RSPO Audit Report

Audit Report

Special Audit (Scope Extension) for

Smallholder Scheme PT Rigunas Agri Utama

FMS40006

RSPO Membership number: 1-0022-06-000-00

Audited Address: Simelinyang, Pauh Ranap, Sengkilo Village, Peranap District, Indragiri Hulu Regency, Riau Province, Indonesia

Date of audit: 17 - 19/11/2015 and 4/05/2016

COMMERCIAL- IN – CONFIDENCE I The contents of this report must not be disclosed to a third party without the agreement of the SAI Global Client

Audit Report

Table of contents Page Executive Overview 4 Abbreviations Used 5

1.0 SCOPE OF THE ASSESSMENT 6 1.1 Introduction 6 1.2 Audit Objective 6 1.3 Scope of Certification 6 1.3.1 Palm Oil Estate 6 1.4 Location of Mill and Estates 7 1.5 Description of Supply Base 9 1.6 Date of Plantings 10 1.7 Area of Plantations 10 1.8 Approximate Tonnages Offered for Certification (CPO and PK) 11 1.9 Other Certificates Held 12 1.10 Organisational Information/Contact Person 12 1.11 Time Bound Plan for Other Management Units 12 1.12 Partial Certification Requirements 16 1.13 Date of Issue of Certificate 16

2.0 AUDIT PROCESS 2.1 Certification Body 17 2.2 Audit Methodology 17 2.3 Qualification of the Lead Auditor and Audit Team Members 18 2.4 Stakeholder Consultation 19 2.5 Date of Next Surveillance Visit 20

3.0 AUDIT FINDINGS 3.1 Action taken on previous audit issues 21 3.2 Claim and use of certification mark and or logo 21 3.3 Description of audit findings 22 3.3.1 National Interpretation RSPO Priciple and Criteria For 22 Scheme Smallholders, Republic Indonesia, 2009 3.4 Recommendation 68 3.5 Environmental and social risk for this scope of certification for 68 planning of the surveillance audit 3.6 Acknowledgement of Internal Responsibility and Formal Sign-off 68 of Assessment Findings List of Tables Page 1 Estates GPS Locations included in certification assessment 7 2 Peranap Smallholder Scheme Profil 10 3 FFB Production of the supply base 10 4 Peranap Smallholder Scheme Age Profiles of Planted Palms 10 5 Land use description of Peranap Smallholder Scheme in 2015 11 6 Estates and Area Planted 2015 11 7 Peranap Smallholder Scheme FFB Production Trend 2012 – 11 2015 8 Peranap Smallholder Scheme Total FFB Production of 11 2015 and Estimate Production of 2016 9 RSPO Certification Time Bound Plan 13 10 List of internal and external stakeholder 19

List of Figures Page 1 Map of Peranap Smallholder Location 8

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List of Appendices Page A Audit Record 69 B Previous Nonconformities and Opportunity for Improvement 72 Summary C Nonconformities and Opportunity for Improvement 73 Summary D Stakeholder’s issues and comment 75 E Definition of, and action required with respect to audit findings 79

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Executive Overview

PT. Rigunas Agri Utama, Peranap Smallholder scheme comprising of 14 KUD and 923 farmers member. Peranap Smallholder Scheme managed by own smallholder and assist by PT Rigunas Agri Utama. Total area of estate was 5,142 Ha and the FFB were supply to Peranap mill PT Rigunas Agri Utama.

This is initial certification audit for Peranap Smallholder scheme as supply base for Peranap Mill. SAI Global has audited Peranap Smallholder scheme operations that comprising 14 KUD and 923 member of farmers/smallholders, support services and infrastructure. Several nonconformities identified during this certification audit. The report indicated that there were 2 major and 1 minor non- conformances and the report mentioned that all Major non-conformances have been corrected and the status has been closed out as explained in Appendix C. Minor findings will be verified in surveillance audit.

At the conclusion of this audit, Peranap Smallholder Scheme operation was found complies with the requirements of the National Interpretation RSPO Principles & Criteria for Sustainable Palm Oil Production For Scheme Smallholders Republic of Indonesia, 2009.

The recommendation from this audit is that certificate can proceed for Peranap Smallholder Scheme as a producer of RSPO Certified Sustainable Palm Oil FFB.

Estimated tonnage of certified FFB produced 86,966 MT

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Abbreviations Used

AA Asian Agri AMDAL Environmental Impact Analysis (Analisis Dampak Lingkungan) BLH Local Environmental Agency BOD Biological Oxygen Demand BPD Village Representative Body LPM Village community organisation BPN National Land Agency (Badan Pertanahan Nasional) CPO Crude Palm Oil CSR Corporate Social Responsibility EFB Empty Fruit Bunch EIA Environmental Impact Assessment FFB Fresh Fruit Bunch GAP Good Agriculture Practices GPS Global Positioning System HCV High Conservation Value HGU Land Use Title (Hak Guna Usaha) Humas Public relation IPM Integrated Pest Management ISO International Standards Organisation IUCN International Union for Conservation of Nature KUD Smallholder organisation/cooperative entity managed by village LCC Legume cover crops LUK Estate Unit Report (Laporan Unit Kebun) MSDS Material Safety Data Sheet MOU Agreement contract between each party NCR Non Conformance Report NGO Non-Government Organisation OHS Occupational Health and Safety P2K3 Safety Committee PEL Environmental Evaluation Manual (Pedoman Evaluasi Lingkungan) PIC Person in Charge PPE Personal Protective Equipment PT RAU PT Rigunas Agri Utama Ltd. RABQSA International not-for-profit organization with charitable status in Australia RKL Environmental Management Plan (Rencana Pengelolaan Lingkungan) RPL Environmental Monitoring Plan (Rencana Pemantauan Lingkungan) RSPO Roundtable on Sustainable Palm Oil RTE Rare, Threatened and Endangered SEIA Social Environment Impact Assessment SHM Property right certificates which issued by Badan Pertanahan Nasional SIA Social Impact Assessment SK Decree letter SP Indonesian Worker Union (Serikat Pekerja) SPSI Serikat Pekerja Seluruh Indonesia TPH Place to collect the FFB from harvest activity UPDKS Caterpillar pest which attack and eat leaf of palm oil tree UU Law or government regulation

Audit Report

1.0 SCOPE OF THE ASSESSMENT

1.1 Introduction

SAI Global conducted the initial certification audit (main audit) of PT. Rigunas Agri Utama, Peranap Smallholder Scheme on 17 – 19 November 2015 integrated with surveillance audit PT Rigunas Agri Utama Mill and Estate. Additional audit for Peranap smallholder scheme was conducted on 4 May 2016. Major and Minor Nonconformities were identified during audit. Follow up audit has been conducted on 28 December 2015 and 4 May 2016 for verification of corrective action taken by the organisation.

The purpose of this audit report is to summarise the degree of compliance with the relevant criteria, as defined on the cover page of this report, based on the evidence obtained during the audit of your organisation.

SAI Global audits are carried out within the requirements of SAI Global procedures which also reflected the requirements and guidance provided in the international standards relating to audit practice such as ISO/IEC 17021, ISO 19011, RSPO Certification System, relevant RSPO Supply Chain Certification System and other normative criteria. SAI Global Auditors are assigned to audits according to industry, standard or technical competencies appropriate to the organisation being audited. Details of such experience and competency are maintained in our records. The audit team is detailed in the attached audit record.

In addition to the information contained in this audit report, SAI Global maintains files for each client. These files contain details of organisation size and personnel as well as evidence collected during preliminary and subsequent audit activities (Documentation Review and Scope) relevant to the application for initial and continuing certification of your organisation.

Details of your primary contact persons and their contact details and site addresses are also maintained. Please take care to advise us of any change that may affect the application/certification or may assist us to keep your contact information up to date, as required by SAI Global Terms and Conditions.

Please note that this report is subject to independent review and approval. Should changes to the outcomes of this report be necessary as a result of the review, a revised report will be issued and will supersede this report.

1.2 Audit Objective

This is the initial certification audit (main audit) for Peranap Smallholder scheme. The purpose of this audit was to determine compliance of your organization’s management system with the audit criteria (National Interpretation RSPO Principles & Criteria for Sustainable Palm Oil Production for Scheme Smallholders Republic of Indonesia, 2009) and its effectiveness in achieving continual improvement and system objectives.

1.3 Scope of certification

The scope of certification is the FFB supply base Peranap Smallholder Scheme.

1.3.1 Oil Palm Estate

Peranap Smallholder Scheme PT. Rigunas Agri Utama

Audit Report

Location : Simelinyang, Pauh Ranap, Sengkilo Village, Peranap District, Indragiri Hulu Regency, Riau Province, Indonesia

GPS Location : East 101° 49’ 46” – 102° 10’ 04” South 0° 43’ 43” – 0° 32’ 26”

1.4 Location of estates

Peranap Smallholder Scheme PT. Rigunas Agri Utama are located in Riau Province, Indonesia. The geographical coordinate of the estates are shown on Table 1.

Table 1: Estate GPS Locations included in certification assessment

Mill and Estate Easting Southing

Peranap Smallholder 101o 49’ 46” – 102o 10’ 04” E 0o 43’ 43” – 0o 32’ 26” S

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Figure 1 Map of Peranap Smallholder Location

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1.5 Description of supply base

Peranap Smallholder Scheme PT. Rigunas Agri Utama managed by own smallholder and assist by PT Rigunas Agri Utama. Total area of estate was 5,142 Ha and consist of 14 KUD and 923 farmer member. Peranap Smallholder Scheme estate supply FFB to Peranap mill PT Rigunas Agri Utama. The profil of Peranap smallholder scheme, hectarage and FFB production of the estates are shown on Table 2 and 3.

Table 2. Peranap Smallholder Scheme Profil Farmers Chairman of Division Area (ha) Name of KUD SP/Village Alamat Number KUD Sencano Jaya Village, I 600 300 Bukit Makmur Sencano Jaya Subdistrict Batang Peranap, Syahrul Efendi Indragiri Hulu Regency Pauh ranap Village, I 420 210 Ketipo Jaya Pauh Ranap SubDistrict Peranap, Indragiri Syarifuddin Hulu Regency Sungai Aur Village, I 500 250 Bukit Permai Sungai Aur Subdistrict Batang Peranap, Suwanto Indragiri Hulu Regency Semelinang Tebing Village, I 306 153 Semelinang Lestari Semelinang SubDistrict Peranap, Indragiri Siswadi Hulu Regency Subtotal 1.826 913 Pesajian Village, Subdistrict II 320 160 Gapoktan Pesajian Batang Peranap, Indragiri Abu Nawas Hulu Regency Punti Kayu Village, II 310 155 Serangge Permai Punti Kayu Subdistrict Batang Peranap, Erman UR Indragiri Hulu Regency Peladangan Village, II 640 320 Lembah Rezeki Peladangan Subdistrict Batang Peranap, Sundono Indragiri Hulu Regency Peranap Village, SubDistrict Usman II 120 60 Sadar Mandiri Peranap Peranap, Indragiri Hulu Mustafa Regency Gumanti Village, SubDistrict II 80 40 Gumanti Gumanti Peranap, Indragiri Hulu Lukman Regency Subtotal 1,470 735 Talang 7 Buah Tangga Talang 7 Buah Ahmad Lana III 200 100 Maju Bersama Village, SubDistrict Rakit Tangga Harahap Kutim, Indragiri Hulu Regency Pulau Sengkilo Village, Maju Usaha III 440 220 Pulau Sengkilo SubDistrict Kelayang, H. Sudirsyam Bersama Indragiri Hulu Regency Kota medan Village, III 160 80 Maju Jaya Kota medan SubDistrict Kelayang, Hasan Basri Indragiri Hulu Regency Talang Durian Cacar Village, Usaha Tani Talang Durian III 340 170 SubDistrict Rakit Kutim, Aprizal Bersama Cacar Indragiri Hulu Regency Kota Baru Village, SubDistrict III 706 353 Lakat Makmur Kota Baru Rakit Kutim, Indragiri Hulu Toni Khairil Regency Subtotal 1,846 923 Source: Asian Agri, March 2015

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Table 3. FFB Production of the supply base

Estate Planted Area (ha) FFB (ton/year) (2015)

Peranap Smallholders Scheme 5,142 87,742 Estate, PT Rigunas Agri Utama

Total 5,142 87,742

Source: PT. Rigunas Agri Utama, January 2015

1.6 Date of plantings

Table 4: Peranap Smallholder Scheme Age Profiles of Planted Palms

Smallholders Planted Area (Ha) % of Planted Area Year Mature Immature Mature Immature 1994 600 - 100% - 1995 1,226 - 100% - 1997 1,350 - 100% - 1998 1,500 - 100% - 2000 360 - 100% - 2001 106 - 100% - Total 5,142 - 100% - Grand Total 5,142 100% Source: PT. Rigunas Agri Utama, January 2015

1.7 Area of plantation

The areas details for Peranap Smallholder Scheme estates are shown on Table 4. Review of estate boundary maps has been done. There is no new open area since November 2005. All land inside the smallholder scheme area has been developed in period 1994 – 2001. The submitted estate boundary maps dated 23 June 2016 indicated that there are natural vegetated land has been cleared however the cleared area are within the enclave which is rubber plantation and it is open by the community who encroached to the company concession which the company do not have control.

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Table 5: Land use description of Peranap Smallholder Scheme in 2016

Used area Hectares Mature plantation area 5,142

Immature plantation area 0 Total area planted 5,142

Emplacement and Mill -

HCV Area (include in Total Area) - Other area (enclave, water ponds, land with slope >30 - %) Total leased area 5,142 Source: PT. Rigunas Agri Utama, January 2015

Table 6: Estates and Area Planted 2016

Estate Mature (ha) Immature (ha) Peranap Smallholder 5,142 0 Scheme Estate Source: PT. Rigunas Agri Utama, January 2015

1.8 Approximate tonnages offered for certification (FFB)

Approximate tonnages offered for certification is estimated based on the Smallholder last three years actual FFB production from Peranap Smallholder scheme Estate; also last year.

