Roundtable on Sustainable Palm Oil Public Summary Report Report No: 106469

Roundtable on Sustainable Palm Oil Public Summary Report Report no: 106469

Certification assessment against the RSPO Principles & Criteria [Indonesia National Interpretation 2008]

PT Mustika Sembuluh Central Kalimantan, Indonesia.

Subsidiary of Wilmar International Limited

Report prepared by: Dian S. Soeminta

Malaysian office: Indonesian office: TUV Rheinland Malaysia Sdn. Bhd. PT TÜV International Indonesia No. 26 – 32, Jalan Perindustrian USJ 1/6, Menara Karya 10th Floor Taman Perindustrian USJ 1, Jl. H.R. Rasuna Said Block X-5 Kav 1-2 47600 Subang Jaya, Jakarta 12950 Selangor Darul Ehsan, Malaysia. Tel : +62 (0)21 – 579 44 579 Tel: +6 03 8024 2400 Fax : +62 (0)21 – 579 44 575 Fax: +6 03 8023 1505 www.tuv.com www.tuv.com

TABLE OF CONTENTS

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

1.1 National Interpretation Used ...... 3 1.2 Type of Assessment ...... 3 1.3 Location and Maps ...... 3 1.4 Description of Supply Base for year 2010...... 7 1.5 Dates of Plantings and Replanting Cycles...... 8 1.6 Other Achievements and Certifications Held ...... 8 1.7 Organisational Information / Contact Person ...... 9 1.8 Company History, Environment and Socio-economic Context...... 9 1.9 Time Bound Plan for Other Management Units ...... 14 1.10 Area of Plantation (Total, Planted and Mature)...... 18 1.11 Approximate Tonnages Certified ...... 18 1.12 Recommendation for Certification...... 18 1.13 Date of Certificate Issued and Scope of Certificate ...... 18 2.0 ASSESSMENT PROCESS ...... 19

2.1 Certification Body...... 19 2.2 Qualifications of Lead Assessor and Assessment Team ...... 19 2.3 Assessment Methodology...... 20 2.4 Stakeholder Consultation and Stakeholders Contacted...... 22 2.5 Date of Next Surveillance Visit...... 22 3.0 ASSESSMENT FINDINGS...... 23

3.1 Summary of Findings...... 23 3.2 Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions...... 42 3.3 Noteworthy Positive Components...... 49 3.4 Issues Raised by Stakeholders and Findings Pertaining to Issues...... 50 3.5 Acknowledgements of Internal Responsibility and Formal Sign-Off by Client...... 66 APPENDICES ...... 67

Appendix 1: Details of Certificate...... 67 Appendix 2: Certification Audit Plan...... 67 Appendix 3: List of Abbreviations...... 71 Appendix 4: List of Stakeholders Consulted ...... 72 Appendix 5: List of Opportunities for Improvement ...... 75

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Page 3 of 77 1.0 SCOPE OF CERTIFICATION ASSESSMENT

1.1 National Interpretation Used The operations of the palm oil mill(s) and its supply base of FFB were assessed against the Indonesian Na- tional Interpretion of the RSPO Principles & Criteria: May 2008. 1.2 Type of Assessment The main certification assessment was carried out on 1 mill and 3 estates under PT Mustika Sembuluh (PT MS) owned by Wilmar International.

1.3 Location and Maps

Table 1: GPS Locations of PT Mustika Sembuluh Mill and Estates

GPS locations Name of mill / estate Location Latitude Longitude PT MS Palm Oil Mill Pondok Damar Village, Mentaya 02°35’28” 112°30’45” Hilir Utara Subdistrict, Kotawar- ingin Timur District. PT MS Estate 1 Pondok Damar Village, Mentaya 02°35’10” 112°30’32” Hilir Utara Subdistrict, Kotawar- ingin Timur District. PT MS Estate 2 Pondok Damar Village, Mentaya 02°39’56” 112°32’18.5” Hilir Utara Subdistrict, Kotawar- ingin Timur District. Bangkal Village, Danau Sembu- lu Subdistrict, Seruyan District. PT MS Estate 3 Tanah Putih Village, Telawang 02°30’16.9” 112°30’36.6” Subdistrict, Kotawaringin Timur District.

Source: Auditor Field Check by GPS Merk Garmin, November 2009

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Figure 1: Location map of PT Mustika Sembuluh within Kalimantan Island

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PT Mustika Sembuluh

Figure 2: Location map of PT Mustika Sembuluh within Central Kalimantan

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PT MS Estate 3

PT MS Estate 1 & Mill

PT MS Estate 2

Figure 3: Map of PT MS Estates 1, 2 and 3, and PT MS Palm Oil Mill

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1.4 Description of Supply Base for year 2010 Mustika Sembuluh mill is one of the palm oil mills that is owned by Wilmar International in Central Kalimantan. Mustika Sembuluh Mill was established in 2006 with production capacity 60 tons/hours in accordance with the legal regulations ‘Keputusan BKPM No. 257/T/Pertanian/Industri/1989’ and ‘Keputusan BKPM No. 1293/T/Industri/2008’. Currently, Mustika Sembuluh Mill receives supplies from 3 company-owned estates, several other company owned estates, and several outgrowers, as described below. The other company-owned estates supplying to PT Mustika Sembuluh mill only supplied FFB to the mill until the end of 2009, and since January 2010, these other company-owned estates were supplying to another company-owned mill under PT Kerry Sawit. Hence, the FFB supply for the other company-owned estates were not included in the scope of this main assessment for PT Mustika Sembuluh.

Table 2: FFB Supply Information for PT Mustika Sembuluh Mill. FFB supplied FFB Contributors Tonnes % Company owned estates: Estate 1 131,474 36.73 Estate 2 89,271 24.94 Estate 3 30,975 8.65 Other companies under Wilmar 105,512 29.47 International (various estates) Smallholders / outgrowers: Plasma 98 0.03 Others 955 0.18 TOTAL 357,985 100 Source: Incoming FFB from September 2008 to September 2009 (mill data)

From the information above, the total amount of FFB supplied from the three estates under PT Mustika Sembu- luh for period September 2008 to September 2009 is 70.32% of the mill’s total FFB supply. All palms planted in PT Mustika Sembuluh estates are less than 10 years old. As such, being a relatively young plantation, the three estates have recorded a constant and significant increased in crop production since 2007 till 2009. This is attributed to the increase in area coming into production and as the palms gets into their prime bearing age.

Table 3: Actual & Estimated FFB Production for PT Mustika Sembuluh for year 2007 – 2014

FFB PRODUCTION (tonnes)

Actual Estimate ESTATE Year Year Year Year Year Year Year Year 2007 2008 2009 2010 2011 2012 2013 2014

MS-1 86,373 113,034 178,681 182,562 169,000 170,300 170,300 169,200

MS-2 13,764 52,036 95,481 137,565 134,000 147,000 152,600 156,500

MS-3 - 17,182 31,961 49,649 76,500 93,900 103,400 111,400

Total 100,138 182,252 306,124 369,776 379,500 411,200 426,300 437,100

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Table 3 indicates that PT Mustika Sembuluh will continue to experience a steady increased in FFB production over the next 5 years. This increased is expected as approximately 56% or 8,485 ha of its planted areas will be coming into their prime bearing age of 6 – 10 years.

The existing palm oil processing plant has a processing capacity of 60 tons FFB/hour. The company plans to increase mill production capacity to 2 X 60 tons FFB / hour (2 lines processing 60 tons FFB/hour for each production line) to accommodate all FFB crops harvested from the 3 PT Mustika Sembuluh estates as well as FFB supplies from plasma plantations.

1.5 Dates of Plantings and Replanting Cycles

Table 4: Age profile of planted palms at all company estates supplying to PT Mustika Sembuluh Palm Oil Mill Hectarage of Oil Palm Planted Areas (Ha) Replant- Name of estate ing cycle 0-5 years 5-10 years 10-15 years 15-20 years 20-25 years (years) PT MS Estate 1 1365.07 4732.94 0 0 0 PT MS Estate 2 3849.06 1882.65 0 0 0 25 years PT MS Estate 3 3271.25 0 0 0 0

1.6 Other Achievements and Certifications Held

Table 5: Details of other certifications or awards held by PT Mustika Sembuluh Certification Standard / Award Certification Body / Date Name of mill / estate achieved Awarder Achieved PT Mustika Sembuluh Family Planning Appreciation President Of Indonesia 29 June 2008 and Mustika Sembuluh Award – Outer Jawa and Bali Na- Palm Oil Mill tional Level II 2nd Best Developer of Female Central Kalimantan 2008 Workforce for Central Kalimantan Provincial Ruler Appreciation Award Best Mill Occupational Safety Kotim District 2008 and Health for Year 2008 Award Government Best Mill Occupational Safety Kotim District 2009 and Health for Year 2009 Award Government

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1.7 Organisational Information / Contact Person Contacts details of the company are as follows:

Company Name: PT Mustika Sembuluh

Address: Head office: The City Tower, Level 16th No.81 Jalan MH Thamrin, Jakarta Branch office: Jl.H.M Arsyad No.100, Central Kalimantan PT Mustika Sembuluh mill:

Jl. Jend. Sudirman Km 62, Desa Pondok Damar, Kec. Mentaya Hilir Utara Kab. Kotawaringin Timur – 74361. Kalimantan Tengah. PT Mustika Sembuluh Estate 1 : Pondok Damar Village, North Mentaya Hilir Sub-district, East Kotawaringin District.

PT Mustika Sembuluh Estate 2:

Pondok Damar Village, North Mentaya Hilir Sub-district, East Kotawaringin District. Bangkal Village, Danau Sembulu Sub-district, Seruyan District PT Mustika Sembuluh Estate 3 : Tanah Putih Village, Telawang Sub-district, East Kotawaringin District Mr.Tan Tong Sin Contact Person Telephone: Tel. (021) 3853625

Fax. (021) 3853628 Email: [email protected]

1.8 Company History, Environment and Socio-economic Context

Company History PT Mustika Sembuluh is one of seven plantation companies located at Central Kalimantan and owned by Wil- mar International, which has a palm oil mill (POM) and palm kernel mill (PK). PT Mustika Sembuluh operates at North Mentaya Ilir Sub-District and Kota Besi Sub-District of Kotawaringin District, and Danau Sembuluh Sub- District of Seruyan District.

PT Mustika Sembuluh was founded on November 29, 1988 in Palembang and initially named PT Rimba Ogako Hayu, under deed of establishment No. 168. On February 12, 1994, the company name was changed to PT Mustika Sembuluh based on Minutes of Notary No. 94. PT Mustika Sembuluh then moved location from Palembang to Palangkaraya, and the business was expanded into oil palm plantation, palm oil and palm kernel processing.

On November 1999, a part of PT. Mustika Sembuluh’s shares were transferred to PPB Oil Palms Berhad based in Malaysia. The statement on the decision of shareholders regarding PT. Mustika Sembuluh is dated August 10, 2005, based on a circular resolution signed by shareholders. 30,000 shares totalling IDR 45 billion were authorized by BPKM to be transferred as stated in the agreement letter of capital changes dated July 15, 2005 No. 793/III/PMA/2005, so 50,000 shares has a nominal value of IDR 75 billion. This change in shareholders was approved in a Decree from the Minister of Justice and Human Rights on 26 August 2005.

In addition, on 23 November 2005, the company made an application to the Department of Industry and Trade, Central Jakarta for approval (Ijin Prinsip) to conduct an oil palm plantation business and for extension of land under PT. Mustika Sembuluh for an area 10,000 ha on 17,500 ha of land reserves, located at Danau Sembuluh and Kota Besi sub-district, East Kotawaringin District, Central Kalimantan Province, with an area of 12,000 ha (net) on 15,994 ha of land reserves within the same location.

The company has land permits and operational permits as listed below:

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Page 10 of 77 1. Location permit No. 22/460/BPN/11/1994 for area 17,500 ha dated 22 February 1994 from Kotawaringin Timur District. 2. Location permit No. 7.460.42 dated 16 October 2003 for area of 4000 Ha from Seruyan District. 3. Extension for location permit No. 173.460.42 dated 22 February 1995. 4. Plantation Business Permit (Izin Usaha Perkebunan/IUP) No. 343 dated 13 August, 2003.

While the area for the location permits listed as no. 1 and no. 2 above totals 21,500 ha, the company did not apply to obtain the land cultivation right titles (Hak Guna Usaha – HGU) for 1,711 ha of this area as there are some local communities that are unwilling to release this area of land to the company. 1,711 ha of this area was therefore enclaved by the company, leaving a total of 19,789 ha as the company’s area. The company has obtained the HGU titles for certain areas of their and, as listed in the table below:

Table 6: Details of Approved Land Cultivation Titles (HGU titles) for PT Mustika Sembuluh

No. Area (Ha) HGU No. Dated Valid for

No. 16, SK.Kanwil BPN No 01/540/HGU- 1. 166.30 23-09-2000 25 years BPN-42/2000 No. 36, SK Kepala BPN No.3-HGU- 2. 5,169.28 07-02-2007 25 years BPN-RI-2007 No. 14, SK Kepala BPN No.2-HGU- 3. 1,990.32 04-06-2007 25 years BPN-RI-2007 No. 10, SK Kepala BPN 4. 5,227.00 18-02-2005 25 years No.8/HGU/BPN/2005 No. 20, SK Kakanwil BPN No. 03/540/HGU/BPN.42/2000 30-12-2000 5. 144.88 25 years SK Kankanwil BPN no. 22-08-2002 01/540/HGU/BPN.42/2002 Total 12,697.78 Source: HGU map of PT Mustika Sembuluh, scale 1:100,000 dated July 18, 2009.

In addition to the above, the company has also applied for approval of three HGU titles for 6188.804 ha, 268.764 ha and 294.91 ha (totaling an area of 6,752.478 ha). Approval of these HGU titles is in progress (as verified from letter received from the National Land Agency on June 15, 2009). The company has already planted on the area of 6,188.804 ha, for which the HGU for this area is still pending approval from the local government, however this is not illegal as the company already has their location permit for this area and is permitted to begin operations while awaiting for HGU approval for this area. Upon approval of these HGU titles, the total HGU area of PT MS shall be 19,450.25 ha. All records requesting for the titles and pertaining to HGU processing are well maintained at the company’s regional office.

PT Mustika Sembuluh mill has been operating since 2006. The mill was built to accommodate all supply of fruits from its 3 PT Mustika Sembuluh estates. PT Mustika Sembuluh mill also receives FFB from other estates outside of the company but under Wilmar Group’s Central Kalimantan Project area, as well as from outgrowers (plasma estates) and other sources (free suppliers). Current production capacity of the mill is 60 tons / hour but the management plans to increase production capacity to 120 tons / hour following an increase of plantation yields that will double that of the current production, as some immature plantation areas will develop to become mature plantations, while plantations are also being developed on land reserves.

General information:

The table below lists general information on PT Mustika Sembuluh’s surrounding stakeholders and estate conditions:

Table 7: General Information on PT Mustika Sembuluh Estates

No. Description 1. Location Government East Kotawaringin District Administration office Seruyan District Plantation Dinas Perkebunan Kotawaringin Timur

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Administration office Dinas Perkebunan Seruyan 2 Surrounding stakeholders (at estate boundaries) North Tanah Putih Village East Pondok Damar Village South PT KSI & PT RHS West Bengkal Village 3. Total Area 20,596.83 Ha 4. Land Condition Dry land, wet land (mineral and peat) 5. Soil type Gong Chenak, Bukit Tuku, Kechor, Tebok, Serai, Cherang, Hangus, Gali 6. Hydrology Rinjau River (MS 3), Hanjaipan River 7. Climate B/Wet (Schimd &Fergusson) 8. Relief Flat to undulating (0-6%) Source: Company profile edition September 2009

Location PT Mustika Sembuluh is located at the central to southern areas of Wilmar’s Central Kalimantan Project (CKP) in the Seruyan and Kotawaringin District in Central Kalimantan. At a larger landscape level, two protected areas occur within the region, which are the Tanjung Putting National Park (more than 100km to the west of PT MS area) and Sebangau National Park (more than 30km to the east of PT MS area). The Mustika Sembuluh estates are surrounded by several other oil palm plantations: PT Maju Aneka Sawit and PT Septa Karya Damai on the eastern border; PT Suka jadi and PT Bumi Sawit Kencana (Wilmar) to the north and north-west; PT Hamparan Mas Sawit BP and state land to the west; and Wilmar’s estates PT Rimba Harapan Sakti and PT Kerry Sawit to the south.

Biophysical Environment: Hydrology Rivers throughout the area of MS drain into three separate watersheds. In watershed 1of MS3 estate, the main rivers flow into the Seranau River, which then flows into the Mentaya River before entering the sea. In watershed 2 located within MS1 and MS2 estates, the Hanjaipan River located north of MS 1 flows into the Pondok Damar River which flows into the Sampit River the Mentaya River into the sea. In watershed 3, located south of MS2 the rivers drain into the Pukun River and enter the Seruyan River before entering the sea.

Soil Types Based on the detailed soil survey carried out by Param Agricultural Soil Surveys (M) Sdn Bhd and the USDA Soil Taxonomy (Soil Survey Staff, 1999) the major soil orders present in the area are Ultisols (alluvial soils - 62 %), Spodosols & Entisols (sandy soils - 11 %), Histosols (peat soils – 8.7 %) and Oxisols (lateritic soils - 3.9 %). There are a few marginal and fragile (sandy) soils in PT. Mustika Sembuluh which occur in less than 20 % (4,352 ha) of the area and only about 2,400 ha (11 %) are presently planted with oil palm. The physical characteristics and limitations of these marginal sandy soils are shown below:

Table 8: Soil Types of PT Mustika Sembuluh Estates Malay- Soil Taxonomy 2nd sian Soil ed (Soil Survey, Characteristics Estates Series 1999) (Sub-groups) Albic Quartzipsam- Sand, structureless, excessively drained. Highly erodible due MS 2 Serai ment to the lack of soil structure MS 3 Weakly cemented hardpan between 50 to 100 cm soil depths. Well to excessively drained. These soils are therefore Miri Typic Haplohumod MS 2 susceptible to flooding during rainy season and high erosion due to hardpan layer and sandy texture Strongly cemented hardpan layer within 50 cm depth. Well to MS 2 Buso Typic Haplohumod poorly drained and seasonally flooded. Highly erodible MS 3 Weak fine subangular blocky. Soil developed over schist or MS 1 Prang Typic Acrudox iron-rich shales erodible soils MS 3 Sandy loam, weak medium subangular blocky, friable. Imper- Banar Aquic Paleudult MS 2 fectly drained Nangka Typic Paleudult Sandy loam, weak fine subangular blocky, friable. Well drained MS 2 Coarse sandy clay loam medium subangular blocky, friable. Holyrood Typic Paleudult MS 3 Moderately well to well drained

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Page 12 of 77 Relief: The relief in MS is flat to undulating (0 – 12 %).

Climate The type of climate in PT Mustika Sembuluh and its surrounding areas are based on the Schmidt & Fergus- son (1951) classification and has a class B (wet) climate type, with an average number of 1.4 dry months and 9.2 wet months. (EIA Draft August 2009).

Worker Conditions Based on information from the company, the total number of workers working for PT Mustika Sembuluh in September 2009 was about 3,403 peoples (2,484 male workers and 919 female workers), according to data in Table 8. According to PT MS’s working regulation there are two categories of employees at MS, which are permanent workers (managerial level, staff level, daily workers) and temporary workers or contracted daily workers. Expatriates at managerial level are not included in under the company’s working regulation 2009. Temporary daily contracted workers are defined as workers who work for MS no more than 21 days a month. When a daily contracted worker has worked more than 21 days a month continually for three months, then the status of the worker will be changed to become a permanent worker under the company’s terms and conditions (in accordance with Decree no. 100/2003 from the Ministry of Manpower). The company has a minimum working age policy of 18 years, and the policy is implemented.

Table 9: Workers of PT Mustika Sembuluh Estates by Categories and Gender (as of September 2009)

Site Categories of Personnel Gender

Contracted Manager Staff Daily workers Male Female Daily Workers Regional 21 180 112 49 291 71 office Mill 2 16 94 23 122 13 Estate 1 5 47 776 184 701 311 Estate 2 2 43 538 443 745 281 Estate 3 3 37 457 371 625 243 Total 33 323 1977 1070 2484 919 Source: HR & Admin Mustika Sembuluh, September 2009

Housing facilities, electricity, medical, and water supplies are available and accessible for managers, staff and workers of MS1 estate, MS2 estate, MS3 estate and the mill. Based on documentation of company’s housing facilities, in 2009, the company has 19 units of permanent houses for managers (23 units are needed); as well as 270 permanent houses for staff level 5A-6A, and non-permanent houses for workers (of which data on total number of houses was not available). Construction of new housing for workers under the MS housing management plan is being carried out and scheduled to be completed 2013. Conditions of non-permanent housing facilities were checked and found to be inadequate due to lack of ventilation, and poor electricity installation. The housing facilities are meant only for the company's workers and their families, however, at MS3, there are houses that are occupied by people not working for MS3.

Table 10: PT Mustika Sembuluh’s Housing Facilities for Staff and Workers (as of September 2009)

Housing & Facilities Available Units Location MS 1, 2 , 3 , Regional office (RO), Office buildings 6 Mill, Ecological Management Unit (EMU) Manager housing 19 MS 1, 2 , 3 Staff housing 270 MS 1, 2, 3 Workers housing Data unavailable MS 1, 2, 3 Main Road : 27,908 km, Roads MS 1, 2, 3 Secondary Road : 206,812 km,

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Collection Road : 833,209 km Electricity units 16 MS 1, 2, 3 Water supply units 12 MS 1, 2, 3 Source: HR & Admin, September 2009

Water supply facilities are available but insufficient, eg. 2 point wheel pump at MS1 estate; 5 point wheel pump at Mill, 1 point wheel pump at MS2. The company has plans to install additional water supply facilities, including a 2-point wheel pump at MS1 and MS2, and a 3-point wheel pump at MS3. The company has a copy of a contract with the contractor hired to install these new facilities (contract MS No. C&A 1608.14/MS-1158). Water supply facilities at MS3 estate were found to be inadequate due to issues of poor drinking water, limited water supplies, poor toilet facilities,and no bathing facilities so workers and their family bath and washing their clothes/other items at the river or swamp area (according to interviews with MS3 workers at housing complexes G10, E11, H9, G9, H3, E12, B1, B2, E5). Medical facilities are available at every estate, including a permanent clinic at MS1 estate, and temporary clinic at MS2 and MS3 estate, which are manned by a company doctor, nurses, and paramedics. Workers also get health facilities and insurance through the National Employee’s Social Security Insurance or “Jaminan Sosial Tenaga Kerja” (JAMSOSTEK) from the Indonesian government. Educational facilities are available for children of workers. MS1 has a playground while a primary and secondary school is available at a nearly village. School teachers are paid by the MS management monthly. Man- agement of MS also provide sport facilities such as a football court and tennis court. A local market is not available at the estate but every month after pay day, there is a traditional market available at the football area. Food, vegetables, and services are offered for sale by sellers who go around the housing complexes every day.

Community Background

According to the company’s Social Impact Assessment report produced in 2009, PT MS is located at two districts (Kabupaten), i.e East Kotawaringin and Seruyan, Central Kalimantan Province. The PT MS area covers three sub-districts (Kecamatan) including North Mentaya Hilir, Telawang and Danau Sembuluh. The boundaries between villages and MS area are clearly marked but boundaries between villages are marked with natural boundaries such as rivers, trees, and forests.

