2007

Growing a Sustainable Future

Environmental and Social Sustainability Report for Indonesia TABLE OF CONTENTS

APP’s Fiber Supply Appendices

103 Introduction 124 Appendix I: and Overview Governance Structure 103 Sustainable Forest 127 Appendix II: Management Operational Structure 105 APP’s Sustainable 128 Appendix III: Fiber Supply Association Memberships 2 Report Scope 106 Environmental 129 Appendix IV: 4 Message from Performance Indonesia’s Units of Governance the Chairman 111 Social Performance 130 Appendix V: Policy Documents 132 Appendix VI: Audit Statement Summaries 134 Appendix VII: Corporate Overview APP’s Conservation Stakeholder Interviews Initiatives for this Report 135 Appendix VIII: 6 Introduction to APP APP Product 8 APP’s Vision 116 Overview Environmental Credentials 8 Corporate Governance 116 APP Conservation Value 136 Appendix IX: Toolkit for Indonesia Plant Variety Protection 9 Sustainability and Certificate for Eucalyptus Corporate Strategy 117 Giam Siak Kecil – Bukit Batu Biosphere Reserve Pellita 05 (EP05) 13 APP’s Fiber Sources 118 Taman Raja 137 Appendix X: 14 APP’s Relationship Conservation Area Conservation Initiative with Stakeholders Working Group Members 118 Senepis Buluhala Tiger Sanctuary 139 Appendix XI: IUCN Red List Species 119 Kutai Orangutan From Conservation Conservation Group Mill Performance Value Forest Survey 141 Appendix XII: IUCN Red List Species - 18 Introduction and Overview 121 Glossary Bukit Batu Biosphere 19 Mills at a Glance Reserve 19 Products 142 Appendix XIII: IUCN Red List Species - 21 Certification and Verification Taman Raja Conservation 23 Fiber Supply Integrity Area 24 Environmental Performance 143 Appendix XIV: Global Reporting Initiative 26 Social Performance (GRI) Index 27 Lontar Papyrus Mill 146 Appendix XV: 39 Indah Kiat Perawang Mill Assurance Statement 53 Indah Kiat Serang Mill of Independent Review Body 63 Indah Kiat Tangerang Mill 73 Pindo Deli Mills 83 Tjiwi Kimia Mill 93 Ekamas Fortuna Mill

2007 Corporate Social Responsibility Cover 1 01 Report Scope

APP is the brand name used This report is APP’s second Sustain- throughout this Sustainability Report ability Report, and covers activities as a reference to PT. Purinusa during the period January 1, 2007 Ekapersada, an Indonesian company to December 31, 2007. The cut-off that operates pulp and paper mills date for performance data for in the Republic of Indonesia, and its APP and Sinarmas Forestry is five operating companies: PT. Lontar December 31, 2007. Papyrus Pulp & Paper Industry in Tebing Tinggi; PT. Indah Kiat Pulp This report has been developed & Paper Tbk. with operations in based on the main considerations Perawang, Serang and Tangerang; and selected G-3 performance PT. Pindo Deli Pulp And Paper Mills indicators of the GRI framework. in Karawang; PT. Pabrik Kertas As is standard APP practice in Tjiwi Kimia Tbk. in Sidoarjo; and, sustainability reporting, this report PT. Ekamas Fortuna in Malang. (The has been verified by an independent, PT. Ekamas Fortuna mill was not credible, third-party reviewer, Société included in APP’s initial Sustainability Générale de Surveillance (SGS), Report, but has been included in this which has adhered to the principles report in the interest of providing and practitioner requirements for a greater transparency.) These mills are B+ Application Level GRI Sustain- located on the Indonesian islands of ability Report. Java and Sumatra. SGS is counted among the world’s Sinarmas Forestry (SMF) is the leading inspection, verification, test- exclusive fiber supplier to APP’s ing and certification companies, with mills. It is an affiliated company of more than 50,000 employees and a Sinarmas Group. network of more than 1,000 offices and laboratories worldwide. The veri- fication for this report was performed by SGS’ office in Jakarta, Indonesia.

2 Cover 2007 Corporate Social Responsibility Report Scope

2007 Corporate Social Responsibility Cover 3 02 Message from the Chairman Our Three Commitments

It has been thirty years since APP began operations with a single, small paper mill in East Java, Indonesia. Today, APP has evolved into a recognized leader in the global paper market.

Along with leadership comes responsibility. As stated in our Corporate Mission, all of the companies operating under the APP brand continually strive to improve the quality of life of their employees, provide satisfactory returns to shareholders, and further strengthen the group’s foundations so that it can build an even better and sustainable tomorrow for its stakeholders.

This Mission is demonstrated daily through APP’s three commitments: to society, to the environment, and to the economy of Indonesia.

4 Cover 2007 Corporate Social Responsibility Throughout our mills and pulpwood We also have initiated training supplier’s operations, APP strives to programs at our mills to prepare alleviate poverty and support Millen- them for future certification to the nium Development Goals through the Chain-of-Custody standard of the creation of jobs, both on-site and in Programme for the Endorsement of neighboring communities. APP views Forest Certification Schemes (PEFC). education as the key to improve We continue to drive improvements in livelihoods, and actively supports the responsible practices employed schools, vocational education, and by SMF on its pulpwood planta- skills-training programs for youth tions and, together with SMF, are Our Three and adults alike. APP also works to making progress toward protecting ensure the delivery of basic medi- large, landscape-scale blocks of cal care to rural Indonesians who, natural forest habitat through such through poverty or remoteness of multi-stakeholder projects as the Commitments location, would not otherwise be Senepis-Buluhala Tiger Sanctuary able to access this vital service. and the Giam Siak Kecil – Bukit Batu Biosphere Reserve. During 2007 APP companies invested nearly US$30 million in social-benefit But APP and SMF can do nothing and environmental programs. But we to deliver lasting benefits to civil are not content to make this invest- society and the environment if we, ment in a vacuum. That is why, during ourselves, are not a sustainable 2007, we commissioned our first-ever enterprise. It is only by ensuring that Social Footprint Assessment. Sched- our mills have a sustainable supply uled for completion by the end of of legal, raw material – fiber from 2008, this assessment should reveal fast-growing, responsibly managed to us the positive and negative social pulpwood plantations – that we can impacts of our operations, as well as continue to operate, create jobs, and the reach and outcomes of our social fuel the Indonesian economy. That is programs so that we can continually why, during 2007, our pulpwood sup- improve our ability to engage stake- plier continued to reforest the barren holders and deliver tangible benefits land, scrub land and degraded forest ment to delivering superior value to to civil society. granted to them by concession of customers, shareholders, employ- the Government of Indonesia, plant- ees, and the community, we remain Our commitment to the environment ing nearly 1.5 million seedlings every firmly grounded in our three commit- drives our mill and pulpwood sup- workday (based on 250 workdays ments. For it is only by making bold, plier operations alike. All of our mills per year). Besides providing APP positive strides in the three pillars of adhere to a strict policy of waste with a sustainable supply of fiber, sustainability – economic, social and reduction, reuse, and recycling. We these vast plantations serve as car- environmental – that we can benefit have invested heavily in process bon stores, and help combat climate this and future generations. improvements and initiatives to change on a global scale. ensure that our emissions, effluent, and solid waste are well below the All of the companies that comprise Sincerely, levels prescribed by law. the APP brand are proud of the continued progress that has been As an industry leader, APP recog- made in delivering tangible benefits to nizes its responsibility to fight society, the environment, the economy global warming. So that we might of Indonesia, and shareholders. have a quantified baseline of our greenhouse gas emissions, APP As we work toward realizing our Teguh Ganda Wijaya commissioned its first-ever Carbon vision of being the number-one Chairman Footprint Assessment. We will pulp and paper company in the use the results of this assessment world, with the highest international to guide us as we work to further standard and the strongest commit- reduce our carbon footprint.

2007 Corporate Social Responsibility Cover 5 03 Corporate Overview Introduction to APP

One of the world’s largest pulp and paper companies, APP is recognized internationally for the quality of its paper products. With current annual combined pulp, paper and paperboard capacity in Indonesia of more than seven million tons, APP ranks as the number-one producer in Asia, outside of Japan.

6 Cover 2007 Corporate Social Responsibility APP’s operating companies produce (“Pindo Deli”) with two mills; PT. (part time and temporary) jobs. In a broad range of printing and writing Pabrik Kertas Tjiwi Kimia Tbk. (“Tjiwi addition, through its exclusive fiber papers, specialty papers, tissue, and Kimia”) with one mill, and PT. Eka- supplier, Sinarmas Forestry (SMF), paperboard. In addition, APP’s mill mas Fortuna (“Ekamas Fortuna”) with one of Asia’s leading forest man- operations produce converted paper one mill. Together, these companies agement companies, APP provided products such as photocopy paper, operate a total of eight mills in Indo- employment for an estimated 6,900 office and stationery papers, hygienic nesia. The Lontar Papyrus and Indah employees and accounted for nearly tissue and packaging products. Kiat Perawang pulp and paper mills 1,600 indirect jobs. This brings the APP’s products are marketed in more are located on the island of Suma- estimated total employment of APP than 65 countries, and APP is a major tra. The remaining six mills produce to more than 71,000 persons. supplier to customers in Europe, paper only and are located on the Japan, Oceania, the United States, island of Java. The importance of these jobs in a the Middle East, as well as Indonesia developing economy such as that in and other countries in Asia. In 2007, sales for the five APP Indonesia can best be understood companies totaled in excess of by referencing a recent assessment APP is one of the business arms US$4.3 billion dollars. APP has no entitled, “Role and Contribution within the Sinarmas Group, a large joint ventures, and does not make of PT Indah Kiat Pulp and Paper Indonesian business conglomerate. use of subcontractors or outsourcing, Industry and PT Arara Abadi Pulp- APP has five operating companies: obviating the need for including these wood Plantation in the Riau Province PT. Lontar Papyrus Pulp & Paper categories in the scope of this report. Social and Economic Develop- Industry (“Lontar Papyrus”) with one ment” that was conducted by the mill; PT. Indah Kiat Pulp & Paper During 2007, APP employed more Bogor Institute of Agriculture in Tbk. (“Indah Kiat”) with three mills; than 37,000 workers. Mill operations 2007-2008. This study reported that PT. Pindo Deli Pulp And Paper Mills created in excess of 25,000 indirect there is a multiplying effect on jobs

Table I – APP Mill Sales and Production in 2007

Mill 2007 Sales (US$ Thousands) 2007 Production (ADMT1)

Indah Kiat 1,856,307 3,806,366

Pindo Deli2 1,262,999 1,693,243

Tjiwi Kimia 1,153,500 1,335,000

Ekamas Fortuna 69,453 178,923

TOTAL 4,342,259 7,013,532

1. ADMT = Air Dry Metric Ton of annual production where an ADMT is measured at 10% moisture for pulp, 6% for paper. 2. PT. Pindo Deli Pulp And Paper Mills owns 80% of PT. Lontar Papyrus Pulp & Paper Industry. Sales for these entities are consolidated for reporting.

2007 Corporate Social Responsibility Cover 7 Table II - Distribution of APP Mill Employees, Mill Indirect Jobs and Fiber Supplier Jobs in 2007

Forestry Temporary Location Mill Employees Mill Indirect Jobs Sinarmas Forestry TOTAL Employees

Island of Java 26,877 6,041 0 0 32,918

Island of Sumatra 10,712 19,501 5,909 735 36,857

Island of Borneo1 0 0 1,054 855 1,909

TOTAL 37,589 25,542 6,963 1,590 71,684

1. This refers to the Indonesian Provinces of East and West Kalimantan

in Indonesia in the supporting and and dedicating itself to company- downstream industries from planta- B. APP’s Vision wide continuous improvement. tion, pulp and paper mill operations. The multiplying effects are as follows: APP’s vision is to become the C. Corporate Governance Plantations: Every one direct 21st century’s number one, employee supports 133,000 jobs international-standard, pulp and in supporting and downstream paper manufacturer, dedicated to Under Indonesian laws regulating industries. This equates to a providing superior value to custom- limited liability companies, and in multiplier of thirty-seven (37). ers, shareholders, employees and accordance with good corporate Pulp and Paper Mills: every the community. governance, private and public one direct employee supports companies alike are required to have 109,000 jobs in supporting To fulfill this vision, APP has two boards: a Board of Directors and downstream industries. committed itself to being socially, and a Board of Commissioners. The This equates to a multiplier environmentally and economically Board of Directors is responsible for of thirteen (13). sustainable in all of its operations. APP operations and management of a keeps this commitment by helping to company in the best interests of the In addition, the study found that for empower people in the communities company and in accordance with every 100 hectares of pulpwood in which it operates, initiating con- the company’s purpose and objec- plantations established, 37 jobs were servation programs to protect the tives. The Board of Commissioners is created in the plantation, pulp and environment, using only the most responsible for supervising the Direc- paper industry. efficient and ecologically sound tors’ policies in running the Company harvesting technology, adopting and to give advice to the Directors. best practices in its mill operations,

8 Cover 2007 Corporate Social Responsibility Operating in a Land of Challenges

The world’s largest archipelagic state, The challenges of conducting business • the rehabilitation of degraded forest Indonesia stretches more than three in Indonesia include political turmoil, and wasteland; thousand miles along the equator, and corruption, poverty, increased pres- • the conservation of high conservation encompasses more than 17,500 islands. sure on resources due to a high rate of value forests; and This nation of islands forms a link population growth, an under-resourced between the Indian and Pacific oceans. public education system, pollution, land • the economic empowerment of Indonesia’s 233 million people represent encroachment and disputes, forest con- forest dwelling communities to myriad cultures, languages, religions version, loss of biodiversity, fire, illegal increase welfare, education and and ethnic groups. logging, and inadequate infrastructure. employment opportunities.

Some 45% of all employment in Indo- In support of President Yudhoyono’s Appendix IV contains a table detailing nesia is in agriculture, yet this sector plan to reduce bureaucracy and root-out the Indonesian units of governance, accounts for only 16% of the country’s corruption from the top down, the Indo- terms that will be used throughout gross domestic product. Today, Indo- nesian Ministry of Forestry established a the report. nesia ranks 107th out of 177 countries ten-year plan, setting as its priorities: on the United Nation Development • the eradication of illegal logging and Program’s (UNDP) Human Development illegal timber trading; Index and 47th out of 108 countries on the UNDP’s Human Poverty Index. • the revitalization of the forestry sector;

It is compulsory for each public (GSM) shall be convened at the three national trade associations: the company in Indonesia to have an request of: Indonesian Public Listed Companies Independent Commissioner, who has Association (AEI); the Indonesian a. 1 (one) or more shareholders who the responsibility of supporting and Pulp and Paper Association (APKI); jointly represent 1/10 (one tenth) or creating a more objective and fair and, the Indonesian Entrepreneur more of the total number of shares system of governance for minority Association (APINDO). Additional with voting rights, unless the Arti- and other stakeholders in accor- information on these associations is cles of Association of the company dance with the principles of good contained in Appendix III. determine a smaller number; or corporate governance. Each public company in Indonesia also must b. The Board of Commissioners. have an Audit Committee. D. Sustainability and The request for convening a GSM Corporate Strategy The Chairman’s role encompasses shall be submitted to the Directors oversight of the overall operations by Registered Letter containing of the business at the highest level, the reasons. This Sustainability Report, the approval of the business strategy second document of its kind issued for the business as a whole and There were no changes or improve- by APP, is intended to provide a advising and supporting the com- ments to the governance of APP’s foundation for a basic understanding pany’s directors in attaining their operating companies during 2007. of APP’s sustainability policies, medium- and long-term goals. Of strategies and programs. It is also the 32 Commissioners that sit on the Additional information about intended to serve as a point of Board, six (32%) are independent. corporate governance and the comparison with past and future operations structure of PT. Purinusa reports on APP’s efforts toward The primary mechanism for providing Ekapersada and its five principal increased environmental and social recommendations or guidance to operating companies is provided responsibility. APP recognizes that, the governing body is based on in Appendices I and II. while it made progress during the paragraph (2) of Article 79 of the reporting period, there remain many Limited Liability Companies Law of APP, through its operating companies areas in which the company can and Indonesia. This law states that the Indah Kiat, Tjiwi Kimia, Pindo Deli, will improve its performance over time. General Meeting of Shareholders and Lontar Papyrus, participates in APP believes that by sharing this

2007 Corporate Social Responsibility Cover 9 information with all interested stake- resources departments of APP and in large part, on internationally holders, this report can foster the its fiber suppliers. accepted standards, and include continuance of a collaborative journey policies that address legal-origin toward continued improvement. The numerous third-party certifica- verification of the fiber supply using tions earned by APP’s production the SGS Timber Legality and Trace- In addition to the summaries con- facilities and products, such as ability Verification Program, and tained in the various paper company OHSAS, ISO 14001, Controlled maintaining the integrity of the chain Annual Reports, this 2007 Sustain- Wood, PEFC Chain-of-Custody and of custody throughout manufactur- ability Report provides more specific Eco-label certification, are testimony ing processes using PEFC indicators and detailed evidence of APP’s to APP’s compliance with interna- and enhancements to procurement commitment to triple-bottom-line tional sustainability standards, protocols. (APP’s Declaration of reporting by demonstrating APP’s codes of conducts, and principles. Sustainability and Fiber Procurement focus on continuous improvement Policy can be found in Appendix V.) in its economic, environmental and In order to assess APP’s progress social performance. in meeting its sustainability targets, As an environmental-performance the company’s highest governing baseline, APP strictly adheres to In early 2000, APP established a body evaluates internal standards of the indicators stated in relevant Sustainability & Stakeholder Engage- expertise and performance bench- national standards and legislation. ment Department which operates marked against international best However, when circumstances so under and reports to the company’s practices. The Sustainability Team, warrant, the company applies more highest governing bodies. This and other relevant players with stringent standards and indicators. department has two key respon- responsibility for sustainability pro- APP has mounted industry-leading sibilities: to facilitate productive, grams, are compensated against a voluntary initiatives, such as the ongoing dialogue with APP’s broad set of economic, environmental and correlated Carbon and Social Foot- and diverse global stakeholder base social key performance indicators. print Assessments of its operations and to develop and execute APP’s As is true with its operations, these commissioned during 2007. sustainability strategies. Based on performance measures are admin- inputs from its global stakehold- istered on a periodic basis through APP also has established Key Perfor- ers, the Sustainability & Stakeholder APP’s Management by Olympics mance Indicators for its sustainability Engagement Team identifies, ana- program, and are supported by its performance. Performance against lyzes and assesses risks in order use of a company-wide Skills Devel- these indicators is evaluated annu- to most-effectively improve APP’s opment Activities Program. ally by APP’s executive management. sustainability strategies and pro- grams. All of APP’s sustainability APP has developed an internal set initiatives and their implementation of mission and values statements, 1. APP and Sustainability are supported by teamwork of and codes of conduct, and policies collaboration between the members relating to economic, environmental, of the Sustainability & Stakeholder and social performance. These are APP offers a range of environmentally- Engagement Department and the applied by all departments across sound paper products made from technology, environment and human the organization. These are based, fiber from sustainable resources.

10 Cover 2007 Corporate Social Responsibility Sustainability Report Award

In recognition of its transparency in the State Capital Market Supervisory Accountants (IAIKAM), to provide rec- reporting and its commitment to social- Agency, the Jakarta Stock Exchange, ognition to organizations that routinely environmental sustainability, APP was the National Committee on Governance, report and publish their environmental presented with its First Sustainability the Forum for Corporate Governance, and/or social practices separately or as Reporting Award at the third annual the Indonesian Center for Sustainable integrated annual reports. Indonesian Sustainability Report Awards Development, the Corporate Forum for (ISRA) in September 2007. Community Development, the Indone- The awards also are intended to encour- sian Business Link and the Indonesian age reporting, increase corporate Seventeen state-owned enterprises Institute of Accountants. accountability, emphasize corporate and private companies participated responsibilities to key stakeholders, and in the event. Only eleven companies The winners were selected after a heighten awareness of the importance of were selected for consideration by a careful evaluation of their 2006 annual corporate transparency and disclosure. panel of fourteen judges representing reports, including reports on socio- various stakeholders. environmental sustainability, through a process which included interviews. The panel included judges selected The ISRA was first organized in from the State Ministry for Environment, 2005 by the Indonesian Institute of

These include elemental chlorine free government’s occupational safety marked contrast to the rural and rela- (ECF) paper and a range of paper and and health regulations and require- tively impoverished living standards paperboard products made with post- ments (SMK3), rigorously maintain the of neighboring villages. Because the consumer recycled waste paper. All of programs recognized by their SMK3 nature and scale of APP’s business APP’s operations are ISO 9001:2000 certifications, and conduct annual, does not enable the company to Quality Management System and third-party audits of performance. offer employment to many commu- ISO14001:2004 Environmental nity members who are less-educated Management System certified, and and relatively unskilled, the company many have remained so for nearly a 2. Social Responsibility views itself as having an obligation decade. Consistent with the tenets of that extends past the mill gate – these certifications, APP’s mills were a commitment to the vitality and early adopters of methods to more APP’s commitment to sustainability sustainability of nearby communities. effectively build-in management tools encompasses maintenance of its for continuous improvement. own economic viability, for reasons APP is committed to mitigating that have a decidedly social dimen- the disparities between mills and All of APP’s operations now observe sion. APP’s continued operation is communities by implementing myriad and surpass national air-emission, the means of ensuring better, more education, training, and empowerment water-effluent and solid-waste stan- stable livelihoods for the more than programs for local communities. APP dards. Performance in these critical 71,000 employees and indirect also provides much-needed health areas is monitored rigorously by workers who depend directly on the care and infrastructure improvements each facility and is verified through company for their income. In addi- that enable local communities to periodic third-party audits. APP’s tion, APP’s continued operations better help themselves. paper, tissue and packaging products indirectly support thousands of fami- are manufactured in compliance with lies, many of whom live in remote a. Education product safety regulations for critical villages and rural communities. and demanding markets in Europe, Recognizing that access to quality Japan, and the United States. APP recognizes that its economic, education is the key to improving technologic, and manufacturing livelihoods and to developing a local All operations have met, and resources (in particular, its pulp base of qualified employee recruits, continue to meet, the Indonesia manufacturing operations), stand in APP invested heavily during 2007

2007 Corporate Social Responsibility Cover 11 in programs to provide higher- Eka Tjipta Foundation (ETF) b. Health Care education opportunities for Higher-Education Scholarships promising high-school students. Eka Tjipta Foundation (ETF) is a Nursing-Skills Development nonprofit organization, founded by Ensuring access to quality health Post-Graduate Program Scholarships the Eka Tjipta Widjaja family, which care is essential to improving APP invested US$29,743 to provide aims to improve the quality of life the quality of life in communities full scholarships to high-potential, and to foster a sustainable society near APP’s mills. During 2007, high-performing high school students, through empowerment programs the company invested US$27,967 enabling them to continue their in education and environmental to improve the practical skills of studies at technical institutes domes- conservation as well as alternative health-care workers. One hundred tically and abroad. Thirteen students energy. The Foundation’s vision is seven nursing-school graduates representing seven APP operations clearly reflected in its motto “good and midwives in Pekanbaru and participated in 2007, up from six deeds create good seeds.” BSD-Serpong received 30 days participants in 2006. By under- of nursing-skill training in the writing the costs of higher education One of the major programs sponsored classroom, followed by 60 days for these students, APP hopes to by ETF is the Tjipta Sarjana Bangun of practical training in a hospital develop them as candidates for lead Desa Program, which provides setting. These individuals received positions in its operations. higher-education scholarships to training in Basic Life Support under-served students. APP invested techniques enabling them to better Scholarship – Academy of Pulp & US$386,478 in 2007 to provide schol- respond in emergency situations. Paper Technology arships to students studying at the APP also invested US$7,990 during university level. The purpose of this 2006–2007 to continue its program of program is to provide greater oppor- 3. Sustainable Forest Management underwriting three-year, full scholar- tunity for youth living in communities ships to Akademi Teknologi Pulp & surrounding APP’s operations by Kertas (Academy of Pulp & Paper enabling them to continue their APP continues its strong commitment Technology) in Bandung and Serang, studies at the university level and to sustainable forest management, a West Java. With this financial support to contribute in the development of commitment that is realized through from APP, 32 high performing high- their hometown once their studies are a close and direct working relation- school students from Perawang, completed. The scholarship covers ship with its exclusive fiber supplier, Jambi, Surabaya, Karawang, and tuition fees, books and a living allow- Sinarmas Forestry (SMF). Tangerang were enrolled in technical ance. Students were selected for the courses of study at the academy. program based on three criteria: a APP and SMF share three goals in At the completion of their studies, high motivation to study; belonging to their vision of sustainable forestry: to students will be hired by their spon- a low-income family; and enrollment strive for sustainable fiber produc- soring mill, and will serve there for a at a university that had partnered with tivity (growth rate and fiber yield); to minimum of three years. APP and ETF. In 2007, 1,058 students provide competitive fiber cost; and to received scholarships. use methods that are environmentally

12 Cover 2007 Corporate Social Responsibility acceptable and socially compat- In past years, some non-governmental ible. APP and SMF also share a organizations (NGOs) have alleged E. APP’s Fiber Sources forest conservation goal of leaving that SMF operations in Riau province, intact large areas of natural forest (in Sumatra, failed to prevent illegally addition to the conservation areas sourced timber, harvested by third The Republic of Indonesia owns required by national regulations) in party subcontractors, from entering some 111 million hectares of state order to protect the biodiversity of the Indah Kiat Perawang Mill’s wood forestland (about 58% of the total valued ecosystems. These programs, supply chain. APP has maintained land mass of the country). Of this discussed in the fiber supply and that no illegally logged timber was area, more than 51.5 million hect- conservation sections of this report, knowingly purchased for its Indah ares (46%) have been zoned as entail close cooperation and collabo- Kiat Perawang Mill, and enforces a protected areas and conserva- ration with other companies, the strict policy of allowing zero illegal tion forests. Thirty-one percent of scientific community, the govern- logs in its fiber supply chain. Indonesia’s land surface has been ment and interested stakeholders. classified as production forest in APP has established a rigorous which pulpwood plantations can be 1 To support the activities in the pulp and tracking system to ensure that all established . APP’s fiber sources paper business and to better manage wood brought into its two pulp mills constitute only 2% of the country’s all of its own improvement activities, in Sumatra is of verified legal and classified production forest. the four largest Sinarmas Forestry non-controversial origin. Fiber- (SMF) operations in Riau, Jambi stream integrity is maintained all No private ownership of forests is and West Kalimantan also are ISO the way from the forest to the mill permitted in Indonesia. However, 14001/2004 certified. These operations through the tracking and docu- the Indonesian Ministry of Forestry manage nearly one million hectares of mentation requirements of APP’s grants licenses (also known as con- forest concessions in 2007. Legal Origin Verification / Chain- cessions) to private companies for of-Custody (LOV/CoC) system. To the reforestation, management and SMF operations in Sumatra continue ensure that this system continues harvest of state-owned forestland. to push forward using a phased to operate effectively, the system approach toward achieving third- performance and improvements are party sustainable forest management verified regularly through third-party 1. Sinarmas Forestry Concessions certification of their plantations audits. All fiber purchased from according to the Principles and outside sources either must be As of December 31, 2007, the area of Criteria for Sustainable Plantation third-party certified according to a concessions under license to Sinarmas Forest Management of the Ecolabel credible sustainable forest manage- Forestry (APP’s exclusive fiber sup- Institute of Indonesia (LEI). During ment standard (in the case of market plier) totaled 2,388,468 hectares. Of 2007, SMF’s operations in Jambi pulp) or come from a documented the total forest concession area, nearly completed a Gap Analysis prior to post-consumer waste source (in four-fifths is located on the island of undergoing a formal forest certifica- the case of recycled paper). (See Sumatra, with the balance on the island tion assessment. APP’s other fiber Appendix VI for APP’s 2007 LOV/ of Borneo in the Indonesian Provinces suppliers are preparing for their Gap CoC Audit Statement Summaries.) of East and West Kalimantan. Analysis assessment.

Table III - Sinarmas Forestry Concessions as of December 31, 2007 (area in hectares)

Area Approved for Plantation Development Barren/Scrub/ Island Total Area Set-Aside Area Subtotal Planted Degraded Fire Damaged

Sumatra 1,865,848 665,142 1,200,706 639,550 148,936 412,220

Borneo (Kalimantan) 522,620 296,679 225,941 121,034 2,503 102,404

TOTAL 2,388,468 961,821 1,426,647 760,584 151,439 514,624

Percent 100 40 60 32 6 22

2007 Corporate Social Responsibility Cover 13 A total of 961,821 hectares (or 40%) the implementation of community needs of forest-dwelling people who of the total concession area has awareness and training programs. would otherwise lack the expertise been set aside as conservation area, or experience to manage a forest

reserves for community use, indig- sustainably. By providing a means enous species and infrastructure. At 3. Community Development and of earning livelihoods through the end of 2007, 760,584 hectares Community Forestry the practice of responsible forest (32% of the total concession area) management, the establishment of of the remaining 1,426,647 hectares community woodlots also helps mini- approved for plantation develop- As is the case with APP’s social mize the incidence of illegal logging ment was established as pulpwood programs SMF’s community devel- and land-clearing by fire, increases plantations. The balance of this area opment programs are designed to the efficiency of non-productive land, (28% of the total concession area) help people live with greater auton- and helps meet the long-term fiber was either degraded forest (151,439 omy, prosperity and environmental supply needs of the company. hectares) or bare earth, scrub lands, awareness. SMF’s programs focus waste lands, or fire-damaged areas on the development of community awaiting reforestation (514,624 hect- economies and infrastructure. These F. APP’s Relationship with ares in aggregate). programs support social and cultural Stakeholders activities and generally incorpo- rate an agricultural dimension. The 2. Protection Against Forest Fires development and implementation of these programs is built on three 1. Stakeholder Identification and key principles: respect for the rights Outreach In addition to the normal issues of of indigenous peoples; deferring growth and disease that impact the development of land on which forests, fires pose a real and pres- there are unresolved, legitimate land As a leading actor in the global paper ent danger to the resource itself, to claims until those claims are resolved trade, APP recognizes the need to nearby communities, and to Indone- using a fair and equitable process; maintain relationships with, and solicit sia and neighboring countries in the and the formulation of plans on a input from, a wide range of stakehold- form of smoke and haze. To address participatory basis. ers around the world and in its home this threat, SMF enforces a strict no- nation of Indonesia. APP’s stakehold- burn policy on licensed concessions. SMF, together with its plantation ers include, but are not limited to, In addition, SMF has put in place a partners, act as responsible caretak- its global customer base, suppliers, number of proactive programs to ers of the people’s forestland, and community leaders and community prevent or minimize the risk of the support the development of sus- members, non-governmental organi- occurrence of forest fires. These tainable community woodlots. This zations, local and regional authorities, programs range from use of water- focus on small-scale forestry adds the government of the Republic of bombing helicopters and firefighting a pragmatic dimension to SMF’s Indonesia, and the media. barges by company fire fighters to sustainable forestry management collaboration with local, regional and programs, and offers a means of In addition, APP maintains open national authorities. It also includes providing for the critical economic lines of communication with national,

14 Cover 2007 Corporate Social Responsibility NGO Stakeholder Messages to APP

(The company) will not be sustainable Making a transparency policy in conflict empowering people, developing it they don’t interact well with local resolution and communication mecha- communities, and improving livelihoods. communities. If they fail to make peace nism as a corporate tradition will bring – FKD (Regional Communication with locals, at some time they will be the company toward a better future. Forum), Riau shut down. CAPPA is demanding for the company – YCBM, Jambi to build a corporate policy of conflict The company should pay more atten- resolution management to be imple- tion to the welfare of communities, and (The company) has to present a more mented in all of its operations. should resolve land conflicts. The ideal positive public image, and has to – Kasmadi Kasyim, Board Member, situation would be to build a partnership improve its conflict management. It has CAPPA (Community Alliance for Pulp relationship in which the communities to be more transparent to the public and and Paper Advocacy) could help the company and vice versa. the communities concerning the prog- – WARISAN (Heritage Forest Conservation ress of conflict resolution under way. If APP wants to keep operating as a and Forestry Association), Riau – NP-SAND (National Park Safety sustainable business in Indonesia, Foundation), Jambi there must be big changes in the way The Indah Kiat Serang Mill is an asset the company thinks and acts – the to the community and FORKLIP sup- Conflict management resolution is very company must find a way to live in ports its existence. But they could, and important in maintaining the company’s harmony with forest-dependent people. should, do more social programs for social sustainability. APP has been quite If there is no change, the conflicts will the well-being of the community around open in discussing conflict problems continue and the company will just their mill, thus improving their relation- with some stakeholders, but still lacking be wasting its money – throwing it at ship with the community. transparency in communicating its one issue after another. The company – FORKLIP (Communication Forum for corporate communication mechanism. needs to make an investment into Intra-industrial and Youth), Serang

regional and local governments, and reporting of stakeholder comments Sustainability & Stakeholder Engage- works closely with them to ensure and complaints. ment Team travels internationally to effective implementation of govern- conduct “Stakeholder Update” events. ment policies and programs. Ms. Aida Greenbury, Director These sessions provide forums for the of Sustainability & Stakeholder open exchange of ideas, concerns, APP and SMF engage stakeholders Engagement for APP Indonesia, and solutions between the company on an “Open Door” basis to discuss serves as a primary point of contact and its stakeholders. issues that affect its mills, related between the company and its stake- forest operations and the relevant holders. To facilitate productive, During 2007, 16 Stakeholder Update stakeholder group. According to ongoing dialogue with APP’s broad events and meetings were held in interviews conducted during the and diverse global stakeholder base, Singapore, Hong Kong, China, the preparation of this report, stake- APP’s Sustainability & Stakeholder United Kingdom, Germany, the Neth- holders also have access to mill Engagement Team publishes its erlands, Japan, the United States, management personnel as needed “APP Stakeholder Update” on a and Australia, generating a wealth of to discuss emerging issues. quarterly basis (more frequently as a input that influences the company’s topic dictates), and distributes this policies, strategies, plans and prac- Formal forest and mill-based pro- document to more than 600 indi- tices. The input gathered at these cesses are in place for community vidual stakeholders and stakeholder sessions is reviewed by APP staff and “stakeholder” liaison through groups worldwide. and middle management with an eye the respective mill ISO 14001 pro- toward balancing the three tenets of grams. However, there are not yet Input from stakeholders is solicited sustainability (economic, social and formal, standardized procedures through face-to-face meetings, environmental), and then is passed at the corporate level for receiving, informal surveys, and both written along with recommendations for handling, responding to and internal and telephonic communication. APP’s action to senior management. Senior

2007 Corporate Social Responsibility Cover 15 management reviews this informa- The interviewed NGO stakeholders layers of bureaucracy existing within tion and, based on appropriateness were quite candid in their comments. a large organization. and relevancy, formalizes plans for While some felt that APP and its implementation at the field level. fiber supplier had recently begun to When the company does act to Among the concerns raised by make some progress in addressing address social-welfare issues, stakeholders in 2007 were: ensuring key issues, all felt that much more stakeholders reported, its efforts the legality of APP’s fiber supply; the needed to be done. are sometimes inadequate or mis- company’s progress toward certifica- matched to the community’s real tion of its pulpwood plantations; the By far, the issue of greatest social needs. Acknowledging that local company’s efforts to protect biodi- concern was that of land-claim communities make demands on versity; and the company’s progress disputes arising from the disparity the company based upon a sense in ensuring its social license to between tribal/historic land tenure of entitlement, stakeholders still operate. As detailed elsewhere in and government-issued concession expressed a desire that the com- this report, APP has programs and licenses. As one stakeholder put it, pany increase its social investment, policies in place to address each of “What the government of Indonesia and target it toward empowerment these concerns. says is ‘wasteland’ still has value to programs rather than on “charity.” the people living on it.” In addition, more than one intervie- wee stated that the company should 2. NGO Stakeholder Interviews APP’s fiber suppliers in Riau and extend its social outreach to the Jambi were viewed by more than more remote villages surrounding its one stakeholder group as needing operations, rather than just focusing As part of the preparation of this improvement in their response to spending on nearby communities. report, APP made arrangements for landclaim disputes. However, third-party, face-to-face interviews APP’s fiber supplier in Jambi was The loss of natural forest cover to be held between Nowack-Beer seen by one interviewee as begin- and illegal logging were among Consulting (a US-based sustain- ning to build good will with local the environmental issues of greatest ability issues management firm) and villagers, though many of its man- concern to the stakeholders inter- eleven individuals representing eight agers still required more training to viewed. Stakeholder perception NGO stakeholder groups on the increase their expertise in conflicts of the company’s environmental islands of Sumatra and Java. (See and crises avoidance. performance was mixed, at best. Appendix VII.) The company was viewed by more APP’s fiber supplier in Riau was Interviewed separately and outside than one interviewee as being viewed by the interviewed stake- the presence of APP and SMF manag- quick to listen, but rather slow to holders from that area as a poor ers, these stakeholders were asked to act on social concerns raised by environmental actor that needs to identify the environmental and social the villages near its operations. further improve its environmental issues of greatest concern to their Stakeholders attributed this to conservation initiatives. organizations and to comment on the a number of factors, including a performance of APP and its fiber sup- lack of social awareness, a lack of One interviewee stated that APP’s plier in addressing these concerns. expertise in social issues, and to the fiber supplier in Jambi was becoming

16 Cover 2007 Corporate Social Responsibility APP Responds

APP values the opinions and comments strong bonds with the people in remote, Footprint Assessment). When it is of these and other stakeholders. As a rural areas are fields in which we have completed in 2009, this independent, responsible company, as the economic made continuous improvement and have third-party assessment will provide a engine of many communities, and as one allocated a great deal of money but can- comprehensive review of the social of the nation’s most prominent actors, not, as yet, claim expertise. impacts of APP’s mill operations and APP shares the concerns of fellow Indo- SMF’s sustainable pulp plantations. The nesians for the conservation of precious During 2007, APP received numerous results of this assessment will serve as natural resources, the enhancement of comments and suggestions from NGOs, foundation upon which APP and SMF quality of life and customers, and other stakeholders can engage in more meaningful dialogue standards of living, the empowerment including the social and academic with local communities to heal wounds, of citizens, and the harmonious co-exis- community. APP has responded to resolve conflicts and build partnerships. tence of industry and commerce with these inputs and has incorporated the APP’s Social Footprint Assessment other sectors of society. relevant information into its overall also will serve as a guide that will lead sustainability strategy. the companies to invest more wisely in Every company, and every individual, empowerment programs that improve possesses varying degrees of compe- So that we might continue to improve, livelihoods, alleviate poverty, develop tence across a range of pursuits. APP and so that our community-directed communities and mitigate the down- is no exception. APP and its fiber efforts might deliver more robust and stream impacts of subsistence living on suppliers excel at making pulp and long-lasting benefits, APP commis- the environment. paper and at practicing responsible sioned its first-ever Social Footprint forestry. Delivering social benefits, Assessment (as part of the paper empowering citizens, and building industry’s first-ever Carbon-Socio

a responsible environmental actor Indonesia’s Ministry of Forestry that is very strict in its environmental 3. Field-level Stakeholder Engagement (Province and District levels), practices, particularly in fire preven- Kementrian Lingkungan Hidup tion. Another stakeholder stated (KLH) – the Ministry of Environment), that the company needs to better During 2007, APP and SMF partici- the Lembaga Ilmu Pengetahuan manage its licensed conservation pated in field-level engagements in Indonesia (LIPI, or the Indonesian areas, not just comply with national its native Indonesia with government Institute of Sciences), Balai Besar regulations. A third interviewee agencies, local community officials, Konservasi Sumber Daya Alam stated that the fiber supplier had community communication forums, (BKSDA, or the Natural Resources made some good first steps toward local, national and international Conservation Agency), the Center environmental responsibility, but he NGOs, universities, and indepen- for Biodiversity Conservation at the needs to see evidence of a genuine dent research organizations. Given University of Riau, the Sumatran interest in responsibility within all the large number of engagements, Tiger Foundation, and the Program levels of the company.” ranging from community meetings for the Endorsement of Certification to full-day conferences, it is diffi- Schemes (PEFC). cult to characterize these sessions The process of organizing these except to note that APP’s level of independent interviews was a first APP has not conducted a recent, engagement in 2007 represented a for APP. The results of this process comprehensive survey of customers, significant increase when compared provided valuable insights and will non-governmental organizations, or to the level of engagement in 2006. be used along with the results of the government stakeholders, but main- Social Footprint Assessment that tains regular interaction with these was commissioned in 2007 in efforts In addition to stakeholder relationships groups. Overall these relationships, to ensure that the programs in which at the local level, APP and SMF with a few notable exceptions, are APP invests in are more effective in develop and maintain stakeholder positive and constructive. alleviating poverty and assuring the relationships and hold regular sustainability of communities over discussions at the regional, national the long term. and international level. During 2007, these relationships included

2007 Corporate Social Responsibility Cover 17 04A Mill Performance Introduction and Overview

APP has five principal companies in Indonesia which operate a total of eight mills: PT. Lontar Papyrus Pulp & Paper Industry (“Lontar Papyrus”) with one mill; PT. Indah Kiat Pulp & Paper Tbk. (“Indah Kiat”) with three mills, Perawang, Serang and Tangerang; PT. Pindo Deli Pulp And Paper Mills (“Pindo Deli”) with two mills, Pindo One and Pindo Two; PT. Pabrik Kertas Tjiwi Kimia Tbk. (“Tjiwi Kimia”) with one mill; and PT. Ekamas Fortuna (“Ekamas Fortuna”) with one mill.