Table 7: Peranap Smallholder Scheme FFB Production Trend 2012 – 2015

Year Actual Production (MT)

2012 98,456 2013 95,823 2014 73,031 2015 87,742 Source: PT. Rigunas Agri Utama, January 2015

Table 8: Peranap Smallholder Scheme Total FFB Production of 2015 and Estimate Production of 2016

Estate Planted Area Actual FFB Estimated FFB (Ha) Production 2015 Production 2016 KUD Bukit Makmur 600 14,900 14,984 KUD Ketipo Jaya 420 10,067 9,469

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Estate Planted Area Actual FFB Estimated FFB (Ha) Production 2015 Production 2016 KUD Bukit Permai 500 11,339 11,273 KUD Semelinang Lestari 306 5,722 6,899 KUD Karya Mandiri 320 4,663 4,341 KUD Serangge Permai 310 4,620 4,207 KUD Lembah Rejeki 600 7,944 8,082 KUD Sadar Mandiri 120 896 1,603 KUD Gumanti 120 2,014 1,603 KUD Maju Bersama 200 2,626 2,600 KUD Maju Usaha Bersama 440 7,088 5,720 KUD Maju Jaya 160 1,979 2,080 KUD Serba Usaha 340 4,588 4,900 KUD Lakat Makmur 706 9,297 9,205 Total 5,142 87,742 86,966 Source: PT. Rigunas Agri Utama, November 2015

Based on the above table, the estimated of certified FFB offered in 2016 for certification Peranap Smallholder scheme are: Estimated tonnage of certified FFB produced 86,966 MT

1.9 Other certificates held No other certificate held by Peranap Scheme smallholder.

1.10 Organizational information/contact person

PT. Rigunas Agri Utama Jl. MH. Thamrin No. 31, Jakarta 10230 Phone : (+62-21) 2301119 Fax : (+62-21) 2301120 Contact person : Ms. Asrini Subrata Stakeholder Relation Manager Email : [email protected]

1.11 Time bound plan for other management units

PT. Rigunas Agri Utama as a subsidiary of PT. Inti Indosawit Subur is committed to RSPO certification of all its Management Units located in North Sumatera, Riau and Jambi Provinces. Time bound plan has been developed to achieve the RSPO certification for all its Management Units and Plasma. The time bound plan is realistic and challenging. The plan was detailed on Table 11. The

Audit Report time bound plan was updated in September 2015. It was noted that all Management Units have been audited for RSPO certification and 2016 for Plasma (smallholder scheme).

Table 9: RSPO Certification Time Bound Plan

Time bound Name of Supply Estate Name of Mill Mill Address for Progress Base Plantation Address certification Delik & Pangkalan Kerinci Village, Bunut Buatan Estate Langgam District, Delik & Pangkalan Pelalawan Regency, Kerinci Village, Buatan I Mill Riau Certified on Bunut Langgam 2010 Delik & Pangkalan 16 September 2010 District, Pelalawan Kerinci Village, Bunut Regency, Riau Buatan (Plasma) Langgam District, Pelalawan Regency, Riau Delik & Pangkalan Kerinci Village, Bunut Buatan Estate Langgam District, Delik & Pangkalan Pelalawan Regency, Kerinci Village, 2010 Buatan II Mill Riau Certified on Bunut Langgam Delik & Pangkalan 16 September 2010 District, Pelalawan Kerinci Village, Bunut Regency, Riau Buatan (Plasma) Langgam District, Pelalawan Regency, Riau Ukui Village, Ukui Certified on Ukui Estate District, Pelalawan 2010 1 March 2011 Ukui Village, Ukui Regency, Riau Ukui I Mill District, Pelalawan Ukui & Lubuk Batu Brought Regency, Riau Jaya District, Certified on Ukui (Plasma) forward from Pelalawan & Inhu 11 June 2012 2012 to 2011 Regency, Riau Ukui Village, Ukui Certified on Soga Estate District, Pelalawan 2010 1 March 2011 Ukui Village, Ukui Regency, Riau Ukui II Mill District, Pelalawan Ukui & Lubuk Batu Brought Regency, Riau Jaya District, Certified on Ukui (Plasma) forward from Pelalawan & Inhu 11 June 2012 2012 to 2011 Regency, Riau Pulau Pauh / Penyabungan / Tungkal Ulu Merlung Village, Certified on Pulau Pauh / 2011 Estate Tungkal Ulu District, 15 August 2012 Penyabungan / Tanjung Jabung Tungkal Ulu Merlung Village, Regency, Jambi Mill Tungkal Ulu Renah Mendalo, District, Tanjung Merlung, Muara Jabung Regency, Tungkal Ulu Papalik District, Certified on Jambi 2012 (Plasma) Tanjung Jabung 11 July 2013 Barat Regency, Jambi Singoan / Bukit Sari Singoan / Bukit Sari / / Bulian Jaya Bulian Jaya Village, Muara Bulian Village, Muara Muara Bulian Muara Bulian / Certified on 2011 Mill Bulian / Pemayung Estate Pemayung District, 28 August 2012 District, Batang Batang Hari Regency, Hari Regency, Jambi

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Time bound Name of Supply Estate Name of Mill Mill Address for Progress Base Plantation Address certification Jambi Maro Sebo Ilir Muara Bulian Certified on District, Batanghari 2012 (Plasma) 12 July 2013 Regency, Jambi Petapahan Village, Petapahan Village, Tapung District, Topaz & Seed Tapung District, Certified on Topaz Mill 2013 Kampar Regency, Garden Estate Kampar Regency, 30 March 2015 Riau Riau Lubuk Bernai / Lubuk Bernai / Kampung Baru / Kampung Baru / Pelabuhan Dagang Pelabuhan Dagang / Taman Raja / Pematang Pauh Taman Raja & Pematang Pauh Certified on 2013 Mill Vilage, Tungkal Ulu Badang Estate Vilage, Tungkal Ulu 20 February 2015 District, Tanjung District, Tanjung Jabung Regency, Jabung Regency, Jambi Jambi Langkan / Penarikan / Tambak / Sotol Segati Estate Village, Langgam 2014 On progress District, Pelalawan Regency, Riau Pangkalan Sarik / Baru Village, Penarikan & Langgam / Siak Hulu Langkan / 2014 On progress Gondai Estate District, Pelalawan / Penarikan / Kampar Regency, Tambak / Sotol Segati Mill Riau Village, Langgam Pangkalan Sarik / District, Pelalawan Baru Village, Regency, Riau Langgam / Siak Hulu Penarikan (KKPA) 2016 - District, Pelalawan / Kampar Regency, Riau Gunung Sahilan Gunung Sahilan Village, Lipat Kain 2016 - (KKPA) District, Pelalawan Regency, Riau Tanah Datar Petatal Village, Talawi Tanah Datar District, Asahan Tanah Datar Estate Regency, North Petatal Village, Brought Tanah Datar Sumatera Certified on Talawi District, Forward from Mill Bahilang Village, 18 May 2015 Asahan Regency, 2015 to 2013 Tebing Tinggi District, North Sumatera Bahilang Estate Serdang Bedagai Regency, North Sumatra S1-S3 / Sukadame S1-S3 / Sukadame Village, Bilah Hulu / Village, Bilah Hulu / Brought Aek Nabara Kota Pinang Aek Nabara Kota Pinang District, Certified on Forward from Mill District, Labuhan Estate Labuhan Batu 6 March 2015 2015 to 2013 Batu Regency, Regency, North North Sumatra Sumatra Teluk Panjie Teluk Panjie Village, Village, Kampung Kampung Rakyat Brought Teluk Panjie Rakyat District, Teluk Panjie Certified on District, Labuhan Forward from Mill Labuhan Batu Estate 21 April 2015 Batu Regency, North 2015 to 2013 Regency, North Sumatra Sumatra Peranap Mill Simelinyang / Pauh Peranap Estate Simelinyang / Pauh Brought Certified on

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Time bound Name of Supply Estate Name of Mill Mill Address for Progress Base Plantation Address certification Ranap / Sengkilo Ranap / Sengkilo Forward from 7 January 2015 Village, Peranap Village, Peranap 2016 to 2013 District, Indragiri District, Indragiri Hulu Hulu Regency, Regency, Riau Riau Simelinyang / Pauh Ranap / Sengkilo Peranap (Plasma) Village, Peranap 2016 On progress District, Indragiri Hulu Regency, Riau Tuo Sumai / Sungai Rambai Village, PWK Bungo Tebo Certified on Tuo Sumai / Sungai Sumai / Tebo Ulu 2016 Estate 3 December 2015 Rambai Village, District, Bungo Tebo Bungo Tebo PWK Sumai / Tebo Regency, Jambi Mill Ulu District, Bungo Tuo Sumai / Sungai Tebo Regency, Rambai Village, PWK Bungo Tebo Jambi Sumai / Tebo Ulu 2016 - (Plasma) District, Bungo Tebo Regency, Jambi Kampung Padang Village, Bilah Hilir Certified on Kampung Padang Tanjung Selamat District, Labuhan 2017 26 May 2015 Tanjung Village, Bilah Hilir Batu Regency, North Selamat Mill District, Labuhan Sumatra Batu Regency, Sennah Village, Bilah North Sumatra Hilir District, Labuhan Certified on Pangkatan 2017 Batu Regency, North 26 May 2015 Sumatra Rahuning Village, Rahuning Village, Bandar Pulau Gunung Pulau Maria Bandar Pulau District, Certified on District, Asahan 2017 Melayu I Estate Asahan Regency, 7 September 2015 Regency, North North Sumatra Sumatra Gonting Mahala Gonting Mahala Village, Bandar Village, Bandar Pulau Gunung Sentral & Batu Certified on Pulau District, District, Asahan 2017 Melayu II Anam Estate 8 July 2015 Asahan Regency, Regency, North North Sumatra Sumatra Negri Lama Utara, Negri Lama Seberang - Certified on 23 Negri Lama Village, Bilah Hilir December 2015 Central, District, Labuhan as Independent Negri Lama Negri Lama Batu Regency, North Mill Seberang Village, Selatan Sumatra - Audited in March Brought Bilah Hilir District, 2016 as Mill and Negri Lama II Forward from Labuhan Batu Aek Korsik Village, supply bases 2018 to 2015 Regency, North Aek Natas District, - HGU No.02-12- Sumatra Aek Kuo Labuhan Batu 00-00-2-00074 Regency, North issued on 29 Sumatra February 2016 for area 188.75 Ha. Negri Lama - Certified on 8 Negri Lama Seberang Seberang Village, *3rd party which is April 2015 Village, Bilah Hilir Brought Bilah Hilir District, excluded from - Audited in March Negri Lama I District, Labuhan Forward from Labuhan Batu scope of 2016 as Batu Regency, North 2018 to 2015 Regency, North certification independent Mill Sumatra Sumatra Source: Asian Agri, March 2015

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1.12 Partial Certification Requirements

All Management Units have been audited for RSPO Certification based on Table 11: RSPO Certification Time Bound Plan, except several areas which land use title are not ready. Statuses of land use title for the related management unit were:  Topaz Estate, PT. Tunggal Yunus Estate: on progress for recommendation regarding Location Permit applied to Regent (Bupati) of Kampar.  Negeri Lama Estate, PT. Hari Sawit Jaya: Land titles HGU Extension No.02-12-00-00-2- 00074 issued on 29 February 2016 includes SK BPN Sumatera Utara No.3/HGU/BPN.12/XI/2015 dated 8 December 2015 regarding extension land titles issues for PT Hari Sawit Jaya for area coverage 188,75 Ha.  Teluk Panjie Estate, PT. Supra Matra Abadi: on progress for technical consideration in gaining Location Permit from Land Agency (BPN) of Rokan Hilir Regency, Riau Province.

1.13 Date of issue of certificate and date of previous assessment

This is the initial certification audit (main audit) for Peranap Smallholder Scheme.

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2.0 AUDIT PROCESS

2.1 Certification body

PT. SAI Global Indonesia

Graha Iskandarsyah, 4th floor Jl. Iskandarsyah Raya No. 66 C Kebayoran Baru, Jakarta 12160, Indonesia Phone : +62 21 720 6186, 720 6460 Fax : +62 21 720 6207 Contact person : Ms. Inge Triwulandari Technical Manager Email : [email protected]

SAI Global is one of the world’s leading business providers of independent assurance. SAI Global provides organisations around the world with information services and solutions for managing risk, achieving compliance and driving business improvement.

We provide aggregated access services to Standards, Handbooks, Legislative and Property publications; we audit, certify and register your product, system or supply chain; we facilitate good governance and awareness of compliance, ethics and policy issues and provide training and improvement solutions to help individuals and organisations succeed.

The SAI Global business is driven by two equally important client needs - the mandated need for organisations to conform to regulations, standards and legislation in all their locations, and the operational need for organisations to improve business processes and procedures as well as corporate culture. As we are a global company, we can meet these needs for any client - those operating within one country's borders and in one language or those operating across borders and in several languages.

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

2.2 Audit methodology

The initial certification audit (main audit) was performed on 17 – 19 November 2015 and 4 May 2016. The audit plan is available in Appendix A of this report on page 69. Assessments plan has included but not be limited to areas of potential environmental and social risk.

The audit methodology for collection of objective evidences is site inspection, documentation and record review and interview with staffs, workers, and group discussion with the stakeholders. Objective evidences from documentation/record review in one area may also be cross checked with other objective evidences in other areas and with the evidence of implementation on site during the

Audit Report audit. Inputs from stakeholders via letter, email, or other communication media were also considered for this initial certification audit.

During the audit, particular attention has been paid to previous non-conformities (Appendix B).

2.3 Qualification of the lead auditor and audit team member

Mujinius Jalaraya – Lead Auditor and audited estate operation, legal aspect, and HCV

Bachelor degree from Faculty of Forestry, Bogor Agricultural University (IPB) in 2008, Majoring in Forest Resources Conservation. He have a working experience in palm oil plantations as SHE Assistant at PT. Astra Agro Lestari Tbk in 2008 - 2012 and as Supervisor Sustainability at Teladan Prima Group in 2012 – 2014. He joined the SAI Global since April 2014 as Auditor ISO 9001: 2008, ISPO and RSPO. Various training has followed, such as: Lead Auditor ISO 9001: 2008 Training (2014), Lead Auditor ISPO Training (2014), Lead Auditor RSPO Training (2014), HCV Assessor Training (2013), Internal Auditor ISO 14001: 2004 Training (2013), Training for Trainers (2013), OHS Expert/Ahli K3 Umum Training (2010), etc. He has much experience in application of quality management system, environmental and OHS management system in the company and much involved in audit of the management system. During work at SAI Global he has had experience for audit ISO 9001: 2008 in various industries and Services Company, RSPO and ISPO audit for several oil palm plantation companies.

Daniel Sitompul – Audit Team Member and audited OHS aspect Daniel graduated with Bachelor of Chemical Engineering degree from Indonesia Institute of Technology in 1995. He has working experience as Quality, Environment and Safety Consultant for many years. She has completed ISO 14001 (2007), OHSAS 18001 (2010), Ahli K3 Umum (2007), ISO 9001 (2009), RSPO PC Training (2013), Auditor SMK3 (2013) dan ISPO Auditor Training (2013). He has also completed the training form government regarding to Safety Management System (SMK3), PROPER and AMDAL (environment). For the last 5 years she has been involved in quality (ISO 9001), Safety (OHSAS 18001) and environmental (ISO 14001) management system consultancy and audits for very broad industrial and in the palm oil sector since 2013 for several plantations and mills.

Fadjar Deniswara – Audit Team Member and audited Social and Labour aspect He graduated with Bachelor of Industrial Engineering degree from National Institute of Technology in Malang. He is a Lead Quality Auditor for ISO 9001:2008 with SAI Global. He has an experience for more than 17 years in auditing. He has an experience in audit with company with labour intensive type (e.g. textile, garments, shoes, etc). He has also qualified as SA 8000 auditor. He has received training for good agricultural practices including integrated pest management and high conservation value (2008-2009).

