roundtable on sustainable palm oil...roundtable on sustainable palm oil 2nd annual surveillance...

Roundtable on Sustainable Palm Oil

2nd Annual Surveillance Audit Report Report no.: ASA2_30001

Surveillance assessment against the

RSPO Principles & Criteria Malaysia National Intepretation year 2010

Sg. Segama Group Estate

Hap Seng Plantations(Rivers Estate) Sdn. Bhd (Subsidiary of Hap Seng Plantations Holdings Bhd)

Lahad Datu, Sabah, Malaysia

Date of assessment: 17-20 March 2014 Report prepared by:

Fadli (RSPO Lead Auditor)

Certification decision by:

M. Bascharul Asana (Director of TUV Rheinland Indonesia)

Certification Body: PT TUV Rheinland Indonesia

Menara Karya, 10th Floor Jl. H.R. Rasuna Said Block X-5 Kav.1-2

Jakarta 12950,Indonesia Tel: +62 21 57944579 Fax: +62 21 57944575

www.tuv.com/id

TABLE OF CONTENTS

1.0 SCOPE OF ANNUAL SURVEILLANCE AUDIT ............ ........................................ 3

1.1 National Interpretation Used 3 1.2 Type of Assessment 3 1.3 Certification Details 3 1.4 Location and Maps 3 1.5 Organisational Information / Contact Person 4 1.6 Description of Supply Base 5 1.7 Actual production volumes, tonnages and projected outputs. 6 1.8 Dates of Plantings and Replanting Cycles 6 1.9 Area of Plantation (Total, Planted and Mature) 6 1.10 Progress Against Time Bound Plan 7 1.11 Compliance to Rules for Partial Certification 7 1.12 Progress of associated smallholders or outgrowers towards RSPO compliance 8 1.13 Approximate Tonnages Certified 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 & Agenda 11

3.0 ASSESSMENT FINDINGS ................................................................................... 13

3.1 Summary of Findings 13 3.2 Status of Previously Identified Non-conformities 28 3.3 Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions 32 3.4 Description of Supply Chain Management System 37 3.5 Identified Non-conformances from Previous Audit against RSPO SCCS Requirements, Corrective Actions Taken and Auditors Conclusions 41 3.6 Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions 41 3.7 Noteworthy Positive Components 43 3.8 Issues Raised by Stakeholders and Findings Pertaining to Issues 43

4.0 CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INT ERNAL

RESPONSIBILITY .................................... ........................................................... 44

4.1 Date of Next Surveillance Visit 44 4.2 Acknowledgements of Internal Responsibility and Formal Sign-Off by Client 44

APPENDICES ............................................................................................................ 45

Appendix 1: List of Abbreviations 45 Appendix 2: List of Stakeholders Interviewed and Contacted 45 Appendix 3: List of Observations / Opportunities for Improvement 47

RSPO 2nd Annual Surveillance Audit Report

- Sg. Segama Group Estate, Hap Seng Plantations Hol ding Bhd . Lahad Datu Malaysia

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1.0 SCOPE OF ANNUAL SURVEILLANCE AUDIT

1.1 National Interpretation Used

The operations of the palm oil mill(s) and its supply base of FFB were assessed against the Malaysia National Intepretation year 2010 of the RSPO Principles & Criteria.

1.2 Type of Assessment

The 2nd annual surveillance certification assessment was carried out on one mill and 3 company owned estates under Sg. Segama Group Estate (SSGOE), Hap Seng Plantations (Rivers Estate) Sdn. Bhd owned by Hap Seng Plantation Holdings Berhad. The date of certification of this unit was May 24, 2012.

1.3 Certification Details

The details of RSPO certification of Bukit Mas Palm Oil Mill are as per the table below Table 1: RSPO Certification details of Bukit Mas Pa lm Oil Mill

1.4 Location and Maps

Table 2: GPS locations for all estates and mills in cluded in annual surveillance assessment

RSPO Membership no.: 1-0098-11-000-00

RSPO Certificate no.: 824 502 14016

Date of first RSPO certificate & validity: May 24, 2012 to May 23, 2017

Date of certification audit: June 27, 2011 to July 02, 2011

Date of previous surveillance audit: 1 – 5 April 2013

Date of revised RSPO certificate & va-lidity (if applicable):

-

CPO tonnages claimed: 41,090 tonnes

PK tonnages claimed: 9,664 tonnes

Name of mill / es-tate Location

GPS locations Latitude Longitude

Bukit Mas (BM) Mill Jalan Jeroco, Lahad Datu Sabah

5o20’ 14.28”N 118o28’25.104”E

Bukit Mas (BM) Es-tate

Jalan Jeroco, Lahad Datu Sabah

5°19’01.928” N 118°27’46.294” E

Sungai Segama I (SS1) Estate


5°19’02.421” N 118°27’47.331” E

Sungai Segama II (SS2) Estate


5°19’02.421” N 118°27’47.331” E



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Figure 1: Location of Sg. Segama Group of Estates w ithin Hap Seng Plantations Sdn. Bhd. River Estates and Jeroco Plantations in Sabah, Malaysia

Figure 2: Estate map of Sg. Segama Group of Estates (SSGOE) relative to other groups of estates un-der Hap Seng Plantations Sdn. Bhd.

1.5 Organisational Information / Contact Person

Sungai Segama Groups of Estates is under Hap Seng Plantation (River estate) Sdn. Bhd. Sungai Segama Group of estates was established in 1991 and consist of three estates which are Sungai Segama I estate, Sungai Segama II Estate and Bukit Mas Estate. Bukit Mas Estate was previously made up of Bukit Mas I and Bukit Mas II Estate, and now these two estates have been amalgamated into one estate named Bukit Mas Estate. All estates location is in Lahad Datu Sabah, Malaysia. The total area is 9,906.4 ha of which 8,761 ha is planted with oil palm and the rest of the area is used for housing and other miscellaneous uses. The first plantation in Sungai Segama I Estate started in 1991, followed by Sungai Segama II Estate and Bukit Mas I Estate and finally Bukit Mas II Estate. Planting was completed in 2008. Sungai Segama Groups of Estate has 3 land titles i.e. 1. Certificate of land ownership title no. 095317614 approved by the Director of Lands and Surveys, Land De-

partment of Kota Kinabalu, valid since January 01, 1991 until December 21, 2089, for total area of 5044 ha for Bukit Mas I estate

N

TomanggongGroup of Estates

Sungai SegamaGroup of Estates

JerocoGroup of Estates

Lahad Datu

Gek Poh Plantation Centre AndRiver Golf And Country Club

Jalan Jeroco

Kg. Tidung• •Kg. Tabin

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2. Certificate of land ownership title no. 095317605 approved by Director of Lands and Surveys, Land Department of Kota Kinabalu valid since January 01, 1991 until December 21, 2089, for total area of 3843 ha for Sungai Segama I and Sungai Segama II estates.

3. Certificate of land ownership title no. 095316340 approved by Director of Lands and Surveys, Land Department of Kota Kinabalu valid since June 16, 1888 until December 21, 2887, for total area of 1434 ha for Bukit Mas II estate (now incorporated together with Bukit Mas I estate)

Sungai Segama Group of Estate also has their MPOB license No. 502429-602000 for Segama estates, CL 095317605,7614,6340 Kinabatangan, Sabah (total area 10,321.00 ha) valid from 01-08-2006 to 31-07-2011. The license has almost expired at time of audit and was in progress for renewal. Bukit Mas Palm Oil Mill (BPOM) was commissioned in 1998 to process the Fresh Fruit Bunches (FFB) from Sungai Segama Group of Estate. The location of Bukit Mas Palm Oil Mill is inside of Bukit Mas estate. The mill has an operating license from MPOB i.e. MPOB 500254304000 valid from 01 April 2011 to 31 March 2012.

Contacts details of the company are as follows:

1.6 Description of Supply Base

Bukit Mas Palm Oil Mill is one of the palm oil mills that is owned by Hap Seng Plantation Holdings Berhad lo-cated in Lahad Datu, Sabah Malaysia. Bukit Mas Palm Oil Mill was established in 1998 with a production ca-pacity of 288,000 mt/year or 45 tonnes/hour according to the mill’s license from the Malaysian Palm Oil Board (MPOB) No. 500254304000. Bukit Mas Palm Oil Mill receives supplies from its 3 company-owned estates, as described below. The scope of this assessment only covers the 3 company-owned estates under Hap Seng Plantations (River Estates) Sdn. Bhd., Sungai Segama Group of Estates, which are Bukit Mas Estate, Sungai Segama 1 and Sungai Segama II estate. Table 2: FFB Supply Information for Bukit Mas Palm Oil Mill for Year 2013 and January to February 2014

FFB Contributors FFB processed January -

December 2013 FFB processed Jan u-

ary-February 2014

Tonnes % Tonnes %

Company owned estates:

Bukit Mas Estate 110,075.44 51.58 19,072.06 50.64

Sungai Segama I Estate 52,324.66 24.52 9,049.14 24.03

Sungai Segama II Estate 51,008.50 23.90 8,724.14 23.17

Sub-total 213,408.60 100.00 36,845.34 97.84

FFB from other estates un-der Hap Seng Plantations

0.00 0.00 815.45 2.16

Outgrowers 0.00 0.00 0.00 0.00

TOTAL 213,408.60 100.00 37,660.79 100.00

Note : At year 2013, FFB from company owned estates (Bukit Mas estate, Sg Segama I estate and Sg Segama II) processing in Jeroco POM amount of 9,684.77 tonnes

Company Name: Hap Seng Plantation (River Estates) Sdn. Bhd.,

Subsidiary of Hap Seng Plantation Holdings Berhad

Address: Jalan Jeroco Km 65. Lahad Datu, Sabah

Office Address: MDLD 2052B, Executive 1, Taman Executive, Mile 1. Jalan Tengah Nipah, Locked Bag No. 5, 91109Lahad Datu, Sabah.

Malaysia

Contact Person: Ling Chia Yi

Telephone: +6089-278128 / 138

Email: [email protected]



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1.7 Actual production volumes, tonnages and project ed outputs.

Table 4: Certified tonnages claimed, certified tonn ages purchased or sold, total and projected CPO and PK production from Bukit Mas palm oil Mill

1.8 Dates of Plantings and Replanting Cycles

The company follows a replanting cycle of 25 years. Information on the dates of plantings are still same condi-tion as previous audit condition as per the table below. Table 5: Age and year of plantings of company estat e supplying to Bukit Mas Palm Oil Mill

Year of Plantings Oil palm planted area at each estate(ha)

Bukit Mas estate Sg. Segama I Sg. Segama II

2005 - 2008 - - 6

2000 - 2004 6 - 264.2

1994 - 1999 4231 44 1133.8

1991 - 1993 21 2351.5 703.5

TOTAL 4258 2395.5 2107.50

No changes on company’s program for replanting activities, according to SG. Segama Group of estate Re-planting Program document, company will start for replanting in year 2016 as determined on the table below.

Table 6: Planned and actual oil palm replanting act ivities for Hap Seng Plantation

Year Total planned re-planting area (ha)

Total planned replanting area for each estate (ha) Actual total area replant-

ed (ha) Bukit Mas Sungai Segama I Sungai Segama II

2016 385.00 - 385.00 - -

2017 948.00 - 948.00 - -

2018 948.00 - 948.00 - -

2019 796.00 21 72 703 -

2020 884.50 - - 884.50 -

1.9 Area of Plantation (Total, Planted and Mature)

Amount (MT) CPO PK

Certified tonnages claimed 41,090 9,664

Certified tonnages sold - -

Certified tonnages purchased - -

Actual Production year 2013 45,932.13* 11,330.67*

Projected output for next 12 months in year 2014 44,582.00 10,783.00

Actual OER and KER for year 2013 OER: 20.59% KER: 5.08%

Projected OER and KER for year 2014 OER: 21.50% KER: 5.20%



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Table 7: Oil Palm Planted Area Summary, FFB Product ion and Average yield/ha for Hap Seng Planta-tion (River Estate), Sungai Segama Group of Estate.

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

Bukit Mas 4,732.9 4,258.0 4,258.0 - 115,816.53 27.20 Sg. Segama I 2,578 2,395.5 2,395.5 - 54,387.67 22.70 Sg. Segama II 2,595.5 2,107.5 2,107.5 - 52,889.17 25.10

TOTAL 9,906.4 8,761.0 8761.0 - 223,093.37 25.46

Source: Sg. Segama Group of Estate Area Statement for Year 2013

Table 8: Land use data for Sungai Segama (River) Es tates Group

Estate Name Total area (ha)

Oil Palm Planted

Area (ha)

HCV/ Potential

HCV areas* (ha)

Land used for other purposes (ha)

Building, Housing,

Road Nursery Cleared

Area Other Land

Bukit Mas 4732.90 4258.00 5.1 351.70 - 118.10

Sg. Segama I 2,578 2395.5 - 161.8 2.4 - 18.30

Sg. Segama II 2,595.5 2107.5 13.7 169.60 - 304.70

TOTAL 9,906.04 8761 18.8 683.1 2.4 441.10 Source: Sungai Segama Group Budget for the year 2013

1.10 Progress Against Time Bound Plan

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 9: Time Bound Plan of the Other Management Un its

Name of Holding Location Time bound plan for certification

Tomanggong Palm Oil Mill and Estate

Lahad Datu Certification audit completed, howev-er certification pending due to new planted area which was not devel-oped in accordance with the RSPO

New Planting Procedure Jerocco Palm Oil Mill and Estate Lahad Datu Certified on 27th September 2013

1.11 Compliance to Rules for Partial Certification

Compliance of the uncertified management units of Hap Seng Plantation Holding Bhd. against the rules for par-tial certification according to RSPO Certification System clause 4.2.4 was assessed by interview and onsite veri-fication during 1st surveillance audit. A summary of findings is as stated below.



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Partial Certification Requirements Audit Findings

(a) The parent organization or one of its majority owned and / or managed subsidiaries is a mem-ber of RSPO.

Yes, parent organization is RSPO member, with membership number

(b-d) A challenging time-bound plan for certifying all its relevant entities is submitted to the Certifi-cation Body (CB) during the first certification au-dit. The time-bound plan should contain a list of subsidiaries, estates and mills.

Any revision to the time-bound plan or to the cir-cumstances of the company shall cause the plan to be reviewed. for whether it is still appropriate, such that changes to the time-bound plan are permitted only where the organisation can demonstrate that they are justified

The company has a timebound plan, current status of each management unit as stated on the table 9 above.

(e) No replacement of primary forest or any area identified as containing High Conservation Val-ues (HCVs) or required to maintain or enhance HCVs in accordance with RSPO criterion 7.3. Any new plantings since January 1st 2010 must comply with the RSPO New Plantings Procedure

As found during the previous surveillance audit, there is new development area in Tomanggung group of estate around 400 ha, which is still within the company’s land title area. Previously the area is flooding area that did not develop as plantation ar-ea, however company trying to make it now as plan-tation area now. The EIA document is in progress for final report made by Kiwi Heng Woods and Envi-ronmental consultant. The EIA document has been made for replanting program in Tomanggung estate for total 14,524.20 ha. The 400 ha that was logged area is within that total area above. The HCV and SEIA assessment of the area is still underway.

As this was raised as non conformity no. NCR 2013-01 of 06 during the previous surveillance, the company took action to close this nonconformity by submitting a land use change analysis to the RSPO and has been advised by the RSPO to adopt a compensation scheme. Further details are ex-plained in Section 3.2 of this report.

(f) Land conflicts, if any, are being resolved through a mutually agreed process, e.g. RSPO Grievance procedure or Dispute Settlement Fa-cility, in accordance with RSPO criteria 6.4, 7.5 and 7.6.

There is no land conflict in all estates under Hap Seng Plantation group.

(g) Labour disputes, if any, are being resolved through a mutually agreed process, in accord-ance with RSPO criterion 6.3.

There is no labour dispute in all estates under Hap Seng Plantation group.

(h) Legal non-compliance, if any, are being re-solved in accordance with the legal require-ments, with reference to RSPO criteria 2.1 and 2.2.

There are some non-compliances to applicable le-gal requirement as seen on the relevant non con-formities on section 3.3 below.