The Lontar Papyrus and the Indah Kiat Perawang pulp and paper mills are located on the island of Sumatra. The remaining six mills produce paper only and are located on the island of Java. None of these six facilities have pulp mills on site.

18 Cover 2007 Corporate Social Responsibility Table I – APP Sales in 2007 (US$ Thousands)

Lontar Indah Kiat Indah Kiat Indah Kiat Ekamas Product Pindo Deli Tjiwi Kimia TOTAL Papyrus Perawang Serang Tangerang Fortuna

Pulp 295,601 533,460 0 0 0 0 0 829,061

Paper 0 602,234 0 101,400 812,512 853,900 69,453 2,439,499

Packaging 0 0 618,870 0 12,275 32,000 0 663,145

Stationery 0 0 0 0 0 231,900 0 231,900

Tissue 53,760 0 0 0 86,053 0 0 139,813

Chemicals 2,798 343 0 0 0 35,700 0 38,841

TOTAL 352,159 1,136,037 618,870 101,400 910,840 1,153,500 69,453 4,342,259

by the five companies has increased Production during 2007 totaled 1. Mills at a Glance by about 25% since 2005, result- slightly more than seven million tons ing in more than 12,000 additional of pulp, paper, paperboard statio- persons who were employed directly nery and tissue products, including APP’s five producing companies or indirectly by the company. more than 2,500,000 metric tons of had total sales of US$4.3 billion hardwood pulp, more than 2,800,000 during the 2007 calendar year, with The Lontar Papyrus and the Indah metric tons of paper, more than US$2.4 billion in sales of paper and Kiat Perawang Mills have an exclu- 1,300,000 tons of paperboard, some US$830 million in sales of paper sive fiber supply arrangement with 217,000 tons of stationery and more pulp. The balance of 2007 sales Sinarmas Forestry (SMF). In 2007, than 113,000 tons of tissue. In total, consisted of packaging, stationery, SMF had a total of nearly 7,000 this represented a 4-5% increase over tissue and chemical products. Sales employees throughout Indonesia, production levels in 2005 and 2006. in 2007 represented a 17% increase and accounted for more than 1,500 over 2006 and a 29% increase over indirect jobs which represented an sales attained in 2005. increase of 20% (1,400 jobs) in over- 2. Products all employment effect since 2005. Taken together, APP’s eight mills employed more than 37,500 people Taken together, the APP mills and APP’s five producing companies during 2007 and accounted for more SMF had an estimated total employ- manufacture products ranging from than 25,000 indirect jobs serving the ment in Indonesia of more than hardwood market pulp to print- mills. The number of jobs provided 71,000 persons. ing and writing papers, photocopy

2007 Corporate Social Responsibility Cover 19 Table II A – APP 2007 Mill Employees and Indirect Jobs

Lontar Indah Kiat Indah Kiat Indah Kiat Ekamas Mill Employment Pindo Deli Tjiwi Kimia TOTAL Papyrus Perawang Serang Tangerang Fortuna

Mill Employees 2,186 8,526 5,141 1,137 6,877 12,929 793 37,589

Mill Indirect Jobs 5,776 13,725 1,185 297 4,278 0 281 25,542

TOTAL 7,962 22,251 6,326 1,434 11,145 12,929 1,074 63,131

Table II B – Fiber Supplier Employees and Indirect Jobs

Fiber Supplier Employment Jambi Province Riau Province Subtotal All Other Provinces TOTAL

Fiber Supplier Employees 1,606 3,659 5,265 1,698 6,963

Fiber Supplier Indirect Jobs 372 49 421 1,169 1,590

TOTAL 1,978 3,708 5,686 2,847 8,553

paper, a wide range of specialty (See Table IV in each mill report The Indah Kiat Tangerang Mill papers, hygienic tissue and tissue section for a listing of major brands. introduced two new color sheets products, office and stationery A listing of the environmental creden- that deliver enhanced printing sharp- papers and products and paper- tials for all of APP’s key products can ness and two-sided printing without board and packaging products. Four be found in Appendix VIII.) strike-through, key attributes that of the mills also produce chemicals enable users to reduce their overall for sale on the open market and for Four of APP’s mills introduced new paper consumption by printing on-site consumption. APP’s mills are products in 2007. The Indah Kiat two-sided materials. able to produce a range of environ- Serang Mill launched an addition to mentally friendly papers, including its Sinarvanda brand of folding box- During 2007, Pindo Deli introduced those made with environmentally board for use in food packaging. The three new products. Golden Coin cup friendly chemicals as stipulated new high-bulk GC-1 line provides stock was added to the extensive by Ecolabel criteria, those made better appearance and rigidity with Golden Coin line of offerings, which with 100% plantation fiber, and a less weight, an important consider- range from woodfree paper to art wide range of products containing ation for customers when shipping board. This new product is certified recycled fiber. their products to market. by the Food and Drug Administrations

20 Cover 2007 Corporate Social Responsibility Table III – APP Production in 2007 (ADMT1)

Lontar Indah Kiat Indah Kiat Indah Kiat Ekamas Product Pindo Deli Tjiwi Kimia TOTAL Papyrus Perawang Serang Tangerang Fortuna

Pulp 674,081 1,842,755 0 0 0 0 0 2,516,836

Paper 0 665,991 0 103,000 865,410 1,040,000 169,481 2,843,882

Packaging 0 0 1,194,620 0 40,415 78,000 9,442 1,322,477

Stationery 0 0 0 0 0 217,000 0 217,000

Tissue 49,419 0 0 0 63,918 0 0 113,337

TOTAL 723,500 2,508,746 1,194,620 103,000 969,743 1,335,000 178,923 7,013,532

1. ADMT = Air Dry Metric Ton of annual production where an ADMT is measured at 10% moisture for pulp, 6 % for paper.

in the United States, Japan and enable them to serve a wide range of EIA) or the UKL/UPL (Environmental Korea. Instant Preprint printing demanding markets. Management and Monitoring Plan) papers support better ink coverage regulations which are mandated by and faster ink drying times. Finally, a. International Standards national and regional government. the Sinarlux brand now has a new Organization (ISO) The AMDAL and UKL/UPL are envi- cast-coated, wet-strength paper ronmental licenses required to begin targeting beverage label applications. All of APP’s mills are compliant business operations. An AMDAL, or with ISO 9001 Quality Management Environmental Impact Analysis, is The Tjiwi Kimia mill introduced System (QMS) standard and with required for businesses that will have three new photocopy paper ISO 14001 Environmental Manage- a significant impact on the environ- products targeting various digital ment System (EMS) standard. APP ment. Business operations which will and offset printing applications became the first company in Indone- not have a significant environmen- including brochures, magazines sia to pursue ISO registration, more tal impact are required to prepare and presentation materials. than a decade ago. and implement an Environmental Management and Monitoring Plan b. Indonesian Ministry of the (UKL/UPL) to ensure compliance 3. Certification and Verification Environment over time. By obtaining AMDAL and/ or UKL/UPL licenses, a company All of the APP mills operating in Indo- demonstrates that it is operating its APP’s eight mills have earned an nesia have complied with AMDAL business in a manner that is environ- extensive roster of certifications to (Environmental Impact Analysis or mentally responsible.

2007 Corporate Social Responsibility Cover 21 Table IV – New Product Introductions During 2007

Product Brand Mill Paper Product Main Regions Where Brand is Sold

Sinarvanda Indah Kiat Serang Food Packaging Asia, Europe

Sinar Color Indah Kiat Tangerang Color Photocopy Paper Asia

Sinar Tech Indah Kiat Tangerang High-opacity Color Paper Middle East, South America, Southeast Asia

Golden Coin Pindo Deli Cup Stock Paperboard Asia

Instant Preprint Pindo Deli Uncoated Printing Paper Africa, Asia, Middle East, Oceania

Sinarlux Pindo Deli Wet-strength Cast-coated Paper Europe

Asia, Europe, Middle East, North & Excelpro Tjiwi Kimia Photocopy Paper South America, Oceania

Extraprint Tjiwi Kimia Photocopy Paper Europe

Paperline Gold Tjiwi Kimia Photocopy Paper Asia, Middle East

The Ministry of the Environment has safety. All APP mills are certified unbroken chain-of-custody of supply, an established multi-level certifi- as compliant with the Government from the legal sourcing of raw mate- cation awards based on meeting of Indonesia’s Occupational Safety rial through mill processes to the sale certain requirements in its Program and Health Management standards of finished product to the customer. for Pollution Control, Evaluation (SMK3). Indah Kiat Tangerang and the and Rating (PROPER). During 2007, two mills at Pindo Deli are certified e. Product Safety and Ecolabels all but one of APP’s mills (Ekamas as compliant with the OHSAS 18001 Fortuna) applied for and were again standard. This internationally recog- Selected paper, tissue and packaging awarded PROPER certificates by nized occupational health and safety products are compliant with product the Ministry. The PROPER award management system helps manage- safety regulations for critical and is given to mills that produce ment eliminate or minimize risk to demanding markets in Europe, Japan emissions at levels below those employees and other affected parties. and the United States. Pindo Deli’s permitted by government standards mills have attained product safety and which use clean technology, d. Japan’s Green Purchasing Law certification meeting US Food and minimize waste, prevent pollution Drug Administration standards and and conserve resources. In 2007, APP’s mills continued the standards set by similar agen- the successful implementation of cies in Korea and Japan. Tjiwi Kimia c. Occupational Safety and Health controls to qualify their output as and the two Pindo Deli mills were the compliant with the requirements of first in Indonesia to certify selected APP has also been a leader in its Japan’s Green Purchasing Law (GPL). mill products to meet Indonesian, industry in occupational health and This law requires certification of an European Union, and Japanese

22 Cover 2007 Corporate Social Responsibility Ecolabel standards. During 2007, the Organization Guidelines for Sus- (SMF), for all of the pulpwood fiber Pindo Deli mills attained Halal prod- tainable Forest Management. The required by its two pulp mills on the uct quality certification for its tissue certification standards for industrial island of Sumatra. The fiber mix of products, a certification that is very plantations in Indonesia were imple- pulpwood furnished to the pulp mills important in Islamic markets. mented in 2004. These standards consists of plantation pulpwood and were developed with support from mixed hardwood (MHW) residues f. Chain of Custody several international organizations. from the development of pulpwood Today, LEI Standard 5000-2, Sustain- plantations from land that has been After completing a successful third able Plantation Forest Management designated by the Government of party audit in December of 2007, both Certification, is the only credible Indonesia for development into pulp- Pindo Deli mills were recommended national forest certification scheme in wood plantations as an integral part to receive the Chain of Custody (CoC) place in Indonesia and the standard of its Forest Land-use Plan. certification to the Programme for to which APP’s fiber suppliers intend the Endorsement of Certification to certify their forest concessions. The six APP paper mills use a range Schemes (PEFC) standard. of raw materials including hardwood paper pulp from the two company g. Sustainable Forest Management 4. Fiber Supply Integrity mills on Sumatra, post consumer waste (PCW), mill broke (paper and APP and SMF are working with the pulp trim and waste), non-fiber fillers, Ecolabel Institute of Indonesia (LEI a. Raw Materials and third-party certified paper pulp or Lembaga Ecolabel Indonesia), an purchased on the open market. organization which recently adopted APP owns no forestland, holds no Virgin fiber from APP’s exclusive standards for both a regular and a concessions to government-owned fiber suppliers accounted for nearly phased approach for full sustainable land, and does not conduct any 60% of the total fiber used in the forest management certification. LEI harvest operations. production of APP’s paper products first produced its principles, criteria during 2007. The balance of fiber and indicators in 1998, based on APP relies on its fiber-supply consisted of post-consumer recy- the International Tropical Timber relationship with Sinarmas Forestry cled waste paper from Indonesia

2007 Corporate Social Responsibility Cover 23 and offshore markets (23%), mill APP believes that it has one of c. Certified Market Pulp broke recovered and recycled at the the most stringent pulpwood fiber mills and non-fiber fillers (10%), and control systems in Indonesia. In APP’s reliance on paper pulp from purchased paper pulp – primarily 2003, to verify the integrity of its fiber third-party certified pulp mills softwood – certified by the Forest supply, APP developed and imple- ensures that all of the pulp procured Stewardship Council (FSC) or the mented a Legal Origin Verification from outside sources originate in Program for the Endorsement of and Chain of Custody (LOV/CoC) forests that are managed sustainably Forest Certification Schemes (PEFC) system. This protocol was devel- and harvested legally. as originating in responsibly managed oped in conformity with the Criteria forests (10%). and Indicators of the LEI Standard d. Recycled Fiber for Wood Fibre Material (plantation b. Pulpwood Fiber Supply Integrity wood and mixed hardwood residues The fact that nearly one-third from plantation development). of APP’s finished-paper product For pulpwood fiber, APP’s fiber furnish is recycled means that suppliers develop only those lands Since 2005, the LOV/CoC system has the company is having two sig- that have been designated by the been subjected to annual audits by nificant positive impacts on the Government of Indonesia, under an independent third party, Société environment. First, the use of its National Spatial Plan as suitable Générale de Surveillance (SGS), post-consumer waste fiber reduces for pulpwood plantations. All active which has found no indication of any the annual forest harvest of virgin fiber sources managed by SMF illegal fiber being harvested or being fiber. Second by recovering fiber passed the Government-mandated introduced into the fiber supply at throughout the pulp-and-paper Sustainable Forest Management the Lontar Papyrus or Indah Kiat manufacturing process – from the evaluation conducted in 2006 by Perawang mills. All of the improve- white-water system all the way Lembaga Penilai Independen (LPI), ments recommended in the annual to trimmings from paper-finishing a Ministry of Forestry-accredited audits by SGS have been imple- operations – the mills reduce the independent auditor. mented, and this fact has been noted amount of solid waste they produce in each of SGS’ annual audit reports. and, in turn, reduce the load on the Once granted a concession, APP’s (See Appendix VI for 2007 LOV/CoC wastewater treatment system at fiber suppliers commission a fea- Audit Statement Summaries.) each mill. sibility study which includes three independent assessments required In addition, in December 2007, SGS by National law. Specific Annual evaluated APP’s fiber suppliers in 5. Environmental Performance Working Plans are then developed Riau and Jambi against the stan- for each Fiber Source Management dards of the SGS “Timber Legality Unit. APP requires its fiber suppliers and Traceability Verification” (TLTV) APP’s manufacturing facilities have to comply with all applicable laws Programme. This assessment was invested in pulp and paper technol- and to use work plan and conser- conducted to benchmark the com- ogy and machinery imported from vation assessment standards that pany’s performance against the TLTV Scandinavia, Europe, the United are government-recognized. All standards and to identify potential States, and Canada. They are gener- of APP’s active fiber sources hold areas of improvement for APP’s fiber ally considered world-class mills. Air valid and legal Annual Working suppliers as they work toward their emissions and wastewater effluents Plans and licenses. goal of obtaining full certification to at the mills meet all Indonesian and the TLTV standard. most international standards.

Table V – APP Paper Mill Product Furnish

Year Hardwood Pulp (APP) Certified Market Pulp Post-consumer Waste (PCW) Mill Broke1 & Fillers TOTAL

2005 52% 13% 23% 12% 100%

2007 57% 10% 23% 10% 100%

1. Mill Broke is paper and pulp trim or waste that is recycled within the mill.

24 Cover 2007 Corporate Social Responsibility APP’s mills observe, operate in (bark, sawdust and wood yard resi- Master Improvement Program (MIP) compliance with, and generally dues), and purchased palm oil shell to accelerate the reduction of water outperform the requirements of residues, all of which are burned to consumption and fiber loss per ton national laws for the environment. create energy used at the mills. of finished product. This MIP is part These requirements are built into the of a coordinated effort that provides operating policies that APP adminis- APP’s six paper mills, lacking any for inter-mill sharing of lessons ters and monitors. All of APP’s mills pulp-making capability or available learned and best practices to lever- have earned certification under the renewable resources, rely primarily age experience and achieve results ISO 9001 Quality Management Sys- on fossil fuels for their energy. more quickly. tem and ISO 14001 Environmental Management System protocols, and b. Water and Fiber Consumption While the final results of the MIP manage their continuous improve- are expected to be reported in ment in environmental performance All of APP’s pulp and paper opera- September of 2008, metrics through using ISO-based Environmental tions have systems in place to the end of 2007 indicate reductions Management System tools. carefully monitor and control water in the consumption of both water and fiber consumption. Each mill and fiber loss per ton of finished The company enforces waste tracks its performance against product at all of the mills. management policies to reduce industry-accepted benchmarks pollutants. These include a Source and water-consumption guidelines An anticipated added benefit of Control Policy and a Reduce, Reuse, published by organizations such the MIP will be the reduction in Recycle Policy. Wastewater plants as the World Bank. During the last wastewater treatment plant operat- employ activated sludge along with three years, almost all of APP’s mills ing costs as the mills’ whitewater physical and chemical treatments have made progress in reducing their recovery systems are improved to to prepare wastewater for safe water and fiber consumption per remove more usable fiber from the discharge into local waterways. ton of product. Fresh water use per wastewater stream. metric ton of product is in the mid-40 a. Energy Mix range (measured in cubic meters per Specific program elements are air-dry metric ton – m3/ADMT) for discussed in the “Mill Programs and The Lontar Papyrus and the Indah both pulp mills, and is in the 10 to 20 Investments to Reduce Consumption Kiat Perawang mills are integrated m3/ADMT range for paper produced and/or Discharges” section of each pulp and paper mills which have at each of the six paper mills. In mill report. the capability to produce their own 2007, all but one of APP’s mills energy. During the last three years, operated well within the World Bank d. Trend of Environmental about 85% of the total energy and guidelines established for water Performance electricity requirements for these consumption and effluents. two mills was met using renewable APP periodically benchmarks the resources. Renewable bio-fuels c. Mill Programs and Investments performance of its mills against oper- included black liquor (a recovered ating and environmental performance chemical byproduct of the pulp- In April 2007, all of APP’s mills in standards for competitive paper mills making process), mill wood waste Indonesia initiated a comprehensive in the United States, Sweden and

2007 Corporate Social Responsibility Cover 25 Japan. Comparisons are made to benchmarks were published In mills observe, operate in compli- relevant government regulations and December of 2007 by the World Bank ance with, and generally outperform to performance data published by International Finance Corporation in the requirements of national laws forest products companies and trade their Environmental, Health and Safety for sustainability, fiber procurement, and professional journals. Guidelines for Pulp and Paper Mills. environment, and health and safety.

In addition to the Mill Improvement In Indonesia, air-emission standards Each mill has a unique set of social Program mentioned above, several are set at the national level (Decree conditions and parameters within of APP’s mills have undertaken from Ministry of Environment, KEP-13/ which it operates. The last section of successful projects to further reduce MENLH/3/1995). Water-effluent each mill report provides a detailed or eliminate their solid waste. These standards are set at the provincial look at the specific social programs projects include: improved fiber level, typically by decree by the that were carried out at each mill recovery; sale of waste to compa- Governor of each Province. The table during 2007. nies that can reuse the material; and presented in each mill profile reflects the composting of sludge for use the applicable Indonesian standard Each of the eight APP mills is as fertilizer in the forest or for use for that mill. profiled on the following pages. in neutralizing acidic soils prior to Each has different capabilities, and planting. Processes to improve air produces a unique range of paper, emissions also have been imple- 6. Social Performance paperboard, and finished paper mented at every facility. products to serve a variety of markets throughout the world. The “Trends of Performance” sec- During 2007, APP’s mills provided tion in each of the individual mill financial and in-kind support for a In addition, each mill has invested reports includes tables that provide number of programs that delivered in a distinctive mix of sustainability- specific data on performance in air social benefits to communities in driven environmental and social emissions, wastewater effluent at proximity of its various operations programs. These have been tailored discharge, and solid waste disposal in Sumatra and Java. These social to address the site-specific condi- for the years 2005, 2006 and 2007. investments included support for tions around each mill operation and Some mills have experienced minor education (with program ranging from to help meet the particular social regressions in performance between scholarships and teacher stipends needs of the communities in and 2005 and 2007 as a result of external to book giveaways and on-the-job- around each mill. factors such as the need to substi- training); support for community tute coal for bio-fuels because of programs and religious activities; NOTE: Throughout this report, spending in their reduced availability. income enhancement programs, and Indonesian Rupiah has been converted to investments in infrastructure (roads, US$ calculated at the interbank rate effective 12/31/2007. 1 Indonesian Rupiah = 0.0001066 US schools and sanitation projects). Mill performance data for water Dollar. 1 US Dollar = 9,379.00 Indonesian Rupiah. consumption and water quality at discharge have been compared As a integral part of fulfilling their role to World Bank guidelines. These as good corporate citizens, APP’s

26 Cover 2007 Corporate Social Responsibility Lontar Papyrus Mill

2007 Corporate Social Responsibility Cover 27 Table I – Lontar Papyrus Sales (US$ Thousands)

Product 2005 2006 2007

Pulp 233,069 276,113 295,601

Tissue 51,047 45,839 53,760

Chemicals 2,798 4,545 2,798

TotaL 286,914 326,497 352,159

mill is responsible for the employ- The Lontar Papyrus mill includes 1. Mill at a Glance ment of nearly 10,000 people, and one pulp-making line, four pulp is an important economic engine in machines, one tissue machine, one Jambi Province. small paper machine, a caustic- PT. Lontar Papyrus Pulp & Paper soda plant, a wastewater treatment Industry (Lontar Papyrus) is a large During 2007, the mill produced about plant and two co-generation facili- integrated pulp and tissue mill 675,000 tons of bleached hardwood ties that use biomass as fuel. During located in the remote rural village of paper pulp which is about 5% above 2007, the mill generated 85% of its Tebing Tinggi in Jambi Province on 2005 levels. Tissue production has electricity requirements on-site from the island of Sumatra. The mill had averaged about 50,000 tons per year biomass fuel while about 15% of its sales in 2007 of slightly more than for the last three years. total energy requirements were met US$350 million, an increase of nearly by using fossil fuels. 8% compared to 2007 and a 20% The mill uses an Elemental Chlorine increase compared to 2006. Free (ECF) bleaching process for a growing volume if its paper pulp. This 2. Products Lontar Papyrus provides more than process substitutes chlorine dioxide 2,000 jobs and has created employ- for elemental chlorine and sodium ment for almost 6,000 people in hypochlorite in the bleaching process. A portion of the pulp produced at the area who provide the mill with In 2007, 23% of the paper pulp pro- Lontar Papyrus is used on-site to needed services. In addition, the duced at Lontar Papyrus was made make jumbo rolls of tissue. The mill’s exclusive fiber supplier, PT. using this environmentally preferred balance of pulp is shipped to APP Wirakarya Sakti (PT. WKS) employs process. This is a 1,400% increase in mills on the island of Java (all of 1,600 workers and has created ECF tonnage compared to 2005 pro- which are non-integrated paper another 370 indirect jobs in the area. duction (from 10,900 to 154,400 tons). mills) or is sold in the open market. Taken as a whole the Lontar Papyrus

Table II – Lontar Papyrus Employees, Mill Indirect and Fiber Supplier Jobs

Category 2005 2006 2007

Mill Employees 1,986 2,093 2,186

Mill Indirect Jobs 2,601 3,855* 5,776

Fiber Supplier Direct Jobs (PT. WKS1) 1,573 1,578 1,606

Fiber Supplier Indirect Jobs (PT. WKS) 359 269 372

Total 6,519 7,795 9,940

1. PT. WKS = PT. Wirakarya Sakti, the mill’s exclusive fiber supplier * NOTE: Data correction from 2006 SR which reported 600

28 Cover 2007 Corporate Social Responsibility Tissue from the Lontar Papyrus mill renewed in 2006 and the mill will be pollution and conserve resources. is sold in jumbo roll form to cus- re-inspected in 2009. The mill man- In 2007, the mill earned the lesser tomers in Asia, Oceania, the United agement team holds quarterly EMS Blue PROPER award, due to delays States, and the Middle East. These project reviews to ensure that con- in installing Continuous Emissions customers convert the jumbo rolls tinuous improvement projects are on Monitoring (CEM) equipment and into finished products, and market target, and that appropriate corrective inconsistencies in laboratory analysis them under a variety of brand names. measures for identified shortcomings methodologies being used. (PROPER The mill also has a small paperboard have been implemented. awards were not issued in 2006.) The machine that is used to produce mill fully expects to be able to regain boxboard for internal consumption. In 1995, the Lontar Papyrus mill its Green PROPER rating in 2008. obtained its first AMDAL license upon completing a successful Environmen- Since 1998, the Lontar Papyrus mill 3. Certification and Verification tal Impact Assessment. The mill’s has remained continuously certified license will be revalidated in 2008. to the Government of Indonesia’s Occupational Safety and Health The Lontar Papyrus mill has remained In 2003, Lontar Papyrus was first Management standards (SMK3). certified as compliant with the ISO awarded a Green PROPER certificate 9001 Quality Management System by the Ministry of the Environment’s In 2007, Lontar Papyrus continued (QMS) standard and the ISO 14001 Program for Pollution Control, its successful implementation of Environmental Management System Evaluation and Rating (PROPER). controls to qualify its output as (EMS) standard for more than The PROPER award is given to mills compliant with the requirements of a decade. The mill’s last QMS re- that produce emissions at levels Japan’s Green Purchasing Law (GPL) certification occurred in 2007, and a below those permitted by govern- so that the mill and its customers renewal assessment is scheduled for ment standards and which use clean would be able to continue selling 2010. The mill’s EMS certification was technology, minimize waste, prevent product in that country. This law

Table III – Lontar Papyrus Production (ADMT1)

Major Product 2005 2006 2007

Pulp 642,753 677,682 674,081

ECF pulp as percent of total 1.7 16.81 22.9

Tissue 50,823 47,110 49,419

Total 693,576 724,792 723,500

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 10% moisture for pulp, 6% for paper.

2007 Corporate Social Responsibility Cover 29 requires certification of an unbroken pulpwood plantations as an integral Indicators of the LEI (Lembaga chain-of-custody of supply, from part of its Forest Land-use Plan. Ecolabel Indonesia – Indonesian the legal sourcing of raw material Ecolabel Institute) Standard for Wood through mill processes to the sale of The percentage of plantation pulp- Fibre Material (plantation wood and finished product to the customer. wood used at Lontar decreased mixed hardwood residues from plan- in 2007 due to the need to meet tation development). This system has increased demand for planta- undergone continual improvement in 4. Fiber Supply Integrity tion pulpwood at the Indah Kiat subsequent years, with increases in Perawang mill in Riau. APP expects the robustness of its protocols. (See that the MHW component of fiber Appendix VI for 2007 LOV/CoC Audit During the last three years, the fiber will continue to decrease until it is Statement Summaries.) mix of pulpwood furnished to the completely eliminated, in accordance pulp mill has consisted of planta- with government regulations. Since 2005, the LOV/CoC has been tion pulpwood and mixed hardwood subjected to annual audits by an (MHW) residues from the develop- APP believes that it has one of the independent third party, Société ment of pulpwood plantations. most stringent pulpwood fiber Générale de Surveillance (SGS), Acacia and Eucalyptus plantation control systems in Indonesia. which has found no indication of fiber is provided by PT. Wirakarya any illegal fiber being harvested or Sakti from its plantations in Jambi In 2003, the Lontar Papyrus mill being introduced into the fiber and South Sumatra. PT. Wirakarya developed and implemented a supply at the Lontar Papyrus mill. Sakti also supplies mixed tropical Legal Origin Verification and Chain All of the improvements recom- hardwood originating from degraded of Custody (LOV/CoC) system to mended in the annual audits by and barren land that has been ensure the integrity of all of its pulp- SGS have been implemented, and designated by the Government of wood. This protocol was developed this has been noted in each of their Indonesia for development into in conformity with the Criteria and annual audit reports.

Table IV – Lontar Papyrus Certification Status as of December 31, 2007

Certification Classification Scope First Issued

ISO 9001 QMS Mill 1995

ISO 14001 EMS Mill 1997

AMDAL – Government of Indonesia Environmental Impact Assessment Mill 1995

Blue PROPER – Government of Indonesia Pollution Control Mill 2002-2003

Occupational Safety & SMK3 – Government of Indonesia Mill 1998 Health Management Green Purchasing Law (GPL) – Product Legality & Sustainability All products 2006 Minister of Environment of Japan

30 Cover 2007 Corporate Social Responsibility In December 2007, SGS evaluated mill fiber and includes a mix of APP’s fiber supplier in Riau and about 20% purchased third-party 5. Environmental Performance Jambi against the standards of the certified, long-fiber market pulp. SGS “Timber Legality and Traceabil- As mentioned, all pulpwood fiber a. Energy Mix ity Verification” (TLTV) Programme. entering the mill is subject to the The assessment was conducted to mill’s Legal Origin Verification and benchmark the company’s perfor- Chain of Custody system. One Because it is an integrated pulp and mance against the TLTV standard hundred percent of the market pulp paper mill, Lontar Papyrus is able and to identify potential areas of purchased by the mill is third-party to co-generate all but 15% of its improvement for APP’s fiber suppli- certified as originating in forests energy requirements on-site using ers as they work toward their goal of meeting either Forest Stewardship bio-fuels which are derived from obtaining certification to the full TLTV Council (FSC) or Programme for the renewable resources. standard in the near future. Endorsement of Forest Certifica- tion Schemes (PEFC) standard for During 2005 and 2006, the mill The tissue machine at Lontar responsible forest management. consumed most of the stockpile of Papyrus is furnished with pulp bark that had enabled it to operate

Table V – Lontar Papyrus Pulp Furnish

Furnish 2005 2006 2007

Plantation Hardwood Pulpwood 41% 46% 42%

Mixed Tropical Hardwood Pulpwood 59% 54% 58%

TOTAL 100% 100% 100%

Table VI – Lontar Papyrus Tissue Furnish

Furnish 2005 2006 2007

Virgin Hardwood Pulp 77% 78% 82%

Purchased Certified Market Pulp 22% 21% 17%

Mill Broke (pulp & tissue trim or waste) 1% 1% 1%

TOTAL 100% 100% 100%

2007 Corporate Social Responsibility Cover 31 Table VII – Lontar Papyrus Energy Sources

Renewable Sources 2005 2006 2007

Black Liquor 73.6% 73.5% 72.3%

Bark and Woodyard Residues 24.4% 18.0% 12.3%

Palm Shell 0.7% 1.0% 0.3%

Subtotal renewable sources 98.7% 92.5% 84.9%

Fossil Fuel Sources

Diesel Oil 1.3% 1.7% 0.9%

Coal – 5.8% 14.2%

Subtotal fossil fuel sources 1.3% 7.5% 15.1%

TOTAL 100.0% 100.0% 100.0%

Note: Percentages are based on the amount of energy generated

as nearly 100% energy self-suffi- within the benchmarks set forth in areas of the operation as well. This cient. In 2007, it was necessary to the World Bank International Finance MIP is part of a coordinated effort by substitute increasing volumes of coal Corporation Environmental (IFC) all of the APP pulp and paper mills in to replace the bark bio-fuel. Guidelines for pulp and tissue in all Indonesia, and provides for inter-mill three years. sharing of lessons learned and best b. Water and Fiber Consumption practices to leverage experience and Mill fiber consumption for both pulp achieve results more quickly. During 2007, the amount of water and tissue has been relatively stable used per air-dried metric ton of pulp during the last three years. While the final results of the MIP are increased by about 4%. This resulted expected to be reported in September from consumption attributable to In April 2007, the mill initiated a 2008, metrics through the end of preproduction tests during mill comprehensive Master Improvement 2007 indicate reductions in the upgrade projects. Project (MIP) to reverse the direction consumption of both water and of water consumption and to reduce fiber per ton of finished product. Water use per ton of tissue paper fiber consumption. In the preliminary An anticipated added benefit to the has nearly doubled since 2005. The analysis of water use and based on MIP will be the reduction in waste- tissue machine increases in water other engineering studies, it was water treatment plant costs as the were due to operating problems determined that there was potential mill’s whitewater recovery system related to the pulp furnish and the to reduce fiber consumption by is improved to remove more usable frequency of machine cleanup. targeting improvements in the white fiber from the wastewater stream. However, the mill has operated well water recovery system and in other

32 Cover 2007 Corporate Social Responsibility Table VIII – Lontar Papyrus Water and Fiber Consumption

Item 2005 2006 2007 World Bank Standard 4

Water1

Water – Pulp (m3/ADMT2) 40.7 42.0 43.8 20-100

Water – Tissue (m3/ADMT) 10.9 17.9 21.9 5-40

Fiber

Pulp (GMT3/ADMT) 4.4 4.2 4.3 NA

Tissue (GMT/ADMT) 1.075 1.083 1.071 NA

1. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities. 2. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 10% moisture for pulp, 6% for paper. 3. GMT = Green Metric Ton where a GMT is the weight of the fiber at the moisture level when delivered to the mill. 4. World Bank IFC Environmental, Health and Safety Guidelines for Pulp & Paper Mills, Dec 10, 2007, page 31 table.

c. Mill Programs and Investments the mill earned only a Blue PROPER mill wood yard is a small reduction in to Reduce Consumption and/or rating in 2007.) The continuous emis- the amount of pulpwood needing to Discharges sions monitoring equipment required be harvested to furnish the mill. an investment of US$470,0002. During 2007, the mill initiated a range (and a one-time installation cost of During 2006 and 2007, the Lontar of programs to reduce consumption US$147,000). The mill installed this Papyrus mill also initiated a number and discharges, using ISO Environ- equipment in order to have better of targeted projects to increase the mental Management Systems (EMS) real-time data with which to control efficiency of the mill power plant protocols to drive these actions on a and minimize emissions. This invest- and to reduce energy costs. These timely basis. ment was made even though it would projects included investments and not result in any direct cost savings. repairs to increase the reliability One of the more important pro- of the solid-fuel-handling system grams at Lontar Papyrus was the A second program completed in in order to optimize power plant installation of continuous emissions early 2007 was the installation of a performance. The total invest- monitoring equipment at the smelt new chip screening and recovery ment during this two-year period dissolving tank and at the recov- system in the mill wood yard, was more than US$5 million. The ery boiler precipitator stacks. (This at an investment of US$623,446. resulting benefits included reduced program had been deferred from the The annualized savings from this energy cost, stabilized and higher- 2000 operating year due to financial investment amounted to more than efficiency boiler operations, reduced constraints at the time, and that US$2 million. An indirect benefit from downtime due to higher reliability, deferral is one of the reasons that the improved recovery of fiber in the and a reduction in air emissions.

2007 Corporate Social Responsibility Cover 33 The mill expects a payback in less Despite the less-favorable fuel mix, Wastewater Effluent than two years from these projects, the mill was able to maintain par- The mill’s discharge of wastewater and has identified additional oppor- ticulate discharges at fairly constant into the Tungkal River continues to tunities to improve power boiler levels that were significantly below be of higher quality than the water performance which will be imple- the Indonesian standard. This perfor- drawn from the river. Despite the mented during 2008. mance is largely attributable to the trend of continuing increases in presence of an electrostatic precipi- BOD, COD and TSS emissions, d. Trend of Performance in Reducing tator on the mill’s multi-fuel boiler. these parameters remain well below Emissions, Effluent and Waste the Indonesian Standard and below During 2007, opacity values improved World Bank IFC Environmental Air Emissions substantially, and are now tracking Guidelines. The rate of water used Although the mill operated at about well below the Government of per ton increased slightly as 90% below the Indonesian Standards Indonesia’s standards. discussed in the Water and Fiber

for SO2 and NO2, there was an Consumption section. increase in both emissions due to In Indonesia, air-emission standards a change in fuel mix and the need are set at the national level (Decree During the past three years, the mill to use coal in the multi-fuel boiler. In from Ministry of Environment, KEP-13/ did not experience any process spills 2007, about 14% of the mill’s energy MENLH/3/1995). Water-effluent that were not handled efficiently and requirements were provided by coal, standards are set at the provincial within regulations by its wastewater up from 6% of the mix in 2006. The level, typically by decree by the treatment facility. coal was needed to replace bark and Governor of each Province. The palm shell that had been used as fuel tables presented reflect the appli- Solid Waste in past years, due to shortages of cable Indonesian standard for the During the last three years, Lontar both these renewable resources. Lontar Papyrus mill. Papyrus provided all its mill sludge

Table IX – Lontar Papyrus Air Emissions

Parameter 2005 2006 2007 Indonesian Standard

3 1 SO2 (mg/m ) 90.63 49.50 69.02 800

3 NO2 (mg/m ) 81.00 64.68 98.36 1,000

Particulate (mg/m3) 119.42 164.31 141.47 230

Opacity2 (%) 31.0 14.2 11.3 40

1. The Indonesian Standard for Air Emissions is measured as milligrams per cubic meter, not kilograms per Air Dry Metric Tons as is common in many countries. 2. Opacity values are based on routine testing, except for 2005 which is based on spot checks.

34 Cover 2007 Corporate Social Responsibility and has diverted about one-half of other materials (which wastes landfill hazardous materials, the mill uses its fly ash to PT. Wirakarya Sakti for capacity) has made this a critical authorized and government licensed use as fertilizer in its plantations. issue for the mill. hazardous waste disposal businesses. This enabled the mill to avoid send- ing a significant volume of waste to Disposal issues are now some of landfill. The mill also has been able the most pressing issues for pulp 6. Social Performance to divert about one-half of its fly ash and paper mills in Indonesia. APP from landfill for use as fertilizer. To mills have been conducting research date, the mill has not found a more to overcome these issues. One a. Safety Performance suitable, economic and environmen- example of this is APP’s continuing tally appropriate way to dispose of research into the use of solid waste, During 2007, Lontar Papyrus had 22 its dregs-and-grit. such as dregs-and-grit as fertilizer reportable safety incidents, down in plantation forests. from the 53 incidents reported in Solid waste disposal has been a 2006. However, the mill’s Severity of particular problem at Lontar Papyrus. As do most mills, Lontar Papyrus Accident index nearly tripled from The mill has an onsite, licensed, solid manages the disposal of a range of its 2006 level of .53 to 1.49. This waste landfill, but the rate of infill of hazardous materials including waste increase was largely attributable to a this dump, the reported unwilling- oil, lab chemicals, mercury lamps fatality caused by a boiler explosion. ness of Ministry of the Environment and catalytic agents. In each case, There were no accidents resulting in to issue new landfill licenses, and the mill has an approved method for a permanent disability during 2007. the unnecessary use of this site for disposing of the material. For the most The mill’s Frequency of Accident

Table X – Lontar Papyrus Wastewater Effluent at Discharge

Parameter 2005 2006 2007 Indonesian Standard World Bank Standard2

BOD (kg/ADMT)1 0.28 0.56 0.76 6.1 1.0

COD (kg/ADMT) 6.94 8.36 9.19 14.0 20

TSS (kg/ADMT) 1.6 1.7 1.9 6.0 1.5

pH 7.4 7.6 7.7 6-9 6-9

AOX (kg/ADMT) 0.038 0.033 0.045 None 0.25

Volume (million m3)3 2,416,284 2,595,399 2,685,313 None None

Rate (m3/ADMT) 45.2 46.0 47.8 None 50

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 10% moisture for pulp, 6% for paper. 2. World Bank IFC Environmental, Health and Safety Guidelines for Pulp & Paper Mills, Dec 10, 2007. page 26 table 1(a). 3. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities.

