Kuala Lumpur Kepong Berhad : Sustainability Report

SUSTAINABILITY STATEMENT AND REPORT

1. Key Highlights for FY2021
2. About This Report

52 Sustainability Governance

1. Materiality Matrix
2. Sustainability Policy

55 Stakeholder Groups and Key Engagements Conducted in FY2021

57 Supplier Code of Conduct, Supplier Non-Compliance Protocol and Grievance Redressal Policies

57 Alignment with the United Nations Sustainable Development Goals

59 Marketplace

70 Environment

80 Workplace

90 Community

A bee foraging on Turnera subulata (White Buttercup), a beneficial plant that provides shelter and supplementary food such as nectar while encouraging the population of predators and parasites.

O U R O R G A N I S AT I O N		51

SUSTAINABILITY STATEMENT AND REPORT

Sustainability continues to be a fundamental aspect of our agenda in our operations and business strategies as we strive towards making our business more sustainable and responsible. Our main focus is to continuously strengthen our policies and guidance to our sustainability commitments in all aspects of oil palm business. Our sustainability framework is derived from the four (4) pillars of sustainability - marketplace, environment, workplace and community.

KEY HIGHLIGHTS FOR FY2021

MARKETPLACEWORKPLACE

• Total CSPO uptake is 735,371 mt or
  88% of total certified oil, where 69% is RSPO uptake and 31% is ISCC uptake
• 87% of our total Group landbank is
  RSPO Certified
• SPOTT rank is 15
• A FTSE4Good constituent
• Received CSR Malaysia's Company of the Year Award for Sustainability & CSR Excellence (Plantation) in the Sustainability & CSR Malaysia Awards 2020
• Awarded Unilever Clean Future
  Brilliance Award by Unilever
• RAM Sustainability Sdn Bhd reaffirmed
  KLK's Sustainability Rating within the Gold category and concurrently assigned a Gold2 (G2) rating on their newly launched and refined rating scale
• Won the Asia Money 2021 Asia's
  Outstanding Companies Poll as Most Outstanding Company in Malaysia under the Plantation sector.
• Became a member of Business for
  Social Responsibility™ ("BSR")
• Became a "friend" of Climate
  Governance Malaysia

CERTIFICATION STATUS

• Maintained workforce of approximately 40,000 in its Plantation and KLK OLEO businesses, excluding IJM Plantations Berhad
• Women represent 20.8% of our Plantation and KLK OLEO businesses
• Netherlands sites achieved One Million man-hours without any lost-time injury

ENVIRONMENT

• Launch of Group Biodiversity Conservation Policy
• KLK's plantations and palm oil mills ("POMs") recorded an
  average emission of 582.18 kg CO2eq/mt CPO, which is translated into 68.37% GHG savings compared to fossil fuel emissions, meeting the target set for the financial year ("FY")
• A total of 9,341 hectares conserved for biodiversity protection

COMMUNITY

• 9,840 hectares with 6,751 schemed smallholders under the
  Indonesian Plasma scheme
• Provided education to 19,000 students annually through 81 learning centres

RSPO

100% Malaysian POMs certified

100% Indonesian POMs certified

100% Malaysian estates certified

87% Indonesian estates certified

Note: All certifications listed excludes IJMP.

RSPO SCC			MSPO SCC
All refineries, KCPs			All Malaysian POMs, refineries,
and KLK OLEO			KCPs and KLK OLEO facilities
facilities certified			certified
MSPO			ISPO
100% Malaysian			100% Indonesian POMs certified
mills certified			87% Indonesian estates certified

ISCC

19 mills certified

KLK OLEO

2 facilities certified

52	KUALA LUMPUR KEPONG BERHAD ANNUAL REPORT 2021

SUSTAINABILITY STATEMENT AND REPORT

ABOUT THIS REPORT

This Sustainability Report ("SR") 2021 was prepared based on the Global Reporting Initiative ("GRI") Standards: Core option and Bursa Malaysia's Sustainability Reporting Framework. The SR focusses on activities carried out by the Company during the financial year from 1 October 2020 to 30 September 2021, with historical data of the preceding years included for comparison, where available and relevant. Unless otherwise stated, all data is correct as at 30 September 2021.

The scope of the SR covers sustainability-related performances, achievements and various initiatives in the past financial year 2021 ("FY2021") and unless otherwise specified, covers our Plantation segment (primarily for oil palm development) and the Oleochemical division ("KLK OLEO"), both of which are our largest and most established business sectors. They account for 44% and 54% of the Group's total revenue in FY2021 respectively. It includes data from KLK's subsidiaries but not from associates and joint ventures.

In September 2021, KLK acquired IJM Plantations Berhad ("IJMP"). However, we have not included IJMP in this year's SR as the acquisition took place at the tail end of our financial year. Unless otherwise stated, all information in this SR excludes IJMP data.

The Group strives to provide its stakeholders with an overview of the Group's approach and progress made in meeting its sustainability commitments. We believe that external assurance improves credibility and transparency of the SR. Hence we are committed to continously improve our sustainability disclosures and explore external assurances in the future.

