency Response Procedure KSI-PRO-GEN-13 Revision 00 dated August 1, 2010. Fire fighting facilities and equipment are available such as fire extinguishers, water hose and tanks, water pumps, and fire blankets. Compliance status: Full Compliance

Criterion 5.6: Plans to reduce pollution and emissions, including greenhouse gases, are devel-oped, implemented and monitored.

Findings: Sources of pollution and emissions were identified and documented in the document "Identification of Environmental and OSH Aspects and Impacts"” including greenhouse gases (GHG) such as methane (CH4) generated from the palm oil mill effluent pond, empty fruit bunch composting, carbon dioxide (CO2) from mill operation and transportation. All records of wastes generated are maintained at the ESH department and RSPO document center. Monitoring of quality of pollution and emission sources identified is conducted regularly and reported to the local government every six months, in line with local regulations. These include air emission monitoring results, mill effluent analyis results and noise levels. The company currently has no GHG emissions reduction programme. Records also shows that air emissions have decreased through regular maintenance of boiler and generator sets. The treatment methodology for POME is a 90 days sedimentation cycle method using 14 ponds consisting of a Cooling pond, Deoiling pond, Seeding Pond, Primary Anerobic Pond, Secondary Anaerobic Pond, Sedimentation and Mixing pond, and Aeration pond before discharged to Jujuhan River. Monitoring of effluent BOD and COD levels is conducted and reported in the company’s UKL/UPL report every six months to the local government e.g. May 2010, monitoirng used independent laboratory, conducted by Balai Riset dan Industrial standarization Padang. From analysis of environmental monitoring, it was found that BOD-5 results from water quality monitoring done on sampling point no. 2 on 10 November 2010 exceeded the government standard, based on report No.1185/BPKIMI/ BRSIP/LAB/XI/2010. Correction action has been taken, however the company still has not performed additional water quality analysis to determine the effectiveness of the corrective action

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taken. Ambient noise levels as per results dated May 2010 exceeded the defined government standard. However no corrective action was taken to reduce noise levels to meet the legal standard. This was raised as a non conformity The company has efforts and strategies to reduce pollution and emissions, such as: - Development of micro hydro power dam in PT KSI Division 3, housing area. - To reduce consumption of fossil fuel, such that it is only used for starting up generators and boilers Compliance status: Non Compliance, See NCR No. 10 of 12 BOD-5 results from water quality monitoring done on sampling point no. 2 on 10 November 2010 ex-ceeded the government standard, based on report No.1185/BPKIMI/ BRSIP/LAB/XI/2010. Correction ac-tion has been taken, however the company still has not performed additional water quality analysis to de-termine the effectiveness of the corrective action taken. Ambient noise levels as per results dated May 2010 exceeded the defined government standard. How-ever no corrective action was taken to reduce noise levels to meet the legal standard. 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. Findings: An environmental impact document (AMDAL) approved by the government is available, as well as an in-dependent social impact assessment (SIA) dated October 2010 conducted by an external consultant (AKSENTA). Local communities and stakeholders were involved in the participatory process of the social impact assessment. Both positive and negative social impacts caused by mill and estate activities to company stakeholders were identified. The action plan for monitoring and management of social impacts was not yet been established at time of audit as the social impact assessment was only recently completed. This is raised as a non conformity. There have been no revisions made to the company’s environmental management document (AMDAL) that encompasses social impact assessments, due to no changes in the estate and mill operation. There is not need to revise the social impacts identified in the AMDAL. However the AMDAL document still does not cover all company’s environmental impacts resulting from mill and estate activities, as explained on the criteria 5.1 above. The company should review and revise the AMDAL document accordingly. There have been no changes made company’s environmental management and monitoring document (RKL/RPL). In the company’ social impact assessment document, the company has already identified the impacts of outgrower schemes and is giving attention to the identified impacts. Compliance status: Non Compliance, See NCR No. 11 of 12 There is no regular management and monitoring plan for identified social impacts which has been es-tablished through a participatory method.

Criterion 6.2: There are open and transparent methods for communication and consultation be-tween growers and/or millers, local communities and other affected or interested parties.

Findings: The company has open and transparent methods for communication and consultation between growers and/or millers, local communities and other affected or interested parties. The company has a documented SOP for communication and consultation with the communities, i.e. KSI-PRO-BNM-05 is-sued on 1 June 2010, and the company has records of communication and consultation meetings held with local communities, such as records of a meeting held on October 16, 2010 with communities in Sei Kunyit Village and meeting held on November 4, 2010 with communities in Talao Village. In the meetings, the company informed the communities on the company’s procedure for making requests and company’s response any information needed, explained the company’s conflict and claim resolution mechanism, management of traditional rights, and established an agreement to make a communication forum (FORKAS) between PT KSI management and villagers (stakeholders). The company has a list of relevant stakeholders, divided into 2 categories i.e. internal and external stakeholders. Internal stakeholders consist of employees, management, board of directors and share-holders. The list of external stakeholders consists of suppliers, customers, competitors, local communi-

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ties, government, journalists, investors, NGOs and other interested parties. The company’s Bina Mitra department is responsible for updating the stakeholders list. The company maintains documented records of complaints and suggestions from stakeholders at the estate and mill offices. The company’s responses are documented as well. A dedicated person who is responsible for consulting and communicating with local communities is available. The company has appointed staff responsible for activities such as public speaking and community relations, land acquisition and tenures, and community development/corporate social re-sponsibility i.e. Mr. Walid Aruse Gani & Henra Edisa are the appointed persons in charge for general communication, while for internal communications, the persons responsible are Mr/ Wagino and Rah-man. Mr. Walid and Mr. Henra are well known by the local communities in two villages as explained during during interviews with villagers from both villages. Based on information from communities in two villages around the company, it was explained that the relationship between PT KSI and the villagers improved recently and the company has become more open to local communities and workers. However, during the stakeholder consultation meeting, some stakeholders stated that the company was not sufficiently transparent on their worker recruitment process. This was noted as an observation and the company should continue to improve on their communication with stakeholders on such matters. Compliance status: Compliance with observations 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. Findings: The company has an open system for dealing with communication and consultation with the communities as defined in an SOP KSI-PRO-BNM-05 issued on 1 June 2010. The process of developing this SOP was that the company made the draft SOP and held a meeting with local communities on October 16, 2010 in Sei Kunyit Village and November 4, 2010 in Talao Village. There are records of meeting minutes which states that the communities accepted the SOP. The company distributed the copies of the procedure for resolution of complaints and disputes to all head of villages and community leaders of villages such as Sei Kunyit and Talao. There currently have been no incoming complaints regarding company’s operation. The company has procedures for identification and calculation of fair compensation for the loss of legal or customary right to land, and these procedures were developed with the involvement of local community representatives and relevant agencies, i.e. SOP-IJIN LAHAN & OPS-00 Guidance for Land Acquisition, SOP for Recognition of Traditional or Customary Rights of the Community, SOP for Mechanism Resolution of Complaints and Disputes, and SOP for Resolution of Land Disputes. All procedures are made publicly available. As stated on minutes meeting on November 25, 2010 communities in Talao Village and Sei Kunyit Village understand and accept the documented procedures. Compliance status: Full Compliance 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 communi-ties and other stakeholders to express their views through their own representative institutions. Findings: PT KSI has established a mechanism for the identification, calculation and compensation of loss of legal or customary rights of land, which is accepted by all parties. The procedures that have been established include SOP for Guidance for Land Acquisition, SOP for Recognition of Traditional or Customary Rights of the Community, SOP for Mechanism Resolution of Complaints and Disputes, and SOP for Resolution of Land Disputes. Documentation and identification of all people who were entitled to receive compensation are well managed by the Bina Mitra department. Land compensation payments were paid by the previous company management, such as land compensation for Mr. Hamilus Sani from Sei Kunyit village dated September 15, 2000 for agreed compensation amount of IDR 2,000,000. Records of negotiations made were not available since compensation payments were conducted by previous management. The only records of the implementation of compensation payment is in the form of a legal statement letter

