1 SUSTAINABILITY REPORT 2018/2019 OUR ETHOS. OUR PRIORITY. sustainability report 2018/2019 SUSTAINABILITY
“SUSTAINABILITY. OUR ETHOS. OUR PRIORITY.” FGV remains resilient in the face of challenges as we move forward with our stakeholders. We are resolute in our objective of driving our sustainability agenda; we stay true to our ethos of prioritising sustainability at the heart of our operations. We uphold the interests of our stakeholders through constant and transparent communications, strengthened principles and renewed policies, underpinned by strong governance and ethical practices. With new leaders at the helm of our organisation, we believe we are on the right track to enhance our sustainability journey as we create value for our shareholders and smallholders. About this Report 1 Sustainability Highlights 2018/2019 2 Statement from the Chairman 3 Statement from the Group Chief Executive Officer 6 Overview of FGV 9 Our Commitment 15 2018-2019 Journey 16 ENVIRONMENTAL STEWARDSHIP No Deforestation, No Peat and No Exploitation (NDPE) Commitment 61 Biodiversity and Conservation 62 Energy and Emissions 70 Waste Management 74 Water Management 77 Responsible Chemical Use and Handling 79 SECTION 04 SECTION 01 SUSTAINABILITY AT FGV Sustainability Governance 18 Sustainability Management 20 Stakeholder Engagement 23 Enriching Our Community Stakeholders 26 Materiality Matters 29 Sustainability Risk Management 32 Performance Scorecard 34 Sustainability and our Environmental, Social and Governance (ESG) Impact 36 CORPORATE GOVERNANCE SECTION 02 Corporate Integrity 39 TABLE OF CONTENTS SECTION 03 RESPECTING HUMAN RIGHTS AND UPHOLDING GOOD SOCIAL PRACTICES Respecting Human Rights 40 Employees 46 Occupational Safety and Health 55 SECTION 05 TRUST AND TRACEABILITY Certification 80 Traceability and Risk Mapping 84 Sustainability Standards in Supply Chain 85 GRI Content Index 86
1 SUSTAINABILITY REPORT 2018/2019 GRI 102-1, GRI 102-46, GRI 102-49, GRI 102-50, GRI 102-51, GRI 102-52, GRI 102-53, GRI 102-54, GRI 102-56 ABOUT THIS REPORT FGV Holdings Berhad (FGV or the Group) is proud to present our fourth biennial Sustainability Report for the year 2018 to 2019. This report provides our stakeholders an overview of our sustainability progress as well as details on how FGV operates in a responsible and sustainable manner across our business. REPORTING SCOPE AND BOUNDARIES The contents of this biennial report cover our operational and financial activities between 1 January 2018 and 31 December 2019. Matters pertaining to Management and the Board are covered up to March 2020. Our most recent report was published on 8 June 2018. In line with global reporting standards, this report has been prepared in accordance with the GRI Standards: Core option. The reporting scope and boundary of this report cover our global operations in our three core business areas: Plantations, Logistics and Sugar, unless otherwise stated. However, as our oil palm plantations comprise the majority of our business and the most material issues, the report is highly focused on the issues that matter most to our stakeholders, especially those relating to our operations in Malaysia and Indonesia. This report should be read together with other parts of our Annual Integrated Report 2019, which is available online on our website, to provide a comprehensive overview of our Group’s performance. Annual Integrated Report 2019: REPORTING PROCESS FGV has strong sustainability governance structures in place to ensure the reliability and completeness of the information presented in this report. The report involved the utmost cooperation of key individuals who were responsible for assisting in and ensuring relevant information was provided prior to submission to the Group Management Committee (GMC). The GMC then recommended this report to the Board Governance & Risk Management Committee (BGRMC), who after having reviewed and assessed the content of this report, recommended it to the Board of Directors (BOD) for their final approval. The Board then gave the final approval for this Report. https://www.fgvholdings.com/investor-relations/annual-reports-presentations/ We welcome any feedback or comments on our report. For further information or to provide feedback, please contact the Group Sustainability Division at sustainability@fgvholdings.com. feedback
2 FGV HOLDINGS BERHAD SUSTAINABILITY HIGHLIGHTS 2018/2019 Continued support of core conservation programmes – Sun Bear Conservation Programme, Rafflesia Conservation & Interpretation Centre and Mega Biodiversity Corridor Conservation Project. Established Sustainability Synergy Committee to facilitate the mainstreaming of sustainability principles and practices in FGV. CORPORATE GOVERNANCE TRUST AND TRACEABILITY RESPECTING HUMAN RIGHTS AND UPHOLDING GOOD SOCIAL PRACTICES SUSTAINABILITY AT FGV ENVIRONMENTAL STEWARDSHIP Established an Independent Advisory Panel (IAP) to further enhance corporate governance and sustainability. Received the internationally recognised ISO 37001:2016 certification for our Anti-Bribery Management Systems (ABMS). Group Sustainability Division now covers FGV’s entire Group operations and reports directly to the Group CEO. Revised the Group Sustainability Policy (GSP 3.0) and included a reinforced component on human rights. Developed the Suppliers Code of Conduct (SCOC) for all suppliers and contractors. Embarked on a regularisation exercise for undocumented workers in Sabah. Adopted Guidelines & Procedures for the Responsible Recruitment of Foreign Workers and rolled out a socialisation exercise that included GSP 3.0 and the SCOC to promote the policies among stakeholders and supply chain partners. Revised contract with recruitment agencies to protect the rights of migrant workers. Established One-Stop Centres and developed a communication pack to strengthen the process of recruiting migrant workers. Built new housing for workers. Accepted as a Participating Company of the Fair Labor Association (FLA) to ensure our practices are aligned with international labour standards. Participated in Labour Supply Chain Mapping conducted by the International Organization for Migration (IOM) and the Earthworm Foundation to align the recruitment process of migrant workers with international standards. Revised and translated employment contract into English, Bahasa Indonesia, Bengali, Tamil and Hindi. 5 languages: Established for children of migrant workers in FGV’s plantations in Sabah. Community Learning Centres 11 100% 100% 33 80% Initiated the MSPO Certification for Independent Smallholders (ISHs) Project in collaboration with the Malaysian Palm Oil Board (MPOB) and assisted 2,368 FFB supplier ISHs to obtain MSPO certification. fresh fruit bunches (FFB) traceability to plantations of origin RSPO-certified complexes MSPO certification for our complexes Increased traceability and risk mapping by developing Traceability of Product (FGV-ToP). traceability of CPO to mills
