kulim rspo public summary report

PUBLIC SUMMARY REPORT

INITIAL RSPO CERTIFICATION ASSESSMENT

KULIM (MALAYSIA) BERHAD

Report Author

Charlie Ross – August 2008 [email protected]

Tel: +61 417609026

BSi Management Systems Singapore Pte Ltd (Co. Reg. 1995 02096‐N) Malaysia Branch (Co.Reg. 9942MX)

460 Alexandra Road 9 Jalan 16/11 Off Jalan Damansara #08‐01/02 PSA Building 1005 Block B Level 10, Phileo Damansara 1 SINGAPORE 119963 46350 Petaling Jaya Tel +65 6270 0777 Selangor Darul Ehsan, MALAYSIA Fax +65 6270 2777 Tel +03 7662 3311/3322 www.bsi‐asia.com Fax +03 7662 3300 Soon Leong Chia: [email protected] Teo Chin Siong: [email protected]

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TABLE of CONTENTS Page No SUMMARY ............................................................................................................................................................... 1 LIST OF ABBREVIATIONS USED ................................................................................................................................. 1 1.0 SCOPE OF CERTIFICATION ASSESSMENT ..................................................................................................... 1–6 1.1 National Interpretation Used .................................................................................................................... 1 1.2 Certification Scope .................................................................................................................................... 1 1.3 Location and Maps .................................................................................................................................... 1 1.4 Description of Supply Base ........................................................................................................................ 1 1.5 Date of Plantings and Cycle ....................................................................................................................... 6 1.6 Other Certifications Held .......................................................................................................................... 6 1.7 Organisational Information/Contact Person ............................................................................................. 6

1.8 Time Bound Plan for Other Management Units ........................................................................................ 6 1.9 Area of Plantation ..................................................................................................................................... 6 1.10 Approximate Tonnages Certified ............................................................................................................... 6 1.11 Date Certificate Issued and Scope of Certificate ........................................................................................ 6

2.0 ASSESSMENT PROCESS .............................................................................................................................. 7–8 2.1 Certification Body ..................................................................................................................................... 7 2.2 Qualifications of Lead Assessor and Assessment Team ............................................................................. 7 2.3 Assessment Methodology, Programme, Site Visits .................................................................................... 7 2.4 Stakeholder Consultation and List of Stakeholders Contacted .................................................................. 7 2.5 Date of Next Surveillance Visit .................................................................................................................. 8 3.0 ASSESSMENT FINDINGS .......................................................................................................................... 8 – 20 3.1 Summary of Findings ................................................................................................................................. 8 3.2 Detailed Identified Nonconformities, Corrective Actions and Auditor Conclusions ...................................................................................... 17 3.3 Noteworthy Positive Components .......................................................................................................... 18 3.4 Issues Raised by Stakeholder and Findings with Respect to Each Issue ................................................................................................................ 19 3.5 Acknowledgement of Internal Responsibility and Formal Sign‐off of Assessment Findings ............................................................................................. 20 LIST of TABLES

1 Mill GPS Locations ................................................................................................................................................ 1 2 Estates FFB Production ........................................................................................................................................ 1 3 Age Profile of Planted Palms ................................................................................................................................ 6 4 Estates and Areas Planted .................................................................................................................................... 6 5 Approximate Tonnages Certified .......................................................................................................................... 6 LIST of FIGURES

1 Location Map ....................................................................................................................................................... 2 2 HCV Areas near Kulim Estates .............................................................................................................................. 3 3 HCV Areas near Sedenak and Sindora Mills and Estates ....................................................................................... 4

4 HCV Areas near Tereh Mill and Estates .......................................................................................................... 5 LIST of PLATES

1 Well maintained Groundcover to control Soil Erosion........................................................................................ 18 2 High Standard of Housing for Staff and Workers ................................................................................................ 19 3 Crèche for Staff and Worker Children ................................................................................................................ 19 List of Appendices

A RSPO Certificate Details B Certification Assessment Plan

Public Summary Report ‐ RSPO Certification Assessment – Sedenak, Sindora, Tereh Mills and Supply Base Page 1

Prepared by BSi Management Systems Singapore Pte Ltd for Kulim (Malaysia) Berhad

SUMMARY

The British Standards Institution (BSi) has conducted an assessment of Kulim (Malaysia) Berhad (Kulim) operations comprising 3 mills, supply base, support services and infrastructure. BSi concludes that Kulim operations comply with the requirements of RSPO Principles & Criteria: 2007 and MY NIWG Indicators and Guidance : 2008.

BSi recommends that Kulim be approved as a producer of RSPO certified sustainable palm oil.

ABBREVIATIONS USED

CPO Crude Palm Oil EFB Empty Fruit Bunch FFB Fresh Fruit Bunch HCVs High Conservation Values MSDS Material Safety Data Sheet PCD Pollution Control Device PK Palm Kernel SOPs Standard Operating Procedures

1.0 SCOPE OF CERTIFICATION ASSESSMENT

1.1 National Interpretation Used

The operations of the mills and their supply bases of FFB were assessed against the Malaysian National Interpretation (MY NIWG : 2008) of the RSPO Principles and Criteria : 2007.

1.2 Certification Scope

The scope of certification includes the production from three (3) palm oil mills that is sourced from thirteen (13) company owned oil palm estates.

1.3 Location and Maps

The Kulim estates and mills are located in Johor State of Peninsula Malaysia (Figure 1). Additional maps are included (Figures 2,3 and 4) showing areas with HCVs adjacent to the estates. The GPS locations of the mills are shown in Table 1.

Table 1: Mill GPS Locations

MILL EASTING NORTHING

Sedenak 103° 32' 17.9628" 1° 43'51.0888"

Sindora 103° 27' 44.316" 1° 59' 7.3392"

Tereh 103° 21' 5.0004" 2° 13' 3.0648"

1.4 Description of Supply Base

The supply base consists of FFB from (i) Company owned Estates; (ii) Company managed Estates and (iii) Outgrowers and Traders. The Company owned Estates

supplied 66∙3% of the total FFB processed at the mills in 2007/08. The FFB production from Company owned Estates is listed in Table 2.

Table 2: Estates FFB Production 2007/08

Estate FFB Production (t)

Asam Bubok 9587

Sindora 65855

Basir Ismail 52503

Ulu Tiram 18716

Sedenak 50696

Rengam 43647

Kuala Kabong 38969

REM/Pasak 24188

Tereh Utara 40452

Tereh Selatan 31313

Selai 31810

Enggang 31580

Mutiara 34402

TOTAL 473718

The Company managed Estates supplied 2∙6% of the FFB processed at the mills in 2007/08. The RSPO P&C are being implemented at the managed Estates but they are not yet ready for certification assessment and their production is not included in the Certificate. Kulim aims to have the Company managed Estates certified during 2009. The Outgrowers and Traders supplied 31∙1% of the FFB processed at the mills in 2007/08. Kulim has held initial discussions with the Outgrowers and Traders on RSPO implementation. Outgrowers and Traders were interviewed during the audit and were aware of the RSPO and had an understanding of Kulim’s requirements. The audit team concluded that the Outgrowers and Traders were at an early stage of RSPO implementation and that additional work is required to provide training to them on RSPO implementation. The FFB production from the Outgrowers and Traders has not been included in the Certificate. Kulim has stated its commitment to work with the Outgrowers and Traders on the implementation of the RSPO P&C with the aim of achieving certification for their production within 3 years from the date of initial certification.

Public Summary Report – RSPO Certification Assessment – Sedenak, Sindora, Tereh Mills and Supply Base Page 2


Figure 1: Location Map



Figure 2: HCV Areas near Kulim Estates



Figure 3: HCV Areas near Sedenak and Sindora Mills and



Figure 4: HCV Areas near Tereh Mill and Estates



1.5 Date of Plantings and Cycle

The Company owned Estates were developed in 1947 and are in the second and third cycles. The age profile of the planted palms is shown in Table 3.

Table 3: Age Profile of Planted Palms

AGE (years) % of Planted Area

0 – 4 21∙18

5 – 16 38∙42

17 – 23 27∙66

24+ 12∙74

1.6 Other Certifications Held

Kulim holds the following Certifications: ISO 14001: 2004 Sindora Mill, Sindora Estate ISO 9001: 2000 Sedenak Mill, Sindora Mill, Tereh Mill

1.7 Organisational Information / Contact Person

Kulim (Malaysia) Berhad Ulu Tiram Estate KB 705, Johor Bahru Johor 80990 Malaysia

Contact Person: Dr Simon Lord Director of Sustainability

Phone: +607 8611611 Fax: +607 8631084 Email: [email protected]

1.8 Time Bound Plan for Other Management Units

Kulim holds an interest in New Britain Palm Oil Ltd that the RSPO has recently approved for Certification. Kulim also holds an interest as the managing agent in 3 mills and 11 estates in West Malaysia. Kulim has submitted to BSi a Time Bound Plan to achieve RSPO Certification for these managed mills and estates during 2009. On the basis of information provided by Kulim and that collected at the time of the audit, the Audit Team has concluded that there are no significant land conflicts, no replacement of primary forest or any area containing HCVs since November 2005, no labour disputes that are not being resolved through an agreed process and no evidence of noncompliance with the law at any of the noncertified holdings.

