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Delivering Year-on-Year Profit

In the past, profitability was considered the only important factor in a company’s bottom-line. However, we are now in an era of accountability; more and more corporations realise that making money as if it is unrelated to its economic and social impacts is not only short-sighted but counterproductive.

RSPO CERTIFICATION

The sustainable production of commodities has become mainstreamed, with Governments, industry players, traders and buyers,indigenous groups and consumers coming together to voice their concerns and forge systemic solutions to move forward. To allay the growing concerns of environmentalists and consumers, the RSPO was established in 2004 to promote the production and use of palm oil for People, the Planet and Prosperity.


RSPO has drawn up eight (8) Principles and 43 Criteria(“RSPO P&C”) that define sustainable palm oil production, one of the most important being that no primary forests or areas that contain significant concentrations of biodiversity or fragile ecosystems or areas that are fundamental to meeting the traditional needs of indigenous communities may be cleared for the cultivation of oil palms. Certification to RSPO may be withdrawn at any time in the event of an infringement of the rules and standards


In 2017, total production of certified palm oil amounted to 12.08 million tonnes or 19% of the global production (Source: RSPO, 20 February 2018). The demand for responsibly produced palm oil is growing as environmentally and socially responsible buyers are willing to pay premium prices. Kulim was among the first palm oil companies to be a member of theRSPO. Since January 2009, almost all of our plantations, including those of JCorp managed by Kulim, have been fully RSPO-certified. All our five (5) mill shave also been certified, the latest being the Pasir Panjang POM, which was certified on 9 March 2017. RSPO certification is valid for five (5) years with a surveillance audit conducted annually and a recertification audit at the end of the fifth year. Since countries differ in their laws for the same criteria,the RSPO P&C are further adapted for use by individual countries through National Interpretations. At a meeting on 6 March 2016, the RSPO Board of Governors has endorsed the revision of the Malaysian National Interpretation(“MYNI”) document.MYNI 2014, as it is known, is based on the RSPO P&C and it supercedes MYNI 2010, which was used for certification of plantations and mills in Malaysia. 


In addition to RSPO, four (4) of our mills have been accorded International Sustainability & Carbon Certification (“ISCC”)status. Two (2) have also earned Identity Preserved (“IP”) status. The ISCC standard verifies compliance with the requirements of the European Union’s Renewable Energy Directive and Germany’s sustainability ordinances. ISCC is now among the most successful certification schemes. IP is part of RSPO’s supply chain model that ensures that sustainable palm oil from a single identifiable source is kept separately from ordinary palm oil throughout the supply chain.

The RSPO also developed a mechanism for supply chain traceability from the plantation to the end user. Kulim’s Certified Sustainable Palm Oil (“CSPO”) can be purchased through three (3) mechanisms approved by the RSPO. The “Book and Claim” option is the most simplified method for a buyer to obtain CSPO without high administrative costs and complex logistics. 

Presently,CPO from the Tereh POM and Pasir Panjang POM are sold under IP status, while CPO from three (3) other mills is sold under the “Mass Balance” mechanism,where CSPO is mixed with conventionally produced CPO and tracked throughout the supply chain. Going forward, our plan is to have CPO from the Palong Cocoa POM to be sold under IP option. 


STAKEHOLDER’S ENGAGEMENT 

In today’s business environment, organisations do not exist in isolation. These include dealing with more sophisticated, better informed and engaged stakeholders with expectations that corporations will be responsive to their concerns.Stakeholder’s engagement is no longer optional for most businesses and is in fact a basis of good corporate governance


For Kulim, engaging with our stakeholders gives us the opportunity to align our business practices with societal needs and expectations, helping us drive long-term sustainability and shareholders’value. We pursue stakeholder’s engagement in sync with our business strategies as an integral part of an idea-generating, innovative and collaborative exercise.

