HOME

OUR APPROACH TO SUSTAINABILITY

Kulim strongly believes that we have a duty to operate in a manner that is respectful of the needs of society as well as our natural environment. Even before sustainability became a global clarion call, we had adopted many agricultural practices that are now recognised as being sustainable. We were, for example, one of the first plantation companies in the world to achieve RSPO certification.

But we have not stopped there. Along with greater regulatory requirements and intensifying stakeholder expectations, we have continued to adopt more global and local standards. These are reflected in our Sustainability Policy, which is reviewed on a regular basis. Following the last revision in May 2018, for example, we have underlined our commitment to “No Deforestation; Protection of Peat Areas; and No Exploitation of People and Communities”.

Our objective is for sustainability to be integrated into every aspect of our strategies and business operations in order to keep enhancing our stakeholder value.

We also continue to evolve our sustainability reporting in line with best practice. In the past few years, we had aligned our report according to the 5Ps of People, Planet, Prosperity, Peace and Partnerships. This year, reflecting greater investor focus on Environmental, Social and Governance (“ESG”) principles, we have adopted the three ESG pillars in the report. At the same time, we have continued to map our initiatives against the relevant United Nations’ Sustainable Development Goals (“SDGs”).

Kulim has identified 10 SDGs that are relevant to our operations, and are guided by the principles and objectives of each in shaping our actions. The 10 SDGs as below:



SUSTAINABILITY CERTIFICATIONS

Various socio-environmental issues are related to the production of palm oil, such as deforestation, loss of biodiversity, environmental damage (due to loss of carbon sinks, i.e. forests) and the displacement of local communities.

In response, a number of guidelines have been developed to aid in the production of sustainable palm oil. Producers that adhere to these schemes are audited and certified as a means of demonstrating the sustainability of their produce. Among the most widely accepted schemes are the RSPO and International Sustainability and Carbon Certification (“ISCC”). Malaysia, being the world’s second largest palm oil exporter, has developed its own Malaysian Sustainable Palm Oil (“MSPO”) standard.

About the RSPO

The RSPO was established in 2004 to promote the sustainable production and use of palm oil. In order for growers to be RSPO certified they need to satisfy the following seven principles:

• Behave ethically and transparently;
• Operate legally and respect rights;
• Optimise productivity, efficiency, positive impacts and resilience;
• Respect community and human rights, and delivery benefits;
• Support smallholders inclusion;
• Respect workers’ rights and inclusion; and
• Protect, conserve and enhance ecosystems, and the environment.

Kulim was among the first palm oil companies to become a member of the RSPO. Since January 2009, all our mills have been RSPO-certified; and as of June 2020 – with the certification of Bukit Layang Estate – all our estates have also been fully RSPO-certified.

We also encourage our smallholders to attain the certification and provide advisory and technical support to those who embark on this journey. To date, three of our 28 outgrowers have been certified while another 25 are working towards it. Our target is for all of our outgrowers to be certified by 2025.

About the ISCC

ISCC is a multi-stakeholder initiative with the multi-pronged objective of reducing GHG emissions, promoting sustainable use of land, protecting natural biospheres and achieving social sustainability. The ISCC standard ensures compliance with the requirements of the European Union, Renewable Energy Directive and Germany’s Sustainability Ordinance.

All five of our mills have been accorded ISCC status.

About the MSPO

The MSPO, launched in 2015, covers the entire supply chain from oil palm plantations to downstream facilities. It contains seven principles:

• Management commitment and responsibility;
• Transparency;
• Compliance to legal requirements;
• Social responsibility, health, safety, and employment conditions;
• Environment, natural resources, biodiversity and ecosystem services;
• Best practices; and
• Development of new plantings.

We are 100% certified to the MSPO scheme, and subsequently received certification for all our mills and estates in March 2019. All mills also successfully received MSPO Supply Chain Certification Standard (“SCCS”) in March 2020.


SUSTAINABILITY GOVERNANCE

We have a multi-tiered governance structure to ensure sustainability is embedded into our day-to-day operations and decisions. The Board of Directors plays an integral role in guiding the progress of Group sustainability initiatives, with our Sustainability Initiative Council (“SIC”) acting in an advisory capacity to the Managing Director. The SIC is chaired by the Plantation Inspectorate and comprises 14 members from various operating units and departments. The Council meets at least 10 times in a year to review the Group’s sustainability performance on several economic, social and environmental indicators.

Supporting our SIC is a dedicated Sustainability and Quality Department (“SQD”) led by the Head of Marketing and Sustainability Division. The SQD is tasked with implementing, reviewing and formulating sustainability-related initiatives. It includes matters relating to certification, compliance, audits and social impact assessments.

