Public Summary Report Sei Daun Final Reviewer OK

Roundtable on Sustainable Palm Oil Public Summary Report Report no.: 824 502 16044 Certification assessment against the RSPO Principles & Criteria year 2013 RSPO Supply Chain Certification System year 2014

PT Perkebunan Nusantara III Sei Daun Palm Oil mill Labuhan Batu Selatan North Sumatera

Date of assessment: June 01 to 05, 2015

Report prepared by: Aswan Hasibuan RSPO Lead Auditor)

Certification decision by: Abdul Qohar (Director of TUV Rheinland Indonesia)

Certification Body: PT TUV Rheinland Indonesia Menara Karya, 10 th Floor Jl. H.R. Rasuna Said Block X-5 Kav.1-2 Jakarta 12950, Indonesia Tel: +62 21 57944579 Fax: +62 21 57944575 www.tuv.com/id

TABLE OF CONTENTS

1.0 SCOPE OF CERTIFICATION ASSESSMENT ...... 3

1.1 National Interpretation Used ...... 3 1.2 Type of Assessment ...... 3 1.3 Location and Maps ...... 3 1.4 Description of Supply Base ...... 5 1.5 Dates of Plantings and Replanting Cycles ...... 7 1.6 Other Achievements and Certifications Held ...... 8 1.7 Area of Plantation (Total, Planted and Mature) ...... 8 1.8 Organizational Information / Contact Person ...... 8 1.10 Time Bound Plan for Other Management Units ...... 9 1.11 Compliance to Rules for Partial Certification ...... 9 1.12 Plan for certification of associated smallholders ...... 10 1.13 Approximate Tonnages Certified ...... 10 1.14 Recommendation for Certification ...... 10 1.15 Date of Certificate Issued and Scope of Certificate ...... 11 2.0 ASSESSMENT PROCESS ...... 11

2.1 Certification Body ...... 11 2.2 Qualifications of Lead Assessor and Assessment Team ...... 11 2.3 Assessment Methodology ...... 12 2.4 Stakeholder Consultation and Stakeholders Contacted ...... 14 2.5 Date of Next Surveillance Visit ...... 14 3.0 ASSESSMENT FINDINGS ...... 14

3.1 Summary of Findings ...... 14 3.2 Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions...... 40 3.3 Noteworthy Positive Components ...... 46 3.4 Issues Raised by Stakeholders and Findings Pertaining to Issues...... 46 3.5 Acknowledgements of Internal Responsibility and Formal Sign-Off by Client ...... 51 APPENDICES ...... 52

Appendix 1: Details of Certificate ...... 52 Appendix 2: Certification Audit Plan ...... 54 Appendix 3: List of Abbreviations ...... 58 Appendix 4: List of Stakeholders Interviewed and Contacted ...... 58 Appendix 5: Observations and Opportunities for Improvement ...... 62

RSPO Certification Assessment Report - PT Perkebunan Nusantara III –Sei Daun Palm Oil Mill –

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1.0 SCOPE OF CERTIFICATION ASSESSMENT

1.1 National Interpretation Used The operations of the palm oil mill(s) and its supply base of FFB were assessed against of the RSPO Princi- ples & Criteria year 2013.

1.2 Type of Assessment The main certification assessment was carried out on 1 and 2 estates under Sei Daun Palm Oil Mill owned i.e. Sei Daun estate and Gunung Tujuh estate by PT Perkebunan Nusantara III.

1.3 Location and Maps

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

Name of mill / es- GPS locations Location tate Latitude Longitude Sei Daun Palm Oil Mill Meranti Village, Torgamba 1º 40’ 35” 100º 19’ 7” Sub District, South Labuhan Batu District, Propinsi Su- matera Utara 21464 Sei Daun estate Sei Meranti Village, Torgam- 1º 40’ 11” 100º 19’ 32” ba Sub District, South Labuhan Batu District Bukit Tujuh Estate Bukit Tujuh Village Torgamba 1º 34’ 9” 100º 13’ 58” Sub District, South Labuhan Ba- tu District

Assessment location, located in Sei Daun Palm Oil Mill

Figure 1. Location of Sei Daun Palm Oil Mill

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Figure 2. Sei Daun estate planted area and its conservation area.

Figure 3. GunungTujuh estate and its conservation area.

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North Sumatera

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1.4 Description of Supply Base Sei Daun Palm Oil Mill has license capacity 60 tonnes/hour according to SPUP No. 350/771/DJ.Bun.5/XI/200. Sei Daun Palm Oil Mill is FFB supplied by two owned estates i.e. Sei Daun estate and Gunung Tujuh estate, another estate belong to PTPN 3 as mentioned on table 2 above, and supplied from out growers. There are 14 out growers supply to Sei Daun palm oil mill in year 2014 and 8 out growers in year 2015 with the composition as stated on the table below.

Table 2: FFB Supply Information for Sei Daun Palm Oil Mill, year 2014 and 2015 *

FFB supplied 2014 FFB supplied 2015 FFB Contributors Tonnes % Tonnes % Company owned es-

tates: Sei Daun 92,033.790 47,478.180 62.12 Bukit Tujuh 52,341.390 16,885.450 59% 64,363.63 Sub Total 144,375.18

Others Company owned

estate Torgamba Estate 499.40 712.540 Bandar Selamat 1,473.97 0 Aek Nabara Utara 331.05 0 Aek Nabara Selatan 1,181.37 0 Sei Kebara 40.29 0 6.51% 4.13% Sei Dadap 2,242.16 0 Sei Baruhur 188.30 0 Sei Meranti 8,127.40 3,792.610 Sei Sumut 1,040.54 0 4,505.15 Sub Total 15,124.48

17Independent out

growers UD May 280.32 Mitra Sejahtera 54.76 Yohana 184.70 Karya Mandiri 17,230.60 Bima sakti 4,465.80 31.37% 36.87% Bekanta 6,386.56 2,062.18 Kartika 7,464.61 Karya Bersama 7,674.83 7,978.01 Torgama Karya 12,563.75 7,715.22 Zilenka 8,743.07

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Waskita Jaya 3,479.39 1,830,66 Akbar sawit jaya 4,182.92 1,395.94 Makmur Jaya 84.21 Bina Rohil 118.89 KDKD 16,491.57 Ravi Prima 260.87 Lasinah 2,495.48 72,914.41 Sub Total 40,229.93

Total 232,414.07 100 109,098.71 100 Note: Supply from January to December 2014 & January to May 2015 (until audit time)

Table 3: FFB Supply Information for Sei Daun Palm Oil Mill, year 2015 and 2016 *

FFB Suplied year 2016 FFB supplied year 2015* FFB Contributors (projection) Tonnes % Tonnes %

Company owned estates :

Kebun Sei Daun 117,605.380 40.70 115,937.500 40.55 (KSDAN)

Kebun Bukit Tujuh 58,675.700 20.30 94,935.000 33.20 (KBUTU)

Sub Total 176,281.080 61.00 210,872.500 73.76

Others Company’s estate (if any)

42,383.00 Kebun Sei Meranti 14.67 0 0

4,567.84 Kebun Torgamba 1.58 0 0

Sub Total 46,950.840 16.25 0 0

Smallholder/Outgrower

65,692.950 22.74 75,000.000 26.23

Sub Total 65,692.950 22.74 75,000.000 26.23

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Grand Total 288,924.870 100% 285,872.500 100%

Note: * Additional data from client provided on March 2016.

Table 4: CPO and PK production from Sei Daun palm Oil Mill in year 2014

FFB supplied in CPO PK FFB Contributor 2014 OER KER (Tonnes) (Tonnes) ( Tonnes ) Company owned estates: 144,375.18 21.54% 31,092.36 4.61% 6,654.38 Others Company owned 15,124.48 21.61% 3,267.83 4.48% 677.57 estate Out grower 72,914.41 20.45% 14,911.00 4.33% 3,157.20 GRAND TOTAL 232,414.07 49,271.2 10,489.15

Table 5: CPO and PK production from Sei Daun Mill in year 2015 & 2016

FFB sup- CPO PK Year plied in OER KER (Tonnes) (Tonnes) ( Tonnes ) 288,924.870 64,950.31 11,932,59 2015 22.48 4.13 176,281.080* 39,627.98 7,280.41

285,872,500 64,982.97 12,233.05 2016 (projection) 22.73 4.28 210,872.500* 47,931.32 9,025.34

Note : * from company’s supplied based(certified estate)

1.5 Dates of Plantings and Replanting Cycles The company follows a replanting cycle of 25 years. Information on the dates of plantings is as per the table below.

Table 6: Age and year of planting and replantings of company estate supplying to Sei Daun Palm Oil Mill .

Oil palm planted area at each estate(ha) Replanting year Kebun Sei Daun Kebun Bukit Tujuh 2016-2012* 14.35 9.85 2011-2007* 6,231.95 2,344.30 2006-2002 845.40 1,502.76 2001-1997 40.32 - 1996-1992 - - 1991-1987 - - 1986-1992 - -

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Page 8 of 62 TOTAL 7,132.02 3,856.91 Note: *replanting activities not new development area. 1.6 Other Achievements and Certifications Held

Table 7 : Details of other certifications or awards held by Sei Daun Palm Oil Mill and its Supply based.

Certification Standard / Certification Body / Name of mill / estate Date Achieved Award achieved Awarder PKS Sei Daun ISO 14001 TUV Rheinland TMT 01/08/2014 – Indonesia 31/07/2017 ISO 9001 TUV Rheinland TMT 01/09/2015 – Indonesia 31/08/2018 SMK3 SUCOFINDO TMT 31/08/2015 – 01/07/2018

1.7 Area of Plantation (Total, Planted and Mature) Table 8: Oil Palm Planted Area Summary, FFB Production and Average yield/ha for Sei Daun Palm Oil Mill Immature FFB Oil Palm Mature (Non- Produc- Average Estate Total area Planted (Produc- production* yield/ Name (ha) area tion) ar- tion) (tonnes) ha (ha) ea (ha) area (ha) Kebun Sei 7,715 7,292.02 7,117.67 174.35 137,385 19.30 Daun Kebun Bukit 4,000 3,856.91 3,847.06 9.85 83,629 21.74 Tujuh TOTAL 11,715 11,148.93 10,964.73 184,20 221,014 41.04 Note:* not all FFB from boths estate supply to SEI Daun POM sometime both estate supply to other mill under PTPN3 such Sei Meranti Palm Oil Mill, Aek Roso POm etc .

Table 9: Land use data for Sei Daun Palm Oil Mill Rub- HCV/ Land used for other purposes (ha) ber Oil Palm Potential Total ar- Plant- Estate Name Planted HCV Housing, ea (ha) ed Ar- Cleared Other Area (ha) areas* Road, other ea Area Land (ha) infrastructure (ha) Kebun Sei 7,715 - 7,292.02 - 398.39 1.14 23.45 Daun Kebun Bukit 4,000 - 3,856.91 - 140.19 2.90 - Tujuh TOTAL 11,715 - 11,148.93 - 538.58 4.04 23.45

1.8 Organizational Information / Contact Person

Contacts details of the company are as follows:

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North Sumatera

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Company Name: PT. PERKEBUNANAN NUSANTARA III

RSPO Membership no. 1-0030-06-000-00 / 14-12-2006

Address: Jln. Sei Batanghari No.2 Medan 20122 Kotak Pos 91

Propinsi Sumatera Utara, Indonesia

Contact Person: Tio Handoko, ST, MM

Telephone: 081 264 575 552 Email: [email protected]

1.10 Time Bound Plan for Other Management Units The time frame laid out below is considered to be both challenging and realistic. This time bound plan has so far been carried out has been revised in year 2015 and the reason for this is because the readiness and company compliances to legal requirement and RSPO requirement. The audit team is satisfied that the company conforms to the RSPO requirements for partial certification as laid out in Clause 4.2.4 of the RSPO Certification Systems document.

Table 10: Time Bound Plan of PT Perkebunan Nusantara III

Time bound plan Name of Holding Location Status For certification

PKSMK Sei Mangke / Simalungun August 2010 Certified

PRBTN Tebing Tinggi May 2015 In-process

PSSIL Sei Silau / Asahan May 2015 In-process

PANAS Aek Nabara / Labuhan Batu May 2014 Certified

PSSUT Sisumut / Labuhan Batu May 2015 In-process

PSBAR Sei Baruhur/ Labuhan Batu November 2014 Certified

PPARO Aek Raso/ Labuhan Batu June 2014 Certified

PTORA Torgamba/ Labuhan Batu June 2015 Planned

PATOR Aek Torop/ Labuhan Batu June 2014 Certified In-process PSDAN Sei Daun/ Labuhan Batu June 2015 In-process PSMTI Sei Meranti/ Labuhan Batu June 2015

Hapesong Mill Tapanuli Selatan November 2016 Planned

1.11 Compliance to Rules for Partial Certification Compliance of the uncertified management units of PT Perkebunan Nusantara III against the rules for partial certification according to RSPO Certification System clause 4.2.4 was assessed by submission self assessment report, expose information from RSPO web site and other sources. A summary of findings is as stated below.

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Partial Certification Require- Audit Findings ments 1. a The organisation is an Yes, PTPN III is an RSPO member with ID No. 1-0030-06-000-00 (mem- RSPO member. bership since 14 December 2006). RSPO Certification system section 4.2.4 PTPN III has beent provide result of the self-assessment for all units enter- ing estate and mill at the time bound. 1.b A time-bound plan for PTPN III has a time-bound plan to achieve RSPO certification for all rele- achieving certification of all relevant entities. However, one of the company’s development areas (Muara vant entities; Upu site) located at South Tapanuli is still not included by the time-bound plan. NPP assessment for this area was carried out by Certification Body (Sucofindo) in year 2012. 1. c. i. There are no significant There are some land conflicts/ potential land conflicts ongoing in other land conflicts. PTPN III’s management units, such as Silau Dunia, and Si Sumut Estates. While the company has already made a conflict resolution mechanism, these conflicts remain unresolved, as the land claimants do still not agree the mechanism. 1. c. ii. No replacement of pri- PTPN III’s development of a new planting area (Muara Upu at South Ta- mary forest or any area contain- panuli) had been raised before as a major noncompliance by TUV Rhein- ing HCV since November 2005. land audit team, which is now closed as the company has carried out applying NPP in accordance with this clause and the progress under review- ing of Compensation Task Force. 1c. iii. No labour dispute that No labour dispute issues were found in other PTPN 3 subsidianires/unis. are not being resolved through an agreed process. 1c.iv. No evidence of non- Some of PTPN III’s other management units have not complied with cer- compliance with law in any of tain legal requirements. For example, in Silau Dunia Estate under another the non-certified holdings. PTPN III management unit, an issue has been found with the area stated under the Right of Cultivation certificate (HGU). However, the company is taking action by inviting National Land Agency (BPN) to re-measure the land and resolve the issue. The process is still ongoing.

1.12 Plan for certification of associated smallholders The mill does not have any scheme or associated smallholders. During this certification audit, it was found that the company has program towards RSPO compliance for several independent out growers that supply FFB to Sei Daun Palm Oil Mill.

1.13 Approximate Tonnages Certified The approximate tonnages certified, based projection production from certified sources in year 2016 for company owned estates only are as follows: FFB production : 210,872.500 tonnes Crude Palm Oil (CPO) : 47,931.32 tonnes Palm Kernel (PK) : 9,025.34 tonnes

1.14 Recommendation for Certification PT Perkebunan Nusantara III Sei Daun Palm Oil Mill has established and maintains an effective system to ensure compliance with the RSPO principles and criteria. The audit team has confirmed through the audit process

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Page 11 of 62 that the company’s practices complies with, adequately maintains and implements the requirements of RSPO Principles and Criteria Generic year 2013. PT TUV Rheinland Indonesia recommends that PT Perkebunan Nusantara III Sei Mangke palm Oil Mill be approved as a producer of RSPO Certified Sustainable Palm Oil.

1.15 Date of Certificate Issued and Scope of Certificate The scope of the certificate covers production of palm oil from Sei Daun Palm Oil Mill and its supply base, which includes Sei Daun Estate and Bukit Tujuh Estate. The date of certificate issued is September 8th, 2016. Further details of the certificate are as per Appendix 1.

2.0 ASSESSMENT PROCESS 2.1 Certification Body

PT TUV Rheinland Indonesia is member of Group TÜV Rheinland Group, a global leader in independent test- ing and assessment services. The TÜV Rheinland Group was established in 1872 with offices located in over 490 locations in 62 countries on all five continents. PT TUV Rheinland Indonesia offers certification for a wide range of management systems according to established international standards including ISO 9001, ISO 14001, OHSAS 18001, SA 8000, as well as CDM Validations and Verifications. PT TUV Rheinland Indonesia’s office is located in Jakarta, Indonesia.

