Roundtable on Sustainable Palm Oil

Annual 1st Surveillance Audit Report the RSPO Principles & Criteria year 2013 (Generic) RSPO SCCS 2014 Report No. ASA11-14011

PT Barumun Agro Sentosa

Jl. DC Mahakam Blok C No. 14 Padang Golf, Polonia Medan - 20157

Date of assessment: August 23 – 25, 2016

Report prepared by: Dewi Akbari (RSPO Lead Auditor)

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

Certification Body: Jakarta Head Office Menara Karya 10th Floor Jl. H.R. Rasuna Said Block X-5 Kav. 1 – 2 Jakarta 12950 – Indonesia Phone: +62 21-579 44 579 Fax: +62 21-579 44 575 Email: [email protected] www.tuv.com

TABLE OF CONTENTS

1.0 SCOPE OF RE-CERTIFICATION ASSESSMENT ...... 3

1.1 Principle and Criteria Used ...... 3 1.2 Type of Assessment ...... 3 1.3 Certification Details ...... 3 1.4 Location and Maps ...... 3 1.5 Organizational Information / Contact Person & Updates on Company Profile ...... 6 1.6 Description of Supply Base ...... 6 1.7 Actual production volumes, tonnages and projected outputs...... 7 1.8 Dates of Plantings and Replanting Cycles ...... 8 1.9 Area of Plantation (Total, Planted and Mature) ...... 9 1.10 Progress against Time Bound Plan ...... Error! Bookmark not defined. 1.11 Compliance to Partial Certification Requirements ...... Error! Bookmark not defined. 1.12 Progress of associated smallholders or outgrowers towards RSPO compliance ...... 11 1.13 Revised Approximate Tonnages Certified ...... 11

2.0 ASSESSMENT PROCESS ...... 12

2.1 Certification Body ...... 12 2.2 Qualifications of Lead Assessor and Assessment Team ...... 12 2.3 Assessment Methodology & Agenda ...... 13

3.0 ASSESSMENT FINDINGS ...... 14

3.1 Summary of Findings ...... 14 3.2 Status of Previously Identified Non-conformities ...... 48 3.3 Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions ...... 55 3.4 Status of Previously Identified Non-conformities ...... Error! Bookmark not defined. 3.5 Identified Non-conformances against RSPO SCCS Requirements, Corrective Actions Taken and Auditors Conclusions ...... Error! Bookmark not defined. 3.6 Noteworthy Positive Component ...... 58 3.7 Conclusion and Recommendation for RSPO P & C and Supply Chain Certification ...... 59 TUV Rheinland recommends that Aek Sigala gala Mill be continuing approved for certification of compliance to the RSPO P & C and Supply Chain Certification System...... 59 3.8 Issues Raised by Stakeholders and Findings Pertaining to Issues ...... 59

4.0 CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY 60

4.1 Date of Next Surveillance Visit ...... 60 4.2 Acknowledgements of Internal Responsibility and Formal Sign-Off by Client ...... 60

Appendix 1: Details of Certificate ...... 61 Appendix 2 : Certification Audit Plan ...... 62 Appendix 3: List of Abbreviations ...... Error! Bookmark not defined. Appendix 4: List of Stakeholders Interviewed and Contacted ...... 63 Appendix 5: Observations and Opportunities for Improvement ...... 64

RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

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1.0 SCOPE OF RE-CERTIFICATION ASSESSMENT 1.1 Principle and Criteria Used The operations of the palm oil mill(s) and its supply base of FFB were assessed against the RSPO Principles & Criteria year 2013 (generic) and RSPO SCCS 2014.

1.2 Type of Assessment The RSPO 1st surveillance assessment was carried out on 1 mill and 3 company estates supplying to this mill, which are Aek Barumun Estate, Aek Sigala-gala Estate and Aek Kulim Estate owned by PT Barumun Agro Sentosa (PT BAS), which was previously named PT First Mujur Plantation & Industry (PT FMPI). The date of 1st certificate of this unit was October 13, 2010 valid until October 12, 2015.

1.3 Certification Details The details of RSPO certification of PT Barumun Agro Sentosa are as per the table below:

Table 1: RSPO Certification details of PT Barumun Agro Sentosa

RSPO Membership no.: 1-0059-08-000-00 on behalf PT Barumun Agro Sentosa since August 29, 2008 RSPO Certificate no.: 824 502 14011

Date of first RSPO certificate & validity: October,13 2010 & valid until October,12, 2015 Date of re-certification audit: June 22-25, 2015

Date of revised RSPO certificate & validity Jan 17, 2017 & valid until Nov 01, 2020 (if applicable): CPO tonnages claimed: 64,102.49 tonnes

PK tonnages claimed: 15,262.49 tonnes

1.4 Location and Maps Table 2: GPS locations for all estates and mills included in re-certification assessment

Name of mill / GPS locations Location estate Latitude Longitude Ujung Gading Jae Village, Simangambat Aek Sigala gala Mill 01 °37 ‘ 16.2 100 °06 ‘ 08.8 Sub District, Padang Lawas Utara District " " Aek Barumun Ujung Gading Jae Village, Simangambat 01 °35 ‘ 01.3 100 °07 ‘ 51.3 Estate Sub District, Padang Lawas Utara District " " Aek Sigala gala Ujung Gading Jae Village, Simangambat 01 °36 ‘ 14.2 100 °05 ‘ 50.5 Estate Sub District, Padang Lawas Utara District " " Jambu Tonang Village, Ujung Gading Jae Aek Kulim Estate Village, Simangambat Sub District, Padang 01 °39 ‘ 01.7 " 100 °05 ‘ 59.6 " Lawas Utara District

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North Padang Lawas District

Figure 1: Map of North Sumatera Province and North Padang Lawas District in North Sumatera, Indonesia

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Figure 2 : Map of PT Barumun Agro Sentosa land area

Description: 1. AS : Aek Sigala-gala 2. ABR : Aek Barumun 3. AK : Aek Kulim

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 6 of 64 1.5 Organizational Information / Contact Person & Updates on Company Profile Contacts details of the company are as follows:

Company Name: PT Barumun Agro Sentosa

Address: Main office :

Jl. DC Mahakam Blok C No. 14, Padang Golf, Polonia, Medan, North Sumatera Province, Indonesia – 20157 Plantation office :

Ujung Gading Jae Village, Simangambat Sub District, Padang Lawas Utara District, North Sumatera Province, Indonesia

Contact Person: Husin Salim

Telephone: +62-812-7516986 Email: [email protected]

PT Barumun Agro Sentosa was previously certified under the company name PT First Mujur Plantation & Industry, which was established in year 1990. The change of company name was agreed by the company’s shareholders according to Act no. 303 dated 28 December 2010 from the Humberg Lie SH, SE, Mkn Notary and approved by the Republic of Indonesia Ministry of Law and Human Rights as per decision letter no. AHU-08277.AH.01.02 year 2011 regarding the change of the company’s statutes.

The company was initially entitled to govern a concession area of 12,319 ha and as stated in the certification report for PT FMPI, the mill is also receiving FFB supply from another small estate area within Aek Kulim estate which is owned by the company but the company has yet to receive the land use certificate (Hak Guna Usaha – HGU) for this area which covers 1,500 ha. At time of certification, the company had the location permit no. 503/0398/K/2009 dated 24 Sept 2009 (the location permit revision no. 503/232/K/2012 date 17 July 2012 about on behalf PT Barumun Agro Sentosa now) from the North Padang Lawas government head for 1,500 ha of land located in Jambu Tonang, Menanti, Huta Raja, Pasir Lancat and Ujang Batu Jae Village, located on Simangambat sub-district, North Padang Lawas District of North Sumatera. The company has since received the Plantation Operation Permit no. 503/157/KPTS/2011 for this 1,500 ha of land on 28 May 2011. As such, the total company’s area is now 13,819 ha and the company is now in process to obtain the land use right (Hak Guna Usaha – HGU) for the area of 1,500 ha. And currently all the requirement already fulfill and waiting for decision from Indonesia National Land Agency.

Fresh fruit bunches (FFB) from the company’s own estates are processed independently by Aek Sigala-gala Palm Oil Mill with an initial installed capacity of 30 tonnes per hour, but had now been increased to 50 tonnes per hour. The company has 3 estates i.e. Aek Sigala-gala Estate, Aek Barumun Estate and Aek Kulim Estate. Each estate consists of 5 divisions, and is managed by an estate manager, while each division is managed by a field assistant along with division assistant for transport and office.

1.6 Description of Supply Base

Table 3 : FFB Supply Information for Aek Sigala-gala Mill from year 2015 and 2016 (per July 2016)

FFB supplied year 201 6 FFB supplied year 2015 FFB Contributors (per July) Tonnes % Tonnes % I. Company owned

estates :

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 7 of 64 FFB supplied year 201 6 FFB supplied year 2015 FFB Contributors (per July) Tonnes % Tonnes % Aek Kulim 103,710.79 30.76 57,542.53 29.77 Aek Sigala-gala 92,784.95 27.52 51,876.85 26.84 Aek Barumun 97,239.13 28.84 60,195.69 31.15 Sub total 293,734.87 87.11 169,615.07 87.77 II. Trader 43,455.00 12.89 23,645.00 12.23 TOTAL 337,189.87 100.00 193,260.07 100.00

1.7 Actual production volumes, tonnages and projected outputs.

Table 4: Certified tonnages claimed, certified tonnages purchased or sold, total and projected FFB, CPO and PK production from Aek Sigala-gala Mill

Amount (MT) Remaks FFB CPO PK Certified tonnages (year 2015) 64,772.27 14,402.00 Certified tonnages sold (January to December - - - 2015). Certified tonnage sold (January to July 2016). - 6.907,05 4.711,63 - Certified FFB tonnages purchased - - Total FFB Production Certified & non Certified 193,260.28 - - (January to July 2016) Total certified FFB produced (January to July 169,615.07 2016) Total mill Production Certified & non Certified 321,105.34 67,325.68 15,022.82 (January to December 2015) Total Actual RSPO Certified Production for year 122,612.72 59,014.76 13,169.76 2015 Conversion Factor year 2015 (average) OER : 20,59 KER: 4,16

Actual FFB from certified estate year 2016 322.760,00

Actual FFB process for year 2016 318.546,00

Conversion rate for year 2016 OER: 20.50 KER: 4.80

Total mill production non certified for year 6,059.00 1,406.00 2016.

Total mill production certified for year 2016. 65.307,00 15.798,00

Projected product year 2017 :

production non certified* 39,000.00 7,410.00 1,833.00

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production certified* 305,249.80 64,102.49 15,262.49

Projected conversion rate for year 2017* OER: 21.00 KER: 5.00

Note: *update data on January 15th, 2017

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

Table 5 : Age and year of plantings of company estate supplying to Aek Sigala-gala Mill

Oil palm planted area at each estate (ha) Total planted Year of Plantings Aek Kulim Aek Sigala-gala Aek Barumun area (ha) Mature Area

1988 231 0 0 231 1989 1,429 0 0 1,429 1990 0 0 0 0 1991 501 1,244 819 2,564 1992 588 1,626 894 3,108 1993 278 366 1,451 2,095 1994 148 311 559 1,018 1995 158 178 0 336 1996 76 43 710 829 1997 90 0 0 90 1998 180 0 0 180 2002 343 217 229 789 2005 413 99 0 512 2007 0 123* 0 123* TOTAL 4,435 4,207 4,662 13,304

Note : * There planting in 2007 covering an area of 123 ha, the land was opened and planted before 2007, but the plants are dying so often done replanting (inset). inserts plants in 2007 is more dominant so the management are set to be the year of planting 2007

Table 6. Planned and actual oil palm replanting activities for PT Barumun Agro Sentosa

Total planned Estate where replanting is Year replanting area Actual total area replanted (ha) to be carried out (ha)* G24 s/d G29, F23 s/d F28, E23 s/d 2017 765 Aek Kulim E28, D23 s/d D28 J25 s/d J27, I21 s/d I26, H21 s/d 2018 895 Aek Kulim H27, G21 s/d G23, F21 s/d F22, E21 s/d E22, D21 s/d D22 G13 s/d G20, F11 s/d F20, E16, 2019 925 Aek Kulim, Aek Barumun E18 s/d E20, D18 s/d D20 2020 828 Aek Sigala-gala & Aek Barumum M13 s/d M14, L5 s/d L14, K4 s/d

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 9 of 64 K7, J4 s/d J7, H12, G12. M16, M17, L15 s/d L18, K12 s/d K16, J16 s/d J18, I14, I16 s/d i18, 2021 1,266 Aek Sigala-gala, Aek Kulim H14, H15, M23, M24, L23 s/d L28, K26, I27, I28, H28, J30 s/d J33 Note : *). Revision of replanting plan based on result of annual meeting dated on December 11, 2014

No replanting activities have been carried out. The first round of replanting is planned for year 2017.

1.9 Area of Plantation (Total, Planted and Mature)

Table 7: Oil Palm Planted Area Summary, FFB Production and Average yield/ha for PT Barumun Agro Sentosa Oil Palm Mature Immature FFB Total area Average yield Estate Name Planted area (Production) (Non-production) Production* (ha) (tonnes/ ha)* (ha) area (ha) area (ha) (tonnes) Aek Kulim 4,490 4,435 4,435 - 93,217.62 21.02 Aek Sigala-gala 4,642 4,207 4,207 - 90,956.48 19.99 Aek Barumun 4,687 4,662 4,662 - 101,220.86 21.71 TOTAL 13,819 13,304 13,304 285,394.96 20.91 * Data is based on total FFB production January to December 2014 Table 8: Land use data for PT Barumun Agro Sentosa

Land used for other purposes (ha) Total Oil Palm HCV Estate Name area Planted Areas* Enclaved/ (ha) Area (ha) (Ha) Housing Mill Nursery occupied/c Others onflict Aek Kulim 4,490 4,435 27 0 5 23 0 Aek Sigala- 4,642 4,207 gala 795.47 40 14 0 367 14** Aek Barumun 4,687 4,662 25 0 0 0 0 TOTAL 13,819 13,304 795.47 92 14 5 390 14 Note : * involved of estate areas **several trees

1.10 Progress against Time Bound Plan : From the explained on section 1.5 above, PT Barumun Agro Sentosa as subsidiaries PT Pasific Agro Sentosa required to provid time-bond plan as stated below:

Certification Name of Subsidiaries Location Total area status

PT. Rimba Mujur Mahkota Desa Sikara-kara Kec. (PT.RMM). Certified on Natal, Kab. Mandailing 4.956 Ha ( HGU, RSPO Member :No: 1-0124- (November. Natal, North Sumatra - year 2002 ) 12-000-00 2014) INDONESIA

Desa Sundutan Tigo, PT. Dinamika Inti Sentosa Kec. Natal, Kab. 6,250 Ha 2026 (PT.DIS) Mandailing Natal, North (location Permit) Sumatra - INDONESIA

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 10 of 64 PT. Cipta Usaha Sejati Kec. Simpang Hilir, 15,110.56 Ha (PT.CUS) Kab. Kayong Utara, (HGU, year 2016 RSPO Member :No: 1-0078- West Kalimantan - 2011) 09-000-00 INDONESIA Kec. Simpang Hilir, PT. Jalin Vaneo (PT.JV) (not 15,699 Ha Kab. Kayong Utara, member yet) (HGU, year 2023 West Kalimantan - 2012) INDONESIA

1.11 Compliance to Rules for Partial Certification Compliance of the management units under Pasific Agro Sentosa against the rules for partial certification according to RSPO Certification System clause 4.2.4 was assessed by submission self assessment report. A summary of findings is as stated below.

Partial Certification Requirements Audit Findings (a) The parent organization or one of its majority PT Rimba Mujur Mahkota is subsidiary of Pacific Agro owned and / or managed subsidiaries is a Sentosa. PT RMM has RSPO member with member of RSPO. membership number No: 1-0124-12-000-00 (since: June 18, 2002). (b-d) A challenging time-bound plan for certifying See table above, some changes on company’s time all its relevant entities is submitted to the bound plan due to several reason explained above. Certification Body (CB) during the first certification audit. The time-bound plan should

contain a list of subsidiaries, estates and mills. Any revision to the time-bound plan or to the circumstances of the company shall cause the plan to be reviewed. for whether it is still appropriate, such that changes to the time-bound plan are permitted only where the organisation can demonstrate that they are justified (e) No replacement of primary forest or any area There are some newly developed plantation areas identified as containing High Conservation Values under PT Cipta Usaha Sejati (CUS) and PT Jalin (HCVs) or required to maintain or enhance HCVs Vaneo (JV), West Kalimantan province Indonesia. in accordance with RSPO criterion 7.3. Any new Company conduct HCV assessment in year 2012 and plantings since January 1st 2010 must comply conduct land use changes analisis (LUCA). According with the RSPO New Plantings Procedure to information stated on HCV amongt the 13 HCVs and associated sub-values assessed, 11 were deemed present at JV and 10 at CUS. Further information stated on HCV document, key no- go areas in PT CUS and PT JV are merged into a single layer and overlaid on the license boundary. The total area of the recommended HCVMA inside the license boundary is c. 20,280 ha. The total non- HCVMA area within the license area is c. 24,830 ha. The area of non-HCVMA that overlaps with areas planned by the company for future oil palm development is estimated to cover c. 4120 ha. Such areas would be considered available for new development, subject to release by local communities through a fair and proper Free Prior and Informed Consent (FPIC) procedure for land release, and full payment of compensation. From LUCA document the indicating areas of clearance since 2005 is 22,042.38 ha both in PT CUS and PT JV with various vegetation coefficients. Currently both companies are under processing on RSPO Remediation and Compensation Porcedure.

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 11 of 64 Partial Certification Requirements Audit Findings (f) Land conflicts, if any, are being resolved There are identified land dispute in several company’s through a mutually agreed process, e.g. RSPO subsidiaries i.e.: Grievance procedure or Dispute Settlement - Land dispute in PT Cipta Usaha Sejati with villager Facility, in accordance with RSPO criteria 6.4, 7.5 from Lumbuk Batu village, Kayong Utara District, for and 7.6. total area 1735 ha, under resolution involving Integrated Team Land Settlement, National Land Agency. - Dispute regarding smallholder scheme development in PT Rimba Mujur Mahkota and PT Dinamika Inti Sentosa with community from Bintuas village 740 ha and Buburan Village 596 ha, Mandailing Natal District. There are some agreements signed however some community still not satisfied with the agreement result. - Claime from “Gerakan Pemuda Untuk Keadilan Rakyat (GPUK)” regarding land occupied by PT Barumun Agro Sentosa 235.50 Ha. And Claim from Haji Soleh Hasibuan. Has been solved and clarified by management PT BAS through letter on February 24, 2015. (g) Labour disputes, if any, are being resolved There are some labour dispute in several companys through a mutually agreed process, in subsidiaries, i.e.: accordance with RSPO criterion 6.3. - Complaint regarding “Eid Mubarak Allowance” in PT CUS in June 2016. The casual wokers reported to Man Power Officer Kayong Utara District. - Labour dispute in PT RMM regarding minimum wages in year 2015 has been solved.

(h) Legal non-compliance, if any, are being Some of PT PAS’s other management units have not resolved in accordance with the legal complied with certain legal requirements, for example in requirements, with reference to RSPO criteria 2.1 PT CUS, PT JV, those has been identified on audit and 2.2. report as well as legal compliance in PT BAS has been recorded on the relevant audit report.