The Group reports the progress of its sustainability measures to Senior Management for evaluation and review, and our performance is regularly reported to the Board.


OUR SUSTAINABILITY JOURNEY

The Group’s sustainability journey began officially in 2004, when we subscribed to the RSPO. We developed our own Sustainable Management System (“SMS”) based on the structures, practices and responsibilities defined in RSPO’s Principles and Criteria.

Sustainable Development and Performance Principles:

1. The SMS places priority on maintaining a safe, healthy and viable work environment in compliance with all applicable rational and international legislations;
2. We invest in the training and development of employees to improve their knowledge, skills and competency to enhance performance and advance their careers;
3. We promote optimum land use to ensure its long-term sustainability and productivity for agricultural use;
4. We strive to build community trust by integrating corporate responsibility and sustainability in all our business processes and contributing to the well-being of the communities in which we operate;
5. We uphold the principle of Free, Prior and Informed Consent (“FPIC”) in all negotiations and interactions with stakeholders; and
6. We agree that there will be no new development in primary forests or High Conservation Value (“HCV”) areas. In any development, Kulim will take into account the conservation of biodiversity and the protection of cultural and customary land use within the context of a sustainably managed landscape.



STAKEHOLDER ENGAGEMENT

We engage with our stakeholders in order to align our business practices with their needs and expectations. Concerted efforts are made to build good relations and rapport with our employees, smallholders, business partners, investors, suppliers, government agencies, NGOs, pressure groups, unions, members of the media and the community at large. We encourage feedback from stakeholders to ensure balanced and fair representation of opinions that guide our decisions.

Objective Benefits of Engaging Cost of Not Engaging
Track socio-political and environmental issue • Maximum positive environmental and social impacts
• Issues identification
• Risk mitigation
• Agility
• Enhanced business intelligence for improved decision-making
• A clearer view of remedial possibilities
• Absence or loss of trust
• Damage control
• Negative press
• Uncertainty of project success
• Increased business risks
Monitor and manage
stakeholder expectations
• Reputation capital
• Stakeholder buy-in, trust and understanding
• Insights and feedback that contribute to value creation
• Competitive advantage and positive impact on business sustainability
• Potential project delays
• Impaired relations
Ensure CR programme
impact
• Strategic value creation
• Successful outcomes for CR investment
• Increased social capital and brand loyalty
• Reputation capital impaired
• Negative perceptions
Enhance employee engagement • Convergence of company’s values and employee expectations
• Boosted morale and reduced anxiety
• Increased productivity and efficiency
• Job satisfaction and intrinsic motivation
• Heightened innovation
• Disengaged employees
• High turnover rate
• Increase in absenteeism
• Lack of trust in Management



MATERIALITY MATRIX




1. Recycling 10. Grievance Mechanism 19. Carbon Emissions
2. Community Investment & Engagement 11. Waste Management 20. Product Quality
3. Agricultural Productivity 12. Responsible Chemical Use 21. Smallholder Management
4. Workers’ Union 13. Economic Performance 22. Supply Chain Management
5. Customer Satisfaction 14. Water Management 23. Transparency & Traceability
6. Renewable Energy 15. Occupational Safety and Health 24. HCV/HCS Protection & Management
7. Training & Education 16. Anti-Corruption 25. Human Rights & Labour Practices
8. Market Presence 17. Corporate Governance 26. Compliance
9. Diversity & Equal Opportunity 18. Fire & Haze 27. COVID-19

OUR MATERIAL MATTERS

We conducted our last materiality assessment in 2018, taking into account stakeholders’ perspectives and balancing these against matters that Kulim believes are important for our continued success. In 2020, Management reviewed our material matters and agreed they were still relevant. However, for greater clarity of reporting, we have made the following changes:

1. Renamed “Energy” to “Renewable Energy”
2. Renamed “Emissions” as “Carbon Emissions”
3. Renamed “Effluent and Waste” to “Waste Management”
4. Renamed Water to “Water Management”
5. Renamed “Corporate Governance and Policies” to “Corporate Governance”

Additionally, we have added COVID-19 to the list, as it had a significant impact on both the social and governance/economic aspects of our operations. Subsequent to the revisions, we now have 27 material matters, as depicted in the matrix (left).

In this Sustainability Statement, we will report on all the refreshed material matters, except for “Market Presence”, “Agricultural Productivity”, “Economic Performance” and “COVID-19”, which are already well covered in the main section of this Integrated Report.

ENVIRONMENT

Plantations necessarily leave a footprint on the environment from the loss of large tracts of indigenous forests; loss of critical habitat for endangered species; as well as soil, air and water pollution. To mitigate these negative impacts, the Group undertakes the following measures:

1. All estates are required to provide regular updates on the species found in and around the estates and track incidents of wildlife encroachment, particularly elephants.

