IFC Joint Smallholder Project on Track

SUSTAINABILITY

Volume 12 - September 2016

v

Transformation: to be or not Engagement workshop to be? with our suppliers (p4) (p8)

The truths and myths of After mill verifications: haze pollution what next? (p5) (p9)

A glimpse of precision The plantation stethoscope: agriculture how practising in plantation (p6-7) differs from in city (p10-11)

On Track:

Musim Mas - IFC joint smallholder project (p2-3) FOREWORD One year anniversary event of the Musim Mas - IFC joint smallholder project Dear Reader On Track: At this stage of our sustainability journey, the key question has shifted from whether we in Musim Mas are conducting our business sustainably, to what we are doing to involve our numerous stakeholders with us on the journey. The unique and challenging nature of the palm oil industry, coupled with Musim Mas - IFC the high demands of various stakeholders, make it essential to share knowledge and experience to ensure a viable future for us all. Our efforts are now being channeled towards ore than a year ago when planning for capacity building for both internal and external stakeholders. joint smallholder project the Musim Mas - IFC joint smallholder programme, our executives had envisioned We are improving the knowledge of independent Mthe holistic development of the participants’ smallholders through the Musim Mas - IFC project so that knowledge and skill sets so that they can become self- inception. they can forge better lives for themselves and their families. reliant and successful farmers. "Our vision is for these (“On track: Musim Mas - IFC joint smallholder project”, p2-3). independent smallholders to be able to continue The Regent of Labuhan Batu Regency, farming successfully beyond the project,” said Mr Mr H. Pangonal Harahap, expressed Based on the theme of Knowledge-Improvement- Jong Tjien Alimin, Musim Mas Smallholder Project his appreciation to Musim Mas and Sustainable-Success, we conducted a Research Field Day Project trainers interacting with Coordinator. smallholder participants IFC for running this programme for the for internal stakeholders to increase their knowledge on benefits of smallholders in the region seedlings, fruit bunches, fertilisers, pests and diseases. With The programme was modeled to enhance the and hoped that this would help improve knowledge, the capacity for improvement and success is farmers’ agricultural practices and improve other their welfare. The Head of the Indonesia heightened (“A glimpse of precision agriculture”, p6-7). competencies such as financial literacy. The latter Pesticides and their safe usage were revenue and expenditure for their Sustainable Palm Oil (ISPO) Secretariat, is often overlooked and yet is crucial for long term also included in the curriculum. As farms. The attributes that would give Mr Herdradjat Natawidjaja, stated that The recently held supplier workshop and the on-going mill economic viability. with fertilisers, the application of them access to credit were also shared the elements of improving access to verification exercise provide a valuable platform for engaging pesticides needs to be targeted so that so that the farmers could utilise bank technology, finance and markets were our third-party suppliers to achieve the sustainability agenda At the start, the Farmer Advisors, who were tasked it is effective. More importantly, the loans to purchase quality seeds and aligned with government policy. (“Engagement workshop with our suppliers“, p8 and “After with the training of the farmers, were as much as farmers were taught on how to safely fertilisers and even hire labour to help mill verifications: what next?”, p9), and we are encouraging possible, selected from within the participants’ prepare and apply pesticides without with farm works. Mr Herman Tandinata, Deputy our stakeholders to start building capacity for sustainable community with a two-fold purpose of fostering a compromising their health and safety. Production Director of the Musim practices (“Transformation: to be or not to