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regarding the compensation made to Mr. Hamilus Saini on behalf of Sei Kunyit villager, witnessed by a community elder i.e. Datuk Bandaro Sei Kunyit dated 15 September 2000. Compliance status: Full Compliance

Criterion 6.5: Pay and conditions for employees and for employees of contractors always meet at least legal or industry minimum standards and are sufficient to provide decent living wages.

Findings: The company maintains documentation of employees’ pay and wages paid are in compliance with the minimum wages defined in both local and national government regulation. On the standard minimum wage, the company complies with the regional minimum wage as per the decree from the Governor of West Sumatera which states that the regional minimum wage standard for estate workers in West Su-matera shall be IDR 940,000 per month (25 days) or IDR 37,600 per 7 hours a day. To comply with this law, the head of HRD Wilmar International Plantation issued a letter no. 057/WIP-HRD/Int-XII/2009 dated 26 December 2008 which states that minimum wages for daily workers at PT Kencana Sawit In-donesia shall be IDR 940,000 per month or IDR 37,600 per day. Minimum wages standard of Kencana Sawit Indonesia complies with the related government regulation which is Government Regulation (Peraturan Pemerintah) no. 8/1981 on wages standard protection and Minister of Indonesian Man-power Regulation no. PER-01/MEN/1999 regarding minimum wages. Staff and workers receive receipts of salary payment (monthly payslips) in a timely manner and they are paid in cash. Evidence was seen in the form of payment slip for temporary workers, Asmai Murni and Asniar from plantation maintenance, e.g. for August, September and October. For August 2010 Asmai Murni received IDR 984,547 and Asniar IDR 984,646. The highest salary for Asmai Murni was on September 2010 where he received IDR 1,879,500 and Asniar received a payment IDR 1,141,359. This is because the worker received overtime and a premium allowance due to their good regular attendance. The company also provides long service allowances, for example, mill permanent daily worker (‘pekerja harian tetap’ or PHT) who has been working 1-3 years will receive IDR 2000 per day, those who have worked 3-6 years for company will receive IDR 2500 per day and IDR 3000 is for worker who has been working more than 6 years for the company. The company has two documented working agreements that was approved by the local governmemt of Social, Man Power and Transmigration agency for the period of 2010-2012 (for permanent daily worker/PHT) and working agreement for PT KSI’s staff for the period of 2008-2010. The company and the worker union is currently working on integration of both working agreements, to make one working agreement that will accommodate both PT KSI permanent staff and temporary workers. There was a record of negotiation and meetings regarding integration of the two working agreements on October 13, 2010 at PT KSI meeting room, attended by PT KSI management and members of the worker union. The company provides adequate housing, medical, educational and other facilities free of charge to employees. Adequate water is supplied twice a day i.e. between 8 to 10 am and 4 to 6 pm. The water source is from a deep well, while electricity is provided 24 hours for housing that supplied by mill, but for some other housing areas in Division 3 (Salo) which are located far from the mill, electricity supply is generated from the company’s micro hydro dam and supplied to the remotey located housing areas from 6.00 pm to 11.00 pm and from 5.00 am to 6.30 am every day. However in some houses, there were broken toilets found and disruptions to supply clean water occurs for some houses in the Salo housing area that happened more than four months ago, but no action was taken by the company, and this was raised as a non-conformity. The company provides elementary school and transport (including school allowance) for children travelling to junior high school outside of PT KSI’s location. The company also provides a day care centre for baby or children below 5 years. The polyclinic centre is available close to PT KSI center office and for each estate office the company provides paramedics in case of medical emergency situation, and this is free of charge for all workers and their family. Mosques and churches are also available within PT KSI’s area. The company has documented agreements with contractors that they are to abide with local labour laws. Some clauses in the contract include compliance to labour laws. PT KSI requires all contractors to follow all government regulations relating to workers, health and safety, RSPO Principles and Criteria, labour laws, and zero burning policy. This was viewed from contract between PT KSI and contrantor for housing development.

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Compliance status: Non Compliance, see NCR No. 12 of 12 There is no action taken by the company for houses that has broken toilets and disruptions to supply clean water since more than four months ago. 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 collec-tive bargaining are restricted under law, the employer facilitates parallel means of independent and free association and bargaining for all such personnel. Findings: The company has a documented policy regarding freedom for association for workers that is available in several locations signed by the plantation head on August 2008. A statement permitting freedom of association for workers is also stated on the company’s documented Worker Agreement (‘Perjanjian Kerja Bersama’ or PKB) for 2008 to 2010 with the worker unions of PT Kencana Sawit Indonesia. The policy was also informed to all employees and workers through an internal memorandum signed by PT KSI’s management, letter no: 026/WIP-HRD/Int-VIII/2009 dated August 12, 2009). There is a worker union in PT Kencana Sawit Indonesia called Serikat Pekerja Seluruh Indonesia (SPSI), which is led by Mr. Hendra. The worker union representatives are re-elected periodically, and for PT KSI, elections for the third replacement cycle of union representatives has been done for the pe-riod of 2010 to 2014. Documented minutes of meetings with the labour union is available at SPSI’s estate office, and the worker union holds meeting as required especially if there is a labour issue. There is also a Bipartite Cooperation Institute (Lembaga Kerja Bersama (LKS) Bipartit) between SPSI and management of Kencana Sawit Indonesia as seen on meeting records dated 19 May, 2010 and minutes of a meeting held among the SPSI commintee on October 13, 2010. Compliance status: Full compliance 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 programme. Children are not exposed to hazardous working conditions. Findings: The company policy regarding child labour was defined since 2008 by Wilmar International Manage-ment, and informed to employees through an internal memorandum no: 026/WIP-HRD/Int-VIII/2009 dated on August 12, 2009 The working agreement between workers and the company for period 2008 to 2010 states under article 12 that employee recruitment shall be done according to applicable laws and regulation. From checks of employee information from the company’s "employee master list", no workers under the age of 18 were found to be working on company either as permanent or temporary worker. The youngest worker found in estate is19 years old. Compliance status: Full Compliance

Criterion 6.8: Any form of discrimination based on race, caste, national origin, religion, disabil-ity, gender, sexual orientation, union membership, political affiliation, or age, is prohibited.

