SUSTAINABILITY REPORT 2020/2021 FGV HOLDINGS BERHAD 200701042133 (800165-P) ANCHORING SUSTAINABILITY. DELIVERING IMPACT.
ANCHORING SUSTAINABILITY. Delivering IMPACT. Natural resources are at the core of our business, being pivotal to our growth and foundational to our continued prosperity. This has shaped and continues to reinforce our respect for nature and embedded sustainability consciousness across the entire FGV. Sustainability is now firmly entrenched as an integral part of our business, receiving close attention and focus from the highest levels of FGV and becoming “business as usual” in our operations. As we embrace sustainability, we innovate new products that deliver positive impacts on our revenues and, through their sustainable nature and the responsible manner by which they are generated, bring benefits to society and our planet. Image: An aerial view of FGV’s estate in Maokil, Johor.
Scan here to view our Annual Integrated Report 2021 online Clean and meaningful, this year’s minimalist design approach captures the sense of dynamic advancement within FGV. The synergising lines form escalating wave charts to illustrate heightened performance levels. The lines making up the wave represent the synergies within the Group and shows the shared goals towards higher value and higher target impacts Inside This Report ABOUT THIS REPORT 4 FGV’s Chairman Address 2021 10 GCEO’s Statement 16 FGV’s 2021 Highlights 18 Our Story 22 Overview of FGV and Its Operations Our Core Value Chain 24 Our Sustainability Journey 2018 - 2021 26 Global Presence 28 Our Sustainability Approach 47 Promoting Economic Growth RESPONSIBLE BUSINESS 51 Operational Excellence 61 Traceability, Responsible Sourcing & Supply Chain Management 65 Sustainability Certifications 68 Business Development & Product Quality 69 Governance, Ethics and Integrity 71 Data Security & Protection 72 Community Engagement & Development RESPECTING HUMAN RIGHTS 77 Upholding Human Rights & Labour Standards 86 Employee Engagement 88 Talent Management 94 Occupational Health & Safety CLIMATE ACTION & ENVIRONMENT PROTECTION 107 Climate Action 112 Renewable Energy & Energy Management 115 Waste Management 117 Soil, Water, Pest & Diseases Management 121 Biodiversity & Land Management ADDITIONAL INFORMATION 130 GRI Content Index
About This Report This Sustainability Report, best read in conjunction with the Annual Integrated Report, emphasises the significance of sustainability to FGV and indicates how we are activating synergies inherent to our sustainability efforts. In addition to presenting our sustainability performance in the year under review, this Report also highlights sustainability initiatives and achievements in relation to material matters based on the 3 pillars of FGV’s Group Sustainability Policy (GSP) 4.0, namely promoting economic growth, respecting human rights and protecting the environment. Annual Integrated Report 2021 Audited Financial Statement 2021 Sustainability Report 2020/2021 REPORTING SCOPE AND BOUNDARIES This report is prepared by reference to national and global standards and contains information on sustainability management activities of the Group and sustainability matters which have been assessed as material based on our annual materiality assessment of economic, environmental, social and governance risks. While this report includes all risks and opportunities material to our sustainability, it does not estimate or forecast future impacts of our sustainability-related material matters. In preparing this report, we are guided by the Bursa Malaysia Sustainability Reporting Guide (2nd Edition). This report is also prepared by reference to Global Reporting Initiative Standards, 2021. The report, issued biennially, is confined to developments throughout the period from 1 January 2020 - 31 December 2021. Unless otherwise stated, it covers all of FGV Holdings Berhad’s businesses in Malaysia and the other countries we operate in. This includes operations which we have full control of including subsidiaries and joint ventures. We also report on other developments or information that may transcend our reporting boundaries but are considered highly material to the Group’s sustainability performance. Our sustainability disclosures throughout this report demonstrates how we support value creation and how important sustainability is to the Group. For a holistic view of our business, this report should be read together with the information available on our website at: www.fgvholdings.com 2 FGV HOLDINGS BERHAD RESPONSIBLE BUSINESS ABOUT THIS REPORT RESPECTING HUMAN RIGHTS
Our Strategic Thrusts 2021 Key Material Matters OUR SIX CAPITALS OUR identified stakeholders FORWARD-LOOKING STATEMENTS Financial Intellectual Natural Human Manufactured Social & Relationship Operational Improvement Products & Markets Penetration New Growth Areas Financial & Capability Building REPORTING INTEGRITY Following good governance practices, we have ensured that the information presented in this report is reliable, consistent and complete. To uphold quality, this report has been reviewed by the Group Management Committee and the Board Sustainability Committee and further reviewed and approved by the Board. Where necessary, we have used forward-looking statements related to our Group’s plans, objectives, strategies, future operations and performance. Such statements should not be taken as guarantees of the Group’s future results as we remain subject to various possible scenarios of risks, uncertainties and assumptions. Actual results and outcomes may significantly differ from forward-looking statements. We make no expression or implied representation or warranty that the results targeted by these forward-looking statements will be achieved. The Group is also under no obligation to update these forward-looking statements or the historical information included in this report. All icons featured here are Navigation Icons that will be consistently featured within our reports as a guide towards better integration and presentation of information. Traceability, Responsible Sourcing & Supply Chain Management NGOs Governance, Ethics and Integrity Board of Directors & Employees Sustainability Certifications Regulators & Governments Customers Operational Excellence Climate Action Media Upholding Human Rights & Labour Standards FELDA and FELDA Settlers Investors & Capital Providers Field Workers Occupational Health and Safety Joint Ventures & Business Partners Suppliers We welcome feedback and enquiries from our stakeholders and the public on our reporting. Improving our reporting practices and standards can only be done with their involvement and regular engagement throughout the year. Our Group Sustainability team can be contacted at sustainability@fgvholdings.com Ernst & Young Consulting Sdn Bhd was engaged to provide independent, limited assurance on selected disclosures in this report. The assurance statement will be included upon finalisation of the assurance exercise. OPPORTUNITIES FOR FEEDBACK External assurance 3 SUSTAINABILITY REPORT 2020/2021 CLIMATE ACTION & ENVIRONMENT PROTECTION ADDITIONAL INFORMATION