2. Buffer zones are established at major water bodies in or around the estates and adjacent to forest reserves. Rapid biodiversity monitoring is conducted regularly in identified hotspots within the vicinity of our operating units. Encroachment by intruders into these conservation areas is closely monitored.

3. To minimise soil erosion, roads have been realigned and silt traps constructed at appropriate locations. We have also planted soft grasses, mucuna and natural cover crops for young palms. In areas where erosion is severe, we encourage the planting of vertivar and Guatemala grass.

4. We strictly prohibit hunting, fishing and the capture of any animal within our estates and adjacent protected areas.

The Group’s Environmental and Biodiversity Unit serves as a point of reference for all environmental matters, especially biodiversity protection and pollution control. The unit collates and analyses environmental and wildlife data, publishing its findings and outcomes in environment and biodiversity bulletins.

HCV/HCS PROTECTION & MANAGEMENT

Under the RSPO, we are committed to preserving and protecting High Conservation Value (“HCV”) as well as High Carbon Stock (“HCS”) sites. The former are areas that are important because of their biological, ecological, social or cultural value; while the latter are forest sites that are important specifically because they contain large stores of carbon (i.e. trees) and/or biodiversity.

As our plantations in Johor border the Endau-Rompin National Park and Labis Forest Reserve, which are both HCV and HCS areas, we recognise the need to be extra vigilant about our operations. We work closely with the Government and Non-Governmental Organisations (“NGOs”) to enhance our ability to monitor and manage our environmental impact while also contributing towards positive interventions to protect the indigenous flora and fauna.

Enhancing Biodiversity

The Group places a great deal of importance on conservation and has set aside 59.08 ha of land in our estates as buffer zones, while designating another 403.08 ha of jungle patches as fullfledged HCV forests. In addition, we have been maintaining wildlife corridors linking natural habitats within our estates since 2011. These corridors are critical to allow for the free movement of animals and the continuation of viable populations. To maintain these natural corridors, we organise an annual tree planting event, involving employees and members of the public.

Through our conservation group, KWD, we also collaborate with the Johor National Parks Corporation, Wildlife Department, Forestry Department and the Police on multiple anti-poaching programmes. In 2020, however, we were unable to conduct any such programme due to the pandemic.

Elephant Encroachment

Elephants encroaching into our estates as well as neighbouring residential estates is a perennial problem given that their natural habitat is disturbed by plantation activities.

In 2020, 75 incidences of elephant encroachment were reported in our estates as well as neighbouring residential areas including: Selai Estate, Bukit Payung Estate, Mutiara Estate, Tunjuk Laut Estate, Siang Estate, Bukit Kelompok Estate, Pasir Panjang Estate, Enggang Estate, REM Estate, Pasak Estate, Sungai Tawing Estate and Sindora Estate. Incursion into these 12 estates caused approximately RM420,763 in damages.

To protect our local communities as well as wildlife, we work closely with the Wildlife Conservation Society (“WCS”) and the Johor Department of Wildlife. We also engage with the state government and our smallholders.

CARBON EMISSIONS

In 2019, we started monitoring our carbon emissions using PalmGHG Version 4. We recorded approximately total of 482,000 tonnes of carbon dioxide equivalent (MT CO2e) across our operations. Our total recorded carbon footprint was 1.25 MT CO2e per metric tonne of CPO or PK processed (MT CPO/PK). In 2020, we recorded a total of approximately 483,000 tonnes of carbon dioxide equivalent (MT CO2e) with a total recorded carbon footprint of 1.22 MT CO2e per metric tonne of CPO or PK processed (MT CPO/PK). This was 21% higher than our footprint in 2018, of 1.01 MTCO2e/MT CPO/PK, mainly due to the temporary shutdown of our biogas faciltiies in Sedenak and Sindora in 2019.

However, compared to our 2012 baseline, this is still an overall reduction of 30%. By 2025, we aim to reduce our carbon footprint by 50% against our 2012 baseline, which translates to 0.88 MT CO2e per MT CPO/PK. We aim to achieve this by installing five biogas plants, one at each of our mills, and estimate this will reduce 90% of total POME emissions while still generating energy. It should be noted, also, that the 2020 figure has yet to be audited but will be validated at the next RSPO assessment

RENEWABLE ENERGY

Over the years, we have been investing into the generation of Renewable Energy (“RE”) using waste from our mills – specifically Palm Oil Mill Effluents (“POME”) and Palm Kernel Shells (“PKS”). By generating more RE, we are able to reduce our electricity offtake from the national grid while also moderating methane emissions from the bio-waste. Effectively, this contributes to a lower carbon footprint.