2007 Corporate Social Responsibility Cover 35 index decreased from its 2006 levels provide free medical treatment for quality of life of people in nearby com- of 11.78 to 4.26. low-income villagers, supplemental munities. During 2007, Lontar Papyrus food for 523 infants and young chil- invested US$10,219 in continued b. Sickness and Absenteeism dren to stave-off malnutrition, and to support for education in its operating send two community health center area. This funding provided opera- The sickness rate for mill employees nurses and two mill-clinic practitio- tional support for an Islamic middle during 2007 remained unchanged ners to Basic Life Support Training in school and high school; scholarships from 2006 levels, having declined Pekanbaru, Riau. for 37 elementary-, junior-high-, and more than 20% in 2005. The mill’s high-school students; private tutoring absenteeism rate in 2007 was 33% The mill also provided US$2,074 for junior-high-school students, as lower than in 2006 and has shown in 2007 to promote healthy living well as for support materials such as an 80% reduction since 2005. through a health-awareness composition books, sports supplies, campaign and support of a school and for transportation to take stu- c. Social-Benefit Programs volleyball tournament. One hundred dents to and from school. A total of local people attended local work- 4,126 village children benefited from During 2007, the Lontar Papyrus shops featuring facilitators from the these programs. mill provided financial and in-kind National Health Department and the support for a number of programs Tanjabbar District Police Department. Lontar Papyrus also invested that delivered social benefits to Topics included safe sex (a session US$2,782 to support on-the-job communities in proximity to its which included the free distribution training at its mill site for 19 university operation in Jambi province. of condoms), prevention of Dengue students and 29 students enrolled in fever, drug abuse, and traffic rules. public and vocational high schools. In Health Sixty-five area children participated addition to training in a wide range of Lontar Papyrus invested US$1,204 in the volleyball tournament. technical and non-technical mill jobs, during 2007 to deliver medical care students received spending money, to residents of Tebing Tinggi, Brasau, Education meals and accommodations at the Adi Jaya and Sumber Makmur Lontar Papyrus views education as a mill during their three-month-long villages. The mill’s funding went to key to improving the livelihoods and vocational internships.

Table XI – Lontar Papyrus Solid Waste

Type of Waste Sludge Fly Ash Dregs-and-Grit

Means of Disposal (%) 2005 2006 2007 2005 2006 2007 2005 2006 2007

Compost (fertilizer) 100% 100% 100% 47% 48% 51% – – –

Landfill – – – 53% 52% 49% 100% 100% 100%

TOTAL 100% 100% 100% 100% 100% 100% 100% 100% 100%

36 Cover 2007 Corporate Social Responsibility Religion other activities based on villagers’ events. This funding was used to During 2007, the Lontar Papyrus requests. By assisting villagers in the provide transportation for villagers mill invested US$6,947 in support of practice of their faith, the mill helped attending special events; a speed- programs which facilitated religious to solidify the relationship between boat to enable a local health-care expression in the four communities the company and the community. worker to reach remote villages; near its operation. This funding went office furniture and supplies for toward support of the observance of Community Activities use by village administrators; and Islamic holidays and festivals; hygienic Lontar Papyrus provided US$3,556 support for local sports teams mass circumcision of 100 village in funding during 2007 to support and athletic competitions. This boys; sacrificial animals; a local a range of village administrative investment delivered benefits to women’s religious study group; and activities, facilities and community the 15,330 inhabitants of Tebing

Table XII – Lontar Papyrus Employee Safety Performance

Safety Performance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Number of Incidents – 48 – 53 – 22

Severity (SRA1) – 0.40 – 0.53 – 1.49

Frequency (FRA2) 7.12 10.92 7.12 11.78 9.50 4.26

1. SRA = Severity Rate Accident = (Lost Hours X 1,000) / (Total Man Hours) 2. FRA = Frequency Rate Accident = (Total Accidents X 1,000,000) / (Total Man Hours)

2007 Corporate Social Responsibility Cover 37 Tinggi, Sumber Makmur and Adi employment for the local community. Entrepreneurship Development Jaya villages. Under this program, the mill provides Program, which provides skills assistance to local work groups in training and assistance in the The mill provided an additional $267 establishing themselves as small establishment and growth of micro- in funding support to organize two legal enterprises. Once the busi- businesses. The mill supported the Communication Forums, organi- nesses are formally established, the growth of the Karya Kencana Silk zations through which villagers company contracts with them, on Screening and Tailoring Enterprise, gain voice and vote in shaping the a daily or per-unit basis, to pro- a business comprised of four house- direction of their communities. Mill vide a variety of services including wives who expanded their market for funding was used to establish a custodial, landscape maintenance, silk-screening and tailoring services Mosque Communication Forum construction, road rehabilitation, to include the mill, government insti- with 30 participants and a Village and brick manufacturing. In 2007, tutions, contractors, and businesses Communication Forum with ten Lontar Papyrus contracted with in the surrounding community. village stakeholders as participants. four small businesses managed This micro-business also began to by local individuals, and with the provide catering for Lontar Papyrus’ In 2007, Lontar Papyrus also pro- government-managed Village- machine employees. If this expan- vided US$618 in donations to help Based-Contractor Service, BUMDES, sion into a new business sector struggling villagers meet their to which it also provides capacity- proves profitable, Karya Kencana will most-urgent needs. This funding building assistance. This program recruit additional employees. went to help provide medical care provided employment for approxi- for a hydrocephalus patient, to help mately 90 people in total. Note: Spending in Indonesian Rupiah has meet the basic needs of 96 orphans, been converted to US$ calculated at the inter- bank rate effective 12/31/2007. 1 Indonesian and to provide a measure of relief to In addition to the contract fees, Rupiah = 0.0001066 US Dollar. 1 US Dollar = mourning families. the mill spent US$16,800 to house 9,379.00 Indonesian Rupiah. contract workers at the mill site. Income Enhancement Lontar Papyrus invested US$293,708 Lontar Papyrus also invested during 2007 to continue to provide US$2,714 in its ongoing

Table XIII – Lontar Papyrus Employee Sickness and Absenteeism Performance

Attendance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Sickness Rate1 0.00900 0.00891 0.00700 0.00695 0.00600 0.00696

Absenteeism Rate2 0.00100 0.00099 0.00030 0.00030 0.00030 0.00020

1. Sickness Rate = (Total Sick Days) / (Total Worker Days) 2. Absenteeism Rate = (Total absentee Days) / (Total Worker Days)

38 Cover 2007 Corporate Social Responsibility Indah Kiat Perawang Mill

2007 Corporate Social Responsibility Cover 39 Table I – Indah Kiat Perawang Sales1 (US$ Thousands)

Product 2005 2006 2007

Pulp 374,299 411,062 533,460

Paper 482,626 569,022 602,234

Chemicals 383 302 343

TOTAL 857,308 980,386 1,136,037

1. Reported data excludes tissue machine at Indah Kiat Perawang operated by Pindo Deli.

Table II - Indah Kiat Perawang Employees, Mill Indirect and Fiber Supplier Jobs

Category 2005 2006 2007

Mill Employees 8,411 8,399 8,526

Mill Indirect Jobs (Indah Kiat Perawang contractors) 8,636 8,240 13,725

Fiber Supplier Direct Jobs (PT. AA1) 3,704 3,465 3,659

Fiber Supplier Indirect Jobs (PT. AA) 199 57 49

Total 20,950 20,161 25,959

1. PT.AA = PT. Arara Abadi, the mill’s exclusive fiber supplier

for the employment of nearly 26,000 The Indah Kiat Perawang Mill 1. Mill at a Glance people, and is an important eco- complex includes four pulp-making nomic engine for Riau Province. lines, six pulp-drying lines, five paper machines, three chemical The PT. Indah Kiat Perawang mill During each of the last three years, plants, ten different co-generation (Indah Kiat Perawang) is a large, the mill complex produced a total power facilities and three waste- integrated pulp and paper complex of approximately 1,900,000 tons of water treatment plants. The mill located in the village of Perawang, bleached hardwood paper pulp. In generates about 90% of its elec- in Riau Province on the island of 2007, the complex produced 666,000 tricity requirements on-site using Sumatra. The mill had sales in 2007 tons of paper, a 12% increase when biomass fuel. Less than 20% of the of slightly more than US$1.1 billion, compared to 2006 production. complex’s total 2007 energy require- an increase of nearly 16% compared ments were met using fossil fuels. to 2006 and a 32% increase The mill uses an Elemental Chlorine compared to 2005. Free (ECF) bleaching process for a growing volume of its market pulp. 2. Products The Indah Kiat Perawang Mill This process substitutes chlorine provides more than 8,500 jobs and dioxide for elemental chlorine and has created employment for an addi- sodium hypochlorite in the bleach- A portion of the pulp produced at the tional 13,700 people in the area who ing process. In 2007, 36% of the Indah Kiat Perawang Mill is used on- provide the mill with needed services. paper pulp produced at Indah Kiat site to make paper products, with the In addition, the mill’s exclusive fiber Perawang was made using this balance shipped to non-integrated supplier, PT. Arara Abadi, employs environmentally preferred process, APP paper mills on the island of Java more than 3,600 workers in the area. double the amount of ECF pulp pro- or sold in the open market. Taken as a whole, the Indah Kiat duced in 2005 or 2006. Perawang Mill complex is responsible

40 Cover 2007 Corporate Social Responsibility Indah Kiat Perawang also produces more than a decade. The last QMS Assessment in compliance with finished paper products. The four re-certification occurred in 2007, and national regulations. This license was major brands of photocopy paper and a renewal the mill’s 9001 assess- renewed in 2000. one major printing paper brand shown ment is scheduled for 2010. The in Table IV are sold to customers in mill’s EMS certification also was In 2003, Indah Kiat Perawang was Asia, Africa, Europe and the Middle renewed in 2007, and the mill will first awarded a Blue PROPER East, as well as in domestic markets. be re-inspected in 2010. The mill certificate by the Ministry of the management team holds quarterly Environment’s Program for Pollu- EMS project reviews to ensure that tion Control, Evaluation and Rating. 3. Certification and Verification continuous improvement projects This award is given to mills which are on target, and that appropriate produce emissions at levels less corrective measures for identified than the government’s standards The Indah Kiat Perawang Mill has shortcomings have been implemented. and which employ clean technology, remained certified as compliant with minimize waste, prevent pollution and the ISO 9001 Quality Management In 1995, the Indah Kiat Perawang conserve resources. The mill’s cer- System (QMS) standard and the Mill received its AMDAL license, tification was renewed for the most ISO 14001 Environmental Manage- indicating that it had successfully recent award period, October 1, 2006 ment System (EMS) standard for completed an Environmental Impact through September 20, 2007.

Table III – Indah Kiat Perawang Production (ADMT1)

Major Product 2005 2006 2007

Pulp 1,866,006 1,907,282 1,842,755

ECF2 pulp as percent of total 17 18 36

Paper 574,030 594,564 665,991

Total 2,440,036 2,501,846 2,508,746

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 10% moisture for pulp, 6% for paper. 2. ECF = Elemental Chlorine Free pulp.

2007 Corporate Social Responsibility Cover 41 Since 1999, the Indah Kiat Perawang the legal sourcing of raw material as meeting the European Union’s Mill has remained continuously certi- through mill processes to the sale of Restriction of Hazardous Sub- fied to the Government of Indonesia’s finished product to the customer. For stances (RoHS) requirements. Occupational Safety and Health Man- each of the last three years, the mill agement standards (SMK3). has contracted Sucofindo, an inde- pendent Indonesian auditing firm, to 4. Fiber Supply Integrity In 2007, Indah Kiat Perawang con- verify that its Acacia pulp products tinued its successful implementation contain only plantation-sourced fiber. of controls to qualify its output as During the last three years, the compliant with the requirements of In 2007, the mill’s IK brand of fiber mix of pulpwood furnished to Japan’s Green Purchasing Law (GPL) printing papers was certified to the pulp mill has consisted of an so that the mill and its customers the Indonesian Ecolabel Standard increasing percentage of plantation would be able to continue selling for product quality. pulpwood and a decreasing product in that country. This law percentage of mixed hardwood requires certification of an unbroken Since 2006, Indah Kiat Perawang’s (MHW) residues from the estab- chain-of-custody of supply, from paper products have been certified lishment of pulpwood plantations.

Table IV – Indah Kiat Perawang Brands

Major Mill Brands Paper Product Main Regions Where Brand is Sold

ePaper Photocopy Paper Africa, Europe, Middle East, South America, Southeast Asia,

IK Printing & Writing Paper Asia, Middle East

IK Plus Photocopy Paper South East Asia

Paperline Photocopy Paper Africa, Eastern Europe

Paperline Global Photocopy Paper Asia

42 Cover 2007 Corporate Social Responsibility Table V – Indah Kiat Perawang Certification Status as of December 31, 2007

Certification Classification Scope First Issued

ISO 9001 QMS Mill 1995

ISO 14001 EMS Mill 1997

ISO 9706 Paper Permanence Woodfree & Photocopy paper 2005

AMDAL – Government of Indonesia Environmental Impact Assessment Mill 1995

Blue PROPER – Government Pollution Control Mill 2003-2004 of Indonesia

SMK3 – Government of Indonesia Occupational Safety & Health Management Mill 1999

Green Purchasing Law (GPL) – Product Legality & Sustainability All products 2006 Minister of Environment Japan

Plantation Fiber-Origin Verification Product Sustainability Acacia pulp products 2005

Indonesian Ecolabel Environmental Friendly products Printing and Writing paper1 2007

Restriction of Hazardous Product Safety Paper products 2006 Substances (RoHS): Europe

1. IK Brand – Paper machines #2, 3 and 5

Acacia and Eucalyptus plantation APP believes that it has one of implemented, and this fact has been fiber is provided by PT. Arara Abadi the most stringent pulpwood fiber noted in each of SGS’ annual audit from its plantations in Riau. PT. Arara control systems in Indonesia. In reports. (See Appendix VI for 2007 Abadi also supplies mixed tropical 2003, the Indah Kiat Perawang Mill LOV/CoC Audit Statement.) hardwood residues that originate developed and implemented a Legal on degraded or barren land that has Origin Verification and Chain of In December 2007, SGS evaluated been designated by the Government Custody (LOV/CoC) system to ensure APP’s fiber suppliers in Riau and of Indonesia for development into the integrity of its fiber supply. This Jambi against the standards of the pulpwood plantations as an integral protocol was developed in confor- SGS “Timber Legality and Traceabil- part of its Forest Land-Use Plan. mity with the Criteria and Indicators ity Verification” (TLTV) Programme. of the LEI (Lembaga Ecolabel The assessment was conducted to The percentage of plantation pulp- Indonesia – Indonesian Ecolabel benchmark the company’s perfor- wood used at Indah Kiat Perawang Institute) Standard for Wood Fibre mance against the TLTV standard increased substantially during 2007 Material (plantation wood and mixed and to identify potential areas of in response to a moratorium on hardwood residues from planta- improvement for APP’s fiber suppli- MHW harvesting called for by the tion development). This system has ers as they work toward their goal of Governor of the Province of Riau. undergone continual improvement in obtaining certification to the full TLTV APP and its fiber supplier have subsequent years, with increases in standard in the near future. honored this moratorium in order to the robustness of its protocols. allow time for scientific findings to The five paper machines at Indah be used to develop a comprehen- Since 2005, the LOV/CoC system has Kiat Perawang are furnished with sive land use policy for the forests been subjected to annual audits by pulp mill fiber from the on-site pulp of Riau. Whether or not the morato- an independent third party, Société lines, third-party certified long-fiber rium is lifted, APP expects that the Générale de Surveillance (SGS), market pulp, recycled mill broke, MHW component of its fiber furnish which has found no indication of any and fillers to enhance paper proper- will continue to decrease until it is illegal fiber being harvested or being ties. As mentioned, all pulpwood completely eliminated, in compliance introduced into the fiber supply at fiber entering the mill is subject to with government regulations. the Indah Kiat Perawang Mill. All of the mill’s Legal Origin Verification the improvements recommended in and Chain of Custody system. One the annual audits by SGS have been hundred percent of the market pulp

2007 Corporate Social Responsibility Cover 43 Table VI – Indah Kiat Perawang Pulp Furnish

Furnish 2005 2006 2007

Plantation Hardwood Pulpwood 41% 51% 92%

Mixed Tropical Hardwood Pulpwood 59% 49% 8%

TOTAL 100% 100% 100%

Table VII – Indah Kiat Perawang Paper Furnish

Furnish 2005 2006 2007

Virgin Hardwood Pulp 72% 72% 72%

Purchased Certified Market Pulp 7% 5% 5%

Mill Broke (pulp & paper trim or waste) 6% 7% 4%

Non-fiber fillers (finished product) 15% 16% 19%

TOTAL 100% 100% 100%

purchased by the mill is third-party consumption, in-the-field debarking Water use per ton of paper declined certified as originating in forests distributes nutrient-rich mulch which by 12.6% during the 2005 to 2007 meeting either the Forest Steward- aids the growth of seedlings that are timeframe as the mill continued to ship Council (FSC) or Programme for planted after harvest. make progress in reducing consump- the Endorsement of Forest Certifica- tion. The mill’s performance is well tion Schemes (PEFC) standard for The reduction in Cluster Palm within the World Bank IFC Environ- responsible forest management. Oil3 (CPO) consumption reflects a mental Guidelines for paper. constricted supply of this biomass fuel caused by increased regional The mill’s fiber use per ton of pulp 5. Environmental Performance demand and a growing export market. and paper products has been flat To provide energy for the new paper during the last three years despite a machine that started-up in 2007, the number of paper machine upgrades. a. Energy Mix mill increased its consumption of coal as a short-term solution In April 2007, the mill initiated a More than 80% of the mill’s energy comprehensive Master Improve- sources are based on renewable b. Water and Fiber Consumption ment Program (MIP) to accelerate resources. Changes in the mix of the reduction of water consumption sources during the last three years In 2007, the amount of water and fiber consumption per ton of result from local supply-and-demand used per air-dried metric ton finished product. This MIP is part of factors outside the mill’s control. of pulp increased by about 9%. a coordinated effort by all of the APP This resulted from consumption pulp and paper mills in Indonesia, The amount of bark available to the attributable to water tests (flush- and provides for inter-mill sharing of mill as fuel was less in 2007 than in ing and commissioning) that were lessons learned and best practices 2006 and 2005, due in large part to performed prior to the start-up of to leverage experience and achieve adoption of in-the-field debarking upgraded mill equipment. Despite results more quickly. of trees by the mill’s fiber supplier. this increase, the mill is well within (Previously, the mill performed the benchmarks set forth in the While the final results of the MIP the debarking operation in its World Bank International Finance are expected to be reported in wood yard.) In addition to reduc- Corporation (IFC) Environmental September 2008, metrics through ing transportation costs and fuel Guidelines for pulp. the end of 2007 indicate reductions

44 Cover 2007 Corporate Social Responsibility Table VIII – Indah Kiat Perawang Energy Sources

Renewable Sources 2005 2006 2007

Black Liquor 65.6% 66.2% 59.4%

Bark 23.9% 21.0% 21.0%

Sawdust 0.2% 0.2% 0.1%

Palm Shell or Cluster Palm Oil 2.3% 1.5% 0.3%

Subtotal renewable sources 92.0% 88.9% 80.8%

Fossil Fuel Sources

Diesel Oil 0.2% 0.2% 0.2%

Marine Oil or other Heavy Oil 0.4% 1.4% 1.3%

Gas – – 2.3%

Coal 6.0% 8.1% 13.3%

Peat 1.4% 1.4% 2.1%

Subtotal fossil fuel sources 8.00% 11.1% 19.2%

TOTAL 100.0% 100.0% 100.0%

Note: Percentages are based on the amount of energy generated

Table IX – Indah Kiat Perawang Water and Fiber Consumption

Item 2005 2006 2007 World Bank Standard4

Water1

Water – Pulp (m3/ADMT2) 38.0 37.0 40.3 20-100

Water – Paper (m3/ADMT) 13.5 13.8 11.8 5-40

Fiber

Pulp (GMT3/ADMT) 4.2 4.1 4.1 None

Paper (ADMT/ADMT) 0.72 0.72 0.72 None

1. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities. 2. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 10% moisture for pulp, 6% for paper. 3. GMT = Green Metric Ton where a GMT is the weight of the fiber at the moisture level when delivered to the mill. 4. World Bank IFC Environmental, Health and Safety Guidelines for Pulp & Paper Mills, Dec 10, 2007, page 31 table 3. in the consumption of both water c. Mill Programs and Investments From an environmental perspective, and fiber per ton of finished product. to Reduce Consumption and/or one of the most significant series Discharges of projects focused on reducing the An anticipated added benefit of amount of solid waste going to land- the MIP will be the reduction in During 2007, the mill initiated a fill. In a large mill complex producing wastewater treatment plant operat- range of consumption and discharge more than 2.5 million tons of pulp and ing costs as the mill’s whitewater reduction programs, using ISO paper a year, the disposal of nearly recovery system is improved to Environmental Management Sys- 300,000 tons of sludge, fly ash and remove more usable fiber from the tems (EMS) protocols to drive these dregs-and-grit poses a formidable wastewater stream. actions on a timely basis. challenge. Since 2005, the mill has

2007 Corporate Social Responsibility Cover 45 made significant progress in recycling recycled sludge sales of more than prepare the sludge for use as its solid waste, going from recycling US$2.1 million. fertilizer. Annual operating expenses only 38% of its solid waste to recy- in 2007 were US$1.4 million. The cling 64% in 2007. The results by type Sludge Recycled as Fertilizer cost avoided by not sending this of solid waste are shown in Table X. One hundred percent recycling of sludge to landfill was more than sludge was one of the mill’s success US$2.6 million in 2007. PT. Arara There were several innovative com- stories in 2007. Beginning in 2005, Abadi pays for the cost of process- ponents to Indah Kiat Perawang’s the mill was able to earn government ing, packaging and transporting the solid-waste-management effort. approval for the use of its sludge fertilizer, and realizes cost savings These included the increased use as fertilizer in forestry operations. from not having to purchase fertilizer. of sludge as fertilizer; the recovery Working closely with its fiber supplier, of fiber from sludge and the sale of PT. Arara Abadi, the mill was able to Recovered Fiber (from Sludge) recovered-fiber pulp; and the devel- field test and prove the sludge to be Recycled as Low-grade Pulp opment of a fertilizer product, KCa, rich in nutrients that promote growth The Indah Kiat Perawang Mill is made by mixing fly ash and dregs- when applied to newly planted seed- able to recover fiber from sludge and-grit, two categories of solid waste. lings. Field testing also showed that in its wastewater treatment plants. the sludge provided a moisture lock In 2006, it was found that, after The mill’s total 2007 investment in that protects seedlings from dehy- pressing, this recovered-fiber pulp solid-waste-management projects dration. The amount of sludge used could be used to make a low-quality was US$2.5 million, with annual as fertilizer has doubled from 31% in paper. Indah Kiat Perawang sells this operating costs of US$1.4 million. 2006 to 65% in 2007. recovered-fiber pulp at cost to a sis- These projects returned more ter company, Indah Kiat Serang. The than US$6.5 million in savings The mill invested roughly US$1.3 million Indah Kiat Serang Mill uses this pulp from landfill cost avoidance and in equipment needed to press and to make a low-grade industrial paper

Table X – Indah Kiat Perawang Solid Waste Management (2005 vs. 2007)

% Sent to Landfill % Recycled as Fertilizer % Recycled Other Means

Waste Material 2005 2007 2005 2007 2005 2007

Sludge 57% – 43% 65% – 35%

Fly Ash 83% 41% 17% 55% – 4%

Dregs-and-Grit 100% 39% – 61% – –

1. SRA = Severity Rate Accident = (Lost Hours X 1,000) / (Total Man Hours) 2. FRA = Frequency Rate Accident = (Total Accidents X 1,000,000) / (Total Man Hours)

46 Cover 2007 Corporate Social Responsibility for wrapping roll stock and boxes. 2007 of roughly US$84,000. The cost Fly Ash Recycled as Fertilizer and During the last three years, the Indah avoided by not sending this sludge Construction Material Kiat Serang Mill has consumed to landfill in 2007 was US$630,000. Between 2005 and 2007, the mill nearly 150,000 tons of this recycled, reduced by one-half the volume low-grade pulp. In 2007, the volume of recovered of fly ash it sent to landfill. (Fly fiber sludge available was reduced by ash is the residual material from The Indah Kiat Perawang Mill also about 6,700 tons, from 36,500 tons in power boilers.) sold recovered-fiber pulp in the mar- 2006 to about 29,800 tons in 2007. ketplace to select buyers. Revenues The various power boilers at Indah from the sale of recovered-fiber pulp The mill recycled 100% of its total Kiat Perawang produced 158,179 were more than US$250,000 in 2007. sludge output in 2007 through the tons of fly ash during 2007. Of this, The investment in equipment needed sludge-fertilizer and recovered- the non-coal fly ash (more than to press and prepare the sludge for fiber pulp programs, and by using half of the total volume) was shipment was about US$2.6 million, a small volume of dried sludge processed with dregs-and-grit to with annual operating expenses in on-site as fuel. make KCa fertilizer. This fertilizer

Table XI – Indah Kiat Perawang Recovered-fiber Volumes (Tons)

Customer 2005 2006 2007 TOTAL

IK Serang 86,280 33,463 29,131 148,874

Market Sales 5,332 2,052 701 8,085

TOTAL 91,613 36,515 29,832 156,959

Table XII – Indah Kiat Perawang Recovered-fiber Pulp Sales (US$)

Customer 2005 2006 2007 TOTAL

PT. Amerta Nigatama 1,628,958 536,266 42,336 2,194,560

PT. Ekamas Fortuna 120,288 250,152 210,000 $580,440

PT. Sopanusa 242,500 0 0 $242,500

TOTAL 1,991,746 786,418 252,336 3,017,500

2007 Corporate Social Responsibility Cover 47 is used by PT. Arara Abadi in its use coal. In 2007, about 15% of the (flushing and commissioning) prior pulpwood plantations. mill’s energy requirements were pro- to start up. This release of added vide by coal, up from 6% in 2005. water to the wastewater treatment Roughly 2% of the fly ash was plant resulted in higher per-ADMT- sold to PT. Semen Padang as raw Despite the less favorable fuel of-production values. Despite the material for cement and another 2% mix, the mill has been able to upgrade project, the mill operated was used on-site as construction reduce particulate emissions by at less than 50% of Indonesian sub-base material. The remaining 16% since 2005. This has helped standards for BOD, COD and TSS 41% of the fly ash was sent to landfill. reduce opacity, which also has during 2007, and has improved its been reduced more than 16%, to AOX emissions since 2005 as it Dregs-and-Grit Recycled as Fertilizer levels that are significantly below approaches the World Bank Dreg-and-grit is a residual material Indonesian Standards. This was benchmark of performance. from the recausticizing4 units. The accomplished through targeted total dregs-and-grit produced in maintenance programs and During the past three years, the 2007 was 89,959 tons. More than selective investments in equipment. mill has not experienced any 60% of this waste material (nearly Particulate emissions also were process spills that were not handled 50,000 tons) was combined with fly reduced as the mill was able to buy efficiently and within regulations by ash to make KCa fertilizer for use in a slightly better grade of coal. its wastewater treatment facility. forest plantations In Indonesia, air-emission standards Solid Waste The mill’s total investment in equip- are set at the national level (Decree The solid waste management proj- ment needed to make KCa fertilizer from Ministry of Environment, KEP-13/ ects at Indah Kiat Perawang resulted was about $688,000, with operating MENLH/3/1995). Water-effluent in a significant reduction in the waste costs for this process of approxi- standards are set at the provincial material going to landfill. Details of mately US$450,000 in 2007. The level, typically by decree by the these projects are contained in the program returns cost savings of Governor of each Province. The section titled “Mill Programs and more than US$2 million in reduced tables presented reflect the appli- Investments to Reduce Consumption landfill costs. The savings in expen- cable Indonesian standard for the and/or Discharges.” ditures for fertilizer have not yet Indah Kiat Perawang Mill. been calculated. As do most mills, Indah Kiat Wastewater Effluent Perawang manages the disposal d. Trend of Performance in Reducing The mill’s discharge of wastewater of a range of hazardous materi- Emissions, Effluent and Waste into the Siak River continues als, including waste oil, laboratory to be of higher quality than the chemicals, batteries and other mate- Air Emissions water obtained from the river. The rials. In each case, the mill has an Although the mill operated at about increases in BOD and COD in 2007 appropriate method for disposing of 80-85% below the Indonesian Stan- were due to an upgrade project the material. For the most hazardous

dards for SO2 and NO2, there was an on paper machine number nine materials, the mill uses authorized increase in both emissions due to a which was completed during 2007. and government licensed hazardous change in fuel mix and the need to This project required a water test waste disposal businesses.

48 Cover 2007 Corporate Social Responsibility Table XIII – Indah Kiat Perawang Air Emissions (Flue gas from power boilers)

Parameter 2005 2006 2007 Indonesian Standard

3 1 3 SO2 (mg/m ) 114.6 94.3 141.2 800 mg/m

3 3 NO2 (mg/m ) 74.4 49.0 97.8 1,000 mg/m

Particulate (mg/m3) 100.0 97.5 84.2 230 mg/m3

Opacity2 (%) 17.9 15.2 14.6 35

1. The Indonesian Standard for Air Emissions is measured as milligrams per cubic meter, not kilograms per Air Dry Metric Tons as is common in many countries. 2. Opacity values are based on routine testing.

Table XIV – Indah Kiat Perawang Wastewater Effluent at Discharge

Parameter 2005 2006 2007 Indonesian Standard World Bank Guidelines3

Standard

BOD (kg/ADMT1) 2.8 3.3 4.1 8.5 1 kg/ADMT

COD (kg/ADMT) 12.7 12.9 14.7 29.75 20 kg/ADMT

TSS (kg/ADMT) 3.1 3.2 3.7 8.5 1.5 kg/ADMT

pH 7.3 7.1 7.1 6-9 6-9

AOX (kg/ADMT) 0.4 0.3 0.3 None 0.25 kg/ADMT

Rate2 (m3/ADMT) 46.87 45.03 46.95 85 50 m3/ADMT

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 10% moisture for pulp, 6% for paper. 2. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities. 3. World Bank IFC Environmental, Health and Safety Guidelines for Pulp & Paper Mills, Dec 10, 2007, page 26 table 1(a).

Table XV – Indah Kiat Perawang Solid Waste

Type of Waste Sludge Fly Ash Dregs-and-Grit

Means of Disposal 2005 2006 2007 2005 2006 2007 2005 2006 2007

Incinerate 0% 0% 5 % 0% 0% 0% 0% 0% 0%

Compost (fertilizer) 42.6% 31 % 65 % 17.0% 56.5% 55% 0% 15% 61.0%

Sell – 34% 30 % – – 2 % – – –

Landfill 57.4% 35 % – 83.0% 43.5% 41% 100% 85% 39.0%

Other – – – – – 2 % – – –

TOTAL 100% 100% 100% 100% 100% 100% 100% 100% 100%

2007 Corporate Social Responsibility Cover 49 • Establishing a Skill Develop- c. Social-Benefit Programs 6. Social Performance ment Activity (SDA) on accident reduction, This SDA involved During 2007, the Indah Kiat Department Managers as well as Perawang Mill provided financial a. Safety Performance mill workers; and in-kind support for programs that delivered a broad range of social • Instituting a zero-accident During 2007, the Indah Kiat benefits to communities in proximity competition involving the Perawang Mill complex had 269 to its operations. reportable safety incidents, down whole mill by section; from the 328 incidents reported in • Requiring all departments to Health Services: Floating Clinic 2006. The mill’s Severity of Accident create SMK3 (health and safety) During 2007, the Indah Kiat index remained virtually unchanged programs to reduce accidents; Perawang Mill invested US$8,683 from 2006, while its Frequency of • Scheduling regular SMK3 6 K to continue operation of its Floating Accident index decreased 14% from program audits; and, Health Care Clinic which, this year, 2006 levels to 3.485. There were no served some 1,300 villagers living • Requiring self-inspection of fatalities or accidents resulting in a in five remote communities along all affected mill operations. permanent disability during 2007. the Siak River.

b. Sickness and Absenteeism Corrective Actions Taken: The program’s physician, nurse, The Indah Kiat Perawang Mill pharmacy assistant, and medical During 2007, the sickness rate for reported 269 major safety incidents assistant travel by speedboat to visit Indah Kiat Perawang Mill employees in 2007. In response, the mill imple- each of the five communities once was 7% higher than the rates in 2006 mented a number of corrective each month and deliver vital health and 2005. The mill’s absenteeism rate actions to further reduce the inci- care and medicines. dence and severity of accidents. in 2007 remained nearly constant These included: with the 2006 level.

Table XVI – Indah Kiat Perawang Employee Safety Performance

Safety Performance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Number of Incidents – 337 – 328 – 292

Severity (SRA1) 0.2423 0.0204 0.02187 0.02197 0.01799 0.02190

Frequency (FRA2) 6.530 4.380 3.807 4.487 3.660 3.485

1. SRA = Severity Rate Accident = (Lost Hours X 1,000) / (Total Man Hours) 2. FRA = Frequency Rate Accident = (Total Accidents X 1,000,000) / (Total Man Hours)

50 Cover 2007 Corporate Social Responsibility Education Programs an on-the-job training program University Preparation Program The mill puts a high value on academic that exposed 150 high school and The Indah Kiat Perawang Mill and vocational education as a means university students to the work- committed US$8,796 in support of a of improving the long-term quality of place environment at the mill. tutorial program designed to prepare life in the communities surrounding Open to students from all of students to take the Public Univer- the mill. Riau Province’s higher education sity Enrollment Examination. Five institution, the program provided hundred Siak District students major- On-the-Job Training technical assistance and training, ing in science took a trial enrollment The Indah Kiat Perawang Mill accommodations, meals, and work- examination to enter the program. invested US$29,110 in support of incident insurance to participants. The thirty top-scoring students

Table XVII – Indah Kiat Perawang Employee Sickness and Absenteeism Performance

Attendance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Sickness Rate1 – 0.01063 – 0.01062 – 0.01141

Absenteeism Rate2 – 0.00070 – 0.00098 – 0.00099

1. Sickness Rate = (Total Sick Days) / (Total Worker Days) 2. Absenteeism Rate = (Total absentee Days) / (Total Worker Days) NOTE: Indah Kiat Perawang did not report targets for employee sickness and absenteeism performance.

2007 Corporate Social Responsibility Cover 51 received a 45-day intensive training supplied by the mill makes morning, Infrastructure: Community Electricity course to prepare them for the actual mid-day, and afternoon trips along Providing access to electrical power Public University Enrollment Exami- the Minas-Perawang road. is an essential component of improv- nation. Of those participating in the ing economics and quality of life in intensive training, ten were success- Training: Community Skill rural Indonesia. During 2007, the mill ful in passing the examination. Development Center continued to maintain an electrical In 2007, the Indah Kiat Perawang relay station, voltage regulator and The program offered by the mill is Mill invested US$276,396 toward other equipment necessary to supply similar to one run by the Siak District the ongoing construction of its two Megawatts of electrical current Government. However, participa- Community Skill Development Center. from the company’s generator to the tion in the government’s program Now 80% completed, the Center will surrounding community. This electri- is limited to higher-performing ultimately consist of offices, a class- cal power is distributed through students. The program offered by the room, mess hall, sanitation facilities, government-owned transmission Indah Kiat Perawang Mill provides and a prayer facility, as well as a cattle lines. The local utility manages the an opportunity for lower-performing barn, food garden, aquaculture ponds, distribution, monitors usage, and students to improve their chances of and horticulture cultivation gardens. bills the company for the power entering the public university. consumed by the community. The Indah Kiat Perawang Mill University Scholarship Program will maintain the facilities, and, in More than 2,400 families in four The Indah Kiat Perawang Mill invested conjunction with the Siak-sub-district villages benefit from the program, US$3,135 in support of a scholarship branch of the National Farming and consume 90% of the energy program for 34 university students Department, will conduct skills supplied to the grid by the Indah who had completed its University training in agriculture and aquaculture Kiat Perawang mill. Most of this Preparation Program and passed the for community groups, and provide electricity is used for lighting and Public University Enrollment Examina- other technical assistance to moti- household purposes during evening tion. Under the terms of the program, vated members of the community. hours, although mill management the company awards scholarships is encouraging villagers to use this for up to nine semesters to eligible Community Support: Religious electric power in home-scale enter- students. To continue receiving Events Program prises that would generate income. scholarship funding from semester to The Indah Kiat Perawang Mill semester, students must to maintain committed US$7,422 during 2007 in The mill’s investment in the a grade-point average of 2.5. support of local religious activities Community Power program has and events. The funding was used totaled US$182,307 since the School Bus to provide 23 preachers, facilities, program’s inception in 2005. The Indah Kiat Perawang Mill spent transportation and food services US$4,798 in 2007 to provide bus for events held at 51 mosques NOTE: Throughout this report, spending in transportation to enable 150 rural near the mill. Some 5,000 persons Indonesian Rupiah has been converted to US$ calculated at the interbank rate effective elementary and junior high school participated in these religious events. 12/31/2007. 1 Indonesian Rupiah = 0.0001066 US students to attend classes. The bus Dollar. 1 US Dollar = 9,379.00 Indonesian Rupiah.