BSi has reviewed Kulim’s Time Bound Plan and considers this to conform to the RSPO requirements for partial certification.

1.9 Area of Plantation

The areas of planted palms at Company owned Estates at June 2008 are listed in Table 4.

Table 4: Estates and Area Planted

Estate Mature (ha) Immature (ha)

Asam Bubok 615 –

Sindora 2812∙50 483∙78

Basir Ismail 2248∙73 485∙48

Ulu Tiram 724∙00 –

Sedenak 2109∙93 570∙62

Rengam 1848∙40 521∙16

Kuala Kabong 1642∙65 –

REM/Pasak 2416∙95 –

Tereh Utara 1951∙85 926∙10

Tereh Selatan 1584∙49 1004∙48

Selai 1313∙71 398∙46

Enggang 1238∙90 455∙30

Mutiara 2283∙60 –

TOTAL 22175∙71 4845∙38

1.10 Approximate Tonnages Certified

The approximate tonnages certified on the basis of 2007/08 production from Kulim Owned Estates are detailed in Table 5. NB: The production from Company managed Estates, Outgrowers and Traders is excluded from the Certificate.

Table 5: Approximate Tonnages Certified

MILL CPO PK

Sedenak 44059 11415

Sindora 13568 4382

Tereh 31287 9146

TOTAL 88914 24943

1.11 Date Certificate Issued and Scope of Certificate

Scope of the Certificate is for the production from the three palm oil mills and their supply base from company owned estates. Certificate details are included as Appendix A. The Certificate issue date will be the date of the RSPO approval of the Assessment Report.



2.0 ASSESSMENT PROCESS

2.1 Certification Body

BSI Management Systems Singapore Pte Ltd 460 Alexandra Road #08–01/02 PSA Building Singapore 119963

Product Manager: Mr Soon Leong Chia Phone: +65 6270 0777 Ext 115 Fax: +65 6270 2777 Email: [email protected] BSi is a leading global provider of management systems assessment and certification, with more than 60,000 certified locations and clients in over 100 countries. BSi Standards is the UK’s National Standards Body. BSi Management Systems provides independent, third‐party certification of management systems. BSi has a Regional Office in Singapore and a Branch Office in Kuala Lumpur.

2.2 Qualifications of the Lead Assessor and Assessment Team

BSi Management Systems Singapore holds copies of educational qualifications, certificates and audit logs for each of the audit team members. BSi has evaluated the qualifications and experience of each audit team member and has registered the following designations for conducting RSPO Assessments. Charlie Ross – Lead Assessor B.App.Sc. M.Sc (Env.Studies) Lead Auditor EMS RABQSA Cert No 012364 Iman Nawireja – Social Assessor B.Ag.Sc. M.Sc. (Comm) Robyn Ross – Social Assessor

Charlie Ross is an independent environmental auditor who has extensive fieldwork experience in conducting environmental and social assessments of oil palm projects over the past 16 years in Indonesia, Malaysia, Nigeria, Papua New Guinea and Solomon Islands. He has completed lead auditor training in ISO 9001 Quality Management Systems, lead auditor training in OSHAS 18001 Occupational Health and Safety Assurance Systems, auditor training in SA8000 Social Accountability and auditor training in RSPO P&C. He has been involved in the RSPO process since RT1 and has conducted audits of oil palm plantation companies (total of 125 audit days) against the RSPO P&C in Indonesia, Malaysia and PNG. Iman Nawireja has a background in the socio‐economic aspects of agriculture, and has assisted with field studies on the effect of resource development projects on farmer and community incomes, health status and household division of labour. He has completed training as an ISO 14001 Lead Auditor. He has assisted in conducting environmental and social assessments of 8 oil palm projects (total of 95 consulting days) during the past 5 years. He has assisted with conducting audits of

oil palm plantation companies (total of 49 audit days) against the RSPO P&C in Indonesia and Malaysia. Robyn Ross has a background in company administration and supporting women with mental health and physical disabilities by assisting them to develop skills for living independently in the community. She has assisted with fieldwork in conducting environmental and social assessments of oil palm projects over the past 5 years in Indonesia and Nigeria. She has completed auditor training in SA8000 Social Accountability. She has assisted with conducting audits of oil palm plantation companies (total of 105 audit days) against the RSPO P&C in Indonesia, Malaysia and Papua New Guinea.

2.3 Assessment Methodology, Programme, Site Visits

The assessment was conducted in 2 stages. Stage I was conducted between 05 and 14 September 2007 against the RSPO MY NIWG Indicators : Version 2. The scope of the Stage I audit included estates, mills and support infrastructure.

Stage II was conducted between 14 and 24 July 2008. The Assessment Plan is included as Appendix B.

The approach was to audit the 3 mills together with 4 estates chosen from their supply base, such that a range of environmental and social factors were covered. These factors included consideration of topography, soils, age of palms and proximity to local communities and areas with HCVs.

The methodology for collection of objective evidence included physical site inspections, observation of tasks and processes, interview of staff, workers and their families and external stakeholders, review of documentation and monitoring data. Checklists and questionnaires were used to guide the collection of information.

The assessment was based on random samples and therefore nonconformities may exist which have not been identified.

Mr Allan Thomas, BSi Lead Auditor EMS, QMS and OHSAS has reviewed this report for conformance with RSPO Certification System requirements and technical content.

Mr Soon Leong Chia, BSi Product Manager RSPO, has reviewed this report for conformance with the RSPO Certification System requirements.

2.4 Stakeholder Consultation and List of Stakeholders Contacted

Stakeholder consultation involved external and internal stakeholders. External stakeholders were notified by placing an invitation to comment on the RSPO and BSi websites. Letters were written to individual stakeholders and telephone calls were made to arrange meetings and to discuss Kulim’s environmental and social performance.



BSi did not receive any responses in writing from stakeholders in relation to Kulim. Meetings were held with stakeholders to seek their views on the performance of the company with respect to the RSPO requirements and aspects where they considered that improvements could be made. Stakeholders included those immediately linked with the operation of the company such as employees, out growers and contractors, as well as organisations that may have an interest in Kulim’s operations or adjacent areas. Stakeholder consultation took place in the form of meetings, interviews and discussion by telephone. The interviewer explained the purpose of the audit at the outset followed by an evaluation of the relationship between the stakeholder and the company before discussions proceeded. The interviewer recorded comments made by stakeholders and these have been incorporated into the assessment findings. Male and female workers and staff were interviewed at each of the four estates and the three mills. Fieldworkers were interviewed informally in small groups in the field. In addition, the wives of workers and staff were interviewed at the housing areas in informal group meetings.

List of Stakeholders Contacted

Contractors

Road Maintenance Contractor Harvesting & FFB Transport Contractor Transport Contractor Composting Contractor Harvesting Contractor Contractors Sindora Mill Contractors Tereh Mill

Smallholders

FFB Supplier – FELDA FFB Suppliers – Kampung Felda Ulu Belitong

Local Communities

Kampong Sedenak Melayu Ulu Belitong Residents Kampung Sri Kenangan: Teachers Ulu Belitong Elementary Teachers, Tereh

Government Departments

Labour Department, Johor Department of Environment, Johor Department of Forestry, Johor Department Occupational Safety & Health Department of Wildlife & National Parks, Johor

NGOs and Others

Malaysia Nature Society, Johor Branch Malaysian CropLife & Public Health Association Wildlife Conservation Society Malaysia

WWF Malaysia NUPW Kluang Branch NUPW Union Leaders

2.5 Date of Next Surveillance Visit

The next surveillance visit is planned for August 2009.

3.0 ASSESSMENT FINDINGS

3.1 Summary of Findings

As outlined in Section 2.3, objective evidence was obtained separately for each of the RSPO Indicators for each of the three mills and each of the four estates. The results for each indicator from each of these operational areas have been aggregated to provide an assessment of overall conformance of the Company’s operations with each Criterion. A statement is provided for each of the Major Compliance Indicators to support the finding of the assessment team. Three (3) Nonconformities were identified against Minor Compliance Indicators. Eleven (11) Observations / Opportunities for improvement were identified. Details of the Nonconformities are given in Section 3.2 (Page 17). Kulim has prepared a Corrective Active Plan that was reviewed and accepted by BSi. BSi has conducted an assessment of the Kulim operations comprising 3 mills, oil palm estates, support services and infrastructure. BSi concludes that Kulim operations comply with the requirements of RSPO Principles & Criteria: 2007 and MY NIWG Indicators and Guidance : 2008. BSi recommends that Kulim be approved as a producer of RSPO Certified Sustainable Palm Oil. Criterion 1.1: Oil palm growers and millers provide adequate information to other stakeholders on environmental, social and legal issues relevant to RSPO Criteria, in appropriate languages & forms to allow for effective participation in decision making.