be?”, p4) as well sense of ownership and an interest in the success of With smallholders contributing about Mas Group, announced at the event, as working with local communities through the Fire-Free the programme. Another important factor in determining 40% of oil palm planted area in “Given the experience in Rantau Prapat Alliance to build greater capacity on fire prevention and the price of FFB, and hence the income Indonesia, replicating such projects in over the last year and the enthusiasm dealing with haze (“The truths and myths of haze pollution”, Oil palm smallholders in Indonesia, and especially of the farmers, is the harvesting other parts of Indonesia will possibly hold of farmers, the programme will be p5). independent ones, are known to underperform in standard which in turn will affect the the key to unlocking the conservation- replicated in three new locations in the areas of productivity and sustainability. One of the key FFB quality. To get the best yield, FFB versus-development predicament Province of Riau. An additional 9,000 Last but not least, we are providing insight into our estate determinants of productivity includes fertiliser and needs to be harvested at optimum through yield per hectare increase and independent smallholders are expected doctors’ capacities to take on the challenges of working in its effective application. These smallholders usually ripeness. Unripe FFB may be rejected at improvements to sustainable practices to benefit from the programme.” the plantations (“The plantation stethoscope: how practising have problems obtaining quality fertilisers and, even the mills, while underipeness will affect without the need to develop more in plantation differs from in city”, p10-11). if available, most smallholders are not equipped with the oil extraction rate (OER) which will land. As demonstrated by the recent The Musim Mas - IFC project is part adequate knowledge on the proper implementation mean discounted price for FFB. The development in Indonesia such as the of the Musim Mas Group’s vision Going forward, we will be publishing our journal in March techniques. The participants were taught to choose farmers were taught on the appropriate moratorium on land development, of sustainable palm oil production, and September each year, instead of January and July. I hope the right fertiliser, and right way of applying it such time to harvest the fruits. Better quality industry players need to focus on yield bringing a positive impact to the welfare you’ll enjoy reading them. as sowing the fertiliser circularly at a certain distance FFB will improve the price of their FFB increase per hectare of land in order to of local communities. The Group is from the trunk. and so increase their income . remain competitive and relevant in the working closely with IFC to integrate sector. independent smallholders into its supply “Before attending this training, I was sowing fertiliser Financial literacy was also part of chain through stages of implementation randomly, without paying attention to the distance, the training program. The concept At the one-year anniversary event for the and targets to ultimately benefit 12,000 Executive Chairman sometimes in the inter-row, other times right on the of saving is especially important project, held on 27 July 2016 in Suzuya independent smallholders. Musim Mas Group trunk. After joining this programme, I now know the when their oil palm trees need to be Hotel in Rantau Prapat, North Sumatra, correct practice of sowing fertiliser which I recently replanted, leaving them with reduced the smallholder participants, Musim started applying to my trees. I hope the trees can or no income for about three years. Mas and IFC management gathered to bear more and better quality fruits,” said Burhan They learned how to keep records of take stock of the programme that has Dongoran, a participating smallholder. their financial transactions to manage benefited over 1,100 members since its p2 p3 Transformation: to be or not to be? Case Study: Pati Sari, ANJ and Korindo