1.12 Progress of associated smallholders or outgrowers towards RSPO compliance As seen from data in Table 3 , the mill receives 11.41 % supply of FFB from trader/supplier so that auditee has not certification smallholder or outgrower plan toward RSPO complaince.

1.13 Revised Approximate Tonnages Certified The tonnages certified have been revised from the previous amount stated in the RSPO certificate issued in November 02, 2015, as projection of FFB production in year 2017 from internal estate (Aek Kulim, Aek Barumun and Aek Sigala-gala) with detail explain on table 9 and table 10. The revised approximate tonnages certified (as per Appendix 1), as follows : Crude Palm Oil (CPO) : 64,102.49 tonnes Palm Kernel (PK) : 15,262.49 tonnes

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 12 of 64 2.0 ASSESSMENT PROCESS 2.1 Certification Body PT TUV Rheinland Indonesia is member of Group TÜV Rheinland Group, a global leader in independent testing and assessment services. The TÜV Rheinland Group was established in 1872 with offices located in over 490 locations in 62 countries on all five continents. PT TUV Rheinland Indonesia offers certification for a wide range of management systems according to established international standards including ISO 9001, ISO 14001, OHSAS 18001, SA 8000, as well as CDM Validations and Verifications. PT TUV Rheinland Indonesia office is located Menara Karya Lt. 10 Jl Rasuna Said Kuningan Jakarta Indonesia.

2.2 Qualifications of Lead Assessor and Assessment Team

New assessment team members that were not part of the previous assessment team are as per the table below :

Name Position Qualifications / Experience Education: Bachelor of Agriculture, Departement of Social and Economic of Agriculture, Sriwijaya University, Palembang.

Trainings attended : Training for Auditor RSPO Supply Chain Certification Standard and Systems from David Ogg and Partners Ltd, RSPO Lead Auditor Training, Indonesian Sustainable Palm Oil (ISPO) Lead Auditor Training, ISO 9001:2008I RCA Dewi Lead Lead Auditor, ISO 14000:2004, OHSAS 18001:2007 trainings , Training Akbari Auditor Specialist Health safety general (AK3U), Training auditors Management System Occupational health and safety.(Auditor SMK3)

Working experience: Exprience in consulting, training and auditing Quality, Environmental, OHSAS of PT Surveyor Indonesia Pekanbaru ( 2000 – 2010), Lead Auditor : QMS 9001:2008, Auditor Indonesian Sustainable Palm Oil (ISPO) and Roundtable Sustainable Palm Oil (RSPO) for TUV Rheinland since 2013. Education: Bachelors Degree in Forestry - Bogor Agriculture University, Indonesia Trainings attended: Indonesian Sustainable Palm Oil (ISPO) Lead Auditor Course by Komisi ISPO, Quality Management System (QMS) Auditor/Lead Auditor by IRCA (ISO 9001:2008), Environmental Management Systems Auditor/Lead Auditor Conversion Training by IRCA (ISO 14001-2004), Calculation of Green House Gas at Palm Oil Plantation by Komisi ISPO, Budi Auditor SVLK Auditor Training by Ministry of Forestry, CoC Auditor by LEI, PUB and Setyawan Café training by ministry of tourism. Work experience: Staff RSPO in PT MAS (2008-2009), Staff Planning & Analysis in PT Bakti Sukses Mandiri (2009-2010), PT Mutu Hijau Indonesia, Jakarta as Technical Manager (2015-2016) and HR and finance manager (2014-2015), Auditor in PT Mutu Hijau Indonesia (2010-2016), and Auditor in PT TUV Rheinland Indonesia (2016-present)

Education: Master Degree in Rural Sociology, Graduate School of Bogor Agricultural University completed in 2005. Trainings Attended: GIS Training, Auditor Training of Indonesian Sustainable Palm Oil (ISPO), Training of Participatory Mapping, Training of Document Preparation HCV and SIA, Auditor Training of Sustainable Doni Auditor Production Forest Management (SFM), Training and Up-Grading of SFM, Training of Mentoring technique for the Rural Farmers, Conflict Resolution Training and Journalism Training. Work Experience : Frequently conducted certification audits of RSPO and ISPO for Palm plantation, the certification audit of SFM (Sustainable Production Forest Management) for HPH and HTI, worked as a consultant

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 13 of 64 for the National Development Planning Agency, Ministry of Environment and Forestry, Indonesian People Bank (BRI), Ministry of Rural Development (KPDT) and the Ministry of Public Works, Director General of Cipta Karya, JICA and UN-HABITAT and UNDP, HCVF document drafting team for the company of HTI, HPH and constituent team for documents of HCV / SIA for oil palm plantations. Since March 2016 till now, work at PT. TUV Rheinland Indonesia.

2.3 Assessment Methodology & Agenda

The surveillance was conducted August 23 to 25, 2016 as per the audit plan below. The assessment was carried out in accordance with TUV Rheinland Indonesia RSPO audit procedure as well as the RSPO Certification Systems document. During assessment, the qualified TUV Rheinland assessors used the RSPO standard (generic) 2013 in which the assessment took place and recorded their findings. Due to the location and proximity of the estates, combined with common management systems, it was possible to carry out both field and document assessments of all estates and the mill within the time frame without compromising the integrity of the assessment in anyway. All 3 estates and 1 mill were visited and the assessment team carried out field and document assessments of compliance to all the RSPO principles and criteria. Common systems were identified and specific evidence was recorded for individual estates. Interviews were conducted at all estates and the mill. The company proposed the correction and corrective action for all identified non conformities raised to the certification body 30 days after the closing meeting. Verification of closure of major non-conformances was conducted 2 months after the closing meeting of the main assessment and implementation of corrective actions for minor non-conformities will be verified during the next surveillance audit. The certification assessment agenda is as explained below.

Location/ Main Date Main activities sites August Aek Sigala-gala - Opening meeting 23, 2015 Mill - Document verification for all previous audit findings - SCCS Audit - AMDAL and environmental monitoring records - Social aspects - Workforce, payment August Aek Kulim Estate Document checks and verification to field for following aspects : 24, 2015 - Record of Maintenance boundary - Planning re-planting - FFB production records - Areal statement - Company management plan - HCV - Environmental aspects and impacts - Chemical and fertilizer usage records - Agricultural best practices - AMDAL and environmental monitoring records - Social aspects - Workforce, payment August Aek Barumun Document checks and verification to field for following aspects : 25, 2015 Estate - Record of Maintenance boundary - Planning re-planting - FFB production records - Areal statement - Company management plan - HCV

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 14 of 64 - Environmental aspects and impacts - Chemical and fertilizer usage records - Agricultural best practices - AMDAL and environmental monitoring records - Social aspects - Workforce, payment Aek Sigala-gala Document checks and verification to field for following aspects : Estate - Record of Maintenance boundary - Planning re-planting - FFB production records - Areal statement - Company management plan - HCV - Environmental aspects and impacts - Chemical and fertilizer usage records - Agricultural best practices - AMDAL and environmental monitoring records - Social aspects - Workforce, payment Closing meeting

2.4 Date of Surveillance Assessment

The next surveillance visit is planned for Augustus 2017.

3.0 ASSESSMENT FINDINGS 3.1 Summary of Findings During this 1st surveillance assessment, 4 (four) non conformity were assigned against Major Compliance indicator, 2 (two) nonconformities against Minor Compliance Indicators and 5 (five) observations or opportunities for improvement were identified. Further explanation of the non-conformities raised and corrective actions taken by the company are provided in Section 3.2. The observations & opportunities for improvement are listed in Appendix 5. • RSPO P & C The following is a summary of findings made for the criteria listed in the RSPO Principles & Criteria year 2013 (generic).

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

Findings:

Company still maintain their commitment to transparency, which is documented in their communication procedure which was issued since April 1, 2009 and change into April 1 st , 2011. Every request categorized by the type of information required, and the replied by Head of Administration in the estate and mill. There are evidences showed during audit regarding their communication records such as incoming letters and letters logbook for incoming and out coming (2014/2015). There is no incoming letter regarding information request. Most of letters are asking for support and donations. Estate still maintains the record as requested by company’s Memo no. 006/SE/DIR/BAS/VIII/2011, regarding documents retention time (10 years). PR shall make a list of stakeholders of PT Barumun Agro Sentosa and stakeholders list should be routinely evaluated and updated every 6 months. PR is an officer assigned to receive information or report to the company in writing.

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

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There are records showed during audit regarding information provided to the one of stakeholders (local government), such as : - Report to Manpower Office, cover letter No. 560/1505/2014, August 13 th 2014. - Environmental Monitoring Report First Semester of 2014, cover letter no. 041/BAS/Lap/VII/2014, July 31 2014. - Report to District Plantation Office, “Aek Kulim Estates”, and cover letter August 2014. Report of Measurement and Wastewater Monitoring in the second quarter April-June 2016 has been submitted to the Ministry of Environment and Forests, Environmental Agency, North Sumatra Province and Environmental Agency of Padang Lawas Utara district, on June 13, 2016. - Investment Activity Report on behalf of PT Barumun Agro Sentosa, 1 st Semester January to June 2016 has been submitted to the Regent of Padang Lawas Utara District, Agency of Investment and Integrated Licensing Service, Padang Lawas Utara District, Investment and Promotion Agency of North Sumatra, Representative of Controlling and Implementation of Investment on July 28, 2016. - Plantation Business Reports, First Semester, January to June 2016, on behalf of PT. Barumun Agro Sentosa has been submitted to the Regent of Padang Lawas Utara, the Agriculture Agency of North Sumatra Province on July 28, 2016. - Report on the Implementation of Environmental Management (RKL) and Environmental Monitoring Reports (RPL), Semester I, 2016 has been submitted to the Ministry of Environment and Forestry, Environmental Agency of North Sumatra Province and Environmental Agency of Padang Lawas Utara District on July 14, 2016. - Report of Surface Water Collection and Utilization of the second quarter April-June 2016 to the Department of Water Resources Management, North Sumatra Province, Integrated Licensing Agency, North Sumatra Province, Regent of Padang Lawas Utara on July 27, 2016. - Performance Report of Guiding Committee of Occupational Safety & Health (GCOSH), second quarter, 2016 April-June, on behalf of PT Barumun Agro Sentosa has been submitted to the Department of Labor and Transmigration, Padang Lawas Utara District, on August 15, 2016. - Report of management and monitoring of HCV / HCV PT Barumun Agro Sentosa has been submitted to the Central of KSDA on August 23, 2016.

The Company recorded incoming and outgoing mail in the log book, for example: - On August 16, 2016, Aek Kulim Estate submitted Letter No. 25 / EMAK / VIII / 2016, address to the Office of Labour Social Assurance (BPJS), Padang Sidempuan, District of South Tapanuli, regarding company data. - On August 16, 2016 General Manager of PT Barumun Agro Sentosa submitted a letter No. 186 / KD-GM / VIII / 2016 to the Director concerning the petition of approval to Telkomsel tower construction in PT BAS.

Compliance status: Full Compliance

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

Findings:

PT BAS still show their commitment in providing information to stakeholders. In the communication procedure described the type of documents as publicly document that may be accessible to the public are land titles/user rights, OHS plans, plans and impact assessments relating to environmental and social impacts (environmental and SIA document), HCV documentation, pollution prevention and reduction plans, details of complaints and grievances, land compensation and negotiation procedures, continual improvement plans, public summary of certification assessment report, quality-environmental-health & safety policy, CSR activity report, agreement between company with workers, communication procedure and human rights policy.

QMF: RSPO-007b-11

RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

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Compliance status: Full Compliance

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

Findings: The company already has a vision, a mission and a commitment signed by the Director of January 1, 2015. In one of the commitments mentioned: "Applying the principles of ethical behavior appropriate decency and fairness are generally accepted and promote fairness in all transactions and operational business, extend all forms of corruption, bribery, fraud in the use of funds and resources." Additionally there is a decree of Directors No. 60 / SK / CEO of-FMPI / VI / 2006 dated June 7, 2006 on business ethics. Mentioned: Company, the directors, management and all employees emphasize avoid conflicts of interest either directly or indirectly. Not allowed to conduct insider trading / transaction, does not have a personal or family land, choose a supplier who has a family relationship with decision makers, select of customers for commodity traded companies that have the family connections with decision makers. The policy above has socialized to workers by morning meeting, it was distributed in all emplasment and tag on wall in mill and estate office. Whereas, to FFB supplier by share of policy with letter. Business ethics code policy is also installed in the offices of estate and mill so that can be seen by workers and stakeholders.

Compliance status: Full Compliance Criterion 2.1: There is compliance with all applicable local, national and ratified international laws and regulations.

Findings: The company has complied and has several permits including: 1. Registered company from the head of the Integrated License Service Agency, Padang Lawas Utara District No. 02.26.1.01.00016 dated July 15, 2012 2. Plantation Business License (IUP-B) issued by head of Padang Lawas Utara District No. 503/226 / K / 2012 dated July 5th, 2012 for an area of 12 319 hectares, located in Jambu Tonang, sub- district of. Simangambat, Padang Lawas Utara District. This permit will be expired on July 5, 2015, and now is in a period of re-registration process (documentary of IUP-B extension request provided dated May 4, 2015) 3. Plantation Business License (IUP-B) issued by head of Padang Lawas Utara District No. 503/227 / K / 2012 dated July 5th, 2012 for an area of 1500 hectares, located in Jambu Tonang, Mananti, Hutaraja, Pasir Lancat, and Ujung Batu Jae, sub-district of. Simangambat, Padang Lawas Utara District. This permit will be expired on July 5, 2015, and now is in a period of re-registration process (documentary of IUP-B extension request provided dated May 4, 2015) 4. Plantation Business License for processing issued by head of Padang Lawas Utara District No. No. 503/223 / K / 2012 dated July 5th, 2012 for mill with a capacity of 60 tons / hour, located in Ujung Gading Jae village, , sub-district of. Simangambat, Padang Lawas Utara District 5. Industrial Liquid Waste Utilization to Land Application Permit issued by head of Padang Lawas Utara District No. 503/224 / K / 2012 dated July 5, 2012. Valid for 3 years 6. Permit of Environment Feasibility for Oil Palm and mills capacity addition issued by the Governor of North Sumatra No. 188.44 / 444 / Kpts / 2010 on July 25, 2014 within the scope of the estate area of 12.319 hectares, CPO mill with capacity of 60 tons / hour, and PK mill with a capacity of 120 tonnes /day 7. Environmental License issued by the head of Integrated Licensing Service Agency of North Sumatra Province No. 660/98 / BPPTSU / 2 / 4.1 / VIII / 2014 on August 25, 2014 for the scope of

QMF: RSPO-007b-11

RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 17 of 64 the estates area of 12. 319 hectares, CPO mill capacity of 60 tons / hour, and PK mill with a capacity of 120 tons / day, and 1 boiler unit capacity of 50,000 liters of water 8. Recommendation on Environmental Management Document (DPLH ) for additional area of 1500 ha issued by Enviromental Agency of Padang Lawas Utara District on August 2011 9. Hazardous and Toxic Wastes Storage Permit from the Ministry of Environment No. 261 of 2009 dated June 10, 2009 10. Temporary Storage of Hazardous and Toxic Wastes Permit from the Head of Integrated Licence Service Agency No. 503/0001/2012 dated March 30, 2012. Valid for 5 years. 11. Registered bipartite institutions in Social Service, Manpower and Transmigration Agency of Padang Lawas Utara District No. 560/658/2011 deted September 13, 2011. 12. Permanent business license from the Central Integrated Licence Service Agency No. 983 / T / Agriculture / Industry / 2006 dated December 21, 2006 13. Permit of Change of Investment Principles issued by the Central Integrated Licence Service Agency No. 137/1 / IP / III / domestic / 2010 on December 31, 2010 14. Permit of Expansion of Investment issued by Investment and Promotion Agency of North Sumatra No. 42/12 / IU / I / domestic / Agriculture / 2011 on October 30, 2011 During 1 st surveillance assessment the company still maintain and regulation compliance accordance to the company procedure number SOP-LGL-01 Rev.03. This procedure still same with the last surveillance, did not revised by company. Procedure mentioned about job description person in charge for implementation law and regulation, such as MR have a job for identified and update new list and regulation. While Document controller, prepared and gave the law and regulation list copy to all related department, and others. In the procedure was state that the evaluation will be held every 3 (three) months and/or, if has new applicable regulation. It also mentioned that legal and related section should develop work program for all rules and regulations compliance.

The company has list of legal requirement as documented on Document The company has listed all applicable legal requirements in a list of indication, evaluation of compliance regulation and requirement last update in August 2016. List of regulation has covered national and international level with legal aspect, environmental, social, worker, plantation operational, forestry and conservation. . The company has complied and has several permits including: 1. Steam Boiler (Boiler) 1 No. 568/408/2011. Date of issue June 30, 2011. The period ended 6 February 2018 2. Steam Boiler (Boiler) 2 No. 568/407/2011. Date of issue June 30, 2011. The period ended May 6, 2017 3. Steam Boiler (Boiler) 3 No. 568/409/2011. Date of issue June 30, 2011. The period ended May 17, 2018

Some procedure still have reference regulation expired, example: IK waste management and house keeping and IK pesticide handling. This condition raised as non-conformity (RSPO00612).