Making Dynamic and Responsible Strides At FGV, we view sustainability from a broader, multi-faceted lens covering not just the environment, climate, human rights and labour standards which are incumbent on us, but also extending to business fortification and transformation to provide to you, our valued stakeholders, with an assurance of continuing business growth. Board Sustainability Committee (BSC) The BSC was formally established in September 2021. The establishment of the BSC reinforces FGV’s unwavering commitment to sustainability, and reflects FGV’s resolve in ensuring that environmental, social and governance (ESG) considerations such as human rights, labour standards, health and safety, climate action, biodiversity, traceability and supply chain, as well as the circular economy, continue to take centre stage in all FGV’s businesses. In formulating the responsibilities and functions of the Committee, FGV has also taken into account various guidance documents including the Malaysian Code on Corporate Governance (MCCG) 2021. Dear valued stakeholders, As the Chairman of both FGV and the Board Sustainability Committee, I am pleased to present FGV’s Sustainability Report which highlights our endeavours on the sustainability front along with notable achievements and significant challenges encountered. We continue to refine and adapt our sustainability approaches to address changes in the environment and our operating circumstances while at the same time striving to develop and shape our business to create long term value for our stakeholders. On behalf of the Board, I am pleased to present FGV’s Sustainability Report which highlights our endeavours on the sustainability front along with notable achievements. FGV’s Chairman Address 2021 4 FGV HOLDINGS BERHAD RESPONSIBLE BUSINESS ABOUT THIS REPORT RESPECTING HUMAN RIGHTS
The BSC takes formal purview of sustainability matters that were previously the responsibility of the Board Governance and Risk Management Committee (BGRMC), supporting the Board in fulfilling its oversight responsibilities in relation to FGV Group’s sustainability policies, strategies and initiatives. Alongside me as the Chairman, the BSC comprises other Board members namely Dato’ Yusli Mohamed Yusoff (who at the time of writing has passed on), Dato’ Amiruddin Abdul Satar, Nik Fazila Nik Mohamed Shihabuddin and Kasmuri Sukardi. BSC members have deep experience across multiple industries within and outside FGV’s business footprint which facilitates a balanced view. I am confident that the BSC will make significant contributions towards FGV’s efforts to achieve the relevant Sustainable Development Goals (SDGs) and in turn advance the overall sustainability agenda. Covid-19 impacts and sustainability related initiatives The COVID-19 pandemic continues to exert an impact on our business despite being listed as an essential industry. However, our operations were able to continue during the intermittent movement control orders imposed throughout 2020 and 2021. Sustainability efforts continue unabated across many areas although some initiatives were inevitably affected and had to be pushed to future dates. The one enduring challenge we faced that was exacerbated by the pandemic is our inability to fulfil the full complement of the plantation workforce we need although we are hopeful that the Government’s lifting of the freeze on migrant workers intake will go some ways to resolving our labour shortage. In fact, addressing the impact of the pandemic has brought to the forefront meaningful sustainability initiatives that underscore our responsibility to society and our people. As the COVID-19 pandemic crosses 2021 into the present day, affected vulnerable parties continue to look towards the more able of us for aid and support. In 2021, continuing on similar efforts in the previous year, FGV kept up the provision of aid and support to needy parties with a more intense focus on alleviating food insecurity. To safeguard the health of the workforce, specifically plantation workers, FGV signed up to the Vaccination for the Agri Commodity Sector (VACOMS) initiative, a national initiative aimed at providing vaccinations to workers in the agriculture and commodity sectors. FGV has received approval for 14,635 vaccine supplies to execute vaccination programmes for its local and migrant plantation workers in Pahang, Perak, Negeri Sembilan and Johor. In addition to the VACOMS programme, FGV has also implemented COVID-19 Antigen kit screening test programme for 26,210 migrant plantation workers in January 2021. 5 SUSTAINABILITY REPORT 2020/2021 CLIMATE ACTION & ENVIRONMENT PROTECTION ADDITIONAL INFORMATION
FGV being a critical component of the food chain took active steps to ensure the availability of our food products throughout the lockdown period. Our production factories and suppliers collaborated tightly to ensure that our end-to-end food supply chain from raw materials to packaging and delivery continued to operate seamlessly without disruption during the total lockdown phase. Sustainability-driven innovations At FGV, innovation is a continuous endeavour that is underpinned by our substantial body of research and development (R&D) expertise amassed over four (4) decades. The many successes borne out of our R&D are indicative of the synergies that are inherent in our business, harnessed through our waste-to-wealth strategy. Importantly, this also furthers our sustainability agenda in multiple ways from waste reduction and production of green renewable energy through recycling of palm biomass to maximising the use of our natural resources to bolster the food chain and alleviate food insecurity. Developments in science and technology, complemented, in no small measure, by our R&D capabilities have brought forth more efficient and economical means to commercialise our R&D discoveries, for instance our renewable green biogas, award-winning germinated palm oil seeds, cattle feed from kernel expellers and new plant-based fat replacers are all already generating revenue, moving us further along our revenue diversification journey. FGV’s Chairman Address 2021 Making Dynamic and Responsible Strides 6 FGV HOLDINGS BERHAD RESPONSIBLE BUSINESS ABOUT THIS REPORT RESPECTING HUMAN RIGHTS
