Roundtable on Sustainable Palm Oil · other PTPN III estates as well as from smallholders which is the Community Plasma Plantation ( Perkebunan Inti Rakyat or PIR) Aek Raso and from

Roundtable on Sustainable Palm Oil Public Summary Report

Report no. : 824 502 14003

Certification assessment against the

RSPO Principles & Criteria NI Indonesia year 2008

PT PERKEBUNAN NUSANTARA III Aek Raso Plantation & Mill

Head Office: Jalan Sei Batanghari no 2 Medan,

North Sumatra Province, Indonesia Date of assessment: 12-16 December 2011

Date of re-audit for update data : 10-12 September 2013

Report prepared by : Fadli (RSPO Lead Auditor)

Certification decision by: M. Bacharul Asana

(Managing Director, TUV Rheinland Indonesia)

Certification Body’s Office : PT TUV Rheinland Indonesia

Menara Karya 10th floor Jl. H.R Rasuna Said Block X-5 Kav. 1-2,

Jakarta, Indonesia. 12950 Tel : +62 21 579 44 579 Fax : +62 21 579 44 575

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 ............................................................................................................... 5 1.5 Dates of Plantings and Replanting Cycles ....................................................................................... 6 1.6 Other Achievements and Certifications Held .................................................................................... 7 1.7 Organisational Information/Contact Person ...................................................................................... 7 1.8 Description of Company History ....................................................................................................... 8 1.9 Time Bound Plan of PTPN III ............................................................................................................ 9 1.10. Audit against the rules for Partial Certification .................................................................................. 9 1.11 Area of Plantation (Total, Planted and Mature) .............................................................................. 10 1.12 Approximate Tonnages Certified .................................................................................................... 11 1.13 Recommendation for Certification .................................................................................................. 11 1.14. Chronology of suspension of RSPO Certificate of PTPN III Sei Mangke Mill and Withholding of

Certification of Non-certified Management Units ............................................................................ 11 1.15 Date of Certificate Issued and Scope of Certificate ........................................................................ 11

2.0 ASSESSMENT PROCESS .................................................................... 12

2.1 Certification Body ............................................................................................................................ 12 2.2 Qualifications of Lead Assessor and Assessment Team ............................................................... 12 2.3 Assessment Methodology ............................................................................................................... 13 2.4 Stakeholder Consultation and Stakeholders Contacted ................................................................. 15 2.5 Date of Next Surveillance Visit........................................................................................................ 16

3.0 ASSESSMENT FINDINGS .................................................................... 17

3.1 Summary of Findings ...................................................................................................................... 17 3.2 Identified Non-compliances, Corrective Actions Taken and Auditors Conclusions ....................... 36 3.3 Noteworthy Positive Components ................................................................................................... 46 3.4 Description of Supply Chain Management System ........................................................................ 46 3.5 Identified Non-compliances against RSPO SCCS Requirement, Corrective Actions Taken and

Auditors Conclusions ...................................................................................................................... 50 3.6 Conclusions and Recommendation for RSPO P&C and Supply Chain Certification ..................... 51 3.7 Issues Raised by Stakeholders and Findings Pertaining to Issues ................................................ 51 3.8 Acknowledgements of Internal Responsibility and Formal Sign-Off by Client ............................... 53

APPENDICES ............................................................................................. 54

Appendix 1 : Details of Certificate ........................................................................................................... 54 Appendix 2 : List of Abbreviations ........................................................................................................... 54 Appendix 3 : List of Stakeholders Interviewed and Contacted ............................................................... 56 Appendix 4 : Observations and Opportunities for Improvement ............................................................. 57

RSPO Certification Assessment Report

- PT Perkebunan Nusantara III, Aek Raso Mill & Esta te

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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 National Interpretation Year 2008 of the RSPO Principles & Criteria.

1.2 Type of Assessment

The main certification assessment was carried out in 1 (one) mill and 1 (one) estate (Aek Raso Mill and Estate) of PT Perkebunan Nusantara (PTPN) III.

1.3 Location and Maps

Maps showing the location of the assessed plantations and mill

Figure 1. Location of PT PN III in North Sumatra Pr ovince, Indonesia.

PTPN III Province



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Figure 2: Location of Aek Raso Plantation and Mill within Labuhan Batu District, North Sumatra Province, Indonesia.

LOKASI USAHA

KEBUN AEK RASO



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Figure 3: Map of Aek Raso Plantation

Table 1: GPS locations for all estates and mills in cluded in certification assessment

1.4 Description of Supply Base

Aek Raso Mill is one of the palm oil mills owned by PT Perkebunan Nusantara III in North Sumatra. This mill was established in 1993 with 30 tons/hours production capacity. Currently Aek Raso Mill is receiving its supplies of fresh fruit bunches (FFB) from its own estate which is Aek Raso Estate, from Aek Torop Estate, and other PTPN III estates as well as from smallholders which is the Community Plasma Plantation (Perkebunan Inti Rakyat or PIR) Aek Raso and from outgrowers. However, Aek Torop, Sei Baruhur and Sei Kebara estates were not included in this audit because they were not regular suppliers to Aek Raso Mill. Details of the mill’s supply base are as per the table below:

Name of mill/estate Location

GPS locations Latitude Longitude

Aek Raso Mill Aek Raso Village. Torgamba District, Labuhan Batu Regency – 21464 North Sumatra Province, Indonesia

01°42’13.7” N 100°10’20.4” E

Aek Raso Estate Aek Raso Village. Torgamba District, Labuhan Batu Regency – 21464 North Sumatra Province, Indonesia

01o 42’12.5” N 100o10’23.7” E

Kebun Aek Torop (KATOR)

Kebun Tasik Raja (Anglo Indonesia Plantation-AIP)

Kebun Tasik Raja

)

PIR Aek Raso



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Table 2: FFB Supply Information for Aek Raso Mill

FFB Contributors FFB supplied in 2012 FFB supplied in 2013*

Tons % Tons %

Company owned estates :

Aek Raso Estate 37,872.14 32.17 7,857.36 11.57

Estates under other management units of PTPNIII:

Aek Torop Estate 15,011.46 12.75 3,160.75 4.66

Sei Baruhur Estate 239.59 0.20 42.09 0.07

Sei Kebara Estate 8,814.11 7.49 10,461.01 15.40

Sub Total I 61,937.30 52.60 21,521.21 31.70

Smallholders:

PIR Aek Raso 21,081.70 17.90 13,165.25 19.38

Sub-total II 21,081.70 17.90 13,165.25 19.38

Others/Independent outgrowers:

UD. Mandiri 26,619.10 22.61 - -

UD. Putra Mandiri Perkasa 4,382.26 3.72 306.74 0.45

UD. Berdikari 1,211.23 1.03 7,923.23 11.67

UD. Reboina 702.18 0.60 7,093.47 10.44

UD. Tekwang 1,807.57 1.54 11,303.28 16.64

UD. Torgamba Karya - - 6,604.64 9.72

Sub-Total III 34,722.34 29.50 33,231.36 48.92

TOTAL 117,741.34 100 67,917.82 100

* FFB supply up to August 2013

1.5 Dates of Plantings and Replanting Cycles

The company follows a replanting cycle of 25 years. Information on the dates of plantings is as per the table below. Table 3: Age and year of plantings of company estat e supplying to Aek Raso Mill

Age & Year of Plantings Oil palm planted area at each estate (Ha)

Aek Raso

0-5 yrs (2008-2013) 2,394.38

6-10 yrs (2002-2007) 620.39

11-15 yrs (1996-2001) 8.86

16-20 yrs (1994-1995) 21.66

TOTAL 3,045.29



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Table 4: Planned and actual oil palm replanting act ivities for Aek Raso Estate

Year Total planned replanting area (Ha)

Actual total area replanted (Ha)

2011 561.80 561.80

2012 1,288.07 1,255.35

2013 539.94 577.23

Total 2,389.81 2,394.38

1.6 Other Achievements and Certifications Held

Table 5: Award Achievement Table

Name of mill/estate

Certification Standard/Award

achieved

Certification Body/Awarder

Date Achieved

KRBTN ISO 9001/14001/SMK3 TUV/Sucofindo 1998/2000/1999

PSMKI ISO 9001/14001/SMK3 TUV/Sucofindo 1998/2000/1999

PSSIL ISO 9001/14001/SMK3 TUV/Sucofindo 1998/2000/1999

PANAS ISO 9001/14001/SMK3 TUV/Sucofindo 1998/2000/1999

PSSUT ISO 9001/14001/SMK3 TUV/Sucofindo 1998/2000/1999

PSBAR ISO 9001/14001/SMK3 TUV/Sucofindo 1998/2000/1999

PPARO ISO 9001/14001/SMK3 TUV/Sucofindo 1998/2000/1999

PTORA ISO 9001/14001/SMK3 TUV/Sucofindo 1998/2000/1999

PATOR ISO 9001/14001/SMK3 TUV/Sucofindo 1998/2000/1999

PSDAN ISO 9001/14001/SMK3 TUV/Sucofindo 1998/2000/1999

1.7 Organisational Information/Contact Person

Contacts details of the company are as follows:

Company Name: PT Perkebunan Nusantara III – Aek Ras o Mill

Address: Jl. Sei Batang Hari No 2 Medan, North Sumatra Province Aek Raso village. Torgamba District, Labuhan Batu Regency – 21464

Contact Person:

Mr. Tio Handoko

Telephone: 061-8452244

Email: [email protected] III.co.id



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1.8 Description of Company History Company History Aek Raso Plantation is one of the business units of PT Perkebunan Nusantara III (PTPN III) with headquarter at Jalan Sei Batanghari No. 2, Medan. In 1985 this estate’s name was PT Perkebunan III and consisted of 5 nucleus estates and 3 smallholder estates. In 1993 the nucleus merged with Aek Torop Plantation with only a smallholder estate left in Aek Raso. In 1996 another re-organization took place in which PT Perkebunan III, PT Perkebunan IV, and PT Perkebunan V (the state owned plantations) merged to become one company named PT Perkebunan Nusantara III. On May 2004, based on Decree of Director of PTPN III No. 3.08/SKPTS/34/2004 on 11 May 2004, management for 4 Aek Torop nucleus estates were moved into Aek Raso Plantation nucleus estate. With nucleus estate of 3,781.69 Ha and smallholder estate of 7,247.84 Ha, the Aek Raso Plantation covers a total area of 11,029.53 Ha. Land use permits and related licenses for Aek Raso Estate Aek Raso Plantation and mill has land use right (HGU) together with land use right of Aek Torop Plantation which is HGU No. 01/Aek Batu (Kebun Aek Torop) and SK: 41/HGU/DA/80, dated 9 July 1980 with a total area of 24,253.0047 Ha as explained below: 1. Based on the Decree of HGU No. SK.41/HGU/DA/80, the decree holder is mandatory to allocate an area

of 6,000 Ha for smallholder purposes. The company has already implemented this obligation by establishing the Community Nucleus Plantation (PIR) scheme called the PIR Aek Raso in the site known as Aek Raso Village. During this process, this smallholder purpose area was extended to 8,000 Ha. This expansion was agreed by the Ministry of Finance through the official decree No. KB.550/803/Mentan/X/1983 of 18 October 1983. The company then divested its right upon the land based on Land Right Divesting Letter No. 3/SPPH/LB/1985 for smallholder project.

2. As much as 6,000 Ha of the HGU area is lent to Anglo Indonesia Plantation (AIP) based on Decree No.

1/SPPH/LB/1990 for the Director of the Trade and Industry Company Marison NV as AIP representative. Since HGU No. 1/Aek Batu (Aek Torop plantation) expired on 31 December 2010, the PTPN III management has applied for extension to the North Sumatra National Land Agency (‘Badan Pertanahan Nasional’ or BPN) through Letter No. 3.09/X/1592/2008 dated 23 May 2008. In line with the application for HGU extension, in accordance with a warrant letter from the provincial offices of North Sumatra BPN No. 620 887 dated 23 June 2009, the extension fee has been made to the Special Treasurer (Bendaharawan Khusus) of North Sumatra BPN through Bank Rakyat Indonesia, Jalan Iskandar Muda branch office to account number 0336.01.000042.30.6 in amount of IDR 704,971,000.00. Within August-September 2010 the surveyors of the North Sumatra BPN office has made measurements of the HGU extension borders. Measurement results are attached in the Area Map No. 26/12/2009 dated 11 December 2009. On 26 October 2010 the B Committee of the North Sumatra National Land Authority (BPN) has carried out soil survey/constarering. The soil survey results shall be incorporated in the form of the minutes of the land assessment according to BA No. 01/RPT/B/2010 record. In connection with the issuance of an extension of HGU SK, the North Sumatra BPN has filed the process to the Central BPN office in Jakarta through Letter No. 2007-300.8/XI/2010 dated 19 November 2010. Thus, the current issue HGU extension No. 1/Aek Stone (Garden Aek Torop) is still in the process by Central BPN in Jakarta. Apart from the stated area within the HGU No. 1/Aek Batu (Aek Torop Plantation), Aek Raso plantation also has an area of 274.46 Ha consisting of 173.28 Ha in the Pasir Lancat Village and 101.18 ha in Manari Tua Village obtained through the purchase process to the community in the two villages. For the land in Pasir Lancat Village there is an official letter issued by the village Head and land letter (SKT-Surat keterangan Tanah) from the head of Simangambat District, as follows:

1. SKT no: 33/84/2006 on 19 December 2006 as 31.07 Ha. 2. SKT no: 33/85/2006 on 19 December 2006 as 96.11 Ha. 3. SKT no: 33/86/2006 on 19 December 2006 as 46.10 Ha.



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Table 6: General information on Aek Raso Plantatio n supplying to Aek Raso Mill

Location of local government admin office

Aek Raso Village, Torgamba District, Labuhan Batu Regency – 21464 North Sumatra Province.

Location of plantation administration office

Aek Raso Village, Torgamba District, Labuhan Batu Regency – 21464 North Sumatra Province.

Stakeholders located at estate’s north boundary

Aek Torop Estate of PT Perkebunan Nusantara III

Stakeholders located at estate’s east boundary Smallholder of Aek Raso Village

Stakeholders located estate’s south boundary PT AIP

Stakeholders located at estate’s west boundary

PT AIP and Huta Raja Village

Total Area 3,781.69 Ha Land Condition Secondary Forest and brush land Soil type Ultisol, Inseptisol and Entisol Hydrology Poor – well-drained Climate type (according to Köppen climate classification)

B1 classification Type Af dan Am

Slope (%) 0-12%

1.9 Time Bound Plan of PTPN III

The time frame laid out below is considered to be both challenging yet realistic. The company will be using the experience from this main assessment to ensure that other management units conform to the RSPO Principles & Criteria. The audit team is satisfied that the company conforms to the RSPO requirements for partial certification as laid out in Clause 4.2.4 of the RSPO Certification Systems document.

Name of Holding Location Time bound plan

for certification Progress in

2013

PKSMK Sei Mangke/Simalungun August 2010 Certified

PRBTN Tebing Tinggi December 2014 Planned

PSSIL Sei Silau/Asahan December 2014 Planned

PANAS Aek Nabara/L. Batu November 2013 In-process

PSSUT Sisumut/L. Batu November 2014 In-process

PSBAR Sei Baruhur/L. Batu November 2014 In-process

PPARO Aek Raso/L. Batu November 2013 In-process

PTORA Torgamba/L. Batu December 2015 Planned

PATOR Aek Torop/L. Batu December 2013 In-process

PSDAN Sei Daun/L. Batu December 2015 Planned

PSMTI Sei Meranti/L. Batu December 2015 Planned

PHPSG Batangtoru/Tapanuli Selatan

November 2016 Planned

1.10. Audit against the rules for Partial Certifica tion

PTPN III’s compliance with partial certification rules under Clause 4.2.4 of 2007 RSPO certification system has been assessed through document check and interview in the head office and through findings of concurrent ISO: 9001 checks conducted at other management units of PTPN III. Below is summary of the findings:

Partial Certification Requirements Audit Findings

1.a The organisation is an RSPO Yes, PTPN III is an RSPO member with ID No. 1-0030-06-000-



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Partial Certification Requirements Audit Findings

member. 00 (membership since 14 December 2006).

1.b A time-bound plan for achieving certification of all relevant entities;

PTPN III has a time-bound plan to achieve RSPO certification for all relevant entities. However, one of the company’s development areas (Muara Upu site) located at South Tapanuli is still not included by the time-bound plan. NPP assessment for this area was carried out by Certification Body (Sucofindo) in 2012 years.

1.c. i. There are no significant land conflicts.

There are some land conflicts/ potential land conflicts ongoing in other PTPN III’s management units, such as Silau Dunia, and Si Sumut Estates. While the company has already made a conflict resolution mechanism, these conflicts remain unresolved as the mechanism is still not agreed by the land claimants.