Findings: The company has a documented equal opportunities policy signed by the Group Plantation Head and Group Head CSR on August 2008. The policy was informed only to employees and communities sur-rounding the company’s location. Based on information from the local communities, the company has regularly provided information about job vacancies in PT KSI for almost 2 years, both formally and in-formally. As informed by villagers from Sei Kunyit village working as mandors in PT KSI, there are approxi-mately 100 locals from 2 villages (Talao Village and Sei Kunyit Village) working for PT KSI. There is no evidence of discrimination, and the following is evidence of equal opportunities provided to all workers: • Female workers comprise around 15% of all of the company’s workers • Female workers also have opportunities to have high positions such as supervisors • Workers of all ethnicities and religions, including Muslims, Catholics and Christians are provided

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with their respective places of worship such as mosques and churches. No workers interviewed on-site complained about any form of discrimination from the management of the estates or mill. A policy to prevent sexual harassment and all other forms of violence against women and to protect their reproductive rights has been developed and is implemented. Compliance status: Full compliance

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.

Findings: The management of PT Kencana Sawit Indonesia has a written policy regarding prevention of sexual harassment and all other forms of violence against women, as well protection of their reproductive rights. The company’s internal working agreement for 2008-2010 contains a clause regarding maternity leave and menstruation leave. Meetings to create awareness on this policy was conducted at Tengah Pulau housing area on October 20, 1010 and attended by 65 participants. At PT KSI mill, training on this policy was conducted on October 29, 2010 attended by 18 participants. The written policy was sent to all managers and includes point 4 pertaining to prevention of sexual harrassment and violence against women. No evidence of sexual harassment was found during the time of the audit. The com-pany established a Gender Committee, with representatives from estate division 1, estate division 2 and estate division 3 on March 22, 2010 to June 21, 2010. There is evidence of implementation of the reproductive rights policy, for example, the company has copies and records of menstruation leave and maternity leave forms applied by workers and these re-cords are kept by the PT KSI clinic and estate office. The company has a grievance mechanism defined in PT Kencana Sawit Indonesia for grievances, vio-lence against women and protection of reproductive rights, which is dated December 28, 2009. There are records of 2 cases of violence in households dated October 1, 2010. The gender committee approached the parties involved to attempt to resolve the issues, and at time of audit, the cases were being monitored. All relevant records of the cases are stored at the gender committee office. The com-pany has also established a gender committee as a more specific grievance mechanism for female workers. Compliance status: Full Compliance

Criterion 6.10: Growers and mills deal fairly and transparently with smallholders and other local businesses.

Findings: The company allows the public to access current and past prices for FFB. Current FFB prices and pre-vious day FFB prices are clearly published on the notification board in front of PT KSI’s mill at the secu-rity office, and near weighbridge, e,g. FFB price for November 25, 2010 was seen on site. The basic price for FFB comes from the FFB pricing authorities in Indonesia, then decided by PT KSI‘s regional head. Upon approval, PT KSI will announce the FFB price to suppliers and establish a pur-chase agreement with FFB suppliers. Copies of all purchase agreements from suppliers are main-tained, i.e. purchase agreement dated November 6, 2010 no. 002/KSI/POM/XI/2010 with supplier, Mr. Mahayudin Indris, Mat Musa DT Bandaro Kayo and H. Khairunas.The purchase agreement will be ap-proved by both parties. Based on interviews with FFB suppliers, they understood the terms of their contractual agreement with PT KSI, and they agreed that the contracts were fair, legal and transparent. The following are samples FFB purchasing contracts with the respective suppliers interviewed:

o FFB purchasing contract no. TBS/KSI/Sol-Sel/49/X/2010 between PT KSI and the company, PTPN VI Jambi-Sumbar, periode 21-27 October 2010

o FFB purchasing contract No: KSI-PKS/TBS/H Khairunas/III/2010 between PT KSI and supplier Mr. H. Khairunisa dated November 24, 2010.

Payments to contractors will be made in 5 days after invoice has been received by PT KSI mill. Compliance status: Full Compliance

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Criterion 6.11: Growers and millers contribute to local sustainable development wherever appro-priate.

Findings: The company makes contributions to local development, with evidence as follows: - The company had already paid the tax liability, i.e.: Land and Buildings tax, 21 and 23 Income Tax,

VAT, and excavation C tax. There is a document of payment of tax for liabilities for year 2010 e.g. Ex-cavation C tax for year 2009 RP. 47,709,623, FFB retribution RP 3 per kg FFB such in January 2010 IDR 40,629.646. The amount of excavation C is base on letter from the Mining Agency of Solok Sela-tan Government.

- The company carries out Community Development (CD) and & Corporate Social Responsibility (CSR) activities from the year 2010-2011

- There are a number of documented CSR programme activities, such as: road maintenance, donations to local communities based on requests, participation in school construction in Talao Village and Sei Kunyit Village.

Compliance status: Full compliance

Principle 7: Responsible development of new plantings

Findings: There is no evidence of development of new estate areas within the company’s area and all existing oil palm estate areas consist of mature palms. The company has no planto extend their estate area. Therefore Principle 7 is not applicable. Compliance status: Not Applicable

Criterion 8.1: Growers and millers regularly monitor and review their activities and develop and implement action plans that allow demonstrable continuous improvement in key operations.

Findings: Some improvement programmes pertaining to environmental, health and safety have been carried out, such as: 1. Control of dust emissions from all PT KSI transporter that pass over the weigh bridge as explained in the company’s programme, PROG-Mill-TBG01 and TBG02 2. Reduce formation of water puddles in back transfer carriage through installation of pump at back transfer carriage, according to mill’s programme, PROG-MILL-TPL03 3. Reduce accidents in fat-pit oil room area through installation of fencing and increasing lighting, as per PROG-MILL-OIR09 4. Reduce potential fo fire due to short circuit of electrical panel during operation through SOP panel monitoring and preventive maintenance, as per PROG-MILL-OIR08 5. All mill operators are now using appropriate PPE such as face mask during boiler dust collection, as per PROG-MILL-BOIL05. This is an improvement since the gap assessment. 6. The company has made a temporary store for shell to reduce piling up of shell 7. The company has improve coordination with estate for EFB storage and disposal, as per programme PROG-MILL-TPL03 8. The company has an improvement programme to revise AMDAL document to cover current activities both in PT KSI mill or estate. However company still has no improvement programme for effluent pond e.g. land application. It is recommended company implement land application to prevent water pollution in Jujuhan river. . Compliance status: Compliance with observation.