52 Cover 2007 Corporate Social Responsibility Indah Kiat Serang Mill

2007 Corporate Social Responsibility Cover 53 Table I – Indah Kiat Serang Sales (US$ Thousands)

Product 2005 2006 2007

Packaging 452,800 500,920 618,870

Total 452,800 500,920 618,870

Table II – Indah Kiat Serang Employees and Mill Indirect Jobs

Category 2005 2006 2007

Mill Employees 5,010 5,095 5,141

Mill Indirect Jobs 956 914 1,122

Total 5,966 6,009 6,263

The Indah Kiat Serang Mill 1. Mill at a Glance includes five paper machines (with 3. Certification and Verification a sixth machine in the planning stage), three converting lines, a The PT. Indah Kiat Serang mill (Indah co-generation plant, an incinerator Since 1995, the Indah Kiat Serang Kiat Serang) is a large non-integrated and two wastewater treatment Mill has remained certified as paper mill located in the village of plants. The mill generates virtually all compliant with the ISO 9001 Quality Serang, in Banten Province on the of its electricity requirements on-site Management System (QMS) standard island of Java. The mill had sales from Indonesian-sourced coal. and since 2004 with the ISO 14001 in 2007 of slightly more than Environmental Management System US$618 million, an increase of (EMS) standard. The mill’s last QMS nearly 24% compared to 2006 and re-certification occurred in 2007 2. Products a 37% increase compared to 2005. and the mill will be subject to a re-certification audit in 2010. The The Indah Kiat Serang Mill provides The Indah Kiat Serang Mill produces mill’s EMS certification was also more than 5,000 jobs and has nearly a dozen branded industrial renewed in 2007 and will be subject created employment for more than paper and paperboard products to a re-certification audit in 2010. The 1,100 people in the area who provide including linerboard and medium, mill’s management team holds quar- the mill with needed on site services. corrugated boxboard, coated box- terly EMS project reviews to ensure Taken as a whole, the Indah Kiat board, paper tubes and industrial that continuous-improvement projects Serang Mill is responsible for the papers. Finished paper and paper- are on target, and that appropriate employment of more than 6,200 board are sold in sheet and roll form corrective measures for identified people, contracts locally for off- to converters and customers in North shortcomings have been taken. site services, and is an important and South America, Asia, and Europe economic engine for the communities and in domestic markets. In 1992, the mill obtained its first in and around the village of Serang. AMDAL license verifying that it had During 2007, Indah Kiat Serang successfully conducted the required During each of the last three years, introduced a new high-bulk version environmental impact assessment the mill has produced a total of of Sinarvanda targeting display and for its operations. The mill’s license about 1,100,000 tons of packaging food packaging applications. The will be revalidated in 2008. paper and paperboard. The Indah paperboard products shown in Table Kiat Serang Mill is one of the larg- IV are the three largest selling brands In 1998, the Indah Kiat Serang Mill est purchasers and users of post for the mill. was awarded its first Blue PROPER consumer waste (PCW) in Indonesia, certificate by the Ministry of the with its products averaging 70% Environment’s Program for Pollution recycled fiber content. Control, Evaluation and Rating.

54 Cover 2007 Corporate Social Responsibility Table III – Indah Kiat Serang Production (ADMT1)

Product 2005 2006 2007

Packaging (Indah Kiat Serang) 1,147,137 1,117,644 1,194,620

Total 1,147,137 1,117,644 1,194,620

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 6% moisture for paper.

Table IV – Indah Kiat Serang Brands

Major Mill Brands Paper Products Main Regions Where Brand is Sold

SinarBoard Ivory Paperboard Asia

SinarRoyal Art board Asia, North America, South America

Sinarvanda Folding Boxboard Asia, Europe

The PROPER award is given to for paper and paperboard prod- Ecolabel Institute) Standard for mills that produce emissions at ucts sold in the United States and Wood Fibre Material (plantation levels below those permitted by Europe. All of these product-safety wood and mixed hardwood residues government standards and which certifications were renewed in 2007 from plantation development). use clean technology, minimize and will be subject to renewal again waste, prevent pollution and in 2008 and 2009. One hundred percent of the long- conserve resources. The mill’s cer- fiber market pulp purchased by the tification was renewed for the most During 2007, the Indah Kiat Serang mill is third-party certified as origi- recent award period, October 1, 2006 Mill, together with GFS (Global Forestry nating in forests meeting either the through September 30, 2007. Service), conducted PEFC training in Forest Stewardship Council (FSC) or 2007 to prepare for a PEFC Chain-of- Programme for the Endorsement of The Indah Kiat Serang Mill was Custody Certification audit in 2008. Forest Certification (PEFC) standard first certified to the Government of for responsible forest management. Indonesia’s Occupational Safety and Health Management standards 4. Fiber Supply Integrity In addition to the inspection required (SMK3) in 2002, but has not renewed to support the mill’s third-party certi- the certificate since 2005. fication, Indah Kiat Serang conducts The five paper machines at Indah its own quality-control check on all During 2007, Indah Kiat Serang Kiat Serang are furnished with pulp incoming consumer waste. The mill continued its successful implemen- that consists of an average of 75% purchased more than 1.1 million tons tation of controls to qualify its output virgin hardwood pulp from APP’s of seven different grades of paper as compliant with the requirements sister companies on the island of waste during 2007. This furnish was of Japan’s Green Purchasing Law Sumatra and purchased long-fiber sourced primarily in Indonesia, with (GPL) so that the mill and its custom- market pulp. Fillers are used to the balance originating in the Euro- ers would be able to continue selling enhance paper properties. pean Union and the United States. product in that country. This law requires certification of an unbroken All hardwood pulp entering the mill is chain-of-custody of supply, from made with fiber subjected to APP’s 5. Environmental Performance the legal sourcing of raw material Legal Origin Verification and Chain of through mill processes to the sale of Custody system in place at both pulp finished product to the customer. mills on Sumatra. This protocol was a. Energy Mix developed in conformity with the Crite- The Indah Kiat Serang Mill also holds ria and Indicators of the LEI (Lembaga The mill’s primary source of six product-safety certifications Ecolabel Indonesia – Indonesian energy is coal primarily because

2007 Corporate Social Responsibility Cover 55 Table V – Indah Kiat Serang Certification Status as of December 31, 2007

Certification Classification Scope First Issued

ISO 9001 QMS Mill 1995

ISO 14001 EMS Mill 2004

AMDAL – Government of Indonesia Environmental Impact Assessment Mill 1992

Blue PROPER – Government of Indonesia Pollution Control Mill 1994-1995

SMK3 – Government of Indonesia Occupational Safety & Health Management Mill 2002

Green Purchasing Law (GPL) – Product Legality & Sustainability All products 2006 Minister of Environment Japan Food Packaging Direct Contact – Product Safety Paperboard 2003 BfR: Germany Food Packaging Direct Contact – Product Safety Paperboard 2005 FDA: USA Restriction of Hazardous Product Safety Paper and Paperboard 2006 Substances (RoHS): Europe

CONEG1: USA Product Safety Paper and Paperboard 2000

EN2 71, Part 3 and Part 9: EU Product Safety Paperboard 2005

ASTM3 F963-03: USA Product Safety Paperboard 2005

1. The Coalition of Northeastern Governors, Toxic in Packaging Materials Clearinghouse Certificate of Compliance. 2. The European Standard 71 for toys and toy packaging. 3. The American Society for Testing and Materials for toys and toy packaging.

the current boiler is unable to burn of “contraries” and non-recoverable usage levels, more variable PCW bio-mass fuels. fiber being rejected. quality, and a slightly higher level of de-inking operations – will prevent the b. Water and Fiber Consumption In April 2007, the mill initiated a MIP process efficiencies from being comprehensive Master Improve- achieved fully. An anticipated added In 2007, the amount of water ment Program (MIP) to accelerate benefit of the MIP will be the reduc- required to make an air-dried the reduction of water consumption tion in wastewater treatment plant metric ton of finished product and reverse the direction of fiber operating costs as the mill’s white reflected improvement from 2006 consumption per ton of finished water recovery system is improved to levels. It has been within the product. This MIP is part of a remove more usable fiber from the benchmarks in the World Bank coordinated effort by all of the APP wastewater stream. International Finance Corpora- pulp and paper mills in Indonesia, tion Environmental Guidelines for and provides for inter-mill sharing of c. Mill Programs and Investments recovered paper mills producing lessons learned and best practices to Reduce Consumption and/or corrugated medium and packaging to leverage experience and achieve Discharges paper for the last three years. quicker results. During 2007, the mill initiated a The mill’s rate of fiber consumption While the results of the MIP range of consumption and discharge also increased gradually during the are expected to be reported in reduction programs, using ISO last two years. This was due primarily September 2008, metrics through Environmental Management Systems to a higher usage level and more the end of 2007 indicate a reduc- protocols to drive these actions on a variable quality of the PCW used, tion in the consumption of water per timely basis. Key projects included a and also to a slightly higher level of ton of finished product. However, new reject-plastic recycling opera- de-inking operations. Both of these the previously noted issues relating tion, plus relatively small investments factors contributed to a higher level to fiber consumption – higher PCW to reduce energy and fresh-water

56 Cover 2007 Corporate Social Responsibility Table VI – Indah Kiat Serang Paper Furnish

Furnish 2005 2006 2007

Virgin Hardwood, Purchased Market Pulp and 75% 76% 74% Post Consumer Waste Paper

Non-fiber Fillers 23% 24% 25%

Other 2% – 1%

TOTAL 100% 100% 100%

1. Includes all pulp and paper recycled within the mill.

Table VII – Indah Kiat Serang Energy Sources

Fossil Fuel Sources

Coal 99.3% 98.9% 99.7%

Diesel and Heavy Oil 0.7% 1.1% 0.3%

TOTAL 100% 100% 100%

Note: Percentages are based on the amount of energy generated.

Table VIII – Indah Kiat Serang Water and Fiber Consumption

Item 2005 2006 2007 World Bank Guidelines4

Water1

Water – Paper (m3/ADMT2) 8.4 10.0 8.6 1.5-10

Fiber

Paper (GMT3/ADMT) 1.040 1.053 1.058 None

1. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities. 2. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 10% moisture for pulp, 6% for paper. 3. GMT = Green Metric Ton where a GMT is the weight of the fiber at the moisture level when delivered to the mill. 4. World Bank IFC Environmental, Health and Safety Guidelines for Pulp & Paper Mills, Dec 10, 2007, page 31 table 3, recovered paper mill, corrugated medium and packaging paper. consumption, and to increase waste- on-site incineration. However, in sale to molders who make various water fiber recovery. These projects order to avoid the cost of incin- types of plastic products. The total have resulted in significant cost and erating the plastic component of investment for this new business was resource savings. these rejects, and to help meet one US$917,000. During its ten months of of Indah Kiat Serang Mill’s social operation in 2007, the mill reported Reject Plastic Recycling program goals for 2007, the mill sales of more than US$260,000 and The Indah Kiat Serang Mill purchases established a new business venture a cost avoidance of US$30,000 in about one million tons per year of to sort, process and remanufac- estimated incineration costs. Most waste paper. The bales of waste ture the plastic reject material. An importantly, the mill hired and trained paper include a significant quantity increasing percentage of plastics – people from the local community. of plastic and other trash that is currently about 22% – is now This operation currently employs rejected when the waste paper is recycled and is used to make core 43 individuals who were previously re-pulped. Historically, these rejects plugs for paper rolls and LDPE, unemployed or underemployed. had been disposed of through HDPE, PE and PP plastic seeds for

2007 Corporate Social Responsibility Cover 57 Energy Consumption at PM #3 Wastewater Fiber Recovery Use of this coal required a higher and PM #6 In 2007, the mill expanded the treat- loading on the boiler, reducing boiler During 2007, the mill invested ment capacity of the #2 Wastewater efficiency and increasing the level of

US$15,000 in new power factor Treatment Plant at a total capital in- SO2 and NO2 emissions. correction equipment to reduce vestment of US$53,000. Total savings energy costs, in part as an offset to from this improvement are tracking The Indah Kiat Serang Mill’s incin- higher energy costs. The savings, at an annual rate of US$335,000, due erator feedstock includes plastic which have exceeded expectations, to the reduced loading on the primary rejects, which are sorted out from are now running at a monthly rate of clarifier, the recovery of additional the volumes of PCW consumed at

US$150,000.This has enabled the mill fiber, and a reduction in wastewater the mill. Both the SO2 and particu- to attain per-ton targets consistent treatment costs. late increases in 2007 resulted from with Ecolabel programs standards. higher loadings of reject plastic.

d. Trend of Performance in Reducing Despite this increase, SO2 values Fresh Water Consumption Emissions, Effluent and Waste were less than 10% of Indonesian During 2007, the Indah Kiat government standard in 2007, and Serang Mill also made an invest- Air Emissions particulate emissions were less than ment of US$12,000 in equipment Although the mill power boiler’s air 50% of the government standards. that is expected to reduce water emissions were running at 2% of As discussed above, an increasing

use per ton by 18% on two of its Indonesian Standards for SO2 and volume of plastic trash is now recov-

five paper machines. This has NO2 in 2007, there was an increase ered in a form suitable for recycling, yielded annualized savings of nearly in both emissions levels due to an reducing the volume incinerated. US$500,000, and has enabled the unfavorable change in the sulfur mill to meet its water-consumption content of available coal. During In Indonesia, air-emission standards reduction targets. 2007, the mill could only purchase are set at the national level (Decree lower-energy-value, higher-sulfur from Ministry of Environment, KEP-13/ coal than had been previously used. MENLH/3/1995). Water-effluent

58 Cover 2007 Corporate Social Responsibility Table IX – Indah Kiat Serang Power Boiler Air Emissions (Flue gas from power boilers)

Parameter 2005 2006 2007 Indonesian Standard

3 1 SO2 (mg/m ) 17.58 13.12 18.19 800

3 NO2 (mg/m ) 3.45 3.79 10.77 1000

Particulate (mg/m3) 17.78 23.81 17.44 350

Opacity2 (%) 4.98 4.09 4.18 35

1. The Indonesian Standard for Air Emissions is measured as milligrams per cubic meter, not kilograms per Air Dry Metric Tons as is common in many countries. 2. Opacity values are based on routine testing except for Pindo Deli which is based on spot checks.

Table X – Indah Kiat Serang Incinerator Air Emissions (Flue gas from incinerator)

Parameter 2005 2006 2007 Indonesian Standard

3 1 SO2 (mg/m ) 3.39 8.57 16.37 250

3 NO2 (mg/m ) 28.96 41.88 21.78 300

Particulate (mg/m3) 10.73 13.73 24.40 50

Opacity2 (%) 3.76 4.03 4.45 10

1. The Indonesian Standard for Air Emissions is measured as milligrams per cubic meter, not kilograms per Air Dry Metric Tons as is common in many countries. 2. Opacity values are based on routine testing.

standards are set at the provincial within regulations by its wastewater level. At the Indah Kiat Serang Mill, treatment facility. 6. Social Performance water-effluent standards are set at the District level of government. Solid Waste a. Safety Performance (See Appendix IV, Indonesia’s Units Solid waste management presents of Governance for a better under- a continuing challenge for the Indah standing of the relationship between Kiat Serang Mill. Although it is able During 2007, the Indah Kiat Serang Provinces and Districts.) The tables to sell its fly ash for use as a con- Mill had 23 reportable safety inci- presented reflect the applicable struction material, and can incinerate dents, down from 29 incidents in Indonesian standard for the Indah its plastic rejects, it is still evaluating 2006. The mill’s Severity of Accident Kiat Serang Mill. alternatives to sending its sludge to index dropped by more than 95% the current licensed on-site landfill. from the 2006 level to 2.43, due Wastewater Effluent primarily to the fact that there no The mill’s discharge of wastewater to As do most mills, Indah Kiat Serang fatalities occurred during the year. the Ciujung River continues to be of manages the disposal of a range There were two accidents in which higher quality than the water drawn of hazardous materials, including workers lost fingers during 2007. from the river. waste oil, lab chemicals, batteries Despite these unfortunate incidents, and mercury lamps. In each case, the mill’s Frequency of Accident index also declined from 2005 and The mill operated at less than 7% the mill has an appropriate method 2006 levels to 2.43. of Indonesian standards for BOD, for disposing of the material. For the COD and TSS during each of the most hazardous materials, the mill last three years. uses authorized and government The Indah Kiat Serang Mill reported licensed hazardous waste disposal no major safety incidents or related corrective actions during 2007. During the past three years, the mill businesses. did not experience any process spills that were not handled efficiently and

2007 Corporate Social Responsibility Cover 59 Table XI – Indah Kiat Serang Water Effluent at Discharge

Parameter 2005 2006 2007 Indonesian Standard

BOD (kg/ADMT1) 0.17 0.22 0.32 9.6

COD (kg/ADMT) 1.47 1.82 1.78 25

TSS (kg/ADMT) 0.39 0.51 0.42 9.2

pH 7.52 7.42 7.41 6-9

Volume (million m3)2 10,413,391 10,711,460 10,893,529 None

Rate (m3/ADMT) 9.08 9.58 9.12 None

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 6% moisture for paper. 2. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities. Note: There are no World Bank discharge benchmarks for non-integrated paper mills

Table XII – Indah Kiat Serang Solid Waste

Type of Waste Sludge Fly Ash Plastic Rejects

Means of Disposal 2005 2006 2007 2005 2006 2007 2005 2006 2007

Incinerate 0.1% 0.1% 0.1% – – – 100% 100% 100%

Compost (fertilizer) – – – – – – – – –

Sell – – – 100% 100% 100% – – –

Landfill 99.9% 99.9% 99.9% – – – – – –

TOTAL 100% 100% 100% 100% 100% 100% 100% 100% 100%

b. Sickness and Absenteeism of improving the long-term quality of was US$23,546, with a total of life in the communities surrounding 2,294 students benefiting from the The sickness rate for mill employees the mill. program. Funding for the Care Schol- during 2007 was 2% higher than in arship Program during the 2007/2008 the 2006. The mill’s absenteeism Scholarship Programs school year was US$21,740, with rate, however, has shown consistent During 2007, the mill continued its a total of 2,123 students benefiting improvement and was below the mill’s support of the Serang Care Schol- from the program. target for each of the last three years. arship Program with funding to underwrite the costs of tuition, The mill also continued its Career c. Social-Benefit Programs books, school supplies, and uniforms Scholarship Program, in which four for children of employee families. high-achieving students each receive During 2007, the Indah Kiat Serang Scholarships are awarded once each three-year scholarships (tuition plus Mill provided financial and in-kind semester to families with elementary-, living expenses) to the Bandung support for a number of programs junior-high-, and senior-high-school Academy of Pulp and Paper Technol- that delivered social benefits to com- students. Indah Kiat Serang con- ogy (ATPK – Akademi Teknologi Pulp munities in proximity to its operations. ducts a mill-wide informational dan Kertas). Program participants outreach to inform employees of were selected through a screen- Education Support Programs the available scholarships. Funding ing process that includes testing The Indah Kiat Serang Mill puts a for the Care Scholarship Program in Chemistry, Physics, Math and high value on education as a means during the 2006/2007 school year English, an interview before a group

60 Cover 2007 Corporate Social Responsibility Table XIII – Indah Kiat Serang Employee Safety Performance

Safety Performance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Number of Incidents – 30 – 29 – 23

Severity (SRA1) 292.25 47.86 147.0 108.26 – 2.43

Frequency (FRA2) 17.87 5.59 2.58 3.74 – 2.29

1. SRA = Severity Rate Accident = (Lost Hours X 1,000) / (Total Man Hours) 2. FRA = Frequency Rate Accident = (Total Accidents X 1,000,000) / (Total Man Hours)

of Indah Kiat Serang and ATPK repre- ing their world-view. During 2007, Thirty-four elementary schools in the sentatives, and psychological testing. 198 adults were enrolled in the Kragilan sub-district took part in the After their three years of study, program (60 in the junior-high competition. A jury comprised of mill program participants are hired by the program and 142 in the senior-high representatives visited each school Indah Kiat Serang Mill and work there program). One hundred percent of the three times during the competition for a minimum of three years. graduating class – 66 adult students – before deciding the winners and successfully completed their course awarding prizes. In 2007, the Indah Kiat Serang Mill of study in 2007 (up from 97% in 2006). invested US$13,434 in its Career Composition Book Giveaway Scholarship Program. Clean & Healthy Environment Competition The Indah Kiat Serang Mill provided In 2007, the mill invested US$1,285 composition books to the students Adult Education Program in support of the Clean & Healthy of 25 schools in five nearby sub- The Indah Kiat Serang Mill Environment program, designed to districts that suffered flood damage invested US$11,848 in an on-site encourage maintenance of schools in in February, 2007. In conjunction adult-education program for mill a manner that is clean, free from haz- with the Eka Tjipta Foundation, the employees. The program provides ards and conducive to learning. The Indah Kiat Serang Mill distributed participants with junior-high-school- program, in which students and teach- nearly 100,000 composition books and senior-high-school-equivalent ers work to keep their schools clean, to some 10,000 students. The mill education, increasing the knowledge safe and orderly, also was intended to invested US$21,324 to provide these and skills of employees and broaden- promote pride and positive attitudes. much-needed school materials.

2007 Corporate Social Responsibility Cover 61 Table XIV – Indah Kiat Serang Employee Sickness and Absenteeism Performance

Attendance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Sickness Rate1 0.00079 0.00105 0.00078 0.00095 0.00078 0.00097

Absenteeism Rate2 0.00027 0.00022 0.00022 0.00024 0.00022 0.00020

1. Sickness Rate = (Total Sick Days) / (Total Worker Days) 2. Absenteeism Rate = (Total absentee Days) / (Total Worker Days)

Junior Achievement Program the February, 2007 flood. These sacrificed animals was distributed to With core funding from the Eka Tjipta families were among those most an estimated 1,840 people after Idul Foundation, the Indah Kiat Serang marginalized by society. Adha Morning Prayer. Mill continued its Junior Achievement Program to help build teamwork Community Spirit Program The mill provided an additional skills and encourages the develop- To build community spirit and foster US$15,999 to support events related ment of an entrepreneurial spirit good relations between the commu- to the celebration of six Muslim among high-school students. A total nity and the mill, Indah Kiat Serang holidays. Some of the funding was of 1,372 students from ten academic provided organizational support and used to bring well-known national and vocational high schools took prize money for 10-kilometer race in preachers to Banten Province. part in the 2007 program. Student the Kragilan sub-district. Held August The program helps build positive companies successfully operated 12 during the Independence Day relations between the community and a range of businesses including Commemoration, the race featured the mill, and provides an opportunity an automotive repair shop, food runners from the mill and from the for community leaders to work with and beverage shops, and vending community at large competing for a mill representatives on a program stalls where people could purchase total of US$1,066 in cash awards. that is of great importance to the vouchers for cellular-phone airtime. people of Banten Province. Support of Religious Activities Food Aid for Flood Victims The Indah Kiat Serang Mill contrib- The Indah Kiat Serang Mill, in uted a total of US$2,452 in support of NOTE: Throughout this report, spending in cooperation with the Eka Tjipta the community’s celebration of Idul Indonesian Rupiah has been converted to US$ calculated at the interbank rate effective Foundation, provided food aid and Adha (a Muslim Holiday). This fund- 12/31/2007. 1 Indonesian Rupiah = 0.0001066 US drinking water to 251 families in ing was used to provide 46 goats Dollar. 1 US Dollar = 9,379.00 Indonesian Rupiah. three villages of the Carenang sub- (one for each mosque in the area) for district that had been impacted by ritualistic slaughter. The meat from

62 Cover 2007 Corporate Social Responsibility Indah Kiat Tangerang Mill

2007 Corporate Social Responsibility Cover 63 Table I – Indah Kiat Tangerang Sales (US$ Thousands)

Product 2005 2006 2007

Paper 80,242 82,691 101,400

Total 80,242 82,691 101,400

Table II – Indah Kiat Tangerang Employees and Mill Indirect Jobs

Category 2005 2006 2007

Mill Employees 1,186 1,161 1,137

Mill Indirect Jobs 198 266 297

Total 1,384 1,427 1,434

The Indah Kiat Tangerang Mill has was in 2007 and the mill will be 1. Mill at a Glance three paper machines, three convert- re-inspected in 2010. ing lines, a co-generation plant, and a wastewater treatment plant. Indah Kiat Tangerang has remained The PT. Indah Kiat Tangerang mill compliant with the ISO 14001 Environ- (Indah Kiat Tangerang) is a small mental Management System (EMS) non-integrated paper mill located in 2. Products standard since 1996, and was also the village of Tangerang in Banten the first mill in Indonesia to be ISO Province on the island of Java. The 14001 certified. The mill’s last EMS mill had sales of slightly more than Indah Kiat Tangerang produces a certification was renewed in 2005 and US$100 million in 2007, an increase of range of branded color photocopy, the mill will be re-inspected in 2008. nearly 23% compared to 2006 and a printing and writing and specialty 26% increase compared to 2005. papers marketed throughout the world. The mill management team holds quarterly EMS project reviews to The Indah Kiat Tangerang mill During 2007, Indah Kiat Tangerang ensure that continuous improve- provides more than 1,100 jobs and introduced Sinar Tech, a new high- ment projects are on target, and has created employment for nearly smoothness, high-opacity color that appropriate corrective measures 300 additional people in the area who paper, and Sinar Color photocopy for identified shortcomings have provide the mill with needed services. paper. Both offerings found ready been implemented. Responsible for the employment of acceptance in key markets in Asia, nearly 1,500 people, the Indah Kiat South America and the Middle East. In 1995, the mill received its first Tangerang Mill provides an important AMDAL license. The AMDAL process economic engine for the villages in ensures that businesses with signifi- and around Tangerang. 3. Certification and Verification cant environmental footprints, such as paper mills, have prepared an Environ- In 2007, the mill produced 103,000 mental Impact Assessment as required tons of paper products. The Indah The Indah Kiat Tangerang Mill has by national law. Indah Kiat Tangerang’s Kiat Tangerang Mill produces printing remained certified as compliant to license was revalidated in 2006. and writing and photocopy papers in the ISO 9001 Quality Management more than 100 colors. System (QMS) standard since The Indah Kiat Tangerang Mill was

1995. The last QMS re-certification awarded its first Green PROPER

64 Cover 2007 Corporate Social Responsibility Table III – Indah Kiat Tangerang Production (ADMT1)

Product 2005 2006 2007

Paper 98,800 94,600 103,000

Total 98,800 94,600 103,000

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 6% moisture for paper.

Table IV – Indah Kiat Tangerang Brands

Major Mill Brands Paper Products Main Regions Where Brand is Sold

Paperline Color Photocopy, Color Wood-free paper, Fancy Jumbo Block Asia, North America

Sinar Spectra Color Photocopy and Color Wood-free paper, Fancy Jumbo Block Asia, Africa, Middle East

Spectra Color Color Photocopy, Jumbo Block, Construction and Origami paper Europe

certificate by the Ministry of the The Indah Kiat Tangerang Mill has Environment’s Program for Pollution remained continuously certified 4. Fiber Supply Integrity Control, Evaluation and Rating for to the government of Indonesia’s the period October 1, 2006 through Occupational Safety and Health September 30, 2007. This Green level Management standards (SMK3) During the last three years, the award is given to mills which pro- since 1998. three paper machines at Indah Kiat duce emission at levels of less than Tangerang have been furnished with 50% of the government standards In 2007, Indah Kiat Tangerang contin- an average of 50% hardwood pulp and which employ clean technology, ued its successful implementation from one of APP’s sister companies minimize waste, prevent pollu- of controls to qualify its output as on the island of Sumatra, 6% third- tion and conserve resources. The compliant with the requirements of party certified long-fiber market mill had been certified at the Blue Japan’s Green Purchasing Law (GPL) pulp, 12-13% recycled mill broke, PROPER level since 2002, indicating so that the mill and its customers and 30% non-fiber materials to compliance with the government’s would be able to continue selling enhance paper properties. base-level standards and initiatives. product in that country. This law requires certification of an unbroken All hardwood pulp entering the mill During 2007, the Indah Kiat chain-of-custody of supply, from is made with fiber subjected to APP’s Tangerang Mill became the second the legal sourcing of raw material Legal Origin Verification and Chain APP operation to attain OHSAS through mill processes to the sale of Custody system in place at both 18001 certification. This internation- of finished product to the customer. pulp mills on Sumatra. This protocol ally recognized occupational health was developed in conformity with and safety management system The Indah Kiat Tangerang Mill, the Criteria and Indicators of the helps management eliminate or together with Global Forestry Service LEI (Lembaga Ecolabel Indonesia – minimize risk to employees and other (an independent consulting firm) Indonesian Ecolabel Institute) Standard affected parties. Certification to the conducted PEFC Chain-of-Custody for Wood Fibre Material (plantation OHSAS 18001 standard also ensures standard training during 2007 in wood and mixed hardwood residues conformance with company occupa- preparation for a PEFC Certification from plantation development). tional, health and safety policies and audit in 2008. demonstrates such conformance One hundred percent of the market to others. pulp purchased by the mill is third- party certified as originating in forests

2007 Corporate Social Responsibility Cover 65 Table V – Indah Kiat Tangerang Certification Status as of December 31, 2007

Certification Classification Scope First Issued

ISO 9001 QMS Mill 1995

ISO 14001 EMS Mill 1996

AMDAL – Government of Indonesia Environmental Impact Assessment Mill 1995

Blue PROPER – Government of Indonesia Pollution Control Mill 2002-2003

Green PROPER – Government of Indonesia Pollution Control Mill 2006-2007

OHSAS 18001 – International Occupational Health Occupational Safety & Health Management Mill 2007 and Safety Assessment Series

SMK3 – Government of Indonesia Occupational Safety & Health Management Mill 1998

GPL – Minister of Environment of Japan Product Legality & Sustainability All products 2006

meeting either the Forest Steward- sludge as fuel. For a complete discus- During the past three years, the ship Council (FSC) or Programme for sion of this program, please see to amount of water required to make a the Endorsement of Forest Certifica- Section 5c., titled “Mill Programs and ton of finished product has been at tion Schemes (PEFC) standard for Investments to Reduce Consumption the low end of the benchmarks set responsible forest management. and/or Discharges.” forth by the International Finance Corporation Environmental Guide- b. Water and Fiber Consumption lines for specialty paper. 5. Environmental Performance During 2006, one hundred percent The rate of fiber use per air-dried of the mill’s output was switched metric ton of finished product a. Energy Mix to colored paper products. This increased slightly in 2006, but change in production required more showed improvement in 2007 with The Indah Kiat Tangerang Mill is frequent wash-ups, resulting in a 15% a 2.5% reduction per ton of finished dependent on fossil fuels to generate increase in per-ton water use. During product when compared to 2005 energy. The mix of sources used 2007, the mill instituted corrective fiber consumption. during the last three years reflects the measures including changing the changing supply/demand balance of color sequence and applying other In April 2007, the Indah Kiat alternative fuels in the area. process efficiencies. As a result, the Tangerang Mill initiated a compre- mill was able to reduce the rate of hensive Master Improvement During 2007, the mill was successful water consumption to a level 2% Program (MIP) to accelerate in using a small amount of its own below the 2005 rate. the reduction of water and fiber

66 Cover 2007 Corporate Social Responsibility Table VI – Indah Kiat Tangerang Paper Furnish

Furnish 2005 2006 2007

Virgin Hardwood Pulp 53% 51% 51%

Purchased Certified Market Pulp 7% 7% 6%

Mill Broke (pulp & paper trim or waste) 10% 12% 13%

Non-fiber Materials 30% 30% 30%

TOTAL 100% 100% 100%

consumption per ton of finished c. Mill Programs and Investments boiler, eliminating the major cost product. This MIP is part a coordi- to Reduce Consumption and/or and nuisance of transporting sludge nated effort by all of the APP pulp Discharges to a nearby cement factory. After a and paper mills in Indonesia and six-month pilot, the mill achieved provides for inter-mill sharing of During 2007, the mill initiated a an optimal ratio of sludge to coal lessons learned and best practices range of consumption-reduction consistent with meeting all relevant to leverage experience and achieve programs using the ISO Environmen- pollution standards for air and solid results more quickly. tal Management Systems protocols waste emissions. As a result, the mill to drive these actions on a timely is now able to burn all of its sludge While the final results of the MIP basis. Key projects included a new in a mixture with coal. Annual cost are expected to be reported in sludge incineration program, reduc- savings estimated at US$40,000 September 2008, metrics through the tions in water and fiber consumption have been realized by eliminating end of 2007 indicate reductions in as part of the Master Improvement the cost of transport. the consumption of both water and Program (MIP), and reductions in fiber per ton of finished product. An electricity consumption. Water and Fiber Savings anticipated added benefit of the MIP The mill realized annualized savings will be the reduction in wastewater Sludge Incineration of nearly US$52,000 during 2007 treatment plant costs as the mill’s During 2007, the IK Indah Kiat from the implementation of a whitewater system is improved to Tangerang Mill successfully piloted program to reduce water consump- remove more usable fiber from the and commercialized a program to tion and fiber loss. Savings were wastewater stream. mix mill sludge with coal in its power achieved by changing the color-run

2007 Corporate Social Responsibility Cover 67 Table VII – Indah Kiat Tangerang Energy Sources

Source 2005 2006 2007

Natural Gas 78.2% 44.8% 55.6%

Coal 9.4% 35.7% 35.1%

Diesel Oil 12.4% 19.5% 8.8%

Sludge – – 0.5%

TOTAL 100.0% 100.0% 100.0%

Note: Percentages are based on the amount of energy generated

Table VIII – Indah Kiat Tangerang Water and Fiber Consumption

Item 2005 2006 2007 World Bank Guidelines3

Water1

Water – Paper (m3/ADMT2) 18.9 21.9 18.6 10-300

Fiber

Paper (ADMT/ADMT) 0.79 0.80 0.77 None

1. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities. 2. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 10% moisture for pulp, 6% for paper. 3. World Bank IFC Environmental, Health and Safety Guidelines for Pulp & Paper Mills, Dec 10, 2007, page 31 table 3, paper mill, specialty paper.

sequence and by re-using 50% ized savings from these investments tables presented reflect the appli- of the process water in the new is US$2,138,016. cable Indonesian standard for the sequence. Fresh water consump- Indah Kiat Tangerang Mill. tion rates during the first six months d. Trend of Performance in Reducing of operation were reduced by 25%. Emissions, Effluent and Waste Wastewater Effluent As an added benefit, the fiber-loss The mill operated at less than 95% rate was reduced by more than 9% Air Emissions of Indonesian standards for BOD, through the addition of a filtering The Indah Kiat Tangerang Mill’s aver- less than 80% of COD and less than station before recycling the age annual air emissions showed 85% of TSS during the last three process water. substantial improvement in 2007 years. Savings from the MIP to as compared to 2006, and with reduce water and fiber consumption

Electricity Savings the exception of SO2 emissions, will first be reflected in the full-year Indah Kiat Tangerang reduced its as compared to 2005 as well. The numbers in 2008. energy consumption by 20% dur- mill’s emissions have been 93 to 99 ing 2007 through a series of small percent below the applicable govern- During the past three years, the mill equipment changes. These included ment standards in each of the last has not experienced any process installing “Auto Off” switches on three years. spills that were not handled effi- the re-winder, cutter, and cut-size ciently and within regulations by machines in the finishing /convert- In Indonesia, air-emission standards its wastewater treatment facility. ing operations; changing all paper are set at the national level (Decree machine main drives from DC to AC from Ministry of Environment, KEP-13/ Solid Waste motors; and installing an inverter on MENLH/3/1995). Water-effluent During 2007, the mill realized a the cleaner and washer pumps. The standards are set at the provincial significant improvement in managing cost of these changes in 2007 was level, typically by decree by the its solid waste. As a result of a US$250,000. The estimated annual- Governor of each Province. The successful pilot project, the mill is

68 Cover 2007 Corporate Social Responsibility Table IX – Indah Kiat Tangerang Power Boiler Air Emissions (Flue gas from power boilers)

Parameter 2005 2006 2007 Indonesian Standard

3 1 SO2 (mg/m ) 8.3 10.7 12.0 800

3 NO2 (mg/m ) 13.7 25.7 9.8 1000

Particulate (mg/m3) 14.4 10.4 9.3 230

Opacity2 (%) 8.3 5.0 5.0 35

1. The Indonesian Standard for Air Emissions is measured as milligrams per cubic meter, not kilograms per Air Dry Metric Tons as is common in many countries. 2. All reported values are based on periodic testing.

Table X – Indah Kiat Tangerang Water Effluent at Discharge

Parameter 2005 2006 2007 Indonesian Standard

BOD (kg/ADMT)1 0.22 0.27 0.27 5.0

COD (kg/ADMT) 1.82 1.81 1.84 10.0

TSS (kg/ADMT) 0.65 0.62 0.71 5.0

pH 7.00 6.83 6.95 6-9

Volume (million m3)2 4,950 5,530 5,270 None

Rate (m3/ADMT) 18.7 21.8 19.1 50

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 6% moisture for paper. 2. Water use measured is for production of paper and excludes water used in offices, at R&D and provided to local communities. Note: There are no World Bank discharge benchmarks for non-integrated paper mills

Table XI – Indah Kiat Tangerang Solid Waste

Type of Waste Sludge Fly Ash

Means of Disposal (%) 2005 2006 2007 2005 2006 2007

Incinerate – – 83% – – –

Landfill – – – – – –

Other (PT. Indocement) 100% 100% 17% – – –

Other (PT. Technotama) – – – 100% 100% 100%

TOTAL 100% 100% 100% 100% 100% 100%

2007 Corporate Social Responsibility Cover 69 now able to incinerate 100% of its conducts periodic briefings and sludge by mixing it with coal in the 6. Social Performance short trainings on traffic safety for power boiler instead having it trans- all employees. ported to a cement producer. a. Safety Performance The mill continues to send its fly b. Sickness and Absenteeism ash to PT. Technotama, a waste- management agency that recycles During 2007, the Indah Kiat The sickness rate for Indah Kiat the fly ash in the manufacture of Tangerang Mill had five reportable Tangerang mill employees during building materials. safety incidents, one more than 2007 was more than 20% higher in 2006, but still below the seven in 2007 than in the preceding two As do most mills, Indah Kiat incidents reported in 2005. The mill years. The mill’s absenteeism rate Tangerang also manages the Severity of Accident index remained showed a 9% improvement between disposal of a range of hazardous at 0.0078 for a second year, and, 2005 and 2007. materials, including waste oil, lab at 1.47, the mill’s Frequency of chemicals, batteries and mercury Accident index was slightly higher c. Social-Benefit Programs lamps. In each case, the mill has an than the index level for 2006. There appropriate method for disposing of were no fatalities in 2007, however, During 2007, the Indah Kiat Tangerang the material. For the most hazardous one accident resulted in a permanent Mill provided financial and in-kind materials, the mill uses authorized disability, the loss of a finger in a support for a number of programs and government licensed hazardous converting machine. that delivered social benefits to com- waste disposal businesses. munities in proximity to its operations. Traffic accidents outside the facility were the source of the mill’s major Health & Environment Programs safety incidents. To reduce the During 2007, the Indah Kiat Tangerang number of accidents, the mill Mill undertook a number of health

Table XII – Indah Kiat Tangerang Employee Safety Performance

Safety Performance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Number of Incidents – 7 – 4 – 5

Severity (SRA1) – 0.030 – 0.0078 – 0.0078

Frequency (FRA2) – 2.100 – 1.170 – 1.470

1. SRA = Severity Rate Accident = (Lost Hours X 1,000) / (Total Man Hours) 2. FRA = Frequency Rate Accident = (Total Accidents X 1,000,000) / (Total Man Hours)

70 Cover 2007 Corporate Social Responsibility and environmental programs to infants and toddlers. Indah Kiat Tangerang Mill invested a total of benefit the people of four “kam- Tangerang also sponsored a Red US$9,610 in education programs. pungs” (sub-villages) surrounding Cross blood-donation event in which The mill provided scholarships and the mill. 203 people participated. financial assistance to ten elemen- tary school students, two junior high To combat the spread of dengue As part of its health-oriented school students, and two senior high fever, the mill provided three rounds programs, the Indah Kiat Tangerang school students identified as having of chemical fogging in each of the Mill sponsored a mass-circumcision high achievement in school. The mill kampungs during 2007. program for local Muslim boys. The also provided a scholarship for one rite of male circumcision is practiced student (the child of a mill employee) In cooperation with two local widely by followers of Islam. to study at the Pulp & Paper Institute community health centers, the mill in West Java. provided supplemental food for 550 Indah Kiat Tangerang also provided village children under five years of funding for the Cisadane Festival in During 2007, Indah Kiat Tangerang age who were at risk of malnutrition. celebration of Environment Day. also provided on-the-job training The mill and nearby health centers for 120 high school students and also partnered in a “Healthy Chil- The total expenditures by the mill 24 university students. Students dren Competition” to raise villager on these health and environment received training in technical or awareness of the importance of programs in 2007 were US$1,540. non-technical skills corresponding to health care to the proper develop- their area of study in school. Training ment of children under five years Education Support Programs was provided in administration, data of age. In this competition, a panel Providing greater access to educa- processing, welding, lathe operation, comprised of health-care profes- tion is one of the paths to enhancing construction, machine operation and sionals evaluated the general health the quality of life in rural Indone- landscaping, among other areas. and developmental skills of village sia. During 2007, the Indah Kiat

Table XIII – Indah Kiat Tangerang Employee Sickness and Absenteeism Performance

Attendance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Sickness Rate1 – 0.012 – 0.012 – 0.014

Absenteeism Rate2 – 0.001 – 0.001 – 0.001

1. Sickness Rate = (Total Sick Days) / (Total Worker Days) 2. Absenteeism Rate = (Total absentee Days) / (Total Worker Days) NOTE: Indah Kiat Tangerang did not report targets for employee sickness and absenteeism performance.