To date, we have commissioned four biogas plants at our POMs – Sedenak POM, Sindora POM, Pasir Panjang POM, and in 2020, Palong Cocoa POM. Installation of a biogas plant at Tereh POM is expected to be completed by the first half of 2021, and will put us well ahead of our target of having biogas capture facilities at all our mills by 2025.

In 2020, we produced 98,361.72 tonnes of PKS, of which was used internally for power generation and the remaining 20.68% tonnes sold to third parties as a source of RE.

WATER MANAGEMENT

Water scarcity is a growing global concern, with water table levels decreasing in many countries that face prolonged periods of drought. Although Malaysia receives an abundance of rainfall, sustainability of supply is still an issue because of contamination as well as excessive water use.

As a plantation, we use significant amounts of water in our estate and mill operations. In addition, our workers consume water for drinking, cooking and personal hygiene. Soil erosion and the use of chemicals as fertilisers and weed killers, meanwhile, could contaminate waterways in or near our estates.

Recognising the importance of conserving water and ensuring healthy water quality in the country’s waterways, we strive to manage water responsibly.

Responsible Consumption

We recycle water from steriliser condensates for use in our mills in order to reduce our water consumption, and have set the target of maintaining a consumption intensity below 1.2 m3 per tonne of FFB. Although our consumption intensity increased by a marginal 3.8% from 2019 to 2020, it remained below our target.

Managing Water Quality

A standard practice to counter soil erosion is to plant fast-growing leguminous cover crops in erosion-prone areas. Meanwhile, to reduce water pollution from heavy metals, wherever feasible the Group combines inorganic with organic fertilisers derived from Empty Fruit Bunches (“EFB”), a waste product from the milling process.

To allay concerns regarding water contamination in the vicinity of our operations, we monitor the Biological Oxygen Demand (“BOD”) of these water bodies. BOD measures the amount of dissolved oxygen needed by aerobic biological organisms to oxidise organic matter (the higher the level, the higher the level of organic contaminants). The BOD of water bodies surrounding our operations has dropped significantly since we started installing polishing plants at our mills, in compliance with DoE requirements. The polishing plants at Sindora, Pasir Panjang and Palong Cocoa POMs have been operational since 2018, while that at Sedenak POM is being commissioned. Meanwhile, the plant at Tereh POM is still in progress and targeted to be completed by the first half of 2021.




RESPONSIBLE CHEMICAL USE

Waterways are also contaminated by the use of chemicals such as pesticides, herbicides and fertilisers. To reduce chemical usage, we have adopted an Integrated Pest Management (“IPM”) approach which involves the use of animals to control pests such as weeds and rodents. In 2008, cattle were introduced in our plantations as a natural weeding method. We also use barn owls to control the rodent population.

Chemicals are used only as a last resort, when other biological measures are unavailable.

Certain pesticides are also harmful to humans, therefore we take care to protect estate workers whenever chemicals are used by providing them with aprons, masks, gloves and goggles. Paraquat, meanwhile, has been totally phased out from our estates.

We also adhere to strict controls and measures to prevent spillage that may harm the environment. All chemicals are stored in proper and clearly marked sheds bordered with bund walls. Chemicals with hazardous properties are clearly marked and stored in appropriate containers. Additionally, our chemicals are labelled with Safety Data Sheets (“SDS”), in Malay and English, which outline appropriate storage and handling methods as well as emergency measures in the event of spillage.


WASTE MANAGEMENT

Most of the solid waste we produce is bio-waste, i.e. EFB, palm fibres and shells. Such waste are disposed of according to SOPs.

• EFB: is used as biocompost
• Palm fibres and shells: more than half produced by our estates are used to generate energy in milling operations; remaining palm fibres are used as biocompost while the shells are sold as biomass.

A small amount of boiler ash is produced when palm fibres and shells are burned and this is recycled into the soil to reduce acidity levels.

Our mills and estates also generate scheduled waste, which is stored in designated sheds for up to 180 days or until the maximum volume of 20 tonnes is met. Subsequently, licensed contractors approved by the DoE will dispose of the waste in accordance with Environmental Quality (Scheduled Wastes) regulations.


SOCIAL

Kulim has always been especially invested in the “people” aspect of sustainability – people who work with us (our internal communities) as well as people affected by the work we do (our external communities). We unconditionally agree with the global vision of building healthy and vibrant communities, and seek actively to create positive value for all communities we influence through ethical and equitable policies.

OUR PEOPLE: OUR GREATEST ASSET

We truly believe that we are only as good as our people. We therefore seek to attract the best people and provide them with a conducive, rewarding environment to bring out the best in them. A large number of our estate/mill workers are foreign, but we treat them as part of the Kulim family, acknowledging and respecting their needs as visitors on our soil.