1.12 Progress of associated smallholders or outgrow ers towards RSPO compliance

There is no FFB from smallholder scheme supply to Bukit Mas Palm Oil Mill (BPOM). Outgrowers that supply to Bukit Mas Palm Oil Mill are independent companies which have a free trade scheme with BPOM.



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1.13 Approximate Tonnages Certified

The approximate tonnages certified shall be the same as per the original certificate, which is as follows Crude Palm Oil (CPO) : 41,090 tonnes Palm Kernel (PK) : 9,664 tonnes

CPO and PK actual production in 2013 was as follows: Crude Palm Oil (CPO) : 45,932.13* mt Palm Kernel (PK) : 11,330.67* mt Average actual Oil extraction rate (OER) for year 2013 is 20.59 % and average actual kernel extraction rate

(KER) is 5.08 %. Note : *) Include actual production for processing FFB’s Sg Segama group of estate in Jeroco POM (actual production in Jeroco POM of CPO amount of 1,981.17 tonnes and PK amount of 479.44 tonnes)



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2.0 ASSESSMENT PROCESS 2.1 Certification Body

PT TUV Rheinland Indonesia 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 490 locations in 62 countries on all five continents. PT TUV Rheinland Indonesia 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 Validations and Verifications. PT TUV Rheinland Indonesia office is located Menara Karya Lt. 10 Jl Rasuna Said Kuningan Jakarta Indonesia.

2.2 Qualifications of Lead Assessor and Assessment Team The assessment team members of this surveillance audit that were part of the same assessment team for the certification audit are as follows: 1) Fadli 2) Carol Ng 3) Yusof Khairan Nizar New assessment team members that were not part of the previous assessment team are as per the table below:

Name Position Qualifications / Experience

Hendra Fachrurozy Auditor

Education: Bachelors Degree in Forestry - Bogor Agriculture Institute. Indonesia, (1995 to 2000). Trainings attended : ISO 9001 : 2008 lead auditor course - Neville Clark (2011), ISO 14001 : 2004 lead auditor course - TUV Rheinland Indonesia (2011), SMK3 auditor course – Department of manpower and transmigration of the Republic of Indonesia (2009), Sustainable Forest Management (SFM) – Forestry Education and Training Centre (2010), Timber Legality of Verification - Forestry Education and Training Centre (2010), RSPO Lead Auditor Course – Pro Forest & Wild Asia (2011). Working experience: Experienced as Junior Consultant at PT Surveyor Indonesia (2002 s/d 2010), assesor for SFM –mandatory (PHPL & PHTL), assessor for industry performance assessment (IPHHK)-mandatory, auditor for Timber Legality of Verfication, auditor for SMK3, auditor for QMS and EMS at TUV Rheinland Indonesia and auditor for RSPO at TUV Rheinland Indonesia.

Dr. Savinder

Auditor

Education: Bachelor of Engineering (Hons) (Civil Engineering), Universiti Sains Malaysia (1999); Master of Science in Highway and Transportation Engineering, Universiti Sains Malaysia (2000) and Ph.D. in Environment & Resource Studies, Mahidol University, Thailand (2008). Trainings attended: November 2010: Auditor’s Training Course on the Malaysian Criteria and Indicators 2002 (Malaysian Timber Certification Council); May 2012: Auditor’s Training Course on the Malaysian Criteria and Indicators (Natural Forest) (Malaysian Timber Certification Council); September 2012: Lead Auditor’s Training Course for Roundtable on Sustainable Palm Oil (RSPO) (Proforest and WildAsia); November 2012: ISO 14001 Lead Auditor’s Training Course (by SGS (M) Sdn. Bhd.)

Working experience: Experience in project administration and community development with the Indigenous Knowledge Network Project (2004); Co-ordinated social development/sustainable livelihood projects as Consultant Environmental Sociologist for Orang Asli in



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Pahang under the United Nations Development Programme (UNDP)/Global Environment Facility (GEF) (2004-2007); Contract Social auditor/technical expert for sustainable forest management (Malaysia Criteria and Indicators (MC&I )(Natural Forest) & Forest Stewardship Council (FSC) and Roundtable for Sustainable Palm Oil (RSPO) for SGS (M) Sdn. Bhd. (2006-present). Consultant Environmental Sociologist for due diligence, social impact assessments for sustainable forest and oil palm management and has worked with various rural communities in Malaysia and Indonesia on High Conservation Value Forest assessments (HCVF) with Malaysian Environmental Consultants (MEC) Sdn.Bhd (2006-2011). Social Screening Consultant for the Sarawak Railway Screening Project-Social Screening Social commissioned by the Bintulu Development Authority, Sarawak and assisted in APEC Transboundary Marine Spatial Planning and Management Project (with Sea Resources Management (SRM) Sdn. Bhd. from 2010-2011. Conducted Participatory Needs Analysis for Local Community Oil Palm Mill in Telupid, Sabah with Alter Palm Oil Trade, Japan (2010-2011). Trainer for social impact assessment for PACOS Trust, Sabah. Registered HCV assessor with RSPO (2010). Social and HCV Auditor for TUV Rheinland Indonesia RSPO Principles & Criteria (2014-)

2.3 Assessment Methodology & Agenda The surveillance assessment was conducted betwen March 18 to 20, 2014 as per the assessment program below. The assessment was carried out in accordance with PT TUV Rheinland Indonesia’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 compromising the integrity of the assessment in anyway. All 3 estates and 1 mill were visited and the assessment team carried out field and document assessments 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 action for all identified non conformities raised to the certification body 30 days after the closing meeting. Verification of closure of major non-conformances was conducted 2 months 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.



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2nd Surveillance Audit Agenda:

Date Location/ Main sites Main activities

18.03.2014 Bukit Mas Palm Oil Mill

• Verification of previous audit findings • Energy efficiency • Water consumption • Workers Issues • Waste Management • OSH management implementation • Mill compound • Fat pit • Workshop • Wastewater treatment plant • Boiler room and engine room • Scheduled waste store and used lubricant store • Diesel tank • Warehouse for lubricants, chemicals and other materials • Document check at mill office

18.03.2014 Bukit Mas Estate

• Plantation maintenance • HVC Bukit Gibos • Chemical store and • Harvesting activities • Plantation maintenance Estates site visit:

- Interviews with manurers/Ganoderma census checkers, harvesters and sprayers

- Land irrigation area, block 95B6 - Bukit Mas waste landfill

• Temporary workers housing under construction

19.03.2014 Sungai Segama 1 Estate & Sungai Segama II estate

• Plantation development • FFB production • Partial certification requirement • Harvesting action • Spraying activities • Workers Housing Area • New HCV area Sg Segama River • Estates site visit:

- Empty chemicals containers store (SSI estate) - Interviews with harvester (SSI estate) and sprayers (SSII estate) - Fertilizer stores at SSI and SSII estate - EFB application area, block 94A3, Division 4 - Chemical store (shared for all estates)

• Document check at main estate office • Protection of Watercourses at Litang River Sg Segama II estate.

20.03.2014 Auditor preparation Closing meeting



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3.0 ASSESSMENT FINDINGS 3.1 Summary of Findings

The following is a summary of findings during this surveillance audit for the criteria listed in the RSPO Principles & Criteria Malayisa National Interpretation year 2010.

Principle 1: Commitment to transparency

Criteria assessed: CR1.1, CR1.2 Criteria not assessed: - Findings: CR1.1 There is no changes on company’s procedure for request of information management i.e. HSPSB P2 1120 issued on November 29, 2010. The procedure are well implemented and clearly understood by the person in charge relevant stakeholders such as procedure was made for all relevant stakeholders that who will receive request for information from workers, government agencies such as MPOB, and so on. In the procedure, it was explained that all incoming information through phone calls, walk in, mail or email will be received by company’s staff, and it will be reported to estate assistants before it is reported to the higher level management who will decide whether the information will be issued or not. During this surveillance audit it was found no information request from stakeholders. There is only a circular regarding MPOB audit which is planned to be conducted on 11/2/2014 and no requested information regarding to this audit. This matter was recorded in visit logbook 2014. CR1.2 As stated in the company’s procedure HSPSB P2 1120 there are some documents made available to the public based on stakeholder requests, and the procedure includes clear information on what kind documents are to be made publicly available. The company still consistently makes annual performance reports, e.g. sighted report for year 2012 for all subsidiaries under Hap Seng Plantations Holdings Berhad. Information stated in the annual report include financial highlights and financial statements, chairman statements about company’s performance review, production and yield performance reports and outlook, including current years prospects, best practices of corporate governance, Corporate Social Responsibility (CSR) plans which cover activities on environment aspects, programmes for local communities, and OSH plan. There is also attached information in the annual report about company’s properties which includes information about all land titles and other information related to land tenure. At the 2nd surveillance audit the Annual report for year 2013 is under development by Hap Seng head office. At Sungai Segama 1 Estate found Safety and Health Programme for Year 2014 containing planning for Safety and Health Committee meetings (planned for March, June, September, and December), Workers Medical Check up for Sprayers/Manurers (June and December), Fire Extinguisher and First aid Box Inspection (Monthly) and Estate Training Programme such as PPE Training (Apr), First aid training (Feb, Aug). Compliance status: Full Compliance

Principle 2: Compliance with applicable laws and regulations

Criteria assessed: CR2.1, CR2.2 Criteria not assessed: CR2.3 Findings: CR2.1 The company has a “List of Law, Regulations, Permits and Licences to manage an Estate and Oil Mill and expiry date) which lists, among others, compliance to legal requirements such as land titles, quit rent payment, domestic and consumer permit for keeping fertilizer and diesel, license for estate vehicle



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renewal etc. However, the legal register has not been updated to include: i)) Minimum Wages Order 2012 and its requirement; ii) International laws which have been ratified by the Malaysian Government, e.g. United Nations Declaration on the Right of Indigenous Peoples (2007) & ILO Convention 98 (1949)(Articles 1-4), Right to Organise and Collective Bargaining. This was raised as a minor non-conformity. At the the palm oil mill, the applicable legislations and licenses for Bukit Mas Palm Oil Mill (BPOM) was last updated on 13/03/13 in the mill’s Register of Legal and Other Applicable Requirement Relevant to Palm Oil Estates accepted by Mill Manager on 09/01/14. It was found that section 20 (Requirement and Approval of Plan), 22 (Prohibition of Pollution of Atmosphere), 23 (Restriction of Noise Pollution), 24 (Restriction of Pollution of Soil), 25 (Restriction of Pollution of Inland Waters), 29A (Open Burning) were not evaluated as being in compliance as seen from evidence in the related format. With reference to Factories and Machinery (Noise Exposure) Regulations 1989, Regulation 27: Those exposed to noise above 85 dBA must attend training. This was not evaluated in term of its compliance status. In Sungai Segama II Estate, found Section 49A of EQ (revised 2012) showed a non- compliance, but no action plan was established accordingly. This was raised as a non-compliance. In Sungai Segama II Estate, similar document is available called Applicable Legislation and Licenses for Sungai Segama Group of Estates and Bukit Mas Palm Oil Mill (Sg. Segama II Estate). Mentioned that Plantation Advisory Department is responsible for ensuring compliance by all estates and mills and update estate and mills on any reenactment or revocation of the said legal aspects. The document was last updated on 13/03/13. At Palm Oil Mill, sighted available a Flowchart of Updating of Existing Laws. Found Environmental Quality Act 1974 Revised 2012 particularly Section 49A was not updated in the register. Also Occupational Safety (Classification, Labelling and Safety Data Sheet of Hazardous Chemicals) 2013 was also not indentified. There was a memo from the Group HR Director dated 14/01/14 informing the enforcement of Personal Data Protection Act 2010 effective 15/11/13 by Minister of Communiction and Multimedia. This was also not included in the legal register. In Sungai Segama II Estate, the regulations on Occupational Safety (Classification, Labelling and Safety Data Sheet of Hazardous Chemicals) 2013 was also not indentified and updated in their list of applicable legal requirements. Bukit Mas mill has a DOE compliance schedule license no. 001190 dated 1 July 2013 - 30 June 2014. There is evidence of compliance to requirements of the license, e.g.: 1) Stack sampling is done twice a year by Uniquejaya Environmental Services in accordance with the

mill’s DOE license. Most recent stack sampling reports were sighted dated April 2013, August 2012 and February 2012. Stack sampling results are well below the allowable emission limit of below 0.4g/Nm3 at 12% CO2 and reports are submitted to the DOE as required.

2) Smoke density readings are recorded and submitted monthly to the DOE 3) Log book for influent and effluent rates, and effluent/land irrigation visiting report book for

recording condition of the effluent ponds and land application areas and corrective actions taken are maintained as required in the DOE license.

However, the mill license states that the mill is required to appoint a competent operator to manage and maintain the effluent treatment system, air pollution control equipment and for management of scheduled wastes in accordance with the year 2012 amendment to the Environmental Quality Act 1974 Section 49A, and report the names and qualifications of these appointed personnel to the DOE within one month of issuance of the license. However, there is no evidence that this was done by the mill. Among the licenses and permits as proof of compliance to legal requirements are: MPOB License No. 502429602000 for selling and removal of FFB from 01/08/2013 to 31/07/2014.; trading license, permit for diesel keeping and permit to hire foreign workers (04.01.2014-03.01.2015). However, the following non-conformities were observed at Sungai Segama II estate which were collectively raised as a Major non-conformity: i) There are inconsistencies in the implementation of the Minimum Wages Order 2012. Checks on pay slips for foreign workers for January 2014 and interviews with migrant workers revealed several cases of workers working full days but receiving less than RM800. ii) Migrant woman worker (sprayer) alleged that she was asked by company officials to stop work before completing eight months of pregnancy, thereby causing her to lose her maternity benefits



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(60days) (Sabah Labour Ordinance Cap 1967, Section 83 (3). iii) Company maintains that foreign women workers are not entitled to paid maternity leave, yet their signed contracts clearly display this entitlement. In addition, Workmen compensation is still pending for a deceased migrant worker at Bukit Mas. This was raised as a negative observation.

CR2.2

There is no changes on company’s right to use land and land ownership of the company can be demonstrated through details of information regarding land title areas, e.g. no. CL 095317614 for area of 5,044 ha in Bukit Mas estate and Sg Segama II estate (period of January 1, 1991 to December 21, 2089) on behalf of the East Asiatic Co. (M) Bhd, no.CL 095317605 amount of 3,843 ha in Sg Segama I & II (period of January 1, 1991 to December 21, 2089) on behalf of The River Estate Sdn. Bhd. and no. CL 095316340 amount of 1,434 ha (414 ha are under Lintang estate - Tomanggong Group of Estates (GOE) for Bukit Mas estate area of 1,020 ha) in Bukit Mas estate (period of June 16, 1988 to December 21, 2887) on behalf of The River Estate Sdn. Bhd. The company has complied with the term of the land title where evidence of monthly payment for the period of January to December 2013 and January 2014 available.

The company is implementing a program for monitoring and maintenance of boundary stone and markers every quarter period. Any missing boundary stones have been replaced by the new boundary stones and marked as needed, such as for boundary stone in Sg Segama II estate (block 94B7 & block 94B8) which was established on December 20, 2013. During verification in field (block 96D1 – Bukit Mas D estate), it was confirmed that boundaries between company with communities areas and riparian/buffer of river have been established in the form of flags (boundary stone from wood material) and ditches. All these activities are the responsibility of the assistant field conductor together with a certified surveyor. The plantation managers and the senior manager will verify implementation of all programs annually. Compliance status: Non-compliance. NCR No. 2014-01 of 08 1) Stated in Bukit Mas mill’s DOE compliance schedule license no. 001190 dated 1 July 2013 - 30

June 2014, the mill is required to appoint a competent operator to manage and maintain the effluent treatment system, air pollution control equipment and for management of scheduled wastes in accordance with the year 2012 amendment to the Environmental Quality Act 1974 Section 49A, and report the names and qualifications of these appointed personnel to the DOE within one month of issuance of the license. However, there is no evidence that this was done by the mill.

2) The mill has not complied with Factories and Machinery (Noise Exposure) Regulations 1989, Regulation 27 that requires those exposed to noise above 85 dBA to attend training on noise exposure.

3) In Sungai Segama II Estate, evaluation of legal compliance done showed non-compliance status under Section 49A of Environmental Quality Act (revised 2012) and no action plan yet to have competent person for scheduled waste management.