The total population of the 3 villages documented in the company’s SIA report dated September 2009 was about 1,608 households or approximately 6,128 people (males and females), according to data as per Table 11. The majority of the village population consists of Dayak communities.

Table 11: Location and area of villages located around PT Mustika Sembuluh’s area

Area No Village Sub-District District Adjacent areas (Ha)1 North Mentaya Tanah Putih (North) 1 Pondok Damar Kotim 14,100 Hilir Kenyala (North) Penyang (East) 2 Tanah Putih Telawang Kotim 3,600 Pondok Damar (South) Sebabi (West) Danau 3 Bangkal Seruyan 14,402 Sebabi Sembuluh Source: Monografi Statistic of Pondok Damar, Tanah Putih & Bangkal, 2009.

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Table 12: Population Demographics for villages located around PT MS area Communities Ethnic Population (%) No Villages Household Non- Female Male Total Dayak Dayak Pondok 1 379 453 832 200 85 15 Damar 2 Tanah Putih 1,502 1,678 3,180 769 82 18 3 Bangkal 846 1,250 2,096 639 65 35 TOTAL 2,727 3,381 6,128 1,608 Source: Monografi Statistic of Pondok Damar, Tanah Putih & Bangkal, 2009.

Most of the communities have access to facilities and carry out a number of economic activities for their subsis- tence. A slash and burn system of agriculture cultivation is common among local communities. Since a palm oil company has been established in their villages, the communities, as well as local smallholders and other private companies use their land for extensive and intensive plantings of palm oil as well as rubber, which has resulted in competition for land use. Based on information from these communities, most of local communities prefer planting rubber trees than oil palm because the daily income is more attractive. From the minutes of meetings held between the company and the stakeholders, most of people surrounding the company actually own their own rubber and or oil palm smallholdings. But ground check during the main assessment, revealed that some of these communities actually prefer to collaborate with PT MS to develop oil palm plasma scheme

Pertaining to land acquisition, from the local communities interviewed, it was found the company has a process to provide compensation for land acquisition and this process is accepted by all parties.

The local communities clearly recognize PT Mustika Sembuluh’s land boundary stones which have been placed by the National Land Certification Agency. The community leaders, village heads and communities who live near the boundaries were invited by the company and the local government to witness the maintenance of the boundary stones. Mapping of the land boundaries was carried out with the participation of local communities to improve communication and respect for all parties with respect to land acquisition, traditional rights identification and access to use of the land within MS area. However, there are two ongoing graveyard disputes between two local community members and the company which are still are negotiation for resolution. The conflict resolution mechanism has already been accepted by all parties involved, ie. Mr. Tarang and Mr. Umbung, however the claim demanded for have yet to met.

The table below shows information on the land area owned by the villages surrounding PT MS area. As per the table, some village own large areas over 12,000 ha, which is normal in certain parts of Indonesia, especially Kali- mantan.

Table 13: Land use data for villages surrounding PT Mustika Sembuluh

Land with Total Area Forest area No Villages Village Area (Ha) housing & other owned by Vil- (Ha) buildings (Ha) lage (Ha)

Pondok 1 14,070.80 29.2 - 14,100 Damar 2 Tanah Putih 1,899 78.4 1,622.60 3,600 3 Bangkal 12,636 600 1,166 14,402

Source: Area data from Villages Pondok Damar, Tanah Putih and Bangkal.

1.9 Time Bound Plan for Other Management Units The time bound plan below is considered to be both challenging and realistic. The company will be using the experience of the main assessment to ensure that the other management units conform to the RSPO principles and criteria. Due to outstanding issues at one of Wilmar’s holding (PT Tania Selatan), the planned certification assessment for this holding, which was initially planned for 2009, has been postponed to 2010. The modified plan has been reviewed and accepted by the audit team. The audit team is satisfied that the company conforms

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Page 15 of 77 to the RSPO requirements for partial certification as laid out in the RSPO Certification System document. The company’s time-bound plan for RSPO certification of other holdings under Wilmar Group is as below:

Table 14: Time Bound Plan to RSPO certification of Other Management Units of Wilmar Group

Time bound Name of Holding Location plan for certification OIL PALM PLANTATIONS

PT Milano (SDE, BSE & MBE) North Sumatra 2009

PT Mustika Sembuluh Central Kalimantan 2009

PT Tania Selatan (BT & BB) South Sumatra 2010

PT Daya Labuhan Indah North Sumatra 2010

PT Milano (CDE) North Sumatra 2010

PT AMP Plantation West Sumatra 2010

PT Primatama Muliajaya West Sumatra 2010

PT Murini Sam Sam Riau 2010

PT Karunia Kencana Permaisejati Central Kalimantan 2010

PT Bumi Sawit Kencana Central Kalimantan 2010

PT Mentaya Sawit Mas Central Kalimantan 2010

PT Kerry Sawit Indonesia Central Kalimantan 2010

PT Sinarsiak Dianpermai Riau. 2011

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PT Kencana Sawit Indonesia West Sumatra. 2011

PT Buluh Canang Plantations South Sumatra 2011

PT Tania (Bamboo Kuning) South Sumatra 2011

PT ANI (Sambas) West Kalimantan 2011

PT Sarana Titian Permata Central Kalimantan 2011

Pt Buluh Canang Plantations West Kalimantan 2011

PT Citra Riau Sarana Riau 2012

PT Gersindo Minang Plantations West Sumatra 2012

PT Permata Hijau Pasaman West Sumatra 2012

PT Karunia Kencana Permaisejati Central Kalimantan 2012

PT Pratama Prosentindo West Kalimantan 2012

PT Putra Indotropical West Kalimantan 2012

PT ANI (Landak) West Kalimantan 2012

PT Asiatic Persada Jambi 2013

PT Agro Palindo Sakti South Sumatra 2013

PT Musi Banyuasin Indah South Sumatra 2013

PT Agroindo Indah Persada Jambi 2013

PT Agro Palindo Sakti West Kalimantan 2013

PT Daya Landak Plantation West Kalimantan 2013

PT Indoresins Putra Mandiri West Kalimantan 2013

Palm Oil Mill

PT Milano (Pinang Awan) North Sumatra 2009

PT Tania Selatan South Sumatra 2009

PT Mustika Sembuluh Central Kalimantan 2009

PT Daya Labuhan Indah North Sumatra 2010

PT AMP Plantation West Sumatra 2010

PT Murini Sam Sam Riau 2010

PT Bumi Sawit Kencana Central Kalimantan 2010

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PT Kerry Sawit Indonesia Central Kalimantan 2010

PT Sinarsiak Dianpermai Riau 2011

PT Kencana Sawit Indonesia West Sumatra. 2011

PT Buluh Canang Plantations South Sumatra 2011

PT Agro Nusa Investama (Sambas) West Kalimantan 2011

PT Sarana Titian Permata Central Kalimantan 2011

PT Citra Riau Sarana (ML) Riau 2012

PT Gersindo Minang Plantations West Sumatra 2012

PT Karunia Kencana Permaisejati Central Kalimantan 2012

PT Agro Nusa Investama (Landak) West Kalimantan 2012

PT Asiatic Persada South Sumatra 2013

PT Musi Banyuasin Indah South Sumatra 2013

PT Agro Indah Persada II Jambi 2013

PT Mentaya Sawit Mas Central Kalimantan 2013

PT Agro Palindo Sakti West Kalimantan 2013 Source: TIME BOUND PLAN FOR WILMAR INTERNATIONAL LIMITED SUBSIDIARIES IN INDONESIA

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1.10 Area of Plantation (Total, Planted and Mature)

Table 15: Area Summary of PT Mustika Sembuluh estates

Area Summary Name of Estates Total (ha)* Planted (ha) Mature (ha)

Mustika Sembuluh Estate 1 6,590 6,098.01 6,030.10

Mustika Sembuluh Estate 2 6,107.19 5,731.71 5,731.71

Mustika Sembuluh Estate 3 6,753.06 4,377.83 3,271.25

Total 19,450.25 15,604 15,033.06

Source: Area statement 2009 * Total area for each estate is as per total approved HGU area and HGU area under application for approval

1.11 Approximate Tonnages Certified As PT Mustika Sembuluh is a relatively young plantation with FFB production projected to increase over the next 5 years, the approximate tonnages certified was calculated based the mill’s estimated CPO production for 2010 as stated in Table 3 of this report, which is 369,776 tonnes. The approximate tonnages of CPO and PK certified are as follows: Crude Palm Oil (CPO) : 81,350 tonnes (OER 22% of 369,776 tonnes) Palm Kernel (PK) : 16,640 tonnes (KER 4.5% of 369,776 tonnes)

In view that the age profile of palms in PT Mustika Sembuluh are generally young and hitting its prime, higher CPO production is expected in the coming years.

1.12 Recommendation for Certification PT Mustika Sembuluh has established and maintains an effective system to ensure compliance with the RSPO principles and criteria. The audit team has confirmed through the audit process that the company’s practices complies with, adequately maintains and implements the requirements of RSPO Principles and Criteria Na- tional Intrepretation Indonesia version 2008. TUV Rheinland Malaysia recommends that PT Mustika Sembuluh be approved as a producer of RSPO Certified Sustainable Palm Oil.

1.13 Date of Certificate Issued and Scope of Certificate The scope of the certificate covers production of palm oil from PT Mustika Sembuluh and its supply base, which includes Mustika Sembuluh Estate 1, Mustika Sembuluh Estate 2, and Mustika Sembuluh Estate 3. The date of the RSPO certificated issued is 11 August 2010, and is valid until 10 August 2015. Further details of the certification are provided in Appendix 1.

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2.0 ASSESSMENT PROCESS 2.1 Certification Body

TUV Rheinland Malaysia Sdn. Bhd. is a member of 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 360 locations in 62 countries on all five continents. TUV Rheinland Malaysia 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 Project Validations. TUV Rheinland Malaysia’s office is located in Subang Jaya, Selangor, Malaysia.

2.2 Qualifications of Lead Assessor and Assessment Team

Name Position Qualifications / Experience

Education: Bachelors Degree in Forestry - Bogor Agriculture Institute. Indonesia, (1990 to 1995). Trainings attended: ISO 9001:2000 lead assessor course 1996 - Neville Clark; ISO 14001 lead assessor course - PE International; OSHAS: 2007 training, Sustainable Forest Management (SFM) - Forest Stewardship Council (FSC) system training; Chain of Custody training for FSC System. Working experience: Professional forester since 1995 to 2000. Lead Auditor for Forest Stewardship Council (FSC), Sustainable Forest Certification (SFC) and Chain of Custody (COC) Certification, Lead auditor Dian S. for Environmental Management System (EMS) and Quality Management Lead Auditor Soeminta System (QMS) audits. Conducted sustainable forest management certification audits on FSC and Indonesian Ecolabel Institute (Lembaga Ecolabel Indonesia - LEI) standards for 20 companies, 50 COC FSC/LEI audits, and EMS and QMS audits at more than hundred companies for TUV Rheinland Indonesia. Instrumental in the preparation of TUV Rheinland Indonesia for Sustainable Forest Management Certification System and TUV Rheinland Malaysia for RSPO Certification. Member of Task Force for Indonesian National Interpretation (Guidance on scheme smallholder RSPO certification). Developed TUV Rheinland RSPO Gap Assessment Checklist and report template. Education: Bachelor of Agriculture Social Economics – Universitas Pem- bangunan Nasional (UPN) ‘Veteran’ Yogyakarta (1986); Master of Science in Natural Resources and Environmental Management - Bogor Agriculture Institute Indonesia (1992); Faculty of Forestry & Environmental Science - Albert Ludwig University of Freiburg Germany, (2003). Trainings attended: Community Development and Participatory Forest Management trainings conducted in Nepal, India and Thailand; Gender, Agriculture and Leadership training - Wageningen University Nether- land; EIA (Environmental Impact Assessment) training - Anutech Austra- lian National University Canberra; Forestry, Market and Society summer school - Albert Ludwig University of Freiburg; ISO 9001:2000 and ISO Suseti- Auditor 9001:2008 training - TUV Rheinland, HCVF (High Conservation Value yaningsih Forest) Auditor training; CoC and SFM FSC system training. Working experience: Field work experience in social and environmental issues for more than 18 years. 15 years experience in forestry and plantation social issues, conducting audits and assessments for social account- ability certification systems and management systems, as well as conducting or facilitating trainings on management of social issues. Experienced in conducting assessments for forestry and palm oil companies for compliance to WWF Indonesian PFTN (Producers Forest and Trade Network) standard, FSC standard and RSPO standards respectively. Active in the Working Group for PAN-ASEAN Timber Certification Initiative in Philip- pine, Thailand, Vietnam, Myanmar and Brunei. Member of Forest Stew-

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ardship Council (FSC) International organization based in Bonn Germany since 2005. Education: Bachelor of Anthropology, Department of Anthropology - Uni- versity of Indonesia, Jakarta. Trainings attended: Sustainable Natural Production Forest Management (Pengelolaan Hutan Alam Produksi Lestari - PHAPL) assessor training (May 2003); Forest Plantation Management (August 2003) training - Indo- nesian Ecolabel Institute (LEI), Forest Management and Agriculture Audi- Fadli Auditor tor Training; ISO 9001:2008, ISO 14000:2004, OHSAS 18001:2007 trainings - Smartwood/Rainforest Alliance; SA8000 training - SA International; RSPO Lead Auditor Training -Indonesian Palm Oil Commissions. Working experience: Experienced as lecturer for D3 Tourism program, University of Indonesia. Social Aspect Auditor of PT. TUV International Indonesia for Sustainable Forest Management and RSPO Principles & Criteria. Researcher of Stakeholder Mapping With CSR Indonesia. Education: Bachelor of Science (Chemistry & Biology), Campbell Univer- sity, USA. (1994 to 1997). Working experience: Previously worked as a Research & Development Chemist & Quality Control Chemist in a Switzerland based multinational company since 1997 to 2002. Experienced in hands-on implementation of EMS, including ensuring all applicable environmental legal requirements are complied, operation of waste water treatment plant including Nelly Yong Auditor waste water lab test analysis, responsible for chemical waste management, environmental aspect & impact evaluation etc. Previously a management system consultant for various standards such as ISO 9001, ISO 14001, ISO/TS 16949, OHSAS 18001 etc starting from 2002 till 2006. She has been involved as an auditor for a 3rd party certification body since year 2002. Instrumental in the preparation of TUV Rheinland (Ma- laysia) for RSPO Certification. Lead Auditor for ISO 9001 & ISO/TS 16949 & auditor for ISO 14001 and has audited more than hundred companies for EMS and QMS audit for TUV Rheinland Malaysia Education: Bachelor of Chemical Engineering, Sriwijaya University Palembang and Master of Occupational Health and Safety, Univerity of Indonesia, Jakarta. Trainings attended: RSPO, Jakarta, 13-18 July 2009, Komisi Minyak Sawit Indonesia. Rahmawati Working experience: Lead Auditor for ISO 9001, ISO 14001 and Auditor Noor OHSAS 18001 since 2001 in PT. TUV International Indonesia, and has audited more than 100 companies. Involved in ISO 9001, ISO 14001 and OHSAS audits for several palm oil plantations and mills. Since 2007, involved in CDM validation projects for several palm oil mills in Indonesia. Had 5 years experience as environmental consultant for PT. Dames and Moore Indonesia, prior to working for PT. TUV International Indonesia.

2.3 Assessment Methodology

The assessment was carried out in conformance with the procedure as per the RSPO Certification Systems document approved by the RSPO Executive Board on June 2007, and with TUV Rheinland Malaysia’s RSPO certification procedures. During assessment the qualified TUV Rheinland Malaysia assessors used the RSPO standard as endorsed for the country in which the assessment took place and recorded their findings. Due to the location and proximity of the estate, combined with common management systems and information derived during Gap-assessment, it was possible to carry out both field and office assessment of all 3 estates within the time frame without compromising the integrity of the assessment in anyway. All 3 estates and the 1 mill were visited and the assessment team carried out field and office assessments of compliance for 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 at the mill. As some major indicators were not fulfilled during the main assessment, some major non-conformances were raised. The company proposed the correction and corrective action for all identified non conformities to the certification body within 15 days from the closing meeting. Verification of closure of major non-conformances was

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Page 21 of 77 conducted 2 months after the closing meeting of the main assessment. The main assessment agenda and verification of major non-conformances was conducted as explained below.

The Assessment Agenda.

The RSPO Certification Audit was conducted from 19 to 23 October 2009, according to the agenda below. Veri- fication of closure of the major nonconformances was carried out on-site on 12 and 13 December 2009.

Date Location/ Main sites Main activities

October 19 Wella Hotel Sampit Stakeholder Meeting Focus Group Discussion PT Mustika Sembuluh Compiling Stakeholder issues Site October 20 Regional Office PT Opening Meeting. Mustika Sembuluh Introduction by team leader. Introduction of team members and assessment agenda Presentation from PT MS management Document review from all aspects 1. Estate 3 Office Environmental and Social Aspect Document Review 2.Pondok Umbung Vil- Social Aspect: EIA, SIA, OSH. Procedure Communication, Conflict lage and Tanah Putih Resolution Procedure, Procedure of Handling Complaints, HCV’s, Village (MS 3) Wages, List of Stakeholder, List of Contractors. Environmental & Safety aspect: Environmental and Safety Man- agement plan, Company’s management plan: Long term and replanting plan. October 21 1. Estate 2 office Environmental and Social Aspect Document Review Social Aspect: EIA, SIA, OSH. Procedure Communication, Conflict 2. Tanah Putih Village Resolution Procedure, Procedure of Handling Complaints, HCV’s, Housing Area D 40 Wages, List of Stakeholder, List of Contractors. (MS 3 estate) Environmental & Safety aspect: Environmental and Safety Man- agement plan, Company’s management plan: Long term and replanting plan. October 22 1. Estate 1 Office Environmental and Social Aspect Document Review 2. Pondok Damar Vil- Social Aspect: EIA, SIA, OSH. Procedure Communication, Conflict lage and River Resolution Procedure, Procedure of Handling Complaints, HCV’s, 3. MS 2 Childcare and Wages, List of Stakeholder, List of Contractors. Housing area Environmental & Safety aspect: Environmental and Safety Man- 4. Bengkal Village agement plan, Company’s management plan: Long term and replanting plan.

October 23 Mill PT MS Environmental and Social Aspect Document Review Social Aspect: EIA, SIA, OSH. Procedure Communication, Conflict Resolution Procedure, Procedure of Handling Complaints, HCV’s, Wages, List of Stakeholder, List of Contractors. Environmental & Safety aspect: Environmental and Safety Man- agement plan, Company’s management plan: Long term and replanting plan.

Major Findings Verification Audit

Date Location/ Main sites Main activities

December PT Mustika Sembuluh Document review related to raised Major Non-Conformances 12 Regional Office PT Mustika Sembuluh Discussed with Management of PT Mustika Sembuluh regard- Site ing progress of Major Findings December Tanah Putih Village On-Site Verification of Traditional Rights Memorandum of Un- 13 derstanding (MoU) Pondok Damar Village On-Site Verification of Land Conflict Issues

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Bengkal Village On Site verification of traditional rights issues PT Mustika Sembuluh Auditor team review, Regional Office Closing meeting, presentation of findings Note: Verification of closure of major findings was conducted by social assessor i.e. Susetiyaningsih

2.4 Stakeholder Consultation and Stakeholders Contacted

Based on information from PT Mustika Sembuluh to TUV Rheinland Malaysia, all identified stakeholders were invited for written comment and open stakeholder consultation. Stakeholders present at the open stakeholder meeting were invited to provide input about the performance of the company directly or by filling a questionaire. The stakeholders selected represented various institutions affected by or interested in PT Mustika Sembuluh’s activities, such local organizations (NGO, press, local communities around the estates and mill). For stakeholders who attended the open stakeholder consultation, the participants were invited through the invitation letter made by TUV Rheinland and were distributed to the parties concerned. Moreover, during the main assessment, the assessment team conducted visits to villages around the 5 estates and mill that were included in the certification scope to get input and verify all issue raised during open stakeholder meeting relating to company’s performance.

PT Mustika Sembuluh Palm oil mill and estates have a documented stakeholders list organized by category, consisting of the name of the contact person, name of organization and address, and relationship of the organization to the PT Mustika Sembuluh. The stakeholder categories include Village Communities, Social Organiza- tions, Worship organizations, Government Organizations, Non-Government Organizations, Suppliers, Contrac- tors, Buyers, Universities or educational institutions, Labour Unions, Company Labour Cooperations, and Out- growers. During the RSPO assessment, stakeholders representing all categories were invited independenly by the auditing team to attend a stakeholder consultation meeting held on 19 October 2009 at Wella Hotel Sampit, East Kotawaringin District, Central Kalimantan Province. Information, responses and comments from stakeholders were given in the form of completed questionaires and focus group discussions. A public announce- ment on the RSPO Certification Audit of PT Mustika Sembuluh was also made available at the RSPO website.

Questions that were asked during the stakeholder consultation are as follows: o Are you aware of the RSPO standard? o Do you have any relationship with the palm oil plantation & mill? o What kind of relationship is this? o Have you attended stakeholder meetings with the company before? What was the purpose of the meeting? o How often does the company conduct stakeholder meeting? o Do you aware of the company’s legal boundaries? o Are there any environmental impacts resulting from the company’s activities that affect you? o Are there any social impacts resulting from the company’s activities that affect you? o Are there any conflicts or disputes between you and the company? o Have you had any experience having to resolve the problems through conflict resolution? o Have you had any communication and consultation with stakeholders set up by the company ? o Are you aware of any HCV areas within the the company’s area? o What are the positive and negative aspects of the company? o Do you have any comments on the company? o Do you have any comments on the auditor team? o Do you need a specific meeting with the auditor team after this event?

List of stakeholders that attended the public consultantion and stakeholders contacted during the assessment are listed in Appendix 4.

2.5 Date of Next Surveillance Visit

The next surveillance audit is planned for June 2011.

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Page 23 of 77 3.0 ASSESSMENT FINDINGS 3.1 Summary of Findings

The following is a summary of findings made for the criteria listed in the RSPO Principles & Criteria INA-NI.

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

Findings: Management has a documented commitment to transparancy stated in management letter dated 16 March 2009 on transparancy of company information. Documents of all information requests are available. All records of information requested by external parties are well maintained at the Regional Of- fice, estates offices and mill office, and some of these information requests from stakeholders were checked and verified during the main assessment. Documents of responses by the company to information requests were also available at the Regional Office, Estates Office and Mill office. In addition, the company has a Standard Operation Procedure for receiving and responding to requests for information from stakeholders

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: Management documents are publicly available, as stated on a management letter number dated 16 March 2009, documents which can be requested by stakeholders include the EIA document, Mustika Sembuluh’s Annual Report, company policies, the company’s land title information, estate and mill monthly production reports, area of estate operations including GIS maps, maps of rivers within MS area, procedure of plantation best practices, organisational charts, and the HCV assessment report. The company also has a Standard Operation Procedure issued on June 2009 stating that the company will also make publicly available SIA documents, the company magazine, investment activity report, report of plantation business, estate statistics, HR documents including expatriate data, landuse within the company’s area, CPO data and information, smalholders statistics, CSR documents, SOPs of the mill and estates. All information is available to government institutions such as the Governor of Central Kalimantan, Land Certification Institution Office, village heads, NGOs and other related stakeholders. The mechanism to provide public information is managed by the General Manager of MS at regional office level. As stated in the company’s SOP, all records on requested information and responses are maintained as stated for 3 years and then stored in the filing room for another 7 years.