3 SUSTAINABILITY REPORT 2018/2019 STATEMENT FROM THE CHAIRMAN THE YEAR 2020 STARTED WITH PROMISE. CRUDE PALM OIL (CPO) PRICES HAD RISEN FROM THE DOLDRUMS AND FGV HOLDINGS BERHAD WAS ON TRACK WITH ITS CAREFULLY STRATEGISED AND MUCH DISCUSSED OPERATIONAL TRANSFORMATION STARTING TO BEAR FRUIT. THE NUMBERS WERE COMING IN AND ALL INDICATORS POINTED TO A MUCH BETTER 2020. This time, there were seven non-compliances cited for the resuspension, compared to the 42 non-compliances with the RSPO’s principles & criteria that had been identified in November 2018. This, to my mind, showed improvement, but obviously it was not enough. A non-compliance is what it is, grievous or not, and it must be corrected. FGV continues to intensify its efforts to address and resolve the concerns raised, and these efforts are elaborated upon throughout the report. The Board has a vision for FGV and that vision translates simply to running our business well and doing it the right way. For me personally, the resuspension was a wakeup call. It was time to make sure that our commitments to sustainability are embedded in our strategies, operationalised and embraced by our people. FGV must balance the quest for profits against the needs of the planet and its people. Then came the COVID-19 pandemic. Its onset was unforeseen, the speed of its spread was shocking, and its impact is still reverberating with no clear end in sight yet. As a multinational company with customers in several countries, the Group has been and will continue to be impacted by the pandemic, even as nations cautiously emerge from lockdowns. Demand has whittled down, driving prices down, as supply chains worldwide struggle to maintain the links of global commerce. What remains unclear at the time of writing is the degree of the impact we are facing and how long it will continue, especially considering reduced purchasing power in economies ravaged by increasing unemployment. Having said that, despite the prevailing challenges, I believe there are opportunities for an organisation like FGV, with its network of nearly 200,000 small farmers and a logistics business that is one of the largest in the country, linking us, our supply chain and our domestic markets seamlessly. As we redirect FGV towards a more sustainable business model, my colleagues and I on the Board are committed to all the best principles of governance and sustainability, across the Group, in all our businesses. DRIVING GOVERNANCE AND SUSTAINABILITY An organisation with a stakeholder base as large and diverse as FGV’s faces the persistent challenge of balancing the interests of many to achieve desirable outcomes for all. However, we are clear that good governance, ethics and integrity can never be compromised, under any circumstances. Driven by the Board, FGV has taken steps to bring about important changes that we are embedding in the Group, at all levels. If there was one blip in January 2020, it was the resuspension of FGV’s Serting Mill Complex by the Roundtable on Sustainable Palm Oil (RSPO). DATUK WIRA AZHAR ABDUL HAMID Chairman For more information on FGV’s new business model, please refer to Our Business Plan in FGV’s Annual Integrated Report 2019 on pages 24 and 25. For more information about FGV’s governance, please refer to the Group’s Corporate Governance Overview Statement in FGV’s Annual Integrated Report 2019 on pages 82 to 116.
4 FGV HOLDINGS BERHAD STATEMENT FROM THE CHAIRMAN Our commitment to zero tolerance for corruption was crystalised when we became the first plantation company in Malaysia to implement the Anti-Bribery Management System (ABMS) across our entire operations. FGV made the deliberate decision to systematically and comprehensively embed the ABMS system in every facet and at all levels of our business. I was conscious that this should not be a box-ticking exercise and that it should extend into the far reaches of our organisation, instead of the handful of departments usually charged with procurement. Subsequently, FGV attained the internationally-recognised ISO 37001:2016 certification for its ABMS on 17 December 2019. To strengthen the Group’s understanding of and commitment to corporate governance and the principles of sustainability, we established an Independent Advisory Panel (IAP) that comprises three independentmembersand twonon-independentmembers. The panel, which convened for the first time in February 2020, advises FGV’s Board and offers recommendations on matters related to good governance and sustainability. As one of the non-independent members myself, I am pleased to report that all the members have a range of experience and expertise, including in strategy, finance and governance, environmental science and sustainable development. Your Board is confident that the panel will add great value to our efforts to steer FGV towards a better and stronger future. On a personal note, I am pleased and honoured that the IAP’s independent members, Dato’ Seri Ahmad Johan Raslan, Datuk Dr Glen Reynolds and Ms Rikke Jarvad Netterstrom, agreed to join us, to walk through this journey with us. ENTRENCHING THE VALUES OF SUSTAINABILITY IN 2018 AND 2019 In 2018 and 2019, FGV reviewed, revised and improved upon its existing policies and procedures, thus closing the gap between what our customers expected of us and what we had committed to. The greater challenge was implementing our commitment. We improved our labour practices and ensured our plantation workers’ rights from pre-employment to employment and post-employment, which included revising and translating employment contracts and developing a Communication Pack as a guide to the employment contracts. We also introduced the Suppliers’ Code of Conduct to ensure suppliers and contractors comply with Group policies and established 11 Community Learning Centres (CLCs) for children of plantation workers in Sabah who were not enrolled in formal education. STRENGTHENING HUMAN RIGHTS As a plantation company with 48,000 workers from at least six countries, FGV has put in place several measures to safeguard their rights and well-being. We ensure that they are not exploited in any way, even by third parties that we are required to work with in host countries. This is reflected in our materiality matrix, where Human Rights is in the top quadrant as one of our five most important pillars. Since mid-2016, our human rights and labour