Fitria Rahmayanti – Audit Team Member and audited Environmental aspect She is Bachelor of Health Nutrition from the University of Gadjah Mada in 2007. Having work experience as a nutritionist at a hospital in Jakarta. He has followed the lead auditor training ISO 9001: 2008 (in 2012), lead auditor training ISPO (18 to 23 February 2012), and lead auditor training ISO 14001: 2004 (2012) and SMK3. Since 2012 joined the junior auditor, and has audited ISPO in various companies, oil palm plantations since 2013 and audit RSPO since 2015.

Audit Report

2.4 Stakeholder consultation

Stakeholder consultation was performed to internal and external stakeholders. Internal stakeholders included staffs and workers. External stakeholders were selected by considering that they have an interest in the organisation activities, directly border with organisation, area which the workers live. External stakeholders included NGO, governments and civil societies.

Letters were also sent to external stakeholders to invite for comment or individual/group discussion. Invitation letter to comment for statutory bodies/district government was sent by email in 13 November 2015 and invitation letter for local stakeholder was sent directly in 18 November 2015. Group and Individual discussion with local stakeholders was conducted during audit, to verify compliance against relevant criteria and indicator related to land status and conflict, environmental, social aspect and HCV. Surrounding Village of estate has been chosen to represent societies.

Group interview was conducted for workers with similar job while others were interviewed individually in the scope to verify compliance against relevant criteria and indicator related to infrastructure facility, labour, social aspect (discrimination and sexual harassment), environment and HCV. The result of stakeholder consultation was used to justify fulfilment of some indicators in this report.

The result of these consultations was provided in Appendix “D” on page 75.

Table 10: List of internal and external stakeholder

Stakeholders Methods of Consultation

Internal stakeholders ( mill & estates )

Head of SPSI Group discussion

Head of Gender Committee Group discussion Group discussion for workers with similar role, Workers otherwise individually interviewed External Stakeholders ( mill & estates ) Head of Villages : - Talang Individual discussion - Semelinang Farmer groups (FFB Supplier / KUD) - KUD Katipo Jaya Individual discussion - KUD Bukit Makmur Social and Labour Agency (Dinas Sosial dan An invitation letter to comment was sent Tenaga Kerja Kabupaten Indragiri Hulu) Agriculture and Plantation Agency (Dinas Pertanian dan Perkebunan Kabupaten An invitation letter to comment was sent Indragiri Hulu) Environment Agency (BLHD Kabupaten An invitation letter to comment was sent Indragiri Hulu) National Land Agency (Badan Pertanahan An invitation letter to comment was sent Nasional (BPN) Kabupaten Indragiri Hulu) Sub District Police (Kepolisian Sektor An invitation letter to comment was sent Peranap) Sub District Head (Camat Peranap) An invitation letter to comment was sent NGOs: AMAN (Aliansi Masyarakat Adat An invitation letter to comment was sent Nasional), GAPKI, Sawit Watch, WWF,

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Stakeholders Methods of Consultation Lentera Rakyat and Walhi Sumatera Utara

District Head (Bupati Kabupaten Indragiri An invitation letter to comment was sent Hulu)

2.5 Date of next surveillance visit

The next surveillance visit will be conducted around twelve month after initial certificate issued before datum month of the certification period.

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3.0 AUDIT FINDINGS

3.1 Action taken on previous audits findings

This is initial certification (main audit) for Peranap Smallholder Scheme, therefore no previous audit findings.

3.2 Claim and use of certification mark and or logo

This is initial certification (main audit) for Peranap Smallholder Scheme, therefore Claim and use of certification mark and or logo of RSPO.

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3.3 Description of audit findings 3.3.1 National Interpretation RSPO Priciple and Criteria for Scheme Smallholders, Republic Indonesia, 2009 PRINCIPLES 1: COMMITMENT TO TRANSPARENCY OBSERVATION & OBJECTIVE SUMMARY OF FINDINGS FOR EACH INDICATOR COMPLIANCE NO CRITERION / INDICATOR EVIDENCE (YES / NO) 1.1 Scheme manager 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 on decision making. 1.1.1 Major - Log Book ‘Information Requests for information submitted in proposal and send to YES Requests of information and Request and Response year company, all the information and aspirations will be addressed to responses given to 2016 and 2015 – KUD Bukit organization with consideration company policy. Some of proposal stakeholders are recorded and Makmur were rejected and approved by the company. maintained for a period determined by existing - Public consultation and PIC who’s tasked associated with social communication are Estate regulations and to serve its interview with smallholder in manager with the daily implementing are ‘Public Relations’. And purpose 4 May 2016 elements 1.1.1 already described in this procedure. - Interview with stake holder The initial response was given no later than 14 days after receipt of dated 3 March 2016 the request from stakeholders. This time frame already decided in the procedure AA-GL-5008.1-R0 – ‘Stakeholder Information Request

Handling’.

The initial response was given no later than 14 days after receipt of the request from stakeholders. Records of information requests and aspirations documented in the Log Book ‘Information Request and Response year 2016 and 2015’. Information and responses may include the following:  The contract between the manager and farmer partnership.  Letter of land / property certificate.  Material / training materials on IPM and the use of agricultural chemicals safely.

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 Health and safety plan.  Planning and impact assessments relating to social impacts and environmental.  Pollution prevention plans.  Complete description of complaints and objections.  Negotiation procedure.  Procedures for calculating the price, and to establish the quality of FFB  Records of current debts and payments, deductions and charges  Continuous improvement plan GUIDANCE: Scheme manager should respond constructively and promptly to requests for information from stakeholders. (See criterion 1.2 for requirements relating to publicly available documentation) Information and responses may include the followings: • Contract between scheme manager and smallholders (criteria 1.2) • Land titles/smallholders’ user rights (2.2) • Training material in IPM and safe use of agro-chemical use (4.6) • Health and safety plan (4.7) • Plans and impact assessments relating to environmental and social impacts (5.1, 6.1, 7.1, 7.3). • Pollution prevention plans (5.6) • Details of complaints and grievances (6.3) • Negotiation procedures (6.4). • Procedure for calculating prices, and for grading, FFB (6.10) • Up-to-date records of debts and repayments, charges and fees (6.10) • Continuous improvement plan (8.1) 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.

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1.2.1 Major • List of Documents and Documents available to the public specified in the ‘List of YES Information and responses Information – PT. Rigunas Documents – PT. Rigunas Agri Utama’. provided covers documents Agri Utama. (that are publicly available) • Log book – receipt note Documents available to the public and stakeholder can be provided which shall be in accordance • Social activities report – KUD to stakeholders according to their relevance through a written with current laws and Bukit Makmur request to the organization. regulations as follows: Documents available to the public placed in the respective sections  Legal within the organization. Such as identity cards, domicile of the Evidence of legal owner, the total area, type of plant, seed origin, productivity, ownership of the land or location of the garden as well as information related to legal issues, land-use rights;(certificate) environmental and social.  Environmental SEIA document (AMDAL), Information provided adequate at minimum, an information available at the summary of the document listed such as : smallholders organisation. • Land titles/user rights  Social • Environmental – AMDAL Smallholders organisation has documents of • Social Activities organisational and social activities. GUIDANCE: Information that should be publicly available include, but are not necessarily limited to: land titles, owner domicile, size of landholding, type of vegetation, origin of seeds, productivity, location of landholding and other information relevant to legal, environmental and social issues. The SEIA document is in the form of AMDAL or DPPL (if relevant). For scheme smallholders, the SEIA is covered in their nucleus estate’ SEIA documents or AMDAL (depending on total area of plasma plantations that required for AMDAL assessment), prepared by their nucleus estate and a copy of the document should be kept at the smallholders organisation. Partner nucleus estates facilitate the processing of legal ownership (in the form of certificate) of their scheme smallholdings’ land.

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PRINCIPLES 2: COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS OBSERVATION & OBJECTIVE SUMMARY OF FINDINGS FOR EACH INDICATOR COMPLIANCE NO CRITERION / INDICATOR EVIDENCE (YES / NO) 2.1 There is compliance with all applicable local, national and ratified international laws and regulations. 2.1.1 Major - List of Legal Compliance Updating of law and regulations change activities were well YES Evidence of compliance with Evaluation 2015 and 2016 documented and update once a year. Last update was performed essential regulations relevant KUD – Bukit Makmur, KUD in 11 May 2015 and January 2016. Information on all applicable and related to oil palm Maju Bersama. legal and other requirements have been reviewed and cultivation. summarised. - Attendance List – 25 August 2015 – Socialization for The evidence of compliance have been provided, including: smallholders Best practise Agronomi/Plantation, such as: - UU No. 5 tahun 1960 regarding basic regulations of agrarian specifics comply by oil palm planting in accordance HGU owned, Fertilizing performed according to the procedure that is specified - UU No. 12 tahun 1992 regarding cultivation system comply by oil palm cultivation performed according to the procedures specified and attention to aspects of environmental pollution and damage to health and safety, not use pesticides are banned, create the IPM report, perform the plantation business permit. - Law No. 12 of 1992 on Plant Cultivation System. - Agriculture Decree No. 395/Kpts/OT.140/11/2005 on Guidelines for Determination of Purchase Price of Fresh Fruit Bunches (FFB). OHS aspect, such as: - OHS Legal requirement: paramedic and first aid officer, personal protective equipment, safety sign, health care, firefighting team and fire prevention equipment etc. WORK ITEM: WI-791794 Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 25 of 79

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Environmental legal compliance, such as: - Government regulation of the Environment No. 5/2014 - water quality standard, environmental impact analysis, etc. - Government Regulation No. 101/2014 regarding hazardous waste management, smallholder has manage the waste properly (liquid, air and solid waste management) Social and labour, such as: - UU no. 13 2003 Employment Article 83, the terms' worker woman breastfeeding her child should be given the proper opportunities to breastfeed her child; it must be performed during working hours'. - UU no. 13 2003 Employment Article 68, “organisation are prohibited from employing children” - Regulation of the President of the Republic Indonesia no. 111 year 2013 about Health Insurance. Conservation legal compliance, such as: - Kepres No. 32 Tahun 1990 regarding Management of protected areas comply by identifying areas comply with HCV in the plantation and surrounding area, perform management and monitoring of HCV identified. - UU No. 5 tahun 1990 regarding the conservation of natural resources and ecosystems, comply with managing HCV areas, create HCV management and monitoring plan and performed it well, create procedures regarding wildlife protection. Socialization to smallholders has been done by the company on 25 August 2015. The copies of legal regulation was sighted on hardcopy and saved by management of smallholders. Based on

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interview with some smallholders, they understood the regulation relevant and related to oil palm cultivation. GUIDANCE: Smallholders are required to have adequate knowledge regarding, and implement main legal requirements relevant to oil palm cultivation, including those related to the scheme partnership between companies and the scheme smallholders. Scheme manager regularly provide an up-to-date list of applicable laws and regulation. For existing plantation there are some condition that could earn exemption from the criterion. This is when only the implementation of the regulation could cause a significant social impact (conflict) and also when the extent of the land was very limited. If upon replanting the significant social impact (conflict) still may happen, then the exemption continues. 2.2 The right to use the land can be demonstrated, and is not legitimately contested by local communities with demonstrable rights. 2.2.1 Major - Legal ownership of the land Smallholders already has the legality of its land ownership in the YES Smallholders are able to show for smallholder in KUD Bukit form of property right certificates (SHM) issued by BPN. Each legal ownership of the land or Makmur, KUD Maju Usaha farmer has an SHM about 2 ha. In KUD Bukit Makmur there were land-use rights Bersama and KUD Sadar 300 member of smallholder with their own certificate and total Mandiri area 600 ha, in KUD Maju Usaha Bersama there were 220 member of smallholder with their own certificate and total area 220 ha. - Site Observation Evidence of ownership SHM can be shown, consists of 15 overlay (farmer groups) and each overlay consist of 20 members. For example Overlay 1 Gunung Mukti Tama farmer groups (KUD Bukit Makmur), farmer Number 20. Several certificate on behalf smallholder were verified during audit such as: - Suryanto, Kavling No. 44, farmers’ participant (NPP) no. 154, SHM No. AI. 549164, Property Right Book (SHM) No. 1 as wide as 2 Ha, Surat ukur dated 16 November 1998 based on SK Kepala Kantor Pertanahan Kab. Indragiri Hulu dated 30 October 1998 No. SK: 02/PIR/KW.24-RGT/1998-300. - Kariman, Kavling No. 01, NPP No. 155, SHM No. AI 549165 SHM No. 2, SK Kepala Kantor Pertanahan Kab. Indragiri Hulu No. SK: 02/PIR/KW.24-RGT/1998-300 as wide as 2 ha, Farmers Group 1.

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- Solihin, Kavling No. 328, NPP No. 134, Farmers group 13, Certificate No. AM 883194, SHM No. 241SK BPN No. 02/PIR/KW.24-RGT/1998-300 dated 30 October 1998, Surat ukur dated 16 November 1998 No. 241/98 as wide as 2 ha. 2.2.1 Minor - Public consultation with Based on public consultation with stakeholder in 18 November N/A Where there are or have been stakeholder in 18 November 2015 it was note and confirm that there were no land dispute that disputes, records of 2015 occurred in plasma/smallholder area. resolution or progress towards resolution are - Site observation and Smallholder organisation has established a mechanism for available interview with smallholder resolution of conflicts and disputes through SOP for Social Conflict and Land Dispute Resolution has been described in AA-GL-0052.1- - Social Conflict and Land R1. Dispute Resolution in AA-GL- 0052.1-R1. GUIDANCE: Information on the status of land title should be those at the time being or those in the process of acquiring legal ownership. Where there are conflicts on the condition of land use as per land title, growers should show evidence that necessary action has been taken to resolve the conflict with relevant parties. For any conflict or dispute over the land, the extent of the disputed area should be mapped out in a participatory way. Evidence of legal ownership of land in the form of certificate (see also criterion 1.2) 2.3 Use of the land for oil palm does not diminish the legal rights, or customary rights, of other users, without their free, prior and informed consent. 2.3.1 Major - Legal ownership of the land Peranap Smallholder scheme already has the documents showing N/A Where other’s customary or for smallholder in KUD Bukit legal ownership or lease of the land in the form of property right legally owned lands have Makmur, KUD Maju Usaha certificates (SHM) issued by BPN. been obtained, records of Bersama and KUD Sadar process and/or negotiated Smallhoder estate development was based on smallholdings Mandiri agreements between Peranap Location Permit (Izin Lokasi) issued by the Governor Riau previous customary land - Social Conflict and Land number: KPTS.78/IL-VI/1992 regarding Location Permit and rights owners and the smallholders Dispute Resolution in AA-GL- acquisition/acquisition of land in the district of Pasir Penyu and are available and 0052.1-R1. Indragiri Hulu district Peranap for oil palm plantations PIR-Trans pattern on behalf of PT. Rigunas Agri Utama. In the first phase complemented with a sketch - Site Observation in appropriate scale. granted locations covering 12.857 ha.

