APP Forest Conservation Policy

One Year Summary

FEBRUARY 2014

www.asiapulppaper.com

www.asiapulppaper.com

Introduction
It has been an extremely busy twelve months since last February, when we announced our Forest Conservation Policy (FCP), marking a permanent end to natural forest clearance in all our suppliers concessions. This was the start of what we believe is one of the worlds most complex and ambitious rainforest conservation programmes.

This is a proud moment for all of us at APP. There have been those who said we couldnt do it and to them I say, We are doing it, and we mean to succeed.

We are doing it, and we mean to succeed.

As ever, there is still more work to do, as our sustainability roadmap is a journey of continual improvement. However, we hope that the work we have done to date in cleaning up our supply chain, will mean APP is seen as an industry leader in the conservation of our countrys valuable rainforests.

Our successes to date are down to the thousands of individuals who have committed so much of their time, effort and enthusiasm to implementing the FCP, from APP staff to our partner companies and external advisors. This includes our technical and on the ground advisors and assessors particularly The Forest Trust, Ekologika and APCS and of course the many NGOs, in Indonesia and worldwide, who have advised, criticised and sometimes praised us. They are many, but chief among them is Greenpeace, without whose robust critical friendship we would not be where we are today. We particularly appreciated the input they provided through their report into our progress, released in October.

This booklet looks back at some of the most significant milestones reached in the past year, to remind us all how far we have come. It also takes a look at the challenges and opportunities that lie ahead.

Aida Greenbury Managing Director Sustainability & Stakeholder Engagement Asia Pulp & Paper

Our sucesses to date are down to the thousands of individuals who have committed so much of their time, effort and enthusiasm to implementing the FCP.

Forest Conservation Policy

Forest Conservation Policy

APPs Forest Conservation Policy in Numbers

Area of land under the control of APP/APP suppliers:

Area of land subjected to the FCP:

million hectares
Employees

million hectares

Independent organisations directly involved in HCV and HCS Assessments

APCS TFT

Ekologika

Ata Marie

100% completion of plantation growth and yield assessments Completion of HCS Assessments due:

Area of land with established plantations

Area of land as football pitch equivalent:

1 million hectares

Number of concessions undergoing both HCV and HCS assessment:

Land Claim Conict mapping completed

Q3 2014

Global output

Area of land without established plantations

1.6 million hectares

million tonnes

area of land as a proportion of area allocated for production forest in Indonesia

FPIC (Free Prior and Informed Consent) implementation pilots

APP/Sinar Mas Forestry staff trained in conict mapping techniques

Completion of HCV Assessments due:

March 2014

Forest Conservation Policy

Forest Conservation Policy

Where it all began

In June 2012, we announced our Sustainability Roadmap Vision 2020. This laid out targets in 10 environmental and social impact areas to be achieved within eight years. Among these was a moratorium on natural forest clearance, due to be implemented in 2015. Critics said this wasnt good enough. So in February 2013, we announced we would be bringing this target forward by two years.

We are doing this for the sustainability of our business and the benet of society.
Teguh Ganda Wijaya, APP Chairman

February 2013
On February 5th we announced a complete end to natural forest clearance throughout our entire supply chain. Our Chairman, Mr Teguh Ganda Wijaya, said in announcing the FCP, We are doing this for the sustainability of our business and the benefit of society. This commitment applies to all our suppliers concessions in Indonesia, which cover 2.6m hectares of land. The moratorium we imposed at the time on all new development will remain in place until a series of assessments is completed to determine which areas of APP suppliers concessions are High Conservation Value (HCV) or High Carbon Stock (HCS); all such areas will be permanently protected.

We also started to implement the FCP in China, where the policy commitments also apply. Together with TFT, we are focusing on mapping out our supply chain of third-party wood chip and pulpwood to neighbouring countries.

