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RSPO Assessment Report

PUBLIC SUMMARY

PPB Oil Palms Berhad

EAST MALAYSIA

This public summary has been prepared in accordance with RSPO requirements and the information included is the result of a full RSPO assessment of the Mills and supply base as included in the scope of the certificate.

Report prepared by: David Ogg FICFor. (Lead assessor). Certification decision made by: Gerben Stegeman.

Control Union (Indonesia) Jl Kramat 3A, Cilandak Timur Jakarta Selatan 12560 Phone: 062-21-7884 2016

[email protected]

Control Union (Malaysia) Persiaran Raja Muda Musa, Off Jalan Sg. Berith, Teluk Gadong, 41100, Klang, Selangor. Phone 03-3377 1600 / 1700

[email protected]

Control Union Certifications. (Head office) Meeuwenlaan 4-6, P.O. Box 161. 8000 AD Zwolle. The Netherlands.

[email protected]

Phone: 0031 38436 0100

Control Union Certifications is a member of the Control Union World Group - an international inspection and certification body. CU performs assessments and certification in many agricultural based fields such as FSC, RSPO, and Organic production, Sustainable Textile Production, Organic Exchange, Eurepgap, HACCP, BRC, GMP and GTP. CU is accredited by the Dutch Council of Accreditation (RVA) on the European quality standard EN 45011 for the inspection and certification of CU Organic program (according to the EU regulation 2092/91) and EUREPGAP program. When requested a copy of the accreditation certificate can be obtained from CU.

www.controlunion.com

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Contents 1. Scope of the Certification Assessment.

1.1 1.2 1.3 National Interpretation used for the assessment. Assessment type. (mill, estate and mill, plantation only etc. etc) Location maps. 1.3.1 Map to show geographical location. 1.3.2 Map to show the supply base and neighbouring entities. 1.3.3 Location addresses of the mill(s). 1.3.4 Approximate tonnages certified. (CPO and PK). Description of supply base. 1.4.1 General description. 1.4.2 Location of the supply base including: · Control Union code for the certificate. · Location address. · GPS reference. 1.4.3 Statistics of supply base including: · Control Union code for the certificate. · Area of oil palm. · Mature area. · Estimated annual FFB production in tonnes. · Planting years. · Cycle. 1.4.4 Percentage of planted areas of different ages Other certifications held (ISO etc) Organisational information/contact person Time bound plan for other management units and justifications Date certificate issued and scope of certificate

1.4

1.5 1.6 1.7 1.8

2. Assessment Process

2.1 2.2 Certification body. Qualifications of the assessment team. 2.2.1 Qualifications of the lead assessor 2.2.2 Qualifications of the assessment team. Assessment methodology. 2.3.1 General overview. 2.3.2 Assessment agenda including: · Assessment dates. · Sites visited. · Main activities. · Total number of person days spent on site. Stakeholder consultation. 2.4.1 Summary of how stakeholder consultation was organised. 2.4.2 List of National and International stakeholders consulted. Date of next surveillance visit.

2.3

2.4

2.5

3

Assessment Findings

3.1 3.2 3.3 3.4 3.5 Lead assessor's summary and recommendation for certification. Summary of the findings by criteria. Non conformity register. Issues raised during stakeholder consultation and company responses. Formal sign-off of the assessment findings. 3.5.1 Acknowledgment of internal responsibility by the client.

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1.

SCOPE OF THE CERTIFICATION ASSESSMENT.

National Interpretation used.

The management of the Palm Oil Mill(s) and associated suppliers of FFB were assessed for compliance against the International RSPO criteria as interpreted and endorsed for Malaysia.

Assessment type. (Mill, Estate and Mill, Plantation only etc. etc).

Palm Oil Mills and estates owned by PPB Oil Palms Berhad

Location maps.

1.3.1 Map showing the location of the plantations. See attachments. 1.3.2 Map to show the neighbouring entities. See attachments.

1.3.3 Location of mills.

Name of Mill

Sapi Palm Oil Mill Reka Halus Palm Oil Mill Sabahmas Palm Oil Mill

Location

KM100, Jalan Sandakan- Telupid, 90009, Sandakan, Sabah KM87, Jalan Sandakan-Telupid, 90009 Sandakan, Sabah KM22.4, Due North off Lahad Datu Town Centre, Lahad Datu, Sabah

1.3.4

Approximate tonnages certified.

CPO 28,400 33,900 60,600 PK 6,300 8,000 13,100

Name of Mill Sapi Palm Oil Mill Reka Halus Palm Oil Mill Sabahmas Palm Oil Mill

Description of supply base.

1.4.1 General description. The supply base is comprised the 4 plantations known as Sapi 1, Sapi 2, Reka Halus and Sabahmas all located in Sabah, East Malaysia. There are no plans to expand the land holding and therefore Principle 7 is not applicable to this assessment. All 4 plantations are owned by the client. (Any smallholders that supply crop to these mills are categorized as independent smallholder with no binding contracts whatsoever. It is based on a willing buyer/willing seller context. Therefore they are outside the scope of the certification. Accurate records are maintained of all supplies of FFB from independent smallholders and the CPO recovered is excluded from the projected mass balance).

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1.4.2 Location of the supply base.

CU Code PO1 PO2 PO3 Plantation Name Sapi 1, Sapi 2 Reka Halus Sabahmas Location address KM100, Jalan Sandakan- Telupid, 90009, Sandakan. KM87, Jalan Sandakan-Telupid, 90009 Sandakan. KM22.4, Due North as off Lahad Datu Town Centre. GPS reference. Longitude Latitude 5º43'57.95" 117º23'13.692" 5º45'45.262" 5º10'33.675" 117º28'16.907 " 118º24'23.127 "

1.4.3 Statistics of the supply base.

CU Code Name

Area of oil palm (ha) Oil Palm Mature

5,644 4,740 8,338

EstTonnes FFB/yr

23.3 32.7 31.9

Planting years

All estates. Vary between 1989 to 2007.

Cycle (years)

Between 20 and 26 years.

PO1 Sapi 1, Sapi 2 6,277 PO2 Reka Halus 4,740 PO3 Sabahmas 8,338 Note: Period covered is June 08 ­ June 09

1.4.4. Percentage of planted areas of different ages.

PO1 PO2 PO3 Planting year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Sapi 1, Sapi 2 Reka Halus Sabahmas 1985 - 1990 30 19 0 1991 - 1995 20 77 27 1996-2000 0 0 73 2001 - 2005 37 4 0 2006 - 2008 13 0 0

Percentage of area planted: PO1 PO2 PO3 14 16 19 20 39 15 23 7 20 26 13 27 7 3 3 7 2 8 16 1 13 -

1.5 Details of other certifications held.

Reka Halus Palm Oil Mill ­ ISO 14001 EMS, HACCP Reka Halus Estate ­ ISO 14001 EMS Sabahmas Palm Oil Mill ­ MPOB: Highest OER achievement 2001 (own estate) Sabahmas Palm Oil Mill ­ Human Resource Excellence Award 2002

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1.6 Contact person.