SUSTAINABILITY GOVERNANCE

KLK's sustainability governance framework supports the Group's progress and response to future challenges. Effective sustainability governance and management structure are vital to ensure integration of the Group's sustainability strategies and commitments into its business agenda and operations. A robust management system is also key in sustaining the Group's endeavours.

Our 3-tiered governance structure comprises the Board of Directors ("BOD"), Sustainability Steering Committee ("SSC") and the Sustainability Working Committee ("SWC") which captures the voice of top management and the relevant stakeholders.

The Board of Directors ("BOD") governs and leads KLK's overall responsibility in integrating sustainable economic, environmental and social initiatives throughout the Group's business strategies. The BOD is supported by the SSC, formed in September 2015, headed by the CEO with members comprising the Group Plantations Director, Managing Director of KLK OLEO and representatives of the Sustainability team. The CEO reports to the BOD on key issues which impact the Group's sustainable responsibilities and commitments. The SSC's mandate is to develop sustainable strategies and policies, and to assist the BOD's decision-making efforts. The SSC also has a monitoring role to ensure KLK meets both its compliance and sustainable development responsibilities.

The SWC supports the SSC. It comprises of representatives from Plantation, KLK OLEO and the Sustainability team. Its role includes developing and driving policies with time bound action plans.

O U R O R G A N I S AT I O N		53

SUSTAINABILITY STATEMENT AND REPORT

SUSTAINABILITY STEERING COMMITTEE

SUSTAINABILITY WORKING COMMITTEE

BODCEOSecretariat

Members

From

Plantation Oleochemical Sustainability department

Sustainability

Working

Committee

Roles:

• Develop Group strategies and policies
• Monitoring sustainable performance

In relation to the roles of the SSC, one of the major decisions made during the FY was to engage an independent Sustainability Advisory Service to perform an ESG Gap Analysis & Development for the ESG Roadmap/Improvement Plan ("Project SHIFT") for the Group.

Project SHIFT aims to guide KLK in benchmarking against best-practices and different sustainability frameworks, e.g. GRI, TCFD, FTSE4Good, etc. to better understand

Group

Secretariat Plantations

Director

Representatives

From

Plantation Oleochemical Sustainability department

Roles:

• Ensure consistent implementation of sustainability practices and standards
• Raising sustainability practices awareness amongst employees
• Continual process of engaging stakeholders

the Group's current standing, assist in the development of our ESG Roadmap with a focus on carbon management and net zero aspiration. The independent Sustainability Advisory Service will also support KLK and those in charge of implementing the sustainability initiatives by facilitating an all-inclusive training session on building a robust sustainability governance framework, mitigate potential risks, and leverage on opportunities.

54	KUALA LUMPUR KEPONG BERHAD ANNUAL REPORT 2021

SUSTAINABILITY STATEMENT AND REPORT

MATERIALITY MATRIX

KLK's materiality matrix addresses key topics that have been identified as important to our business and stakeholders. We considered and prioritised significant economic, environmental and social topics. These topics were positioned on the materiality matrix based on two axis - importance to KLK Group and its stakeholders.

IDENTIFY

We assessed if our concerns disclosed in last year's Sustainability Report are still relevant and if there are any new concerns to be raised based on:

• changing global and local trends
• the directions of the palm oil industry
• regulatory changes
• media analysis
• our strategies and internal policies

In the course of the assessment, the Group has determined that the majority of material topics presented in FY2020 still remain relevant.

0102

Our

Assessment

Process

03

VERIFY

Most material ESG impacts on KLK were identified on a Materiality Matrix which was reviewed by the BOD.

PRIORITISE

Engaged with internal and external stakeholders to rate the material concerns according to their importance. With stakeholder engagement as one of KLK's sustainability cornerstones, we actively met where permissible, conversed, consulted and worked with a broad cross-section of our stakeholders. This provided us with a better understanding of their concerns and perspectives.

Influence on stakeholder assesments & decisions

ENVIRONMENT

A. Carbon Footprint

B. Protection of High Carbon Stock

Forests

C. Management of Peatlands

D. Protection of High Conservation Value

and Biodiversity

E. Legal Compliance

F. Water Footprint

									MARKETPLACE
				N		G.	Ethical Practice
					H.	Evaluation of Suppliers'/Contractors'
										Sustainability Commitment
									I.	Market and Commodity Prices
									J.	Product Certification
									K.	Traceability
									WORKPLACE
									L.	Health and Safety
									M.	Labour Relations and Human Rights
									N.	Training and Education
									COMMUNITY
									O. Community Investment
									P.	Free, Prior and Informed Consent
									Q.	Grievance Redressal
		Significance of ESG impacts	R.	Sustainable Development of
			Smallholders
	High Importance	Very High Importance	Extremely High Importance

During the FY under review, there were no significant changes to our business model or operating boundaries. Thus, these material concerns continue to be indicative of our journey to strengthen KLK's sustainability performance. However, any changes of these concerns have been highlighted to KLK and our stakeholders in the Materiality Matrix.

It should be noted that material concerns that fall outside the scope of coverage are no less important considerations to us and disclosure of our progress in addressing these concerns continue to be made through other appropriate channels.