Kulim has prepared “Communication and Consultation Management Guidelines” that define the responsibilities and actions required for receiving, recording and responding to enquiries and requests from internal and external stakeholders. Each estate and mill maintains an “Enquiry Register Book“ for recording verbal and written communications. Inspections of records showed that written requests are held on file together with Kulim’s response (1.1.1). The registers were commenced in mid 2007 and local managers had replied to requests within 14 days. Criterion 1.2: Management documents are publicly available, except where this is prevented by commercial



confidentiality or where disclosure of information would result in negative environmental or social outcomes.

Kulim holds copies of each of the 7 management documents that are required to be publicly available. Each of these documents was inspected during the audit and details noted of the issue date and version. Kulim policy is to make these available upon request.

In addition, Kulim has prepared a “Sustainability Handbook” June 2007 that details the company’s environmental and social policies and grievance procedure. Copies of the handbook are available on request. Criterion 2.1 – There is compliance with all applicable local, national and ratified international laws and regulations.

Inspection of records and Department of Environment site visit reports confirmed each of the mills met environmental licence requirements. Monitoring records show BOD well within the land application limit for all of the previous 12 months at each mill. Emission monitoring and continuous smoke opacity measurements met compliance requirements at each mill for the previous 12 months.

Department of Occupational Safety and Health site visit reports for each of the mills and estates show no outstanding issues. Kulim has implemented systematic safety audits by the Group Safety Officer that include checks of currency of drivers and operators licenses for mobile plant and equipment. Kulim’s Sustainability Team carries out internal RSPO surveillance audits (most recent May 2008) that include checks of legal compliance with licences and regulations.

Kulim provides a good standard housing for staff and workers that meets housing regulations as noted for Criterion 6.5 (Page 18). Water supplied to housing from the government reticulated supply and from Kulim water treatment plants was within the potable water quality limits. Kulim advised there are no litigations against the oil palm estates and mills (2.1.1).

Kulim has developed a Sustainability Program Legal Register that lists all of the applicable legislation and licences and was communicated to the operating units in February 2008. Kulim’s Sustainability Team updates the Register centrally and any changes are disseminated to operating units. Each of the three mills and the four estates held a copy of the current issue of the Legal Register and applicable licenses were displayed. Criterion 2.2 – The right to use the land can be demonstrated and is not legitimately contested by local communities with demonstrable rights.

Kulim operations are on either “Freehold Land” or “State Leases”. Details of Land Titles and summary of lease history are held in file "Grant Title" on the SPO Server. Kulim Property Department holds a hard copy of land titles (2.2.1). Only oil palm is grown on the land, which is consistent with the titles and lease conditions (2.2.2).

Kulim has commenced a program (to be checked at surveillance audit) of surveying the boundaries of all of its properties and installing boundary stones. Inspections at each of the estates audited confirmed boundary stones are clearly marked and maintained.

There are currently no Land disputes at the Kulim estates. Kulim has resolved three cases since 2006. Two cases involved encroachment by other oil palm companies onto Kulim estate land. The boundaries were resurveyed and negotiation between parties reached agreement on the resurveyed boundaries. The third case involved overplanting at Mutiara Estate onto adjacent State land. The boundary was resurveyed and the overplanted land was returned to the State. Inspection of correspondence records confirmed the disputes have been resolved. Criterion 2.3 – Use of the land for oil palm does not diminish the legal rights of other users without their free, prior and informed consent.

Kulim operations are on either “Freehold Land” or “State Leases”. The land is not encumbered by Customary Rights (2.3.1). The right to use the land is not disputed. Where previous disputes have occurred, Kulim holds detailed maps prepared by an independent surveyor (2.3.2). Criterion 3.1: There is an implemented management plan that aims to achieve long‐term economic and financial viability.

Kulim has an annual budget that is projected for 5 years (3.1.1). The projections include forecasts of FFB yields/ha and oil extraction rates for each of the mills. Kulim has implemented a management system for monitoring and reporting of performance against production targets for achieving long‐term economic and financial viability. Production and performance are reported monthly to Kulim senior management. A long term planting plan, which is updated yearly (most recent update 2008), gives details of the replanting program at each estate. Criterion 4.1: Operating procedures are appropriately documented and consistently implemented and monitored.

The Kulim Agriculture Manual has been updated with best practices and was re‐issued in December 2007. The Kulim Agriculture Manual has detailed SOPs for growing oil palm from nursery through to mature palms, including upkeep and harvesting. Inspection confirmed each of the four estates held the current issue of the Kulim Agricultural Manual on site. In addition, Work Instructions in Bahasa Malaysia have been prepared for land fill management, bulk fuel tank and refuelling, pesticide store, diesel engine management, linesite, lubricant and fuel store, effluent sampling, sediment and oil interceptors, materials and waste, water catchment and treatment plant, scheduled waste, non‐scheduled waste and fertiliser application (4.1.1).

Kulim has a system comprising several levels of regular inspections and reporting of information on operational



performance in relation to standards. A Regional Controller carries out independent checks and a Plantation Inspector carries out checks every two months on estate operations. Each estate held a copy of the Plantation Inspector’s report, together with recommendations and actions taken by the estate.

Inspection of field conditions and observation of a range of tasks during the audit confirmed that SOPs and Work Instructions were being implemented consistently.

SOPs for each mill are documented in the respective Mill Quality Management Manual (4.1.1). Work Instructions, including the emergency shut‐down of equipment, were displayed at each work station.

Mill Operators carry out hourly checks and record operating parameters on the logsheet at each work station together with any comments on abnormal operation. Mill Engineers carry out checks in relation to Shift Supervisor reports and the Mill Manager follows up on action on “Maintenance Report Log Book”. Internal ISO 9001 Audits are carried out six monthly plus independent annual audits by the Certification Body.

Inspections during the audit confirmed work station logsheets and shift supervisor reports were filled out consistently and accurately. Review of records of audits and corrective actions confirmed there were no significant outstanding issues. Observation of tasks and inspections during the audit of the mill confirmed that Work Instructions and SOPs were consistently implemented. Criterion 4.2: Practices maintain soil fertility at, or where possible improve soil fertility, to a level that ensures optimal and sustained yield. Kulim Agronomy Section of the R&D Department makes two visits per year to each Estate and checks fertiliser application as well as other field practices.

The Agronomy Section collects annual foliar samples, one per block, for analysis of macro‐nutrients and some trace elements, eg boron. Data are input to a GIS Database and analysed for optimisation of FFB yield and review of the fertiliser programme. Soil samples (2 per block) are collected five yearly and data are entered to the GIS database.

Agronomy Section also collects data on the locations where EFB and mill effluent are applied. These areas are inspected twice yearly and Agronomy advises on the fertiliser programme for the subsequent year Criterion 4.3: Practices minimise and control erosion and degradation of soils.

The soil conservation practices implemented include maintenance of groundcover vegetation, box stacking of pruned fronds, planting of Guatemala and Vetiver grasses in erosion prone areas, eg stream banks, channelling of water from road‐side drains into the palms. Mucuna bracteata is planted immediately following replanting of palms to establish groundcover. Terraces and platforms are used on sloping areas. Stop

bunds are constructed on terraces for controlling water flow and to promote infiltration. Field inspection of a range of topography, including terraced land, confirmed consistent implementation of soil conservation practices.

The weed spraying programme has been changed since November 2007 by ceasing the use of Mist Blowers and implementing selective weeding using Knapsack Sprayers. A more recent change has been confining the use of glyphosate to the spraying of palm circles only, in order to encourage regeneration of soft grasses and improve groundcover.

Roto slashing is used to maintain harvesting paths that are accessible by tractor. An additional measure is to limit vehicular traffic within palms to fertiliser spreading and roto slashing. Field inspection confirmed that groundcover vegetation has improved markedly since the Stage I Audit in September 2007.

Each estate has a road maintenance program with a schedule for cleaning of roadside drains and silt traps and grading of road surfaces.

Peat soils occur only at Kuala Kabong Estate where a water management programme has been implemented. The estate carries out monitoring of water levels each morning and afternoon at the network of 60 weirs and data have been recorded since 2001. The height of weirs is adjusted daily, depending upon rainfall and water flow, to achieve the target 60cm water level relative to the ground surface. On an annual basis, the ground level is measured relative to each weir and the height of the weir is adjusted to maintain water level at 60cm relative to the ground level.

The are no sandy, low organic matter or acid sulphate soils at the Kulim estates. Field inspection confirmed that groundcover vegetation generally is well maintained in order to reduce the erosion risk of soils.