Principle Contact person: Business address: Group name if applicable: Office telephone: Mobile telephone: Fax: e-mail: Web site: Simon Siburat PPB Oil Palms Berhad, 15th Floor Wisma Jerneh, Jalan Sultan Ismail, Kula Lumpur n/a 089-671546 019-8138035 089- 670260 [email protected] www.ppboil.com.my

1.7 Time bound plan for other management units and justifications.

The time frame laid out below is considered to be both challenging and realistic. The company will be using the experience of the main assessment to ensure that the other management units conform to the RSPO principles and criteria. The audit team are satisfied that PPBOP plantations conform with the RSPO requirements for partial certification as laid out in the Final RSPO Certification Systems document, May 2007, section 4.2.4. Legal ownership documents have been sited. Progress will be verified and reported in subsequent surveillance visits.

Name of plantation.

Terusan (1 + 2) Kiabau Ribubonus Suai Suburmas Segarmas Mustika Sembuluh Hibumas Sri Kamusan Sekar Imej Aktif Kukuh Koperasi Sarana Titian Permata Bumi Sawit Kencana Kerry Sawit Indonesia Karunia Kencana Permai Sejati Mentaya Sawit Mas Kencana Sawit Indonesia

General Location within Malaysia / Indonesia

Sandakan, Sabah. Sandakan, Sabah. Sandakan, Sabah. Miri, Sarawak, Bintulu, Sarawak. Miri, Sarawak. Sampit, Central Kalimantan Sandakan, Sabah. Sandakan, Sabah. Sandakan, Sabah. Sandakan, Sabah. Sandakan, Sabah. Sampit, Central Kalimantan. Sampit, Central Kalimantan. Sampit, Central Kalimantan. Sampit, Central Kalimantan Sampit, Central Kalimantan. West Sumatra, Indonesia

Area Summary Ha

Total 7,653 1,655 3,262 5,674 2,311 4,727 20,427 7,540 2,832 3,642 250 1,208 19,266 11,472 19,139 19,650 16,371 10,216 Planted 6,878 1,320 2,835 5,069 2,079 3,655 15,674 5,491 1,800 2,363 223 524 3,480 6,760 13,663 Under development Ditto 7,729

Time bound date:

2009 2009 2009 2009 2009 2009 2009 2010 2010 2010 2010 2010 2012 2012 2011 2011 2012 2012

Name of Mill.

Terusan Ribubonus Suburmas Kencana Sawit Indonesia Mustika Sembuluh Sri Kamusan

General Location.

Sandakan, Sabah, Malaysia. Sandakan, Sabah, Malaysia. Bintulu, Sarawak, Malaysia. West Sumatra, Indonesia. Sampit, Central Kalimantan. Sandakan, Sabah, Malaysia.

Annual output

CPO 56,600 29,000 56,300 45,300 35,000 36,000 PK 13000 5,175 13,290 11,310 14,985 8,280

Time bound date:

2009 2009 2009 2012 2009 2010

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1.8 Date certificate issued and scope of certificate

Name of Client: Client number: Certificate number: Certification Decision Date: Issued by Address Telephone Fax Email Website Scope Name of Mill: Scope (Summary of suppliers of FFB): Projected mass balance CPO: Certificate registration code: Type of certification: Name of Mill: Scope (Summary of suppliers of FFB): Projected mass balance CPO: Certificate registration code: Type of certification: Name of Mill: Scope (Summary of suppliers of FFB): Projected mass balance CPO: Certificate registration code: Type of certification: PPB Oil Palms Berhad CU809360 CUC809360 18-09-2008 Control Union Certifications Group scheme: Yes Meeuwenlaan 4-6 8025 BS Zwolle 0031 (0) 38 426 0100 0031 (0) 38 423 7040 [email protected] www.controlunion.com/certification

Sapi Palm Oil Mill PO1 ­ Sapi 1 & Sapi 2 estates 15,000 tonnes CU- 809360D01 Single site: Yes Reka Halus Palm Oil Mill. PO2 ­ Reka Halus Estate · 29,000 tonnes CU-809360D02 Single site: Yes Sabahmas Palm Oil Mill · PO3 ­ Sabahmas Estate 70,000 tonnes CU-809360D02 Single site: Yes

Group scheme: Yes

Group scheme: Yes

Group scheme: Yes

Certifier (contact person) Signature

Gerben Stegeman.

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2.

ASSESSMENT PROCESS.

2.1 Certification Body.

Control Union Certifications is a member of the Control Union World Group - an international inspection and certification body. CU performs assessments and certification in many agricultural based fields such as FSC, RSPO, and Organic production, Sustainable Textile Production, Organic Exchange, Eurepgap, HACCP, BRC, GMP and GTP. CU is accredited by the Dutch Council of Accreditation (RVA) on the European quality standard EN 45011 for the inspection and certification of CU Organic program (according to the EU regulation 2092/91) and EUREPGAP program. When requested a copy of the accreditation certificate can be obtained from CU.

2.2 Qualifications of the assessment team.

2.2.1 Qualifications of the lead assessor. David Ogg FICFor.

REQUIREMENT A minimum of post high school (post secondary school) training in either agriculture/forestry, environmental science or social sciences; At least 5 years professional experience in area of work relevant to the assessment (e.g., palm oil management; agriculture/forestry; ecology; social science); Training in the practical application of the RSPO criteria, and RSPO certification systems; Successfully completion of an ISO 9000:19011 lead assessors course; A supervised period of training in practical assessmenting against the RSPO criteria or similar sustainability standards, with a minimum of 15 days assessment experience and at least 3 assessments at different organisations. QUALIFICATIONS OND (credit) Forestry. Newton Rigg College of Agriculture and Forestry. Penrith, Cumbria. U.K. 1978 to 1981 Professional forester since 1981. 1987. Passed the examinations necessary to be accepted as a member of the Institute of Chartered Foresters. 2004 Promotion to a Fellow of the ICF. Instrumental in the preparation of the CUC certification systems. Fully trained in similar certification programmes such as FSC, PEFC, GOTS, Organic Exchenge. BATALAS ISO 900:2000 lead assessors course. September 2007. Extensive experience in the Palm Oil industry by conducting pilot projects with 4 different companies throughout Malaysia and Indonesia from August 2006 to August 2007. Developed the CUC assessment checklist and system plans and training new assessors as team members. Conducted a significant number of assessments since 1998. (In excess of 3,000). SmartWood. Soil Association. Indfor: 700 group members including PEFC and FSC FM and COC; Control Union: GOTS, GGL, FSC COC, CRAMER, OE, Recycle standard. RSPO to date: 4 x pre-assessments. 5 x main assessments. (Malaysia, Indonesia and Colombia). Compliance Yes

Yes

Yes

Yes. Yes.

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2.2.2 Qualifications of assessment team. RSPO REQUIREMENT ASSESSOR Fluent in main local languages Mr Manivannan and English. Dian Susanty Dwi Muhtaman Field working experience in the David Ogg palm oil sector, or a demonstrable equivalent. Mr Manivannan

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

David Ogg Mr Manivannan

Health and Safety assessmenting on the farm and in processing facilities. (For example OHSAS 18001 or occupational. Health and safety assurance system). Workers welfare issues and social assessmenting experience. (For example with SA8000 or related social or ethical accountability codes).