TRAINING & EDUCATION

We provide our corporate employees with continuous training to help them realise their potential. By enhancing our employees’ competencies, we also better position the Group to achieve our corporate goals.

Up-Skilling Programmes

Each year, we develop the potential of stand-out employees through the Johor Corporation Leadership Programme (“JLP”) and Advanced Johor Corporation Leadership Programme (“AJLP”). Under these
programmes, participants are presented with different business scenarios and work in teams to produce the best outcomes. In 2020, three employees graduated from each of the JLP and AJLP. This is in addition to the four AJLP graduates in 2019 and 19 JLP graduates from three previous batches.

We also collaborate with the Johor Skills Development Centre (“PUSPATRI”), ILP Pasir Gudang as well as IKM Johor Bahru to conduct technical courses for our employees. In addition, we encourage employees to pursue professional qualifications such as the ACCA, CIMA, MIA, Certified Integrity Officer (“CeIO”) and human resources certifications CAHRM and CHRO, among others.


Job Rotation

Job rotation and generic training is provided to bridge the skill gaps of staff at all levels. Through exposure to different roles, employees both deepen and broaden their knowledge and capabilities, thereby adding value to the organisation. Apart from learning new skills, job rotation facilitates better understanding of the organisation as a whole and the functions of the different operating units and departments.

Talent Management & Succession Planning

Succession planning ensures a robust leadership pipeline within the Group. To support succession planning, in 2019 we revised our Talent Management Framework to be able to identify high potential candidates who then undergo a talent development programme. This includes mentoring and coaching, as well as placement in a strategic core unit for overall exposure. The ultimate goal is to have the right person with the right skills for the right job at the right time, as well as to ensure leadership readiness for key positions as and when the need arises.

Our efforts to groom and prepare our people to meet current and future workforce needs contributed to Kulim being named one of Kincentric’s Best Employers in Malaysia in the GLC category in 2020.


Performance Management System

Strengthening the Group’s organisational capabilities, our Performance Management System (“PMS”) promotes a culture of achievement through incentives and rewards. Targets for individuals, teams and
the Group as a whole are reviewed and the bar raised every year to continuously push for excellence.

Cadet Planter Programme

The Strategic Enhanced Executive Development System (“SEEDS”), which was launched in 2007, has been reengineered as the Cadet Planter Programme, which develops leadership skills among fresh graduates. In 2020, six participants graduated from the programme, four of whom offered permanent positions as Assistant Managers.


Employee Engagement

We recognise that employees feel a greater sense of belonging to a company when there is healthy communication and engagement across all levels. We have therefore instituted various platforms on which Management can meet and share their views with the rest of our staff, such as Townhalls, Sembang Santai with the Managing Director and turun padang sessions. We also communicate regularly with employees via emails, our intranet and a quarterly newsletter. We value our employees’ views and encourage open communication at all times.



DIVERSITY & EQUAL OPPORTUNITY

As at end 2020, we had a total of 7,182 full-time employees in Malaysia Plantation Operation. Of this total, 5,911 (or 82%) were classified as workers while the remaining 18% comprised management and non-executives. About 73% of our manpower were foreigners, mainly from Indonesia, India and Bangladesh.

We strive to inculcate an inclusive work environment, and enforce a policy of non-discrimination based on gender, nationality, ethnicity or religion, among others. We also subscribe to the basic right of “equal pay for equal work” for all employees, including field, office and management, based on pre-defined grades.

In 2020, we recorded a turnover rate of below 6%, testament to the culture of respect and inclusivity that we have engendered, which contributes to strong retention power.



Gender Equality

We fully appreciate the benefits of having equal representation of the two genders, and have a policy of non-discrimination against women throughout our operations, including our estates. However, the nature of plantation operations naturally attracts more men, and has led to a much higher male representation throughout the Group. There are only 851 women on our payroll, making up 11.85% of our workforce.

Women representation is higher within our corporate offices, and we actively encourage women to take up management positions. Currently, 110 managers (1.53%) are women.

Total Ratio Women in Workforce
2018 11.52%
2019 12.04%
2020 11.85%

Women Onwards

Fully funded by the Company, WOW was established as part of a larger women employee outreach programme. In addition to providing a platform for women to air their grievances, WOW supports and promotes gender equality, as well as advances the knowledge and skills of our female employees.

Under a WOW programme known as Jejari Bestari, which has been established in every estate, women employees are assisted to develop products or services that match their skills such as tailoring, baking or craft-making. These products/ services are sold to staff and the public during festive occasions and company events. Unfortunately, in 2020, such events were postponed or cancelled due to the COVID-19 pandemic.