Compliance status: Full Compliance

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

Findings: Based on checks of various mill and estates activities and documents, no evidence of non-compliance to legal requirements were found. PT Mustika Sembuluh’s estates and mills has a list of applicable legal and other requirements documented under “Register of Environmental Laws and Regulations” (“Daftar Keten- tuan Hukum & Peraturan & Perundangan Bidang Lingkungan Hidup”) dated 1-9-2009. The company also carries out evaluations of compliance to applicable local, national dan ratified international laws. Checks on new or latest updates to regulations & legal requirements are conducted every quarter. This is done through checks of latest updated and news via the internet & via audit by external parties (NGOs etc) from which the latest requirements are communicated. Latest updates are then listed in a form for “Notice of

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New/Amended Environmental Regulations” ("Form Pemberitahuan Perundangan Baru / Perubahan Bidang Lingkungan Hidup). List of approvals are then listed in “Register of Licenses of PT Mustika Sem- buluh” ("Daftar Perijinan PT Mustika Sembuluh). The company has an SOP issued on April 2009 for identification of regulations and legal laws to ensure that all regulation related to equipment and occupational health and safety are available and updated. The procedure is also to ensure that all operating units comply with applicable laws and conducts their operational activities in accordance with applicable regulations as well. The company has made good efforts to comply with changes in the regulations. For example, according to the update to regulations stated in the Forestry Ministry Decree Letter No. P.43/menhut-I/2008 dated 10/7/2008 regarding 'Guidance for Land Lease in Forest Area', the company is required to apply for a "Forest Area Released" permit letter. PT Mustika Sembuluh has obtained the "Forest Area Released" permit letter for an area of 15,994 Ha. The company has also made efforts to comply with another updated regulation, ie. Decree no. 79/2008 from the Governor of Central Kalimantan dated 16 December 2008 regarding minimum wage standards for workers in the Central Kalimantan Province.

Compliance status: Full Compliance

Criterion 2.2: The right to use the land can be demonstrated, and is not legitimately contested by local communities with demonstrable rights.

Findings: PT Mustika Sembuluh has a plantation business permit (ijin usaha perkebunan/IUP) No. 343 year 2003 dated 13 August 2003, and the company also has copies of their location permits, with details as below : 1. Location permit No. 22/460/BPN/11/1994 dated 22 February 1994 for 17,500 ha at East Kotawar- ingin District. 2. Location permit No. 7.460.42 dated 16 October 2003 for an area of 4,000 Ha from Seruyan District. Extension for location permit no. 173.460.42 dated 22 February 1995. The total area belonging to the company as per their location permits is therefore 21,500 ha. The company is not using all area in its total area of 21,500 ha. In process of applying for the land cultivation rights titles (Hak Guna Usaha, or HGU title) 1,711 Ha of land was excluded from the application as there are some local communities in these areas that do not wish to allow development on their land, as such the management decided to enclude this area. The current total land area under Mustika Sembuluh's Operation and included in their land permits is 19,789 ha, and the land use licenses (HGU) for these areas are as listed below: 1. HGU certicate No. 14 with SK No.2-HGU-BPN-RI-2007 dated 4 June 2007 to 7 February 2037 for an area of 1,990.32 ha. 2. HGU certificate No. 36 with SK No. 3-HGU-BPN-RI-2007 dated 7 February 2007 valid for 25 years for area of 5,169.280 ha in East Kotawaringin district. 3. HGU certificate No. 10 with SK No.8/HGU/BPN/2005 dated 18 February 2005 valid for 25 years for area of 5227.00 Ha in Seruyan District. 4. HGU certificate No. 16 with SK No.01/540/HGU/BPN/.42/2000 dated 23 September 2000 valid for 25 years with area 166.30 Ha in East Kotawaringin District. 5. HGU certificate No. 20 with SK No.03/540/HGU/BPN.42/2000 dated 30 December 2000 valid for 25 years for area of 144.88 ha. The total approved HGU areas under the company is therefore 12,697.78 ha. In addition, the company has made the application for three HGU titles covering an area of 6,752.47 ha (one HGU for 6,188.804 ha, one for 268.764 ha, and one for 294.91 ha) and approval is in progress (as verified from letter received from the National Land Agency on June 15, 2009). The company has already planted on the area of 6,188.804 ha, for which the HGU for this area is still pending approval from the local government, however this is not illegal as the company already has their location permit for this area and is permitted to begin operations while awaiting for HGU approval for this area. Upon approval of these 3 additional HGU titles, the total HGU area under the company shall be 19,450.25 ha. All records requesting for the titles and pertaining to HGU processing are well maintained at the company’s regional office.

Estate boundaries are clearly identified and demarcated on the field with markers made by the National Land Agency (Badan Pertanahan Nasional) as well as internally by the company. The company has a GIS Department responsible for a conducting a monthly boundaries monitoring program. Estate

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boundaries and position of markers were also clearly drawn on working map, including information on GIS positions. The company has been involved in two ongoing land disputes since early 2005 with members of Tanah Putih Village, Mr. Tarang and Mr. Umbung, over the areas of MS 3 estates plantation block no A21TU/ A22TU and D33TU/ D32TU which they claim to be their ancestor's graveyards which were desecrated by the company while their workers were carrying out land clearing and development work. The process of resolution conflict started on 12 August 2008, they presented the case the customary court. At the time, Tarang demanded IDR 2 billion and Umbung's family demanded IDR 7 billion. On 15 August 2008, the leaders of the customary court (Damang Adat) of Kota Besi district found MS guilty of the offence and imposed a fine to repair the graveyard and perform other customary rights amounting to IDR 25,018,000 for Tarang and IDR 64,010,000 for Umbung. The decision of the customary court was accepted by MS management but rejected by the Tarang and Umbung family. As such, the MS team met with Tarang and Umbung on 30 August 2009 at Umbung’s hut to renegotiate. The meeting was attended by 9 villagers of Tanah Putih, 2 staff of the 'Save Our Borneo' (SOB) NGO and MS team. The two men made several demands for compensation from the company, including reinstate- ment and fencing of the desecrated graves, and that the company give them ‘melawen’ plates (a special antique plate from Majapehit empire). Tarang demanded that the company return 7 ha of land sourounding the graveyard which, according to him, belonged to his father. However, the company could not meet their demands, and the conflict resolution process of the company was not acceptable by the affected parties. As such, additional efforts and meetings to resolve the conflict are in progress. It was noted that the company was involved in two other land disputes cases in which the conflict resolution process of the company was accepted by the affected local community members. There were also cases of desecration of ancestral graveyards of Mr. Saradi bin Kian and Mr. Eduwar Johan. The cases were brought to the customary court, which ruled that the company shall pay compensation amounting to IDR 49,235,000 and IDR 16,975,000 to Mr. Saradi bin Kian and Mr. Eduwar Johan respectively. The company complied to the court ruling, and the two men accepted the compensation. As such, these disputes were resolved.

Compliance status: Non Compliance See NCR No. 1 of 12

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

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Findings: The traditional or customary rights of several land owners have been identified. However there is no evidence that other traditional land owners from Bangkal, Pondok Damar and Tanah Putih Villages have any negotiated agreements with the company on the use of their land. For example, there is no documented agreement on extraction of sand from MS3 area for traditional use, or agreements on access rights given to traditional right owners within MS area. There are four documented negotiated agreements between traditional land owners of Tanah Putih village and MS management (i.e: an MOU negotiated agreement to enclave areas belonging to individual communities of Tanah Putih village) but no similar MOUs for Bang- kal and Pondok Damar villagers were available. Stakeholders of Tanah Putih village suggested that all traditional rights should be recognized and formalized as negotiated agreements with MS management (i.e: cultural sites, land for cultivation, sand extraction, etc). The company has some maps of an appropriate scale showing extent of recognized customary rights, but information on the maps is insufficient. The company developed GIS land utility maps of scale 1:63.000 which shows the enclaves or compartments belonging to each village or individual land owner from the Tanah Putih, Bangkal and Pondok Damar villages. Identification of traditional rights with participatory mapping was carried out on with the involvement of the community of Pondok Damar village. But traditional or customary rights of other land owners were not identified on the GIS maps with the participation of the Tanah Putih community (i.e. sand extraction at MS3 area compartment F40TU and block D). The company maintains copies of negotiated agreements between Mustika Sembuluh and individual traditional land right owners, which describes the process of consent and compensation of land aquisition. However, the company does not have any documented negotiated agreements between the company and and individual or communities from Tanah Putih, Bangkal and Pondok Damar villages with regards to their traditional rights and usage of the land. The village heads and community elders of Tanah Putih, Pondok Damar and Bangkal villages, the company has not approached them to develop documented agreements on the traditional or customary use of their land.

Compliance status: Non Compliance See NCR No. 2, 3 and 4 of 12

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

Findings: The company has a long term management plan for a 25 year period (2000 to 2025) with information on this document consisting of company activities such Planting/Replanting, FFB production, FFB supply and purchasing, and CPO/PK production. The company has also developed a medium term plan for a 5-year period (2010-1014), containing information on the budget for each activity (including activities for environmental management programs and all CSR related expenses, legal compliance and RSPO P & C compliance) and revenue from company's production including all company's liabilities. Almost all the company's area is planted, with the last planting carried out in year 2007. The total planted area in PT Mustika Sembuluh is 17391 ha, and up to 2009, the total immature area is 1500 ha and mature plantation is 15891 ha. The company has developed replanting programs for the next 20 years. Replanting programs will be start in year 2025, with 54 ha replanted in those areas previously planted in the year 2000, 1087 ha in year 2026, 461 ha in year 2027, in 574 ha in year 2028, 3463 ha in year 2029, and 4237 ha in year 2030. The company has no clear plans for 1960 ha of unplanted area in PT MS III as stated on their document regarding balance of area that can be planted, and this was raised as an observation. Some of these areas are still occupied by local communities, while some of these areas are categorized as fragile soils (sandy soil and peat soil). Information from a land survey report states that out of this remaining area, only 1215 Ha can be planted, and this consists of 307 Ha of encroachment area (overlapping with Sukajadi), 539 ha of land area operated by the community, 90 ha of plantable reserve, 279 ha of land clearing area.

Compliance status: Compliance with observations

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

Findings: Estate standard operating procedures for land clearing till harvesting are defined in Wilmar International Ltd Agriculture Manual & Standard Operating Procedures, "Agriculture Manual & Standard Operating Procedure For Oil Palm 2007", distributed & available at all estates. For mill operations, PT Mustika Sembuluh has complete standard operating procedures from reception of FFB to dispatch of Crude Palm Oil. The company has a procedure for reception of incoming FFB from outgrowers. A team of surveyors from the mills will evaluate and investigate outgrowers that request to supply to Mustika Sembuluh POM, outgrowers are to inform the company of the location of the FFB source and the surveying team will then visit and verify the actual location of supply. The supplier will then provide all relevant information such as plantation location, total plantation area, evidence that the plantation operations meets legal requirements, and sources of FFB from other farmers that will be supplied by the supplier. Internal audits are conducted on an annual basis by the internal audit team. The last internal audit was conducted on July 2009. The internal audit program covers all company's activities relating to compliance to RSPO requirements. Record of operational result as well maintained at all estates and mill, such as FFB delivery records, FFB grading reports, monthly monitoring reports for waste water, COD and BOD analysis results of POME used for land application, delivery orders to SAP-PT Kumpai, quality reports for CPO delivered to Sinar Alam Permai.

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: Leaf analysis is conducted regularly every year for all PT Mustika Sembuluh estates and the data is used to determine fertilizer recommendations for all estates. Leaf analysis is usually carried out February and March each year. Leaf samples are taken from each of the existing plantation blocks then sent to a selected laboratorium. PT MS also conducted a soil analysis in 2007 with report available. Activities to maintain and improve soil fertility are carried out at PT Mustika Sembuluh estates 1, 2 and 3, including application of fertilizer, plantings of leguminous cover crops and application of empty fruit bunches (as compost). Fertilizer activities are conducted based on fertilizer recommendations from the Ecological Management Unit (EMU) division.

Compliance status: Compliance with observations

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

Findings: Soil maps are available at each estate, and information on the soil maps include soil type and distribution of fragile soils at all PT Mustika Sembuluh estates. Some fragile soils were identified in estate 3 and estate 2 i.e sandy soil. 8.8% of soil in Mustika Sembuluh Estate 2 and 3 consists of sandy soil (Serai soil), while peat soil (Gali soil) takes up 8.7% of the area. No sloped areas were identified at any of the Mustika Sembuluh Estates, as all land in Mustika Sembuluh estates consist of flat lands (slope class A between 0-8%). PT Mustika Sembuluh does not have a management strategy for planting on sloped areas, are there are no sloped areas within PT Mustika Sembuluh's Estates. However, Wilmar International has a generic SOP for planting on slopes above a certain limit. Some smalls areas consisting of peat soil were identified in MS 2 and 3. Management has identified the

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depth of each peat area, as recorded in their document "Table Depth in Peat Soil and MS3 Inventory” that was prepared on June 2009, which identified the distribution of peat soil depth from being 0.20m to 4.5m. Some plantings were performed on a limited scale at some of MS 2 and 3 peat soil areas. As the peat soils are located at small areas, the company did not make specific canals to monitor water table, although some weirs were made to control water level. The company has a monitoring program to minimised subsidence of existing peat soils, and also developed 6 subsidence control points and 160 weirs thoughout the Mustika Sembuluh area, especially in MS 3 estate. The company has a monthly road maintenance program which includes activities such as graveling to ensure that main roads, collection roads and secondary roads are always in good condition for use. To minimize soil erosion, the company plants leguminous cover crop on all open area as explained in CR4.2. A standard operation procedure was established to minimize planting of palm oil on sandy and peat soil. The top management has also issued an internal memo to cease planting on all remaining peat and sandy soills. The company also applies fertilizers to the field according to fertilizer recommendations to prevent soil degradation.

Compliance status: Full compliance

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

Findings: All watercourses and wetlands located within the Mustika Sembuluh area have been identified and plotted on hydrology maps. Riparian buffer zones were identified and marked with boundary markers on site, e,g. for the watercourses located at estate compartment no 026 MSIII which in 5 meters wide, a 10 meter wide buffer zone was marked on each side of the watercourse. Every 20 m along the river/watercourse there are trees marked with yellow paint. There is no treatment with agrochemicals on this riparian zone, and no slashing activities are carried out. The company will remove all immature palms that grow on the riparian buffer zone. The SOP for management of riparian zones has been established & implemented. However, while most river riparian buffer zones have been marked, it was found that riparian buffer zones have not yet been marked at several other rivers/watercourses, for example at Ranjau River, compartment no. 388, 098, A12TU, 667 of MS1, as well as watercourses near Pondok Damar village. This was raised as an observation. Some inconsistency in the implementation of the defined SOP was also found, as at some areas, evidence of manuring and spraying activities were found at block 112 of MS1 estate and HCV 4.2 in MS 2. The management has tried to implement enrichment plantings for some riparian zones e.g. in block 062 of MS 1 estate. The company has established an environmental management programme to improve the quality of the water supplied to the employees around the housing areas & this programme includes activities such as installation of clean water treatment at every housing complex, clean water distribution system, training of operators for clean water treatment, etc. Implementation of the programme is in progress. The company has established water quality monitoring programs to be conducted every 6 months .The results of water quality monitoring will be reported to the Regional Body for Management of Environ- mental Impacts (Bapedalda) and integrated with UKL/UPL monitoring report. According to the latest monitoring report, the level of BOD and COD at rivers located within PT Mustika Sembuluh’s area had exceeded the legal water quality standards as defined in the local regulation PP 82 year 2001. How- ever, the cause of this exceedance was unlikely to be from the mill's activities as all waste water from the mill is only used from land application, and none of the waste water produced from mill activities are disposed into the Pondok Damar River. From checks of the water sampling points, it is possible that the pollution resulted from upstream activities, outside of the company’s area. The company is still determining the cause of the exceedance of the water quality standards, and as the company has already taken measures to protect rivers within their areas through delineation of buffer zones, this was raised as an observation. Results of monitoring of well water quality shows that water quality at the wells are still within the legal standards. Records of mill water usage per tonne of FFB are also available.

Compliance status: Compliance with observations Observation: Riparian zones delineated on hydrology maps have not all been marked on-site at the identified watercourses. The company should develop an action plan to carry out this field delineation.

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

Findings: The company has an SOP on Agronomy regarding detection and census of palm oil pest and diseases, as well as an Agricultural Manual as guidance for control of integrated pest management. Detection of pest and diseases serves as an "Early Warning System" to determine the level of pest and disease attacks on plantation areas. A census will be performed when the level of attack is over the normal standard. Detection of pest and diseases are conducted periodically every 6 months. From interviews with EMU staff, there have been no cases of high pest attacks at PT Mustika Sembuluh estates 1, 2 and 3. Small attacks were reported and controlled with manual treatment (handpicking) and biological treatment such as plantings of beneficial plants such as turnera sublunata and cassia cobanensis. To prevent rat attacks, the company uses owls as rat predators, but company also relies on other natural predators that live in plantation areas such as snakes or other predators of rats. Record of IPM implementation are maintained by the company with records such as reports on detection of pest and disease infestation, report on areas of plantings of beneficial plants, monitoring reports of pest detection activities at planted sandy soil areas, such as was conducted on June 25, 2009 in MS2. From census records, it was seen that rates of pest infestation was low, demonstrating a well implemented IPM program The company has records of training conducted for their mandores and workers for how to cary out pest census and IPM activities. The company monitors levels of active ingredients used for pesticides as well as other agrochemicals (herbisides and fungicides) and toxicity levels in accordance to the standards designated in the local regulation, Kep. 187/MEN/1999. The report is included in "Analyis on Usage of Pesticide Active Ingredients" with details of of active ingredients used in herbisides (Ally 20 WDG, Amiphosate 480 AS, Amiron-M 20 WG, Antarlang), insecticides (Agrimec 18 EC, Decis 25 EC, Dursban 200 EC, etc; Regent 4 Sc), and fungicides (Benlate SP, Score 250 SC). Data for each estate showed that the highest amount of pesticides used in year 2009 for MS 1 was Agrimec 18 EC, of which the calculated a.i. /LD 50 per tonne of FFB was less than 0.0006 while the a.i. per hectare was approximately 0.02. The highest amount of pesticides used for MS 2 was Regent 50 SC (a.i. Fipronil 50g/l), of which the calculated a.i. /LD 50 per tonne of FFB was less than 0.00439 while the a.i. per hectare was approximately 0.07415. The highest amount of pesticides used for MS 3 was Petrokum (a.i. Brodifacoum 0.05%), of which 1551 g was applied through the year. The calculated a.i. /LD 50 per tonne of FFB was less than 0.0000062 while the a.i. per hectare was approximately 0.0000307.

Compliance status: Full Compliance

Criterion 4.6: Agrochemicals are used in a way that does not endanger health or the environment. There is no prophylactic use of pesticides, except in specific situations identified in national Best Practice guidelines. Where agrochemicals are used that are categorised as World Health Organisation Type 1A or 1B, or are listed by the Stockholm or Rotterdam Conventions, growers are actively seeking to identify alternatives, and this is documented.

Findings: The list of agrochemicals used at PT Mustika Sembuluh is approved by the Pesticide Commision of the Indonesian Agriculture Department. The list of agrochemicals maintained by the estates contains information on each chemical used, such as active ingredients, toxicity data, etc. The company used to use Furadan (containing carbofuran), which is listed as a WHO Type 1B chemical, but this chemical was no longer used as of 2009. The company also used to use Klerat and Petrokum, which contains brodifacoum, a chemical is listed as a WHO type IA chemical, but as of 2009, this chemical was not used anymore. Only purchases of approved chemicals from approved suppliers are allowed. Estate managers will provide the required quantity for usage & purpose of the order during annual budgeting period. Usage analysis of pesticides is recorded on monthly basis. A list of approved pesticides i.e. CKP Agrochemical List is prepared by central office & distributed to all estates. The company also has a documented list of applied agrochemicals, which include target dosage, and kinds of agrochemicals that can be applied by specifically trained personnel. Workers responsible for agrochemical application have been trained and records of these training are available.

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At MS2, it was observed in the warehouse that waste materials from agrochemicals, including pesticides containers were stored properly. Warehouse staff in charge of preparation of herbicide mixture processes were interviewed and were found to have a good understanding on usage of PPE and company SOPs. The chemical mixing area has a bund with proper sump to prevent chemical leakages from polluting the environment. Control of empty containers is ensured by the staff through use of bin cards & a requisition form entitled "Administration for Management of Hazardous Wastes" and the quantity is reflected in the incoming / outgoing scheduled waste record (Data Keluar Masuk Limbah B3). Samples cross checks of the amounts of the chemicals Glisat and Trap versus the monthly inventory in bin card & incoming / outgoing scheduled waste record showed that the quantity is documented correctly. At Estate 2, consideration should be given to provide proper fencing or any other suitable method to prevent the unauthorized access of the PPE & fertilizer bag washing area to the surrounding people especially children. Although proper signages have been posted at the location (such as "Children Are Not Allowed to Play Here”, this may not be effective enough as the children may not be able to read & understand the hazard of the area to their health. This is also to prevent other possible incidents such as drowning in the washing ponds.

Compliance status: Compliance with Observations

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

Findings: PT Mustika Sembuluh's Occupational Health and Safety (OHS) Policy is the same as Wilmar International's OHS policy, since PT. Mustika Sembuluh is one of the companies under Wilmar Group. The OHS policy was established and approved by top management. PT MS has an Occupational Safety and Health (OSH) Team responsible for occupational health and safety programmes.The plantation OSH team structure was approved by the Labour Department on 24 November 2008 No. 560.566/1042/WAS.KK/I/P2K3/2008, however the structure has recently been changed and reapproval by the Labour Department is in progress. Each estate has its own OSH team which holds a regular safety meeting once every 3 months. Records for safety meetings held on January, April, and July are available. Medical expenses of employees are covered by the company, but expenses due to work-related accidents are covered under Jamsostek insurance. The company conducts medical check up for all new workers prior to starting work for the Company both for permanent and temporary workers. Periodic physical medical checkups are conducted for workers who work in high risk areas such as sprayers, manure applicators, mill workers, workshop workers and paramedics. The company has allocated a budget to conduct regular blood tests for sprayers. Every estate and POM has its own documented OHS risk assssment. The mill's risk assessment is documented in the document 'Environmental and OSH Aspects and Impacts'. In the estates, some OHS programs have been planned to ensure compliance of work practices to safety regulations. For example: OHS training is provided to new workers as required under the regulation UU No. 01/1970, and paramedics are provided with their certificate on Company Health & Hygiene (Hyperkes - Permenaker n0. 01/1979). At the mill, some OHS programs are in place to reduce risks as identified in risk asessment, such as prevention of fires due to LPG explosions at the warehouse by storing LPG tanks in enclosures or behind safety chains, and conducting regular checking. However, risk assessments for construction of buildings such as construction of the new mess hall at MS1 and new housing MS2 have not been conducted yet. As such, hazard and risk controls have not been implemented well yet, since it was found that some building construction workers are not using proper PPE, such as helmets and safety belts. Records of OHS training programs conducted for workers are kept by the Regional Office - Human Re- sources Department and documented. An emergency response procedure (ERP) dated January 01 2009 has been etablished at all estates and the mill. The ERP was implemented during a fire accident on 6 April 2009. The company establish the SOP 03/EHS/(1)/0909 Rev.01 dated 1 September 2009 related to usage of PPE. In the SOP the company identified necessary PPE for workers relevant to their work activities. For the estates, this includes PPE for loading, harvesting, manuring, spraying, and slashing, while for the mill, PPE required for boiler operators, sterilizer operators, warehouse workers, and maintenance was also listed. From on-site checks, it was found that the PPE provided for sprayers, chemical mixers

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and manurers was sufficient. However, the PPE for some workers at MS2 such as loaders and harvesters was found to be improper and not provided by the company as required by the regulation UU 01/1970, and this was raised as a non-compliance. The company has conducted first aid training for all group coordinators and field conductors at the estates, and field conductors are required to bring first aid kits to worksites Work accidents are recorded at each estate and palm oil mill as well as the clinic. Every month the report is recapitulated and reported by the clinic to the management through the Regional Office Human Resources Department (HRD-RO).