David Ogg

Mr Manivannan

David Ogg

Mr Manivannan

Dian Susanty Dwi Muhtaman

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

David Ogg Mr Manivannan Dian Susanty Dwi Muhtaman

QUALIFICATIONS Malaysian citizen. Indonesian citizen Indonesian citizen Professional forester since 1981. See also above. 2 years of plantation management. 7 years with corporate agriculture financing. Degree in agribusiness. Professional forester since 1981. See also above. Global Gap and GMPB2. 7 years assessment experience. Standards include GAP and IPM. Professional forester since 1981. See also above. Global Gap and GMPB2. 7 years assessment experience. Standards include GAP and IPM. Professional forester since 1981. See also above. Global Gap and GMPB2. 7 years assessment experience. Standards include GAP and IPM. Social assessment experience in FSC audits. Social expert on several certification forest audits/assessments. Sarjana Degree in Animal Husbandry, specialising in Social Economics Biodiversity and environmental forest management. Global Gap standard. 12 years on quality and environmental dimensions for industrial sector Participation in variety of oil palm plantation assessment for RSPO standards and HCV identification and Social Impact Assessment. Managing Director of forest management company for 18 years. 7 years with corporate agriculture financing. Degree in agribusiness.

Compliance Yes Yes Yes Yes

Yes

Yes Yes

Yes

Yes

Yes

Yes

Yes Yes

Yes Yes

Yes

Economic issues.

David Ogg Mr Manivannan

Yes Yes

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2.3

Assessment methodology.

2.3.1 General overview.

The assessment was carried out in conformity with the procedures as laid down in the CUC RSPO Procedure Manual and the program manual for the assessor and certifier. During the assessment the qualified CUC 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 of Reka Halus to Sapi 1 and 2, and the single location of Sabahmas , combined with the common management systems and information derived during the preassessment, it was possible to carry out both field and office assessments of all 8 estates within the time frame without compromising the integrity of the assessments in anyway. All 8 estates and the 2 mills were visited and the three assessors carried out field and office assessments of compliance for all the RSPO principles and criteria. Common systems were identified and specific evidence was recorded for individual estates. Interviews with managers took place in both formal and informal environments and worker interviews were conducted on all estates and in both mills. No sampling formula was necessary.

2.3.2 Assessment agenda.

Date 9th June Location /main sites Reka Halus · Main activities (Detailed for 9th and summarised thereafter). Opening meeting. Introduction by team leader. Introduction of team members and assessment agenda. Presentation of estates by respective managers. Presentation by Oil Mill(s). Source of FFB by respective managers. Chemical stores. Storage. MSDS leaflets. Herbicide mixing areas. PPE. Ventilation. Security. Field inspections. Herbicide application programmes. Harvesting sites and efficiency. Fertilising operations. SOP's. Soil maps. Land preparation. Ground cover. IPM. First aiders and boxes. Ground cover. Soil erosion. Field observations of all operations. Worker interviews. OSH. Sexual, religious, racial harassment. Pay and contracts. Child labour. First aid. Awareness. New planting sites. Zero burn. HCV's. Identification. Management plans. Environmental Impact Assessments. Implementation. Riparian zones. Width. Current and future management. Non maintenance regimes. Water management. Water courses. Water monitoring. Road maintenance. Run off. Social amenities. Social Impact Assessments. Local communities. Contributions made. Employment opportunities. Social impacts. Complaints procedures. Work shops. Oil traps. Safe working environment. PPE. Diesel tanks. Environmental waste management. Line sites. Interviews with householders. Inspection of water discharge points. Water improvement plans. Waste disposal. Document inspection and assessment. Mill and workshop inspections. Documentation. Worker interviews. Mills. SOP's. Safe working environment. Gen sets. Walk ways. Signs. EFB. POME treatment. Emissions. Mass balance. Diesel tanks. PPE. Fire extinguishers. First aiders and boxes. Fuel and water usage. OSH. Training. Management structure. First aiders. Full document review. Completion of the checklist. Review and documentation of evidence. All aspects of RSPO P&C's.

Reka Estateplantaion visit. Reka Halus. Social and Environmental.

· ·

· · · · · · · · · · · · · Sapi Palm Oil Mill. · ·

10th June

Reka Halus Palm Oil Mill.

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11th June

Sapi I and 2 Plantation visits.

· Worker interviews. OSH. Sexual, religious, racial harassment. Pay and contracts. · Document inspection and assessment. · As for 9th June. · Field operations. · Worker interviews. · Chemical stores. · Workshops. Etc. Full document review. Partial completion of the checklist. Review and documentation of evidence. All aspects of RSPO P&C's. Interim closing meeting for Sapi Estates and Reka Halus and mills. Continuation of document review for plantations and mills visited to date. · First open stake holders meeting. · Move to Sabahmas Estate. · Opening meeting. · Chemical stores. Storage. MSDS leaflets. Herbicide mixing areas. · Field inspections. Herbicide application programmes. Harvesting sites and efficiency. Fertilising operations. SOP's. Soil maps. Peat management. Land preparation. Ground cover. IPM. First aiders and boxes. · Worker interviews. OSH. Sexual, religious, racial harassment. Pay and contracts. Child labour. · New planting sites. Zero burn. · Water management. Water courses. Water monitoring. · Road maintenance. Run off. · HCV's. Identification. Management plans. Environmental Impact Assessments. · Riparian zones. Width. Current and future management. Non maintenance regimes. · Work shops. Oil traps. Safe working environment. PPE. · Mill and workshop inspections. Documentation. Worker interviews. · Mills. SOP's. Safe working environment. Gen sets. Walk ways. Signs. EFB. POME treatment. Emissions. Mass balance. Diesel tanks. PPE. Fire extinguishers. First aiders and boxes. Fuel and water usage. · OSH. Training. Management structure. First aiders. · POME application. · Full document review. Completion of the checklist. Review and documentation of evidence. All aspects of RSPO P&C's.

Second open stakeholder meeting. · Report preparation and Social issues arising from morning.

12 June.

th

Reka Halus

13 June 14th June

th

Sapi POM office. Sabahmas Estate

Sabahmas plantaion and mill inspection.Environmental.

15th June 16th June

Audit of documentations.

Sabahmas Estate Office.

17th June

Sandakan Office.

· Social amenities. Social Impact Assessments. · Local communities. Contributions made. Employment opportunities. Social impacts. Complaints procedures. · Closing meeting. Chaired by the assessment team leader. Welcome and introduction by the team leader. Presentation of findings by the assessment team. Questions and answers. · Final summary by team leader.

Number of assessors participating: 4 Number of days spent for the assessment on site: 9 Total number of person days used for the assessment on site: 27. (Only 2 auditors moved to Sabahmas).