practices have been scrutinised by civil society organisations and regulators. I am grateful for this scrutiny because it has forced FGV to confront its weaknesses and enabled the current leadership to drive change. Our focus on improving our labour practices and employment guidelines has enabled us to progress at a faster pace. However, there is still some way to go before we can relegate the taint of the past to history as a lesson well learnt and never to be repeated. Meanwhile, we will continue to strive to protect the rights of all our workers and address existing gaps by engaging regulators such as the Roundtable on Sustainable Palm Oil (RSPO) and the Malaysian Palm Oil Certification Council, which operates the Malaysian Sustainable Palm Oil (MSPO) standard. We are also engaging with strategic partners such as the Human Rights Commission of Malaysia (SUHAKAM) and international organisations, namely the International Organization for Migration (IOM), Fair Labor Association (FLA) and Earthworm Foundation (EF). HEALTH AND SAFETY The well-being of all our 48,000 people is of paramount importance to us. As they strive to keep our operations going, we must reciprocate their dedication and ensure that they work in a safe and rewarding environment. Our plantation workers, who are mostly migrant workers, are the lifeblood of FGV. Without them, our plantation business cannot operate. We allocated RM349.5 million to improve housing and facilities across the board. As of December 2019, we have spent RM206.3 million and completed 319 out of 435 blocks of new housing for workers. In addition, we ensured that the workers’ safety training is conducted in the workers’ native languages and that they are provided with medical assistance when needed. In recognition of the current environment, we have also set up a COVID-19 Task Force to develop and implement risk mitigation protocols and processes across our operations. Thus far, we have successfully managed to isolate our workforce from infection. Our efforts also extend to the smallholders, both from the Federal Land Development Authority (FELDA) and independent smallholders, all of whom we have always worked closely with throughout this period. We are conscious that FELDA settlers provide us with one-third of our total production, allowing THE GREATER CHALLENGE WAS IMPLEMENTING OUR COMMITMENTS.
5 SUSTAINABILITY REPORT 2018/2019 STATEMENT FROM THE CHAIRMAN us to be the link between them and international markets. Their livelihoods are inextricably linked with ours; their well-being is our well-being. ENVIRONMENTAL STEWARDSHIP Of FGV’s total hectarage of 439,230 Ha, 351,230 Ha has been planted. Of this, 343,404* Ha are in Malaysia and 22,578 Ha (excluding landbanks under joint ventures) are in Indonesia. Of FGV’s 343,404* planted hectares in Malaysia, much of these areas are now in their second generation of planting. In Indonesia, FGV acquired PT Citra Niaga Perkasa (PTCNP), PT Temila Agro Abadi (PTTAA), PT Patisindo Sawit (PTPS) and PT Felda Indo Rubber (PTFIR). Due to the soil types in the area, FGV has suspended peat soil activities since 25 April 2017. FGV is now working with local communities to address persistent food security issues. In 2018 and 2019, the size of our High Conservation Value (HCV) areas grew by 257.41 Ha with our Tawai estates in Perak being the most recently assessed in 2018. We have 14 HCV locations in Malaysia and two in Kalimantan, Indonesia, where we conduct biodiversity assessments in all our operations once every five years to develop Environmental Management and Monitoring Plans. These assessments have enabled us to identify the rare and critically endangered wildlife species within our concessions and operational borders. Moving forward, FGV has also adopted the principles of the High Carbon Stock Approach (HCSA) as we strive for continuous improvement in all our operations. GROWING BEYOND OIL PALM As part of our strategy to become an integrated and sustainable agribusiness organisation, we have tapped into the palm-based circular economy and started selling energy derived from renewable sources in our plantations. The energy is derived from biogas and bio-compressed natural gas (bio-CNG). Renewable energy has tremendous potential as a viable substitute for fossil fuels, besides adding to our income streams. We have invested and will continue to invest in renewable energy technologies by building more biogas plants to capture methane at our mills. We currently have 30 biogas plants that capture methane at our palm oil mills, which have helped to reduce our carbon dioxide emissions by more than 100,000 tonnes. In 2018 and 2019 alone, we recorded a total reduction of 177,035 MT of CO2 emissions from 27 biogas plants that were monitored. Beyond our traditional oil palm business, FGV has also identified significant opportunities in the food sector that we consider to be strategic adjacencies to our existing operations. These include alternative crops and dairy farming, both of which have tremendous potential for growth. As we grow our presence as a significant player in the food production sector, FGV will ensure that all these new businesses are managed in a responsible and accountable manner, adhering to all our policies and guidelines. MOVING FORWARD As we move forward in a post COVID-19 world, the future we envisioned a few months ago has been reshaped. The ‘new normal’ that everyone has been talking about has forced disruption in the way we work and interact. Our responsibility to our stakeholders and our commitment to the principles of the United Nations Sustainable Development Goals (SDGs) have taken on new meaning, demanding greater focus on sustainable business practices. In these times and in the world beyond, FGV will work to our strengths, conscious of the new order and sympathetic to the needs of our stakeholders, our people and the planet. ACKNOWLEDGEMENT I wish to thank my colleagues on the Board of Directors, who have been dedicated and committed to driving change within the organisation as we move forward. I would also like to record my heartfelt appreciation to FGV’s Management and employees for facing the challenges we were confronted with head-on, not allowing the prospect of failure to diminish their fervour. To all stakeholders and partners, I thank you for your support throughout the years. We will continue to strengthen our relationships to create value for the sustainable growth of FGV. For more information, please see Management Discussion and Analysis in FGV’s Annual Integrated Report 2019. * This figure includes oil palm, rubber, timber, coconut, orchards, coffee, cocoa and nurseries.