PT Barumun Agro Sentosa has shown their compliances to applicable law regarding Manpower and Human resources Management. Evidences regarding worker payment for all estates and mills have collected during audit, such as Wage Payment lists and payslips. The wage payment lists and payslips (for July 2016) consist of detail information, such as: 1. Employment Number, 2. Name and Position 3. Status and category 4. Working Days (effective and non-effective) 5. Fix Income (basic income, Rice Allowance, Insurance: 4.54%) 6. BPJS (4%) 7. Variable income (Harvesting and non-Harvesting Allowance) 8. Total income

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 18 of 64 9. Fix deductions (Rice, Insurance) 10. Signature

Compliance status: Non-compliance NCR No RSPO 00612 (Minor non-conformity)

Some procedure still have reference regulation expired, example: IK waste management and house keeping and IK pesticide handling

Criterion 2.2: The right to use the land is demonstrated, and is not legitimately contested by local people who can demonstrate that they have legal, customary or user rights. Findings: The company has documents showing ownership or lease of the land in accordance with relevant laws, including their land use right (hak guna usaha) certificate and decree i.e land use right (hak guna usaha) certificate no.1 dated on September 5, 2003 (register number : 02.10.09.82.2.00001) on behalf PT First Mujur Plantation (PT FMP) for a total areas of ± 12,319 Ha in Jambu Tonang Village, Barumun Tengah Sub District, Tapanuli Selatan District, North Sumatera Province which is valid from 12 December 1986 to 31 December 2021. Basic registration is Minister of Home Affairs decree No.SK.67/HGU/DA/86 on December 2, 1986 regarding land use right on behalf PT First Mujur Plantation for a total areas of ± 12,641.50 Ha . Total areas is different on land use right certificate with land use right decree because re-measurement of the land area conducted on August 31, 2003 and development of new cadastral maps (special situation map no. 7/10/IV/1993 dated on January 8, 1993) that the total PT FMP’s areas was measured to be ± 12,319 Ha only . The name of company has changed to be PT Barumun Agro Sentosa (PT BAS) since November 6, 2002 (based on notarial deed no.5 and it has approved by Minister of Justice and Human Rights decree no.C-23861.HT.01.04.TH.2002 on December 4, 2002) and the name of company on land use right certificate has revised too since June 8, 2007. Update of information regarding exchange of forest areas process is signatories of the minutes of exchange of forest areas between directorate general of forestry planning (on behalf Minister of Forestry) with director of PT Barumun Agro Sentosa dated on April 2, 2012. There are additional areas an area of 1,500 Ha near Kulim Estate where their FFB was supplied to the company’s mill. It areas has been processed for land use right appropriate of laws and regulations such as : • Head of Padang Lawas Utara decree No.503/0398/K/2009 dated on September 24, 2009 regarding location permit on behalf PT First Mujur Plantation & Industry with valid for 36 months and a total areas of ± 1,500 Ha. • Head of Padang Lawas Utara decree No.503/340/K/2012 dated on December 11, 2012 regarding renewal of location permit on behalf PT Barumun Agro Sentosa with valid from September 25, 2012 till September 24, 2013 and a total areas of ± 1,500 Ha. • The company has submitted letter no.029/BAS-Mhn/BPN/VII/2013 dated on July 17, 2013 to Head of National Land Agency u.p Head of regional office in North Sumatera Province regarding request of the measurement of areas on location permit amount ± 1,500 Ha. It has receipt by regional office dated on September 11, 2013. • Head of Padang Lawas Utara decree No.503/412/K/2014 dated on July 24, 2014 regarding the revision of location permit map because based on verification of field by Forestry Instance in North Sumatera Province and Forestry Instance in Padang Lawas Utara District with company that total areas less than 1,500 Ha (location permit no. No.503/340/K/2012). Boundaries stones are used on the field to identify land boundaries and borders with other stakeholder areas. Based on boundary stone monitoring report on June 2015 that all boundaries stones (based on special situation map no. 7/10/IV/1993 are 22 units) surrounding company’s area has maintained and demarcated on field. The results of verification on field that boundary stone no. BPN 19 in block N1 - Aek Sigala-gala estate (coordinate of 10 33’ 23.51” N - 100 0 3’ 23.99” E ) is good condition and well maintained. The company has also made other boundaries in the form of canals or roads or soil piles to make clear borders between the area belonging to the company such as block N1, O21, N21, N22, J31, etc. There was a land dispute issue of estates areas during audit. Some of community member claimed that their land has been use as plantation but not been paid yet. The claimer has conducted some protest actions in front of PT BAS Office in Medan (based on records showed during audit. The claimer was Mr. HH, declared himself as the representative of Mr. HSH in Gariang Area (based on evidence, a letter from

QMF: RSPO-007b-11

RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 19 of 64 Mr. HH, dated at February 16 th 2015). PT BAS has responded this claim and giving clarification to RSPO in February 24 th 2015. There letter consist of two points related to this case: a. Point 6: PT BAS welcome to Mr HH to deliver their claim and proof that their claim is valid. b. Point 7: PT BAS declare that all of plantation areas acquisitions process has been followed the legal procedures. If any parties such as community member claimed that their land has not been paid, PT BAS welcome for any grievances from related stakeholders. During audit process, Auditors have been tried to conduct a meeting with the claimer. The phone number as mentioned in cover letter has been called and visited but ended up with no response. The address as mentioned also has been visited but there is no GPURK secretary office found in the actual place. Regarding company’s officer, there is no more letter and direct actions from Mr. HH since March 2015. On August 1, 2016 PT Barumun Agro Sentosa submitted a letter to National Land Agency (NLA), South Tapanuli District, Number: 028 / BAS-MHN / BPN / VIII / 2016 concerning the request Cadastral measurements of ± 1.500 ha area for the application of Land Use Title (LUT). Till the audit has been conducted, no reply from NLA of South Tapanuli District.

Compliance status: Full compliance

Criterion 2.3: Use of the land for oil palm does not diminish the legal, customary or user rights of other users without their free, prior and informed consent.

Findings:

Estates still maintain procedure document issued in November 1 st 2008 regarding “Flowchart and Procedures on handling land Disputes”. During recertification audit, there is an issue rise regarding customary rights regarding Mr. HH claim. Based on the evidences collected during audit, the claim regarding customary right has no enough valid evidences. PT BAS still open communication if the claimer provide any new evidences and would process as the legal procedures. Stakeholder meeting conducted during audit; no one of the stakeholder attended to the meeting has clear understanding (and data) regarding this issue. Local community leader of related village has been met by the auditor during audit. The community leader said that he no this issue but not involved by the claimer during the process. Based on company’s legal officer statement regarding this issue, there is no proven valid legal evidence showed by the claimer that company has been diminishing local community’s legal and customary rights

Compliance status: Full compliance

Criterion 3.1: Commitment to long-term economic and financial viability

Findings:

Aek Kulim Estate, Aek Barumun Estate and Aek Sigala-Gala Estate has detailed budget and management plan (RKAP) for year 2014 - 2019 which has been signed by the Technical & Agronomy Manager, Act. General Manager, Estate Manager and approved by Director. The document consist of detailed information about executive summary budget, salary of employee, area statement, estimation of production, harvesting, maintenance of mature plant and general cost. During 1st surveillance audit there are no changes in company replanting program. The company made a 5-year replanting program for the 3 estates, from year 2017 to 2021. The replanting program will start in 2017 for 760 ha in Division III of Aek Kulim Estate, year 2018 for 900 ha in Divisions II, IV and IV of Aek Kulim estate, year 2019 for 900 ha in Division III of Aek Barumun Estate, year 2020 for 960 ha in Divisions I, IV and V of Aek Sigala-gala estate, and year 2021 for 1000 ha in Divisions I, II IV of Aek Kulim estate,

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 20 of 64 and Divisions I and II of Aek Sigala-gala estate. The company applies a 26 year replanting cycle to ensure good seed quality and easy maintenance . The oldest plantings is in Aek Kulim estate are 26 years now located in Afdeling III block D25 to 27 and E24 to 28 and the average productivity of 2014 is still high at 21,2 tonnes of FFB per ha. Aek Kulim Estate budget in 2015 contained the seed procurement items which purchased from certified seed sources for replanting plan in 2017. The selection of seeds contained in Oil Palm Nursery procedure SOP-TAN-05 rev 01 dated 01-04-2011. There were costs of land clearing (including planting) in budgeting 2017 For the palm oil mill, also has has detailed budget and management plan (RKAP) for year 2014 - 2019 which has been signed by the technical & Agronomy Manager, Act. General Manager, POM senior manager and approved by Director. Budget and management plan (RKAP) 2014 – 2019, the contained was mention: - Projection FFB include (own estate and out-growers) - Projection OER of CPO and PK production - Projection for cost processing - Projection for cash flow Production realization from the plan and budget in 2015 showed: - Realization total FFB received from own estate is 293,735,000 kg FFB processed 277,650,000 kg - Aek Kulim estate = FFB received 103,710,790 kg, FFB processed 94,774,751 kg - Aek Sigala-gala = FFB received 92,784.950 kg, FFB processed 89,210,534 kg. - Aek Barumun = FFB received 97,239.130 kg FFB processed 93,664,714 kg - FFB received from third parties 43,455,000 kg’s - Processed FFB from own estate is 277,650,000 kg’s - Processed FFB purchased from third parties is 43,455,000 kg’s - Total porcessed FFB 321,105 ton - Production of own CPO is 59,015,000 kg’s - Realization OER 21.26% - Production of own kernel's is 13,170,000 kg’s - The yield of own kernel's is 4,74% - Realization of total processing costs is Rp 301.79/kg, budget Rp 266.60/kg. (2015) -

Compliance status: Full Compliance

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

Findings:

During surveillance, no change documents related to operating prosedures. The SOPs for all estates are maintained on file and includes SOPs for all main estates activities procedures from land survey, preparation of road connection, land drainage, palm oil nurseries, fertilizing, pruning, palm oil harvesting, land opening without burning, palm oil planting on marginal soil, replanting and Integrated Pest Management. Those are are dated April 1, 2011. SOPs for palm planting, weed control, liquid waste utilization has 2 nd revised on April 15, 2014. Procedure for palm oil planting on slope area was revised on June 1, 2014. The SOPs for the mill is documented and most of the documents are dated April 1, 2011. The SOPs for mill including : the processing palm oil mill which covers the activities of the receiving process of the FFB, weighing, loading ramp, sterilizer processes, threshing processes, pressing processes, clarification processes, depericarper station, the kernel station, water treatment, boiler, power house, and effluent treatment. SOP for preparation of palm oil mill, SOPs laboratory and so on, and work instruction boiler operational, generator operational, loading ramp, sterilizer, pressing, clarification, and so on.

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

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The company has the SOP-MR-07 rev. 02 of the internal audit dated April 1, 2011. The scope covers all activities in the planning, implementation, evaluation, reporting and corrective and preventive actions in the internal audit of the QMS, EMS, RSPO and ISCC. This SOP as monitoring the implementation of quality and environment management activities, RSPO and ISCC, conducted regularly and continuously. Internal audit report is a reference in the corrective action. The party which responsible for internal audit, namely MR, Document Control, and Estate / Mill Manager. After the implementation of the internal audit performed corrective and preventive actions and monitoring of corrective and preventive actions as well as the evaluation of the effectiveness of corrective and preventive action. Internal audit carried out each semester, and the last internal audit was conducted on 2016. Evaluation of the results of internal audits conducted on June, 2016. During surveillance audit found that PT BAS has external FFB supplier, detail data regarding the supplier was available. PT BAS has mechanism of how to engage local business especially FFB supplier (trader and/or out-grower). The company conducts the management review for operational activities every once year to monitored the activity, with evidence sighted from minutes of meeting of Management Review. The last management review was conducted on December, 2015, and was attended by personnel from all department such as general manager, security manager, engineering, plantation, director, estate manager, finance, legal, agronomy, technical department and staff from company holding office, with the content result of management review such as: 1. Followed activity for previously management reviewed 2. Audit for Quality system, environmental and ISO 3. Key performance for Mill and Estate 4. Environmental management program 5. Program to full fill of law and regulation 6. Emergency response 7. External communication with client 8. Waste water management The company has a procedure for the determination / selection of suppliers FFB, which requires: full profile-related identity, the legality of business and tax payment obligations of the suppliers, the origins of the FFB should produce from legal sources, FFB price transparency between dealer and supplier/farmers, evaluations/regular assessment of supplier performance, agreement binding in a transparent, fair and agreed by both parties without any pressure according to the code of conduct established business companies.

Compliance status: Full Compliance

Criterion 4.2: Practices maintain soil fertility at, or where possible improve soil fertility to, a level that ensures optimal and sustained yield.

Findings:

The company has carried out fertilizing (organic and an-organic), weeding (manual and chemist), pruning, etc appropriate SOPs about GAP so that the yield on year 2014 is 20.91 ton FFB/ha (refer to Table 7 above). Records of fertilizer input has maintained i.e fertilizing realization report year 2015 and 2016 (per July) on mature areas in each estates. Volume of fertilizer has implemented to field on year 2015 are : Type of Estate (Tonnes) Year 2015 No fertilizer Aek Kulim Aek Sigala -gala Aek Barumun 1. Urea 1,581.18 1,432.85 1,700.05 2. RP 1,103.39 1,040.05 1,204.35 3. MoP 1,024.03 897.10 1,168.50 4. Dolomite 791.34 785.95 1,046.50 5. Borate 0.00 0.00 0.00 6. NPK 0.12 0.75 0.00

QMF: RSPO-007b-11

RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

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Type of Estate (Tonnes) 2016 (until Jul y) No fertilizer Aek Kulim Aek Sigala -gala Aek Barumun 1. Urea 1,416.64 716.40 859.95 2. RP 1,294.28 678.55 721.65 3. MoP 1,502.96 714.45 864.60 4. Dolomite 1,110.95 657.80 721.60 5. Borate 0.17 0.00 0.00 6. NPK 0.00 0.00 0.00 Fertilize planning in 2015 and 2016 define based on fertilizer recommendation from the Sumatra Bioscience (Bah Lias Research Station) (for year 2016) and PT Sentana Adidaya Pratama (research team from research and development department) (for year 2015), where recommended to use Urea,RP, MoP, Borate and Dolomite. Realization of fertilizer year 2016 above has accordance with fertilizer recommendation. There is additional NPK fertilizer in Aek Barumun estate because there is an initiative from estate manager in order to optimizing yield. Result of observation in the field (block M34-M35) that there are no fertilize activity in riparian areas so that the company has implemented fertilizer recommendation. The company has been conducted the soil, midrib and leaf sampling analysis on October to November 2015 by the Sumatra Bioscience (Bah Lias Research Station) as monitoring changes in nutrient status. It will be used as fertilizer recommendation year 2016. Record of the result of soil, midrib and leaf sampling analysis and fertilizer recommendation on year 2016 has available with covering Na, Ca, Zn, and Mg level, as well as other parameters. Fertilizer recommendation year 2015 based on the result of soil, midrib and leaf sampling analysis which has conducted on October 2013 by PT Sentana Adidaya Pratama (research team from research and development department). Record of the result of soil, midrib and leaf sampling analysis and fertilizer recommendation on year 2015 has available too. The fertilizer recommendation year 2015 and 2016 has excluded oil palm trees on riparian areas.

A nutrient recycling strategy has implemented such as EFB application and land application (POME) year 2015 such as tabel bellow :

EFB EFB EFB Mill & Estate Production Application Application (tonnes) Plan realization (Ha) (Ha) Mill 68.875.580 68,857,580 68,559,870 Aek Kulim Estate 13,192,310 12,340,850 Aek Sigala-gala 23,226,000 17,370,380 Aek Barumun 32,141,560 37,828,830

Produksi land land Mill POME application application Productions Plan ( m3 ) Realization ( m3 ) ( m3 ) Mill 160,221 160,221 216,462 Aek Sigala-gala 160,221 216,462

Compliance status: Full Compliance

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

Findings: The company has a soil map of all estates made to scale 1;25,000 which shows that three main soil type found within the estates are podsolic soils (74.1% or 8,628 ha), latosols soils (23.90% or 2,784 Ha) and alluvial soils (2.0% or 238 Ha). Soil maps of all estates are also available and documented in HCV assessment report prepared for PT First

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 23 of 64 Mujur Plantation & Industry by the Indonesian sustainable pal oil foundation in October 2009. According to the map and as described in the report, more than 95% of the land at Aek Barumun estate and Aek Sigala- gala estate and over 70% of land at Aek Kulim estate consists of inceptisols and ultisols. All estate has an SOP for planting on sloped soils dated August 01, 2009. The SOP is applicable for areas with slopes between 15 0 to 45 0 and the SOP describes work instructions for how to develop individual terraces using manual methods, developing contours for higher sloped areas using mechanical methods and planting of cover crops to reduce erosion. The auditee has implemented stacking of midrib which perpendicular to the direction of contour and platform or individual terrace “tapak kera” with stacking of sacks where inside sack is soil or sand. All estate have road maintenance program prepared for each month for one year. The information documented in each estate includes the block number, size of area, length of roads where maintenance work was conducted, the types of machinery used (includes grader, excavator for digging drains and bulldozer for widening the roads), planned and actual road maintenance work carried out. The record of road maintenance programme and realization year 2015 and 2016 has available sample in Aek Barumun estate year 2015 and 2016 are using road grader is 9.950 m, using compactor is 5.100 m, using bulldozer is 16,253 m, excavator of long arm is 7,575 m, using excavator (drains) is 17,095 m and mini excavator (drains) is 155 m. The total length of the road (main and corridor road) in Aek Barumun estate is 309,133 m. Whereas, road maintenance (program and realization) report year 2016 (per July 2016) in Aek Sigala-gala estate are using greader is 564.930 m. The total length of the road (main and corridor roads) in Aek Sigala-Gala estate are 33,960 m. It was observed during site visits (roads in block D8, C3, F14, D13, G8, L30 and B10 ) that roads and drains were maintained and can be traverse (for road). Based on soil map that there are no peat soils at all estates, therefore the company has no water management programme for peat soils, and drainability assessment not available too. Based on soil map that there are no fragile or marginal soils were identified but the estate has an SOP for planting on marginal soils. The SOP describes different strategies for management of marginal soils such as mechanical cultivation of the soil, application of calcium carbonate on acidic soils, developing terraces and contours on sloped land, planting leguminous cover crops, making wash bunds on hilly land areas and silt pits and low lands to collect rain water, application of mill effluent and EFB to increase soil fertility and additional application of fertilizer based on soil analysis results and recommendations.

Compliance status: Full Compliance

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

Findings : The company already has water resource management in form of standard operational procedure No. SOP-MR-20 which contains water resource and rivers management including liquid wastes management for water pollution controlling. Water resources include: - Spring protection and maintenance - River banks management - Liquid waste management - Land application management and supervision - Water use efficiency

Riparian area well maintained with no chemical and fertilization activities on the river banks as wide as 5 meters either side of the river. There is a circular from General Manager PT BAS No. 226 / KD-GM / XII / 2012 dated December 19, 2012 on the maintenance of watershed/riparian with the following provisions: - The area afforested 2 times the width of the river either side of the rivers. - No spraying and inorganic fertilizing on the specified river banks - Build permanent markers between the oil palm plantation area and the river banks areas - Marking of palm oil plant that are in river banks as a boundary demarcation chemical activities - Inventory on planted trees in riparian areas - Handling trees on the river banks.

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 24 of 64

Water Management Plan has been provided and implemented. Water Management in PT BAS consists of several parts, such as office, warehouse, housing, and field activity (Estate/Plantation) and Palm Oil Mill (POM). The company reported surface water utilization and efforts in water use efficiency every three months including to the government. Observations made during the audit which the company should improve information on water resource management include access to clean water for local community, worker and the settlers who live surrounding the estates.

The water source of Warehouse and housing are taken from wells (Ground water) and a water pond. Based on data of water consumption (Ground water) in July 2016, example per day in Aek Barumun was 635 m³ and Aek Sigala-gala was 180 m³. Water efficiency efforts one of them with socialization to employees to efficient use of water and for prevention of pollution and the availability of water, do several things, such as a fencing around the the water pond and also planting trees.

Evidence of river banks maintenance activities are recording of planted trees and maintenance in each block until July 2016. In the recording there is information about the realization of trees planted including types of tree, number of trees planted and the location. The company also has data on the number of oil palm in the river banks to ease the amount of fertilizer recommendation followed by recording of fertilizer applied and the amount of saved fertilizer that was not applied in the non-fertilization area. The company has conducted appropriate treatment of mill effluent to required levels and regular monitoring of discharge quality. There are two SOP containing procedures for liquid waste management, namely SOP MR-17 for liquid waste processing and SOP MR-18 for liquid waste utilization. Based on soil map that there are no peat soils at all estates, therefore the company has no water management programme for peat soils, and drainability assessment not available too. There are 16 effluent ponds installed for waste processing treatment so as to meet the quality standards set by the government, especially Biochemical Oxygen Demand (BOD) standard. Quality of effluent monitored regularly in every month by accredited laboratory, the Laboratory Sucofindo Medan, and reported to related environmental agency. Monitoring samples taken from an inlet, an outlet and also in the river to ensure there is no leakage of waste. Results of monitoring in June 2016 indicate BOD level in inlet pond of 28990 mg/l, while at outlet pond of 98,6 mg/l and it is far below the prescribed maximum limit of 100 mg / l. In addition to BOD values, the other parameters in monitoring are pH, N Total, Suspended Solid, Oil and Fats, and COD, and the value of these parameters are not exceeded the permitted limit as required in decree of the Minister of Environment and forestry No. 5/2014 on effluent standards for industrial activities. PT BAS does not dispose of waste into water bodies, but has been applied to the land with the requirements of PH 6-9 and BOD < 5000 mg/l. Water consumption per ton TBS / FFB recorded and monitored in reports of Water Usage in every month. In Year 2015 the figure of water use in the factory as much as 221.151 m3 to process 321.105 tonnes FFB or 0.69 m3 / tonne of FFB.