2007 Corporate Social Responsibility Cover 71 Indah Kiat Tangerang provided The second-hand books and maga- the reconstruction project. While mill composition books to one kinder- zines were collected by Indah Kiat management acknowledged that garten, six elementary schools, one Tangerang Mill employees. the project suffered from a lack of secondary school, and four social community and government support, foundations that suffered flood dam- Sanitation Rehabilitation Program it views the project as a meaning- age in February, 2007. In conjunction In an effort to reduce the incidence ful step in encouraging community with the Eka Tjipta Foundation, of Dengue Fever in the area, the members to take greater responsibil- which provided core funding, the Indah Kiat Tangerang Mill partnered ity for their living environment. Indah Kiat Tangerang Mill distributed with local villagers to reconstruct composition books to an additional 100 meters of a 200-meter-long NOTE: Throughout this report, spending in twenty elementary schools impacted sanitary sewer that had historically Indonesian Rupiah has been converted to US$ calculated at the interbank rate effective by the flood. Indah Kiat Tangerang caused flooding during the rainy 12/31/2007. 1 Indonesian Rupiah = 0.0001066 US also distributed composition books, seasons. The mill provided building Dollar. 1 US Dollar = 9,379.00 Indonesian Rupiah. used books and magazines to street materials valued at US$1,576, and children in neighboring kampungs. 20 villagers provided the labor for

72 Cover 2007 Corporate Social Responsibility Pindo Deli Mills

2007 Corporate Social Responsibility Cover 73 Table I – Pindo Deli Sales (US$ Thousands)

Product 2005 2006 2007

Paper 634,918 707,773 812,512

Tissue 66,572 75,433 86,053

Packaging 12,848 12,040 12,275

Total 714,338 795,246 910,840

Table II – Pindo Deli Employees and Mill Indirect Jobs

Category 2005 2006 2007

Mill Employees 7,309 7,099 6,877

Mill Indirect Jobs 148 201 4,278

Total 7,457 7,300 11,155

During the last three years, Pindo Deli the mills rely on fossil fuels for their 1. Mills at a Glance increased its total output from 857,000 energy requirements. to 970,000 tons of paper products. During 2007, the mills produced Located in the village of Karawang, in 865,000 tons of paper, 64,000 tons of 2. Products West Java Province on the island of tissue and 40,000 tons of paperboard. Java, PT. Pindo Deli Pulp and Paper Mills (Pindo Deli) operates two non- Together, the Pindo Deli mills have Pindo Deli produces nearly two integrated paper mills The two mills 12 paper machines, 37 converting dozen branded paper products, had sales in 2007 of slightly more lines, and two wastewater treat- including photocopy paper, printing than US$900 million, an increase of ment plants. Also on-site are two and writing paper, tissues (facial, nearly 15% compared to 2006 and a co-generation plants owned and towel, napkin and toilet), cast-coated 27% increase compared to 2005. operated by PT. Dian Swastika Sen- paper and board, carbonless and tosa, the exclusive supplier of power thermal papers, art paper, art paper- The Pindo Deli mills provide more and steam to Pindo Deli. Pindo Deli board, and specialty papers such as than 6,800 jobs and have created One operates a de-inking plant and embossed, release-base and secu- employment opportunities in the a calcium carbonate plant. Pindo rity paper. Table IV shows the ten surrounding area for an additional Deli Two operates a pallet factory, leading brands and the main regions 4,200 people who provide the mills a corrugated box plant and a caustic in which these products are sold. with needed services. Responsible soda plant. The company also oper- today for the employment of nearly ates a tissue machine within the During 2007, Pindo Deli introduced 11,100 people, the two Pindo Deli Indah Kiat Perawang mill complex. three new products: Golden Coin cup mills provide an economic engine stock, Instant Preprint printing paper for the village of Karawang and the Because they are non-integrated and Sinarlux, an improved wet- surrounding communities. mills located in an urban setting, strength cast-coated paper. Market

74 Cover 2007 Corporate Social Responsibility Table III – Pindo Deli Production (ADMT1)

Product 2005 2006 2007

Paper 753,074 820,842 865,410

Tissue 57,271 61,585 63,918

Packaging 46,608 39,746 40,415

Total 856,953 922,173 969,743

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 5-6% moisture for paper.

reception has been strong for these is scheduled for 2008. The mill in 1997 and its license was last new offerings. management team holds quarterly renewed in 2005. The Caustic EMS project reviews to ensure that Soda plant received its first license continuous improvement projects in 1999 and this license will be 3. Certification and Verification are on target, and that corrective revalidated in 2008. measures for identified shortcomings have been implemented. Pindo Deli Two was first awarded a The Pindo Deli mills have earned a Green PROPER certificate in 2002 wide array of certifications, enabling Between 2004 and 2006, Pindo by the Ministry of the Environment’s them to compete in demanding Deli attained ISO 9706 certification Program for Pollution Control, markets the world over. for five of its key product lines (as Evaluation and Rating. The Green shown in Table V). The ISO 9706 PROPER award is given to mills Pindo Deli Mills One and Two have Standard for Permanent Paper signi- which produce emissions at levels been certified since 1996 and 1997, fies that these products have a rated of less than 50% of the government’s respectively, as compliant with the level of permanence that is pre- standards and which employ clean ISO 9001 Quality Management Sys- ferred by libraries and museums for technology, minimize waste, prevent tem (QMS) standard, and since 2001 documents, books or other records pollution and conserve resources. and 1999, respectively, as compliant requiring stipulated permanence. The mills’ certification was renewed with the ISO 14001 Environmental for the most recent award period, Management System (EMS) stan- In 1992, Pindo Deli One was first from October 1, 2006 through dard. The last QMS re-certification licensed as meeting government September 30, 2007. occurred in 2005 and the mills will be requirements for an Environmental re-inspected in 2008. The mills’ last Management and Monitoring Plan. In 2005, PT. Pindo Deli Pulp and EMS certification was renewed in This license was last revalidated in Paper Mills became the first APP 2005 and a renewal assessment 2006. Pindo Deli Two was licensed operation to attain OHSAS 18001

2007 Corporate Social Responsibility Cover 75 Table IV – Pindo Deli Brands

Major Mill Brands Paper Products Main Regions Where Brand is Sold

Bola Dunia Photocopy Paper Southeast Asia

White & Color Printing & Writing Paper, Brief Card, Golden Coin Africa, Asia, Middle East, North America Art Paper, Art Board

Impression 2000 Carbonless Paper Asia, Middle East, North America

Livi Tissue Products Africa, Asia, Europe,

Nice Tissue Products Africa, Asia

Office Print Photocopy Paper Europe, Southeast Asia

Office Print Copy Photocopy Paper Europe, Southeast Asia

Paseo Tissue Products Africa, Asia, Middle East, Oceana

Sinarlux Cast-coated Paper Europe

Sinarlux 8000 Cast-coated Paperboard Europe

certification. This internationally In 2007, both mills continued their and Japan. Seven other product recognized occupational health and successful implementation of lines at the two mills are USFDA- safety management system standard controls to qualify their output as certified, with the earliest of these helps management eliminate or compliant with the requirements of certifications dating back to 2004. minimize risk to employees and Japan’s Green Purchasing Law (GPL) Selected mill products also have other affected parties. Compliance so that the mills and their custom- been Ecolabel certified to Indone- with the OHSAS 18001 standard ers would be able to continue selling sian, European Union and Japanese ensures conformance with company product in that country. This law standards. In March of 2007, Pindo occupational, health and safety requires certification of an unbroken Deli also was certified compliant to policies, and demonstrates such chain-of-custody of supply, from the European Union sensory analysis conformance to others. the legal sourcing of raw material standard, DIN EN 1230-1, for its through mill processes to the sale of cast-coated paper and paperboard The Pindo Deli mills have remained finished product to the customer. coming in contact with foodstuffs. certified as compliant with the Government of Indonesia’s During 2007, Pindo Deli achieved During 2007, the Pindo Deli mills Occupational Safety and Health product safety certification for its attained Halal product quality Management standards (SMK3) cup stock base from the US Food certification for its tissue products, since 2005 at Pindo Two and since and Drug Administration (USFDA) a certification that is very important 2006 at Pindo One. and from similar agencies in Korea in Islamic markets.

76 Cover 2007 Corporate Social Responsibility Table V – Pindo Deli Certification Status as of December 31, 2007

Certification Classification Scope First Issued

ISO 9001 QMS Mill 1 / Mill 2 1996/1997

ISO 14001 EMS Mill 1 / Mill 2 2001/1999

Cast-coated and Photocopy paper 2004

ISO 9706 Product permanence Instant Preprint 2005

Art Board and Uncoated paper 2006

UKL/UPL – Government of Indonesia Environmental Management and 1992/1997/ Mill 1 / Mill 2 / Caustic Soda Plant and Karawang Regency Monitoring Plan 1999 Green PROPER - Government Pollution control Mill 2 2002-2003 of Indonesia OHSAS 18001 – International Occupational Safety & Health Occupational Health and Safety Mills 2005 Management Assessment Series Occupational Safety & Health SMK3 – Government of Indonesia Mills 2005 & 2006 Management GPL – Minister of Environment Product legality & sustainability All products 2006 of Japan

Cast-coated paper & Paperboard 2004

Napkin Tissue and Brief Card 2005 FDA – USA Product safety Art Board 2006

Towel Tissue, Cup Stock, Printing 2007 paper and Corrugated boxboard

FDA – Korea Product safety Cup Stock base 2007

FDA – Japan Product safety Cup Stock base 2007

DIN Sensory Analysis – Cast-coated paper & Product Safety 2007 European Union Paperboard

Ecolabel – Indonesian Standard Product quality Uncoated paper 2006

Ecolabel – European Product quality Photocopy and Graphic paper 2006 Union Commission

Ecomark – Japanese Standard Product quality Color Brief Card 2007

Halal – Religious Standard Product quality Tissue products 2007

Product safety based Woolworth Quality Assurance Tissue products 2007 on HACCP1

1. HACCP = Hazard Analysis and Critical Control Point, an international defined protocol.

In 2007, the mills’ tissue products mills for the mill’s PEFC certification 75-80% hardwood pulp from APP’s were certified to Woolworth’s Quality audit. After the audit was completed sister companies on the island of Assurance Standard. This Australian in December of 2007, the auditor rec- Sumatra, 5-7% third-party-certified company’s product safety system is ommended that both mills be certified long-fiber market pulp, 10-15% based on the internationally recog- compliant to the PEFC standards. recycled mill broke, and 18-21% nized Hazard Analysis and Critical non-fiber fillers to enhance paper Control Point protocol. and paperboard properties. 4. Fiber Supply Integrity Pindo Deli, together with Global All hardwood pulp entering the Forestry Service (an independent mill is made with legal and non- consulting firm), conducted PEFC The 12 paper machines at Pindo controversial fiber subjected to APP’s training early in 2007 to prepare the Deli are furnished with an average of Legal Origin Verification and Chain of

2007 Corporate Social Responsibility Cover 77 Custody system in place at both pulp on line during 2007. This installation 2005, a result of targeted fiber mills on Sumatra. This protocol was was necessary because of delay in recovery projects that have been an developed in conformity with the Crite- the construction of a new natural- integral part of the effort at both mills ria and Indicators of the LEI (Lembaga gas pipeline from South Sumatra to to reduce water consumption. Ekolabel Indonesia – The Indonesian West Java. Ecolabelling Institute) Standard for In April of 2007, the mill initiated a Wood Fibre Material (plantation wood b. Water and Fiber Consumption comprehensive Master Improvement and mixed hardwood residues from Program (MIP) to accelerate the plantation development). Since 2005, the mills have reduced reduction of water and fiber consump- by 16% the amount of water required tion per ton of finished product. This One hundred percent of the market to make an air-dried metric ton of MIP is part of a coordinated effort by pulp purchased by the mill is third- finished product. This has been all of the APP pulp and paper mills in party certified as originating in forests accomplished through a series of Indonesia and provides for inter-mill meeting either the Forest Stewardship small projects focused on waste sharing of lessons learned and best Council (FSC) or the PEFC standard reduction and fiber recovery, which, practices to leverage experience and for responsible forest management. in turn, reduces water use. During achieve results more quickly. each of the last three years, the amount of water required to make a While the final results of the MIP are 5. Environmental Performance ton of finished product has been at expected to be reported in Sep- the low end of the benchmarks set tember 2008, metrics through the forth in the World Bank International end of 2007 indicate reductions in a. Energy Mix Finance Corporation Environmental the consumption of both water and Guidelines for paper. fiber per ton of finished product. In 2006, the mill implemented a An anticipated added benefit of the contingency plan and installed a The mills’ rate of fiber use has been MIP will be the reduction in waste- new coal-fired boiler which came reduced by more than 12% since water treatment plant costs, as the

78 Cover 2007 Corporate Social Responsibility Table VI – Pindo Deli Paper Furnish

Furnish 2005 2006 2007

Virgin Hardwood Pulp 80-85% 75-80% 73-80%

Purchased Certified Market Pulp 5-10% 8-10% 5-7%

Mill Broke1 10% 10-12% 10-15%

Non-fiber Fillers 18-20% 18.5-20.5% 18.5-21%

TOTAL 100.0% 100.0% 100.0%

1. Includes all pulp and paper recycled within the mill.

Table VII – Pindo Deli Energy Sources

Source 2005 2006 2007

Fossil fuel oil 0.8% 2.0% 2.2%

Fossil fuel coal – 0% 25.5%

Fossil fuel gas 99.2% 98.0% 72.3%

TOTAL 100.0% 100.0% 100.0%

Note: Percentages are based on the amount of energy generated

Table VIII – Pindo Deli Water and Fiber Consumption

Item 2005 2006 2007 World Bank Standard4

Water1

Water – Paper (m3/ADMT2) 20.0 19.5 16.8 5-40

Fiber

Paper (GMT3/ADMT) 0.91 0.86 0.80 None

1. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities. 2. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 10% moisture for pulp, 6% for paper. 3. GMT= Green Metric Ton where a GMT is the weight of the fiber at the moisture level when delivered to the mill. 4. World Bank IFC Environmental, Health and Safety Guidelines for Pulp & Paper Mills, Dec 10, 2007, page 31 table 3 for uncoated printing and writing paper.

mills’ whitewater recovery system (EMS) protocols to drive its improve- of water treatment in the waste- is improved to remove more usable ment programs on a timely basis. Key water treatment plant by reducing fiber from the wastewater stream. projects included Chemical Oxygen the COD load. During 2007, Pindo Demand (COD) reduction in the One changed its biological treatment c. Mill Programs and Investments wastewater treatment plant, energy process from contact stabilization to Reduce Consumption and/or savings and the increased substitu- to a conventional plug flow system. Discharges tion of calcium carbonate for fiber. This action has decreased the COD of effluent from level of 180 During 2007, the mill initiated a COD Reduction ppm (average in 2006) to 125 ppm wide range of programs using ISO The goal of Pindo Deli’s COD Reduc- (average in 2007), a 30% reduction Environmental Management Systems tion project was to reduce the cost in the COD concentration.

2007 Corporate Social Responsibility Cover 79 Pindo Deli Two adopted a new While NO2 emissions increased in in managing its solid waste. The carbon-based nutrient to enhance this same period, due to the instal- mill now has three government- the microorganism level of activity lation of a coal boiler at Pindo One, approved users of sludge – PT. and reduce odor. This action has these emissions are still at less than Sumber Berkah, PT. Kalimas Sakt generated other positive impacts 2% of the government standard. and PT. Sinar Indah Kertas – all i.e. less chemical treatment cost of which continue to conduct and less bio-sludge generation. As Despite the addition of the coal reutilization trials. Located in the a result, Pindo Deli Two reduced its boiler, the mill was able to reduce nearby village of Tangerang, these wastewater treatment plant chemical its particulate emissions to a level companies are manufacturers of costs by US$100,000 per year and that was 12% lower than the 2005 lower quality paperboard for the its annual sludge-handling costs by level and less than 4% of Indonesia’s domestic market. At year-end, the nearly US$4,500. government standard. This improve- mill sent 400 tons of fly ash that had ment was attributable to the newly been stored in its silo for delivery to Energy Reduction installed state-of-the-art electrostatic PT. Holcim Cement and PT. Holcim Pindo Deli made a concerted effort precipitator which was a part of the Beton, approved buyers in the in 2007 to reduce energy use and coal boiler investment. construction-materials business. associated costs through targeted projects addressing electricity and In Indonesia, air-emission standards As do most mills, Pindo Deli manages steam usage on paper machines 8, are set at the national level (Decree the disposal of a range of hazard- 9 and 12, on the cast-coating line, in from Ministry of Environment, KEP-13/ ous materials including waste oil, lab the tissue mill, in the corrugated box MENLH/3/1995). Water-effluent stan- chemicals, batteries and mercury plant, and in the caustic soda plant. dards are set at the provincial level, lamps. In each case, the mill has an Taken as a whole, it is estimated that typically by decree by the Governor of appropriate method for disposing of these projects will reduce energy each Province. The tables presented the material. For the most hazardous costs by US$8.6 million per year. reflect the applicable Indonesian materials, the mill uses authorized standard for the Pindo Deli mills. and government licensed hazardous Calcium Carbonate Substitution waste disposal businesses. for Fiber Wastewater Effluent During 2007, both Pindo Deli mills The mills’ discharge of wastewater continued efforts to reduce fiber to the Citarum River was about 15% 6. Social Performance cost and enhance paper product higher in COD than the upstream performance by substituting calcium water obtained from the river. carbonate for fiber. To date, the mill a. Safety Performance has spent more than US$3 million to The two mills have achieved install needed presses and related significant reductions in their waste- During 2007, the Pindo Deli mills equipment to realize improved water effluents during the past two had 241 reportable safety incidents, paper performance attributes while years (ranging from 33 to 50%) as down 25% from the 320 incidents reducing the fiber loading. Results discussed in the “Mill Programs and reported in 2006. However, the mill’s for this project will begin to be Investments to Reduce Consumption Severity of Accident index increased tracked in 2008. and/or Discharges” section. Savings from 0.327 in 2006 to 0.618 in 2007. are being realized from the 2007 This is attributable to two on-the-job d. Trend of Performance in Reducing MIP projects to further reduce water deaths in 2007; one resulting from a Emissions, Effluent and Waste and fiber consumption, and these fall into the mill broke tank, and the savings will first be fully reflected in other from a falling-object incident Air Emissions the 2008 numbers. that occurred when the sling on During the last two years, Pindo Deli a crane gave way. There were no accidents that resulted in any has reduced SO2 emissions by two- During the past three years, the mill thirds to a level that is less than 1% did not experience any process spills permanent disability during 2007. of the Indonesian standard. This has that were not handled efficiently and resulted from a tight focus on mea- within regulations by its wastewater The mill has taken corrective actions surement and regular maintenance treatment facility. including the erection of a barrier in each power generation plant to around Paper Machine 12, increased ensure efficiency as the volume of Solid Waste worker education, and improved product and the demand for power Pindo Deli continued to make equipment maintenance. increased during the last three years. steady progress throughout 2007

80 Cover 2007 Corporate Social Responsibility Table IX – Pindo Deli Power Boiler Air Emissions (Flue gas from power boilers)

Parameter 2005 2006 2007 Indonesian Standard

3 1 3 SO2 (mg/m ) 12.89 6.23 4.13 ≥800 mg/m

3 3 NO2 (mg/m ) 7.77 9.28 18.16 ≤1000 mg/m

Particulate (mg/m3) 8.42 12.89 7.44 ≤230 mg/m3

Opacity2 (%) <5% <5% <5% ≤35%

1. The Indonesian Standard for Air Emissions is measured as milligrams per cubic meter, not kilograms per Air Dry Metric Tons as is common in many countries. 2. Opacity values are based on routine testing except for Pindo Deli which is based on spot checks.

Table X – Pindo Deli Wastewater Effluent at Discharge

Parameter 2005 2006 2007 Indonesian Standard

BOD (kg/ADMT)1 0.75 0.55 0.42 ≤5 kg/ADMT

COD (kg/ADMT) 2.05 1.41 1.04 ≤10 kg/ADMT

TSS (kg/ADMT) 0.77 0.59 0.52 ≤5 kg/ADMT

pH 7.24 7.14 7.12 6-9

Volume (million m3)2 13.57 13.82 14.18 None

Rate (m3/ADMT) 15.96 14.78 14.48 None

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 6% moisture for paper. 2. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities. Note: There are no World Bank discharge benchmarks for non-integrated paper mills.

Pindo Deli’s Frequency of Accident Mobile Clinic Program required assistance in meeting their index decreased from 2006 levels to Pindo Deli invested US$5,715 during basic needs. Pindo Deli also supplied 8.051 in 2007. 2007 to bring medical care to some food, cooking oil, medicines, and 4,300 patients in four nearby villages composition books to families in b. Sickness and Absenteeism through its Mobile Clinic program. Karawang that were impacted by Under the program, clinics were held flooding early in the year. The sickness rate for mill employees at eight service-delivery locations during 2007 was 35% lower than in four times a month on a rotating The mill provided audio facilities 2006 and 2005. The mill’s absenteeism basis. The mill provided medicine, an for several mosques surrounding rate reflected an improvement of more ambulance, and physician services. its operations. Pindo Deli also than 12% over the prior two years. In 2007, Pindo Deli increased the participated in and provided financial number of physicians on staff so that support for the area’s commemora- c. Social-Benefit Programs it could better serve patients who tion of Indonesia’s Independence previously had been seen only by a Day and Muslim Holiday. During 2007, the Pindo Deli mills medical assistant. provided financial and in-kind Pindo Deli invested at total of support for a number of programs Community Support and Disaster US$14,625 in community support that delivered social benefits Relief and disaster relief during 2007. to communities in proximity to During 2007, the Pindo Deli mills its operations. supplied food and drink to 1,211 resi- Income Enhancement Program dents in five neighboring villages that Pindo Deli invested US$613 during

2007 Corporate Social Responsibility Cover 81 Table XI – Pindo Deli Solid Waste

Type of Waste Sludge Fly Ash

Means of Disposal (%) 2005 2006 2007 2005 2006 2007

Reutilization Trials 2% 12% 43 % NA NA 47.6%

Landfill 98% 88% 57 % NA NA –

Other1 – – – NA NA 52.4%

TOTAL 100% 100% 100% NA NA 100%

1. Silo storage while awaiting sale to approved buyer.

Table XII – Pindo Deli Employee Safety Performance

Safety Performance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Number of Incidents 400 453 400 320 289 241

Severity (SRA1) 0.745 0.850 0.500 0.327 0.294 0.618

Frequency (FRA2) 9.400 13.278 9.030 10.935 9.842 8.051

1. SRA = Severity Rate Accident = (Lost Hours X 1,000) / (Total Man Hours) 2. FRA = Frequency Rate Accident = (Total Accidents X 1,000,000) / (Total Man Hours)

Table XIII – Pindo Deli Employee Sickness and Absenteeism Performance

Attendance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Sickness Rate1 0.01300 0.01492 0.01100 0.01589 0.01100 0.00994

Absenteeism Rate2 – 0.06666 – 0.06656 – 0.05765

1. Sickness Rate = (Total Sick Days) / (Total Worker Days) 2. Absenteeism Rate = (Total absentee Days) / (Total Worker Days) NOTE: Pindo Deli did not report targets for employee absenteeism performance.

2007 to continue its rice-farming benefit the people of Adiarsa NOTE: Throughout this report, spending in support program. The mill made Timur and Adiarsa Barat, two Indonesian Rupiah has been converted to US$ calculated at the interbank rate effective available 82.7 hectares of land villages located near the mill. This 12/31/2007. 1 Indonesian Rupiah = 0.0001066 US surrounding the mill for use as rice funding provided materials and Dollar. 1 US Dollar = 9,379.00 Indonesian Rupiah. fields by local farmers on a low-cost labor for the construction of a sanita- lease basis. tion facility, the renovation of the Taqwa Mosque, the construction of Infrastructure Projects a village road, and the procurement During 2007, Pindo Deli invested materials for the rehabilitation of an US$2,552 in infrastructure projects to Islamic school.

82 Cover 2007 Corporate Social Responsibility Tjiwi Kimia Mill

2007 Corporate Social Responsibility Cover 83 12 paper machines, 137 convert- products, Excelpro and Extraprint, Mill at a Glance ing lines, a coal-fired co-generation into key markets in Europe, North plant, a fluidized bed incinerator for America and Asia. The mill also intro- waste, a chemical plant (producing duced an improved Paperline Gold The PT. Pabrik Kertas Tjiwi Kimia caustic soda, and various chlorine photocopy paper. Tbk. mill (Tjiwi Kimia) is a large and hypochlorite products), two non-integrated paper mill located de-inking plants, a pallet factory, 3. Certification and Verification in the Regency of Sidoarjo in the a corrugated box plant and two province of East Java on the island wastewater treatment plants. The Tjiwi Kimia mill has remained of Java. The mill had sales in 2007 certified as compliant with the ISO of slightly more than US$1.1 billion, 2. Products 9001 Quality Management System an increase of nearly 21% compared (QMS) standard and the ISO 14001 to 2006 and a 25% increase com- Tjiwi Kimia produces a range of Environmental Management System pared to 2005. coated and uncoated printing and (EMS) standard since 2001. The writing papers, cast-coated paper last QMS re-certification was in Tjiwi Kimia mill provides more than and board, carbonless paper and 2007 and a renewal assessment is 12,900 jobs and is an economic a wide range of value-added office scheduled for 2010. The mill’s EMS engine for the communities in and and stationery products. Tjiwi Kimia certification was renewed in 2007 around the village of Sidoarjo. also prints books and brochures and and a re-assessment is also sched- is among the largest publishers in uled for 2010. The mill management In 2007, the mill produced 1,335,000 Indonesia. The mill’s leading branded team holds quarterly EMS project tons of paper goods, consisting of paper products are sold in North reviews to ensure that continuous 1,040,000 tons of paper products, America, the Middle East and Asia. improvement projects are on target 217,000 tons of stationery products and that appropriate corrective and 78,000 tons of corrugated box During 2007, Tjiwi Kimia introduced measures for identified shortcomings products. Tjiwi Kimia operates two new photocopier branded have been implemented.

Table I – Tjiwi Kimia Sales (US$ Thousands)

Product 2005 2006 2007

Paper 670,600 700,500 853,900

Stationery 204,700 194,900 231,900

Packaging 23,800 26,800 32,000

Chemicals 27,100 29,200 35,700

Total 926,200 951,400 1,153,500

84 Cover 2007 Corporate Social Responsibility In 1999, Tjiwi Kimia first met UKL/ Program for Pollution Control, of Indonesia’s Occupational Safety UPL requirements and was awarded Evaluation and Rating. The PROPER and Health Management standards a license for its Environmental award is given to mills that produce (SMK3) since 1998. Management and Monitoring Plan. emissions at levels below those In 2005, the mill also obtained an permitted by government standards In 2007, Tjiwi Kimia continued AMDAL license after preparing the and which use clean technology, its successful implementation of required Environmental Impact minimize waste, prevent pollution controls to qualify its output as Assessment for the mill operations. and conserve resources. The mill’s compliant with the requirements of Both of these licenses were issued PROPER certification was renewed Japan’s Green Purchasing Law (GPL) by the government of the Province of for the most recent award period, so that the mill and its customers East Java. from October 1, 2006 through would be able to continue selling September 30, 2007. product in that country. This law In 2002, Tjiwi Kimia was first requires certification of an unbroken awarded a Blue PROPER certificate Tjiwi Kimia has remained certified chain-of-custody of supply, from by the Ministry of the Environment’s as compliant with the Government the legal sourcing of raw material

Table II – Tjiwi Kimia Employees and Mill Indirect Jobs

Category 2005 2006 2007

Mill Employees 13,260 13,065 12,929

Total 13,260 13,065 12,929

Table III – Tjiwi Kimia Production (ADMT1)

Product 2005 2006 2007

Paper 949,000 974,000 1,040,000

Stationery 223,000 181,000 217,000

Packaging 77,000 78,000 78,000

Total 1,249,000 1,233,000 1,335,000

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 6% moisture for paper.

2007 Corporate Social Responsibility Cover 85 Table IV – Tjiwi Kimia Brands

Major Mill Brands Paper Products Main Regions Where Brand is Sold

Inspira Uncoated Offset Paper North America

Paperline Gold Photocopy Paper Asia, Middle East

Paperline Multi Purpose Photocopy Paper North America

Table V – Tjiwi Kimia Certification Status as of December 31, 2007

Certification Classification Scope First Issued

ISO 9001 QMS Mill 1995

ISO 14001 EMS Mill 1998

Environmental Management UKL/UPL – Province of East Java Mill 1999 and Monitoring Plan

AMDAL – Province of East Java Environmental Impact Assessment Mill 2005

Blue PROPER – Government of Indonesia Pollution control Mill 2002-2003

SMK3 – Government of Indonesia OH&SM Mill 1998

GPL – Minister of Environment of Japan Product legality & sustainability All products 2006

Ecolabel – Indonesian Standard Product quality Uncoated paper 2006

Exercise book, Notebook Ecolabel – European Union Commission Product quality 2006 and Loose Leaf

Ecomark – Japanese Standard Product quality Notebook 2005

through mill processes to the sale of All hardwood pulp entering the finished product to the customer. mill is made with fiber subjected 5. Environmental Performance to APP’s Legal Origin Verification Selected mill products have also been and Chain of Custody system in a. Energy Mix Ecolabel certified to Indonesian, Euro- place at both of APP’s pulp mills on pean Union and Japanese standards. Sumatra. This protocol was devel- oped in conformity with the Criteria Tjiwi Kimia is dependent on Indonesia- 4. Fiber Supply Integrity and Indicators of the LEI (Lembaga sourced coal as the primary fuel Ecolabel Indonesia – Indonesian source for its energy generation. The 12 paper machines at Tjiwi Kimia Ecolabel Institute) Standard for b. Water and Fiber Consumption are supplied with a fiber furnish Wood Fibre Material (plantation which is predominately paper pulp. wood and mixed hardwood residues During the last three years, the from plantation development). The amount of water required at mill has made steady progress in Tjiwi Kimia to make a ton of finished increasing the non-fiber filler content. One hundred percent of the purchased product was reduced in 2007 as long-fiber market pulp is certified compared to 2006 levels. In all three While the mill does not track and and meets either the Forest Steward- years, the amount of water required record the mill-wide mix of hard- ship Council (FSC) or the Programme to make a ton of finished product has wood and softwood pulp consumed, for the Endorsement of Forest been at the low end of the bench- it does track the mix carefully on a Certification (PEFC) requirements for mark in the World Bank International product-line basis. sustainable forest management. Finance Corporation Environmental Guidelines for paper.

86 Cover 2007 Corporate Social Responsibility Table VI – Tjiwi Kimia Paper Furnish

Furnish 2005 2006 2007

Virgin Hardwood Pulp, Purchased Market Pulp and 75% 76% 74% Post Consumer Waste Paper

Non-fiber Filler 23% 24% 25%

TOTAL 98% 100% 99%

1. Includes all pulp and paper recycled within the mill.

Table VII – Tjiwi Kimia Energy Sources

Sources 2005 2006 2007

Coal 96.7% 96.2% 95.8%

Natural Gas 1.8% 1.5% 2.3%

Fuel Oil 1.5% 2.3% 1.9%

TOTAL 100.0% 100.0% 100.0%

In April 2007, the mill initiated a wastewater treatment plant costs as changing the sequence of color runs comprehensive Master Improvement the mill’s whitewater recovery system to minimize water use, and installing a Program (MIP) to accelerate the is improved to remove more usable new screen for recycling wastewater. reduction of water and fiber con- fiber from the wastewater stream. Water consumption was reduced by sumption per ton of finished product. 14% in 2007 as compared to 2006. The MIP is being implemented at c. Mill Programs and Investments Annualized savings are estimated at Tjiwi Kimia as part of its Skill Devel- to Reduce Consumption and/or more than US$500,000. opment Activity (SDA process, and Discharges is part of a coordinated effort by all Fiber Loss Reduction of the APP pulp and paper mills in During 2007, the mill initiated a The mill also instituted a number of Indonesia and provides for inter-mill wide range of programs using the changes in operating practices and sharing of lessons learned and best ISO 14001 Environmental Manage- enhanced maintenance in order to practices to leverage experience and ment Systems (EMS) protocols, in reduce the loss of fiber during paper- achieve results more quickly. conjunction with the SDA method- making. This included replacing ology, to drive these actions on a seals and repairing clarifiers (to The SDA process focuses on a timely basis. Key projects included optimize the recycling of waste- combination of changes in operating reducing water consumption, water which contains fiber) as well practices, enhanced maintenance reducing fiber losses and reducing as installing new screens and a new and small, targeted capital invest- steam and electricity consumption. filtration system. Annualized savings ments. from these projects are estimated at Water Consumption about US$500,000. While the final results of the MIP During 2007, the mill instituted a are expected to be reported in number of changes in operating Energy Consumption September 2008, metrics through the practices and enhanced maintenance Reducing steam and electricity use end of 2007 indicate reductions in in order to reduce water use, which, was a key focus in 2007. This was the consumption of both water and in turn, reduced energy costs. Key accomplished by implementing fiber per ton of finished product. changes included recycling water specific changes in operations (e.g., and substituting wastewater for increasing power plant steam outlet An anticipated added benefit of fresh water in several key places temperature by 10ºC), and enhanced the MIP will be the reduction in in the manufacturing processes, maintenance (e.g., periodic checks

2007 Corporate Social Responsibility Cover 87 of groove depth in press rolls) along Particulate emissions in 2007, though continues to be of higher quality than with targeted investments such as higher than in 2006, were less than the water obtained from the river. the purchase of a new inverter and 20% of the government standard and a pulley in a blower motor. These, were 19% lower in 2007 than in 2005. Improvements during the last three along with the active promotion of The mill’s coal-fueled power boiler years in wastewater effluents – a higher level of awareness among incorporates an electrostatic pre- BOD, COD and TSS – have resulted employees, enabled the mill to save cipitator, and the mill has a targeted largely from projects to reduce fiber more than US$1.5 million on an maintenance program to ensure that losses, improve wastewater quality annualized basis. it can continue to maintain a level and reduce wastewater treat- of emissions that is well below the ment costs. The section entitled d. Trend of Performance in Reducing allowable standard. “Mill Programs and Investments Emissions, Effluent and Waste to Reduce Consumption and/or In Indonesia, air-emission standards Discharges” describes these projects Air Emissions are set at the national level (Decree in more detail. Since 2006, Tjiwi Kimia has reduced from Ministry of Environment,

SO2 emissions by more than 90% KEP-13/MENLH/3/1995). Water- Savings from the MIP/SDA projects to a level that is less than 1% of effluent standards are set at the to further reduce water consumption the Indonesian Standard. This has provincial level, typically by decree and fiber loss that were implemented resulted from a tight purchasing by the Governor of each Province. in mid-to-late 2007 will first be reflect- focus on selecting coal with low- The tables presented reflect the ed in the full-year numbers for 2008. sulfur content. applicable Indonesian standard for the Tjiwi Kimia mill. During the past three years, the mill

The mill’s NO2 emissions increased did not experience any process spills during 2007, due to a one-time failure Wastewater Effluent that could not be handled efficiently of equipment, which upset the air-to- The mill’s discharge of wastewater and within regulations by its waste- fuel balance. into a branch of the Brantas River water treatment facility.

88 Cover 2007 Corporate Social Responsibility Table VIII – Tjiwi Kimia Water and Fiber Consumption

Item 2005 2006 2007 World Bank Guidelines4

Water1

Water – Paper (m3/ADMT2) 8.4 10.0 8.6 5-40

Fiber

Paper (GMT3/ADMT) 0.878 0.886 0.872 None

1. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities. 2. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 10% moisture for pulp, 6% for paper. 3. GMT = Green Metric Ton where a GMT is the weight of the fiber at the moisture level when delivered to the mill. 4. World Bank IFC Environmental, Health and Safety Guidelines for Pulp & Paper Mills, Dec 10, 2007, page 28 tables 1(i) & 1(j), paper mill, uncoated and coated printing and writing paper.

Table IX – Tjiwi Kimia Power Boiler Air Emissions (Flue gas from power boilers)

Parameter 2005 2006 2007 Indonesian Standard

3 1 SO2 (mg/m ) 410.4 53.6 31.0 750

3 NO2 (mg/m ) 25.8 57.4 74.4 850

Particulate (mg/m3) 30.0 12.7 24.4 150

Opacity2 (%) NA NA NA 20

1. The Indonesian Standard for Air Emissions is measured as milligrams per cubic meter, not kilograms per Air Dry Metric Tons as is common in many countries. 2. Opacity values are based on routine testing.

Table X – Tjiwi Kimia Water Effluent at Discharge

Parameter 2005 2006 2007 Indonesian Standard

BOD (kg/ADMT)1 0.23 0.23 0.17 5

COD (kg/ADMT) 0.53 0.51 0.44 10

TSS (kg/ADMT) 0.13 0.07 0.12 5 pH 7.04 7.00 7.00 6-9

Volume (million m3)2 10.46 12.38 11.52 None

Rate (m3/ADMT) 7.96 10.04 8.19 None

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 6% moisture for paper. 2. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities (i.e., only water for paper machines is included). Note: There are no World Bank discharge benchmarks for non-integrated paper mills.