Compliance status: Non Compliance See NCR No. 5 and 6 of 12

Criterion 4.8: All staff, workers, smallholders and contractors are appropriately trained. Findings: The company has a training procedure documented in an SOP. Training programs for employees are also set by each estate and documented in "Training Program". For example, at MS1 Estate, types of trainings conducted in 2009 include trainings on RSPO, OSH, Harvesting, etc. However, there is no continual training program for contractors. For plasma, trainings were conducted by the estate which has plasma, e.g. MS 2 has records of trainings provided to plasma on RSPO and Maintenance systems. Record of trainings to increase competence for each employee are kept by the estates, mill and HRD RO. The training records kept include attendance lists of trainings and historical records for each employee. The company uses contractors for work such as transporting FFB from plantations to the mill and building construction. Training regarding the company policy, company regulations and contractor activities are conducted through meetings. Records of these trainings are maintained. However, it was noted that no evaluations of contractor work performance are carried out to use in consideration of whether to continue using the contractor or not.

Compliance status: Compliance with observations

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

Findings: All environmental aspects and impacts from plantation and mill activities were identified in their AMDAL document for estate 1 to 3 and for the mill. All estates and the mill have also conducted their environmental aspect & impact assessment, which was revised for all estates on August 2009 to ensure all environmetal aspects & impacts have been identified & evaluated effectively. Audits are carried out to identify if any new activities are to be included in the assessment and this has been positively verified. The significance of the environmental aspects were identified & relevant environmental objectives & targets have been established. An environmental aspect & impact identification has been also conducted for subcontractor activities such as boiler construction & construction of new loading ramp. The environmental management programme (RPL and RKL) is available for all 3 estates and was revised on September 2009. The key environmental programmes & objectives (which targets) include reduction of usage of herbicides, recycling and reuse of waste chemical containers and scheduled waste, and reduction of water used for spraying. Since the AMDAL document is still new, the company still has not submitted a formal report on their progress to the relevant local institution, however some environmental parameters are being monitored and monitoring results are kept at the Regional Office, such as analysis results for POME, and water quality of rivers near the company's area. The company has extended their plantation area and increased mill capacity from 60 tons/hour to 120 tons/hour. As such, they are required by law to revise their AMDAL document in accordance to the new changes in their operations. The latest revision to the AMDAL document was done on September 2009 to incorporate the latest changes.

Compliance status: Full compliance

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Criterion 5.2: The status of rare, threatened or endangered species (ERTs) and high conservation value habitats, if any, that exist in the plantation or that could be affected by plantation or mill management, shall be identified and their conservation taken into account in management plans and operations.

Findings: PT Mustika Sembuluh, together with the Malaysian Environmental Consultant, has conducted an assessment and identification of protected, rare and endangered species and HCV habitats within their area. The results of these assessments is that 6 types of HCVs were identified in 3 estates, and some protected mammals species found include Hylobates agilis (Uwa-uwa), Manis javanica(Trenggiling), Nycticebus coucang(Kukang), Macaca nemestrina( beruk). Some protected bird species and unpro- tected bird species were also found, such as species of eagles i.e. Elang Bondol (Haliastus indus), Elang Ikan (Ichthyophaga sp), Raja Udang Meninting (Alcedo meninting). Based on the assessment results, 6 types of HCV areas and potential HCV areas were identified in all company estate areas, as follows: • HCV 1 areas (Forest areas containing globally, regionally or nationally significant concentrations of biodiversity value) identified at MS 1, MS 2 and MS 3; • HCV 2 areas (Forest areas containing globally, regionally or nationally significant large landscape level forests) identified at MS2 and MS3. This includes a HCV 2.2 area (large level landscape forest) identified at MS 2; • HCV 3 area (Forest areas that are in or contain rare, threatened or endangered ecosystems.) identified at MS 3; • HCV 4 area (Forest areas that provide basic services of nature in critical situations) identified at MS 1, MS 2 and MS 3 estates. This includes HCV4.3 areas (forests critical to water catchment and erosion control) located at MS 1 and MS 2 estates; • HCV 5 areas (Forest areas fundamental to meeting basic needs of local communities) identified at identified at MS 1, MS 2 and MS 3 estates; and • HCV 6 areas (Forest areas critical to local communities’ traditional cultural identity) identified at identified at MS 1 and MS 3 estates.

Some of the identified HCV areas refer to the same area, which has more than one HCV value, for example, the HCV areas type 1 to 6 located at MS 3 are referring to one forested area. The forest consists of a mix of secondary forest and agroforestry including bamboo, jungle, rubber, cassava and fruit trees. The area also contains a number of ironwood trees. The main block of forest also contains HCV3 area in the form of Kerangas Forest and an area where the Rinjau river flows through the forest. All identified HCV areas and potential HCV areas are clearly explained in the company’s HCV assessment report. A HCV management plan for all identified HCV areas in MS1, 2 and 3 has been established by PT Mustika Sembuluh's conservation team and this is documented in a HCV Monitoring and Action Plan. The document describes the activities planned for each identified HCV, total area to be managed and periodic monitoring activities for each identified HCV. The document was just recently completed, so there were no monitoring records available at time of the assessment. To prevent inappropriate hunting and collecting activities within their area, the company made sign boards and has periodic patrolling programs. However, the company still has no warning signs against illegal fishing or action plan to prevent this, although from patrol records, evidence of illegal fishing using poison in a riparian zone at MS3 was found and recorded. Mustika Sembuluh has assigned a conservation canager which is responsible for to handling all planned activites regarding to environmental conservation, and she is assisted by several estate officers in carrying out daily activities. However, it was found that all officers were still not trained yet, and do not have enough competence to perform their duties as required by the documented management and monitoring HCV plan.

Compliance status: Non Compliance see NCR No. 7 and 8 of 12

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

Findings: Wastes are identified & listed in the scheduled waste inventory list (monthly list, updated by respective representatives from every estate). Control of wastes including hazardous & non hazardous wastes are implemented through a recycling programme (for recyclable wastes such as plastics etc), and proper storage of hazardous wastes such as empty agrochemical containers, waste oils, filters, battery, etc. Storage area of hazardous wastes are properly managed through provision of proper bunding with secondary containment (sump pit), allocation of proper fire extinguishers & sand for spillage mitigation, proper access controls such as locked enclosures to prevent unauthorised withdrawal of the empty chemical containers for personal use, etc. Several staff interviewed at the waste storage warehouse, APD washing area & fertilizer bags washing area were found to have a good understanding of waste management, including management of other wastes such as waste water generation & waste water disposal. A new SOP has been established for washing of empty agrochemical containers & fertilizer bags & management of waste washing water, effective since September 2009. This SOP was communicated, trained & available at all estates. The supervisors for each estate were interviewed to test their understanding of the new SOP, including verifying the actual practice. The interview revealed that they understood clearly the instructions and potential impacts to environment. Monitoring of waste are carried out by individual estates & mills. A bin card system is used for control of waste generation & storage. Quarterly reporting to legal authorities is conducted, with the last report dated September 2009. Samples verified during the audit includes quantities of empty chemical containers such as glisat, trap, ally, medical wastes (used needles, cotton etc), "cynoof" empty containers, etc. At the mill, 2 final discharge points for waste water were observed - 1 point located at anaerobic point, and another located behind the factory, linked to the drain next to the sterilizer station. It was observed the wastewater drain located next to the sterilizer station is contaminated with palm oil (due to spill at the sterilizer station - loose fruits loading station). An action plan is in place i.e. construction of an improved oil trap to ensure pollution of water due to the oil contamination is stopped. Temporary action such as cleaning of the drain has been carried out. Potential for improvement: Consideration should be given to conducting analysis of the water discharge from the 2nd discharge point (overflow of water from oil trap) once the construction of the improved oil trap has been completed & in operation (mill). Currently, a test has been carried for 1st discharge point (located at anaerobic pond / kolam limbah).

Compliance status: Compliance with observations

Criterion 5.4: Efficiency of energy use and use of renewable energy is maximized.

Findings: Sources of renewable energy used for mill operations are fibre and shell. The company regularly monitors and maintains calculations for how much energy/ton CPO or energy per ton palm oil product is produced from fibre and shell consumption since year 2008. Average renewable energy used per month was 34.26 Kwh per tons of FFB in year 2008, while for January to September 2009, it was 23.91 Kwh Per tons of FFB. The company conducted an efficiency analysis using energy usage data from January to September. The analysis results showed that from an expenditure of 3 billion rupiah in 2008, the expenditure for purchase of fossil fuel was reduced to below 1 billion rupiah in August 2009. This shows that there is a very good improvement in energy efficiency from 2008 to 2009. Company still uses fossil fuels for limited activities such as start up of boiler and transportation purposes. According to a report of usage of fossil fuels (Diesel oil) used in PT MS Mill, 221,363 liters was used in year 2008, while the company used 161,265 liters of fossil fuel from January 2009 to September 2009. Records of Fuel Consumption for year 2008 showed that consumption of fossil fuel used to produce 1 tonne of FFB was lower compared to consumption of shell and fibre used to produce 1 tonne of FFB, and this trend continued in year 2009.

Compliance status: Full Compliance

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

Findings: No fire is being used for preparing land for replanting. Top management has developed a zero burning policy and training of this policy has been conducted at all company levels. There is no evidence either in documentation or from observations in the field that fire was used for land preparation in any of Mustika Sembuluh's areas. Sign boards are posted in the estate areas stating prohibition of burning. A standard operating procedure has been established for handling emergency responses to land burning. The zero burning policy has been implemented & communicated to all employees. The harvesters & sprayers were interviewed & confirmed they understood the intention of the policy. Standard Operation Procedure was established for handling emergency responses for land burning. Fire extinguishers & facilities are available at all estates and at the mill.

Potential for Improvement. 1. At Estate 2, it was observed there are 4 tanks containing approximately 11,000 litres of diesel fuel & 2 tanks containing approximately 22,000 litres of diesel fuel. 1 fire extinguisher unit & 5 bucket of sand were available at the location, including the water tanks (2 big units) for fire emergencies. At Estate 1, an almost similar number of diesel fuel tanks and water tanks for responding to fire emergencies & 3 fire extinguishers were observed. Consideration should be given to review the adequacy & suitability of the facilities to respond to cases of fire at this area. According to the MSDS for diesel fuel, the suitable fire extinguishing media to be used is dry chemical / foam / CO2, and not water. 2. Consideration should be given to carrying out post mortem evaluations of fire drills conducted for identification of opportunity for improvements. 3. Consideration should be given to evaluate the frequency of chemical spill drills & first aid drills conducted.

Compliance status: Compliance with observations

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

Findings: Sources of pollution and emissions were identified and documented in the document "Identification of Sources of Pollution and Emissions”. Among the pollution and emission sources identified include greenhouse gases (GHGs) such methane generated from the mill effluent ponds, composting of empty fruit bunches, carbon dioxide emissions from mill operations, and transportation. All records of wastes generated are maintained at the General Affairs Department. Monitoring of pollution and emission quality of the sources identified is conducted regularly and reported to the local government every six months, in line with local regulations. These include air emission monitoring results, mill effluent analyis results and noise levels. The company does not have a GHG emissions reduction program, however company has plans to implement CDM project for the mill. To minimize water pollution, the company does not discharge effluent to the nearby river. Records also shows that air emissions have decreased through regular maintenance of boiler and generator sets. Treatment methodology for POME is a 90 days sedimentation cycle method using 11 ponds consist of a Cooling pond, Deoiling pond, Seeding Pond, Primary Anerobic Pond,Secondary Anaerobic Pond, Sedimentation and Mixing pond before dischage for land application (applied to total area of 30 ha). As mill production is still not at full capacity, all waste water is discharged to the plantation area for land application, there is no waste water discharged to the river around plantation area. Monitoring of waste water BOD and COD levels is conducted and reported in the UKP/UPL report every six months to the local government.

Compliance status: Full Compliance

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

Findings: An environmental impact document approved by the government is available, as well as an independent social impact assessment dated May 2009. Local communities and stakeholders were involved in the participatory process of the social impact assessment. Both positive and negative social impacts caused by mill and estate activities to company stakeholders were identified. Regular monitoring and management of social impacts have not yet been carried out as the company is still developing its social impacts management plan for the period of 2010 to 2015. There are changes on company operational scope from an area of 15,990 Ha to 19,990 Ha as well as a change in mill processing capacity from 60 tons of FFB per hour to 120 Tons of FFB per hour. Due to this, the environmental impact assessment is under revision by the company which contracted the consultant, Green Enviro of Palangkaraya Central Kalimantan, to conduct the re-assessment on 2009 (as per Con- tract Doc.No: 5/III/Amdal/2009). The process of the reassessment is still ongoing, with approval from the Government of Central Kalimantan Province. This new revised environmental management document would replace the last Mustika Sembuluh EIA document that was previously approved by the Indonesian Government cq. Ministry of Agriculture on 7 June 1995 for an assessment area of of 15,990 Ha. The EIA document published on 2002 was also approved by Government of East Kotawaringin District. The company produces a regular and scheduled environmental and social impact management and monitoring report, but the social impacts covered in this report are not based on the social impacts identified in the company’s social impact assessment report. These must also be covered in this report. The documented social impact assessment carried out by company includes an assessment of impacts of smallholders and outgrowers of Mustika Sembuluh. From the Matrix Identification of social impacts attached in the Social Impacts Management Plan, both positive and negatuve social impacts from smallholders/outgrowers were identified.

Compliance status: Non Compliance See NCR No. 9 and 10 of 12

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

Findings: The company has open and transparent methods for communication and consultation between growers and/or millers, local communities and other affected or interested parties. The company has documented SOP for communication and consultation with the communities, and the company has many records of communication and consultation meetings held with local communities from 2006 to 2009. For example, there is a record of a communication with all village heads held on 27 June 2006 regarding to plans on worker recruitment, with photos and documented process available at the Re- gional Office. There are also records of acommunication with Village Heads and communities held on 2 May 2007 regarding problem identification and developing a community team for fire safety. Around 45 persons attended in this meeting. A document that lists 10 categories of stakeholders is available at the Mustika Sembuluh Regional Of- fice. Stakeholders of Mustika Sembuluh listed include government agencies (at provincial, district, subdistrict and village levels), community leaders, palm oil estate companies, policy institutions, universities and schools, NGOs (national and local level); contractors, suppliers, smallholders/outgrowers, social organisations, workers and local communities. The company maintains documented records of the complaints and suggestions from stakeholders at the MS Regional Office. Responses are documented as well. A dedicated person who is responsible for consulting and communicating with local communities is available. The companys has a list of MS staff who are responsible for activities such as public relation and community relations, land acquisition and tenurial, and community development/corporate social responsibility

Compliance status: Full Compliance

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

Findings: The company has an open system for dealing with complaint and grievances as defined in an SOP issued on April 2009. The mechanism was developed through an open manner with the participation of local communities. The company distributed the copies of the procedure for resolution of complaints and disputes to all head of villages and community leaders of villages such as Tanah Putih, Bangkal, and Pondok Damar village. Recently, the company implemented this SOP to resolve land disputes with community members of Tanah Putih village and Desa Bengkal village. Records for incoming complaints and suggestions are well maintained by the Regional Office. The company has procedures for identification and calculation of fair compensation for the loss of legal or customary right to land, and these procedures were developed with the involvement of local community representatives and relevant agencies, i.e. SOP for Guidance for Land Acquisition, SOP for Recognition of Traditional or Customary Rights of the Community, SOP for Mechanism Resolution of Complaints and Disputes, and SOP for Resolution of Land Disputes. All procedures are made publicly available.

Compliance status: Full Compliance

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

Findings: PT MS has established a mechanism for the identification, calculation and compensation of loss of legal or customary rights of land, which is accepted by all parties. The procedures that have established include SOP for Guidance for Land Acquisition, SOP for Recognition of Traditional or Customary Rights of the Community, SOP for Mechanism Resolution of Complaints and Disputes, and SOP for Resolution of Land Disputes. Documentation and identification of all people who were entitled to received compensation are well managed by the MS Regional Office staff and maintained under file "Recapitulation of Compensation for Community Land at PT Mustika Sembuluh for Periode 06 June 2001 to 15 August 2009”. For example, the company has documented records of land compensation given to an individual, Mr. Ed Uwar Johan No., for acquisition of his land compartment or block (currently MS-02750-F41TU), and agreed compensation amount of IDR 120,900,000. All compensation payments made to people entitled to receive such compensation have been made, with receipts kept by the company at the regional office. For example, there are records of documented payments as compensation for acquiring 10,512.98 Ha of land that was owned by 1,082 community people made between June 2001- 15 August 2009, and the compensation payments amounted to IDR 6,338,030,000.

Compliance status: Full Compliance.

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

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Findings: The company maintains documentation of employees’ pay and wages paid are in compliance with the minimum wages defined in both local and national government regulation. Staff and workers receive receipts of salary payment (monthly payslips) in a timely manner and they are paid in cash. The company has a documented working regulation that was approved on 24 September 2009 by the Head of Manpower & Transmigration Institution of East Kotawaringin government, with an approval letter no. 560.565/998/KEP/HI-KESJA/2009. This document complies with the local legislation from the Minister of Manpower and Transmigration no. KEP-48/MEN/IV/2004 regarding the mechanism for approval of company regulations. PT MS maintains copies of documents required for hiring of expatriate workers, in compliance with national legislation. Contracts of local workers also meet legal requirements set by the Ministry of Manpower and Transmigration. Workers of MS received copies of their work contracts, which are signed by the worker and a MS management representative. Adequate housing, medical, educational and other facilities are provided by company and free of charge. Transportation for children to school is available. However, water supply facilities at MS3 estate were found to be inadequate due to issues of poor drinking water, limited water supplies, poor toilet facilities,and no bathing facilities so workers and their family bath and washing their clothes/other items at the river or swamp area (according to interviews with MS3 workers at housing complexes G10, E11, H9, G9, H3, E12, B1, B2, E5). This was raised as a non-compliance. The company has documented agreements with contractors that they are to abide with local labour laws. Some clauses in the contract include compliance to labour laws, eg. under clause 8 for Responsibility and Risk, point 8.3 states a requirement to abide by Indonesian Regulation, while point 8.6 states a requirement to comply to the RSPO principles and criteria, labour laws, and zero burning policy.

Compliance status: Non Compliance See NCR No. 11 of 12

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

Findings: Company has a documented policy to recognize freedom of association. There is also a documented company regulation allowing all workers to form bipartite or labour unions as stated under clause 8 and clause 42 of the MS Company Regulation 2009. MS has a labour organization, namely the Lembaga Kerjasama Bipartiet ('LKS Bipartiet') for employees that was formed on 15 June 2009. The LKS Bipartiet institution for Mustika Sembuluh estate is legally approved by the head of manpower and transmigration, government of East Kotawaringin District. To support the right of workers to organize and have collective bargaining, LKS Bipartiet has regular meetings with the MS management and employees. All records of regular meetings held with the labour union are well maintained and properly kept at the labour union office and the company’s regional office. For example, there are records of bipartite meetings held on 18 July 2009 and 5 October 2009 at the mill.

Compliance status: Full Compliance.

Criterion 6.7: Children are not employed or exploited. Work by children is acceptable on family farms, under adult supervision, and when not interfering with education programmes. Children are not exposed to hazardous working conditions.

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Findings: Management of Mustika Sembuluh has written policy against employment of children under 18 years old within their company. The Human Resources Department also released an Internal Memo dated 12 August 2009 which states under point 2 that children are not to be employed. Contracted labour is subject to the same requirements and these requirements are stated in the contracts of employees. During the time of the audit time there is no evidence that the company employed children under 18 years old to work at either the plantations or the mill, including contractors. According to records, the youngest worker employed by the company currently is 19 years old. This was confirmed through interviews with workers and checks of documents conducted at MS1, MS2, MS3, the mill and the Regional Office.

Compliance status: Full Compliance

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

Findings: MS has a policy on equal opportunities for all employees. This is detailed in Company Regulation 2009, clause 3 point 7, which states that the company is committed to provide equal opportunities for all employees. This was also stated in an Internal Memo from the Head of HRD to all Regional Managers dated 12 August 2009, point 3. During the audit, no evidence of discrimination was found. There is evidence of equal treatment in working opportunities for workers in the company, for example, 25% of all MS workers are female, female workers have equal opportunities to become higher ranking staff, such as Senior Officers, and equal working opportunities are provided workers of different ethnicities and religions, including Muslims, Catholics Christians, and Hindu Kaharingans.

Compliance status: Full Compliance

Criterion 6.9: A policy to prevent sexual harassment and all other forms of violence against women and to protect their reproductive rights is developed and applied.

Findings: The management of Mustika Sembuluh has a written policy regarding prevention of sexual harassment and all other forms of violence against women, as well protection of their reproductive rights. The company’s internal regulation 2009, contains Clause 10 regarding maternity leave, Clause 11 regarding menstruation leave and Clause 19 - point 6 regarding cost of delivery of babies. An internal memo dated 12 August 2009, from the HRD Head was sent to all Regional Managers and includes point 4 pertaining to prevention of sexual harrassment and violence against women. No evidence of sexual harassment was found during the time of the audit. The company established a Gender Committee on 17 March 2009, with representatives from MS1, the Industrial Complex, the mill, Geographical Information System department (GIS), Ecological Management Unit (EMU), Human Re- sources Department (HRD), and Accounting departments. Training of the company's sexual harassment policy to the Gender Commitee was carried out on 17 March 2009, 11 May 2009, and 25 May 2009, while training of the sexual harrassment policy was conducted at the mill on 27 August 2009. There is evidence of implementation of the reproductive rights policy, for example, the company has copies and records of menstruation leave and maternity leave forms applied by workers and these records are kept by the PT MS clinic and estate office. The company has a grievance mechanism for gender issues defined in PT Mustika Sembuluh's Com- pany Regulation in 2009 under Clause 4, based on an SOP dated June 2009. The company has also established a gender committee as a more specific grievance mechanism for female workers, as mentioned above.