4) There are inconsistencies in the implementation of the Minimum Wages Order 2012. Checks on pay slips for foreign workers for January 2014 and interviews with migrant workers revealed several cases of workers working full days but receiving less than RM800.

5) Migrant woman worker (sprayer) alleged that she was asked by company officials to stop work before completing eight months of pregnancy, thereby causing her to lose her maternity benefits (60days) (Sabah Labour Ordinance Cap 1967, Section 83 (3).

6) The company maintains that foreign women workers are not entitled to paid maternity leave, yet their signed contracts clearly display this entitlement.

NCR No. 2014-02 of 08 1) Under the mill’s list of applicable legislations and licenses for Bukit Mas Palm Oil Mill, updated

13/03/13, evaluation of compliance was not done for certain sections, i.e. Section 20 (Requirement and Approval of Plan), 22 (Prohibition of Pollution of Atmosphere), 23 (Restriction of Noise Pollution), 24 (Restriction of Pollution of Soil), 25 (Restriction of Pollution of Inland Waters), 29A (Open Burning) were not evaluated accordingly as seen from the related format.

2) Factories and Machinery (Noise Exposure) Regulations 1989, Regulation 27 which requires those exposed to noise above 85 dBA must attend training, was not listed in the mill’s list of applicable



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legislations and licenses. 3) At Bukit Mas Palm Oil Mill, found Environmental Quality Act 1974 Revised 2012 particularly Section

49A was not updated in the register. Also Occupational Safety (Classification, Labelling and Safety Data Sheet of Hazardous Chemicals) 2013 was also not identified. There was a memo from the Group HR Director dated 14/01/14 informing on the enforcement of Personal Data Protection Act 2010 effective 15/11/13 by Minister of Communication and Multimedia. This was also not included in the legal requirements register.

4) In Sungai Segama II Estate, the Occupational Safety (Classification, Labelling and Safety Data Sheet of Hazardous Chemicals) 2013 was also not identified and updated in the legal requirements list.

5) Legal register has not been updated to include: � Minimum Wages Order 2012 and its requirements; � International laws which have been ratified by the Malaysian Government, e.g. United Nations

Declaration on the Right of Indigenous Peoples (2007) & ILO Convention 98 (1949)(Articles 1-4), Right to Organise and Collective Bargaining.

Principle 3: Commitment to long-term economic and financial viability

Criteria assessed : CR3.1 Criteria not assessed : - Findings: CR3.1

Both Bukit Mas Palm Oil Mill and three supplier estates (Bukit Mas estate, Sg Segama I estate and Sg Segama II estate) has an annual budget (year 2013 and 2014) that was made a year before the current fiscal year. The information in the budget consists of area statement year 2014 to 2018, crop production Plan year 2014 to 2018 (yield per ha, crop extraction rate, CPO produced), monthly budget breakdown (year 2014), budget summary for revenue & capital expenditure year 2014 to 2018, and turnover including revenue expenditure, cost of sales, total overhead (include general charges and vehicle running account), total expenditure and capital expenditure (include mature upkeep/harvesting & transporting, manuring).

There are changes on company replanting program as stated in the previous surveillance audit report. According to the revised plan, Sg Segama Group of Estate replanting program will start on year 2016 and as a result of verification in field, there is no evidence of replanting activities have been implemented in the field. Details of information about new replanting program are as explained below :

- Year 2016 for total area of 385 ha in Sg Segama I estate (block S91A: 196.50 ha and block S91B: 188.50 ha).

- Year 2017 for total area of 934.5 ha in Sg Segama I estate (block S92A: 201 ha, block S92B: 202 ha, block S92C: 274 ha, and block S92D: 257.50 ha).

- Year 2018 for total area of 960 ha in Sg Segama I estate (block S92E: 264.5 ha, block S92F: 226.5 ha, block S92G: 120.5 ha, block S92H: 348.5 ha).

- Year 2019 for total area of 796 ha in Bukit Mas estate (block B93A: 21 ha), Sg Segama I (block S93A: 72 ha) and Sg Segama II (block S93A: 275 ha, block S93B: 225 ha and block S93C: 203 ha).

- Year 2020 for total area of 884.5 ha in Sg Segama II estate (block S94A: 316.5 ha, block S94B: 320.2 ha, block S94C: 247.8 ha)

Compliance status : Full Compliance

Principle 4: Use of appropriate best practices by growers and millers

Criteria assessed: CR4.1, CR4.2, CR4.3, CR4.4, CR4. 5, CR4.6, CR4.7, CR4.8 Criteria not assessed: Findings: CR4.1



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The estates are still applying their documented SOPs for estate operations documented in the Oil Palm Agricultural Policy manual dated July 2009, covering nursery practices, land clearing and preparation, soil conservation & terracing, road construction and maintenance, establishment of leguminous cover crops (LCC), planting density and planting technique, upkeep of immature and mature palms, pest and diseases, manuring, EFB application, harvesting, bunch census and palm thinning. There is evidence of monitoring of implementation of the estate SOPs, i.e. agronomist visits are conducted annually and recommendations for improvements to field practices are recorded in Agronomic Advisory Reports. Evidence of implementation of practices required as per the estate SOPs were checked and confirmed to be implemented according to the SOPs, e.g. EFB application at mature palm areas is also carried out at rates of 35 to 70 mt/ha/year and applied in centre of each station which consists of four palms, in accordance with the SOP. However it was found that rat baiting was not carried out in accordance with the company’s SOP. This is described further below and raised as a nonconformity under CR4.5. The mill is still implementing their SOP for Bukit Mas POM v1.0 dated 22 November 2010, which covers operations such as reception, sterilizer station, press station, threshing, oil room (clarification), kernel plant, lab, CPO dispatch, engine room, electric, workshop, vehicles, and boiler station, land irrigation and SOP for taking POME samples prior to land irrigation. Updates to SOP are created in separate documents but not yet incorporated in the main SOP document and are undated. The mill maintains records of monitoring in Monthly Performance Reports, which include data on: - FFB production, oil production, kernel production, EFB, products despatched - FFB grading reports - Laboratory analysis results for CPO, PK, press cake, oil losses on dry fibre, sterilizer condensate,

EFB, final effluent, kernel losses, and shell analysis. - Processing efficiency report, and plant and machinery maintenance reports Weekly inspections are conducted by Hap Seng's Processing Controller, output is Weekly Mill Visit Report. Sighted from sample of recent mill visit report conducted on 12 March 2014 shows inspection covers mill stations including reception, FFB ramp and hopper, sterilizer station, threshing station, press station, oil room, boilers, engine room, kernel plant, sterilizer condensate usage, and effluent ponds. Inspection aspects cover operation parameters of machines, safety and condition/maintenance of the station. Similar inspections are also conducted by the mill manager or staff, but not regularly. CR4.2 Leaf sampling is conducted annually and results of leaf analysis are made available in Agronomic Advisory Reports prepared for each estate, as seen from Agronomic Advisory Reports for Sg. Segama I and II estates. Soil sampling for all estates was also last conducted by Borneo Samudera Sdn. Bhd. with certificates for soil analysis conducted in year 2013 sighted for 90 soil samples from Bukit Mas estate, 41 soil samples from Sg. Segama I estate and 53 soil samples from Sg. Segama II estate. Results of leaf and soil analysis for previous years are used to develop fertilizer recommendations for the next year. An EFB Application Programme 2013 is available for all 3 estates. POME application records are maintained in a logbook by the mill, including amounts applied daily. Satellite application pond inspection logbook is also maintained. EFB application areas at Sg. Segama estate I and Bukit Mas estate were visited on-site and it was observed that EFB is applied in one or two layers mounds between one in every 4 palms. According to RPSO, the company is not eligible for NPP because there is no SEIA & HCV. The company has been advised by RSPO to declare the area and then adopt the compensation scheme. The company has prepared a landuse change analysis to be submitted to RSPO. The process is still ongoing, subject to RSPO’s approval of LUC. This was raised as a negative observation. CR4.3

The company has potential erosion risk map (scale 1: 200,000) where it is based on the Revised Universal Soil Loss Equation (RUSLE). On the map has informed that there are slope > 250 in Sg Segama GoE (Sg Segama I, Sg Segama II and Bukit Mas estate) such as border of between block 92C7 with 92D6, block 91B2, block 94A3 and block 94B4. It was verified during visits to the field (to the border of between block 92C7 with 92D6) that there are terracing and setting of palm fronds parallel with the direction of the slope. This is effective as practices minimizing soil erosion. No bare or exposed soils were sighted within the estates and ground cover is adequate. It was confirmed through visits to field that they do not carry out blanket spraying.

Planned and actual road maintenance programs in year 2014 for Sg. Segama I, Sg Segama II and Bukit Mas estates were sighted including budget and monthly schedule for field road maintenance activities



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such as grading/ compacting of field roads, patching of potholes in field roads, new road gravelling, and highway maintenance activities such as grading/compacting, resurfacing and leveling, and patching of potholes. One the material of road maintenance has been available i.e quarry which was taken in block 96C3 (one of place). As seen from the actual implementation records that management has maintenance of road and sighted in the field, roads are well maintained.

Based on soil map, the soil classification/type in Sg Segama GoE are Kinabatangan (flood plain), Sapi (swamps), Lungmanis (very low hill and valley floors), Keretam (moderate hills slope) and Bidu-Bidu (mountain and hills). Distribution of soil type in Sg Segama GoE are Sg Segama I estate: Bidu-Bidu, Kinabatangan Keretam (dominan), Lungmanis and Sapi-Sapi; Bukit Mas estate : Kinabatangan, Keretam (dominan in Bukit Mas II), Lungmanis (dominan in Bukit Mas I & II), Buran, Darau, Guan, Kumansi (dominan in Bukit Mas II); and Sg Segama II estate : Kinabatangan, Keretam (dominan), Lungmanis. Based on those information, there are no peat soils, sandy/low organic matter and acid sulphate soil in the estates. It was also verified in the field (block 94A9 (sapi-sapi)) that there are collection drains located at every fourth row of trees. CR4.4 The company has protected water courses and wetlands from agrochemical application however there is a stream between field 96D1 with 96D2 at Bukit Mas D estate which flows to Sg Segama river but no action taken by the company to prevent agrochemical application at this small river. This condition was raised as non-conformity (NCR no. 03 of 08). The green belt (cover crops) / buffer in along of water courses and river within the estate were sight well maintained, such as riparian buffer zones of Sg Segama river are still in good condition whereas water catchment of block 95F3 (Bukit Mas estate) are in good condition too. Rainfall data is monitored monthly and summarized in annual Agronomic Advisory Reports, as seen from the Agronomic Advisory Report for 2013 for Sg. Segama I estates produced after advisory visit on 12 & 28 March 2013 and report for 2013 for Sg. Segama II estate produced after advisory visit on 11 & 15 June 2013. Based on rainfall data, rainfall in the past 3 years since year 2011 was highest from the months of January to April and lowest around the middle of the year in July to August. The agronomic advisory reports includes analysis of risks due to high rainfall during certain months, such as reduced effectiveness of fertilizer applications due to leaching, surface run-off and risk of occurrences of disease, and impact of soggy field conditions. Mill water usage is monitored and recorded in Monthly Performance Reports, with acceptable operating parameters established as follows: 1) Total water usage/tonnes of FFB = 2.50 2) Domestic water usage/ tonnes of FFB = 1.00 3) Process water usage/ tonnes of FFB 0.75 4) Boiler water consumption/tonnes of FFB = 0.75 Analysis of water usage trends in water consumption per tonnes of FFB processed and tonne CPO processed for year 2013 was conducted with graphical output. Water usage from January to September 2013 was below the target of 0.75 for process water usage per tonne FFB, except in June 2013 when the usage was 0.80. However, there were no readings from October to December 2013 and it was explained that this was due to breakdown of the flow meter which has yet to be repaired up until time of audit. This was raised as an observation. The mill does monitoring of final effluent discharge once a month which include final discharge analysis, analysis of sample from Sg. Sikuk (point where Sg. Sikuk merges with Sg. Segama) and upstream and downstream points of Sg. Segama. Analysis is done by Lahad Datu Edible Oils Sdn. Bhd., which is an accredited under Malaysian Standards. Results for final discharge point for several months is as follows: 1) Cert no. AS/EF511 dated 05.01.2014, BOD of final discharge = 42ppm 2) Cert no. AS/EF479 dated 20.11.2013, BOD of final discharge = 48ppm 3) Cert no. AS/EF457 dated 29.10.2013, BOD of final discharge = 35ppm The results are within the limits stated in the mill’s compliance schedule license no. 001190 for land application which is valid from 1 July 2013 to 30 June 2014, and states maximum BOD of effluent discharged as 100mg/l. All discharge from the mill’s effluent ponds are applied to the field. The mill maintains records of land application on “Daily Pumping record of Land Irrigation Monitoring Log Sheet’, information on the sheet including total effluent pumped to each satellite pond including operation time (running hours). There are 4 satellite ponds for land application for total 53.31 ha planted area in Bukit Mas estate



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CR4.5 The company still implements their SOP on Pests and Diseases management (ref. HSPHB OPAP no. 10) last revised July 2009. In accordance with their SOP, no prophylactic pest spraying is conducted. Pest management with chemicals is done only once high rates of pest attacks are detected through monthly census. Sighted in the Agronomic Advisory report for Sg. Segama I, the estate has an annual programme for planting of beneficial plants such as Cassia, Tunera and Antigonen. The report shows the planting programme for year 2011 and 2012 at Sg. Segama estate I was completed according to plan. The estate also has records of Ganoderma Census/Treatment report Summary, sighted records of census and treatment as at February 2013 in the Agronomic Advisory Report for the estate. However, it was sighted from rat baiting records for Sg. Segama estate that several rounds of rat baiting was carried out at some fields in the estate in year 2013, e.g. S91A1 - S91A5, S91B1 - S91B7, S92C1 - S92C7, S92D1 - S92D7, S92E1 - S92E8, S92F1 - S92F6, S92G1 - S92G4, S92H1 - S92H8, S99A1-S99A2, but rat census results shows rat infestation rates below 5% for most of these fields throughout year 2013. Rat baiting was therefore carried out at rates of attacks of below 5%, which is not in accordance with the estate’s SOP (OPAP 10) which states that baiting campaigns are carried out when the incidence of fresh damage in an area exceeds 1 palm in 20 (5%). It was explained by estate management that the company had revised their practice to permit rat baiting to be conducted at below 5% as long as an increasing trend of rat attacks is observed. However, the data in rat infestation summary reports also does not clearly indicate dates and specific fields when rat baiting campaigns was applied and so it cannot be confirmed if rat baiting was justified by increase in trends of rat attacks. CR4.6 Chemicals used at all estate include Dewana (Glyphosate), Starane, Ally, Amine, Garlon, Mentor, Paraquat, Garlon, Activator, Websob, Enforce (methamidophos), Ebor Baits (warfarin 0.0%), Matikus (Brodifacoum 0.003%). Written justification on usage of chemicals is described in the company’s Oil Palm Agricultural Policy manual dated July 2009, however, as described above, it was found that rat bait, which contains the WHO Class IA active ingredient brodifacoum is being applied at rat attacks rates below 5%, which is not in accordance with the company’s SOP for pest management. Female chemical sprayers interviewed at Sg. Segama I estate confirmed that they had undergone medical checks once every 3 months, and are provided with free medical treatment if and when required, with no complains of work related health issues. In Sungai Segama II Estate, found listed pesticides used such as Ally 20DF, Dupont Surfactant, Dewana Glyphosate, Garlon, Matikus, Nufarm 2.4-D Amine 48, Spraymate Activator, Wetsorb, Fendona, Starane, Ammo Supre and Ebor. A Chemical Register was sighted as well. It was found during site visits that the general ventilation at the chemical store is sufficient, labelling is good and MSDS available, First aid box also available. However, the store does not having emergency shower and eye wash for preparedness in case of any potential spill, splash to eyes and skin. This was noted as an observation. At Sungai Segama II Estate at Block 93B3, found 3 lady sprayers who were not pregnant and doing spraying job. No pesticides under Type 1A and 1B kept in the store as sampled in the related Chemical Store. At Palm Oil Mill, there are records that the lab supervisor and 5 others lab workers attended Medical Surveillance, while 2 workers were sent from water treatment station, 6 workers were sent from the boiler and 2 workers were sent from the store. All are fit as reported by the occupational health doctor and tested on 20/04/13. The next surveillance is scheduled on 15/03/14. At Sg. Segama 2 estate, 6 Sprayers underwent medical surveillance and all were confirmed to be healthy as seen from test results done on 27/12/13 by the occupational health doctor. CR4.7 At Hap Seng Plantations (River Estates) Sdn Bhd. Bukit Mas Palm Oil Mill programme for the year 2014 indicated plan for OSH such as Safety and Health Committee Meeting, Monitoring Accident, Audiometric Test, Training on welding and cutting etc. Also included Emergency Response Plan, The revised OSH Policy still not yet approved and communicated to all employees and contractors. Policy available dated 31/12/04 signed by Chief Executive-Group Plantation. SS2- Similar Policy found in organization chart file. The company prepared the new draft of OSH Policy and waiting to be signed by the Chief Executive. At Palm Oil Mill, Hazard Identification, Risk Assessment & Risk Control last reviewed on 01/04/13.



