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.