2007 Corporate Social Responsibility Cover 89 Table XI – Tjiwi Kimia Solid Waste

Type of Waste Sludge Fly Ash

Means of Disposal (%) 2005 2006 2007 2005 2006 2007

Incinerate – 40% – – – –

Sell – – 100% 100% 100% 100%

Landfill 100% 60% – – – –

TOTAL 100% 100% 100% 100% 100% 100%

Solid Waste In each case, the mill has an appro- Tjiwi Kimia reported no major safety Tjiwi Kimia continued to make steady priate method for disposing of the incidents or related corrective progress in managing its solid waste material. For the most hazardous actions during 2007. in 2007. The mill now sells 100% of materials, the mill uses authorized its mill sludge to a nearby govern- and government licensed hazardous b. Sickness and Absenteeism ment approved newsprint producer waste disposal businesses. which mixes the sludge into its The sickness rate for mill employees furnish to make a domestic grade of during 2007 was markedly lower paper. The mill continues to sell its 6. Social Performance in 2007 than in the previous two fly ash to a government-approved years. The mill’s absenteeism rate in construction company that makes 2007 remained constant with 2006 cement bricks, paving blocks and a. Safety Performance performance, which reflected a 46% roof tiles. reduction from the 2005 rate. During 2007, the Tjiwi Kimia mill had As do most mills, Tjiwi Kimia manages 167 reportable safety incidents, up c. Social-Benefit Programs the disposal of a range of hazardous from the 155 incidents reported in materials including waste oil, lab 2006. The mill’s Severity of Accident During 2007, the Tjiwi Kimia mill pro- chemicals, batteries and mercury index increased to 11.56 from 7.95 in vided financial and in-kind support lamps. General non-hazardous 2006, and its Frequency of Accident for a number of programs that deliv- wastes on-site are segregated into index also increased from 2006 ered social benefits to communities their recyclable components in levels to 53.65. Four mill employees in proximity to its operations. partnership with a local recycling were killed in car accidents outside co-operative, which also takes respon- the mill gate and 12 employees Health Care/AIDS Awareness Program sibility for disposing of any residues suffered permanent disabilities due During 2007, Tjiwi Kimia participated at a licensed municipal facility. to accidents during the year. in a number of programs to help

90 Cover 2007 Corporate Social Responsibility Table XII – Tjiwi Kimia Employee Safety Performance

Safety Performance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Number of Incidents – 169 – 155 – 167

Severity (SRA1) – 22.05 – 7.95 – 11.56

Frequency (FRA2) – 79.12 – 49.89 – 53.65

1. SRA = Severity Rate Accident = (Lost Hours X 1,000) / (Total Man Hours) 2. FRA = Frequency Rate Accident = (Total Accidents X 1,000,000) / (Total Man Hours)

ensure the health and welfare of for women and on the correlation In a program intended to stimulate people living near the mill. of healthy sexual relationships interest in learning and careers, Tjiwi with workplace productivity. The Kimia offered plant tours to student Tjiwi Kimia conducted an outreach mill also distributed educational groups, providing them a first-hand campaign to raise awareness of the materials throughout the nearby opportunity to experience the importance of proper health care. city of Surabaya. Tjiwi Kimia’s 2007 papermaking process. In addition, the mill organized investment in health-care-related a blood drive for which 637 mill programs was US$29,314. Tjiwi Kimia also reached out to employees volunteered. 12,600 students in 15 area high Education Support Programs schools through its Economics for Tjiwi Kimia continued its participation During 2007, Tjiwi Kimia invested Life Program. Conducted in coopera- (begun in 2002) in a large-scale HIV/ US$12,654 in programs designed tion with the Eka Tjipta Foundation, AIDS and Drug Addiction awareness to provide local villagers greater Indonesian Junior Achievement and campaign. This campaign had a access to education and enhanced the East Java Province Education reach of more than 80,000 persons learning experiences. Service, this program provided at the mill, in local schools, in the technical assistance and entrepre- surrounding communities, and at The mill provided scholarships to neurial skills training to students, and other APP mill sites. During 2007, enable two orphaned children to gave them the opportunity to create the mill provided a keynote speaker attend school, and provided finan- and run their own food-service and and was an exhibitor at Indonesia’s cial support to 11 schools in the handicraft businesses. 3rd National Symposium on HIV/ mill area. Tjiwi Kimia also provided AIDS (held in February), conducted composition books to 12 elemen- Community Activity Programs an AIDS prevention workshop tary schools and one soccer school, The Tjiwi Kimia mill invested for program trainers, and offered and distributed writing paper to 26 US$17,328 during 2007 in support seminars on reproductive health schools and public institutions of community activities.

2007 Corporate Social Responsibility Cover 91 Table XIII – Tjiwi Kimia Employee Sickness and Absenteeism Performance

Attendance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Sickness Rate1 – 0.01000 – 0.00610 – 0.00460

Absenteeism Rate2 – 0.00120 – 0.00070 – 0.00070

1. Sickness Rate = (Total Sick Days) / (Total Worker Days) 2. Absenteeism Rate = (Total absentee Days) / (Total Worker Days) NOTE: Tjiwi Kimia did not report targets for employee sickness and absenteeism performance.

The mill provided financial support 2007 to plant and maintain 3,000 transportation and construction, and for two special religious events, the Sengon trees in the area around the then to earn income by providing Maulid of Prophet Muhammad SAW mill. The first reforestation program small-business support to the mill. and the Isro Mi’roj, in which some ever attempted by the mill, this tree Some 3,250 workers benefited from 3,000 persons took part. It also pro- planting effort involved more than this program. vided funding to eight local mosques 100 Tjiwi Kimia employees and was in support of Safari Jum’at (Friday led by the mill’s General Affairs The mill also invested US$368 in Prayer) and a priest’s wages. Department Manager. Mill employees continued support of Rombong Biru now maintain the trees with periodic (a small-scale food vendor program). In addition, Tjiwi Kimia provided applications of fertilizer Through this ongoing program, 18 underwriting for some of the sports individuals have the opportunity to activities of the local youth orga- Income Enhancement Programs earn income by preparing lunches nization, in which 250 children To enhance livelihoods and enable and selling food to workers at the participated. The mill also subsidized villagers to live more autonomously, mill site. the maintenance costs of a soccer Tjiwi Kimia actively supported the field located in a nearby village, creation of entrepreneurial oppor- NOTE: Throughout this report, spending in enhancing the athletic experiences tunities for individuals and small Indonesian Rupiah has been converted to US$ calculated at the interbank rate effective of local youth. businesses to generate income 12/31/2007. 1 Indonesian Rupiah = 0.0001066 US through the provision of services to Dollar. 1 US Dollar = 9,379.00 Indonesian Rupiah. Community Beautification Program the mill and its employees. In support of the government’s efforts to raise environmental aware- Tjiwi Kimia invested US$8,884,810 in ness, and to enhance the quality its Partnership Program during 2007, of life in the Kedung Bocok village, enabling locals to develop skills in Tjiwi Kimia invested US$8,528 during product assembly, pallet making,

92 Cover 2007 Corporate Social Responsibility Ekamas Fortuna Mill

2007 Corporate Social Responsibility Cover 93 for a comprehensive Environmental 1. Mill at a Glance 2. Products Management and Monitoring Plan as required by the government of Indonesia and the Malang Regency. The Ekamas Fortuna mill is a small- Ekamas Fortuna produces a range to medium-scale, non-integrated of branded industrial paper and industrial paper mill located near paperboard products that includes 4. Fiber Supply Integrity the city of Malang, in the village of corrugating medium, kraft liner, core Gampingan in East Java Province board, chipboard, paper cores and on the island of Java. The mill had tubes and laminating papers. These The two paper machines at Eka- sales of US$69.5 million in 2007, an products are sold in Southeast Asia mas Fortuna are furnished with an increase of about 31% compared to under the Ekamas Fortuna brand. average of 95% waste paper, 3% 2006 and 2005 sales. unbleached softwood market pulp, and use a small amount of recovered- The Ekamas Fortuna mill provides 3. Certification and Verification fiber pulp from Indah Kiat Perawang roughly 800 direct jobs and has Mill in Riau. All unbleached market created employment in the sur- pulp entering the mill must meet the rounding area for an additional 280 The Ekamas Fortuna mill has been Forest Stewardship Council (FSC) people who provide the mill with certified since 2003 as compliant with Controlled Wood standard or the needed services. Responsible for the ISO 9001-2000 Quality Manage- Programme for the Endorsement the employment of more than 1,000 ment System (QMS) standard. A of Certification Schemes (PEFC) people, the Ekamas Fortuna mill re-assessment of compliance to these Non-Controversial Wood standard. serves as the economic engine for standards will take place in 2008. The first-stage audit to assess Ekamas the nearby communities. The mill conducts its own quality- Forfuna’s compliance with the ISO control checks on all incoming waste. 14001-2004 Environmental Manage- The mill produced a total of around Paper-machine and converting- ment System (EMS) standard was 180,000 tons of industrial paper, machine waste and other paper trim performed during 2007. (The certifi- paperboard and packaging per year and waste are not measured directly cate was awarded in 2008.) A full for each of the past three years. but included as waste paper in the re-certification audit of compliance Ekamas Fortuna purchases more mill furnish calculations. than 170,000 tons per year of waste to this standard will be performed in paper, most of it procured locally, 2011. Ekamas Fortuna’s management team holds quarterly EMS project and its products contain more than 5. Environmental Performance 95% recycled fiber on average. reviews to ensure that continuous improvement projects are on target, The Ekamas Fortuna mill includes and that appropriate corrective a. Energy Mix two paper machines, 21 converting measures for identified shortcomings lines, a steam generation plant, and a have been implemented. Ekamas Fortuna is dependent on fossil wastewater treatment plant. Electrical fuels to generate energy. The mix of power is drawn from the PLN national The Ekamas Fortuna Mill has been sources used during the last three electricity distribution network. licensed as meeting the requirements years reflects the 2005 commissioning

94 Cover 2007 Corporate Social Responsibility Table I – Ekamas Fortuna Mill Sales (US$ Thousands)

Product 2005 2006 2007

Paper & Packaging 52,724 52,940 69,453

Total 52,724 52,940 69,453

Table II – Ekamas Fortuna Mill Employees and Mill Indirect Jobs

Category 2005 2006 2007

Mill Employees 789 781 793

Mill Indirect Jobs 96 193 281

Total 885 974 1,074

Table III – Ekamas Fortuna Mill Production (ADMT1)

Product 2005 2006 2007

Paper 174,278 169,780 169,481

Packaging 11,071 11,292 9,442

Total 185,349 181,072 178,923

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 6% moisture for paper.

Table IV – Ekamas Fortuna Brands

Major Mill Brands Paper Products Main Regions Where Brand is Sold

Ekamas Fortuna Corrugating Medium Southeast Asia

Ekamas Fortuna Chipboard Southeast Asia of coal-fired steam generation equip- Corporation Environmental Guide- Program (MIP) to accelerate the ment in response to a changing lines for recovered paper. During reduction of water consumption supply/demand balance and cost. 2007, the mill began work on water- and fiber loss per ton of finished Coal is sourced from the adjacent consumption reduction projects that product. This MIP is part of a coor- Indonesian Province of Kalimantan. should show improvement in 2008. dinated effort by all of the APP pulp and paper mills in Indonesia, and b. Water and Fiber Consumption The rate of fiber use per ADTP provides for inter-mill sharing of increased slowly during the past lessons learned and best practices Although it has varied from year to three years, as virgin unbleached to leverage experience and achieve year, in each of the past three years kraft pulp has been displaced results more quickly. Details of these the amount of water required to by additional locally-sourced programs follow in section (c). make a ton of finished product has wastepaper in the furnish. been at the high end of, but within, While the final results of the MIP the benchmarks set forth in the In April 2007, the mill initiated a are expected to be reported in World Bank International Finance comprehensive Master Improvement September 2008, metrics through the

2007 Corporate Social Responsibility Cover 95 Table V -- Ekamas Fortuna Certification Status as of December 31, 2007

Certification Classification Scope First Issued

ISO 9001 QMS Mill 2003

ISO 14001 EMS Mill First Audit 2007

UKL/UPL – Government of Indonesia Environmental Management and Mill 2000 and the Regency of Malang Monitoring Plan

end of 2007 indicate reductions in water consumption and COD, and KEP-13/MENLH/3/1995). Water- the consumption of both water and is expected to generate savings of effluent standards are set at the fiber loss per ton of finished product. about US$65,000 per year. provincial level, typically by decree by the Governor of each Province. An anticipated added benefit of Steam Consumption The tables presented reflect the the MIP will be the reduction in During 2007, the mill invested applicable Indonesian standard for wastewater treatment plant operat- US$260,000 in four press units to the Ekamas Fortuna mill. ing costs as the mill’s whitewater reduce the water content of the recovery system is improved to paper sheet into the pre-dryer Wastewater Effluent capture more usable fiber from the section, with a consequent reduction The mill discharges wastewater wastewater stream. Several specific in steam consumption. This invest- to the Lesti River. The mill met the program elements are discussed in ment is anticipated to result in annual much stricter provincial wastewater the “Mill Programs and Investments savings in excess of US$135,000 by emission standards in 2006 and 2007 to Reduce Consumption and/or reducing the mill’s energy consump- and operated at less than 25% of Discharges” section of this report. tion and associated costs. the Indonesian National Standards for permitted BOD, COD and TSS c. Mill Programs and Investments d. Trend of Performance in Reducing levels. The mill has been successful to Reduce Consumption and/or Emissions, Effluent and Waste in reducing its wastewater emissions Discharges by two-thirds to three-quarters of Air Emissions 2005 levels. During 2007, the mill initiated a Although the mill power boiler’s wide range of programs using ISO air emissions for 2007 are approxi- During the past three years, the mill 14001 Environmental Management mately 80% below the Indonesian did not experience any process spills

Systems (EMS) protocols to drive Standards for SO2 and 90% below that could not be handled efficiently

these actions on a timely basis. Key the Indonesia standard for NO2, and within regulations by its waste- projects were initiated to reduce the the mill experienced an increase in water treatment facility. use of water and steam. both types of emissions due to an unfavorable change in the sulfur Solid Waste Water Consumption content of the available coal. The Solid waste management represents In 2005, the Ekamas Fortuna mill mill had no alternative to buying an ongoing area of challenge for began a series of projects to reduce high-sulfur coal. Ekamas Fortuna mill. During 2007, water consumption, reduce fiber loss the mill completed a two-year trial and reduce COD. The first of these Particulate levels for 2005 and 2006 to recycle 100% of its sludge in was the installation of a new supple- were probably under-recorded due order to capture the fiber contained mentary settling tank. The capital to an inappropriate sampling point in that material.5 expenditure of US$111,000 resulted location, now corrected. However, in annual savings of US$180,000, the increased particulate emissions The mill is currently able to sell only and provided dramatic reductions now being recorded are still at levels a small portion of its waste ash for in COD. In 2007, the mill made a less than one-half of the relevant use in construction, and continues US$250,000 investment in Krofta national standards. to evaluate alternatives to landfill for water and wastewater treatment the remaining ash. Plastic and glass technology to address fresh water In Indonesia, air-emission standards waste is removed from the incoming consumption levels. This investment are set at the national level (Decree wastepaper raw material and is in technology has further reduced from Ministry of Environment, currently sent to landfill for disposal.

96 Cover 2007 Corporate Social Responsibility Table VI – Ekamas Fortuna Paper Furnish

Furnish1 2005 2006 2007

Northern Unbleached Kraft Pulp 3.8% 3.8% 2.9%

Perawang Recovered Fiber Pulp 0.2% 0.2% 0.3%

Imported Waste Paper 34.4% 34.4% 34.2%

Local Waste Paper 61.6% 61.6% 62.7%

TOTAL 100.0% 100.0% 100.0%

1. Data reported Includes all pulp and paper recycled within the mill.

Table VII – Ekamas Fortuna Energy Sources

Sources 2005 2006 2007

Coal 29.3% 97.8% 94.0%

Diesel Oil 58.7% 1.6% 4.6%

Marine and Other Heavy Fuel Oil 12.0% 0.6% 1.4%

TOTAL 100.0% 100.0% 100.0%

Note: Percentages are based on the amount of energy generated.

Table VIII – Ekamas Fortuna Water and Fiber Consumption

Item 2005 2006 2007 World Bank Standard3

Water1

Water – Paper (m3/ADMT2) 8.4 10.1 9.0 1.5-10

Fiber

Paper (Waste and Pulp to Paper Product ) 1.039 1.046 1.050 None

1. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities. 2. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 10% moisture for pulp, 6% for paper. 3. World Bank IFC Environmental, Health and Safety Guidelines for Pulp & Paper Mills, Dec 10, 2007, page 31 table 3, paper mill – recovered paper.

Table IX – Ekamas Fortuna Air Emissions (Flue gas from power boilers)

Parameter 2005 2006 2007 Indonesian Standard

3 1 SO2 (mg/m ) 56.3 10.26 123.8 800

3 NO2 (mg/m ) 6.6 30.6 70.1 1,000

Particulate (mg/m3) 28.9 41.6 107.1 230

1. The Indonesian Standard for Air Emissions is measured as milligrams per cubic meter, not kilograms per Air Dry Metric Tons as is common in many countries.

2007 Corporate Social Responsibility Cover 97 As is the case with most paper exceeded its Severity of Accident 2006 but 9% lower than 2005 levels. mills, Ekamas Fortuna manages the and Frequency of Accident index The mill’s absenteeism rate, however, disposal of hazardous materials such targets during the reporting year, and showed a 25% reduction in 2007 as as waste oil, batteries and mercury both metrics were notably higher in a result of new regulations which lamps. The mill has an appropri- 2007 than in the previous two years. made absenteeism a metric in deter- ate method for disposing of each While there were no fatalities during mining wage increases, promotions, material. For the most hazardous the year, there was one accident and monthly bonuses. materials, the mill uses authorized resulting in a permanent disability and government licensed hazardous (the loss of two fingers). In addi- c. Social-Benefit Programs waste disposal businesses. tion, there was an increase in traffic accidents outside the mill in which During 2007, the Ekamas Fortuna mill commuting employees were involved. provided financial and in-kind support 6. Social Performance for a number of programs that deliv- However, the mill reported no major ered social benefits to communities safety incidents or related corrective in proximity to its operations. a. Safety Performance actions during 2007. Health Care & Sustenance During 2007, the Ekamas Fortuna mill b. Sickness and Absenteeism The physical well being of villagers is of had 52 reportable safety incidents, great importance to Ekamas Fortuna. more than double the level of its The sickness rate of mill employees During 2007, the mill allocated $5,331 in target performance indicator. The mill during 2007 was 2% higher than health care and sustenance assistance.

Table X – Ekamas Fortuna Water Effluent at Discharge

Parameter 2005 2006 2007 Indonesian Standard

BOD (kg/ADMT1) 2.98 1.1 1.01 2.8

COD (kg/ADMT) 8.22 2.77 2.42 6.0

TSS (kg/ADMT) 4.14 1.14 0.89 2.8

pH 7.12 7.35 7.26 6-9

Volume (million m3)2 1,467.2 1,744.4 1,633.6 NA

Rate (m3/ADMT) 8.3 10.1 8.9 NA

1. ADMT = Air Dry Metric Tons of annual production where an ADMT is at 6% moisture for paper. 2. Water use measured is for production of pulp and paper and excludes water used in offices, at R&D and provided to local communities. 3. Indonesian Standards are quoted in ppm and values given in kg/ADMT are calculated on the basis of permitted volumetric and concentration discharge parameters. 4. National Standards translate to 10 kg / ADMT for BOD / 20kg/tonne ADMT for COD / 10 kg / ADMT for TSS. Provincial Standards translate into 2.8 kg/ADMT for BOD / 6.0 kg / ADMT for COD / 2.8 kg / ADMT for TSS. Note: There are no World Bank discharge benchmarks for non-integrated paper mills.

Table XI – Ekamas Fortuna Solid Waste

Type of Waste Sludge Fly/Bottom Ash Rejects (plastic, glass )

Means of Disposal (%) 2005 2006 2007 2005 2006 2007 2005 2006 2007

Landfill 100% 50% – 100% 98% 96% 100% 100% 100%

Recycling1 – 50% 100% – 2% 4% – – –

TOTAL 100% 100% 100% 100% 100% 100% 100% 100% 100%

1. Two-year trial to recycle sludge to use recovered fiber in the paper mill. Ash is recycled for use as bricks and paving stones.

98 Cover 2007 Corporate Social Responsibility The company provided practi- as support for the children of former The company’s funding supported tioners and medical supplies to employees of the mill. The mill also the on-the-job training at the mill for deliver free medical check-ups supported educational activities for 25 students from a local vocational to some 500 villagers who might families living nearby. high school and 20 students from otherwise be without access to universities in the Malang District. health care. It also sponsored a Ekamas Fortuna provided full This on-the-job training was intended blood drive in conjunction with the support for needy students who to expose the students to a real- local Red Cross, in which 104 mill participated in the mill’s on-the- world work environment and to help employees participated. job training program, and provided prepare them for future careers in facilities and spending money for the commerce and manufacturing. Ekamas Fortuna also provided five balance of the 45 high school and tons of rice and other staples to university participants. In addition, 20 villagers living near some 450 local villagers. the mill received training in the The mill also provided financial assembly of “designer” shopping Education support and facilities for university bags, and the manufacturing of Demonstrating its commitment to students who were implementing bricks and paving stones using education as a means of bringing community development programs sludge from the papermaking long-term benefit to families living in surrounding communities. process. In addition to delivering near the mill, Ekamas Fortuna a social benefit, this skills-building allocated US$5,331 during 2007 Vocational Training program also delivered an environ- in support of learning. Ekamas Fortuna mill allocated mental benefit by creating viable US$3,200 in 2007 to support building materials from a manufac- The mill provided educational and skills training of villagers and turing byproduct. living-expense support for 50 orphaned the encouragement of entrepre- children living in local villages, as well neurial enterprises.

Table XII – Ekamas Fortuna Employee Safety Performance

Safety Performance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Number of Incidents 24 30 24 35 24 52

Severity (SRA1) 11.53 51.19 11.53 52.08 11.53 78.10

Frequency (FRA2) 11.53 14.42 11.53 17.25 11.53 23.07

1. SRA = Severity Rate Accident = (Lost Hours X 1,000) / (Total Man Hours) 2. FRA = Frequency Rate Accident = (Total Accidents X 1,000,000) / (Total Man Hours)

Table XIII – Ekamas Fortuna Employee Sickness and Absenteeism Performance

Attendance 2005 2006 2007

Parameter Target Actual Target Actual Target Actual

Sickness Rate1 – 0.00740 – 0.00660 – 0.00670

Absenteeism Rate2 – 0.00300 – 0.00200 – 0.00150

1. Sickness Rate = (Total Sick Days) / (Total Worker Days) 2. Absenteeism Rate = (Total absentee Days) / (Total Worker Days) NOTE: Ekamas Fortuna did not report targets for employee sickness and absenteeism performance.

2007 Corporate Social Responsibility Cover 99 Support for Religious Activities program which focused community allocated US$31,989 in infrastruc- The villagers living in proximity to attention on the value of maintaining ture improvements and community the Ekamas Fortuna mill are highly the quality of the local waterway. projects to benefit the villages in religious. While largely Islamic, the the Malang District which surround community also reflects Christian Community Empowerment the mill. Some 12,000 individuals and Buddhist beliefs. Recognizing that partnerships with benefited from these projects. local individuals encourage the entre- Ekamas Fortuna helped to build preneurial spirit and lead to improved Infrastructure improvements bonds with the community through livelihoods, Ekamas Fortuna provided included road construction and its support of local and regional opportunities for village residents repairs, the rehabilitation of the religious activities. In 2007, the mill to benefit financially from the mill’s elementary schools at Gampingan allocated US$7,730 to support the presence in their community. village, repairs to the community activities of the faithful. health center and public buildings, During 2007, mill management and funding to build the village During 2007, the mill provided finan- encouraged the opening of food stalls border. These projects contributed to cial support for the local mosque and on the mill site, enabling local villagers an increase in the quality of service for secular schools. It also provides to earn income through the sale of delivered by the government to the funding for a number of Religious meals to workers. In addition, the mill community. Paving stones made Fairs that are held at the village, partnered with local small businesses from sludge were used in several of sub-district, and district levels. to provide product transportation, the construction projects, adding the waste management services, and environmental benefit of recycling of The rite of male circumcision is widely the operation of parking lots. mill byproducts. practiced by followers of Islam. The Ekamas Fortuna mill provided Ekamas Fortuna also employed NOTE: Throughout this report, spending in much-needed funding for a mass roughly 60% of local villagers in mill Indonesian Rupiah has been converted to US$ calculated at the interbank rate effective circumcision event for the children sub-operations during 2007. These 12/31/2007. 1 Indonesian Rupiah = 0.0001066 US of villagers and former employees. tasks included sorting recycled paper Dollar. 1 US Dollar = 9,379.00 Indonesian Rupiah. and the manufacture of pallets. Community Projects Community projects included the The mill also participated in capacity provision of clean water for villagers, building and support for youth the provision of sports supplies for organizations in Gampingan and village teams, underwriting the pur- Sumberejo villages. chase of stationery supplies by the local government office, and financial The mill allocated a total of $1,066 support for the village’s celebration in these empowerment activities of Indonesia’s national holiday. during 2007.

The mill also participated in the Infrastructure Improvements Malang District’s “Clean River” During 2007, Ekamas Fortuna

100 Cover 2007 Corporate Social Responsibility 05 APP’s Fiber Supply

2007 Corporate Social Responsibility Cover 101 Table I – Sinarmas Forestry Forest Concession Area

SMF Forest Concession Area as of June 30, 2006

Province Total Area Set-Aside Area Area Approved for Plantation Development

Barren/Scrub/ Subtotal Planted Degraded Fire Damaged

Riau 656,718 278,450 378,268 272,793 41,160 64,315

Jambi 345,072 115,745 229,327 155,621 48,001 25,705

South Sumatra 674,811 196,084 478,727 88,617 6,000 384,110

Subtotal Sumatra 1,676,601 590,279 1,086,322 517,031 95,161 474,130

100% 35% 65% 31% 6% 28%

West Kalimantan 299,700 196,576 103,124 33,131 – 69,993

East Kalimantan 183,300 88,300 95,000 73,247 – 21,753

Subtotal Kalimantan 483,000 284,876 198,124 106,378 – 91,746

100% 59% 41% 22% 0% 19%

Total 2,159,601 875,155 1,284,446 623,409 95,161 565,876

Percentage 100% 41% 59% 29% 4% 26%

SMF Forest Concession Area as of December 31, 2007

Province Total Area Set-Aside Area Area Approved for Plantation Development

Barren/Scrub/ Subtotal Planted Degraded Fire Damaged

Riau 826,195 346,708 479,487 295,105 94,891 89,491

Jambi 364,842 122,350 242,492 185,893 48,894 7,705

South Sumatra 674,811 196,084 478,727 158,552 5,151 315,024

Subtotal Sumatra 1,865,848 665,142 1,200,706 639,550 148,936 412,220

100% 36% 64% 34% 8% 22%

West Kalimantan 299,700 196,576 103,124 40,601 – 62,523

East Kalimantan 222,920 100,103 122,817 80,433 2503 39,881

Subtotal Kalimantan 522,620 296,679 225,941 121,034 2,503 102,404

100% 57% 43% 23% – 20%

Total 2,388,468 961,821 1,426,647 760,584 151,439 514,624

Percentage 100% 40% 60% 32% 6% 22%

102 Cover 2007 Corporate Social Responsibility complying with APP’s fiber procure- As reported in the 2005-2006 APP A. Introduction and Overview ment policies. SMF’s primary Environmental and Social Sustain- business is the production of plan- ability Report for Indonesia, SMF’s tation pulpwood fiber by planting companies continue to implement APP owns no forestland, holds no and nurturing fast-growing species sustainable forest management forest concession licenses to gov- on land licensed by the Government practices. The majority of the ernment-owned land, and does not of Indonesia. species planted for pulpwood fiber conduct any harvest operations. APP are Acacia mangium, Acacia cras- relies on its exclusive fiber-supply As of December 31, 2007, SMF held sicarpa, and Eucalyptus pellita. As relationship with Sinarmas Forestry valid licenses to 2,388,468 hectares of December 31, 2007, there were (SMF), one of Asia’s leading forest of forest concessions in Indonesia. about 760,000 hectares of plantation management companies, for all of Of this area, 40% (961,821 hectares) forest dedicated to APP’s pulp and the pulpwood fiber for its two pulp is set aside for conservation, paper mills, a key to ensuring that mills on the island of Sumatra. indigenous-species protection APP’s mills will have a sustainable and preservation, community use fiber supply. Equally important are This relationship allows APP to and related infrastructure needs. the well-funded SMF Research and be assured of its fiber supply and The SMF set-aside area has been Development programs, designed to enables the company to enforce increased by nearly 87,000 hectares increase fiber yield through contin- stringent policies on sustainability in the last 18 months. uous research and development as and purchasing (including legal, well as through the development and non-controversial fiber origin) and to During 2007, SMF provided more than application of leading technologies. honor its responsibility to the people 6,900 direct jobs and created employ- in the local communities in and ment for an additional 1,600 people Fire prevention and protection are around its operations. who provided needed services in and the other critical component of around the SMF concessions. Taken SMF’s efforts to protect its set-aside SMF is comprised of four large as a whole, APP’s fiber suppliers are areas and fast-growing pulpwood forestry companies and a number responsible for the employment of plantations from destruction by fires of smaller partner plantation-forest more than 8,500 people, and are an on concession lands or adjacent licensees. The four major companies important economic engine in the areas. These efforts resulted in an are: PT. Arara Abadi (PT. AA) and PT. rural areas where they operate in 86% reduction in forest area that Satria Perkasa Agung (PT. SPA) in Riau, Jambi and Kalimantan. experienced fire damage during Riau Province; PT. Wirakarya Sakti 2007 as compared to 2006. (PT. WKS) in Jambi Province (all The four major SMF companies on the Island of Sumatra); and PT. are certified to, and have remained Finnantara Intiga (PT. FI) in West Kali- compliant with, the ISO 14001 B. Sustainable Forest mantan Province on the Indonesian Environmental Management System Management side of the island of Kalimantan. standard. The two largest operations, PT. Arara Abadi and PT. Wirakarya SMF is committed to the principles Sakti, have been ISO 14001 compli- The practice of sustainable for- of sustainable forestry and to ant for more than a decade. estry requires a commitment to the

2007 Corporate Social Responsibility Cover 103 principles of responsible plantation are government-recognized. All working practices for minimizing

forest management in achieving a of APP’s active fiber sources hold such CO2 emissions from lowland sustained fiber yield through eco- valid and legal Annual Working plantation forestry operations. nomically, environmentally and Plans and licenses. socially sound forestry practices. Forestlands (especially lowlands/ For APP’s customers, sustainable For more detailed information on peatlands) that are designated for forest management means that the SMF’s sustainable forest manage- production forestry in Indonesia are company will be able to supply their ment certification activities, see rapidly being degraded because of needs today, and for as long as they section D. Environmental Perfor- a lack of responsible management, need paper. mance, subsection 1. Certification. sustained social and economic pressures, and the use of slash-and- SMF only develops land that has A portion of the pulpwood plantation burn land-clearing practices. The been designated by the Govern- operations of APP’s fiber suppli- best solution to developing such ment of Indonesia, under its National ers were established on degraded areas while preserving the greater Spatial Plan, as land suitable for lowland in Sumatra during a time natural forest depends on active pulpwood plantations. All active fiber period dating from the early 1990s forest management and on creating sources managed by SMF passed to the present. The prevalent view buffers to prevent encroachment and the Government-mandated Sustain- was that this usage represented a illegal occupation of the land. able Forest Management evaluation sound way to bring non-productive conducted in 2006 by Lembaga land (which is classified as produc- APP’s fiber suppliers are committed Penilai Independen (LPI), a Ministry tion forest according to Indonesia’s to responsible management of low- of Forestry-accredited independent national spatial policy, and as unsuit- lands by: auditor. In its assessments, LPI able for community or agricultural • Developing plantations or evaluates a company’s sustainable use) into commercially productive reforesting degraded peatlands forest management practices and use, according to the regional and designated by the government examines the social, economic and national development plan. for production forestry; environmental factors that form the foundation of its sustainability. Some concern has recently been • Ensuring responsible water raised by certain groups regarding management in peatlands to enable an environment for tree Once granted a concession, APP’s the carbon dioxide (CO2) emissions fiber suppliers commission a caused by water-level manage- growth while, at the same time, feasibility study and a long-term ment during harvesting and planting limiting peat subsidence; management plan, both of which activities in these areas. APP • Providing proactive fire prevention are required by Law. Specific Annual acknowledges that increasing global and suppression management Working Plans are then developed concerns about greenhouse-gas- with active participation of local for each Fiber Source Management related issues must be taken very communities; Unit. APP requires its fiber suppliers seriously. It has, therefore, asked • Setting aside natural peat swamp to comply with all applicable laws its pulpwood suppliers for evidence forests of unique and special merit and to use work plan and conser- both of their plantation water table for permanent conservation and vation assessment standards that management strategies and of their carbon storage;

104 Cover 2007 Corporate Social Responsibility • Preserving and/or enhancing forest acquired licenses to an additional minimized by providing conservation areas of special merit that have 228,000 hectares of forest conces- set-asides that provide sanctuary and been identified and set aside for sions during the last 18 months, that help maintain the biodiversity conservation; and primarily on the island of Sumatra. of the area within the plantation landscape. In addition, conservation • Developing areas zoned for As mentioned in the introduction to set-asides within the plantation production forestry that either have this section, APP’s fiber suppliers forest provide wildlife corridors and/ been previously logged or replant their forest concession areas or buffer areas adjacent to perma- are degraded forestlands. with fast growing tree species – nently protected natural forests such primarily Acacia mangium, Acacia as national parks, critical watersheds C. APP’s Sustainable Fiber crassicarpa, and Eucalyptus pellita. and wildlife reserves. Supply These species are achieving growth rates ranging from 10-35m3/hectare/ SMF ensures that all fiber entering year in mean annual increment APP’s pulp mills in Sumatra fulfill the As of December 31, 2007, SMF held (MAI). As of December 31, 2007, requirements of APP’s stringent Fiber valid licenses for 2,388,468 hectares 760,584 hectares of plantation forest Procurement policy. This policy: of forest concessions in Indonesia. have been dedicated to supplying 1. Ensures that wood suppliers Of this area, 40% (more than APP’s pulp and paper mills, a key to maintain compliance with all 960,000 hectares) is set aside for ensuring that APP’s mills will have a relevant regional, national and conservation, indigenous-species sustainable fiber supply. Based international regulations for protection and preservation, commu- on existing pulp mill capacity of sustainable forestry and nity use and related infrastructure 2.7 million tons per year, a wood land-use management; needs. The SMF set-aside area has input of 11.6 million green metric 2. Ensures that a multi-stage been increased by nearly 87,000 tons per year is required. At current environmental and social hectares in the last 18 months. average yields, a plantation area of 640,000 hectares of even-age- assessment is conducted prior to plantation development. The In 2007, APP’s fiber suppliers planted rotation forest is needed to provide environmental assessment will a total area of 236,000 hectares of this volume of fiber. In addition, it is meet or exceed the standard fiber plantations. Of this, 133,000 standard practice to provide a 20% required by national law; hectares were first-rotation plantings buffer as a contingency for weather and 103,000 hectares were second- damage or other natural losses. 3. Ensures that wood is properly and third-rotation plantings. The checked and verified for legal seedlings were planted at an average SMF’s companies are engaged in origin and integrity of the chain density of 1,666 plants per hectare. what is termed intensive silviculture – of custody before it enters the SMF continues to plant seedlings harvesting followed almost imme- mill, and that companies and mills at an average of 1.5 million plants diately by replanting. In this type maintain systems and procedures per workday. of silviculture, careful attention is to reasonably ensure that wood paid to the impact on animals such coming from illegal sources is To support the future growth of as insects, microbia, birds and rejected before it enters the mill; APP’s business, SMF’s operations larger mammals. These impacts are

2007 Corporate Social Responsibility Cover 105 4. Requires that wood suppliers Sakti, manage nearly 600,000 hectares mills are subject to rigorous scrutiny comply with relevant universal of active forest concessions and and protection protocols to ensure human-rights regulations have been ISO 14001 compliant for that the pulpwood supplied is from and undertake community more than a decade. legal sources and that no illegally relations programs based upon harvested fiber enters the mill wood participatory assessment and PT. Wirakarya Sakti and PT. Satria yard. The protocols for this Legal Ori- planning principles, involving all Perkasa Agung were first certified as gin Verification and Chain of Custody relevant stakeholders; and ISO 14001-compliant in 1999. Their (LOV/CoC) verification were devel- last inspection occurred in 2006, oped in conformity with the Criteria 5. Ensures that wood suppliers who and both PT. WKS and PT. SPA will and Indicators of the LEI (Lembaga are found in breach of relevant legal be subjected to full re-certification Ekolabel Indonesia – The Indonesian requirements and provisions of the audits in 2009. PT. Arara Abadi was Ecolabelling Institute) Standard for policy shall be immediately warned first certified as ISO 14001-compliant Wood Fibre Material (plantation wood and, for repeated violations, have in 1998, was most recently re-certified and mixed hardwood residues from their contracts terminated. in 2006, and had its renewal assess- plantation development). ment in 2007. In West Kalimantan, PT. Through its rigorous implementation Finnantara Intiga was first certified APP believes that it has one of the of these policies, SMF helps APP as ISO 14001-compliant in 2003, most stringent pulpwood fiber ensure that its fiber supply is legal was re-certified during 2007, and is control systems in Indonesia. Since and sustainable, and will remain so scheduled for a renewal assessment 2005, the integrity of APP’s LOV/CoC over the long term. (See Appendix V in 2010. system has been verified annually by for the text of APP’s Fiber Procure- an independent third-party auditor, ment Policy.) Taken together, these four ISO Société Générale de Surveillance 14001-compliant forestry companies (SGS), which has found no indication D. Environmental Performance account for nearly one million hect- of any illegal fiber being harvested ares of forest concession area, as or being introduced into the fiber of the end of 2007. The companies’ supply at the Indah Kiat Perawang or management of an additional 200,000 Lontar Papyrus pulp mills. All of the 1. Certification hectares was undergoing assess- improvements to the system recom- ment at year-end. SMF’s remaining mended in annual audits by SGS companies are expected to obtain have been implemented, and this a. ISO 14001 Environmental ISO 14001 certification covering fact has been noted in each of SGS’ Management Systems Certification their operations on all other forest annual audit reports. management units under concession. The four largest SMF operations In addition, in December, 2007, SGS are certified to, and have remained b. Legal Origin Verification and evaluated APP’s fiber suppliers in compliant with, the ISO 14001 Chain of Custody Certification Riau and Jambi against the stan- Environmental Management System dards of the SGS “Timber Legality standard. The two largest operations, All of APP’s fiber suppliers providing and Traceability Verification” (TLTV) PT. Arara Abadi and PT. Wirakarya pulpwood to the Perawang and Jambi Programme. The assessment was

106 Cover 2007 Corporate Social Responsibility Table II – Sinarmas Forestry Certification Status as of December 31, 2007

Province/Company Certification / Standard Scope First Issued

Riau / PT. Arara Abadi EMS / ISO 14001-2004 standard 299,975 ha. 1998

Legal Origin Verification / Plantation wood / residues Riau / PT. Arara Abadi 2005 Chain of Custody to LEI1 standard from plantation development

Riau / PT. Satria Perkasa Agung EMS / ISO 14001-2004 standard 76,017 ha. 1999

Legal Origin Verification / Plantation wood / residues Riau / PT. Satria Perkasa Agung 2007 Chain of Custody to LEI standard from plantation development Legal Origin Verification / Plantation wood / residues Riau / PT. Sekato Pratama Makmur 2007 Chain of Custody to LEI standard from plantation development Legal Origin Verification / Plantation wood / residues Riau / PT. Bukit Batu Hutani Alam 2007 Chain of Custody to LEI standard from plantation development

Jambi / PT. Wirakarya Sakti EMS / ISO 14001-2004 standard 293,812 ha. 1997

Legal Origin Verification / Plantation wood / residues Jambi / PT. Wirakarya Sakti 2005 Chain of Custody to LEI standard from plantation development

Jambi / PT. Wirakarya Sakti Controlled Wood to FSC standard 191,130 ha. 2007

West Kalimantan/ EMS / ISO 14001-2004 standard 299,700 ha. 2003 PT. Finnantara Intiga West Kalimantan / OS&HM to Government of Golden Flag Award 2003 PT. Finnantara Intiga2 Indonesia SMK 3 standard

1. Lembaga Ekolabel Indonesia – The Indonesian Ecolabelling Institute. 2. Forest Management Unit Sintang.

conducted to benchmark the com- for sustainable production forest 3. Work plan development; pany’s performance against the TLTV management, including plantation 4. Work plan implementation; standard and to identify potential forest management. LEI Sustainable areas of improvement for APP’s fiber Plantation Forest Management certi- 5. Periodic evaluation; and suppliers as they work toward their fication is a voluntary program based 6. Final Assessment & goal of obtaining full TLTV compli- on the principles of transparency, Certification Decision. ance certification in the near future. independence, non-discrimination, and accountability. There are three levels of require- c. LEI Sustainable Plantation Forest ments to achieve full LEI Sustainable Management Certification Today, the LEI certification standard Plantation Forest Management for sustainable forest plantation man- certification: In 1998, The Indonesian Ecolabel- agement is the only credible, national, Level 1: Systems. The first level ling Institute (LEI) first produced its forest-certification scheme in place requires that a good environmen- principles, criteria and indicators in Indonesia, and is the standard to tal management and monitoring for sustainable forest management which APP’s fiber suppliers intend to system is in place and is in use. based on the International Tropical certify their forest concessions. ISO 14001 EMS is the most com- Timber Organization Guidelines for mon system used for recording, Sustainable Forest Management. The Beginning in early 2007, APP’s fiber monitoring, and taking corrective LEI certification standard for indus- suppliers began preparations for the actions for any activities that may trial plantations was developed in LEI Sustainable Plantation Forest have an environmental impact. 2001 with support from several inter- Management certification process. national organizations, including the APP will use LEI’s phased approach Level 2: Legality and Traceability. US Agency for International Develop- which consists of six steps: The next level requires proof of timber legality and traceability ment, and The Nature Conservancy. 1. Application & public announcement; of the wood supply, meeting a During 2006, LEI developed phased 2. Pre-assessment & public rigorous third-party standard approach certification standards consultation; of performance.