Forest Conservation Policy

Forest Conservation Policy

March 2013
Among our promises was a commitment to complete transparency. We established a series of Focus Group Discussions to enable Indonesia-based NGOs to question, challenge, advise and inform our protocols and to learn about the progress we were making. It soon became clear that we would all benefit from more eyes on the ground. This has led to our Independent Observer (IO) programme, enabling local NGOs to see for themselves how the FCP is being implemented out in the forest. The IO programme was expanded to cover pulp mill inspections to verify that any Natural Forest Wood (NFW) arriving at the mill had been harvested prior to our February 5th announcement. As a result of a report from an NGO, we, along with TFT, investigated an alleged breach of the FCP in Kalimantan. Once our investigations were complete, we reported our findings publicly. In this instance, the forest clearance identified in the report had taken place in an area where there was a substantial overlap between the boundaries of our suppliers concession and those of a neighbouring oil palm concession. The clearing was done by the palm oil company, and consequently there was no breach of the FCP. However this case shed light on the problem of conflicting concession boundaries between various resource industries. As a result, we have embarked on a programme to map out the license overlaps. Given the extent of this problem, we have called for more joined-up land-use planning by government ministries and local authorities.

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Forest Conservation Policy

April 2013
An important issue raised by NGOs was the monitoring and processing of Natural Forest Wood (NFW) felled prior to the February announcement. In April, Aida Greenbury posted a blog covering the issue, explaining how all NFW outside APPs pulp mills would be located, identified, quantified and tracked through the supply chain using an inventory monitoring system developed by TFT. This system would ensure that only stocks of NFW felled prior to the moratorium would be processed. In that blog Aida Greenbury also addressed the question of how much natural forest the FCP itself might conserve. She explained that HCS assessments were ongoing, and that the company would publish hard data derived from satellite imagery of all supplier concessions once the assessments were complete. Another issue raised by NGOs through FGDs was that of restoration. APP confirmed that the subject was and would remain on the table. The priority in the first instance would of course be assessments and a comprehensive conservation plan, but restoration would be addressed as part of a long term approach to sustainable forest management.

This system would ensure that only stocks of NFW felled prior to the moratorium would be processed.

May 2013
A second alleged breach of the FCP was reported by NGOs in PT. Riau Indo Agropalma (RIA), one of our suppliers in Riau, Sumatra. APP and TFT immediately launched an investigation. That investigation showed that 70 hectares of forest had been cleared after February 5th 2013. The land had been cleared as part of a community livelihood agreement made between APPs supplier and the local community prior to the moratorium. Such agreements are a legal obligation for concession owners in Indonesia. The land clearing highlighted some of the complex tensions between local community development needs, regulatory obligations and forest conservation goals in Indonesia. This breach of our FCP demonstrated that we had not established rigorous sign-off processes between local management teams and headquarters. Together with TFT, we undertook an immediate review to assess whether similar cases existed with other suppliers that could threaten the moratorium elsewhere.

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June 2013
We trialled our online FCP monitoring dashboard developed by TFT. This website, whose development has been ongoing, allows interested parties, including customers, NGOs and media, to follow progress of the FCP on the ground as well as providing access to policies, maps, reports, and other critical documents. More information on this transparency initiative can be found at www.asiapulppaper.com/ sustainability/tracking-progress/ monitoring-dashboard

July 2013
A long standing land tenure conflict was finally resolved in Jambi between Senyerang village and PT Wira Karya Sakti (WKS). With efforts to resolve this conflict dating back to 2002, APP requested mediation and facilitation support from TFT. Using a new conflict resolution approach, agreement was reached and a Memorandum of Understanding was signed by all parties. We completed an initial social conflict mapping exercise and training programme across all 38 of our suppliers concessions. The objective of the training was to familiarise staff and managers with APPs new approach to identifying and managing social conflict in communities within and around our operations. We also completed an initial review of our social conflict management system in China. This has resulted in a proposed action plan for social engagement and conflict resolution for our operations. July also saw the announcement of our plans to construct a new pulp mill in South Sumatra using best-available technology. We are fully committed to ensuring that this mill is compliant with our FCP, and will only use plantation wood. The mill will be located close to our concessions in South Sumatra, and we will ensure that the principles of Free Prior and Informed Consent (FPIC) are applied in determining the final site of the mill.

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Since that day, we have only accepted wood from non-HCV/ HCS areas, from our plantations, or chips from suppliers for which we had clear verication of compliance with the FCP.

August 2013
A deadline to complete the transport to our mills of any NFW felled prior to the moratorium was set for the end of August. On the 31st, the last truck entered our Indah Kiat mill. Since that day, we have only accepted wood from non-HCV/HCS areas, from our plantations, or chips from suppliers for which we have had clear verification of compliance with the FCP.