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No complaints associated with land disputes between the smallholders and the surrounding community. This was also confirmed during the public consultation with stakeholders and the local community on 16 October 2015. Documents showing legal ownership or lease of the land available were completely avalilable and kept in Smallholder office/KUD. Smallholder organisation has established a mechanism for resolution of conflicts and disputes through SOP for Social Conflict and Land Dispute Resolution has been described in AA-GL-0052.1- R1. GUIDANCE: Where lands are encumbered by legal or customary rights, the grower must demonstrate that these rights are understood and are not being threatened or reduced. This criterion should be considered in conjunction with criteria 6.4, 7.5 and 7.6. Where customary rights areas are unclear these are best established through participatory mapping exercises involving affected and neighbouring communities. This criterion allows for sales and negotiated agreements to compensate other users for lost benefits and/or relinquished rights. Negotiated agreements should be non-coercive and entered into voluntarily, carried out prior to new investments or operations and based on an open sharing of all relevant information in appropriate forms and languages, including assessments of impacts, proposed benefit sharing and legal arrangements. Communities must be permitted to seek legal counsel if they so choose. Communities must be represented through institutions or representatives of their own choosing, operating transparently and in open communication with other community members. Adequate time must be given for customary decision-making and iterative negotiations allowed for, where requested. Negotiated agreements should be binding on all parties and enforceable in the courts. Establishing certainty in land negotiations is of long- term benefit for all parties.

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PRINCIPLES 3: COMMITMENT TO LONG-TERM ECONOMIC AND FINANCIAL VIABILITY OBSERVATION & OBJECTIVE SUMMARY OF FINDINGS FOR EACH INDICATOR COMPLIANCE NO CRITERION / INDICATOR EVIDENCE (YES / NO) 3.1 There is an implemented management plan that aims to achieve long-term economic and financial viability. 3.1.1 Major - Rencana Kerja Jangka Documented operational work plan for a minimum duration of 3 YES A documented operational Panjang Peranap Plasma years period 2014 - 2016 has been create by KUD and assist by work plan for a minimum 2014 -2016 Company PT Rigunas Agri Utama. Smallholder management plan duration of 3 years. was create to achieve economic viability and long-term financial. - Smallholder Estate Unit The plan was approved by each KUD (such as Bukit Makmur, Maju Report (LUK) Usaha Bersama and Maju Bersama). The parameters listed in the management plan which includes : - Land area statement (planting years, non-planted areas, i.e. HCV, conservation areas, fragile soils, enclaves) with updated location maps. - Plan for management of scheme smallholders - Crop projection = Fresh Fruit Bunches (FFB) yield trends - Cost of Production = cost per tonne of FFB trends - Forecast prices - Financial indicators – profitability forecast (income vs cost) - General strategy and allocation for environmental and social management The achievement of the management plan is reviewed every month in the Smallholder Estate Unit Report (LUK) according to the current month. Reviewing of LUK was conducted for period 2015. GUIDANCE: The minimum 3-years operational work plan, at least, covers estimation of FFB production. Smallholders together with the scheme managers prepare :

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• Estimation of FFB production • Access to new information and technology as well as market/price information • Factors affecting cost of production

Smallholders organisation should be involved in the calculation of debts and repayments, relevant agreement with bank, loan mechanism, etc. Scheme smallholders receive training services from scheme managers in relation to the management of plantation to optimize continuous productivity.

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PRINCIPLES 4: USE OF APPROPRIATE BEST PRACTICES BY SCHEME MANAGER OBSERVATION & OBJECTIVE SUMMARY OF FINDINGS FOR EACH INDICATOR COMPLIANCE NO CRITERION / INDICATOR EVIDENCE (YES / NO) 4.1 Operating procedures are appropriately documented and consistently implemented and monitored. 4.1.1 Major - Good Agriculture Practices Documented procedure or manual of Good Agriculture Practices YES A documented procedure or (GAP) procedure (GAP) has been develovep and defined by KUD and assist by manual of Good Agriculture Company PT Rigunas Agri Utama. Practices (GAP) in key activities (use of superior seeds, fertilizer SOP cover key processes, harvesting, transportation, application, IPM techniques manuring/fertilizer, Integrated Pest Management, Good and harvesting) is available. Agriculture Practices (GAP), etc. The documented Standard Operating Procedures (SOP) for was evident: • AA-APM-OP-1100.01-R1 Nursery • AA-APM-OP-1100.02-R1 Land Preparation • AA-APM-OP-1100.03-R1 Creation and Maintenance of Road • AA-APM-OP-1100.04-R1 Creation and Maintenance Trenches • AA-APM-OP-1100.05-R1 Soil and Water Conservation • AA-APM-OP-1100.06-R1 Planting Leguminous Cover Crop • AA-APM-OP-1100.07-R1 Oil Palm Planting • AA-APM-OP-1100.09-R1 Manuring • SOPs for IPM:  AA-APM-OP-1100.10-R1 Pest & Diseases Control  AA-APM-OP-1100.08-R1 Weeding Control  AA-APM-OP-1100.14-R1 Census and Identification Plant • AA-APM-OP-1100.11-R1 Management Pesticides • AA-APM-OP-1100.12-R1 Castration • AA-APM-OP-1100.13-R1 Pruning • AA-APM-OP-1100.15-R1 Census of Production

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• AA-APM-OP-1100.16-R1 Consolidation • AA-APM-OP-1100.17-R0 Water Management • AA-APM-OP-1100.18-R1 FFB Harvesting • AA-APM-OP-1100.19-R1 Transportation Management • AA-APM-OP-1100.20-R1 Replanting Hardcopy of procedure are available and controlled. Copy of the procedure were available in each KUD and it documented in Indonesian language. 4.1.1 Minor - Good Agriculture Practices SOPs are implemented on the ground and understood by each YES Evidences of implemented (GAP) procedure farmers/smallholder. Work Instructions has been developed and procedures are available posted at office in each KUD. Procedure has been disseminated - Interview with periodically to all related farmers/smallholder (harvest, brondol farmers/smallholder in KUD and upkeep). Last dissemination performed in March - April 2015. Bukit Makmur, KUD Maju Interviews with the farmers/smallholder in KUD Bukit Makmur, Usaha Bersama, KUD Sadar KUD Maju Usaha Bersama and KUD Sadar Mandiri indicate Mandiri satisfactory level of understanding and implementation in the - Site Observation in KUD Bukit field. Makmur, KUD Maju Usaha Sample of farmers/smallholder operational implementation were Bersama, KUD Sadar Mandiri taken in harvesting process, such as in Kavling No. 52 Hamparan 2 on behalf Kustanto KUD Bukit Makmur, Kavling No. 54 Hamparan 2 on behalf Kumpul Suyanto KUD Bukit Makmur, Kavling No. 54 on behalf H Sihombing, KUD Maju Usaha Bersama, Kavling No. 56 on behalf Siman KUD Maju Usaha Bersama. Pesticide spraying implementation were taken such as in Kavling No. 9 hamparan I KUD Bukit Makmur on behalf Misni, Kavling No. 64 Hamparan 4 KUD Bukit Makmur. The results were shown and it was observed that all of the activity of harvesting and upkeep (herbicide spraying) was met with the procedure and well implemented. GUIDANCE:

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Scheme smallholders implement GAP in accordance to the Standard Operating Procedure (SOP) of their nucleus estates or to the Pedoman Teknis Pembangunan Kebun Kelapa Sawit (Technical Guidance on Cultivating Oil Palm) issued by Directorate General of Plantations, Ministry of Agriculture Republic of Indonesia. 4.2 Practices maintain soil fertility at, or where possible improve soil fertility to, a level that ensures optimal and sustained yield. 4.2.1 Major - AA-APM-OP-1100.09-R1 – Peranap Smallholder has established the SOPs for Good YES Records of type and volume of Manuring Procedure Agricultural Practices in managing soil fertility which defined in AA- fertiliser supplied to APM-OP-1100.09-R1 – Manuring Procedure. Manuring was smallholder - Plan and Realisation of performed manually with spreading the fertilizer by person Manuring KUD Bukit uniformly in each palm oil trees in accordance with dose which has Makmur, KUD Maju Usaha defined by Research and Development recommendation. Bersama and KUD Sadar Mandiri in 2015 Estates activities are carried out based on KUD Work Program which generated from annual budget. Activities program are such as manuring and other operation activity. Site observation was performed during audit to some activities: spraying and manuring. Field observation and interview with employees working in those activities showed that procedures were well implemented. Activities have been performed at defined interval. Records of type and volume of fertiliser supplied to smallholder well maintained in document “Rencana dan Realisasi Pemupukan” (Plan and Realisation of Manuring). Below are the record of type and volume of fertiliser supplied to KUD Bukit Makmur, KUD Maju Usaha Bersama and KUD Sadar Mandiri in 2015:

Volume of Fertilizer (Kg) Type of Fertilizer Bukit Maju Usaha Sadar Makmur Bersama Mandiri ZA 328,960 253,440 19,917 MOP 211,200 166,960 14,385 RP 79,360 87,660 8,852

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Dolomite 158,270 112,640 8,852

4.2.2 Major - FFB Production trend 2012 – Records of land productivity in the last 3 years documented in FFB YES Records of land productivity in 2014 Peranap Smallholder production record monthly each KUD and smallholder. Below are the last 3 years scheme land productivity generally in smallholder scheme in last three years :

Year FFB Production Hectare (ha) Yield 2012 98,456 5.142 19.15

2013 95,823 5.142 18.64

2014 73,031 5.142 14.20 Average 267,310 5.142 17.33

4.2.1 Minor - Site Observation in KUD Bukit At the time of the audit conducted there was no application of EFB YES Records of EFB and/or organic Makmur, KUD Maju Usaha in Smallholder estate (KUD Bukit Makmur, KUD Maju Usaha fertilizer application on the Bersama, KUD Sadar Mandiri Bersama and KUD Sadar Mandiri). Organic fertilizer which used by land, if such practices are of smallholder was the oil palm midrib and leaf which were arranged regular operation by the - Interview with in path between oil palm tree. smallholders smallholder/farmers GUIDANCE: Smallholders are expected to have and implement simple manual GAP related to oil palm cultivation (see also criterion 4.1) The use of organic fertiliser, where necessary, may be used to maintain soil fertility. Smallholders organisation are expected to test the quality of the planting materials (e.g fertiliser) before dispatching to their members. In this matter, smallholders organisation should consult with nucleus estates or mills purchasing their FFB. Smallholders organisation and partner nucleus estates should train the smallholders to maintain simple records of their plantation activities. The use of EFB by scheme smallholders depends on its availability at the nucleus estates.

4.3 Practices minimise and control erosion and degradation of soils. 4.3.1 Major - Work instruction AA-APM-OP- The organisation has management strategy for planting on slopes YES Evidence of terracing or other 1100.05-R1 described above certain limit, as referred to company’s SOP and work conservation efforts for

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plantings on sloping terrains at preparation for planting instructions. The work instruction AA-APM-OP-1100.05-R1 or before replanting including planting on slopes described preparation for planting including planting on slopes area has been developed by organisation: - Site observation in KUD Bukti Makmur, KUD Maju Usaha - Flat undulating 0° – 5° Bersama and KUD Sadar - Rolling 6° - 12° Mandiri - Hilly 13° - 20° - Steep >20° System for planting on slopes area was provided through terracing, levelling of terrace, planting legume cover crops and determining of planting space. Site observation indicated that practices to control and minimize erosion have been applied by : • Terracing • Making the catchment where runoff water, called: “Tapak Kuda”. • Making the catchment where runoff water, called “Rorak”. • Planting legume cover crop. 4.3.1 Minor - Replanting procedure (AA- At the time of the audit conducted there was no new planting N/A Evidence of ground cover crops APM-OP-1100.20-R1) conducted by smallholder scheme. Planting for replanting will be establishment during immature performed around year 2019. However, during site observation in plantings - Site observation in KUD Bukti the ground open area, smallholder has been plant legume cover Makmur, KUD Maju Usaha crops (Mucuna bracteata) to prevent erosion. Bersama and KUD Sadar Mandiri Smallholder organizations also has defined the Replanting procedure (AA-APM-OP-1100.20-R1), which explained that after the process of land clearing and chipping, it must be performed planting land cover crop to prevent soil erosion and keep the soil fertility.

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4.3.2 Minor - Map of Soil Type (Asian Agri There were no peat soil identified or areas with fragile soils in N/A Proof of drainage system Research and Development Peranap smallholder based on Map of Soil Type (Asian Agri construction on peat and low Centre Tebing Tinggi – Research and Development Centre Tebing Tinggi – North lands Sumatera Utara, October 2012) Sumatera, October 2012). Maps georeferenced was available with scale 1 : 25.000. Mostly, soil type in Smallholder estate were Typic - Site observation in KUD Bukti Dystrudepts and Typic Hapludults. Makmur, KUD Maju Usaha Bersama and KUD Sadar Therefore it was not applicable for drainage system construction Mandiri on peat and low lands. GUIDANCE: Smallholders are expected to have and implement simple manual GAP related to oil palm cultivation (see also criterion 4.1) Smallholders should show efforts to minimise erosion on stream banks within their land if their land was very limited. If the extent of the land is sufficient for conservation of riaparian area, then the conservation should be done Development in peatland should be in accordance with government regulation 4.4 Practices maintain the quality and availability of surface and ground water. 4.4.1 Major - Soil and water conservation Training on soil and water conservation has been performed by PT YES Records of training on soil and training record in KUD Bukti Rigunas Agri Utama to all KUD and smallholder on 7 July 2015 (KUD water conservation. Makmur, KUD Maju Usaha Bukti Makmur, KUD Maju Usaha Bersama and KUD Sadar Mandiri). Bersama and KUD Sadar Record of training were evident and could be demonstrated such Mandiri on 7 July 2015 as attendance register, photo documentation and training material. 4.4.1 Minor - Work instruction AA-APM-OP- Smallholder has management strategy for planting on slopes YES Evidence of efforts to prevent 1100.05-R1 above certain limit, as referred to company’s SOP and work erosion and maintain natural instructions. The work instruction AA-APM-OP-1100.05-R1 water resources - Site Observation in KUD Bukit described preparation for planting including planting on slopes Makmur and KUD Maju Usaha area has been developed by organisation: Bersama - Flat undulating 0° – 5° - Rolling 6° - 12° - Hilly 13° - 20°

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- Steep >20° System for planting on slopes area was provided through terracing, levelling of terrace, planting legume cover crops and determining of planting space. Site observation in smallholder kavling at KUD Bukit Makmur and Maju Usaha Bersama indicated that practices to control and minimize erosion have been applied by : • Terracing • Making the catchment where runoff water, called: “Tapak Kuda”. • Making the catchment where runoff water, called “Rorak”. • Planting legume cover crop. 4.4.2 Minor - Plan and Realisation of Records of type and volume of fertiliser application to smallholder YES Records of fertiliser and Manuring 2015 KUD Bukit well maintained in document “Rencana dan Realisasi Pemupukan” pesticides application Makmur, KUD Maju Usaha (Plan and Realisation of Manuring). Below are the record of type Bersama and KUD Sadar and volume of fertiliser application to KUD Bukit Makmur, KUD Mandiri Maju Usaha Bersama and KUD Sadar Mandiri in 2015:

- Plan and Realisation of Volume of Fertilizer (Kg) Pesticide usage 2015 KUD Type of Bukit Makmur, KUD Maju Fertilizer Bukit Maju Usaha Sadar Usaha Bersama and KUD Makmur Bersama Mandiri Sadar Mandiri ZA 328,960 253,440 19,917 MOP 211,200 166,960 14,385 RP 79,360 87,660 8,852 Dolomite 158,270 112,640 8,852

Records of type and volume of pesticide application to smallholder well maintained in document “Rencana dan Realisasi Penggunaan WORK ITEM: WI-791794 Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 38 of 79

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Pestisida” (Plan and Realisation of Pesticide usage). Below are the record of type and volume of pesticide application to KUD Bukit Makmur, KUD Maju Usaha Bersama and KUD Sadar Mandiri in 2015:

Volume of Pesticide (Lt) Type of Fertilizer Bukit Maju Usaha Sadar Makmur Bersama Mandiri Glifosate 204 150 22 Flouroksipir 35 25 4

GUIDANCE: Smallholders are expected to have and implement simple manual GAP related to oil palm cultivation (see also criterion 4.1) 4.5 Pests, diseases, weeds and invasive introduced species are effectively managed through using appropriate Integrated Pest Management (IPM) techniques. 4.5.1 Major - Pest and Diseases IPM Plan has been developed by smallholder scheme and YES Records of monitoring and management program 2015 documented in “Pest and Diseases management program”. IPM control of pests and diseases Plan has been prepared within the budget in 2015. KUD assisted by - SOPs for IPM : PT Rigunas Agri Utama has established Work Program annually for  AA-APM-OP-1100.10-R1 IPM. IPM programme includes detection and census of pest and Pest & Diseases Control diseases, weeds controlling, planting and upkeep of beneficial  AA-APM-OP-1100.08-R1 plant, use of pesticide and herbicide. Weeding Control Organisation has establish the SOPs for IPM:  AA-APM-OP-1100.14-R1  AA-APM-OP-1100.10-R1 Pest & Diseases Control Census and Identification  AA-APM-OP-1100.08-R1 Weeding Control Plan  AA-APM-OP-1100.14-R1 Census and Identification Plant - Records of pest occurrence The SOP describes integrated pest control (integrated pest and control 2015 management/IPM) which combines various control techniques e.g. mechanical, biological, physical and chemical, applied early warning system (EWS) through periodically census for pests by :

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1. Visual observation (visual plant e.g. leafs or broken stems and fruit rot) 2. Conducting a census (to determine the distribution and level of attack) 3. Control (manual, biological or chemical) e.g planting of Turnera subulatta (nest of natural predator caterpillars (Ulat Api). 4. Census of evaluation (to see the effect of control). Several records of pest occurrence and control verified ie : - Rat census conducted every 3 months, Last census in July 2015 in Peranap scheme smallholder known the average level of rat attacks was less than 5% (1-3%) so that there is no chemical control using pesticides. - Detection of leaf-eating caterpillar pests (UPDKS) was performed by rotation 6 times a year or every two months on the same block. Last early detection of the rotation 1-3 period January - July 2015 in Peranap Smallholder scheme, there were no UPDKS pests detected. Plans and realization of early detection of pests and diseases was well documented. - IPM training to IPM workers has been performed in March 2015 by Asistant and Managers PT Rigunas Agri Utama. Records of training was evidenced. - Monitoring Gufon (Tyto alba) is performed every month to monitor the activity of owls as predators of rats. Last observation conducted in June 2015. - Planted the beneficial plant as the host/nest for natural enemies UPDKS (Eucanticona purcelata, cycanus sp). The beneficial plant such as: Turnera subulata planted in the collection and the main road, Antigonon leptopus planted in every corner of the main road intersections and road collection, Casia cobanensis planted alternately with Turnera WORK ITEM: WI-791794 Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 40 of 79

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in Collection Road and Main Road. Evidence of planting and upkeep was sighted and the field observations were also observed well maintained. 4.5.1 Minor - Training of IPM (Integrated Training of IPM (Integrated Pest Management) has been YES Smallholders shall be able to Pest Management) to performed by PT Rigunas Agri Utama to smallholder on 15 June demonstrate adequate smallholder on 15 June 2015 2015. The record of training were evident. During audit and knowledge on IPM and are able interview with farmers/smallholder in KUD Bukit Makmur, KUD to implement it. - Interview with Maju Usaha Bersama and KUD Sadar Mandiri indicate satisfactory farmers/smallholder in 17 – 18 level of understanding on IPM knowledge and implementation in November 2015 the field. - Site observation in KUD Bukit Makmur, KUD Maju Usaha Bersama and KUD Sadar Mandiri GUIDANCE: Smallholders are expected to have and implement simple manual GAP related to oil palm cultivation (see also criterion 4.1) 4.6 Agrochemicals are used in a way that does not endanger health or the environment. There is no prophylactic use, and if agrochemicals, which were categorised as World Health Organisation Type 1A or 1B, or are listed by the Stockholm or Rotterdam Conventions, were used, growers are actively seeking to identify alternatives, and this is documented. 4.6.1 Major - List of pesticide use in 2015 Smallholder organisation have a complete listing of WHO class 1A, YES Evidence of registered and (KUD Bukit Makmur, KUD class 1B, and Stockholm or Rotterdam Conventions pesticide. It permitted agrochemicals use as Maju Usaha BErsama and was well documented in KUD office. regulated by the Minister of KUD Sadar Mandiri) Agriculture and no use of Type of pesticide use based on “The Green Book of Pesticides” agrochemicals categorized as issued by The Pesticides Commission of the Agricultural Ministry of WHO Type 1A or 1B or are the Republic of Indonesia. As seen on the list of pesticides, listed by the Stockholm or pesticides that used in smallholders such as Touchdown 620 SL Rotterdam Conventions (Glifosat) registered number: RI.01030120042015 permit valid until 25 September 2018 and Starane 480 EC (Floroksipir) registered number: RI.01030120083155 permit valid until 4 January 2018.

Audit Report

There was no usage of pesticide which listed in WHO class 1A, class 1B, and Stockholm or Rotterdam Conventions pesticide. 4.6.2 Major - SOP AA-APM-OP-1100.11-R1- Pesticide use and handling was documented in the procedure SOP YES Evidence of user of pesticide is Management Pesticides and AA-APM-OP-1100.11-R1-Management Pesticides and SOP AA- using in accordance with SOP AA-APM-OP-1100.08-R1- APM-OP-1100.08-R1-Weeding Control. General instructions of targeted species, appropriate Weeding Control. security in working with pesticides described in procedure includes dosage, method and time of the selection of kinds of pesticides, pesticide storage, pesticide application - Interview with Spryaer workers use, addressing pesticide contamination, first aid instructions, in 18 November 2015 medical assistance. - Site observation in KUD Bukit Agrochemicals have been applied and handled by trained spraying Makmur, KUD Maju Usaha workers who have received usage of limited pesticide training. Bersama and KUD Sadar Training was delivered by Pesticide Commission of Agriculture Mandiri Department Riau Province on 25th March 2014 in Peranap estate. Training record and certificates were sighted for all sprayers. Training covered handling of concentrate agrochemical and spraying method including pesticide hazard. Pesticides handled, used and applied only by persons who have completed the necessary training, it was observed during field audit that all sprayers’ workers have trained. Personnel interviewed (sprayer workers) in KUD Bukit Makmur and Manju Usaha Bersama can clearly explain the type of work including work methods and goals, materials used (pesticides) including the dosage and hazards and risks, personal protective equipment and first aid. Pesticides were always applied in accordance with the product label and storage instruction, such as: Gramoxone dose 1,5 L/ha, Garlon dose 0,33/ha, Lindomin dose 200-500 L/ha.

Audit Report

4.6.3 Major List of PPE distribution 5 August PPE for handling of chemicals were provided including boots, YES Sufficient working safety 2015 apron, safety glass, respiratory mask and hand gloves. PPE equipment is available distribution every year and once the PPE was damaged. The PPE were provided to the workers using pesticides such as spraying workers at Kavling No. 47 KUD Bukit Makmur named Mr. Sunarto. The PPE were: safety googles, safety gloves, safety shoes, and chemical mask and safety clothes. 4.6.4 Major  Procedure AA-APM-OP- Implementation of spray liaises with PT Rigunas Agri Utama. YES Evidence of pesticides storage 1100.11-R1 dated 1 February Chemicals and sprayers are all provided by PT Rigunas Agri Utama. and disposal of their containers 2009 – Management There is MOU between schemes smallholder and KUD. in accordance with existing Pesticides regulations Pesticides were stored in the determined area separated from  Field observation at central fertiliser and other chemicals. Pesticides storage was provided in warehouse central workshop. Pesticides storage was locked areas with limited access. The storage was ventilated through cross flow ventilation.

MSDS and hazard symbol label were provided nearby of pesticides. Emergency shower and eyewash were also provided to anticipate in case of an emergency of chemical handling. The possible spill was managed. Secondary containment was provided around the pesticides storage area. Spill kit was also provided in the area. EHS patrol was regularly performed monitor possible spill. All empty pesticides containers were triple rinsed and collected in the temporary storage of hazardous waste. Pesticides containers were transported by authorised transporter, PT Shali Riau Lestari. Records of pesticides containers quantity were evident. Liquid waste from pesticides was reused for the next spraying applications also there are several ex-containers “jerry can” that may re-use for field application. 4.6.1 Minor - Interview with stakeholder and There are no toxicity cases have occurred since N/A farmers/smallholder in KUD plasma/smallholder has operated during audit performed. It was Bukit Makmur, KUD Maju

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Records of treatment for Usaha Bersama and KUD Sadar evident through interview with stakeholder and pesticides operators, where Mandiri farmers/smallholder (KUD Bukit Makmur, KUD Maju Usaha toxicity cases have occurred Bersama and KUD Sadar Mandiri) in 18 November 2015. 4.6.2 Minor - Certificate and Record of Agrochemicals have been applied and handled by trained spraying YES Records of training on the use Training use of limited workers who have received usage of limited pesticide training. of limited pesticides pesticides by Pesticide Training was delivered by Pesticide Commission of Agriculture Commission of Agriculture Department Riau Province on 25th March 2014 in Peranap estate. Department Riau Province on Training record and certificates were sighted for all sprayers. 25th March 2014 in Peranap estate. Its evidence that training has been conducted in an appropriate language (Bahasa Indonesia) and understood by the workers. Training covered handling of concentrate agrochemical and spraying method including pesticide hazard. Pesticides handled, used and applied only by persons who have completed the necessary training, it was observed during field audit that all sprayers’ workers have trained. Personnel interviewed (sprayer workers) can clearly explain the type of work including work methods and goals, materials used (pesticides) including the dosage and hazards and risks, personal protective equipment and first aid 4.6.3 Minor List of pesticide use in 2015 Type and volume of pesticide use has been records, types of YES Records of type and volume of pesticide used same with the scheme smallholders used. Type of pesticide supplied to the pesticide use based on “The Green Book of Pesticides” issued by smallholders The Pesticides Commission of the Agricultural Ministry of the Republic of Indonesia. As seen on the list of pesticides, pesticides that used in smallholders such as Touchdown 620 SL (Glifosat) registered number: RI.01030120042015 permit valid until 25 September 2018 and Starane 480 EC (Floroksipir) registered number: RI.01030120083155 permit valid until 4 January 2018.

Audit Report

Pesticides use was similar in 2014 and 2015. Less harmful alternatives has not been applied or considered. These pesticides were still effective to the target pest, weed or disease and have minimal effect on non-target species. GUIDANCE: Smallholders are expected to have and implement simple manual GAP related to oil palm cultivation (see also criterion 4.1) List of registered and permitted agrochemicals as regulated by the Minister of Agriculture has considered prohibition to the use of agrochemicals categorised as Type 1A and 1B WHO or listed in the Stockholm and Rotterdam Convention. Smallholder organization keep records of used pesticides Smallholder organization is suggested to consult with Local Pesticide Surveillance Commission for proper chemical container disposal manner Pesticide storage warehouses are equipped with warning signs Pesticide is not applied by pregnant women or children The use of paraquat should be reduced in stages and replaced with other pesticides Scheme manager supplies the pesticides to its scheme smallholder members. 4.7 An occupational health and safety plan is documented and effectively communicated and implemented 4.7.1 Major - OHS Policy OHS policy was available and signed by Chief of KUD. OHS YES Health and safety guideline for Programs/Plans 2015 was available and implemented such as: smallholders is in place, which - OHS Plan safety trainings, safety inspection, Handling of incidents and may be developed by nucleus emergency simulation. estate, smallholders organisation or other relevant The implementations of the programs were evident such as: institution  Safety Committee meeting during April-October 2015  Emergency procedure testing/simulation on 24 October 2015 (mill) and 9 June 2015 (estate and small holder)  Fire Fighting Training  First aid training  Safety Patrol 4.7.2 Major - Risk Assesment 2015 Risk Assessment have been established and socialized to the YES Evidence of having received related workers. Several risk assessment was sighted such as training on safe working practices. WORK ITEM: WI-791794 Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 45 of 79

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- List attencandce of RA fertilizing, road maintenance, harvesting and FFB transporting. The socuialization socialization has been performed on 21 May 2015. 4.7.1 Minor - List attendance of emergency Emergency simulation has been conducted on 23 August 2015. The YES Evidence of an understanding simulation simulation was related to fire handling and prevention. The muster and/or implementation of points at several locations were available and the workers were emergency procedures and aware for the evacuation route. handling of possible accidents 4.7.2 Minor - Emergency Procedure There were no reports for any accidents for the last two years. But YES Records of accidents, if any the related procedure was available to handling any incidents occurred. 4.7.3 Minor - Notes of meeting on 30 Notes of meeting between KUD and workers were available and YES Record of meetings regarding October 2015 reviewed. The meeting was planned to be conducted monthly. The occupational health and safety last meeting was on 30 October 2015. 4.7.4 Minor  The list of personal protective equipment and emergency List of PPE YES Safety working equipment is  List emergency equipment were available and contains: hose, water pump available equipment List of distribution was evident such as helm, safety googles, safety gloves and safety clothes on 5 August 2015. Interview conducted for worker from block KT51 named Akmaldi showed that they were understood the importance of those equipment. GUIDANCE: Smallholders in this criterion, include their families working in their oil palm plantation. Scheme smallholders should: • Have adequate knowledge on high-risk working practices in the field and develop necessary guidance on safe working condition. • Record the pesticides application (including trademark, dosage and application method). • Conduct the application in a safe way for both workers and environment.