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3.2 Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions A total of 12 nonconformances were identified during the main certification assessment. These consisted of 1 major non-conformity and 11 minor non-conformities. For the major non-conformances, the company has taken the necessary corrective action to close these non-conformances within 60 days of completion of the assessment, and this was verified by the audit team through a verification document as well as checks of documents submitted by the company. For the minor non-conformances, the company has taken corrective action against these as well, and for those which could not be verified as closed through document checks, the closure of these minor non-conformities will be assessed during the next surveillance audit. A summary of all identified non-conformances, corrective actions taken and auditor conclusions is as below:

Criterion 2.1: There is compliance with all applicable local, national and ratified international laws and regulations. (Indicator 2.1.1 : Evidence of compliance with relevant legal requirements). Non-conformance 1 of 12 (Major non-conformity): The company has not complied to certain applicable legal requirements, for example: 1) CV. Arwana’s permit for hazardous waste collection only states permission for collection of used lubricating oils and used oil, but not other types of hazardous wastes, although the contractor is collecting other types of hazardous wastes. 2) The company is temporarily storing hazardous waste in a central warehouse that has not been approved for temporary waste storage by the Ministry of Environment or Bapedalda. Corrective Action:

- PT KSI’s management sent a letter to CV Arwana requesting CV Arwana to apply for the license to be a hazardous waste collector to the relevant Institution (Environmental Department (Bapedalda) of West Sumatera), for the collection of the following categories of hazardous wastes: used oil, used agrochemical packaging, used batteries, used foil filters, contaminated cloth, etc. CV Arwana has submited to PT KSI evidence that they have already sent a letter to the Bapedalda on Decem-ber 3, 2010. The company will continue to monitor the status of the license of their waste collection companies.

- PT KSI’s management shall only store temporary waste at the approved temporary store at the palm oil mill and no longer at the central warehouse

Auditor Conclusions: Closed with ongoing observation PT KSI has sent an offical letter to CV Arwana requesting CV Arwana to apply for a license to be a hazardous waste collector and the company provided evidence of letter sent by CV Arwana to the Bapedalda West Sumatera for application of license as hazardous waste collector. The process to ob-tain the license is lengthy, and the audit team has requested PT KSI to report the progress of the ap-proval of their license every three months. To date, the company provided the audit team a copy of a letter from the West Sumatran Environmental Department dated 11 March, stating that the processing of CV Arwana’s license is under way. Criterion 4.1: Operating procedure are appropriately, documented and consistently imple-mented and monitored. (Indicator 4.1.1: Records of checking or monitoring of operations. Minimum requirement: once a year). Non-conformance 2 of 12 (Minor non-conformity): There is no evidence that checking or monitoring for all estate operations activities (i.e. internal audit) to ensure compliance with the company’s SOPs for estates has been carried out. Corrective Action: The company will always review and conduct trainings of all existing SOPs to relevant department. The management of PT KSI has assigned a trained Internal Audit team responsible for conducting internal audits of compliance to existing standard operation procedures. The Internal Audit schedule has been established. Auditor Conclusions: Evidence of correction and corrective action taken was accepted, to be

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verified during next surveillance audit PT KSI provided the list of internal audit team members and internal audit schedule. Criterion 4.3: Practice minimize and control erosison and degradation of soils Indicator 4.3.1: (Maps of fragile soils must be available). Non-conformance 3 of 12 (Minor non-conformity): Identified fragile soil areas as per the company’s soil map is not the same with actual distribution of fragile soil in the field Corrective Action: PT KSI has conducted re-identification of sandy soil areas within PT KSI area and will give soil samples to their external consultant by January 20, 2011. A new soil map will be made after results from the external consultant have been received. Auditor Conclusions: Evidence of correction and corrective action taken was accepted, to be verified during next surveillance audit Criterion 4.3: Practice minimize and control erosison and degradation of soils Indicator 4.3.2: (A management strategy should exist for plantings on slopes above a certain limit (needs to be soil and climate specific). Non-conformance 4 of 12 (Minor non-conformity): The company does not monitor erosion levels for land which has more than 25% slope Corrective Action: The company shall measure and monitoring erosion levels for land which has slope of more than 25% and make a standard operation procedure for monitoring erosion levels. Auditor Conclusions: Evidence of correction and corrective action taken was accepted, to be verified during next surveillance audit Criterion 4.7: An occupational health and safety plan is documented, effectively communicated and implemented (Indicator 4.7.6: Evidence of OHS and first aid equipments available at worksites) Non-conformance 5 of 12 (Minor non-conformity): Some OHS equipments was not provided such as:

• CPO and FFB truck drivers and construction workers at housing GB 7 in Estate 2 are not pro-vided with first aid kits.

• Some workers under Syamsul Rizal contractor that worked in housing construction at Division II not provided of PPE

Corrective Action: The company has provided PPE and first aid kit at all estates, and this was informed to all workers in-cluding contractors. The company has revised their contract with contractor and include statement re-quire contractor to provide first aid kits and PPE to their workers. The company shall conduct regular monitoring and inspection on this matter. Auditor Conclusions: Evidence of correction and corrective action taken was accepted, to be verified during next surveillance audit Criterion 4.7: An occupational health and safety plan is documented, effectively communicated and implemented. (Indicator 4.7.7: Workers trained in first aid should be present in both field and mill operations)

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Non-conformance 6 of 12 (Minor non-conformity): PT KSI has not provided first aid training for FFB and CPO transporters as discussed with a driver from the company Surya Persada Eresindo (SPE) and S4 (under Wilmar group), which are contractors for construction of housing area G7 in Estate Division 2. Corrective Action: The company shall conduct first aid re-training for all contractors before December 20, 2010 and this training will included in PT KSI’s annual OSH training plan. Auditor Conclusions: Evidence of correction and corrective action taken was accepted, to be verified during next surveillance audit Criterion 4.7: An occupational health and safety plan is documented, effectively communicated and implemented (Indicator 4.7.8: Records of the occurrence of any work accidents are maintained and regularly reviewed). Non-conformance 7 of 12 (Minor non-conformity): A review of accidents that occurred during the year 2010 has not been done Corrective Action: The OSH team conducted a meeting on December 10, 2010 to investigate the cause of accidents that occurred in the year 2010. The company shall include investigations into causes of accidents in all fu-ture OSH team meetings. Auditor Conclusions: Evidence of correction and corrective action taken was accepted, to be verified during next surveillance audit Criterion 5.1: Aspect of plantation and mill management, including replanting, that have envi-ronmental impacts are identified, and plan to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement. Indicator 5.1.1: Documented impact assessment. Non-conformance 8 of 12 (Minor non-conformity): The company’s RPL & RKL document has not been updated to reflect changes in the company’s current environmental and social impacts, e.g in the existing AMDAL/RKL/RPL, air emissions were not identified as an environmental aspect and air pollution and noise was not identified as an impact from mill activities. From samples river water analysis results, it was found that not all water quality parameters were ana-lyzed as required by the Governement regulation (PP 82, year 2001). Corrective Action: The company assigned the external consultant who prepared the company’s AMDAL to conduct a revi-sion of their environmental management and monitoring plan as required by the relevant law and regu-lation and the revision shall be completed latest by March 2011. The company’s next RKL and RPL re-port shall be done according to the company’s revised new document RKL and RPL. While waiting for revised RKL and RPL document, all environmental monitoring shall be conducted according to regula-tions. Auditor Conclusions: Evidence of correction and corrective action taken was accepted, to be verified during next surveillance audit Criterion 5.3: Waste is reduced, recycled, re-used and disposed of in an environmentally and socially responsible manner. Indicator 5.3.1: (Management plan of hazardous waste and instruction of disposal of agro-chemicals and their containers waste in accordance with the product label and existing regula-tions)