Compliance status: Full Compliance

Criterion 4.5: Pests, diseases, weeds and invasive introduced species are effectively managed using appropriate Integrated Pest Management techniques.

Findings:

During surveillance, no change documents related to IPM. The company have a Work Instruction (WI) on description and management of pests and diseases such as nettle caterpillars, rats, rhinoceros beetles, crown disease and spear rot, as well as an WI on how to conduct routine and periodic census for all types of pest and disease. These WI are WI-TAN-01 about Control of caterpillar (ulat api), WI-TAN-02 about Control of rats, WI-TAN-03 about Control of Oryctes, WI-TAN-04 about Control of crown disease,WI-TAN- 05 about Control of spear root diseases, WI-TAN-06 about Control of stem root (Ganoderma), WI-TAN-07 about Control of bagworm (ulat kantong). In addition, all estate have a documented budget allocation and annual program for time table pest management activities (such as pest census, hand picking and chemical treatments) will be carried out, estimated number of man days required and estimated amount of chemicals required. According to management, treatment of pests is not necessarily carried out according to the schedule or budget, but only when census results show high rates of attacks. This is to minimize usage of chemical treatment for such pests. All estate has record of IPM monitoring through early warning system

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All estates also have a documented IPM programme which includes a schedule for planting of the beneficial plants, vertiver grass (to reduce erosion) and turnera subulata (a plant which attracts natural predators of leaf pests), at each estate division and the area to be planted. All estate maintain monthly records for Progress of Planting of Beneficial Plants as part of their IPM program, Turnera subulata was planted at fields of Division II covering an area of between 718 m. From site visits, it was observed that Turnera subulata have indeed been planted along most areas of the estates. Implementation of IPM has been well documented. For Example, for the implementation of detection can be seen in the “caterpillar sensus Report ". Both of these have been verified by auditor, for example, refer to Detection caterpillar sensus Report for Aek Barumun, Division I, Period July 2016, there was no visual attack.

Training for those involved in the implementation of IPM consistently done, such as the training of Pests and Diseases Management on 10 March 2016 in Aek Kulim, and the training conducted by Staff. The training agenda includes methods of conducting census for rats, bagworms & nettle caterpillars and termites, program for planting of beneficial plants. The training records include attendance lists, some records includes photos of the trainings and training materials used. All estates conducts monitoring of pesticide toxicity units (a.i. per tonne of FFB as well as a.i. per hectare) for all chemicals used in the document Agrochemical Usage Analysis. Analysis data is available for year 2015.

Compliance status: Full Compliance

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

Findings : The company uses only agrochemicals which are registered under the Department of Agriculture Indonesia (Indonesia Commission of Pesticides). The company has list of pesticides was used where it has informed about name of pesticide (name of trade), active ingredient, species target and name of company as registration holder, status and the time limit expired, example :Bayfidan 250 EC, Triadimenol 250,7 g/l; Meta Prima 20 WDG, Methyl metsulfuron 20%; Prima Up 480 SL, Isoproplyamine glyphosate 480 g/l; Dithane M-45 80 WP, Mancozeb 80%; Bestox 50 EC, Alfa Cypermethrin 50 g/l; etc

Data and analysis on usage of all agrochemicals is available for each estates and the company has documented justification for agrochemicals used. The analyses include data on active ingredients used, area treated, amount applied per ha and number of applications. For example in Aek Sigala-gala, the following is sample data on some agrochemicals used from January to July 2016, for planted area of 7.806,2 Ha: 1. Prima Up 480 SL, Isoproplyamine glyphosate 480 g/l, total amount applied is 3.347,5 l, a.i. applied is 1.191,71 l, which is equivalent to 0.153 l per Ha 2. Meta Prima 20 WDG, Methyl metsulfuron 20%, total amount applied is 153,25 kg, a.i. applied is 30,65 kg, which is equivalent to 0,004 kg per Ha

Records of pesticides of use year 2016 (plan and realization) has provided with information are block number, total of block area, name of trade, area treated (Ha), volume of used, total of employees or man days (Hari Orang Kerja) and information of their LD50 and active ingredients use where it was stated on Material Safety Data Sheet (MSDS) each agrochemical product included amount of active ingredients applied per ha information. The Company has a list of prohibited chemicals (POP, PIC, MAN, WHO 1a, 1b, EU, US). Based on the results of checks in the red list there is no evidence that company use chemicals categorized as World Health Organization Type 1A or 1B, or listed by the Stockholm or Rotterdam Conventions. The company has a commitment not use paraquat for all activities. Training on Pesticide Application Techniques and the Use of PPE held on August 4, 2016 to the foreman and Chemists, for 18 staffs in Aek Sigala-gala estate. The company has a license of Hazardous Waste storage permit number. 503/0001/2012 issued by Head of Integrated Licensing Services Padang Lawas Utara Regency in Gunung Tua on March 30, 2012, valid for 5 years for the storage of the following types of waste, i.e. used oil, used batteries, pesticide containers, with maximum storage time of 90 days. The application of the pesticide by spraying and injecting the stem.

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Cholinesterase examination has been carried out for employees who are in contact with chemical on August 9, 2016 conducted by the Clinical Laboratory Prodia, as many as 63 people. The company has followed up the results of the examination. The Company has a policy that the work related to pesticides should not be performed by women who are pregnant or breastfeeding. The policy contained in the manual document "Guidelines for Management Integration" BAS-SUB-01 dated November 1, 2012 clause 7.5.9. The use of toxic and hazardous materials and waste control B3. "Estate managers ensure that the chemist is a team of workers who are not in a period of containing / pregnant or nursing". The female employees related to chemical done medical examination in the clinic for prenatal care each month, evidenced by results of medical examinations of women chemical employees The company has evidence of a list of chemical used and registered in chemical book issued by the Directorate of Pesticide and Fertilizer, Ministry of Agriculture Republic Indonesia in 2013. The list of chemicals used in the company is: 1. Prima up 480 SL (for narrow leaf weeds, reeds) 2. Meta Prima 20 WDG (for broad leaf weeds, Melastoma, Lantana camara , etc.) 3. Bayfidan 250 EC (for stem rot disease Ganoderma boninense ) 4. BESTOX 50 EC (for caterpillars fire Thosea asigna ) 5. Biocis 25 EC (for caterpillars fire Thosea asigna ) 6. D Amin 875 SL (for broad leaf weeds) 7. Hamador 25 EC (for caterpillar fire Setora nitens ) 10. Matador 25 CS (for caterpillar fire Setora nitens ) 11. Sevin 85 SP (for caterpillar fire Setora nitens ) 13. BM Promax 75 SP (for caterpillar bag) 14. Sime RB Phoromon 1000 SL (for horn beetle) 15. Sinophate 75 SP (for caterpillar bag) All of the chemicals above has been registered and got recommendation of chemicals used in the work place by decree of Labour Head North Padang Lawas Regency number No: 560/1152 / DSTKT / I / 2016, on 11 January 2016 valid for 1 years until December 31, 2016. Issued in Gunung Tua.

Compliance status: Full Compliance

Criterion 4.7: An occupational health and safety plan is documented, effectively communicated and implemented. Findings : The company has policy of quality, environmental and occupational health and safety was sign by Director on January l 2, 2013 and the target of health and safety management system year 2014 and 2015 was provided too. Furthermore, the company have health and safety committee programme year 2015 and 2016 where it has implemented by auditee such as training of first aid in working areas dated on October 7, 2014 with 25 participants, submit OHS report to local government, medical check-up (general and specific), evaluation of OHS performance by health and safety committee, inspection OHS by safety and health committee, corrective action from the results of inspection, the watering roads, health education, counselling nutritious food and water sanitation education. The company have the record monitoring of effectiveness from all activities of health and safety programme year 2015 in report of Evaluation programme P2K3 year 2015 . The company have the records of health and safety, environmental evaluation and list of risk assessment identification year 2016 and procedure of identification and risk assessment (SOP-MR-12 rev.0 dated on October 01, 2012). The risk assessment consist all activity in palm oil mill and estate and was recorded in the register of identification “significant impact and non-acceptable risk” (F-MR-20) where has included the risk on wheel loader operation at mill. During the surveillance audit list identifying aspects and dangers and impact assessments and risk PKS: Revision 03, dated December 14, 2015 and the revised 04 dated January 18, 2016 (already include elements aspects no. U-01 and U-21 aspect Development activities Sterilizer Vertical.)

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The company has conducted health and safety training for workers in the form morning meeting/briefing and special session where key note speaker from local government or expert covering OHS aspect and usage of PPE. PPE was provided by auditee and mill workers are provided with safety helmets, safety shoes and ear protection and workers were observed wearing their PPE as required, harvesting worker in block A14 & N16 wearing their PPE as required such as boots, safety helmet, cover of chisel (“dodos”) and cover of sickle (“egrek”), and spraying workers in block M8 and B10 wearing their PPE as required such as masker, apron, boots, and gloves The company has some training and realization programs year 2015 : 1. Refresh operator stations Machine Room, the organizer / trainer K3U officer dated 27 Feb 2015, participans 2 engine room operator 2. Refresh Boiler Operator station WTP, the Operator PT Mandala Alpha True March 17, 2015, participans 14 boiler operator and WTP 3. Training Expert AK3 Chemicals, PT Safindo Kingdom on 4 - May 16, 2015 an Imran 4. Training K3 heavy equipment operators, Internal training by AK3U dated May 21, 2015, 5. The welding operator training, internal training dated June 15, 2015, followed by 4 people welder 5. Training K3 generator operator, to 21 December 2015,

Training and realization programs year 2016 1. CSR training , the organizer D’Guru consultan , dated Feb 25, 2016, participans : 5 employee 2. Internal Training for officers K3, dated March 22,2016, participans 6 employee mill 3. Refresh training Boiler operator, dated May 24, 2016 participans 9 operator boiler 4. Training Expert Electrical K3, the organizer PT Safindoraya, dated July 29, 2016 for Suparman (Assistant Processing Mill) Planing 1. Training K3 heavy equipment operators, Internal training by AK3U , September 2016, 2. Refresh training RSPO P & C and SCCS, Internal training by Rizki Sitepu (Manager certifica tion, November 2016.: Evidence of implementation to address the identified issues are using PPE by workers in working areas, evacuation route map and sign in office, store, workshop, socialization of OHS in morning meeting, etc.

Records of hand over PPE to workers has available such as safety helmet, boots, apron, masker, gloves in estate and safety shoes, ear protection, safety helmet, masker in mill was available 1. Aek Sigala Gala mill : dated August 11, 2016 2. Aek Kulim estate dated August 5, 2016 3. Aek Barumun estate dated August 6, 2016

The evidenced realization of the policy is company was have P2K3 (Occupational Health and Safety Committee) was responsible in Health and Safety Management System. The committee was approved by head of social, man power and transmigration office which was stated on head of social, man power and transmigration office decree in Padang Lawas Utara District number 560/023/2016 regarding the health and safety committee in PT BAS, valid for 2 years from the dated issue on 18/03/2016. One of person in health and safety committee i.e secretary has qualification as occupation health and safety expert. It condition has appropriated with regulation. Health and safety committee has conducted meeting with topic of health and safety in working areas once every 3 month, but P2K3 Meetings should be conducted every month in accordance with the contents P2K3 performance report to the Department of Manpower. In the recording evaluate the achievement of objectives and targets K3 2015 and the first semester of 2016 has not discussed matters relating to plans, achievements, obstacles and next P2K3 work program discussed by the results of the implementation of the previous K3 as fedback to the next work program. It condition was raised as non-conformity (NCR No RSPO 00613)

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The company has accident a documented procedure on emergency preparedness and response documented as SOP No.SOP-TGD-01 in the form Indonesian language. Categories such emergencies: Disaster: Earthquakes, floods, riots and other disasters, fires or explosions, leaks or spills B3. Disruption to the environment caused by the weak performance of waste management facilities and waste disposal. Based on interview with workers at Aek Kulim Estate (harvester in block L22 and N24), sprayer in block M8 and B10) and sterilizer station worker in mill) that they has understood regarding there are accident and emergency condition.

Accident statistic monthly report (January to Juni 2016) has available such as accident report, accident investigation report, accident summary report, recapitulation of accident report year 2010 to 2016, graphic of accident per type of accident cause year 2010 to 2016 Medical facilities for all workers such as policlinic near company areas has provided but if any condition that the policlinic can not handle accident or disease so the patient will be recommended to hospital. The company has provided the occupational accident benefit from social security provider in employment (BPJS Ketenagakerjaan) for all workers. There are evidence the proof of payment of monthly premium on January to Juny 2016 for estate and mill. The occupation accident summary report has included Lost Time Accident (LTA) information and personel injury. Available P2K3 performance report period the second quarter (April-June 2016), there recapitulation Accidents Year 2016. On 13 April 2016 workplace accidents have taken place the name Irwan Suryadi Saragih (SKU Harvest) exposed to electrical current at the time of harvest oil palm fruits, causing loss of working hours as much as 343 hours of work. Calculation FR (frequensy Rate) = 0.01 and SR (Saverrity Rate ) = 0.015.

Compliance status: Non Compliance

NCR No. RSPO 00613 (Minor non-conformity) :

1. P2K3 Meetings should be conducted every month in accordance with the contents P2K3 performance report to the Department of Manpower 2. In the recording evaluate the achievement of objectives and targets K3 2015 and the first semester of 2016 has not discussed matters relating to plans, achievements, obstacles and next P2K3 work program discussed by the results of the implementation of the previous K3 as fedback to the next work program

Criterion 4.8: All staff, workers, smallholders and contract workers are appropriately trained.

Findings:

The company has some training programs designed for staff, workers and plasma farmers as well. There are training has programmed for staff, workers and smallholder farmers (plasma) and also for the contractor, e.g. best practice management on spraying, fertilizing, harvesting, fruit grading; first aid and safety, waste management, plant pest detection, fire-fighting simulation, SOP, MCU for worker and HCV. The company has conducted implementation OHS training dated on August 2016, MCU for worker dated July 2016. Recording on staff training provided with evidence of minutes and certificate on implemented training. The company generally uses contractors to transport FFB and CPO, and socialization regarding OHS has been conducted to them, and the contractors should pay attention and implement the OHS policy in the worksite. There is no procedure which set mandatory for contractors who will work in the company’s worksite should have demonstrable expertise. the Company needs to improve the selection method in contractor tender process through revise procedure SOP No. 53/CKP/(0)/0909 to include consideration of the contractor ability / expertise in the field which it is responsible as the qualification criteria of selection. some condition at the company:

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Page 29 of 64 1. Document the findings are not yet available identification Training Needs to review the Third Party and society Neighbourhood. 2. Based on interviews WITH foreman and employees, they get yet Training And Understanding Regarding:. DAS, MSDS, Committee on Gender, Contents of the Handbook P3K This condition raised as non-conformity (RSPO00614).

Compliance status: Non Compliance

NCR No RSPO 00614 (Major non-conformity).

1. Document the findings are not yet available identification Training Needs to review the Third Party and society Neighbourhood. 2. Based on interviews WITH foreman and employees, they get yet Training And Understanding Regarding:. DAS, MSDS, Committee on Gender, Contents of the Handbook P3K

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

Findings: During surveillance, no change documents. Environmental aspects and impact of plantation and mills activities had been identified. The companys’ document of environmental impact identification was their Analisis Dampak Lingkungan (ANDAL) created in 7 Juli, 2010, based on the Governor's Decree No. 188.44 / 444 / KPTS- / 2010 concerning the environmental feasibility of oil palm plantation activities and increase the capacity of POM PT First Mujur Plantation & Industry, in Ujung Gading Jae village, District Simangambat, Padang Lawas Utara regency, Province North Sumatera which consist of 12.641,50 ha and POM capacity is 60 ton FFB/hour. Then the company obtained an approval letter from government, namely environmental permit/license number 660/98 / BPPTSU / 2 / 4.1 / VIII / 2014 dated August 25, 2014 The Environmental Permit for oil palm plantation activities and increase the capacity of the boiler and turbine and plant development kernel oil and castor bean plant (biji jarak). The company also has a document environment management (DPLH) for oil palm plantations covering an area of 1500 ha in Aek Kulim based on the recommendation of the Head of Environment office district North Padang Lawas, number 600/264/2011 dated August 23, 2011. During the re-certification audit, the company already periodically reporting on environmental management and monitoring (RKL/RPL) every 6 month, evidenced by receipt if letter. The company has conducted laboratory testing for waste water in the Environment Laboratory, environmental agency (BLH), North Sumatra province every month, which have been accredited by national accreditation committee/KAN

Compliance status: Full Compliance

Criterion 5.2: The status of rare, threatened or endangered species and other High Conservation Value habitats, if any, that exist in the plantation or that could be affected by plantation or mill management, shall be identified and operations managed to best ensure that they are maintained and/or enhanced.

Findings: HCV assessment report is available which is made by YASBI on 2009 and Re-mark on 2016 for 1500 Ha. HCV document covered the whole concession and around with landscape analysis overview.

The company has conduct of the program to conserve all the rare and threatened species (HCV 1.2) through: 1. To protect the habitat of rare and endangered species of birds as Mentioned in the HCV documents, the company has installed a sign board to prohibit the felling of trees as habitat of rare birds, which is on the border of the estate with community land and large trees in agro-tourism park.

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Page 30 of 64 2. Socialization about the HCV and rare bird species for all workers and community. 3. Prohibit employees to hunt birds, reptiles and fish as well as rare mammals 4. Patrol to prevent poaching 5. Make management plan to monitored the HCV area in every estate 6. Make signboard in housing, office, road production. Based on field observation in housing, office and road production, the company has established they signboard. The company has HCV document and HCV management plan and records of monitoring in the second half of 2016. Realization of the riparian zone restoration area (potential HCV 4.1) and 1.1. • Planting trees in border areas gradually • Maintenance of plants • Riparian boundary zone • Prohibit chemis activity in riparian boundary zone • Creating a pamphlet riparian zone However, HCV assessment results that have been implemented do not including the location permit area of 1,500 ha. This condition raised as non conformity. (NCR No. RSPO00615 )

Compliance status: Non Compliance NCR No. RSPO00615 (Major non-conformity) : Based on identification documents for an area of 1,500 Ha HCV, there are some differences in the data include: The extent of riparian siumpat on a map in HCV 1 with HCV 4.

Criterion 5.3: Waste is reduced, recycled, re-used and disposed of in an environmentally and socially responsible manner.