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Sampled process of Loading Ramp, Hazard should be more specific in category such as physical, mechanical etc and column of (which can cause/effect) should detailing explain type of injury rather than injury only. In Sungai Segama II Estate, the HIRARC was reviewed on 17/02/14 for activities such as palm thinning, bunch cencus, freezer, staple, pantry, fax machine, telephone activity, printing activity, typing activity, writing activity and photostating activity only. The HIRARC was approved by the manager of Sg. Segama II estate. The HIRARC for remaining activities like quarry activities, road maintenance, and water dispenser was done on 01/04/11. Hazard should be more specific in category such as physical, mechanical etc. Column for person-in-charge and due date were left blank. Sprayers attended chemical handling training on 10/08/14 regarding Occupational Safety Procedures and Proper Usage of PPE, and the training involved 8 sprayers. Another training on Methods for Safe Usage of Chemicals was attended by 16 workers including a sprayer in 2013. At Palm Oil Mill, found evidence of BPOM Store PPE Record Book for issuance of PPE to workers. Observed at the mill, workers were wearing PPE such as helmet, vest, safety shoes, mask and ear plug/mask. In Sungai Segama II Estate, sprayers were observed at Block 93B3 wearing apron, chemicals mask, safety glass, gloves and shoes. While at Block 94A1, the harvesters are wearing helmets, shoes and safety glass. In central workshop, workers are wearing safety vest, helmet and safety shoes. At Bukit Mas Palm Oil Mill, an OSH committee and persons responsible for OSH have been clearly identified as evidence of Safety Committee Organization Chart 2014. The OSH committee comprises of the mill manager, senior mill assistant, mill assistants, management representatives, and worker representatives. Sighted a memorandum for appointment of committee members dated 15/01/14 approved by Mill Manager. In Sungai Segama II Estate, also found Safety and Health Committe oeganization chart 2014, comprising of the estate manager, assistant chairman, secretary, assistant secretary, 8 employer representatives and 8 employee representatives. At the palm oil mill, the Safety Committee meeting was last conducted on 28 December 2013 attended by 12 members. The previous meeting was held on 16 September 2013 attended by 16 members including the Chairman, Asst. Chairman & Secretary. A meeting on 01 July 2013 was attended by 16 members and 13 March 2013 attended by 16 members. At Palm Oil Mill, on 21/02/14 a First Aid Talk for driver, mandore, sprayer and workers by a Medical Surveillance officer at Sg. Segama Group of Estates (SSGOE) Community Hall. At Bukit Mas Palm Oil Mill, sample First Aid Kit audit records for year 2014 was sighted for 15 March 2014 (workshop department, Boiler station, process shift, grading dept, office), 17 February 2014, and 09 January 2014. During field visit to Sg, Segama II estate, Block 94A1, the harvesting mandore was found to have first aid box at site for 3 harvesters under his care. The central workshop was also checked and found 2 first aid boxes available. As seen at Sungai Segama Clinic, there is evidence of record for issuance first aid box to mandores. The company maintains accident records, e.g. at Palm Oil Mill, there are records of an accident involving a worker on 25 August 2013 which occurred while he was driving a backhoe back to the mill from central workshop. Investigation report was prepared by the estate as sighted in accident report ref. no. BPOM/Accident/0813/27. For the whole of year 2013, accident statistic records are maintained. The JKKP 8 form for annual summary of accidents was sent to the Department of Occupational Safety & Health (DOSH) on 23/01/14. While at Sg. Segama II estate, the JKKP form was sent to DOSH on 22/01/14 by the estate manager including a report on 14 accidents involving harvesters, pickers and lorry drivers. At the estate, a letter from the Manpower Department of Kinabatangan was found dated 05/02/14 and on 04/06/13 regarding worker’s compensation, and requesting a full medical report to process the claims of a foreign worker involved in an accident. He was covered by Lonpac Insurance for Foreign Worker Compensation Scheme-Class of Policy (00091). For Bukit Mas estate, in 2013 (30th April) there was one fatality case. For this case, the JKKP 6 for reporting of major accidents was sent to DOSH by Bukit Mas Estate management. The JKKP 8 form was sent to DOSH on 01/01/14 and 32 accidents were listed. The accidents that occured included thorn pricks, hit by ‘parang’ (knife), falling down from bridge, hit by falling fronds and motor vehicle accidents. CR4.8



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At the Palm Oil Mill, training and briefings are conducted such as Policy Briefing on the Prevention and Eradication of Sexual Harassment in the Workplace done on 14/03/14 during morning muster (7.15 am-8.00am). There was also a Training on Fire Extinguishers and Fire on 03 March 2014, training on Water treatment and Boiler Water Control on 27 September 2013, and Briefing on Knowledge of Base Chain- Conveyor Chain by Ewart Chain Co. UK on 25 April13. A few training plans for 2014 were indentified in the Bukit Mas Palm Oil Mill Programme for the Year 2014 such as PPE Training in (March), MSDS Training (July), Fire Extinguisher Training (March), First Aid Training (February) etc. At the Central Workshop, only Workshop Executive attended scheduled waste training. Sungai Segama II Estate’s Training Programme for The Year 2014 lists plans for training on PPE (April), Spray Pump Maintenance (Monthly), SOP Sprayers (planned for February), SOP Manuring (planned for February, done 26 February 2014), SOP Harvesting (planned for September) SOP Drivers (planned for May) and First Aid (planned for February). Compliance status: Non-compliance NCR No. 2014-03 of 08 There is a stream between field 96D1 with 96D2 at Bukit Mas D estate which flows to Sg Segama river but no action taken by the company to prevent agrochemical application at this small river. NCR No. 2014-04 of 08 1) There was evidence that rat baiting at Sg. Segama I estate are carried out at rates of attacks of

below 5%, which is not in accordance with the estate’s SOP (OPAP 10) which states that baiting campaigns are to be carried out when the incidence of fresh damage in an area exceeds 1 palm in 20 (5%).

2) The data in rat infestation summary reports also does not clearly indicate dates and specific fields when rat baiting campaigns was applied and so it cannot be confirmed if rat baiting was justified by increase in trends of rat attacks.

Principle 5: Environmental responsibility and conservation of natural resources and biodiversity

Criteria assessed: CR5.1, CR5.2, CR5.3, CR5.4, CR5. 6 Criteria not assessed: CR5.5 Findings: CR5.1 The company has a documented Environmental Impact Assessment Management Action Plans and Continuous Improvement Plans that was last updated on March 10, 2014 for Bukit Mas Palm Oil Mill and Sg. Segama Group of Estates. The company has made some revisions to the documents based on comments given by the audit team during the previous annual surveillance audit. The Environmental Impact Assessment which applies to all estates now includes mitigation and monitoring plans for all identified aspects and impacts for all estate operations, including impacts related to soil erosion, water pollution, biomass disposal, ecological protection, air pollution, waste generation, pest infestation and traffic and transportation impacts. The mill's environmental impact assessment also includes mitigation and monitoring plans for all identified aspects and impacts, such as continuously reduce fertilizer usage through EFB and POME application, maximize usage of renewable energy and study energy generation, to continue to try and engage a licensed scheduled waste collector, and so on. However the mill’s EIA could still be improved as the output of mill activities such as EFB, POME, wastes, etc are incorrectly listed under column named ‘Operations’, and it is not clear which mill operations result in each type of environmental output and related aspects. This was raised as an observation. It was also noted that at time of this audit, the mill was constructing a new continuous desludging plant for the effluent treatment pond, but the environmental aspects and impact of the construction and operations of this plant was not identified in the mill’s Environmental Impact Assessment document. This mill took immediate corrective action to include the environmental impacts resulting from the construction and operations of the desludging plant on their Environmental Impact Assessment document. The company has an environmental impact assessment report (June 24, 2011 (date of assessment : January 10 – April 01, 2010)) that was reviewed and updated on March 10, 2014. Both in the mill and



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all estates, has made list of existing activities including relevant aspect and impacts as determined on “Environmental Impact Assessment Management Actions Plans and Continuous Improvement Plans” document. On the monthly report that there are environmental issues in estate and mill i.e soil erosion, water pollution, biomass disposal, ecological protection, air pollution, waste generation (solid and liquid), pest infestation and traffic and transportation. Continuous improvement plans for all identified aspects and impacts, such as continuously reduce fertilizer usage through EFB and POME application, maximizes usage of renewable energy and study energy generation, to continue to try and engage a licensed scheduled waste collector, provide chemical mixing area to prevent pollution, store chemical material at separate store area and so on. Realization from those plan i.e EFB and land application, provide chemical mixing area, store chemical material at separate store area, making mark as bound of agrochemical activities in river/drainage etc. CR5.2 The SSGOE has conducted an HCV assessment which is reported in an HCV report dated 2014 for the three estates, namely Bukit Mas, Sg.Segama 1, Sg.Segama 2 and the mill. The report is complete with management and monitoring prescriptions which is updated on a yearly basis. The HCV assessment conducted for SSGOE has not conclusively identified HCV habitats within its company boundary. At present, the company only avoids damage to and deterioration of HCV habitats by ensuring that HCV areas are connected, corridors are conserved, and buffer zones around HCV areas are created. The following are the non-conformities which have been collectively raised as Major non-compliance:

� There is no species inventory for flora and fauna for Bukit Kibos forest (identified as potential HCV1.2, 1.4. and 2);

� There is no corresponding list for conservation status for the species identified, except for avian species; and

� A proposed preliminary biodiversity study has been postponed to 2016 for two consecutive years.

HCVs identified in the HCV report on 24 June 2011 shows potential 8 HCV values. There is yet to be a stakeholder consultation to conclusively identify HCVs. This was raised as a negative observation. There is no tangible evidence of implementation of HCV management plan. There is no evidence of monitoring records or outcomes of monitoring which are fed back into the revised management plan. The annual revised management plan merely updates the timelines and responsibilities for implementation without any analysis of attributes/health of HCV. This was raised as a negative observation. No evidence of consultation with the local communities on community watersheds (HCV 4.1) and forest areas fundamental to meeting the basic needs of local communities within the company boundary (HCV 5). Interview with the village head of Kg.Litang, documented on Pg.13 of HCV report makes no mention of any consultation on HCV1.2, 4 and 5. This was raised as a negative observation.

The company conducted reclassification of the HCV type in several areas in SSGOE in March 2013 to review previous HCV document. According to reclassification result, there is 9 identified HCV areas and potential HCV areas in SSGOE i.e. Bukit Kibos (HCV 1.2; 1.4) total area 75.5 ha; Sg. Segama (HCV 1.2;2;4.1 and 5); Others River (HCV 4) Sg. Sikok, Sg. Litang Besar, Sg. Litang Kecil, Sg maarang Arang, Sg. Tigbos and other small tributaries; Water catchment pond (HCV 4.1; HCV 5) total area 17.5 ha; Rocky and steep hill (HCV 4.2) total area 30 ha; Non-operating quarries (HCV 4.2) total area 35.4 ha; Burial site (HCV 6) total area 0.3 ha; jungle area (HCV 4.3) total area 35.4 ha; and Tree planting area (10.7 ha) planted with Gaharu, Jelutong and Mahogany as management initiative because the land unsuitable for oil palm. On 2nd surveillance audit, There is HCV map attached on the HCV document where to explain the location of potential HCV areas within all 3 estates but there is yet to be a stakeholder consultation to conclusively identify HCV’s and the HCV assessment conducted for SSGOE has not conclusively identified HCV habitats within its company boundary. However there is no species inventory for flora and fauna for Bukit Kibos forest (identified as potential HCV1.2, 1.4. and no corresponding list of conservation status for the species identified, except for avian species. This is condition was raised as non-conformity (NCR no. 05 of 08). The company made timeline and management plans for protection and conservation identified HCV area including identified impact that might be appear from current activities to HCV area. The action plan/program is a preliminary



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biodiversity study but it was postponed to year 2016 for two consecutive years. This is condition was raised as a non-conformity (NCR no. 05 of 08). An action plan has been implemented such as maintaining of the riparian reserve by prohibiting any cutting down of the trees at the areas, prohibition of any of the manuring and spraying operation at the riparian reserve area, to monitor for any signs of erosion or illegal activities in Bukit Kibos, installation of warning signboard of taking fish by means of electric shocks and illegal hunting fauna, socialization of HCV area and their conservation, there are evidence that worker carry out activities in the blocks near Sg. Segama river without disturbing Proboscis monkey activities. CR5.3 The company continues to implement waste management in accordance with their waste identification and operation plan as per the Environmental Impact Assessment Management Plan and Continuous Improvement Plans document. Domestic waste is still collected and disposed in a shared landfill at Bukit Mas estate. The landfill was visited and no scheduled wastes were observed in the landfill. However, there was found evidence poor implementation of the procedure since there was rubbish scattered in some part of the linesite. This condition was raised as a minor non-compliance. Empty chemical containers are still being stored at an enclosed store. There has been no collection of the empty chemical containers since 21 July 2011 by Newgate Industries, due to the contractor being unwilling to collect the chemical containers due to small amount and lack of suitably licensed contractors for scheduled waste collection in the company’s region. The company carries out triple rinsing of the chemical containers and stores them in a secure designated store to prevent reuse. CR5.4 Bukit Mas Mill still conducts monthly monitoring of renewable energy usage/ tonnes CPO and energy produced (kWh)/mt fibre/ shell utilized. Renewable energy usage trends are recorded and analysed, as seen from document ‘Renewable Energy Utilization for Financial Year 2013’. Renewable energy utilization ranged from 1.27 to 1.40 mt shell & fibre/mt CPO in year 2013. Total fibre utilized in year 2013 was 40,547.63 tonnes and total shell utilized in year 2013 was 17,072.69 tonnes, with total kWh generated of 410,998.00 kWh. Bukit Mas mill still conducts monthly monitoring of diesel consumption/ tonne FFB processed and diesel consumption/ tonne CPO processed and usage trends are recorded and analysed, as seen from ‘Diesel Consumption for Financial Year 2013’. Average diesel usage ranged from 1.02 to 2.13 tonnes diesel per tonne FFB processed, with unusually high usage in August 2013 of 3.38 tonnes diesel/tonne FFB processed. It was explained that this was due to rainy season at the time when the mill needed to pump more effluent than usual to the effluent treatment ponds and power was generated from the diesel genset instead of using mill generated power when the mill is not processing. The mill’s budget for diesel usage in year 2013 for 3 genset was 81,402 tonnes, which is less than actual usage which was 147,800 tonnes for whole of year 2013. CR5.6 The mill's plans to mitigate polluting activities is as stated in the Environmental Impact Assessment Management Plan and Continuous Improvement Plans document dated 24 June 2011 and last reviewed on 10 March 2014. Plans include 6 monthly monitoring of isokinetic emissions, continued implementation of the continuous emission monitoring system and land application to ensure smoke emissions and POME applied to the field complies with legal requirements, regular desludging of effluent ponds and ensuring alkaline boiler ash is not applied in close sequence with ammonia fertilizers to avoid greenhouse gas emissions in the form of ammonia. The mill is currently constructing a new continuous desludging plant in line with this plan to reduce greenhouse gas emissions. As checked from the mill's latest smoke emission reports to the DOE for February and March 2014, smoke emissions are in compliance with the legal standard. Final discharge, upstream and downstream water analysis results for November and December 2013 and January 2014 tested by Lahad Datu Edible Oils Sdn. Bhd. were also sighted and analysis results were found to be in compliance with the mill's DOE license for land irrigation. As found during previous audits, the company was planning to implement a Clean Development Mechanism (CDM) Methane Capture with Power Generation project at the mill, but during this audit, there is still no progress in the implementation of this project, which is likely to due poor financial incentives for implementation of CDM projects in the existing market. Based on soil type/classification map that no peat soil in the areas so there are not activity of monitor and reduce peat subsidence rate through water table management.