Criterion 4.4: Practices maintain the quality and availability of surface and groundwater

Kulim has developed a water management plan for the estates and mills. The Kulim Agriculture Manual Section A17 “Protection of Water Courses” provides guidance on implementation of buffer zones relative to the width of stream or drain. Each estate has a program for reinstatement of riparian buffer zones prior to the time of palm replanting (4.4.1). Field inspection confirmed reinstatement of riparian buffer strips is being implemented.

In order to prevent the discharge off site of suspended contaminants such as oil and sediment, Kulim has installed pollution control devices on all drains at mills and the maintenance workshops and vehicle wash‐down bays at estates. Inspection during the audit confirmed the pollution control devices are checked and cleaned regularly. Kulim has applied these water quality protection practices uniformly across all of its operations.

Treated mill effluent is not discharged off‐site but approximately 40% is used as an ingredient for compost



and the remainder is applied to the palms for recycling of nutrients. At Sedenak Mill, the area for land application of treated effluent has been doubled during the past twelve months to minimise the risk of seepage from entering waterways.

Inspection confirmed that bunds and weirs have not been built across the main rivers flowing through the estates (4.4.2). Kulim has implemented a program of monitoring water quality of streams flowing through the estates that involves collecting upstream and downstream samples (4.4.3). The sampling frequency has been set in relation to the potential risk to the environment and is more frequent at mills than at the estates.

Each of the estates measures daily rainfall and the information is used for planning work programmes such as fertiliser application and spraying.

Each mill has measured water consumption since meters were installed in early 2007 and the information is reported monthly against targets. The mills have achieved between 20 and 30% reduction of consumption over the past year by repairing all leaking valves and pipes and changing work practices related to the use of water, such as for cleaning of mill floors.

Inspection of the Sindora Mill effluent treatment system found that there was inadequate freeboard at one pond where part of the embankment had been excavated during installation of a transfer pump (4.4.6).

A nonconformity was raised against minor compliance indicator (4.4.6) as there was a risk of overflow of the embankment and discharge off‐site into a protected catchment immediately downstream. Criterion 4.5: Pests, diseases, weeds and invasive introduced species are effectively managed using appropriate integrated Pest Management (IPM) techniques.

Kulim’s Agricultural Manual–Section J provides detailed information on Integrated Pest Management including the IPM strategies for a range of palm pests. The IPM Program consists of monitoring of pest numbers and use of biological controls wherever possible. When additional treatment using chemicals is necessary, then this is carried out in a controlled manner. For example, field conditions are inspected for weeds prior to spraying in order to identify the appropriate chemical and spray technique. Interview of Assistant Managers and inspection of records confirmed the implementation of IPM practices.

Barn Owls (Tyto alba), have been introduced for control of the major pest, rats. The estates carry out a barn owl census annually and Agronomy Section advises on the need to increase Barn Owl densities in relation to rat damage data. The estates have introduced beneficial plants, such as Turnera subulata and Cassia cobanensis for control of leaf‐eating insects.

Kulim has compiled data from each estate on the quantity of pesticides applied and the active ingredient of each chemical and calculated a toxicity budget with

information available since 2002. However the overall data show no clear trend with substantial variations in usage due to factors such as seasonal differences and the replanting program. Criterion 4.6: Agrochemicals are used in a way that does not endanger health or the environment. There is no prophylactic use of pesticides, except in specific situations identified in national Best Practice guidelines. Where agrochemicals are used that are categorised as World Health Organisation Type 1A or 1B, or are listed by the Stockholm or Rotterdam Conventions, growers are actively seeing to identify alternatives and this is documented.

The Kulim Agricultural Manual – Section H – provides justification of the use of chemicals in relation to particular field conditions, such as for controlling individual species of weeds (4.6.1).

Estate staff inspect field conditions prior to spraying and advise the Mandore on the spray treatment required who then prepares a requisition for issue of chemicals using the “Store Issue Note”. This is a controlled process requiring the Assistant Manager to endorse, Storekeeper to issue and verify and Manager to approve.

A check of all chemicals at the Pesticide Stores showed that Kulim held only those on the “Approved List of Pesticides Registered for Oil Palm (WEF April 2007)” as advised in MPOA Circular 29 October 2007. Observation of spraymix preparation and spraying in the field at each estate confirmed measurements are made accurately and chemicals are used in accordance with product label requirements (4.6.2).

Kulim has purpose built pesticides stores. Inspection at each estate confirmed the stores are secure, clearly signed and are well maintained with good separation of chemicals, labelling, spill containment, provision of PPE, water available for washing and a high standard of housekeeping. Inspection confirmed all stores meet the requirements of the Acts and Regulations (4.6.3).

Inspection of the chemical stores showed the information on the product label of each chemical is in Bahasa Malaysia. In addition, Kulim has extracted the precautionary measures from the MSDS for each chemical and translated into Bahasa Malaysia for display at the chemical store. The Work Instruction at the chemical mixing area is in Bahasa Malaysia, which is understood by local and Indonesian workers. Interview of the storeman, mandore and sprayers confirmed their understanding of the precautions for the chemicals (4.6.4).

Medical screening of sprayers is carried out monthly at each of the clinics. An OSH registered medical practitioner conducts annual medical surveillance of sprayers (4.6.5).

At each of the estates male workers were hired as sprayers, except at Sindora where there were two female sprayers. The Hospital Assistant and Manager confirmed the policy to transfer female sprayers to



alternative duties when pregnancy was confirmed (4.6.6).

The use of Class 1 chemicals is minimised and avoided where possible by use of IPM techniques. Paraquat is restricted to use in palms <1 year old. A check of store issue records at the estates confirmed that paraquat was used only at estates where recent (<less than 1 year) replanting has been carried out. Kulim has been involved in drafting the Terms of Reference for the RSPO Project “Alternative Weeds Strategy” which aims to avoid the use of Class 1 chemicals. Kulim has engaged Syngenta to conduct a “Pesticides Stewardship Course” for Managers and Assistants at the estates.

Kulim has not used aerial spraying of agrochemicals (4.6.8). The estates record information on the quantity of chemical and areas where applied for each field in a “Daily Cost Book”. This information is summarised in the “Agronomy Proforma” and reported six monthly to Kulim’s Agronomy Department. Criterion 4.7: An occupational health and safety plan is documented, effectively communicated and implemented.

Kulim has a documented OSH Plan that consists of the elements described below for this criterion. Records held at each of the mills and estates show that appropriate Certificates are held and there are no outstanding issues arising from the most recent Department of Occupational Safety Health inspections and confirm their operations meet compliance with the OSH Act 1994 and the Factory and Machinery Act 1967 (4.7.1).

Kulim’s Occupational Safety Health Policy was approved by the Managing Director 1 January 2008 and is displayed on notice boards throughout the operations. Awareness and implementation of OSH Policy are communicated at muster and weekly briefings and through the Annual Training Programme that covers all aspects of OSH. Implementation is monitored through self assessment via the OSH Committee Meetings and independently by the Group Safety Officer and a safety consultant.

The Group Safety Officer has conducted and documented Safety Risk Assessments in conjunction with each of the mills (October 2007) and the estates (January 2008) for each work area and all work stations and tasks.

Kulim has a documented Annual Training Programme for safety. All new hires and contractors undergo a safety induction programme that is supplemented with workplace specific training. At the mills, training in safety topics that apply across the work place, eg PPE, is carried out at the shift briefings. Safety training for each work station is a component of SOP training.

At the estates, the safety awareness training programme is based on briefings at morning muster as well as follow‐up by the Assistant Managers in the field. Pesticide training is carried out in‐house and includes an evaluation of the sprayers’ understanding. Each estate

maintains records of sprayer training. Interviews of sprayers and observations of tasks at each of the estates confirmed safe working practices were understood and product label precautions were implemented consistently.

Kulim’s standard issue of PPE for all mill workers is safety shoes, helmet, and earplugs. Additional PPE is provided specific to the workstation and the assessed risk, eg safety glasses and leather gloves for firemen. All workers receive new issues of PPE in January each year and records are held for individual re‐issues. Kulim requires contractors to provide appropriate PPE to their employees and to observe safety requirements.

Kulim supplies appropriate PPE to estate workers on the basis of the task risk assessment. Pesticide application operators are issued with waterproof apron, rubber boots, nitrile gloves, N95 respirator, and eye protection. Harvesters are supplied with a safety helmet and sickle cover. Fruit collectors are issued with safety helmet, safety boots and leather gloves. Inspection confirmed each estate holds records of PPE issues for individual workers using the “DOSH recommended standard form”.

Each mill and estate has a person who is responsible for OSH, such as the coordination of training and organising OSH Committee meetings at least quarterly in accordance with Government requirements. The OSH Committees comprise representatives from each work area and includes at least two male workers and one female staff. Records are kept of the minutes of OSH meetings and inspection showed the topics discussed include work related and housing, safety issues and accidents. Information from the Safety Committee Meetings is communicated to workers during muster safety briefings.