There are cost mitigation benefits too, we use palm residues from replanting as organic fertilisers thus reducing costs and the environmental impact from using chemical fertilisers, biogas produced from palm biomass powers our palm oil mills and is also used to generate electricity for our plantations not served by the national grid. Our successes continue to give us the confidence and added impetus to further sharpen our focus on innovation to reap greater benefits from our waste-to-wealth strategy and in the process, continue to widen and diversify our revenue base. The FGV Group has subsidiaries placed along our circular economy value chain that can leverage R&D discoveries for commercialisation as well to introduce the associated products into the market and nurture them to maturity. Optimising our natural resources In 2020 we launched the Integrated Farming Blueprint with an overarching intent of revenue diversification. Integrated Farming has since been developed into a new business line with vast growth potential. I am happy to report that encouraging progress continues to be made building on the platform created in 2020. This initiative is also an integral part of FGV’s embrace of the circular economy and currently encompasses: Cash Crops and Large Scale Paddy Farming, Animal Feed & Nutrition as well as Integrated Dairy Farming and the end-to-end digital marketplace, GOGOPASAR. Sustainability is infused across all Integrated Farming businesses. The agriculture-based businesses optimise the use of natural resources at our disposal and leverage our extensive body of agriculture expertise. Cavendish bananas are cultivated as an intercropping cash crop with coconut in our Paloh Estate in Johor maximising land use and revenue generation capacity. Cash crops, namely pineapple, watermelon and banana are planted to optimise use of 15,000 hectares of land allocated for oil palm replanting each year. This activity also has beneficial effects in preserving soil texture and fertility as well as improving pest and disease control. Use of the land also extends to fresh fish farming. There is a social side too, as we involve farmers from the B40 group, providing them with a source of income, as part of our efforts to promote the right to an adequate standard of living. The value cycle created by businesses under the ambit of Integrated Farming ensures future business sustainability for FGV and expands our impact across the agribusiness value chain. The businesses embrace renewables to reap the revenue generation potential afforded by the circular economy, for instance, Animal Feed & Nutrition initiative turns waste to value through repurposing palm kernel expeller into high quality animal feed which, aside from being sold commercially, also benefits our Dairy Farming business by providing a ready source of healthy nutrition to nurture optimum health and promote the milk production of our dairy livestock. E-Commerce is now ubiquitous, driven by pandemic restrictions and a growing population of tech-savvy consumers with a distinct preference for online shopping. GOGOPASAR, launched in November 2020, is a logical and strategic complement to the FGV Group as it adds the important digital element to our supply chain. This is an integral move in our digital transformation efforts which keeps us relevant with the times and enhances the sustainability of our supply chain especially in light of the mobility and physical interaction challenges during the pandemic. 7 SUSTAINABILITY REPORT 2020/2021 CLIMATE ACTION & ENVIRONMENT PROTECTION ADDITIONAL INFORMATION
Supporting national agenda The Twelfth (12th) Malaysia Plan continues to emphasise the importance of sustainability, underpinning its prominent position in the national agenda. Malaysia signified its intention, through its Nationally Determined Contribution (NDC) under the Paris Agreement to reduce its greenhouse gas (GHG) emissions intensity of GDP by 45% by 2030 relative to the emissions intensity of GDP in 2005. In support of Malaysia achieving its NDC and to play our part alongside the global community in shouldering our shared responsibility to reduce global warming, FGV, in September 2021, became the first agriculture and food company in Malaysia to sign on to the United Nations-backed Science Based Target initiative (SBTi) Business Ambition for 1.5 Celsius (1.5°C) pledge, which calls for limiting global warming to 1.5°C. This commitment requires FGV to halve its greenhouse gas emissions by 2030 and hit net-zero emissions by no later than 2050. Execution will be key to meeting the commitment, and to this end, FGV has developed an integrated climate action plan based on six key strategic factors which include climate governance and risk management, carbon management, operational efficiency, waste management, water management, and climate awareness. Short- and mid-term targets will be developed and performance monitored regularly to ensure effective emissions tracking and consistent annual reduction. We anticipate challenges as FGV strive to fulfil this pledge. The most significant challenge will be balancing revenue growth pressures while managing GHG emissions as the manufacture of revenue-generating products invariably entail GHG emissions. Nevertheless, FGV will remain steadfast and spare no efforts to help address the existential threat of global warming. Malaysia imports some RM60 billion worth of food annually and the Government has called for local corporations to contribute to reducing the food import bill. FGV, a major food producer and one of the largest plantation companies in Malaysia, needs to also play our part to help. Indeed, we do have the capacity, resources and expertise to do so and, significantly, make a return in the process, witness our Integrated Farming initiative which is positioned to capitalise on the tremendous opportunity for substituting imported food with those that are locally produced and manufactured. This will directly contribute to reducing our nation’s food imports and, more broadly, further fortify our food security situation. Malaysia imports some RM60 billion worth of food annually and the Government has called for local corporations to contribute to reducing the food import bill. FGV, a major food producer and one of the largest plantation companies in Malaysia, needs to also play our part to help. FGV’s Chairman Address 2021 Making Dynamic and Responsible Strides 8 FGV HOLDINGS BERHAD RESPONSIBLE BUSINESS ABOUT THIS REPORT RESPECTING HUMAN RIGHTS