Compliance status: Full Compliance

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

Findings: Current and past prices paid for FFB are made publicly available, as up-to-date pricing information is publicly posted at the security post of MS mill every day. Suppliers, outgrowers or smallholders receive updates on current FFB prices from the mill every month through an official mill management letter. The mechanism of FFB pricing is defined by local government regulation from the Plantation Institution of East Kotawaringin, based on the decree of Ministry of Forestry, no. 627/Kpts-II/1998 on FFB pricing. Pricing mechanisms for FFB and inputs/services are documented at the mill office. Contractual agreements between MS mill and supplier or outgrowers/smallholders are legal and transparent. The mill management invites all supplier or outgrowers for a meeting to discuss and explain any contracts before these are signed by both parties. There are 4 outgrowers that have a contractual agreement with MS mill on 2009. Payments to suppliers and outgrowers are made on time, at least one month after FFB is supplied to the mill from the supplier or outgrower and this was confirmed through interviews with suppliers. The mechanism of payment is agreed by both parties and stated on a documented contractual agreement as well.

Compliance status: Full Compliance

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

Findings: The company has many records of contributions made to local government organizations and local communities, however most of these contibution only donations. There were no contributions made base on the outcomes of Social Impact Assessment to manage or reduce the social impacts of the company's operations identified and contribute to local sustainable development. CSR programs currently being implemented are not targeted for community development, or to improve the livelihood of the local communities

Compliance status: Non Compliance See NCR No. 12 of 12

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

Findings: A documented SIA that includes the expansion of existing areas and plantations of MS3 is available. The company has also revised their EIA document to include the expansion of existing areas under MS3 estate and this revised document is pending approval from Government of Central Kalimantan Province. The revised EIA document would replace the last Mustika Sembuluh EIA document that was already approved by Indonesian Government cq. Ministry of Agriculture on 7 June 1995 as well as the Government of East Kotawaringin District cq. BAPEDALDA on 10 April 2003.The AMDAL draft was made on August 2009 and covered all estates and mill activities including new planting developments as well as plans for increasing mill capacity to accommodate the increase FFB production from newly matured planted areas and FFB from smallholders. The AMDAL document was made by an external consultant (Green Enviro Consultant). The management and monitoring plan of environmental impacts (RPL/RKL) is available however it is pending approval from the government of Central Kalimantan. A cocumented social impact management plan is also available and implementation of the plan will commence from 2010 to 2015. The management plan has been made integarted with others estate plan (see explanation in Criteria 3.1 above) The company's documented social impact assessment prepared in 2009 includes an assessment of the social impacts of smallholders and outgrowers of MS2. The company has records of a development program for smallholders (i.e: technical support programmes, training programmes, and other community development programmes).

Compliance status: Compliance with observations

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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: A land survey of the newly developed area at MS3 was conducted by the Agronomy Department, and the survey results showed that land topography in the new development area consists of flat to undulating land of 0-6%, climate type B. As such, this land is relatively stable and less prone to erosion. Based on soil survey results, the main soil material of the new planted area at MS 3 estate consists of sand stone (sandy stone with middle to very rough textures) and clay stone material. Most of soils in new development area in MS 3 estate consists of sandy soil (Serai type) and includes the Sungai Rinjau watershed. Some of the sandy areas of the newly developed areas of MS 3 estate have already been planted, even though the company's agonomist department company recommended to avoid planting on sandy area. This was recommended as planting activities in sandy land are extremely dangerous and result in soil degradation, since palm oil plantings utilize high levels of nutrients, but sandy soils contain low amounts of soil minerals. As such, the company has ceased planting on the remaining sandy area, while for the sandy areas that have already been planted, it was recommended to increase application of fertilizers and EFB compared to normal soils, in order to increase soil fertility and prevent soil degradation.

Compliance status: Compliance with observations

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: There are new planting areas at MS3 which cover areas of 167.08 Ha planted in 2007, 7.57 Ha planted in 2008 and 46.72 Ha planted in 2009. From the HCV assessment report, it was also noted that 717.09ha of newly acquired areas was designated as HCV areas. This 717.09ha area is listed under the company’s location permit, but not within the company’s HGU title area as the area actually belongs to the local communities There is no evidence that the newly developed areas have replaced any primary forests or HCV areas. The company has made efforts to comply with applicable regulation pertaining to development of new plantings, such as by conducting an Environmental Impact Assessment as well as an assessment to identify existing HCVs, even though the HCV assessment was conducted only after new development areas were opened, but based on information from satelite images, most of the areas that have already been opened were not covered by forests but by degraded forests. As such, the company decided to designate these areas as HCV areas, as explained in Criteria 5.2. A preliminary HCV assessment was done by WWF Indonesia in April 2007 and later in an MoU dated 6 September 2007, an independent HCV assessor was recommended to conduct the full assessment. The HCV assessment went through a public consultations process on 16 July 2007 that involve RSPO RILO, Environmental NGOs such as BOS-Mawas and Social NGOs such as Laman, Pokker, Jari and local communities from 13 surrounding villages Stakeholders were consulted and asked to comment on the HCV findings. The company has a GIS map of MS3 estate of scale 1: 60.000 showing the area of land acquisition, identified HCV areas as wel as the names of local communities. The company also has a documented land use planning map for the newly planted areas at PT Mustika Sembuluh MS 3 estate at the Regional office, as well as documented plans for development of new plantings. The map includes information on land areas to be considered as HCV areas or potential HCV areas at MS 3 estates. The company also has a map showing the condition of the land before the new area was opened in year 2006, including information on land areas that were identified as HCV areas or potential HCV areas.

Compliance status: Full Compliance

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

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Findings: A map is available that contains information on the marginal and fragile soils located with the newly planted area of MS3, including information about distribution of peat soil. In addition, the company has decided to cease all plantings on sandy soil and peat soil, as stated on their Internal Memo. Please refer to Criteria 4.3.

Compliance status: Full Compliance.

Criterion 7.5: No new plantings are established on local peoples’ land without their free, prior and informed consent, dealt with through a documented system that enables indigenous peoples, local communities and other stakeholders to express their views through their own representative institutions.

Findings: The company has a Social Impact Assessment document that describes both positive and negative social impacts resulting from mill and estate activities, including expansion of the existing land areas at MS3. The social impact assessment activities for PT Mustika Sembuluh was carried out by a consultant, Aksenta, on in 04-11 May 2009. Documentation of local communities and stakeholders who par- ticipated in social impact assessment process of Mustika Sembuluh company during the assessment on 04-11 May 2009 are available. Public participation was done through workshops, focus group discussions and other mechanisms. Refer to CR6.1 for further details. A training programme pertaining to the new planting areas and list of participants, was conducted and documented, with records maintained at Regional Office level. This programme included publicising of the company’s HCV management, mechanism of land use access and other community development programmes. Payments were made to the owners of land acquired by the company. Documented records of payments are available and maintained by the company. Refer to findings described in Criteria 2.3, 6.4, and 7.6.

Compliance status: Full Compliance

Criterion 7.6: Local people are compensated for any agreed land acquisitions and relinquish- ment of rights, subject to their free, prior and informed consent and negotiated agreement

Findings: Documented identification and assessment of customary and legal rights with the involvement of relevant government agencies and local communities are available (please refer to findings of Criteria 6.4). Procedures or mechanisms for the identification, calculation and compensation for loss legal/customary rights of the land which is accepted by parties are in place. There are four company procedures pertaining to this, which are an SOP on Technical Guidance for Land Acquisition, an SOP on Recognizing the Traditional or Customary Rights of the Community, a SOP on Resolution of Complaints and Dis- putes, and an SOP on Resolution of Land Disputes. The company maintains sufficient records of negotiations processes and/or the details of compensation for loss of legal/customary rights. For example, Mr. Endress NA Meloy from Sebabi Village (Telawang sub-district, East Kotawaringin district) receive compensation for acquisition of his land area of 4,37 Ha at A39Tu and A40Tu within MS area in 2009. Documentation of the compensation process was checked and found to be adequate.For further details, please refer to findings of Criteria 6.4 above. Communities that have lost access and rights to land for plantation expansion are given opportunities to benefit from plantation development through Community Development programmes implemented by the company or through being FFB suppliers for the company. Records of the process and outcome of any compensation claims are recorded and an appropriate compensation payment is in place. Records of compensation payments made to people entitled to receive compensation are kept in the form of receipts. Compensation payments made for 10,512.98 Ha of land that was owned by 1082 community people from06 June 2001- 15 August 2009 were documented and the compensation amounted to IDR 6,338,030,000. An additional payment of IDR 120,900,000 was made to Mr. ED Eduar Johan for acquisition of his land, which is now compartment number MS-02750 block F41TU at MS3 estate.

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Compliance status: Full Complience

Criterion 7.7: Use of fire in the preparation of new plantings is avoided other than in specific situations, as identified in the ASEAN guidelines or other regional best practice.

Findings: The company has a zero burning policy which has been publicised to all levels of the compnay, and there was no evidence that the company used fire during land preparation of the new development area. Sign boards are posted in the estate area stating prohibition of burning requirements. A Standard Operation Procedure was established for handling emergency responses to land burning (See explanation under Criteria 5.5). Fire extinguishers & facilities are available at all estates and the mill (See explanation under Criteria 4.7).

Compliance status: Full Compliance

Criterion 8.1: Growers and millers regularly monitor and review their activities and develop and implement action plans that allow demonstrable continuous improvement in key operations.

Findings: Company regularly monitors all identified environmental parameters as defined by relevant agencies, such as air emissions monitoring to minimize the impact of air pollution generated from activities in POM, noise, liquid waste. Every 6 months, monitoring results will be reported to the Regional Body for Management of Environmental Impacts (Bapedalda). For example, the company has available the UKL and UPL report for the period of July 2009 Company routinely conducts internal audits to ensure that environmental performance is done is in accordance with established standards, Based on the results of internal audits, the management of company will conduct a review / evaluation of the company's overall performance both in terms of environmental as well as fulfillment of product quality. These reviews are routinely performed once a year; for example, the last review was conducted on August 2009.

The company also revised and prepared certain documents based on findings of previous RSPO audit (gap assessment).

Compliance status: Full compliance

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

Criterion: 2.2. Where there are, or have been, disputes, proof of resolution or progress towards resolution by conflict resolution processes acceptable to all parties are implemented.

Non-conformance No 1 of 12 (Major): The company’s conflict resolution processe is not accepted by all affected parties, due to the existence of a land dispute case between MS3 estates and Mr Tarang and Mr. Umbung (ie. The Tarang-Umbung case) from MS3 estate, both of whom have not accepted the resolution mechanism of the company.

Corrections : 1.The negotiation between Tarang – Umbung and Mustika Sembuluh is ongoing and making good progress 2. A mechanism for resolving the issues has been established and agreed by Tarang- Umbung and the management of Mustika Sembuluh

Corrective Action: The company will improve their communications with the local communities and design new social programs to improve relationships between the company and the local communities. In addition, the com-

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pany will also invite local communities to participate in activities that may have an impact on the livelihood of local communities. The company will conduct regular meetings with stakeholders to enhance communication and relationships. A similar approach will be carried out by the management to resolve any other conflicts that may arise in the future.

Auditor Conclusions: Closed with Ongoing Observations

AUDIT VERIFICATION FINDINGS:

During an on-site audit verification conducted on 11 to 14 December, 2009, checks of documents related to the ancestral graves and compensation claims made by Tarang bin Udil and Umbung bin Ja- hun were carried out and the two men were also interviewed. The MS team has taken important steps towards working more effectively to resolve the conflicts over the Tarang-Umbung grave and land ten- ure claims since the RSPO main assessment was completed. MS is highly committed to solving the long-standing dispute over the ancestors grave and compensation claims made by Tarang and Um- bung. After the meeting on 30 August 2009, the company held several additional meetings and discussions with the two men on 6 and 20 November 2009, then on 4 and 17 December 2009. A documented mechanism towards resolution was accepted and signed by the affected parties on 6 November 2009. However, the men continued to demand for an amount of monetary compensation which is much higher than the amount decided by the customary court. Mr. Tarang demanded for a compensation amount of IDR 750,000,000 or equivalent to 3 pieces of Melawen plate, and also demanded that the company returned about 7 ha land area lay in MS3 estate. Mr. Umbung demanded for IDR 1,000,000,000 of compensation. According to their representative, the demand was reasonable due to the trauma and heartache experienced by their families resulting from the desecration of the graves, and also due to lack of response from the company for 3 years since 2005. However, the company has not agreed to their demands and are continuing to have discussions to come to a resolution and compensation amount that is agreeable to all parties. The management has also offered to develop land belonging to the two mean and plant any crops chosen by the men, but to date, the offers made by the company have still been rejected by the two men. Even though, no agreement on the compensation amount has been reached, the non-compliance is considered closed as the conflict resolution mechanism of the company been agreed upon by the two men, and the company has shown that it is making efforts to reach a resolution to this case. It was also agreed that the two men and the company would appoint mediators to assist them in reaching a resolution of the conflict, and schedule of meetings and negotiation would be set up by both parties in a timely manner. The status of this case will be monitored by the audit team during the next surveillance audit.

Criterion 2.3. Records of any negotiated agreements between traditional owners of land and plantation companies (if any), supplemented with maps in appropriate scale.

Non-conformance No 2 of 12 (Major): Records of negotiated agreements between traditional owners of land or other community users and PT Mustika Sembuluh are available, but insufficient, as explained below: 1. The legal and customary rights of several users from various communities were not identified, and there are no records of negotiated agreements on use of land (eg. For “sand mining” activity at MS3 estate) between these land users and the company. 2. There is no documented evidence to show that activities carried out by these communities are formalized or prohibited by the company management.

Correction:- 1. The identification and determining of legal right, customary right, others user for the use of land in MS 3 will be made available with the consent from affected parties (owners of enclaved land) 2. A documented notice prohibiting or allowing any activities within the concession area of Mustika Sem- buluh will be produced once participatory mapping and the consent from effected partieshas been obtained.

Corrective Action :- The company will make monitoring program periodically to identify the legal or customary rights of other users in all of PT Mustika Sembuluh estates that were not identified and will take appropriate action to develop a MoU with these users.

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Auditor Conclusions: Closed

AUDIT VERIFICATION FINDINGS:

During audit verification, documents related to the traditional or customary right of other land users within MS estates were checked and examples inspected. Information on identified traditional, customary or legal rights or land use activities carried out by local communities was available at the MS Re- gional Office. Approximately another 83 MOUs have been signed by individuals or community members of Pondok Damar, Bangkal and Tanah Putih villages pertaining to their traditional or legal rights within MS area. In these negotiated agreements or MoUs, the company provided access right to the communities to carry out various activities within the company’s area, such as: • Using the main roads, collecting roads and path roads within MS area for villager to access their traditional land within the area owned under MS. • Planting and harvesting agricultural crops/rubber trees, timber trees on their land within MS areas. • Protecting and maintaining natural resources such as rivers and springs for fishing, and agricultural land for better livelihood. • Local hunting activities, except hunting of protected wildlife listed under Government Regulation No. 5/1990 and Government Regulation PP No.7/1999 for protected endangered species like wwa, orang utans, proboscis monkeys and others. • Animal grazing, with applicable permits • Farming or animal husbandry is allowed within MS area, under certain terms and conditions. • Managing and protecting cultural sites such as ancestor graves and religious shrines • Local sand extraction is allowed within MS area with respecting to the MOUs.

According to the MoUs, any acquisition of land from the communities or individual land owners by MS company would be conducted using the process of free, prior and informed consent. However, the local community members are not to reclaim the land as their own, and if they wish to hand over their traditional rights to the land to other, they must inform or obtain permission for PT MS. The typesof MOUs signed vary depending on the activities in the traditional/ community rights. Some examples of the 83 MOUs that showed records of negotiated agreement between MS and local community are as below: • MOU no. 111/MoU/BM-PR/XI/2009 was signed on 10 October 2009 with ED Edward Johan of Tanah Putih, the owner of block F40-TU within MS3 area. A documented process of negotiation and maps of traditional/legal rights developed in a participatory manner between MS and ED Edward Johan with the communities of Tanah Putih was available. The MoU states that this owner has customary rights to use the land for sand extraction activities. • MOU no. 029/MOU/BM-PR/XI/2009 was signed on 13 November 2009 between MS and the village head of Pondok Damar, Customary leader (Damang adat) of Pondok Damar village and 6 community leaders. The MoU includes 9 agreement points related to traditional access that have been given by the company to the local community. A documented process of negotiation is available as an attach- ment to the MOU. A documented map of traditional rights of the land, GIS map, and pictures of land situation are available and developed in a participatory manner. • MOU no. 123/MOU/BM-PR/XII/2009 was signed on 17 December 2009 with Bangkal village head, Customary Leaders and BPD of Bangkal as representatif of Bangkal village. A documented process of negotiation as well as maps developed with the local communities is attached to the MoU. The MoU includes 21 points of agreement pertaining to traditional rights access and management of the HCVs within the company’s area. • A monitoring plan implementation of MOUs in 2010 with community has been developed.

Criterion: 2.3. Maps of an appropriate scale showing extent of recognised customary rights.

Non-conformance No. 3 of 12 (Major): Maps of traditional rights or other uses of the land by the community, and maps showing enclaved areas, or HCV areas at MS3 estate are insufficient or lacking.

Correction:- 1. The preparation of maps of traditional rights or other uses of the land by the community, and maps showing enclaved areas, or HCV areas at MS3 estate has been completed. Traditional rights maps will be

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prepared through participatory mapping. Local communities need to be informed about the maps with details on their traditional rights or other land uses. This is to ensure that all interested parties are aware of these maps.

Corrective Action :- 1. Similar maps will be produced for MS1 and MS2. 2. The maps shall be produced in accordance to FPIC procedures.

Auditor Conclusions: Closed

FINDINGS OF AUDIT VERIFICATION:

During audit verification, document of GIS Maps were checked and examples inspected by TUV auditors. All traditional right such as enclave areas owned by local communities have already been identified and marked on GIS maps. The maps are of appropriate scale showing extent of recognized traditional/legal/customary rights as well as land utilization within all three of PT MS’s estates. Evidence is as follows: • GIS maps of enclaved areas was updated by the company on 29 October 2009 to scale 1:51,146 to- showed the enclaves or compartments which are under the traditional rights of villages or individual land owners from Tanah Putih, Bangkal and Pondok Damar villages. • GIS maps showing areas where sand extraction is carried out for traditional use at MS3 area compartment F40TU and other blocks was updated by the company on 20 November 2009 to scale 1:48000 to show the location of sand extraction within MS3 estate. The GIS maps were prepared through participatory mapping on 27 October 2009. Consultation had been carried out with traditional land owners. • GIS maps of cultural sites claimed by the community on MS3 land was updated by the company on 8 December 2009 to scale 1:12,000 to show the location of Umbung bin Jahun’s family graveyard. This area was classified as a land conflict area and this situation was identified on compartement D33TU of the GIS maps in of MS3 area. • All traditional rights to land related claimed by local communities within MS1, MS2 and MS3 areas have been mapped, and these maps were prepared through a participatory manner with the local communities. These documented maps are available at the regional office’s land department.

The head of Tanah Putih village also suggested that there are other land owners with traditional rights to the land within MS3 area that should be recognized and shown on the GIS maps. There is an enclaved area at MS3 area that is owned by communities or groups of Tanah Putih. According to MS management and local government land institution, the border of this enclaved area with MS3 area is clearly marked, but the border of land owned by individuals within the enclave should be recognized by communities themselves and identification and marking of these borders is the responsibility of the local government land institution, not the company. However, the company can assist in the facilitating the process of GIS mapping. Based on information from the Land Department of PT MS, the company already has a schedule to help and facilitate local government staff to carry out land surveys, invento- ries and measurement of community land within enclaved areas for land identification.

Criterion: 2.3. Copies of negotiated agreements detailing process of consent.

Non-conformance No. 4 of 12 (Major): Copies of negotiated agreements detailing process of consent regarding traditional rights or other uses of the land by the community are not available yet.

Correction:- The process of preparing Memorandums of Understanding that detail the process of consent with regard to traditional rights or other land uses by the community has been completed for villagers of Tanah Putih, Bangkal and Pondok Damar villages.

Corrective Action : All matters regarding traditional rights or other land uses by the community will be negotiated through the FPIC procedure.

Auditor Conclusions: Closed with ongoing Observations

AUDIT VERIFICATION FINDINGS:

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Documents of negotiated agreement are checked and example inspecteds. There are approximately 87 MOUs regarding to both traditional/customary rights and land utilisation agreements between the company and individuals/communities of Tanah Putih, Pondok Damar and Bangkal villages available in Regional Office level but not available at the estate level. An additional 83 MOUs were prepared and signed after completion of the RSPO main assessment. Documents detailing the negotiation processes, such as participatory mapping process documents, pictures showing locations of traditional rights areas, lists of participants who attend negotiation meetings, and GIS maps, are available and kept by the Land Departement of PT MS. The terms of the MOUs were negotiated and signed upon agreement by all parties. All affected parties such as individuals in charge, heads of villages, customary leaders, community elders and others stakeholders who were involved in the negotiation processs received copies of the MOU documents as well. Examples of the new MOUs signed are as follows: • MOU 029/Mou/BM-PR/XI/2009 made with the Pondok Damar village community, contains 21 points of agreement pertaining to traditional/customary rights access and management of HCV areas within PT MS area. • MOU 030/Mou/BM-PR/XI/2009 with Andi, a villager of Pondok Damar, contains 5 points of agreement pertaining to management of graves as cultural sites, and others traditional rights within PT MS area. • MOU 092/Mou/BM-PR/XI/2009 with Erna Arjuansyah, a villager of Pondok Damar, contains 9 points of agreement pertaining to access to utilize his own rubber plantation land within PT MS area. • MOU 123/MOU/BM-PR/XII/2009 with community of Bangkal village, contains 21 points of agreement pertaining to traditional/customary right accesss and management of HCV areas within PT MS area. • MOU 111/MOU/BM-PR/XI/2009 updated with ED Uwar Johan villager of Tanah Putih, contains 12 points agreements pertaining to utilization of his own land within PT MS area for activities such as sand extraction, and that these activities are carried in accordance with local legal requirements. • The company has 18 copies of MOU documents detailing processes of negotiation between MS company and individual villagers of Tanah Putih, and these villagers also have copies of these negotiated agreements. All villagers who signed the MOUs are aware of, and agree with, the terms of the MOUs.

Criterion: 4.7 Evidence of OHS and first aid equipments available at worksites

Non-conformance No. 5 of 12 (Minor): The company has established an SOP related to identification of PPE used at estates and the mill. However, it was found that the company has not provided appropriate PPE for harvesters at MS2, and this is not in line with regulation UU No.1/1970, article 14.

Correction: 1. SOP No. 3/EHS/(1)/0909 shall be revise to define suitable PPE for harvesters. 2. All harvesters at MS 2 shall be provided with proper shoes as part of their PPE, as well as working equipment.

Corrective Action :- 1. All SOPs related to occupational safety and health will be based on the risk assessment and hazard identification. Data from the occupational injury rates will also be used for determining the right PPE to be used at all operations in all estates.

Auditor Conclusions: Closed, the effectiveness of corrective action will be verified during surveillance audit

Criterion: 4.7 A documented risk assessment for Occupational Health and Safety (OHS).