1.c. ii. No replacement of primary forest or any area containing HCV since November 2005.

PTPN III’s development of a new planting area (Muara Upu at South Tapanuli) had been raised before as a major noncompliance by TUV Rheinland audit team, which is now closed as the company has carried out applying NPP in accordance with this clause.

1c. iii. No labour dispute that are not being resolved through an agreed process.

No labour issues were found during this surveillance audit.

1c.iv. No evidence of non-compliance with law in any of the non-certified holdings.

Some of PTPN III’s other management units have not complied with certain legal requirements. For example, in Silau Dunia Estate under another PTPN III management unit, an issue has been found with the area stated under the Right of Cultivation certificate (HGU). However, the company is taking action by inviting National Land Agency (BPN) to re-measure the land and resolve the issue. The process is still ongoing.

1.11 Area of Plantation (Total, Planted and Mature)

Table 8: Oil Palm Planted Area Summary, FFB Product ion and Average yield/Ha for Aek Raso Plantation

Estate Name Total area (Ha)

Oil Palm Planted area

(Ha)

Mature (Production)

area (Ha)

Immature (Non-production)

area (Ha)

FFB Production*

(tons)

Average yield/ ha*

Aek Raso 3,781.69 3,045.29 650.91 2,394.38 7,857.360 12.071 TOTAL 3,781.69 3,045.29 650.91 2,394.38 7,857.360 12.071

Note: * Data is from January to August 2013

Table 9: Other land use data for PTPN III

Estate Name

Total area (Ha)

Oil Palm

Planted Area (Ha)

HCV/ Land used for other purposes (Ha)

Potential HCV

areas* (Ha)

Office, Housing &

Road Nursery Other Land (Non

Plantable)

Aek Raso Estate 3,781.69 3,045.29 0.60 735.80 0 -



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TOTAL 3,781.69 3,045.29 0.60 735.80 0 -

1.12 Approximate Tonnages Certified

The approximate tonnages certified, based on production data for year 2012, are as follows:

Crude Palm Oil (CPO) : 8158 tonnes ; average OER: 21.54 Palm Kernel (PK) : 1700 tonnes ; average KER: 4.49

1.13 Recommendation for Certification

Aek Raso Mill of PTPN III and its supplying estate 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 National Interpretation Indonesia version 2008. TUV Rheinland Malaysia recommends that PTPN III Aek Raso Palm Oil Mill be approved as a producer of RSPO Certified Sustainable Palm Oil.

1.14. Chronology of suspension of RSPO Certificate of PTPN III Sei Mangke Mill and Withholding of Certification of Non-certified Management Units

TÜV Rheinland Malaysia Sdn. Bhd. issued a suspension letter dated on 2 May 2012 for PTPN’s Sei Mangkei Mill which had previously been RSPO certified. This resulted in withholding of certification of other management units under PTPNIII, including Aek Raso. The suspension was issued due to an ongoing significant land dispute issue and new planting carried out at Muara Opu which was not done in accordance with the RSPO New Planting Procedure (NPP). The corrective action proposal was sent by PTPN III and verification was completed on 7 July 2013. Based on the verification, the land dispute issue was deemed clear and then closed by TRM, while the Muara Opu issue was not clear and cannot be closed.

In October 2012 PTPN III conducted the HCV and Social Impact Assessment (SIA) using the external consultant, then continued with NPP programme with Sucofindo. During the RSPO – CB forum on 5-6 March 2013, this issue was communicated to RSPO and the conclusion was Muara Opu issue does not has impact the certification process, and therefore TÜV Rheinland Malaysia Sdn. Bhd. issued a letter for lifting of the suspension.

The RSPO certification audit for Aek Raso was done on December 2011, and due to the suspension of Sei Mangkei mill, the certification of Aek Raso was withheld. Upon lifting of the suspension, a re-audit was conducted on September 2013 to update information found during the certification audit.

1.15 Date of Certificate Issued and Scope of Certif icate

The scope of the certificate covers production of palm oil from Aek Raso Palm Oil Mill and its supply base, which is only the Aek Raso Estate. The date of certificate issued is [Date of certificate to be included upon certification decision and issuance of certificate]. Further details of the certificate are as per Appendix 1.



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2.0 ASSESSMENT PROCESS 2.1 Certification Body

TUV Rheinland Malaysia Sdn. Bhd. is member of Group TÜV Rheinland Group, a global leader in independent testing and assessment services. The TÜV Rheinland Group was established in 1872 with offices located in over 500 locations in 65 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.

2.2 Qualifications of Lead Assessor and Assessment Team

Name Position Qualifications/Experience

Fadli Lead

Auditor

Education: Bachelor of Anthropology, Department of Anthropology - University 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 - Indonesian Ecolabel Institute (LEI), Forest Management and Agriculture Auditor 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.

Dian S. Soeminta

Auditor

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 for Environmental Management System (EMS) and Quality Management 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.

Rahmawati Noor

Auditor

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. Lead Auditor for ISO 9001, ISO 14001 and OHSAS 18001 Experience : 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 year’s experience as environmental consultant for PT. Dames and Moore Indonesia, prior to working for PT. TUV International Indonesia.



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Hendra Fachrorozy

Auditor

Education: Bachelors Degree in Forestry - Bogor Agriculture University. Indonesia,. Trainings attended : IRCA ISO 9001:2000 (QMS) Lead auditor Course, ISO 14001:2000 (EMS) Lead auditor Course, Sustainable Forest management Certification Assessor Course (LEI Standard), Pro Forest-Wild Asia RSPO Lead Auditor training, etc. Working experience: Starting career as forester in PT. Surveyor Indonesia 2008 as forestry surveyor and responsible for Sustainable Forest management coordinator, moved to TUV Rheinland Indonesia in 2010 as SFM , VLK, ISO (EMS and QMS), RSPO project audits including RSPO assessment P&C.

Carol Ng Technical Expert

Education: Bsc. Biotechnology & Bsc. Environmental Management - Monash University. Trainings attended: RSPO Malaysian National Interpretation Requirements and Certification – SIRIM; Implementation of RSPO Principles & Criteria - QA Plus; RSPO Stepwise Support Programme; 2nd Biodiversity Seminar – RSPO; Certification Body Biodiversity Forum & Workshop – RSPO; Environmental Quality Act 1974 (DOE) and ISO9001:2008 QMS Conversion Requirements - TUV Rheinland, ISO14001 Environmental Management System Lead Auditor training – Neville Clarke. Working experience: Experience in implementing sustainable practices in Sime Darby plantations to comply with RSPO requirements, performing RSPO internal audits and implementing sustainability projects. Prepared training materials and conducted several RSPO requirements trainings and workshops to plantation management teams (2008).

2.3 Assessment Methodology The certification assessment was conducted between 12 to 21 December 2011 as per the assessment program below. The assessment was carried out in accordance with TUV Rheinland Malaysia’s RSPO audit procedure as well as the RSPO Certification Systems document. During assessment, the qualified TUV Rheinland assessors used the RSPO standard as endorsed for the country in which the assessment took place and recorded their findings. The estate and mill were visited and the assessment team carried out field and document assessments of compliance to all the RSPO principles and criteria. Common systems were identified and specific evidence was recorded for individual unit. Interviews were conducted at estates and the mill and surroundings villages. The company proposed the correction and corrective action for all identified non conformities raised to the certification body before 60 days after the closing meeting. Verification of closure of major non-compliances was conducted 1.5 month after the closing meeting of the main assessment i.e. on 06 to 10 February 2012 and implementation of corrective actions for minor non-conformities will be verified during the next surveillance audit. The certification assessment agenda is as explained below.

After lifting of suspension of RSPO certificate (Sei Mangke POM – PT Perkebunan Nusantara III) that the certification body has conducted re-verification (up-date of data and information) for major finding dated 9-13 September 2013 as per the assessment program below. The assessment was carried out in accordance with TUV Rheinland Malaysia’s RSPO audit procedure as well as the RSPO Certification Systems document. During assessment, the qualified TUV Rheinland 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 estates, combined with common management systems, it was possible to carry out both field and document assessments of all estates and the mill within the time frame without compromising the integrity of the assessment in any way.

1 (one) estate of Aek Raso Plantation and 1 (one) mill were visited and the assessment team carried out field and document assessments of compliance to all the RSPO principles and criteria. Common systems were identified and specific evidence was recorded for individual estates. Interviews were conducted at all estates and the mill.



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Table 10: Agenda of RSPO Main Assessment for PTPN I II Aek Raso Mill and plantation

Date Loc ation/ Main sites Main activities

12-12-2011 Aek Nabara Selatan Estate Office

Stakeholder consultation.

Aek Nabara Selatan Mill Office

Opening Meeting Presentation from PTPN III Management

13-12-2011 Aek Raso Estate Office

Document review: Checks of documents pertaining to all RSPO Principles & Criteria Worker Interviews: Wages, OSH, sexual harassment issues, first aid, housing facilities, labour unions, gender issues, communication procedures, handling of complaints. Contractor interviews: Legal agreements, payment, contractor worker wages, OSH.

Local community interviews: Land disputes, transparency, communication and complaints procedure, compensation.

Aek Raso Village Aek Raso

Cooperative 14-12-2011 Huta Raja Village Pasir Lancat village

15-12-2011 Aek Raso Mill Office

Document review: Checks of documents pertaining to all RSPO Principles & Criteria Worker Interviews: Wages, OSH, sexual harassment issues, first aid, housing facilities, labour unions, gender issues, communication procedures, handling of complaints. Contractor interviews: Legal agreements, payment, contractor worker wages, OSH. Housing amenities inspection: Facilities, sanitation, water supply, and other facilities

Division 2 & 3 housing

16-12-2011 Aek Nabara Selatan Mill Office

Document review: Checks of documents pertaining to all RSPO Principles & Criteria Worker Interviews: Wages, OSH, sexual harassment issues, first aid, housing facilities, labour unions, gender issues, communication procedures, handling of complaints. Contractor interviews: Legal agreements, payment, contractor worker wages, OSH. Housing amenities inspection: Facilities, sanitation, water supply, and other facilities

Perbaungan Village

Table 11: Agenda for Verification of Closure of Maj or Non-conformities

Date Location/Main sites Auditor Main activities

06-02-2012 - Fadli & Hendra Fachrurozy

Travelling to Aek Raso Estate & Mill

07-02-2012 Aek Raso Mill Office Fadli & Hendra Fachrurozy

Verification Major finding no 1, 2, 15, 19 of 19

Aek Raso Estate Office Fadli & Hendra Fachrurozy Verification Major findings no 1, 2,

3, 7, 8, 15, 19 of 19

Tabel 12: Re-verification Assessment (up-date of da ta and information) Agenda

Date/time (1) Activity Auditor Auditee Remarks

Monday , 09 September 2013 05.45-08.10 Travelling Jakarta - Medan FA - • GA 0180 08.30-17.00 Travelling Medan - PPARO FA



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Date/time (1) Activity Auditor Auditee Remarks

Tuesday , 10 September 2013

08.00 – 08.30

08.30 – 12.00

PPARO

Opening Meeting Data and information Up dating related to:

• Major NCR • Report

FA Mill & Estate Management

Aek Raso Estate Office & Aek Raso Mill Office.

• RSPO P&C(Principle 1 to 8)

• RSPO SCCS (E.1 toE.6)

12.00-14.00 Break FA 14.00-17.00 Continuing previous agenda FA

Wednesday , 11 September 2013 08.00-12.00

KPARO Data and information up dating related to:


FA

Estate Management


12.00-14.00 Break FA 14.00-17.00 Continu oing previous agenda FA

Thursday , 12 September 2013 08.00-12.00

KPARO Data and information up dating related to:


FA

Estate Management


12.00-14.00 Break FA 14.00-17.00 continuoing previous agenda FA 18.30–06.00 Travelling to Medan FA

Friday , 13 September 2013 08.55-11.20 Travelling to Jakarta FA GA 183

2.4 Stakeholder Consultation and Stakeholders Conta cted

The stakeholder consultation involved both external and internal stakeholders. External stakeholders were notified to make comments on the certification assessment by placing an invitation to comment on the RSPO website. Stakeholders included those immediately linked with the operation of the company such employees, outgrowers, the local government, NGO’s, trade and labour unions and local communities. Stakeholder consultation took place in the form of meetings and interviews. Meetings with stakeholders were held to seek their views on the performance of the company with respect to the sustainability practices outlined in the RSPO Principles & Criteria, and to comment on aspects where improvements could be made. Meetings with local communities were held at their respective premises within and near the company’s area. A stakeholder consultation meeting was also held at Labuan Batu 3 district (DLAB 3) Hall, Aek Nabara Selatan estate, Emplashment Village, Bilah Hulu District, 21462, Regency of Labuhan Batu on 12 December 2011. Lettters inviting individual stakeholders to the stakeholder consultation meeting were prepared and sent to the individual stakeholders, while electronic mail and telephone calls were made to arrange the meetings. In all the interviews and meeting, the objectives of the RSPO and the purpose of the assessment was clarified at the outset followed by an evaluation of the relationship between the stakeholders and the company before discussion proceeded to obtain the stakeholders feedback on the company’s compliance to different aspects of the RSPO Principles & Criteria. Although several stakeholders were not familiar with RSPO but they agreed with its objective and expressed their willingness to collaborate in the promotion of sustainable palm oil in North Sumatra province. In



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all interviews and meeting, the assessment team did not restrict discussion of both the positive and negative aspects of operations conducted by PT Perkebunan Nusantara III Aek Raso Estate and mill. The stakeholder consultation meeting held with stakeholders during the audit was extensive and productive, with an attendance of more than 50 participants. This was followed by site inspections, including visits to the local communities, interviews with land claimants and contractors, and inspections of worker amenities and infrastructure. All stakeholder issues raised were recorded and forwarded to the management for their written response, and this is summarized in Section 3.7.The list of stakeholders that attended the stakeholder consultation meeting and stakeholders interviewed during the assessment is included as Appendix 3.

2.5 Date of Next Surveillance Visit The next surveillance visit is planned for [date to be confirmed upon certification decision, to conduct surveillance one year from date of certificate]



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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 Indonesia National Interpretation year 2008.

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: The company has a written commitment to transparency for requested information, as long as the information provided does not result in significant negative impact on the company. The company’s commitment to transparency is documented in their communication procedure which includes the procedure for receiving and responding to stakeholder requests for the provision of information related to the company’s operations (covering the estates and palm oil mill). To date, most letters received by the company are requests for assistance and funding from the surrounding communities. All incoming letters are recorded in a log book used to record information about stakeholders who send these letters, such as date of the letter or request, name, organization, and the information or type of assistance requested. The company also maintains records of their responses to letters and requests received by stakeholders according to the established retention time which is 2 years. Sample letters requesting assistance from the company, as well as the company’s responses, are as follows: - Letter from Aek Raso Plantation manager dated 10 January 2011, No. KPARO/XI/01/2011 in

response to a letter from the Social Sciences Faculty of Universitas Negeri Medan on 8 January 2011, No. 2347/H33.31/PM/2010, asking for permission to conduct research. This response letter stated that the company agreed to give permission for the intended research.

- Letter from estate manager in response to the proposal requests for educational support facilities and infrastructure of Raudhatul Atfhal- Al Anshor Kindergarten of the Division C Hamlet Aek Raso Torgamba Sub-District 2009/2010, dated 26 January 2010.

- Evidence of the donation in February 2011 of IDR 3,000,000 in response to a proposal for assistance to the 2nd anniversary of South Labuhan Batu Selatan Regency on 15 January 2011 from the executive committee.

- Proposal from afdeling A of Aek Raso Village community on 7 December 2011 for concrete trench. There is evidence that the response from the company was also delivered to the sender on 15 December 2011.

- Official travel permit No. PPARO/SPD/150/2010 on 19 April 2011 for 6 staff of Aek Raso plantation to attend a work health & safety event as response to invitation from South Labuhan Batu Regency Manpower and Transmigration Agency.

All records for information requests and their responses are kept according to company policy IK-3-12-01/01 Rev.04. 01-09-200 for 3 years retention time for RSPO related documents. 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: The company issued Memorandum No. 3.00/SE/01/2009 of 5 January 2009 from Director regarding public availability for company documents. The memorandum states whether the documents are publicly available or not. Documents made available to the public are:



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- Documents related to environment and social impact assessment (AMDAL/UKL-UPL and environmental management and monitoring reports (Laporan RKL-RPL).

- Documentation of social activities and community programs. However, the memorandum does not include documents stated in RSPO P&C to be publicly accessible such as land title use rights (HGU), health & safety plans, and ongoing development plans. Based on interviews with surrounding communities and company staff and workers, there was no information requested by stakeholder. The requests from communities or stakeholders were only financial donation requests for developments or traditional ceremonies in the villages. Compliance status: Non-Compliance. See NCR no. 1 of 19. Memorandum letter No. 3.00/SE/01/2009 of 5 January 2009 does not cover documents stated in RSPO P&C as publicly accessible such as land title use right (HGU), health & safety plans, and ongoing development plans.