ith the implementation A case in point, Pati Sari, one of implemented in three concessions - of the NDPE (No the Group’s third-party suppliers, Tunas Sawa Erma A, Tunas Sawa Erma The truths and myths Deforestation, No Peat and was flagged in 2014 for some non B and Tunas Sawa Erma E, involving WNo Exploitation) policies by major palm compliance in its supply base. Instead a total of 24,000 hectares. During oil companies, one of the litmus tests of severing business ties, Musim Mas the moratorium period, Korindo of haze pollution of a company’s resolve to push forward engaged them to study the issues and promised to develop a comprehensive the sustainability agenda is perhaps the encouraged them to find solutions. sustainability policy along the principles he Southeast Asian haze is an occurred in community lands, where their crops, or mere accidents. will, patience and ability to "sanitize" Eventually, Pati Sari opened up and of no deforestation, no peat planting issue affecting several countries a large number of farmers cultivated its supply chain. shared information on its supply and no exploitation. including Brunei Darussalam, cash crop (which may include oil As a further step, five villages or base. It stopped buying from illegal TIndonesia, Malaysia, Singapore, palm) and resorted to burning to communities were chosen in a pilot However, though such “sanitization” FFB suppliers and implemented a While the success or failure of the Thailand etc. It is a long term issue save cost. The rights of farmers using program, based on the number of fire may help one to technically meet procurement system that filtered illegal sustainability journey of Korindo is yet that occurs in varying intensity during burning to clear land had always incidences in the past. Musim Mas NDPE policies, it may not be sufficient FFB from its supply base. Normal to be seen, Musim Mas is pleased to every dry season in the region. The been embedded in the law. As such, started working with the community to bring enough positive changes on business with them proceeded without have made the decision to engage primary cause is forest fires principally solution to the haze problem must leaders to understand the cause of the ground, a process now the industry disruption after that. Korindo. “By doing so, we have helped on the Indonesian islands of Sumatra include assistance to the farmers to the fires and possible prevention. calls “transformation”. “An inward kickstart the transformation process and Kalimantan. clear land without burning. The community with the highest looking, self serving company may take In another case involving the ANJ in Korindo,“ said Dr Petra Meekers, reduction in the incidence of fires the approach of cutting off any supplier group, the outcome was less Director of Sustainability and CSR. In 2015, haze pollution reached its Musim Mas is one of the founding will be rewarded with monetary or in- who is non compliant,“ said Dr Petra encouraging. ANJ group was found ’’However, we need the support of climax. However, its exact magnitude members of Fire-Free Alliance (FFA). kind incentives in order to encourage Meekers, Director of Sustainability and developing new oil palm plantation in other stakeholders to guide, push and was hard to measure. Estimations About 70 villages near or within its better and sustainable fire prevention. CSR. “This is the simplest approach: Papua and all hell broke lose. When encourage Korindo to move forward. for the extent of damage could concessions have been identified as If you are not important enough to they were slow in responding to the We can not do it alone.“ range between 250,000 to 2,000,000 high risk area and outreach programs With the bulk of fires occurring us in our supply chain - sorry, we stop complains, big buyers with NDPE policy hectares, with financial losses on creating fire free environment had outside of its concession, Musim Mas buying from you so that we are in strict one by one deserted them. Today Musim Mas believes that reportedly from US$ 1 billion to US$ been initiated. These programs were understands that it needs to look compliance with our NDPE policy. But ANJ group still continues its business, transformation can only be achieved 20 billion, life casualties between 19 instrumental to understand why local beyond its boundaries and works Musim Mas feels that as one of the ostensibly without much problem, with active engagement, through to 100,000 people. communities would need to resort with surrounding communities to get leading palm oil companies, we owe by diverting its sales to local buyers. close cooperation and constructive to fire: whether for clearing debris, rid of the root cause of the fires. the industry a responsibility to do more Their development project in Papua dialogues. The end game is creating The real significance of 2015, deterring wildlife from damaging than that.“ continues. In short, the “embargo’’ by a real impact on the ground instead of however, lied not only in the scale big buyers was not able to instigate any walking away from a problem. Leading of the haze pollution but it was a Musim Mas believes that only a change, much less a transformation. palm oil companies can play a part Fire alerts by land use area watershed year in which location and proactive engagement will yield in encouraging their stakeholders to distribution of hot spots were for the practical results. Creating a real impact So when the case of Korindo was focus more on the transformation of a 01 January 2015 - 31 December 2015 01 January 2016 - 25 September 2016 first time made available publicly, is about getting all the stakeholders highlighted in public, Musim Mas felt problematic supplier instead of knee thanks to the satellite mapping together to start a conversation and that the failure in the case of ANJ jerk reaction to cut him out of the supply published on line by World Resources look for possible implementation must not be repeated. When big base with the sole purpose of sanitizing Institute (WRI), a Washington based options. While a cessation to purchase buyers rushed for exit by stopping one’s supply chain. “Engagement does research institute. Based on satellite may be a tool in negotiation, it is not all purchases, Musim Mas decided not always guarantees transformation,’’ mapping, it was shown that the a strategy that can always create real to stay back and engage them. After said Dr Meekers. “But without percentage of hot spots in oil palm impact on the ground. Suppliers need intensive discussions, Korindo has engagement, no transformation will concessions were relatively low e.g. to go through an initiation and be agreed to a 3 month moratorium on ever happen.” from January to December 2015, guided on the sustainability issues. new development. This would be a mere 11%; while from January to September 2016, 9%. Source: Global Forest Watch 2015 Source: Global Forest Watch 2016