Nucleus estate, co-operatives, smallholders organisation and smalholders monitor the implementation. 4.8 All staff, workers, smallholders and contractors are appropriately trained 4.8.1 Major Training programme 2015 Training programme was available for year 2015 such as YES Socialization of Harvesting Best Practice, Training PHT, Training of WORK ITEM: WI-791794 Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 46 of 79

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Programme and training held Water and Land Conservation, Training of Fertilizing, Safety for smallholders organisation, Training, First aid Training, P&C RSPO Training etc. tailored to the smallholder’ needs 4.8.1 Minor List attendance of training 2015 Implementation of training have been conducted and several lists YES Records of implementation of attendance of training were available such as: training  Socialization of Harvesting Best Practice on 21 July 2015  Training of Pengendalian Hama Terpadu on 15 June 2015  Training of Fertilizing on 27 Februari 2015  Safety Training on 21 May 2015  First aid Training on 11 March 2015  HCV training on 7 July 2015  Fire Handling and Prevention Training on 24 April 2015 GUIDANCE: Smallholders organisation in this criterion, is farmers group or Village Unit Cooperation (KUD) Smallholders can show that they have received necessary training relevant to their duties and knowledge of RSPO. Workers on smallholder estates also need adequate training and skill that can be achieved through extension activities as provided by growers or mills who purchase fruit from them, by smalholders organisation or through collaboration with other institutions or organisations. Records showing smallholders training should not be required but anyone working on the farm should be adequately trained for the job they are doing. Scheme smallholders should be facilitated by nucleus estate and their relevant cooperatives or smallholders organisation.

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PRINCIPLES 5: ENVIRONMENTAL RESPONSIBILITY AND CONSERVATION OF NATURAL RESOURCES AND BIODIVERSITY OBSERVATION & OBJECTIVE SUMMARY OF FINDINGS FOR EACH INDICATOR COMPLIANCE NO CRITERION / INDICATOR EVIDENCE (YES / NO) 5.1 Aspects of plantation and mill management which 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. 5.1.1 Major Document of ANDAL, RKL and Initial Environmental Impact Assessment documents (ANDAL, RKL YES A documented SEIA, available RPL for Rigunas Agri Utama Mill and RPL) which were approved by Governor of Riau Province KPTS at smallholders organisation. (NCR # 2015 and Estate #KPTS 332/VII/2005 332/VII/2005 dated July, 8 2005 for RAU Mill and Estate, and The document shall be made – 01 has dated 8 July 2005 smallholders’ area. known to all members been Based on interview with smallholders, they do not understood CLOSED) about SEIA. SEIA document was kept at KUD. Major Non Conformity: Based on interview with smallholder members on, almost of them doesn’t know about EIA (AMDAL) even the documents was available at smallholder organization (KUD). Follow up by organisation : Organisation has been performed socialization EIA to board and chairman of comitee (Kelompok Tani) and smallholder members on 6 December 2015. Root cause analysis, correction and corrective action report are explain in Appendix C on this report. 5.1.2 Major Document of ANDAL, RKL and Based on initial environmental impact assessment document YES Environmental impact RPL for Rigunas Agri Utama Mill (ANDAL, RKL, RPL) there was cannot showed environmental assessment involves (NCR # 2015 and Estate #KPTS 332/VII/2005 impact assessment involves smallholder participation. smallholder participation – 03 has dated 8 July 2005 Environmental impact assessment was held by second party and been consultant. CLOSED) Major Non Conformity: Based on observation, there was no evidence environmental impact assessment (AMDAL) involves smallholder participation.

Audit Report

Follow up by organisation : Organisation has coordinating with CSR department and smallholders to identified EIA using interview and quessionaire method to smallholders and borders village. Based on evidence there was community assessment and participate from community around the PT RAU and smallholders. The assessment covers need and problem of community analysis, community development program. This assessment was included in AMDAL/EIA and the result was documented in this document. Root cause analysis, correction and corrective action report are explain in Appendix C on this report. 5.1.1 Minor Report of implementation RKL There was no records implementation RKL RPL in smallholders. NO Records of implementation and RPL PT Rigunas Agri Utama Implementation RKL RPL just covered mill and estate PT Rigunas report on management of (NCR # 2015 period semester II 2014 and Agri Utama. environmental impacts, kept at – 02 still semester I 2015 smallholders organisation Minor Non Conformity: OPEN) Based on observation, there were no records of implementation and report of environmental impact (AMDAL) in smallholder organization. Root cause analysis, correction and corrective action report are explain in Appendix C on this report. GUIDANCE: Smallholders are expected to understand potential negative impacts of their operations and appropriate mitigation techniques and methods to implement them (in particular on land clearing, pesticides application, river stream banks erosion) For scheme smallholders, a documented environmental assessment and management, in the form of AMDAL, is prepared by nucleus estate, where a copy should be available at smallholders organisation In general, scheme smallholders’ land are in the same landscape with their nucleus estates, hence the AMDAL should be part of the AMDAL of nucleus 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

Audit Report

5.2.1 Major - Interview with Based on interview with smallholders in KUD Bukit Makmur, KUD YES Smallholders are able to list farmers/smallholder in KUD Maju Usaha Bersama and KUD Sadar Mandiri they are able to list protected flora and fauna in Bukit Makmur, KUD Maju protected flora and fauna in their local areas. For example Misni, their local areas Usaha Bersama and KUD Madrozi, Suparjan, Poniman and Mulyadi in KUD Bukit Makmur, Sadar Mandiri on 17 – 18 they were able to list the protected fauna in their Kavling and November 2015 around kavling such as : Raja udang (Halcyon chloris), Elang tikus - HCV Assessment report by (Elanus caeruleus), Landak (Hystrix brachyura), Trenggiling (Manis Forestry Department, Bogor javanica), etc. Agriculture Institute in September 2012 - Field observation 5.2.1 Minor - Interview with Organization has been appointed PIC HCV (Officer HCV) in Plasma YES Where protected species exist farmers/smallholder in KUD Peranap/Smallholder Estate. The responsibility of HCV area within the plantation, a Bukit Makmur, KUD Maju management is part of the job description of the HCV Officer. dedicated person in Usaha Bersama and KUD ”HCV Officers” have no particular background for HCV smallholders organisation Sadar Mandiri on 17 – 18 management, however they has been trained in regard structure shall be appointed to November 2015 identification, management and monitoring of HCV. train smallholders on - HCV Assessment report by conservation including how to Forestry Department, Bogor Organization PT Rigunas Agri Utama has a policies or rules to mitigate conflict with relevant Agriculture Institute in protect RTE species based on UU No.5 / 1990. Penalties under the protected species September 2012 UU No.5 / 1990 "person who deliberately capture, injure, kill, - Field observation keep, possess, maintain, transport, and trade in protected animals alive or dead can shall be punished with imprisonment of 5 years and a maximum fine 100.000.000, - (one hundred million). Policy also documented in Kebijakan Perusahan dated 1st December 2014 and Environmental Field Procedure Conservation Area Monitoring (AA-PL-08-EFP). Penalties were communicated directly to all smallholders during HCV socialization and through the HCV sign board and warnings board.

Audit Report

Inspections conducted regularly through HCV patrol to check no traps/snares put up within or nearby areas of HCV. Schedule and report of HCV patrol was sighted. Relevant laws were taken into account for determining appropriate measure including UU #5/1990 about Natural resources conservation, PP#7/1999 about List of protected plan and wildlife, Kepres #32/1990, and PP26/2008. 5.2.2 Minor - Interview with HCV Assessment has been conducted by independent assessors YES Results of high conservation farmers/smallholder in KUD from Forestry Department, Bogor Agriculture Institute in value identification kept at the Bukit Makmur, KUD Maju September 2012. smallholders organisation (see Usaha Bersama and KUD also criterion 5.1) Sadar Mandiri on 17 – 18 Assessment has been conducted and cover the following: November 2015 • Presence of protected areas that could be significantly affected - HCV Assessment report by by the grower or miller; Forestry Department, Bogor Agriculture Institute in • Conservation status (e.g. IUCN status), legal protection, September 2012 population status and habitat requirements of rare, - Field observation threatened, or endangered (RTE) species that could be significantly affected by the grower or miller. • Identification of HCV habitats, such as rare and threatened ecosystems, that could be significantly affected by the grower or miller HCV assessment performed by a qualified HCV assessor. All assessors were approved in RSPO as HCV assessor - Discipline Specialist, coordinated by an RSPO approved HCV assessor - Team Leader. Document of HCV assessment were kept at the smallholders organisation/smallholder Estate and each KUD. GUIDANCE: Information on protected species and habitat with high conservation values may be obtained from smallholders organisation and relevant government institution such as the government Plantation Agency (Dinas Perkebunan), BKSDA (government conservation of natural resources agency). WORK ITEM: WI-791794 Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 51 of 79

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Scheme managers assist in the development of list of local protected flora and fauna species (both in local and the latin names) Information on protected species and measures to mitigate conflict may be obtained from relevant government institution such as Plantation Agency (Dinas Perkebunan), BKSDA or competent NGOs. Information on protected species and high conservation value identification is prepared by nucleus estate in accordance with and included in SEIA documents (AMDAL). 5.3 Waste is reduced, recycled, re-used and disposed of in an environmentally and socially responsible manner. 5.3.1 Major - Procedure AA-KL-06-EFP – An agrochemical waste management was handled by smallholder YES An agrochemical waste Handling of Hazardous Waste. organisation based on procedure AA-KL-06-EFP – Handling of management plan is available Hazardous Waste. - Form AA-KL-601-FM – Record of Hazardous waste All empty pesticides containers were triple rinsed and collected in the temporary storage of hazardous waste. Pesticides containers - Hazardous waste manifest were transported by authorised transporter, PT Shali Riau Lestari. - Observation to temporary Records of pesticides containers quantity were evident. Liquid storage of hazardous waste waste from pesticides was reused for the next spraying applications also there are several ex-containers “jerry can” that may re-use for field application. 5.3.2 Major - Permit of temporary storage Based on interview with smallholders organisation (KUD) and it YES Smallholders can explain of hazardous waste for member, they understood that containers ex agrochemical is a measures to dispose hazardous Peranap Mill hazardous waste and cannot trash anywhere. The containers must chemicals and their containers No.4/BPMD&PPT/BP- be triple rinsed and then collected at hazardous temporary in accordance to instruction LB3/XI/2013 dated 28 storage at PT Rigunas Agri Utama mill which has the licence from labels as stated by the November 2013 valid for 5 Local Environmental Agency (BLH). manufacturer years

- Permit of extension storage of hazardous waste from BLH Indragiri Hulu Regent No.660/BLH- Wasdal/III/2015/87 dated 16 March 2015

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- MOU No.036/SRL- PKU/MOU/III/2015 dated February 9, 2015 between PT Rigunas Agri Utama and PT Shali Riau Lestari valid through 22 February 2016 5.3.1 Minor - Public consultation with Based on public consultation with stakeholder on 18 November N/A Records of complaints from stakeholder in 18 November 2015 it was verified and confirmed that there was no complaints local communities related to 2015 from local communities related to disposal of hazardous chemicals disposal of hazardous and its resolution. chemicals and its resolution, if any. GUIDANCE: Management and plan of agrochemical waste disposal should include steps for: • Appropriate disposal of hazardous chemicals and their containers. • Surplus chemical containers should be disposed of or cleaned in an environmentally and socially responsible way (e.g. returned to vendor or cleaned using a triple rinse method). The used water, for triple rinse, was not disposed in water sources. The disposal instructions on manufacturer’s labels should be adhered to. 5.4 Efficiency of energy use and use of renewable energy is maximised. 5.4.1 Minor Not applicable Not applicable N/A An appropriate guidance for improving the efficiency of energy use by scheme smallholders, prepared by scheme manager GUIDANCE: Efficiency of energy use includes for example the use of cattle for FFB transportation and the use of cattle waste as fertilizer and/or biogas (if possible) This provision does not apply to scheme smallholders who only use manual labour to care for and harvest FFB. 5.5 Use of fire for waste disposal and for preparing land for replanting is avoided except in specific situations, as identified in the ASEAN guidelines or other regional best practice. 5.5.1 Major Replanting Procedure Replanting plan will be begun in 2019; about 25 years from their YES During replanting, smallholders first grow on 1994. shall be able to prove that fire

Audit Report

was not used to prepare land It was described within the replanting procedure that the KUD and disposal of waste. Fire is committed to zero burning method. only permitted in special cases which involve elimination of pest and diseases where recommendation from relevant government agencies must be in place prior to use of fire. 5.5.2 Major The List attendance of Forest Fire The socialization of emergency respond procedure has been YES Smallholders understand Prevention on 5 January 2015 performed to all smallholder workers on 5 January 2015 regarding emergency responses to fire prevention of forest. The list attendance was available. procedure against forest fires (Prosedur Tanggap Darurat Kebakaran Lahan). 5.5.1 Minor List of emergency respond Fire prevention equipment were available such as nozzle, hose, YES Smallholders organisation owns equipment water pump, axe, sand etc. simple fire control equipment 5.5.2 Minor Replanting Procedure In the procedure of replanting mentioned that, the methods used YES Smallholders receive extension are: services on zero-burning techniques in land preparation  Toppling trees using heavy equipment (excavators)  Chipping: cutting palm trunk, so as not infected with ganoderma  Planting LCC / legumes (Mucuna and Puereria javanica etc. So that the decay of the old oil palm trunks can be faster  Planting of oil palm. GUIDANCE: Fire should be used only where an assessment has demonstrated that it is the most effective and least environmentally damaging option for minimising the risk of severe pest and disease outbreaks, and with evidence that fire-use is carefully controlled. Use of fire on peat soils should be avoided. 5.6 Plans to reduce pollution and emissions, including greenhouse gases, are developed, implemented and monitored

Audit Report

5.6.1 Minor Identification of environmental Identification of pollution sources from smallholders’ activities YES Identification of pollution aspect in smallholders’ plantation was evident. The source of pollution, type and its control was sources in smallholders’ recorded. plantation is available The information of pollution and emission sources at smallholder was reviewed and updated on March 2015 including emission from vehicles and electricity generator (not limited), electricity usage.