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

Findings: The following licenses were checked for Aek Raso Mill: - License for effluent discharge to water or water sources, dated 13 January 2011, and valid for 3

years - License for temporary storage of hazardous wastes, dated 28 March 2008 and valid for 3 years,

therefore expired on March 2011. The company applied for license extension on 16 September 2011, and the company has a letter from the Environmental Agency confirming that the processing of the renewed license is underway. This was raised as an observation that the company must continue monitoring the progress of the license renewal process for temporary storage of hazardous wastes.

- License for hazardous wastes collection by the company’s contractors. The hazardous wastes stored at the mill was collected by two different contractors in 2011 (one in February 2011 and one in July 2011) and valid licenses for hazardous wastes collection issued by the Land Communication Director General of the Ministry of Communications were recorded.

The mill prepared reports to the South Labuhan Batu Regency Environmental Agency once every 3 months as required in their licenses. However, according to the company’s RPL/RKL document, several parameters require monitoring and their results to be included in the implementation report; however evidence of monitoring or analysis of some of these parameters were not recorded in the implementation reports for July 2011 or December 2010. For example, there were no analysis for soil erosion measurement for soil with over 40% slope and for soil quality, no groundwater quality analysis for the water used by workers in Aek Raso Estate, no analysis of Aek Raso river water, and no biodiversity index measurement. This was raised as a nonconformity under CR5.1. There are payment slips for level IA workers for November 2011 for IDR 1,762,066. This payment complies to the worker minimum payment regulation for North Sumatra Province of 2011. Based on this regulation, the PTPN III Director issued a decision letter No. 3.08/SKPTS/R/46/2011 regarding to workers’ wages to be increased to IDR 1,035,000 starting 3 January 2011. There is record of worker insurance payment (Jamsostek) on December 2011 of Aek Raso Plantation and mill for October 2011 period as much as IDR 1,700,933,975 via Bank Mandiri. The company also has valid or up-to-date licenses to use all equipment for palm oil mill such as: sterilizer, back pressure vessel, boiler, steam turbine, diesel motor, hoisting crane, electric installation, surface water usage, channeling lightening installation, and permit for waste disposal to water source. However, there were no licenses for the following: 1. Company registration license for Aek Raso Mill. 2. License to use wheel loader or tractor.



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The organization has been evaluated against the legal and required compliances and the organization has shown to be compliant with all applicable legal requirements. However, the organization has not fully complied to the following legal requirements:

1. Law No. 1 of 1970, in which several chemicals sprayers (though they are not permanent workers) are not provided with proper PPE, such as safety shoes, apron, hand gloves, mask, and eye goggles (estates), as confirmed from interview with workers at Division 1 Block JJ 21.

2. Law of Transportation of 2009, in which FFB transporter trucks do not have valid car license (STNK), first aid kit, or safety triangle, or driver does not have driving license or license is expired, as confirmed from interview with FFB driver in the mill.

3. Regulation of Ministry of Manpower and Transmigration No. Per.02/MEN/1980, in which there is no medical check-up for workers working in hazardous areas (chemicals sprayers, though they are not permanent employees).

4. Law No. 13 of 2003 concerning freelance workers’ wages especially contractors such as replanting workers, as confirmed from interview with workers at Division 1 Block JJ 21.

Compliance status: Non-compliance, see NCR no. 2 of 19 There is no evidence that the company has the following licenses: 1. Company registration license for Aek Raso Mill. 2. License to use wheel loader or tractor The estate and mill maintain and update their list of all applicable legal requirements relating to environmental, occupational safety and health, the company plantations, and employment as well as records of internal compliance checks to legal requirements. The company provides a mechanism for evaluation of implementation and compliance to applicable legal requirements in a standard operation procedure i.e. IK-3.11-01/01, rev 2, dated 2 June 2009. There are also procedures which define the mechanism of evaluation of compliance to regulations related to the company's plantation, legislation related to the environment, legislation relating to labour, and regulations related to health and safety. The SOP states that the identification and evaluation is to be carried out 2 (two) times a year and conducted by the each section, and estate and will be compiled by Legal officer and supported by the Head of Operations / field and other departments within the company organisation. The organization has been evaluated against the legal and required compliances and the organization has shown to be compliant with all applicable legal requirements. However, the organization has not fully complied to the following legal requirements:

1. Law No. 1 of 1970, in which several chemicals sprayers (though they are not permanent workers) are not provided with proper PPE, such as safety shoes, apron, hand gloves, mask, and eye goggles (estates), as confirmed from interview with workers at Division 1 Block JJ 21.

2. Law of Transportation of 2009, in which FFB transporter trucks do not have valid car license (STNK), first aid kit, or safety triangle, or driver does not have driving license or license is expired, as confirmed from interview with FFB driver in the mill.

3. Regulation of Ministry of Manpower and Transmigration No. Per.02/MEN/1980, in which there is no medical check-up for workers working in hazardous areas (chemicals sprayers, though they are not permanent employees).

4. Law No. 13 of 2003 concerning freelance workers’ wages especially contractors such as replanting workers, as confirmed from interview with workers at Division 1 Block JJ 21.

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

Findings: Evidence that the company has the right to use land is sufficient. Land titles for all properties are available and are in accordance with applicable laws. The right to use land is HGU certified No. 1/Aek Batu (Aek Torop Plantation) for 3,781.69 Ha and land letter from Simangambat District for some area. Since HGU No. 1/Aek Batu (Aek Torop plantation) expired on 31 December 2010, PTPN III management has applied for extension to North Sumatra BPN through Letter of Request No. 3.09/X/1592/2008 of 23 May 2008. Based on letter from North Sumatra BPN No. 620 887 of 23 June 2009 the company has completed a payment of IDR 704,971,000.00 for this purpose.



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Apart from the stated area within the HGU No. 1/Aek Batu (Aek Torop Plantation), Aek Raso plantation also covers an area of 274.46 hectares consisting of 173.28 hectares in Pasir Lancat Village and 101.18 ha in Manari Tua Village obtained through purchase processes with the community in two villages. For the land in Pasir Lancat Village there is an official letter issued by the village Head and land letter (‘Surat Keterangan Tanah’ or SKT) from the head of Simangambat District, as follows:

1. SKT No: 33/84/2006 on 19 December 2006 for 31.07 Ha. 2. SKT No: 33/85/2006 on 19 December 2006 for 96.11 Ha. 3. SKT No: 33/86/2006 on 19 December 2006 for 46.10 Ha.

Legal boundaries are clearly demarcated and maintained on site. There was no conflict between company (plantation and mill) and surrounding community. There was conflict regarding to boundary between Aek Raso Plantation and another company, PT First Mujur Plantation & Industries in 2006. This conflict was resolved by meeting on 3 February 2006. It was stated within the meeting agreement that both companies was not allowed to conduct any activities along the boundary. This agreement was signed by both company managers. Several area in Aek Raso plantation and mill was cultivated traditionally by Aek Nabara and Sigambal Villages. Land acquisition was done around 1980 but evidence of compensation payment was not well documented. Based on interviews, the community accepted the compensation and moved to the neighboring Huta Raja Village. There are no recent complaint from stakeholders regarding Aek Raso plantation and mill HGU. The company issued Memorandum No. 3.12/SE/10/2011 to all district managers pertaining to information channel use for information, suggestions, and complaints to the company. There were minutes from meeting on 18 October 2011 regarding to socialization process of grievance and complaint held with Aek Raso villagers. Compliance status: Full Compliance.

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.

Findings: Based on interview with the community there is no customary land inside the Aek Raso Mill and plantation HGU area, as was mentioned in the SIA report. However, the company allocated 100 Ha inside the HGU for the community’s grazing land. There is evidence of negotiation with 25 cattle owners on 26 September 2011 accompanied with site map which has been distributed to the community. Compliance status: Full Compliance

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

Findings: The company’s present documented plan used as reference for company’s working plan is the Long Term Plan (Rencana Jangka Panjang or RJP) document. The existing information in the RJP focuses more on production plans, planting plans, and planned expenditures (cost) associated with production operations for both estates and mill for the 5-year working period. This RJP document also includes a working plan for company’s activities related to social aspects, legal compliance, and environmental issues which are currently the company’s responsibilities. The RJP document also includes company’s activities such as long-term corporate CSR (Corporate Social Responsibility) activities of the company’s stakeholders. The RJP includes working plan documents such as guidance for activities in all PTPN III estates and mills, and during the assessment the company has established an RJP work plan for 2009-2013, including RJP for Aek Raso Mill. The RJP documents consider the results of the social impacts assessment and HCV identification that have been conducted.



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Compliance status: Full Compliance

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

Findings: The estate has working instructions from land preparation until harvesting and follow the working instructions, i.e.: 1. IK-3.01-14/01 Land preparation for oil palm trees planting rev. 05 dated 15-02-2010 2. IK-3.01-14/02 Preparation for oil palm trees planting rev. 05 dated 15-02-2010 3. IK-3.01-14/05 Block Area Unit 4. IK-3.01-14/06 Land preparation and plant maintenance at sloping grounds and downstream area

(low lying areas) rev. 01 dated 15-02-2010 5. IK-3.01-17/01 Maintenance of not yet productive plants rev. 06 dated 15-02-2010 6. IK-3.01-17/04 Maintenance of productive plants rev.05 dated 15-02-2010 7. IK-3-01-19/01 Fertilizing rev.05 dated 06-05-2011 8. IK-3.01-20/02 Harvesting rev. 07 dated 16-05-2011 9. IK-3.01-20/08 FFB transportation rev. 02 dated 06-05-2011 10. DP-3.01-18/01 Guidelines for plant chemical usage rev.00 dated 15-02-2011 The mill has working instructions from incoming FFB to CPO distribution and implement the working instructions, i.e: 1. IK-3.03-01/12 Weighing bridge rev 02 dated 15-02-2010 2. IK-3.03-01/16 Receiving FFB rev.03 dated 06-05-2011 3. IK-3.02-01/10 Internal and External Calibration rev 01 dated 15-02-2010 4. IK-3.03-01/19 Palm Oil Mill rev 02 dated 02-09--2010, including sterilizer (perebusan), thresher

(penebahan), digester (pengadukan), clarification (pemurnian), kernel processing (pengolahan biji) 5. IK-3.03-01/20 Production process and quality control 6. IK-3.03-04/01 FFB Sortation rev.06 dated 06-05-2011 7. IK-3.03-07/02 Product Delivery rev 04 dated 06-05-2011 8. DP-3.03-05/01 Quality Plan Rev 01 dated 06-05-2011 There is no operation checking or monitoring by Aek Raso internal POM, but checking and monitoring in Internal audit is conducted for ISO 9001 and ISO 14001. Last Internal audit was conducted on 02-03 March 2011. Estate is audited internally on 11-12 March 2011. There is evidence of lack of implementation of the company’s work instruction for Handling of Licenses (Work Instruction No. IK-3.11-03/01), i.e. the company’s license for storage of hazardous wastes expired on March 2011 but there was no action taken to apply for license renewal until September 2011, which was 6 months after the license had expired. Calibration sounding tape: last calibration was on 5 November 2009. Calibration of sounding tape has been scheduled annually, However there is no evidence that calibration was done in 2010. Calibration is in progress for 2011. Compliance status: minor Non-compliance No. 4 & 5 o f 19 NCR no. 4 of 19: There is evidence of poor implementation of the company’s work instruction for Handling of Licenses (Work Instruction No. IK-3.11-03/01), i.e. the company’s license for storage of hazardous wastes expired in March 2011 but there was no action taken to apply for license renewal until September 2011, which was 6 months after the license had expired. NCR no. 5 of 19: There is no evidence that calibration 2010 for sounding tape has been conducted. Calibration is in progress for 2011.



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

Findings: There is evidence of routine leaf analysis done annually in Aek Raso Estate by the Indonesian Palm Oil Research Institute as indicated by leaf analysis results in 2010 for 20 samples, and the last soil analysis for the estates was done on November 2009 for 522 soil samples, also by the Indonesian Palm Oil Research Institute. A fertilizer recommendations report prepared by the institute in 2011 based on 2010’s leaf analysis results is also available and includes description of visual analysis of planted palms. Based on records of actual fertilizer applications compared against recommended fertilizer applications, fertilizer applications have been carried out according to plans. The company also carries out land application of empty fruit bunches (EFB) with documented work plans for when application is carried out and records of amount applied block applied. However, there is no clear documented plan on how to ensure that EFB application is carried out in all sandy areas, as recommended in the company’s fertilizer recommendation report. This was noted as an observation. The company also plans to start carrying out land application of palm oil mill effluent in year 2012 to Division 3 of the estate. Compliance status: Compliance with observations

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

Findings: Based on the company’s fertilizer recommendation report for year 2011, which includes information on soil types in the estate, Aek Raso Estate is classified under tertiary formation with mixture of sandy soil and clay soil with flat to undulating topography. The general soils types found at Aek Raso Estate are Typic Hapludult (red yellowish podsolic) and Typic Paleudult (yellow podsolic) which is of average fertility. In the report, there were also identified areas with high sand content with poor organic matter, i.e. at block EE 17, block GG10, 11 TT Division 2, block KK 16 Division III, and blocks KK18, KK19, KK21, KK22, L22 TT 2006 Division 1. The estate has a map indicating all identified areas with high sand content. There are no peat soils identified in the estate area. The estate maintains a road management plan for both manual and mechanical maintenance e.g. observed road manual maintenance plan for Division 1 for October to December 2011 and schedule for heavy machinery operations for road maintenance, indicating that road grading, compacting, and excavating works for Aek Raso Estate were planned for March 2011. As observed during field visits, the estate roads are maintained with drainage, although parts of the roads were bumpy due to the rainy season. As reviewed from the company’s RPL/RKL document and topography map, approximately 75% of the estate consists of undulating and steep hilly topography. The company has a work instruction for Land Preparation and Management of Plantings and Sloped Land and Lowland Areas (Work Instruction No. IK-3.01-14/06). Practices described include planting leguminous cover crops once drainage has been constructed, and mechanical land management depending on the degree of slope (i.e., bunding or benteng at less than 3°, horse-shoe (tapak kuda) method at 3-28° and terracing or contouring at areas of slope above 28°. As viewed on site at recently replanted areas of Division 1 and Division 3 which was replanted in year 2011, the sloped areas where replanting was carried out are well managed with terracing and LCC planting was also carried out. Previously felled palms are retained on site as an additional effort to reduce soil erosion. The company currently has no documented work instruction for management of fragile or problem soils, such as soils of high sand content and poor organic matter. The company has records of land application of EFB, e.g. at Division 4, and based on the fertilizer recommendation report which stated that EFB should be applied at high sandy areas, the estate developed a plan for January-February 2012 for application of EFB at high sandy areas located at Division 1, 2, and 3. Compliance status: Full compliance

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



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Findings: Aek Raso Estate has one river, the Aek Raso River, and a documented Management Program for River Conservation Area. This program includes a schedule and planned actions for planting local tree species at the conservation area (i.e. riparian buffer zone) of the river, including river areas identification, creating planting holes, conservation area demarcation, tree planting, notification installation prohibiting damaging trees, and monitoring of program progress. The estate’s progress report was updated on 21 November 2011. According to the report, a total of 5,389 trees of various species (Mahogany, ‘Meranti’ and Gaharu) were planted but 1,928 of these died or were washed away during floods. Based on interviews with contracted sprayers from Division 3, the river riparian buffer zones are marked and they have been informed by the company that they are not allowed to carry out spraying at the buffer zones. It was confirmed during site visit. Aek Raso Estate maintains monthly records of water usage at the office, housing, clinic, mosque, church, canteen, and for washing vehicles. The main water sources include groundwater wells (located at each house). The mill conducts monthly analysis of mill effluent quality discharged into the river including BOD levels and this is reported once every 3 months to the local environmental agency. From the 2011 records, the BOD levels for mill effluent discharge did not exceed the legal standard for BOD which is 100 ppm. The mill has a documented water management plan for September 2011 to end of year 2012, which includes a schedule for water usage identification and evaluation, conducting study on water usage efficiency, flow meters and pipes installation (planned for 2012) and progress plan evaluation. There is evidence of implementation of the plan, as there are documented records of water usage evaluation at the mill on a monthly basis since January 2011. However, there is evidence of water wastage in the mill, i.e. a leaking fire hydrant was seen at the mill loading ramp. This was raised as an observation. The mill has established a target for water usage for mill processing, which is 1.7 m3 of water per ton FFB, and it was noted as an observation that this target for processing of FFB is quite high. Water usage target has also been established for other areas such as the mill office, housing, canteen, and other buildings. However, water usage calculation or records per ton FFB were found to be inaccurate. For example, based on the data on the October 2011 report, i.e. actual water usage for process was 4,255 m3 and FFB production was 8353.770 tons but this was calculated to be 1.9 tons of water used when it should have been 0.51. The mill corrected the data during the audit and based on the revised data, the water usage of the mill (in tons of water produced per ton of FFB) each month was not exceeded. Compliance status: Compliance with observations

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

Findings: The estate has a work instruction for Oil Palm Pest Management No. IK-3.01-17/14, which states that census are required to be conducted monthly for pests, prior to chemical treatment to identify areas where chemical treatment shall be conducted. The estate maintains records of census conducted once a month for pests including rats, rhinoceros beetles (Orytes rhinoceros), nettle caterpillars, and bagworms. There are records of usage of 40 g of the chemical Marshall 5G (used for treating rhinoceros beetle pests) on August 2011 in Division 2 and 40 g of the rat bait Klerat on July 2011 in Division 1, and evidence that these pest attacks were indicated by census records from these two estate divisions. As census records shows that there is a low rate of attacks by pests, there is currently no implementation for biological pest management. However, the company has a documented plan for planting Turnera subulata (a plant used to attract natural predators of leaf pests). According to the plan, 0.3 Ha in each division will be planted with the beneficial plants between March-April 2012 for all Divisions. The estate has records of pest management training on 28 November 2011 for 24 workers, and records of training materials used and photos of the training conducted are available. The estate maintains records of pesticide toxicity units in active ingredient (a.i.) used per hectare, e.g. usage of Marshall 5G on August 2011 was calculated to be 0.20 gr a.i./ha and usage of Klerat on July 2011 was 0.02 grams a.i. per Ha.