RSPO certification and US Customs and Border Protection Withhold Release Order While we have been consistent both in thought and actions in relation to our sustainability commitments and unstinting in channelling resources to uphold them, the complexity of the value chain and the multiple players therein will inevitably result in some lapses. Where there have been lapses, we readily admit to them, and we have doubled our efforts and instituted rectification measures with the requisite urgency. FGV remains fully committed to our sustainability and human rights agenda and has placed priority and intense efforts aimed at lifting the Roundtable on Sustainable Palm Oil (RSPO) certification suspension and the United States Customs and Border Protection (CBP) Withhold Release Order (WRO). On the RSPO certification, FGV has implemented the RSPO Complaints Panel (CP)’s directives of November 2018 and January 2020, respectively, and verification audits involving six of FGV’s complexes were conducted between January and April 2021 by an independent auditor appointed by the RSPO. FGV was made to understand by the RSPO Secretariat that the outcome and findings of the verification audit were deliberated by the CP in August 2021 and FGV has since been following up regularly with the RSPO while awaiting the decision on the RSPO certification suspension. However, at the time of writing, FGV has yet to receive any feedback or response from the CP. FGV is committed to obtaining RSPO certification for all its complexes to demonstrate compliance with the RSPO Principles and Criteria (P&C). However, FGV is forced to put on hold efforts to achieve certification for remaining uncertified complexes until and unless a decision is made by the CP on the matter. Our inability to provide a clear response to our stakeholders on the matter due to the delay by the CP puts FGV in a very difficult position, not to mention the significant negative impact this is having on the company from a reputational and commercial standpoint, particularly on the loss of business opportunities. With regards to the WRO issued by the CBP on 30 September 2020 against palm oil products made by FGV Group, we have recently appointed ELEVATE, an industry leader in sustainability and supply chain services globally to conduct an independent assessment of FGV’s operations against the 11 International Labour Organization (ILO) Indicators of Forced Labour, as advised by the CBP. FGV estimates that we would be able to submit to the CBP, a petition to modify the WRO, together with the assessment and verification of remediation report by ELEVATE towards the end of 2022. Looking forward As a responsible corporate citizen and environmental steward, we will always have sustainability at the heart of our efforts. Sustainability is now an integral part of our business strategy and is firmly entrenched across all facets of our operations. As we forge ahead, we will remain unwavering in our sustainability commitments because everyone in FGV knows that without sustainability, there can be no prosperity. Hence, greater intensity and focus on sustainability will be on the cards for the next year and beyond, with new initiatives to build on the platform we have established from past efforts. 9 SUSTAINABILITY REPORT 2020/2021 CLIMATE ACTION & ENVIRONMENT PROTECTION ADDITIONAL INFORMATION
GCEO’s Statement A Business sustenance In the recent years, we have conducted a structured replanting exercise to improve the age profile of our oil plam plants in a strategic imperative to mitigate declining yields associated with old and ageing plants. Ensuring an optimal age profile for our oil palm plants is critical for the future sustenance of FGV and to provide assurance that the livelihood of those dependent on our business is not adversely affected. In 2012, the average age profile of our oil palm plants was 16.2 years. Of that, about 49% were trees over 20 years old. The replanting exercise has significantly improved the age profile. Currently, young and prime aged plants amount to 54%, compared to 36% in 2012, while plants classified as old and very old have dropped to 32% from 49%. It is typical in the industry to replant at the rate of 4-5% annually and maintaining our replanting rate will result in FGV achieving our optimum age profile by 2026. There is however, a downside to replanting in that it is investment intensive. Over the past 9 years, FGV has invested an average of RM300 million each year on replanting. Dear valued stakeholders, Sustainability continues to gain prominence in FGV. Across 2020 and 2021, our sustainability journey has taken on a decidedly strategic orientation - revenue generation leveraging on our embrace of the circular economy - no doubt this will continue into 2022 and beyond as an intrinsic part of revenue base expansion and revenue diversification. In 2020, we instituted the Waste-to-Wealth initiative to optimise our use of the natural resources, notably by-products from palm processing in keeping with our efforts on circular economy. Today, we generate a range of products, some of which have been successfully commercialised, validating the efficacy of our Waste-to-Wealth initiative. On a broader front, FGV is doing our part in future-proofing the palm oil industry. We are passionate about changing the narrative for Malaysian palm oil, by taking a holistic view and approach towards sustainability. This is to ensure that Environmental, Social and Governance (ESG) considerations continue to take centre stage in all of FGV’s endeavours. Integrating Sustainability with Operational Excellence 10 FGV HOLDINGS BERHAD RESPONSIBLE BUSINESS ABOUT THIS REPORT RESPECTING HUMAN RIGHTS
