APP Sustainability Report 2008-2009 - Asia Pulp and Paper

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Chairman’s Statement Chairman’s Statement APP is proud of its commitment to a wide range of responsible initiatives that help advance the societal and environmental interests of our stakeholders world-wide. These are a few examples of milestones and highlights achieved in 2008 and 2009 presented in this report: • APP secured PEFC Chain-of-Custody certification for all of its major mills: Pindo Deli, Indah Kiat Tangerang, Indah Kiat Serang, and Tjiwi Kimia were certified in 2008, and Indah Kiat Perawang and Lontar Papyrus were certified in 2009. • PT WKS, a major APP pulpwood supplier, achieved Indonesian Ecolabelling Institute (LEI) Sustainable Forest Management (SFM) certification in September 2009, making it the largest LEI-certified plantation forest in Indonesia. • APP achieved LEI Chain of Custody certification for four major mills in July 2009: Indah Kiat Perawang, Lontar Papyrus, Pindo Deli and Tjiwi Kimia. • Indah Kiat Pulp and Paper mils were honoured in 2008 with a Presidential Primaniyarta Award, for outstanding achievements and contributions to increasing Indonesia’s exports. • APP joined the UN Global Compact Network (UNGCN) in 2008, aligning our operations and strategies with the Compact’s 10 principles in the areas of human rights, labour practices, environment and anti-corruption measures, and adopting the UN Millennium Development Goals (MDGs) into our company corporate social responsibility (CSR) activities. • At the 2008 conference by the UN and Indonesian National Development Planning Agency (Bappenas), our Tjiwi Kimia mill received two of 10 awards presented to private companies and local government agencies recognized to have noteworthy contributions toward achieving Indonesia’s MDGs. • APP completed its first company-wide carbon footprint assessment in 2008. It was part of APP’s initiative to provide a baseline for its greenhouse gas (GHG) emissions and to develop programmes to reduce them in future. • The flagship Giam Siak Kecil – Bukit Batu Biosphere Reserve, the world’s final Biosphere Reserve initiated and co-managed by a private sector conservation project, supported by APP and its pulpwood suppliers in Riau Province, Sumatra, received official recognition by the UNESCO International Coordinating Council Man and the Biosphere programme, in May 2009. • APP completed the first company-wide social footprint assessment (SFA) undertaken within the worldwide pulp and paper industry in 2009 to better understand the social and economic impacts of APP operations on local communities, and to design ways to measure and respond to such impacts. • APP held its first Open House in 2008 for customers and stakeholders at its Riau, Sumatra facilities to provide insight into sustainable forest management practices and the implementation of chain of custody (CoC) protocols across our operations. • In 2009, APP held a global webcast for the first time in partnership with ProPrint Magazine to help continue to establish a greater open dialogue with stakeholders worldwide. Graphic 1 - Sustainable development Addressing the poverty cycle and environmental degradation Higher risk of natural disaster Environmental degradation Sustainable land practises, raw material regeneration Subsistance development Illegal land use Sustainable development Better living standards and awareness of the environment Inadequate income Poor health and education Livelihoods Health, education social safety needs [2.10] 8 APP 08/09 Sustainability Report APP 08/09 Sustainability Report 9
Corporate Governance Each major APP operating company, with the exception of Ekamas Fortuna, publishes a formal annual report and audited financial statements made available to shareholders, bondholders and the public. The reports outline in detail the companies’ board structures, composition and relevant background, governance committees, results of independent financial audits in compliance with Indonesian accounting standards. This section summarizes the key elements of governance at work. Formal Reports from Group Companies [2.6] Two APP companies, PT. Indah Kiat Pulp & Paper Tbk., (“Indah Kiat”) and PT. Pabrik Kertas Tjiwi Kimia Tbk., (“Tjiwi Kimia”) are publicly listed and abide by Indonesia Stock Exchange (IDX) and capital market regulations relating to transparency, reporting and disclosure of financial conditions and operational performance. Audited financial statements and annual reports are available to the public and interim results are published in both the Indonesian and English language. The balance sheet and income statement are published in two Indonesian daily newspapers, one of which is of national circulation and the other in the domicile of the company, no later than the end of the third month after the date of the annual financial statement. PT. Pindo Deli Pulp and Paper Mills (“Pindo Deli”) and PT. Lontar Papyrus Pulp & Paper Industry (“Lontar Papyrus”), which have issued Rupiah denominated bonds listed on the IDX, also produce audited financial statements and annual reports. During the reporting period, APP did not receive any financial assistance from the government and have no monetary sanctions for non-compliance to laws and regulations. The APP Governance Structure Companies in the APP Group have a supervisory board of commissioners as required under Indonesian company law, with independent members representing the interests of third-party shareholders and bondholders, as applicable under capital market regulations for listed companies and securities. Individual, published company annual reports provide a detailed description of the board’s role and composition. Performance Based Compensation During the two reporting periods, the performance targets and basis for remuneration of the APP boards of directors were reviewed and approved by their respective boards of commissioners. Details of the total remuneration of both boards are published by Indah Kiat, Tjiwi Kimia, Pindo Deli and Lontar Papyrus in their respective annual reports. Shareholders attending the Annual General Meeting