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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 estate uses agro-chemicals approved by and registered to Pesticide Book 2011 for Agriculture and Forestry issued by the Directorate of Fertilizers and Pesticides DG of Agricultural Infrastructure Development Ministry of Agriculture, i.e.: Sevin, Klerat, Marshal 5G, Matador 25 EC, Sida Up 480 SL., Gempur 480 SL. Pesticide use (including the active ingredients used, area treated, amount applied per Ha) is recorded in Pesticide Use Evaluation for Quarter III report. Number of application is stated in company’s budget plans (Rencana Kerja Anggaran Perusahaan or RKAP). For example, for productive plants: weed management in 2011 was done every 3 months rotation 4 times a year, circle path spraying is conducted by non-permanent worker, every 6 months, rotation 2 times per year, and path spraying, conducted by non-permanent worker, every 6 months rotation 2 times per year. The RKAP implementation is recorded in the Plants Routine Maintenance Record, for example at Division 2 for maintenance circle and way path on April and October the chemical applied for 168.66 Ha, Glyphosate applied 0.72 l/Ha. In RKAP area, amount that must be applied is 180.81 Ha. and Glyphosate 0.8 l/Ha. Regarding to medical check up that shall be conducted for workers, there was no record that the non permanent worker already received their regular medical check up. This finding was stated as NCR no 16 of 19 in 3.2 section below. However, there was no evidence regarding to best practice training given to the sprayers. And also found that chemical usage Sevin, shown difference between actual (59.7 gr/ha), MSDS (0.45 kg/ha, normal utilization (0.45 L/Ha) and package label (1-2 Kg/Ha). The same case was also observed for Marshall 5G, for 5 gr/tree packaging, normal 250 g/Ha, actual 256 gr/Ha. There was no record found regarding to the pregnant or breasfeeding women not involved in pesticide related activity. This findings was stated as NCR no 7 of 19 in 3.2 section below. Based on interviews with contracted sprayers at the estate’s Division 3, only glyphosate is used for spraying. There is no usage of chemicals containing paraquat. Washing facilities for chemical spraying equipment were observed at the Division 3 office and it was confirmed by sprayers that they wash and store their PPE at the chemical store. The sprayers wear appropriate PPE include a body suit with hood, boots, rubber gloves, and mask. The sprayers receive free medication from the estate clinic when ill, and are covered under Jamsostek (national health insurance). Regarding to management o fempty agrochemical packages, there was no evidence that the company comply with the related criteria since it was found that the empty chemical containers was not store in proper manner. This finding was stated as NCTR no. 8 of 9 in 3.2 section below. Compliance status: Non-Compliance, see NCR no 6,7,8 of 19 NCR no. 6 of 19: Sprayer with status non permanent worker (working on behalf of a contractor) has yet to receive regular medical check-up (NCR no.6 0f 19) NCR no. 7 of 19: 1. No documented evidence that best practice training was given to spray workers. 2. Record of chemical usage, SEVIN, shown difference between actual (59.7 gr/Ha), MSDS (0.45 kg/Ha), normal utilization (0.45 l/Ha) and package label (1-2 kg/Ha) � at Afdeling 1, November 2011. Thesame case was observed for Marshall 5G, for 5 gr/tree packaging, normal 250 g/Ha, actual 256 g/Ha.



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3. There is no recorded evidence that pregnant or breastfeeding women do not work with pesticides. Ncr no 8 of 19: There is no management for empty agrochemical packages (such as Sevin and Marshal 5G).

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

Findings: Aek Raso Estate has an occupational and safety policy signed by the head of the OH&S Committee (Panitia Pembina K3 or P2K3) dated 18 February 2011. The policy includes commitment to avoid accidents especially near the state electricity company line. However there is no commitment related to health, such as to avoid poor health of estate workers. The OH&S Committee is responsible for health and safety programs. The OH&S Committee has been approved by Manpower and Transmigration Agency of Labuhan Batu Regency on 29 September 2011 (Kep.48/P2K3/DSTKT/2011). OH&S Committee Secretary is the Management Represepnative (MR) of District Labuhan Batu I,. He is OH&S expert (AK3) certified. However the MR was not based in Aek Raso Mill. Aek Raso Mill still does not have its own OH&S expert. Regular meetings are conducted monthly (e.g. records on 28 September, 13 October 2011 and 17 November 2011). Minutes of meeting are recorded. OH&S Committee at the estate is responsible for health and safety programs. OH&S Committee has been approved by the Manpower and Transmigration Agency of South Labuhan Batu on 17 June 2011 (Kep.38/P2K3/DSTKT/2011) OH&S Committee Secretary is MR of District Labuhan Batu II, who is OH&S expert (AK3) certified. OH&S Committee meeting is conducted monthly. Minutes of OH&S Committee meeting are recorded, such as the records available from meeting in 30 November 2011. There is no evidence of monthly OH&S Committee meeting since there are no meeting attendance lists from August to September 2011. According to IK-3.08-18/02 rev 04 dated 15-02-2010, every employees is required to have Jamsostek insurance which covers accident, death and retirement. Every employee who already has a Jamsostek insurance will receive Jamsostek card. This is also stated in the Employee-Employer Joint Agreement 2010-2011 Section X Article 53. For contract workers, PTPN III requires the contractor to pay insurance for their workers as such Teknindo Contromatra that repairs boilers according to Agreement No. 3.02/SPJ/377/2011 Article 14 and PT. Sira Perkasa Utama with Agreement No. 3.01/SPJ/27./2011 Article 13. The agreement is that the contractor’s pay is deducted 0.28% for insurance. Aek Raso Mill conducts annual medical checkups. Last year its check-up was done on 29 October 2010. In 2011, medical checkup participant was done according to the Employees List. Medical check-up is conducted regularly for power house operators, sterilizer station operators, boiler operators, water treatment operators, kernel plant assistant operators, warehouse officers, water treatment operators, welders, and boiler station mechanics. Medical checkup includes audiometry, spyrometry, vision, Pb content in blood, and ergometry. In addition to the annual check-ups, Aek Raso also measures and monitors the working environment. This is conducted by the Medan Company Hygiene and Occupational and Health Agency which includes noise, light and dust. The organization conducts annual medical checkups for agrochemicals operators, foremen, sprayers, warehouse operators, workshop operators, and harvesters. Medical checkups are conducted according to invitation from PTPN III head office. In 2011 the head office planned to conduct medical checkups for



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63 employees. The attendance list on medical evaluation on 3 October 2011 shows that 43 employees completed the medical check-up for this year. The medical check-up covers audiometry, spyrometry, vision, blood cholinesterase content, and ergometry. The results have not yet been notified. The last medical check-up report was on 30 October 2010 conducted by the Secretariat General of Health and Safety Agency, Ministry of Manpower and Transmigration of Medan. See 4.6 indicator 2 minor. The mill has done identification of OH&S hazard and risk in Identification of Sources of Danger and Risk Assessment and Mitigation on 2 February 2011 for the following activities: FFB reception, FFB loading to lorry for sterilization, taking out lorry from sterilizer, open/loss of sterilizer door, loose fruits in the digester, press machine operation, purifier operation, kernel plant operation, boiler, turbine and generator operation, fat pit operation, welding activities, grinding machine operation, wheel loader operation, and maintenance activities. The estate has identified OH&S hazard and risk in Identification of Sources of Danger and Risk Assessment and Mitigation on 12 February 2011 for the following activities: harvesting, warehouse activities, workshop activities, manual plants maintenance, and chemical plants maintenance. However, hazards and risks from transporting FFB from estate to mill have not been identified. This was raised as an observation. The organization conduct OH&S training annually as planned in OH&S Committee Program, and the realization is recorded such as: - First aid training conducted on 14 May 2011 - Emergency procedures socialization and simulation conducted on 27 May 2011 - Hazardous material and waste training conducted on 25 November 2011 - Responsibility and authority of OH&S Committee conducted on 14 May 2011 - Basic of OH&S and legal requirement conducted on 16 February 2011 The organization conducts OH&S training annually as planned in OH&S Committee Program, and the realization is recorded such as: - Hazardous material and wastes handling conducted on 23 May 2011. For the mill, accident and emergency preparedness is defined in IK-3.12-01/10 rev 01 dated 15-02-2010. The procedure includes how to manage accidents, emergency situations such as fire, flood, or explosion. Emergency response team has been determined and approved by head of OH&S Committee, and emergency telephone number is written in SD-10-02 including fire station, sectoral police station, army (district military command), as well as activities to monitor and maintain fire extinguishers and hydrants. There are three different emergency telephone numbers in SD-10-02 rev 0 which are placed in the administration offices and meeting rooms. The hydrant at the loading ramp is found to be leaking, and one fire extinguisher in the electrical workshop has low pressure.

The estate has an emergency preparedness procedure as defined in the SD-10-02 Rev 0 document. The procedure includes flow chart procedure, list of emergency response equipment, identification of potential emergency condition, and emergency response team.

First aid kits are available in many areas of the mill, such as at sterilizer stations, warehouses, and workshops. The kits contain betadine solution, isopropyl alcohol, and burn ointment, as well as band aid, scissors, and cotton. First aid training for mill operators is available and was conducted on 18 May 2011. Ten participants were recorded to have attended the training. However the first aid team is only available for the morning shift, and is not available for the second shift. First aid kits are available at estate offices and workshops, however they are not available at the warehouse. First aid kit was not available at the work area at Division 1 Block JJ 21 where manual weeding activities take place. However, there was no evidence for first aid training for estate foremen.

There were accidents on 10 July 2011 and 9 June 2010. These accidents were recorded in the Workplace Accident Report and Investigation report from the Supervisor.

Work accident is recorded by estate and summarized every month. There were 3 accidents in 2011. Accident investigation is available for the 4 July 2011 and 24 November 2011 accidents. There is no summary record available for February, May, or June 2011. Accidents recorded in the summary and polyclinic reports were not included in OH&S Committee monthly meeting reports for July and September 2011.There was no corrective action to follow up the accident investigations.



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Compliance status: Non-conformance, see NCR No. 9, 10, 11, 12, 13 of 19

NCR no. 9 of 19: There is no commitment related to health, such as to avoid ill health of estates workers in occupational and safety policy signed by head of OH&S Committee on 18 February 2011. NCR no. 10 of 19: 1. There are three different emergency telephone numbers in SD-10-02 rev 0I and are placed in

the administration offices and meeting rooms. 2. The hydrant in the loading ramp leaks and one fire extinguisher in the electrical workshop has

low pressure. NCR no. 11 of 19: First aid kit is not available at the warehouse, and first aid box/bag is not available at the working area in Afdeling 1 Block JJ 21 for manual weeding activities on 2011-12-13

NCR no. 12 of 19: 1. First aid team is not available for the second mill shift.

2. There is no evidence of first aid training for foremen in Aek Raso estate. NCR no. 13 of 19: 1. There is no summary record for accidents for February, May, or June 2011.

2. The accidents recorded in the summary and polyclinic reports are not included in the OH&S

Committee monthly meeting report for July and September 2011.

3. There was no corrective action to follow up the accident investigation.

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

Findings: Training program is developed by the PTPN III head office. The mill will receive training invitation from head office almost every month. List of employees to receive training is recorded by Administration (Tata Usaha). After three months training, the organization will evaluate the effectiveness of training. Training record for each employee is kept in a training database. The database is regularly updated by the Administration. Contractors for work with values of more than IDR 100 million are chosen by PTPN III Head Office, for example PT. Technindo Contro Matra, a boiler repair contractor. The organization provides socialization related to government regulations, PPE, and sexual harassment on 25 July 2011. Compliance status: Full Compliance

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: The estate and mill have a combined documented Environmental Monitoring and Management Plan (RKL/RPL) prepared in 2006 by the Environmental and Natural Resources Research Department of the North Sumatra University in Medan. This document was revised from the previous RPL/RKL prepared



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in 1994 based on the mill’s Environmental Evaluation Study (Studi Evaluasi Lingkungan or SEL) prepared in 1993. This revision was due to changes on the estate operations and organizational changes such as PTP IV (Persero) merger with PTPN III, division of the estate and mill managements, and conversion of rubber to oil palm. The revised RPL/RKL document includes identification of environmental aspects and impacts pertaining to soil quality, erosion risks, chemical aspects (air quality and noise, emissions, water quality, liquid and solid waste, hazardous wastes) and biological aspects (wildlife, vegetation, water biota, etc). There is evidence that the estate and mill prepares their report for implementation of the RKL/RPL once every 6 months as required by law. The latest report for July 2011 was recorded and includes results of analysis for air emissions, generator & boiler emissions, ambient air quality, and noise which were analyzed in July 2011, as well as monthly mill effluent quality results, as required to be reported in the RKL/RPL document. The sampling for emissions and noise and ambient air quality for Semester 2 was done in 31 October – 5 November 2011 and analysis results are still pending. However, according to the company’s RPL/RKL document, there are several parameters require monitoring and results included in the implementation report but evidence of monitoring or analysis of some of these parameters were not recorded in the implementation reports for July 2011 or December 2010. For example, there were no analysis for soil erosion measurement for soil with over 40% slope and for soil quality, no groundwater quality analysis for the water used by workers in Aek Raso Estate, no analysis of Aek Raso river water, and no biodiversity index measurement. According to the company’s RPL/RKL document, there are several parameters require monitoring and results included in the implementation report but evidence of monitoring or analysis of some of these parameters were not recorded in the implementation reports for July 2011 or December 2010. For example, there were no analysis for soil erosion measurement for soil with over 40% slope and for soil quality, no groundwater quality analysis for the water used by workers in Aek Raso Estate, no analysis of Aek Raso river water, and no biodiversity index measurement

Compliance status: Non-compliance, see NCR no 3 0f 19 There were no analysis results for soil erosion measurement of soil with over 40% slope and soil quality, no water quality analysis for groundwater used by the Aek Raso Estate workers, no water analysis in Aek Raso river, and no biodiversity index measurement.