2.2 Qualifications of Lead Assessor and Assessment Team

Name Position Qualifications / Experience

Education: Bachelor of Agriculture, University of North Su- matera. Trainings attended: ISO 9000:2000 Series Auditor / Lead Auditor Training - PE International (Jakarta), IEMA Advanced EMS Auditor (IEMA / EARA ISO 14001) Auditor / Lead Audi- tor Training Course - PE International (Jakarta), OHSAS 18001 Lead Auditor Training Course - PE International (Ja- karta). Aswan Hasibuan Lead Auditor Working experience: Experienced in Quality Control from 1994-2004. Auditor for Quality Management System since 2004 – present. Auditor for Environmental Management Sys- tem since 2005 – present. Auditor for OHSAS 18001 since 2007 - present. Conducted over 100 Quality Management System audits since 2004, over 50 Environmental Manage- ment System audits since 2006 , and over 25 OHSAS audits since 2007 Education: Bachelors Degree in Forestry - Bogor Agriculture Institute. Indonesia, (1990 to 1995). Trainings attended : ISO 9001:2000 lead assessor course 1996 - Neville Clark; ISO 14001 lead assessor course - PE In- ternational; OSHAS: 2007 training, Sustainable Forest Man- agement (SFM) - Forest Stewardship Council (FSC) system Dian Susanty Auditor training; Chain of Custody training for FSC System. RSPO Soeminta lead Auditor training year 2010 by Pro Forest and Wild Asia. SCCS training by David Ogg Consulting. ISPO Lead Auditor training Working experience: Professional forester since 1995 to 2000. Lead Auditor for Forest Stewardship Council (FSC), Sustainable Forest Certification (SFC) and Chain of Custody (COC) Certification. Lead auditor for Environmental Manage-

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ment System (EMS) and Quality Management System (QMS) audits. Conducted sustainable forest management certification audits on FSC and Indonesian Ecolabel Institute (Lembaga Ecolabel Indonesia - LEI) standards for 20 companies, 50 COC FSC/LEI audits, and EMS and QMS audits at more than hundred companies for TUV Rheinland Indonesia. Instrumen- tal in the preparation of TUV Rheinland Indonesia for Sustain- able Forest Management Certification System and TUV Rhein- land Malaysia for RSPO Certification. Member of Task Force for Indonesian National Interpretation (Guidance on scheme smallholder RSPO certification). Developed TUV Rheinland RSPO acceditation process and report template. Education: Magister Agribusiness Management IPB, Bachelor Degree in Forestry University of Gajah Mada Training Attended : RSPO Lead Auditor Training (2014), IRCA ISO 9001:2008 (QMS) Lead auditor Course, IRCA ISO 14001:2004 (EMS) Lead auditor Course, Timber Legality Veri- fcation (SVLK), OHS-MS (SMK3), ISPO Auditor Course, Chain of Costudy (COC) Auditor Training of Indonesia Eco-labeling, Entin Hendartin Auditor Forest Certification (Sweden, 1997) Working experience: Technical Assistant to Indonesia For- esters Association (1993-2004), Communication Manager the Borneo Orangutan Survival Foundation (2005-2007), Profes- sional Consultant in Forestry Sector (2007-2010), Auditor at PT Mutu Hijau Indonesia (2010- Juni 2013), Auditor for QMS, EMS, SVLK, RSPO and ISPO (2010 s/d present) Education : Diploma Applied Analitycal Chemistry. North Su- matra University, Medan and Bachelor of Chemical Engineer- ing, University of Jaya Baya, Jakarta. Trainings attended: ISO 9000:2000 Series Auditor / Lead Auditor Training - PE International (Jakarta), IEMA Advanced EMS Auditor (IEMA / EARA ISO 14001) Auditor / Lead Auditor Training Course - PE International (Jakarta), OHSAS 18001 Lead Auditor Training Course - PE International (Jakarta). ISPO lead auditor training. National Examination Board of Oc- cupational Safety and Health (International General Certifica- tion (IGC) 1,2 and 3 TUV Nord (Dubai). National Examination Suriadi Auditor Board of Occupational Safety and Health (International Tech- nical Certification (ITC) for Oil and Gas Industries. RRC (Du- bai). Indonesian Engineer Association (PII) (Jakarta), Occupa- tional Health and Safety Specialist for lifting equipments. Indo- nesia Man Power and Transmigration Department (Jakarta). Working experience: Experienced in Quality Control from 1992-2004. Coordinator for Safety Quality and Environment Management System since 2002 – present. Auditor for Envi- ronmental Management System since 2002 – present. Auditor for OHSAS 18001 since 2012 - present. Conducted over 10 Quality Management System audits Environmental Manage- ment System audits and OHSAS

2.3 Assessment Methodology

The certification assessment was conducted between June 01 to 05, 2015 as per assessment program below. The assessment was carried out in accordance with PT TUV Rheinland Indonesia’s RSPO audit procedure as well as the RSPO Certification Systems document. During assessment, the qualified TUV Rheinland assessors used the RSPO standard as endorsed for the country in which the assessment took place and recorded their findings.

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Page 13 of 62 Due to the location and proximity of the estates, combined with common management systems, it was possible to carry out both field and document assessments of all estates and the mill within the time frame without com- promising the integrity of the assessment in anyway. All 2 estates and 1mill were visited and the assessment team carried out field and document assessments of compliance to all the RSPO principles and criteria. Common systems were identified and specific evidence was recorded for individual estates. Interviews were conducted at all estates and the mill. The company proposed the correction and corrective action for all identified non conformities raised to the certification body 30 days after the closing meeting. Verification of closure of major non-conformances was conducted 6 months after the closing meeting of the main assessment and implementation of corrective actions for minor non-conformities will be verified during the next surveillance audit. The certification assessment agenda is as explained below.

Main Assessment Agenda.

Date Site/location Age nda 01.06.2015 DLAB 1 District Stakeholder consultation - Presentation on TUV Rheinland and RSPO 08.00-12.00 - Introduction to purpose of the stakeholder consultation - Feedback and comments on from stakeholders. 01.06.2015 Sei Daun Opening Meeting POM - Introduction and background of estate and mill 13.00-17.00 - Audit team introduction and audit plan finalization Document Checking - Mill Tour - Mill site visit - Mill compound - Loading ramp - Security post - Lubricant store - Effluent treatment ponds - Interviews with mill workers from boiler and clarification stations - Document Review: OHS, Environmental, Issues related to Legal compliance ,Occupational Safety & Health implementation, Training , AMDAL, UPL/UKL, RKL/RPL Aspect Impact Analysis, Verification of previous audit findings On-site visit: plant tour. Interviews: Head of Mill, staff operation, kerani(foreman) and Mill Worker ( operators) 02.06.2015 Sei Daun Document Check Estate - Legal Land - Land application - Checking HCV area - Boundary with - Riparian - Water Reserve and water dam - Business Plan - OHS - Boundary maintainance. - Harvesting activities - Worker’s housing area 04.06.2015 Bukit Tujuh Es- Document Check tate - Legal Land - Land application - Checking HCV area - Boundary with - Riparian - Water Reserve and water dam - Business Plan

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- OHS - Boundary maintainance. - Harvesting activities - Worker’s housing area 05.06.2015 Bukit Tujuh Es- Field Check related to: tate & Sei - Legal Land 08:00 – 12:00 Daun Estate - Land application - Checking HCV area - Boundary with - Riparian - Water Reserve and water dam - Business Plan - OHS - Boundary maintainance. - Harvesting activities - Worker’s housing area 05.06.2015 DLAB 1 - Preparation for cloing meeting District - Closing Meeting 08:00 – 17:00

2.4 Stakeholder Consultation and Stakeholders Contacted The stakeholder consultation involved both external and internal stakeholders. External stakeholders were notified to make comments on the certification assessment by placing an invitation to comment on the RSPO website. Stakeholders included those immediately linked with the operation of the company such employees, out growers, the local government, NGO’s, trade and labor unions and local communities. Stakeholder consultation took place in the form of meetings and interviews. Meetings with stakeholders were held to seek their views on the performance of the company with respect to the sustainability practices outlined in the RSPO Principles & Criteria, and to comment on aspects where improvements could be made. Meetings with local communities were held at their respective premises within and near the company’s area. A stakeholder consultation meeting was also held on District Labuhan Batu 1 Meeting Room on June 01, 2015. Letters inviting individual stakeholders to the stakeholder consultation meeting were prepared and sent to the individual stakeholders, while electronic mail and telephone calls were made to arrange the meetings. In all the interviews and meeting, the objectives of the RSPO and the purpose of the assessment was clarified at the outset followed by an evaluation of the relationship between the stakeholders and the company before discussion proceeded to obtain the stakeholders feedback on the company’s compliance to different aspects of the RSPO Principles & Criteria. Although several stakeholders were not familiar with RSPO but they agreed with its objective and expressed their willingness to collaborate in the promotion of sustainable palm oil in North Sumatera province. In all interviews and meeting, the assessment team did not restrict discussion of both the positive and negative aspects of operations conducted by Sei Daun, Bukit Tujuh estates and Sei Daun Palm Oil Mill. The stakeholder consultation meeting held with stakeholders during the audit was extensive and productive, with an attendance of more than 40 attendees. This was followed by site inspections, including visits to the local communities, interviews with land claimants and contractors, and inspections of worker amenities and infrastructure. All stakeholder issues raised were recorded and forwarded to the management for their written response, and this is summarized in Section 3.4.The list of stakeholders that attended the stakeholder consultation meeting and stakeholders interviewed during the assessment is included as Appendix 4.

2.5 Date of Next Surveillance Visit

The next surveillance visit is planned for June 2017

3.0 ASSESSMENT FINDINGS 3.1 Summary of Findings

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Page 15 of 62 The following is a summary of findings made for the criteria listed in the RSPO Principles & Criteria Generic standard 2013 and RSPO SCCS Modul C.

3.1.1. RSPO P & C

Criterion 1.1: Growers and millers provide adequate information to relevant stakeholders on environmental, social and legal issues relevant to RSPO Criteria, in appropriate languages and forms to allow for effective participation in decision making.

Findings: Unit management of PTPN III Sei Daun POM has all the documents required under applicable regulations (such as: HGU Certificate, the document EIA / RKL / RPL, document the Study of Social and Em- ployment) to enable the company to provide adequate information to the stakeholders associated with problems legal, environmental governance, social governance, and labor. The management unit also has a clear mechanism to regulate public access to such documents.

Reports provided regularly to the relevant agencies, for example: • Progress Report on the Plantation Business Bukit Tujuh estate the second half of 2014 there is a receipt of the Head of the Forestry and Plantation, Labuhan Batu Selatan regency on January 26, 2015. • RKL-RPL Semester II 2014 Sei Daun Estate, Bukit Tujuh Estate and Sei Daun POM to South Labuhan Batu regency BLH Kota Pinang. There is a receipt of the relevant agencies dated March 26, 2015 a.n Uswatun Karimah.

The management unit showed evidence of a request for information from stakeholders as below: • Letter No. PSDAN / X / 06A / V / 2014 dated May 14, 2014 of POM Manager of Sei Daun To the Head of the District Meranti Torgamba about Permitting employees became a member of the Village Consul- tative Body (BPD) in Sei Meranti for Period 2013-2019 on behalf of Erwinsyah Siregar. The letter is in response to a letter from the Head of the District Sei Meranti Torgamba No. 005/213 / SM / V / 2014 dated May 12, 2014.

Compliance status: Compliance

Criterion 1.2: Management documents are publicly available, except where this is prevented by commercial confidentiality or where disclosure of information would result in negative environmental or social outcomes.

Findings: Documents are publicly available in accordance circular letter from the Director of Marketing and De- velopment Planning No. 3.00 / SE / 01/2015 April 8, 2015 are: Company profile, Annual report, Finan- cial Statements, Certificate HGU, HGB and HPL, handbooks GCG, Evaluation results GCG by independent institutions, Information award, Company Registration (TDP), EIA documents (RKL / RPL, UKL / UPL and DPPL), Data CSR, documentation of OHS program, policy management system PTPN III, objective/target of Environment Management System and OHS Management System of PTPN III The policy of environmental management systems and safety management systems (K3) PTPN III (Persero), Compulsary Labor Report, Achieving Company Program, document permitting such permit land application, TPS B3 and License for incinerator operation, Hazardous Waste, and infectious wate, reports the monitoring and measurement, report production achievement, names estate / unit, Docu- ment program of continuous improvement (Results of management review meetings), Policy human rights, Document SIA, Document High Corservation Value ( HCV), and the prevention of pollution re- duction plan, Flow problem solving / conflict, Data public consultation and certification assessment report and data communications stakehoders.

There is evidence of socialization list of documents to the parties (public and employees) conducted on May 15, 2015 and was attended by 57 participants.

Compliance status: Compliance

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Criterion 1.3. Growers and millers commit to ethical conduct in all business operations and transactions

Findings: The management unit has a code of conduct third edition authorized by the Board of Commissioners and Board of Directors. The code of conduct that is created as a guideline which is a standard of behavior for all individuals in the move both inside and outside the company. Document consists of goals and objectives, the benefits of code of conduct, values, business ethics and commitment to stakeholders, the basic attitude of the individual, the behavior of individuals inside and outside the company, the behavior of a superior, behavior as a subordinate, behavior towards fellow colleagues, commitments on specific issues such as liability salvage companies, trade transactions as a result of insider information, conflicts of interest, political activities, donations, commissions, kickbacks, gratuities control, handling whistleblowing, management and administration of property report kekayaraan State administrators. Enforcement of the code of conduct such as monitoring the implementation of the code of conduct, reporting pelaggaran code of conduct, sanctions for violations of the code of conduct. - The management unit makes internal memo for dissemination of code of conduct Number KSDAN / in- ten / 634/2015 dated March 28, 2015 and socialization held on April 1, 2015 with the number of participants 104 people from various parts such as askep, assistant section, KTU, chairman and secretary of the SP BUN KSDAN basis, krani department, harvest foreman, maintenance foreman, krani transport, harvesters, and maintenance. Internal Memo from Manager PSDAN No. PSDAN / Int / 36 / V / 2015 dated May 12, 2015. Socialization code of conduct and data that can be published as well as data that can not be published on 15 May 2015. There is a list of participants attending the socialization as many as 57 people most great is krani of each area. Compliance status: Compliance Criterion 2.1: There is compliance with all applicable local, national and ratified international laws and regulations.

Findings: The management unit showed evidence of the results of the evaluation laws and regulations in 2015 as many as 129 regulations (May 4, 2015-signed by the Estate Manager). In the document mentioned regulation number, sourcing, location of the application, the related articles, related activities, indicators of compliance, corporate compliance and follow-up will be done. Sei Daun management unit show evidence of regulation evaluation and compliance,

The company maintains a list of all applicable legal requirements relating to environmental, occupational safety and health, the company plantations, and employment as well as records of internal compliance checks to legal requirements as they are summarize in the FM-3.11-01/03. List of applicable legal, regulation and other requirements was recorded in the FM-3.11-01/01

Proof of compliance with the relevant legal requirements (for examples social aspect is): • The wages of labor in accordance with Governor Decree No. 188.44 / 0972 / KPTS / 2014 at a minimum of Rp1.625 million per month. • Indonesian Government No. 101 Year of 2014 concerning of Management of Hazardous Waste. • POM management unit of Sei Daun, Sei Daun estate and Bukit Tujuh estate not employ childs in accordance with Law No. 13 of 2003 on labor POM Chapter 68 &69 Company has the copy of the each regulation which are kept in head office while the summary of each regulation related to unit operation kept in management unit.

Company assign Estate GA Assistant as responsible person to manage legal documentation in coordination with Legal Division in head office.

In yearly based corporate conduct internal audit for legal compliance and documented as updated Law Register. Compliance status:Compliance

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Criterion 2.2: The right to use the land is demonstrated, and is not legitimately contested by local people who can demonstrate that they have legal, customary or user rights.

Findings: Sei Daun Estate controlled area concession covering an area of 7,555 hectares (HGU No. 02 / Aek Stone Valid until December 31, 2010, consists of 10 Cambodgien with palm oil commodity. Currently the concession is in the process of renewal. HGU Sei Daun Estate blend with Sei Baruhur and Tor- gamba Estates namely SK HGU No. 44 / HGU / DA / 80 dated 9 July 1980 which expired on December 31, 2010 covering an area of 25,593.74 hectares. SPUP for these fields was fused. Currently the concession extension is constrained by the identification of the status of permanent production forest area covering an area of 14 094 hectares, even in areas identified Sei Daun Estate their status area with forest preserves covering 288 ha (in Afdeling VI). This is raised as nonformity. Documents Progress maintenance of the concession until now not available in the office of Sei Daun Estate. This is raised as non conformity. (See NCR No. 2015-02-13).

Handling certificate extension to Sei Daun Estate HGU and HGU certificate acquisition for Bukit Tujuh Estate, and Sei Meranti until delivery letter No. 3:11 / X / 104/2014 concerning the issuance of a letter dated October 31, 2014 to the Chief of the Forest Service proinsi North Sumatra. Progress on the follow-up to the legal processing of the land until the month of June 2015 is not yet available in the office of Sei Daun Estate and orchards Bukit Tujuh Estates. This is raised as NCR (NCR No. 2015-01 of 13).

Legal land Right for Bukit Tujuh Estate. Based on the Decree of the Minister of Interior No. 54 / HGU / DA / 88 on granting the concession to PT Plantation IV (Persero) Mount Pamela for 35 years on farm- land Torgamba an area of 1329 ha portion of the total area of 9987.4 hectares located in the village of Ujung Gading subdistrict Barumun Central, South Tapanuli Province North Sumatra and Decree No. 53 / HGU / DA / 88 on the granting of the concession on behalf of PT Pekebunan IV (Persero) Gunung Tujuh for 35 years on the State land / plantation Torgamba area of 8658 ha. As part of a total area of 9987.4 ha. Both of these efforts Right to apply from the date of June 29, 1988 until December 31, 2023. HGU certificate until the time of the audit can not be issued in connection with the constraints in acquir- ing licenses forest area release from the ministry of forestry. Permit the release could not be obtained because the PTPN 3 who get land ownership transition of PTPN IV has not been able to acquire replacement land forest area opened according to the available rules and regulation. Of the total land area of 9987.4 hectares concession, Bukit Tujuh Estate only manage an area of 4000 ha, sedangak rest goes into the area management of Sei Meranti estate. Both estates are part of the plantation owned by PTPN 3. Until the completion of the audit activities carried progress of land that is currently done by PTPN 3 related to the completion of the land, namely: The chronology of this land issues Bukit Tujuh Estate stated clearly in the land conflict chronology documents published on April 12, 2011 signed by Director of PTPN 3. Until the completion of the audit activities carried progress of land that is currently done by PTPN 3 related to the completion of the land, namely: - Letter issuance No. 3:11 / X / 104/2014 concerning the issuance of a letter dated October 31, 2014 to the Chief of the Forest Service North Sumatra Province. - Bukit Tujuh Estate has got Plantation Business Registration License No. PK.350 / 537 / Dj.Bun.5 / VII / 2001 dated July 5, 2001, but only for plantation land area of 1329 ha land area alone meanwhile for estate operation is 4000 ha, the remaining area of 2671 yet his SPUP, based on the description of the rest of the area into SPUP no. HK.350 / 770 / DJ.Bun.5 / XI / 2001 belonging Sei Meranti Estate (covering an area of 8658 Ha).