of Shareholders (AGMS) for Indah Kiat, Tjiwi Kimia and Pindo Deli and its subsidiary Lontar Papyrus must approve the contents of the published annual reports as an account of the performance of each company and its directors, and the effectiveness of the oversight provided by its board of commissioners and members of audit committee, whose combined role is to protect the interests of all shareholders, including minorities. Conflicts of Interest Employees shall avoid any direct or indirect conflicts of interest with the company. This includes personal benefits or benefits received by people or organizations connected with an employee. Members of both boards may not hold any other position which place him or her in conflict of interest or which violates the companies statutes, except with the agreement of a general meeting of shareholders. Anti-corruption program As a part of its good governance program, APP launched a “Whistle Blowing” program in late 2008, led by the Internal Control and Audit Division (ICAD). Each company’s ICAD team, which operates at the company’s headquarters and at the appropriate mills, conduct regular audits of areas that have a high risk of corruption, such as departments related to finance and those that have frequent contact with external parties, such as purchasing, sales and marketing. ICAD also operates an ethics call center and email reporting system to collect reports of corrupt behaviour within APP operations and it investigates every report. In cases where corruption is found to have occurred, employees involved will receive either warning or termination letters, depending the severity of the case. Suppliers found to be involved in corrupt practices are usually terminated and prevented from working with APP again. Mechanisms for Feedback to the Board of Directors or Board of Commissioners APP has installed a system called i-suggest that allows employees to submit suggestions for operational improvements through the company intranet portal system. Incentives are available for employees whose suggestions are implemented. Mission, Vision All APP companies share a strong common vision and mission. See page 3. Values and Codes of Conduct APP companies follow common, clearly defined mission and value statements, maintain codes of conduct, and establish policies related to economic, social, and environmental performance. These apply to all employees, including board members, and are available for employees to view through the APP intranet portal as well as the public APP corporate website. Policies guiding procurement and fibre supply are discussed on page 94. In terms of environmental performance, APP companies at a minimum comply with all relevant national standards and legislation. See page 16 onwards. Risk Management A central part of the annual business planning process is an assessment of risks associated with changes in the global, regional and local economic outlook, risks relating to social conditions, the environment, weather and climate conditions, market and consumer trends, technological, regulatory and legislative change and reputational risks arising from external factors, erroneous communications, publications or media reports. These are assessed and monitored with any implications reviewed at each mill’s regular monthly board meetings. Oversight of the Triple Bottom Line and Sustainability Performance The role of the APP companies’ directors is to conduct ongoing reviews and monitoring of financial results and measurement of progress towards meeting or outperforming environmental targets, limits or guidelines, as well as completing social programs in a timely and responsible manner. External Charters, Principles or Initiatives Endorsed by APP This report follows, as fully as possible, the Global Reporting Initiative’s Third Generation (GRI G3) Guidelines, as an international standard of responsible disclosure on the Group’s business, social and environmental performance and governance. The GRI Guidelines are among the most used, credible and trusted framework for monitoring corporate sustainability largely because of the way they have been created: through a multi-stakeholder, consensusseeking approach. GRI seeks to make sustainability reporting by all organizations as routine as, and comparable to, financial reporting. GRI Guidelines are widely used. As of January 2009, more than 1,500 organizations from 60 countries use the guidelines to produce their sustainability reports. G3 is the latest version of the guidelines, requiring greater levels of disclosure and performance metrics than previous guidelines. In addition, the adoption of the 6 key performance criteria, expressed as questions supporting the framework for this report, has been deliberately aligned with a number of internationally recognized principles considered directly relevant to APP in the context of the pulp and paper industry and Indonesia (see table overleaf). These include the Global Compact on Human Rights, International Tropical Timber Organization (ITTO) Criteria for Sustainable Tropical Forest Management and the World Business Council for Sustainable Development (WBCSD). [2.6, 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 , 4.10, EC 4, SO 2, SO 4, SO 8] [4.4, 4.8, 4.9, 4.11, 4.12] 10 APP 08/09 Sustainability Report APP 08/09 Sustainability Report 11
Page 2 and 3: Contents Report Scope 02 Corporate
Page 4 and 5: Introduction to APP Indah Kiat Pulp
Page 8 and 9: Corporate Governance Corporate Gove
Page 10 and 11: Sustainable Products Sustainable Pr
Page 32 and 33: Stakeholder Engagement Care for the
Page 34 and 35: Stakeholder Engagement Stakeholder
Page 40 and 41: Social Initiatives and Poverty Alle
Page 46 and 47: Climate Change Climate Change APP h
Page 48 and 49: Responsible Plantation Management W
Page 50 and 51: Responsible Plantation Management R
Page 52 and 53: Responsible Plantation Management R
Page 54 and 55: Ecosystem Protection Ecosystem Prot
Page 56 and 57:
GRI Index Economic Page Page Societ
Page 58 and 59:
112 APP 08/09 Sustainability Report
Page 60:
Notes 116 APP 08/09 Sustainability
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