Kulim has developed site‐specific Emergency Response Plans for each estate and mill. The Plans cover the main emergencies likely to occur and include site plans and emergency call‐out phone numbers. Records are held of Emergency Response training carried out by local fire brigade officers. Interviews of staff, workers and residents at housing confirmed their knowledge and understanding Emergency Response.

An external trainer has conducted first aid training for supervisors at the mills and for mandores at the estates. In addition to workers, first aid training also was provided for some of the wives who reside at the company housing. Site inspections confirmed first‐aid kits were available at workstations at the mills and were supplied to mandores for use in the field. The Clinic Hospital Assistants are responsible for checking and re‐stocking of first aid kits. Inspections during the audit confirmed that first‐aid kits were well stocked and records were maintained.

Kulim has implemented a system for recording and reporting of all work related accidents and injuries. LTAs are reported monthly to senior management and to DOSH immediately following an accident and a summary report to DOSH annually. The Group Safety Officer reviews LTAs monthly.



All Malaysian workers are covered by SOCSO Government Compensation. Foreign workers are covered by Foreign Workers Compensation Endorsement Schedule through Tokio Marine Insurans (Malaysia Berhad). Inspection of records confirmed the policies were current at the time of the audit. Criterion 4.8: All staff, workers, smallholders and contractors are appropriately trained.

Engineering Dept identifies and coordinates external training that is common to the group mills. The majority of local training is “On the Job” informal instruction. The Mill Training Programme for year 2008 includes a schedule for OSH training in conjunction with SOPs for both Staff and Workers. The estates have an Annual Training Programme that was prepared on the basis of needs assessment for each task (4.8.1). Each mill and estate is responsible for maintaining records of external and internal training for staff and workers. Estate Hospital Assistants have received training in the chemicals used for control of palm pests. Kulim conducts safety training for contractors and their employees. All new hires undergo training for their job. The estates and mills hold records of training for individual workers and staff. Criterion 5.1: Aspects of plantation and mill management, including replanting, that have environmental impacts are identified and plans to mitigate the negative impacts and promote the positive ones are made, implemented and monitored to demonstrate continuous improvement.

Kulim prepared an Environmental Aspects and Impacts Register in 2007 that was based on a risk assessment process and considered the negative as well as beneficial environmental aspects (5.1.1). The scope of the Register includes the operational activities at all estates, mills and support services and infrastructure. The Register was reviewed and updated in March 2008 to include additional information from the biodiversity survey and stakeholders adjacent to the estates.

Kulim has prepared an Environmental Improvement Plan (January 2008) by considering each of the significant impacts identified in the Aspects and Impacts Register and reviewing opportunities for improvement. The Improvement Plan includes a work programme (updated 30 April 2008) with responsibility and target date for implementation at each of the estates and mills.

The progress with implementation of the Environmental Improvement Plan was checked during the audit. For example, at each of the estates and mills, pollution control devices have been fitted to all workshop drains and wash‐down bays for removal of sediment and oil from wash‐down water. These were found to be well designed and maintained. For the larger improvements involving capital expenditure, progress was noted in relation to budget, design and contractual arrangements. Criterion 5.2: The status of rare, threatened or endangered species and high conservation value

habitats if any, that exist in the plantation or that could be affected by plantation or mill management, shall be identified and their conservation taken into account in management plans and operations.

Kulim engaged a consultant, Lewie Dekker, to carry out a rapid biodiversity survey (December 2007) at each of the estates (5.2.1). The survey included assessment of HCVs within each estate as well as the immediate surrounding area. At all estates, remnant vegetation has previously been logged and HCVs within the estates generally were limited to riparian vegetation. There are areas with HCVs near the estates. For example Mutiara Estate is approximately 20 km to the west of a declared area Endau‐Rompin National Park and wildlife from the national park potentially could enter the estate.

The consultant also prepared a list of rare, threatened and endangered species of fauna that are found at or near the estates and documented a Biodiversity Management Plan specific to each estate and includes immediate actions to be taken for fauna protection as well as long term strategies for enhancing habitats (5.2.2). Inspections confirmed the immediate actions of the management plan are being implemented. Immediate actions at Mutiara Estate have been the removal an electric fence around a boundary between swampy grassland and swamp forest. Longer term strategies include reinstatement of riparian buffer zones within the estate at the time of replanting to form wildlife corridors.

The consultant also recommended a program for establishing baseline information on habitats and wildlife. Kulim plans to engage the Malaysian Nature Society, Johor Branch to conduct a migratory bird study. This will be carried out as a follow‐up to the rapid biodiversity study and will provide a more detailed assessment through site visits to four estates identified by Lewie Dekker. Kulim SPO Team has communicated the rapid biodiversity assessment findings to each of the estates and supported the implementation of the “immediate actions”.

Audit checks confirmed signboards prohibiting hunting have been posted at the estate entry, the housing compound and the estate boundaries. Security patrols have been increased to prevent hunters entering the estates. Staff and workers have been made aware of wildlife protection requirements during muster briefings.

Interview of workers, staff and security officers confirmed awareness of Kulim policy prohibiting the taking or hunting of wildlife within and adjacent to the estates. In addition, Kulim has initiated the Wildlife Defender Project in collaboration with Wildlife Conservation Society (Malaysia). This Project will train security personnel as Wildlife Wardens. Kulim has prepared a list of Security personnel to be trained in October 2008 by the Society’s Enforcement Trainer and Advisor (Asia). Criterion 5.3: Waste is reduced recycled, re‐used and disposed of in an environmentally and socially responsible manner.



Kulim has identified all waste products in the Environmental Aspects and Impacts Register and has prepared an “Improvement Programme for the Control of Wastes” 3 September 2007. In addition, Kulim has prepared work instructions “Non‐scheduled Waste Management Guidelines” and “Scheduled Waste Management Guidelines” 15 May 2007 for control of waste through minimisation, recycling and disposal (5.3.1).

Mills and estates have set up stores for non‐scheduled wastes that can be recycled and scheduled wastes for collection by a licenced contractor. Records of wastes stored are held on “Bin Cards” and Manifest Consignment Notes are held on file for scheduled wastes that have been collected by the contractor. Kulim’s scheduled waste management and disposal meets compliance with Regulatory requirements.

Kulim has implemented a program of segregation of wastes at source into recyclables (plastic, glass, metal, paper), organic wastes for compost and non‐recyclables for disposal. This program has reduced substantially the quantity of solid waste requiring disposal by landfill. Non‐scheduled solid wastes that are not recyclable are disposed in small sanitary landfills within the oil palm estates. Inspections confirmed that these small landfills are appropriately located, well managed and are consistent with regulatory requirements.

Crop residues recycled to the field include empty bunches for compost with mill effluent. Treated mill effluent that is excess to composting requirements is applied to the palms in accordance with DOE Licences for land application, using a furrow system. Records are maintained of the quantities of mill effluent and other crop residues transferred to the compost site. The quantity and quality of effluent recycled to the palms for land application also are recorded

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

Renewable and non‐renewable energy use are monitored and reported per t FFB. At the mills, the operating hours for the boiler and steam turbine have been extended for optimising the generation of electricity from palm fibre and nut shell fuel. Criterion 5.5: Use of fire for waste disposal and for preparing land for replanting is avoided except in specific situation, as identified in the ASEAN guidelines or other regional best practice.

Kulim has implemented a zero burn policy. Inspections of the estates confirmed no evidence of open burning (5.5.1). In preparation for replanting, the old palms are felled, chipped and windrowed. This has been consistently implemented and was confirmed by inspection of replanted areas at Sindora and checks made of contracts for replanting.

Kulim has implemented a system for waste segregation at source, recycling and disposal. Inspections of the mills, estates and housing areas confirmed no evidence of fire used for waste disposal.

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

Kulim’s Combined Improvement Plan (30 April 2008) details the improvements to be carried out for reducing the impact of identified significant pollutants and emissions (5.6.1).

Operational controls are included in ISO 9001 QMS at each mill. Site specific pollution prevention measures are included in the Environment Improvement Plan 2008. For example at Tereh Mill, firemen were recently re‐trained to improve control of smoke emission from the boiler. In addition, Work Instructions have been implemented for specific improvements eg WI27 to reduce water consumption and discharge of wastewater. Kulim has initiated a Clean Development Mechanism (CDM) project at each of the mills for methane capture from each of the effluent ponds for reduction of greenhouse gases.

The Kulim Corporate Improvement Plan was prepared 1 May 2007 following the Baseline Survey in March of that year. This details the improvements to be made across all departments to achieve RSPO implementation. A Combined Improvement Plan was prepared initially in January 2008 and was reviewed 30 April 2008 to go beyond RSPO requirements.