There is a map showing the location BPN stakes, which Stake no. 13 up to No. 92 of HGU No. 02 and Field of Land No. 69/12/2008. Based on the minutes of the re-installation of boundary markers, Minutes of the handover Tugu limit HGU PTPN 3 Sei Daun Estate in 2009 installed 82 stakes. Boundary markers care program in 2014 has been carried out every 6 months; 2014 Based on Internal memo from the manager KSDAN No. KSDAN / Int / 32 / II / 2014 dated February 10, 2014 and KSDAN / Int / 136 / VI / 2014 dated June 17, 2014. Treatment was conducted in June and December of 2014. There is evidence of boundary markers care for the pin 84 to 92; 13 to 21; 67 to 873 for the period from the second half of 2014. There is monitoring schedule per pillar HGU PTPN 3 Sei Daun 2015. For the six stakes afedling stake

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81, 2015 will be scheduled in June 2015 and December 2015. The results of checks on the ground, stake no 75 and 76 in Afdeling VI can be seen clearly that the stake maintains well and evidence of an improvement over the damaged boundary markers. For in- stance Bukit Tujuh Estate showing news peg monitoring events pillar No. KBUTU / BA / P / 01/2015 dated January 5, 2015. However, based on the results of field observations legal stakes could not be found along the boundary between blocks A 1SD A20 estate boundary Evidence with HTI PT SRL ( Bukit Tujuh Estate) The management unit has shown evidence of improvement in the form: Related Photos Stakes boundary conditions in Block A, E and G, news monitoring events peg pillar No. KBTU / BAP / 01/2015 dated 5 January 2015, the condition of photos on the block boundary markers G1, A.1, A.4, A.7 and A.8, but the data treatment monitoring period boundary markers in June 2015 yet. NCR in 2.2.2 criteria have not been met. There is no significant land conflict in both real Sei Daun and Bukit Tujuh estate. This is also confirmed by local communities during an onsite interview.

The management unit has a policy of conflict resolution and payment of compensation for land claims as follows: • Directors Decree No. 3:11 PTPN III / SKPTS / 01/2015 dated March 31, 2015 Guidelines for the implementation of the related to Sugu Hati of the Garapan area/ Unit PTPN III. • Working procedures of conflict resolution Document No. IK-3.11-12. The scope of work procedures is the resolution of conflicts in the working area of PTPN III which includes the handling of conflicts of arable acreage, laments the relationship between the company and stakeholders. Based on the results of document review and public consultation with the community around the area HGU PTPN III unit Sei Daun (Hamlet Bagan Baru Sei Meranti, Hamlet Sumbersari Village Torganda, Desa Bagan Manunggal, and Bukit Tujuh Village), it is known that there is no land issues between local communities by Sei Daun estate and Bukit Tujuh Estate, community supports a fully operational unit of Sei Daun PTPN III and approve the boundaries of the area of PTPN III Sei Daun unit that has been measured by the authorities. In the estate there Sei Daun layered security system program using all the components that have been formed: 1. The security guard by guard / team buser commandeered by Pa pam 2. watchman section 3. Patrol in rotation every night olehkaryawan leadership 4. Piket executive employees in rotation on major holidays or time off mass 5. Assistance BKO security of the North Sumatra Police Mobile Brigade by 2 people. The Company is not recommended for emnggunakan military power in securing farm and factory Compliance status: Non Compliance

NCR No. 01 of 13 The handling of certificate extension to Sei Daun Estate HGU and HGU certificate of acquisition for Bukit Tujuh Estate and Sei Meranti Estate until delivery letter No. 3:11 / X / 104/2014 concerning the issuance of a letter dated October 31, 2014 to the Chief of the Forest Service province of North Sumatra. Progress on the follow-up to the legal processing of the land until the month of June 2015 is not yet available in the office of Sei Daun Estate, Bukit Tujuh Estate and Sei Meranti Estate.

NCR No. 02 of 13 The boundary stone from BPN could not be found along the boundary between Bukit Tujuh Estate blocks A1 to A20 with HTI PT Surya Raya Lestari Criterion 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.

Findings: The management unit has HGU map PTPN III Sei Daun POM, working areal map, land plot map, and boundaries mark map. There is no identified existing traditional /communal right In the area PTPN III Sei Daun, as explained on some documents such as EIA, SIA, and the results of the public consultation with communities around the estate such Dusun Baru Bagan Sei Meranti, Hamlet Sumbersari De- sa Torganda, Desa Bagan Manunggal, and Desa Bukit Tujuh.

Compliance status: Not Applicable

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

Findings: The company has record of management plan for long term economic and financial viability through the budget record for each estate within Sei Daun Palm Oil Mill’s supply base, i.e.: 1. Sei Daun Estate; Has a record budget plan for year 2014 – 2016, when the production plan in year 2015 is about 137.385 tonne with yield per hectarage average is about 19.30 tonne/Ha; 2. Bukit Tujuh Estate; Has a record budget plan for year 2014 – 2016, when the production plan in year 2015 is about 137,385 tonne with yield per hectarage average is about 19.30 tonne/Ha; with total mature planted area is 83,629 Ha. In budget plan estate also showed the all activity in the estate such as salary, fertilizer application, maintenance, harvesting, FFB transport, overhead, production cost and others. During the certification audit, while in year 2016 production plan is about 285,827,500 tonne with yield per hectarage average is about 21.74 tonne/ha , with total mature planted area 10,988.93 Ha. However the management plan is not available in sei daun mill. This is raises as non conformity NCR No. 2015-03 of 13 . Replanting activities were done for Sei Daun estate and Bukit Tujuh estate since year 1997. Total replanting since the beginning until the audit time is 10988.93, whrere 7,132.02 ha in Sei Daun estate and 3856.91 for Bukit Tujuh estate.

Compliance status: Non Compliance NCR No. 2015-03 of 13 No documents found for the next 3 years work plan for Sei Daun POM. Provided only RKAP 2015 alone

Criterion 4.1: Operating procedures are appropriately documented and consistently implemented and monitored.

Findings: PTPN III’s estates are provided with work instructions for all estate activities including land clearing, mature and non-mature planting management, manuring, transportation, pest management, soil conservation, hazardous chemical use, etc. Evidence has been found as to the implementation of the work instructions, e.g. sighted onsite at Sei Daun and Bukit Tujuh Estates, where horseshoe method or terracing and adequate ground cover at sloped planted areas are implemented. They are done based on the company’s Work Instruction for Land Preparation and Management of Plantings, Sloped Land and Lowland Areas (Work Instruction No. IK-3.01-14/06). Census records are maintained as per the company’s Work Instruction No. IK- 3.01-17/14 for Oil Palm Pest Management. At Bukit Tujuh Estate, a map prepared prior to 2008 replanting for Division 5 and 6 has been sighted, which was prepared in accordance with the company’s Work Instruction No. IK-3.01-10/01 for Mapping and Measurement. The mill also has documented SOPs available for the mill processes. Bukit Tujuh Estates carries out operation checks through internal audits at least once a year by Internal Monitoring Division. The last internal audit report is dated 30 November 2014 and the previous audit report 16 November 2014. The 2014 internal audit covered assessment of estate FFB production and productivity, fertilizer application, payment of premium for harvesting foreman, inventory records, chemical distribution, finance, etc. All estates maintain operational results records. For example, Bukit Tujuh Estate whose planting activity monthly report for November 2014 was sighted. The report covers actual FFB transported, FFB production, actual fertilizer application, chemical use record, pest census record, etc.

Sei Daun POM receive the FFB from 17 agencies collecting palm fruit. Each agency has been collecting pieces of information about the list of farmers who became suppliers, and also submit their land right letter documents the farmers who became his supplier. But when checking the FFB received on May 30, 2015 against the fruit of CV KDKD and UD Karya Mandiri, the information source of the fruit was not listed in the document Letter Fruit accompanying fruit coming, so it can not be ascertained that the fruit comes from the list of farmers that has been delivered by the agents. CV Makmur Jaya is also a supplier of farmers who became suppliers.

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It was not found evidence verifying FFB independent suppliers periodically once a year as required by the relevant SOP on Management / Supplier Development FFB and Out Grower (PK3.03.09). In SOP is said that Mill has a verification team will conduct regular verification of the out growers Compliance status: Non Compliance

NCR No. 2015-04 of 13. Sei Daun POM receive the fruits from 17 agencies which collecting FFB . Each agency has been collecting pieces of information about the list of farmers who became suppliers, and also land documents the farmers who became his supplier. But when checking the fruit received on May 30, 2015 against the fruit of CV KDKD and UD Karya Mandiri, the information source of the fruit was not listed in the document Letter of FFB that accompanying fruit coming, so it can not be ascertained that the fruit comes from the list of farmers that has been delivered by the agents. CV Makmur Jaya is also a supplier of Sei Daun POM which is not sending the list of farmers who became their suppliers.

NCR No. 2015-05 of 13.

No evidence of the verification process of independent FFB suppliers periodically conduct once a year as required by the relevant SOP on Management / Development FFB Supplier and Out Grower (PK3.03.09). In SOP is said that POM has a verification team that will conduct regular verification of the out growersFFB Criterion 4.2: Practices maintain soil fertility at, or where possible improve soil fertility to, a level that ensures optimal and sustained yield.

Findings: There is evidence of regular soil and leaf analysis carried out in all estates. For example, the last soil analysis in Sei Daun Estate was done on 16 September 2014 over 106 samples, while the last leaf analysis was carried out on 24 August 2014 over 181 samples by the Indonesian Oil Palm Research Institute (PPKS). Based on analysis results a fertilizer recommendation report is prepared annually by the institute, e.g. this report was available for Sei Daun estate. The company has an internal target to use only 75% of fertilizer recommended. As sighted from fertilizer applications for Division 2 of Sei Daun estate, actual fertilizer applications for year 2014 was 225,656 kg, which is 75% of recommended amount of 300,874 kg. Sighted from field visits to Division 3 and Division 2 of the estate, there is adequate plantings of leguminous covers crops and application of EFB as part of efforts to increase soil fertility. Monthly EFB applications for each estate division are available, i.e. program sighted for October 2014 at Division 3 of Sei Daun estate, and EFB applications records for Division 2 of Sei Daun estate.

Compliance status: Compliance

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

Findings: The Sei Daun estates have no map of marginal soils as there no marginal soils are found there. The estates’ soil consists of podzolic soils, i.e. Typic Paleudult (yellowish brown podzolic) at Sei Daun estate, which is not classified as a marginal soil, although it is prone to erosion at sloped areas. PTPN III has a work instruction for Land Preparation and Management of Plantings and Sloped Land and Lowland Areas (Work Instruction No. IK-3.01-14/06). Its practices description includes planting of leguminous cover crops once drainage is constructed and mechanical land management depending on the slope degree (i.e., ‘benteng’ (bunding) at sloped areas of less than 3°, ‘tapak kuda’ (horseshoe) method at sloped areas of 3°- 28°, and terracing or contouring at others of above 28°). Sei Daun and Bukit Tujuh Estates area consists of flat to undulating parts, while Sei Daun Estate generally consists of flat land. As sighted in Sei Daun and Bukit Tujuh Estates, the horseshoe or terracing and adequate ground cover methods in planted sloped areas are implemented, and no significant erosion has been found. Sei Daun Estate has budgets for mechanical road maintenance, i.e. for July-December 2014. The division’s budgets are IDR 40,143,760 for main road maintenance; IDR 2,885,436 for grading; and IDR

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732,086 for roller. Documentation has been prepared for actual monthly road maintenance works in ‘Records of Use of Tractor in 2014’. Manual road maintenance is carried out in all estates on regular basis and the records are maintained. However, some estates’ roads are still not in good condition and signs of mild erosions at some part of these roads are found, indicating that further maintenance is required. This has been noted as an observation. From the results of the field visit identified there are some marginal land in Bukit Tujuh estate such as sandy land, land that is inundated by water, such as in blocks (G.20); section 1, land slope as steep as in block F3; E 4, but there is no map of the distribution of marginal land in the Bukit Tujuh Estate.. This is raised as non conformity. NCR No. 2015-06 of 13. No peat soils are present in Sei Daun and Bukit Tujuh Estates, thus peat water management plan is not required.

Compliance status: Non Compliance NCR No. 2015-06 of 13. From the results of the field visit identified there are some marginal land such as sandy land, land that is inundated by water, such as in blocks (G.20); section 1, land slope as steep as in block F3; E 4, but there is no map of the distribution of marginal land in the Bukit Tujuh Estate.

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

Findings: Sei Daun Estate and Bukit Tujuh Estate has installed signboards by river stating that no chemical spraying is allowed. This has been seen in the river from water reservoir. The estate has also carried out plantings of local species of plants at the river riparian buffer zones. However, based on interviews with manurers from Division 1 of Sei Daun Estate, manuring is carried out in the estate riparian river and far from the water reservoir; they implement pocket manuring pratice although they mentioned that only manual weeding was applied to the palm trees located by the river buffer zone, instead of chemical spraying. Sprayers interviewed in Sei Daun Estate have been informed not to carry out spraying near water sources, such as a spraying in Division 1. The main water source to all estates is groundwater wells. There is evidence of monitoring of water quality, i.e. in implementation reports of Environmental Monitoring Plan (RPL)/Environmental Manage- ment Plan (RKL) documents for each estate, where they are required to conduct analysis of groundwater used for consumption. However, Permit the use of water in the land owned by Sei Daun Estate ie by decree of South Labuhan Batu regency government, namely Letter No. 503/157 / BPPPTPM-LS / 2014 to PTPN III KebunSei Daun is only one point in emplasment of Sei Daun Estate. ¾ inch wide of pipe and 20 liters / minute of water debit, but this time in the Sei Daun Estate there is more than one point in the water wells. This is raised as non conformity (NCR No. 2015-07 of 13) Sei Daun estate has a documented programme for water use and conservation for end of 2014 and 2015, including maintenance and installation of water conservation technology, replacement of leaking water installations and informing workers to conserve water. As this is a newly introduced programme, its implementation will be verified in the next surveillance audit. The estate also has monthly records of water use in various estate locations, including the office, housing, clinic, canteen, school, mess hall, transporter washing facility, etc. The water use target is set and the records show no monthly target excess during 2014. The mill carries out land application of Palm Oil Mill Effluent (POME), and the quality control conducts monthly sampling of effluent Biochemical Oxygen Demand (BOD) for discharge points as well as monitoring wells. POME analysis is conducted by the external laboratory. The available analysis results are dated, among others, 14 October 2014, 18 September 2014, 23 August 2014 and 30 July 2014. All months’ results show that the BOD levels of the samples are below the legal requirement that applies to land application (5,000 ppm) as per Environment Ministry State Minister Regulation No. 28/2003 on Technical Guidelines for Assessment of Wastewater Use from palm Oil Industry to Soil. The results are: BOD of 1,567 on 27 October 2011; BOD of 1,956.9 on 27 September 2011; BOD of 2,050.8 on 23 August 2014; and BOD of 1,762.0 on 30 July 2014. The mill also runs water sampling and analysis of the monsoon drain water against parameters for clean water under Health Ministry Regulation No. 416/MENKES/PER/IX/1990. The last analysis result available is dated 29 May 2014, where it is found that the clean water quality still complies with limit of 5 according to relevant regulation. The mill recorded daily water use for processing FFB per tonne. It has set standard of using 1.5 tonnes of water for processing FFB per tonne. Data on the mill’s water use indicates that it was running below

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the water needs from January to November 2014 (averagely 1.4 tonnes of water were used for processing FFB per tonne).

Compliance status: Non Compliance. NCR No. 2015-07 of 13 Permit the use of water inside Sei Daun Estate concesion as stated on decree letter of head of Labuhan Batu Selatan regency, i.e. No. 503/157 / BPPPTPM-LS / 2014 to PTPN III Kebun Sei Daun is only one point in emplasment Sei Daun Estate. ¾ inch and 20 liters / minute, but at this time in the Sei Daun Estate there is more than one point in the water wells. Criterion 4.5: Pests, diseases, weeds and invasive introduced species are effectively managed using appropriate Integrated Pest Management (IPM) techniques.

Findings: PTPN III’s estates have Work Instruction No. IK-3.01-17/14 for Oil Palm Pest Management stating that census must be conducted monthly for pests prior to chemical treatment to identify areas where chemical treatment will be applied. There is evidence of census records maintained in the estates. For example Division 1 of Bukit Tujuh Estate maintains census records of nettle caterpillar and records that no attacks have been done by this pest in 2014. Census records of nettle caterpillar, rat and rhinoceros beetle have been sighted in Division 2 of Sei Daun Estate for September, October and November peri- ods. Census records of nettle caterpillar and bagworm attack in Sei Daun Estate Division 2 have been sighted. Census for all pests including ganoderma infection have been made in Bukit Tujuh Estate Di- vision 3. These records in general show a small level of or no pest outbreak in 2014 in all estates. The estates only apply chemicals for pests when attack evidence is found. For example, according to Bukit Tujuh Estate census records, spraying of Decis (for treatment against nettle caterpillars) was done over 74.29 ha of year 2000’s planting in Division 1, where the dosage applied was 37 litres, making it 498 litre/ha. Census record from Division 1 shows indication of pest attack, with number of caterpillar of averagely 2.5 per frond. Where there is no evidence of pest attacks, there is no pesticide application. Records are available on integrated pest management training delivered on 21 September 2014 to 13 workers in Sei Daun Estate, and on 26 September 2014 for 8 workers in Bukit Tujuh Estate. Chemical use data is also recorded in active ingredient use per ha, e.g. from Division 6’s data in Sei Daun Estate where 3.5 litres of chemical Gempur 490SL (containing Glyphosate 356g/l) was applied to 354.05 ha in October, and active ingredient per ha was 3.51(litres).

Compliance status: Compliance

Criterion 4.6: Pesticides are used in ways that do not endanger health or the environment.

Findings: Bukit Tujuh Estate used chemicals registered and permitted, i.e.: Herbicides such as Sida Up 490 SL, Gempur 480SL; and Insecticides such as Matador 25 EC, Decis, Fungicides such as NOBB, Bayleton, Trico SP, etc. (mainly used for rubber). Records of pesticide applied (including active ingredients used, area treated, application per ha and applications number) are maintained at estate division offices, e.g. Herbicides Toxicity Calculation record has been sighted on usage of Sida Up and Gempur at Division 2 of Bukit Tujuh Estate. Chemicals are stored in a secure storehouse with appropriate ventilation. Sei Daun Estate has records of trainings delivered to sprayers and manures, regarding proper use of chemicals and safety in August 2014. Used chemical containers in Sei Daun Palm Oil Mill, Sei Daun Estates and Bukit Tujuh Estates are kept in a secure storehouse and collected by third-party (subcontractors). Waste material from agrochemicals including pesticides containers were disposed or sent to authorized collector or Hazardous waste processor Based on interview with contract spraying workers in Bukit Tujuh Estates as well as contract manuring workers in Sei Daun Estate, they have undergone routine medical checks, and the estates check to

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have contractors run medical checks for their workers. Based on interviews with female chemical sprayers in Sei Daun Estate, they have been informed that pregnant or breastfeeding sprayers are not allowed to perform spraying and there are mechanism has been established to ensure that these pesticide-applying workers are actually not pregnant nor breastfeed their babie. From interview result it was informed that sprayer tim in afdeling VI Sei Daun estate has not formal training regarding agrochemical hadling mechanism and some of them were not using PPE eiter such as google . This is raised as non conformity.

