Audit Report 3rd Annual Surveillance Audit Report for PT. SMART Tbk. Tanah Laut Mill and Its Supply Bases RSPO20010 RSPO Membership number: 1-0019-05-000-00 Audited Address: Tanah Laut Mill: Kecamatan Kintap, Kabupaten Tanah Laut, South Kalimantan, Indonesia Its Supply Bases: Tanah Laut Estate Kecamatan Kintap, Kabupaten Tanah Laut, South Kalimantan, Indonesia Kintapura Estate Kecamatan Kintap, Kabupaten Tanah Laut, South Kalimantan, Indonesia Date of audit: 12 August 2015 COMMERCIAL- IN – CONFIDENCE I The contents of this report must not be disclosed to a third party without the agreement of the SAI Global Client Doc ID: 3843 / Issue Date May 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 1 of 190 Audit Report Table of contents Page Executive Overview 4 Abbreviations Used 5 1.0 SCOPE OF THE ASSESSMENT 7 1.1 Introduction 7 1.2 Audit Objective 7 1.3 Scope of Certification 7 1.4 Location of Mill and Estates 8 1.5 Description of Supply Base 8 1.6 Date of Plantings 10 1.7 Area of Plantation 10 1.8 Approximate tonnage offered for certification (CPO and PK) 11 1.9 Other certificates held 15 1.10 Organizational information/contact person 15 1.11 Timebound plan for other management unis 15 1.12 Partial Certification Requirements 28 1.13 Date of Issue of Certificate dan Date of Previous Assessment 29 2.0 AUDIT PROCESS 29 2.1 Certification Body 29 2.2 Audit Methodology 30 2.3 Qualification of the Lead Auditor and Audit Team Members 31 2.4 Stakeholder Consultation 32 2.5 Date of Next Surveillance Visit 33 3.0 AUDIT FINDINGS 33 3.1 Action taken on previous audit issues 33 3.2 Claim and use of certification mark and or logo 33 3.3 Summary of findings 34 3.3.1 RSPO Principle and Criteria 34 3.3.2 RSPO Supply Chain 144 3.3.2.1 RSPO Supply Chain Standard – Module E Mass Balance 144 3.3.2.2 RSPO Supply Chain System 155 3.4 Recommendation 157 3.5 Environmental and social risk for this scope of certification for planning of the 157 surveillance audit 3.6 Acknowledgement of Internal Responsibility and Formal Sign-off of 157 Assessment Findings Page List of Tables 1 Mill and Estates GPS Locations 8 2 Tanah Laut Mill Estimated FFB Production of the Supply Bases 2016 8 3 Tanah Laut and Kintapura Estates Age Profiles of Planted Palms 2015 10 4 Tanah Laut and Kintapura Estates and Area Planted 2015 10 5 Tanah Laut and Kintapura Estates Land Use Summaries 2015 10 6 Tanah Laut Mill FFB Production Trend 2011-2014 11 7 Tanah Laut Mill Total CPO and PK Production 2014 – 2015 and Estimate 11 Production of 2015 – 2016 8 Tanah Laut Mill Actual Production of Certified CPO and PK, Actual volume 13 since date of last reporting period 9 Tanah Laut Mill Estimated Production of Certified CPO and PK 14 WORK ITEM: Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 2 of 190 Audit Report Table of contents Page 10 Other Certificates Held by Mill and Estates 15 11 RSPO Certification Time Bound Plan 16 12 List of internal and external stakeholder 32 List of Figures Page 1 Map of Mill and Estates Location 9 List of Appendices Page A Audit Plan 158 B Previous nonconformities, corrective actions and status 161 C Nonconformities, Corrective Actions and Observations Summary 176 D Stakeholder’s issues and comment 185 E Definition of, and action required with respect to audit findings 191 WORK ITEM: Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 3 of 190 Audit Report Executive Overview This is the third (3rd) annual surveillance audit visit on 10 – 12 August 2015 against the Generic RSPO Principles and Criteria for Sustainable Palm Oil Production, May 2013 and RSPO Supply Chain Certification Standard, CPO Mill, Module E Mass Balance, November 2014. PT. SMART Tbk. Tanah Laut Mill operations comprising one mill, two oil palm estates as supply bases: Tanah Laut Estate and Kintapura Estate of PT. SMART Tbk. There were also supply base from independent third party which excluded from the scope of certification. Two (2) minor and five (5) major non-conformances were issued during this audit. The organization has followed up by submitting correction and corrective action plan. Follow up audit for verification on the correction and corrective action of the major and minor NCR issued was done on 12 August and 9 September 2015. The 1 (one) minor and 4 (four) majpr non-conformances issued in the 3rd annual surveillance audit has been rectified and considered as closed. One minor non- conformance is still open. There was land dispute