WOW events in 2020 included:
• An annual meeting of representatives or executives of each complex’s WOW units to present their 2019 progress reports and to propose programmes for 2020.
• Tilawah & Tadarus Al-Quran during Ramadhan, followed by the Khatam Al-Quran Ceremony.
• Fortnightly Quran recitation classes which attracted the participation of 20 employees. Since COVID-19, physical classes have been postponed and will be held virtually in future.
• Visit by our new Managing Director to the Palong Complex at Mungka Estate for a briefing on the activities carried out by the WOW unit there.

Sexual Harassment

We have strict policies against any form of sexual harassment, which are shared with employees through the ‘Buku Panduan Anggota Pekerja Perladangan’ and our Company Policy Poster. These programmes also focus on creating greater awareness among our women employees on their rights. As a result, they have become more open to reporting cases of sexual harassment. In 2020, one such case was reported.

Maternity Leave

All our female employees are entitled to 60 days of paid maternity leave in accordance with Malaysia Employment Act 1955 Part IX Maternity Protection. In 2020, 34 female employees who took maternity leave subsequently returned to work, and are still with us. We are proud of this 100% retention rate as employment patterns suggest that women with newborn babies are likely to leave their jobs after a year. As a matter of policy, we ensure that pregnant or nursing employees are not exposed to harmful chemicals at work.

C.A.R.E.

C.A.R.E., launched in April 2018, reflects Kulim’s corporate values namely Competitive, Action, Responsible and Ethical. C.A.R.E. programmes are conducted by Employee Relations Executives (i.e. Executive Imams) to encourage employees to apply these values into their day-to-day activities.

Activities in 2020 included:

• Training for 39 Imam and Bilal to conduct C.A.R.E. programmes in their respective operating units

• Launch of Pilot C.A.R.E. programme in February for 25 workers at Basir Ismail Estate

• Preparation to transition C.A.R.E into C.A.R.E. 2.0

Workers Salary KA$H KAD

The KA$H Kad project, initiated by our Human Resources Department (“HRD”), was implemented at end 2018 to provide a safe, secure and globally-accepted manner to bank in workers’ salaries.


Benefits:
• Reduced risk from not handling large amounts of cash
• On-time salary payments
• Ease of transfer for foreign workers who wish to send money to family overseas
• Cashless business transaction
• Cost effectiveness

During the year under review, 5,532 more workers registered for a KA$H KAD. Currently, a total of 33 estates and mills, including KPF and Selai Cattle, use KA$H crediting. In view of the card’s popularity, we aim to reach 100% adoption for salary payout to the Group’s more than 6,000 workers.



OCCUPATIONAL SAFETY & HEALTH

The health and safety of our employees has always been top priority and, given the global pandemic, was a critical area of focus in 2020. We have in place an Occupational Safety and Health (“OSH”) policy which applies not only to Kulim employees but also visitors, customers and contractors on our premises. Each estate and mill has a dedicated OSH committee and an OSH officer who is responsible for organising safety training programmes and conducting quarterly OSH meetings. The officer also investigates any accidents that occur and reports back to the chairperson. As a result of continuous efforts to enhance our safety performance, our Lost Time Accident Rate (“LTAR”) and severity rate have been improving steadily over the years.

Key safety indicators, 2018-2020


Target 2018 2019 2020
LTAR <10 1.98 1.53 1.48
Severity rate <3.5 3.25 2.82 1.46
Fatality 0 0 1 0

However, we were saddened by three fatalities during the year.


All employees, including foreign workers, have access to clinics and health benefit plans, hence receive treatment for free.

HUMAN RIGHTS & LABOUR PRACTICES

We believe in treating all our employees fairly, guided by Human Resources policies which reflect Malaysia’s labour laws as well as the International Labour Organisation (“ILO”)’s Declaration on Fundamental Principles and Rights at work. We also adhere to the Code of Conduct for Industrial Harmony developed by the Ministry of Human Resources and Malaysian Council of Employers’ Organisations (predecessor of the Malaysian Employers Federation and the Malaysian Trades Union Congress).

Living Conditions

Our estate and mill workers typically live in two or three-bedroom houses that meet the Employees’ Minimum Standards of Housing, Accommodations and Amenities Act 1990. Weekly inspections are carried out to ensure all living quarters, as well as nurseries and community halls, are in good condition.

Managing Overtime

During peak harvest season, our mill workers tend to work longer hours to ensure the fruit are processed before their quality deteriorates. However, they do not exceed the overtime limit as set by the Department of Labour.

Child and Bonded Labour

We do not engage in child and bonded labour, and will not employ anyone below the age of 16. Instead, we provide access to schools and other amenities to ensure the well-being and proper development of our workers’ children and families.