6 FGV HOLDINGS BERHAD GRI 102-14 STATEMENT FROM THE GROUP CHIEF EXECUTIVE OFFICER ON 28 JUNE 2012, FGV HOLDINGS BERHAD BECAME ONE OF THE LARGEST LISTED PALM OIL COMPANIES IN THE WORLD, PRODUCING THREE MILLION TONNES OF PALM OIL ANNUALLY, ONE-THIRD OF WHICH IS PRODUCED BY NEARLY 200,000 SMALL FARMERS. Compared with other big players, however, FGV was admittedly slow off the starting blocks, and faced great challenges trying to implement new thinking and standards across its operations. Improving the practices of the past is often easier said than done. Such was also FGV’s experience as we tried to roll out new initiatives across our 68 mill complexes and 202 estates, to restore operational integrity and introduce new thinking in line with the principles of the RSPO. As a result, FGV has suffered public admonishment culminating with the suspension of some of our operations by the RSPO’s Complaints Panel. That was a bitter pill to swallow at a time when new leadership was coming into the company and the Group was in the process of addressing several fundamental operational issues on the ground. Nevertheless, in November 2018, the Board made the commitment to right all wrongs and to make sure that FGV lives up to its stated ambitions. On the operational front, things are moving forward at a steady clip. However, with regard to the adoption and implementation of all the RSPO’s principles and criteria, while we have taken some important steps in the right direction, there is still much more to be done, not least of which is entrenching new thinking and changing mindsets across the Group. Unfortunately, just as we thought we had our path ahead clearly mapped out, the COVID-19 pandemic hit the world hard – a global health crisis that degenerated very quickly into an economic and financial meltdown. At the time of writing, the full scale of the COVID-19 fallout remains unclear and we are still mapping the impact of the crisis on our operations and our people. Despite continuing to run our estates and mills throughout the nationwide Movement Control Order, our people were able to avoid the risk of exposure with stringent safety measures implemented across all our operations. We continue to remain vigilant and will take all necessary steps to enhance controls should they be necessary. STRENGTHENING SUSTAINABILITY FGV’s operations stretch from Perlis in the far north of Peninsular Malaysia across the South China Sea to Sarawak and Sabah, employing 48,000 people. Among our employees are 31,000 migrant workers whom we have closely engaged with and are thus aware of the terms of their contracts, have access to their passports and live in appropriate accommodation. Yes, as a plantation company, our estate and mill workers are vital to our success and continued sustainability. We placed their human rights as a top priority in November 2018, reviewing and correcting several internal policies and processes to safeguard their interests. The listing marked the start of the Group’s aspirational journey to establish itself as an industry leader, with the noble intention of achieving operational excellence and topnotch sustainability credentials. DATO’ HARIS FADZILAH HASSAN Group Chief Executive Officer
7 SUSTAINABILITY REPORT 2018/2019 STATEMENT FROM THE GROUP CHIEF EXECUTIVE OFFICER Thus, in 2019, we adopted the Guidelines and Procedures for the Responsible Recruitment of Foreign Workers to ensure that the recruitment of migrant workers was responsibly and ethically managed. We established One-Stop Centres in Bukit Rokan, Malaysia; Lombok, Indonesia; as well as in Chennai and Kolkata in India to facilitate a strengthened pre-departure and post-arrival orientation programme for our migrant workers. We have also installed safety boxes as an option for our migrant workers to keep their passports. To bolster our efforts, we are collaboratingwith various external parties, including Tenaganita, to develop human rights training modules for our workers as well as with the UN IOM and the EF in a labour supply mapping project. Similarly, we are engaged with two distinct groups of smallholders who work their farms across the country, either as schemed FELDA settlers or as independent smallholders. These farmers produce about one-third of the crops we process, from smallholdings that range in size from 2 Ha to 40.46 Ha. Their challenges are ours and, as part of our supply chain, we are socialising our new policies and procedures to ensure that they too are aware of the rights of migrant workers. As part of our commitment to continuous improvement, in May 2019, we reviewed and revised our Group Sustainability Policy 3.0 (GSP), tightening gaps and including value chain partners and business partners in our sustainability journey. The strengthened policy was formulated through a consultative process involving key stakeholders such as SUHAKAM, IOM, the Malaysian Palm Oil Board (MPOB) and Tenaganita. We have a much more robust section on respecting human rights, which is aligned with the Universal Declaration of Human Rights and the United Nations Guiding Principles on Business and Human Rights (UNGPs). GSP 3.0 focuses on three key areas, namely Respecting Human Rights, Protecting the Environment and Promoting Sustainability. To ensure that the policy is well-understood and put into practice by all employees across the Group, as well as by our contractors and suppliers, we have been running a socialisation exercise that, barring any unforeseen circumstances, will be completed by the end of June 2020. Once the socialisation exercise is completed, we will be better-equipped to identify both sustainability risks and opportunities. Strong awareness and the comprehensive adoption of the policy are critical to ensure long-term business growth. Additionally, as a firm believer in the strength of partnerships, in October 2019, FGV, with the support of the Procter & Gamble Company, became a Participating Company of the FLA. Through our affiliation with the FLA, we have embarked on a five-year programme that involves a holistic approach to strengthening our internal systems and mechanisms to ensure that the rights of our workers are respected and protected. Further underscoring our commitment to sustainability, we have expanded our Group Sustainability Division’s (GSD) mandate beyond the plantation sector to cover the entire Group operations. We have also intensified our focus on human rights, to review and where necessary, correct FGV’s previous approach. Thus, in March 2019, we appointed new leadership for GSD with experience in the human rights field. ROUNDTABLE ON SUSTAINABLE PALM OIL (RSPO) In February 2020, FGV achieved 100% Malaysian Sustainable Palm Oil (MSPO) certification, capping a 54-month concerted Group-wide effort to complete the exercise. With this, we are now again concentrating on our RSPO certification. FGV has 33 RSPO-certified mills, out of a total of 68. Additionally, FGV has 25 mills that have already been audited but are still awaiting the RSPO’s decision on progressing their certification (when the Serting Mill Complex was resuspended in January 2020, the RSPO’s Complaints Panel also decided to suspend the certification processes of all FGV mills that had successfully passed their audits). Nevertheless, with all the ongoing efforts to correct the single remaining major non-compliance, I am confident that our aspiration to achieve full RSPO certification by mid-2021 is still achievable. For the record, FGV had on 3 April 2020, submitted an appeal against the decision of the Complaints Panel, as we hold the view that the actions taken against FGV were harsh and did not take into consideration independent auditors’ assessments that we had, in large part, already corrected most of the issues identified in November 