Majority of hot spots actually p4 p5 A glimpse of precision agriculture are faring in Indonesia, right from my mobile phone,” said Mr Ooi Ling Hoak. t the Musim Mas' inaugural G&A (Genetic hectares of land,” said Mr Ooi Ling Hoak, the Head and Agricultural) Research Centre Field Day of the Musim Mas Research and Development (R&D) Explaining yield recording activity Most importantly, precision agriculture on 16 May 2016 in Sorek Estate, Pekanbaru, unit and the Group’s chief agronomist. “We can then using smartphone technology can help close the yield gaps between Aplanters and agronomists from our plantation focus on conditioning each soil area for optimal yield. what is being observed and what is management team were in a discussion on how to For example, when you have an area filled with sandy theoretically possible, which translates manage 130,000 hectares of planted area as if they soil, you can apply dried palm fibre (from the mill). into better yield. A sustainable vision were smallholder farmers tending to their plots in Sandy soil is dry and gritty to the touch, and because make sense for the kingdom and so for progressed to incorporate the greater for the industry is to increase yields their backyard. the particles have big spaces between them, it can’t good control you have to strike where use of technology, including global on the existing landbank while the hold on to water. Water and nutrients drain rapidly, it hurts the most - the queen mother positioning satellites and computer environmental footprint is reduced This approach is known as precision agriculture. straight through to places where the roots of the chamber (i.e. apply the pesticide software for mapping and record - a more viable solution to meet the Planters want to find out - nearly down to each oil plants cannot reach. The dried fibre can help maintain selectively).” keeping. challenge of rising demand for food palm tree - what is happening on their estate. For moisture and fertiliser.” from a growing global population. example why a part of the estate ended up with Precision agriculture enables planters The R&D team also unveiled specially poorer yields than the rest or how to deal with In another demonstration on pest, Mr Cheong Yew to know what is going on in every programmed Samsung tabs for pest outbreaks effectively or how efficient is the Loong, our chief entomologist, explained “the hectare, making it more efficient with keeping records. Previously, field application of fertiliser. termite queen lays an egg every three seconds for fertilisers and pesticides. agronomists will note down the data on 30 years. Gradually the queen gives birth to an entire paper and pass it to data-entry clerks. “We do a soil survey and classification for every six kingdom. Once the queen mother dies, life will not Effective use of agricultural inputs Currently, data is recorded directly into such as fertilisers is essential for a a Samsung tab and uploads directly good reason. Almost 60 percent into the central database. This system of plantation operating cost is the dramatically improves the accuracy fertiliser component. Moreover, there of data entry and ensures that the is a growing awareness that excess management can react quickly to the agrichemicals may also pollute natural data analysis. water sources. “I can be in another country, yet I Planters visited the Group’s Genetic know exactly how my baby seedlings Research Centre (GRC). The GRC has 218.55 hectares of breeding (parental) palms planted since 2012. The Group’s oil palm breeding research programmes include palm yields, bunch oil content analysis, and vegetative growth measurements. The materials are being developed on a semi-commercial scale for further evaluation. The Group is targeting to produce high-quality DxP seeds by the year 2022. With the elite planting materials, Musim Mas Plantation is looking to improve its land productivity from 6 tonnes per hectare to 10 tonnes per hectare, in contrast to the industrial norm of 4.5 tonnes. Briefing on fibre application Soil profile examination More recently, precision agriculture has p6 p7 Engagement After mill workshop verifications: with our suppliers what next?