with one of community member regarding closing of Estate access. The Estate suggested to management to take the issue to court. Until the audit completion, there has no respond from the management yet. This will be concern area during next visit. The audit concluded that PT. SMART Tbk. Tanah Laut Mill and its supply bases operation were found complies with the requirements of the Generic RSPO Principles and Criteria for Sustainable Palm Oil Production, May 2013 and RSPO Supply Chain Certification Standard, CPO Mill: Module E Mass Balance, November 2014. The estimate figures of production offered for certification 2014 are: Estimated tonnage of certified CPO produced : 24,395.55 MT Estimated tonnage of certified PK produced : 6,042.05 MT Therefore PT. SMART Tbk. Tanah Laut Mill and supply bases can continues to be certified as RSPO Mass Balance Model CPO and PK producer. WORK ITEM: Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 4 of 190 Audit Report Abbreviations Used AAA Agronomy Advisory Audit ANDAL Environmental Impact Analysis (Analisis Dampak Lingkungan) BHL Daily basis paid workers (Buruh Harian Lepas) BKM Log book of group leader activity (Buku Kegiatan Mandor) BLH Local Agency of Environmental (Badan Lingkungan Hidup) BOD Biological Oxygen Demand BPN National Land Agency (Badan Pertanahan Nasional) CEO Chief Executive Officer COD Chemical Oxygen Demand CPO Crude Palm Oil CSR Corporate Social Responsibility D&L Document and Legal DELH Document of Environmental Evaluation (Dokumen Evaluasi Lingkungan Hidup) EFB Empty fruit bunches FFB Fresh Fruit Bunch GAR Golden Agri-Resources Limited GPS Global Positioning HCV High Conservation Value HGU Land Use Title (Hak Guna Usaha) HPH Forest Authority Concession (Hak Penguasaan Hutan) IMT PT. Ivo Mas Tunggal IPB Bogor Agricultural University (Institut Pertanian Bogor) IPM Integrated Pest Management ISO International Standards Organisation KNTE Kintapura Estate KUD Village Unit Cooperatives (Koperasi Unit Desa) LD Lethal Dosage LOTO Lock out tag out MAA Mill Advisory Audit MCAR Management Committee Agronomy and Research MSDS Material Safety Data Sheet MT Metric Ton NGO Non Government Organisation OHS Occupational Health and Safety OIA Operation Internal Audit P2K3 Safety Commitee PK Palm Kernel PKB Mutual Working Agreement (Perjanjian Kerja Bersama) PKWT Contracted worker (Pekerja Waktu Tertentu) POM Palm Oil Mill POME Palm Oil Mill Effluent PPE Personal Protective Equipment RABQSA Quality Society of Australia RKL Environmental Management Plan (Rencana Pengelolaan Lingkungan) RPL Environmental Monitoring Plan (Rencana Pemantauan Lingkungan) RSPO Roundtable on Sustainable Palm Oil SA Social Accountability SCCS Supply Chain Certification System SHM Land Own Title (Surat Hak Milik) WORK ITEM: Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 5 of 190 Audit Report SIA Social Impact Assessment SKU Permanent worker (Syarat Kerja Utama) SMD Senior Managing Director SMARTRI SMART Research Institute SOP Standard Operation Procedure SPM Independent Worker Union (Serikat Pekerja Mandiri) SPNA Sungai Panci Plasma SPNE Sungai Panci Estate TLV Threshold Limit Value TLTE Tanah Laut Estate TLTM Tanah Laut Mill TLTT Tanah Laut Transport VPA Vice President of Agronomy WORK ITEM: Doc ID: 3843 / Issue Date May, 2014 © SAI Global Limited Copyright 2008 - ABN 67 050 611 642 Page 6 of 190 Audit Report 1.0 SCOPE OF THE ASSESSMENT 1.1 Introduction SAI Global conducted a surveillance audit of PT. SMART Tbk. Tanah Laut Mill and Its Supply Base on 10 – 12 August 2015 and 9 September 2015. The purpose of this audit report is to summarise the degree of compliance with the relevant criteria, as defined on the cover page of this report, based on the evidence obtained during the audit of your organisation. SAI Global audits are carried out within the requirements of SAI Global procedures which also reflected the requirements and guidance provided in the international standards relating to audit practice such as ISO/IEC 17021, ISO 19011, RSPO Certification System, relevant RSPO Supply Chain Certification System and other normative criteria. SAI Global Auditors are assigned to audits according to industry, standard or technical competencies appropriate to the organisation being audited. Details of such experience and competency are maintained in our records. The audit team is detailed in the attached audit record. 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