Inspection of monitoring records and reports to Department of Environment confirmed the mills meet compliance with the boiler gaseous emission limits and the effluent treatment meets water quality requirements. Since the Baseline Survey in March 2007, the mills have achieved significant improvements in water quality discharged via monsoon drains. At Sedenak Mill, this has been achieved by improved segregation of wastewater and treatment via the effluent pond system.

Peat soils occur only at Kuala Kabong Estate where an appropriate water management programme is implemented. Water levels of drains are carefully controlled using a conventional system to monitor and maintain average water level below ground surface of 50‐70cm. The present conventional monitoring programme does not provide a measure of peat subsidence rate. No data are held at the Estate on changes in peat surface level relative to a fixed datum for assessment of subsidence. The peat surface is measured relative to weir heights, but the weirs have not been tied in by survey to a benchmark to enable assessment of changes in peat surface level.

A nonconformity was issued against minor compliance indicator (5.6.3) because the existing monitoring does not provide a measure of peat subsidence rate. Criterion 6.1: Aspects of plantation and mill management, including replanting, that have social impacts are identified in a participatory way and plans to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement.



Kulim has carried out a Social Impact Assessment of its operations and recorded the results in a Social Impact Register (February 2008) that considers negative as well as beneficial aspects and impacts. Records are held for each stakeholder meeting, including notes of the main points of discussion with internal and external stakeholders (6.1.1).

A consultative process was used to obtain information from Staff, Workers and their dependants, Contractors and Local Communities. Participants signed an Attendance Sheet to confirm their participation. Kulim has retained copies of all stakeholder meeting attendance records together with notes of the Meeting Minutes.

Kulim has prepared a Social Improvement Plan for the Group of estates and mills and has focused initially on common issues across all the operations. The Improvement Plan includes target dates set by each management and was last updated 30 April 2008. Checks carried out during the audit confirmed progress with implementing the Social Improvement Plan. Criterion 6.2: There are open and transparent methods for communication and consultation between growers and/or millers, local communities and other affected or interested parties.

Kulim has prepared “Communication and Consultation Management Guidelines” that were communicated to the Managers of all estates and mills on 7 July 2008 (6.2.1). The Guidelines provide local managers with flexibility to use the form of communication that is appropriate for a range of situations that includes workers, community leaders, civil society and government. The local Mill Manager and Estate Manager are responsible for communications with internal and external stakeholders.

Kulim has prepared a general list of Stakeholders that includes Government Agencies, Suppliers, Contractors, NGOs, Neighbouring Plantations, Independent Smallholders and Local Communities – updated 2 June 2008. Each estate and mill records communications, together with the response, in a “Register of Enquiry”, which was implemented mid 2007. Criterion 6.3: There is a mutually agreed and documented system for dealing with complaints and grievances, which is implemented and accepted by all parties.

The grievance procedure and guidance are documented in “Kulim Sustainability Handbook”, June 2007 (6.3.1). Details of disputes, process and outcome are recorded in the “Grievance and Complaints Register” that is held at each mill and estate.

Inspection of records showed the system has worked effectively for resolving internal labour complaints and disputes as well as an external land dispute at Mutiara Estate. The system is open to all affected parties, in accordance with Kulim Policy.

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

Kulim follows the Land Acquisition Act 1960 (ACT 486), which details the acquisition, the assessment of compensation to be made on account of the acquisition and any other matters incidental thereto (6.4.1).

Kulim abides by any decision of the independent Arbitrator and Assessor. The Act includes an Appeals and Grievance Procedure. Under the provisions of the Act, the outcome of compensation determinations are publicly available. Criterion 6.5: Pay and conditions for employees and for employees of contractors always meet at least legal or industry minimum standards and are sufficient to provide decent living wages.

There is a collective Labour Agreement for both workers (NUPW) and staff (AMESU) and pay and conditions are documented (6.5.1).

The majority of Kulim’s labour is recruited from Indonesia. Foreign workers are members of the NUPW and have access to information on pay and conditions. Interview of staff and workers confirmed knowledge of pay and entitlements.

Pay records at Sedenak and Tereh Mills showed hours of overtime worked during the 2007 peak crop season exceeded the Labour Department approval (120 hours/month). Kulim has identified excess overtime as an important social issue in the Social Impact Assessment (SIA) (SR032) but it has not yet been addressed. The mill and estates operate autonomously and there presently is no system for checking the hours of overtime worked in relation to the permitted monthly maximum.

Although a breach had not occurred in the 5 months prior to the audit, a nonconformity was issued against minor compliance indicator (6.5.2) for failure to implement controls to prevent exceedance of the Government approved overtime limit.

Foreign workers’ passports are withheld by the company and a pass is issued to allow travel. Kulim is implementing an Immigration Identity Card in conjunction with Immigration Department who has visited the estates and collected documentation and photos of foreign workers. This initiative will enable migrant workers to move freely outside of the estate or mill.

Workers receive free housing, clean water supply, free electricity (subsidised at locations connected to government supply), free medical, school transport and one set of free school uniform per year and also have access to welfare amenities. The housing standard is good and meets government regulations, although repainting is required at some estates and mills. At Tereh Mill a budget has been approved for a housing



replacement programme for 50 new houses to be built over the next three years. Criterion 6.6: The employer respects the right of all personnel to form and join trade unions of their choice and to bargain collectively. Where the right to freedom of association and collective bargaining are restricted under law, the employer facilitates parallel means of independent and free association and bargaining for all such personnel.

At the mills and estates minutes of meetings with union representatives are recorded and held on file (6.6.1). For example at Sedenak Mill minutes were reviewed for the recent meeting (24 April 2008) with combined NUPW and AMESU representatives.

Freedom of Association is included as a Policy in the Kulim Sustainability Handbook – June 2007. The Policy was communicated to estates and mills in February 2008. Interview of staff and workers confirmed knowledge of the policy but some were not Union members by choice. Criterion 6.7: Children are not employed or exploited. Work by children is acceptable on family farms, under adult supervision and when not interfering with education programmes. Children are not exposed to hazardous working conditions.

An inspection of employment records at each estate and mill confirmed age checks are carried out at recruitment (6.7.1). Indonesian workers’ information is obtained from their passport and Malaysian workers’ National ID Card. No children were observed at the workplace at any of the estates or mills. Criterion 6.8: Any form of discrimination based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation or age is prohibited.

The Kulim Sustainability Handbook includes a Policy on Equal Opportunities – June 2007. The Handbook and Policies were communicated to estates and mills in February 2008. Policy awareness and training is conducted during muster briefings. Interview of staff and workers confirmed knowledge of the Policy. Inspection of payroll records at the estates and mills did not identify differences in pay rates between ethnic groups or between male and female workers on daily rates. Criterion 6.9: A Policy to prevent sexual harassment and all other forms of violence against women and to protect their reproductive rights is developed and applied.

A Policy on Sexual Harassment and prevention of Violence against women is displayed on notice boards at Offices (6.9.1). Policy awareness training was conducted for all staff and workers in June and July 2008.

Kulim has established a “Women’s Grievance Panel Committee” that is charged with raising the awareness of women’s concerns and responding to the needs of

training, counseling and providing a channel of communication on women’s issues (6.9.2). This includes receiving any complaints related to gender issues. Interviews of staff and workers confirmed awareness of the policy and procedure but not had occasion to use. Criterion 6.10: Growers and mills deal fairly and transparently with smallholders and other local businesses.

The FFB pricing mechanism is documented by Kulim Corporate Finance Department (6.10.1). The FFB price is detailed in each contract with Outside Suppliers.

Malaysian Palm Oil Board (MPOB) sets the FFB price monthly and this information is publicly available. Kulim’s Finance Department calculates the value of FFB supplied by Traders and notifies the mills for payment to suppliers.

Before a Contract is signed, Kulim Marketing Department explains the Terms and Conditions to the Trader at a Meeting. Upon reaching an agreement, the Contract is signed and stamped to confirm the Contractor agrees. Interviews of Contractors at estates and mills and suppliers of FFB confirmed fairness of dealings with the company, eg one transport contractor has been with Tereh Mill for more than 20 years. Interviews of contractors and suppliers confirmed that payments are made in a timely manner. Criterion 6.11: Growers and millers contribute to local sustainable development wherever appropriate.

Local communities generally have good access to Government services, health and education and infrastructure is well established. Community assistance is related to the local situation. Examples of contributions include assistance with places of worship and donations to schools for activities. There is a budget to meet local requests for assistance.

At remote locations, such as Tereh Mill, which is surrounded by oil palm estates, Kulim makes donations to support local community facilities, such as the school and places of worship. The mill supplies water and electricity to the school and resident teachers free of charge. The clinic facilities are made available to government health workers who run a monthly clinic to provide anti‐natal care and immunisations for workers, worker families and the outside community. Principle 7: Responsible Development of New Plantings

Kulim has not carried out any new oil palm developments since November 2005 and there are no plans for expansion of plantings. There were no new land developments or plantings taking place at the time of the audit and Principle 7 is not applicable to this Assessment. Criterion 8.1: Growers and millers regularly monitor and review their activities and develop and implement action plans that allow demonstrable continuous improvement in key operations.