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2.4 Stakeholder consultation 2.4.1 Summary of how the stakeholder consultation was organised. PPBOP included a list of 453 local stakeholders in their application form to CUC. All of these stakeholders, plus additional National and International stakeholders and Kampungs as identified by PPBOP and CUC were invited to make written responses to a questionnaire. The questionnaire included full details of the company to be assessed, the names and addresses of all the mills and supply base, the dates of the assessment and the date time and place of the open stakeholder meetings. Notification was also posted on the CUC and RSPO web sites. 12 questions are asked. In summary: 1. Do you have any remarks on the RSPO standard? 2. What is your relation with the applicant? 3. Are there any plantation or mill management practices that affect you? 4. Do you consider any management is in conflict with the RSPO principles and criteria? 5. Do you have any suggestions for management? 6. Are you aware of any HCV in the plantations or in adjacent land? 7. Are you aware of any endangered or rare species? 8. Are there any adverse (or positive) effects on local communities? 9. Additional comments. 10. Are you likely to attend the open stakeholder meeting? 11. Do you have any comments about the assessment team and would you like to meet with them? 12. Do you have any comments of the applicant's management of any other plantations? There were no responses to stakeholder letters received. Having discussed this with management and with stakeholders who attended the stakeholder meetings, it was concluded that the relationship between the company and the local communities and workers is very constructive and stakeholders found no cause to comment. 2.4.2 List of the National and International stakeholders contacted. EPF Polis Socso Labour Department NUPW. 4 offices. Emyza bt Sudin AidEnvironment. Sawit Watch Forest Peoples WWF PACOS Sabah Forestry. MIC RSPO and CUC web sites. JABATAN ALAM SEKITAR (DOE) JABATAN ALAM SEKITAR (DOE) SANDAKAN JABATAN ALAM SEKITAR (DOE) TAWAU JABATAN BURUH (LABOUR DEPARTMENT) JABATAN TENAGA KERJA JABATAN KERJA RAYA JABATAN IMIGRESEN SANDAKAN JABATAN IMIGRESEN LAHAD DATU JABATAN KESELAMATAN DAN KESIHATAN JABATAN KESIHATAN PEKERJAAN (DOSH) HOSPITAL LAHAD DATU JABATAN PERHUTANAN SABAH (FORESTRY DEPT) JABATAN PERTANIAN SABAH (DOA) JABATAN PERTANIAN SANDAKAN JABATAN PERTANIAN PEJABAT DAERAH BELURAN KUMPULAN WANG SIMPANAN PEKERJA (EPF) PEJABAT DAERAH LAHAD DATU SOCIAL SECURITY ORGANIZATION (SOCSO) BALAI POLIS LAHAD DATU MALAYSIAN PALM OIL BOARD (MPOB) JABATAN BOMBA & PENYELAMAT MALAYSIA (CAWANGAN SANDAKAN) LEMBAGA MINYAK SAWIT MALAYSIA (MPOB) JABATAN BOMBA & PENYELAMAT MALAYSIA (CAWANGAN LAHAD DATU) JABATAN PERKHIDMATAN HAIWAN DAN SEKOLAH KEBANGSAAN PERMAI PERUSAHAAN TERNAK KAMPUNG TONITING KAMPUNG ULU SAPI KAMPUNG BINTANG MAS KAMPUNG PUTATAN KAMPUNG ULU SAPI KAMPUNG KADUMU KAMPUNG SUNGAI SAPI

2.5 Date of next surveillance visit:

August 2009.

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3.

ASSESSMENT FINDINGS.

3.1 Lead assessor's summary and recommendation for certification: The lead auditor conducted a scoping visit in February 2007 of all three estates in connection with the preparation of CO2 mass balance analysis. The lead auditor also led a full RSPO pre-assessment of the Sapi and Reka Halus estates in April 2008 with an additional team of 2 CUC auditors. The main RSPO audit was conducted in June 2008 with a team of 4 auditors over a 9 day period. All three mills were inspected and their operations were audited for compliance against all of the applicable RSPO principles and criteria for mills. The only sampling that was conducted was worker interviews and records. The supply base included in this audit was the PPBOP owned estates: Reka Halus, Sapi and Sabahmas. Whilst each estate has a number of operating units, they were all audited for compliance against the applicable RSPO principles and criteria for plantations. Two open stakeholder meetings were held, which were attended by a total of 124 people with representatives from local government, police, schools, communities, workers and suppliers. Section 3.4 of this report gives details but it is worthy of note that the majority of those that attended the meetings gave positive feedback regarding their relationship with the company and the estates. The audit team were impressed with the clear commitment of the company ­ at all levels ­ to comply with the RSPO principles and criteria. The sustainability department is led by a director of the company and the team is highly motivated and effective in conducting their work. They are commended for their pragmatic documentation systems and for ensuring that those systems are implemented by managers responsible for field operations, stores, workshops and in the mills. Managers at all levels are trained in the RSPO requirements and the lead auditor has witnessed tangible and effective improvement in many areas of operations since the first pre-scope audit in February 2007. In summarising the results of the audit, it is simplest to copy here the findings with regard to Principle 8:

The company has a continuous improvement plan which includes specific reference to the 6 key areas of activity 8.1.1 to 8.1.6. There is clear evidence, both in documentation and in the field, of continual improvement. Since the pre-assessment carried out in April 2008 and the pilot project conducted in February 2007, the company has implemented many improvements. (Refer to Memorandum 06/04/2007 from Managing Director Mr Khoo Eng Min to all Senior Managers. Subject: Closing meeting of RSPO compliance audit in which Mr David Ogg raised the following issues: Hilly/steep land. Riparian Reserves. Conservation Areas. Health/Safety awareness and Chemical stores and Chemical usage). Chemical stores have been upgraded with improved security, ventilation and internal bunding. MSDS leaflets have been translated and displayed outside the stores. Chemical traps have been installed and mixing of all herbicides takes place in a secure area. Drip trays are used wherever required and all used containers are triple rinsed, punctured and stored prior to collection for disposal. The spray regimes have been changed and the lead auditor has witnessed a considerable increase in the green vegetation beneath the palms accompanied with significant reductions in herbicide use. Ultra Low volume applicators have further reduced the need for water and are more ergonomically friendly. Diesel tanks have been bunded and there is on going improvement to ensure drainage taps are turned off and hoses and nozzles are stored within the bunds. Workshop drains are fitted with waste traps and electrical fittings have been checked for safety. Fire extinguishers are on prominent display and are regularly inspected. On going work with regard to the environment is spear headed by the Sustainability team with full

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support by group and estate managers at all levels. Sabahmas has a particularly wide and diverse range of wildlife, primarily due to the location of 514 ha of secondary rainforest that forms the conservation area which cuts deeply into the plantation from the East. This ridge gives a direct link into the Tabin Wildlife and forest reserve extending to about 120,000 ha. (Core of 5,000ha of virgin rainforest). In addition, the estate has a further 80 ha of wildlife reserves and it is a credit to the enthusiasm of the Environment / Safety and Health Officer and to the full Sabahmas management team that the wildlife is so well protected and habitats enhanced. On all estates, riparian zones have been identified that must be left unplanted at the time of replanting, and are now `maintenance free regimes'. This is allowing native species to colonise the areas in advance of the time of clearance and jungle tree planting is taking place to improve the feed source for native primates and other wildlife. There are many reports and recommendations with regard to HCV management and their enhancement and all estates are implementing the recommendations as part of their management plans. Ground over 25 degrees is being identified and will not be replanted. Continuous improvement with regard to field techniques is generally limited to productivity and reduced use of herbicides and the side effect is reduced run off and erosion. EFB is recycled. Solid decanter waste is applied to the Estates and all mills will be carrying out land irrigation of liquid POME by the end of 2008. Mills are well organised and run in such a way as to create a safe working environment. A social impact assessment has been completed recently and the recommendations are being implemented. All estates have comprehensive social amenities including worker housing, clinics, crèche, schools, religious, sports fields and community halls. Shops are also available on site or very nearby. The company clearly contributes to local communities with cash grants and contributions; work in kind and use of services. There is an ongoing house for workers improvement plan, particularly with regard to water supplies.