Findings: During the 1st surveillance audit, there is change about the source identification of waste and pollution in the company based on The company has a record list of waste and pollution sources identified as per document F-TAB dated April 1 st , 2012, where wastes and pollution sources identified include: 1. Hazardous waste from engine room, water pump, hazardous waste and oil based on SOP-TAB-02 and IK-UM-01 2. Clinical waste from clinic 3. Secondary spare parts and scrap metal from workshop 4. Secondary tires from workshop 5. Used batteries from engine room, water pump and workshop 6. Office waste i.e. ink, paper, cartridge, etc 7. Secondary container from herbicide and pesticide 8. Domestic waste from emplacement 9. Emission and noise from engine room, generator set, water pump, and vehicle 10. Dust from vehicle and fertilizer unloading 11. There is a management plan developed for all identified wastes. During 1 st surveillance audit, the hazardous storage licensed is still valid. The company has a license of Hazardous Waste storage no. 503/0001/2012 issued by Head of Integrated Licensing Services Padang Lawas Utara Regency in Gunung Tua on March 30, 2012, valid for 5 years for the storage of the following types of waste, i.e. used oil, used batteries, pesticide containers, with maximum storage time of 90 days. And changes the B3 waste storage permit, by decree of the Head of the Integrated Licensing Services Padang Lawas Utara District No. 503 / 0010.A / LA / XI / 2014 concerning Amendment of the Head of the Integrated Licensing Services North Padang Lawas District No. 503/001/2012 on temporary storage permit LB3. Changes to additional types of waste stored to be: Used oil / used batteries and dry batteries scrap, waste from laboratories containing liquid and solid LB3 For medical hazardous waste from clinic activity, company still have agreement with Sri Torgamba Hospital to handle the clinic waste, based on letter of clinic waste destroy number 07/EM-AK/VII/2012. The company have been collaboration with CV Amindy Barokah, a licensed transporter. The last Manifest

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Page 31 of 64 dated 07-06-2016 transporter truck BK 8798 MM • ZF 0009364 = 4.150 liters of used oil • ZF 0009365 = 130 kg of used batteries, corrosive • ZF 0009366 = 274 kg of used filters • ZF 0009367 = 70 kg of medical waste • ZF 0009368 = 595 kg contaminated packaging (packaging meta prime, former prime up jerry cans, cartons of chemicals, plastic packaging sinophate). • ZF 0009369 = 4 kg lampu TL Manifest previously dated 07-06-2016 does not exceed the period Waste water processed at Waste Water Treatment Plant (WWTP), consists of 16 pool. The Company has obtained permission for land application from decree of Regent North Padang Lawas No. 503/224 / K / 2012 dated July 5, 2012 for 3 years. Application for extension has been sent by letter No. 037 / BAS-MHN / CPM / V / 2015 dated May 4, 2015. Company install flow meters to determine the volume of waste water flowed into the plantation. Ther are161 distribution tub, for an area of 258 ha in block H to 16, 17, 18, 19, 20 Aek Sigala-gala estate and block I 19, I 20 Aek Kulim estate. There are 17 monitoring wells. Testing of waste water is conducted every month by accredited laboratory. Measurement results show that the parameters of pH, total N, total suspended solids, oil and grease, COD with K2CR2) 7 and BOD5 no exceeds quality standards. For example, the certificate No. 02895 / CLACAI dated 09-04-2015 otlet measurement results (pond 16), certificate No. 02 898 / CLACAI dated 9-04-2015. Waste water test results have been reported on a quarterly basis to the environmental Office of North Padang Lawas dated 27-04-2015 and to the Ministry of Environment by letter No. 107 / KD-GM / IV / 2015 dated 28-04-2015. Waste processing based on SOP Liquid and Solid Waste Utilization (SOP-MR-18) rev 00 April 14, 2014. The company makes Balance report of hazardous waste and reported quarterly to the Environment Office North Padang Lawas regency, i.e letter No. 21 / EM-AK / IV / 2015 dated April 13, 2015. Type of hazardous waste: dirty oil, battery scrap, packaging meta prime, former jerry cans, a former fertilizer, cardboard packaging, chemical packaging, the former filter, infusion bottles, syringes former, isopropyl alcohol, klerat. EFB are used as mulch and organic fertilizer with a dose of 60 tonnes / ha, shells and fiber uses as fuel for boilers, and boiler crust to solidify the road. All set in SOP-MR-18 Liquid and Solid Waste Utilization. Vehicle emission test was held on 25 November 2015 to 26 vehicles. Compliance status: Non Compliance NCR No. RSPO00616 (Major non-conformity) :

The Company has not undertake an obligation as stated in the Decree of the Head of Integrated Services and Investment Padang Lawas Urara District No. 503/0001 / IX / 2015 is the third point no.9. Delivering a monitoring report every 1 (one) month for wastewater monitoring results. A monthly report that there were only for the month of July 2016 and has been sent via post to the relevant agencies

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

Findings: The company has recorded their energy use from the fossil fuel and the renewable energy for mill operation, evidenced by record use of fossil fuel, shell and fiber. According to the records in 2016 from January until July, fossil fuel used for all activities in mill (starting up the generator in the mill) is 264.985 litres of diesel, with total FFB processing is 188.443 tonnes. On average the fossil fuel used is 1,41 litre per tonnes FFB and 6,87 litres per tonnes CPO. The company also has recorded their fossil fuel use for Aek Kulim, Aek Sigala-gala and Aek Barumun estate from January to July 2016, with the following details: 1. Aek Kulim estate : 103.026 liters of diesel

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2. Aek Sigala-gala estate : 120.642 liters of diesel 3. Aek Barumun estate : 90.024 liters of diesel fuel

The company has commitment for use renewable energy from shell and fiber. And for fossil fuel energy, the company has committed to minimize it in production process. The company has record of renewable energy from shell and fiber in energy ton/product by the evidence is in 2016 until July, FFB total production is 188.443 tons, total energy used from shell is 7.349 ton and fibre is 17,940 ton.

Compliance status : Full Compliance

Criterion 5.5 Use of fire for preparing land or replanting is avoided, except in specific situations as identified in the ASEAN guidelines or other regional best practice

Findings: Land clearing activities refers to procedure of land clearing with Zero Burning, SOP-TAN-04 April 1, 2011. The procedure set out system without burning for land clearing include: creating boundary blocks, build roads and bridges, “mengimas” and uprooted, “merencek”, install stacking lanes, stake the point of planting, make a drainage ditch and planting cover crops. Compliance status : Full Compliance

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

Findings:

During the 1st Surveillance audit, there is no change about the source identification of waste and pollution in the company. The company has a record list of waste, pollution and GHG emission sources identified as per document F-TAB10 dated August 1 st , 2014, that shows activities potentially as source of pollution and GHG include : a) Pollution sources: generators, welding machine, loading and unloading activities at the storage, water pump machine, workshop, polyclinic, office and house activities, chemical spraying, fertilizing, and harvesting. b) GHG emission sources at the estates : land clearing, replanting, fertilizing, transportation, generators for electricity, spraying and heavy equipment operation c) GHG emission sources at the mill : chemical usage for processing, POME, potential emission of NO2, SO2

This identification matrix is based on SOP Measurements and Mitigation of Greenhouse Gases. No. SOP- MR-11. Addition to pollution and emission source, it also available information on kind of pollutant/emission and action plan/mitigation to reduce it. The Company has a conducted measurement quality emission, as evidenced schedule of inspection emission test in mill, which the point sampling is stationary emission, ambient, noise, etc. For inspection in semester I year 2016 conducted on April, as evidenced are :

1. Analysis of air emission reports, sampling taken on August 2 2016, with power generator sampling at Aek Sigala-gala estate (1 unit), guess house (1 unit), Aek Estate Kulim (2 units), Aek Barumun estate (1 unit) , POM (power generator 2 units, 3 units of boilers), were the result of particulate, SO2, NO2, H2S, HCl, CL2, Opacity, NH3, HF, Cl 2, Hg, As, Sb, Cd, Zn and Pb was good and did not exceeded the quality standard based on decree of the minister of environment number KEP.13 / MENLH / 3/1995. Laboratory testing conducted by the Environment Unit of the Environment Agency of North Sumatera Province. 2. Analysis report of air Ambient test, sampling taken on April 18, 2016, conducted in POM area (housing, boiler station and near of security post), office of Aek Barumun (yard office, genset room), office of Aek Kulim (yard office) and office of Aek Sigala-gala estate. The result include SO2, NO2, CO, Pb, TSP, PM2,5,

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Page 33 of 64 Oxidant, PM10 and hydrocarbon was good and did not exceeded the quality standard based on PP No. 41/1999. Laboratory testing conducted by the Environment Unit of the Environment Agency of North Sumatera Province. 3. Noise measurement conducted in 11 point sample i.e. boiler station, engine room, in front of security post, housing, in front of office Aek Kulim, Aek Sigala-gala, Aek Barumun, in front of genset room Aek Kulim, Aek Sigala-gala, Aek Barumun, guess house, and the result are good and did not exceeded the quality standard based on decree of the minister of environment number Kep.48/MENLH/11/1996. Laboratory testing conducted by the Environment Unit of the Environment Agency of North Sumatera Province on 18 April 2016. The company has records of efforts and strategies employed to reduce pollution and emissions, such as: - Routine maintenance of boiler and vehicles, emission testing every six months - Right dose, right time, right place and the right way of using chemical material for plantation and water treatment - Immediately applied EFB/organic fertilizer - reduce the use of fossil fuels and replace with shell and fibre for the production process in palm oil mill - measurement and analysis of effluent periodically, deepening the waste water pond and strived - continuing tree planting in the river banks and maintenance - Utilization of liquid waste to land application with close supervision - forward to the utilization of methane gas as a source of electrical energy The organization is already doing the GHG calculation using tools recommended by the RSPO(Palm GHG calculator). Field emission during 2015 is 116,347 tCO 2e derived from land clearing, fertilizer, N2O, fuel and reduced by crop sequestration and conservation credit. Mill emission in 2014 recorded 10,375 tCO 2e derived from POME, diesel fuel and reduced by shell credit. Compared to 2014 emission data were recorded field emission of 116,314 tCO 2e and 10,786 tCO 2e of mill emissions, then a small increase in field emissions but on the contrary there is a decrease in plant emissions.

Compliance status: Fully Compliance

Criterion 6.1 Aspects of plantation and mill management that have social impacts, including replanting, are identified in a participatory way, and plans to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continual improvement.

Findings:

There are 3 documents showed during audit regarding social impact assessment: a. Environmental Impact Management and monitoring Report (RKL), first Semester 2014. b. Social Impact Asessment Report, First Mujur Plantation and Industry 2009. c. Social Impact Assessment Report, PT Barumun Agro Sentosa, Second Semester 2013 (published in January 2014).

These three documents have been developed with involvement of related stakeholders on the process. Records of stakeholder involvement such are meeting records, questionnaires and attendant list has shown during audit. Detail stakeholders involved during the assessment on 2013 detail as follow:

Number of Lo cation Method Respondent’s Category participants Rubber (Karet) Farmer 5 • Marlaung Village Petani Sawit 4 • Martujuan Village A. Interview Jasa Umum 5 • Mananti Village Wiraswasta 6 • Ujung Gading Jae Village PNS 3 • Jambu Tonang Village Jambu Tonang 5 Jambu Tonang B. Focus Group Communities Discussion Ujung Gading Jae 6 Ujung Gading Jae (FGD) Communities Marlaung Village 5 House of Marlaung Head of

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Page 34 of 64 Village C. Community PT. BAS employee 10 Aek Kulim Estate Office Workshop

Issues assessed in this documents are community access to working opportunities; local business opportunities; local income level; Local average household income; Institutions; community perceptions; social and cultural changes; local community health level; local tenure issues and local community access to infrastructure.

PT BAS already have Social Impact Management Plan for 2010 – 2015 as mentioned in First Mujur Social Impact Assessment Reports. There is a table (table 5.1) on page 50 outlined the plan on mitigation, implementation and monitoring to the SIA report. The records has summarized social impacts into parameters and indicators, as follow :

No Parameter Impacts Indicators 1 Working Opportunities • Level of Working Opportunity and worker mobility • Recruitment Procedure 2 Business Local business opportunity for local businessman Opportunities 3 Local Income Company’s obligations to local and national governance 4 Household income • Household Income from Company’s activities • Household Income influenced by Company’s activities 5 Institutions New local community institutions 6 Community Community perceptions regarding company’s operations Perceptions 7 Social and Cultural Social and Cultural changes monitored and recorded Exchanges 8 Community Health • Kind of disease/illness and the patients • Health facilities owned by company and government 9 Tenurial • Land Tenure cases or land acquisitions issues • Mechanism of land tenure cases • Local land tenure pattern 10 Accessibilities • Road access and transportation service existence • The rights among parties regarding the uses and access to road facilities

Activities planned to avoid negatives impacts focused on land tenure and acquisitions issues. Activities in order to promote positive impacts is covered in CSR programs, such as : - Social facilities (infrastructure) maintenance, - Social donations, community support and participations in local religious celebration events Documented records showed during audit regarding activities in order to promote positive impacts were available such as : - Donation realization records to Ujung Gading Julu Villages, Juni 2015. - Acceptance records of donations and gratitude letter from head oh Ujung gading Julu Head of Village. This Social Impact Management Plan is routinely reviewed every 6 months. The last review has been conducted and documented in June 2016. This Social Impact Management Plan is not difference between 2015 with 2016. Three methodological actions has taken in order to gain stakeholder participations in Social Impact . Management Plan review process, such as direct interview, discussion and workshop with stakeholders.

PT BAS has no smallholder scheme so particular attention regarding this is issue not relevant. There are social impact assessment documents or Social Impact Assessment (SIA) PT Barumun Agro Sentosa, Semester I, 2016. SIA document preparation method is through Focus Group Discussion (FGD), workshops, participatory mapping and in-depth interviews with stakeholders from the village of Merlaung, Martujuan, Menanti, Ujung Gading Jaya, Jambu Tonang, Ujung Gadung Jae.

The work plan of social impact management in 2016.

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No Social Impact Source of impact Management Management Plan

1. Working Recruitment, plant Employees: Recruitment, at Opportunities maintenance, Submission of beginning of each harvesting and regulations, training, year, the adjustment transporting of FFB, dissemination of of the minimum office administration rights and wage. obligations, UM. Community: Announcement of recruitment, employment 2. Business Development in Partnership in the Evaluation of low- Opportunities physical and non- production, cost market, physical, harvesting scheduling low-cost agricultural and transporting of market, the extension. FFB, mill operations realization of CSR. 3. Local Income Companies Mandatory payment Regulation Licensing, tax of dues to the evaluation government 4. Community The appointment of Visit to the villages Perceptions Recruitment, staff in social field, maintenance, the company is harvesting, known by transporting community, meetings with community regularly 5. Kesehatan Employees: Regular Pengobatan geratis masyarakat checks of employees working in high risk, Free Medical treatment of the Service employee's family.Society: Cooperation with Polindes, free medical examination, provide access of treatment for community, roads repairing, installation of traffic signs. 6. Accessibilities Boundaries Fixing rule of Pelaksanaan di installation and land mobilisation (in and lapangan acquisition, out) in companies, Field development in road improvements, implementation. physic and non installation of traffic physic. signs

Compliance status: Full Compliance

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

Findings: Estate still maintains a procedure for external communication, published April 1 st , 2011. This procedure attaches guidance of communication system by developing forms of communication. The forms have applied consistently, such as F-MR-24 (Reports and Information from External Stakeholders), F-MR-25 (Information request from External Stakeholders logbook), and F-MR-28 (Information request from External Stakeholders logbook). For the stakeholder communication, company person in charge (PIC) in

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Page 36 of 64 responsibility for carry out the communication and consultation The company is also has list of new stakeholder was recorded on July 2016 based on form F-MR-32. The document is an update from same document was made on April 1 st 2014. The management was categorized stakeholder into: government, head of village, costumer, contractor, supplier, community and employee. Details data of stakeholder was include name of organization, contact person, address, and telephone number. There are no stakeholder categorized as FFB supplier and local community leader (BPD and youth actor). This finding rise as observation.

There are records showed during audit regarding information provided to stakeholders, such as : a. A letter from Head of Ujung Gading Julu Village, June 05 th 2015, requesting for support of heavy equipment. b. This letter has been responded by Estate Manager of Aek Sigala Gala by sending a letter to Head of Ujung Gading Julu Village, June 09 th 2015, CC to estate manager.

There is a Decree Letter of General Manager PT Fisrt Mujur Plantation and Industry (now PT Barumun Agro Sentosa) Number: 091 / ST / GM-FMPI / VI / 2009 on June 30, 2009, decided, on behalf of Indra Purnama, Head of Personnel and General Section, was assigned as Public Relation of Estate. His task is to receive any requests for information and complaints from the stakeholders, visiting to villages, in order to know problems that can be helped by the company. Records of incoming mail for example: - On August 6, 2016, letter from the District of Torgamba Number 08 / EMAk / VIII / 2016 concerning the request for funding of Indonesia Independence Day Celebration . - On July 26, 2016 letter from the Village of Langkimat Number: 46 / EM AK / VII / 2016 concerning the request for assistance in constructing the bridge.

Compliance status: Full Compliance

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

Procedures of communication use SOP-MR-09, applicable since April, 1 st , 2011. These procedures contain way to handle of complaints, including process to overcome the complaints on each division. These procedures have been informed to workers and a copy was placed in every security office and estate gate. The company has a procedure to conduct land acquisition and procedure for calculation of fair compensation. These procedures were revised & have been informed to relevant parties, applicable since April, 1 st , 2011 (SOP-LGL-02). Fee compensation was calculated based on actual market price. Checks to company correspondence with external community for period of 2014 – 2016, there is no specific letter regarding dissatisfaction and complaint. The communication with external was recorded in to information request log book and corporate social responsibility log book. Stakeholder consultation has conducted with local during re-certification audit. Issues rise during stakeholder meeting were: a. The infrastructure conditions especially the main road b. The role of labor union dealing with worker complaint and grievance c. CSR/CD activities d. Access road for local FFB e. Boundary stone f. Retirement program for worker Detail information regarding stakeholder consultation result will show in the next chapter. Most of complaint and grievances that followed up with actions were around roads maintenance. Local community leaders (stakeholders) send letters requesting support for road maintenance. During audit, PT BAS shows that they have been responded this letter and including road maintenance as CSR Program.

Compliance status: Full Compliance

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

Findings:

Company still use their documented procedure SOP-LGL-02 regarding identification, calculation and compensation for the loss of legal or customary rights of the land, valid since 15 April 2011 .

This procedure has reviewed with participations of stakeholders. The participation conducted in informal meeting with key stakeholder such as local village heads. Stakeholders and Management agree that legal procedure by involving local government is the best way in conducting negotiations concerning compensations. Its comply to national regulation regarding land tittle and guidance to land compensations. For some cases that rise up to a conflict situation, affected parties or complainer (such as land claimer) conducted their own procedure such as applying demonstrations and sending letters without clear address to be responded. Company will engage them and offering a negotiation procedures to be followed by the complainer.

The last compensation process is period of 2007-2013 in estate Aek Sigala-gala. Company already pays land compensation about 21 people for 97.81 Ha. All this payment is well documented for example compensation payment for occupant in this estate in April 27 th , 2013 and July 12 th , 2013. No new case for land compensation.

Compliance status: Full Compliance

Criterion 6.5 Pay and conditions for employees and for contract workers always meet at least legal or industry minimum standards and are sufficient to provide decent living wages.