2018. The one major non-compliance identified was in fact progressing on a scheduled plan of correction that the RSPO had been apprised of. Irrespective of the outcome of the appeal, FGV will continue to implement its action plan to address any gaps and enhance our labour practices. THE COVID-19 PANDEMIC The COVID-19 pandemic and the government’s Movement Control Order (MCO) have affected FGV’s operations and disrupted some of our initiatives to fulfil the Complaints Panel’s directives. Due to this, we have requested an extension of time for the completion of all the initiatives. This includes the major non-compliance, which is the regularisation exercise of undocumented workers in Sabah. Also, the building of new worker accommodation has been delayed as the MCO has prevented the free movement of workers and materials to complete the exercise on time. Despite the delay, FGV remains committed to fulfilling all our obligations as expeditiously as possible. In fact, our commitment and resolve to meet and uphold labour standards go beyond certification. TRUST AND TRACEABILITY To promote greater traceability, we have developed a computerised traceability system called Traceability of Product or FGV-ToP. This is part of our overall Sustainable Palm Oil Management System (SPOMS) that also includes an Audit Integrated Management System (FGV-AIMS). With the introduction of FGV-ToP, customers are now able to obtain details such as the certification, geolocation and production per month of a mill from the system. OUR ESTATE AND MILL WORKERS ARE VITAL TO OUR SUCCESS AND CONTINUED SUSTAINABILITY.
8 FGV HOLDINGS BERHAD STATEMENT FROM THE GROUP CHIEF EXECUTIVE OFFICER As at December 2019, all of FGV’s CPO production is already 100% traceable to mills and about 90% is traceable to estates. FGV’s internal production is 100% traceable to our estates and our FELDA settlers are also 100% traceable to their estates. For independent smallholders, we have a target of full traceability by 2021. ENVIRONMENTAL STEWARDSHIP FGV adopted its ‘No Deforestation, No Peat, No Exploitation’ (NDPE) policy in 2016, a commitment that is important in recognising environmental protection and respect for human rights. The Group has also decided that it will not develop any greenfield areas of high conservation value, including peatlands, and where possible, will restore peatlands that were previously cleared after 25 August 2016, without causing social conflict among local communities expecting economic benefits from their land. In this regard, FGV has been working with the Indonesian government to implement a Peat Restoration Management Plan at PT Temila Agro Abadi plantation in Kalimantan, Indonesia. Most crucially, FGV has taken proactive measures to reduce our greenhouse gas (GHG) emissions by increasing our renewable energy efforts, such as establishing biogas capture plants and producing bio-CNG, among others. Thanks to our strategic investment in renewable energy technologies, we have reduced our carbon dioxide emissions by more than 100,000 tonnes by building biogas capture plants to capture methane at our palm oil mills. Currently, we have 30 biogas capture plants, which have helped to reduce our GHG emissions significantly. For instance, we monitored 12 biogas plants in 2019, which showed a reduction of 79,415 MT of CO2 emissions. These biogas plants have also benefitted local communities by providing them with electricity and further reducing their GHG emissions as they were previously depending on diesel power generators for electricity. The respective plants supplied electricity to rural communities in Umas, Baiduri Ayu in Sabah and Asian Plantations Limited (APL) in Sarawak. Moreover, we have reduced our GHGemissions through bio-compressed natural gas (bio-CNG) plants. Bio-CNG is a viable and sustainable alternative to diesel in vehicles and in the manufacturing industry. At the moment, we have one bio-CNG plant and we are currently working with key partners to build 35 more. When completed, we will own the most bio-CNG plants in the world for a plantation company. Our biogas and bio-CNG plants have also enabled us to sell renewable energy, which is part of our palm-based circular economy. Our circular economy has shown tremendous growth, such as in the production of animal feed using waste by-products from milling processes since 2015. Sales increased by over 100% from 10,182 MT in 2018 to 21,653 MT in 2019. We target to achieve 50,000 MT of feed production in 2020. The palm-based circular economy is part of FGV’s Business Plan 2021 and it includes dairy farming and alternative crops. In biodiversity conservation, we are committed to conserving and protecting the ecosystem and habitats of endangered, rare and threatened species. Our Sun Bear Conservation Programme (SBCP) is the first such programme in Peninsular Malaysia and we are extending it for another five years. We have invested close to RM2.3 million over the past five years to rescue and rehabilitate sun bears in Peninsular Malaysia. In 2019, 13 sun bears were rescued and provided with shelter, treatment and rehabilitation before being released into their natural habitat. In addition, FGV is part of the Mega Biodiversity Corridor Conservation Project, which is establishing a network of forest corridors to enable the safe migration of wildlife between key forest habitats. We contributed RM1.7 million to support the re-establishment, restoration and protection of key migratory routes, especially of Borneo pygmy elephants and orangutans, to allow safe migration within the Lower Kinabatangan Basin in Sabah. Developed in partnership with the Borneo Conservation Trust (BCT), the project has since conducted a number of activities such as organising the ‘Honorary Wildlife Warden’ (HWW) capacity building programme in November 2018. As part of our contribution to flora conservation, FGV is working with the Forest Research Institute of Malaysia (FRIM) to establish a Rafflesia Conservation & Interpretation Centre (RCIC) in Gerik, Perak. The RCIC will serve as a one-stop research, education and conservation centre for the endangered Rafflesia. GOING FORWARD 2018 and 2019 were not easy for us, with multiple challenges requiring the Management team to fire from all cylinders at the same time. As our Chairman frequently reminds us, in adversity we must find opportunity. Our strategic business shift is ongoing, at a rather opportune time. This shift will also force us to reinforce our commitment to sustainability as we identify new revenue streams. As strong proponents of consultation and engagement, we will continue to adopt a consultative approach, including materiality assessments every two years to ascertain issues of importance to our stakeholders. We will also continue to identify risks and opportunities in economic, environmental and social matters and strive to provide regular updates and share information with stakeholders in a transparent manner. We will continue to enhance our labour practices and will actively strive to contribute to climate action. FGV aspires to become a business organisation that goes beyond meeting minimum standards on sustainability and human rights. It is our goal to play an instrumental role in developing solutions for industry issues. ACKNOWLEDGEMENTS We would like to record our appreciation to our business partners and stakeholders, who have been supportive of FGV throughout these trying times. We thank you for your support and contributions and for moving forward together with us in our sustainability journey. I would also like to thank the Board for its direction and support during this time. FGV has taken bold steps to grow and move forward over the last two years. This would not have been achieved without their leadership and guidance.