September 2013
The European and North American Environmental Paper Networks (EPN/ EEPN) published a set of indicators and milestones against which stakeholders could assess our progress in implementing the FCP. We reviewed these in detail and expressed our confidence that our implementation of the FCP and Roadmap commitments was on course. EPN then hosted a global webinar to discuss the milestones and APPs performance. Aida Greenbury was given the opportunity to present progress on the FCP. Participants mainly included companies and NGOs including Greenpeace, Rainforest Action Network, and WWF. Learning from previous NGO-reported grievances concerning our forest moratorium, we, together with TFT, carried out a comprehensive review of all our pulpwood suppliers activities to ensure that there would not be any further moratorium violations. As part of this review, we identified two cases that we voluntarily reported on our website and directly to key stakeholders including the media. The first case took place in PT. Bina Duta Laksana (BD L) in Riau province. Like the PT. RIA case mentioned above, in this concession a community livelihood agreement had been made before the February 5th moratorium. It was not possible to determine if any of the 28 hectares developed, had been HCS. The second case occurred in PT. Bumi Andalas Permai (BAP), PT. Sebangun Bumi Andalas (SBA), and PT. Bumi Mekar Hijau (BMH) in South Sumatra province. Nearly 70 hectares of HCS forest was wrongly cleared in an area set aside from development, pending full HCV and HCS assessments. The two cases resulted in additional sign-off procedures between local management and head office being put in place to prevent the recurrence of such breaches. September also saw further development of the FCP Monitoring Dashboard. Customers and NGOs were invited to provide input on content and system improvements.

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The report acknowledged the challenges ahead, and made constructive recommendations for tackling them.

October 2013
Greenpeace released its FCP Progress Report. The 14-page report was thorough, objective and fair. We welcomed it, in particular the observation that our senior management were clearly wholly committed to the FCP, and that our transparent reporting and selfdisclosure was commendable. The report acknowledged the challenges ahead, and made constructive recommendations for tackling them. Finally, it recommended that consumer companies wishing to re-engage with APP should closely scrutinize our progress in implementing the FCP.

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November 2013
APP regards the FSC as a highly credible standard for certification of responsible forest management. We were therefore encouraged to learn that its board of directors publicly welcomed our FCP and expressed interest in understanding more about how it is being implemented. Our ambition is to be formally re-associated with the FSC.

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January 2014
The Rainforest Alliance will undertake a third-party evaluation of the progress we are making in implementing our Forest Conservation Policy and related public commitments. The Rainforest Alliance will release its findings in a report in late 2014. A team of peatland experts has also been engaged. The team is being led by Wageningen University and Research centre (Alterra in collaboration with Wageningen University).

December 2013
We received the draft HCV reports for the first 11 concession areas from the third-party auditor APCS. These have now been submitted for peer review and for NGO input. In addition, work was completed by TFT and APP on a comprehensive assessment of our suppliers plantation growth rates and pulpwood yields (the so-called Growth and Yield assessments). This provides both us and our stakeholders with clarity on our ability to manage our pulp business for the foreseeable future using sustainable plantations.

This provides both us and our stakeholders with clarity con our ability to manage our pulp business for the foreseeable future using sustainable plantations.

In a 3-month Inception Phase, which began in January 2014, the team will analyse current peat management issues and opportunities in APP supplier concessions, and propose an outline plan for a follow-up Second Phase of the work, in which, an approach for moving towards responsible peat management will be identified. Along with the results of the HCV and HCS assessments, recommendations from the team will be used to develop APPs Integrated Sustainable Forest Management Plans (ISFMP).

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Looking ahead

We expect 2014 to be no less challenging and busy than the rst year of our FCP.
Looking back at what was achieved in 2013 and more importantly looking to the future, we are confident that by this time next year, our stakeholders in particular the NGO community, and those many customers who have shown environmental leadership will recognise just how far we have come. Having done much of the groundwork in 2013, the year ahead will be about increasing engagement with the FCP as we will not be successful in our efforts to conserve the natural forest and biodiversity in our concessions, without the support of others. We are appealing to businesses, Government, NGOs and communities to work with us as we seek to find a real and lasting solution to Indonesias deforestation issues. We also want to ensure that all stakeholders are doing what they can to incentivise sustainability by supporting market recognition for pulp and paper products that have been produced using responsible forestry practices.

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