5.6.2 Minor Greenhouse gas emissions Smallholders with scheme smallholder has been developed the YES An emission reduction plan is reduction Programme year 2015 programme on how to reduce emission. available The programs such as reduce diesel consumption, reduce electricity consumption, reduce chemical fertilizer. The records of each programme were sighted as evidence implementation. GUIDANCE: Scheme managers should include an assessment of all polluting activities of scheme smallholdings in their overall plans for pollution and emissions abatement

Audit Report

PRINCIPLES 6: RESPONSIBLE CONSIDERATION OF EMPLOYEES AND OF INDIVIDUALS AND COMMUNITIES AFFECTED BY SCHEME SMALLHOLDER OBSERVATION & OBJECTIVE SUMMARY OF FINDINGS FOR EACH INDICATOR COMPLIANC NO CRITERION / INDICATOR EVIDENCE E (YES / NO) 6.1 Aspects of plantation and mill management 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. 6.1.1 Major - Attendance list of small Social impact assesment document was available in YES Social impact assessment holders dated 6-8 December Smallholder/KUD office and it has been disseminated to all documents is available at 2015. members of smallholders. Last dissemination performed in smallholders organisation and is December 8, 2015. made known to the members - Sosial Impact Assessment Dokumen and AMDAL. 6.1.1 Minor - Action Plan and Follow up of Action Plan based on social impact assessment already made by YES Smallholders own records of monitoring sosial impact year organisation. Monitoring on planned social impact assessment management and monitoring of 2015 and 2016 already performed. social impacts (RKL/UPL) which - Social Assistance Report and are available at smallholders CSR Document. Some social assistance already performed such as: organisation  On August 7, 2015 to Sencano Jaya village, Batang district Peranap pecuniary Rp 1.500.000, - for the race event's 70th Independence Day.  On June 7, 2015 to the Sencano Jaya village, Batang district Peranap pecuniary Rp 1.500.000, - for Halal Bihalal activitie Some of the action plan on social impact assessment also already performed such as improved wellbore and the provision of building materials. All activities was already recorded. 6.1.2 Minor Time table for management of impact assesment has been YES An implementation timetable - Social impact assessment – determined. for management of impacts is planning and monitoring available, which is in result. accordance with AMDAL

Audit Report

Action Plan on implementation Aspects Social Impact Identification divided into several components: education, economic, social, cultural and physical. Education component Some programs in the educational component were determined and among other scholarships for children who are less able, development of school libraries and galleries for school teacher. Economic component Some programs in the economic components include oil palm replanting management facilitation, creation of ditches and bridges. Non-agricultural business skills training, development of livestock business unit, Improved caretaker capacity in the development of cooperative business unit / agency. Socio-Cultural Component Some programs in the Social and Cultural among others Increased capacity of managers of social organizations in the village include BPD, LPM, youth organizations and women's organizations. Increasing the capacity of rural communities in planning for rural development, foster social groups and economic development in the village. Increasing the capacity of village government makes rules, facilitation of participatory village mapping, help fund youth activities and the implementation of religious activities in the village. Physical Components Some programs in the physical components of which include assistance repair damaged roads in rural areas and provide help clean water supply for society. GUIDANCE: A documented social impact assessment (AMDAL) is done by nucleus estate WORK ITEM: WI-791794 Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 57 of 79

Audit Report

6.2 There are open and transparent methods for communication and consultation between growers and/or mills, local communities and other affected or interested parties 6.2.1 Major - Document Communication Smallholders’ organisation has recorded the communication and YES Smallholders organisation has Mechanism of Consultation and consultation process and result with local communities. It was records on communication and Complaints”. documented in 'Document Communication Mechanism of consultation with local Consultation and Complaints ". communities During audit it was verified that there was no complaints from communities and stakeholder. 6.2.2 Major - Minutes of meeting KUD Bukit Periodic meeting between smallholders’ organization and member YES Records of periodic meeting Makmur. was conducted monthly and recorded in monthly minutes of between smallholders’ meeting. organisation and its members 6.2.1 Minor - Book of aspiration and All aspiration from communites has been recorded including the YES Smallholders organisation has respons KUD Bukit Makmur, responses and follow up action. Some example were cerified during records on communities’ KUD Maju Usaha BErama and audit, such as: aspiration and their responses KUD Sadar Mandiri or follow-up actions - Complaints regarding FFB price from smallholders member on November 17, 2015 and January 8, 2016. It has been respond and followed up with meeting between KUD Bukit Makmur and it members where it was stated that the pricing FFB was in accordance with the FFB Pricing determination from Plantation Department Riau Province. 6.2.2 Minor - Document of Mechanism The officer responsible for consultation and communication with YES A dedicated person appointed Communication Consultation stakeholders is the Chairman of KUD. in smallholders organisation and Complaints responsible for communication and consultation with stakeholders GUIDANCE: Communication and consultation mechanism should be designed in collaboration with local communities and other affected or interested parties. These should consider the use of existing local mechanisms and languages. Consideration should be given to the existence/formation of a multi-stakeholder forum.

Audit Report

Communication should take into account differential access to information of women as compared to men, village leaders as compared to day labourers, new versus established community groups, and different ethnic groups. Consideration should be given to involving third parties, such as disinterested community groups, NGOs, or government (or a combination of these), to facilitate smallholder schemes and communities, and others as appropriate, in these communications 6.3 There is a mutually agreed and documented system for dealing with complaints and grievances, which is implemented and accepted by all parties 6.3.1 Major - Document of Mechanism Smallholder organisation has defined the mechanism for complaints YES A system for complaints are in Communication Consultation handling which documented in social complaints handling place at smallholders and Complaints procedure. Communication, consultation and complaints from organisation stakeholders could be delivered either orally or in writing. Organisation will be responded the complaints and address immediately. Some complaints were verified during audit and it has been responded and adress by Chairman of the KUD. 6.3.1 Minor - Document of Mechanism All complaints has been recorded by smallholder organization. All YES Smallholders organisation has Communication Consultation complaint recorded in the 'Document Communication Mechanism records on complaints/ and Complaints of Consultation and Complaints ". grievances, and reports on steps to address them For example on November 17, 2015 and January 8, 2016 there are complaints regarding the FFB Price. Organisation has been followed up to address the complaints and it has been closed out. 6.3.2 Minor - Interview result with Based on the interview result with smallholders’ organization and N/A A documented process and smallholders dated 4 May 2016. stakeholder around estate, there is no issue regarding land disputes. outcome of resolution of disputes, if any GUIDANCE: Dispute resolution mechanisms should be established through open and consensual agreements with relevant affected parties 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 6.4.1 Minor - Interview result with Based on the interview result with smallholders’ organization and N/A Records of negotiation smallholders dated 4 May 2016. stakeholder around estate, there is no issue regarding land dispute. processes and/or outcome of

Audit Report

agreed compensation are in place, if any. GUIDANCE: Procedure for compensation payment should consider gender, local communities and migrants. Local communities have right to appoint their own representatives for negotiation of compensation. Smallholder should follow existing procedure for identifying legal and customary rights and the procedure for identifying people entitled to compensation. A procedure for calculating and distributing fair compensation (monetary or otherwise) is established and implemented. The process and outcome of any negotiated agreements and compensation claims were documented and made publicly available. 6.5 Wage and conditions for employees and for employees of contractors always meet at least legal or minimum industry standards and are sufficient to meet basic needs of personnel and to provide some discretionary income 6.5.1 Major - Interview result with Smallholder scheme (plasma) plantations are managed by N/A Proof of wage payments to smallholders dated 4 May 2016. smallholders’ group organisation and KUD (village cooperation workers business body) and owned by each members of smallholder. Farmers' income does not come from the minimum wage but from the harvest which is done by the farmers themselves. Based on interview on 4 May 2016, their income could be 4.5 to 5 million IDR per month. From these explanation this indicator is not applicable. 6.5.1 Minor - Interview result with Estate owners are smallholders themselves and they do not hiring N/A A work contract is in place for smallholders dated 4 May 2016. the employees. They recruited their families who are aged above 18 permanent employee, if any years to work as a harvester or plantation upkeep. Smallholders do not provide wages to his family however they share the profit from the FFB sale. GUIDANCE: Smallholders organisation should periodically be aware of the Regionally Minimum Wage (Upah Minimum Regional, UMR) according to the local regulation where the plantation is established. For temporary workers, work condition should be in accordance with the agreement which was made transparently and freely. Evidence of wage payments can be achieved by getting acknowledgement from some workers 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.

Audit Report

6.6.1 Minor - Cooperative policy dated 7 July Smallholder scheme organisation has defined the Policy regarding YES Evidence of no restriction for 2014, point no 10. freedom of worker unión. Cooperative Policy at point 10 stated that workers and contractors to join organisation give the freedom of association in accordance with Law unions - Attendance List – 5 August of 1945 and Pancasila. This has been communicated by KUD to all 2015 – socialization of member and farmers group on August 5, 2015. cooperative policy During audit and interview with several member of smallholder it was confirmed that they understood about the policy and they have a freedom to join the unions. GUIDANCE: The rights of workers and contractors to form union and to negotiate collectively to their employer should be respected 6.7 Child labour is not used. Children are not exposed to hazardous working conditions. Work by children is acceptable on family farms, under adult supervision, and when not interfering with education programmes. 6.7.1 Major - Cooperative policy dated 7 July Smallholder scheme organisation has defined the Policy to prevent YES Smallholders can show that use 2014, point no 8. child labour. It was stated in Cooperative Policy at point 8 that of child labour is in accordance organisation states the prohibition of acceptance of workers aged with the regulation - Attendance List – 5 August under 18 years. 2015 – socialization cooperative policy. This policy has been disseminated by the Chairman and coaches ofKUD represented by the Manager and Smallholder scheme - Field visit Assistant on August 5, 2015 to all members. - Interview with smallhoders 4 Based on the field visit and interview with smallholders member, May 2016. there was no worker under 18 years. It can be prove from the worker identity and list of worker in KUD office. GUIDANCE: Smallholders should refer to minimum working age and school leaving age in accordance with existing regulations. Work by children is acceptable on self-managed family smallholdings, under adult supervision and not disturbing their education and also in accordance with existing regulations. 6.8 The employer shall not engage in or support discrimination based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation, or age.

Audit Report

6.8.1 Major • Cooperative policy dated 7 Smallholder scheme organisation has defined the Policy to prevent YES Evidence that all employees and July 2014, point no 7. and against discrimination, it stated in Cooperative Policy point 7 employee groups, including “treating all employees of cooperatives in a fair and respectful of migrant workers are treated • Attendance List – 5 August human rights, as well as representation regardless of race, caste, equally 2015 – socialization national origin, religion/belief, disability, gender, sexual orientation, cooperative policy. union membership, political affiliation and or age This policy has been disseminated by the Chairman and coaches ofKUD represented by the Manager and Smallholder scheme Assistant on August 5, 2015 to all members. GUIDANCE: Negotiation process should include women, indigenous people and minority ethnic. Smallholders organisation have procedure to receive complaints which may be dealt with in accordance to criterion 6.3. Positive discrimination to provide employment and benefits to specific communities is acceptable as part of negotiated agreements. 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 6.9.1 Major • Cooperative policy dated 7 Policy to prevent sexual harassment and all other forms of violence YES Smallholders organisation has July 2014, point no 9. against women stated in the the Cooperative Policy in point 9 which established documents that states prevent sexual harassment and all forms of violence against advise its members against • Attendance List – 5 August women and protect the rights of reproduction. sexual harassments and forms 2015 – socialization of violence against women and cooperative policy This policy has been disseminated by the Chairman and coaches of to protect their reproductive KUD represented by the Manager and Smallholder scheme Assistant rights. on August 5, 2015 to all members. GUIDANCE: Smallholders respect reproductive rights of their workers 6.10 Scheme managers deal fairly and transparently with smallholders and other local businesses. 6.10.1 Major • Document of Mechanism There are similar complaint regarding FFB price,on November 17, YES Records of no repetition of Communication Consultation 2015 and January 8, 2016 organisation has been followed up by complaints from nucleus estate and Complaints. conduct the meeting between Company, KUD and smallhoder (partner companies) and/or member. other local business partners to • Minutes meeting 15 february smallholder 2016 – KUD Bukit Makmur.

Audit Report

Minutes of meeting were recorded in the BAP between KUD Bukit Makmur with Company dated February 15, 2016 whereby it was agreed that the pricing FFB is in accordance with the provisions of the Plantation Department (Dinas Perkebunan) and age of the plant. 6.10.2 Major • Letter from Local The price determined by meeting with Tim Penetapan Harga from YES Records of FFB price Government Pemprov Riau local government with grower and smallholder. There were current determination mechanism from related fo FFB price and past prices available such as prices for 4-10 November 2015. the Price Determination Team determination no. 43/TPH The receipt of payment was evident in September 2015. (Tim Penetapan Harga) to TBS-XI/2015 smallholders’ organisation and receipt of FFB payments issued by the mills 6.10.1 Minor The agreement/contract documents between contractor and The contract documents no. YES Smallholders organisation has smallholder is sighted such as for FFB transporter. 001/SPK/KUD-MUB/TBS/XII/2014 documented contracts with All contracts are acknowledged by all parties as part that contain of their business partners, if any contract are well understood. The contract contains all relevant information such as payment method, work requirements, force majeure, contract period, cancellation of contract, etc. 6.10.2 Minor Receipt of Payment on 3 The payment was made on time according to contract. The last YES Evidence that contract payment November 2015 payment was on 3 November 2015. is made on-time 6.10.3 Minor NA NA N/A Evidence of credit payment, if any 6.10.4 Minor - Maintenance of roads Smallholder farmers were not performed road maintenance and YES Evidence of road maintenance documentation transportation themselves. Road maintenance was done by the and transportation if company of PT Rigunas Agri Utama. The payment for road smallholders pay related levies - Receipt of Payment on 3 maintenance and transportation of FFB from estate to mill was November 2015 made on time according to contract. The last payment was on 3 November 2015.

Audit Report

6.10.5 Minor Management plan Smallholder Replanting will be planed in year 2019. Smallholder organisation N/A Replanting plan is prepared in for 2013 – 2016 créate management plan every 3 years. Last management plan adequate time created for 2013 – 2016. So that replanting program has not been planed yet. GUIDANCE: Contract made should be understood by all involved parties, fair, legal and transparent and all costs, fees and levies are explained and agreed in advance. Smallholders’ organisation should involve in the determination of FFB price. 6.11 Scheme manager contribute to local sustainable development wherever appropriate. 6.11.1 Minor - Documentation of social Several smallholders’ contribution to the local development has YES Records of smallholders activities. been performed to the surrounding community, for example organisation and/or individual smallholders’ contribution to • On August 7, 2015 contribution to Sencano Jaya village, Batang the local development district Peranap pecuniary Rp 1.500.000, - for the race event's 70th Independence Day. The all activity and contribution has been recorded by smallholder organisation. GUIDANCE: Scheme smallholders, after conversion, contribute to the local development through their organisation. Smallholders organisation actively negotiates with nucleus estate on subtractions of smallholders’ FFB sales for local development contribution and its management. Smallholders organisation participate in the determination of the use and management of the contribution fund.

Audit Report

PRINCIPLES 7: RESPONSIBLE DEVELOPMENT OF NEW PLANTINGS This Principle was not applicable due to planting date of Plasma Peranap/Smallholder was begin in 1994 and Replanting will began after 25 year age of planted in 2019.