Rainforest Alliance, who investigate on the non-compliant n an industry often criticised for studies. Director of CSR and Sustainable presented the process of suppliers, but rather to identify having complicated supply chains Development, framed the issue neatly, upcoming mill verification any potential issues, compile data difficult to understand from an Many issues arising from mill “It doesn’t matter whether smallholder for the participating mills: and formulate solutions to improve Ioutsider’s perspective, Musim Mas verifications are common across A or dealer B makes the physical objectives, methodology, practices in the landscape. The outputs Traceability Team aims to shed light the industry. Eliza Goh, Musim delivery to the mill during a particular process and preparatory from the mill verifications may be able on the Group’s supply chain by Mas Traceability Team leader, said, period. As long as both parties may requirements. The CORE to form a platform for transformation. understanding the supply base of the “Sometimes we may encounter send to the mill, we should consider Supplier-participants listening intently to consortium is also the third-party mills in relation to their FFB mills which do not meet many legal them as suppliers and assess the the speaker independent verifier of the “There is a definite need for us to sit dealers and smallholders. requirements laid down in government potential risk.” Group’s work to review down together to identify the problems regulations.” progress against its stated and then look for solutions,“ said Eliza The traceability team takes on different But the real issue is: after mill verification, t a supplier engagement targets and sustainability policy. Goh, the Musim Mas Traceability Team roles at times: firstly, it acts as the Group’s Eliza’s biggest headache is to trace what next? "Mill verification is known workshop held on 2 March leader. designated researchers to check how all the third-party FFB suppliers, in to be a notoriously costly process. 2016 in Medan, Indonesia, One of the main concerns raised by third-party mills are implementing particular, smallholders and their While spending millions of dollars on Aparticipants from different supplier the participants during this workshop The path to establish and maintain their sustainable principles and how dealers. Eliza explained, ”There it can demonstrate one's commitment, parent groups were present at Musim was the possibility of not being able to sustainable and traceable supply this relates to the policy of Musim usually are a few layers of dealers what will it change on the ground?," Mas Auditorium, oleochemical comply with sustainability requirements chains is full of challenges. Musim Mas Mas. Secondly, it acts as the Group’s doing the amalgamation of FFB from asked Dr Meekers. complex, to understand the elements and the consequences of this. believes in continuous and positive “sustainability representative” to the smallholders, and in such cases of sustainability system. engagement with our supply chain educate and convince third-party mills traceability is simply lost.” 40% of oil palm plantation in Indonesia To this end, Musim Mas assured the stakeholders to provide direction and to adopt practices in compliance with is owned by smallholders. More often Management personnel from 14 participants that the Group understood clarity. Mr T.K. Lim, Director of Strategy Musim Mas Sustainability Policy. The current trend in the industry seems than not, they are not able to meet supplier parents groups attended the that they may need time to implement & Planning, said, “This engagement to focus more on the exact locations all the legal requirements. Nor does event. They were part of the middle the recommendations from the mill workshop has been fruitful for Musim With the increase in the number of mill of all the FFB suppliers to a mill. But their structure of operation afford to senior management responsible verification report. Musim Mas believes Mas and our suppliers. It will enable us verifications, ultimately Musim Mas such a definition of traceability may not them the possibility of pursuing any for a network of mills in their group. in close cooperation and constructive to push forward with the sustainable Traceability Team hopes to crystallise yield practical results. “Supply base form of sustainability certification. These parent groups were also the top dialogue with suppliers to integrate development agenda collectively. the key issues among the numerous can be dynamic. But traceability is a "The industry cannot accept that these suppliers of Musim Mas. sustainable development principles We are looking forward to a closer concerns, formulate solutions one-time snapshot. Smallholders who smallholders be excluded from the with current business practices. collaboration with all our suppliers.” and encourage mills to adopt the supply you in January may shift their mainstream supply chain by the mill The workshop aimed to raise The Group will work with them recommendations. produce to another mill in February," verification exercise," said Dr Meekers. awareness in these suppliers of the through training, capacity building said Eliza. Musim Mas Sustainability Policy programmes, and other continuous The team will visit more mills in the It seems that sustainability journey and to gain commitment from them positive supports. provinces of North Sumatra, Riau, The works of Musim Mas on mill certainly does not end at mill to comply with it. The event was Central Kalimantan - each of which verification and traceability only aim to verification. facilitated by the CORE consortium of Musim Mas further clarified that contributes to the Group’s supply base seek out approximate locations of the Proforest, Daemeter Consulting, and the Group would not be trying to in ascending order - to build up case mills’ supply base. Dr Petra Meekers, p8 p9 Dr Yulin Iffendi (33 Years old)