During the stakeholder meetings, very positive feed back was given from local communities, suppliers and from workers. The approach to local education is summarised in a letter from the Director of Borneo Child Aid Society: For the RSPO audit team: "We have had an excellent cooperation with PPB OP Sabahmas about providing education for the children of workers. The management of Sabahmas has gone positively into this by providing 4 very good buildings for schools, which are the absolute best among our present 90 learning centres in plantations. Furthermore the children are provided with a meal and drinks provided by the plantation which bears all costs of running the project. It is the best example we have of plantation involvement in the children's education from any of the companies we are working with. Yours sincerely. Torben Venning" In the experience of the lead auditor, water supplies to workers housing is the most frequently raised subject at any audit. PPBOP has an on going improvement programme and are now providing water collection butts to houses. The audit team inspected all of the documented management systems as well as assessing how those management systems are implemented in practice. It is important to note that the documents inspected are working documents, which are used for every day management, and it was the role of the audit team to assess how the systems complied with the RSPO principles and criteria. (Management systems must be designed BY the company FOR the company and this is the case for PPBOP). It is therefore the recommendation of the lead assessor that: · A certificate of compliance is awarded. Signed:

Name: David Ogg FICFor. Date: 17th June 2008.

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3.2 Audit Summary.

1.1 Findings: · Records of all requests for information. · Public documents available as required. · Clear compliance with the law. · Good systems in place to track and implement changes. Summary evidence / additional comments: Comprehensive system with evidence of action taken as the result of a request for information. No restriction as to the documents that are publicly available with the exception of confidential commercial information. All offices have a list of the relevant laws and document checks on licences and permits, statutory returns and other laws confirmed implementation, There are 69 identified laws and regulations that the company must comply with. These are contained in a single file. EIA's were sighted and cover all plantings / replantings since the law came into effect. The company keeps a record of all licences and their expiry dates and ensures that inspections are carried out well in advance of that expiry date. It was noted that there is a considerable delay between the time of inspection of mill plant and the issuing of a new licence by authorities. All plant has been inspected, reports prepared and stamped by the authorities. All clinics: During the audit it was identified that clinics are not sending a monthly return to the local health office regarding communicable diseases. This has not been done in the past because there have not been any diseases recorded. Zero returns must be made. Land titles inspected for all estates and the mills. Boundaries between other plantation companies are identified with red and white marks on trees or with posts. In the context of these 3 estates, there are no customary rights because these lands were previously state owned land that has been leased out to the company on a 99 years lease period known as Country Lease. Annual and projected budget for the next 5 years. Future production projection. Income. Costs etc are all included. There is also a long term projection to 2024. Wilmar International Ltd. Agricultural Manual and standard operating procedure for oil palm. (2007). This is an updated version prepared since the merger of Wilmar and PPBOP. There are 11 chapters covering all aspects of the agronomy of oil palm establishment, maintenance and harvesting. All managers have copies. Site inspections and interviews with staff confirmed that the SOP's are understood and are being implemented. The Agricultural Manual and SOP's agree with the RSPO P&C's. Mills: Safe/Standard Operating Procedure. 72 page document covering all mill practices. All Compliance Yes

1.2 2.1

Yes No (see NC 2008/01)

2.2

2.3

· Land titles / country leases for all properties. · Mechanism for resolution of conflicts. · Boundaries identified. · No disputes noted. · No customary rights.

Yes

Yes

3.1

· Annual budgets inspected. · Annual replanting programmes projected to 2013. · Up to date SOP's covering all operations. · Clear implementation of SOP's on all estates.

Yes

4.1

Yes

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4.2

· Well planned and managed fertiliser regimes. · Good monitoring of fertiliser inputs and records. · EFB and POME land application. Records seen and ground work inspected. · Zero burn policy adhered to.

4.3

· · · · · ·

Soil maps available for all estates. No fragile soils identified. Good ground cover seen. Frond placement to reduce erosion. Terracing carried out as required. Road maintenance programmes in place. · No peat identified.

staff members have a copy. Sections are also clearly displayed in the mills. Annual recommendations for fertiliser and EFB applications. EFB is not removed from mills promptly resulting in flies affecting local housing. POME (liquid) application is now planned for the end of the year 2008 for all estates. Sabahmas Mill: Work in progress: Trenches expected to be completed by second week of July 2008. Sapi Mill: Solid POME (Sludge cake). 912 tonnes in 2007. To date in 2008, 1,100 tonnes have been applied. This is shown by division.EFB is also burnt in the mill, under licence, in an incinerator, to produce bunch ash for the liming of acidic areas in a sister estates. Approx 2,000 ha. Chapter 4 of the agricultural manual and SOP covers Establishment and maintenance of legume covers. Field inspections of all estates show excellent ground cover and the maturing Estates have extensive inter row and inter oil palm ground cover of ferns and rough grasses. Spraying is limited to circles around the palms. Maps for all estates identify cover crop planting. Maps show all the terracing. No slopes over 25 degrees will be re-planted. (See SOP 3.2.7) E.g. Sapi 2 About 30.8 ha has been identified in the EIA report prepared in Feb 2008. (Continued below). Field inspections show excellent ground cover and the maturing Estates have extensive inter row and inter oil palm ground cover of ferns and rough grasses. Spraying is limited to circles around the palms. HCV 4 areas have been identified on maps and in the EIA referred to above. The estates are identifying HCV4 areas by marking with red paint on the oil palms. No maintenance work is taking place within these areas and they will not be replanted. The plans include the planting of jungle trees in these areas. This has been implemented. The agricultural manual and SOP's include reference to Sabah Water Resources Enactment 1998 and JPS guidelines 1998 and Sarawak EIA guidelines 1995. Riparian zones widths are stated for different widths of river. Rivers are defined and all water courses have been identified on maps. The EIA makes recommendations for water monitoring and water sampling points are identified on maps. Arch lever file for principle 4 includes monitoring reports. 25th January 2008. All tests are within WHO specifications. The tests are made every 4 months. Water use varies from 2.0 to 3.996 tonnes per tonne FFB. Arch lever file for principle 4 includes a water management plan. It includes an overview of

No (see NC 2008/02)

Yes

4.4

· Levels of water usage per tonne of FFB processed recorded. · No drainage into protected areas. · Water management plans in place and implemented. · Water sampling on entry and leaving the estates. · Adherence to Sabah Water Resources Enactment 1998 and JPS guidelines 1998 and Sarawak EIA guidelines 1995. Considered to be the most stringent.

Yes

Page 15 of 26

4.5

· Documented and implemented IPM system. · Monitoring of IPM used. · Planting of beneficial plants. · Monitoring of pesticide use per ha. · Written justification for all agrochemicals used. · All pesticides are officially registered. · Well ventilated and secure chemical stores with MSDS leaflets and first aid. · Annual medical checkups. · No work with agrochemicals for breast feeding or pregnant woman. · Paraquat is being replaced. · Chemical residue testing of CPO. · Records of pesticide use. · OSH plans in place and implemented and good records. · OSH committees and responsible persons. · Documented risk assessments. · Accident and emergency procedures. · First aiders at all sites. · First aid kits at all places of work. · Training programmes in place. · Accident records available. · Worker insurance in place. · Training plans and records as appropriate for all staff and workers. · Documented and implemented impact assessments. · Environmental improvement plans in place and positive action implemented. · Local stakeholders consulted.