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Non-conformance 9 of 12 (Minor non-conformity): The company provides facilities for cleaning of PPE (Aprons, masks) however there is not enough stor-age room for chemical materials, no room for cleaning contaminated clothes and no washing room for sprayers and manurers. Workers currently wash contaminated clothes at home, which will generate health and safety problems and result in environmental due to uncontrolled washing activities There is also no action taken by the company to prevent pollution especially in housing area for sub-contractors. Corrective Action: The company has provided a bath room near the chemical store to ensure that all discharge is under safe conditions. The company will improve on the sanitation at all housing areas including contractor’s housing and other supporting facilities. Auditor Conclusions: Evidence of correction and corrective action taken was accepted, to be verified during next surveillance audit The company provided photographic evidence that a bathroom and washing facilities have been pre-pared for the workers. Effectiveness of this corrective action will be verified during surveillance audit. Criterion 5.6: Plans to reduce pollution and emissions, including greenhouse gases, are devel-oped, implemented and monitored. Indicator 5.6.2: Records of identification, monitoring, and treatment methodology for POME. Non-conformance 10 of 12 (Minor non-conformity): BOD-5 results from water quality monitoring done on sampling point no. 2 on 10 November 2010 ex-ceeded the government standard, based on report No.1185/BPKIMI/ BRSIP/LAB/XI/2010. Correction ac-tion has been taken, however the company has not yet performed follow-up water quality analysis to de-termine the effectiveness of the corrective action taken. Ambient noise levels as per results dated May 2010 exceeded the defined government standard. How-ever no corrective action was taken to reduce noise levels to meet the legal standard. Corrective Action: The company shall reconfirm test results with the relevant institution and review monitoring results Auditor Conclusions: Evidence of correction and corrective action taken was accepted, to be verified during next surveillance audit 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 continuos improvement. Indicator 6.1.1: Regular monitoring and management of social impact, with the participation of local communities Non-conformance 11 of 12 (Minor non-conformity): There is no regular management and monitoring plan for identified social impacts which has been es-tablished through a participatory method. Corrective Action: The company has made a management and monitoring plan for all identified social impact and held meetings with relevant stakeholders to obtain feedback and approval. In future, the company will al-ways involve relevant stakeholders for all activities which require stakeholder involvement. Auditor Conclusions: Evidence of correction and corrective action taken was accepted, to be verified during next surveillance audit Criterion 6.5: Pay and condition for employees and for employees of contractors always mee at least legal and industry minimum standards and are sufficient to provide decent living wages. (Indicator 6.5.1: Growers and millers provide adequate housing, water supplies, medical, educa-

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tional, and other facilities for employees where such facilities are not available or accessible)

Non-conformance 12 of 12 (Minor non-conformity): There is no action taken by the company for houses that has broken toilets and disruptions to supply clean water since more than four months ago. Corrective Action: All broken toilet and septic tanks have been renovated, and a broken generator was repaired. The company shall conducted regular checking according to schedule for all facilities. Auditor Conclusions: Evidence of correction and corrective action taken was accepted, to be verified during next surveillance audit

3.3 Noteworthy Positive Components

Criterion 2.1: There is compliance with all applicable local and national and ratified international laws and regulation. Findings: The company demonstrated a high level of commitment and preparation to comply with the RSPO Principles & Criteria. Criterion 2.3: Use of land for oil palm does not disminish the legal right,or customary right, of other users, without their free, prior and informed consent. Findings: The company has a good reationship with local communities, and there are no identified land conflicts within company’s area.

Criterion 4.4: Practices maintain the quality and availability of surface and ground water

Findings: The riparian rivers within the company’s area are in good condition and well maintained with forest cover. Criterion 5.2: The status of rare, threatened or endangered species and high conservation value habitas, if any, that exist in the plantation or mill management, shall be identified and their con-servation taken into account in management plans and operations. Findings: The company has a significant area allocated for conservation which is well protected, especially for wildlife habitats located at Bukit Salo, Bukit tengah Pulau, and Bukit Harimau. The company also has a good programme with ZSL to protect the conservation area and its biodiversity.

3.4 Issues Raised by Stakeholders and Findings Pertaining to Issues A) Issues Raised during Stakeholder Consultation Meeting

No. Issues Raised Management Response Audit Verification

1 - What are the negative and positive impacts of RSPO

• The management has made a The company’s social impact management

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implementation to the local communities?

- Information on PT KSI’s CSR programme is expected by local communities

- PT KSI is not transparent yet especially about the worker recruitment process

- Road access in Solok Se-latan should be improved because the villagers still use this road.

social impact assessment to identify both negative and positive impacts and made a management plan/programme to control the im-pacts. • The management made an in-formation communications proce-dure to stakeholder and informed of the procedure to communities in the Talao and Sei Kunyit Village. The management supports road im-provement activities from Solok Se-latan to PT KSI’s plantations The company has provided funding for road gravelling and levelling in Sei Kunyit Village and Talao Village. The management supports utiliza-tion of company’s road by Sei Kunyit and Talao community

plan was still not established at time of audit (See NCR No. 11 of 12). The company allows communities to use the company roads. Road maintenance is conducted regularly especilly for roads that are used for FFB transportation. Donations for road maintenance in two villages was provided, and agreed by villagers.

2

- PT KSI has fulfilled legal regulations such as minimum wage, AMDAL etc. - PT KSI currently does not employ local people to perform technical work, but only hire them as general workers that only perform physical work. All technical expertise is hired from outside the region.

• The management ensures that the company fulfills labour and envi-ronmental regulations • Recruitment of workers is done based on competencies needed by management. The company’ workforce comprises more than 50% of local employees.

The company’s minimum wage is in accordance with the government standard, as explained under Section 3.1, Criteria 6.5 The company has local workers, doing mostly spraying and harvesting activities but not in managerial positions. Construction activities are carried out a by local contractor.

3

The company made communication forum called FORKAS to consult and obtain feedback from the communities only after PT KSI started implementing RSPO requirements, and the company has no clear programme or action plan for FORKAS.

FORKAS was just recently established and the programme still has not been discussed between the communities and company.

The company currently has no working plan for the FORKAS.

4

What is the benefit of RSPO certification to employees?