Compliance status: Non Compliance NCR No. 2015-08 of 13. From the interviews with the sprayers’ team in section VI Sei Daun Estate, the spraying has not received formal training related material handling of pesticides.

NCR No. 2015-09 of 13 Found the sprayers were not using PPE in the Sei Daun Estate afdeling VI

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

Findings: The company has implemented a certified Occupational Health and Safety (OSH) management system and has an OSH Policy (the document entitled “OSH Commitment)” dated 8/04/13 approved by (Plan- ning and Development Director - PT Perkebunan Nusantara III) implemented in the plantation and mill. The policy cover mitigatioon of risks to workers health and safety at all workplace activity. The policy is written in Bahasa Indonesia and understood by workers, for examples, a chemicals warehouse officer in Kebun Rambutan and wastewater treatment plant (WWTP) officers have a good understanding of company policies related to occupational and health safety.The company has an occupational safety and health (OHS) committee organization as responsible person for safety and health programme for each estate and mill. The OHS Committee has obtained approval letter from Department of Labour in local regency. For example decree of head of labour department Simalungun regency number 118.45/283/DTK/2015 dated March 23, 2015 about determination of the OHS organizational structure of Dusun Hulu estate. The OSH Committees of the mill and all estates are still valid and the people who take in charge of the OSH Committee is still working in the company. OHS committee have plan/work program for 2015 and its implementation such as monthly meetings, emergency response tool checklis inspection, emergency response training, bakortiba, earthquakes, riots, etc. Simulation training of emergency response teams in mill was held on May 13, 2014 at the front office and factory security guard (fire training / bakortiba), earthquakes and riots, evidenced by the minutes of simulation and photos of activities. Training was followed by all emergency response teams/personnel (234 person) , and showed that 92.74% of personnel respond to emergencies.

The company has established the potential hazard identification and risk assessment for all activities that are carried out in plantation of Sei Daun estate and Bukit Tujuh in Palm oil mill, last revision January 17, 2015. The activities were identified have risks are manual and chemical weeding, wipping lalang/weeds, pest/ disease protection, road maintenance, harvesting, harvesting in PLN track, collecting FFB, FFB transportation etc. While risks assessment in palm oil mill including activities: sorting, loading ramp, the operation process capstant, tractor / wheel loader, stew, boasting crane, screw press, clarification, kernel plant, patpit, boilers, turbines, generator and sediment plant. The company also has risks assesment in workshop, electrical, traction, civil service and laboratory (operation analysis, sampling and effluent treatment). All risks were identified and implemented. For example, activity handling chemicals in the warehouse, activities cause risk were identified started from lift and draw up, measure and pour. Potential hazards of falling, falling materials and eyes/skin irritation and inhalation of chemicals. Opportunities may occur, due to a minor injury, loss of material with level of medium risk, and to control needed careful when working, using PPE masks, gloves, shoes, hats, provide P3K. OSH form for PPE briefing and dissemination are also available.

The company provides PPE in adequate amounts, both for estates and mill. The use of PPE is based on Circular letter number. 3:12/SE/07/2014 dated March 29, 2014 to all heads of sections, District Manager, and Manager of the Working Unit.

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PPE in mill such as: - Receiver station of FFB: hats, gloves, boots - Stew: helmets, boots and masks - Thrasher / threshing: helmets, boots and ear plugs - Pressing: helmets, boots and ear plugs - Clarification: helmets, boots and ear plugs - Control of waste water: a hat, rubber gloves, boots and masker if necessary - Reservoir: a hat, rubber gloves, boots and masker if necessary - At the height of: vest, body harness - Station kernel: helmets, ear plugs, boot - Water supply helmets, ear plugs, boot - Station stem boiler: helmet, goggles, fire resistant vests, boots, leather gloves. - Power plant station: hats, ear muff, boots, gloves.

The company has a training program for OSH. There is a socialization of OSH in Sei Daun estate POM - Use of PPE held on Tuesday March 31, 2015, participants is third party/contractors: CV Ramayana (FFB supplier), CV Sama Suka (FFB supplier), UD Alief Perkasa (supplier), loading and unloading workers (SPSI), transportation contractor: UD Mario Mandiri, PT Parika Paningke, UD Anastasia, UD R Jaya, UD Gintar, UD Bentasil. Participants 12 people. Sei Daun has conducted a simulation of emergency response of forest fire on December 03, 2014 in Division III, Emergency response simulation followed by 78 people with the aim of knowing the ability to gather, use of hydrant, extinguishing the fire extinguisher, the speed of rescue, and spread information numbers can be contacted. Health and safety training for emergency response (simulation) was conducted at Sei Daun dap estate related to response to earthquake and fire on 22 November 2014. This training covered information on health and safety and first aid.

Accident records are maintained and reviewed by OHS committee at the OHS meetings regularly (once a month). Record of work accidents are kept by hospital and OHS personnel and documented in form FM-12-2003. Supervisor at all locations are responsible to investigate accidents and reporting these to the hospital and OHS supervisor. Health and safety committee reports which include monthly record of work accidents are submitted to the Labuhan Batu District Manpower Office Head for example as reported by health and safety committee of Sei Daun estate on December 2014. Accident and emergency preparedness procedures are still exist and available at the point of used. Procedures to handle emergencies are documented under PK-3-12-08, and cover emergencies such as fire, explosion, force major, and public demonstrations. Emergency procedures for handling fire at available at office, land and mill and documented in a diagram.

In Gunung Tujuh, auditor found an evidence that sprayers worker informed that PPE is provided by their contractor for free, incuding gloves, boots and masks. However no googles or aprons are provided. Auditor raised as non conformity (see criterion 4.6.5). The company has provision for accident insurance for worker is BPJS as evidenced sampled (Sei Daun estate and POM) for payment record for March 2015. Rate 6.54% from basic salary, (2% employee and 4.54% contribution by company). Further sampled on wage slip for worker for March 2015 shown contribution made to BPJS. Also available as evidence during sampling a list of “JAMSOSTEK participants cards (‘Kartu Peserta JAMSOSTEK’ or KPJ)” Kebun Gunung Tujuh contained 845 workers.

Health monitoring and examinations are regularly conducted for all workers especially whos exposed to high risk (once a year) where records of these are available. The last medical examination was conducted on March 13, 2014 (Gunung Tujuh estate), Sei Daun estate has send their workers for medical examination on 25 March 2014, but there is insufficient follow up regarding to abnormal result as shown in laboratory analysis result No: 37/A/LHU-KES/BK3/-MDNXII/2014. This was noted as an observation.

The company has OHS and first aid equipment available at worksites such as helmet, earplug, safety glass, shoes, glove, masker, first aid box, fire extinguishers. First aid kits were provided to all sites of plantation offices and mill office and First Aid trainings are conducted by OHS personnel and nurses at all plantations and in the mill all chemical clerk and his assistant (Rambutan estate) was attended first aid training, as improvement from last year audit findings. Health and safety training for emergency response (simulation) was conducted at Sei Daun Estate related to response to earthquake and fire on 22 November 2014. This training covered information on health and safety and first aid.

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Compliance status: Non Compliance (relevant with findisngs on Cr 4.6 ) NCR No. 2015-09 of 13 Found the sprayers were not using PPE in the Sei Daun Estate afdeling VI. Criterion 4.8: All staff, workers, smallholders and contractors are appropriately trained.

Findings: Sei Daun Palm Oil Mills has a documented 2014 training plan, including training plan for OSH hazard and risk identification, workplace safety inspections, first aid training, hazardous waste management, and emergency response training. The estate has documented worker identification that requires training. For example in February 2013, six workers were identified needing hazardous waste management training and 9 others were identified needing first aid training, including 7 harvesting foremen. The estate also has carried out the relevant training for all identified workers on 8 July 2014 and maintained training participant record. Bukit Tujuh Estate training programme in 2014 has also been observed, including harvesting, fire emergency and pest management trainings.

The company’s estates maintain records of trainings delivered by contractors to their workers. For example, in Sei Daun Estate manuring training was delivered on 20 July 2014 to 12 manurers, PPE use training on 26-27 September 2014 to 24 workers, integrated pest management training on 21 March 2014 to 13 workers, and harvesting procedures training on 28 September 2014 to 14 workers. In Bukit Tujuh Estate, fire emergency training was delivered on 26 October 2014 to 33 workers, harvesting training on 3 October 2014 to 41 harvesters, and pest management training on 26 September 2014 to 8 workers. The estate also carries out evaluation of workers understanding on the trainings provided. Bukit Tujuh Estate holds records of competency certificates for several contractors, i.e. contractors for building construction and road maintenance. Selection of contractors providing spraying workers is done by PTPN III head office. Certificates of competency from North Sumatera Chamber of Commerce & Industry for two contractors providing spraying workers to Sei Daun Estate have been sighted and re- ferred to as evidence that selected contractors are eligible for executing this work.

Compliance status: Full Compliance

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

Findings: All estates have Environmental Impact Assessment (AMDAL) documents. For example those sighted in Sei Daun Palm Oil Mill, Sei Daun and Bukit Tujuh Estates. Their revised versions of Environmental Management/Monitoring Plan (RPL/RKL) prepared by the Research Institute of North Sumatera Uni- versity (USU) have been approved by the Environmental Department Head. The original AMDAL documents of both estates are Environmental Evaluation Assessment (SEL) and original RPL/RKL documents prepared in 1993. The RPL/RKL documents have been revised in 2006 for all estates due to changes in plantation operation, e.g. change in the estates’ HGU concession resulted in changes in estate capacity and design Number : 660/608/BPDL-LB/2006 dated 22 December 2006. All estates have prepared RPL/RKL implementation report once semi-annually to comply with legal requirements. For example, Sei Daun Estate report in July 2014 includes reports on air quality, emissions from generator, groundwater and soil quality, and noise. In Bukit Tujuh Estate, such report includes result of analysis of the same parameters, as well as of odor levels, and amount of hazardous waste produced. This is reported semi-annually, while some parameters to be reported annually have been sighted in the estate’s December 2014 report, e.g. analysis of employment opportunities, local community perception and CSR activities. The analysis results indicate no excess towards legally permitted standards in both estates.

Compliance status: Full Compliance

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Criterion 5.2: The status of rare, threatened or endangered species and other 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 operations managed to best ensure that they are maintained and/or enhanced.

Findings: The Company has assessed / HCV identification conducted by the Center for Biological Resources and Biotechnology Research (PPSHB) Institute for Research and Community IPB in 2013. From the identification results identified an area of 27.28 ha, or by 12:36% of the total estate area (7555 ha), which consisting of HCV HCV 1.3 and 4.1 Riparian 16:34 River ha, 4.1 HCV and HCV 5 area around the springs Block J16 (3.80 ha), HCV 4.2 Areal Slope > 40% are in some locations 2:36 ha; 2:55 ha; 1:01; 1:22 ha.

At Bukit Tujuh estate has been identified three types of HCV is HCV 1.3, 4.1 and HCV HCV 4.2. Land HCV 1.3 and 4.1 are riparian located in block A18 to the F 20 measuring 7:20 Ha; Riparian Black Wa- ter River that flows along the block B1 to E20 measuring 21.94; The area slopes were identified in three locations: In Block E4 area of 3.74 hectares; Block E 3:1:56 Ha; Block F 3 covering 2:23, the total area identified HCV is 36.67 ha. From the results of the identification wild animal in Sei Daun estate identified 6 species categorized protected under PP 7 In 1999, CITES and IUCN among which Pronailurus bengalensis (cats); Elanus caerulues (Eagle Forest); Bird cekakak Thicket (Halcyon smyrnensis; cekakak River (Halcyon chloris; bird Honey Coconut (Antreptes malacensis). Wildlife found in the Bukit Tujuh estate namely Eagle Mouse (Elanus caerulus), crested serpent eagle (Spilornis cheela); Cekakak blukar (halcyon smynensis; cekakak river (Halcyon chloris) When the audit found a bunch of monkeys and birds are also found in many places kingfisher, but are not included in the document HCV. There SK (Management Decision) No. Sei Daun KSDAN / SKPTS / 03/2013 on the establishment of the management team identify HCV / HCV, DAS and IPM Sei Daun estate appointed on 4 February 2014 as many as eight members of the team. All the members are already get related training activities of the management and monitoring of HCV, on 18 March 2013. After that re-socialization associated with HCV on May 18, 2015 as contained in the internal circular letter No. KSDAN / Int / AF / V / 2015. Should the company has an associated data collection program possession of weapons for hunting, wild animals ownership of the homes to ensure that no employees who do the hunting.

There SK Management Decision No. Sei Daun KSDAN / SKPTS / 03/2013 on the establishment of the management team identify HCV / HCV, DAS and IPM Sei Daun estate appointed on 4 February 2014 as many as eight members of the team. All the members are already get related training activities of the management and monitoring of HCV, on 18 March 2013. After that re-socialization associated with HCV on May 18, 2015 as contained in the internal circular letter No. KSDAN / Int / AF / V / 2015. The Company does not have a program associated data collection possession of weapons for hunting, wild animals ownership of the homes to ensure that no employees who do the hunting. This ia potential for company improvement in the future operational activities.

There is a document management plan recommended by the HCV HCV consultant team, in addition the company also makes HCV management and monitoring plan, as contained in the document "pro- grem monitoring and management of High Conservation Value Areas Sei Daun Daun Year 2015. How- ever, there are inconsistencies between program management of HCV that has been made for 2015 and its realization as yet done conservation plant maintenance activities; water quality monitoring and erosion measurements. The monitoring results will be recorded in the form of monitoring the border area rivers, creeks, ditches and channels but the realization does not exist. There is inconsistency between HCV management program that has been made for 2015 and its realization as not yet done for maintenance activities of conservation plant; Monitoring of water quality and erosion measurements. The monitoring results were recorded in the area of monitoring Form river banks, creeks, ditches and channels but the realization does not exist and not as planned in the program

There is no HCV set asides with existing local communities that have been identified. This is not applicable for Sei Daun estate.

Compliance status: Non Compliance.

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NCR No. 2015-10 0f 13 There is inconsistency between HCV management program that has been made for 2015 and its realization as not yet done for maintenance activities of conservation plant; Monitoring of water quality and erosion measurements. The monitoring results were recorded in the area of monitoring Form river banks, creeks, ditches and channels but the realization does not exist and not as planned in the program Criterion 5.3: Waste is reduced, recycled, re-used and disposed off in an environmentally and socially responsible manner.

Findings: All estates and mills have identified all sources of wastes from estate and mill activities including spraying, manuring, storehouse, pest management, etc. in their 2014 Environmental Aspects and Impacts Identification. In several locations such as Division 2 office of Sei Daun Estate, evidence has been sighted of separation between organic and non-organic wastes. Sei Daun Estate has record dated 11 May 2015 on waste sold to a contractor (PT Putra Tunas Sejati) including used fertilizer bags, rice bags, and used rubber tapping cups, metal, chemical containers, vehicle spare parts and used polybags. Sei Daun Palm Oil Mill also has similar records on solid waste collection by a contractor, namely PT Putra Tunas Sejati, on 11 May 2014. Used chemical containers in Sei Daun Palm Oil Mill, Sei Daun Estates and Bukit Tujuh Estates are kept in a secure storehouse and collected by third-party (subcontractors). Waste material from agrochemicals including pesticides containers were disposed or sent to authorized collector or Hazardous waste processor. Sei Daun Mill has planned and implemented waste management as noted from Working Instruction such as Working Instruction for Monitoring and Use of Solid Waste (IK-3.12.01/14 rev.03 dated 15 February 2010), Working Instruction for Handling and Use of Hazardous Waste (IK-3.12.01/08 rev.03 dated 15 February 2013) and Working Instruction for Mill Liquid Waste Management (IK-3.03-14/01 rev.02 dated 15 February 2013). The mill has implemented waste management such as use of POME (liquid waste) for Land Application (LA) areas, EFB (solid waste) as organic fertilizer, other solid wastes (non-EFB) and hazardous waste submitted to license third party.

Sei Daun Mill is appropriately licensed to temporarily store hazardous waste (Head of Labuhan Batu District Decree No. 503.660/205/BLH-LB/WAS/2012 dated 21 August 2013),

Bukit Tujuh Estate holds a valid licence to temporarily store hazardous waste. This licence is dated 14 October 2013, valid for 3 years and allows storing hazardous waste for maximum 180 days. Hazardous waste at the storage facility includes used oil, vehicle spare parts, used printer cartridges, and used light bulbs, while inventory of all types of chemicals is maintained. Prior to the storage license, hazardous waste was sent to Sei Daun Mill or collected by a contractor, i.e. 21 liters of used oil sent on 11 May 2015, and 83 liters of used oil and 6 used batteries collected by the contractor (PT Putra Tunas Sejati) also for Agrochemical containers.

Sei Daun Estate has a temporary storage facility for hazardous waste, including used oil, filter, used battery, printer cartridge, etc. Estate staff maintains inventory of these types of waste and the records are available at the estate. This waste will be send to Sei Daun Mill for final collection by contractor. However, records show that the last date of sending to the mill was on 8 May 2015. Sei Daun Estate also maintains records of monthly solid waste, as sighted from February 2014 record which includes amount of stored waste such as used fertilizer bags, papers, spare parts, used chemical containers, used spraying equipment, used polybags, etc.

Sei Daun Mill has records of waste monitoring/analysis, such as monthly report for hazardous waste and waste balance (include manifest), solid waste and solid waste (monitoring of POME to land application areas).

Compliance status: Full Compliance

Criterion 5.4: Efficiency of fossil fuel use and the use of renewable energy is optimized..

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Findings: To control the use of fossil fuel efficiency and the use of renewable energy, the company has published the procedure Management of usage of natural resources (SDA) No. PK-3.02-05 Rev. 00 which include the report of electricity use, fuel oil and lubricants. The monitoring process of the electricity, fuel oil and lubricants usage conducted regularly each month. The monitoring report are include : a. Fuel and lubricants consumption for vehicles b. Fuel and lubricants consumption for machinery and equipment. c. Electricity consumption d. Water consumption

All monthly report in 2014 for the use of fossil fuel efficiency and renewable energy are stored properly.