Non-conformance No. 6 of 12 (Minor): The company has conducted a risk assessment related to activities at the estates and mill. However hazards and risks from construction of buildings/housing/facilities either by the company or hired contractors have not been assessd yet, for example, construction of new housing at MS2 and facilities at new mess at MS1. Due to this, controls of hazards and risks have not been implemented yet, and it was found that several construction workers were not using appropriate PPE, such as helmets and safety belts.

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Correction:- 1. A risk assessment for construction of buildings/housing/facilities will be conducted (by the Safety Offi- cer)

Corrective Action :- 1. Using the results of risk assessment evaluations, proper monitoring and control measures will be carried out to minimize or eliminate any hazards and risks. 2. Risks and hazards related to all new activities and operations will be evaluated. 3. Training will be conducted to all contractors in order for them to observe implementation of the OSH policy in Mustika Sembuluh.

Auditor Conclusions: Closed, the effectiveness of corrective action will be verified during surveillance audit

Criterion: 5.2. Posters and signs warning of the presence of protected species are to be produced, distributed, and made visible to all workers and the community, including guidelines in handling them.

Non-conformance No. 7 of 12 (Minor): There are no warning signs against illegal fishing activities in MS 3 estate, although from patrol records, evidence of illegal fishing activities using poison at river riparian zone were found and recorded.

Correction:- Warning signs prohibiting illegal fishing will be erected at strategic areas within MS3.

Corrective Action :- To prevent or minimize illegal fishing/hunting activities, the management of MS1, MS2 and MS 3 will implement the following:- 1. More warning signs will be erected at all strategic places prohibiting illegal fishing/hunting. 2. Communicate company regulations on prohibition of illegal fishing/hunting activities to all workers. 3. Conduct regular patrolling of all rivers in accordance with the HCV Monitoring and Action Plan.

Auditor Conclusions: Closed, the effectiveness of corrective action will be verified during surveillance audit

Criterion: 5.2. Companies are to appoint dedicated and trained officers to monitor any plans and activities as above.

Non-conformance No. 8 of 12 (Minor): Officers appointed and dedicated to conduct monitoring of plans and activities relating HCV areas or protected areas have not received appropriate training related to these activities.

Correction:- Training related with monitoring and implementation of HCV action plans will be conducted for all relevant personnel of Mustika Sembuluh Estate & Mill by our conservation and biodiversity manager.

Corrective Action:- This is part of an ongoing process to enhance the capability of the Mustika Sembuluh personnel on protecting the HCV areas identified inside Mustika Sembuluh. Such training will be conducted 2 times a year and this training will be part of the training program for Mustika Sembuluh 1, 2, 3 and Mustika Sembuluh Palm Oil Mill.

Auditor Conclusions: Closed, the effectiveness of corrective action will be verified during surveillance audit

Criterion: 6.1. Regular monitoring and management of social impact, with the participation of local communities.

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Non-conformance No. 9 of 12 (Minor): Regular monitoring and management of social impacts, with the participation of local communities has not yet been conducted.

Correction :- 1. The management will review the recommendations of the Social Impact Assessment. 2. A monitoring and management plan will be developed based on the SIA recommendations. These plans will be implemented accordingly.

Corrective Action:- 1. Continuous monitoring and implementation of the recommended community development (CD) program will be carried out. The CD programme will be implemented selectively and progressively based on the recommendations of the social impact assessment.

Auditor Conclusions: Closed, the effectiveness of corrective action will be verified during surveillance audit

Criterion: 6.1. A regular and scheduled environmental management and monitoring report.

Non-conformance No. 10 of 12: The company produces a regular and scheduled environmental and social impact management and monitoring report, but the social impacts covered in this report are not based on the social impacts identified in the company’s social impact assessment report.

Correction: 1. The report on the monitoring and schedule for social impact management based on social impact management plan will be produced by the people in charge of community development.

Corrective Action:- 1. The report on monitoring of the progress of social impact management will be prepared 3 times a year. The progress report will be monitored by the General Manager of the Central Kalimantan Project. A meeting to monitor the progress of implementation will be held once every 4 months.

Auditor Conclusions: Closed, the effectiveness of corrective action will be verified during surveillance audit

Criterion:6.5. Growers and millers provide adequate housing, water supplies, medical, educational, and other facilities for employees where such facilities are not available or accessible.

Non-conformance No. 11 of 12: Water supplies and toilets at housing facilities provided for workers at MS3 estate were found to be insufficient.

Correction :- 1. Sufficient communal toilets will be provided at MS 3 2. Constructions of 3 units of tube wells are underway, while another 3 units of water treatment plants will be constructed at MS3.

Corrective Action:- To ensure sufficient water supplies and toilets for worker in Mustika Sembuluh, the management of each estate will: 1. Regularly check housing conditions of their workers (once every 2 month). 2. Repair immediately any leakages or breakages. 3. Obtain feedback on workers issues through their representatives. 4. Send water samples to the Environmental Management Unit to conduct water quality checks. 5. More units of wells and water treatment plants will be constructed for MS 1 & 2 Estate.

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Auditor Conclusions: Closed, the effectiveness of corrective action will be verified during surveillance audit

Criterion: 6.11. Records of company contributions to the local development.

Non-conformance No. 12 of 12: There is no evidence that community development / CSR programs developed were based on results of consultation with the local communities or results of the company’s Social Impact Assessment.

Correction :- Contribution to local sustainable development will be carried out based on results of consultation with local communities or based on the outcomes of social impacts identified in the SIA.

Corrective Action : 1. More activities will be carried out in accordance with the recommendations of the Participatory Social Impact Management Plan 2010- 2015. 2. Monitoring and evaluation of CD programmes conducted for the local communities will be carried out.

Auditor Conclusions: Closed, the effectiveness of corrective action will be verified during surveillance audit

3.3 Noteworthy Positive Components

Criterion 5.1: Aspect of plantation and mill management,including replanting, that have environmental impacts are identified, and plans to mitigate the negative impacts and promote the positive ones are made, implemented and monitored, to demonstrate continuous improvement. Findings: The environmental aspects & impacts assessment conducted by the mills & estates has been improved with clearer linkages to the environmental management programmes & environmental objectives & targets

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

Findings: Awareness on managements of inventory of hazardous wastes according to legal requirements has improved significantly. Criterion 4.1: Operating procedure are appropriately documented and consistently implemented and monitored. Findings: Good Agriculture Practices are consistently implemented and monitored, and evaluations are regularly carried out to determine the effectiveness of these activities.

Criterion 4.5 & 4.6

Findings: Consistent implementation of monitoring activities for Integrated Pest Management, Best Agricultural Practices, Environmental Performance.

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3.4 Issues Raised by Stakeholders and Findings Pertaining to Issues

The following is a list of issues raised by stakeholders during the stakeholder consultation meeting held at Wella Hotel Sampit on October 19, as well as through interviews with stakeholders held during the audit. The documented response by the management of PT Mustika Sembuluh to each issue and details of verification carried out by the audit team for each issue is described and listed below.

No. Issues Raised Management Response Audit Verification 1 Pondok Damar river was There was a time when the effluent There is an agreement be- polluted by MS mill waste, pond leaked and the effluent contami- tween company and the based on laboratory analy- nated the stream that flowed through people that the company sis results for parameters Pondok Damar Village but that incident must deliver clean water in- such as BOD, COD, pH, oil happened before 2008. Mitigation frastructure. The company & grease content that has measures that were implemented in- has done so but improve- been done by the Techni- cluded the repair of the leakage, and ment is required. The cal Body for Environmental diversion of all effluent discharged to company is waiting for a Health & Prevention of land application instead of into water- written statement from the Contagious Disease (Balai ways, as well as improvement on in- village head in order to ob- Teknik Kesehatan Ling- ternal procedures on effluent man- tain management approval kungan & Pemberantasan agement. In addition to the above, the for the budget plan, but the Penyakit Menular - company has compensated the af- villages and village head BTKLPPM) Banjarbaru. Mr. fected community both financially and said that the letter has not Rumdan Mahmud, the also by supplying clean water. As part yet been prepared. Head of EIA Bapedalda of our responsible practices, we moni- Kotim, informed this result tor the quality of the stream that flows to Head of Dinkes Kotim, through Pondok Damar village on a Dr. Yuendri Irawanto. regular basis. There is an ongoing The management has commenced A conflict resolution proc- 2 conflict on traditional land with the process of finding a conflict ess is in place. between the company and resolution. So far we have not A mechanism has been es- Mr. Tarang and Mr. achieved an agreement yet. The case tablished and is accepted Umbung Jahun of Tanah was taken to the customary court in by the affected parties, Putih village, Telawang September 2008, the customary lead- however the amount of Subdistrict, since 2003 that ers decided that the compensation compensation has not yet has not yet been resolved based on customary laws should be been agreed upon by all by Mustika Sembuluh. Rp 64 million for Umbung and Rp 25 parties. million for Tarang. But both men re- A conflict resolution jected the stated amount because they mechanism that accepted felt that the sum was not adequate. by both parties was estab- In spite of the rejection, the company lished again on December remains committed to further negotia- 18 2009. It was agreed that tion. The men then requested for com- both parties would have a pensation amounting to IDR mediator to facilitate the 750,000,000 for Tarang and IDR 1 bil- negotiation process and lion for Umbung Juhun. The claimants schedules of meetings and have also lodged a report against the negotiations would be set company to the district police depart- up by both parties in timely ment through the office of Ridwak Ke- manner. suma. Later the company proceeded with another round of negotiations in the presence of the NGO, SOB-WALHI and the affected parties changed their demand to 7 pieces of Melawen plates (Umbung) and 3 pieces of Melawen plates (Tarang) without any reason. The management is aware that it is not possible to meet such demand because the Melawen plates are antique and rare. In view of this, Tarang and

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No. Issues Raised Management Response Audit Verification Umbung will accept monetrary compensation equivalent to Rp 250 million for every Melawen plate. We need to get approval from the top managment before any agreement can be reached. The management is committed to resolving the case as long as the compensation demanded is logical and realistic. Mustika Sembuluh’s policy PT Mustika Sembuluh has complied The audit team verified that 3 on temporary workers is with the relevant regulation, in particu- the company complies to not implemented in accor- lar, Ministerial Decree No the government regulation, dance with the Indonesian 100/Men/2004. The company released Kepmen 100/Men/VI/2004. Worker & Transmigration an internal memorandum 007/MS-HRD Fortemporary workers that Ministry Regulation no. VIII/2009 with on guidelines on perma- work for 21 (twenty one) 100/Men/VI/2004 clause nent workers dated 10 August 2009, days or more within 3 10, and clause 11. Tempo- which states that the status of tempo- (three) consecutive months rary workers work for the rary workers that have worked 21 or more, the company have company more than 21 (twenty one) days or more within 3 to changes their status to days continuously and (three) consecutive months or more status of permanent some have even worked will be upgraded to permanent worker worker, as required by this for the company more than status. regulation. 3 years, but are still classified as temporary workers. Payments for employees PT Mustika Sembuluh will always No verification required as 4 meet the minimum wage comply with relevant laws and regula- this is a positive comment. defined in the Central Ka- tions, including minimum wages of limantan Governor regula- workers defined by the local govern- tion for minimum standards ment, and workers insurance of wages. Workers are also (JAMSOSTEK). insured under Jamsostek, in accordance with legal requirements. The housing facilities pro- The temporary housing referred to in Workers of PT MS stay at 5 vided for workers or em- this issue is not under PT Mustika houses provided by com- ployees are only temporary Sembuluh, but under Karunia Kencana pany with sufficient infra- housing and are not suffi- Permaisejahtera (KKP), another com- structure except for clean cient for the workers. pany under Wilmar’s Central Kaliman- water supply, which is lack- tan Project. Therefore, this issue is not ing, especially for several relevant to this certification audit. houses in MS 3 Estate. The company is currently developing new sources of clean water that will be ready at the end of 2009. Payment for over time is The effective guidelines on overtime in Payments made to workers 6 not sufficient because PT Mustika Sembuluh are in line with of PT MS for overtime work sometimes worker work the laws and regulations, including the are paid fairly. This is evi- overtime for 3 hours, but calculation of over time. dent in the payment slip only one hour of overtime The guidelines on over time are de- documents of worker and is recorded by their man- fined in the company regulations, part interviews with workers of dor or coordinator. 6, first sentence to seventh sentence. PT MS. The mandor Workers specialising in certain work brought up in this issue may be requested to work beyond the (which was raised during normal working hours and they will be the stakeholder consulta- paid accordingly for working beyond tion meeting) was not from the normal hours. (as per the com- PT MS, but from another pany’s regulation, Part 5 Sentence 6) company not within the The mandor brought up in this issue scope of certification for PT was most likely not from PT MS but MS.

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No. Issues Raised Management Response Audit Verification from Tangar village and working for another company under Wilmar. Teachers of Pondok The company does not have the au- The company’s response 7 Damar school are paid by thority to upgrade and pay the salary of was accepted. MS below the Minimum the temporary teachers. Teachers are The salary of local teach- Wages Standard regula- paid by the local government and un- ers is the responsibility of tion. der the responsibility of the school’s the government. Additional management. The company only pro- fees or salary for local vides side income to these teachers in teachers are provided by view of their low income. PT MS as part of their CSR programme. However, the company will look into hiring permanent teachers paid by the company, not by the government (refer to Issue no. 40) MS purchased books for Provision of books is not only given to The company’s response 8 Pondok Damar school SMP Pondok Damar but also to SMP was accepted. without consulting the Bangkal, SMP Tanggar, and SMP Tan- school, so the books pro- jung Rangas. These other schools vided did not meet the were able to enjoy the provision and needs of the students. did not complain. As always, when books are procured, we will always consult the respective schools. In future, we will approach the school heads directly before procuring books. Payments to contractors The issue was raised by Hapsa Tjong, The company’s response 9 are constantly up to 3 a contractor which has completed their was accepted. Currect re- months late. As a result, project in PT Mustika. As such, he is cords show that payments payments made to the con- no longer being paid by the company. made to contractors are tractor’s workers are also This is an old issue, and the company made on time. late. is ensuring they no longer make late payments to contractors. 10 The company has very few The opportunity for local cooperatives The company’s response partnerships with local to have casual contracts/long term was accepted. people. For example, only contracts with the company will depend a small number of local en- on the needs of the company. We al- terpreneurs have success- ways direct them to the operating units ful bidded for projects in that require the services. Sometimes the company. the local co-operatives cannot meet the company’s requirement and guidelines, which is why their bid for the contract is not accepted. The company must obtain The company has obtained the Forest The company’s response 11 a government letter on Release form in accordance with the was accepted. land release, according to Ministerial Decree Forestry RI No. the regulation from the 695/kpts-II/1996 dated 4 November Ministry of Forest, No. 60, 1996 for 15,994 ha of land, and this 2008. letter was authorised by the Minister of Forestry Djamaludin Suryohadiku- sumo.

From land measurements The company will write in to Seruyan The company’s response 12 carried out by cadastral district office to seek clarification on was accepted. land surveyors, the Na- which area of land has been enclaved The status of this matter tional Land Agency has and will mark this on a map for will be verified during the enclaved 1,300 Ha land reference. We are not aware of any next surveillance audit. within PT Mustika Sembu- area within PT Mustika Sembuluh that luh area. was enclaved by the National Land

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No. Issues Raised Management Response Audit Verification Agency.

The company should not The company only develops land on The company’s response 13 develop plantations on land which they have the required land use was accepted. bought over by the com- titles (HGUs). The company has a land pany but located outside of permit (Izin lokasi) for 17,500 ha of the coverage of their land land is based on the decree by the use titles (HGU). There are Land Department Head ( Kepala Kan- some ongoing land con- tor Pertanahan Kabupaten Kotawar- flicts in such areas. ingin Timur) of East Kotawaringin Dis- trict: 222/460/BPN/II/1994 (Surat Keputusan Kepala Kantor Pertanahan Kabupaten Kotawaringin Timur) dated 22 February 1994 that was signed by the Land Department Head, Dr. Wardy Ambung The Land Permit map, comprise two maps: i) South of the government road, an area of 7,330 ha which is covered under 5 land use titles (HGU) as follows: 166.31 ha - 27 June 2001; 144.88 ha - 27 Sep 2002; 5169.28 ha - 29 May 2007; and 1990.32 ha - 04 June 2007. Total area of these land use titles is 7470.79 ha. ii) North of the Government road, about 7,900 ha. Currently, the company is still waiting to obtain the land use title after applying for it to the Cen- tral National Land Agency office on 14 April 2009. The land use title covers land area of 6,188.80 ha, 723.53 ha and 648.40 ha, which makes a total area of 7560.73 ha and this does not exceed the total land permit area (7900 ha). The company any should For management and protection of wa- The company’s response 14 improve the condition of ter bodies and streams within the was accepted. the river buffer zones in company’s area, the company has order to protect the rivers. conducted the following : - Established procedures on the management of water bodies or streams bordering the neighbouring areas. - Conducted training on the SOP to relevant personnel who are working within the area such as maintenance /upkeep workers involved in sprayer- ing, manuring and slashing work. - Demarcation of riparian boundaries either through pegging or painting of palm trees planted within the riparian zones. - Putting up of sign boards to inform workers/ people not to carry out

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No. Issues Raised Management Response Audit Verification chemical spraying, slashing and manuring within the riparian zones. - Plans to conduct audit on proper implementation of the SOP in the management of riparian zones. - Taking water sample periodically at 6 month interval as part of the implementation of the RKL and RPL. It is very difficult to find Based on the analysis results of water The company’s response 15 fishes in the river surround- samples taken from the sampling was accepted. ings PT Mustika Sembu- points near Pondok Damar every 6 MS company give access luh’s area. This may be a months, the quality of water is deemed to local communities to result of pollution from the to be good. carry out traditional rights company’s activities that In addition, based on the results of an activities within the have killed most of the fish. aquatic survey carried out at the river, company’s area as defined 17 different species of fish were found under the MOU in PT Mustika Sembuluh’s river. Apart agreement. from that, some species of birds found included the egret (Egretta sp), blue- eared kingfisher (Alcedo meninting), stork-billed kingfisher (Pelar-gopsis capensis), White-breasted Waterhen (Amaurornis phoeo-nicurus), lesser coucal (Centropus bengal-ensis), and greater coucal (Centropus sinensis) which all feed on fish, so we can indirectly infer that there is still a rich presence of fish in the stream.. From interviews with workers, the workers mentioned that they still continue to fish in the streams within the estate surroundings to supplement their daily needs. The company makes ef- No response as this is positive issue. No verification required as 16 forts to meet the needs of this is a positive comment. villagers, for example on education and school development. It is better for the company Suggestion was noted. No verification required as 17 to involve people in this is a suggestion. smallscale (plasma) revi- talisation programs. The latest edition of the The HGU owned by the company for The company’s response 18 spatial plan of Central Ka- this area was based on the regulation was accepted. The audit limantan province is not Perda Kalteng No 8 Tahun 2003, but team is monitoring the pro- available yet, only the 2003 until now has not been approved by gress of this case and the edition. The local govern- DPR-RI (Dewan Perwakilan Rakyat – decision from the government is conducting an audit Republic Indonesia) and Forest Minis- ment. to determine the number of try. *Note: According to Indo- existing land cultivation The audit on all permits issued by the nesian law, the company is rights titles (HGU titles) local government has not been con- allowed to operate without that are covered in the ducted yet (at time of audit). But based an approved HGU as they spatial plan of the province on the letter from the Head of Agricul- already have an approved for preparation of the city. ture Department for Central Kaliman- location permits (Ijin lokasi) Should results of the audit tan (Surat Kepala Dinas Perkebunan and Plantation Business show that the company’s Kalteng Nomor 525/4479/KSP/Disbun) Permit (Ijin Usaha Perke- area is located within pro- dated 19 October 2009, the team plans bunan/IUP). ductive forest areas, this to conduct the audit on 22 to 26 Octo- may result in the local gov- ber 2009.

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No. Issues Raised Management Response Audit Verification ernment withdrawing the company’s HGU in order to re-establish that area as a forest. Our village is located near Not relevant to the RSPO Certificaton No verification as this area 19 PT Mentaya Sawit Mas. Audit for PT MS as this area where the where the road was con- Relationship of our village road was constructed is located out- structed is located outside with the company is good, side of the company’s area. of the company’s area. even thought there is an issue of a road being developed across Baampah village. It is suggested that Mustika Sembuluh become more effective and efficient in increasing welfare for the people. Note: The road mentioned above is 2.5 Km long (including a watershed) How about the company’s Refer to the response no 14 on the The company’s response 20 management of river management of river riparian zones was accepted. riparian zones and The management of the riparian zones Sembuluh Lake? of Sembuluh Lake is not by the com- Chemicals used at these pany because it is too far from where river riparian zones may the company is operating. Morever, the pollute the river water and direction of water flow from the com- impact the community pany’s land holdings is not going into which relies on their Sembuluh Lake. (PT Mustika Sembu- fisheries for income. luh is not part of the water catchment of Sembuluh Lake) Please refer to the location map of PT Mustika Sembuluh and their surroundings for reference. How about management of Our laboratory is new and only started The company’s response 21 hazardous wastes operation at the end of August 2009. was accepted. generated from the mill’s Hence, there is little or negligible haz- laboratory? Where does ardous waste presently. Nevertheless, PT Mustika Sembuluh we have built a special and separate dispose of these wastes? waste disposal area for such wastes. We will dispose these wastes according to the SOP based on the legal requirements. BLH Seruyan, the new The company has submitted the RKL – The company’s response 22 district office, has not been RPL report for semester II 2008. The was accepted. received the company’s report on the implementation of RKL- latest RKL and RPL RPL for semester I for year 2009, has implementation report. been sent. They request the company to send the report to them. Training related to We have trained the workers on the The company’s response 23 environmental protection environmental aspect of plantation and was verified and accepted. must be given to plantation mill activities. The sort of training and and POM workers. awareness is in accordance with their presribed activities.