• Improvements on occupational health and safety, freedom of com-munication, freedom to join any or-ganization of worker’s choice • Improvements to working environment and housing area.

RSPO implementation by the company benefits the employees through improvement of their living conditions and enhancing livelihood for employees

5

- What is the RSPO stan-dard that should be fulfilled by company? - What has the company done to fulfill RSPO require-ments? - How is the company’s CSR programme being im-plemented?

• The RSPO standard consists of 8 principles and 139 indicators for In-donesia. • The company maintains BPN boundary stones, for example. • The management has conducted some CSR programmes in the form of grants, and currently has formed two Communication Forums in

Explanation accepted

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- It is important to confirm PT KSI land status with the National Land Agency (‘Badan Pertanahan Nasional’ or BPN)

Talao and Sei Kunyi as a forum for ongoing communication of CSR programmes in the community. • PT. Kencana Sawit Indonesia holds 2 HGU certificates for a total area of 10,216 Ha.

6

Traditional elders of Sanggai Balai Bago sub-district, agrees and supports PT KSI’s efforts to achieve RSPO certificataton. The communities also support this because the company has good relationship with the communities even though the relationship could be further enhanced. The communities have a smallholders scheme with 6 companies including PT KSI

The management pays very much attention to social responsibility for community and has established a communication Forum (FORKAS) as an effort towards achieving a positive relationship with the communities

The company currently has no working plan for the FORKAS.

7

The RSPO standard is not clear. It is hoped that company is able to meet the standard with respect to all aspects. Administratively, PT. KSI has fulfilled its obligations, in case of accidents PT KSI also directly report these to government authorities (in general PT KSI has a good relationship with the local government). - Contributions to the local government (Solok Selatan) are much less when compared with company’s income. Reason: PT KSI’s expenditure in other districts and for road maintenance is high. The Kubu community is threatened by plantation ac-tivities.

• The management has fulfill all company’s legal obligations as required by legal regulations • The management has identified existing HCV areas and conducted an SIA and has a policy regarding indigenous people (Kubu people) which states that the company permits the Kubu people to utilize their area for traditional subsistence activities such as hunting and fishing, and the area allocated to these people.

No explainantion from management regarding amount of contribution to the local governement.

8

1. What is the impact of RSPO to local communities? 2. PT KSI is not transparent about their recruitment process 3. The company’s road maintenance should be improved and it is better if not only focused in Damasraya district but also to other region.

• The management made a Social Impact Assessment to identify both negative and positive social impacts • Recruitment of workers is done based on competencies needed by management. The company’ workforce comprises more than 50% of local employees. • The management supports road improvement activities from Solok Selatan to PT KSI’s plantations The company has provided funding for road gravelling and levelling in Sei Kunyit Village and Talao Village. The management always permits communities in Talao and Sei Kunyit to use company’s road for their

Explanation accepted and has been verified through checks of appropriate documents.

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community activies.

9

1. PT KSI complies to all regulations pertaining to employment of workers. 2. PT KSI hires very few local employees. 3. PT KSI is still not transparent in their provision of information.

• Recruitment of workers is done based on competency requirement by the management. The company’ workforce comprises more than 50% of local employees. • PT KSI’s management has developed a procedure for providing information to stakeholder and publicised this procedure to Talao and Sei Kunyit villages.

Findings pertaining to minimum wage, workers welfare, housing facilities, health facilities, and other amenities were explained in Section 3.1 under CR6.5. The company has already developed and is implementing a communications procedure as explained under Section 3.1, CR6.2.

10

What is the difference between the RSPO and SMK3? What kind of license does TUV have to certify the company to RSPO requirements?

• RSPO is a certification of sustainable palm oil production. While SMK3 is a management system for occupational safety and health. • TUV Rheinland Malaysia has been accredited by RSPO as certification body for RSPO.

No verification required

11

RSPO was forced on to PT KSI, because it seems everything PT KSI does is just to get the RSPO certificate .

The management always make efforts to comply with legal regulations and company’s policy/ regulations inclusive of Wilmar management directives

The management always try to comply with relevant legal regulations and other requirements. The company has a list of legal and other requirement and conduct periodic evaluation of its compliance.

12

Mill waste is directly disposed to rivers, especially to Ganeh river and Jujuhan river. The company restrictions for not spraying chemicals at the area of rivers border, but the society still feels that the river contains waste water

PT KSI Management has implemented waste management as part of their defined procedure, in the future PT KSI plans to implement land application for all effluent in plantation area, no more effluent discharge to river.

The company currently has no land application programme for mill effluent. Currently the quality of effluent discharge is within the governement standard, based on water quality analysis results. However as seen from the discharge point near PT KSI mill, the waste water was observed to be very dark and smelly.

13

Will the company accept il-legally sourced FFB or FFB produced from non-conserved areas from out-siders? The question is for PT KSI regarding their contribution to local communities.

PT Kencana Mill has a standing pol-icy that purchase only legally pro-duced crop.

Explaination accepted and verified.

14 The Sumatera Spatial Land Forum team, consists of 10 Governors and 4 ministers

The management has identified HCV areas and Riparian buffer zones within their area covering a

Explanation accepted and observed from field visits.

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and has reached an agreement regarding the Sumatra island that spatial land management in Sumatera will be based on ecosystem of the land area. Although the concept is still very politically driven, but the concept is appropriate with the balance of the ecosystem. PT KSI area is included in this forest area, therefore the plantation management must be in accordance with the concept of ecosystems that has been established.

total area of 2,229.59 ha. The company has made a management programme for HCV areas and Riparian buffer areas.

15

PT KSI only made contributions after the change to the new management.

In fact, contributions have been made since the previous management.

Explanation accepted and verification explained under Section 3.1, CR6.11

B) Issues Raised during Stakeholder Interviews On-site

No. Issues Raised Management Response Audit Verification

1.

Contractor’s workers were never given protective equipment such as shoes, helmet, etc. Accidents often occur because of no shoes or safety helmets

The management has met and in the future will continue to work to accomplish this requirement.

This issues was raised as a non-conformity under CR4.7. See NC no. 5 of 12 under Section 3.2.

2.

Donations were only recently given by PT Kencana Indonesia since the company started implementing RSPO

In fact, contributions have been made since the previous management.

Explanation accepted and requires further investigation during next surveillancde audit.

3.5 Acknowledgements of Internal Responsibility and Formal Sign-Off by Client

It is acknowledged that the assessment visit was carried out as described in this report and we accept the as-sessment findings and report content. Signed on behalf of Wilmar International Group Signed on behalf of TUV Rheinland Malaysia

………………………………………….

…………………………………………. [Dian S. Soeminta/Lead Auditor] Simon Siburat Lead Auditor Group Sustainability Controller Date: 31 January 2011 Date: 14 February 2011

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APPENDICES Appendix 1: Details of Certificate

Standard: RSPO Principles & Criteria for Sustainable Palm Oil Production;

Indonesian National Interpretation: 2008

Certificate Registr. No.: 01 100 117288

TUV Rheinland Malaysia Sdn. Bhd. certifies:

Certificate Holder: PT Kencana Sawit Indonesia Palm Oil Mill Subsidiary of Wilmar International Limited, Jorong Sei Kunyit, Sangir Balai Janggo Sub-district Solok Selatan District, West Sumatera, Indonesia and its company owned estates according to the annex.