Audit Report

PRINCIPLES 8: COMMITMENT TO CONTINUOUS IMPROVEMENT IN KEY AREAS OF ACTIVITY OBSERVATION & OBJECTIVE SUMMARY OF FINDINGS FOR EACH INDICATOR COMPLIANCE NO CRITERION / INDICATOR EVIDENCE (YES / NO) 8.1 Scheme managers regularly monitor and review their activities and develop and implement action plans that allow demonstrable continuous improvement in key operations. 8.1.1 Major - Internal audit report 26 Continuous improvement was seen as corrective actions plan YES Scheme manager, together January 2015 raised from internal audit. The last audit was performed on 26 with smallholders, prepares January 2015. The corrective actions plan raised have been closed action plans for continuous - RKL-RPL Report 2015 and implemented effectively. Bellow are some action plan for improvement, based on - HCV Asessment report continues improvement : consideration of the main social and environmental impacts and - Social Impact Asessment Reduction in use of certain chemicals: Report opportunities for improvement • The organisation committed that Paraquat only used for - CSR Program specific species: a few species of ferns, such as: Stenochlaena and Lycopodiophyta. Reduction of Gramoxone consumption. Environmental impacts: • Segregation of domestic waste. • Improvement in monitoring of domestic water consumption. • Wildlife protection around plasma/smallholder estate. • Monitoring of RTE species regularly to control the population dynamics of wildlife. • Sign board installation for HCV protection and awareness to conserve biodiversity and HCV area. Social impacts: • Projects to improve social impacts are integrated within CSR program • Monitoring and managing the positive and negative impact from social impact assessment (SIA) • Improve and implementation the CSR program regularly

Audit Report

• Review social impact assessment every two years to improve the social relationship with stakeholders and affected parties. Regular evaluation of plantation and mill operation was performed through internal and external audits. The coverage of the audit including operational/Agronomy best practises, production, occupational health and safety, environmental/biodiversity aspect and social aspect. A monitoring action plan has been established after AMDAL/social impact assessment and annual evaluation was also done to monitor result and progress of action. Most of the plans were executed and the result found was as expected (CSR, local recruitment, etc).

Audit Report

3.4 Recommendation

The recommendation from this audit is that certificate can proceed for Peranap Smallholder Scheme as a producer of RSPO Certified Sustainable Palm Oil FFB.

Audit recommendations are always subject to ratification by RSPO.

This report was prepared by: Mujinius Jalaraya, Daniel Sitompul, Fadjar Deniswara and Fitria Rahmayanti.

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

 Environmental risk: compliance with regulations, hazardous waste management, RKL RPL reporting  Social risk: compliance with regulations  OHS: prevention of hazard and risk

Appendix “A” – Audit Record

Times* Date Auditor Audit meetings plus functions/ processes/ areas/ *shifts audited: From - To

16/11/2015 Day 1 – Monday

Travelling Jakarta – Pekanbaru (GA174) 10.25 – 12.10 Mujinius,

Daniel, Fitria Travelling Pekanbaru – Peranap (RAU) 13.00 – 17.00

17/11/2015 Day 2 – Tuesday

Plasma Peranap

Mujinius, Opening meeting 08.00 – 08.30 Daniel, Fitria Document review and site visit: Criteria: 2.1 all indicators for best agriculture practice Criteria: 2.2.1 and 2.2.2 Criteria: 3.1 all indicator Mujinius Criteria: 4.1.1 (Estate), 4.1.2, 4.1.3 08.30 – 12.00 Criteria: 4.2, 4.3 and 4.5 all indicator Criteria: 4.6 indicator 2, 3, 4, 5, 9, 12 Criteria: 5.2 all indicators Criterion: 8.1 Document review and site visit: Criteria: 2.1 all indicators for environmental aspects Criteria: 4.3 indicator 4 Fitria Criteria: 4.4 indicator 1, 3, 4 08.30 – 12.00 Criteria: 4.6 indicator 1, 6, 7, 8, 10 Criteria: 5.1, 5.3, 5.4, 5.6 all indicators Criterion: 8.1 Document review and site visit: Criteria: 2.1 all indicators for OHS aspects Criterion: 4.6.11 Daniel Criteria: 4.7 all indicators 08.30 – 12.00 Criterion: 4.8 all indicators Criterion: 5.5 all indicators Criterion: 8.1 Mujinius, Break 12.00 – 13.30 Daniel, Fitria

Mujinius, Audit Continues 13.30 – 17.00 Daniel, Fitria

Setyo Traveling Surabaya – Jakarta (GA307) 07.50 – 09.25

Travelling Jakarta – Pekanbaru (GA174) 10.25 – 12.10 Setyo, Denis Travelling Pekanbaru – Peranap (RAU) 13.00 – 17.00

18/11/2015 Day 3 – Wednesday

Peranap Estate Document review and site visit: Setyo RSPO Supply Chain 08.00 – 12.00 RSPO Certification System Clause 4.2.4

Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 69 of 79 Audit Report Document review (Plasma Peranap and Peranap Estate) Criteria: 1.1; 1.2; 1.3 all indicators Criteria: 2.1.1 for social aspect Criteria: 2.2.3; 2.2.4; 2.2.5; 2.2.6; 2.3 all indicator Denis Criteria: 4.6.12 08.00 – 12.00 Criteria: 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.11, 6.12, 6.13 Criterion: 8.1

Interview with employees, labour union and committee gender Document review and site visit: Criteria: 2.1 all indicators for best agriculture practice Criteria: 2.2.1 and 2.2.2 Criteria: 3.1 all indicator Mujinius Criteria: 4.1.1 (Estate), 4.1.2, 4.1.3 08.00 – 12.00 Criteria: 4.2, 4.3 and 4.5 all idicator Criteria: 4.6 indicator 2, 3, 4, 5, 9, 12 Criteria: 5.2 all indicators Criterion: 8.1 Document review and site visit: Criteria: 2.1 all indicators for environmental aspects Criteria: 4.3 indicator 4 Fitria Criteria: 4.4 indicator 1, 3, 4 08.00 – 12.00 Criteria: 4.6 indicator 1, 6, 7, 8, 10 Criteria: 5.1, 5.3, 5.4, 5.6 all indicators Criterion: 8.1 Document review and site visit: Criteria: 2.1 all indicators for OHS aspects Criterion: 4.6.11 Daniel Criteria: 4.7 all indicators 08.00 – 12.00 Criterion: 4.8 all indicators Criterion: 5.5 all indicators Criterion: 8.1 Mujinius, Daniel, Fitria, Break 12.00 – 13.30 Denis, Setyo

Mujinius, Daniel, Fitria, Audit Continues 13.30 – 17.00 Denis, Setyo

19/11/2015 Day 4 – Thursday

Peranap Mill

Setyo Reporting on Site 08.00 – 12.00 Document review and stakeholder interview: Criteria: 1.1; 1.2; 1.3 all indicators Criteria: 2.1.1 for social aspect Criteria: 2.2.3; 2.2.4; 2.2.5; 2.2.6; 2.3 all indicator Denis Criteria: 4.6.12 08.00 – 12.00 Criteria: 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.11, 6.12, 6.13 Criterion: 8.1

Interview with employees, labour union and committee gender

QEF08sa.RSPO.01 / Issue Date: 2009-Apr-15 © SAI Global Indonesia Copyright 2009 Page 70 of 79 Audit Report Document review and site visit: Criteria: 4.4.2 Mujinius Criteria: 5.2 all indicators 08.00 – 12.00 Criteria: 7.3 if applicable Criteria: 8.1 all indicators Document review and site visit: Criteria: 4.4.1, 4.4.3, 4.4.4 Fitria 08.00 – 12.00 Criteria: 5.1, 5.3, 5.4, 5.6 all indicators Criteria: 8.1 all indicators Document review and site visit: Criteria: 4.1.1 (Mill), 4.1.2, 4.1.3, 4.1.4 Daniel Criteria: 4.6 indicator 11 08.00 – 12.00 Criteria: 4.7, 4.8 and 6.10 all indicators Criteria: 8.1 all indicators All Break 12.00 – 13.30

All Audit Continues 13.30 – 15.30

All Auditor Discussion 15.30 – 16.00

All Closing Meeting 16.00 – 17.00

All Travelling Peranap – Pekanbaru 17.00 – 23.00

20/11/2015 Day 5 – Friday

All Travelling Pekanbaru – Jakarta (GA173) 08.35 – 10.20

Setyo Traveling Jakarta – Surabaya (GA312) 11.10 – 12.45

04/05/2016 Additional Audit in Jakarta Office– Wednesday Document review and Smallholder Teleconfrence: Criteria: 1.1; 1.2; 1.3 all indicators Criteria: 2.1.1 for social aspect Criteria: 2.2.3; 2.2.4; 2.2.5; 2.2.6; 2.3 all indicator Denis & Criteria: 4.6.12 08.00 – 12.00 Mujinius Criteria: 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.11, 6.12, 6.13 Criterion: 8.1

Teleconfrence with smallholder KUD Bukit Makmur, Maju Usaha Bersama and KUD Sadar Mandiri Break 12.00 – 13.30

Denis, Muji Audit Continues 13.30 – 15.30

Denis, Muji Auditor Discussion 15.30 – 16.00

Denis, Muji Closing Meeting 16.00 – 17.00

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

This is the certification Audit, no Previous Nonconformities and Opportunity for Improvement Summary.

NATIONAL INTERPRETATION RSPO PNC FOR SCHEME SMALLHOLDERS

QEF08EL Non Conformance Report

Organisation Name: PT. Rigunas Agri Utama – Peranap Smallholder Location: Kab. Indragiri Hulu, Riau Date: 19 November 2015 Audit team leader: Mujinius Jalaraya Activity/Report ID: WI-845227 License/Certificate No.: FMS40006 Organisation’s acknowledgement of receipt of NCR Employee Name: Welly Pardede Date NCR Accepted: 19 November 2015

Section 1 Section 2 Section 3 Section 4 Section 5

Details of non-conforming situation: SAI Organisation’s Response/Action SAI Global SAI Global Verification of SAI Global NCR Closure:

Verification Taken: Response Corrective Action for (how and Review: Effectiveness: when) Name Date

NCR Nr. NCR

clause(s)

Classification

Standard(s) & & Standard(s)

2015- RSPO Major Non-conforming situation: Due Date: Root cause: Response - There was evidence that EIA Fitria 28 01 smallholde There was no evidence for socialisation of January 19th The EIA socialization conducted Acceptable socialization has conducted to Rahmayan Decemb r scheme SEIA (AMDAL) to all members. 2016 to board and chairman of (please see board and chairman of comitee ti er 2015 Criterion comitee (Kelompok Tani) and section 4 for (Kelompok Tani) and 5.1 has not been delivered to details) smallholder members on 6 indicator Requirement: SAI smallholder members. December 2015. major 1 Follow up RSPO Criterion 5.1 indicator major 1 Reviewer: - Non Conformity has been Method: CLOSED off site audit Correction: Fitria Objective evidence: Socializing EIA to board and Rahmayanti chairman of comitee (Kelompok Plasma Peranap Tani) and smallholder members.  Based on interview with smallholder Date: members, almost of them doesn’t Corrective Action: 28 December know about EIA (AMDAL) even the 2015 documents was available at Scheduling and filing EIA smallholder organization (KUD). socialization once a year to board and chairman of comitee (Kelompok Tani) and smallholder members.

2015- RSPO Minor Non-conforming situation: Due Date: Root cause : Response Rootcause analysis has been Fitria 28 02 smallholde There were no evidence records of Next audit management less accurate to Acceptable defined by organisation as well as Rahmayan Decemb r scheme understand the making of EIA (please see correction and corrective action. ti er 2015 implementation and report on Criterion management of environmental impact that created by second party and section 4 for The effectiveness of this follow up 5.1 (AMDAL) kept at smallholders SAI consultant details) will be verified next audit. The indicator organisation. Follow up status of NC still OPEN. minor 1 Method: Correction:

off site audit coordinating with CSR Reviewer: Requirement: department and smallholders to Fitria identified EIA using interview Rahmayanti RSPO Criterion 5.1 indicator minor 1 and quessionaire method to smallholders and borders Objective evidence: village. Date: Plasma Peranap 28 December 2015  Based on observation, there were no Corrective Action: records of implementation and report coordinating with smallholders to of environmental impact (AMDAL) in copy and documented the result smallholder organization. of identification of EIA.

2015- RSPO Major Non-conforming situation: Due Date: Root cause: Response Based on evidence sent by Fitria 28 03 smallholde There was no evidence environmental January 19th the lack of participation from PT Acceptable organisation, there was community Rahmayan Decemb r scheme impact assessment (AMDAL) involves 2016 RAU and communities around (please see assessment and participate from ti er 2015 Criterion the PT RAU to summarizing the section 4 for smallholder participation. community around the PT RAU 5.1 EIA report. details) and smallholders. The assessment indicator SAI major 2 Requirement: Follow up covers need and problem of Correction: Reviewer: RSPO Criterion 5.1 indicator major 2 Method: community analysis, community off site audit Cordinating with CSR Fitria development program. This department and smallholders to Rahmayanti assessment was included in Objective evidence: identified EIA using interview and quessionaire method to AMDAL RKL RPL. Plasma Peranap smallholders and borders Date:  Based on observation, there was no village. 28 December evidence environmental impact 2015 assessment (AMDAL) involves smallholder participation. Corrective Action: coordinating with smallholders to participate in identification of EIA.

Appendix “D” – Stakeholder’s issues and comment

During on site audit, there was no comment from National/International NGO and local government in Labuhan Batu District. Direct interview and group discussion was conducted with local stakeholder (village head and public figure) to verify land identity, customary right, land dispute issues, environmental issues, labor issues and social issues. No negative issue found during consultation; however there were some aspiration from local stakeholder as explains below. The following as information gathered during consultation

Date Stakeholder Observation

18 Employees Interviews have been done to workers both in Smallholder Estate with November several job backgrounds such as ‘Kerani Umum, Mantri Tanaman, 2015 Harvester and Sprayer Workers. All workers have been equipped (free of charge) with PPE, working equipments, housing, electricity, clean water, medical facilities, etc. Wages including overtime hours, premium and bonus were also paid according to current regulation

19 Community Interview has been done to several community leaders in surrounding November leaders Peranap smallholder scheme (refer to “public consultation attendance 2015 register” attached in this report) such as village leaders from: Gumanti Village, Pauranap Village, Tebing Village and Buah Tangga Village. Based on interview result with leaders, principally the smallholder scheme has implemented CSR program to support peoples in term of infrastructure development, provision of education and sanitation facilities, heavy equipment support (grader), local economic support (cattle breeding and fisheries), etc. The existence of smallholder give the big contribution for local economic growth and reduce the poverty. “Humas” (Public relation officer) was assigned to perform public consultation with communities. No land conflict identified where the land was previously granted by government in the form of SHM Property right (not taken over from local communities). As told by the leaders, there was no air or water pollution caused by the company due to continuous effort in managing the environmental risks. The company has also employed local peoples (in majority) both for Mill and Estate.

AUDIT REPORT List receipt note of public consultation invitation letter

AUDIT REPORT

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

RSPO Principle and Criteria, Indonesian National Interpretation:

Major Nonconformities occur when system is failing to meet a relevant compulsory indicator.

Minor Nonconformities occur when system is failing to meet other indicators.

Opportunity for Improvement is a documented statement, which may identify areas for improvement, but shall not make specific recommendation(s). Client may develop and implement solutions in order to add value to operations and management systems. SAI Global is not required to follow-up on this category of audit finding.

RSPO Supply Chain Certification System:

Major Nonconformities occur when system is failing to implement and/or maintain requirements of Supply Chain Certification System.

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

Area of concern issued when there is an area of the system for which the client is required to investigate potential non- conformity.

Action required: SAI Global may require client to formulate preventive action plan for approval prior to next planned audit/certification decision or alternatively may follow up client’s preventive action at the next planned audit. Lack of client attention to such issues implies that a preventive action system is not working effectively.