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: A HCV Assessment was carried out by BKSDA, and assessment document dated June 2009 is available at all estates except for Rambutan estate. Report lists a total of 27 areas in all estates identified as HCV, of which 11 areas are HCV 1, 11 areas identified as HCV4, and 5 areas identified as HCV 6. No HCV 2, 3, or 5 areas were identified. A highly endangered species, the pangolin ('trenggiling') was also identified in several estates. The HCV assessment document is still not sufficient, and had several inconsistencies in the HCV definitions used. There were also inconsistencies between the locations of HCV areas on HCV maps and in the HCV assessment document as well as on the field. A HCV Monitoring plan is documented, entitled 'Rencana Jangka Panjang Program Konservasi Periode 2009-2011', dated June 2009, but plan is lacking detail. The plan only includes a timetable for carrying out identification of flora and fauna at protected areas, installment of HCV indicating signs, restrictions to enter protected areas, regular management and monitoring and 3 monthly reports on status of programme. An annual evaluation of the effectiveness of the program is also to be carried out (but as programme was only implemented this year, no evaluation done yet). Management has stated that they restrict outsiders or company personnel from entering the protected areas for hunting. Posters and signs prohibiting hunting of protected species and information on identified HCV areas are visible in appropriate scale in all locations that identified as HCV areas. There is no



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evidence or reported about hunting activities carried out by company’s worker.The company assigns personnel assistants (APK or Estate Human Resources Assistant ) in each estate to monitor plans associated with HCV and ERT species, however the APK personnel are not sufficiently competent in managing HCV’s, and although the company has provided training on HCV’s this was only attended by head office personnel. Compliance status: Fully compliance

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

Findings: The mill has identified all wastes in their environmental aspects and impacts identification for 2011, including wastes and pollution sources from chemical stores, laboratory, office, fat pit, effluent pond, workshop, and processing stations. The estate has also identified all wastes in their environmental aspects and impacts identification for 2011, including all wastes from estate activities such as chemical spraying, pest management, office and housing cleaning, road and drainage maintenance, and oil usage. During site visits to Division 1 housing in Aek Raso Estate, it was observed that domestic wastes are separated into organic and inorganic wastes, in which organic wastes are disposed of at individual landfills behind each house, which are covered once full and turned into compost for the workers to plant vegetables. Inorganic wastes are stored in used fertilizer bags and sold to a collector for recycling. It was observed that the small landfills are located nearby groundwater wells used as water source for each house which may result in potential contamination of the water sources due to leachate from the waste. This was raised as an observation. Aek Raso Estate temporarily stores hazardous wastes in their material store, including used oil, empty oil drums, and used batteries. These hazardous wastes are sent to the mill store for collection by a contractor. The estate maintains inventories of stored hazardous wastes and records of when these wastes are transported to the mill. The mill has a store for hazardous wastes and maintains daily inventories of types of hazardous wastes collected from the estate and mill, including used oil, empty oil containers, used batteries, printer cartridges, and chemical containers. However, there were no records of storage of oil contaminated rags or cloth gloves, and this was noted as an observation. Report on the hazardous wastes in stock are sent to the local environmental agency once every 3 months, and there is evidence that hazardous wastes are collected once every 180 days in accordance with their license for storage of hazardous wastes, ie. in 2011 there was collection on 4 February 2011 by a contractor, PT Binasamsurya Mandala Putra, and on 6 July 2011 there was a collection by CV Amindy Barokah. The estate has also prepared a washing area at each division office to wash spraying equipments, and these facilities were observed at Division 3 office. Based on interviews with contracted sprayers at Division 3, they use the washing facilities and their PPEs are stored at the division office. However, during interviews with contracted female sprayers at Division 1 of Aek Raso Estate, they stated that they sometimes wash their spraying equipment in a nearby river although they are aware that washing facilities are available. The estate management took immediate action to retrain the contracted female sprayers as well as other workers on proper management of hazardous wastes, including handling pesticides to use the washing facilities, and provided evidence of the retraining. This was raised as an observation. They are not aware of the reason why washing should not be done in the river. This was raised as a non-compliance. The washing facilities observed were small and inconvenient for all sprayers to use simultaneously, and the sprayers said that this is why they prefer to use the river to wash their equipment. Compliance status: Compliance with observations

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



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Findings: The company has record of energy use (renewable energy) such as from shell and fibre generated from palm oil production process. From record of shell and fibre 2010 use analysis, it is known that 1 kg of shell can generate 4,200 kcal and 1 kg of fibre can produce 2,420 kcal. In 2010, Aek Raso Mill’s total use of shell for renewable energy generation is 30,540,132 kg while use of fibre is 10,318,141 kg, producing total energy of 3,748,000 kwh. Until November 2011, 10,785,015 kg of shell and 28,243,042 kg of fibre were used. The company also maintains monitoring record for fossil fuel for generator, water pump and also transportation units. Records of energy used from fossil fuel are made monthly. In 2010, fossil fuel used is 79,242 litres. In 2011 until November the fossil fuel used is 66,232 litters. Compliance status: Full Compliance

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:

The company has no zero burning policy. It is stated in the company’s Work Instruction No. IK-3.01-14.01 on Land Preparation for Planting that fire is not to be used during replanting. Evidence is found indicating implementation of this work instruction. Contract was sighted engaging contractor appointed for land preparation for planting in 2008 where activities listed in the contract does not include burning activities. Site visit to Aek Raso Estate’s replanting area, e.g. to block P.30 of Division V, found that there was no fire used during land clearing for replanting activities. Based on interviews with several workers and observation in estate as well as visit to all estates’ housing, there were no evidence of waste burning been sighted.

The company has an emergency response procedure documented under Work Instruction No. IK-3.12-01/10 rev.01 (dated 7 January 2005), including identification of any potential emergency situations (fire, accidents, flood, explosion, and chemical leakage) and flowchart for handling fire-emergencies. Training on emergency response procedure against fire was delivered in September 2011 to 33 workers in Aek Raso Estate.

Fire-extinguishing facility and fire-fighting equipment have been sighted in Aek Raso Estate, e.g. at Division 2 office, workshop, main office, temporary chemical storage facility, etc. The estate has one mobile tank for its whole area and ready to use. Sufficient fire prevention facility and infrastructure are available in Aek Raso Mill, such as fire extinguisher, hydrant, hoe, spade, plastic bucket, sandbox, drum sides, crowbars, and manila rope. Compliance status: Full Compliance

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

Findings: The mill has identified sources of pollutions and emissions in their Environment Aspects and Impacts Analysis document for year 2011, including emissions and greenhouse gases from the boiler, generators, and effluent ponds. The estate also has identified all sources of pollution in their environmental aspects and impacts identification for year 2011, including those from estate activities such as chemical spraying, pest management, office and housing cleaning, road and drainage maintenance, and oil usage. The mill monitors the quality of pollution sources, i.e. the mill conducts monthly analysis of quality of mill effluent discharged to the river (reported once every 3 months to the local Environmental Agency). From the 2011 records, it was observed that there were some months where effluent quality exceeded the legal standards, for example, from June to September 2011, the standard of 250ml/l Total



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Suspended Solids was exceeded. However, the mill took corrective action to recirculate the effluent, and monitoring results for October and November showed that all environmental parameters were within the legal standards. The mill also conducts annual analysis of air emissions from the generators, boiler, and monitors quality of ambient air near the office, housing and mill entrance. From analysis results dated 8 June 2011, analysis results for emissions were within the legal standards. There is evidence that the mill has strategies to reduce pollution, as the mill is currently working to implement land application of mill effluent to the estate land, as a measure to reduce water pollution by stopping mill discharge to the river. The land application infrastructure is currently under construction and planned for completion in year 2012. The mill also has a plan to recycle regenerated anion-cation water from the boiler. However the mill currently has no plan for reducing greenhouse gas emissions. This was raised as a non-compliance. It was also observed at the mill’s fat pit that there is significant amount of leakage and at the time of audit, this leakage was flowing out to the surrounding land without any containment. The mill is already in progress to construct a new fat pit to replace the old one, and the mill took action to contain the leakage by digging a hole in the ground where leakage is flowing, to contain the leakage and prevent flow to the land. This was raised as an observation. The mill has a raw effluent treatment pond, 4 anaerobic ponds, 2 maturity ponds, and 4 facultative ponds. The mill has a work instruction for the management and monitoring of mill effluent, and daily records of pH and temperature of effluent at all ponds are maintained in a log book. The mill maintains monthly records of the monthly amount of effluent produced in metric tons and metric tons per ton FFB, however, this data should also be in metric tons per CPO for easy monitoring to ensure the standard 2.5m3/tons of CPO, according to the mill’s license for land application, is not exceeded. This was raised as an observation. Compliance status: Non-compliance, see NCR no 14 of 19. The mill currently has no plan for reducing greenhouse gas emissions. 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: The company has social impact assessment report which consists of positive and negative impacts of plantation activity from 2010 which was compiled by North Sumatra University in Medan. There is evidence of participation from affected parties including the community. However, the assessment did not cover impact of palm oil mill activities. The assessment also did not present evidence of worker participation. There is evidence of community participation in the social impact management plan in the form of community agreement from Pasir Lancat, Huta Raja, and Aek Raso Villages. However there is no workers participation for this management plan. There has been no revision of the environment management document since there have not been changes in company’s scope of operations. The SIA report does not include impact from smallholder plantations, but instead of the company has smallholder plantation joining Aek Raso Village Cooperative. Compliance status: Non-Compliance, see NCR No. 15, 16, 17, 18 of 19

NCR no. 15 of 19: The company has an SIA report, however:

- It does not include impacts of the palm oil mill - It does not include impacts on workers. - It does not include impacts of smallholder plantation.

NCR no. 16 of 19:

- There is a social impact management plan but does not include social impact on workers, and there is no evidence of community and employee participation in the impact management plan.



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NCR no. 17 of 19: - There is no environmental management and monitoring report that includes the results of the

SIA study. - .

NCR no. 18 of 19:

There is no study on the impact of plasma on the community estate including in the SIA report.

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: There is a work instruction regarding communication and consultation procedures with stakeholders No. dok. IK-3.00-13/01, Rev. No. 03, revised on 15-02-2010. The company issued Memorandum No 3.12/SE/10/2011 sent to all district managers and estate/unit managers pertaining to information channel for submission information, suggestion, and critics to the company. The company is always updating their stakeholder list for the 2011 period consisting of names and contact numbers of related government agency, village and community leaders, NGOs, workers union representatives, suppliers, and contractors. Community aspirations and their responses are recorded in an updated log book. Palm oil mill plantation has official staff for communication and consultation purpose with community as stated within the job description. Compliance status: Full Compliance Criterion 6.3: There is a mutually agreed and documented system for dealing with complaints and grievances, which is implemented and accepted by all parties. Findings: The company Directors issued circular No 3.12/SE/10/2011 to all district managers and the entire estate manager/unit on the existence of information channels used for the parties to submit information, suggestions and criticism of the company. There is the official report dated 18 October 2011 concerning socialization and dispute resolution procedures with public complaints. There is evidence that this agreement is signed by the head of the Aek Raso Village and Aek Raso Estate manager. There are no public complaints about operations associated with the palm oil mill. There is a procedure for calculating compensation for losses of legal or customary rights of communities. 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: The process of managing compensation for legal or customary rights losses is sufficient with the



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following evidence: � Documented procedure for the loss of community’s legal rights is available and instructions state

that if the conflict is resolved then compensation in the form of gifts (“sugu hati”) should be given and the calculation should be discussed with the local communities involved in the conflict as well as related stakeholders.

� To date, there have been no parties entitled to receive compensation or “sugu hati” due to the loss of legal rights, therefore there is no documentation on identification or persons entitled to receive compensation, and no records of any compensation that has been made to outside parties.

� To date, there has been no negotiation process of compensation settlements; therefore there is no documentation of any compensation negotiation processes.


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.

Findings: There is a list of public employee salaries for November 2011 and it complies with the minimum wage regulation. There is a list of the salaries of employees for November 2011. There are employees of the lowest class IA/0 in Division I, section maintenance workers, with a salary of IDR 1,650,000. There is a common agreement book between PTPN III and plantation workers (SP-BN) PTPN III 2010-2011, agreed on 1 February 2010, witnessed by Head of Manpower and Transmigration Agency of North Sumatra. There is adequate housing area for all mill employees (154 people). Water for family needs come from the mill and scheduled for mornings and afternoons for an hour. There are no functioning toilets (broken) in section III, number 415 B, 400 (since 1997), and in the daycare. There is no drinking water and bathing facilities in division II housing area. These were raised as observations. Employees bathe in natural stream and drinking water is sourced from the spring. However, employees receive monthly drinking water allowance of IDR 40,000. There is work agreement (SPK) for mature plant maintenance work (TM) of Aek Raso Estate section 01 No. CV DLAB-2/SPK/375/2011 with CV. Perintis Utama, and SPK for fertilization of mature plant No. DLAB-2/SPK/288/2011. Obligations on general point f states the requirements for contractors are to comply to all applicable laws concerning employment, including but not limited to wages and fulfillment of the rights of workers/employees as applicable, comply to health and safety regulations, workers insurance payment, and is responsible for workplace accidents that befall workers or others at work sites. Compliance status: Compliance with observations 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: The company is guided by Law No. 13 of 2003 section 104 that every worker/laborer has the right to form and join trade unions/labor unions. The company's policy on freedom to form unions contained in the Book of Collective Bargaining Agreement (CBA) 2010-2011 which states in article 5 that PTPN III directors recognize that PTPN III plantation workers' union is lawful in the company. PTPN III directors will not interfere with or impede in any way on matters concerning the development of trade union organizations which do not conflict with labor laws and regulations.



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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. Findings: Article 11 of book two of 2010-2011 CBA states that laborers who are hired are at least 18 years of age and do not exceed 30 years of age. There is a document that lists the employees of Aek Raso Estate and Mill in 2011 which includes the number of employees as well as personal data such as job level, education level, and date of birth. From these data it is known that the employee with the youngest age accepted work was born in 1981 and was recruited when he was 20 years old in 2001. Compliance status: Full Compliance Criterion 6.8: Any form of discrimination based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation, or age, is prohibited. Findings: Policy on equal opportunity and treatment of employment is described in work instructions No. doc. IK-3.08-01/01, Rev. No. 08, dated 06-05-2011. Revision of acceptance and appointment of class IA employees with the provisions of the labor requirements to be acceptable: at least elementary school education or its equivalent, and at the most high school level or its equivalent, at least 18 years of age and does not exceed 30 years, following company selection. Evidence of its implementation is in a list of employees, and this policy has been implemented in Aek Raso Mill in 2011. From these data it is known that employees working in PTPN III consist of various ethnic and religious backgrounds, as well as from various levels of education from elementary school to college, occupying various positions. There is no evidence of discrimination, and the following is evidence of equal opportunities provided to all workers:

• Female workers comprise around 15% of all of the company’s workers • Female workers also have opportunities to have higher positions such as Supervisors • Workers of all ethnic and religious groups, including Muslims, Catholics and Christians are provided

with their respective places of worship such as mosques and churches. No workers interviewed on-site complained about any form of discrimination from the management of the estate or mill. 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: There is a company policy on prevention of sexual harassment and violence against women. There is evidence of the policy dissemination and implementation based on attendance list dated 13 July 2011. PTPN III issued a circulated notice dated 28 June 2011 on the socialization of anti-violence against women. Interviews with harvesting and spraying workers indicate that they know about the sexual harassment prevention and anti-violence against women policies. Policy on the protection of reproductive rights contained in the Working Agreement Book article 26 on



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maternity leave stating that female employees are entitled to maternity leave for 1.5 months prior to giving birth and 1.5 months after delivery. Female employees who have miscarriage are granted permission for leave for 1.5 months after the miscarriage. Employee income during maternity leave is the same as that of active employees. Chapter 27 describes menstruation leave. Records of policy implementation include: - Employees on maternity leave, i.e. Dahmiyanti, NRK: 97.23.23092, from 1 October 2011 to 31

December 2011. - There is no evidence of employees on menstruation leave. - There are no cases of sexual harassment. As a particular form of complaint handling mechanisms, a gender committee was formed to handle sexual harassment cases based on Decree of Aek Raso Estate Manager No. KPARO/SKPTS/04/12/2011 dated 15 December 2011 concerning gender committee team in Aek Raso Estate. Compliance status: Full Compliance

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

Findings: The Mill has information on FFB purchase price for today and the previous day mounted on a notice board at the mill entrance. Price for 14 December 2011 is IDR 1,465/Kg, and the price on December 13, 2011 is IDR 1.480/Kg. The bulletin board can be viewed from outside of the mill fence. For FFB in the mill following the agency's decision plantation districts with other stakeholders and informed to the supplier once every two weeks via fax, phone or SMS.

The mill has contract with several FFB suppliers such as with UD Usaha Bersama (under Contract No. PARO/SPJ/06/2011 dated 21 February 2011) and with Maysin (No. PARO/SPJ/02/2011, dated 10 January 2011). Several evidences have been found indicating that all parties understand contracts they have entered into and that the contracts are fair, legal and transparent.