Findings:

In clause number 9 of working agreement, state that the company provide the housing and clean water for employee and electricity shall be paid by the employee. Company also provide the housing and facilities for employee, such as elementary school, church and mosque, Sport facility (Football and badminton), and daycare, poly-clinic, schools (Kindergarten till High School), School bus (8 unit), ambulance (2 unit) and free electricity. The Company has conducted socialization of infrastructure owned by the company and in order to maintain it. Socialization is held on July 18, 2016, attended by 56 workers. After the socialization, participants are expected to pass on their knowledge to other friends who are working in a corporate. The BAS plantation has open access to local traditional market. Some of worker aloud to open little shop with their own capital in emplacement areas. None of PT BAS working operations is located in remote area with no access to local market. Every consumption good is affordable by all workers. As part of company’s policy, workers also provided rice allowance that the value based the number of their family members There is North Sumatra Governor Decree No. 188.44 / 636 / KPTS / 2015 about Minimum Wage Fixing of Padang Lawas Utara District in 2016, on December 30, 2015. The Decree is effective on January 1, 2016. Under this decree minmum wage of Padang Lawas Utara District in 2016 is IDR. 2,006,415. - Decree of the Board of Directors of PT. Barumun Agro Sentosa No. 002 / SK-BHL / BAS-DIR / I / 2016 concerning the rise of Minimum Wages for Freelance Daily Labour, January 14, 2016. It was decided Employee Wages of BHL IDR. 80,300 (eight thousand three hundred thousand rupiahs). - Decree of the Board of Directors of PT Barumun Agro Sentosa No. 003 / SK-BHL / BAS-DIR / I / 2016 on the rise of SKU Wages on January 14, 2016. It was decided Employee Wages of SKU IDR. 66,900 (sixty six thousand nine hundred rupiahs).

There is evidence of payroll salary in July 2016 for staff, monthly employee, permanent employee (SKU), and worker (BHL). The employee was accept the salary with component consist of basic salary, allowance for rice (include wife and children), allowance “Employment Insurance”, overtime and harvesting incentive . PB and SKU pay checks as follows:

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Page 38 of 64 - On Behalf of Ronal Hasibolan Saragih, monthly worker, class 1A, receiving net wages IDR. 3,396,481, (main wage of IDR. 2,007,000) in July 2016. - On Behalf of Jaga Pasaribu, as mechanical, status: SKU, POM -Sigala Gala PT Barumun Agro Sentosa, receive net salary in July 2016 amounted to IDR. 2,868,378. - On Behalf of Ahmad Alfan Sidiq, worker of Aek Kulim Estate, worked for 15 HK / day, received a salary of IDR. 1,204,500 in July 2016. Companies PT Barumun Agro Sentosa has given religious holiday allowance (RHA)) for workers freelance worker, SKU Monthly, Monthly Employees and Staff in 2016. RHA was given on Idul Fitri, either employees who embrace Islam or Non-Islamic. For example, on behalf of Terpuji Sembiring, helper grader, Officer Identity Number: 02E300.C.201406.363 receive Religious Holiday Allowance IDR. 2,446,300 on June 17, 2016. Extrafooding: - On July 21, 2015, canned milk procurement of 22 pieces for employees of 1 st shift, POM Aek Sigala-gala, PT Barumun Agro Sentosa. - On July 12, 2016 procurement of Indomie, instant noodle, 114 pieces, for first shift employees, POM Sigala-Gala, PT Barumun Agro Sentosa. - Company contributed grief allowance for employees or their families are experiencing grief. For example, employees on behalf of Rahin Iskandar, Office Department, obtained grief allowance IDR 500,000 on May 23, 2013, his parents died. - The company is contributing to the employee's wedding. For example, employees on behalf of Martumbur Silitongan, Department of Security, received allowance of IDR. 300,000 on May 14, 2014. - The company provides wages for employees who are ill. For example, John Darwin Sinaga receive allowance of Rp. 2.57.125 in April 2016. He had been ill for 30 days. - The Company also provides reimbursement for the treatment of employees. For example, workers on behalf of Rasminar Feronika Simanjuntak, as SKU of teacher of Huria Church HKBP, Aek Kulim Estate, receive replacement treatment IDR. 1.687.000 on January 25, 2016. - Companies give menstruation leave for workers. For example, workers on behalf of Nurlinda Sianturi, Aek Kulim Estate, menstruation leave on August 11, 2016. - In 2015 the company give bonuses to Monthly Employee Monthly, Working Conditions Unit (SKU) and staff. For example, workers on behalf of Ramadan, workshop labor/krani, NIK: 02E100.B.199303.014, receiving a bonus of Rp. 14,109,558 in 2015.

Compliance status: Full Compliance

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

Findings:

Company still keep and maintain their policy regarding their respect the rights of all personnel to form and join trade unions. The freedom workers to have a worker union, was state in PKB (Labor Agreement) in clause 5 about recognition to worker union. The worker union has organization management structure for 2014 – 2016. Company provides the facilities i.e. meeting room for SKP-BAS (Barumun Agro Sentosa Worker Union) in employee housing in Aek Kulim Estate. There are Labour Union Organizations for estate of PT Barumun Agro Lestari which has been registered in the Manpower and Transmigration Agency, Padang Lawas Utara District with Number. BP.01 / SKP- PT BAS / DSTKT / II / 2016 on February 16, 2016 and already have article of association and bylaws (AD / ART). Plantation Labor Union board members as follows: Chairman: Ramadan; Secretary: Haikal Tanjung; Treasurer: Swaji. On March 7, 2016, meeting has been held between representatives of the company PT. Barumun Agro Sentosa with representatives of Plantation Labor Union, agenda was about CLA period 2016-2017. Interview result with labor union member confirmed that PT BAS management treat them equally among workers, there’s no discrimination issue regarding their membership to labor union. Bipartite cooperation Institution has been established based on Meeting record June 1th 2015. The Appointment letter has published in June 3 rd 2015. According to the Labor Union member statement, the worker union still takes role as a channel for worker complaint and grievances to management. All problem reported will discussed internally and with management by Bipartite cooperation Institution.

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Page 39 of 64 There is Collective Labour Agreement (CLA) between PT Barumun Agro Sentosa with Working Unit of Plantation Labour Union of PT Barumun Agro Sentosa, year period 2016-2018. CLA has been listed on the Department of Labor and Transmigration, Padang Lawas Utara District Number: 05 / PKB / DSTKT / V / 2016. CLA includes things: the recruitment, working days and working hours, wages, premiums, bonuses and holiday allowances, social security, health insurance, social assistance for workers, occupational safety and health, work rules, job termination, fees for out of office duties, educational tasks and duty transfered.

Compliance status: Full Compliance

Criterion 6.7 Children are not employed or exploited.

Findings:

PT BAS still hold policy of minimum age worker requirements. It has contained in PKB clause 10 about the recruitment, state that the workers at least is 18 years old. Evidence of implementation the policy is : 1. Sign board of announcement about the company only accept the worker at least 18 years old or was married, and also ban of bringing children under 18 years old for worker still applied at some points. The sign board was posted in front of office worker union, estate office and mill office. 2. Checks to list of employee of PT BAS May 2015 there is no finding the employee under 18 years old. The Company has conducted socialization of age limit for workers, that is 18 years old and disseminate procedures for prevention of sexual harassment. Socialization is held on July 18, 2016 attended by 56 workers. After the socialization, participants are expected to pass on their knowledge to other friends who are working in a corporate environment. Based on the check of employees list in July 2016 there was no workers in 18 years old when employed by the company PT Barumun Agro Sentosa.

Compliance status: Full Compliance

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

Findings:

Worker master list per July 2016 also shows the worker heterogeneity regarding religions, ethnics and races. There are worker from java, batak, nias, etc. registered as workers. Interview result with some workers confirmed that there is no discrimination issue among workers. Commitment to equal opportunity has documented to Collective Working Agreements (PKB). The promotion listed in clause 14 of PKB, state that the workers who has meet the qualification or because have vacancies in higher position may be promoted. Equal treatment in working opportunity was guaranteed by company as define in decree No 009/SE/DIR/BAS/VIII/2011.

Employee Work Agreement between PT BAS and worker union of PT BAS period 2016-2018 has been disseminated to all levels of employees, for example, on August 3, 2016 for employees of workshop in Aek Kulin Estate, on July 9, to workers in Afdeling III and IV, Aek Kulin Estate. One of socialization material in CLA is that anyone have an equal opportunity to work in the company PT Barumun Agro Sentosa .

Compliance status: Full Compliance

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

Findings:

PT BAS still maintain their commitment regarding prevention for sexual harassment and violence, valid from August 26, 2011. The policy has communicated to all level of worker. Direct interview with maintenance and harvester workers found that they acknowledged regarding gender and prevention of sexual harassments policy. The workers aware any kind of sexual harassment and gender based violation, and know to whom they has to report if any cases happen. Company also has policy for female regarding their reproductive rights. The company gives the leave for female when they got period and pregnancy (give birth and maternity). The leave day for female’s period is one day every month, approved by manager. The leave day for pregnancy/give birth is 3 months (90 days). The Gender committee that has established and the organization management structure have been appointed. They take lead on actions regarding prevention for sexual harassment and violence. They may report to gender committee or labour union if any happen; they also have phone number of committee person. The gender committee has book of complaints/grievances, but there is no related cases recorded there. Results of interview with gender committees and employees of Polyclinic (August 24, 2016), it was noted that no cases of sexual harassment. The Company's commit in ensuring convenience for women employees.

Compliance status: Full Compliance

Criterion 6.10 Growers and millers deal fairly and transparently with smallholders and other local businesses.

Findings: Since 2011, PT BAS buys FFB from external source (outgrowers). The price of FFB was informed by billboard in the outside of mill consist of today price and yesterday’s price. During audit PT BAS could show evidences regarding past and present FFB prices, and make payments as mentioned in the contracts. During re-certification audit found that PT BAS has only one external FFB supplier, detail data regarding the supplier was not available. This finding indicate that there is no standard mechanism for FFB supplier, such as: a. Requirement for local business partnership as FFB supplier, b. The origins of FFB c. Price transparency between supplier with their out-growers d. Evaluation mechanism. This situation has risen as non-conformity in P&C 4.1. There was FFB price, set by the Department of Plantations, North Sumatra Province, August 16th, 2016. FFB Price is valid for the period of August 16 to 22, 2016. Price of FFB for plant of 3 years old amounting to IDR. 1,324.20, plant of 6 years old IDR. 1,635.78 and the plant of 10 years old amounting to IDR. 1,857.66. Prices for FFB of smallholders refers to the prices issued by the Department of Plantations, North Sumatra Province, while prices for independent farmers refer to the market price.

Related to third party complaint, FFB seller (PT Mega Agung Pratama), it was set out in SOP Standard Operating Procedure of Communication No. Documents: SOP-MR-09 on April 1, 2011. At the point VI of the grievance / complaint from external parties, it was explained that complaints of stakeholders should be through public relations, discussed by GM and manager to make decision. PR submit responses to a complaint, submitted no later than 30 days from receipt of the complaint / grievance. There are cooperation agreements between PT Barumun Agro Sentosa and PT Mega Agung Pratama No. 01 / BAS / SP-TBS / XII / 2015 on December 30, 2015. In Article III, it was explained

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Page 41 of 64 that the PT Barumun Agro Sentosa provide competitive price of FFB to the PT Mega Agung Pratama with reference to the market price, based on the price calculation in accordance with the quality of FFB. There was spending voucher on August 19, 2016 of PT Barumun Agro Sentosa to PT Mega Agung Pratama amounting to 114,760 kg of FFB, price IDR 1,483.71 / kg, total payment of IDR. 170, 270 ,476. The result of interview with KTU POM Sigala-gala, FFB is derived from the plant of four years old, which according to FFB price of plant age that is set by the Plantation Office of North Sumatra Province on August 16, 2016 amounting to IDR. 1,484.59.

Compliance status: Full Compliance

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

Findings:

Company’s commitment to contribute to local development implemented by activities named as CSR Program. The programs have been developed based on the aspirations, grievances and consultations with stakeholder. Records of communication and consultation regarding CSR program is available and traceable, begin with letter from stakeholder, estate/mill response and follow up to General manager, approval, and implementation records.

The CSR program for 2014 divide into 7 activities, such as: a. Development of Worshipping House, IDR 54.640.000,- b. Donation for religion equipment, IDR 1.780.000,- c. Religion Celebration, IDR 34.000.000,- d. Donation for Sport Facility, IDR 3.000.000,- e. Donation for National Feast day Celebration, IDR 44.750.00,- f. Rehabilitation and Maintenance for local roads, IDR 51.879.671,-

Company also shows evidences of their contribution to local development in 2015, such as: a. Hand over record: Donations for Road Maintenance and canal development, June 11 th 2015, at Ujung Gading Julu Village, costed IDR 5.192.096,48, signed by estate manager and Head of Ujung Gading Julu Village. b. Donations of Presentations Tools for Sub District office of Simangambat, February 17 th 2015.

CSR Program 2016 as follows: - Repairing and construction of ditch in the road of Ujung Gading Jae village. - Procurement of culvert diameter of 40 cm and the installation of culverts in the village of Ujung Gading Julu. - Repairing of scriping road in the village of Ujung Gading Julu. - The opening of a new road in the village of Manaon UB. - Construction of latrines in the village of Ujung Gading Julu and Ujung Gading Jae. - Assistance in repairing the road and ditch construction in village of Ujung Gading Jae.

Realization of CSR 2016 as follows: - Assistance for Prophet Muhammad's Birthday celebration, held on January 18, 2016 in Djambu Tonang, IDR. 6,000,000. - Help with the cost of treatment (surgery) on February 6, 2016 residents of the village of Huta Raja, IDR. 1,000,000. - Cheap Market activity (Bazar) for community around the company and its employees on 16-17 June 2016 in Djambu Tonang, Huta Raja, Pasir Lancat, IDR. 818, 910, 438. - Rehabilitation assistance for Mosque of Amaliyah on May 31, 2016 in the village of Tobing Tinggi IDR. 2,200,000. - Assistance in repairing road in Djambu Tonang 7-13 March 2016, amounted to IDR. 7,450, 000.

The result of interview with the Head of Village and Community Leaders of Ujung Gading Julu

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Page 42 of 64 village (August 24, 2016), it was noted that in 2016, till July the company PT BAS has realized CSR program, that was12 km of road maintenance and the installation of culverts at three points. Companies build partnerships with local communities, among others: - Firdaus AU, SPK number: 001 / PPP / BAS-GM / IX / 2014, addresses in Bukit Tujuh Village, Sub district. Torgamba, South Labuhan Batu District, his job is transporting empty fruit bunches, effective on August 30, 2017. - Ivan Motor, SPK Number: 001 / PPP / BAS-GM / VII / 2014, address in Marlaung Village sub district. Simangambat, Paluta District, his job is transporting FFB, effectiveon June 30, 2017. - YT Motor, FFB Transporting.

Employees who work in the company come from the villages around the estate, including: Aek Barumun Estate 54 people, Aek Kulim Estate183 people, Aek Sigala-gala Estate 238, people POM Sigala Gala 16 people. Regards to recruitment, company have announced it to the community around the estate for example, on March 31, 2015 announcement of a job as a security force (SECURITY).

Compliance status: Full Compliance

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

Findings:

There are no Company’s operations related to trafficked and forced labour. All of plantation workers are Indonesian Local workers.

Compliance status: Full Compliance

Criterion 6.13 Growers and millers respect human rights.

Findings:

Company’s commitment in Human rights has documented in Collective Working Agreement (PKB) 2014/2016, such as: a. The freedom workers to have a worker union, was state in clause 5. b. Commitment to equal opportunity has documented in clause 14. c. Clause 10 about the recruitment, state that the workers at least are 18 years old. This PKB has been socialized to all level workers. Last socialization process was at June 20 th 2015, conducted in Afdeling I, II, III, IV and V of Aek Kulim Estate. Other subjects that communicate in the socialization process are: a. Restriction for all workers in consuming alcohol and drugs inside PT BAS Operation Areas. b. Restriction in conducting violence actions/activities inside PT BAS Operation Areas.

Companies PT Barumun Agro Sentosa has a policy of protection of human rights, that was published on April 1, 2011 which is that management is committed to protecting and respecting human rights include personal human rights, political rights, rights in the field of law, legal eguity rights, property rights and social culture right. Protection of human rights policy has been disseminated to all levels of employees and third parties (AU Firdaus, Ivan Motor, Supriya) on June 15, 2016. The company also socialize protection of women workers and the prevention of sexual harassment, guarantee of no discrimination on workers' rights, business ethics, no recruitment for under 18 years old workers.

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 43 of 64 Compliance status: Full Compliance

Criterion 7.1: A comprehensive and participatory independent social and environmental impact assessment is undertaken prior to establishing new plantings or operations, or expanding existing ones, and the results incorporated into planning, management and operations.

Findings:

The company has conducting routine social impact assessments and publish report every 6 months. Issues assessed are community access to working opportunities; local business opportunities; local income level; Local average household income; Institutions; community perceptions; social and cultural changes; local community health level; local tenure issues and local community access to infrastructure. The assessment has conducted in a proper method with participations of local community. Based on this assessment result, Company could keep up to date with social conditions surround the estates, and could frequently monitor and manage the social impacts.

Compliance status : Full Compliance

Criterion 7.2: Soil surveys and topographic information are used for site planning in the establishment of new plantings, and the results are incorporated into plans and operations.

Findings:

The company uses result of soil survey and topographic information for site planning..

Compliance status: Full compliance

Criterion 7.3: New plantings since November 2005 have not replaced primary forest or any area required to maintain or enhance one or more High Conservation Values.

Findings: Based on operational map and plants map identified in that there is additional area of 1500 ha which is not covered in the previous HCV assessment. In the part of area are planting year 2005 of 284 ha in section I and 91 ha in section VI, and this area potentially excluded from certification scope since no evidence (map or imagery) that proved no primary or HCV area has been replaced during this period. Based on hectare statatment and map, planting year 2005 exist in block K33, K34, K35,K36,K37,K38, L32,L33,L34,L35, M30,M31, M34, M35, M22, M23, N20, O20 of Aek Kulim estate. There are no recorded data on land clearing that cover the entire of those blocks, there is just recording on plants consolidation. Because of HCV assessment has not been done in this additional area, then map of HCV area distribution was not available, as well as stake-holder consultation and HCV management documents.

Compliance status: Non Compliance

NCR No. RSPO00617 (Major non-conformity) : PT BAS has HCV documents. Land clearance above 2005 must be submitted to the RSPO. In accordance with the guidelines contained in the P & C Generic 2013, when the land has been cleared since november 2005, and without sufficient analysis prior HCV, then the land will be used as an exception from RSPO certification program until their HCV compensation plans that have been developed and accepted by the RSPO

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Criterion 7.4: Extensive planting on steep terrain, and/or marginal and fragile soils, including peat, is avoided.

Findings:

The Company does not undertake plantings on steep slopes, marginal soils and peat soil in the area of new planting.

Compliance status: Full Compliance

Criterion 7.5: No new plantings are established on local peoples’ land where it can be demonstrated that there are legal, customary or user rights, without their free, prior and informed consent. This is dealt with through a documented system that enables these and other stakeholders to express their views through their own representative institutions.

Findings: The company still use their documented procedure SOP-LGL-02 regarding identification, calculation and compensation for the loss of legal or customary rights of the land, valid since 15 April 2011 . The last compensation process is period of 2007-2013 in estate Aek Sigala-gala. Company already pays land compensation about 21 people for 97.81 Ha. All this payment is well documented for example compensation payment for occupant in this estate in April 27 th , 2013 and July 12 th , 2013. No new case for land compensation .