4.6

Water Management. Key legislation. Climate conditions. Water quality. Water management measures. Workers awareness and education programs. "Conservation posters are displayed in prominent locations throughout the mill and workers housing". Agricultural manual Chapter 8. Section 2.2 Biological control. 2.3 Physical control. 2.4 Cultural control. This is a very comprehensive chapter and it is clear that beneficial plants have been and are being planted for IPM purposes. The chemical stores a re well planned and managed with good ventilation. Pre-mixing takes place in bunded areas with shower facilities. Inspection of records, interviews with the workers and medical staff confirmed that annual check ups take place and pregnant and breast feeding woman are assigned other work. The only negative point is that the herbicide records do not make it clear as to the The OSH plans and documents are well thought out and is also displayed in the work places. Interviews with workers confirmed knowledge of the plans and procedures and first aid training records were inspected and also confirmed by interview. Safe working environments observed in mills and places of work.

Yes

Yes

4.7

Yes

4.8:

5.1

5.2

· HCV assessments completed. · Management plans are well prepared and are being implemented. · HCV's are generally the riparian zones. · HCV waterfall jungle reserve is well protected. · Illegal activities are actively discouraged and signs around the estate make it clear that hunting, fishing etc is illegal.

Annual training programme for all workers. Regular assessments take place to ensure all workers are up to date with training. Individual worker records with photographs. EIA carried out by independent consultant dated on 28th June 2007 for Sapi I and Sapi II. For Reka Halus (existing plantation, no replanting) is using Environmental Management Plan / ISO 14001(valid to February 2009). Monitoring for the first for November 2007 to February 2008 is in place, dated 11 March 2008. Next would be on June and October 2008. A non conformity was identified in 5.1.2 regarding an action plan. Assessment HCV conducted by Independent consultant on January 3 to 12, 2008 for PPB: Reka Halus, Sabahmas and Sapi estates. Company just received final report of HCV assessment from consultant. Identified HCV of a variety of statuses on all estates. The recommendations from the above report have been collated into the "Sabahmas Conservation Action Plan for HCVF and ERT's". This includes 13 points that need to be addressed with a timeline and person in charge. Reka Halus and Sapi estates.

Yes

No (See NC 2008/09)

Yes

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In addition to the report identified above, the company has collated information from various reports regarding HCV habitats and ERT's. These reports are also combined into a management plan. Riparian zones are identified on maps and marked on the ground using coloured poles. Non maintenance regimes and jungle tree planting is taking place. Identified waste from all sources such as: - Nursery generated waste are Fertilizer leaching, excess from insecticide, fungicide, solid plastic waste etc. - Planting generated; used poly bags. Etc Waste management plan is in place. All solid waste collected and stored on temporary storage (categorize as SW 410). PPBOP is seeking a suitable company that has license from government as waste collector. Chemical containers ar triple rinsd and stored in a responsible way before collection. Engine oil (SW 305), as schedule waste, is already disposed of to Ng Sian Hap Pottery factory Sdn. Bhd that has license from DOE. Sapi Estate: Mitigation and improvement plan to reduce identified waste has been established (June 05, 2008), however no timeframe/or schedule to take the action is stated in the improvement plan. Sapi Mill: Some leakage of water from pumps and the end of the over flow pipe from the water tank is 2 metres above ground level resulting in wet conditions. It is also suspected that the bund around the diesel tank is not liquid proof. Monitoring records inspected and found to be in accordance with industry standards. SOP's and evidence on ground.

5.3

· Waste products identified. · Plans to avoid pollution are in place. · EFB and POME are used for fertiliser.

No (see NC's 2008/03, 2008/04)

5.4 5.5

5.6

· All energy used in the mills is monitored. · No evidence of burning anywhere on any estate. · Previous crops chipped and shredded. · Plans in place to mitigate all polluting activities. · Pollutants are identified. · No peat.

Yes Yes

Management of waste plans. Scheduled waste identified and stored appropriately. Reka Mill & Reka Estate: The SOP states that an annual review of the environmental program and action plan will take place. However company has not reviewed the 2007 figures and no targets have been set for the year 2008. SIA for 3 existing operations at PPB Oil Palms Berhad, 18 Feb 2008. The document shows that the affected parties were consulted and interviewed during the identification of impacts SIA report covers Proposed Action Plan which describes recommendation, action, remarks, time line to complete and responsible staff (person in charge). However, there is no comprehensive action plan to address the recommendations and proposed action plan. Some of activities have been executed and documented. The housing development plan,

No (see NC 2008/05)

6.1

· Documented and implemented social impact assessments prepared in participation with affected parties.

No (see NC 2008/06)

Page 17 of 26

6.2

6.3

· Clear and transparent communication with local stakeholders. · Extensive lists of stakeholders. · Identified lines of communication. · Complaints and dispute resolution procedures which is used. · Procedure is fully available.

for example (proposed plan made by SIA), is available but is not a comprehensive document. Items of the plan are scattered in throughout other documents. The stakeholder meeting and interviews confirmed that communications and relationships between the estates and stakeholders is good. Documented and inspected. Confirmation by interview that the system is accepted and works in a timely manner. Sapi Estate and Mill: Two complaints were found to have been settled but no settlement dates recorded. The report only documented that the complaint has been addressed Not applicable. Pay and conditions and contracts were inspected in all offices and discussed during worker interviews. They are understood by all workers. There was an issue of under-payment relating to 7 workers identified by the audit team. This was immediately investigated by the management and was accepted as a genuine error and was corrected immediately. Evidence of closure is available. Pay records for all workers were inspected. Linesites were inspected and it is noted that water supplies are being improved. Kindergarten and nursery crèches are maintained by the estates. Minutes of meeting with worker reps are recorded. Meeting with worker reps is through the various committees (eg: OSH Committee, and Sexual Harassment Committee). Interviews and inspection of records and labour registration cards confirmed no employment of children below the age of 16. Policy displayed in office and muster grounds. Wage records inspected and rates confirmed as being the same for male and female workers and migrant workers. Policy publicly displayed in office and at linesite. Worker interviews confirmed that no sexual harassment takes place. Interviews with suppliers of services confirmed that they are fairly treated and paid promptly.

Yes

No (see NC 2008/07)

6.4 6.5

· No customary lands. · Contracts of pay and conditions in compliance with the law. · Housing, water supplies, medical, educational and welfare amenities supplied. · Improvement implemented to line site water supplies and to waste water discharge,

Yes No (see NC's 2008)

6.6

· Minutes of meetings with trade unions and worker representatives. · Published statement recognizing freedom of association. · No child labour. · Publicly available equal opportunities policy. · No evidence of discrimination. · Well displayed and clear policy on sexual harassment. · FFB is supplied by the estates owned by the company. · Suppliers of services paid in a timely manner. · There are demonstrable contributions to local development. · Not clear that local communities are fully consulted.

Yes

6.7 6.8

Yes Yes

6.9 6.10

Yes Yes

6.11

Records of contributions were reviewed and individual projects recorded in the checklist. These include contributions for medical, sport and recreation. Humana School. Transport. Donations to individual Associations and families and improvement in water supplies. Suggestion forms are available to all workers and staff and the company is encouraged to ensure that these are reviewed and acted upon in a timely manner. An NC has been raised as it is not clear that communities are fully consulted.

No (See NC 2008/10)

7.1

· Not applicable as no new planting is

Yes

Page 18 of 26

planned. 7.2 7.3

· ·

Not applicable as no new planting is planned.