Compliance status: Full Compliance

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

Findings: The company has a zero burning policy, during recertification audit the company showed good improvement regarding implementation of zero burning policy as required by RSPO P&C, there is no evidence of waste burning activity. To avoid the usage of fire during land clearing or replanting, the company has issued circular letter No. 3-01/SE/05/2012 dated February 23, 2012 for all entire Estate Manager in PTPN III in order to : a. Estate that will be conduct land clearing or replanting do not burning in the area of land clearing or replanting. b. In case if there are still burning in the area of land clearing or replanting, the responsibility for that violation will be handled by local management. c. Estate management should conduct the monitoring regularly and located the sign of prohibiting burn in strategic area/location. The monitoring for land clearing that will be conducted by subcontractor through agreement letter that state the prohibition of burning during land clearing or replanting and send internal employee to control and monitoring the implementation. For each project during land clearing and planting the company also established the records of land clearing implementation without burning on Handover report of final work stage attached with Minutes of Examination and Job advancement and also report of physical examination and progress of work every week, so the company can monitor detail during the field visiting and check documentation

Compliance status: Full Compliance

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

Findings: All estates and mills have identified all sources of waste from their activities, including spraying, manuring, warehouse, pest management etc. when making Identification of Environmental Aspects and Im- pacts 2014. Plans have been established to mitigate several pollution-creating activities, especially those regulated under AMDAL or RKL and RPL documents. POME is managed and treated at the mill’s effluent treatment plant which consists of fat pit, mixing pond, anaerobic ponds, aerobic ponds, and facultative ponds. The mill’s procedure for POME management and treatment follows SOP No. IK-3.03-14/01 rev. 02 (dated 15 February 2013) on Use of POME for Application to Oil Palm Estates’, stating that daily reports of land application data must be prepared, including debit, pH, location of the land application and pumped POME pond, and that sampling to gain information on quality of the soil to where the application is carried out must be conducted annually. Furthermore, POME samples from the sampling (monitoring well) must be analyzed biannual- ly. The mill maintains daily records of pH, BOD, debit and temperature of POME samples,

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related to the optimizing of natural resources consumption such as water and electrical power .

Compliance status: Full Compliance

Criterion 6.1: Aspects of plantation and mill management that have social impacts, including replanting, 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 continual improvement.

Findings: The management unit of Sei Daun POM and estates as well as Bukit Tujuh has made Social Impact Assessment (Social Impact Assessment (SIA) and perform identification of Traditional Peoples Rights. • Analysis and identification conducted in collaboration with the Research Institute of the University of North Sumatra, Medan. • The implementation process of participatory assessment using PRA methods, focus group discus- sions, SWOT analysis, and field data collection conducted jointly by villagers and employees. • Records of meetings with the interested parties and time document generation is well documented SIA • From the results of the study are known data as follows: - Right to traditional and cultural sites in the vicinity of the village - The economic potential of the village and the possibility of development based on the potential - community institutions in the village including influential figures - SIA report comes with the attendance list and photos of activities - positive and negative impacts caused by operational enterprise (Oil logging, replanting, tripe wick- et, road maintenance, fertilizing, spraying pesticides, weeding manually, child jack wood, palm fronds, FFB harvesting, washing appliances). - Interaction impact on the development of the village estates and Life Employees The management unit shows notes of the meeting in the SIA report made including the list of attendees meeting with the parties at the time of preparation of the document SIA.

Sei Daun Estate management unit showed evidence of involvement of the public and employees in the preparation of the SIA document, evidenced by the attendance list public and employees of the mill as well as the estates during the times of FGD and FRA. Participants involved including the village head, village staff, community leaders, traditional leaders and employees of various divisions. However, the POM and management unit Sei Daun has not show enough evidence that the social impact assessment has been carried out with the participation of affected parties. In addition POM Management Unit and Sei Daun Estate not show enough evidence that the monitoring plan to reduce the impact of (social) negative was consulted with affected parties and has not appointed its Insurers and have yet to develop a schedule for implementation (POM and Sei Daun Estate). Compliance status: Compliance with observation.

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

Findings: The management unit has several procedures to conduct communication and consultation with stakeholders including the employees, namely the Working Procedures Communication and Consultation of Stakeholders No. PK-3.00-03. Interest procedure for creating a balanced communication and consultation with stakeholders and build on each other through the dissemination of information, accurate and transparent to stakeholders of PTPN III

Here are some officers who conduct communication and consultation with stakeholders: • Head of Section, District Manager, for managers / Unit responsible communicate to stakeholders on the performance of PTPN III via the website, telephone, mail, email, fax, and a suggestion box. • Head of Section, District Manager, for managers / Unit responsible for following up on all requests for information, aspiration, suggestions and comments received from stakeholders. • District Manager of the estate / unit responsible for mail, email, fax, nota phone / media (print / electronic) from stakeholders who registered through krani archive into the log book "agenda incoming

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mail" and at the same time prepare the sheets disposition to receive a response from management • The head of the responsibility for mail, email, fax, note / phone / media from the district manager / estate manager / units and stakeholders who registered through krani section secretariat company into the log book "agenda incoming mail and at the same time prepare the sheets disposition to be forwarded to personnel responsible for incoming and outgoing mail to be initialed and forward to getting feedback from the directors of PTPN III

Based on the results of the public consultation with stakeholders around the POM and Sei Daun Estate and Bukit Tujuh Estate known that the officer appointed to conduct communication and consultation has been known and unknown phone number by society because of frequent visits to villages around the operational areas of the company.

The management unit has the list of stakeholders for each estate (Sei Daun Estate and Sei Daun POM and Bukit Tujuh Estate. List of stakeholders consisting of the name of the agency / stakeholders, the name of the leadership, address, and telephone number. For example, the Sei Daun management unit have a list of names of stakeholders in estate / unit 2015, such as: • Contractor. The management unit has a list of 12 where the contractor (CV Tunas Muda CV Rajun Jaya, CV Karya Talent, CV Ramadan, CV Wahana Graha Perkasa, CV Rohil Mandirim CV Karya Nusantara, CV Rudin Sejahtera, CV Sibaganding, CV Duta Perkasa, CV Harka Jaya Mandiri and PT Bangun Nusantara) • Government agencies like Sei Meranti, Torganda Village, Bukit Tujuh Village. • Community leaders are like Hamlet Sari Bagan, Bagan Bau Hamlet, Hamlet Source Sari • NGOs • Future Media, organizations, and youth organizations • Labor union • Local Farmers

Evidence of communication with the parties recorded in the logbook of communication that contains dates, resources (internal and external), the summary information, the response from the company, and the date the response from the company. Unit management show evidence of communication with the parties, eg: Letter of Election supervision committee Labusel dated 7 April 2014 relating to the holding of voting and vote counting will sound legislative election on April 9, 2014. The management unit provides feedback in the form of the issuance of an exemption Padwidharsono and Hendra Wibowo on 10 to 12 April 2014 (response given on April 8, 2014). Compliance status: Full Compliance

Criterion 6.3: There is a mutually agreed and documented system for dealing with complaints and grievances, which is implemented and accepted by all parties.

Findings: Complaint handling policy for employees and the parties are in: • Procedures for Conflict Resolution No. IK-3.11-12. the scope of the conflict in all areas of work PTPN III which includes the handling of conflicts of arable acreage, laments the relationship between the company and stakeholders. • Industrial Dispute Settlement Procedure No. PK-3-06-02. • Collective Labor Agreement (PKB) Chapter XIV Settlement of complaints Article 68 (Procedures for Complaints and Grievance Resolution employees) The management unit storing complaints from employees and the public on the logbook complaints and conflicts. The book contains a number, recording date of entry into complaints or conflicts, grievances or conflicts submitted, the source or origin of the complaint (individual, section, estate or unit, media delivery (suggestion box, direct mail), feedback or response from companies to complaints or conflicts submitted. In 2014-2015 there were no complaints from employees or the parties.

Compliance status: : Full Compliance

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

Findings: The management unit showed PTPN III Directors Decree No. 3:11 / SKPTS / 01/2015 dated March 31, 2015 on Guidelines for the implementation of Sugu Hati against Areal Garapan Kebun / Unit PTPN III. The management unit shows the working procedure of conflict resolution Document No. IK-3.11-12. The scope of work procedures is the resolution of conflicts in the working area of PTPN III which includes the handling of conflicts of arable acreage, laments the relationship between the company and stakeholders, except employees.

In the area of PTPN III Sei Daun Unit not found their traditional rights / communal rights and there are no problems between the communities surrounding land with Sei Daun Estate and Bukit Tujuh Estate.

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

Findings: Policy related to salary which is used as a reference by the management units are: • Provincial Minimum Wage (UMP) in North Sumatra Governor stated in Decree No. 188.44 / 0972 / KPTS / 2014 at Rp1.625 million per month, up by 7.91 percent from the previous Rp1.505 million. • Letter from Sei Daun Manager No. KSDAN / X / 70 / V / 2015 dated May 25, 205 to the contractor regarding payments district minimum wage (UMK) to employees of the contractor shall be adjusted by the standard MSE South Labuhan Batu District Agricultural Sector of Rp1.870.000. • Directors of PTPN III Decree No. 3:08 / SKPTS / R / 08/2015 dated January 12, 2015 on Salary In- crease Employee PTPN III. decided: - Salary increase as of January 1, 2015 - Compensation social include: (1) the rental house for employees who do not get housing, for example, for an office employee directors are given per month 50% x basic salary in 2015, while the plantation workers / units granted per month by 35% X base salary in 2015, (2) water 15% x the rent (for all employees), (3) electricity 27% x the rent (for all employees), and (4) transport by 35% x base salary in 2015 (for employees of the office directors) - Ssalary component of take home pay for employees implementers are: basic salary, fixed allow- ances, social benefits (rents for eligible employees, water, electricity and transport for all employees). - Salary smallest Rp1.625.000 (class 1A with tenure 0 years) and the largest salary for Group IV D tenure of more than 7 years Rp12.030.359 Example: • KSDAN. Harvesting the post of Group IA / 0, Sei Daun Estate, Afdeling IX foreman Ali Maksum Al- wagim name. Revenues consist of Basic Salary Allowance Fixed Rp1.218.750 Rp406.250, Rice Rp143.250, Water Rp63.984, Electric Rp115.172, Benefit Waiver 3 hours Rp30.364 (every Sunday and holiday work if employees are given compensation of 3 overtime hours), Premium Rp1.042.851, BPJS CEC A / B Company (4.55%) Rp73.775, Pension Fund A / B Company 4% Rp48.750, article 21 A / B Company Rp38.893. withholding 21 A / B Company Rp38.893, BPJS CEC A / B Company (4.54%), BPJS CEC 6% to Rp73,125, Rice Rp143.250, SPBUN 500, States Please HELP (STM) Rp5.600, Rp144.000 debt, others 10,000. Rp2.755.646 acceptable amount. • However, based on the results of field observations in Afdeling 6 Sei Daun estate found BHL employees who earn a salary by the number that has not changed for three years in a row, and wages earned under the terms of applicable legislation (PKS and estates).

Labor laws contained in the Collective Labor Agreement (PKB) and the letter of appointment or contract work. Contract and the CLA has been read and understood by employees prior to the signing of the agreement.

Here's an example of acceptance and promotion of employees: • Letter of agreement Employment / Appointment Certificate consists of: Date Start Work / Probation

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(Article 1), placement (Article 2), wages / Salary (Article 3), Duties and Responsibilities (Article 4) Description of Self-Employees (Article 5), Overtime (Article 6), transfer duties / Mutation (Article 7), Days of Rest (Sunday / Holidays) (Article 8), provisions for Employee Women (Article 9), provision Just for Employees Who Lived In Kampung (Article 10), signing the Letter of Agreement / Appoint- ment (Article 11). • Unit management provide facilities and infrastructure employee benefits in full, for example: facilities and infrastructure in the Sei Daun estate consisting of: Housing employees: employees' housing-led 11 units, Afedeling 1 as many as 68 door, Afdeling II as many as 70 door, Afedling III 80 door , Afdeling IV as many as 82 door, Afdeling V as many as 68 door, Afdeling VI sebanyak56 door, Afdeling VII as many as 58 door, Afdeling VIII sebanyak62 door, Afdeling IX as many as 70 door, Afdeling X as many as 66 door, Emplasment many as 56 door, Hall (1 unit in emplasment), Hall Em- ployees 10 units located in, afdeling and emplasmen, Church of 10 units located in the department and emplasmen, Kindergarten 1 unit located in emplasmen, School TPI 1 unit located in emplasmen, Mesjid 11 units located at afdeling and emplasmen, Church of 1 unit in emplasment, tennis 1 unit, field volleyball 3 unit, a football field 1 unit, School JSS 1 unit located in emplasmen, primary School 1 unit located in emplasmen, Babysitting as many as 10 unit is located in the department, Polyclinic 1 unit, 1 unit in emplasment Cooperative, clean water pump 10 units in section The results of field observations provide information: • Housing Bukit Tujuh Estate Afdeling 3 and Afdeling 6 Sei Daun Estate: Building a babysitting have inadequate facilities and infrastructure, but the management unit PTPN III showed improvement efforts with complementary facilities and infrastructure meant • Means of water disposal in residential Afdeling 6 noncurrent so stagnant water and lots of mosquito larvae, but the management unit has shown improvement drains on June 5, 2015. • Improve management unit 6 residential buildings that had long broken (leaky roof and frame ceiling and walls had rotted) in Afdeling VI and VII (Sei Daun estates on March 12, 2015).

Efforts are being made entrepreneurs in particular regarding access of workers to decent food, and reasonably affordable price to make the policy: • The provision of rice / natura, • An impromptu market in the estate every week (the price is cheaper compared to the prices in the city) • The cooperatives provide goods needs of employees at a bargain price. Inviting merchants daily necessities enter the housing estate or mill, as well as provide a vehicle for shopping to the market for the employees every month one so as to reduce transportation costs for employees.

Compliance status: Full Compliance Criterion 6.6: The employer respects the right of all personnel to form and join trade unions of their choice and to bargain collectively. Where the right to freedom of association and collective bargaining are restricted under law, the employer facilitates parallel means of independent and free association and bargaining for all such personnel

Findings: The management unit to support the existence of unions and LKS Bipartit, the support is listed at PKB Article 5 (Recognition Organization), Article 6 (Facility's Unions PTPN III), Article (Facility Management Trade Unions PTPN III), Article 8 (Negotiations between the Board of Directors of PTPN III and Planta- tion Workers Union PTPN III).

Implementation of policies, including: • The management unit showed evidence of mutilation States Plantation Workers (SP-BUN) PTPN III Sei Daun POM (in accordance with article 2 paragraph 1 of the Decree of the Minister of Manpower and Transmigration No. Kep, 16 / Men / 2001 dated February 15, 2001 on the Procedure for Registra- tion of Trade Unions / Labour Union. Proof of registration No. 560/26 / DSTKT / 2013 dated June 28, 2013. • Decree of the Head of Social Affairs, Labor and Transmigration of South Labuhan Batu District No. Kep560 / 19 / TK / 2015 dated May 28, 2015, on the Establishment and Appointment of members of bipartite cooperation agencies in PTPN III

Results interview with the chairman of the POM union Sei Daun Estate showed that the company

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strongly supports the existence of the union.

Plantation Workers Union (SP BUN) and LKS Bipartit show the minutes of the meeting: • Meeting dated January 21, 2015 to discuss the act of stealing a mild performed by employees PTPN III (SP member base KSDAN BUN) and discuss the work program as PKB socialization and work discipline. • On 25 February 2015 discussion of the discipline of employees according to applicable laws and regulations and in accordance with the days and hours of work in accordance with CBA period 2014- 2015 CHAPTER XII Article 65 paragraph (1) item a, b, and e. the meeting was attended by five representatives of workers (Workers POM and Sei Daun and Bukit Tujuh Estate) and 5 representatives of companies

Compliance status: Full Compliance

Criterion 6.7: Children are not employed or exploited.

Findings: Based on the checklist of documents and interviews in the field knownthat the management unit of PTPN III Sei Daun POM and Bukit Tujuh POM not receive employee under 18 years old.

Based on data from permanent employees PTPN III Sei Daun POM and Bukit Tujuh Estate and known no employee whose age under 18 years, employees of the youngest in the name of Parlin Sidabutar born July 24, 1994, and was hired on January 1, 2014 (at the age of 20 years) , Compliance status: : Full Compliance

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

Findings: There is no discrimination in PTPN III unit Sei Daun POM. This can be evidenced from: • Proof of jobs as employees Implementing Harvesters Palm in PTPN III (Persero). The committee pointed LPP Medan Campus as a consultant in carrying out the recruitment and selection of candi- dates for executive employees (labor palm harvesters). There are several requirements requested (such as date of birth, educational requirements, residency around the estates, following the selection by LPP Medan), as well as information flow admission selection (such as the date of receipt of applications from employees, receiving applications, the announcement of the selection and administration, and admission tests be employee). • The management unit showed a circular regarding the recruitment of prospective employees executing 3:08 Number / SE / 96/2014 dated March 11, 2014. In the circular described certain provisions, Among them: the mechanism and the passing standard on each stage of selection is in accordance with the provisions of the LPP Campus Medan ,

Based on the results of the public consultation with unions and communities that exist around the company did not reveal any kind of discrimination against migrant workers, local communities and women. This can be evidenced from the origin of the employees were very be-diversity, namely: • Origin area employees: Medan, Huta Baru, Gunung Sitoli, Bukit Tujuh, Dolok Hilir, Karang Mulia, Timbaan, Lush, Sukoharjo, Seragen, Huta Raja, Rantau Prapat, Purba Tua, Bela-wan, Tanjung Ma- raja, Aek korsik, Deli old, Sidamanik, Central Java, Tebing Tinggi, • Batak, Javanese and Padang. • Christianity and Islam.

Results of interviews with employees in Sei Daun Estate and Bukit Tujuh Estate known that the respective read and understand the agreement before it signed, applying for jobs themselves to companies without their agents, their clear career path, the facility obtained from the company in the form of health insurance and employment , in accordance with his training and getting awards for job performance are made, and never getting unfair treatment from the company. Compliance status: Full Compliance

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Criterion 6.9: There is no harassment or abuse in the work place, and reproductive rights are protected.