9 SUSTAINABILITY REPORT 2018/2019 GRI 102-16 OVERVIEW OF FGV VISION AND MISSION CORE VALUES To be among the World’s Leading Integrated and Sustainable Agribusinesses and Deliver Value to customers and stakeholders VISION OUR CORE VALUES AND GUIDING PRINCIPLES We believe in according our people a harmonious work environment to keep them highly engaged. Our hope is that all our employees will live out our core values in their daily lives as we aspire to build a high-performance culture. Our core values are made up of five essential guiding principles known as PRIDE, which stands for the following: MISSION Creating value through our human capital The embodiment of governance and compliance Cultivating diversification in commodities and geography Building an integrated value chain advantage 1 4 2 3 To be a Global Leader by: PARTNERSHIP Best solutions and ideas come from working with both colleagues (internal) and business partners (external). RESPECT Our sustained success and achievements can only come from respect for people (colleagues, peers and business partners), as well as the environment, which is the main source of our business. INTEGRITY Integrity is about trust, honesty and sincerity. In our context, it means being responsible and accountable for one’s own actions and behaviours. Each employee is responsible for the Group’s success and business reputation. DYNAMISM We strive to discover, create ideas and identify growth potential from uncharted opportunities and beyond traditional boundaries, all done in the best interests of stakeholders and communities. ENTHUSIASM We strive to lead with passion and work with enthusiasm. We are enthusiastic about what we do and committed to the growth and future of our agribusiness, while at the same time propagating sustainable development around the world.
10 FGV HOLDINGS BERHAD GRI 102-18 GROUP ORGANISATION STRUCTURE Business Sector Business Division Support Division BOARD OF DIRECTORS – FGV HOLDINGS BERHAD Board Governance & Risk Management Committee Plantation Sector Investment Committee Nomination and Remuneration Committee Board Tender Committee Audit Committee Group Internal Audit Group Secretarial GROUP CEO Group Governance & Risk Management Logistics & Others Sector Bulking Logistics & Transport Technology & IT Group Human Capital Group Strategy Group Transformation Group Strategic Communication Group Sustainability Group Health, Safety & Environment BGRMC IC NRC BTC AC Sugar Sector MSM Malaysia Holdings Berhad Finance & Corporate Services Group Finance Group Procurement Group Information Technology Group Tax Group Treasury Group Legal Upstream Downstream Marketing & Trading Research & Development Rubber Operational Excellence Integrated Farming Renewable Energy
11 SUSTAINABILITY REPORT 2018/2019 GRI 102-2 BUSINESS SECTORS All information presented is accurate as of 31 December 2019 PLANTATION SECTOR SUGAR LOGISTICS SUGAR SECTOR #1 Edible oil storage in Malaysia with 844,400 MT of storage capacity (#2 in the world) #1 Refined sugar brand with 61% local market share GULA PRAI LOGISTICS & OTHERS SECTOR UPSTREAM 439,230 Ha* PLANTATION LANDBANK IN MALAYSIA & INDONESIA LARGEST OIL PALM MILL OPERATOR 338,437 Ha PLANTED OIL PALM HECTARAGE IN MALAYSIA * Including land under Land Lease Agreement (LLA) with FELDA SAJI SERI PELANGI #1 Refined cooking oil brand in Malaysia with 34% market share #1 Margarine with 40% volume share DOWNSTREAM 3.07 Million MT LARGEST CRUDE PALM OIL PRODUCER IN MALAYSIA RESEARCH AND DEVELOPMENT YANGAMBI Germinated seed producer in Malaysia with 44% market share #1 68 mills IN MALAYSIA 730,000 MT LARGEST COMPOUND FERTILISER PRODUCTION WITH CAPACITY PER YEAR IN MALAYSIA
12 FGV HOLDINGS BERHAD GRI 102-4 OUR GLOBAL PRESENCE 1 2 4 7 6 8 5 3 9 10 CREATING VALUE, HELPING COMMUNITIES Further details on the assets owned by FGV can be found on our website at www.fgvholdings.com PLANTATION LAND MANAGED (HA) PLANTATION DETAILS: 202 estates 68 mills 22,578 417,146 2019 2018 22,578 416,652 Malaysia Indonesia NEGERI SEMBILAN 6 estates 3 mills 2 rubber-processing facilities 1 research and development centre 1 transportation sub-depot 9 SELANGOR 1 mill 1 kernel-crushing plant 2 transportation depots 1 transportation sub-depot 1 warehouse 1 bulking terminal 1 palm oil refinery* 8 PAHANG 60 estates 27 mills 1 rubber-processing facility 1 kernel-crushing plant 1 transportation depot 1 transportation sub-depot 1 biodiesel plant 1 oleochemical plant* 1 palm oil refinery 1 fertiliser manufacturing plant 1 research and development centre 2 bulking terminals 1 warehouse 7 4 KELANTAN 11 estates 3 mills 1 transportation sub-depot 1 PERLIS 1 sugar refinery 3 PENANG 1 sugar refinery 1 transportation sub-depot 2 KEDAH 1 estate 1 rubber-processing facility PERAK 7 estates 2 mills 1 transportation sub-depot 6 5 TERENGGANU 7 estates 5 mills WEST MALAYSIA
13 SUSTAINABILITY REPORT 2018/2019 JOHOR 20 estates 14 mills 1 kernel-crushing plant 1 transportation depot 1 transportation sub-depot 5 bulking terminals 2 palm oil refineries*** 1 sugar refinery 1 fertiliser manufacturing plant 2 warehouses 10 SABAH 75 estates 11 mills 2 palm oil refineries 2 bulking terminals 1 fertiliser manufacturing plant 1 research and development centre 1 kernel-crushing plant 1 transportation depot 1 transportation sub-depot 1 jetty operation 1 power plant 11 SARAWAK 10 estates 2 mills 1 transportation sub-depot 12 OUR GLOBAL PRESENCE 11 12 OUR GLOBAL PRESENCE * Joint venture (JV) ** One of the two bulking terminals is a JV *** One of the two palm oil refineries is a JV CAMBODIA 1 rubber-processing facility FRANCE 1 trading office* INDONESIA 5 estates 1 rubber-processing facility 1 bulking terminal PAKISTAN 1 refinery complex* 2 bulking terminals** 1 trading office* 1 jetty operation SPAIN 1 trading office* THAILAND 1 rubber-processing facility TURKEY 1 vegetable oil refinery* USA 1 oleochemical plant EAST MALAYSIA