Compliance status: Full Compliance

Criterion 7.6: Where it can be demonstrated that local peoples have legal, customary or user rights, they are compensated for any agreed land acquisitions and relinquishment of rights, subject to their free, prior and informed consent and negotiated agreements.

Findings: The Company has provided fair compensation to landowners for new plantation with evidence kept by the company. Compliance status: Full Compliance

Criterion 7.7: No use of fire in the preparation of new plantings other than in specific situations, as identified in the ASEAN guidelines or other regional best practice.

Findings: The Company has a zero burning policy for land preparation, land preparation for the new planting after year 2005 to 2007 exist in block K33, K34, K35,K36,K37,K38, L32,L33,L34,L35, M30,M31, M34, M35, M22, M23, N20, O20 of Aek Kulim estate, has done mechanically.

Compliance status: Full Compliance

Criterion 7.8: New plantation developments are designed to minimise net greenhouse gas emissions. Findings: No applicable since the requirement 7.8 applied from year 2015 and the latest oil palm planted in PT BAS is in year 2007.

Compliance status: Full Compliance

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Principle 8: Commitment to continuous improvement in key areas of activity

Findings: Company have commitment on emission and pollution reduction and environmental damage cause the activity contained in the quality policy, Environmental and Safety and Health on point number 3 was state “ to prevent and reduce the environmental impact pollution from any activities company production and also responsible on the environment and biodiversity, natural resource conservation. Company always promote conduct continual improvement for all activity to improve the performance quality management system, environmental and health and safety as define in management review result, and regular evaluation of plantation and mill operation. PT BAS has conducting routine social impact assessments and publish report every 6 months. Issues assessed are community access to working opportunities; local business opportunities; local income level; Local average household income; Institutions; community perceptions; social and cultural changes; local community health level; local tenure issues and local community access to infrastructure. The assessment has conducted in a proper method with participations of local community. Based on this assessment result, Company could keep up to date with social conditions surround the estates, and could frequently monitor and manage the social impacts.

Compliance status : Full Compliance

• RSPO SCCS / Description of RSPO Supply Chain Management System November 2014

Aek Sigala-gala Mill is located in North Sumatera - Indonesia. Aek Sigala-gala mill has production capacity of 50 tonnes/hours. The mill processes Fresh Fruit Bunches (FFB) from PT Barumun Agro Sentosa Estate (Aek Sigala-gala estate, Aek Barumun estate and Aek Kulim estate) and outgrower. The location of Aek Sigala- gala Mill is inside of Aek Sigala-gala estate.

The company implements SCC-RSPO with “ Mass Balance (MB )” model according to the nature of mill FBB supply condition. The following is a description of the company’s supply chain management system according to the RSPO SCCS requirements, including status of compliance of the company and their outsourced third parties to RSPO SCCS requirements.

E.1. Definition

Findings: The organization (Aek Sigala-gala mill – PT BAS) was implemented the RSPO-SCCS Mass Balance model. This SCCS model allowed to mixing of certified and uncertified product but shall be control by the Mass Balance record to ensure the quantity of certified product, and only certified product could be claim by the organization as certified palm oil product. Organization has identified the volume of certified and uncertified FFB supplied to the mill. Based on record of Mass Balance showed the amount of FFB certified and uncertified, when the certified FFB is come from own estate (Aek Barumun, Aek Kulim and Aek Sigala- gala). Whereas, uncertified FFB is come from suppliers/traders. Based on Table 3 above that Aek Sigala-gala mill was received certified FFB year 2015 is approximately 293,734.87 tons of FFB ( 87,11% from the total of FFB received in once year) and uncertified FFB is approximately 45,455.00 tons (12.89%). Whereas, in year 2016 (January to July) was received certified FFB are 169,615.07 tons (87.77%) and uncertified FFB are 23,645.21 tons (12.33%). Aek Sigala-gala Mill produced Crude Palm Oil (CPO), Palm Kernel (PK) and Palm Kernel Oil (PKO) but PKO not include scope.

Mass balance record also showed the certified product. In year 2015 that certified CPO are 59,014.76 tons (87.77%) and uncertified CPO are 8,310,90 tons (12.3%). Whereas, certified PK are 13,169.76 tons (87.67%) and uncertified PK are 1,853.59 tons (12.33%). In year 2016 (per July 2016) that certified CPO are 34,071.47 tons (88.40%) and uncertified CPO are 4,472.92 tons (11,60%). Whereas, certified PK are 4,613.81 tons (84.26%) and uncertified PK are 861.60 tons (15.74%).

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Compliance status : Full Compliance

E.2. Explanation

Findings: Projection of certified FFB production year 2016 from Aek Barumun estate, Aek Kulim estate and Aek Sigala-gala estate is 304,127.00 tons so that projection of certified CPO production is 78,936.4 tons (OER : 20,50%) and certified PK production is 17,878.7 tons (KER : 4.80%).

The complete production record for 2015 and projection 2016 presented in Table 4 in RSPO P&C Summary report. During the 1st surveillance, mill has registered in RSPO IT Platform, i.e.: in e-Trace system and GreenPalm. With registered number in e-Trace RSPO_PO1000000884 and registered number in GreenPalm GP00000941. Based on e-Trace and GreenPalm transaction record for year 2015, there is no sales activity done by company . but Periode January – July 2016 sales activity done by company such as : CPO = 6.907,05 MT and PK = 4,711,63 MT

Compliance status: Full Compliance

E.3. Documented procedures

Findings: During the 1 st surveillance audit, there is no revised about company procedure’s has recorded and documentation owned procedure and work instructions to ensure the implementation of RSPO SCCS Mass Balance. That procedures such as: - Procedure for delivery FFB from estate to mill (SOP-ADM.TAN-11) - Procedure to receive FFB (SOP-PKS-07 Rev.01,effective date on April 01, 2011), - Procedure for processing palm oil mill (SOP-PKS-01 Rev.02,effective date on April 01, 2011), - Procedure for preparation of palm oil mill operation (SOP-PKS-02 Rev.02, effective date on April 01, 2011), - Procedure for running operation of palm oil mill (SOP-PKS-03 Rev.02, effective date on April 01, 2011), - Procedure for stopping operation of palm oil mill (SOP-PKS-04 Rev.02, effective date on April 01, 2011), - Procedure for laboratory (SOP-PKS-05 Rev.02, effective date on April 01, 2011), - Procedure for administration of mill (SOP-PKS-06 Rev.02, effective on April 01, 2011), - Procedure for the tender and production sales contract (SOP-MKT-01 Rev.01, effective date on April 01, 2011), - Procedure for dispatch of CPO & PK to customer (SOP-MKT-02 Rev.01, effective date on April 01,2011), - Procedure for hand over FFB to customer on mill office (SOP-MKT-03 Rev.01, effective date on April 01, 2011), - Procedure for production delivery report on mill office (SOP-MKT-04 Rev.01, effective date on April 01, 2011), - Procedure for production delivery report on director office-Medan (SOP-MKT-05 Rev.01, effective date on April 01, 2011), - Procedure for customer satisfaction survey (SOP-MKT-06 Rev.02, effective date on April 01,2011), - Work Instruction for operation of boiler, turbine, generator, weighbridge, loading ramp, sterilizer station, threshing station, pressing station, clarification station, oil purification station and processing of drab (WI-PKS-01 to WI-PKS-12) - Procedure of entry to UTZ/eTrace process in Aek Sigala-gala mill The company has a procedure for implementation of SCCS requirements as listed above. Furthermore, the company has procedure for certified product communication and claim according to RSPO requirements as they have made claims. Refers to information from MR, the mill only make claims regarding the use of or

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Page 47 of 64 support of RSPO certified palm oil that are in compliance with the RSPO Rules for Communication; and procedure of inform to certification body if over certified product production. The management has issued letter decree No.031/BAS-DIR/VI/2013 dated on June 01, 2013 regarding structure of organization and job description as responsible of integration management system (include SCC system). Their annex are 1.structure of organization, 2.team work such as coordinator, management representative for integration management system (ISO, RSPO, ISPO, ISCC), document control and document control assistant) and 3.job description each level/job. The last on traning RSPO and SCCS has conducted on 23-24 November 2015, trained by Mr.Haris Silalahi.S.Si ( deGuru Consulting) external training, and attended by 29 participants from different division. The training documentation are a. Training invitation (internal memo) b. Training minutes meeting c. Trainer list of attendees d. List of participants e. Training documentation/pictures

The company has identified and created training program in 2016 for all staff involved in RSPO SCC systems. Refresh P&C RSPO dan SCCS, Internal training by Rizki Sitepu (manager certification) date November 04, 2016

Auditee has procedure for receiving FFB (SOP-PKS-07 Rev.02) where it is describe of activity from receiving FFB until making the FFB receive report and describe describe how to handle document for material (FFB) of certified and non-certified, and state the definition of certified and non-certified FFB.

Compliance Status : Full Compliance

E.4. Purchasing and good in

Findings: Auditee has mechanism to receive FFB in mill (SOP-PKS-07 Rev.01) where include verify volume of certified and non-certified FFBs received. On the FFB received form (F-PKS-08) has informed certified FFB and non-certified FFB where year 2015, certified FFB receipt are 293,734.87 tons and non-certified FFB receipt are 43,455.00 tons. Whereas, year 2016 (per July) that certified FFB receipt are 169,615.07 tons and non-certified FFB receipt are 23,645.00 tons. Auditor has verification to ensure volume of certified FFB where transaction FFB receipt dated on 05 August 2016 has appropriate between hard document of FFB receipt with FFB receipt report.

During assessment, mill has evaluated of volume the CPO and PK certified quantity year 2015 and 2016. The annual balance records including the incoming certified FFB and non-certified FFB, the production process, the finished goods of certified and non-certified CSPO and CSPK, Sales and end stock. The auditee has sold certified CPO under ISCC scheme and green palm platform. The company delivery product from positive stock but not implemented sell short.

Compliance status: Full Compliance

E.5. Record keeping

Findings: The company has created procedures and work instruction related to RSPO SCC system that already covered all aspect of RSPO SCCS requirements. All documented procedure will be evaluated and monitored every year through internal audit process.

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For daily production process, in the procedure of Supply Chain Certification System Mechanism has described that mill manager are the person in charge to control the volume of acceptance and production of RSPO certified palm kernel . Production process and delivery of finished product will be reported daily, monthly, quarterly and yearly.

The company also already has a mechanism of the retention times for all records and reports shall be a ten (10) years base on : Decree of the President Director of PT BAS Number. 006 / SE / DIR / BAS / VIII / 2011 dated August 26, 2011 about: Retention times for record and report, and all document related delivery product certified and uncertified should keep in 10 (ten) years. Aek Sigala-gala mill has recorded and balance receipts if RSPO certified and uncertified in to mass balance record and also for palm oil production such as CPO and PK with basis three months and evaluated in every month.

On the FFB received form (F-PKS-08) has informed certified FFB and non-certified FFB where year 2015, certified FFB receipt are 293,734.87 tons and non-certified FFB receipt are 43,455.00 tons. Whereas, year 2016 (per July) that certified FFB receipt are 169,615.07 tons and non-certified FFB receipt are 23,645.00 tons. Auditor has verification to ensure volume of certified FFB where transaction FFB receipt dated on 05 August 2016 has appropriate between hard document of FFB receipt with FFB receipt report.

Compliance status: Full Compliance

3.2 Status of Previously Identified Non-conformities

A total of 13 non conformances were identified during the re-certification assessment. These consisted of 9 major and 4 minor non-conformities according to RSPO P & C. Whereas, a total of non-conformity RSPO SCCS is For the non-conformances, the company has taken the necessary corrective action to close these non- conformances within 60 days of completion of the assessment, and this was verified by the audit team through checks of documents submitted by the company. During this 1st surveillance assessment, it was found that there was sufficient evidence for closure of all non- conformities. The following is a description of the evidence of action taken to close the non-conformities raised during the previous assessment, as well as auditor’s conclusions on the status of the non-conformities.

• RSPO P&C

Criterion 2.1 (Major indicator 1): Evidence of compliance with relevant legal requirements.

Non-conformance No. 2015-01 of 13 (Major non-conformity)

1. The company has not run the boundary demarcation in South Aceh since the issuance of the forestry minister's decree on July 2012, the company has not fulfilled Government Regulation No. 10/2010 article 17, paragraph 1, which states that the applicant company must conduct demarcation and reforestation activities no later than 1 year from the date of decree issuance The Company must propose the instructions to the Minister on the continuation of the process of demarcation in South Aceh when a grace period of one year has elapsed. 2. Environmental permits are required for each business activity that have made environmental documents as stipulated in Law 32 of 2009 article 121. 3. PT BAS is not reporting the results of monitoring the quality of the soil once a year as required by the Decree of the Head of Padang Lawas Utara for the Use of Liquid Wastes in PT BAS No. 503/224 / K / 2012 on July 5, 2012 Dictum No. 4 Item 9. This is also do not comply with the Ministerial Decree No. LH 29 2003 Article 5 on Guidelines for Terms and Licensing Procedures for Utilization of Palm Oil Waste into the Land. 4. PT BAS has no operation license of the 5 engine units of vertical steam vessel (vertical sterilizer) that

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 49 of 64 is installed and operated. The existing licenses are only applied for 3 units of horizontal steam vessel. In the existing license certificates (no. 568/403/2011, No. 568/404/2011 and No. 568/406/2011) mentioned horizontal steam vessels made by PT Aman Sentosa in 2003, while the new vertical steam model was made in the year 2015 by PT Tri Royal Timurraya. 5. Some boiler and steam operators do not yet have operator license as stipulated in the Regulation of the Minister of Manpower No. PER.04 / MEN / 1985 on Power and Production Equipment and required under the Regulation of the Minister of Manpower No. 01 of 1988 on Qualifications and Requirements of Steam Equipment Operators.

Evidence of correction and corrective action taken 1. The company shows a letter sent to the Minister of Forestry, this could be a part of process to extend arrangement of boundary demarcation in South Aceh district, while waiting for an answer forestry minister or the governor of Aceh for socialization exchange of forest area in South Aceh. 2. The company shows a letter that sent to the Environmental Agency of Padang Lawas Utara District, this could be a part of environmental permit issuance process. 3. The company has proved soil testing and monitoring report No 161/KD-GM/VI/2015 and has been reported to the Minister of Environmental and Forestry on June 28, 2015 with copies to Regent of Pdang Lawas utara District, the local Environmental agency. 4. It is evidence available which is licenses for 5 units of new vertical steam has been issued. 5. SIO training is a formal training that has a specific schedule. The company has been backing the training needs in a training plan in 2015 and 2016 . During 1 st surveillance audit already operator boiler license.

Auditor Conclusions : Closed

Criterion 2.1 (Minor indicator 2): A documented system, which includes written information on legal requirements, shall be maintained

Non-conformance No. 2015-02 of 13 (Minor non-conformity)

PT BAS cannot prove the existence of identification and evaluations of Regulatory Compliance (every three months), nor is there evidence that the work program was made in order to meet the regulations as stipulated in the mechanism/procedure (SOP-LGL-01).

Evidence of correction and corrective action taken

1. The Company made a newest identification and evaluations of Regulatory Compliance on April 15, 2015 work plan to meet all regulations requirement. 2. The company has proved direction to staff Legal Department to comply / implement each phase of the work as mentioned in SOP-LGL-01

Auditor Conclusions: Closed

Criterion 4.7 (Minor indicator 5) : Accident and emergency procedures shall exist and instructions shall be clearly understood by all workers. Accident procedures shall be available in the appropriate language of the workforce. Assigned operatives trained in First Aid should be present in both field and other operations, and first aid equipment shall be available at worksites. Records of all accidents shall be kept and periodically reviewed

Non-conformance No. 2015-03 of 13 (Major non-conformity) Auditee has not shown the last evidence about the process of land legality for the additional areas amount of 1,500 Ha

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Evidence of correction and corrective action taken The company has provided letter no.045/BAS/Mhn-BPN/VII/2015 dated on July 27, 2015 to Head of Regional Office of National Land Agency in North Sumatera Province regarding request of cadastral measuring on additional areas. It has received by Regional Office of National Land Agency in North Sumatera Province dated on July 30, 2015 with letter receipt no.3593. Response of letter it from government has not been issued

Auditor Conclusions: Closed.

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

Non-conformance No. 2015-04 of 13 (Major non-conformity) The Company has no procedure of appointment/selection of FFB supplier that must comply requirements, such as: a. Complete Supplier Profile (identity, legal aspects, tax obligation) b. The FFB must legal FFB (not stolen and grow and harvested from legal land owned by out- grower). c. Price transparency between suppliers with their out-growers. d. Evaluation mechanism to FFB supplier as required above. e. Agreement Form that bounded both parties, in transparent manner, deal fairly, agreed by both parties without enforcement, and complies with general business ethics.

Evidence of correction and corrective action taken

Based on documented procedures No. SOP-purc-08, which was published on July 1, 2015, the company has been implemented in accordance with the supplier selection procedures Selection of Supplier candidate, must complies requirements such as: - Ability and capacity to supply FFB appointed as requirement. - Administrative Data compliment: Profile, ID, legality etc. - Experiences in supplying FFB - The clarity of FFB origin - Transparency to out-grower regarding FFB price - Easiness in transaction and payment method - Re-evaluation of Supplier -. Evaluation of Supplier Performance -. Problem identification and corrective actions as a follow-up -. Re-evaluation Supplier Auditor Conclusions: Closed.

Criterion 4.6 (Major indicator 2): Records of pesticides use (including active ingredients used and their LD50, area treated, amount of active ingredients applied per ha and number of applications) shall be provided

Non-conformance No.2015-05 of 13 (Major non-conformity) Information of amount of active ingredients applied per ha has not included on the records of pesticides of use year 2014 and 2015 or report of activities which using of agrochemicals

Evidence of correction and corrective action taken

The company has provided form of active ingredient applied per hectare and it has informed amount of active ingredients applied per hectare year 2016 (January to July).

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Auditor Conclusions: Closed.

Criterion 4.7 (Major indicator 1): A health and safety policy shall be in place. A health and safety plan covering all activities shall be documented and implemented, and its effectiveness monitored

Non-conformance No. 2015-06 of 13 (Major non-conformity) Auditee has not conducted monitor of effectiveness from health and safety committee program year 2014

Evidence of correction and corrective action taken

Auditee has provided evaluation report for health and safety committee year 2015. Inside the report has informed are result of evaluation each activities and generally, conclusion and follow-up plan. The follow- up plan has been stated in the health and safety program year 2016. Auditor Conclusions: Closed Criterion 4.7 (Minor indicator 5) : Accident and emergency procedures shall exist and instructions shall be clearly understood by all workers. Accident procedures shall be available in the appropriate language of the workforce. Assigned operatives trained in First Aid should be present in both field and other operations, and first aid equipment shall be available at worksites. Records of all accidents shall be kept and periodically reviewed

Non-conformance No. 2015-07 of 13 (Minor non-conformity) • Three supervisor of harvesting in block A14 not participation in first aid training • Accident report dated on 17 April 2015 for harvesting worker not available • The auditee not conducting regular review to accident report .

Evidence of correction and corrective action taken

Company provide evidence such as: • Competency or certificate of first aid training • Reporting accident dated on 17 April 2015 for harvesting worker available • Available training program regarding first aid training for three supervisor of harvesting in block A14 especially or supervisor who has not been participated in first aid training

Auditor Conclusions: Closed

Criterion 4.8 (Major Indicator 1) : A formal training programme shall be in place that covers all aspects of the RSPO Principles and Criteria, and that includes regular assessments of training needs and documentation of the programme.