Scope: Palm Oil Production and Plantation Management System

An audit was performed, Report No. 117288. Proof has been furnished that the requirements according to RSPO Principles & Criteria for Sustainable Palm Oil; Indonesian National In-terpretation: 2008 are fulfilled. The due date for all future audits is 21-02 (dd.mm).

Validity: The certificate is valid from 2011-04-21 to 2016-04-20.

The palm oil mill and supply base covered in certification scope are:

CPO Tonnage Total Productions*: PK Tonnage Total Productions*: Company Estates FFB Tonnages*: FFB Tonnages from other sources*: CPO Tonnage claimed for certification: PK Tonnage claimed for certification:

48,462 tonnes 10,331 tonnes 177,462 tonnes 49,485 tonnes 37,888 tonnes 8,074 tonnes

* Average for year 2009 and 2010

GPS locations Name of mill/ estate Location

Latitude Longitude PT KSI Mill Sei Kunyit, Sangir Balai Jinggo sub-district,

Solok Selatan District, West Sumatera, Indonesia

01° 99’ 46” 101° 37’ 48”



01° 26’ 20” 101° 32’ 25”



01° 29’ 27” 101° 27’ 07”



01° 29’ 23” 101°31’42”

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Appendix 2: Certification Audit Plan

Date / Time (1) Organizational Unit and Processes Auditor /

Abbrev. Interviewee Procedure -

EM/QM Element -Standard Chapter

Sunday Novem-ber 21, 2010

Traveling Jakarta to Jambi then to Muara Bungo

Travel by Garuda. Stay overnight at Muara Bungo Hotel

Monday, 22 November 2010

10.00-12.00

Open Stakeholder Consultation All Auditor Invited stake-holders

12.00-13.00

Lunch and break

13.00-15.00

Continue Stakeholder Consultation

15.00 End of Open Stakeholder Consultation 16.30 Traveling to PT KSI Site

Tuesday, 23 November 2010 08.00-08.30

• Opening Meeting • Introduction by team leader. • Presentation on estates by respective managers. • Presentation on palm oil mill • Source of FFB by respective managers

Auditors and Managers

08.30- 09.30

HGU legal requirement, all related legal requirement & document checking

All Auditors Top Management & Related Man-ager

09.30-12.00

Environment, Economic and Legal Is-sues • Field operations. • Worker interviews. • Riparian zones. • HCV

All Auditors Plantation and Palm Oil Mill manager

Principle 1 Criteria 1.1; 1.2; Principle 2 Criteria 2.1;2.2;2.3; Principle 3 Criteria 3.1;

12.00-13.00

Break and Lunch All Auditors

Travelling to PT KSI 1 Environment and Legal Issues • Chemical stores • Workshops. • Legal Aspect

Riena Widiyanti (RW)

Social issues • Housing. • Medical. • Schools. • Local communities • HCV

Dian S. Soeminta (DSS)

Plantation Manager Principle 4 Criteria 4.1; 4.2;4;3 Principle 2 Criteria Principle 3 Principle 5 Criteria 5.1 to 5.6 Principle 8

Environment and Legal Issues • Chemical stores • Workshops. • Legal Aspect

Rahmawati(RA)& Agus Salim Alfat (ASA)

Plantation Manager Principle 2 Criteria 2.1 Principle 4 Criteria 4.6,4.7, 4.8Principle 8

13.00-17.00

Social issues Fadli (FA) Plantation Manager Principle 2

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• Housing. • Medical. • Schools. • Local communities • HCV

Criteria 2.2, 2.3 Principle 6 Criteria 6.1 to 6.11 Principle 8

17.00 End of 1st day audit Wednesday, 24 November 2010, PT KSI 2 & 3 Estate

Environment, Economic and Legal • Field operations. • Worker interviews. • Riparian zones. • HCV

DSS & RW Plantation Manager Principle 4 Criteria 4.1; 4.2;4;3 Principle 2 Criteria Principle 3 Principle 5 Criteria 5.1 to 5.6 Principle 8


ASA & RA Principle 2 Criteria 2.1 Principle 4 Criteria 4.6,4.7, 4.8Principle 8

08.00-12.00

Social issues. • Housing. • Medical. • Schools. • Local communities • HCV

FA Principle 2 Criteria 2.2, 2.3 Principle 6 Criteria 6.1 to 6.11 Principle 8

12.00-13.00

Lunch & break

Environment, Economic and Legal Is-sues • Field operations. • Worker interviews. • Riparian zones. • HCV

RW & DSS Plantation Manager Principle 4 Criteria 4.1; 4.2;4;3 Principle 2 Criteria Principle 3 Principle 5 Criteria 5.1 to 5.6 Principle 8


ASA & RA Plantation Manager Principle 2 Criteria 2.1 Principle 4 Criteria 4.6,4.7, 4.8Principle 8

13.30-17.00

Social issues • Housing. • Medical. • Schools. • Local communities • HCV

FA Plantation Manager Principle 2 Criteria 2.2, 2.3 Principle 6 Criteria 6.1 to 6.11 Principle 8

17.00 End of 2nd day audit Thursday, 25 November 2010, PT KSI Palm Oil Mill 08.00-12.00

Environment, Economic and Legal • Field operations. • Worker interviews. • Riparian zones. • HCV

DSS & RW Plantation Manager Principle 4 Criteria 4.1; 4.2;4;3 Principle 2 Criteria Principle 3 Principle 5 Criteria 5.1 to 5.6 Principle 8

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ASA & RA Principle 2 Criteria 2.1 Principle 4 Criteria 4.6,4.7, 4.8Principle 8

Social issues. • Housing. • Medical. • Schools. • Local communities • HCV

FA Principle 2 Criteria 2.2, 2.3 Principle 6 Criteria 6.1 to 6.11 Principle 8

12.00-13.00

Lunch & break

13.00-14.0 0

Additional Document check for remaining issues at mill and plantation estate

17.00-18.00

Preparation for Closing Meeting ALL Manager

19.00-20.00

• Presentation of findings by the audit team. • Questions and answers. • Final summary by team leader.