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Compliance status : Non Compliance NCR No. 2014-05 of 08 1) The HCV assessment conducted for SSGOE has not conclusively identified HCV habitats within its

company boundary. There is no species inventory for flora and fauna for Bukit Kibos forest (identified as potential HCV1.2, 1.4. and no corresponding list of conservation status for the species identified, except for avian species.

2) The company’s plan to conduct a preliminary biodiversity study was postponed to 2016 for two consecutive years.

3) HCVs identified in the HCV report on 24 June 2011 shows potential 8 HCV values. There is yet to be a stakeholder consultation to conclusively identify HCVs.

NCR No. 2014-06 of 08 There is evidence of poor waste management implementation since there were found rubbish scattered within main drain of the worker housing and found rubbish in a tray mixed between plastic, leaves and hazardous waste such as damaged sprayer pump and aerosol paint container sighted in the backyard of housing of Sg. Segama II estate no. 320, 321, Bukit Mas mill housing no. 182, and Bukit Mas Housing no. 410, 411 and 412.

Principle 6: Responsible consideration of employees and of individuals and communities affected by growers and mills

Savinder: Criteria assessed: CR6.1, CR6.2, CR6.3, CR6.4, CR6. 5, CR6.6, CR6.7, CR6.8, CR6.9 Criteria not assessed: CR6.10, CR6.11 Findings: CR 6.1 There was no change on the social impact monitoring and management since last audit. The Social Impact Assessment for estate plantation and mill including participation of migrant workers and community member of Kampong Litang. There is the 3rd public consultation on 7th March 2014 attended by 40 persons including affected parties such as the head of surrounding villagers, teacher, immigration officer, staff of surrounding companies, workers, and supplier. The mitigation and monitoring plan for the identified social impacts was sighted including information about time schedule and identified person responsible for implementation of the plan, this is an improvement compare with previous audit condition. Documented consultation and communication procedures have been established both for mill/estates and local community and other affected parties. There is a nominated plantation management official at the operating unit responsible for consultation and communication with local communities or other affected parties. CR6.2 There is a documented SSGOE, TMGOE and JGOE Stakeholder Consultation Minutes, SOP for complaints available. Incoming (letters of requests or complaints) and outgoing correspondence are documented into two separate registers categorised under each individual folder. There is a dedicated officer at each estate and mill responsible for consultation and communications. The overall social liaison officer is the Group (General Manager, the respective Estate Managers are the social liaison officers for each estate. Correspondence is handled by Estate Clerk. Records of communication from each estate is sent to the Plantation Central Office (head office), e.g. SK.Litang asked for lean water supply (e.g.document dated 7 March 2014 titled, “SSGOE, TMGOE and JGOE Stakeholder Consultation Minutes”).The Senior General Manager Estate then emails the General Manager about any decision made and then the General Manager follows up. There is a list of stakeholders, updated in March 2014, comprising 18 government agencies (including nearby schools, 12 neighbouring estates, 3 NGOs, 4 internal stakeholders, 4 suppliers, 21 contractors, 3 local villages and 2 consultants. CR6.3



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Each of the estates and the mill has a grievance mechanism which is documented. There are several methods whereby a grievance can be channelled to the relevant authority at the estates and mill. There are two Standard Operating Procedures related to grievance mechanism, i.e. Procedure for handling of Complaints and Grievances (“Prosedur Menangani Aduan dan Rungutan”) (dated: 29 November 2011 ref: HSPSB P1 1120) and Complaint Reporting Procedures and Problems: Interested parties or stakeholders (“Prosedur Melapor Aduan dan Permasalan: Pihak-pihak yang Berkepentingan atau Stakeholders”) (dated: 4 July 2011 ref: HSPSB P1 1120b). Among the methods to channel complaints is via the morning muster/roll call, via respective supervisors (mandores), direct to the manager, in a complaints box located at the entrance to each estate/mill office or a standard form which is filled by workers to report about their housing/work conditions, titled, “Sg.Segama Central Unit Record Book House Repair Executive & Staff” The standard overall complaints form is titled, “Borang Aduan-Complaints Form (Hap Seng Plantations Holding Berhad) which is applicable for all estates and mill at SSGOE. In addition, at the management level, the Joint Consultative Committee (JCC) is the platform for the grievance resolution at the highest level of SSGOE, which is a body consisting all estates and mill. The audit team has checked the complaints book mentioned in 6.3.1 and confirms that the system resolves disputes in an effective, timely and appropriate manner. The system is open to all internal stakeholders, i.e. all workers (local and foreign), staff, contractors, suppliers and smallholders. CR6.4 There is a document titled, “Land Disputes, Squatter Disputes, Loss of Legal and Customary Rights which is a guideline to identify lawful and legitimate persons or individuals who are entitled to compensation. The document also describes procedures for the distribution and time-frame for compensation as well as calculation for various compensations. However, There company is yet to finalise (the document showed to the auditor is superseded) the procedure for identifying legal and customary rights and the procedure for calculating and distributing fair compensation. This was raised as a negative observation. There are no land claims which necessitate compensation to date at SSGOE. CR6.5 The audit team observed that there are employment contracts for local workers and staff at SSGOE. There is also evidence to show that the migrant workers are legalised, i.e. through random checks on migrant workers’ passports (work permits). There are also pay slips for each employee. Workers’ pay slips are based on the check-roll which is filled in by the respective supervisors of the workers (local and foreign) whereas staff have a fixed monthly salary, the amount is stated in the employment contract. Workers work eight hours a day for 6 days a week. The audit team confirms that workers do not work on public holidays and week off days and that the overtime working hours and payments are in accordance with the Sabah Labour Ordinance. Foreign workers are insured under the Workmen’s Compensation Act 1952 (Act 273). An example sighted was a Foreign Workers Compensation Scheme Policy (Lonpac Insurance Bhd.) from 01.08.2013 to 31.07.14 which covers Workmen Compensation, Repatriation Expenses (RM4800), Personal Accident (Off Work Hours) for A. Accidental Death (RM23,000);B. Permanent Disablement (RM23,000) C. Temporary Disablement (As Per Workmen’s Compensation Act 1952) and D. Medical Expenses. For local workers and staff have social security (SOCSO) deductions, in accordance with the Employees Social Security Act 1969 (Amended 2003). The audit team also confirms that the local workers and staff and the employer also contribute to the Employees Provident Fund (EPF), in accordance with the Employees Provident Fund Act 1951 (Act 272). The company also provides adequate housing, water and electricity (from Tenaga Nasional Berhad, TNB) for its workers, in accordance with Workers’ Minimum Standard of Housing and Amenities Act 1990 (Act 446). Foreign workers are housed according to their ethnicity and religious beliefs and have adequate beds, running water from taps, kitchen and toilet facility. There is regular solid waste disposal system and routine maintenance for the upkeep of the linesite/housing. In summary, the housing and welfare facilities for staff and workers exceed the minimum standards for housing (Workers’ Minimum Standard of Housing and Amenities Act 1990 (Act 446). This was raised as a positive observation. In addition, there is also a Humana School for foreign children, initiated with the Humana Child Aid Society Sabah in 2012 with a current total of 147 students. Migrant workers interviewed are fully satisfied with this facility for their children. There is documented evidence of payment to Humana



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(Monthly Report: Humana House No.159: February 2014) as proof of company support (RM6000/mth) (depending on the number of children). At present, there are 63 boys and 84 girls, all Indonesian, between the ages of 5-15 years, ranging from kindergarten to Primary 6 (as at February 2014).This was also raised as a positive observationn. There is evidence of a general induction course for employees, comprising General Workers, Harvester, Sprayer, Vehicle Operators, Loaders etc, given by the by Sr. Estate Assistant of Sungai Segama Group of Estate (SSGOE). The objective of the course is for the employees of SSGOE to fully understand the duties, terms and conditions as an employee, Personal Protective Equipment, SOP to minimize injuries due to carelessness, Company Policy (OSH and sexual harassment) and Employment contract: Basic salary (daily rate), Off days (Sunday), Public Holidays, Overtime, Working Hours (8 hours a day), Sick leave, Consequences on disobedience to comply with OSH rule explained. The course was conducted in appropriate language with notes in Bahasa Malaysia which is understood by all workers. However, the effectiveness of the general induction course questionable as foreign workers continue to voice out grievances pertaining to work conditions and entitlement. The following are the findings related to employment contracts for Adela Complex which were raised as non-conformity (Major): � Despite induction courses conducted, migrant workers do not fully understand maternity benefits

and levy deductions. There is no separate contract for migrant and local workers (to meet immigration requirements for foreign workers). The contracts for foreign workers do not stipulate the levy deductions, workmen compensation and maternity benefits.

� Contracts for local workers do not stipulate SOCSO and EPF contributions from employer and employee.

� Glass and containers filled with water (potential aedes mosquito breeding ground) found at the outer perimeter (near water tank) behind the Bukit Mas creche.

CR6.6 Hap Seng plantation has a documented policy which states that the employer respects the right of all personnel to form and join trade unions of their choice to bargain collectively. The company’s statement for freedom of association of workers has been made publicly available and explained to the workers. There is notice from Sg. Segama I Plantation, 21 February 2013, no. SS1/037/02/13/MJ to all staff and workers that the employee respects the rights of workers to form and to become members of unions that they choose for collective bargain as mentioned in letter no. 6 and 7 of HSPHB Gek Poh Holdings Corporate Culture. CR6.7 The company has a policy stating that children that are not employed or exploited, as stated in an internal memorandum letter no. SCU/0666/06/2011. According to the policy, the management will not employ underage persons below 16 years old. There were no underage workers found during field visits and the morning musters. CR6.8 There is notice from Sg. Segama I Plantation, 21 February 2013, no. SS1/037/02/13/MJ to all staff and workers that employees are not allowed to be involved in or support to discrimination against nation, caste,citizenship,religion, disability, gender, age, sexual interest, and competency as mentioned in article no. 15 of Hap Seng Corporate culture. Based on interview to the workers there was no case of discrimination happen in this company. CR6.9 There is a policy on sexual harassment sighted at Bukit Mas. There is also a Standard Operating Procedure for the grievance mechanism pertaining to sexual harassment sighted at Bukit Mas estate. There are dedicated gender officers and gender committees for both men and women (separately) at SSGOE. The members of the gender committee comprise of representatives from the estates, mill and management with a total of 10 members. The women’s gender committee was formed in January 2014. Appointment letters were sighted for female office staff into the gender committee at Bukit Mas estate dated 7 January 2013, titled, “Appointment to the Committee on Sexual Harassment and Violence - SSGOE” and the appointment of male staff into the male gender committee for Bukit Mas estate, e.g. appointment letter titled, “ Appointment to the Committee on Sexual Harassment and Violence - Men ”



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dated 17 February 2014. Evidence of implementation of the sexual harassment policy is gender committee meetings as demonstrated in the minutes of meeting dated 13 March 2013, titled, “Meeting Minutes of Inaugural Harassment Complaints Committee / Sexual Violence and Harassment Committee” The second meeting was held on 18 February 2014. There is also documented evidence of minutes of meeting for the male gender committee, dated 19 February 2014, titled,“Meeting Minutes of the Committee on Sexual Harassment and Violence“. Apart from the appointment of gender officers, forming of gender committees and gender committee meeting, evidence of implementation of the policy is a briefing on sexual harassment and violence for all levels of employees, both male and female on separate occassions, as per a document titled,“Briefing on Sexual Harassment and Violence 2014“ dated 25 February 2014 attended by 189 female employees. The briefing included a demonstration on what constitutes sexual harassment and violence against women in the workplace. In conclusion, the Gender committee actively raises awareness on sexual harrassment and violence against women to all levels of staff/workers. There is a separate gender committee for male and female staff and the workers are knowledgeable on the grievance procedure related to sexual harassment. This was raised as a positive observation. There is yet to be a policy to protect the reproductive rights of all, especially of women. Female workers interviewed are unsure of their reproductive rights according to the national laws. This was raised as a negative observation. Compliance status: Non-compliance NCR No. 2014-07 of 08 1) Despite induction courses conducted, migrant workers do not fully understand maternity benefits and

levy deductions. There is no separate contract for migrant and local workers (to meet immigration requirements for foreign workers). The contracts for foreign workers do not stipulate the levy deductions, workmen compensation and maternity benefits.

2) Contracts for local workers do not stipulate SOCSO and EPF contributions from employer and employee.

3) Glass and containers filled with water (potential aedes mosquito breeding ground) found at the outer perimeter (near water tank) behind the Bukit Mas estate creche.

Principle 7: Responsible development of new plantings

Criteria assessed: CR7.1, CR7.2, CR7.3, CR7.4, CR7. 5, CR7.6, CR7.7 Criteria not assessed: Findings: Principle 7 is not applicable because the company has no development area program. Compliance status:

Principle 8: Commitment to continuous improvement in key areas of activity

Carol: Criteria assessed: CR8.1 Criteria not assessed: - Findings: The mill and estates have a documented Environmental Impact Assessment Management Plan and Continuous Improvement Plans document dated 24 June 2011 and last reviewed on 10 March 2014. The Environmental Impact Assessment which applies to all estates now includes mitigation and monitoring plans for all identified aspects and impacts for all estate operations, including impacts related to soil erosion, water pollution, biomass disposal, ecological protection, air pollution, waste generation, pest infestation and traffic and transportation impacts. The mill's environmental impact assessment also includes mitigation and monitoring plans for all identified aspects and impacts, such



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as continuously reduce fertilizer usage through EFB and POME application, maximize usage of renewable energy and study energy generation, to continue to try and engage a licensed scheduled waste collector, and so on. There is evidence of implementation of the continuous improvement programmes, e.g. construction of desludging plant is in progress and the mill has improved their scheduled waste management by applying appropriate labels to scheduled waste containers and ensuring scheduled wastes are stored securely. There is book record of house repair already done. For example: a. House no. D62: replace 2 pieces wall plug … b. House no. D51: repaired toilet bowl, fluorescent tube, mosquito netting and window glass. c. House no. D 42: repairing ceiling fan at bedroom. However, site visited to the linesite shows poor condition at backyard drainage. There was stagnant water full of rubbish in the drainage. There is no evidence that the company has implemented waste management at the housing. There was also container of aerosol paint scattered at the dainage at SSII housing no 321, BPOM housing no. 182 and Bukit Mas Estate housing no. 412. Compliance status: Non- compliance NCR No. 2014-08 of 08 There is no evidence of actions taken or improvements made based on results of the Social Impact Assessment 2012 (last annual review in 2014) and from clinic inspection report 2014. For example: Stagnant and damaged main drain in the back yard of housing at Sg. Segama II estate no. 320, 321, Bukit Mas Palm Oil Mill housing no. 182, 184 and Bukit Mas housing no. 410, 411, 412.