 

Objective

Benefits of Engaging

Cost of Not Engaging

Tracking sociopolitical and environmental issues

Ø  Maximise positive environmental and social impacts

Ø  Issue identification

Ø  Mitigation and adapting

Ø  Enhance business intelligence to improves decision making

Ø  Collaboration, feedback and identify remedial actions

Ø  Absence or loss of trust

Ø  Damage control

Ø  Negative media report

Ø  Ensure project success

Ø  Increased business risks

Monitoring and managing stakeholder expectations

Ø  Reputation capital

Ø  Ensure buy-in and build trust and understanding

Ø  Insights and feedback that contribute to value creation and delivering performance

Ø  Positive impact on business sustainability and a competitive advantage

Ø  Potential project delay

Ø  Impaired relations

Ensuring CSR programme impact

Ø  Strategic value creation

Ø  Successful outcomes for CSR investment

Ø  Builds social capital and brand loyalty

Ø  Reputation capital is impaired

Ø  Negative perceptions

Ensure buy-in of employees and build trust

Ø  Convergence of company’s values and employee expectations

Ø  Boost morale and reduce anxiety

Ø  Increase productivity & efficiency

Ø  Job satisfaction and intrinsic motivation

Ø  Drives innovation

Ø  Disengaged employees

Ø  High turn over rate

Ø  Increase in absenteeism rate

Ø  Lack of trust in management

 

At Kulim, concerted efforts are made to build good relations and rapport with our employees, business partners, investors, members of the media, suppliers, government agencies, NGOs, pressure groups, unions and the community at large. We take the utmost care to ensure a variety of perceptions and inputs can be obtained that represents the views and opinions of a broad spectrum of stakeholders. To ensure balanced and fair representation of opinions on a subject matter, we recognise the importance of bringing on board,opposing and critical voices.

 

Stakeholders issues cannot be treated in isolation. Going back to 2008 and in line with the principles of the Global Reporting Initiative, Kulim has engaged with its internal and external stakeholders to develop a materiality process that will identify and prioritise the issues that are of most interest to our stakeholders and have a bearing on our business across the entire whole value chain.

Basically, Kulim’s Sustainability Materiality Framework consisted of three (3) steps:

 

Ø IIdentification. We began by identifying our stakeholders, prioritising them systematically by assessing their influence on Kulim and our impact on them, be it economic,environmental or social. Through engagement with the stakeholders, we determined the critical issues to be managed and changed.


P Prioritisation. Issues were prioritised using internal and external criteria as well as weighting to reflect the most important to both stakeholders and to our business. At this stage, the issues were presented graphically using a materiality matrix. From our engagements with stakeholders and materiality analysis we determined the material issues of highest concern. In 2017, the seincluded water usage at our estates and mills, as well as health and safety standards at the workplace.


Ø Review.The issues prioritised in the materiality index were reviewed internally and signed off at the management level.

 

While a materiality assessment is an investment of time,effort and resources, it is an invaluable tool for gathering insights that can drive Kulim’s sustainability strategy. Our materiality matrix is reviewed and adjusted annually.

 

THE NEW FRONTIER

Today, we are at the new frontier of sustainability. The last decade has seen increased attention to global challenges that are now at the top of both the business and public agenda. Businesses the world over are doing more than ever to tackle the sustainability challenge – to recognise social responsibilities, reduce environmental impacts, guard against unethical practices, make governance more transparent and be more accountable to stakeholders. More than ever before, companies are looking to make sustainability a core part of every business decision they make and a means of creating opportunity and a source of competitive advantage. 


Despite all the efforts of companies to shift to more sustainable strategies, the challenges before us are greater than ever before. Soon more than nine (9) billion people will share our planet. Increasing demands for food, energy and water are pushing nature to its limits. Climate change has become an undisputed fact,along with natural resource depletion, loss of biodiversity and deforestation,ocean acidification , water and air pollution and acid rain, are all among a growing list of planetary challenges. 


Now is the time to step up and forge ahead. Kulim is well aware that the road ahead will not be easy. But if we sharpen our focus and get things right, we believe that we can find common ground solutions that are good for businesses, environment and people. The journey towards a system of sustainability that will enable us all to “meeting the needs of the present generation without compromising the ability of future generations to meet their own needs” is not marked by a clear path. Kulim is determined to play its part in helping define that path that offers greater prosperity for present as well as future generations.