Examples of trainings provided include: - Awareness and training on riparian zone management for the maintenance/upkeep workers who are doing

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No. Issues Raised Management Response Audit Verification spraying, slashing and manuring work. - Awareness and training on scheduled waste management for staff who are responsible for the store and workers working in the store. - Awareness and training on the management of HCV areas to relevant staff and workers. - Awareness and training on the identification of environmental aspects and impacts for estate managers and staff. - Awareness and training on types of protected wildlife species as stipulated in government regulation RI no 7 tahun 1999 and knowledge that they will be fined if they have contra- vene the Law (Undang-undang No. 5 Tahun 1990 ) on biodiversity conservation and ecosystem. - Awareness is achieved through the putting up of wildlife posters and about 40 of these posters have been exhibited in public area such as housing sites, offices, main roads, and surrounding villages such as Pondok Damar, Tanah Putih, and Bangka villages. All plantation companies The mapping of water ways/streams in The company’s response 24 under Wilmar group, not PT Mustika Sembuluh has been com- was verified and accepted. only PT MS, has to pleted. produce an inventory of data on rivers within their HGU areas (including data on river width, river lengths, etc). River riparian zone areas should be planted with hardwood trees. The company should make Every year, before the dry season The company’s response 25 efforts to socialize to the begins, the company will put up was accepted and it was surrounding community not signboards/banners as part of their verified from field visits that to carry out land burning awareness campaign to surrounding there is no evidence of before the community communities not to do open burning land burning having been plants paddy fields or other when developing their farm land. carried out. plants. CKP Wilmar Group has an Indonesian tagline to discourage land burning: ”CAMKAN” (= Cegah AMankan PadamKAN), which means Prevent, Control and Put out. How are the mill’s In the treatment of mill effluent the The company’s response 26 management of palm oil palm oil mill uses a biological system was accepted and it was mill effluent, hazardous (anaerobic, aerobic and facultative) in verified during the audit wastes, as well as its a lagoon set up. that the company manages monitoring and its reporting The mill effluent after being treated in their hazardous wastes in efforts to government? the lagoon to meet the legal accordance with legal re- requirement based on Kepmen LH no quirements. Although the 18 tahun 2003 the treated effluent will company’s permit for land

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No. Issues Raised Management Response Audit Verification be channeled to the oil palm fields for application for POME has land application. not been approved, it was The company is currently conducting 1 verified that application for year research to study the benefits of the permit was made to the applying treated effluent to the field. Bapedalda. The company We are applying for the permit to carry also conducts monitoring of out land application of treated effluent effluent BOD to ensure in the oil palm field. they meet the legal re- Currently, the company submits quirements, and govern- progress report on a 3-months basis. ment officials from the local So far we have submitted 4 reports to environmental department the BLH office of Kotawaringin district. (Bapedalda) conducts The company adopted the concept checks to ensure this ofrReuse, recycle and recovery in the management of its schedule waste. The company’s temporary storage of schedule wasted is in line with the government regulations (Keputusan Kepala Bapedal No 1 year 1995 on methods and regulations on storage and collection of hazardous wastes). As part of schedule waste management, the schedule wastes that are generated and utilized are recorded in line with government regulations (Peraturan Pemerintah RI No. 18 year 1999 on management of hazardous wastes) For scheduled waste that cannot be recylce, the company has engaged third parties who are authorised to handle these schedule wastes. They have the relevant permits to collect, store and transport these schedule waste as stipulated in the government regulation (Peraturan Menteri Negara Lingkungan Hidup No 18 year 2009on licensing for management of hazardous wastes) Reporting on the management of hazardous wastes is conducted at every 3 month interval in line with the government regulation (Peraturan Peraturan Pemerintah RI No. 18 tahun 1999). The report is submitted to the BLH Kabupaten Kotim office. To date, the company has submitted the schedule waste reports during the period stated below :

Period I (January – March 2009) Period II (April – June 2009) Period III (July – September 2009) One of the RSPO We have been disposing of our organic It was confirmed from re- 27 requirements is reduction by-products such as EFB and decanter cords and during site visits of usage of chemicals, cake solid by applying them appropri- that empty fruit bunches including inorganic ately in the oil palm fields. For palm oil and other mill wastes are fertilizers. Does the mill effluent (POME) we are making full applied based on re- company have any plans to use of it for field irrigation and fertiliza- comendations from the

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No. Issues Raised Management Response Audit Verification use more organic fertilizers tion in selected fields near the mill with EMU division. Use of to reduce usage of suitable soils. However, we are now in treated POME for land ap- inorganic fertilizers? If yes, the process of setting up a composting plication has begun since what is the standard quality area for these useful organic by- July 2008, and still pending of organic fertilizers that products and will formulate a standard approval from the local will be used by Mustika according to our estate requirements. government (refer to issue Sembuluh? no.26 above) 28 Lorries transporting CPO The CPO dan palm kernels from PT The company’s response and FFB are damaging the Mustika Sembuluh mill are not sent to was accepted. roads along Sampit to Kuala Pembuang. Instead, it is deliv- Kuala Pembuang. ered to Bagendang Sampit and Pang- Clarification on whther PT kalanbun. MS lorries use this way or not must be clarified. If not, the company should inform stakeholders on their management of traffic and transport, which may result on damage of roads. 29 Mustika Sembuluh has No response as this is a positive issue. No verification required as implemented OHS this is a positive comment. management. They already received an OSH reward “1st Place Winner for Implementation of OSH”. The company has implemented use of PPE, equipment certification, reporting of hazardous materials, and medical check ups.

30 How does PT Mustika Based on the local regulation UU no. From on-site checks, it was Sembuluh ensure that 1 year 1970 and Permenaker no. 5 found that the PPE pro- proper PPE are provided to tahun 1996, PT. Mustika Sembuluh vided for sprayers, chemi- their employees? (for has established a Health and Safety cal mixers and manurers example, chemical policy and implemented a was sufficient. However, sprayers) management system for creating a the PPE for some workers healthy and safe working environment at MS2 such as loaders at the work place. and harvesters was found to be improper and not One way of demonstrating this is provided by the company through the use of Personal protection as required by the regula- equipment (PPE) for every type of tion UU 01/1970. This was work carried out in the operations of issued as non-compliance PT Mustika Sembuluh. no. 5 of 12 as described in Section 3.2 above. This The determination of appropriate PPE minor non-conformity will is based on the HIRARC (Hazard be verified during the next Identification, Risk Analysis, Rating surveillance audit. and Control) for every work activity performed within the plantations and mill. Evidence of this can be inferred from the following documents found at the estate and mill:

Estate : SOP 11/EHS/(0)/0409 Risk Assess- ment; SOP 03/EHS/(1)/0909 Personal

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No. Issues Raised Management Response Audit Verification Protective Equipment; GUD 01/EHS/ (1)/0909 Guideline on the use PPE.

Mill: PROS/MSPOM-EHS-003 Identification on the aspect and impact of LK 3; PROS/MSPOM-EHS-014 Personal Protection Equipment.

PT. Mustika Sembuluh provides appropriate PPE for each respective work activity and makes these PPE available at all time

The distribution and issuance of PPE to the relevant workers are recorded as proof of implementation.

When the PPE are faulty and have exceeded its shelf life, they are replaced accordingly. The faulty or expired PPE are returned and are replaced with new PPE. 31 How does PT Mustika In the implementation of its Safety and From on-site checks, it was Sembuluh ensure that Health policy, PT Mustika Sembuluh found that the PPE pro- appropriate PPE are being ensures that its workforce understands vided for sprayers, chemi- used by the employees & the functions of each type of PPE that cal mixers and manurers the employees understand is provided. This is done through a was sufficient. However, why PPE needs to be structured training and awareness pro- the PPE for some workers worn? gramme among the workforce in the at MS2 such as loaders estates and mills on the use of PPE. and harvesters was found to be improper and not The awareness campaign on the use provided by the company of PPE is done during the morning as required by the regula- muster (row call) or safety talk con- tion UU 01/1970. This was ducted each day before the com- issued as non-compliance mencement of work. no. 5 of 12 as described in Section 3.2 above. This To ensure that all PPE are in good minor non-conformity will working order, the management will be verified during the next conduct inspections and enforce the surveillance audit. use of PPE to ensure that the workforce wears appropriate PPE as required.

In addition to the above, during the Safety and Healthy committee meeting that is conducted on a quarterly basis, the importance of PPE is discussed. Issues that are usually discussed include the proper use, replacement and non-compliance against government regulation Permenaker no. 4 tahun 1987. The minutes of meeting are submitted to the Department of Human Resources.

Asides from this, the management of PT Mustika Sembuluh conducts both

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No. Issues Raised Management Response Audit Verification internal and external audits, such as RSPO audit, such as what is being done here.

The establishment of such auditing systems is a way of monitoring and evaluating the safety and health management system of PT Mustika Sem- buluh. . 32 Medical checks conducted The mentioned medical checks are The company conducts for workers must be conducted by the company as re- medical check ups for all relevant to their work quired. new workers prior to start- activities. The company ing work for the Company. should conduct 3 types of Periodic medical checkups medical checks ie. pre- are conducted for workers employment medical who work in high risk areas checks, regular medical such as sprayers, manure checks and special check applicators, mill workers, ups. workshop workers and paramedics. The company has allocated a budget for the clinic to buy ‘choli- nesterase’ tests to be used as blood tests for sprayers. 33 How does PT Mustika In every Contract Agreement with the Through on-site checks, it Sembuluh ensure that their contractor, its stated in Part 3, sen- was found that training re- suppliers / contractors also tence 5 that ” The contractor is regarding the company pol- comply with the company’s quired to provide personal protective icy, company regulations safety & health procedures, equipment and first aid kits for its and contractor activities such as those related to workers”. Part 8, sentence 6 states are conducted through use of PPE? that ”In line with the requirements of meetings. The company the RSPO Principles and Criteria, it is provides training related to mandatory for all contractors to comply their system of FFB trans- with the relevant regulations on labour, portation from plantation to health and safety. They are also re- mill, security system, plan- quired to comply with the local envi- tation boundaries, patrols, ronmental regulations that covers zero and health and safety re- burning, management of schedule lated activities to the FFB wastes (oil and other schedule transportation contractors. wastes).” Records of these trainings are maintained. To monitor the implementation of these requirements by contractors, PT Mustika Sembuluh will conduct inspections and issue reminders to contractors to comply with safety and health regulations as well as environmental regulations. 34 Additional food (milk) Milk is provided free of charge to According to interviews should be given to workers in regular direct contact with with female sprayers in the sprayers agrochemicals, such as sprayers and field at MS2, the company manurers. Milk, in addition to being an provides milk as extra food additional food supplement, also dou- for females sprayers (one bles as a binding agent to neutralize can per week). the poisonous effects of chemicals. This is in line with the company’s internal directive to provide milk to all workers handling chemicals, which was issued in Internal Memorandum No.

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No. Issues Raised Management Response Audit Verification 014/GM/VIII/2009. 35 Since PT Mustika Sembu- The company will officially inform the The company’s response luh was established, the village head or the enquirer to submit was accepted. company has not provided location maps and relevant data on the plasma (small estates) for co-operatives/KUD plasma in order to surrounding communities establish their legal status. such as those from Sem- buluh Village.

36 The company does not The company will officially write to the The company’s response is have any sustainable eco- enquirer to enquire what sort of pro- fair. The company currently nomic development programmes they wish to be established has no economic develop- gram, unlike other planta- in the village and which co-operative ment program for local tion companies such as PT we should work with. We will not communities or small es- Erna Djuliawati which has entertain personal requests. tates. development programs in the form of chicken farms and vegetable farms. 37 The company provides in- The level of assistance to be given to The company’s response is sufficient funding for edu- the schools should be within the fair. The company is not cation and infrastructure means of the company. The company required to provide such aid. The company also has provided housing for the teachers fuding, and it was verified does not provide scholar- and honorary payments to more than that the company is al- ships for students. 10 teachers. We are continuing to pro- ready carrying out other vide stationary and books to the stu- CSR programs. dents. At the moment we have no plans to give scholarships yet because the company is providing assistance to about 15 villages. 38 The company is employing The total number of workers in PT MS The company’s response is very few local people. that originate from Central Kalimantan fair. is 995, out of a total workforce of 3,403 (29.2%). Whenever the company has job vacancies, they will produce a letter to announce this to the nearby villages Pondok Damar, and Sembuluh. Exam- ples of such letters are available.

40 Suggestion: The company Hopefully, in going forward, we will be No verification required as should hire more perma- able to hire more permanent teachers this was a suggestion. nent teachers for PT MS’s at PT Mustika Sembuluh’s schools schools 41 Suggestion: The company Allocation of slots for practical training The company’s response should increase the num- provided to undergraduate students was accepted. No verifica- ber of locations and opoor- depends on: tion required as this was a tunities for stundents of suggestion. SNK Kertapati to have 1. The type of discipline and qualifica- practical trainings, eg. tion of undergraduate. For instance Trainings at the CPO mill, if the undergrad is studying agron- Environmental Manage- omy, we will place him in the estate ment Unit, or the plantation but if he is studying engineer- workshop. ing/workshop, than we will place him in the workshop and if he is studying adminstraion, than he will be placed at the office. 2. Regarding accomodation, the company will try to provide appropriate accomodation and therefore request early confirmation on the availability

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No. Issues Raised Management Response Audit Verification of accomodation from the respective operating units where the undergrad will be placed. 3. The availabilty of people who can provide guidance to these under- grads. 42 PT Mustika Sembuluh has - PT Kerry Sawit Indonesia has pro- No verification required as enhanced educational op- vided assistance to teachers in SMK this is a positive issue. portunities and facilities Kertapati school. through the following: - Specialised transportation cannot be - Hiring of 3 permanent provided at this point because this de- teachers pends on the availability of transporta- - Provided transportation tion within the company. for school students to the - Areas of practical trainings for their locations of practical agronomy within the estates are de- training. cided by the respective Estate Manag- - Provided package books ers. for students - Assistance in terms of provision of - Accepted students for in- books can be considered (this will be ternship. co-ordinated with Bina Mitra cooperation) - The company will give similar opportunities to other schools, such as SMK Kertapati. For instance, from 6 July to 12 September 2009, 15 students are currently undergoing practical training in the company. 43 The company has prom- Each time the company meets with the The company’s response ised to established plasma local community representatives, the was accepted. (small estates) for the local company has informed them that they communities but this has are ready to assist the local communi- not been carried out yet. ties in developeing plasma as long as The community of Tabiku this is on the community’s own land village is hoping that the and this land is free from any ongoing company will establish land conflicts. some small estates for them as this will guarantee The company will send out letters to their economic provision on village heads/enquirers to request for the long term. It will also relevant data, location maps, data on assist the governent in re- co-operatives and KUD plasma in to ducing poverty and en- establish their legal status. hancing the economy of the local communities. 44 There are several areas of These areas are actually located out- No verification required as community land located side of PT Mustika Sembuluh’s area this issue is not related to adjacent to PT MS, KKPS and thus not relevant to this certifica- PT MS. II and KKPS III which over- tion audit. The issue involves other laps with the company’s companies under Wilmar Group and (Wilmar Group) land. resolution of these issue is ongoing. 45 The company has previ- These are old cases. Currently the The company’s mechanism ously acquired land but company has mechanisms for the for land compensation is in provided only partial or no identification, calculation and compen- place, appropriate and be- compensation for the land. sation for loss legal/customary rights of ing implemented for PT This land was cultivated the land which is accepted by parties Mustika Sembuluh as de- and planted without resolu- are in place. These mechanisms are scribed in Section 3.1 un- tion of the conflict. being implemented by the company to der Criteria 6.4. resolve all ongoing land dispute cases. 46 There are sandy areas The company has done some planting The company’s response within the company’s land on sandy soils in MS3, but has since was accepted. Part of the

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No. Issues Raised Management Response Audit Verification that are unsuitable for ceased planting on sandy soils due to sandy area in MS3 has not planting but have been high risk of soil degradation. been planted and is under planted with oil palm. research 47 People that apply for This issue pertains to other companies No such cases were found plasma (small estates) out- under Wilmar Group, not PT Mustika during verification. side the company’s HGU Sembuluh. area usually face difficul- ties or do not get any response from the company. 48 The company has not pro- The companies mentioned are other No verification required as vided compensation for companies under Wilmar Group, so issue is not relevant to PT land acquired from Kawan this issue is not relevent to PT Mustika MS. Batu Village, especially Sembuluh. land under PT BSK2, MSM 1 and MSM 2. 49 The local communities are The company has done some planting The company’s response frequently tricked by the on sandy soils in MS3, but has since was accepted. Part of the company, which claims ceased planting on sandy soils due to sandy area in MS3 has not that certain areas are high risk of soil degradation. been planted and is under sandy areas that cannot be research. The complaint cultivated, but the company from the communities were secretly plants and culti- noted, but as the planted vates these areas. area belongs to the company, this was not deemed as a significant issue. 50 There are many cases in These issues pertain to other compa- The company’s mechanism which the company has not nies under Wilmar Group and not rele- for land compensation is in completed their process of vant to PT Mustika Sembuluh. The place, appropriate and be- resolving land disputes or process of resolution of these issues at ing implemented for PT providing agreed compen- other companies under Wilmar Group Mustika Sembuluh as de- sation for the land, but they is in process. scribed in Section 3.1 un- began cultivation of the ac- der Criteria 6.4. quired areas. Meetings are held with local communities before operational activities are carried out and meetings of these meetings are documented. 51 Wilmar Group is currently PT Mustika Sembuluh has no evidence There is no evidence of PT acquiring land from villag- of such claims being made. MS acquiring this new ers of Kawan Batu and land. As described earlier, Tanah Putih villages and the company has a these issues, and the ac- mechanism for land acqui- quisition process has not sition in place that is being been completed. For ex- implemented. ample, land is being acquired from Mr. Yongsil (land being acquired by PT Mustika Sembuluh II), Mr. Siber and Mr Rahmadi (land being acquired by PT Bumi Sawit Kencana), Mr. Handoko, Mr. Ilu Jiwes and Mr. Ajis (land being acquired by PT BSK). 52 The company removed two The company representatives in The company’s response farms and a graveyard charge of conducting identification of was accepted. form land at at Pondok graveyard areas is being changed, and Damar Village, but there identification of graveyard areas is cur-

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No. Issues Raised Management Response Audit Verification was no agreement be- rently in progress. Going forward, the tween the company and management team will conduct a the village on the removal meeting with the new team. The man- of the graveyard. agement of PT Mustika Sembuluh just received a letter on the formation of the new team on 21 October 2009. 53 The people of Pondok The company has their AMDAL docu- It was verified that the Damar village are wonder- ment and any local community mem- company has their AMDAL ing if PT Mustika Sembuluh bers who wish to view this document or document. The manage- has their AMDAL docu- inquire on progress of its implementa- ment response on the is- ment prepared. In addition, tion may make a request to the com- sue of the waste facility the people of Pondok pany.The company is transparent on was accepted. Damar village are still issues related to the AMDAL because traumatized by an accident this is a public document that is acces- in which a waste facility as sible to anyone as required under local PT MS mill collapsed last regulation (UU No 23 year 1997 clause year. 5 regarding environmental management). Besides that the company has already registered their AMDAL document as one of their public documents which can be accessed by anyone who wishes to seek information on the company. PT MS’ AMDAL agreement no. 16/Komisi-Kotim/IV/2003 and a letter of transparency on the AMDAL document has been given to the village head of Pondok Damar village on March 16 2009. Ref: 362/ADM&PR/3 /2009. Currently the company is working together with CV Green Enviro to revise their AMDAL document due to a number of changes in its operational acitivities, such as land application of mill effluent, setting up of a Palm Ker- nel Crushing plant, establishment of an integrated laboratory and storage facil- lity for schedule waste management.

It is understandable why the villagers of Pondok Damar are still traumatised by the accident that had happened. The company is managing the effluent well and making efforts to ensure that the incident of 2008 will not happen again by defining and implementing safer management practices as follows: - Forming a new standard operating procedure on effluent pond management - Forming an emergency response plan on how to manage leakage. - Implementation of the procedure. - Maintainance of the effluent pond. - Planting of the cover crop (mucuna bracteata) and vertiver grass besides the effluent pond to reduce soil erosion. - Strengthening the effluent pond

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No. Issues Raised Management Response Audit Verification bunding by reinforcing the wall where necessary. 54 The road linking PT In line with the agreement, the gov- The company has a docu- Mustika Sembuluh to ernment road has now been reinstated mented MOU agrrement Tabiku Village and Pondok back to its old function to allow access with the local communities Damar Village has been by the local communities. But unfortu- allowing them access to disconnected, and the vil- nately, there are some communities these land areas. lagers requested that this who are planting oil palm in the area road be reinstated. and this has disrupt the process of reinstating the road. Until the local communities are willing to uproot the planted palms, this problem cannot be resolved. 55 PT Mustika Sembuluh In line with the agreement dated 9 Oc- The company’s response should not establish a first tober 2008, the company will not es- was accepted as this was level secondary school tablish a secondary school within PT agreed upon by the local (Sekolah Menengah Per- Mustika Sembuluh. community of Pondok tama – SMP) within their Damar Village. plantation area because Pondok Damar Village already has a secondary school. 56 PT Mustika Sembuluh The company has an SOP for recruit- The company’s response must recruit workers from ment of workers. It is defined in this was accepted. people of Pondok Damar SOP that non-skilled workers required Village based on their level a minimum qualification of first level of education. secondary school education (SMP), however, skilled workers must have completed at least their higher secondary school education (Sekolah Me- nengah Atas – SMA). The company’s recruitment process is also dependant on their current requirements. Most of company’s workers from Pondok Damar Village are only qualified to be unskilled workers, and only a small portion makes up skilled laborers. 57 PT Mustika Sembuluh In progress as stated in response to The process of compensa- must pay compensation for stakeholder issue no. 52. tion of a graveyard area removal of a graveyard in- within the company area is side the company area. in place.

58 PT Mustika Sembuluh The company has taken a step further The company’s response must provide a clean water in this request and even went to the was accepted. No verifica- facility at Pondok Damar extent of installing water taps for Pon- tion required as the com- Village. dok Damar village. Even so, we are pany is not obligated to still receiving complaints from the vil- provide this facility to the lagers, and we have requested that the villagers. village head submit a written complaint to the management of PT Mustika Sembuluh, but this has not been received. We will conduct a meeting with the villagers of Pondok Damar and we will implement the initial agreement that was finalised. 59 The company must remove The company is managing their river The company’s response all palm trees located 50m riparian zones in accordance with local was accepted. from the roads and river regulations. It should be noted that banks to form riparian there is no rivers in PT Mustika Sem-

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No. Issues Raised Management Response Audit Verification buffer zones. buluh except for natural waterways or streams that are not large enough to constitute a river. The company has watershed maps for reference. Never- theless the company understands the importance of maintaining water quality and therefore has developed an internal environmental policy to manage all riparian zones along natural waterways or streams within its land holding.

In the management of riparian of river, please refer to the response to stakeholder issue no. 14. 60 The company should not The company has never restricted, The company has an MOU restrict people from enter- prevented or prohibited people from agreement local communi- ing the plantation area in entering the plantation area to check ties access to their land order to see their enclaved on their land. according to their tradi- land. tional rights. 61 The people of Pondok The company has paid the fine. This issue is in line with the Damar Village has made a agreement between com- claim for a cultural fine pany and people of Pondok from PT Mustika Sembuluh Damar Village. There is called the Mapas Lewu evidence that the company fine. has paid this fine.

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

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

Signed on behalf of PT Mustika Signed on behalf of TUV Rheinland Malaysia

…………………………………………. …………………………………………. Simon Siburat Dian S. Soeminta Group Sustainability Coordinator Lead Auditor Date: 17 February 2010 Date: December 30, 2009

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APPENDICES Appendix 1: Details of Certificate

Standard: RSPO Principles & Criteria for Sustainable Palm Oil Production; Indonesian National Interpretation: 2008

Certificate Registr. No.: 01 100 106469

TUV Rheinland Malaysia Sdn. Bhd. certifies:

Certificate Holder: PT Mustika Sembuluh Palm Oil Mill Subsidiary of Wilmar International Limited, B & G Tower, 10th Floor, Jalan Putri Hijau No. 10 Medan, North Sumatera, Indone- sia. and its supply base according to the annex.

Scope: Palm Oil Production and Plantation Management System

An audit was performed, Report No. 106469. Proof has been furnished that the requirements according to RSPO Principles & Cri- teria for Sustainable Palm Oil; Indonesian National Interpretation: 2008 are fulfilled.

The due date for all future audits is 11-08 (dd.mm).

Validity: The certificate is valid from 2010-08-11 to 2015-08-10.