Findings: Harassment policies contained in the policy: • Code of conduct Ethics Code Chapter IV Section C No. 12 that is not sexual misconduct such as sexual harassment, defamation superiors and subordinates and their families. • PKB Chapter XIV of Article 68 of the Procedure for Settlement of Complaint and Grievance. Implementation of the policy: • The management unit showed evidence of sexual harassment socialization dated May 5, 2015, which was attended by executive employees and line managers in Sei Daun Estate. Material socialization includes the basic attitude of the individual, the behavior of individuals at companies such as not ex- ert pressure or intimidation, humiliation or harsh words, harassment or provocation and to keep and respect the personal nature of sesame employees such as religion, status, ethnic / racial and family, conduct as boss , the behavior of a superior and subordinate behavior. Socialization harassment and violence in the family was attended by 76 employees.

The management unit has a policy to prevent sexual harassment and violence, and there is evidence that the policy of socialization has been done. However, the management unit has not shown sufficient evidence of implementation of the policy, for example through the establishment of a gender committee as a forum for complaints that are more comfortable for victims (POM and Estates). This is company’s opportunity to improve the performance in the future operation.

Reproduction protection policies listed in PKB period 2014 to 2015: Article 26 On Maternity Leave, Arti- cle 27 On Leave Haid, and Article 57 On Family Planning.

Implementation of the policy: • Affidavit never takes menstrual leave / H1 (in accordance with CBA Article 27) of the female employees (Krani Production, Krani Krani Sorting and processing in Sei Daun POM) with respect to the ab- sence of disorder / illness that interferes with the activity of work. • There is evidence of identification of contractor personnel regarding pregnancy and breastfeeding conditions, especially for workers spray

However, the management unit does not have sufficient evidence of specific complaints mechanisms (sexual harassment and violence) (POM and Estates). Compliance status: Compliance with observation.

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

Findings: The management unit has a pricing policy of oil as follows: • Work procedures of purchase and pricing of Third Party FFB Palm Oil, No. PK-3.03-12. FFB purchase by a third party is the acceptance of fruit bunches of other parties not owned by PTP Nusantara III compensation / payment with pricing set by: - Forecast and palm kernel oil extraction - Actual selling price (auction) oil and palm kernel Last - Cost though purely average RKAP year (USD / kg m + I) - Cost of Sales CBP year and commercial section (Rp / Kg M + I) • Memorandum of Chief Commercial number 3:07 / MO / 84/2015 dated 30 April 2015 regarding pricing information of 3rd party FFB. Memorandum refers to the Directors Circular Letter No. 3:05 / SE / 01/2009 dated February 12, 2009, regarding the formulation of pricing FFB purchase the All- III / Plasma and cost of sales.

Chronology of the purchase procedure and processing of oil palm FFB 3rd party are as follows: • POM proposed tonnage, FFB criteria and prospective suppliers • Ditrik SPJ publishes purchase and purchase price guidelines of FFB • Commercial section provides information CPO prices and core,

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• The accounting department to formulate a purchase price FFB 3rd party, • POM make purchases and summarize purchase and publish the minutes • District make payments for FFB 3rd party and report the results and evaluate the purchase • The technology evaluation and monitoring

The purchase price listed on the Sale and Purchase agreement FFB Article 5, namely: • The purchase price for each kg of fresh fruit bunches (FFB) is determined by the buyer and the market price may change based on developments / changes in the price of CPO and a core set by commercial section PTPN III. • The purchase price of FFB by the POM manager Sei Daun FFB based on the pricing of the District Manager of shavings. • The price of each kilogram FFB submitted by the sellers and may vary based on visually estimated yield of sorting quality FFB made by the buyer. • The selling price has been shown transparently by the Mill in public funds tau notice board which can be viewed by any third party seller.

Results of interviews with the management unit FFB prices prevailing in the POM in accordance with Circular No. 3:05 / SE / 01/2009 dated 12 February 2009. The final price is determined each day by the district manager. There is provision for determining the grade FFB (Super, A, B, C, D, E). For example, the price of FFB Super (S10) dated May 19, 2015 Rp1.715, dated May 20, 2015 Rp1.710, dated May 21, 2015 Rp1.700.

The circular from the District Manager can be found on the bulletin board so that the plant can be seen by the public. The management unit has to disseminate the work procedures of purchase and the pricing of oil palm FFB (PK-3.03-12) to the parties.

In interviews with local contractors in mind that they understand the contract is made and the contractor has a copy of the contract in question.

Here's an example of a letter of agreement with the contractor: • Sale and Purchase Agreement Letter of fresh fruit bunches of oil palm in the Sei Daun POM between PTPN III with No. CV-KD KD DLAB.1 / SPJ / 41/2015 dated March 31, 2015. The agreement contains the following: Number of fresh fruit bunches (Article 1), Quality Fresh Fruit bunches (Article 2), Sortase provision of fresh fruit bunches (Article 3), Requirements Acceptance of Fresh Fruit bunches (Article 4), Price (Article 5). Implementation Oversight Purchase FFB (Article 6), Payment (Article 7), Capability Factory (Article 8), Force Majeure (Force Majeur) (Article 9), the Settlement of Disputes (Article 10), Notifications (Article 11), the Term (Article 12), Goodwill (Article 13), termination of the Letter of Agreement (Article 14), Else (Article 15).

The results of interviews with the contractor in mind that payments made by PTPN III are in conformity with the contract made and agreed.

There is evidence of payment for the job CV Tunas Muda pda dated March 31, 2014 amounted to Rp91.581.304 (such documents are equipped with Request for Use of Budget (PPAB No. KSDAN / PPAB / 24/2014 and has been examined by the Head of Technical and Head of Finance and approved by District Manager.

Compliance status: Full Compliance

Criterion 6.11: Growers and millers contribute to local sustainable development wherever appropriate.

Findings: Companies contributing to local development through its CSR program, Community development and taxes or levies.

Object recapitulation environmental development, support for community estates / unit se-Dlab-1 Year 2014:

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• Loans local businessman / trained partners UD Sinar Sriwerdani of Rp20,000,000 • Entrepreneurship training dates 14 to 15 March 2014 (Memorandum Director of Human Resources and General No. 3:10 / MO / 09/2014 dated January 17, 2014 regarding the Partnership Program Loan Disbursement Period TW-I / 2014 • Realization of aid KBL to villagers around the estate / unit Se DLAB I the survey in 2012 and the realization till November 2014 as Renovation / Repair Mosque, renovation of the building construction posyandu, Hall Godang Renovation, Renovation Institution Nurjamah, Help Mobiler SMP Negeri 2 Tor Gamba , renovation Musollah Source Sari, and renovation of Masjid An nur Torgamba

2015: • Loans local entrepreneurs / partners assisted "Independent Prabot" Rp50,000,000

Taxes: • Proof of payment of fees SPTPD Surface Water Tax Sei Daun POM April 2015 as many as 44 640 M3 amounted Rp6.424.656 dated May 7, 2015, March amounted Rp5.852.832 (40 690 m3) 9 April 2015, the month of February amounted Rp5.870.160 (40,800) date March 6, 2015 Summary of Income tax payment Art 21 months from January to December 2014 at Rp1.135.021.305 Compliance status: : Full Compliance

Criterion 6.12. No forms of forced or trafficked labour are used.

Findings: The management unit showed evidence of job applications and letters of intent or letters of appointment which illustrates the lack of labor trafficked and forced in any form. Cover letter contains for employment, a letter of good conduct from the police, health certificate, diploma, transcripts. The management unit showed letters of intent (SPK), which depicts the two sides both employers and prospective employees understand their rights and obligations. For example: • Letter of agreement Employment / Appointment Certificate contains: Date Start Work / Probation Peri- od (Article 1), placement (Article 2), Wages / Salary (Article 3), Duties and Responsibilities (Article 4) Description of Self-Employees (Article 5 ), Overtime (Article 6), transfer duties / Mutation (Article 7), Days of Rest (Sunday / Holidays) (Article 8), provisions for Employee Women (Article 9), provision Just for Employees Who Live In Kampung (Article 10), signing the Letter of Agreement / Appointment (Arti- cle 11).

Results of interviews with employees at Bukit Tujuh Estate and Sei Daun Estate known that the employee gives the application and following the selection of hiring other than that there is no compulsion to do the job in the company, because each position has been discussed in advance with the employees con- cerned. Compliance status: Full Compliance

Criterion 6.13. Growers and millers respect human rights.

Findings: The management unit has a policy to respect human rights as follows: • Circular of the Board of Directors of PTPN III No. 3:08 / SE / 245/2011 dated June 28, 2011 on the socialization of human rights. The socialization material contains information that women's right to obtain the protection of human rights such as the right to life, the right to equality, the right to liberty and security of person, the right to equal protection of the public, the right to services and physical and mental health as well as possible, the right to decent work and good working conditions, the right to further education and the right not to be abused or forms of cruel treatment or torture is inhumane and arbitrary. There is evidence of socialization which took place on May 5, 2015, May 7, 2015 which was attended by 54 employees, representing various divisions. Compliance status: Full Compliance Principle 7. Responsible development of new plantings

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Findings: From table 6 section 1.5 above submitted that all the palm trees in Sei Daun and Bukit Tujuh Estate are a young plant that comes from replanting activities that are not a new crop of new development. 7 so that the requirements do not apply to Sei Daun Palm Oil and its supply chains. Compliance status: Not applicable Criterion 8.1: Growers and millers regularly monitor and review their activities and develop and implement action plans that allow demonstrable continuous improvement in key operations.

Findings:

All estates have monitoring action plan (Environmental Monitoring/Management Plan - RKL/RPL) and prepare biannual reports to the local environmental department, which include parameter analysis result such as air and water quality, ambient noise, and generator emissions. In addition, Sei Daun Estate has a documented environmental management programme for year 2014. However, the environmental management programme covers cleaning of spill at hazardous wastes temporary storage facility, including implementation progress report. In addition, the estate also plans to improve domestic waste management. It should also consider other aspects where environmental performance can be improved. Sei Daun Estate also has a documented environmental management programme for year 2014 which includes programme to construct and renovate Division 1 and 6s’ fertilizer storage facilities. Evidence has been sighted as to implementation of this programme in the estate’s expenditure records for construction of storage facility. Sei Daun Estate has a set of documented environmental objectives and targets dated 7 June 2015, including planting of 4,500 Mahogany trees and 2,200 Durian trees as part of greening programme, and to fulfill environmental requirements. Based on chemical usage records in all estates, there is several evidence of implementation of chemicals use- reducing practice. For example, zero use of paraquat or minimized use of chemicals for pest management due to little or even no pest attacks found in the estate. Some work procedures and work instructions are still included SG models which is not within their own RSPO SCCS 2014 that removes SG models for POM, such as: PK-3:03:11 PK-3:03:08.

Compliance status: Full Compliance

RSPO Supply Chain Certification

Module E: RSPO Certification System Section 5: General Chain of Custody System Require- ments for the Supply Chain

E.1. Definition

Findings: Sei Daun Palm Oil decided to implement RSPO SCCS, the company has established supply chain management system refer to RPSO SCCS standard year 2014. Considering the nature of incoming material which is FFB come from company’s owned supply based, other estate under PTPN 3 and independent outgrowers, company decided to implement Mass Balance Modul E with non physical separation. To support implementation of RSPO Supply Chain, Sei Daun Palm Oil Mill has a complete standard operation manual and standard operation procedure about supply chain for all strategic operation units. Sei Daun Palm Oil Mill is subsidiary of PT Perkebunan Nusantara III.

PT Perkebunan Nusantara is RSPO member with membership number 1-0030-06-000-00 .

Compliance status: Full Compliace

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E.2. Explaination

Findings: The estimated tonnage of CPO and PK products that could potentially be produced by Sei Daun Palm Oil Mill has been recorded as mentioned on the table 2 to 5 on the section 1 above. This figure represents the total volume of certified palm oil product (CPO and PK) that Sei Daun palm oil mill is allowed to deliver in a year. The actual tonnage produced has been recorded in this report and will be reported also on each subsequent annual surveillance report, as stated on PTPN 3 Direc- tor Decree letter No. 3.03/SKPTS/01/2014 dated June 16, 2014. By stated on the letter to the public summary of the P&C certification report PT Perkebunan Nusantara Sei Daun palm Oil Mill selects RSPO SCCS with MB. Company implement non physical segregation for incoming FFB from company’s owned estate and out growers. However company still defined Segregation for Rambutan Palm Oil Mill, Segregation model is no longer valid for Palm Oil Mill. PTPN 3 has register to IT platform, the mill also meet all registration and reporting requirements for the appropriate supply chain through the RSPO supply chain managing organization (RSPO IT platform or book and claim). This will be cheked during next surveillance audit.

Compliance status: Full Compliance E.3.Documented Procedure

There is a set of existing standard operation procedure since incoming material (CSPO) until product dispatch. The company has a procedure for implementation of SCCS requirements. There are a set of existing procedures consisting of : • Incoming FFB ( IK-3.03-12/01); • Supply Chain Mechanism (PK-03.03-12) • FFB grading (IK-3.03-03/11) • Process and quality control Palm Oil Production (IK-3.03-03/10) • Out grower management and capacity building ( PK-3.03-09) • FBB analysis (PK-3.03-10) • Product delivery Product Delivery to Belawan Installation, PT Sarana Agro Nusantara, PT IKN, PKSMK and other parties. • IK-3.03-12/01 Rev 01 dated on 03/05/2014 about receiving sustainable EFB and non-sustainable EFB • IK-3.03-03/11 Rev 00 dated on 01/07/2014 about EFB grading in loading ramp • IK-3.03-11 Rev 00 dated on 01/07/2014 about supply chain mechanism • IK-3-03-08 Rev 01 dated on 01/07/2014 about Product delivery to the PT SAN, IKN, PKSMK • IK-3-03-04/01 Rev 06 about Grading FFB in loading ramp • Work instruction for weighing • And others

At time of audit, the company has prepared all documented system following reference standard it was verify the system quite well and the implementation will be verified during next surveillance audit. However some work procedures and work instructions are still included SG models which is not within their own RSPO SCCS 2014 that removes SG models for POM, such as: PK-3:03:11 PK-3:03:08

PK-3.03-8 parts 7:14 it is said that the recipient of palm oil, namely PT SAN Belawan must be certified RSPO SCCS, but no evidence that PT SAN has been RSPO SCCScertified.

All standard operation procedures and working instruction are listed on master list document, all docu-

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ments were kept maintained by administration officer in the mill. All activities from CPO received, storage until dispatches were recorded on “working sheet oil stocking format” everyday. Company also makes monthly report for CPO received and sold. All records are keep maintained properly, some records was sight during main audit such as weighbridge (WB) and expedi- tion slip records, , Unloading material (CPO) book, Bill of Landing. There is product transfer document and summary of weighbridge notes including the manifest and invoice documents to inform about all transaction from Sei Daun Palm Oil mill. Mill manager has authority and having overall responsibility for and authority over the implementation of these requirements and compliance with all applicable requirements has been assigned at the audit time. The mill manager has responsibility for overall implementation of RSPO SCCS in Sei Daun palm Oil mill. Compliance status: Non Compliance Non-conformance 2015-11 of 13. Some work procedures and work instructions are still included SG models which is not within their own RSPO SCCS 2014 that removes SG models for POM, such as: PK-3:03:11 PK-3:03:08. Non-conformance 2015-12 of 13 ( Major non-conformity): PK-3.03-8 parts 7:14 it is said that the recipient of palm oil, namely PT SAN Belawan must be certified RSPO SCCS, but have found no evidence of PT SAN has been RSPO SCCS certified

E.4. Purchasing and goods in

Findings:

Sei Daun palm oil mill documents all volumes of certified and non certified FFB recived. For certified material the mill will receiving certified FFB from 2 supply base estates i.e. Bukit Tujuh estate and Sei Daun estate. As mentioned on IK-3.03-12/01, every incoming FFB must be accompanied by FFB delivery note (PB- 25) from supplier, they have to inform clearly FFB source (estate and afdeling) including planting year, quantity, harvesting date, loading time and signed by the estate manager or supplier (estate assistant or third parties). Incoming FFB following the mill capacity and production time, the time limit for receiving FFB from third party is 18.00 pm. Loading ramp worker will grading the FFB following of IK-3.03- 03/11 and record the result into FM-03.03-03/01 “Check Sheet Mutu dan criteria/Sortasi FFB Kelapa sawit, as required by PK -3-03-03/01 “Perencanaan & pengendalian Proses Pengolahan” When receiving RSPO certified material, weighbridge operators will verify the claimed category of the material under IP model, name of supplier (supplier has RSPO certificate or not), ensure quality and quantity of products, ensure number of seal (red and yellow). Weight bridge operator give instruction to the driver regarding defined storage tank (i.e. storage tank no 3, 4 or 5) for CSPO from certified mill and working instruction of traceability for CPO and PK production including mechanism for handling of non- conforming material/documents. In year 2014, total FFB received by Sei Daun palm Oil Mill is 232,414.07 MT and for year 2015 is (288,924.870 tonnes. All weighbridge (WB) and delivery note were keeping maintained by administration section. Commercial department will update material stock information to monitor the product.

Compliance status: Full Compliance

E. 5. Records Keeping Sei Daun Palm Oil has record of mass balance for record of certified and non-certified produced of FFB, CPO and PK. On the mass balance report, data will update in monthly basis and will input in every day then in every 3 months the mill will evaluate to ensure the condition stock of certified and non-certified product. Until the end on 2014, the stock for certified will keeping in positive. Mass balance record data in 2014 and 2015 showed the condition of CPO and PK certified. During ths recertification audit, there is no record of sales certified product.

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Company using outsourcing company for CPO transport, i.e. CV Cipta Buana for CPO and PK delivery from Sei Daun palm oil mill to specified location. There is contract no. 3.03/SPJ/110A/2015 dated January 2, 2015 between PTPN3 and CV Cipta Buana; however there is no statement regarding that independent third parties engaged provide relevant access for duly accredited CBs to their respective operations, systems, and any and all information, when this is announced in advance. There was no evidence of RSPO SCCS training for workers at the weighing, Ramp fruit, Procesing, CPO dispact, grading and other related parts. Training is only given to laboratory personnel only.This is a non conformity

Compliance Status: Non Compliance NCR No. 2015 -13 of 13. There was no evidence of RSPO SCCS training for workers at the weighing, Ramp fruit, Procesing, CPO dispact, grading and other related parts. Training is only given to laboratory personnel only.

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

During the certification assessment total 13 nonconformities were assigned,i.e. 10 Non conformities related to RSPO P & C with 7 Major non compliance were assigned again major indicators and 3 minor nonconformities were assigned against Minor Compliance Indicators. Remain 3 major non conformities were assigned again to RSPO SCCS Modul C. Observations or opportunities for improvement were identified. Further ex- planation of the non-conformities raised and corrective actions taken by the company are provided in Section 3.2. The observations & opportunities for improvement are listed in Appendix 5.