Payments to contractors are made one week as of the date of invoice receipt by Aek Raso Mill according to contract, e.g. payment for UD Bersama on 12 December 2011 by Bank Transfer Slip. Compliance status: Compliance with observations

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

Findings: There is evidence of the company's contribution to regional development: 1. Evidence of surface water use levy payment in November 2011, amounting to IDR 2,461,165 to

South Labuan Batu Regency. 2. Proof of payment for light fire extinguishers on November 2011 amounting to IDR 1,925,000 to

South Labuan Batu Regency. There is a list of mill and state aid. Compliance status: Full Compliance

Principle 7: Responsible development of new plantings

Findings: No evidence of new plantings development was found. Areas with young palms planted in 2011 in



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Division 1 and Division 3 of the estate were observed and there were previously felled old palm trees in the replanted area, as evidence that these were replanted areas and not newly planted areas. Hence, Principle 7 is not applicable. Compliance status: Not applicable

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: The mill has an environmental monitoring action plan in the form of a documented Environmental Monitoring and Management Plan (RKL/RPL) prepared in 2006 by the Environmental and Natural Resources Research Department of the North Sumatra University, Medan. The mill and estate prepare their report for RKL/RPL implementation once every 6 months as required by law. The latest report for July 2011 was reviewed and includes results of air emission analysis, generator and boiler emissions, ambient air quality, and noise which were analyzed in July 2011, as well as monthly mill effluent quality results, as required to be reported in the RKL/RPL document. However, the company is currently preparing the latest report for Semester 2 of 2011, but has not conducted any new analysis for air emissions, generators and boiler emissions, ambient air quality, and noise. This is not in accordance with RKL/RPL requirements to carry out analysis of these parameters twice a year. In addition, according to the company’s RPL/RKL document, there are some parameters which require monitoring and results to be included in the implementation report, but evidence of monitoring or analysis of some of these parameters were not observed in the implementation reports for July 2011 and December 2010. This was explained further and raised as a non-compliance under CR2.1. There is evidence that the mill has plans to reduce pollution, as it is currently working to implement land application of mill effluent to the estate land, as a measure to reduce water pollution by stopping mill discharge to the river. The land application infrastructure is currently under construction and planned for completion by 2012. The mill also has a plan to recycle regenerated anion-cation water from the boiler. However the mill currently has no plan for reducing greenhouse gas emissions. It was also observed at the mill’s fat pit that there is significant amount of leakage flowing out to surrounding land. These issues were raised as nonconformities under CR5.6. The estate has a plan to reduce pollution by establishing land application of mill effluent to Division 1 of the estate. This is planned for completion by 2012. In addition, the estate also plans to reduce chemical usage for pest management by planting Turnera subulata planned for March and April 2012 for all divisions. Compliance status: Compliance with observations There has been no social impact management and monitoring report. Compliance status: non-compliance, see NCR no 19 of 19.

3.2 Identified Non-compliances, Corrective Actions Taken and Auditors Conclusions A total of 19 non-compliances were identified during the main certification assessment. These consisted of 7 major non-conformities and 12 minor non-conformities. For the major non-compliances, the company has taken the necessary corrective action to close these non-compliances within 60 days of completion of the assessment, and this was verified by the audit team through an on-site verification audit conducted on 6 February 2012 as well as checks of documents submitted by the company. For the minor non-compliances, the company has taken corrective action against these as well, and for those which could not be verified as closed through document checks, the closure of these minor non-conformities will be assessed during the next surveillance audit. A summary of all identified non-compliances, corrective actions taken and auditor conclusions is as follows:



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Criterion 1.2(Major indicator 1): Information and responses must include any relevant or required documentation, in accordance with applicable national laws Non-conformance 2011 -1 of 19 (Major non-compliance ):

The company Directors issued circular No. 3.00/SE/01/2009 on 5 January 2009 stating that documents that are publicly available but not including the documents as stated in RSPO P&C are:

- Legal: Land titles/user rights (Site Permit/Izin Lokasi), Plantation Operation Permit (Izin Usaha

Perkebunan), Land Use Right (Hak Guna Usaha) or other documentation relating to application for Land Use Title in accordance with relevant procedures.

- Health and Safety Plans - Long-term improvement plans

Correction: The company revised and re-publish the management Circular Letter concerning the fulfillment of document or information that is accessible to the public by including Land Use Title (HGU) certificate, Health and safety work programs, and Outcomes of the management review concerning to the continuous improvement of information.

Corrective Action: Conduct scheduled internal audit in order to monitor implementation of Director circular letter regarding to this issue. Auditor Conclusions: Closed Major verification Audit result:

The company management issued letter No. 3.00/SE/01/2012 on 24 January 2012 concerning publicly available documents which states that the documents may be published. Documents which can be published are: company profile; annual reports; financial statements; HGU and HGB, certificates; award information; environmental impact analysis documents (RKL/RPL, UKL , UPL and DPPL); CSR data; annual policy and quality objectives; occupational health and safety policies; occupational health and safety program documentation; employee annual report; ; land application license documents (permits use of the palm oil industry waste on land or land application); hazardous waste storage permit; and permit to operate hospital hazardous waste incinerator.

Criterion 2.2 (Major indicator 1): Evidence of compliance with relevant legal requirements.

Non-conformance 2011- 2 of 19 (Major non-compliance ): a. There is no evidence that the company has a license to transport equipment such as wheel

loaders, as required by the Regulation of Minister of Manpower and Transmigration No. 5/1985. Article 134 which states that “Each aircraft lift and transport planning must be approved by the appointed Director or Officer, unless specified otherwise”

b. Aek Raso palm oil mill cannot present documents for Plantation Business Registration License. c. The organization has been evaluated against the legal and required compliances and the

organization has shown to be compliant with all applicable legal requirements. However, the organization has not fully complied to the following: 1. Law No. 1 of 1970, in which several chemicals sprayers (though they are not permanent

workers) are not provided with proper PPE, such as safety shoes, apron, hand gloves, mask, and eye goggles (estates) � interview with workers at Afdeling 1 Block JJ 21.

2. Law of Transportation of 2009, in which FFB transporter trucks do not have valid car license (STNK), first aid kit, or safety triangle, or driver does not have driving license or license is expired � interview with FFB driver in the mill.

3. Regulation of Ministry of Manpower and Transmigration No. Per.02/MEN/1980, in which there is no medical check-up for workers working in hazardous areas (chemicals sprayers, though



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they are not permanent employees). 4. Law No. 13 of 2003 concerning freelance workers’ wages especially contractors such as

replanting workers � interview with workers at Afdeling 1 Block JJ 21. d. The company has List of Legal Requirements concerning manpower/labor, environmental,

fertilizing, cultivation of plants and animals, and OHSAS. However several regulations are not listed and have no evaluation for compliance, i.e.: Decree of Minister of Manpower and Transmigration No:

1. Permenakertrans PER.08/MEN/VII/2010 concerning Personal Protective Equipments 2. Permenakertrans PER.13/MEN/X/2011 concerning TLV for Physical and Chemical Factors

in the Workplace 3. Permenaker Per.04/MEN/1987 concerning OH&S Committee and Guidelines for Appointing

OH&S Staff 4. Permenaker Per.03/MEN/1998 concerning Guidelines for Investigating and Reporting

Accidents 5. Permenaker Per.01/MEN/1979 concerning Hygiene and OH&S Training Requirements for

Company Paramedic Decree of Minister of Health No:

1. Permenkes No. 416/1990 concerning Clean Water Quality 2. Permenkes No. 492/Menkes/Per/IV/2010 concerning Drinking Water Quality

Obsolete regulation related to Environmental is still listed, e.g.: 1. Law no. 23/1997 concerning Environmental Management (This law has been replaced with

Law No. 32/2009) Legal requirements related to Environmental matters have not been listed:

1. Government Regulation No. PP 85/1999 concerning Hazardous Waste Management. Correction: a. Request partner/s in transportation services and heavy machinery to complete and provide Permit Endorsement Wheel Loader lift transport. b. File a Plantation Registration for Aek Raso palm oil mill. c:

1. Provide appropriate PPEs for employees working with risks and hazards

2. Request the FFB transportation service providers to complete permits and requirements, such as: driver's licenses, vehicle registrations, first aid kits, safety triangle, etc.

3. Request the service provider to perform periodic health checks for workers dealing with chemicals

4. Evaluate and investigate the wage payment policies of the third party. d: Complete all regulations related to occupational health and safety.

Corrective Action:

1. Identify workers’ needs for PPEs in estate divisions. 2. Checking permits and requirements on trucks transporting FFB, such as driver's licenses, vehicle

registrations, first aid kits, safety triangle, etc. 3. Each worker who work with chemicals should receive appropriate medical examination as specified

in the Employment Agreement. 4. Create a basic calculation method for wholesale pricing that is tailored to the workload and MSE.

Auditor Conclusions: Closed Major Verification Audit result Verification result: a. There is license No. 560/02/DSTKT-WLD/2012 for wheel loaders at PTPN III PKS Aek Raso, from

the Department of Manpower and Transmigration of Labuan Batu Regency dated 30 January 2012, for Komatsu wheel loaders, type/brand WA 150-1, Komatsu, serial number WA 150-1-



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10276, made in 1998. b. The Company has filed an application for IUP-P dated 25 January 2012 to the South Labuan Batu

Regency Cq. Head of Pe-service Integrated Licensing and Investment of South Labuhan Batu Regency, through letter No. 3.11/X/12/2012. Since there was no progress response from related government for this letter, the company once again sent new application letter No. DLAB2/X/19/2013 dated 15 April 2013. By this condition, the company only can wait for the response and will re send the letter after three month from the latest application letter.

c. 1. There is evidence that spray workers are now equipped with proper PPEs in section 1, afedling II, III and IV. Workers were observed wearing coats, masks, gloves, and boots. There is a list of attendance for PPE socialization by spray workers dated 8 February 2012. 2. There is evidence that FFB truck drivers have valid driver's licenses and vehicle registrations. There are first aid kits and truck equipments in accordance with applicable regulations. 3. There is a list of the names of five spraying contractors. There is evidence of medical check-up in 2012 conducted by the Center for Field Occupational Health and Safety field for 20 workers, including employees of the spraying contractors and the medical check-up proceeded normally.

4. The Aek Raso management sent a notice to one of the contractors through Letter No. KPARO/X/86A-F/2011 dated 2 December 2011 regarding the completion and appropriateness of workers’ wages and to pay the wages of the workers in accordance with the applicable provisions of MSE which is IDR 29,125 per hour. This notice also contains provisions ensuring workers wear full PPE, drivers must have valid driver's licenses and vehicle registrations, and equipped with first aid kit in each transport unit. Service providers are required to conduct periodical medical examinations of workers. There is evidence of a reply from the contractor dated 5 December 2011 that they approved the contents of PTPN III’s letter. There is evidence of receipt of the evaluation of workers' wages by a third party in the form of wage receipts for December 2011, in accordance with government regulations of IDR 30,000 per hour, signed by the workers.

d. There are evaluation results for compliance with: 1. Regulation of Minister of Manpower and Transmigration No.08/VII/2010. 2. Regulation of Minister of Manpower and Transmigration No. PER.13/MEN/X/2011 concerning Threshold Limit Value for Physical and Chemical Factors in the Workplace. 3. Regulation of Minister of Manpower and Transmigration No. PER.04/MEN/1987 concerning OH&S Committee and Guidelines for Appointing OH&S Staff. 4. Regulation of Minister of Manpower and Transmigration No. 01/MEN/1979 concerning Hygiene and OH&S Training Requirements for Company Paramedic. 5. Regulation of Minister of Manpower and Transmigration No. 03/1998 concerning Guidelines for Investigating and Reporting Accidents. 6. Regulation of Minister of Manpower and Transmigration No. 08/VII/2010 concerning Personal Protective Equipments.

Criterion 5.1(Major indicator 2): Records of regular report on environmental management in accordance with relevant regulations. Compliance status: Major Non-compliance No. 2011-3 of 19. According to the company’s RPL/RKL document, several parameters require monitoring and their results to be included in the implementation report; however evidence of monitoring or analysis of some of these parameters were not recorded in the implementation reports for July 2011 or December 2010. For example, there were no analysis for soil erosion measurement for soil with over 40% slope and for soil quality, no groundwater quality analysis for the water used by workers in Aek Raso Estate, no analysis of Aek Raso river water, and no biodiversity index measurement. Correction: Report of all parameters is required in the RKL/RPL for the second semester of 2011. Corrective action: Identify and incorporate analysis results of erosion level for soil with 40% slope, quality of plantation soil, groundwater quality analysis, Aek Raso river water quality analysis, and index of terrestrial biodiversity decline into RKL/RPL.



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Auditor conclusion: Closed Date of enclosure: 13 September 2013. Auditor verification result: There is evidence that Aek Raso Estate has sent a letter to the Head of Technology of PTPN III regarding the second request to be included in the report above parameter UKL/UPL for the first half of 2013. There is evidence of response from North Sumatra University as the executor for this RPL/RKL management activity on 25 September 2013 stating that the RKL/RPL for first half of 2013 will start the analysis for slope and erosion rate and is currently in the process of finalization. There is evidence that the UKL/UPL revised version report 2013 already including analysis for soil erosion measurement for soil with over 40% slope and for soil quality, groundwater quality analysis for the water used by workers in Aek Raso Estate, analysis of Aek Raso river water, and biodiversity index measurement.

Criterion 4.1 (Minor indicator1): Records of checking or monitoring of operations. Minimum requirement: once a year. Compliance status: Minor Non-compliance No. 2011- 4 of 19 There is evidence of poor implementation of the company’s work instruction for Handling of Licenses (Work Instruction No. IK-3.11-03/01), i.e. the company’s license for storage of hazardous wastes expired on March 2011 but there was no action taken to apply for license renewal until September 2011, which was 6 months after the license had expired. Correction: File for extension for Hazardous and Poisonous waste storage area to the South Labuhan Batu Regency Environment Agency.

Corrective Action: Identify and monitor all expired licenses. Auditor Conclusions: Evidence of correction and co rrective action taken was accepted. Effectiveness of implementation to be verified at s urveillance audit.

Criterion 4.1 (Minor indicator 2): Records of operational results.

Non-conformance 2011-5 of 19 (Minor non-compliance ): There is no evidence that calibration was done in 2010. Calibration is in progress for 2011. Correction: Request calibration process for all measuring instruments. Corrective Action Identify all equipments requiring calibration and ensure measuring instrument has been calibrated. Auditor Conclusions: Evidence of correction and co rrective action taken was accepted. Effectiveness of implementation to be verified at s urveillance audit

Criterion 4.6 (Minor indicator 2): Records of the results of health check-up for those who apply agrochemicals.

1. Non-conformance 2011- 6 of 19 (Minor non-complia nce): Sprayer with status non permanent worker (working on behalf of a contractor) has yet to receive



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regular medical check-up. Correction: Request contractors to carry out periodic health check-ups for workers .

Corrective Action: Ensure all contractors labor health being checked periodically by preparing purpose worker medical check- up plan and evidence of implementation. Auditor Conclusions: Evidence of correction and cor rective action taken was accepted. Effectiveness of implementation to be verified at s urveillance audit. Criterion 4.6 (Major indicator 3): Documentary evidence that usage of agrochemicals is appropriate for the target species, given at correct dosage and applied by trained personnel in accordance with the product label and storage instructions.. Non-conformance 2011- 7 of 19 (Major non-complianc e): 1. No documented evidence that best practice training was given to spray workers. 2. Record of chemical usage, SEVIN, showing difference between actual (59.7 gr/Ha), MSDS (0.45 kg/Ha), normal utilization (0.45 l/Ha), and package label (1-2 kg/Ha) � at Afdeling 1, November 2011.

The same case was observed for Marshall 5G, for 5 gr/tree packaging, normal 250 g/Ha, actual 256 g/Ha.

3. There is no recorded evidence that pregnant or breastfeeding women do not work with pesticides. Correction: - Conduct training on the use of chemicals handling for spray workers. - Use chemicals in accordance with recommended use as indicated in container label. . - Make record of Identification and assessment to the entire women workforce.

Corrective Action

- Ensure all workers working with and exposed to chemicals receive proper training. - Ensure use of chemicals is in accordance with recommended use. - Ensuring workers who are pregnant or breastfeeding are not in direct contact with chemicals by move

them into non chemical activity department. Auditor Conclusions: Closed Evidence of correction and corrective action taken was accepted. Major Verification Audit Result:

1. There is evidence of hazardous and poisonous material management training for spray workers from I-IV on 16 December 2011 and 8 February 2012. There is an attendance list and photo documentation of the participants.

2. Based on interview with the workers and indicated in the list of sprayer in 2013 there are no pregnant employees working as spray workers.

Criterion 4.6 (Major indicator 4): Waste material from agrochemicals including pesticides containers are properly disposed in accordance with laws and regulations. Non-conformance 2011- 8 of 19 (Major non-compliance ): There is no management for empty agrochemical packages (such as Sevin and Marshal 5G).

Correction: Placing used chemical containers in temporary hazardous waste bin in estate divisions.

Corrective Action To disseminate the control and placement of chemical packs to sprayers.



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Auditor Conclusions: Closed

Date of closure: 12 September 2013.

Major Verification Audit Result: There is evidence of all hazardous and poisonous waste in the hazardous and poisonous warehouse including Sevin and Marshal 5G already pick by licensed hazardous and poisonous contractor.