The palm oil mill and supply base covered in certification scope are:

Name of GPS locations Location mill / estate Latitude Longitude PT MS Palm Jl. Jend. Sudirman Km 62, Desa Pondok Damar, 02°35’28” 112°30’45” Oil Mill Kec. Mentaya Hilir Utara Kab. Kotawaringin Timur – 74361. Kalimantan Tengah. PT MS Estate Desa Pondok Damar, Kec. Mentaya Hilir Utara, 02°35’10” 112°30’32” 1 Kab. Kotawaringin Timur PT MS Estate Desa Pondok Damar, Kec. Mentaya Hilir Utara, 02°39’56” 112°32’18.5” 2 Kab. Kotawaringin Timur Desa Bangkal, Kec. Danau Sembulu, Kab. Seruyan District. PT MS Estate Desa Tanah Putih, Kec. Telawang, Kab. Ko- 02°30’16.9” 112°30’36.6” 3 tawaringin Timur.

CPO Tonnage Total Productions: 79,870 tonnes PK Tonnage Total Productions: 15,609 tonnes Company Estates FFB Tonnages: 251,720 tonnes Smallholders FFB Tonnages: 1,053 tonnes CPO Tonnage claimed for certification*: 81,350 tonnes PK Tonnage claimed for certification*: 16,640 tonnes

* based on projected increase of FFB production from immature crop in 2010.

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Appendix 2: Certification Audit Plan

Procedure - Organizational Unit and Proc- Auditor / Date / Time (1) Interviewee EM/QM Element esses Abbrev. Standard Chapter Sunday, Traveling Jakarta to Sampit via Dian Soeminta October 18, Palangkaraya by 7P 371 (DSS), Nelly 2009 Traveling to Sampit via Palang- Yong (NY), karaya (Overnight in Sampit) Rahmawati Noor (RA), Susetiyaningsih (SS), Fadli (FA) Monday,19 October 2009 08.00-12.00 Open Stakeholder Consultation All Auditors Invited stake- Sampit holders 12.00 Break and continue traveling to site PT Mustika Sembuluh 15.00-17.00 Review Stakeholder input All Auditors Tuesday, 20 October 2009 08.15- 09.30 • Opening Meeting All Auditors Top Manage- Regional • Introduction by team ment & Related Office leader. Managers • Presentation of estates by respective managers. • Presentation of Oil Mills source of FFB by respective managers 09.30-12.00 HGU legal requirement , all re- All Auditors Plantation and Principle 1 Regional lated legal requirement & Palm Oil man- Criteria 1.1; 1.2; Office documentation checking ager Principle 2 Criteria 2.1;2.2;2.3; Principle 3 Criteria 3.1; 12.00-13.00 Break & Lunch 13.30-17.00 Environement, Economic and DSS Plantation Man- Principle 4 PT MS Es- Legal Issues ager Criteria 4.1; tate 3 • Field operations. 4.2;4;3 • Worker interviews. Principle 2 • Riparian zones. Principle 3 • HCV Principle 5 Criteria 5.1 to 5.6 Principle 8 Environment and Lagal Is- NY& RA Plantation Man- Principle 2 sues ager Criteria 2.1 • Chemical stores Principle 4 • Workshops. Criteria 4.6,4.7, • Legal Aspects 4.8 Principle 8 Social issues SS & FA Plantation Man- • Housing. ager Principle 2 • Medical. Criteria 2.2, 2.3 • Schools. Principle 6 • Local communities Criteria 6.1 to • HCV 6.11 Principle 8 17.00 End of 1st day audit Wednesday, 21 October 2009

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Procedure - Organizational Unit and Proc- Auditor / Date / Time (1) Interviewee EM/QM Element esses Abbrev. Standard Chapter 08.00-12.00 Environement, Economic and DSS Plantation Man- Principle 4 PT MS Es- Legal ager Criteria 4.1; tate 1 • Field operations. 4.2;4;3 • Worker interviews. Principle 2 • Riparian zones. Criteria • HCV Principle 3 Principle 5 Criteria 5.1 to 5.6 Principle 8 Environment and Legal Is- RA & NY Principle 2 sues Criteria 2.1 • Chemical stores Principle 4 • Workshops. Criteria 4.6,4.7, • Legal Aspects 4.8 Principle 8 Social issues. SS & FA • Housing. Principle 2 • Medical. Criteria 2.2, 2.3 • Schools. Principle 6 • Local communities Criteria 6.1 to • HCV 6.11 Principle 8 12.00-13.00 Lunch & break 13.30-17.00 Environement, Economic and DSS Plantation Man- Principle 4 Continue Legal Issues ager Criteria 4.1; Estate 1 • Field operations. 4.2;4;3 • Worker interviews. Principle 2 • Riparian zones. Criteria • HCV Principle 3 Principle 5 Criteria 5.1 to 5.6 Principle 8 Environment and Lagal Is- RA & NY Plantation Man- Principle 2 sues ager Criteria 2.1 • Chemical stores Principle 4 • Workshops. Criteria 4.6,4.7, • Legal Aspect 4.8 Principle 8 Social issues SS & FA Plantation Man- • Housing. ager Principle 2 • Medical. Criteria 2.2, 2.3 • Schools. Principle 6 • Local communities Criteria 6.1 to • HCV 6.11 Principle 8 17.00 End of 2nd day audit Thursday,22 October 2009 08.00-12.00 Environement, Economic and DSS Plantation Man- Principle 4 PT MS Es- Legal ager Criteria 4.1; tate 2 • Field operations. 4.2;4;3 • Worker interviews. Principle 2 • Riparian zones. Criteria • HCV Principle 3 Principle 5 Criteria 5.1 to 5.6 Prinsip 8

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Procedure - Organizational Unit and Proc- Auditor / Date / Time (1) Interviewee EM/QM Element esses Abbrev. Standard Chapter RA & NY Principle 2 Environment and Legal Is- Criteria 2.1 sues Principle 4 • Chemical stores Criteria 4.6,4.7, • Workshops. 4.8 • Legal Aspect Principle 8

Social issues. SS & FA • Housing. Principle 2 • Medical. Criteria 2.2, 2.3 • Schools. Principle 6 • Local communities Criteria 6.1 to • HCV 6.11 Principle 8 12.00-13.00 Lunch & break 13.30-17.00 Environment, Economic and DSS Plantation Man- Principle 4 Continue Legal Issues ager Criteria 4.1; Estate 2 • Field operations. 4.2;4;3 • Worker interviews. Principle 2 • Riparian zones. Criteria • HCV Principle 3 Principle 5 Criteria 5.1 to 5.6 Principle 8 Environment and Legal Is- RA & NY Plantation Man- Principle 2 sues ager Criteria 2.1 • Chemical stores Principle 4 • Workshops. Criteria 4.6,4.7, • Legal Aspects 4.8 Principle 8 Social issues SS & FA Plantation Man- • Housing. ager Principle 2 • Medical. Criteria 2.2, 2.3 • Schools. Principle 6 • Local communities Criteria 6.1 to • HCV 6.11 Principle 8 17.00 End of 2nd day audit Friday,23 October 2009 08.00-12.00 Economic Issue & Legal DSS & RA Manager Principle 1 PT MS Mill • Mill inspection Principle 2 • Workshops. Principle 3 • Stores. Principle 4 • POME application. Principle 5 • Document review. Principle 8

Environmental Issues NY Manager Principle 1 • Mill inspection Principle 2 • Workshops. Principle 3 • Stores. Principle 4 • POME application. Principle 5 • Document review. Principle 8

Social Issues SS & FA Manager Principle 2 • Mill inspection Principle 6 Principle 8

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Procedure - Organizational Unit and Proc- Auditor / Date / Time (1) Interviewee EM/QM Element esses Abbrev. Standard Chapter • Worker • Document review. 12.00 Lunch & Break 13.00 ALL Manager Preparation for Closing Meeting 15.00 • Presentation of findings ALL Manager by the audit team. • Questions and answers. • Final summary by team leader. 17.00 End of Audit 18.00-22.00 Traveling to Palangkayara ALL Saturday 24 October, 2009 10.45 Traveling to Jakarta (Flight GA 551)

Appendix 3: List of Abbreviations

AMDAL Analisis Dampak Lingkungan & Sosial (Social & Environmental Impacts Assessment) Bapedalda Badan Pengendalian Dampak Lingkungan Daerah (Regional Body for Management of Environmental Impacts) CPO Crude Palm Oil DPR-RI Dewan Perwakilan Rakyat – Republic Indonesia (House of People's Representatives – Republic of Indonesia) EIA Environmental Impact Assessment EMU Ecological Management Unit ERTs Endangered, Rare & Threatened species ESH Environmental Safety & Health FFB Fresh Fruit Bunches GIS Geographical Information System EFB Empty Fruit Bunches HCV High Conservation Value HRD Human Resource Department IPM Integrated Pest Management LTA Lost Time Accident MSDS Material Safety Data Sheets NGO Non-Government Organization OSH Occupational Safety & Health PHL Pekerja Harian Lepas (Temporary Daily Worker) PHT Pekerja Harian Tetap ( Permanent Daily Worker) PKO Palm Kernel Oil POME Palm Oil Mill Effluent PPE Personal Protective Equipment PT MS PT Mustika Sembuluh RKL Rencana Pengelolaan Lingkungan (Environmental Management Plan) RPL Rencana Pemantauan Lingkungan (Environmental Monitoring Plan) RO Regional Office SIA Social Impact Assessment SMA Sekolah Menengah Atas (Higher Level Secondary School) SMP Sekolah Menengah Pertama (First Level Secondary School) SOP Standard Operating Procedure UKL Upaya Pengelolaan Lingkungan (Environmental Management Efforts) UPL Upaya Pemantauan Lingkungan (Environmental Monitoring Efforts)

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Appendix 4: List of Stakeholders Consulted

No. Name of Stakeholders Institution - Address Remark

Stakeholders that attended the Public Consultation Meeting

1 Letter and email letter Save Our Borneo NGO NGO from SOB - 9 Oktober Palangkaraya 2009) 2 Tomas AMAN (Aliansi Masyarakat Adat NGO Nusantara) 3 Derlin Sihite, (Disnaker Kotawaringin Timur) Local Government Rep 4 Achmad Gozali Disnaker Seruyan Local Government Rep 5 Mansyur Ibrahim Disnaker Seruyan) Local Government Rep 6 Juniardi Disnaker Seruyan Local Government Rep 7 Syarif AW (BPD Tangar Village institution 8 Yasmufi – Tanah Putih Community member 9 Nurhadi – SMP2 Pondok Damar Teacher 10 Hapso Tjong CV Gemilang Jaya Contractor 11 - Koperasi Maju Bersama Cooperation institution 12 H. Priyo Widagdo Kadishut Seruyan Local Government Rep

13 Wicaksono BPN Seruyan Local Government Rep

14 Joko Marwoto Disbun Kotawaringin Timur Local Government Rep

15 H. Yusuf Sulaiman Balai Lingkungan Hidup Seruyan Local Government Rep

16 Kuanteksa Sekcam MHU Local Government Rep 17 Muh. Kusasi Kades Baampah Head Village

18 Mr. Kusnadi, BLH Seruyan Local Government Rep

19 Ms. Umi Alfian, BLH Sampit Local Government Rep 20 Mr. Andre PT. Lam Hui Indonesia Contractor 21 Mr. Nasir, PT. Lam Hui Indonesia Contractor 22 Mr. Maulana, Disnaker Sampit Local Government Rep

23 Jaliansyah Desa Sembuluh I, Head village 24 Irwan, Desa Sembuluh I Community member 25 M. Azan. Desa Sembuluh I Community member

26 M. Azanur S.Pd.I SMK Kertapati Danau Sembuluh Head School

27 Didi Supriadi, Tabiku, kecamatan Danau Head village Sembuluh 28 Darwan Desa Tabiku, kecamatan Danau Community member Sembuluh 29 Sukarsih, Tangar, kec. Mentaya Hulu Head village 30 Abdul Wahid Desa Kawan Batu, Kec. Mentaya Community members Hulu 31 RA. Purnomo Desa Kawan Batu, Kec. Mentaya Community members Ulu 32 Anang A. Desa Kawan Batu, Kec. Mentaya Community members

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Page 73 of 77 Hulu 33 James Watt, Gerakan Anti Korupsi Indonesia NGO AMAN (GAKI), 34 Manto, Desa Pondok Damar Community member 35 Daryani Kawan Batu, kec. Mentaya Hulu Head village 36 Badrun Isam Tokoh Masyarakat Community member 37 M. Nasir Perwakilan Camat Telawang Local Government Rep 38 Abdul Suud Tokoh Masyarakat Community member 39 Surianto Tokoh Masyarakat Community member 40 Daryanto Tokoh Masyarakat Community member 41 Yuwelson SMPN 3 Danau Sembuluh Teacher 42 Johansyah Desa Tangar Community member 43 Edi Yanto LSM NGO 44 Redes Nehang Desa BKI Head village 45 Juansyah SDN 1 Head master 46 Supriadi Yayasan Pendidikan Kertapati Teacher 47 Abdul Khaidir Desa Sembuluh II Head village 48 Normasyah Desa Sembuluh II Community member 49 Tejo Simon CV. Gemilang Raya Manager 50 M. Ridwan Disnakertrans Seruyan Local Government Rep 51 Adriani Desa P Limau Head village 52 Abdul Syukur Desa Tj. Rangas Head village 53 Simon S. Basa PT Sapta Karsa Damai Contractor 54 Hendy Hartono LSM PDATOR NGO 55 Hardedy LSM PDATOR NGO 56 Jomas GAKI Community member Stakeholders Interviewed On-Site: 1. Simon Siburat Wilmar International 2. Edrin Moss MS – Regional Office Regional Office 3. Hidayat MS-RO Environment Regional Office 4. Calley Beamish Environment Manager Regional Office 5. Mr. Karyono Anggara Environement oficer MS3 6. Mr. Fajar Environemnt oficer MS2 7. Eka AMANA, MS – Regional Office Document control 8. Melisa Environemnt oficer RO 9. Amran, Hamadi, Ratman Daily worker MS II 10. Mr. Leang Agronomy 11. Aris Legal Legal 12. Hendra MS – Regional Office Regional Office 13. Robiansyah MS – Regional Office Public Relation 14. Andi Ayub MS – Regional Office Land worker 15. Samsudin MS – Regional Office Bina Mitra/CD 16. Beni Rosa MS – Regional Office Community Development 17. John R MS – Regional Office Human Resources Dept. 18. Amin Hidayat MS – Regional Office Pay rol 19. Amanto Harjono MS – Regional Office Bina Mitra/CD 20. Tan MS – Regional Office Head of CKP 21. Helmi MS 3 Estate Manager 22. Karyono MS 3 Humas 23. Endang MS operator 24. Kamarudin MS – maintenance Worker 25. Bambang MS - maintenance Worker 26. Herdi MS – maintenance Worker 27. Samsul MS - maintenance Worker

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Page 74 of 77 28. Dahlan MS – maintenance Worker 29. Manggo MS - maintenance Worker 30. Siti Stania MS – maintenance Overseer 31. Anita MS - maintenance Overseer 32. Karnedi MS – maintenance Overseer 33. Muafirin MS - maintenance Overseer 34. Saihun Najib MS Worker 35. Ganti MS Worker 36. M. Asrani MS Worker 37. Charles H. MS mill Legal 38. Endang MS – 3 operator Worker 39. Kamarudin MS – 3 operator Worker 40. Bambang MS – 3 operator Worker 41. Herdi MS - 3 operator Worker 42. Samsul MS – 3 operator Worker 43. Dahlan MS – 3 operator Worker 44. Manggo MS – 3 operator Worker 45. Tutuk Mahendrata MS 3 worker 46. Riyanawati MS 3 Wife of worker 47. Upik MS 3– Pemupukan Worker 48. Ali MS 3– pemupukan Worker 49. Misran MS 3– pemupukan Worker 50. Ismail MS 3– pemupukan Worker 51. Siswaryo MS 3– pemupukan Worker 52. Adamah MS 3 pemupukan Worker 53. Hendarto MS 3 – operator Johndeer Worker 54. Legianto MS 3 - maintenance Worker 55. Toni MS 3 Worker 56. Sugiyanto MS 3 - harvesting Worker 57. Meriyama MS3 - maintenance Worker 58. Tiniati MS 3 – PGA Worker 59. Siti Hadijah MS 3 – PGA Worker 60. Ediyanto MS 2 Estate Manager 61. Putut MS 2 – Account officer Worker 62. Eti MS 2 – Admin officer Worker 63. Sainah MS 2 - Children care unit Worker 64. Siti Kurniawati MS 2 – Children care unit Worker 65. Enah Suhaenah MS 2 – Children care unit Worker 66. Adi Kurniawan MS 1 – HRD officer Worker 67. Tati MS 1 – Admin officer worker 68. Riswantoro BM-PR Manager 69. Xeng Ka Yee Environmental Management Unit Senior Manager 70. Ong Son Chong Purchasing Manager 71. Lim Peng Ho STP AGM 72. Mohus Palm Oil Mill RPTM 73. Asrif Mahmud KSI GEM 74. Wilidarita CWS Admin 75. Arief Zulkarnain EMSC EMSC Dept 76. Catur Hari P MS MILL MS 77. Raymond Tan CES Senior Manager 78. S. Kadir Security Senior Manager 79. Lim Choon G Regional Office Ak Manager 80. Lee Kok Seng Regional Office Adm 81. Hidayat A EMM 82. Keu Haw Gee Regional Office PH

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Page 75 of 77 83. Lai Yun Choy CWS Manager 84. Sri Santoso Medical HD 85. Yuyun Medical Admin 86. Adji HRD HRD Officer 87. Eko Saputro Mill MS EHS 88. Noviati KSY Mill Log 89. Dewi Anggreani MS Mill Log 90. Hambani Lo Kanwil VII Staf Ops Tbs POM 91. S. Irwansyah MS Mill PGA 92. Shendy Octavian Mill EHS Off 93. Ani Indrawati Mill PGA Clerk 94. Selvi Indah Ria Mill EHS EHS Officer 95. Ardiansyah Mill Supervisor Adm 96. Barho Mill DC 97. Yulius Pauner RSPO-RO Doc. Control 98. Sary Mardhianty RSPO Sosial Dept 99. Septa Primananda Environmental Management Senior Ass. Manager Unit 100. Denie Alfianto Environmental Management AM Unit 101. Aria Gumilang Regional Office

Appendix 5: List of Opportunities for Improvement No. Related Observation (Recommendation for improvement) : Discussed clause With

1. 1 4.1 The company should maintain records on the supplier, source and loca- Mill tion of their FFB. 2. 4.1 The agreement between FFB outgrowers and MS Mill should include a Mill statement that the RSPO certification body has the authority to assess the supplier’s plantation. 3. 4.1 Outgrower verification reports should include information about land status Mill or any information regarding legality of land.

4. 4.4 It was found that many watercourses within PT Mustika Sembuluh’s es- EMU tates are still not properly maintained, especially the riparian buffer zones.

5. 5.2 The company has no plans to manage and monitor all identified rare, EMU threatened or endangered species or high conservation value habitats to preserve these areas. 6. 5.1 All Estates: Consideration should be given to define more clearly the All mechanism on how to utilize waste data in order to determine if environ- estates mental objectives are being met. For example, the company has defined targets for reuse of empty chemical containers to be 50% for 12 months & sale of wastes to 3rd parties is also 50% for 12 months. Similarly, other environmental objective & targets should be established in the environmental management program as well.

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At Estate 2, consideration should be given to provide proper fencing or 7. 4.7 All estates any other suitable method to prevent unauthorized access to the PPE store and fertilizer store, by the surrounding communities, especially children. Although proper signages have been posted at these locations to inform that children are prohibited from playing in these areas, these signages may not be effective enough as the children may not be able to read & understand the hazard of the area to their health. This is also to prevent other possible incidents such as drowning accidents in the washing ponds

At Estate 2, it was observed there are 4 tanks containing approximately 8. 4.7 All estates 11,000 litres of diesel fuel & 2 tanks containing approximately 22,000 litres of diesel fuel. 1 fire extinguisher unit & 5 bucket of sand were available at the location, including the water tanks (2 big units) for fire emergencies. At Estate 1, an almost similar number of diesel fuel tanks and water tanks for responding to fire emergencies & 3 fire extinguishers were observed. Consideration should be given to review the adequacy & suitability of the facilities to respond to cases of fire at this area. According to the MSDS for diesel fuel, the suitable fire extinguishing media to be used is dry chemical / foam / CO2, and not water. Mill & all Estates: Consideration should be given to carrying out post mor- 9. 4.7 All estates tem evaluations of fire drills conducted to identify opportunities for im- and mill provement. Mill & All Estates: Consideration should be given to evaluate the fre- 10. 4.7 All estate quency of chemical spill drills & first aid drills conducted. and mill Mill: Consideration should be given to conducting analysis of the water 11. 5.3 Mill discharge from the 2nd discharge point (overflow of water from oil trap) once the construction of the improved oil trap has been completed & is in operation. Currently, a test has been carried for 1st discharge point (located at anaerobic pond / kolam limbah). OSH activities should be reported consistently every 3 months to the gov- 12. 4.7 EMU ernment as required by regulation Permenaker No. 04/MEN/1987 (EHS- EMU) Oil/diesel spills from trucks or ‘jonder’ (tractors) at loading ramp areas of 13. 5.1 Estates the mill should be controlled and handled properly to prevent the spills from contaminating water in the drainage ditch. The mill should conduct checks on whether their truck or tractor drivers 14. 2.1 Mill have proper driver’s licenses or operator’s license (‘surat izin operator’).

The company should regularly evaluate and review their level of compli- 15. 2.1 EMU ance to OHS and other requirements as well as implementation of their programs to comply OHS regulations. The estates polyclinics should have a proper system and inventory of all 16. 4.7 All estates used and expired medications.

Medical check up records of employees should be signed consistently by 17. 4.7 Estates the medical doctor (Polyclinic MS1).

The company should have a system to identify the root causes and cor- 18. 4.2 EMU rective actions requird to eliminate the root cause of nonconformities found during internal audits and patrols. 19. 1.1 Regular meeting with company’s stakeholders should be held to improve Mr. Tan, communication and transparency (Related to 6.2) Mr. Simon S., Mr. Amanto 20. 6.1 Both positive and negative impacts of social aspects should be managed Mr. consistently based on participatory social impact management plan that Simon has been done. S.

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21. 6.5 Mustika Sembuluh’s company regulation 2009 should be implemented Mr. John consistently. Effective communication of the company regulation to em- Rorim- ployees or workers should be carried out for awareness and better under- pandey standing. Mr. Helmi The system for managing documents such as administrative information, worker contracts, contractor information or other information should be Mr. Edi- consistent for all estate also mill. yanto

Company regulations pertaining to housing or settlements should be im- Mr. Nazor plemented consistently as there are some houses or settlements occupied by non-workers.

22. 6.6 A proper worker’s union should be established. Mr. John Rorim- Pandey

23. 6.8 Mr. John Equal opportunity for employees should be improved, particularly to work- Rorim- ers of different gender. pandey

24. 6.10 The company’s management should continuously and effectively maintain Mill or improve their communication and relationship with out-growers and smallholders

25. 6.11 Effective CD programs should be implemented through : Mr. Amanto 1. Community empowerment by implementing social impact management plan developed with the participation of local communities. Mr. Catur

2. Providing mill or plantation tours for students surrounding the company to enhance their perception of PT Mustika Sembuluh.

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