14 FGV HOLDINGS BERHAD VALUE CHAIN OUR BUSINESS ACTIVITIES THAT CREATE VALUE PLANTATION SECTOR SUGAR SECTOR LOGISTICS & OTHERS SECTOR On an Annual Basis: Through MSM Malaysia Holdings Berhad (MSM): Under Logistics & Others Sector: We process We produced We manage Over 0.93 million MT of storage capacity for edible oils 3 warehouses 1.07 million MT 7 types around 0.36 million MT of Crude Palm Kernel Oil about 37.2% of our own CPO to produce oils and fats for industrial usage and domestic consumption 14.9 million MT of FFB to produce 3.07 million MT of CPO and 0.77 million MT of Palm Kernel We produce We export We refine of refined sugar in 2019 for domestic and export markets 8.8% of our sugar to Southeast Asia, South Korea, China, New Zealand and Australia of products from sugar for the domestic market 2 jetty operations 437 liquid tankers and cargo trucks
15 SUSTAINABILITY REPORT 2018/2019 OUR COMMITMENT In honouring these commitments, we draw on the United Nations Guiding Principles on Business and Human Rights (UNGPs), the International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work and other relevant ILO conventions. We pledge to No Deforestation, No Peat and No Exploitation (NDPE). As a responsible corporate citizen, we are also dedicated to contributing to the achievement of the United Nations Sustainable Development Goals (SDGs). SUSTAINABILITY is at the heart of FGV’s ethos and we place high priority on sustainable business practice throughout the Group. We are committed to respecting and upholding internationally recognised human rights principles and standards from the Universal Declaration of Human Rights (UDHR) as well as other global human rights instruments.
16 FGV HOLDINGS BERHAD JOURNEY 2018-2019 Entered into a joint-venture with Universiti Putra Malaysia for environmental research on the Oil Palm Ecosystem Project, Water Stress Index (WSI) and water footprint. Adopted the Guidelines and Principles for Responsible Recruitment of Foreign Workers. Reduction of GHG emissions and partnership with Sime Darby Energy Solutions Sdn. Bhd. and Biotek Dinamik Sdn. Bhd. to produce bio-compressed natural gas (bio-CNG). Adopted the Supplier Code of Conduct. Established the Sustainability Synergy Committee. Established the Independent Advisory Panel on Governance and Sustainability (IAP). Facilitated the regularisation of undocumented workers in Sabah. Expanded FGV’s Sustainability Division to have a Group-wide function. The Group Sustainability Division now directly reports to the Group CEO of FGV, driving higher accountability and fast decision-making. J[OUR]NEY 2018-2019
17 SUSTAINABILITY REPORT 2018/2019 Appointed new leadership in the Group Sustainability Division consisting of personnel with a cumulative experience of 45 years in the fields of human rights, law reform and development. Adopted the revised Group Sustainability Policy (GSP 3.0). Became a Participating Company of the Fair Labor Association (FLA) as part of FGV’s long-term endeavour to enhance its labour practices. Established one-stop centres in Malaysia, Indonesia and India where workers will receive orientation programmes, briefings and training. Embarked on a Socialisation Programme to promote greater awareness and application of FGV’s revised GSP, the SCOC and the Guidelines and Procedures for the Responsible Recruitment of Foreign Workers within its operations and among its suppliers and contractors. Entered into a partnership with the Malaysia Institute for Supply Chain Innovation (MISI) and Malaysia’s National Applied Research and Development Centre (MIMOS) to validate traceability data and verify suppliers’ compliance with the Group Sustainability Policy. Participated in a Labour Supply Chain Mapping project conducted by the International Organization for Migration (IOM) and Earthworm Foundation to review the recruitment process of migrant workers. JOURNEY 2018-2019
18 FGV HOLDINGS BERHAD Head (Reports directly to GCEO) SUSTAINABILITY GOVERNANCE Our Board provides oversight for the highest level of sustainability governance. It is accountable for the Group’s sustainability strategy and performance and sets the sustainability direction for FGV. Our Board is highly attentive and responsive to sustainability matters within FGV, which highlights the importance of sustainability to FGV. The Group’s overall sustainability framework and strategies, including principles and policies, are reported to the Group Management Committee (GMC) on a monthly basis and to the Board Governance & Risk Management Committee (BGRMC) every quarter. The Group has also established a Sustainability Synergy Committee (SSC) to ensure effective communication and implementation of sustainability commitments. PLANTATION MANAGEMENT COMMITTEE PLANTATION SECTOR FINANCE & CORPORATE SERVICES SUSTAINABILITY SYNERGY COMMITTEE (SSC) LOGISTICS SECTOR SUGAR SECTOR INDEPENDENT ADVISORY PANEL ON GOVERNANCE & SUSTAINABILITY BOARD BOARD GOVERNANCE & RISK MANAGEMENT COMMITTEE (BGRMC) GROUP MANAGEMENT COMMITTEE (GMC) Compliance Engagement GROUP SUSTAINABILITY Regulations Technical GRI 102-18 SUSTAINABILITY AT FGV SUSTAINABILITY – OUR ETHOS, OUR PRIORITY. This embodies how we prioritise sustainability at FGV. In everything that we do, we ensure that it is done in the most sustainable and responsible manner. Embracing sustainability at the core of our business, we are steadfast in our efforts to respect human rights, support our local communities and minimise environmental harm. The Head of Group Sustainability serves as the chair of the SSC, which meets at least once a quarter to establish, deliberate and agree on sustainability-related plans and strategies. This committee will also monitor progress and address emerging issues pertaining to sustainability. Matters arising from the SSC are captured in monthly reports to the GMC and Plantation Management Committee, while biannual reports are prepared for the Independent Advisory Panel on Governance and Sustainability. Any issue that is unresolved at the SSC level and that requires management attention will be escalated to the GMC, BGRMC and FGV Board for further direction.