2007 Corporate Social Responsibility Cover 107 Level 3: Sustainable Plantation APP’s other fiber suppliers are the three pillars of sustainability – Forest Management Assessment. currently in the process of conduct- social, environmental and economic The final level or stage in the ing internal gap analyses against considerations. process is the achievement LEI Standard 5000-2 to prepare for of full certification against the certification assessments using In the fiber suppliers’ nurseries, only LEI national standard. The LEI both full and the phased-approach minimal applications of biodegrad- standard covers a full range of certification processes. able pesticides and fungicides are sustainable environmental and used. These herbicides are on the social principles, criteria and indi- The management of forestland to the approved list in the Green Book of cators which are assessed by an stringent environmental and social the Agriculture Department of Indo- auditor through field surveillance. criteria of internationally acknowl- nesia. Further, according to ISO14001 edged certification systems is not standard, with which APP’s’ fiber During 2007, PT. WKS (APP’s fiber easily implemented in a developing, suppliers are compliant, the nurseries supplier located in Jambi province in transitional economy such as that are equipped with effluent treatment Sumatra) conducted a gap analysis of Indonesia. Recognizing that this facilities that are tested regularly. prior to undergoing formal forest cer- effort will take time, APP continues tification assessment of its 293,812 to drive and support the efforts of In the field, APP’s fiber suppliers use hectares of plantation forests. In Sep- its fiber suppliers to attain the goal minimal applications of biodegrad- tember 2007, PT. WKS successfully of credible, third-party forest- able herbicides, which are certified completed Step 2 of the LEI process, management certification. to be ecologically friendly according pre-assessment and public consulta- to national regulations. Herbicides tion. In 2008, PT. TUV International are applied only once during the first Indonesia, an accredited, indepen- 2. Forestry Practices year of plantation development, in dent certification body, will assess combination with manual weeding. the production, ecological and social These minimal amounts of chemicals aspects of PT. WKS’ forest manage- APP’s fiber suppliers plant and dissolve into the plantation forest soil ment practices against LEI Standard reforest concessions approved by when it rains. 5000-2. PT. WKS expects to receive the government and delineated for its Assessment Report and Certifica- use as pulpwood plantations, using Since SMF’s plantations are sus- tion Decision in the last half of 2008. balanced practices in addressing tainably managed, one of the key

108 Cover 2007 Corporate Social Responsibility parameters monitored is nutrient in 2007 by not having to send this natural regeneration, and the use of balance. SMF makes judicious use sludge to landfill. While PT. AA pays alternate fertilizers including cop- of fertilizer (containing macro- and for the cost of processing, packag- picing fertilizer options. PT. AA’s micro-nutrients), applying it only ing and transporting the fertilizer to R&D department has successfully when necessary to boost initial its concessions, it will realize savings produced superior planting materials growth in certain soils. from not having to purchase fertilizer. for clonal forestry. A special facility has been established to produce Riparian zones (areas adjacent to A similar program was put in place superior clones for operations. This streams and rivers) are included by PT. WKS, using sludge gener- facility has successfully reduced in conservation set-asides and ated at the Lontar Papyrus mill. In contamination rates, increased are protected as mandated by the this case, the forestry company has multiplication rates, and improved government. In addition, APP’s fiber been using 100% of the mill sludge both survival and nursery rates to suppliers monitor the impact of their as fertilizer for the last three years. adequately supply these plants for activities on area rivers and streams Both programs were approved by the the district nurseries. To reduce the on a regular basis. Indonesian government after satis- investment required, PT. AA’s R&D factorily completing the required field department has developed advanced The bark of harvested trees is often tests and registration. mini-cutting techniques, which delivered to the APP mills for use as supply superior planting materials a bio-fuel to reduce the consumption to the plantation at a lower cost. To of fossil energy. Leaves, branches, 3. Forestry Research and Development conduct the research, PT. AA’s R&D roots and other residues are left on department operates four labora- the ground to protect the soil natu- tories, a biotechnology laboratory, rally and to serve as organic nutrient Sinarmas Forestry’s Research and a microbiology laboratory, a soil material as they decompose. Development (R&D) missions are: laboratory and a wood technology • to enhance competitiveness by laboratory. Of particular interest is To reduce its use of commercial adopting world-class standards and the company’s research on molecu- fertilizers, SMF’s two leading fiber environmentally friendly practices; lar markers, which is conducted in suppliers have partnered with APP’s the R&D Biotechnology Laboratory. • to improve plantation productivity Indah Kiat Perawang and Lontar The goal of this work is to shorten through the development and appli- Papyrus pulp mills to recycle mill the breeding cycle and to speed-up cation of leading technology; and sludge, a pulp-making byproduct, the production of superior planting as fertilizer in the forest plantations. • to conduct research to overcome materials for use in operations. problems encountered in existing In Riau Province, PT. Arara Abadi plantations. During 2007, PT. WKS launched (PT. AA) conducted field tests to its Highly Intensive Eucalyptus assess the viability of using the mill The company’s R&D groups continue Plantation Project. The goal of this sludge. The tests showed that this to focus on their stated objective, to three-year project is to triple the material was rich in nutrients that produce cost-competitive pulpwood. mean annual increment (MAI) of would promote growth when applied Research projects undertaken in selected superior Eucalyptus clones to newly planted plantation seed- pursuit of this objective cover a in different soil types while moving lings. These tests demonstrated that wide range of activities. from manual to mechanized meth- the sludge fertilizer also provides a ods of silviculture. The initial effort moisture lock that protects seedlings In January 2007, PT. Arara Abadi was during 2007 was on a small scale, from dehydration. Based on these granted a Plant Variety Protection and was staged with the consider- positive test results, PT. AA was able Certificate (patent) for Eucalyptus ation of using this new methodology to nearly double the amount of mill pellita 05 (EP05) from the Depart- in community forestry programs. sludge used as fertilizer in its planta- ment of Agriculture of Republic of Parameters to be studied include tions from 38% of the Indah Kiat Indonesia. (See Appendix IX for a stocking density, access, light and Perawang Mill’s total sludge volume copy of the certificate) air circulation, soil mineral content, in 2006 to 64% in 2007. alternative cover crops, fertilizer and Research conducted by PT. AA cost. Results at the end of the first The mill made the needed invest- during 2007 included trials on tree year were encouraging, but, as this ments to be able to press and improvement, including genetic gain species grows on a six-year rotation, prepare the sludge for use as trials, progeny trials, silviculture trials it will be three years before definitive fertilizer, and saved US$2.6 million such as spacing, site preparation, results can be determined.

2007 Corporate Social Responsibility Cover 109 Both companies (PT. AA and PT. agencies to protect forest conces- WKS) have conducted research 4. Fire Prevention and Protection sions and surrounding lands from into the possible use of alternative the ravages of wildfires. SMF’s forest species such as Anthocepalus operators have Fire Management cadamba, Cratoxyllum sp, Dyera SMF has in place, and strictly Plans in place for each conces- costulata, Eugenia sp, Fragraea enforces, a “No-Burn” Policy. There sion area. Execution of these plans crenatula, Hibiscus similes, are negative environmental, social relies on early detection and rapid Khaya anthotheca, Lophopetalum and financial consequences to the response, including the use of dedi- multinervium, Shorea leprosula and burning of forests, even of degraded cated helicopters and fireboats as Shorea selanica. These different forest areas. Fiber is so valuable that well as of trained fire fighters. species were evaluated for use SMF brings wood residues from site as fiber sources as well as for preparation and harvesting processes SMF’s fire-fighting capacity was enrichment of local ecosystems. to APP’s mills for use as bio-fuel, strengthened during 2007. Its which helps the mills increase their operating companies now maintain self-sufficiency in energy. substantial fire-prevention and suppression teams with more than APP and its fiber suppliers continue to 600 trained fire officers. These teams work hand-in-hand with government use the latest satellite data, provided

Table III – SMF Forest Concession Fire Experience (area in hectares)

Total burnt area

Province 2006 2007

Riau 3,060 1,257

Jambi 2,344 1,410

South Sumatra 13,407 0

West Kalimantan 1,361 24

East Kalimantan 50 131

Total 20,222 2,822

110 Cover 2007 Corporate Social Responsibility by Singapore’s National Environment PT. WKS districts have budgeted rural areas of the provinces where Agency twice daily, to plot “hotspots.” funds to build a tower in 2008. the forest concessions are located. This enables firefighting teams to Because SMF concessions cover an respond promptly when fires break The results of these investments and extensive area (2.4 million hectares), out, and to report their progress management actions can be seen in their companies operate in and through a centralized system. the dramatic 85% reduction in forest around a significant rural population. area that experienced fire damage One of the endemic problems in As an example of actions taken during 2007 as compared to 2006. these areas is poverty. SMF recog- in 2007 to strengthen the forestry nizes that this is a pivotal issue and company’s fire response, PT. WKS has implemented a number of social- invested US$250,000 (plus operating E. Social Performance benefit programs in addition to its costs) to build four fire towers in four role as a significant employer. different districts of its concessions. These towers enhance the ability of During 2007, SMF provided more its fire rangers to monitor hot spots, 1. Overview than 6,900 direct jobs and created which aids early detection of fires to employment for an additional minimize losses. Based on the value 1,600 people who provided needed derived from the investment in the Sinarmas Forestry employees are services in and around the SMF first four towers, each of the remaining predominately local hires from the concessions. Taken as a whole,

Table IV – Sinarmas Forestry Employees And Temporary Jobs

Province 2005 Employment 2006 Employment 2007 Employment

Direct Temp. Total Direct Temp. Total Direct Temp. Total

Riau 3,704 199 3,903 3,465 57 3,522 3,659 49 3,708

Jambi 1,573 359 1,932 1,578 269 1,847 1,606 372 1,978

South Sumatra 301 168 469 489 324 813 644 314 958

Subtotal Sumatra 5,578 726 6,304 5,532 650 6,182 5,909 735 6,644

West Kalimantan 464 37 501 616 200 816 433 426 859

East Kalimantan 232 92 324 262 336 598 621 429 1,050

Subtotal Kalimantan 696 129 825 878 536 1,414 1,054 855 1,909

TOTAL 6,274 855 7,129 6,410 1,186 7,596 6,963 1,590 8,553

2007 Corporate Social Responsibility Cover 111 APP’s fiber suppliers are responsible To provide greater access to basic were provided with prime fruit for the employment of more than education, PT. AA invested US$3,696 seeds for planting. An additional 8,500 people, and are an important to underwrite the school fees for more 21 villagers were trained in honey economic engine in the rural areas than 1,200 students in grades 1-9. harvest management, and some 200 where they operate in Riau, Jambi, It also invested US$16,479 to provide elementary school students received South Sumatra and in East and West scholarships to 109 junior high training through an “Introduction to Kalimantan Provinces. school, senior high school, and Plant Cultivation” curriculum. university students. In addition, SMF, through its operat- Acacia and Eucalyptus ing companies, provides educational In addition, PT. AA worked in Nursery Program support, skills training and income- conjunction with the local vocational PT. AA also continued its Acacia enhancement programs, delivers training center and other similar and Eucalyptus Nursery Program community health services, and organizations to provide skills devel- in partnership with the Bunut supports local religious activities, opment programs for local youth. PT. Abadi Microfinance Organization, infrastructure improvements and AA’s investment in these skills devel- a community cooperative in Pinang other community needs. opment programs was US$7,505. Sebatang Barat village. This program provides high-quality seedlings for The following two sections provide b. Skills Training and Income the company, helps develop entre- a more-detailed description of the Enhancement preneurial and managerial skills, and types of social programs that were generates much-needed income for funded during 2007 by PT. Arara Community Training and Skill local families. Abadi and PT. Wirakarya Sakti, two of Development Center SMF’s major companies in Sumatra. PT. AA invested US$61,207 during PT. AA’s 2007 investment of 2007 in the construction and US$10,662 helped this organization operation of a Community Training double the size of its seedling nurs- 2. PT. Arara Abadi Center. Funds were used to finalize ery to four hectares, to build its own construction, begun in 2005, of the office on-site, and to increase its Training Center’s main building and production of seedlings to 950,000 During 2007, PT. Arara Abadi made other facilities, and to set up a pilot per month. The organization made significant investments in programs fruit orchard with thirteen types of a profit of US$6,930, benefiting the that promoted educational opportu- fruiting plants and trees. cooperative’s 157 participants and nity, enhanced income, supported their families. community culture, provided greater Now nearing completion, the access to health care, and raised the Center provides local people with c. Community Health Services quality of life in villages surrounding training in cultivation, harvesting, its operations. and marketing of food crops, as During 2007, PT. AA invested well as in aquaculture techniques. US$3,157 to provide healthcare a. Educational Support The Center’s orchard and produce services and medicine to 12 villages gardens produce quality seeds that that surround its plantation. In During 2007, PT. AA invested a are distributed to the 520 farmers addition to health exams, medi- total of US$38,678 in programs to living near PT. AA’s plantation. cation and health education for support the education of more some 1,105 people, this investment than 1,400 children in 16 villages Plant Cultivation Capacity Building provided supplementary food for surrounding its plantation. PT. AA also invested US$7,505 children less than five years of age. in 2007 to implement a capacity- Health care services were provided These funds were used to provide building program for farmers in in public halls or village admin- stipends to 66 non-permanent development and Pelalawan Districts. istrative offices that were readily teachers in 39 community schools This funding was used to provide accessible to the community. in 25 neighboring villages. PT. AA instruction in plant cultivation and also provided US$5,171 for repairs honey harvesting, and to underwrite d. Support for Religious Activities to a local school building, and the costs of seeds that would be US$3,919 for computers, printers, provided to program participants. During 2007, PT. AA contributed and furniture to further support a total of US$138,193 toward the teaching and learning. This year, 99 farmers who completed construction of a mosque, opera- three days of training in fruit cultivation tion of a school and the provision of

112 Cover 2007 Corporate Social Responsibility prayer kits (which included a prayer and hygienic circumcision of ects include the provision of water rug, religious books, and a micro- 455 underprivileged Muslim boys in 24 tanks to ensure a clean water supply, phone) in several village surrounding villages near its pulpwood plantations. improvements to sanitation systems, PT. AA’s operations, i.e.: Pinang the construction and repair of public Sebatang Barat, Batu Gajah, Melibur, e. Support of Community Needs facilities, and the construction and Bukit Batu, Belantaraya, and Kes- maintenance of roads, bridges and uma. During 2007, PT. AA invested ditches. The company engaged local US$31,954 to help meet a wide stakeholders in the planning of these PT. AA also contributed US$20,866 range of needs in villages near its projects, and hired local contractors, in support of religious events and pulpwood plantations. This funding providing additional job opportuni- lectures featuring nationally known was used to supply fuel for a village ties in the community. Some 31,400 preachers from Pekanbaru, the capital generator, to provide public transpor- people benefited from these infra- of Riau Province. By bringing tation, to provide care for orphans, structure projects. well-educated preachers to four and to support art and cultural local villages, PT. AA helped foster activities in the community. greater religious understanding 3. PT. Wirakarya Sakti among the local people. An estimated PT. AA provided an additional $16,823 3,800 villagers attended these for equipment, facility improvements, religious activities. and event organization in direct PT. Wirakarya Sakti (PT. WKS) made support of sports, art, and cultural extensive investments during 2007 PT. AA contributed US$63,717 to programs for approximately 3,250 in programs that increased educa- provide each of the 199 villages young people in the area. tional opportunity, enhanced income, near the plantation with a cow for provided greater access to health ritual slaughter during Idul Adha, f. Infrastructure Improvements care, and raised the quality of life in the Muslim holiday. An estimated villages surrounding its operations. 5,950 villagers shared the meat PT. AA invested a total of US$231,934 from these sacrificed animals. in infrastructure improvement proj- a. Scholarship Programs ects designed to improve the quality In addition, PT. AA committed of life and promote development in During 2007, PT. WKS invested US$13,932 in support of free 85 neighboring villages. These proj- US$12,795 in support of basic-

2007 Corporate Social Responsibility Cover 113 education scholarships for elementary in conjunction with the Farming aquaculture operations were split and junior high school student from Assistance Officer of the local three ways, with 60% going toward low-income families. A total of government. Men and women ongoing management, 20% toward 400 students from 64 schools in from 133 families in the villages of village development, and 20% 41 villages and 5 regencies received Senyerang, Sei Rambai and Teluk returned to the company to repay needed assistance, making it possible Nilau participated in the program the capital it provided to purchase for them to continue their elementary which creates income opportunities, fish stocks and to manage the and secondary school education. develops fiscal responsibility and ponds sustainably. improves market skills. PT. WKS also committed US$5,331 By providing ongoing income in scholarship support to help offset Farmers from each village were streams and food for the villagers, the costs of a university education. organized into Rice Farmer Asso- the aquaculture program has reduced Under this program, 50 local students ciations, and each farmer works the dependence of these villagers on enrolled in Jambi University and one hectare of rice field. At harvest the forest for subsistence, and has Batanghari University each received time, each Association markets its contributed to a decrease in defores- US$107 to help defray costs. farmers’ crops. In 2007, the second tation stemming from illegal logging year of the rice farming program, and conversion to agriculture. b. Community Health Service the farmers doubled the productiv- ity of their fields, and were able to d. Infrastructure Improvements During 2007, PT. WKS invested repay the US$17,059 in start-up US$21,643 in a variety of health funding provided by PT. WKS in During 2007, PT. WKS invested service programs to benefit the com- 2006. In addition, the cooperation US$137,272 toward infrastructure munities near its pulpwood plantation. of the farmers in this program has improvements in 54 villages in improved relationships and has pro- 11 sub-districts. The funding was The company provided free medical vided impetus for the formation of a used for a wide range of new- services to more than 3,600 patients, Community Fire Protection Guard. construction and repair projects, vector fogging to combat the spread and included work on 50 places of dengue fever, and community Fish Farming of worship, 16 schools, roads and health supervision. PT. WKS also PT. WKS also invested US$16,242 bridges, a traditional marketplace, a provided underwriting for the during 2007 in support of an health facility, a soccer field, and local hygienic mass circumcision of aquaculture program to provide government offices. These infrastruc- 150 local boys. economic opportunity and suste- ture improvements were identified nance to the people of four villages through a stakeholder-based Commu- c. Income Enhancement Programs along the Batanghari River, in the nity Development Diagnostic Study Pemayang sub-district. Each of conducted by PT. WKS. Rice Farming the 77 families participating in the In 2007, PT. WKS continued its sup- program managed its own fishpond, NOTE: Throughout this report, spending in port of community rice farming along harvested and marketed the fish to Indonesian Rupiah has been converted to US$ calculated at the interbank rate effective the banks of the Pangabuan River other villagers, and earned approxi- 12/31/2007. 1 Indonesian Rupiah = 0.0001066 US by providing technical assistance mately US$128. The profits from the Dollar. 1 US Dollar = 9,379.00 Indonesian Rupiah.

114 Cover 2007 Corporate Social Responsibility 06 APP’s Conservation Initiatives

2007 Corporate Social Responsibility Cover 115 together on four major projects: called the Conservation Value For- A. Overview the Giam Siak Kecil – Bukit Batu est (CVF) Toolkit for Indonesia. The Biosphere Reserve; the Taman Raja objective of developing a CVF Toolkit Conservation Area; the Senepis – assessment protocol was to build APP recognizes its responsibility as Buluhala Tiger Sanctuary; and the on existing government regulations a steward of the land in Indonesia Kutai Orangutan Conservation Group. by assessing the forest area in the from which its fiber is sourced, and (See Appendix X for a listing of the context of the entire landscape, sup- its responsibility to its customers to Working Group members for the four porting conservation management ensure the legal and non-controversial Flagship Conservation Initiatives.) planning, and supplying additional origin of the fiber contained in its information for monitoring purposes. finished products. Although APP The new process also provides a does not hold any forest conces- mechanism for public comment. sion licenses or own any forests, B. APP Conservation Value it has launched a number of forest Forest Toolkit for Indonesia During 2007, SMF field-tested the conservation initiatives together with CVF Toolkit. Eight recruits were SMF, government agencies and civil trained by staff at the Pusat Pen- In 2003, Indonesia’s Ministry of society organizations. Among these didikan Lingkungan Hidup (Center Forestry established protocols for projects is a new Conservation Value for Environmental Education) of a Micro-Delineation Process for the Toolkit for Indonesia, designed to be Riau University in techniques for assessment of degraded forestland used by APP’s fiber suppliers in field conducting social and biodiversity prior to development into pulpwood assessments before developing a assessments. The training also plantations. This assessment plantation management Work Plan. included four field-based assess- provides for the identification and This new Toolkit was field-tested ments and an evaluation of each allocation of land for protected during 2007. individual’s performance. Teams riparian zone habitat, buffer zones were then established to conduct for protected areas, conservation Flagship Conservation Programs com- ten field assessments of fiber- set-asides, local community use, flora prise another important dimension of supplier forest areas in Sumatra to and fauna gene-pool conservation, APP’s and SMF’s conservation efforts. identify the key social and envi- and pulpwood plantation forests. The mission of these Flagship Conser- ronmental values present and to vation Programs is to identify, protect provide objective input for devel- While this new process provided and manage areas of significant and oping a management plan for the useful guidance for concession own- representative biodiversity habitat, 80,000 hectare forest management cultural significance and ecosystem ers, APP felt that it did not address unit. (Appendix XI contains a listing the needs of all of its stakeholders. services for the present and long-term of the IUCN species identified by the Working with SMF, APP developed a benefit of the people of Indonesia. CVF survey teams.) more stringent assessment protocol, During 2007, APP and SMF worked

116 Cover 2007 Corporate Social Responsibility Table I: CVF Toolkit Assessment Costs – 2007

Activity Expenses (US$)

CVF assessment of 6 FMUs1 12,185

Boundary markings & survey 26,261

Making signage of FCA 5,684

Salary & travel expenses of CVF team 54,155

TOTAL 98,296

1. FMU = Forest Management Unit

While much work remains to be In total, SMF invested more than Regency level), the Lembaga Ilmu done to fine-tune the Toolkit, several US$100,600 in the CVF Toolkit project Pengetahuan Indonesia (LIPI, or the benefits have been realized from during 2007. To support the further Indonesian Institute of Sciences), the pilot assessments conducted development and use of this Conser- Balai Besar Konservasi Sumber during 2007. The use of the CVF vation Value Forest Toolkit in 2008, Daya Alam (BKSDA, or the Natural Toolkit has raised awareness of the APP and SMF will work to verify the Resources Conservation Agency) importance of biodiversity and social results of the pilot assessments, and the Center for Biodiversity considerations among SMF’s local to validate the Toolkit through an Conservation at the University of and district teams. In addition, the independent evaluation, and to guide Riau, as well as APP and SMF. feedback process with district man- APP’s fiber suppliers in maintaining agers and within key departments and improving upon the implementa- The proposed GSK-BB Biosphere has helped the SMF forestry staff see tion of APP’s environmental policies. Reserve, in the peat-swamp forest the landscape context of potential of Giam Siak Kecil – Bukit Batu in plantation and natural forest areas. Riau, would encompass two wild- C. Giam Siak Kecil – life reserves totaling nearly 100,000 Using the results of the CVF survey, Bukit Batu (GSK-BB) hectares. SMF, together with its PT. Arara Abadi’s Forestry Environ- Biosphere Reserve partners, has contributed more than mental Department conducted its 72,000 hectares from its licensed annual Biodiversity Survey (flora, production forest area in Riau, Suma- fauna and wildlife monitoring). To tra. This area of permanent, natural ensure consistent tracking of any A Biosphere Reserve is a UNESCO forest will serve as an ecological changes, protected monitoring concept for a landscape-level corridor between the two wildlife points were established and are approach to conservation that com- reserves. The core conservation area surveyed each year. The results of bines conservation forests as core in the proposed Biosphere will total these surveys were used to prepare protected areas with zones where more than 172,000 hectares. the 2008 Management Plan for this sustainable development is fostered Forest Management Unit to ensure by enterprises and local dwellers. During the fourth quarter of 2007, the protection of the species identi- Governance systems for these PT. Arara Abadi (APP’s fiber supplier fied while allowing for an appropriate reserves are often highly innovative. in Riau), in cooperation with LIPI, level of commercial activity. These funded a US$24,500 biodiversity plans were submitted to Government During 2007, a multi-stakeholder study to create baseline data for an of Indonesia’s Forestry Department process to establish a biosphere initial management plan for the pro- at the District and Province levels in Riau was initiated by SMF. Part- posed Biosphere Reserve landscape. for review and approval. ners in this partnership included PT. Arara Abadi funded a US$34,000 the Forestry Service (Province and socio-economic study, also conducted

2007 Corporate Social Responsibility Cover 117 by LIPI during 2007. This col- keeping with the goal of protecting laboration is believed to be one of D. Taman Raja what will become a 9,000-plus Indonesia’s first private sector part- Conservation Area hectare upland nature preserve nerships for the conservation of such in Jambi Province, Sumatra. a unique and vital natural resource. (A list of the IUCN fauna and flora Taman Raja is a forest concession SMF invested US$17,059 during that were found by the LIPI survey consisting of more than 16,400 2007 to develop the management- of the proposed 177,000-hectare hectares in Jambi Province, Sumatra. planning framework document and Biosphere Reserve is included in When granted this concession, one for a Social and Biological Survey of APP’s fiber suppliers conducted Appendix XII.) of the proposed reserve. (A list of its required micro delineation assess- IUCN endangered species found in During 2007, SMF and its forestry ment and recognized that more than the Taman Raja Conservation Area is 6,800 hectares were inhabited by operations invested a total of nearly included in Appendix XIII.) US$79,000 in consulting services several local communities. This same area of the concession included a and operational costs associated The key milestones for the Taman number of small palm oil farms. An with this project. Raja Conservation Area project for additional 3,600 hectares had been 2008 are: deforested by illegal logging prior to For 2008, the agreed-upon bench- the granting of the concession. The • Developing the Conservation marks for the GSK-BB Biosphere remaining 6,000 hectares of natural Area initial landscape-approach Reserve project are: forest appeared to have vital biodi- Management Plan; and • Development of a landscape level versity and social values. • Establishing a formal partnership management plan; with international stakeholders • Formalization of key strategic In 2007, SMF established a collab- and local NGOs to support moni- partnerships to implement orative agreement for a Taman toring and implementation of the multi-stakeholder management: Raja Conservation Area project. management plan. Group Members included APP, the • Submission of the project to Sumatran Tiger Foundation, the UNESCO for recognition under its Community Alliance for Pulp and Man and the Biosphere program; and E. Senepis Buluhala Tiger Paper Advocacy (CAPPA), the Forum Sanctuary • Assessing the carbon footprint Komunikasi Daerah (FKD, a local within the 72,000 hectares contrib- Communication Forum), two local uted by SMF and its partners for foundations, a Village Chief, The A flagship conservation initiative of permanent conservation. Natural Resources Conservation APP and SMF, the Senepis Buluhala Agency (BKSDA), and SMF. Tiger Sanctuary project, calls for the establishment of a 106,000-hectare During 2007, a conservation wildlife sanctuary in a production management-planning framework forest that still supports a viable was developed and agreed upon population of the Sumatran Tiger. by the Project Group members, in APP and SMF have been ardent

118 Cover 2007 Corporate Social Responsibility supporters of this globally important identified risks and opportunities at • Implementation of the Plan; the landscape level. initiative, and provided US$26,800 in • Obtaining special protection funding during 2007 for the develop- status for the forest area; and ment of an initial Management Plan. The initial Management Plan set forth SMF provided funding for an addi- three key objectives: • Identification of enrichment plant needs. tional US$5,100 of operational cost. • Slowing down, or halting, the rate of encroachment within the Project Working Group members remaining habitat. This effort include the Yayasan Penyelamatan F. Kutai Orangutan will require improvements in law Conservation Group dan Konservasi Harimau Sumatra enforcement; formulation of a (Foundation of Sumatran Tiger collaborative management author- Conservation and Protection), the Riau ity; securing designated protected Kutai National Park (200,000 hectares) Province Forestry Service, BKSDA status for the remaining habitats; in East Kalimantan is one of the last (The Natural Resources Conservation and the erection of physical barri- remaining strongholds of the Bornean Agency), the Forestry Service of Rokan ers to deter the most-aggressive Orangutan (Pongo pygmaeus). In Hilir and Dumai Regencies, the Wildlife land speculators; 1997, the park experienced exten- Conservation Society – Indonesia, sive loss due to El Niño-related fires PT. Arara Abadi, PT. Diamond Raya, • Enhancing the remaining tiger habitat that swept through Kalimantan. The and PT. Suntara Gajapati. to attract the prey species on which the Sumatran Tigers feed; and monoliths of standing dead wood rising 40 meters above the regenerat- In late 2007, the Working Group • Monitoring the impacts of the ing understory are testimony to the approved the initial Management planned management efforts with rich forest that once stood there, and, Plan and started the implementation accurate and scientific techniques, with support of private companies, of the Senepis Buluhala Tiger Sanc- and sharing this information trans- will stand again. tuary Program. The Plan detailed parently with all stakeholders. the unique habitat requirements of In 2007, APP’s fiber supplier PT. the Sumatran Tiger, put forth practi- Milestones identified for 2008 include: Surya Hutani Jaya (PT. SHJ), cal actions that will be required to approached SMF with a request to ensure the long-term viability of • Completion of the Definitive help solve an ongoing problem – the current tiger population, and Management Plan;

2007 Corporate Social Responsibility Cover 119 Orangutan migration into a plantation • Threats from ongoing mining • Initiating discussions with other concession adjoining the southern and adjoining land uses; and land owners and groups with similar challenges to develop boundary of the Kutai National Park. • Threats from illegal activities collaborative approaches to the SMF initiated an investigation with including poaching, wildlife protection of the Orangutan popu- PT. SHJ into options for a solution to trading and illegal logging. the challenge that would ensure the lations, based on the identified opportunities and threats; and survival of the Orangutan, as well as The challenge faced by this national provide for the economic viability of park is similar to those faced by many • Initiating discussions and next the plantation. parks in Indonesia – rampant poverty steps on a landscape-level in the area results in land encroach- management solution for this As a first step, SMF approached ment and illegal logging as people Orangutan population. park officials and initiated the struggle to find sources of income formation of a Working Group, to and sustenance. Coupled with the During 2007, SMF and APP invested include Kutai National Park officials, growing needs of local communities a total of more than US$220,000 civil society groups, BKSDA (The for land development and the ever- in the ongoing development of Natural Resources Conservation more-urgent need for coal, which is its Conservation Value Toolkit Agency), private sector companies, being mined in East Kalimantan, the and four Flagship Conservation the Center of International Forest challenges that the Working Group Programs. This figure excludes Research (CIFOR) and The Nature are addressing are significant. the employment-related costs of Conservancy (an international NGO). managers and staff involved in these This Working Group was convened Key activities planned for 2008 forest conservation initiatives. to discuss options on how the Park include: could best be managed to support NOTE: Throughout this report, spending in • Identifying total Orangutan the identified Orangutan population. Indonesian Rupiah has been converted to populations within and adjoining US$ calculated at the interbank rate effective The initial engagement highlighted the plantation area; 12/31/2007. 1 Indonesian Rupiah = 0.0001066 US Dollar. 1 US Dollar = 9,379.00 Indonesian Rupiah. three broad concerns for the park: • Initiating investigations on the • Occupation and forest encroachment root causes for the Orangutan by local and migrant communities; migrations into the plantation area;

120 Cover 2007 Corporate Social Responsibility Glossary Of Terms

AOX (Absorbable Organic Halogens) Biomass in wastewater that can be decom- Measure of the total amount of Biological material that can be used posed by biological organisms, halogens (chlorine, bromine and as fuel or for industrial production. consuming the oxygen dissolved in iodine) bound to dissolved or the receiving waters as a result. It is suspended organic matter in pulp Biosphere often used to gauge the effective- or paper mill wastewater. Part of the earth and atmosphere ness of wastewater treatment plants. capable of supporting living organisms. Archival Paper Carbon Footprint Paper made in accordance with Black Liquor A measure of the impact human ISO-9706, containing an alkali An aqueous by-product (consisting activities have on the environment in reserve to provide characteristics of lignin residues, hemicelluloses, terms of the amount of greenhouse of permanence. and the inorganic chemicals) that is gases produced, measured in units concentrated and burned to create of carbon dioxide. Biodegradable energy and to recover the chemicals Waste material composed primarily in the pulping process for re-use. Carbon Storage and Carbon Sinks of constituent parts that occur Trees and other plants absorb naturally, are able to be decom- Bleached Pulp carbon dioxide from the atmosphere. posed by bacteria or fungi, and are Pulp whose natural brightness has Through a process called photosyn- absorbed into the ecosystem. Paper been improved using chemicals. thesis, plants store this carbon as is normally biodegradable. cellulose, starches, and sugars. This Bleaching carbon remains stored (or “bound”) Biodiversity Process using chlorine or other inor- until it is released through the burn- Refers to the variety of life on ganic chemical compounds to whiten ing or decomposition of the wood three levels: the variety of ecosys- the color of the pulp used fiber. A young forest, composed of tems (ecosystem diversity), the in papermaking. growing trees, binds carbon dioxide variety of species (species diver- more efficiently than does a mature sity) and the variety within species BOD (Biochemical Oxygen Demand) forest and acts as a repository, or (genetic diversity). A parameter that identifies the “sink,” by storing that carbon for amount of organic compounds found years to come.

2007 Corporate Social Responsibility Cover 121 Chain of Custody (CoC) Elemental Chlorine Free (ECF) Mill Broke The step-by-step monitoring process A bleaching process that substi- Paper trimmings and other paper through which products are traced tutes chlorine dioxide for elemental scrap from the manufacture of paper from their origin to the final end chlorine and sodium hypochlorite in recycled internally in a paper mill. product. In the case of paper, the the bleaching process. The acronym chain of custody stretches from the ECF is used often to describe paper Non-controversial Fiber Verification forest or pulpwood plantation to the bleached using this process. Protocols and systems established finished paper product. to verify that fiber delivered to a pulp Environmental Management mill facility does not come from con- COD (Chemical Oxygen Demand) System (EMS) troversial sources. Depending on the A parameter that identifies the The part of an overall management verification protocols, controversial amount of organic compounds system that includes structure, sources can include areas of high found in wastewater. It is used as planning activities, responsibilities, conservation values, areas where a measure of water quality. practices, procurements, processes land-tenure is in dispute, and areas and resources for developing, imple- in which civil rights are threatened by

Chlorine Dioxide (ClO2) menting, achieving, reviewing and forest operations or operators. A heavy, reddish-yellow gas used maintaining an environmental policy.

in solution as a bleaching agent An example of an EMS certification NO2 (Nitrogen Oxides) and disinfectant. system is ISO-14001. Chemical compounds that occur when fuels containing nitrogen are Commercial Forest Fly Ash burned. Nitrogen oxides contribute Forestland that supports the growth One of the residues generated in the to acid rain and can contribute of commercial volumes of timber combustion of coal. Fly ash is gener- to producing the ozone in photo- within an acceptable timeframe and ally captured from the chimneys chemical smog. is designated for such a purpose. of coal-fired power plants before release into the atmosphere. Bottom pH De-Inking ash is removed from the bottom of The measure of the acidity or Removal of printing ink and impuri- the furnace. alkalinity of a solution. ties from recovered paper to produce recycled fiber pulp with improved High Conservation Value Recycled Content whiteness and purity. Forest (HCVF) The portion of a product that is made The concept of High Conserva- from recycled materials diverted from Ecolabel tion Value Forests was developed the waste stream; usually stated as a In general terms, an Ecolabel is a by the Forest Stewardship Council percentage by weight. special seal or mark displayed on a (FSC) and first published in 1999. product signifying that it is has an Over time, this phrase has taken Recycled Material environmentally beneficial property on a more general meaning, refer- 1. Mill Broke – Paper trimmings and or properties. The “Ecolabel” referred ring to forests that contain natural other paper scrap from the manu- to in this document is a mark that habitats which possess areas that facture of paper recycled internally is awarded following an audit are considered to be of outstanding in a paper mill. process conducted by an accredited, significance or critical importance. independent body against a set of 2. Pre-consumer Waste – Material environmental standards and criteria. ISO-14001 that was discarded before it was A range of Ecolabeling schemes An international Environmental ready for consumer use. exists in various countries. However, Management System standard that 3. Post-consumer Waste – Discarded the Ecolabel standard recognizes specifies rigorous requirements that used consumer items (magazines, reciprocal systems and is supported must be met before a facility can be directories, office paper) collected by its strong international network. certified as compliant. for recycling from homes and businesses with the intention of Elemental Chlorine Legal Origin of Fiber Verification incorporating these materials into

Chlorine gas (Cl2), often used as a Protocols and systems established to new products. bleaching agent in pulp manufacture, verify that fiber delivered to a pulp mill and for water purification. facility has been legally harvested.

122 Cover 2007 Corporate Social Responsibility Recycled Product Sustainable Forest Management A product made exclusively, or in (SFM) Certification part, from materials diverted from A market-based instrument aimed the waste stream. at promoting sustainable forest management. SFM Certification typi- Riparian Zone cally takes into account a balance of Land area which borders a body of environmental, economic and social water, usually a river or stream. values. The more-credible SFM Certification schemes require the Silviculture independent assessment of forest The cultivation and management of management practices according forests and woodlands. to internationally and/or nationally accepted standards. Sodium Hypochlorite Bleaching chemical produced TSS (Total Suspended Solids) by mixing sodium hydroxide and The amount of solids in wastewater elemental chlorine. Mills are elimi- effluent which is often used as a nating the use of this chemical from measure of water quality. bleaching processes because it produces quantities of persistent Virgin Fiber organo-chlorine compounds as Wood fiber that has not previously by-products. been used in the manufacture of paper or board.

SO2 (Sulfur Dioxide) Chemical compound produced when Wood-free Paper boilers burn fuel that contains sulfur, Bleached coated or uncoated print- typically coal and oil in the paper ing and writing paper that contains industry. Sulfur dioxide contributes no more than 10% ground wood or to acid rain and can contribute mechanical pulp. Also commonly to producing the ozone in photo- referred to as “free sheet.” chemical smog.

Sustainable Development According to a definition used by the World Bank, sustainable develop- ment is “a process of managing a portfolio of assets to preserve and enhance the opportunities people face.” Sustainable development includes economic, environmental, and social sustainability, which can be achieved by rationally managing physical, natural, and human capital.

Sustainable Forest Management Management that maintains and enhances the long-term health of forest ecosystems for the benefit of all living things while providing environmental, economic, social and cultural opportunities for present and future generations.