It is obvious that in difficult times when financial resources are scarce, maintaining this level of investment is challenging to say the least. Delivering on social responsibilities Our people and workforce are the backbone of our business, and it is incumbent on us as a responsible business to respect and uphold human rights, treat all with dignity and safeguard their wellbeing. Over the past few years, we have sharpened our focus on ensuring compliance to human rights and labour standards. For instance, through our affiliation with the Fair Labor Association (FLA), we have formulated an action plan covering a range of initiatives to align FGV’s policies and procedures with FLA’s Workplace Code of Conduct that is based on internationally-recognised human rights standards, and to enhance our labour practices. The key areas of focus under FGV’s affiliation to the FLA include improving FGV’s migrant worker recruitment process, developing human rights capacity-building and training programmes, strengthening grievance mechanisms and enhancing our labour monitoring systems. Together with the FLA, we have crafted a long term and comprehensive programme to implement a range of initiatives to realign our labour practices and standards to more strongly embed our responsibility to uphold the rights of our workers. Our progress under the FLA is subject to their validation. Two assessments have been conducted against the FLA Action Plan. The latest FLA Progress Report issued on 31 March 2021 notes the advancements made in strengthening our internal management systems to uphold labour standards. FGV believes that steady progress has been made and that we are on the right track towards achieving our goal of transforming our systems, structures and practices to be fully aligned with international standards and best practices. As part of FLA’s annual due diligence cycle, FLA is conducting an Independent External Assessment (IEA) on FGV’s palm oil supply chain in Malaysia. This IEA aims to evaluate workplace management systems, working conditions, and associated labour standards risks. It will include a review of employment relationships, indicators of forced labour, child labour, harassment and abuse, discrimination, hours of work, health and safety, freedom of association, and fair compensation. The comprehensive workplace assessment at the estate level will help the FLA and FGV teams document any gaps in working conditions that needs to be addressed. FGV is expected to develop a corrective action plan to address all the IEA findings. FGV has also established a steering committee to look into all matters relating to the Withhold Release Order (WRO) issued by the United States Customs and Border Protection (CBP). This committee, of which I am the Chairman, and whose members consist of FGV’s senior management, meets on a monthly basis. In addition to overseeing and advising on the execution of initiatives aimed at addressing the WRO, this committee is, importantly, also monitoring and facilitating the independent assessment being conducted by ELEVATE. Other significant highlights in relation to our human rights agenda, specifically in relation to migrant workers were: FGV e-Wallet system, which not just enhances the security of our workers’ salaries, but also provides added convenience through cashless payments and remittances. We continually enhance the features of the e-Wallet, which now contains additional functions including e-Attendance, e-Grievance, e-Announcements, e-SOS and e-Learning. In our continuous effort to improve our workers’ wellbeing, we have allocated an amount of RM10.8 million in 2021 towards enhancing the accommodations and facilities extended to our workers. This is on top of the RM350 million invested to construct 319 blocks of new workers’ housing over the past three years. To improve access to healthcare for our workers, FGV has established 13 clinics in our plantations that are located in remote areas, with the guidance and approval of the Ministry of Health. In furtherance of our responsibility to safeguard the health of our workers, we have also facilitated COVID-19 vaccination for them. In anticipation of the Government’s decision to reopen Malaysia’s borders to new migrant recruits, FGV has put in place additional safeguards and due diligence measures including a pre-sourcing assessment mechanism, to align its recruitment procedures with best practices relating to responsible and ethical recruitment. 11 SUSTAINABILITY REPORT 2020/2021 CLIMATE ACTION & ENVIRONMENT PROTECTION ADDITIONAL INFORMATION
Food security and sustainability FGV, being a major food producer has an integral role to play in strengthening food security and ensuring the sustainability and resilience of our country’s food chain. As the COVID-19 pandemic emerged, we took immediate steps to bolster the sustainability of our supply chain so as to ensure adequate supply of food continue to be available and accessible in the midst of the movement control orders. FGV is committed to supporting the national food security agenda. As a further step to strengthening food security, FGV has established an end-to-end digital grocery marketplace, GOGOPASAR, to ease access and overcome mobility restrictions. The digital platform is a strategic complement to our supply chain, infusing it with greater sustainability and it is a critical business requirement for operations in the new normal. The various agriculture-based businesses under our Integrated Farming initiative is another aspect of our contribution to enhance Malaysia’s food security by reducing our reliance on food import. These businesses will also play important roles as FGV strives to diversify our earnings base and dilute its present reliance on palm oil. As a responsible food producer, we constantly strive to innovate and fulfil our customers’ expectations for nutritious and healthy products. This view extends throughout all our businesses. Our subsidiary, Delima Oil Products Sdn Bhd, has introduced healthier Premeo plant-based animal fat and dairy fat replacers. Being palm-derived, the replacers come from a sustainable source and, through innovative R&D, the replacers are healthier being naturally cholesterol-free, rich in Vitamin E, and contain no trans-fat. FGV Integrated