Kulim prepared a Corporate Improvement Plan (1 May 2007) following the March 2007 Baseline Survey of the environmental impacts of the mills and estates. The Plan details the improvements to be made across all departments to achieve RSPO implementation. Kulim also prepared an Environmental Aspects and Impacts Register in mid 2007 that was based on a risk assessment process and considered the negative as well as beneficial environmental impacts. The scope of the Register included the operational activities at all estates, mills and support services and infrastructure.

In January 2008, Kulim supplemented the environmental improvement plan with information on OSH and social issues and prepared a Combined Improvement Plan. The Combined Improvement Plan includes each of the key elements identified by RSPO and are outlined below.

The use of Class 1 chemicals is minimised and avoided where possible by use of IPM techniques. For example, the use of Paraquat is restricted to application in palms <1 year old. Kulim also has contributed to the “RSPO Alternative Weeds Management Strategy”.

Kulim has implemented a program of segregation of wastes at source into recyclables (plastic, glass, metal, paper), organic wastes for compost and non‐recyclables for disposal. This program has reduced substantially the quantity of solid waste requiring disposal by landfill.

Site‐specific pollution prevention measures are included in the Combined Improvement Plan 2008. An outcome of the Plan is the installation of pollution control devices on all wastewater and stormwater drains.

The Social Improvements for the Group of estates and mills initially focussed on common issues across all the operations such as policy development and establishment of the “Women’s Grievance Panel Committee”.

Kulim’s Finance Department has assigned a special budget code for capturing RSPO implementation expenditure. In addition a Sustainable Palm Oil (SPO) Team facilitates implementation, monitoring and reporting of sustainability performance.

3.2 Detailed Identified Nonconformities, Corrective Actions and Auditor Conclusions

Three (3) Nonconformities were assigned to Minor Compliance Indicators.

Kulim has prepared a Corrective Action Plan for addressing the identified Minor Nonconformities. These will be addressed during the 12 months following Initial Certification and will be checked at the Surveillance Assessment scheduled for August 2009.

BSi has reviewed and accepted Kulim’s Corrective Action Plan. 4.4.6 – Water drainage into protected areas is avoided wherever possible. Appropriate mitigating measures will be implemented following consultation with relevant stakeholders.

Sindora Mill ‐ Inspection showed a section of the anaerobic pond 2 embankment had been removed when the pump was installed for transferring effluent to the compost site. At the time of the audit site visit the freeboard at this location was considered inadequate. There was a risk of overtopping and discharge of effluent into the downstream catchment during heavy rain or if blockage of the outlet pipe to pond 3 was to occur.

A nonconformity was raised against this minor compliance indicator as there was a risk of overflow of the embankment and discharge of effluent off‐site into a protected catchment immediately downstream.

Kulim has prepared a Corrective Action Plan to repair the section of the embankment. Kulim has advised the corrective action to repair the embankment was completed during July. This will be inspected at the Surveillance Audit. 5.6.3 ‐ Monitor and reduce peat subsidence rate through water table management. (Within ranges specified in C4.3).

Kuala Kabong ‐ The present conventional monitoring programme does not provide a measure of peat subsidence rate. No data are held at the Estate on changes in peat surface level relative to a fixed datum for assessment of subsidence. The peat surface is measured relative to weir heights, but the weirs have not been tied in by survey to a benchmark to enable assessment of changes in peat surface level.

A nonconformity was issued against this minor compliance indicator because the existing monitoring does not provide a measure of peat subsidence rate.

Kulim has prepared a Corrective Action Plan to implement a monitoring program for assessment of peat subsidence. This will be checked at the Surveillance Audit. 6.5.2 – 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 languages understood by the workers or explained carefully to them by a Plantation Management official in the operating unit.

Sedenak and Tereh Mills ‐ Pay records showed during the 2007 peak crop season excessive hours of overtime compared with the Department of Labour approved maximum of 120 hours per month were worked at Sedenak Mill and at Tereh Mill.

Although a breach had not occurred in the 5 months prior to the audit, a nonconformity was issued against minor compliance indicator (6.5.2) for failure to implement controls to prevent exceedance of the Government approved overtime limit.

Kulim has prepared a Corrective Action Plan. This will be checked at the Surveillance Audit.



Observations/Opportunities for Improvement

Eleven (11) Observations/Opportunities for Improvement were identified. The progress with the Observations/Opportunities for Improvement will be checked at the Surveillance Assessment visit scheduled for August 2009.

1. Sedenak Estate – small areas of bare soil occur at some locations, eg P99 block 1 (4.3.2).

2. Laboratory analyses results are sent to all mills and estates by hard copy/email where they are manually input to an excel spreadsheet. A check of records showed accurate transcription but possibility of error during transfer of data. SPO proposes to request UTCL to forward data by email in excel spreadsheet. (4.4.3)

3. The programme and sampling results of ambient water quality at all mills and estates have not been reviewed in relation to the applicability of measured parameters as indicators of the specific potential impacts or frequency of sampling relative to seasonal conditions. (4.4.3)

4. Tereh Mill – a site specific Water Management Plan, including site map and locations of discharge points has yet to be prepared. (4.4.7)

5. Mutiara Estate – an annual medical surveillance has not yet been conducted but is scheduled to be carried out in September 2008 by OSH registered medical practitioner. (4.6.5)

6. Sedenak Estate – First Aid training has not yet been carried out but is scheduled during October. (4.7.1)

7. Sindora Estate – sprayers were not wearing safety

goggles correctly whilst refilling knapsacks with chemical. (Corrective action was taken immediately this was pointed out). The pre‐mixed container of Ally was not marked to distinguish it from other 20L containers of water. (Corrective action was taken upon return from the field). (4.7.1)

8. Inadequate control at each mill to prevent boiler ash and fibre from entering monsoon drains, which places increased loading on Pollution Control Devices. (5.3.2)

9. Sedenak Mill – Stored decanter cake is exposed to rain and is at risk of being washed into the adjacent drain and discharge via a PCD off‐site. (5.3.2)

10. At Tereh Mill, to date boiler ash has not been recycled to the field. A trial is in progress to evaluate incorporation of boiler ash with bio‐compost. (5.3.3)

11. Interviews concluded that mill staff and workers receive a copy of their “Employment Contract” but at most estates, Staff, Local and Foreign workers are not provided with a copy of their “Employment Contract”.

3.3 Noteworthy Positive Components

Improvement of Groundcover Vegetation for Soil Conservation

The Baseline Survey that was conducted in March 2007 identified the use of “mistblowers” for applying herbicides to paths and palm circles as the cause of poor groundcover in mature palms, leading to soil erosion. Kulim ceased the use of mistblowers in mid 2007 and changed its practice to selective weeding using knapsack sprayers and the spraying of palm circles only.

Inspection of field conditions during the July 2008 audit found major improvement in the amount of groundcover, with soft grasses and broadleaf plants now covering much of the bare soil observed previously (Plate 1). The improved groundcover provides protection of the soil from erosion by rainfall and runoff.

Plate 1: Well maintained Groundcover for Prevention of Soil Erosion

Control of Point‐source Pollutants and Emissions

Kulim has prepared a comprehensive assessment of all emission sources from the mills and estates. The company used this information to install spill containment at all storage and use locations for minimising the risk of accidental release of agrochemicals and other potential contaminants to the environment. In addition, pollution control devices have been installed on all mill and Estate wastewater drains for protection of water resources.

Biodiversity Conservation

Kulim initiated the assessment of HCVs at the estates with a Rapid Biodiversity Survey that was conducted in late 2007. This provided “screening” information on the presence of HCVs within and adjacent to the estates as well as a biodiversity management plan for each identified site. Kulim is following up the rapid biodiversity assessment with detailed field surveys and development of a strategy to protect fauna and flora. Kulim is a Corporate Member of the Malaysian Nature Society, Johor Branch



and has engaged them to conduct detailed biodiversity assessments of remnant vegetation (Flora and Fauna), a Water Bird census and a review of wetlands, watershed, habitat and riparian zones for management of water quality at fifteen (15) sites. Kulim has initiated the Wildlife Defender Project in collaboration with Wildlife Conservation Society (Malaysia). This Project will train security personnel as Wildlife Wardens. Kulim has prepared a list of Security personnel to be trained in October 2008 by the Society’s Enforcement Trainer and Advisor (Asia). In conjunction with Malaysian Environment Week this October 2008, Kulim in collaboration with Wild Asia Sdn Bhd is organising tree planting in Labis Bahru Estate. The ultimate aim of the program is to create natural corridors across the plantation landscape as functional habitats for wildlife, in addition to improving the local environment. The tree‐planting activity aims to demonstrate that the creation of natural corridors goes beyond simply planting trees. It is a vision for natural corridors for wildlife and the local communities.