Criterion 4.7 (Major indicator 1): Evidence of a documented occupational safety and health (OSH) policy and its implementation.. Non-conformance 2011-9 of 19 (Major non-compliance) :

There is no commitment related to health, such as to avoid ill health of estates workers in occupational and safety policy signed by head of OH&S Committee on 18 February 2011

Correction: Revise OH&S Policy by adding points concerning employee health programs.

Corrective Action: - Carry out health checks on workers in accordance with OH&S commitments and policies.

Major verification audit result: Closed The company already revised policy as Working Instruction no. IK-03.08/02 rev 05 dated 15 August 2013 which is including workers health programs. Best on interview and observation at estate it was found that the company also conducted medical check-up for workers. For example: there was record of worker’s medical chek-up of as health program for worker consist of name of the workers .

Criterion 4.7 (Minor indicator 5): Accident and emergency preparedness procedure.

Non-conformance 2011- 10 of 19 (Minor non-complianc e):

1. There are three different emergency telephone numbers in SD-10-02 rev 0I and are placed in administration office and meeting room.

2. The hydrant at the loading ramp is leaking, and one fire extinguisher in the electrical workshop has low pressure.

Correction: - Revise SD-01 10-02 rev. - Fix hydrant - Ensure all relevant documents are in accordance with current data. - Ensure all emergency equipments are ready to use. Corrective Action - Ensuring al related documents suitable with updated information. - Ensuring all emergency equipments ready to use in proper manner by conduct proper

scheduled monitoring. .

Auditor Conclusions: Evidence of correction and cor rective action taken was accepted. Effectiveness of implementation to be verified at s urveillance audit Criterion 4.7 (Minor indicator 6): Evidence of OHS and first aid equipments available at worksites.



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Non-conformance 2011-11 of 19 (Minor non -compliance): First aid kits are not available at warehouse or at working area in division 1 Block JJ 21 where manual weeding activities take place on 2011-12-13 Corrective Action: Supplying first aid kits and bags to all foremen in division.

Corrective Action: Identify all work sites which require first aid kits and bags. Auditor Conclusions: Closed Evidence of correction and corrective action taken was accepted. Effectiveness of implementation to be verified at surveillance audit Criterion 4.7 (Minor indicator 7): Workers trained in first aid should be present in both field and mill operations. Non-conformance 2011-12 of 19 (Minor non -compliance):

1. First aid team is not available for second mill shift. 2. There is no evidence first aid training for foremen in Aek Raso Mill.

Correction:

- Revise the Emergency Response Team of Plant Operations shifts I and II. - Provide evidence that every foreman has completed first aid training.

Corrective Action: - establish Emergency Response Teams for the second shift workers group- provide schedule for first aid training for Aek Raso Mill foreman and keep the record of training plan implementation Auditor Conclusions: Evidence of correction and cor rective action taken was accepted. Effectiveness of implementation to be verified at s urveillance audit Criterion 4.7 (Minor indicator 8): Records of the o ccurrence of any work accidents are maintained and regularly reviewed. Non-conformance 2011-13 of 19 (Minor non-compliance ):

1. There is no summary record of accidents for February, May and June 2011. 2. Accidents recorded in recapitulation report and polyclinic report are not included in OH&S Committee monthly meeting report for July and September 2011. 3. No corrective action was taken to follow up accident investigations.

Correction:

- Documented evidence of workplace accidents for February, May and June 2011. - Discussion of workplace accidents in OH&S Committee monthly meeting. - Conduct accident investigation and follow up.

Corrective Action: - Ensuring documents of workplace accidents are well documented. - Ensuring that monthly report of OH&S Committee consist of all OH&S aspects. - Ensuring accidents investigation being followed up.

Auditor Conclusions: Evidence of correction and cor rective action taken was accepted. Effectiveness of implementation to be verified at s urveillance audit



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Criterion 5.6 (Minor indicator 1): Records of efforts and strategies employed to reduce pollution and emissions.

Non-conformance 2011- 14 of 19 (Minor non-complianc e): The mill currently has no plan for reducing greenhouse gas emissions. Correction: Creating a time-bound program for Greenhouse Gas Reduction.

Corrective Action: Identify all estate and mill activities which affects Green House Gas Reduction Program Auditor Conclusions: Evidence of correction and cor rective action taken was accepted. Effectiveness of implementation to be verified at s urveillance audit

Criterion 6.1 (Major indicator 1): Documented environmental and social impact assessment, including details of positive and negative social effects that may be caused by plantations and mills, and documented participation of affected parties and local communities. Non-conformance 2011-15 of 19 (Major non-compliance ):

The company has an SIA report, however: - It does not include the impacts of palm oil mill - It does not include the impact on employees. - It does not include the impact of smallholder plantations.

Correction: Complete the SIA documents on impacts of social aspects, palm oil mill, and smallholders.

Corrective Action: SIA document made must include all the social impacts on employees and public as well as smallholders.

Auditor Conclusions: Closed Date enclosure: 12 September 2013 Verification audit result: There is SIA report documenting impact of mill and the impact on employees and community, as well as the impact on smallholders of Aek Raso Estate and Mill. There is evidence that the SIA document was revised to include the impact on employees and the impact of the mill. Criterion 6.1 (Minor indicator 1): Regular monitoring and management of social impact, with the participation of local communities.

Non-conformance 16 of 19 (Minor non -compliance): There is a social impact management plan but does not include social impact on workers, and there is no evidence of community and employee participation in the impact management plan. Correction: Develop a social impact management plan involving the community and employees.

Corrective Action: - .

Establish Work Instruction regarding to preparation of Social Impact Assessment including involving of community and employees. Auditor Conclusions: Closed



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Evidence of correction and corrective action taken was accepted. Effectiveness of implementation to be verified at surveillance audit Criterion 6.1 (Minor indicator 3): A regular and scheduled environmental management and monitoring Report.

Non-conformance 2011-17 of 19 (Minor non -compliance) There is no environmental management and monitoring report that includes the results of the SIA study. Corrections: Develop environmental management reports and monitor SIA studies

Corrective Action: Implement environmental monitoring including SIA review. Auditor Conclusions: Closed Evidence of correction and corrective action taken was accepted. Effectiveness of implementation to be verified at surveillance audit Criterion 6.1 (Minor indicator 4): Particular attention paid to the impacts of outgrower schemes (where the plantation includes such a scheme). Non-conformance 2011- 18 of 19 (Minor non-complianc e): There is no study on the impact of plasma on the community estate. Correction:

- Conduct social impact assessment regarding to plasma scheme availability up on community estate.

Corrective Action: Revise RKL/RPL documents to include impact of smallholdings on the community. Auditor Conclusions: Evidence of correction and cor rective action taken was accepted The effectiveness of implementation will be verifie d in the next surveillance audit. Criterion 8.1 (Major indicator 1) : Growers and millers regularly monitor and review their activities and develop and implement action plans that allow demonstrable continuous improvement in key operations. Non-conformance 2011- 19 of 19 (Major non-complianc e): There is no report on the monitoring and management of social impacts.

Corrections : - Develop reports on management and monitoring of social impact on the community.

Corrective Action: - . - Ensure monitoring and social impact management and reporting is done regularly as the schedule. Auditor Conclusions: Closed Evidence of correction and corrective action taken was accepted. Verification audit result: There is a report of realization of community social impact management in 2011. There is evidence of discussion on village development programs involving the community in the form of agreement



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between the company and the community of Aek Raso Village dated 18 October 2011 along with the meeting minutes.

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 and impacts assessment conducted by the mill and estate has been improved with clearer linkages to environmental management programs, environmental objectives and targets

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

Findings: Awareness on management 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, and Environmental Performance.

3.4 Description of Supply Chain Management System

Aek Raso Palm Oil Mill is located in North Sumatra. The mill has a production capacity of 60 tons FFB/hours. In 2012, Aek Raso Mill receives approximately 52.60% (61,937.30 ton) of its FFB supply from 4 company-owned estates (Aek Raso, Aek Torop, Sei Baruhur, and Sei Kabara estates) and the remaining 47.40% (55,804.04 tons) from outgrowers and smallholders. From January to August 2013, Aek Raso Mill received a total of 69,298.80 tons FBB comprising 22,902.19 tons (33.05%) from the company’s own estate and 13,165.25 tons (19.0%) from independent outgrowers/smallholder scheme. The mill produces Crude Palm Oil and Palm Kernel.

The company implements SCC-RSPO with “Mass Balance” model according to the condition of the mill’s FFB supply. The following is a description of the company’s supply chain management system according to RSPO SCCS requirements, including status of company’s compliance and their outsourced third parties to RSPO SCCS requirements. During the audit, the company has an SCC system but only several NCs were identified according RSPO SCC standard year 2009, these were raised as non-compliances as described below:



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SCCS Section 3.2 Certification Requirements

Findings:

Aek Raso Palm Oil Mill is one of the mills owned by PT Perkebunan Nusantara III, and is located in Aek Raso Village, Simangambat District, Labuhan Batu Regency, North Sumatra. PT Perkebunan Nusantara III is an RSPO member (Member No. 1-0030-06-000-00). There are no outsourced activities to independent third parties in Aek Raso Palm Oil Mill therefore the company does not have the duty to ensure subcontractor’s compliance with the RSPO Supply Chain Certification System. Aek Raso Palm Oil Mill have not registered in the UTZ Certified system and not claims yet too where the company will be registration to UTZ Certified and claims after get certificate or surveillance audit. Compliance status: Full Compliance

1. Documented procedures

Findings:

Decision of company Director dated 5 August 2011 (No. 3.03/SKPTS/03/2011) to establish the Segregation (SG) option for Supply Chain Certification System (SCCS). This condition is not suitable with actual field condition which is Mass Balance (MB). This condition was raised as a non-conformity.

The organization has integrated the SCCS System with Quality Management System Certification (ISO 9001:2008) and Environment Management System (ISO 14001:2004).

The organization has established and maintained a supply chain certification system procedure dated 6 June 2011. The SCCS procedures include the following: - Work Instruction of FFB purchased and processing from external parties (IK-3.03-12/01) - Work Instruction for receiving FFB at Palm Oil Mill (IK-3.03-01/16 Rev.03 dated 6 May 2011) - Work Instruction for Palm Oil Processes (IK-3.03-01/19 Rev.03 dated 6 May 2011) - Work Instruction for Quality and Palm Oil Process Controlled (IK-3.03-01/20 Rev.02 dated 15 February

2010) - Work Instruction for CPO and PK Analysis (IK-3.03-01/22 dated 15 February 2010) - Work Instruction of Palm Oil Product Storage (IK-3.03-01/24 Rev.03 dated 6 May 2011) - Work Instruction of certified palm oil sales to Belawan Instalation, PT Sarana Agro Nusantara, PT IKN

and other parties (IK-3.03-07/02). - Work Instruction of planning and controlling production process and re-planting (IK-3.01-18/01) - Work Instruction of grading FFB (IK-3.03-04/01 Rev.06 dated 6 May 2011) - Work Instruction of Weighbridge - Work Instruction of Supply Chain Certification System (IK-3.03-15/01 Rev.00 dated 6 May 2011)

Whereas forms recording SCCS system implementation are: - FM-3.03-01/16-01 (Receipt of FFB/PB-28) - FM-3.03-01/16-02 (Weighbridge recapitulation) - FM-3.03-04/01-01 (Weekly report for FFB grading) - FM-3.03-04/01-02 (Monthly report for grading report) - FM-3.03-04/01-03 (Weekly report for FFB receipt that was not processed the previous day) - FM-3.03-04/01-04 (Monthly report for FFB receipt that was not processed the previous day) - FM-3.03-05/01-03 (Check sheet for processing monitoring) - FM-3.03-05/01-01 (Check sheet for FFB quality and grading in mill) - FM-3.03-05/01-02 (Check sheet for pre-operations in mill) - FM-3.03-05/01-06 (Daily production report) - FM-3.03-05/01-04 (E-mail/Faximile for daily production report) - FM-3.03-05/01-07 (Result of the CPO quality analysis, and Oil losses) - FM-3.03-05/01-08 (Result of the PK quality analysis, and Kernel losses) - FM-3.03-05/01-10 (Calculated oil volume in Storage Tank) - FM-3.03-07/02-01 (FFB Receipt Slip)

Palm oil mill and estate have appointed personnel with the responsibility and authority to implement the SCCS Requirements, which are the Manager, Vice Manager and Assistant (based on Decision of Director No. 3.12/SKPTS/16/2011 dated 3 June 2011).



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Compliance status: Non-Compliance

NCR No. 01 of 03

There is a difference in model supply chain certification system between Director’s decision letter (SG) with the system implemented in the mill (MB).

2. Purchasing and goods in

Findings:

Procedures for reception of certified FFB and goods is covered in the company’s Work Instruction concerning FFB Purchased and Palm Oil Processes (IK-3.03-12/01 Rev.03) which regulates definition of certified FFB and verify FFB sources. A personnel has been appointed with the duty of checking and ensuring FFB quality and quantity as per purchase documents.

When receiving RSPO certified palm, assistant processing staff are to verify the claimed category of the material under mass balance system, supplier supply chain certification number, and quality and quantity of products (coordinating with assistant laboratory staff). The organization will identify certified FFB and non-certified FFB according to the following methods:

Category Certified FFB Non-certified FFB Transport documents Stamped as ‘CSPO’ No stamp Name boards Stated as CSPO Not stated as CSPO Transport form No. PB-25.01 CSPO Stamped No stamp Transport truck Marked with ‘CSPO’ sign No CSPO signs on trucks

The organization has established a procedure/mechanism for handling non-compliant material/documents (IK-3.05-04/06 Rev.02 dated 6 May 2011) but does not include declassification of RSPO material when the supplier supply chain certification number is found to be invalid. This condition was raised as a non-compliance. Compliance status: Non-compliance

NCR No. 02 of 03

Lack of evidence that Aek Raso Mill has established and written a procedure that includes a mechanism to declassify RSPO material if a supplier’s supply chain certification is found to be invalid e.g. Identity Preserved � Segregated � Mass Balance � Non-RSPO Certified Palm Oil.

3. Sales and goods out

Findings:

The company’s mechanism for sales and outgoing goods is described in their procedure for sales of RSPO certified palm oil made to Belawan Installation (storage tank in Belawan port owned by PTPN III), PT Sarana Agro Nusantara (a CPO and PK trader and PTPN III sister company), PT IKN (a trader and PTPN III sister company of only for rubber trading) and other parties (IK-3.03-07/02). The company’s supply chain procedure is also implemented for trading rubber products. Records of all sold RSPO certified materials are recorded in material dispatch forms, notifications on material quality and receipts of received palm oil.

The organization has ensured all Palm Oil Delivery Receipt (PB-33.01) issued for certified palm oil includes information buyer’s name and address, date of issuance, product description including supply chain model, product quantity, and references to transport documents.

To date, the company has not yet sold their certified palm oil products as certified CSPO. Compliance status: Full Compliance



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4. Processing

Findings:

During processing, certified FFB is not separated non-certified FFB and therefore the model supply chain used in mill is Mass Balance (MB).

South Aek Nabara palm oil mill has conducted simulation for CSPO production process according Director Circulate No. 3.12/SE/09/2011 dated 31 October 2011.

Aek Raso retains records and balances of certified palm oil receipts and deliveries on a monthly basis in “CPO & PK Balance” form and “CPO & PK Production” form. Compliance status: Full Compliance

5. Record keeping

Findings:

The organization has established a mechanism for control and maintenance of the data and document used in the implementation of the mass balance system. The retention time for all records and reports is less than five (5) years (i.e. 3 year (based on annex II TP.28 – Decree of Director No. 3.00/SKPTS/13/2011 dated 30 June 2011)) and therefore this condition was raised as a non-compliance. The storage and maintenance of documents is the responsibility of the respective departments. The organization has divided the records to be kept to three (3) categories of documents i.e. Active documents (to be stored at least for 1 year), inactive documents (to be stored for at least 1 – 5 years) and permanent documents (to be stored for more than 5 years and under 30 years). All records pertaining to SCCS implementation are categorized as permanent documents.

The organization retains records and balances of certified palm oil received and deliveries on a monthly basis in “CPO and PK Balance” form and “CPO and PK Production” form. All volumes of palm oil that are delivered are deducted from the material accounting system according to actual daily conversion ratios and delivery product from a positive stock.

In FFB delivery note (PB-25), there is information on name of estate, division, and field/block so that certified FFB can be tracked back completely to the plantation. Whereas, information of number delivery order and contract in the product delivery note can be used for back track to the palm oil mill for RSPO certified palm oil. During audit, the organization has not yet sold their certified palm oil products as certified CSPO. Compliance status: Non-compliance

NCR No. 03 of 03

The retention time for all records and reports of SCCS implementation will storage is less than 5 (five) years.

