FGV Annual Report 2016

FELDA GLOBAL VENTURES HOLDINGS BERHAD 66 REPORTING ON WHAT MATTERS The Group also believes in non-violent conflict and dispute resolution, utilising legal channels as a means for peaceful and legitimate resolution that is agreeable to both parties.We are committed towork with relevant Stakeholders to ensure that a balanced, mutually agreed and structured conflict resolution system is accessible to smallholders, indigenous and rural communities and other affected Stakeholders. In cases of encroachment, FGV is committed to taking immediate and transparent action to mitigate and conduct remedial action. In March 2016, FGV was informed by Stakeholders in Kalimantan, Indonesia that development activities had encroached onto protected areas in the PT CNP HCV 4 area, which has been identified to be peatland. Investigations from a third-party consultant revealed that the contractor acted alone and without the knowledge of management. The findings have since been submitted to the RSPO, which is presently deliberating the matter. Regular updates on this are available on our website. In 2016, the Begahak community raised a land conflict issue in FELDA Sahabat 1 & 2 and FGVPM Sahabat 55 to the Sabah Land Development and RSPO. FGV held several discussions with the community to resolve the issue amicably. Towards addressing this issue, we had conducted a participatory mapping and investigation assessment. Discussions will continue in 2017. VALUE CHAIN FGV's diverse number of economic activities depends on a lengthy value chain to provide raw materials as well as other supporting services to function. We recognise that the strength of our sustainability framework is only as strong as its weakest link, and hence we have taken stringent measures to ensure that our value chain partners comply with sustainability laws and regulations. The Group, therefore, conducts proactive communications, both formal and informal, with our Stakeholders to encourage better decision making, as well as to identify risks and opportunities in their relationship with us. Realising the potential risk of our palm product being tainted by unsustainable raw materials, we are in the process of coming up with a supplier guidelines to bind all our suppliers in an ethical conduct in sourcing practices. The Group sees innovation as an important aspect in improving our value chain, especially in developing new products and cost-saving programmes. The company undertakes applied research, and the findings are then used to develop further downstream and consumer products. We have a R&D council that primarily reviews R&D programmes and drives innovative culture, at the same time ensuring sustainability remains one of the main criteria in our plans. RAWMATERIALS AND OTHER RESOURCES FGV's Business Clusters make use or produce rawmaterials and other resources from our plantations, smallholders and other suppliers. Our value chain begins with these materials and extends to processing, packaging, transportation and distribution. We are committed to ensuring the sustainability of the rawmaterials sourced, utilised and distributed, and encourage our value chain partners to embrace sustainable practices, i.e. occupational health and safety practices, waste management practices and environmental conservation through our engagement with them. As the sustainability impact of our value chain partners affects our sustainability framework, we take stringent measures to ensure that they comply. TRACEABILITY Traceability is an essential element of our business where the chains of the supply run across various sectors. Without traceability, it is difficult to ensure that our end-products are sustainable, which is becoming an increasingly important consideration for our customers, especially those seeking sustainability status for the entire delivery. FGV is working on establishing the traceability of its raw materials to ensure that rawmaterials are derived from sources in a sustainable manner. We endeavour to work closely with the value chain partners to ensure that traceability and transparency are embedded in their practices to create a more sustainable value chain. In line with that, we are in the process of developing our own computerise traceability system called Traceability of Product (FGV-ToP). FGV-ToP is part of an overall Sustainable Palm Oil Management System (SPOMS) that also includes Audit Integrated System (FGV-AIMS). This FGV-ToP has gone live effective from January 2017. It becomes particularly challenging to us as we purchase FFB for our mills from third parties in addition to the FFB from our own estates and smallholders. While we are able to trace all our FFB and PK up to supplying mills, tracing to the plantation of origin has been difficult for external crops. To facilitate better traceability of our products, we are working with our business partners to develop a model to identify sustainability risks associated with a specific geographical area. Our expansion down the value chain. SUSTAINABILITY STATEMENT ADDRESSING ECONOMIC IMPACT