Medical degree from Trisakti University / Jakarta The plantation practising in PT Sukajadi Sawit Mekar Estate (Sebabi) Clinic location: for three years and five months. Sees about 25 patients per day on average stethoscope: Most common afflictions in his patients: Respiratory tract infections / Cough and Flu and Dyspepsia. I joined the clinic for a change in working environment, to experience new how practising in things. The quality of our clinic is quite good, and the medical devices are adequate to examine patients and provide outpatient treatment. It is easy to save money working and to live here because the company offers food and lodging. The plantation differs from in city estate life also provides a quiet environment.

lantations are usually located far away from cities. Hence to ensure that the employees along with their families have access to medical Pservices, Musim Mas builds clinics in its estates to meet the medical needs of its workers and their families. Medan

The job scope of estate clinic staff typically entails: • Clinic Management - including management of patient data, medicine and equipment, and the Badan Penyelenggara Jaminan Sosial (BPJS) Pekanbaru Kalimantan programme • Medical consultation and treatment for patients A C Pontianak • Accompany patients to appointed hospitals for emergency cases Sumatra • Monthly gynaecological check up • Health checks for staff and workers - monthly and yearly basis Padang • Provide health socialisation and training on first aid and medication B Palangkaraya

We spoke to three doctors to find out about what they think about Palembang working on a plantation.

Dr Chrisdiansyah Lukman Hakim Saputra (31 Years old)

Bachelor of Science (Medical), from University Brawijaya / Malang - East Java Clinic location: practising in PT Guntung Idamannusa (PT GIN) for two years and eight Dr Irsan Rusli (40 years old) months. Sees about 30 to 40 patients per day on average Medical degree from North Sumatra Islamic University / Medan Most common afflictions in his patients: Respiratory tract infections, cough and flu, Clinic location: practising in PT Musim Mas Estate 2 for six years gastritis and diarrhoea. and eight months. Sees about 15 patients per day on average I joined this clinic as it allows me the opportunity of applying what I learned (medical and Most common afflictions in his patients: management) directly. What I like about working in a plantation estate is that it is free from Hypertension, joint disease and influenza. pollution and traffic jam. We can learn a lot of things that cannot be experienced in cities. The clinic is adequately equipped with rooms for patients and medical equipment. I decided to join this clinic knowing that it is located in a The only form of transportation to and from PT GIN is by boat since rivers and canals surround the area. This situation plantation, to get more experience in handling diseases and to widen my makes our medical work specially challenging from having to provide treatment in the boat to being lost in the river en- knowledge in treating patients. What I enjoy about working here is the intimate atmosphere and route the appointed hospital due to low visibility. The journey to a hospital in a major city like Batam requires a 45-min kinship that is seldom experienced outside. I don’t quite like it when a co-worker is transferred to other journey by boat and there were occasions when the baby arrived faster than we could travel, so I have helped deliver locations, especially if we have worked closely together. a baby on board. These are experiences which other doctors and paramedics may never encounter and make us even stronger than before. There have been significant improvements to the clinic’s facilities and infrastructure since Musim Mas took over.*

*PT. GIN was acquired by the Group in late 2013. p10 p11 Headquartered in Singapore, our business is involved with every part of the palm oil supply chain: from managing plantations and mills to refining crude palm oil and manufacturing palm-based products, supported by an extensive fleet of ship tankers and barges that enhance our logistical capability. We have 37,000 employees in 13 countries across Asia Pacific, Europe, and the Americas, committed to meet global palm oil demand in an environmentally, socially and economically viable way.

This newsletter is published by Musim Mas. Comments and suggestions are welcomed. Please contact the Sustainability Team at [email protected] or visit our website at www.musimmas.com.