Non-conformance No.2015-08 of 13 (Major non-conformity)

• Formal Training such as HCV-related aspects, the social aspects (CSR etc.), as well as to SCCS has not been programmed, and also has not been done before. • Training Need Identification Assessment is set in SOP HRD-02 but does not run completely

Evidence of correction and corrective action taken

The organization has develop work plan / training program for year 2015 and Training Need Assessment has been made to recognize kind of training is most needed. HCV training is currently to be priority, and

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RSPO 1st Surveillance Audit Report PT Barumun Agro Sentosa

Page 52 of 64 the organization has been conducted training HCV as follows: 1. Date of September 11, 2015 was attended by 27 employees estate and mill, 2. Date of August 26, 2016 was attended by 27 people from the village Marlaung 3. Date of September 10, 2016 was attended by 26 people from the village Jambu Tonang and Pasir Lancat

Auditor Conclusion: Closed.

Criterion 5.2 (Major indicator 1) Information shall be collated in a High Conservation Value (HCV) assessment that includes both the planted area itself and relevant wider landscape-level considerations (such as wildlife corridors).

Non-conformance No.2015-09 of 13 (Major non-conformity) HCV assessment results that have been conducted do not including the location permit area of 1,500 ha

Evidence of correction and corrective action taken

Auditee has provided HCV assessment report is available which is made by YASBI on 2009 and Re- mark on 2016 for 1500 Ha. HCV document covered the whole concession and around with landscape analysis overview

Auditor Conclusion: Closed.

Criterion 7.3 (Major indicator 1) There shall be evidence that no new plantings have replaced primary forest,or any area required to maintain or enhance one or more High Conservation Values (HCVs), since November 2005. New plantings shall be planned and managed to best ensure the HCVs identified are maintained and/or enhanced (see Criterion 5.2).

Non-conformance No. 2015-10 of 13 (Major non-conformity) 1. The Company has not been able to provide evidence that new planting in 2005 and 2007 do not replace primary forest or HCV areas (including land use change analysis) 2. The map of the HCV in 1500 ha of additional land is not yet available

Evidence of correction and corrective action taken

Auditee has provided HCV assessment report is available which is made by YASBI on 2009 and Re- mark on 2016 for 1500 Ha. HCV document covered the whole concession and around with landscape analysis overview

Auditor Conclusion: Closed.

Criterion 7.3 (Major indicator 2) A comprehensive HCV assessment, including stakeholder consultation, shall be conducted prior to any conversion or new planting. This shall include a land use change analysis to determine changes to the vegetation since November 2005. This analysis shall be used, with proxies, to indicate changes to HCV status.

Non-conformance No.2015-11 of 13 (Major non-conformity) The company has not been carrying out stakeholders consultations in the assessment of HCV for the additional land (1500 ha).

Evidence of correction and corrective action taken The Company has appointed a licensed consultant HCV to conduct HCV studies in the area of 1500 ha

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Page 53 of 64 and has conducted a public consultation identification of HCV on August 15, 2015 proved by list of attendance of stakeholder consultation. This stake holder consultation attended by 25 people and minutes of meeting has been recorded as well Auditor Conclusion: Closed.

Criterion 7.3 (Minor indicator 3) Dates of land preparation and commencement shall be recorded.

Non-conformance No.2015-12 of 13 (Minor non-conformity)

NCR No.2015-12 of 13.

There are no recorded data on land clearing that cover the entire area of new planting year 2005 and 2007.

Evidence of correction and corrective action taken

Company provide evidence such as: 1. Landsat image maps 2. books foreman activities 3. document search data year of planting

Auditee has delivered information regarding land clearing for new plantation, as follows: 1. Additional area of 1500 ha was the compensation of public land where the land was the farmer's land and mostly former rubber plant so it is not a forest. 2. History recording year 2005 plantation in Aek Kulim estate in addition area (Area Development) - The first time, land clearing conducted on 1997 and 1998 due to flooding all the plants die and become bald area then bush. - In year 2000 to 2003 areas have been re-planted, but most of the plants were die. - In year 2004 and 2005 carried out the insertion of the plant - Determination of the Year of Plant by the estate manager is into the year 2005 due to the population of plants that mostly grow in 2005. - In the data recording there are no LC records in 2005 that there was only the insertion of plants - Evidence of the monitoring map Landsat images of 1997, 1998, 2000, 2003, 2004 and 2005 (4-5 LANDSAT TM) Attached.

Auditor Conclusion: Closed.

Criterion 7.3 (Major indicator 4) An action plan shall be developed that describes operational actions consequent to the findings of the HCV assessment, and that references the grower’s relevant operational procedures (see Criterion 5.2).

Non-conformance No.2015-13 of 13 (Major non-conformity) The Company has not drafted a HCV management plan HCV on addtional area (1500 ha)

Evidence of correction and corrective action taken Auditee has provided HCV assessment report is available which is made by YASBI on 2009 and Re- mark on 2016 for 1500 Ha. HCV document covered the whole concession and around with landscape analysis overview

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Page 54 of 64 The Company has conducted a public consultation identification of HCV on August 15, 2015.

Auditor Conclusion: Closed.

• RSPO SCCS

E.2 : Explanation

Non-conformance SCCS No.2015-01 of 02 (Major non-conformity) Information of trade transaction by green palm and eTrace and evidence of registration to eTrace and green palm not provided

Correction: Auditee provide information about registration of member and trade transaction on green palm and eTrace

Corrective Action: Auditee will be share information of trade transaction on green palm and eTrace to mill or estate

Auditor Conclusions: Closed.

Verification result :

Auditee has provided registration on green palm and eTrace as trading platform for RSPO product. Greenpalm member no.GP00000259 and eTrace member ID no. RSPO_PO1000001315 where it has joined since March 2011 (greenpalm). Auditee has RSPO member since 29 August 2008 and no.1-0059- 08-000-00. . Based on e-Trace and GreenPalm transaction record for year 2015, there is no sales activity done by company . but Periode January – July 2016 sales activity done by company such as : CPO = 6.907,05 MT and PK = 4,711,63 MT.

E.3 : Documented procedures

Non-conformance SCCS No. 2015-02 of 02 (Major non-conformity) Auditee has not been carried out training/awareness/refreshment/update of information to related employee about new SC standard

Correction: • Revision of SCCS training program where it has included SCCS training • Auditee conducting SCCS awareness/refreshment/update/training

Corrective Action: To ensure all relevant employees has understood and implemented regarding new SC standard

Auditor Conclusions: Closed.

Verification result : Company has provided supply chain training/awareness/re-socialization/updating dated 23-24 November 2015, trained by Mr.Haris Silalahi.S.Si ( deGuru Consulting) external training, and attended by 29 participants from different division. The training documentation are

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Page 55 of 64 a. Training invitation (internal memo) b. Training minutes meeting c. Trainer list of attendees d. List of participants e. Training documentation/pictures

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

During this 1 st surveillance assessment, total of 6 (six) non conformances were identified 4 (four) non conformity were assigned against Major Compliance indicator, 2 (two) nonconformities against Minor Compliance Indicators and 5 (five) observations or opportunities for improvement were identified

For the major non-conformances, the company has taken the necessary corrective action to close these nonconformances within 60 days of completion of the assessment, and this was verified by the audit team through checks of documents submitted by the company. A summary of all identified non-conformances, corrective actions taken and auditor conclusions is as below :

• RSPO P & C

Criterion 2.1.4 A system for tracking any changes in the law shall be implemented

NCR No.RSPO 00612 (Minor non-conformity) : Some procedure still have reference regulation expired, example: IK waste management and house keeping and IK pesticide handling Correction: Doing improvement of work instructions number WI-TAN-01 & WI-PU-01 by using the latest rules and regulations that are used as references from procedures

Corrective Action:

Revise the Document Control Procedure (SOP-MR-04) which confirmed the revised document should also be made if there are changes to the legislation as references used in making of procedures

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

Criterion 4.7.4 The responsible person/persons shall be identified. There shall be records of regular meetings between the responsible person/s and workers. Concerns of all parties about health, safety and welfare shall be discussed at these meetings, and any issues raised shall be recorded.

NCR No. RSPO 00613 (Minor non-conformity) : Health and safety committee has conducted meeting with topic of health and safety in working areas once every 3 month, but P2K3 Meetings should be conducted every month in accordance with the contents P2K3 performance report to the Department of Manpower. In the recording evaluate the achievement of objectives and targets K3 2015 and the first semester of 2016 has not discussed matters relating to plans, achievements, obstacles and next P2K3 work program discussed by the results of the implementation of the previous K3 as fedback to the next work program

Correction : • Companies Will conduct meetings every month according to applicable regulations • Will be conducted evaluation of targets K3 each semester to be used as reference in the preparation of the next work program

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Corrective Action • Revise Work Program P2K3 which begin Aug. bln onwards held every month • Ensure Discussion Evaluation of target achievement K3 included in schedul / work program P2K3

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

Criterion 4.8.1. (Major): A formal training programme shall be in place that covers all aspects of the RSPO Principles and Criteria, and that includes regular assessments of training needs and documentation of the programme

NCR No. RSPO00614 (Major non-conformity) :

1. Document the findings are not yet available identification Training Needs to review the Third Party and society Neighbourhood. 2. Based on interviews WITH foreman and employees, they get yet Training And Understanding Regarding:. DAS, MSDS, Committee on Gender, Contents of the Handbook

Correction: 1. The company has identified training needs for the community 2. The Company has conducted socialization / training DAS, MSDS, Handbook Committee P3K And Gender

Corrective Action:

The identification results will be included in the program of socialization and immediately performed Created program as an ongoing socialization of the DAS, MSDS, Committee on Gender and the contents of the book Guide P3K etc. there is evidence that the program has been made in accordance with the identification training needs

Auditor Conclusions: Closed.

Verification result: Company provide evidence such as: 1. The company has identified training needs using form F-HRD-03 for contractors and communities around the company in october and november 2016 2. Document training report on DAS, MSDS, and the contents of guidebooks P3K on August 27, 2016 3. Document training program 2016

Date of closure : August 27, 2015

Criterion 5.2 (Major indicator 1) Information shall be collated in a High Conservation Value (HCV) assessment that includes both the planted area itself and relevant wider landscape-level considerations (such as wildlife corridors).

NCR No. RSPO00615 (Major non-conformity) :

Based on identification documents for an area of 1,500 Ha HCV, there are some differences in the

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Page 57 of 64 data include: The extent of riparian siumpat on a map in HCV 1 with HCV 4.

Correction : Make a clarification letter to the consulting firm related to differences in the river area on a map HCV siumpat 1 and HCV 4. Consultant has followed the letter of the company and has revised the document of HCV.

Corrective Action: The revised procedure SOP-MR-04 (point 1 (B) with the assertion of the relevant sections need to evaluate and ensure the correctness / accuracy of the data documents created by third-party / consultant before it is submitted to DC for distribution

Auditor Conclusion: Closed.

Verification result: Company provide evidence such as: 1. Map HCV 1 & 4 update September 2016 2. Revised final report HCV document dated 6 September 2016 3. procedures of document control 4. a clarification letter to the consulting firm related to differences in the river area on a map HCV siumpat 1 and HCV 4

Date of closure : August 27, 2015

Criterion 5.3 (Major indicator 2) All chemicals and their containers shall be disposed of responsibly

NCR No. RSPO00616 (Major non-conformity) :

The Company has not undertake an obligation as stated in the Decree of the Head of Integrated Services and Investment Padang Lawas Urara District No. 503/0001 / IX / 2015 is the third point no.9. Delivering a monitoring report every 1 (one) month for wastewater monitoring results. A monthly report that there were only for the month of July 2016 and has been sent via post to the relevant agencies

Correction : The Company will be report the results of water quality analysis of waste 1x a month according license number; 503/0001 / IX / 2015

Corrective Action: Companies conduct Revised Program Environmental monitoring The company ensures Reporting Schedule wastewater and river water is conducted every month

Auditor Conclusion: Closed.

Verification result: Company provide evidence such as : 1. Revised environmental monitoring and reporting program 2. The covering letter Measurement and Monitoring Reports Wastewater month period July 2016 3. Receipt of Reports Results of Measurement and Monitoring Liquid Waste month period July 2016

Date of closure : August 27, 2015

Criterion 7.3 (Major indicator 1) There shall be evidence that no new plantings have replaced primary forest, or any area required to maintain or enhance one or more High Conservation Values (HCVs), since November 2005.New plantings shall be planned and managed to best ensure the HCVs identified are maintained and/or enhanced (see Criterion 5.2).

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NCR No. RSPO00617 (Major non-conformity) :

PT BAS has HCV documents. Land clearance above 2005 must be submitted to the RSPO. In accordance with the guidelines contained in the P & C Generic 2013, when the land has been cleared since november 2005, and without sufficient analysis prior HCV, then the land will be used as an exception from RSPO certification program until their HCV compensation plans that have been developed and accepted by the RSPO

Correction : Companies did Clearing in 2005. The differences in Areal Statement PT. BAS encountered Planting Year 2005 and 2007, due to land clearing is carried out in 1999/2000, but Many Plants die due to flooding and is often carried out replanting / inserts. Plants Life in the area most of the Plants inset in 2005 and 2007. So managemant set Being Planted In 2005 and 2007, the company has performed an analysis of HCV Enough earlier

Corrective Action:

Companies have evidence that land clearing was done in 1999/2000 include: Landsat image maps, books foreman activities, and document search data year of planting

Auditor Conclusion: Closed.

Verification result: • total area of 635 Ha. in addition to the evidence already explained, the company has also sent an email to the RSPO secretariat in 2015, but still no answer from the RSPO secretariat until the audit. • in addition to the evidence already explained, the company has also sent an email to the RSPO secretariat in 2015, but still no answer from the RSPO secretariat until the audit. in accordance with the map data Landsat imagery, the area is already open in 1997. • Company provide evidence such as: 1. Landsat image maps 2. books foreman activities 3. document search data year of planting

Date of closure : August 29, 2015

• RSPO SCCS During 1 st surveillance audit, there is not non-conformity RSPO SCCS

3.4 Noteworthy Positive Component

Criterion 5.2.1 (Major indicator 1): Records of results of identification of any protected, rare, threatened or endangered species, and HCV habitat.

Observation : Good maintaining of conservation area condition and protection of existing plant inside plantation area.

Criterion 5.3. (Major indicator 2): Estates and mills waste management and disposal are implemented to avoid or reduce pollution

Observation : Good handling of hazardous waste from collection, to storage and disposal and documentation

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Criterion 6.1 (Major indicator ) Records of company contributions to the local development.

Observation : The company has good contribution to local community development, as confirmed by villager surrounding the company’s area.

Criterion 8.1. (Major indicator 1): A monitoring action plan based on the social environmental impact assessment, and regular evaluations of plantation and mill operations. As a minimum, these must include, but not necessarily be limited to: • Reduction in use of certain chemicals (criterion 4.6). • Environmental impacts (criterion 5.1). • Waste reduction (criterion 5.3). • Pollution and emissions (criterion 5.6). • Social impacts (6.1).

Observation : There is significant improvement in due to implementation of corrections and corrective actions for pre- assessment findings especially in areas pertaining to agrochemical reduction program, review information of environmental impact, reduction of waste, monitoring of generated pollution and emission etc.

3.5 Conclusion and Recommendation for RSPO P & C and Supply Chain Certification The audit team has confirmed through the audit process that PT Barumun Agro Sentosa , that Aek Sigala gala Mill Palm Oil Mill and estate has established and maintains an effective system to ensure compliance with the RSPO P & C year 2013 and and Supply Chain Certification System requirements (November 2014)

TUV Rheinland recommends that PT Barumun Agro Sentosa , that Aek Sigala gala Mill Palm Oil Mill and estate be continuing approved for certification of compliance to the RSPO P & C and Supply Chain Certification System re-quirements

3.6 Issues Raised by Stakeholders and Findings Pertaining to Issues

A) Issues Raised during Stakeholder Interviews On-site

No issue raised during stakeholder interview on site.

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4.0 CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY

4.1 Date of Next Surveillance Visit

The next surveillance visit is planned for August 2017.

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

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

Signed on behalf of PT Barumun Agro Sentosa Signed on behalf of TUV Rheinland Indonesia

…………………………………………. …………………………………………. Husin Salim Dewi Akbari Assistant Director Lead Auditor Date: November 30 , 2016 Date : November 30 , 2016

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Page 61 of 64 APPENDICES Appendix 1: Details of Certificate

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Page 63 of 64 Appendix 2 : List of Abbreviations

AMDAL Analisis Dampak Lingkungan & Sosial (Social & Environmental Impacts Assessment) BOD Biological Oxygen Demand COD Chemical Oxygen Demand CPO Crude Palm Oil EIA Environmental Impact Assessment ERTs Endangered, Rare & Threatened species ESH Environmental Safety & Health FFB Fresh Fruit Bunches EFB Empty Fruit Bunches HCV High Conservation Value HIRA Hazard Identification and Risk Assessment IPM Integrated Pest Management LTA Lost Time Accident MSDS Material Safety Data Sheets NGO Non-Government Organization OSH Occupational Safety & Health PK Palm Kernel PKO Palm Kernel Oil POME Palm Oil Mill Effluent PPE Personal Protective Equipment RKL Rencana Pengelolaan Lingkungan (Environmental Management Plan) RPL Rencana Pemantauan Lingkungan (Environmental Monitoring Plan) SIA Social Impact Assessment SOP Standard Operating Procedure TSS Total Suspended Solids UKL Upaya Pengelolaan Lingkungan (Environmental Management Efforts) UPL Upaya Pengelolaan Lingkungan (Environmental Management Efforts) SCCS Supply Chain Certification System MR Management Representative

Appendix 3 : List of Stakeholders Interviewed and Contacted

Name of No. Institution - Address Remark Stakeholder Stakeholders Interviewed On-Site 1 Mr Sitepu 2 Staff Sustainability 3 Staff Legal 4 Mrs Nurpina Staff weightbridge 5 Mr Jais KTU 6 Amran Hasibuan Staff Clarification 7 Ishak Sirait Staff IPM 8 Holoan Simamora Staff Afdeling 9 Siregar Harvester Imran

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Page 64 of 64 Appendix 4: Observations and Opportunities for Improvement

No. Related Observations / Opportunities for improvement clause

1 Should be Evidence for delivering report to relevant agencies not only via the post, but 5.1.2 there must be evidence that the report has been received by the agency

2 PT BAS has been monitoring and management of high conservation value area based 5.2.4 program monitoring sites of high conservation value. but the results of these evaluations have not been used to prepare a monitoring program next year

3 6.5.2 PKB (collective labor agreement) period 2016-2018 should be socialized to all levels of employees. • Aek Sigala-gala mill should be provides drinking water free of charge for employees is work overtime more than three (3) hours. 4 6.5.3 • Companies need to reconfirm that overtime work can be done at most three (3) hours in one (1) day and 14 (fourteen) hours in one (1) week.

5 Companies in order to increase the return of local partnerships with communities around the estate . The results of interviews with community representatives Ujung Gading Julu 6.11.1 and Djambu Tonang village known that they requested that be made a partner in the management of oil palm plantations and Mill example for transport work and EFB.

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