Farming Holdings Sdn Bhd, the subsidiary operating our expanding animal feed and animal nutrition business, has launched its ALMA range of high-quality animal feed which is free of antibiotics and include healthy formulations for beef and dairy cattle feed, goat and sheep feed, chicken and native chicken feed, natural mineral feed and additional feed for livestock. Significantly, ALMA animal feed products contain ingredients which are approved by the US Food and Drug Administration (FDA). GHG emissions and renewable energy At FGV, we have an enduring commitment to reducing GHG emissions, conscious of its harmful effects to our environment and the existential threats of global warming. The industry has long captured and converted methane gas emitted from palm oil mill effluent (POME) into biogas for internal consumption to power palm oil mills. Capturing methane and converting it to biogas for combustion to produce energy, significantly reduce the climate change impacts of palm oil production. For emphasis, as a greenhouse gas (GHG), methane is 21 times more potent than CO2. FGV is at the forefront in this space as we are among the first palm oil companies with 28 biogas plants and first to develop a palm based Bio-Compressed Natural Gas (Bio-CNG) plant in 2015. To underscore the revenue generation potential, we are targeting revenues approximating to RM14 million from sale of bigoas-generated electric power to Tenaga Nasional Berhad (TNB) - a validation of our waste-to-wealth strategy, one among many others I might add. We have signed on to the United Nations-backed Science Based Target initiative (SBTi) Business Ambition for 1.5°C pledge, being the first Malaysian food and agriculture company to do so which, in our context, calls for the halving of our greenhouse gas emissions by 2030 and achieving net-zero by no later than 2050. To deliver on this pledge, we have developed a group-wide climate action plan and put in place a variety of mechanisms to monitor and reduce our GHG emissions. For instance, we have implemented a Continuous Emission Monitoring System which is a full monitoring system for emission released by mills that can be accessed in real-time by the Department of Environment. GCEO’s Statement 12 FGV HOLDINGS BERHAD RESPONSIBLE BUSINESS ABOUT THIS REPORT RESPECTING HUMAN RIGHTS
On-going, business-as-usual actions in relation to GHG emissions reduction are in place across the FGV group. To name a few: renewable energy generation, effective waste management, daily monitoring of LNG and electricity usage and installing efficient insulation and heat exchangers to reduce heat losses. Additionally, we continuously apply advanced technology to enable emission reduction, an example being the implementation of our Palm Oil Mill Integrated System (POMIS) which helped reduce boiler fuel consumption by 15%, contributing to lower emissions. Specific toMSM, our sugar business subsidiary, GHG emissions reduction is also an embedded imperative. On-going operational measures, amongst others, cover the installation of back pressure turbines which enables naturally generated electricity to be produced based on the current power needs, reducing fossil fuel consumption and emission of heat and carbon dioxide into the environment. As a responsible environment steward, we remain steadfast in ensuring environmentally responsible practices, specifically on reducing and controlling GHG emissions. We strictly follow our no deforestation, no planting on peat and no exploitation (NDPE) policy and enforce the same across our supply chain to eliminate irresponsible practices which can damage or compromise peatlands leading to GHG emissions. We have signed on to the United Nations-backed Science Based Target initiative Business Ambition for 1.5°C pledge, being the first Malaysian food and agriculture company to do so which, in our context, calls for the halving of our greenhouse gas emissions by 2030 and achieving net-zero by no later than 2050. 13 SUSTAINABILITY REPORT 2020/2021 CLIMATE ACTION & ENVIRONMENT PROTECTION ADDITIONAL INFORMATION
GCEO’s Statement Biodiversity and Wildlife Conservation While not directly related to GHG emissions but having equal sustainability significance, wildlife protection and human-wildlife conflict management are closely tied to our duty as environmental stewards. These areas remain hugely important priorities. We also remain committed to our wildlife conservation programme. One of FGV’s conservation projects involves the rescue, rehabilitation and release of injured or displaced Malayan Sun Bears. This project is implemented in partnership with the Malaysian Nature Society, the Department of Wildlife and National Parks Peninsular Malaysia and the National University of Malaysia (UKM). Through this project, FGV and its partners have developed three documents namely ‘Guidelines in Managing Sun Bear in Captivity’, ‘Guidelines on Conflict Management for Sun Bear’ and ‘Malayan Sun Bear Conservation Action Plan’. We envisage these guidelines will be useful reference tools for interested parties such as conservation centres, zoos, research centres, NGOs and wildlife conservationists. While this project is ongoing, we have expanded our Protection of Rare, Endangered and Threatened Species Programme to include pygmy elephants, gibbons and pangolins, and we are exploring the possibility of developing similar guidelines in relation to these species. FGV has also embarked on a new 3-year initiative to protect and enhance High Conservation Value (HCV) and High Carbon Stock (HCS) areas within the vicinity of FGV’s and the Federal Land Development Authority (FELDA)’s plantations by planting fast growing indigenous or native tree species and wild fruit trees. Under this programme, FGV targets to plant a total of 50,000 trees in three years. Automation and digitalisation Labour shortage is an enduring challenge across the palm oil industry. The COVID-19 pandemic has exacerbated this challenge, driving an urgent focus across the industry on leveraging automation to the maximum extent possible. Developments in information technology (IT) have widened the automation possibilities for our industry in addition to making them economically feasible through moderating the investment outlays. In addition to mitigating our labour situation, automation and digitalisation keep us relevant. Automation and digitalisation have the effect of future-proofing our plantations, allowing us to progressively reduce our reliance on manual labour, leaving us less exposed to the vagaries of labour shortages. A case in point is the mechanisation of an area 115,000 hectares of flat 14 FGV HOLDINGS BERHAD RESPONSIBLE BUSINESS ABOUT THIS REPORT RESPECTING HUMAN RIGHTS