6. Training

Findings:

The company’s supply chain certification system training mechanism is included in the training procedure (IK3.08-11/01 Rev.07). The organization has established and specified the training records as follows: - FM-3.08-11/01-01 Human resources Development Programs - FM-3.08-11/01-02 Training Plan/Schedule - FM-3.08-11/01-05 Training Attendance List - FM-3.08-11/01-08 Personal Training Evaluation for Training Implementation - FM-3.08-11/01-09 Training Evaluation - FM-3.00-01/02-01 Summary of Work Area Document

The organization has conducted supply chain certification system standard training for all Aek Raso Palm Oil Mill employees (dated 19 October 2011). Moreover, the mill (each section) has conducted daily briefing on one of these topics such as SCCS socialization. Training records include attendance list, training agenda, and



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presentation. Compliance status: Full Compliance

7. Claims

Findings:

The company has not yet prepared a procedure for certified product communication and claim according to RSPO requirements as they have not made any claims yet. According to product traceability instruction, the mill will only make claims regarding the use of or support of RSPO certified palm oil that are in compliance with RSPO Rules for Communication and Claims after SCCS certificate is issued. This will be confirmed during the next audit. Compliance status: Compliance with observations

3.5 Identified Non-compliances against RSPO SCCS Re quirement, Corrective Actions Taken and Auditors Conclusions

NCR SCCS-2011-01 of 03:

There is a difference in model supply chain certification system between Director’s decision letter (SG) with the system implemented in the mill (MB). Correction: Revision of Decree of Director No. 3.03/SKPTS/03/2011 dated 5 August 2011 on the decision to establish the Segregation (SG) option as Mass Balance (MB) SCCS model.

Corrective Action: Ensuring that mill officers will use the new version of Decree of Director No. 3.03/SKPTS/03/2011 by monthly monitoring. Date of closure: January, 2012 Verification result:

PT Perkebunan Nusantara III has revised Decree of Director concerning model supply chain change from Segregation (SG) to Mass Balance (MB) in Aek Raso Palm Oil Mill as was stated on Director Decree No. 3.03/SKPTS/01/2012 dated 2 January 2012. Auditor Conclusions: Closed NCR SCCS-2011-02 of 03:

Lack of evidence that Aek Raso Mill has established and written a procedure that includes a mechanism to declassify RSPO material if a supplier’s supply chain certification is found to be invalid e.g. Identity Preserved � Segregated � Mass Balance � Non-RSPO Certified Palm Oil. Correction: Revision of handling non-compliant material/document mechanism (No. IK-3.05-04/06 Rev.02 dated 6 May 2011.

Corrective Action: The company will ensure that each procedure complies with the standards/requirements. Date of closure: January, 2012 Verification result:



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Working Instruction No. IK-3.05-04/06 Rev.02 was revised to Working Instruction No. IK-3.03-15/01 Rev.00 dated 1 February 2012. The new working instruction explains the mechanism to declassify RSPO material if a supplier’s supply chain certification is found to be invalid. Auditor Conclusions: Closed NCR SCCS-2011-03 of 03:

The retention time for all records and reports of SCCS implementation will storage is less than 5 (five) years. Correction: Revision of retention time record and report SCCS in annex II - Director Decree No. 3.00/SKPTS/13/2011 dated 30 June 2011.

Corrective Action: Adjust the retention time period of RSPO/SCCS records and reports according to RSPO standards/requirements. Date of closure: January, 2012 Verification result:

Revision of retention time was not done in the Director’s decree because there was Work Instruction for Palm Oil Processing No.TP.4-2011 states that retention time is 5 (five) years for records/reports related SCCS such FFB receipt note in palm oil mill, processing records/documents, weighbridge slip, etc. Auditor Conclusions: Closed

3.6 Conclusions and Recommendation for RSPO P&C and Supply Chain Certification

The audit team has confirmed through the audit process that the company has established and maintains an effective system to ensure compliance with the RSPO P&C and Supply Chain Certification System requirements. It is also confirmed that the company did not yet sell any CPO and PK as RSPO Certified before this certification audit.

TUV Rheinland Malaysia recommends that Aek Raso Palm Oil Mill be approved for certification of compliance with RSPO P&C and Supply Chain Certification System requirements.

3.7 Issues Raised by Stakeholders and Findings Pert aining to Issues Issues Raised during Stakeholder Consultation Meeti ng

No. Stakeholders Issues Raised Management’s Response Audit Verification

1 Ilham (Head of Aek Raso Village)

What are the advantages of the RSPO to the surrounding community? We assisted in facilities and infrastructure in PTPN III’s CSR activities. Please improve the environmental development because it is not yet covered. For example, concrete trenches in Division A; improving junior high school buildings in the Aek Raso

To improve long-term social and economic welfare of the community and environmental sustainability. Every year PTPN III consistently allocates CSR funds to communities around the estate. Proposal for concrete ditch in the Aek Raso Village Division A was received in Aek Raso Estate on Friday 9 December 2011, while

There are no land conflicts with local communities. There is support for community capital venture for community development programs.



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Village (already proposed) No land conflicts with local communities and no waste problem.

the junior high school proposal has yet not been submitted because it will be submitted by the Principal. No land conflicts with Aek Raso Village and land boundaries are quite clear.

2 Village religious leaders

Appealed to PTPN III to provide opportunities for high school graduates to be accepted for work. Proven relief religious facilities have been given to the village by the company. Every Christmas/major holiday please help villages around PTPN III

Aek Raso Estate has yet to recruit employees because existing labor is sufficient to meet the company’s needs, but next if need additional employee then Aek Raso Estate Management course will convey the information to community can participate in the selection for admission appropriate applicable requirements.

There is evidence of surrounding village communities accepted to work as employees.

3 Aek Raso village cooperative

Say thank you, because he feels guided and nurtured, happy and prosperous. Plants replanting time is coming. Farmers had been fostered and financed, then was paid. Please give assistance for replanting. (It's been filed but is still in the process of identification). FFB prices change every day.

Good cooperation will continue to be maintained to remain sustainable. PTPN III is still waiting for data collection results on the request of farmer cooperatives for replanting. FFB prices do change depending on government decision.

Price of FFB varies, changes at least once a month.

4 Head of Pasir Lancat Village

Pasir Lancat and Aek Raso are located side by side. There is no problem sticking in Pasir Lancat. However, within 2 years of my leadership, PTPN III purchased ±400 Ha of my people’s land. There is 200 Ha that has not been processed. Request: 200 Ha of land returned to the community.

Aek Raso Estate has no problems in its relationship with Pasir Lancat Village. Pasir Lancat Village’s land is outside the concession and PTPN III has provided compensation to the community since 1992 with a certificate that has been renewed by Head of Simangambat District No. 33/84/2006 dated 19 December 2006 and No. 33/85/2006 dated 19 December 2006 and No. 33/86/2006 dated 19 December 2006.

The land is not yet managed by the company because it is located in the swamp area.



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5 Executive Director of Topan RI, NGO

The results of the investigation: several areas (South Marbou) have many difficult obstacles with the location of production process, due to poor road conditions. While there are complete machine condition. Please ask for heavy machinery for road repair. Bureaucracy should not be too difficult. 2004 MOU between AEK Raso smallholders with PTPN III Directors. The contents of the MOU: FFB from Aek Raso smallholder will be processed at Aek Raso Palm Oil Mill, and the mill will be co-managed by farmers.

The company will wait for public proposals for the improvement of the production road. FFB from smallholder is processed at Aek Raso Palm Oil Mill.

Aek Raso smallholder’s production road conditions need to be improved because there is damage in some sites. There is no MOU that states farmers participate in managing the factory.

B) Issues Raised during Stakeholder Interviews On-s ite

No. Issues Raised Audit Verification

1. Minimum wages still below government standard

Contractor workers get minimum wages in line with government standard.

3.8 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 PN3 Aek Raso …………………………………………. Tio Handoko Group Sustainability Coordinator Date: December 15, 2013

Signed on behalf of TUV Rheinland Malaysia

………………………………….. Fadli Lead Auditor Date: 09 December 2013



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APPENDICES

Appendix 1: Details of Certificate [Details of certificates to be included upon certification decision and issuance of certificate]

Appendix 2: List of Abbreviations AIP Anglo Indonesia Plantation AMDAL Analisis Dampak Lingkungan dan Sosial

(Social and Environmental Impacts Assessment) APL Areal Penggunaan Lain (Non-forested Land Use) APU Air Permukaan Umum (Public water surface) BPD Badan Penasehat Desa (village advisory body) BPN Badan Pertanahan Nasional (National Land Agency) CD Community Development CPO Crude Palm Oil CSR Corporate Social Responsibility EIA Environmental Impact Assessment ERTs Endangered, Rare and Threatened species ESH Environmental Safety and Health FFB Fresh Fruit Bunches EFB Empty Fruit Bunches GIS Geographic Information System HCV High Conservation Value HGB Hak Guna Bangunan (Building Use Right) HGU Hak Guna Usaha (Land Use Rights) HPK Hutan Produksi Konversi (Converted Production Forest) Hyperkes Hygiene Perusahaan dan Kesehatan Kerja (Company Hygiene and Occupational

Health) HRD Human Resource Department IDR Indonesian Rupiah (Indonesian currency) IPM Integrated Pest Management IUP Izin Usaha Perkebunan (Agriculture Use Permit) K3 Keselamatan dan kesehatan kerja/Occupational Safety and Health KATOR Kebun Aek Torop/ Aek Torop Estate KUD Koperasi Unit Desa (Village Unit Cooperative) LKS Lembaga Kerja Bersama (Cooperation Institute) LTA Lost Time Accident MOU Memorandum of Understanding MSDS Material Safety Data Sheets NGO Non-Government Organization OKI Ogan Komerang Ilir (Regency name) OSH Occupational Safety and Health PAD Pendapatan Asli Daerah (Regional Original Income) PBB Pajak Bumi dan Bangunan (Land and Building Tax) PHT Pekerja Harian Tetap (Permanent Workers) PIR Perkebunan Inti Rakyat/Community nucleus estate PKO Palm Kernel Oil POME Palm Oil Mill Effluent PPE Personal Protective Equipment P2K3 Panitia Pembina Keselamatan dan Kesehatan Kerja (Occupational Safety and

Health Committee) RJP Rencana Jangka Panjang/Long Term Plan RKAP Rencana Kerja Anggaran Perusahaan/Company Budget Plan RKL Rencana Pengelolaan Lingkungan (Environmental Management Plan) RPL Rencana Pemantauan Lingkungan (Environmental Monitoring Plan) RTRWP Rencana Tata Ruang Wilayah Propinsi (Provincial Land Use Plan) RUTR Rencana Umum Tata Ruang Wilayah (Area landscape planning )



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SIA Social Impact Assessment SKT Surat Keterangan Tanah/Local Land use right SOP Standard Operating Procedure SPPI Serikat Pekerja Perkebunan Indonesia (Indonesian Estate Workers Union) SPSI Serikat Pekerja Seluruh Indonesia (Indonesian Workers Union_ UKL Upaya Pengelolaan Lingkungan (Environmental Management Efforts) UPL Upaya Pengelolaan Lingkungan (Environmental Management Efforts) UPTD Unit Pelaksana Teknis Daerah (Regional Technical Implementation Unit)



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Appendix 3 : List of Stakeholders Interviewed and C ontacted

No. Name of Stakeholder Agency /Position Remarks Stakeholders Interviewed during Public Consultation Meeting 1. M. Sitompul Labuhan Batu Environmental

Officer

2. Syahril Tambunan Head of Pasir Lancat village 3. M. Mukti Tanjung North Labuhan Batu Youth leader 4. Edwin Simpang Ampat Police Officer 5. Mr. Head Of Village Aek Nabara Village resident 6. Rianto Aek Songsongan Village resident 7. Sudirman Head of Tanjung Alam Village 8. Zuwendi Supplier for South Aek Nabara Mill 9. Darif Simangunsong Labor Union Labuhan Haji Estate 10. Village Head Aek Raso Village 11. A. Pane Labuhan Batu Regency Industrial

Officer

12. Abdul Latif Sei Dadap Village resident Stakeholders Interviewed On-Site 1. Siti Aminah Worker 2. Tini Worker 3. Aga Field conductor 4. Fachry Worker 5. Elvin Ginting Worker 6. Boi Worker 7. Rina Worker 8. Paini Worker 9. Zaenah Worker 10. Yani Worker 11. Sani Worker 12. Yogi Worker 13. Suharto Worker 14. Situmeang Field Conductor 15. Rosdiana Worker 16. Agus PTPN III Staff 17. Arnold Sipahutar, SE PTPN III Staff 18. Tio Handoko, ST,MM PTPN III Staff 19. Zuliono SP, QIA PTPN III Staff 20. David P. Sihombing, QIA PTPN III Staff 21. Nefo Armansyah Srg PTPN III Staff 22. Idham Matondang PTPN III Staff 23. Suryono Damanik PTPN III Staff 24. Pujimantoso PTPN III Staff 25. Nokman Syarif PTPN III Staff 26. A. Zein PTPN III Staff 27. Arnold Siregar PTPN III Staff 28. Abdul wahid PTPN III Staff 29. Benyamin Siregar PTPN III Staff 30. Sidarta Sitepu PTPN III Staff 31 Tenty Wahyuni PTPN III Staff 32 Suhadi WS PTPN III Staff



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Appendix 4 : Observations and Opportunities for Imp rovement

No. Observations/Opportunities for Improvement Criteria 1 Several employee housing facilities does not function, such as toilets and

domestic wastewater sewer. 6.5

2 Some people do not know the channel to submit a complaint to the company. 6.2

3 Disseminate the employee for residential waste management has not been effective.

6.5

4 Inadequate fire extinguishers and first aid kits in housing areas. 6.5

5 There has been no communication with the village heads and community leaders of Pasir Lancat, as well as related agencies regarding residents’ demand to the plantation land company located in this village.

2.2

6 The company has applied to the Environmental Agency to renew their license for temporary storage of hazardous wastes which had expired in March 2011. The company must monitor the license renewal progress.

2.1

7 It is recommended to conduct more thorough checking or monitoring through internal audit or audit that is conducted by POM and the estate itself.

4.1

8 There is evidence of water wastage in the mill, i.e. observation of a leaking fire hydrant at the mill loading ramp.

4.4

9 There is no clear documented plan on how to ensure that EFB application is carried out in all sandy areas, as recommended in the company’s fertilizer recommendation report.

4.3

10 The mill has established a target for mill processing water usage of 1.7 m3 water per ton FFB, which is higher than the normal 1.2m3 tons water per ton FFB which usually can be achieved in other mills. However, calculation or records of water usage per ton FFB were initially found to be inaccurate. The mill corrected the data during the audit and, according to the revised data, the mill’s monthly water usage was not exceeded. The mill should ensure accurate records of water usage per ton FFB are maintained.

4.4

11 There are no water facilities or PPE container at the fertilizer store at Aek Raso Estate Division 3, although these facilities are available at the nearby division office. The estate should consider having PPE and water facilities at the store itself to use when needed, especially in case of emergency.

4.7

12 Monthly OH&S Committee meeting should be completed with attendance list as evidence, since there is no attendance list from August to September 2011.

4.7.2

13 Hazards and risks from FFB transportation activities from estate to mill should be identified.

4.7.3

14 It is recommended all OH&S team receive training on the duties and authority of OH&S team.

4.7.4

15 It is recommended to investigate causes of accidents more thoroughly related to unsafe conditions and unsafe acts.

4.7.8

16 The mill and estate has documented identification of Environmental Aspects and Impacts, but these documents also include identification of aspects and impacts related to occupational safety. These should be identified in a separate documents or the document renamed appropriately.

5.1

17 There were no records of storage of oil contaminated rags or cloth gloves at the hazardous waste store of the mill.

5.3

18 The small landfills behind each workers house are located near groundwater wells used as water source for each house, which may result in potential contamination of the water sources due to leachate from the waste.

5.3

19 During interviews with contracted female spray workers at Division 1 in Aek Raso Estate, they state that sometimes they wash their spraying equipment in a nearby river although they have been informed to use the available washing

5.3



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No. Observations/Opportunities for Improvement Criteria facilities. This is because the washing facilities are small and inconvenient for all sprayers to use simultaneously. The estate should consider improving their washing facilities.

20 There is significant leakage at the mill’s fat pit during the audit which was flowing out to surrounding area without any containment. The mill is in the process of constructing a new fat pit to replace the old one, and the mill took action during the audit to contain the leakage by digging a hole in the ground where leakage flowed to contain the leakage and prevent further flow to the ground. The mill must continue to monitor and control the leakage until the new fat pit functions.

5.6

21 The mill maintains monthly records of amount of effluent produced, in metric tons per month and metric tons per ton FFB. However, this data should be in metric tons per CPO to for easy monitoring to ensure that the standard 2.5m3/tons CPO, according to the mill’s license for land application, is not exceeded.

5.6