19 SUSTAINABILITY REPORT 2018/2019 01 S E C T I O N Establishment of an Independent Advisory Panel We are continually exploring avenues to advance sustainability. To gain a fresh perspective, FGV has established an Independent Advisory Panel (IAP) and appointed Dato’ Seri Ahmad Johan Raslan as its Chairman. Dato’ Seri Ahmad Johan is a former Executive Chairman of PricewaterhouseCoopersMalaysia (PwC). He has held various board positions in the government and private organisations, including Putrajaya Corporation and AmBank Group. There are four other IAP members who are experts in related fields. SUSTAINABILITY AT FGV The IAP’s advisory role complements FGV’s ongoing efforts to champion sustainability. Its primary role is to provide valuable independent advice and recommendations to FGV on matters of corporate governance and sustainability, to enable FGV to lead the industry in sustainability. The first meeting was conducted on 20 February 2020. UN Sustainable Development Goals (SDGs) The launch of the SDGs in 2015 was a global call for action towards ending poverty, protecting the planet and ensuring peace and prosperity. At FGV we have taken this seriously and embraced the SDGs as important guidance as to how we govern and manage sustainability across our businesses. We have aligned our initiatives with relevant SDGs and continue to contribute towards these goals through our operations and existing outreach programmes, especially Goals 2, 4, 5, 6, 7, 8, 12, 13, 15 and 16. Independent Members Non-Independent Members Dato’ Seri Ahmad Johan Raslan Ms Rikke Jarvad Netterstrom Datuk Dr Glen Reynolds Datuk Wira Azhar Abdul Hamid Dato’ Yusli Mohamed Yusoff WE HAVE ALIGNED OUR INITIATIVES WITH RELEVANT SDGS To know more about the IAP members, please visit https://www.fgvholdings.com/about-fgv/independent-advisory-panel/?pid=datoseri-ahmad-johan-bin-mohammad-raslan
20 FGV HOLDINGS BERHAD The Group Management Committee is chaired by the GCEO. He also acts as the advisor to the Sustainability Synergy Committee. The GSD reports directly to the GCEO, driving higher accountability and quick decision-making in areas concerning corporate respect for human rights and social responsibility as well as environmental sustainability, which include commitment to the ‘No Deforestation, No Peat, No Exploitation’ (NDPE) Policy. Given this newly-established reporting structure, the GCEO plays a significant and direct role in overseeing and advising on the overall conduct of the Group’s sustainability efforts and programmes. The Head of GSD directs and oversees the day-to-day work of the GSD and advises the Group on matters pertaining to sustainability, which include aspects relating to human rights and environmental protection. The Head of the GSD also serves as the Chairperson of the Sustainability Synergy Committee, with committee members from various Business Sectors. SUSTAINABILITY AT FGV GRI 102-11 SUSTAINABILITY MANAGEMENT Our Group Sustainability Division (GSD) has the overall responsibility for developing, implementing and monitoring sustainability strategies and performance. In early 2019, GSD’s mandate was expanded to cover the entire Group’s operations – prior to that, GSD only covered FGV’s Plantation Sector. We appointed new leadership in GSD consisting of personnel with a cumulative experience of 45 years in the fields of human rights, law reform and development. Additionally, GSD now reports directly to the Group CEO of FGV, reflecting our renewed focus on embedding and mainstreaming sustainability across the Group. To ensure better communication and more effective implementation of sustainability initiatives across the Group, our Sustainability Synergy Committee (SSC) was established in 2019. Comprising heads or representatives of the various sectors and divisions within the FGV Group, the SSC is tasked with facilitating the mainstreaming of sustainability principles and practices throughout FGV and ensuring the effective implementation of FGV’s sustainability initiatives and programmes across its operations. We continue to apply a precautionary approach to how we manage our sustainability risks, ensuring we fully understand the issues at hand and developing appropriate action plans. GCEO HEAD OF GSD SUSTAINABILITY COMPLIANCE AND CERTIFICATION SUSTAINABILITY TECHNICAL SUSTAINABILITY ENGAGEMENT SUSTAINABILITY REGULATION GROUP CHIEF EXECUTIVE OFFICER (GCEO) HEAD OF GROUP SUSTAINABILITY DIVISION (GSD)
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