FGV Annual Report 2020

Managing NDPE Risks of Indirect FFB Suppliers FFB from the dealers network may carry high risk towards FGV’s NDPE commitments. In 2020, FGV conducted an assessment of the NDPE risk level within a 50km radius of 72 FFB collection centres that account for 50% of supplies from the FFB dealers network. Overall, our findings showed that none of these posed high NDPE risks. However, on the specific subject of deforestation, we identified four (4) collection centres, which accounted for 1.5 per cent of supply from our dealers network, as being exposed to the risk of deforestation in their surroundings. Another 22 collection centres were exposed to peatland risk. FGV has notified the concerned parties of these findings, and awaits verification of the data collected during the assessment exercise. Financial Year Target Our Performance in 2020 2020 1. Trace the source of FFB (TTP) to 23 mill complexes and verify their compliance with FGV’s GSP. 1. 1,600 independent smallholders supplying FFB to 10 mills have been traced to their farms with full traceability and NDPE compliance information. 2. To validate data provided by FGV at mill level and super dealer level selectively (sampling). 2. 3,200 independent smallholders have been traced to be supplying FFB to the 23 mills. 3. Sustainability risk mapping for NDPE compliance for large suppliers (i.e. commercial plantations). 3. 72 collection centres (comprising about 50% of FFB from dealers network) has been risk mapped. None shown to have high risk on overall assessment, though some has high risk on specific NDPE components. FGV’s rubber business focuses on the production of high-quality natural rubber materials. Our Rubber operations completed a successful turnaround of the business, recording 3 million net profit in 2019 for our Malaysian operations. In addition to the commercial rubber, we have produced green rubber, a high-quality speciality rubber with synthetic rubber properties. As a Group practice, our raw material suppliers are bound by the FGV SCOC. The Rubber Division has also mapped out the supply in Malaysia, where 70%are obtained from domestic sources, with a traceability process that can detail the region from which our rubber products originate. Our factories in Malaysia also adopted SAP system that is used to monitor and update data on sources of rawmaterials, rubber volumes and schedule of shipments and deliverables. In Thailand, the Rubber Division team visits suppliers or their agencies to assess their sustainability practices. In 2020, FGV embarked on the traceability of rubber supply from domestic sources to ensure they do not come from deforested or protected areas. Our target was 100% traceability of Tier 2 supplies. We successfully achieved 96% traceability by the end of 2020 and we expect to achieve 100% traceability by 2021. In 2021, we are exploring to trace the origin of rubber from overseas supply. Sustainability Matters Rubber Business Implementation of the EcoVadis Corporate Social Responsibility (CSR) Management System Since 2018, the Rubber Division voluntarily participated in the industry’s annual Ecovadis Survey to ascertain the sustainability of FGV’s rubber products. The system helps companies evaluate and monitor how they are performing across four (4) main themes: Environment, Labour Practices & Human Rights, Ethics and Sustainable Procurement. We also participate in annual bio-audits conducted by the global natural rubber industry. This audit involves an assessment of rubber production processes and product quality, as well as a sustainability audit. Conducting annual assessments has helped us identify gaps and potential opportunities across our operations to improve performance and reduce costs, besides ensuring we remain compliant with legal requirements. 112 FGV HOLDINGS BERHAD Annual Integrated Report 2020