Yes Yes Yes Yes Yes Yes Yes Yes

Not applicable as no new planting is planned. 7.4 · Not applicable as no new planting is planned. 7.5 · Not applicable as no new planting is planned. 7.6 · Not applicable as no new planting is planned. 7.7 · Not applicable as no new planting is planned. 8.1 · Clear evidence of continual improvement in key areas. The company has a continuous improvement plan which includes specific reference to the 6 key areas of activity 8.1.1 to 8.1.6. There is clear evidence, both in documentation and in the field, of continual improvement. Since the pre-assessment carried out in April 2008 and the pilot project conducted in April 2007, the company has implemented many improvements. (Refer to Memorandum 06/04/2007 from Managing Director Mr Khoo Eng Min to all Senior Managers. Subject: Closing meeting of RSPO compliance audit in which Mr David Ogg raised the following issues: Hilly/steep land. Riparian Reserves. Conservation Areas. Health / Safety awareness and Chemical stores and Chemical usage). Chemical stores have been upgraded with improved security, ventilation and internal bunding. MSDS leaflets have been translated and displayed outside the stores. Chemical traps have been installed and mixing of all herbicides takes place in a secure area. Drip trays are used wherever required and all used containers are triple rinsed, punctured and stored prior to collection for disposal. The spray regimes have been changed and the lead auditor has witnessed a considerable increase in the green vegetation beneath the palms accompanied with significant reductions in herbicide use. Ultra Low volume applicators has reduced the need for water and is more ergonomically friendly. Diesel tanks have been bunded and there is on going improvement to ensure drainage taps are turned off and hoses and nozzles are stored within the bunds. Workshop drains are fitted with waste traps and electrical fittings have been checked for safety. Fire extinguishers are on prominent display. On going work with regard to the environment is spear headed by the Sustainability team with full support by group and estate managers at all levels. Sabahmas has a particularly wide and diverse range of wildlife, primarily due to the location of 514 ha of secondary rainforest known as Rainbow Ridge which cuts deeply into the plantation from the East. This ridge gives a direct link into the Tabin Wildlife and forest reserve extending to about 120,000 ha. (Core of 5,000ha of virgin rainforest). In addition the estate has a further 80 ha of wildlife reserves and it is a credit to the enthusiasm of the management team at Sabahmas that the wildlife is protected and habitats enhanced. On all estates the riparian zones have been identified that must be left unplanted at the time of replanting and are now non-maintenance regimes and this is allowing native species to colonise the areas. There are many reports and recommendations with regard to HCV management and enhancement and all estates are implementing the recommendations as part of a management plan. Ground over 25 degrees is being identified and will not be replanted. Continuous improvement with regard to field techniques is generally limited to productivity and reduced use of herbicides and the side effect is reduced run off and erosion. EFB is recycled. Solid decanter waste is applied to the Estates and all mills will be carrying out land application of liquid POME by the end of 2008. A social impact assessment has been completed recently and the recommendations are being implemented. All estates have comprehensive social amenities including worker housing, clinics, crèche, schools, religious, sports fields and community halls. Shops are also available on site or very nearby. The company clearly contributes to local communities with cash grants and contributions; work in kind and use of services. There is an ongoing house for workers improvement plan, particularly with regard to water supplies.

Page 19 of 26

3.3 Non conformity register.

This section gives an over view of new or revised non-conformities raised during this assessment and of action taken to close out non-conformities raised during the previous assessments. Major non-conformities raised during a main assessment will prevent CU from making a positive certification decision for the concerned units/products. The NC number is comprised of 2 parts to include the year in which the NC is raised as well as a sequential number.

Date: Number settled (See 5.1): Number outstanding (See 5.2):

17 June 2008 10

th

NON CONFORMITY REPORT NC number: 2008/01 Client name: PPBOP Date raised: 17th June 2008 Major or Minor: Minor. Raised by: David Ogg Aspect of standard: 2.1.3. Ref: Legal requirements. A mechanism for ensuring that they are implemented. Evidence of non-conformity: All clinics: During the audit it was identified that clinics are not sending a monthly return to the local health office regarding communicable diseases. This has not been done in the past because there have not been any diseases recorded. Zero returns must be made. Auditors signature:

Date: 17th June 2008. Proposed corrective action / improvement action by company.

Timeline for conformance: Until 2009 audit. Review of corrective /improvement action: Auditors signature: Date:

NON CONFORMITY REPORT NC number: 2008/02 Client name: PPBOP Date raised: 17th June 2008 Major or Minor: Minor. Raised by: David Ogg Aspect of standard: 4.2.3 EFB application. Evidence of non-conformity: EFB is not removed from mills promptly resulting in flies affecting local housing. Auditors signature:

Date: 17th June 2008. Proposed corrective action / improvement action.

Page 20 of 26

Timeline for conformance: Until 2009 audit. Review of corrective /improvement action: Auditors signature: Date:

NON CONFORMITY REPORT

NC number: 2008/03 Client name: PPBOP Date raised: 17th June 2008 Major or Minor: Minor Raised by: David Ogg Aspect of standard: 5.3.2 Having identified wastes and pollutants, an operational plan should be developed and implemented, to avoid or reduce pollution. Evidence of non-conformity: Sapi Estate: Mitigation and improvement plan to reduce identified waste has been established (June 05, 2008), however no timeframe/or schedule to take the action is stated in the improvement plan. Auditors signature:

Date: 17th June 2008 Proposed corrective action / improvement action.

Timeline for conformance: Until 2009 audit. Review of corrective /improvement action: Auditors signature: Date:

NON CONFORMITY REPORT

NC number: 2008/04 Client name: PPBOP Date raised: 17th June 2008. Major or Minor: Minor Raised by: David Ogg. Aspect of standard: 5.3.2 Having identified wastes and pollutants, an operational plan should be developed and implemented, to avoid or reduce pollution. Evidence of non-conformity: Sapi Mill: Some leakage of water from pumps. The overflow pipe from the water tank ends 2 metres above the ground and so over flow water splashes around the drain that it is meant to enter; resulting in wet condition. (The over flow pipe is too short by 2m). It is also suspected that the bund around the diesel tank is not diesel proof.

Auditors signature: Date: 17th June 2008. Proposed corrective action / improvement action. Timeline for conformance: Until 2009 audit. Review of corrective /improvement action:

Page 21 of 26

Auditors signature: Date:

NON CONFORMITY REPORT

NC number: 2008/05 Client name: PPBOP th Date raised: 17 June 2008 Major or Minor: Minor Raised by: David Ogg Aspect of standard: 5.6.2 Plans to reduce pollution and emissions, including greenhouse gases, are developed, implemented and monitored. Evidence of non-conformity: Reka Mill & Reka Estate: The SOP states that an annual review of the environmental program and action plan will take place. However company has not reviewed the 2007 figures and no targets have been set for the year 2008. Auditors signature:

Date: 17th June 2008 Proposed corrective action / improvement action.