ALL Manager

Friday, 26 November 2010 06.00 Traveling to Padang 17.00-18.00

Traveling to Jakarta ALL Travel by Garuda

Appendix 3: List of Abbreviations AMDAL Analisis Mengenai Dampak Lingkungan & Sosial

(Assessment of Environmental & Social Impacts; consists of the ANDAL, RPL & RKL documents)

ANDAL Analisa Dampak Lingkungan Hidup (Environmental Impacts Assessment) Bapedalda Badan Pengendalian Dampak Lingkungan Daerah

(Regional Body for Management of Environmental Impacts) BPD Badan Pembangunan Desa (Village Development Body) BPN Badan Pertanahan Nasional (National Land Agency) CD Community Development CPO Crude Palm Oil CSR Corporate Social Responsibility EIA Environmental Impact Assessment ERTs Endangered, Rare & Threatened species ESH Environmental Safety & Health FFB Fresh Fruit Bunches EFB Empty Fruit Bunches FORKAS Forum Komunikasi (Communication Forum) HCV High Conservation Value HRD Human Resource Department Hyperkes Hygiene Perusahaan & Kesehatan Kerja (Company Hygiene & Occupational Health) IPM Integrated Pest Management KER Kernal Extraction Rate KKPA Koperasi Kredit Primer Anggota (Prime Cooperative Credit for Members) KSI Kencana Sawit Indonesia KUD Koperasi Unit Desa (Village Unit Cooperative) LKS Lembaga Kerjasama (Cooperative Institute) MSDS Material Safety Data Sheets

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NGO Non-Government Organization OER Oil Extraction Rate OSH Occupational Safety & Health PGA Personnel and General Affairs PHT Pekerja Harian Tetap (Permanent Daily Worker) PK Palm Kernel PKB Perjanjian Kerja Bersama (Working Agreement) PKO Palm Kernel Oil POM Palm Oil Mill POME Palm Oil Mill Effluent PPE Personal Protective Equipment RKL Rencana Pengelolaan Lingkungan (Environmental Management Plan) RPL Rencana Pemantauan Lingkungan (Environmental Monitoring Plan) SIA Social Impact Assessment SIO Surat Izin Operator (Operator Permit Letter) SMK3 System Manajamen Kesehatan dan Keselamatan Kerja

(Occupational Safety & Health Management System) SOP Standard Operating Procedure SPSI Serikat Pekerja Seluruh Indonesia (Indonesian Workers Union) UKL Upaya Pengelolaan Lingkungan (Environmental Management Efforts) UPL Upaya Pengelolaan Lingkungan (Environmental Management Efforts) UPTD Unit Pelaksana Teknis Daerah (Regional Technical Unit)

Appendix 4: List of Stakeholders Interviewed and Contacted

No. Name of Stakeholder Institution - Address Stakeholders Interviewed during Public Consultation Meeting

1. Mr.Yerry Head of BPN Solok Selatan 2. Rahyul BPN Solok Selatan, mapping and measuring section 3. Beni Almahendra Contractor 4. AKP Benu Alam Police Sector Sangir 5. Basrial, SE Head of Sub District 6. Yanuar Head of Plantation Solok Selatan 7. Kiarman Koramil Sangir 8. Zulfariadi Departemen Tenaga Kerja Solok Selatan 9. Syafriman Head of Village Talao 10. Jupni M Deputy Head of Village Talao 11. Syafrizal Deputy Head of Sei Kunyit (Wali Nagari) 12. Dedi Marlis Deputy Head of Sei Kunyit (Wali Nagari) 13. Yafrizal Service manager Muara Bungo 14. H Matmusa Communities leader for Sei Kunyit Village 15. Jamilus Dt. Rajo Bangun Communities leader for Sei Kunyit Village 16. Zulhidra BPN Solok Selatan 17. Nurasidi P Villager 18. Hendra Head of Worker Union 19. Supriyanto Contractor 20. Asrizal Hutbun (Forestry Department) 21. Zainal Abidin Chief of Cooperation 22. Maridis Villager 23. Maskun Villager staff 24. Bursan Villager staff 25. Gadimiz Communities leader 26. Sudirman Youth leader 27. Anas KKPA 28. Yansen Smallholder Scheme 29. A. Mantap Smallholder Scheme 30. Jamilus Sumbar Post (Media / Press)

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31. Helfi Yulinda Haluan Daily (Media / Press) 32. Martius FFB contractor 33. Novi Hendrik Local Environment section Solok Selatan 34. Rusniyal Deputy head of villager (Wali nagari) 35. Bahar Communities leader of Sei Kunyit Village 36. Bachtiar Communities leader of Sei Kunyit Village 37. Suryaman Local NGO 38. Carda S Local NGO

Stakeholders Interviewed On-Site 39. Simon Siburat Environmental Sustainability Coordinator - Wilmar Interna-

tional 40. Michael Tay General Estate Manager 41. Wansep Mill Manager 42. Memed Edyos Estate Manager 43. Siti Rochmah EHS 44. Jules Sonny EHS HO 45. Indra RSPO Coordinator West Sumatera 46. Edrin Moss RSPO Manager 47. Rachman Mill Supervisor 48. Irvan BM LO Padang 49. Fazry OR Operasional 50. Hainul Nandi Mill Supervisor 51. Hendra Mill Supervisor 52. Selvi Indah Ria EHSC-Medan 53. Sutanto EMP AMP 54. Donal darwir Manager EHS & Q RO 55. Sulimi Arman DMI 56. Daniel FAA 57. Eric Co 58. Herni Zen FAA 59. Harri Purnama 60. Aprizal Anang Mill 61. Wagino Mill Administrasi 62. Leonardo S Mill 63. Zulsyahri DC/QC

Appendix 5: Observations and Opportunities for Improvement

No. Observations / Opportunities for Improvement Criteria 1 The company should more consistent to record all incoming and outgoing letters

requesting information in their communication log book, as it was observed that two letters received by the company were not recorded in the log book.

1.1

2 The company’s policy regarding the indigenous people “Orang Rimba” should also communicated to contractors and communities surrounding the company’s area.

2.3

3 The list of the company’s environmental and OSH legal requirements should be re-viewed every 6 months in accordance with identification procedures and regulations as per the company’s procedure LK3-002 PRO-EHS.

4 There are no management plan for certain wetland areas as required by the com-pany’s SOP for management of rivers (KSI-SOP-GEN-09)

4.4.1

5 Internal audits to inspect and monitor operational activities should also be focused on day-to-day operations across all departments based on the SOP that has been es-tablished for each department.

4.4

6 1) Mr Nazaruddin Purba should be qualified as an OHS expert as soon as possible in order to fulfill the relevant legislation. 2) It is recommended that the OHS expert should also be an expert on POM opera-

4.7.2

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tions to help the leader or manager to coordinate and improve business safety, com-pany hygiene and occupational health, as well as help monitor compliance of the POM to OSH legislations

7 The agenda for regular OSH meetings should include discussions on issues related to health and safety, such as provision of PPE and first aid equipment, reviews of causes of work-related accidents and occupational disease, etc.

4.7.8

8 The company should develop a programme to reduce fossil fuel consumption 5.4.2 9 The company should evaluate the competency of all trained HCV team, to ensure

that they are able to perform this job function as required. 5.2.2

10 The company should continue to enhance their level of communications and trans-parency with local stakeholders on matter such as worker recruitment, as based on feedbackd during the stakeholder consultation meeting, some stakeholders were still not aware of the company’s worker recruitment process.

6.2