WORKERS’ UNIONS

We respect the right of our employees to join organisations of their own choosing, as part of our commitment to freedom of association. A total of 2,250 (38%) of our workers are represented by the Malaysian Agricultural Producers Association (“MAPA”)/All Malayan Estates Staff Union (“AMESU)” and MAPA/National Union of Plantation Workers (“NUPW”). We maintain good relations with the union leaders and work collaboratively to sign Collective Bargaining Agreements (“CBAs”) which set out our policies on work-related issues such as working conditions, wages and benefits, among others.

GRIEVANCE MECHANISM

In 2008, we established a Grievance Policy, ensuring there is a platform for employees, suppliers and other stakeholders to raise any concerns or feelings of injustice or dissatisfaction. Through the policy, we also provide guidelines on fair and transparent response to grievances. As a member of the Malaysian Agricultural Producers Association (“MAPA”), moreover, Kulim adheres to grievance procedures as stipulated under our collective agreements.

In addition to the common grievance channel, women employees have a separate channel to air any gender-related grievances, as provided for under the WOW programme.

SMALLHOLDER MANAGEMENT

We have a total of 25 smallholders who supply FFB to our mills. We enjoy a good relationship with our smallholders and encourage them to adopt best practices in order to obtain RSPO certification. Our SQD team conducts annual RSPO awareness programmes for all smallholders and engages with them on the practices they need to adopt to obtain RSPO compliance. Various financial incentives are also provided, such as premium for FFB that is RSPO-certified. Smallholders who demonstrate interest in applying for the certification receive training and other forms of support from Kulim under our Smallholder Inclusion Programme.

In April 2020, Eng Lee Heng Trading, one of our trader suppliers, received the RSPO certification, on the heels of being MSPO certified in 2019.



OUR COMMUNITY: OUR SOCIAL LICENCE TO OPERATE

COMMUNITY INVESTMENT & ENGAGEMENT

By virtue of being responsible and ethical, we believe in contributing to the well-being of the communities in which we operate. Our outreach programmes focus on five key areas: community well-being, sports, welfare, education and infrastructure development.

All staff are encouraged to take part in community projects, and the spirit of volunteerism is apparent in the willingness of everyone, including the Management, to allocate time and effort in order to make a difference to the less fortunate or marginalised.

Institution/Programme Purpose Approximate
Contribution
(RM ‘000)
Kelab Bola Sepak Johor Darul Takzim (“JDT”) To support the development of football in Malaysia. 1,500
Yayasan Johor Corporation To improve the living conditions of underprivileged communities. 1,100
Yayasan Pelajaran MARA (“YPM”)’s Pintar Harapan Programme To provide assistance to rural students and especially those from B40 families (with household incomes below RM3,000 per month). It includes tuition classes, examination preparation, science workshops, excellence seminars, mentor/mentee programmes, writing programmes and training books. 59
School Uniform Project To subsidise the school uniforms of employees’ children. 63
COVID-19 CR Initiatives Contributions to Hospital Sultanah Aminah Johor Bahru, government initiated COVID-19 Fund, frontliners, hemodialysis patients undergoing Home Surveillance Order for COVID-19, NGOs and communities. 762

BUILDING A BETTER FUTURE


Events of the past decade have pushed sustainability to the top of every responsible company’s agenda. We’ve discovered that business growth and sustainable practices are not mutually exclusive. In fact, they are closely tied together. Today we live in a world where both the public and private sectors have a role to play in being socially responsible, safeguarding the environment, guarding against unethical practices, and being more accountable and transparent. In order to do this, companies must treat sustainability as a core consideration in every business decision they make.

As the world’s human population increases, natural resources are inevitably strained. Kulim recognises that it is up to each of us to do our part in slowing down trends such as loss of biodiversity, deforestation, ocean acidification, air and water pollution, and other threats to the only world we have. Now is the time for us to step up and forge ahead. Kulim is well aware that the road ahead will be rocky and challenging. Nevertheless, we believe it is possible to find a middle ground, where decisions can be made that are good for business, the environment and humanity.

The journey towards sustainability will enable Kulim to join the global movement “meeting the needs of the present generation without compromising the ability of future generations to meet their own needs”. It may not always be a clear path, but Kulim remains determined to help define as well as walk that road and achieve peace and prosperity for present and future generations.


GOVERNANCE

We are aware of our role within the larger sphere of our communities, the nation and world, and seek to contribute in every way possible to better lives and a healthier environment. We have been guided in our journey by various guidelines, which ultimately require us to respect our stakeholders and uphold the highest level of integrity while seeking excellence in everything that we do.

CORPORATE GOVERNANCE

Led by our Board of Directors, Kulim upholds the highest level of corporate governance as we recognise the importance of gaining and maintaining the trust of all our stakeholders. Our governance policies are guided by the Malaysian Code on Corporate Governance (“MCCG”) 2017, and are continuously reviewed in line with best practices.