3.2 Status of Previously Identified Non-conformitie s

During the 1st surveillance assessment, a total of 6 nonconformances were identified. All nonconformities are categorized as minor non-conformities. 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 2nd surveillance audit. A summary of all identified non-conformances, corrective actions taken and auditor conclusions is as below:

Criterion 4.2.4 Partial Certification RSPO Certification System

Non-conformance 2013-01 of 06 (Major non-conformity ) Requirements for uncertified management units and/or holdings; For new planting area in Tomanggung estate (400 ha) has to follow RSPO NPP not only make EIA. Correction and Corrective Action: Correction: 4 HCV assessors based in Malaysia were identified and an action plan to implement RSPO NPP procedure and conduct the HCV and SEIA assessments according to the RSPO NPP requirements has been determined. Corrective Action: The Sustainability Executive will follow and control the implementation of NPP since beginning until program finished and will make report to the relevant RSPO CB. Verification result during 2nd surveillance audit: Hap Seng has voluntarily reported that between September 2007 and March 2012, a total of 1,430.24Ha. of land in the Tabin and North Bank Estates (Tomanggong Group of Estates were commercially cleared without a prior HCV Assessment. The company (SSGOE) has been advised by RSPO Compensation Task Force (CTF) to declare the area and then adopt the compensation scheme*. The compensation procedure entails a compensation plan which demonstrates commitment to substantial, long-term benefits to nearby protected areas (i.e. Tabin and Kulamba Wildlife Reserves) .The company subsequently conducted a Retrospective HCV Assessment via Green Harvest Environment Sdn.Bhd. (GHE) (7 September 2013) to determine the requirements for continued RSPO certification through the RSPO compensation procedures. In addition, the company has prepared a landuse change analysis (LUC) to be submitted to RSPO. The process is still ongoing,



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subject to RSPO’s approval of LUC. According to the GHE’s retrospective HCV report (Pg.17), “there is significant interest in creating corridors which connects Tabin WR with the Kulamba WR. In fact, a portion of the Tabin Estate was previously recommended for inclusion in the proposed Lower Kinabatangan-Segama Wetland Area (citing Payne, Sabah Biodiversity Conservation Project, Malaysia ,Lower Segama Final Report)” “Professional planning and preparation of the plan could yield a partial offset of the liability (as per LUC) RSPO Compensation Procedures provide a limited opportunity for continued membership/certification after clearance of one or more HCVs. Auditor Conclusions: Closed with observations (Unti l LUC is approved by RSPO)

Criterion 2.1. (Minor indicator 3) A mechanism for ensuring that they are implemented

Non-conformance 2013-02 of 06 (Minor non-conformit y) At workshop found no mechanism to ensure enforcement of legal compliance as found a compressor (7.5kw) not having a certificate of fitness/Pendaftaran Mesin Tekanan (PMT). Only available Borang Ujian dated 05/07/04 from JKKP (JKKP.IS 127 453/2-200421920 (2) but not renewal of CF after that. The number of PMT also not printed on the compressor. Also observed 10 diesel tank (18,000 lit each) not having proper labeling as required by the Occupational Safety and Health (Chemical Packaging and Labeling) Regulations 1997. At Scheduled waste store (SW 305 and 306) found not properly labeled as required under Environmental Quality (Scheduled Waste) Regulations 2005. Correction and Corrective Action: Correction: 1. A new compressor will be purchased to be used at the workshop to replace the current one. The

certificate of fitness will be applied for the new air compressor. 2. The PMT number will be printed on the compressor once the new compressor has arrived. 3. Specification of the labeling as per guidance on storage of hazardous chemical has een obtained

and is currently being implemented. 4. Specification of the labeling as per Environmental Quality (Scheduled waste) regulation 2005 has

been obtained and is currently being implemented. Corrective Action: Renewal of the air compressor is monitored by Segama Centra Unit Workshop Executive. The PMT number will be inspected on a monthly basis by Workshop Executive and is recorded inside his workshop Inspection Checklist. The label will be inspected on a monthly basis by Workshop Executive and is recorded inside his workshop Inspection Checklist. The label will be inspected on a monthly basis by workshop executive and Mill Executives, The inspection will be recorded inside the workshop inspection. Verification result during 2nd surveillance audit: It was verified at the workshop that the certificate of fitness for the air compressor at the workshop has been renewed with PMT number printed on the compressor. Diesel tanks and scheduled wastes collected have been labelled according to legal requirements. Auditor Conclusions: Closed Criterion 4.7. (Minor indicator 1.d ) The appropriate personal protective equipment (PPE) are used for each risk assessed operation. i. Companies to provide the appropriate PPE at the place of work to cover all potentially hazardous operations such as pesticide application, land preparation, harvesting and if used, burning.



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Non-conformance 2013-03 of 06 (Minor non-conformity ) 1. The management of PPE not fullt implemented as found at cyclone area found 3 workers doing maintenance of pump and welding activities not wearing face mask, ear plugs/muff for noise exposure area. No fire extinguisher stands by near then fot hot work activity. At Block E4, found Harvester not wearing goggle to prevent eye exposure to dust, only wear helmet and safety shoes. BME- two female workers found not wearing any safety helmets, safety shoes (wear only white rubber shoes bought by themselves abd not provided by the company). 2. Contracted workers carrying out construction work at temporary housing at Bukit Mas estate are not using any PPE and no checks done by the estate to ensure their contractors comply with safety requirements Correction: 1. Issuance of reminder letter to the workers involve were done immediately. All workers were

reminded during the morning briefing to wear the PPE provided to them at their workplace. 2. Issuance of reminder letter to the workers involve were done immediately. Standby fire

extinguishers were made available at the hot work site immediately. All workers were reminded during the morning briefing that a mobile fire extinguisher must be made available near to any hot work activity.

3. All harvesters are provided with proper safety google immediately as per SOP. The record of PPE issuance is available at the estate.

4. Issuance of reminder letter to the contractors involved immediately. The contractors were informed to ensure that their workers will use proper PPE at workplace and strict action will be taken if the contractor does not follow the rule. Review on the HIRARC is ongoing.

Corrective Action: • Mill executive will be conduct random spot check on monthly basis and recorded inside the PPE

Inspection Checklist. Any worker that does not wear proper PPE at the workplace will be given a disciplinary action.

• Fire extinguishers were available at strategic location of the mill and easily accessible. • Training for the harvester on PPE usage are conducted on yearly basis. • Monthly spot check by Sg. Segama General manager and manager on the contractors workers will

be conducted to monitor their compliance. The spot check report will be forwarded to Sustainable Executive. Review of HIRARC will be done a yearly basis.

Verification result during 2nd surveillance audit: Sighted at the mill that workers now wear appropriate PPE especially at high risk places. At time of this audit, there was no additional construction on-going, however there is a draft contract for contractors which states that they are required to comply with all OSH requirements while carrying out work within the company’s area, including wearing appropriate PPE Auditor Conclusions: closed

Criterion 5.3. (Minor indicator 2) Having identified wastes and pollutants, an operational plan should be developed and implemented, to avoid or reduce pollution.

Non-conformance 2013-04 of 06 (Minor non-conformit y) 1) Scheduled wastes at the mill and Bukit Mas estate workshop are not stored in separate containers and labeled in accordance with DOE requirements 2) There was sighted oil spillage adjacent to empty lubricant oil containers stacked in an open area of the mill compound. At the mill used lubricant store adjacent to the workshop, also sighted evidence of oil spillage on the floor and oil in the store drain which was not cleaned Correction: 1. Proper label according to DOE requirement are immediately ordered from supplier and implemented. 2. All scheduled waste has been kept in separate containers



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Corrective Action: The schedule waste store will be inspected on a monthly basis by the workshop executive and mill assistant. The findings will be recorded inside the workshop Inspection Checklist.

Disposal of schedule waste will be conducted every 6 months through authorized contractors. Records of disposal are kept by the workshop and mill.

Verification result during 2nd surveillance audit: Sighted at the mill that scheduled waste containers are now labelled accordingly. There is no evidence of oil spillage observed throughout the mill compound Auditor Conclusions: Evidence of immediate action t aken was accepted. Effectiveness of implementation to verified at next audit. Criterion 6.5. (Minor indicator 2) Labour laws, union agreements or direct contracts of employment detailing payments and conditions of employment (e.g. working hours, deductions, overtime, sickness, holiday entitlement, maternity leave, reasons for dismissal, period of notice, etc) are available in the language understood by the workers or explained carefully to them by a plantation management official in the operating unit. Non-conformance 2013-05 of 06 (Minor non-conformit y) There is no evidence that copy of employment contract is given to the workers as mentioned within the contract. Correction: The proposal for distributing copy of contract agreement to the workers has been forwarded to the top management for approval. Currently awaiting approval. Corrective Action: All workers are annually informed regarding their contract agreement. Records of training are available at the estates and mills. Verification result during 2nd surveillance audit: The company has provided documented evidence on the induction courses conducted for new workers, including refresher courses for existing workers. The Sabah Labour Ordinance 1967 does not require copies of the contract to be distributed to the workers. The workers’ contracts are kept at the Bukit Emas office and available for viewing by the workers. Interviews with foreign workers confirmed this. Auditor Conclusions: Closed Criterion 6.7 (Minor indicator 1) Children should only be allowed work in schemes and individual land holdings if permitted by national regulations and not interfering with education programmes. Under such situation, children should only work under adult supervision. Non-conformance 2013-06 of 06 (Minor non-conformi ty) Young children of contracted housing construction workers at Bukit Mas estate were sighted at housing construction area playing with construction materials and exposed to risk of falling from housing under construction Correction: Issuance of reminder letter to the contractors involved immediately on prohibition of children at the workplace/hazardous area. The contractor was reminded not to allow children at the workplace.

Corrective Action: Monthly spot check by Segama General Manager and Manager on the contractors’ workers will be conducted to monitor their compliance. The spot check report will be forwarded to Sustainibility Executive. Verification result during 2nd surveillance audit:



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It was sighted during this surveillance that the company already sent reminder letter to the housing construction contractor. And also observed that there were no children in the linesite. No construction or contracted work was ongoing during this surveillance audit. There was no evidence found of children being allowed near high risk work areas. Auditor Conclusions: Closed

3.3 Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions

During this surveillance assessment, a total of 8 nonconformances were identified. All nonconformities are categorized in minor and major non-conformities. 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. And for the major non-conformances the company already provide some documents as evidence and already verified by auditors. A summary of all identified non-conformances, corrective actions taken and auditor conclusions is as below:

Criterion 2.1. (Major indicator 1) Evidence of compliance with relevant legal requirements.

NCR No. 2014-01 of 08 1) Stated in Bukit Mas mill’s DOE compliance schedule license no. 001190 dated 1 July 2013 - 30

June 2014, the mill is required to appoint a competent operator to manage and maintain the effluent treatment system, air pollution control equipment and for management of scheduled wastes in accordance with the year 2012 amendment to the Environmental Quality Act 1974 Section 49A, and report the names and qualifications of these appointed personnel to the DOE within one month of issuance of the license. However, there is no evidence that this was done by the mill.

2) The mill has not complied with the that requires those exposed to noise above 85 dBA to attend training on noise exposure.

3) In Sungai Segama II Estate, evaluation of legal compliance done showed non-compliance status under Section 49A of Environmental Quality Act (revised 2012) and no action plan yet to have competent person for scheduled waste management.

4) There are inconsistencies in the implementation of the Minimum Wages Order 2012. Checks on pay slips for foreign workers for January 2014 and interviews with migrant workers revealed several cases of workers working full days but receiving less than RM800.

5) Migrant woman worker (sprayer) alleged that she was asked by company officials to stop work before completing eight months of pregnancy, thereby causing her to lose her maternity benefits (60days) (Sabah Labour Ordinance Cap 1967, Section 83 (3).

6) The company maintains that foreign women workers are not entitled to paid maternity leave, yet their signed contracts clearly display this entitlement.

Correction:

1) BPOM management is currently preparing proposal for sending mills personnel for the 3 competent person post mentioned. The proposal once prepared will be submitted to top management for their approval.

2) BPOM management is currently liaising with NIOSH to conduct the training for the mill and workshop executives. Once the training has been held, the executives will conduct the training to the workers exposed to noise above 85Dba.

3) The mills personnel sent to the competency course will also be taking charge for the estate scheduled waste.

4) Proper explanation of the piece rate work salary calculation and payment is currently being prepared and will be displayed. The calculation will be incorporated inside the Annual Induction Briefing.

5) Immediate briefing will be held to all female workers and clarify the maternity leave issue. This issue will be informed clearly to the workers during the induction training. All female workers also will be reminded again on the company policy of preventing pregnant female workers from being exposed to chemicals.



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6) Same with no. 5, Immediate briefing will be held to all female workers and clarify the maternity leave issue. This issue will be informed clearly to the workers during the induction training. All female workers also will be reminded again on the company policy of preventing pregnant female workers from being exposed to chemicals.

Corrective action: 1) The EQA 1974 Section 49A will be updated along with other legal requirements. This include revision

and the inclusion of proper action plans and time bound of completion. 2) The monitoring of the progress of action plan to comply with all legal requirement will under

Personnel & Administration and Safety & Health Officer. 3) The training on noise exposure will be conducted on yearly basis to all affected personnel. 4) The Annual Induction Briefing will continue to be done on yearly basis complete with the workers

signature. A feedback form to determine the workers understanding will be prepared and distributed. The briefing also will be done in several stages of small groups as to ensure better understanding.

5) The clinic, estates and mill supervisor will monitor all female workers medical record to ensure none of them exposed to chemicals. If identified, the female workers will be transferred to another job.

Verification during 2nd surveillance audit: 1) The company provided evidence of a scheduled waste management training which was done on 18th

December 2013 by Chemsain HRD Sdn. Bhd. The company has also applied to send participants to join a training on competent operator to manage and maintain the effluent treatment system, air pollution control equipment and for management of scheduled wastes in accordance with the year 2012 amendment to the Environmental Quality Act 1974 Section 49A, however the training provider has not confirmed the date of training yet due to lack of participants, as seen from email correspondence with the trainer dated 8 August 2014. Since the delay is due to the trainer, this is considered closed with observations and status of training and appointment of competent operator will be checked during next surveillance audit.

2) Audiometric training covering the requirements of the Factories and Machinery (Noise Exposure) Regulations 1989, Regulation 27 was done on 8 August 2014, as seen from training attendance lists. The training included 21 participants from SSGOE as well as participants from the other group of estates under Hap Seng Plantations

3) Refer to findings for part 1 above 4) The company provided an updated piece rate calculation document comparing wages before

minimum wage implementation and after minimum wage implementation for various types of workers, including loose fruit collectors, FFB loaders, FFB transporters, FFB ramp workers, sprayers, manual weeders, circler rakers, manurers, EFB applicators, and rat baiters. According to the revise document, payment rates for all workers have been increased such that minimum wages of each type of workers is more than RM800 a month if working for 26 days. As the document is new, evidence of payment to workers according to the revised calculation will be verified during the next surveillance audit.

5) The company conducted an investigation into the alleged refusal of provision of maternity benefits to the pregnant female worker, with investigation report dated 10 April 2014 sighted. Result if investigation was that the female worker interviewed were transferred from spraying work to other work not involving chemical spraying, and her maternity benefits were provided later.

6) The company provided copy of memo regarding maternity leave and allowance outlining the maternity benefits of female workers which is provided given that they work for the company for at least 90 days within a period of 6 months or work with the company not less than 180 day in a period of 12 months, in accordance with the Sabah Labour Ordinance.

Auditor Conclusions: Closed with observations Closure date: April 2014

Criterion 2.1. (Minor indicator 2 ) A documented system, which includes written information on legal requirements.

NCR No. 2014-02 of 08

1) Under the mill’s list of applicable legislations and licenses for Bukit Mas Palm Oil Mill, updated 13/03/13, evaluation of compliance was not done for certain sections, i.e. Section 20 (Requirement



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and Approval of Plan), 22 (Prohibition of Pollution of Atmosphere), 23 (Restriction of Noise Pollution), 24 (Restriction of Pollution of Soil), 25 (Restriction of Pollution of Inland Waters), 29A (Open Burning) were not evaluated accordingly as seen from the related format.

2) Factories and Machinery (Noise Exposure) Regulations 1989, Regulation 27 which requires those exposed to noise above 85 dBA must attend training, was not listed in the mill’s list of applicable legislations and licenses.

3) At Bukit Mas Palm Oil Mill, found Environmental Quality Act 1974 Revised 2012 particularly Section 49A was not updated in the register. Also Occupational Safety (Classification, Labelling and Safety Data Sheet of Hazardous Chemicals) 2013 was also not identified. There was a memo from the Group HR Director dated 14/01/14 informing on the enforcement of Personal Data Protection Act 2010 effective 15/11/13 by Minister of Communication and Multimedia. This was also not included in the legal requirements register.

4) In Sungai Segama II Estate, the Occupational Safety (Classification, Labelling and Safety Data Sheet of Hazardous Chemicals) 2013 was also not identified and updated in the legal requirements list.

