FGV Annual Integrated Report 2019

27 ANNUAL INTEGRATED REPORT 2019 03 S E C T I O N To further enhance our efforts, the Group’s Research and Development (R&D) Division devises new innovations for planting materials and works hand-in-hand with the business units to create new products that cater to the market. In addition to these initiatives, the Group continues to optimise the cost of our human capital. This has included reviewing our benefits and perks as well as reducing total manpower numbers. While the rightsizing continues, we must also look closely at how our work culture is evolving. Personally, I can sense that while there is some improvement, we need to move much faster to achieve a high- performing culture. We also need to make business decisions faster, and before that, be very clear in our mind that the decision is a correct one that will be followed through, in order to unlock maximum value. Procurement savings have also been obtained through improved processes and negotiation strategies, and were designed to ensure the sustainability of our recovery. To bolster these efforts, I am also proud to share that FGV is the first plantation organisation to carry out such a comprehensive implementation of the Anti-Bribery Management System (ABMS). This has been acknowledged via the internationally recognised ISO 37001:2016 certification. SUSTAINABILITY The Group remains wholly committed to the sustainability agenda. We consistently communicate significant initiatives and developments, especially with regard to the Roundtable on Sustainable Palm Oil (RSPO) certification process. Again, we acknowledge that there are gaps, but there is nothing we cannot fix with determination and a clear idea of the best way of running our operations. To my mind, there is no substitute for sustainable development; it is the only way to move forward. What we need to be clear about is that sustainability is a commitment that cannot be taken lightly. While poor corporate behaviour can impact our bottom line, more importantly, it can also impact our stakeholders negatively. This is something we must get right at every level of our operations. Your Board remains deeply committed to embedding the best values within FGV. We are fully committed to respecting human rights including that of our migrant workers and have in fact already taken significant steps. These include: • Revising, updating and strengthening the Group Sustainability Policy; • Ensuring that employment contracts and communication packs for migrant workers are explained, translated and understandable; • Implementing a new Supplier Code of Conduct that requires all of our suppliers and contractors to commit to FGV’s principles and standards; • Implementing new Guidelines and Procedures for Responsible Recruitment of Foreign Workers; and • Revising the contracts with recruitment agencies to include clear provisions to protect workers, and to ensure that no fees are charged to migrant workers throughout the recruitment process. FGV also pays close attention to its Federal Land Development Authority (FELDA) smallholders, from whom we obtain two-thirds of our fresh fruit bunches (FFB). Our relationship with them is symbiotic and thus, apart from sustaining their livelihoods, we are also playing our part to add value to their businesses by helping to ensure they are Malaysian Sustainable Palm Oil (MSPO)-certified. FGV has established an Independent Advisory Panel (IAP) and its function will be to provide independent advice and recommendations to FGV on matters pertaining to corporate governance and sustainability. The IAP comprises five experts in related fields, whose advisory role will complement FGV’s existing and ongoing efforts to champion sustainability. BUILDING FOR THE FUTURE FGV’s future is clearly predicated on one major factor – our ability to maximise the potential and value of our landbank. This is due to the fact that out of FGV’s total landbank of 439,230 Ha, around 351,000 Ha is leased from FELDA under a Land Lease Agreement (LLA), which costs us an additional RM248 million a year and 15% of plantation profit sharing. Thus, to remain competitive, FGV needs to be far more productive and competitive compared to our peers. In that context, we will be implementing strategies that are meant to reposition FGV as a major player in the agriculture and food industries. Rest assured that palm oil will remain a mainstay of the business, but we must look to sectors that we can quickly and easily move into, to help mitigate the effect of the cyclical nature of crude palm oil prices and offset our leasing bill. In this regard, the Group has already started earning some revenue from new income streams in the circular economy and in renewable energy. We are also paying close attention to potential adjacent businesses, leveraging on land that is not suitable for oil palm as well as areas that have not produced any fruit for the first three years following replanting. By planting cash crops that enjoy high demand locally and regionally, this creates an extra revenue stream for the Group. Ultimately, we will continue improving our operations, upskilling our staff, enhancing governance and practising sustainability. Our value- creation story is a long-term one, and it is my hope that we will achieve all that we have set out to do. While the road ahead will be tougher than anyone of us expected, I believe FGV has shown its resilience and will get through these difficulties. ACKNOWLEDGEMENTS Allow me to take this opportunity to extend my appreciation to my colleagues on the Board of Directors for their dedication to the cause we all share. They have discharged their duties admirably. I would also like to thank the Management and employees of FGV, who have persevered and proven their commitment to effecting positive change. I would also like to record my gratitude to all our stakeholders, who continued to support FGV throughout the year. We are confident that the strength of our relationships and the current efforts to transform the Group will bear fruit for all of us. STATEMENT FROM THE CHAIRMAN STATEMENTS AND ANALYSIS