and undulating areas. As at 2021, this area is fully mechanised through the application of Mechanical Assisted Infield Collection such as Mini Tractors and 3-Wheelers. The conventional harvesting and collection methods have been upgraded to mechanical means, moderating our use of manual labour. We also adopt precision farming to reduce the use of manpower, operation time, and fuel consumption. As part of precision farming, we have also developed a drone-spraying methodology that can efficiently spray for weed, pests and disease control. Drone spraying without a doubt has improved the productivity of workers in the upkeep of the estates, by enabling them to spray much larger areas. In digitalising our business operations, FGV is developing an Electronic Harvesting Interval Report System for our mills, to improve traceability of our fresh fruit bunches. For replanting, autonomous application methods are used, such as Shuttle Radar Topography Mission dataset to produce topography and slope map, GIS Software for replanting area design, Global Navigation Satellite System, for example EMLID and Trimble, which are for pre-lining or lining point stackout, Archive Satellite Image or UAV Image for area desktop study, and Avenza Map for felling and chipping palm counting. We are also modernising traditional industrial practices through the implementation of POMIS. FGV mills use POMIS to enhance their performances as it utilises modern smart technology and sensors for increased automation and improved communication which also facilitates better plant oversight, monitoring and control. Through POMIS we are able to reduce dependency on manual labour in mill operations by 5% which has proven to be beneficial during the pandemic, where mill operations were continuously in automatic mode with minimum requirement for manual intervention for operational support. Looking forward Sustainability is now prominently entrenched in our strategy and our operations. In 2022 and beyond, this will be no different. In fact, I expect sustainability to gain even greater prominence. We will continue to future-proof our business and the industry by further embedding all facets of sustainability into our operations and supply chains and take a broader view of the sustainability impact extending to the society and the planet. Efforts will continue in nurturing the nascent seeds sown under our waste-to-wealth strategy and progress them to maturity so that they yield the anticipated returns and sustainability impacts. Our embrace of the circular economy will become more pronounced as we continue to innovate, aided by our R&D, with hopes that new opportunities for recycling and repurposing will emerge along with the associated revenue generation potential. One thing remains constant in 2022, in common with previous years: we will continue to be under close scrutiny in the sustainability radar. In response, we must remain vigilant and redouble our efforts to act responsibly and ethically conscious of our duty to uphold the rights of all within our ecosystem. CLIMATE ACTION & ENVIRONMENT PROTECTION ADDITIONAL INFORMATION SUSTAINABILITY REPORT 2020/2021 15
FGV’s 2021 • Completed felling of 13,127 Ha and replanted 2,815 Ha landbank. • Expansion of mechanisation areas to 30,391 Ha, making a total of 115,000 Ha fully mechanised area using the Mechanical Assisted Infield Collection method. • Applied 297,178 MT of fertilisers, equivalent to 100% coverage. • Saji ranked #7 topmost chosen Fast Moving Consumer Goods (FMCG) brands in Malaysia, based on Kantar’s Brand Footprint 2021. Plantation • FELDA emerged as the largest shareholder of FGV with total shareholding of 79.80% as of 31 December 2021. • Launched RM500 million Sukuk Murabahah programme, which indicates confidence in FGV’s balance sheet. • Paid windfall tax of RM184 million based on high CPO price recorded during the year. • Contributed around RM15 million for CSR-related activities. Corporate • Established the Board Sustainability Committee. • Established Gender Equality and Women Empowerment Committee which reflects FGV’s commitment to provide women with equal access to all opportunities throughout our operations. • Improved in the SPOTT rankings, climbing to 19th position from 23rd, with an overall SPOTT assessment score of 74%. • Pledged to adopt science-based targets and become a net-zero emission entity by 2050, making FGV as Malaysia’s first food and agriculture company to sign the UN-backed SBTi’s Business Ambition for 1.5ºC pledge. • Expansion of wildlife conservation and human-wildlife conflict management to include pygmy elephants, pangolins and gibbons besides the existing programme for sun bears. • Embarked on a new 3-year initiative to protect and enhance High Conservation Value and High Carbon Stock areas within our plantations. • Ensure compliance to responsible sourcing, sustainability standards and regulations through traceability and supply chain management. To date, our palm oil is 100% traceable to mill and 98% to plantation. For rubber, 97% is traceable to plantation (local suppliers). • Continued the implementation of programmes under its affiliation to the Fair Labor Association (FLA), with the overarching objective to enhance it labour practices by focusing on a range of initiatives to strengthen FGV’s migrant worker recruitment process, human rights capacity building and training programmes, grievance mechanisms and labour standards monitoring systems. Sustainability RESPONSIBLE BUSINESS ABOUT THIS REPORT RESPECTING HUMAN RIGHTS FGV HOLDINGS BERHAD 16