Recycling of used Pesticide Containers

Kulim has worked with the Department of Environment and Ministry of Agriculture to develop a program for the collection and recycling of used pesticide containers. This involved development of a protocol and participation in a trial of the cleaning, storage, collection and recycling of used plastic pesticide containers.

Facilities

Kulim provides a high standard of housing (Plate 2) and facilities, such as crèches (Plate 3) for its staff and workers.

Plate 2: High Standard of Housing for Staff and Workers

Plate 3: Crèche for Staff and Worker Children

3.4 Issues Raised by Stakeholders and Findings with Respect to Each Issue

The majority of stakeholders had positive comments about Kulim. These are shown below. For the situations where stakeholders raised issues, the company’s response is stated.

Worker Issues

Foreign workers stated that their travel outside the estates is restricted because the company holds their passports. They have to request permission to travel for shopping for food supplies.

Kulim has recognised that holding appropriate identity papers is a key issue in limiting foreign workers’ freedom to travel outside of the estate where they are employed. Kulim has initiated a project with the Immigration Department to develop and issue Identity Cards to foreign workers. The project is well advanced with Immigration Department having recently photographed workers and the issue of identity cards is imminent.

The audit team concluded that this innovation will be of great benefit to the foreign workers.

None of the contractors interviewed raised any issue of concern about the conditions of contract with Kulim. Several contractors had worked with Kulim for more than 20 years and confirmed a good relationship with the company. Contractors had a good understanding of contract terms and conditions, including labour law requirements for their employees, wage rates, EPF contribution, sick pay and holiday pay. The company also had specific standards for OSH and the wearing of PPE. Contractors were aware of RSPO as at the mills and estates it had been communicated to them 3‐4 times.

Outgrowers and FFB Traders

The FFB suppliers interviewed were from the FELDA Communities near the mills. The outgrowers prefer to sell their crop to Kulim as the price received is higher than that paid by FELDA mills. The outgrowers have a good relationship with the company and one has been



supplying FFB to Kulim for more than 8 years. With the current high CPO price, many outgrowers were employing foreign workers for upkeep and harvesting of the oil palms. The FELDA communities have basic public infrastructure and Kulim provides donations to schools and support for religious festivals.

Local Communities

Local communities have good relationships with Kulim and there were no disputes over land or other issues. The Government provides basic facilities and services for health and education, except at the remote Kampong Sri Kenagan, near Mutiara Estate. Kampong children attend the government school at Mutiara Estate and Kulim provides medical treatment at its clinic. The company provides donations to support religious celebrations as well as uniforms and textbooks for school children at some kampongs.

Government

Labour Department confirmed the labour regulations for working hours and the payment of overtime under the provisions of the Employment Act 1955 and 1998 Amendment. Under special conditions, such as seasonal harvest, the Department will issue approval to a company to increase the maximum overtime per employee from 104 to 120 hours per month. The Environment Department and Department of Occupational Safety Health both confirmed there are currently no outstanding compliance issues at the Kulim mills and estates.

NGOs

The Malaysian Nature Society, Johor Branch, had completed a scoping study in March and is waiting for approval to proceed with the water bird census and detailed biodiversity surveys. The Malaysian Nature Society views this as a good opportunity to acquire data on habitats and fauna populations and is waiting for Kulim approval.

Since the completion of the RSPO field audit, Kulim has approved a contract to engage the Malaysian Nature Society, Johor Branch, to carry out the work described above.

The audit team concluded that this is a positive outcome for detailed assessment and management of HCVs.

The Malaysian CropLife and Public Health Association have worked with Kulim in the development of its procedures for recycling of used pesticide containers. This involved conducting training and implementing controls for triple rinsing, storage and collection of used containers. CropLife found Kulim cooperative to work with and they are registered as participants in the National Recycling Program for used pesticide containers.

3.5 Acknowledgement of Internal Responsibility and Formal Sign‐off of Assessment Findings

Please sign below to acknowledge receipt of the assessment visit described in this report and confirm the acceptance of the assessment report contents including assessment findings.

Signed for on behalf of (Kulim Malaysia Berhad)

Signed for on behalf of BSi Management Systems Singapore Pte Ltd

........................................................ Mr Charlie Ross Lead Auditor Date: 11 September 2008

Appendix “A”

RSPO Certificate Details

PUBLIC SUMMARY REPORT CERTIFICATE DETAILS


Kulim (Malaysia) Berhad Certificate Number : SPO 537873 Ulu Tiram Estate Certificate Issue Date: (RSPO Approval Date) KB 705, Johor Bahru Johor 80990 Malaysia

Website: www.kulim.com.my Standards: RSPO Principles & Criteria : 2007; Malaysia National Interpretation : 2008

Sedenak Palm Oil Mill and Supply Base

Location Kulai, Johor

Address Sedenak Palm Oil Mill, KB 721, 80990 Johor Bharu, Johor

GPS E 103° 32' 17.9628" N 1° 43'51.0888"

CPO Tonnage Total Production 67236.1 mt PK Tonnage Total Production 18178 mt

Company owned Estates FFB Tonnage Sedenak (50696), Rengam (43647), Asam Bubok (9587), Kuala Kabong (38969), UTE (17856), Basir Ismail (45381), REM/Pasak (24188)

Company managed Estates FFB Tonnage* Tebrau (7809)

Outgrowers and Traders FFB Tonnage* 115970mt of Total FFB 354103mt

CPO Tonnage Claimed** 44059 mt

PK Tonnage Claimed** 11 415 mt

Sindora Palm Oil Mill and Supply Base

Location Kluang, Johor

Address Sindora Palm Oil mill, KB 501, 86009 Kluang, Johor

GPS E 103° 27’ 44.316” N 1° 59’ 7.3392”

CPO Tonnage Total Production 28256 mt

PK Tonnage Total Production 8706 mt

Company owned Estates FFB Tonnage Sindora (65855), UTE (860), Basir Ismail (7122)

Company managed Estates FFB Tonnage* Tebrau (195), S Kiri (9684)

Outgrowers and Traders FFB Tonnage* 69345 mt

CPO Tonnage Claimed** 13568 mt


Tereh Palm Oil Mill and Supply Base

Location Kluang, Johor

Address Ladang Tereh Mill, KB 538, 86009 Kluang, Johor

GPS E 103° 21’ 5.0004” N 2° 13’ 3.0648”

CPO Tonnage Total Production 37979 mt

PK Tonnage Total Production 11079 mt

Company owned Estates FFB Tonnage Tereh Utara (40452), Tereh Selatan (31313), Selai (31810), Enggang (31580), Mutiara (34402), Rengam (357)

Company managed Estates FFB Tonnage* S Sembrong (56)

Outgrowers and Traders FFB Tonnage* 36963 mt

CPO Tonnage Claimed** 31 287 mt


* Production from Company managed Estates, Outgrowers and Traders is excluded from the Certificate.

** The tonnage claimed is the proportion of the total FFB production sourced from Company owned Estates.

Appendix “B”

Certification Assessment Plan

PUBLIC SUMMARY REPORT CERTIFICATION ASSESSMENT PLAN


AUDIT TEAM – CR: Charlie Ross RR: Robyn Ross IN: Iman Nawireja

DATE TIME ACTIVITY CR RR IN

Monday July 14

AM Opening Meeting – EPA HQ HR – Review Pay & Conditions, Worker Contracts, Training √ √ √

PM Document Review √ √ √ Tuesday July 15 Sedenak Mill

AM Inspections, Task Observations, Effluent Treatment and Disposal Staff, Mill Worker Interviews Housing Compound, Interview Residents, Clinic

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PM Document Review Female Staff Interviews Stakeholder Interviews

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Wednesday July 16 Kuala Kabong Estate

AM

Field Inspections, Task Observations/Interviews Inspection of Facilities (Workshops, Stores) Housing Compound, Interview Residents, Clinic Stakeholder Interviews

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PM Document Review Female Staff Interviews Worker Interviews

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Thursday July 17 Sedenak Estate

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Friday July 18 Sindora Estate

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Saturday July 19 Sindora Mill


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PM Document Review Female Staff Interviews Stakeholder Interviews

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Sunday Review and Collation of Data Pick-up from Hotel - Travel JB → Kluang

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Monday July 21 Mutiara Estate

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Tuesday July 22 Tereh Mill


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Document Review Female Staff Interviews Stakeholder Interviews Travel Kluang → JB

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Wednesday July 23

AM Interviews Agronomy Section R&D Department Follow-up at EPA HQ

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PM Follow-up – contact stakeholders Female Staff Interviews

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Thursday July 24

AM Prepare IAV Report Preparation for Closeout √ √ √

PM Closeout Meeting √ √ √

kulim rspo public summary report

Documents