Timeline for conformance: Until 2009 audit. Review of corrective /improvement action: Auditors signature: Date:

NON CONFORMITY REPORT

NC number: 2008/06 Client name: PPBOP Date raised: 17th June 2008 Major or Minor: Minor. Raised by: David Ogg Aspect of standard: 6.1.3. Ref: Social impact assessment plans. A timetable with responsibilities for mitigation and monitoring is reviewed and updated as necessary. Evidence of non-conformity: SIA report covers Proposed Action Plan which describes recommendation, action, remarks, time line to complete and responsible staff (person in charge). However, there is no comprehensive action plan to address the recommendations and proposed action plan. Some of activities have been executed and documented. The housing development plan, for example (proposed plan made by SIA), is available but is not a comprehensive document. Items of the plan are scattered in throughout other documents. Auditors signature:

Date: 17th June 2008. Proposed corrective action / improvement action.

Timeline for conformance: Until 2009 audit. Review of corrective /improvement action: Auditors signature: Date:

Page 22 of 26

NON CONFORMITY REPORT

NC number: 2008/07 Client name: PPBOP th Date raised: 17 June 2008 Major or Minor: Minor Raised by: David Ogg Aspect of standard: 6.3.2 The system resolves disputes in an effective, timely and appropriate manner. Evidence of non-conformity: Sapi Estate and Mill: Two complaints were found to have been settled but no settlement dates recorded. The report only documented that the complaint has been addressed. Auditors signature:

Date: 17th June 2008. Proposed corrective action / improvement action. Timeline for conformance: Until 2009 audit. Review of corrective /improvement action:

Auditors signature: Date:

NON CONFORMITY REPORT NC number: 2008/08 Date raised: 17th June 2008 Major or Minor: Minor. Raised by: David Ogg Aspect of standard: 6.5.3. Growers and millers provide adequate housing, water supplies, medical, educational and welfare amenities in accordance with Workers' Minimum Standard of Housing and Amenities Act 1990 (Act 446) or above, where no such public facilities are available or accessible not applicable to smallholders). Evidence of non-conformity: Sapi Mill: Water: The Certificates of Analysis in 31 Dec 2007 and 7 Jan 2008 show some indicators that are not compliant with WHO Specification (Coliform, Turbidity). Workers also raised this issue during interviews. Sabahmas Estate/Mill: Water analyses June 2, 2008 showed non compliance with WHO specification for drinking water. Drinking water sampled has been treated with Polyaluminium chloride, Soda ash and chlorine. Workers do not drink the water. Instead they drink rain water. Only during dry season do they drink the treated water. One water tank in the housing complex is shared between two families. Auditors signature:

Date: 17th June 2008. Proposed corrective action / improvement action. Timeline for conformance: Until 2009 audit. Review of corrective /improvement action: Auditors signature: Date:

Page 23 of 26

NON CONFORMITY REPORT NC number: 2008/09 Date raised: 29th October 2008 Major or Minor: Minor. Raised by: David Ogg Aspect of standard: 5.1.2 Environmental improvement plan to mitigate the negative impacts and promote the positive ones, is developed, implemented and monitored. Evidence of non-conformity: All mills: record of 5 years environment plan, e.g Sapi Mill: - reduce water consumption to ratio of 1.5% per tonnes FFB. - Reduce Noise level by 5% - reduce smoke density by 5%. - reduce final discharge volume by 10% - reduce schedule waste volume by 10% However company still no make action plan to achieve defined objective above. :

Date: 29th October 2008. Proposed corrective action / improvement action. Timeline for conformance: Until 2009 audit. Review of corrective /improvement action: Auditors signature: Date: NON CONFORMITY REPORT NC number: 2008/10 Date raised: 29th October 2008 Major or Minor: Minor. Raised by: David Ogg Aspect of standard: 6.11.1 Demonstrable contributions to local development that are based on the results of consultation with local communities. Evidence of non-conformity: Procedures relating to contributions do not ensure full consultation with local communities.

Date: 17th June 2008. Proposed corrective action / improvement action. Timeline for conformance: Until 2009 audit. Review of corrective /improvement action: Auditors signature: Date:

Page 24 of 26

3.4 Issues raised during stakeholder consultation and company responses. (The subjects raised and responses by the company will be reviewed at the first annual surveillance assessment). Subject raised Assessment team Company response and proposed action to findings be taken. Sapi: Being suppliers for years, The audit team asked if Cannot help with fertiliser but will investigate other smallholder feels that PPB does not it is possible to get issues. contribute in terms of assistance such fertilizer subsidy for as improving access road to farmers small holders. The main road has been graded. Management will plantation, no assistance on fertilizer, or try to find out who has raised the issues. other welfare improvement to suppliers, help dig (drainage channel) for smallholders plantation. FFB price always determined by PPB. Acceptable answer. This is a willing buyer / willing seller. This is an There is no consultation/discussion with open market. suppliers. Meeting organized by PPB always related with technical and quality. FFB price has been never put on the agenda of the meeting FFB price always lower compared to Acceptable answer. This is an open market. other mill. Why Sapi has always been big different compared to Semenanjung price? Grading for smallholder to tight and Acceptable answer. The MPPOB will fine the mills if they process under makes it difficult to comply. ripe or poor crop. Grading is essential Not aware about the complaint Acceptable answer. Every time there is a meeting with stakeholders, procedure they will be reminded that the complaint procedure is in place. A notice at the mills will also be erected. Suppliers of Sapi mill are also given a form to raise any issues. Payment of FFB is proposed to be date Acceptable answer. Payment is by the end of the second week of the of 7 every month which in line with the month following. worker payment days every month. Lack of clean water availability in The company disputes The company has not promised clean water. villages. PPB promises to contribute to this claim and further clean water in villages but no action. investigation could not substantiate this claim. Request PPB to contribute to school in Acceptable answer. The Government is supplying the electricity. Free terms of electricity, training courses, housing for teachers. Donations are given and minor school improvement, electric recorded. supply to ensure the learning process is not interrupted. Request PPB to support school Acceptable answer. As above. infrastructures, study tools/equipments, scholarship funds for the poor, gift for outstanding students Flies are many in schools and housings The EFB needs to be near by the mills. removed more quickly. This has been raised as a non-conformity. Community/FFB suppliers has to pay Acceptable answer. Yes. A nominal sum. for medical treatment at the clinic Clinic is not willing to issue "letter of Acceptable answer. The clinic cannot produce a sickness note. It must sickness" to teachers who are sick and come from a recognised GP. go to clinic. Water supplies. Protection of water Acceptable answer. The treatment plant is fenced. Neither fertiliser nor reservoirs. herbicides are used within the locality. Nursery housekeeping. Food Acceptable answer. Management has now provided kettles for food preparation and storage. Safety. preparation. The safety is being looked into. Maintenance of worker houses. Acceptable answer. On an annual basis. Not everything can be updated at one time. Rolling 30% each year. If worker goes to hospital in Lahad Datu Acceptable answer. Not at all! The company takes up the cost. The they have to pay. worker is reimbursed. If they do not go without a referral letter, them they will have to pay.

Page 25 of 26

3.5 Formal sign off of assessment findings.

3.5.1 Acknowledgement of internal responsibility by the client. I the undersigned, being the legal representative of the inspected company, agree with the contents of this report and accept the liability in execution of the instructions given in the report.

Comments:

Name: Position: Signature:

Simon Siburat RSPO Co-ordinator

Date:

29th October 2008

3.5.2 Statement by the certifier on behalf of Control Union Certifications:

I, the undersigned, declare that the information and conclusions included in this report have been prepared in good faith and that the certification decision has been based upon this information. Name: Gerben Stegeman. Position: Certifier Signature:

Date:

September 18, 2008

Page 26 of 26

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