Highlights • Recorded highest oleochemical storage throughput handled of 0.95 million MT. • Introduced cold chain transportation services and acquired 10 refrigerated trucks. • Expanded FGV transport’s fleet capacity to 549 units to strengthen operations. • Penetrated into Oil and Gas Industry - awarded Telecommunication Infra & System Maintenance (TISM) contract for Petronas Refinery & Petrochemical Corporation (PRPC). LOGISTICs & Others • Gula Prai ranked #3 topmost chosen FMCG brands in Malaysia, based on Kantar’s Brand Footprint 2021. • Secured refined sugar supply contract with The Coca-Cola Company worth an estimated RM290 million for domestic and international production. • Signed agreement with Wilmar to collaborate in the establishment of a sustainable sugar supply chain. Sugar • Integrity Assessment Tool (IAT) survey conducted by the Malaysian Institute of Integrity (IIM) on 1,500 employees demonstrated an increase in level of integrity in FGV to 81% in 2021, from 68% in 2018. • Anti-Bribery Management System (ABMS) in compliance with Section 17A of the MACC Act. • Commitment from the Board members toward governance and integrity through the Integrity Pledge. • 100% of FGV employees have renewed their integrity pledge online in 2021. Governance • Harvested 600 Ha of FGV’s Fortified Field Fragrant Rice (3FR) contract farming programme, yielding 3,751 MT of fragrant paddy to produce “Saji Aroma” rice. • Launched FGV Chuping Agro Valley to develop an integrated high-value cash crop and large-scale dairy farming. Integrated Farming • Established a new Grievance Management Unit, to address all grievances channelled from the FGV e-wallet system. • To further internalise PRIDE values among the employees, the 2021 PRIDE campaign was launched in March which included a PRIDE Survey. • Launched a new PowerSafe App to digitalise online reporting and management, allowing its workers to file health, safety, and environmental reports. • Achieved 8% in carbon emission reduction from biogas plants. CLIMATE ACTION & ENVIRONMENT PROTECTION ADDITIONAL INFORMATION 17 SUSTAINABILITY REPORT 2020/2021
Our Story FGV is harnessing synergies to heighten value creation and optimising the potential of every business to make headway in delivering sustainable value to our stakeholders. We are staying steadfastly on track of our strategic gameplan and goals, and ensuring clear communication with our stakeholders. In every action we take, we remain anchored on responsibility and accountability, guided by strong effective governance and prudent financial practices. Today, FGV is among the world’s largest producers of CPO, accounting for 4% of total CPO production with a focus on three core businesses; Plantation, Sugar, and LO while nurturing two new businesses, namely Consumer Products and Integrated Farming. Through harnessing the strengths and expertise of every business segment within the Group, FGV is now well-positioned to advance as Malaysia’s agribusiness champion. Our Mission P R I D E Our Vision To be among the World’s Leading Integrated and Sustainable Agribusinesses and Delivering Value to customers and stakeholders To be a global leader by: • Creating Value through our Human Capital • Building an Integrated Value Chain Advantage • The Embodiment of Governance and Compliance • Cultivating Diversification in Commodities and Geography Our Organisational Values Partnership Best solutions and ideas come from working with both internal (colleagues) and external (business partners) stakeholders. Respect Our sustained success and achievements can only come from respect for people (colleagues and business partners), as well as the environment, which is the main source of our business. Integrity Integrity is about trust, honesty and sincerity. For FGV, 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 Strive to discover, create ideas and identify growth potential from uncharted opportunities and beyond traditional boundaries, all done in the best interests of our stakeholders. Enthusiasm We are enthusiastic about what we do, committed to the growth and future of our agribusinesses, while at the same time, propagating sustainable development around the world. 18 FGV HOLDINGS BERHAD
Note: All productions and operational figures are based on yearly average Plantation FGV’s plantation business is dominated by the integrated segments of Upstream, Downstream, R&D, Marketing & Trading, and Renewable Energy value chain. 438,885 Ha 67 Mills Complexes (97% MSPO & 45% RSPO-certified) Oil palm 336,315 Ha Rubber 7,668 Ha Other crops 3,352 Ha Unplanted area 91,550 Ha Total landbank: (including Malaysia and Indonesia) Managing 219 estates Planted area 30% FGV 27% third-party smallholders 43% FELDA settlers 2.68 mil MT CPO production of 30% Refined 70% Traded Vegetable oil refining capacity 5,553,600 MT Rubber processing capacity 233,400 MT Kernel crushing plant capacity 1,007,600 MT Biodiesel plant capacity 110,000 MT Oleochemical plant capacity 476,000 MT Processing of 13.04 million MT Fresh Fruit Bunch (FFB) RESPONSIBLE BUSINESS ABOUT THIS REPORT RESPECTING HUMAN RIGHTS 19
>12,000 Ha oil palm plantations for R&D purposes 58 highly qualified researchers & 17 agronomists R&D Integrated Farming Integrated Farming leverages on synergies within FGV to diversify into other forms of commercial agriculture. It is part of FGV’s circular economy that involves cultivating cash crops on marginal plantation land and producing animal feed from palm by-products. • Animal feed & nutritional products, for livestock and poultry • Paddy & rice • Food & cash crops • GOGOPASAR e-commerce platform #1 oil palm germinated seed producer in Malaysia with 43% market share Malaysia’s leading fertiliser manufacturer with 700,000 MT annual production capacity Consumer Products #1 refined cooking oil brand in Malaysia with 42% market share #1 margarine brand in Malaysia with 41% market share Other brands CLIMATE ACTION & ENVIRONMENT PROTECTION ADDITIONAL INFORMATION 20
Pakistan 7% Malaysia 91% Indonesia 2% Sugar business operates mainly through FGV’s 51% owned subsidiary, MSM Malaysia Holdings Berhad. Sugar 2.05 mil MT Annual sugar production capacity 1.08 million MT Storage capacity of Dry Cargo 0.11 million MT Liquid 0.97 million MT (inclusive of Indonesia & Pakistan) LO Sector facilitates the vertical integration of the Group’s core businesses by connecting the flow of assets to drive Group-wide efficiencies. Logistics & Others 549 units Transport’s fleets Among the largest sugar refiners in the world Dominant market share in domestic refined sugar market Other Services FGV services ensure consistent supply of our products in the market through leading storage, efficient logistics, retail and e-commerce distribution solutions. 21 SUSTAINABILITY REPORT 2020/2021
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