A summary of all identified non-conformances, corrective actions taken and auditor conclusions is as below:

RSPO P & C

Criterion 2.2. (Major indicator 1): The right to use the land is demonstrated, and is not legitimately contested by local people who can demonstrate that they have legal, customary or user rights.

Non-conformance 2015-01 of 13 (Major non-conformity): The handling of HGU certificate extension for Sei Daun Estate and for Bukit Tujuh Estate and Sei Me- ranti Estate can be showed on delivery letter No. 3:11 / X / 104/2014 concerning the issuance of a letter dated October 31, 2014 to the Chief of the Forest Service province of North Sumatra, however evidence of the progress on the follow-up to the legal processing of the land until the month of June 2015 is not yet available in the office of Sei Daun Estate, Bukit Tujuh Estate and Sei Meranti Estate.

Correction: Issuing a letter to the Head of North Sumatra Provincial Forestry Officer to ask for information related to a follow-up letter of PTPN III Number: 3:11 / X / 104/2014 tgl.31 October 2014.

Corrective Action: To documenting all the documents related to the concession certificate.

Date of Closure: July 30, 2016 Auditor Conclusions: Closed with observation. Verification result: Company sent documents:

1. Copy of letter no. 3.11/X/85/2015 dated September 22, 2015 to Head of Forestry Office North Su- matera asking for change “Forest Land” status become “Other Usage Area” status. 2. Copy of letter no. 3.11/X/28/2016 dated February 12, 2016 to Head of National Land Authority North Sumatera.

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3. Letter No. 522/287 dated Medan February 9, 2016 from Forestry Office North Sumatera Province, regarding explaination of land status for PT Perkebunan Nusantara III Torgamba Group in South Labuhan Batu, North Sumatera Province. 4. Attachment of Letter No. 522/287 from Forestry Office North Sumatera Province to demonstrate that Sei daun estate and Bukti Tujuh estates which are included on Torgamba group estate is not included on Forest land status but category as Other Usage area(APL) It is stated on letter no. 3.11/X/28/2016 that land status for all PTPN 3 Torgamba group area which are Sei Daun estate and Bukit Tujuh estate included inside those estate group, have been changed from Forest Land status become Other Usage Area (Area Penggunaan Lain/APL) status, current status 25,593 ha area was released . In the Letter No. 522/287 explain that the letter is not an evidence of land title (land use right), the letter only statement of clarification regarding land status of the estates. The company is ongoing to process land used right, as mentioned no. 3.11/X/28/2016 dated February 12, 2016 after they got information from North Sumatera Land Used Right Officer as consideration before HGU issued. PT perkebunan Nusantara 3 still waits for confirmation from National Land Authority (BPN) for confirmation about processing Company’s HGU. The progress of reciveing HGU certificate should be monitor regulary until the land used right (HGU) certificate for Sei Daun & Bukit Tujuh estate has been issued.

Criterion 2.2. (Minor indicator 2): Legal boundaries shall be clearly demarcated and visibly maintained.

Non-conformance 2015-02 of 13 (Minor non-conformity): The boundary stone from BPN could not be found along the boundary between Bukit Tujuh Estate blocks A1 to A20 with HTI PT Surya Raya Lestari Correction: To Identify and inventory the entire BPN stakes between Block A1 to A20 and report the condition of the stakes and make sure the entire BPN stakes are always be available. Corrective Action: To caring for and maintaining the existence of the existing pillars markers along the boundary between Block A1 to A20 bordering with HTI PT SRL.

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

Criterion 3. 1(Major indicator 1): Commitment to long - term economic and financial viability

Non-conformance 2015-03 of 13 (Major non-conformity): No documents found for the next 3 years work plan for Sei Daun POM. Provided only RKAP 2015 alone.

Correction: To create a Long-Term Plan document for the next three years and ensure compliance with RKAP 2015, (for Sei Daun Mill)

Corrective Action: To documenting the Document of Long-Term Plan for the next 3 years.

Date of Closure: July 30, 2015 Auditor Conclusions: Closed with observation

The company provide long term planning called “Rencana Jangka Panjang” documents for year 2014 to 2018, According to document provided, information contain planning for production, finance, cost production, Human resources, Busines transformation, Intormation technology issues, and strategy for

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achievement. The planning also contains strategy for company’s social aspect and conservation but the strategy for achievement on company’s social aspect and conservation is not explained in detail on the long term management plan, this is company’s opportunities to improve the contain of management plan as guidance for company’s operasional.

Criterion 4.1. (Major indicator 4): The mill shall record the origins of all third-party sourced Fresh Fruit Bunches (FFB).

Non-conformance 2015-04 of 13 (Major non-conformity): Sei Daun POM receive the fruits of 17 agencies which collecting palm fruit. Each agency has been collecting pieces of information about the list of farmers who became suppliers, and also land documents the farmers who became his supplier. But when checking the fruit received on May 30, 2015 against the fruit of CV KDKD and UD Karya Mandiri, the information source of the fruit was not listed in the document Letter of FFB that accompanying fruit coming, so it can not be ascertained that the fruit comes from the list of farmers that has been delivered by the agents. CV Makmur Jaya is also a supplier of Sei Daun POM which is not sending the list of farmers who became their suppliers..

Correction: 1. To include the source of fruit (FFB) in the cover Letter of fruit received in the POM to all suppliers of FFB to Sei Daun POM. Completing the farmer’s list names of CV.Makmur Jaya as requested in the PK-3.03-09.FFB Corrective Action: 1. The available cover letter has to attach the acknowledgment of the source of fruit received by POM. To documenting all documents on behalf of CV. Makmur Jaya farmers in accordance with PK-3.03- 09.

Date of Closure: July 30, 2015 Auditor Conclusions: Closed. Verification Result: The company provide letter No. DLAB/PSDAN/Int/100/2015 from Labuhan Batu District Manager to Sei Daun Palm Oil Mill Manager dated June 26, 2015 regarding requirement for FFB verification for outgrower in year 2015. The letter asking to supplier UD Monika Jaya for field verification. All supplier require to provide list of their FFB suppliers and FFB landowner including their profile such as supplier name, address, location of plantation, total area, production capacity. There are list of farmers that supply FFB to Sei daun estate and FFB transmittal not including information about FFB origin.

Criterion 4.1. (Major indicator 4): The mill shall record the origins of all third-party sourced Fresh Fruit Bunches (FFB).

Non-conformance 2015-05 of 13 (Major non-conformity): No evidence of the verification process of independent FFB suppliers periodically conduct once a year as required by the relevant SOP on Management / Development FFB Supplier and Out Grower (PK3.03.09). In SOP is said that POM has a verification team that will conduct regular verification of the out growersFFB Correction: To verify the entire FFB supplier accordance with PK 3.03-09 and follow up the results of the verification and form a verification team signed by the District ManagerFFB.

Corrective Action: To document all the results of the verification made to all available suppliers.

Auditor Conclusions: Closed Date of Closure: July 30, 2015

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Verification result: There is internal memeo No. MR-SM-PN3DLAB-1 dated June 18, 2015 rearding activity to verity FFB suppliers. There is checklist to verify supplier performance such as: legality of supplier, request of FFB sources, total area and production capacity. Company also provide sample of FFB supplier verification result and photograps. Verification result has been recordedd on Interen Memo e.g. result verification with intern memo no. MR/Int/23/2015. Another sample will be checked duringn next surveillance audit.

Criterion 4.3. (Major indicator 1): Practices minimise and control erosion and degradation of soils.

Non-conformance 2015-06 of 13 (Major non-conformity): From the results of the field visit identified there are some marginal land such as sandy land, land that is inundated by water, such as in blocks (G.20); section 1, land slope as steep as in block F3; E 4, but there is no map of the distribution of marginal land in the Bukit Tujuh Estate. Correction: To identify marginal area such as sandy soil, water flooded area and slope area especially for area in Block G20, Afdeling I, Block F3 and block E4, the company make map of marginal soil distribution.

Corrective Action: To documenting marginal land distribution maps.

Date of Closure: July 30, 2015 Auditor Conclusions: Closed Verifikasi Result: Company provide marjinal soil map, there 3 type of marjinal soil has been identified, i.e. Sandy soil, wet land, and potential high erosion because very slop area in Bukit Tujuh estate.

Criterion 4.4. (Major indicator 1): An implemented water management plan shall be in place

Non-conformance 2015-07 of 13 (Major non-conformity): Permit the use of water inside Sei Daun Estate concesion as stated on decree letter of head of South Labuhan Batu regency, i.e. No. 503/157 / BPPPTPM-LS / 2014 to PTPN III Kebun Sei Daun is only one point in emplasment Sei Daun Estate. ¾ inch and 20 liters / minute, but at this time in the Sei Daun Es- tate there is more than one point in the water wells.

Correction: Identify and inventory the entire existing point of the ground water (wells) and take care of the water use permits.

Corrective Action: To ensure all well water points are used comes with its use permit.

Date of Closure: July 30, 2015 Auditor Conclusions: Closed The company provide evidence i.e. letter no. KSDAN/X/VI/85/2015 i.e. asking to revise permit for depth well water for Sei Daun estate to Head of intergrated Services agency and Investement, Labuhan Batu Selatan District. There is decree letter from Head of intergrated Services agency and Investement, Labuhan Batu Se- latan District No. 685/214/BPPTPM-LS/2015 regarding Permit Letter for Depth well water usage. For PTPN 3 Sei Daun estate into ¾ inch and 40 liters / minute, there are changed from one point into two points of wells.

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Criterion 4.6. (Major indicator 5): Pesticides shall only be handled, used or applied by persons who have completed the necessary training and shall always be applied in accordance with the product label. Appropriate safety and application equipment shall be provided and used. All precautions attached to the products shall be properly observed, applied, and understood by workers (see Criterion 4.7).

Non-conformance 2015-08 of 13 (Major non-conformity): From the interviews with the sprayers’ team in section VI Sei Daun Estate, the spraying has not received formal training related material handling of pesticides. Correction: Implement handling of chemicals training / pesticides in accordance with the PK-3.08-08 to all sprayers. Corrective Action: To documenting the entire of training results document in accordance with PK-3.08-08.

Date of Closure: July 30, 2015 Auditor Conclusions: Closed. Verification Result: The company provides training for sprayer regarding, training was conducted on June 15, 2015. Train- ing attended by 24 participant including sprayer in Blok KK Afdeling VI. Company provides training evidence such as training material, list of participant and photograph.

Criterion 4.6. (Minor indicator 7): Application of pesticides shall be by proven methods that minimise risk and impacts.

Non-conformance 2015-09 of 13 (Minor non-conformity): Found the sprayers were not using PPE in the Sei Daun Estate afdeling VI Correction: To completing PPE to all sprayers and to disseminate the use of PPE.

Corrective Action: To documented evidence of socialization according IPK-3.08-08.

Date of Closure: Before Next Surveillance audit Auditor Conclusions: Evidence of immediate action taken was accepted. Effectiveness of implementation to verified at next audit.

Criterion 5.2. (Minor indicator 4): Where a management plan has been created there shall be ongoing monitoring:• The status of HCV and RTE species that are affected by plantation or mill operations shallbe documented and reported;• Outcomes of monitoring shall be fed back into the management plan.

Non-conformance 2015-10 of 13 (Minor non-conformity):

There is inconsistency between HCV management program that has been made for 2015 and its realization as not yet done for maintenance activities of conservation plant; Monitoring of water quality and erosion measurements. The monitoring results were recorded in the area of monitoring Form river banks, creeks, ditches and channels but the realization does not exist and not as planned in the program Correction: Develop program of HCV monitoring and management and performs monitoring according to program.

Corrective Action: To document monitoring results against HCV management such as Plant Conservation monitoring, Water Quality, Erosion Measurement according to the plan on the HCV management Program.

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

RSPO SCCS:

SCCS requirement (E.1.1)

Non-conformance 2015-11 of 13 ( Major non-conformity): Some work procedures and work instructions are still included SG models which is not within their own RSPO SCCS 2014 that removes SG models for POM, such as: PK-3:03:11 PK-3:03:08. Correction Revise Business Process and Related SCCS Work Instructions to eliminate segregation models and distribute PK and IK revisions to the entire Work Unit. Correction Action To documenting PK and IK related SSCS model changes and ensure PB and IK are understood and applied. Auditor Conclusions: Closed Date of Closure: July 30, 2015 Verification result: The mill provides revised SOP No. PK-3:03:11 9(certified CPO & certified PK product distribution and PK-3:03:08 (RSPO Supply Chain Mechanism), the new SOP has include possible supply chain model that could be implemented by Sei daun Palm Oil Mill following the nature of mill supply base. If Com- pany 100% received certified FFB they will implement Identity Preserved and if they mixed with non certified then they will implement Mass Balance.

SCCS requirement (E.1.1.)

Non-conformance 2015-12 of 13 ( Major non-conformity): PK-3.03-8 parts 7:14 it is said that the recipient of palm oil, namely PT SAN Belawan must be certified RSPO SCCS, but have found no evidence of PT SAN has been RSPO SCCS certified

Correction To revised SOP PK-3.03-8 parts 7:14, PTPN 3 not required but only support PT SAN into the certification scope of PTPN III.

Correction Action To communicate with PT SAN for SCCS certification

Date of Closure: July 30, 2015 Auditor Conclusions: Closed Verification Result: Company submits revised SOP PK-3.03-08 approved on May 19, 2016, including aaproval letter from “Kepala Urusan Pengolahan Kelapa Sawit”. The SOP has included statement that PTPN 3 not required but only supports PT SAN into the certification scope of PTPN III.

SCCS requirement: (E.5.1)

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Non-conformance 2015-13 of 13 ( Major non-conformity):

There was no evidence of RSPO SCCS training for workers at the weighing, Ramp fruit, Procesing, CPO dispact, grading and other related parts. Training is only given to laboratory personnel only.

Correction: Provide the SCCS training / socialization to workers at the weighing, Ramp fruit, Procesing, CPO dispact, grading and other related division.

Correction Action: To documenting the results of SCCS the training / socialization in accordance with PK-3.08-08

Auditor Conclusions: Closed. Date of Closure: July 30, 2015 Verification Result: Company provides SCCS training according to letter No. 55/Int/2015 dated July 2015, regarding So- cialisation SCCS standard dated July 23, 2015. The training also conducted tanggal 24Juli 2015 regarding SCCS socialization for loding ramp workers on July 24, 2015, signed by Sei Daun POM manager. There list of participant dated July 24, 2015.

3.3 Noteworthy Positive Components

No. Related Observations / Opportunities for improvement clause

1. 2.1 Legal requirements register at Sei Daun palm oil mill and its supply base estates has been kept up to date with latest legal requirements

2. 4.6 It was confirmed through site visit to chemical stores and chemical usage records that there is no more usage of Paraquat at all estates

3. 5.3 Sighted at worker’s housing that waste is separated into organic and inorganic wastes and dispose small holes in the land behind the houses. The organic wastes are covered with soil for a month and then used as compost.

3.4 Issues Raised by Stakeholders and Findings Pertaining to Issues

A) Issues Raised during Stakeholder Consultation Meeting B) No. Issues Raised Management Response Audit Verification Positive aspects - The company always • The company has always supports the environment supported and social activities outside • Provide assistance to reli- the company related to gious facilities religious activity.

Negative aspects - The Aid program Positive comment no need to 1. • Assistance provided by associated facilities be verifed. PTPN III quality is often not in proposed religious has line with expectations so that given the company such as the donated items quickly bro- the use of assistance ken. For example bookcase of vehicles, infrastructure, materials carelessly physical materials religious • The provision of a slow buildings.

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No. Issues Raised Management Response Audit Verification - Goods can only be granted Hope: in accordance with the • Request for help to provide specification of goods faster processing costs amount existing • Company employees pay capabilities. more attention to worship - Related quality of goods • In order PTPN III along with received by the religious leaders support the management of affected ministry of spirituality parties will conduct • Good cooperation will pro- inspection before handing duce good over the goods . • Ensuring recruitment from - Management Party the surrounding environment intervened in check the • Improve the community de- number and quality of the velopment program (such as goods given to the affected bazaar) parties to avoid deviations • Not seen their refreshment from the costs incurred in the religious field Partnership & Community Development Section . - Religious refreshment still held every activity religious holidays such as the Prophet's Birthday, Christmas Day.

- Cooperation between the worker union and management has always • There are no problems with been good in meeting the employees targets of the company as • Cooperation between the No need to verify as it is 2. well as the welfare of management and interested positive commnet. employees. parties need to be main- - Management remains tained and improved enhance the good cooperation with the worker union. Sei Daun Estate Management improve • Environmental Development coordination with the Program continue to be held Partnership & Community Community surounding Sei (2 times a year), for exam- Development Section to Daun and its supply base ple cheap bazaar, roadwork continue loan. has been employeed by the 3. • To be in receipt of the com- - Sei Daun Estate company for casual worker pany's employees more put management prioritizing sometime could become residents around • residents around the estates monthly payment staff Operational results in sew- that are willing and qualified age plant as labor into Sei Daun Estate. • The company provides skills - Baking Training for children No need to verify as it is training for children of em- of employees who work positive commnet. ployees and unemployed closely with the environment • management group already Working agreement has 4. The Company has been implementing legislation in the been implemented. been approved by local field of employment with a manpower and good example report obliga- - Management advise and transmigration officer. tory, , P2K3 report, employ- cooperate with section

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No. Issues Raised Management Response Audit Verification ees' Environment Manage- Partnership & Community - Company has evaluate ment plan wages are in ac- Development Section . their compliance to legal cordance with the mini-mum - employees so that children regulation including wage set. are unemployed to be regulation for workers • There is no question of in- made in the training issues. dustrial relations between the program Partnership & company and employees en- Community Development tering Disnakertrans Section . • Contract employees needs to - Management remains and be enrolled in Disnakertrans always respect the laws and regulations. - Management KSDAN trying to have no problems with employees about industrial relations. - KSDAN management already advocated to the contractor so that the workers register with Manpower. • There is contamination but - Management always they can be overcome reminded all workers to guard against • Improve environmental man- contamination. agement so as leader in the - Control of hazardous waste management of hazardous in Sei Daun Estate already waste implemented according to the working procedures and • The company has normalized will always strive to improve before there were complaints environmental management. Company provide secondary from the public, such as giving - Management's own contaimnent to minimze the fish in the river socialization to employees spillade and prevent and the community about contamintatio to other. • Environmental pollution occurs the preservation sungau but not until there is loss of life border region and not to Company has environemntal or through the legal system hunt protected animals. management program and

- The company always keeps SOP for hazardouse waste • There has never been a com- the parties in order to avoid handling. plaint from the public to BLH environmental pollution, 5. while the possibility Company always late to • Companies can improve the conducted by parties who dispose hazardouse waste, conservation area on the are not responsible. banks of the river flow - Company has confirmed to this is concern this has been the public if there is a raise as potential for • The company obedient in giv- problem that is reported to improvement. ing reporting but always late the Environmental Agency. • Hazardouse waste Transpor- - The company has improved Some comment will be tation always late and so man- the preservation of check again during next ifest it's too late delivered watershed conservation audit. areas by planting Jabon, • For the transport of LB3 notify mahogany, gelaga and the BLH so they can be su- bamboo. pervised - Management remains confirmed to subordinate • In order to inform the Compa- personnel that any reporting ny's activities regarding done on time. WWTP Normalization - Hazardous waste • BLH will give seedlings to be transportation fleets and

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No. Issues Raised Management Response Audit Verification planted on the riverbank on workers delayed by the the sidelines of the principal carrier are limited. oil (not including the cost of - Transportation of hazardous planting) waste has been notified to the Environmental Agency and has been accompanied during transport takes place.