Following the amendment to Section 17A of the Malaysian Anti- Corruption Commission (Amendment) Act 2018, we have strengthened our frameworks to inculcate a culture of integrity that does not tolerate any form of bribery or corruption.

We also have a Code of Ethics which applies to everyone who represents Kulim. The Code sets out guidelines on how to deal with colleagues, customers, shareholders, smallholders, suppliers, competitors and members of the wider community. It also outlines Kulim’s expectations with regard to employees’ behaviours and actions that impact our natural environment.

Employees are required to sign our Ethics Declaration Form when they join Kulim. To ensure a culture of integrity across the board, we have a Whistleblowing Policy that encourages staff to report any criminal or unethical activity.

ANTI-CORRUPTION

Underlining our commitment to creating a culture of integrity, Kulim is working towards obtaining the ISO 37001:2016 Certification for ABMS. Towards this end, our newly established Integrity Unit developed three new policies that were implemented in September 2020: an Anti-Bribery and Anti-Corruption Policy, a Due Diligence Policy and a Referral Letter Policy.


Upon the launch of our Anti-Corruption and Anti-Bribery Policy, the Integrity Unit also carried out various programmes among our employees and our contractors, suppliers and business associates to underline our zero-tolerance for corruption. The objective is to ensure integrity in all our dealings and those of our partners.

We expect to obtain the ISO 37001:2016 Certification in the second quarter of 2021.

COMPLIANCE

Compliance with the RSPO is voluntary. However, we have made the commitment to comply with the programme’s seven Principles and Criteria (P&C) because we recognise its value in ensuring responsible and ethical operations. As part of our responsibility to employees, we also adhere to the following regulations:

• Employment Act 1955
• Minimum Wages Order 2020
• Children and Young Persons (Employment) Act 1966
• Workers Minimum Standard of Housing and Amenities Act 1990
• Occupational Safety and Health Act 1994
• Industrial Relations Act 1967
• Factories and Machinery Act 1967


TRANSPARENCY & TRACEABILITY

The RSPO has 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 mechanisms approved by the RSPO – Book and Claim, Identity Preserved and Mass Balance. Book and Claim is the simplest, allowing buyers to obtain the product without incurring high administrative costs and relying on complex logistics.

Presently, CPO from Tereh POM, Pasir Panjang POM and Palong Cocoa POM are sold under Identity Preserved (“IP”) status, meaning all the CPO from these mills are certified. CPO from the other two mills is sold under the Mass Balance (“MB”) mechanism where CSPO is mixed with conventionally produced CPO and tracked throughout the supply chain.


PRODUCT QUALITY

The quality of our palm oil influences the marketability of our products. To this end, Kulim has always ensured the highest quality, guided by our Quality Policy. The policy outlines expectations for the Group’s estates and mills based on the high standards of regulators, stakeholders and our customers.

Standards and Certifications

To maintain the highest quality in our processes, we comply with Environmental Management Stystem (“EMS”) ISO 14001:2015, Quality Management System (“QMS”) 9001:2015 and Laboratory Management System ISO/IEC 17025:2017 standards. While adherence is voluntary, we believe these standards enable us to usefully examine our values, priorities, policies, strategies, objectives, methods for allocating resources for delivering performance and continuous learning.

Certifications achieved at our different operating units:



Quality Environment 5S Certification

Since January 2015, Kulim has adopted the 5S quality environment concept developed by the Japanese, which stands for Seiri (Sort), Seiton (Set In Order), Seiso (Shine), Seiketsu (Standardise) and Shitsuke (Sustain). The 5S principles are based on the premise that cleanliness and tidiness contribute towards a safe and conducive work environment. This in turn, has a positive impact on staff performance and, ultimately, the Group’s profitability.

In September 2020, our sixth Surveillance Audit was conducted by Malaysia Productivity Corporation (“MPC”) based on new criteria and requirements which place greater focus on the concept of Plan-Do-Check-Action and Impact.

Product Grading Method

Quality control starts at the earliest stages. At the R&D stage, we focus on planting and cultivating specific species of palms. At harvesting, we use the FFB grading method for best results when processing into CPO. Grading criteria for FFB ripeness are distributed to our estates, mills and corporate office via email and regular briefings. The standards also list instructions to distinguish the ripeness of the FFB by assessing the colour, size, stalk length and the characteristic ratios of harvested FFB.

CUSTOMER SATISFACTION

Kulim solicits customer feedback to continuously improve the quality of our products and services. We conduct an annual customer satisfaction survey which allows us to engage with our customers in an organised and constructive manner, identify product quality issues, and take prompt action where necessary.

When customers return the surveys, the answers are analysed and our findings presented to Senior Management to ensure the Group’s leadership are aware of any challenges, issues or discontent.