5) Legal register has not been updated to include: � Minimum Wages Order 2012 and its requirements; � International laws which have been ratified by the Malaysian Government, e.g. United Nations

Declaration on the Right of Indigenous Peoples (2007) & ILO Convention 98 (1949)(Articles 1-4), Right to Organise and Collective Bargaining.

Correction:

1. The list is currently being reviewed by the Mill Manager. Once understood, the documents will be filled in properly and signed.

2. BPOM management is currently liaising with NIOSH to conduct the training for the mill and workshop executives. Once the training has been held, the executives will conduct the training to the workers exposed to noise above 85Dba.

3. The list of legal register is currently being updated. Once updated, the list will be distributed to all

operating units.

Corrective action: 1. The newly appointed Safety & Health Officer will go through the FMA, EQA and OSHA and prepare a

complete compliance status report. 2. Review of the List of Applicable Legislation and Licenses will be carried out every January of each

year. 3. The training on noise exposure will be conducted on yearly basis to all affected personnel. Auditor Conclusions: Evidence of immediate action taken was accepted. Effectiveness of implementation to verified at next audit. Criterion 4.4. (Major indicator 1) Protection of water courses and wetlands, including maintaining and restoring appropriate riparian buffer zones at or before replanting along all natural waterways within the estate. NCR No. 2014-03 of 08 There is a stream between field 96D1 with 96D2 at Bukit Mas D estate which flows to Sg Segama river but no action taken by the company to prevent agrochemical application at this small river. Correction: 1. The area has been demarcated immediately.

2. Briefing to all staff and assistant are conducted immediately to inform them the situation.

Corrective action:

1. Area that has been demarcated will be inspected on yearly basis. Refurbishment will be done to faded/ unclear marker.

2. Spot check will be conducted by Assistant Manager and Manager to the marked area.



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Any spraying activity observed at the demarcated area will be reported to top management for disciplinary action.

Verification during 2nd surveillance audit: There was pictures shows demarcation of the stream between field 96D1 and 96D2 at Bukit Mas Estate to Sg Segama river to indicate areas where chemical application activities are not allowed. There was schedule of yearly basis inspection to the demarcated area. Auditor Conclusions: Closed

Criterion 4.5. (Minor indicator 1) Documented IPM system.

NCR No. 2014-04 of 08 1) There was evidence that rat baiting at Sg. Segama I estate carried out at rates of attacks of below

5%, which is not in accordance with the estate’s SOP (OPAP 10) which states that baiting campaigns are to be carried out when 1the incidence of fresh damage in an area exceeds 1 palm in 20 (5%).

2) The data in rat infestation summary reports also does not clearly indicate dates and specific fields when rat baiting campaigns was applied and so it cannot be confirmed if rat baiting was justified by increase in trends of rat attacks.

Correction:

1. Oil Palm Agriculture Procedure (OPAP) will be reviewed and SOP for rat baiting will be updated in the coming OPAP Committee meeting. The updates and reviews include the 0% rat damage tolerance and mill records on rat damage as a reference for rat baiting.

2. Summary records of the rat baiting is updated immediately.

Corrective action: OPAP will be reviewed on annual basis or whenever there is amendment to the SOP.

Auditor Conclusions: Evidence of immediate action taken was accepted. Effectiveness of implementation to verified at next audit.

Criterion 5.2 (Major indicator 2) Management plan for HCV habitats (including ERTs) and their conservation.

NCR No. 2014-05 of 08 1) The HCV assessment conducted for SSGOE has not conclusively identified HCV habitats within its company boundary. There is no species inventory for flora and fauna for Bukit Kibos forest (identified as potential HCV1.2, 1.4. and no corresponding list of conservation status for the species identified, except for avian species. 2) The company’s plan to conduct a preliminary biodiversity study was postponed to 2016 for two consecutive years. 3) HCVs identified in the HCV report on 24 June 2011 shows potential 8 HCV values. There is yet to be a stakeholder consultation to conclusively identify HCVs.

Correction:

1. The HCV Assessment will be incorporated inside the Compensation Scheme. The scheme will be implemented by the management once it has been approved by RSPO.

2. The stakeholder consultation for the HCV identified also will be incorporated inside the Compensation Scheme.

Corrective Action: 1. The management will provide status report on the progress of the HCV Assessment once the Land

Use Change Analysis and Compensation Plan has been approved by the RSPO.



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2. Any recommendations made inside the assessment or required will be implemented by the management in accordance to the budget.

Verification during 2nd surveillance audit: The company has established a Land use change (LUC) analysis and compensation plan for a newly planted area located at Tomanggang GOE which was not converted in accordance with RSPO requirements. The LUC and compensation plan has been submitted to the RSPO for approval. Upon approval of their plan, it was informed by Hap Seng management that the budget allocated for implementation of the compensation plan will be used for conducting the preliminary biodiversity study, including species inventory, as well as the stakeholder consultation. Approval of the compensation plan is still pending from the RSPO. Auditor Conclusions: Closed with observations

Criterion 5.3 (Minor indicator 2) Having identified wastes and pollutants, an operati onal plan should be developed and implemented, to avoid or re duce pollution.

NCR No. 2014-06 of 08 There is evidence of poor waste management implementation since there were found rubbish scattered within main drain of the worker housing and found rubbish in a tray mixed between plastic, leaves and hazardous waste such as damaged sprayer pump and aerosol paint container sighted in the backyard of housing of Sg. Segama II estate no. 320, 321, Bukit Mas mill housing no. 182, and Bukit Mas Housing no. 410, 411 and 412. Correction: 1. Cleaning of the area has been conducted immediately after the audit. 2. All sanitation and building inspection report are reviewed back by the estate and mill personnel to

ensure no houses are left behind. 3. Repair job of the drains is currently being prepared and will be forwarded to management for

approval. Corrective action:

1. Any cleaning or repair job for housing need to go through General Manager or Mill Manager Offices. 2. Once the repair or cleaning has been done, relevant personnel will counter check on the progress

and confirm the completion of the job. Auditor Conclusions: Evidence of immediate action taken was accepted. Effectiveness of implementation to verified at next audit. Criterion 6.5. (Minor indicator 2) Labour laws, union agreements or direct contracts of employment detailing payments and conditions of employment (e.g. working hours, deductions, overtime, sickness, holiday entitlement, maternity leave, reasons for dismissal, period of notice, etc) are available in the language understood by the workers or explained carefully to them by a plantation management official in the operating unit. NCR No. 2014-07 of 08 � Despite induction courses conducted, migrant workers do not fully understand maternity benefits and

levy deductions. There is no separate contract for migrant and local workers (to meet immigration requirements for foreign workers). The contracts for foreign workers do not stipulate the levy deductions, workmen compensation and maternity benefits.

� Contracts for local workers do not stipulate SOCSO and EPF contributions from employer and employee.

� Glass and containers filled with water (potential aedes mosquito breeding ground) found at the outer perimeter (near water tank) behind the Bukit Mas estate creche.

Correction: 1. Proper explanation of the piece rate work salary calculation and payment is currently being prepared

and will be displayed. The calculation will be incorporated inside the Annual Induction Briefing.



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2. Immediate briefing will be held to all female workers and clarify the maternity leave issue. This issue will be informed clearly to the workers during the induction training. All female workers also will be reminded again on the company policy of preventing pregnant female workers from being exposed to chemicals.

3. The contract agreement for locals is currently being reviewed by Personnel & Administration Department. Once completed and approved, the form will be distributed and used immediately.

4. The leftover tools and rituals has been cleaned by the management immediately. Ritual activity is not prohibited by the management however sanitation and cleanliness aspects need to be taken into consideration.

Corrective Action: 1. The Annual Induction Briefing will be done on yearly basis complete with the workers signature. A

feedback form to determine the workers understanding will be prepared and distributed. The briefing also will be done in several stages of small groups as to ensure better understanding.

2. The estates and mill supervisor will monitor all female workers medical record to ensure none of them exposed to chemicals. When identified, a temporary job transfer notice will be given to the workers.

3. Any rituals done by the workers will have to go through the General Manager/Manager/Mill Manager endorsement.

Auditor Conclusions: Evidence of immediate action t aken was accepted. Effectiveness of implementation to verified at next audit.

Criterion 8.1 (Major indicator 5) Social impacts (C6.1)

NCR No. 2014-08 of 08 There is no evidence of actions taken or improvements made based on results of the Social Impact Assessment 2012 (last annual review in 2014) and from clinic inspection report 2014. For example: Stagnant and damaged main drain in the back yard of housing at Sg. Segama II estate no. 320, 321, Bukit Mas Palm Oil Mill housing no. 182, 184 and Bukit Mas housing no. 410, 411, 412. Correction: 1. Cleaning of the area has been conducted immediately after the audit. 2. All sanitation and building inspection report are reviewed back by the estate and mill personnel to

ensure no houses are left behind. 3. Repair job of the drains is currently being prepared and will be forwarded to management for

approval. Corrective Action: 1. Any cleaning or repair job for housing need to go through General Manager or Mill Manager Offices. Once the repair or cleaning has been done, relevant personnel will counter check on the progress and confirm the completion of the job. Verification during 2nd surveillance audit: There were pictures provided as evidence of the sanitation and building facilities area cleaning process. The company also established a plan and budget for repairing job for facilities. Closure date: April 2014 Auditor Conclusions: Closed

3.4 Description of Supply Chain Management System

During 2nd surveillance audit there is no changes on company’s supply chain management, the company has no sale certified palm oil and or certified palm kernel. Bukit Mas Mill is located in Sabah - Malaysia. The mill was commissioned in 1998 to process the Fresh Fruit Bunches (FFB) from Sungai Segama Group of Estate. The location of Bukit Mas Palm Oil Mill is inside of Bukit Mas estate. The mill has an operating license from Malaysian Palm Oil Board (MPOB) i.e. MPOB license no. 50025430400 valid from 01 April 2013 to 31 March 2014.



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The company implements SCC-RSPO with “Segregation (SG)” model according to the nature of mill FFB supply condition. The following is a description of the company’s supply chain management system according to the RSPO SCCS requirements, including status of compliance of the company and their outsourced third parties to RSPO SCCS requirements:

1. Documented procedures

Findings:

During the 2nd surveillance audit there are no changes on company’s procedure for implementation of SCCS requirements. The existing procedure consist of 16 chapters, from reception until POME sampling (reception, sterilization station, press station, threshing station, oil room, kernel plant, laboratory, CPO dispatch, engine room, electric, workshop, vehicle, boiler station, POME treatment plant, WTP and POME sampling) as listed in a book “Safe/Standard Operating Procedure version 1.0” issued on Nov 22, 2010 for Bukit Mas mill. It was sighted now that the company has established procedure for SOP marketing (incoming order process), SOP Finance (issued invoice process), and SOP Claim/Trade in Bukit Mas mill. The procedure for related SCCS requirement i.e Chapter 1 and Chapter 8 has been updated. The procedure on SOP reception has included a description regarding how to handle documents for certified and non-certified material (FFB) and it is also states the definition of certified and non-certified FFB in the procedure. The mechanism (SOP CPO Dispatch) to write information certified or non-certified CPO on Weighbridge Advice Ticket has been established. Company has implemented all revised procedures for their daily operation.

Bukit Mas mill has assigned the persons for overall responsibility for and authority over the implementation of these requirements and compliance with all applicable requirements, i.e. the appointed executive of sustainability, the General Manager of Sungai Segama Group of Estates and the Mill Manager as Person in Charge (PIC) for the implementation of the RSPO SCCS of Bukit Mas Palm Oil Mill (according to memorandum no. A-14/4/1 (286/12), issued on November 21, 2012). During 2nd surveillance audit, mill manager has been replaced but mill’s memorandum about the person in-charge of implementation SCCS in Bukit Mas POM has not been updated accordingly. This condition was raised as non-conformity (NCR SCCS 2014 - 01 of 04).

The procedure for SOP Reception (Chapter 1) has been revised including information regarding how to handle documents for certified and non-certified material (FFB) including the definition of certified and non-certified FFB. The working instruction for drivers must to hand over FFB delivery note to weighbridge operator has been established.

Compliance status : Non Compliance

Non-conformance SCCS 2014-01 of 04

Mill manager has been replaced but mill’s memorandum about the person in-charge of implementation SCCS in Bukit Mas POM has not been updated accordingly.

2. Purchasing and goods in

Findings:

The mechanism to receive FFB in mill (SOP for Reception (Chapter 1) has been established including mechanism to verify FFB sources from certified sources or non-certified sources. Compared with the previous surveillance audit, there have been no changes in the mechanism to receive FFB in mill.

Refer to table 3 above that year 2013 all receipt FFB from company owned estates, whereas year 2014 (January to February) there are receipt FFB from other estates under Hap Seng Plantations amount of 815.45 MT consist of FFB from Northbank estate (Tomanggung GOE) amount of 116.89 MT, Lutong estate (Jeroco GOE) amount of 280.43 MT, Batangan estate (Jeroco GOE) amount of 125.15 MT and Lokan estate (Jeroco GOE) amount of 292.98 MT. Jeroco POM and supply based it (all estate in Jeroco GOE) has RSPO certificate but Tomanggung POM and supply based it (all estate in Tomanggung GOE) has not RSPO certificate.



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Verification to weighbridge advice ticket no. 125183 dated on February 1, 2014, no. 126935 dated on February 20, 2014, no. 126855 dated on February 19, 2014 (FFB from Northbank estate and stamped as CSFFB), no. 126858 dated on February 19, 2014 (FFB from Northbank estate and stamped as FFB), no. 127078 dated on February 21, 2014 (FFB from Northbank estate and stamped as FFB), no. 127077 dated on February 21, 2014 (FFB from Northbank estate and stamped as FFB) and no. 126935 dated on February 20, 2014 (FFB from Northbank estate and stamped as CSFFB) where it weighbridge has signed by driver and weighbridge operator. The results of verification that there were some weighbridge ticket for receipt of FFB from Northbank estate stamped as certified sustainable FFB by weighbridge operator, even though that is non-certified source so the procedure of the delivery and reception of CSFFB in-house and non in-house FFB (sub article of “FFB/CSFFB process) has not been implemented consistently.

The company has procedure or mechanism to inform the CB immediately if there is a projected overproduction. This procedure still not implemented because company still not claim the product as certified product.



There were some weighbridge ticket for receipt of FFB from Northbank estate stamped as certified sustainable FFB by weighbridge operator, even though that is non-certified source.

3. Records Keeping

Findings:

The company has established a mechanism for control and maintenance of documents and data control. The retention time for all records and reports has been defined for at least for five (5) years and has been understood by all staff, especially clerk staff. The storage and maintenance of documents is the responsibility of the mill clerk. The mill has improved their record keeping method to make easier and accessible by relevant staff.

FFB balance has been recorded on a three monthly basis such as for incoming certified FFB and deliveries of certified CPO, and Palm Kernel. The existing material balance record has been updated such as period of January to December 2013 and January to February 2014 but there are FFB from non-certified estate (Northbank estate – Tomanggung GOE) under Hap Seng group amount of 116.89 MT was written internal source certified. Impact from this condition is that the volume of CSPO & CSPK production and stock include oil & kernel from FFB non-certified sources. This condition was raised as non-conformity (NCR SCCS no. 2014-03 of 04). There are different dispatch information between mass balance with monthly performance report because mass balance based on volume in weighbridge ticket whereas report based on sounding. All volumes of palm oil that are delivered are deducted from the material accounting system according to actual daily conversion ratios.

The mechanism on how to indicate the selected supply chain model in all purchase and sale contracts documents has been established. Now the mill states information on the selected supply chain model on all relevant documents, as such CPO Sales Contract, CPO Delivery Order, CPO Delivery Arrangement, and CPO sales invoice. There is evidence that the company has implemented for mechanism it in field such as on the contract no. R2114CP and no. R15913 dated on February 7, 2014 for CPO product with supply chain model is MB; contract no. R1714CP dated on February 5, 2014 for CPO product with supply chain model is SG; contract no. R2714CP dated on February 25, 2014 for CPO product with supply chain model is SG and contract no. R3214CP dated on March 06, 2014 for CPO product with supply chain model is SG.