- Until now the Environmental Agency still not provide seedlings on purpose yet. • The company has always - Torgamba Estate is always communication, consultation communication, consultation and coordination and coordination with the • The company gave a good local community and contribute well to the village No need to verify as it is 6. contribution to the village Torgamba Torgamba including the positive commnet. • For companies more con- handling of the scientious in dealing with environmental impact the environmental impacts according to ISO 14001 clause. - Accordining to the discretion of the Board of Directors that the recruitment process • Please keep hiring by the conducted by Plantation company conveyed through Institute Medan. The company has response the adjoining villages - All proposals are always incoming proposal from • responded and adapted to Ask that all proposals re- community, there are a lot of 7. sponded to quickly by the the Social Impact incomingproposal as company Assesment program that documented on log book • Please made a race like has been agreed. incoming and outgoing letter. quiz for Muslim children in - Smart-race closely for the village Muslim children is still limited between Kindergarten which is located in the Estate, and it is possible for inter-village. • The company is expected to - Companies are always be more serious in manag- trying to manage the ing the environment environment as possible for There is a book called • Using of the CSR fund by its preservation. environmental management companies more transpar- program to conserve. ent 8. • CSR fund management Total donation CSR program Establish a special institu- authority of Section 3:10 in in PT PN3 is 1% from net tion that manages the fund Head Office. company’s profit as required companies such as the rep- by governemnet regulation. resentatives of the community, local government and the company. • Good relations with the No need to verify as it is 9. communities that have been positive commnet. well maintained - The whole house of worship • has been fixed in Houses of worship that have To be checked again during 10. been unsuitable please re- accordance with the priority next audit. paired scale verification results Survey Team.

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No. Issues Raised Management Response Audit Verification Commununity surounding • Sei Daun and itd supply Company Recruitment pro- base has been eployeed by cess in the estate level in- 11. the company for casual stead of at the Campus LPP worker sometime could Medan become monthly payment staff • Improve third parties FFB re- Company received FFB from ceiving process in POM outgrowers, however the • - Management develops mechanism to ensure FFB 12. Palm oil which is not good please note because some Integrated Pest controls. orign has to be improved. manyof them are attacked by Company implement IPM in pests all estates area. - Bukit Tujuh Estate seeks to prioritize local contractors registered in PTPN3 If there is a contractor's work partners as needed and in the estate in order to priori- prioritizing community Commununity surounding tize local contractors and im- workers around. Sei Daun and itd supply plemented by the communities - Bukit Tujuh Estate always base has been eployeed by that exist around all bun / local forward proposals submitted the company for casual village to the relevant section and worker sometime could Providing assistance to in- prioritize the proposals that become monthly payment 13. creasing the company's CSR have been established staff. and prioritized at the local vil- under the SIA. lage and conducted openly - According to Board of More open in recruitment in Directors policy in terms of Company has envirnmental coordination with village gov- recruitment through the program including water ernment Plantation Institute Medan. management plan ad More conserve the environ- - To protect the environment environmental program. ment and water resource and water resources Bukit Tujuh Estate planting trees on the border river conservation. - • Torgamba Estate seeks to meet increasing living standards of employees and surrounding communities. Companies can improve peo- - Recruitment at the Commununity surounding ple's lives discretion of the Board of Sei Daun and itd supply More Recruitment for local Directors through the base has been eployeed by workforce Plantation Institute Medan. 14. the company for casual EIA is irreparably - Torgamba Estate always worker sometime could For more company prioritize implement continuous local contractors rather than improvements on EIA become monthly payment an outside contractor (environment Impact staff Assesment) - Torgamba Estate seeks to prioritize local contractors are unlisted in the by laws. - The aid program to orphans The aid program for orphans still be awarded and and renovation of houses of to be verified again during 15. / provision of physical worship should not be elimi- next audit. material renovation for nated houses of worship gradually

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

It is acknowledged that the assessment visit was carried out as described in this report and we accept the assessment findings and report content.

Signed on behalf of PT Perkebunan Nusantara Signed on behalf of PT TUV Rheinland Indonesia III Sei Daun Palm Oil Mill

[Tio Handoko] [Aswan Hasibuan] [Management Representative] Lead Auditor Date: April 20, 2016 Date: April 20, 2016.

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APPENDICES Appendix 1: Details of Certificate

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Page 54 of 62 Appendix 2: Certification Audit Plan

Organizational Unit and Process- Auditor / Ab- Procedure - EM/QM Element - Date / Time (1) Interviewee es brev. Standard Chapter Sunday, May 31 st , 2015 10.40-13.05 Traveling Jakarta to Medan DSS, SU, GA 186 By GA EN 13.05- Travelling to site DSS, SU, EN & AH Monday , June 01 st , 201 5 Kebun Sei Daun 08.00-12.00 Verification of document about Le- DSS Estate Prinsip 2 gal Land, Management Plan, Best Criteria 2.1, 2.2.2; Practices, HCV Issues Prinsip 4 • Compliance laws and regulations • Criteria 4.1; 4.2; 4.3; 4.4.1;4.4.2; Management plan 4.4.4;4.5 • HCV • Water management Prinsip 5 • Continous improvement Criteria 5.2 Prinsip 7 Criteria 7.1-7.4;7.8 Prinsip 8 Criteria 8.1 Verification of document about En- AH Estate Prinsip 3 vironment, Agrochemical, OHS Is- Criteria 3.1 sues Prinsip 4 • Business Plan Criteria 4.6.9- 4.6.12; 4.7 • OHS • Waste Prinsip 5 • Efficiency of energy Criteria 5.1;5.4;5.5;-5.6 (exclude 5.2 & 5.5) • Continous improvement Prinsip 8 Criteria 8.1 Verification of document about Best SU Estate Prinsip 4 Practices Criteria 4.1; 4.2; 4.3; 4.4.3;4.6.1- • Agrochemical 4.6.8; 4.8 • Emergency responses to land burning Prinsip 5 • Environment Criteria 5.3;5.6 • Continous improvement Prinsip 7 • Reduce pollution and emission Criteria 7.7

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Organizational Unit and Process- Auditor / Ab- Procedure - EM/QM Element - Date / Time (1) Interviewee es brev. Standard Chapter Stake- holder Wednesday, June 03 rd, 2015 Kebun Bukit Tujuh 08.00-12.00 Verification of document about Le- DSS Estate gal Land, Management Plan, Best Prinsip 2 Practices, HCV Issues Criteria 2.1, 2.2.2; • Compliance laws and regulations • Management plan Prinsip 4 • HCV Criteria 4.1; 4.2; 4.3; 4.4.1;4.4.2; • Water management 4.4.4;4.5 • Continous improvement Prinsip 5 Criteria 5.2 Prinsip 7 Criteria 7.1-7.4;7.8 Prinsip 8 Criteria 8.1

Verification of document about En- AH Estate Prinsip 3 vironment, Agrochemical, OHS Is- Criteria 3.1 sues Prinsip 4 • Business Plan Criteria 4.6.9- 4.6.12; 4.7 • OHS • Waste Prinsip 5 • Efficiency of energy Criteria 5.1;5.4;5.5;-5.6 (exclude 5.2 & 5.5) • Continous improvement Prinsip 8 Criteria 8.1 Verification of document about Best SU Estate Prinsip 4 Practices Criteria 4.1; 4.2; 4.3; 4.4.3;4.6.1- • Agrochemical 4.6.8; 4.8 • Emergency responses to land burning Prinsip 5 • Environment Criteria 5.3;5.6 • Continous improvement Prinsip 7 • Reduce pollution and emission Criteria 7.7

Prinsip 8 Criteria 8.1 Verification of document about So- EN Estate Prinsip 1 cials and employees Issues Criteria 1.1-1.3 • Transparancy Prinsip 2 • Conflict land Criteria 2.1, 2.2; 2.2.3: 2.2.4- • Environmental Doc (Social issues) 2.2.6;2.3 • Social and employees • Continous improvement Prinsip 5 Criteria 5.1 Prinsip 6 Criteria 6.1-6.13 Prinsip 7 Criteria 7.5;7.6 Prinsip 8 Criteria 8.1 12:00 – 14:00 Break 14:00 – 17:00 Melanjutkan Agenda pagi Thursday , June 04 th , 20 15 Kebun Bukit Tujuh & Sei Daun 08.00-12.00 Field Verification/observation about DSS Estate Prinsip 2 Legal Land, Management Plan, Best Criteria 2.1, 2.2.2; Practices, HCV Issues Prinsip 4 • Compliance laws and regulations Criteria 4.1; 4.2; 4.3; 4.4.1;4.4.2;

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Organizational Unit and Process- Auditor / Ab- Procedure - EM/QM Element - Date / Time (1) Interviewee es brev. Standard Chapter • Management plan 4.4.4;4.5 • HCV Prinsip 5 • Water management Criteria 5.2 • Continous improvement Prinsip 7 Criteria 7.1-7.4;7.8 Prinsip 8 Criteria 8.1 Verification of document about En- AH Estate Prinsip 3 vironment, Agrochemical, OHS Is- Criteria 3.1 sues Prinsip 4 • Business Plan Criteria 4.6.9- 4.6.12; 4.7 • OHS • Waste Prinsip 5 • Efficiency of energy Criteria 5.1;5.4;5.5;-5.6 (exclude 5.2 & 5.5) • Continous improvement Prinsip 8 Criteria 8.1 Verification of document about Best SU Estate Prinsip 4 Practices Criteria 4.1; 4.2; 4.3; 4.4.3;4.6.1- • Agrochemical 4.6.8; 4.8 • Emergency responses to land burning Prinsip 5 • Environment Criteria 5.3;5.6 • Continous improvement Prinsip 7 • Reduce pollution and emission Criteria 7.7

Prinsip 8 Criteria 8.1 Verification of document about So- EN Estate Prinsip 1 cials and employees Issues Criteria 1.1-1.3 • Transparancy Prinsip 2 • Conflict land Criteria 2.1, 2.2; 2.2.3: 2.2.4- • Environmental Doc (Social issues) 2.2.6;2.3 • Social and employees • Continous improvement Prinsip 5 Criteria 5.1 Prinsip 6 Criteria 6.1-6.13 Prinsip 7 Criteria 7.5;7.6 Prinsip 8 Criteria 8.1 12:00 – 14:00 Break 14:00 – 17:00 Melanjutkan Agenda pagi Friday, June 05 th , 2015 PKS Sei Daun 08.00-12.00 Field Verification/observation about DSS Mill Prinsip 2 Legal Land, Management Plan, Best Criteria 2.1, 2.2.2; Practices, HCV Issues Prinsip 4 • Compliance laws and regulations • Criteria 4.1; 4.2; 4.3; 4.4.1;4.4.2; Management plan 4.4.4;4.5 • HCV • Water management Prinsip 5 • Continous improvement Criteria 5.2 Prinsip 7 Criteria 7.1-7.4;7.8 Prinsip 8 Criteria 8.1 Verification of document about En- AH Mill Prinsip 3 vironment, Agrochemical, OHS Is- Criteria 3.1 sues Prinsip 4 • Business Plan

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Organizational Unit and Process- Auditor / Ab- Procedure - EM/QM Element - Date / Time (1) Interviewee es brev. Standard Chapter • OHS Criteria 4.6.9- 4.6.12; 4.7 • Waste Prinsip 5 • Efficiency of energy Criteria 5.1;5.4;5.5;-5.6 (exclude • Continous improvement 5.2 & 5.5) Prinsip 8 Criteria 8.1 Verification of document about Best SU Mill Prinsip 4 Practices Criteria 4.1; 4.2; 4.3; 4.4.3;4.6.1- • Agrochemical 4.6.8; 4.8 • Emergency responses to land burning Prinsip 5 • Environment Criteria 5.3;5.6 • Continous improvement Prinsip 7 • Reduce pollution and emission Criteria 7.7

Prinsip 8 Criteria 8.1 Verification of document about So- EN Mill Prinsip 1 cials and employees Issues Criteria 1.1-1.3 • Transparancy Prinsip 2 • Conflict land Criteria 2.1, 2.2; 2.2.3: 2.2.4- • Environmental Doc (Social issues) 2.2.6;2.3 • Social and employees • Continous improvement Prinsip 5 Criteria 5.1 Prinsip 6 Criteria 6.1-6.13 Prinsip 7 Criteria 7.5;7.6 Prinsip 8 Criteria 8.1 12:00 – 14:00 Break 14:00 – 16:00 Preparation for Closing Meeting ALL Audi- tor 16:00 – 18:00 Closing Meeting ALL Audi- All Re- tor spective Auditee 18.30 - Traveling to Medan ALL Auditor Menginap 1 malam di Medan DSS, SU, EN Saturday , June 06 th , 201 5 07.30 – 10.55 DSS, SU, GA 263 EN

QMF: RSPO-007a-13(Rev.0) RSPO Certification Assessment Report - PT Perkebunan Nusantara III –Sei Daun Palm Oil Mill –

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AMDAL Analisis Dampak Lingkungan & Sosial (Social & Environmental Impacts Assessment) CPO Crude Palm Oil EIA Environmental Impact Assessment ERTs Endangered, Rare & Threatened species ESH Environmental Safety & Health FFB Fresh Fruit Bunches EFB Empty Fruit Bunches HCV High Conservation Value IPM Integrated Pest Management LTA Lost Time Accident MSDS Material Safety Data Sheets NGO Non-Government Organization OSH Occupational Safety & Health PKO Palm Kernel Oil POME Palm Oil Mill Effluent PPE Personal Protective Equipment RKL Rencana Pengelolaan Lingkungan (Environmental Management Plan) RPL Rencana Pemantauan Lingkungan (Environmental Monitoring Plan) SIA Social Impact Assessment SOP Standard Operating Procedure UKL Upaya Pengelolaan Lingkungan (Environmental Management Efforts) UPL Upaya Pengelolaan Lingkungan (Environmental Management Efforts)

Appendix 4: List of Stakeholders Interviewed and Contacted

Name of No. Institution / Position Remarks Stakeholder Stakeholders Interviewed On-Site 1. Sinaga KTU Sei Daun • Salary • Worker isues • Working contract for outsourcing 2. Sumarni dan Staf di Tempat Penitipan • Salry Rusmiati Sei Daun • Working contract • Infrastructure and childcare • Housing facility • Health Facility 3. Budi Darma Asisten Afdeling VI • Worker welfare facility • Complaint and communication mechanism 4 Terson Sirait Centeng/Warga • Welfare facilities( electrical, clean perumahan Afdeling VI water, health) Kebun Sei Daun • Complaint mechanism 5 Nurmaulina Paramedis di Kebun Sei • Health facilities karyawan, Tarigan Daun • Hiperkes, • Clinic license • Expired date monitoring for medicine,

6 Diana Br Gultom Staf di Tempat Penitipan • Salary Kebun Bukit Tujuh • Working contract • Infrastructure and childcare • Housing facility • Health facility

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7 Nuryono Warga perumahan • Infrastructure and welfare (electrici- Afdeling III Kebun Bukit ty, clean water and health) Tujuh • Complaint mechanism 8 Susi Br Raja/Andi Warga perumahan • Infrastructure and employee workers Simamora Afdeling III Kebun Bukit (Electricity, clean water and health) Tujuh • Complaint mechanism 9 Firman Asisten Laboratorium PKS • FFB pricing mechanism Sei Daun • FFB quality grading

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Appendix 5: Observations and Opportunities for Improvement

No. Observations / Opportunities for Improvement Criteria 1 Brimob (Police Guard) use as security personnel at Sei Daun Estate should be 2.2 avoided, especially if there is a conflict or dispute with a resident population of approximately likal games 2 Demarcation of rivarians should not use piles are easily lost and damaged. 5.2. 3 From the field observations, block F3 very steep slopes, the Bukit Tujuh Es- 4.3.2 tate still not yet terracing to prevent erosion, some horseshoe visible but not exhaustive location that slope is steep, planting cover crop is not done even though the company already tried to planting lemon grass, but planting its done less dense making it less effective to prevent erosion 4 From the discussion with the sprayers, the company has not had a mecha- 4.6.12 nism to ensure that no woman is pregnant or breastfeed-ing working as sprayers 5 The company should have a program associated data collection possession 5.2.3 of weapons for hunting, wild animals pet ownership in the homes to ensure that no employees who do the hunting 6. 5.2 collection possession of weapons for hunting, wild animals pelihraan ownership of the homes to ensure that no employees who do the hunting. 7. It was found that waste materials from agrochemical, including pesticides 5.3 containers, are not disposed or sent to authorized collector or to hazardous waste processor. Currently the company treats agrochemical containers as normal solid waste. 8. , the POM and management unit Sei Daun has not show enough evidence 6.1.2 that the social impact assessment has been carried out with the participation of affected parties. In addition POM Management Unit and Sei Daun Estate not show enough evidence that the monitoring plan to reduce the impact of (social) negative was consulted with affected parties and has not appointed its Insurers and have yet to develop a schedule for implementation (POM and Sei Daun Estate). 9. The management unit has not shown sufficient evidence of implementation of 6.9 the policy, for example through the establishment of a gender committee as a forum for complaints that are more comfortable for victims (POM and Estates)

QMF: RSPO-007a-13(Rev.0)