2007 Corporate Social Responsibility Cover 123 Appendix I: Governance Structure

Board of Commissioners 1. PT. Purinusa Ekapersada 2. PT. Indah Kiat Pulp & Paper Tbk. President Commissioner Teguh Ganda Wijaya Board of Directors: a. The structure of the Board of Directors and Board of Commis- Vice President Commissioner President Director sioners of the company had Ir. Gandi Sulistiyanto Soeherman Teguh Ganda Wijaya remained unchanged since the APP Sustainability 2006 Report Commissioners Director until June 28, 2007. Indah Suryasari Wijaya Limantara Drs. John Ferdinand Pandelaki Arthur Tahya b. On June 29, 2007, the company Frenky Loa Director appointed a new Board of Directors Hasanuddin The Suresh Kilam and Board of Commissioners, as follows: Independent Commissioners Director Mas Achmad Daniri Arthur Tahya Board of Directors: Prof. Dr. Teddy Pawitra Kamardy Arief Board of Commissioners: President Director Letjend. TNI (Purn.) Soetedjo Yudi Setiawan Lin Ramelan, SH. President Commissioner Muktar Widjaja Vice President Directors c. On September 6, 2007 one of the Linda Suryasari Wijaya Limantara Independent Commissioners, Prof. Commissioner Hendra Jaya Kosasih Dr. Teddy Pawitra, resigned from his Hajjah Ryani Soedirman Suresh Kilam position and was replaced by Drs. Lin Shun Keng Pande Putu Raka, M.A., and the Commissioner replacement is valid to date. Letjen TNI (Purn.) Soetedjo Directors Didi Harsa d. The Audit Committee member- Commissioner Raymond Liu, Ph.D ship of the company had remained Agustian Rachmansjah Partawidjaja Ir. Buyung Wahab, MM unchanged since the SR Report 2006 Baharudin until 25 November 2007. The structure of the Board of Direc- Agustian Rachmansjah Partawidjaja tors and Board of Commissioners e. As part of continuously maintain- of the company has remained Corporate Secretary ing Good Corporate Governance, unchanged since the APP Sustain- Agustian Rachmansjah Partawidjaja on November 26, 2007 the company ability 2006 Report.

124 Cover 2007 Corporate Social Responsibility formed a new Audit Committee, Raymond Liu, Ph.D Audit Committee’s Role in as follows: Ir. Buyung Wahab, MM. the company: Agustian Rachmansjah Partawidjaja Audit Committee: • The Audit Committee holds routine Corporate Secretary meetings with the management to Chairman Agustian Rachmansjah Partawidjaja review the Company’s Quarterly Drs. Pande Putu Raka, MA Financial Statements. The Audit Board of Commissioners: Committee also participates in Member developing the Company’s Drs. Rusli Prakarsa President Commissioner Annual Budget. Teguh Ganda Wijaya Member • Routine meetings with the Internal Dr. Aditiawan Chandra Vice President Commissioner Auditor of the Company are held Ir. Gandi Sulistiyanto Soeherman to discuss its findings to enhance Audit Committee’s Role in internal control. the company: Commissioners Indah Suryasari Wijaya Limantara Arthur Tahya 4. PT. Pindo Deli Pulp and Paper Mills • The Audit Committee holds routine Drs. John Ferdinand Pandelaki meetings with management to review the company’s Quarterly a. The structure of the Board of Independent Commissioners Financial Statements. The Audit Directors and Board of Commis- Prof. Dr. Teddy Pawitra Committee also participates in sioners of the company had Letjend.TNI (Purn.) Soetedjo developing the company’s Annual remained unchanged since the SR Kamardy Arief Budget. Report 2006 until August 28, 2007. Ramelan, SH • Routine meetings with the Internal b. On August 29, 2007, the company Auditor of the Company are held c. On September 6, 2007 one of appointed a new Board of Directors to discuss its findings to enhance the Independent Commissioners, and Board of Commissioners, internal control. Prof. Dr. Teddy Pawitra, resigned as follows: from his position and was replaced by Drs. Pande Putu Raka, M.A., and Board of Directors: 3. PT. Pabrik Kertas Tjiwi Kimia Tbk. the replacement is valid to date.

President Director d. The Audit Committee member- a. The structure of the Board of Tsai Huan Chi ship of the company had remained Directors and Board of Commissioners unchanged since the SR Report 2006 of the company had remained Vice President Directors until November 25, 2007. unchanged since the SR Report Hendra Jaya Kosasih 2006 until June 28, 2007. Linda Suryasari Wijaya Limantara e. As part of continuously maintain- Indah Suryasari Wijaya Limantara ing Good Corporate Governance, b. On June 29, 2007, the company on November 26, 2007 the company appointed a new Board of Directors Directors formed a new Audit Committee, and Board of Commissioners, Suhendra Wiriadinata as follows: as follows: Huang Hua Ching Audit Committee: Board of Directors: Board of Commissioners: Chairman President Commissioner President Director Drs. Pande Putu Raka, MA Yudi Setiawan Lin Teguh Ganda Wijaya Member Commissioners Directors Drs. Rusli Prakarsa Linda Suryasari Wijaya Limantara Yudi Setiawan Lin Arthur Tahya Hendra Jaya Kosasih Member Drs. John Ferdinand Pandelaki Lu Ho-Chang Dr. Aditiawan Chandra Suresh Kilam Suresh Kilam

2007 Corporate Social Responsibility Cover 125 Independent Commissioners Board of Directors: Audit Committee’s Role in Letjend. TNI (Purn.) Soetedjo the company: Drs. Pande Putu Raka President Director Prof. Dr. Wahjudi Prakarsa Lin Fu Li • The Audit Committee conveys the Committee Audit Charter to the The above formation is valid to date. Vice President Directors management. Hendra Jaya Kosasih f. The Audit Committee member- Linda Suryasari Wijaya Limantara ship of the company had remained Indah Suryasari Wijaya Limantara • Routine meetings with the Internal unchanged since the SR Report 2006 Auditor of the Company are held until March 28, 2007. Directors to discuss its findings to enhance Suresh Kilam internal control. g. As part of continuously maintain- Lin Shun Keng ing Good Corporate Governance, on Ir. Buyung Wahab, MM March 29, 2007 the company formed Arthur Tahya a new Audit Committee, as follows: Board of Commissioners: Audit Committee: President Commissioner Chairman Teguh Ganda Wijaya Drs. Pande Putu Raka, MA Vice President Commissioner Member Drs. John Ferdinand Pandelaki Drs. Kamardy Arief Commissioner Member Sukirta Mangkudjaja Dr. Aditiawan Chandra Independent Commissioners Audit Committee’s Role in Letjend. TNI (Purn.) Soetedjo the company: Drs. Pande Putu Raka Prof. Dr. Wahjudi Prakarsa • The Audit Committee conveys the Committee Audit Charter to The above formation is valid to date. the management. c. The Audit Committee member- • Routine meetings with the Internal ship of the company had remained Auditor of the Company are held unchanged since the SR Report 2006 to discuss its findings to enhance until March 28, 2007. internal control. d. As part of continuously maintain- ing Good Corporate Governance, on 5. PT. Lontar Papyrus Pulp & Paper March 29, 2007 the company formed Industry a new Audit Committee, as follows:

Audit Committee: a. The structure of the Board of Directors and Board of Commis- Chairman sioners of the company had remained Drs. Pande Putu Raka, MA unchanged since the SR Report 2006 until November 15, 2007. Member Drs. Kamardy Arief b. On November 16, 2007, the company appointed a new Board Member of Directors and Board of Commis- Dr. Aditiawan Chandra sioners, as follows:

126 Cover 2007 Corporate Social Responsibility Appendix II: Operational Structure

PT Purinusa Pulpwood Supplier Ekapersada

PT Arara Abadi

fiber supply

PT Indah Kiat Pulp PT Pabrik Kertas PT Ekamas Fortuna PT Pindo Deli Pulp & Paper Tbk Tjiwi Kimia Tbk (99.17%) And Paper Mills (52.7%)* (59.6%)** (manufacturer of (97.6%) (manufacturer of (manufacturer of paper products) (manufacturer of pulp and paper) paper products) tissue and paper)

PT Lontar Papyrus fiber supply Pulp & Paper Industry PT Wira Karya Sakti (80%) (manufacturer of pulp and paper)

Management Control * PT. Purinusa shares interest in PT. Indah Kiat Pulp & Paper Tbk has Supply Chain slightly changed to 52.7% as of 30 Juni 2006 to end of December Shares Ownership Control 2007. This change happened because PT. Indah Kiat Pulp & Paper (owned more than 50% shares) Tbk is public company. ** PT. Purinusa shares interest in PT. Pabrik Kertas Tjiwi Kimia Tbk has slightly changed to 59.6% as of end of December 2007. This change happened because PT. Pabrik Kertas Tjiwi Kimia Tbk is public company.

2007 Corporate Social Responsibility Cover 127 Appendix III: Association Memberships

APP (under the name of Indah Kiat, • developing good relations among Tjiwi Kimia, Pindo Deli, and Lontar 2. APKI = Asosiasi Pulp dan Kertas industrial communities especially Papyrus) is enrolled in the following Indonesia = Association of Indonesian in corporate level Pulp and Paper organizations: • representing Indonesian business society in labor organizations Teguh Ganda Wijaya 1. AEI = Asosiasi Emiten Indonesia = • protecting, defending and empow- Vice Chairman I Indonesian Public Listed Companies ering all business people especially members of the association Association Soebardjo Head of Raw Material Committee APINDO International Network : Suresh Kilam Vice President 3 Mr Yan Partawidjaya is The Chief • ILO (Jakarta, Manila, Bangkok of Agribusiness compartment in Diki WIjaya Vice President I dan Jenewa) this organization. Suresh Kilam Head of • International Organization of Paper Marketing Committee Employers (IOE) Jenewa AEI is a non-profit organization consists of public companies listed Subarjo Head of • International Confederation of in Jakarta Stock Market (BEJ), Sura- Raw Material Committee Trade Union, in Belgium baya Stock Market (BES), and • All members of ACE (SNEF, MEF, on other stock markets. ECOT, ECOP) 3. APINDO = Asosiasi Pengusaha • Nippon Keidanren International AEI was established at December Indonesia = Indonesian Entrepreneur Cooperation Center (NICC) Japan 1988 to answer the rising challenge Association of the booming stock market trend • Korean Employers Federation (KEF) in Indonesia at the 80s. This asso- • Confederation of Norwegian Busi- ciation aims to develop conducive Indra Widjaja as Special Member/ ness and Industry (NHO), Norway and professional market environ- member of honor • Australian Chamber of Commerce ment among public companies, and and Industry (ACCI) to motivate other private companies G. Sulistiyanto as Special Member/ to join the stock market trading. member of honor • Global Remuneration Organization Other reason of the establishment (GRO) America of this association is to provide a APINDO was established on Janu- • American Compensation forum to solve stock market prob- ary 31, 1952. Its vision is to create a Association (ACA) lem together. (See also http://www. conducive atmosphere for industrial asosiasi-emiten.or.id/) sector development by: (See also: www.apindo.or.id)

128 Cover 2007 Corporate Social Responsibility Appendix IV: Indonesia’s Units of Governance

Unit of Governance Name in Bahasa Indonesia Size of Governance Unit

Sub-village or Hamlet Kampung 20-30 households

Village Dusun 50+ households

Commune (local government unit) Desa 5-10 Dusun

Sub-District Kecamatan 10-15 Desa

District Kabupaten / Kota 10+ Kecamatan

Province Propinsi 5-40 Kabupaten

National Government Pemerintah Pusat Indonesia 32 Propinsi

Adapted from: www.aisaforestnetwork.org/glossary.html

2007 Corporate Social Responsibility Cover 129 Appendix V: Policy Documents

practices in our mill operations, and stakeholders respecting the cultural Declaration of Sustainability dedicating ourselves company-wide contexts in which we operate. to continuous improvement. On economic sustainability, we have One of the world’s largest pulp and This statement has been developed a responsibility to our employees paper companies, APP is recognized as part of APP’s commitment to and their families, our customers internationally for the quality of its sustainability and good governance and the communities who depend paper products. With current annual in all its operations. The meaning of on APP for their incomes and liveli- combined pulp, paper and packing sustainability to APP is the balance hoods. The responsible development grades capacity of more than seven of economic, environmental and of the pulp and paper industry is million tons in Indonesia, APP ranks social interests. integral to the future prosperity of as the number-one producer in Asia, the communities and countries in outside of Japan. Headquartered in On environmental sustainability, we which we operate. Jakarta, APP currently has multiple believe that continuous improve- manufacturing facilities in Indonesia ments in raw material sourcing and To achieve sustainability, APP and markets its products in more utilization, process efficiency, waste commits to the following: than 65 countries on six continents. minimization and supply chain • Compliance with national legisla- management are core disciplines Our vision is to become the 21st tion and relevant international in achieving a better environment. regulations; Century’s premiere, world-class pulp Using national protocols as the base- and paper manufacturer – a company line, we believe in protecting high • Maintaining robust standards for dedicated to providing superior conservation value areas of forest fiber suppliers through APP’s Fiber value to customers, shareholders, identified to be home to endangered Procurement Policy covering envi- employees and the community. species of wildlife and plants or that ronmental standards, conservation is important to local communities. principles and social impact; To fulfil this vision, APP has • Continuing investment in recycling committed itself to being socially, On social sustainability, we are technology and promoting efficient environmentally and economically committed to respecting and uses of recyclable resources; sustainable in all its operations. APP protecting human rights and will • Continuing to explore innovative will keep this commitment by helping enforce this commitment within ways of recycling the waste prod- to empower the people in the com- our own operations and our supply ucts that arise from papermaking; munities where we operate, initiating chain. Our long-term aim is to conservation programs to protect contribute to active development • Minimizing pollution from opera- the environment, using only the most of the communities in which we tions and benchmarking processes efficient and ecologically sound operate. We will endeavour to against international best practice, harvesting technology, adopting best make our operations transparent to as well as continuing to minimize

130 Cover 2007 Corporate Social Responsibility energy use and its resulting Sustainability, please do not hesitate • Ensure that wood is properly environmental impacts; to contact us or go to our website – checked and verified as to legal origin and chain of custody before • Improving the safe handling and www.asiapulppaper.com. it enters the mill; storage of raw materials, process intermediates, chemicals, products Jakarta, 2004 • Maintain systems and procedures and waste; APP to reasonably ensure that wood Sinarmas Pulp and Paper Products coming from illegal sources shall • Introducing the best available be rejected before it enters the mill; technology that ensures maxi- Last Updated: December 2006 mum efficiency, but also enables • Expect that wood suppliers progress toward the goal of sup- comply with relevant universal porting local communities through Fiber Procurement Policy human rights regulations; employment opportunities and • Expect that wood suppliers development programs; undertake community relations • Implementing detailed opera- APP is committed to purchasing programs based upon participa- tional unit guidelines to manage wood fiber for pulp-making opera- tory assessment and planning emergency and social conflict situ- tions from sustainably managed principles, involving all relevant ations, should these arise; and forestry sources, which conserve stakeholders; areas of outstanding habitat and • Investing further in employees • Ensure that wood suppliers operate in harmony with local through training and education. who are found in breach of communities. To implement this relevant legal requirements and commitment, APP will: These commitments have been the provisions of the policy shall developed by listening to our stake- • Ensure that wood suppliers main- be immediately warned and, for holders and consulting experts in a tain compliance with all relevant repeated violations, have their variety of professional fields. This regional, national and international contracts terminated. has taken place with the recognition regulations for sustainable forestry that the balance of the three sustain- and land use management; Jakarta, 2004 ability pillars – environmental, social • Ensure that a multi-stage envi- APP and economic – can only be achieved ronmental assessment process Sinarmas Pulp and Paper Products with an equal weighting of each. is conducted prior to plantation development. The environmental Last Updated: December 2006 This statement is supported by assessment process will meet or APP’s technical documents and exceed the standard required by relevant certifications. Should you national law; need further information on APP’s

2007 Corporate Social Responsibility Cover 131 Appendix VI: Audit Statement Summaries

132 Cover 2007 Corporate Social Responsibility 2007 Corporate Social Responsibility Cover 133 Appendix VII: Stakeholder Interviews for This Report

FKKM Riau NP-SAND Banten Province (Java) Forum Komunikasi Kehutanan National Park Safety Foundation Masyarakat (Communication Forum on Community Forestry) Contact: FORKLIP Mr. Doni Pasaribu Forum Komunikasi Lintas Contact: Industri dan Permuda Mr. Aiden Yusti Address: (Communication Forum for Jl. A. Hasan Lrg. Muhajirin No. 42 RT Intra-industrial and Youth) WARISAN 21 Kel. Simp. IV Sipin, (Forest Conservation & Forestry Kec. Telanai Pura – Jambi Contact: Association) Mr. Endang Arista, Chairman YCBM Contact: Yayasan Citra Bina Mandiri Address: Mr. Indra (a conflict-resolution NGO) Sub-district Kragilan, Serang, Banten Address: Contact:

Jlm. Umbran Sari, Rumbai, Pekanbaru Mr. Pahrin Siregar Riau Province (Sumatra) Address: Jambi Province (Sumatra) Jl. A. Hasan, Lrg. Muhajirin No. 42 FKD Riau RT 21 Kel. Simpang IV Sipin, Forum Komunikasi Daerah Kec. Telanaipura, Jambi (Regional Communication Forum) CAPPA Community Alliance for Pulp FKD Jambi Contact: and Paper Advocacy Forum Komunikasi Daerah Mr. Harry Oktavian (Regional Communication Forum) Contact: Address: Mr. Rivani Noor Contact: Jl. Paus Perum Vila Indah Pauas Mr. Edi Zuhdi Blok C. 36, Pekanbaru Address: Jl. Sk Rd Syahbuddin, LRg Address: Alamanda No. 91 Jl. SK. RD. Syahbudin no. 91, Lrg. Alamanda, Kel. Mayang Mangurai Kec. Kota Baru, Jambi 36126

134 Cover 2007 Corporate Social Responsibility Appendix VIII: APP Product Environmental Credentials

SFM Certification Chain of Custody (CoC) CoC Legal Paper, Tissue and Long-fiber Short- Third- ECF Recycled ISO 14001 Origin / Ecolabel Paperboard Products Pulp2 fiber Pulp party Capable Content CoC Audited

Coated P&W1 √ FSC/PEFC LEI3 √ √ √ √ √

Uncoated P&W1 √ FSC/PEFC LEI3 √ √ √ √ √

Photocopy √ FSC/PEFC LEI3 √ √ √ √ √

Color Photocopy √ FSC/PEFC LEI3 √ √ √ √

Art Paper √ FSC/PEFC LEI3 √ √ √ √

Carbonless √ FSC/PEFC LEI3 √ √ √

Cast-coated Paper √ FSC/PEFC LEI3 √ √ √ √

Tissue √ FSC/PEFC LEI3 √ √ √

Brief Card √ FSC/PEFC LEI3 √ √ √ √

Color Brief Card √ FSC/PEFC LEI3 √ √ √ √ √

Paperboard √ FSC/PEFC LEI3 √ √ √ √

Triplex Board √ FSC/PEFC LEI3 √ √ √ √

Art Board √ FSC/PEFC LEI3 √ √ √ √

Cast-coated Board √ FSC/PEFC LEI3 √ √ √ √

Containerboard √ FSC/PEFC LEI3 √ √ √ √

Boxboard √ FSC/PEFC LEI3 √ √ √ √

Exercise Book √ FSC/PEFC LEI3 √ √ √ √ √

Tablet √ FSC/PEFC LEI3 √ √ √ √ √

Loose Leaf √ FSC/PEFC LEI3 √ √ √ √ √

Envelope √ FSC/PEFC LEI3 √ √ √ √

1. P&W stands for Printing and Writing papers, often referred to as Woodfree, and used in digital and traditional printing presses as well as in office and stationery products. 2. All long-fiber pulp is purchased on the open market and must be FSC or PEFC certified. 3. LEI Phased Approach Sustainable Forest Management certification is underway at all of APP’s fiber suppliers.

2007 Corporate Social Responsibility Cover 135 Appendix IX: Plant Variety Protection Certificate forEucalyptus pellita 05 (EP05)

136 Cover 2007 Corporate Social Responsibility Appendix X: Conservation Initiative Working Group Members

To date the project working group Dr. Yusrizal 1. Giam Siak Kecil – Bukit Batu contains: Director of BKSDA, Riau, University of Jambi Biosphere Reserve as chairperson, and Vice Chair person is a representative from Ir. Agung Setyabudi Sinarmas, Mr. Haris Surono. BKSDA, Jambi Ir. A. Rachman Sidik Director for Balai Besar Konservasi Mr. Agus Wahyudi Sumber Daya Alam (BKSDA), 2. Taman Raja Conservation Area PT Rimba Hutani Mas Riau province. free translation of BKSDA is Natural Resources Source: Memorandum of Understanding, Conservation Agency Mr. Waldemar Hasiholan December 12, 2006, Taman Raja collaborators Executive Director, Sumatran Ir. Haris Surono Tiger Foundation General Manager, Sinarmas Forestry 3. Senepis – Buluhala Tiger Sanctuary Flagship Conservation Program Mr. Edi Zuhdi Forum Komunikasi Daerah (FKD Mr. T. Izmet Prof. Enny Sudarmonowati -Local Communication Forum) contact person for biological and Agriculture and Forest Service, Dumai City socio-economic studies, Indonesian Mr. Sudirman, SH, Institute of Sciences (LIPI) Pusat Studi Hukum dan Kebijakan Ir. Haris Surono Otonomi Daerah (Law and Regional Sinarmas Forestry Mr. Ahmad Muhammad Regulation Study Center) Center for Biodiversity Conservation, Mr. Omita Natural Science, University of Riau Mr. Pahrin Effendi Siregar PT Diamond Raya Timber Yayasan Citra Bina Mandiri Mr. J. Saragih (Citra Bina Mandiri Foundation) Forest Service, Siak Regency Ms. Dwi Yani Kusumaningrum BKSDA, Riau Mr. Rivani Noor Mr. Heribertus Hariadi Community Alliance for Pulp Ir. M. Apif Forest Service, Bengkalis Regency and Paper Advocacy Forest Service Riau Province Ms. Erni Yanti Mr. Haris Forest Service, Riau province Lubuk bernai Village Chief Mr. Didik Purwanto, PT Arara Abadi Mr. Haryo Wibisono Wildlife Conservation Society Indonesian Program

2007 Corporate Social Responsibility Cover 137 Mr. Bastoni Secretary Godwin Limberg Yayasan Penyelamatan dan Konser- (CIFOR) vasi Harimau Sumatra (Foundation Edy Purwanto, S. Hut Hermansyah (PT. Pertamina) of Sumatran Tiger Conservation and (Kutai National Park) Protection) Nurul. M. Karim (PT. Kaltim Prima Coal) Members Mr. Didik Purwanto PT Arara Abadi M. Eduardsyah Paramitha Ananda (PT. Pupuk Kaltim) (BOS Foundation) –BOS : Borneo Mr. Triharyanto Orangutan Survival PT Ruas Utama Jaya Dr. Chandra Dewana Boear (PPHT Unmul – Tropical Forest Nardinyono Mr. Halimuntara Gajapati Research Center of Mulawarman (The Nature Conservancy) University) Source: Surat Penugasan No. 86/2007, BKSDA, Provinsi Riau, August 2007 M. Danang Anggoro, S.Si., M.Si. Yudi Purnomo (BKSDA assignment letter) (BKSDA – The Natural Resources (PT. Sumalindo Hutani Jaya) Conservation Agency) Dr. Sri Suci Utam 4. Kutai Orangutan Conservation Irfanni, SP. (UNAS –National University) Group (PT Surya Hutani Jaya) Source: Assignment Letter of Head of Kutai Anwar Rosyadi, S. Hut National Park No. PT.774/BTNK-1/2007 dated Chairman (Sinarmas Forestry) Sept 6th 2007

Ir. Agus Budiono Mardian M/SC. (Head of Kutai National Park) (PT. Indominco Mandiri)

Vice Chairman Roy. A. Mewengkang (PT. Badak NGL) Ir. Haris Surono Wardi Atmodjo, MM (Sinarmas Forestry)

138 Cover 2007 Corporate Social Responsibility Appendix XI: IUCN Red List Species From Conservation Value Forest Survey

Scientific Name Local Name IUCN Category*

Mammals

Petaurista elegants Spotted Giant Flying Squirrel Least concern

Helarctos malayanus Malayan Sun Bear Vulnerable

Macaca nemestrina Pig-tailed Macaque Vulnerable

Elephas maximus sumatranus Sumatran Elephant Endangered

Phantera tigris Sumatran Tiger Critical endangered

Tragulus sp. Mouse Deer Least concern

Maccaca fascicularis Long-tailed Macaque Near threatened

Muntiacus muntjak Deer Least concern

Cynocephalus veriegatus Flying Lemur Least concern

Felix bengalensis Leopard Cat Least concern

Hystrix brachyuran Porcupine Vulnerable

Presbytiss frontata White-fronted Leaf-monkey Data deficient

Felis viverrina Fishing Cat Vulnerable

Tragulus napu Greater Mouse-deer Endangered

Hylobates agilis Owa/Ungko Endangered

Phalanger sp. Pukang/Kuskus Vulnerable

Cervus indicus Rusa Least concern

Cervus unicolor Sambar Least concern

Hylobates syndactylus Siamang Endangered

Tapirus indicus Malayan Tapir Endangered

Manis javanica Malayan Pangolins Vulnerable

Ratufa bicolor Black Giant Squirrel Vulnerable

Lutra sumatrana Hairy-nosed otter Data deficient

Presbytis melalophos Leaf Monkey Least concern

Felis marmorata Clouded Tiger Cat Least concern

Presbytis frontata White-fronted Surili Data deficient

Tapirus indicus Asian Tapir Vulnerable

Lariscus insignis Three-striped Ground Squirrel Least concern

Anthracoceros malayanus Asian Black Hornbill Least concern

Loriculus galgulus Blue-crowned Hanging Parrot Least concern

2007 Corporate Social Responsibility Cover 139 Scientific Name Local Name IUCN Category* Birds Elanus caeruleus Black-winged Kite Least concern Gallus gallus Domestic chicken Least concern Gracula religiosa Hill Mynah Least concern Bubo sumatranus Barred-eagle Owl Least concern Leucopsar rothschildi Bali Starling Least concern Egretta garzetta Little Egret Least concern Dinopium sp. Burung Pelatuk Least concern Spizaetus cirrhatus Changeable Hawk-eagle Least concern Spilomis cheela Crested Serpent Eagle Least concern Cirus aeruginosus Marsh Harrier Least concern Chloropsis cochinchinensis Blue-winged Leafbird Least concern Alcedo atthis Kingfisher Vulnerable Buceros rhinoceros Hornbill Rhinoceros Near threatened Fregata andrewsi Christmas Island Frigate Bird Least concern Cairina Sculata White-winged Duck Endangered Ciconia stromi Storm's Stork Endangered Mycteria cinerea Milky Stork Vulnerable Leptoptilos javanicus Lesser Adjutant Vulnerable Centropus sinensis Crow Pheasant Least concern Accipiter trivirgatus Crested Goshawk Least concern Anthracoceros malayanus Black Hornbill Near threatened Haliastur Indus Brahminy Kite Least concern

Alcedo meninting Blue-eared Kingfisher Least concern Cynogale benettii Otter Civet Endangered Hemigalus derbyanus Banded Palm Civet Least concern Egretta alba Great White Egret Least concern Argusianus argus Great Argus Near threatened Reptiles Varanus sp. Monitor Lizard Vulnerable Crocodylus sp. Crocodile Vulnerable Tomistoma schlegellii False gavial Endangered Testudinidae sp. Turtle Vulnerable

Chitra indica Narrow-headed Soft-shell Turtle Vulnerable Naja sp. Spitting Asian Cobra Vulnerable Python molurus Indian Rock Python Endangered Amyda cartilaginea Asiatic Soft-shell Turtle Vulnerable Crocodylus porosus Saltwater Crocodiles Least concern

* IUCN Red List Categories The IUCN Red List Categories (and Criteria) are classification of the broadest range of species Extinct Vulnerable intended to be an easily and widely understood according to their extinction risk. Extinct in the wild Data deficient system for classifying species at high risk of global Critically endangered Near threatened extinction. The general aim of the system is to The categories are listed in rank order of the risk Endangered Least concern provide an explicit, objective framework for the of extinction of a species.

140 Cover 2007 Corporate Social Responsibility Appendix XII: IUCN Red List Species From Survey of Proposed Giam Siak Kecil – Bukit Batu Biosphere Reserve

Scientific Name Local Name IUCN Category*

Big Mammals

Elephas maximus Asian Elephant Endangered

Helarctos malayanus Malayan Sun Bear Deficient data

Hylobates agilis Agile Gibbon Least concern

Macaca fascicularis Long-tailed Macaque Least concern

Macaca Nemestrima Pig-tailed Macaque Vulnerable

Panthera Tigris Sumatran Tiger Endangered

Tapirus Indicus Malayan Tapir Vulnerable

Trachypithecus cristatus Silver-leaf monkey Least concern

Birds

Anthracocerus malayanus Black Hornbill Least concern

Ardea Sumatrana Great-billed Horn Least concern

Heliopais personata Masked-fin Foot Vulnerable

Leptoptilos javanicus Lesse Adjutant Vulnerable

Mycteria cinerea Milky Stork Vulnerable

Platysmurus leucopterus Black Magpie Least concern

Rhyticeros corrugatus Wrinkled Hornbill Vulnerable

Treron fulvicollis Cinnamon-headed Green Pigeon Least concern

Trichastoma rostratum White-chested Blabber Least concern

Reptiles

Crocodylus porosus Salt Water Crocodile Vulnerable

Tomistoma schlegelii False Gavial Deficient data

Fish

Scleropages formosus Golden Dragonfish Endangered

* IUCN Red List Categories The IUCN Red List Categories (and Criteria) are classification of the broadest range of species Extinct Vulnerable intended to be an easily and widely understood according to their extinction risk. Extinct in the wild Data deficient system for classifying species at high risk of global Critically endangered Near threatened extinction. The general aim of the system is to The categories are listed in rank order of the risk Endangered Least concern provide an explicit, objective framework for the of extinction of a species.

2007 Corporate Social Responsibility Cover 141 FLORA

Species Family Local Name IUCN Category*

Aglaia ignea Meliaceae Pasak Lingau Near threatened

Anisoptera costata Dipterocarpaceae Mersawa Endangered

Gonystylus bancanus Thymelaeaceae Ramin Vulnerable

Shorea parvifolia Dipterocarpaceae Meranti Endangered

Shorea teysmanniana Dipterocarpaceae Meranti Bunga Endangered

Shorea uliginosa Dipterocarpaceae Meranti Batu Vulnerable

Sloanea sp. Bombacaeae No local name Endangered

Vatica rassak Dipterocarpaceae Rasak Endangered

Vatica umbonata Dipterocarpaceae Rasak Endangered

source: Laporan Akhir : Keanekaragaman Hayati Suaka Marga Satwa Giam Siak Kecil Blok Tasik Betung dan Hutan Konservasi PT. Arara Abadi Blok Bukit Batu, Riau by LIPI in cooperation with SMF and APP

Source: Final Report of Biodiversity of Tsik Betung Block, Giam Siak Kecil Bisophere Reserve and Bukit Batu Block, PT. Arara Abadi Conservation Forest, Riau Province by LIPI in cooperation with SMF and APP

Appendix XIII: IUCN Red List Species From Survey of Taman Raja Conservation Area

Scientific Name Local Name IUCN Category*

Big Mammals

Helarctos malayanus Malayan Sun Bear Data deficient

Neofelis nebulosa Clouded Leopard Vulnerable

Manis javanica Malayan Pangolin Near threatened

Macaca nemestrina Pig tailed Macaque Vulnerable

Buceros rhinoceros Hornbill Rhinoceros Near threatened

Buceros bicornis Great Hornbill Near threatened

Argusianus argus Great Argus Near threatened

source: Kolaborasi Pengelolaan Taman Raja Source: Taman Raja Management Working Group

* IUCN Red List Categories The IUCN Red List Categories (and Criteria) are classification of the broadest range of species Extinct Vulnerable intended to be an easily and widely understood according to their extinction risk. Extinct in the wild Data deficient system for classifying species at high risk of global Critically endangered Near threatened extinction. The general aim of the system is to The categories are listed in rank order of the risk Endangered Least concern provide an explicit, objective framework for the of extinction of a species.

142 Cover 2007 Corporate Social Responsibility Appendix XIV: Global Reporting Initiative (GRI) Index

The Global Reporting Initiative’s Sustainability Reporting Guidelines provide an internationally recognized framework for corporate reporting on sustainability initiatives. This report was prepared using the latest 2006 version of the guidelines known as the G-3 Guidelines. The table below provides an index or cross reference to the page or pages on which each topic or indicator (Standard Disclosure) is addressed.

GRI Section Description of Topic or Indicator Pages

1. Strategy and Analysis

Statement from the most senior decision maker of the organization (e.g., CEO, chair or equivalent 1.1 4 senior position) about the relevance of sustainability to the organization and its strategy.

1.2 Description of key impacts, risks and opportunities. 4

2. Organizational Profile

2.1 Name of the organization. 2

2.2 Primary brands, products and/or services. 19

Operational structure of the organization, including main divisions, operating companies, 2.3 2, 7 subsidiaries and joint ventures.

2.4 Location of the organization’s main headquarters. 2, 132

Number of countries where the organization operates, and names of countries with either major 2.5 2, 7 operations or that are specifically relevant to the sustainability issues covered in this report.

2.6 Nature of ownership and legal form. 2, 8

Markets served, including geographical breakdown, sectors served and types of 19, 28, 40, 54, 2.7 customers/beneficiaries. 64, 74 84, 94

2.8 Scale of the reporting organization. 7, 18

2.9 Significant changes during the reporting period regarding size, structure or ownership. 9

2.10 Awards received in the reporting period. 11

3. Report Parameters

3.1 Reporting period (e.g., fiscal/calendar year) for information provided. 2

3.2 Date of most recent previous report (if any). 2

3.3 Reporting cycle (annual, biennial, etc.). 2

3.4 Contact point for questions regarding the report or its contents. 15

3.5 Process for defining report content. 2

3.6 Boundary of the report. 2

3.7 State any specific limitations on the scope or boundary of the report. 2

Basis for reporting on joint ventures, subsidiaries, leased facilities, outsource operations 3.8 7 and other entities. Data measurement techniques and the bases of calculations, including assumptions and 3.9 techniques underlying estimations applied to the compilation of the indicators and other 2 information in the report. Explanation of the effect of any re-statements of information provided in earlier reports, 3.10 9 and the reasons for such re-statements.

2007 Corporate Social Responsibility Cover 143 GRI Section Description of Topic or Indicator Pages

3. Report Paramaters (cont’d.)

Significant changes from previous reporting periods in the scope, boundary, 3.11 2 or measurement methods applied in the report.

3.12 Table identifying the location of the Standard Disclosures in the report. 148

3.13 Policy and current practice with regard to seeking external assurance for the report. 2

4. Governance, Commitments and Engagement

4.1 Governance structure of the organization. 8, 124, 127

4.2 Indicate whether the Chair of the highest governance body is also an executive officer. 8

For organizations that have a unitary board structure, state the number of members of 4.3 8, 124 the highest governance body that are independent and/or non-executive members. Mechanisms for shareholders and employees to provide recommendations or 4.4 8 direction to the highest governance body. Linkage between compensation for members of the highest governance body to 4.5 8 ensure that conflicts of interest are avoided.

4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided. 8

Process for determining qualifications and expertise of members of the highest governance body 4.7 10 for guiding the organization’s activities due to climate change. Internally developed statements of mission or values, codes of conduct and principles relevant 4.8 10 to economic, environmental and social performance and the status of their implementation. Procedures of the highest governance body for overseeing the organization’s identification and management of economic, environmental, and social performance, including relevant risks and 4.9 10 opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles. Processes for evaluating the highest governance body’s own performance, 4.10 10 particularly with respect to economic, environmental, and social performance. Explanation of whether and how the precautionary approach or principle is 4.11 8, 10 addressed by the organization. Externally developed economic, environmental, and social charters, principles, or other 115, 140, 4.12 initiatives to which the organization subscribes or endorses. 142, 143 Memberships in associations (such as industry associations) and/or national/international 4.13 9, 128 advocacy organizations.

4.14 List of stakeholder groups engaged by the organization. 15-17, 135

4.15 Basis for identification and selection of stakeholders with whom to engage. 14

Approaches to stakeholder engagement, including frequency of engagement by type and by 4.16 15-17 stakeholder group. Key topics and concerns that have been raised through stakeholder engagement and how the 4.17 15-17, 135 organization has responded to those key topics and concerns, including through its reporting.

5. Management Approach and Performance Indicators

Economic

7, 19, 28, EC 01 Direct economic value generated and distributed. 40, 54, 64, 74, 84, 94 Financial implications and other risks and opportunities for the organization’s activities EC 02 5 due to climate change.

EC 04 Significant financial assistance received from the government. None – NA

11-14, 26, Development and impact of infrastructure investments and services provided primarily EC 08 35, 50, 59, for public benefit through commercial, in kind or pro bono engagements. 70, 80, 90, 98 Understanding and describing significant indirect economic impacts, including the EC 09 7 extent of impacts.

144 Cover 2007 Corporate Social Responsibility GRI Section Description of Topic or Indicator Pages

5. Management Approach and Performance Indicators (cont’d.)

Environmental

EN 01 Materials used by weight or volume. 19-25

EN 02 Percentage of materials used that are recycled input materials. 22-24

32, 45, 57, EN 03 Direct energy consumption by primary energy source. 68, 79, 87, 97 33, 45, 57, EN 10 Percentage and total volume of water recycled and reused. 68, 79, 89, 97 Location & size of land owned, leased, managed in, or adjacent to, protected areas 13, 102-109, EN 11 and areas of high biodiversity value outside protected areas. 116-120 Description of significant impacts of activities, products, and services on biodiversity 13, 102-109, EN 12 in protected areas and areas of high biodiversity value outside protected areas. 116-120

EN 13 Habitats protected or restored. 116-143

EN 14 Strategies, current actions, and future plans for managing impacts on biodiversity. 116-143

Number of IUCN Red List species and national conservation list species with habitats EN 15 140, 142, 143 in areas affected by operations, by level of extinction risk. 34, 49, 59, EN 20 NO, SO, and other significant air emissions by type and weight. 69, 81, 89, 97 35, 49, 60, EN 21 Total water discharge by quality and destination. 69, 81, 89, 98 36, 49, 60, EN 22 Total weight of waste by type and disposal method. 69, 82, 90, 99 34, 48, 59, EN 23 Total number and volume of significant spills. 68, 80, 88, 96

Social

6, 19, 28, LA 01 Total workforce by employment type, employment contract and region. 40, 54, 64, 74, 84, 94 Rates of injury, occupational diseases, lost days, and absenteeism, and total number 26, 35, 50, LA 07 of work-related fatalities by region. 59, 70, 90, 98 26, 36, 50, Education, training, counseling, prevention, and risk control programs in place to assist LA 08 60, 70, 90, workforce members, their families, or community members regarding serious diseases. 99, 111-114

HR 09 Total number of incidents of violations involving rights of indigenous people and actions taken. None – NA*

26, 36, 50, Nature, scope and effectiveness of any programs and practices that asses and manage SO 01 60, 70, 90, the impacts of operations on communities, including entering, operating and exiting. 99, 111-114 Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly SO 07 None – NA practices and their outcomes. Monetary value of significant fines and total number of non-monetary sanctions for SO 08 None – NA non-compliance with laws and regulations. Monetary value of significant fines for noncompliance with laws and regulations PR 09 None – NA concerning the provision and use of products and services.

* There were no reported incidents of violation of indigenous people’s rights during 2007. This was confirmed by the 2007 LEI LOV and CoC Verification. See page 106.

2007 Corporate Social Responsibility Cover 145 Appendix XV: Assurance Statement of Independent Review Body

146 Cover 2007 Corporate Social Responsibility 2007 Corporate Social Responsibility Cover 147 148 Cover 2007 Corporate Social Responsibility © Copyright 2009 PT. Purinusa Ekapersada. All rights reserved.

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Photo Credits: APP and Peter W. Nowack. Indonesia