The mill’s material balance report includes columns for volumes of received FFB divided into external and internal sources. However all FFB from internal sources is included in the mill’s volume of CSPO & CSPK production and stock, even though the internal sources listed included FFB from non-certified estates under Hap Seng group. Impact from this condition is that the volume of CSPO & CSPK production and stock includes oil & kernel from FFB Non Certified sources.



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4. Sales and goods out

Findings:

There is no changes on product goods-out system in Bukit Mas Palm Oil Mill, all products dispatched from Bukit Mas Mill are transported to the Pangkalan Jeroco bulking station and direct to refinery. The relevant documents before sending CPO out to the refinery with tanker include weighbridge advice ticket, MPOB L3 form, logbook for tanker/trailer of palm oil filling palm oil (“jadual log untuk tanker minyak sawit atau trailer isi sawit”) and delivery order. The shipment of the barge must bring the relevant documents before sending it out to the refinery/ bulk installation. Documents such as Time Sheet Form, MPOB Q2 Form, Customs Permit Form from Royal Malaysian Customs and Delivery Order need to be brought by the driver to the refinery.

The company has prepared a format in all sales invoices including the information regarding selected supply chain model. According to the sales procedure, the information stated on the sales invoices must include the name and address of the buyer; delivery date, the date of document issued, product description, quantity of product, quality of product, transporter number/vechicle number, destination and delivery order number including reference order number. Selected model will be stated on sales document if the company has order to deliver certified product. During 2nd surveillance audit, the company has claimed the CPO and PK as RSPO certified such as delivery date on February 11, 12, and 24, 2014 and March 05, 2014. The fourth of delivery date has available regarding name and address of the buyer, description of the product including the supply chain model (non-certified so CPO stamp only, CSPO-SG, CSPO-MB and CSPO-SG), the quantity of product delivered, and reference to related transport documentation (long vehicle no. ST5258N, ST5258N, QMP4287 and barge: jeroco no.3 & tugboat : Mercedes star no.15).

Compliance status: Full Compliance

5. Processing

Findings:

The mechanism for FFB reception and unloading has been revised to include procedures for verification and separation between certified and non-certified FFB. The mechanism also has included instructions for separation of storage for certified and non-certified material in the CPO storage tank. It is stated in the SOP that before loading of CPO is being done the tanker driver must check the vehicle to ensure there is no CPO leftover or other contaminant material inside the tanker. In the SOP for CPO Dispatch (chapter 8), the CPO Dispatch procedure specifies procedures for separation of certified CPO from non-certified CPO. The company has mechanism to make RSPO certified products can be tracable to certified material

The company has receipt of FFB non-certified from Northbank estate (period of January to February 2014) but handling receipt of FFB, FFB processing and storage of CPO & PK not separate between certified material with non-certified material so certified material has contaminated. This is condition was raised as non-conformity (NCR SCCS no. 2014-04 of 04) . Whereas Daily production report (FFB received, production (CPO & PK), extraction rate (OER & KER), stock and despatch) now states separate data on certified material and non-certified material but condition above not done.

There are no outsourced activities to an independent palm kernel crush in Bukit Mas mill because the company sells only palm kernel, not palm kernel oil.



There is no evidence of segregation in the processing of FFB material received from non-certified sources such as Northbank estate from certified FFB material, resulting in contamination of CSPO and CSPK with non-certified material.



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6. Training

Findings:

Bukit Mas Palm Oil Mill had conducted an update/refresher SCCS training was done on January 17, 2014 attended as seen from training records such as Bukit Mas Palm Oil Mill (BPOM) supply chain training report, and attendance list.


7. Claims

Findings:

The company has prepared a procedure for certified product communication and claims according to RSPO requirements as they have not made any claims yet. According to product traceability instruction, the mill will only make claims regarding the use of or support of RSPO certified palm oil that are in compliance with the RSPO Rules for Communication and Claims after SCCS certificate is issued. The procedure will be implemented once the company has a contract for purchase of certified product.


3.5 Identified Non-conformances from Previous Audi t against RSPO SCCS Requirements, Corrective Action s Taken and Auditors Conclusions

During the 1st surveillance audit for Supply Chain, there were no non-conformities raised, so there are no verification further to measure the effectiveness of the corrective actions that have been done.

3.6 Identified Non-conformances, Corrective Action s Taken and Auditors Conclusions


Mill Manager has been replaced but the mill’s memorandum about the person-in-charge of implementation SCCS in Bukit Mas POM has not been updated accordingly

Correction :

A new letter will be issued out by Senior General Manager/ Processing Controller immediately;

Corrective Action :

1. Training on Supply Chain System is currently done in yearly basis. Next training is expected to be done in June 2014.

2. Any new personnel appointed by the company needs to be briefed about the Supply Chain System by the Mill Manager

Date of closure : April, 2014

Auditor Conclusions: Closed

Verification result :

The company has revised previous memorandum regarding PiC for the implementation of RSPO SCCS of Bukit Mas POM with new memorandum (dated on April 6, 2014) from processing controller regarding appointment of mill manager as PiC for the implementation of the RSPO SCCS.



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There were some weighbridge tickets for receipt of FFB from Northbank estate stamped as certified sustainable FFB by the weighbridge operator, even though this is a non-certified source. It was found that 116.89 tonnes of FFB received from Northbank estate - Tomanggong GOE was categorized as certified sustainable FFB in the mill’s mass balance report.

Correction :

Refresher training was conducted immediately to BPOM weighbridge operators and executives by Sustainability Executive

Corrective Action :

1. The training will be conducted on yearly basis

2. Mill assistant and manager will conduct spot checks on the weighbridge operator as to ensure correct stamp is used




The company has provided evidence of refresher training (date on April 9, 2014) conducted for weighbridge operator and chief clerk, regarding SCCS with supply chain model is Segregation (SG) and TMGOE and external estate FFB cannot be accepted and processed by BPOM cause they are yet to receive RSPO certificate. Otherwise it, the company has provided list of FFB receipt from January to February 2014 (amount of 15 transaction) where there are information regarding date of receipt, ticket number, truck number, block number and quantity, replace of all weighbridge advice ticket which previous of stamped CSFFB be stamped FFB and memorandum dated on May 6, 2014 from processing controller to all mill manager in Hap Seng Plantation Holdings Berhad regarding RSPO certified CSPO-SG mills that all palm oil mills which certified for CSPO-SG will not receive any uncertified FFB with immediate effect.


The mill’s material balance report includes columns for volumes of received FFB divided into external and internal sources. However all FFB from internal sources is included in the mill’s volume of CSPO & CSPK production and stock, even though the internal sources listed included FFB from non-certified estates under Hap Seng group. Impact from this condition is that the volume of CSPO & CSPK production and stock includes oil & kernel from FFB Non Certified sources

Correction :

The monitoring form was reviewed and updated accordingly as per required during the annual surveillance audit. Once completed, the form will be used immediately by BPOM

Corrective Action :

1. The monitoring form will be updated daily by the RSPO clerked and counter checked by the assistance

2. Mill Manager will then check the monthly summary report and submit it to Processing Controller and Sustainability Executive for compliance check




The company has provided revision of mass balance where has removed column of internal non-certified RSPO in



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received FFB section, production of CPO section and production of PK section. In addition, Bukit Mas mill has deducted stock of CPO and PK which derived from FFB non-certified in mass balance of March 2014. In mass balance report of March and April 2014, no non-certified FFB from other non-certified estate groups are listed.


There is no evidence of segregation in the processing of FFB material received from non-certified sources such as Northbank estate from certified FFB material, resulting in contamination of CSPO and CSPK with non-certified material

Correction :

With immediate effect, BPOM will not accept any FFB from non-RSPO certified estates. Memo on this issue has been issued out from Processing Controller and distributed to all estates and mills

Corrective Action :

1. No FFB from non-RSPO certified estates will be accepted by BPOM

2. SOP on Traceability will be reviewed to cater with the changes and mill will comply accordingly

3. Introduction to traceability training will be conducted to all estate managers to enhance their understanding on the matter. The training will later be conducted to all estates and mill executives and staffs in stages




The company has issued a memorandum dated on May 6, 2014 from processing controller to all mill managers in Hap Seng Plantation Holdings Berhad stating that all palm oil mills which certified for CSPO-SG will not receive any uncertified FFB with immediate effect.

3.7 Noteworthy Positive Components

Criteria Findings

6.5 Humana School was initiated in 2012 and has 147 students. Migrant workers interviewed are fully satisfied with this facility for their children.

6.5 Housing and welfare facilities for staff and workers exceed the minimum standards for housing (Workers’ Minimum Standard of Housing and Amenities Act 1990 (Act 446).

6.9 Gender committee actively raises awareness on sexual harrassment and violence against women to all levels of staff/workers. There is a separate gender committee for male and female staff and the workers are knowledgeable on the grievance procedure related to sexual harassment.

3.8 Issues Raised by Stakeholders and Findings Pert aining to Issues Below is a summary of issues raised by stakeholders interviewed on-site

No. Issues Raised Audit Verification

1.

Foreign workers do not understand the terms and conditions of the contract, especially females and their maternity benefits.

This was raised as non-compliance.

2 A female foreign worker alleged that she was denied This was raised as non-



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maternity leave as she was asked to stop work before the legal period of leave entitlement.

compliance.

3 The father interviewed Bukit Mas creche complained of unkept grass and compound at the creche.

This has been brought to the attention of the SSGOE management during the closing meeting.

4.0 CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INT ERNAL RESPONSIBILITY

4.1 Date of Next Surveillance Visit

The next surveillance visit is planned for 01 April 2015

4.2 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 assessment findings and report content. Signed on behalf Hap Seng Plantations Holdings Bhd.

…………………………………………. Name: Position: Date:

Signed on behalf of TUV Rheinland Indonesia

………………………………………. Fadli Lead Auditor Date: May 15, 2014



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APPENDICES

Appendix 1: List of Abbreviations

CITES Convention on International Trade in Endangered Species CDM Clean Development Mechanism CPO Crude Palm Oil DOA Department of Agriculture DOE/ JAS Department of Environment / Jabatan Alam Sekitar DOSH/ JKKP

Department of Occupational Safety & Health / Jabatan Keselamatan dan Kesihatan Pekerja

EIA Environmental Impact Assessment EPF Employee Provident Fund ERTs Endangered, Rare & Threatened species ESH Environmental Safety & Health EQA Environmental Quality Act FFB Fresh Fruit Bunches EFB Empty Fruit Bunches GOE Group of Estates HCV High Conservation Value HIRARC Hazard Identification, Risk Assessment and Rick Control HSPHB Hap Seng Plantations Holdings Bhd. IPM Integrated Pest Management IUCN International Union for Conservation of Nature JGOE Jeroco Group of Estates KWSP Kumpulan Wang Simpanan Pekerja (Employee Provident Fund Group) LCC Leguminous Cover Crop LTA Lost Time Accident MSDS Material Safety Data Sheets MPOB Malaysian Palm Oil Board NADOPOD Notification of Accidents , Dangerous Occurrence, Occupational Poisoning and

Occupational Diseases NGO Non-Government Organization NIOSH National Institute of Occupational Safety and Health OSH Occupational Safety & Health P&A Personnel & Administration PERKESO Pertubuhan Keselamatan Sosial (Social Safety Organization) PK Palm Kernel POME Palm Oil Mill Effluent PPE Personal Protective Equipment Sg. Sungai (River) SIA Social Impact Assessment SOCSO Social Security Organization SOP Standard Operating Procedure SPO Sustainable Palm Oil SSGOE Sg. Segama Group of Estates TMGOE Tomanggung Group of Estates TNB Tenaga Nasional Berhad USECHH Use and Standards of Exposure of Chemicals Hazardous to Health

Appendix 2: List of Stakeholders Interviewed and Co ntacted No. Name of Stakeholder Institution / Position Remarks

Stakeholders Interviewed On -Site



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1. Joseph Koput Mill Manager 2. Franki RSPO Executive 3. Bunga Esah bt. Sado (Lab) 4. Saidah, Sprayer SS2 5. Masriani Sprayer SS2 6. Niar Sprayer SS2 7. Mustaffa Kamil Hj. Omar Manager SS2 8. Jehezchial Edy Tamaho Medical Assistant 9. Mohd Irfan Alwi Mandore SS2 10. Tompong Darman Workshop Executive 11. Osman@Open Laithe Sr. Mill Asst 12. Hoh Kam Hoe Sr. Mill Asst 13. En.Amsal Ambok Harvester Male foreign worker (from

South Sulawesi, Indonesia) 14. Pn.Rosmiati binti Haji Made Supervisor (mandore) Female foreign worker (from

South Sulawesi, Indonesia) 15. Pn.Rosdiana binti Arman Raking (general worker) Female foreign worker (from

South Sulawesi, Indonesia 16. En.Irpan Shah Rahman Mandore (harvester) Male foreign worker (from

South Sulawesi, Indonesia) 17. Pn.Saedah Sprayers (Sg.Segama II) Female foreign worker (from

South Sulawesi, Indonesia 18 Pn.Niar Sprayers (Sg.Segama II) Female foreign worker (from

South Sulawesi, Indonesia 19 Pn.Masriani Sprayers (Sg.Segama II) Female foreign worker (from

South Sulawesi, Indonesia 20 Pn. Norbayah Creche ayah (Bukit Mas) Female foreign worker (from

South Sulawesi, Indonesia 21 Pn.Samsiar binti Sultang Creche ayah (Bukit Mas) Female foreign worker (from

South Sulawesi, Indonesia 22 Pn. Darmi Bulla Not available Female foreign worker (from

South Sulawesi, Indonesia 23 En. Rahmat bin Sukri Not available Male foreign worker (from

South Sulawesi, Indonesia 24 Odang Titing Loose fruit bunch picker. Female foreign worker (from

South Sulawesi, Indonesia 25 Pn.Sudarmi Djapar - Staff, Bukit Mas Estate,

SSGOE and head of female gender committee.

26 Mr. Ismail bin Ottawrid Kampong Litang Head 27 Mr. Gusmit School Principle of Kampong

Litang



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Appendix 3: List of Observations / Opportunities fo r Improvement

No. Observations / Opportunities for Improvement Criteria 1. Workmen Compensation is still pending for a deceased migrant worker (Edy bin

Dagan) at Bukit Mas. 2.1.1

2.

Inconsistencies and contradictions between national, regional, international and RSPO P&C are not identified, e.g. Malaysian immigration circular forbidding foreign nationals from joining trade unions.

2.1.2 (P&C 2013)

3. According to RPSO, Tomanggong estate (proposed new expansion area) is not eligible for NPP because no SEIA & HCV was conducted prior to land clearing in 2009. The company has been advised by RSPO to declare the area and then adopt the compensation scheme. The company conducted a retrospective HCV assessment via Green Harvest Environment Sdn.Bhd. (7 September 2013).The company has prepared a landuse change analysis (LUC) to be submitted to RSPO. The process is still ongoing, subject to RSPO’s approval of LUC.

4.2.4

4. The shared chemical store of the estates does not having emergency shower and eye wash for preparedness in case of any potential spill, splash to eyes and skin.

4.6

5. HCVs identified in the HCV report on 24 June 2011 shows potential 8 HCV values. There is yet to be a stakeholder consultation to conclusively identify HCVs.

5.2.2 (P&C 2013)

6. There is no tangible evidence of implementation of HCV management plan. There is no evidence of monitoring records or outcomes of monitoring which are fed back into the revised management plan. The annual revised management plan merely updates the timelines and responsibilities for implementation without any analysis of attributes/health of HCV.

5.2.4 (P&C 2013)

7. No evidence of consultation with the local communities on community watersheds (HCV 4.1) and forest areas fundamental to meeting the basic needs of local communities within the company boundary (HCV 5). Interview with the village head of Kg.Litang, documented on Pg.13 of HCV report makes no mention of any consultation on HCV1.2, 4 and 5.

5.2.5 (P&C 2013)

8. There company is yet to update (the document showed to the auditor is superseded) the procedure for identifying legal and customary rights and the procedure for calculating and distributing fair compensation.

6.4

9. There is yet to be a policy to protect the reproductive rights of all, especially of women. Female workers interviewed are unsure of their reproductive rights according to the national laws.

6.9.2 (P&C 2013)