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Developing Sustainable Futures: Key Drivers for Sime Darby

Maybank Investment Bank Plantation Conference

20th October 2015

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The Sime Darby Group

• Diversified global business

• Operations in 26 countries

• Over 130,000 employees worldwide

INDUSTRIAL

One of the world’s leading Caterpillar

dealers

ENERGY & UTILITIES

Core businesses in ports, engineering

services and water management

PLANTATION

The world’s largest producer of

certified sustainable palm oil

MOTORS

A major automotive industry player in

the Asia Pacific region

PROPERTY

A leading Malaysian developer of

sustainable communities

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Developing Sustainable Futures

PROFIT

PROSPERITYPLANET

PEOPLE

Sustainability is a

company’s commitment to

operate in an

economically, socially

and environmentally

sustainable manner whilst

balancing the interests of a

diverse range of

stakeholders

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Our Strategic Sustainability Positions

Strategic Positions Key Focus Areas

Leverage on sustainability

to create value

• Sustainability-led innovation and new business

• Carbon, energy and water management

• Mutual growth of communities1

Effectively manage

sustainability risks

• Sustainability risk identification, assessment and control

• Ethics and corporate values2Develop sustainability

Thought Leadership• Strategic participation in key sectoral and thematic organisations3

Instill a performance

culture

• Environmental, Safety & Health (ESH)

• Lean Six Sigma (LSS)

• Sustainability culture4

Effective sustainability

reporting• Stakeholder engagement5

Our five positions drive our sustainability strategy across the Group

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Our Plantation Value Chain

605,046

0.54 2.35

14Refineries &

Crushing Plants

Planted in Malaysia,

Indonesia, Liberia,

Papua New Guinea and

Solomon Islands

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Roundtable on Sustainable Palm Oil (RSPO)

• The RSPO is a multi-stakeholder initiative that aims to promote the growth

and use of sustainable palm oil.

• Members include environmental and social NGOs, banks and investors,

growers, processors, manufacturers and retailers of palm oil products.

RSPO Principles & Criteria

1 Commitment to transparency

2 Compliance with applicable laws and regulations

3 Commitment to long-term economic and financial viability

4 Use of appropriate best practices by growers and millers

5 Environmental responsibility and conservation of natural resources and biodiversity

6Responsible consideration of employees and of individuals and communities affected by

growers and mills

7 Responsible development of new plantings

8 Commitment to continuous improvement in key areas of activity

The RSPO provides a robust framework to capture our good practices and provides a foundation to

continuously improve our methods and address emerging issues of concern.

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Towards 100% RSPO Certification1

1. Progress of certification as at 30th June 2015

2. CSPO – Certified Sustainable Palm Oil

3. CSPK – Certified Sustainable Palm Kernel

4. SCCS – Supply Chain Certification System

98% of Strategic

Operating Units RSPO

Certified

97% of annual CPO

production capacity

RSPO certified

Upstream

Total No. Strategic Operating Units (upstream) 65

Total No. Strategic Operating Units Certified 64

Total Annual CPO Production (MT) 2,355,647

Total CSPO2 Production (MT) 2,292,000

Total Annual PK Production (MT) 547,005

Total CSPK3 Production (MT) 520,000

93% of refineries RSPO

SCCS certified

Downstream

Total No. Refineries & Crushing Plants

(downstream)14

Total No. Refineries SCCS4 Certified 11

Smallholders / Third Party FFB

Total External FFB Processed (MT) 1,222,207

Total Certified External FFB Processed (MT) 590,314

95% of annual PK

production capacity

RSPO certified

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Progress of Our Supply Chain Certification

Mass

Balance

Certified

Segregation

Certified

Not

Certified

South Africa

Hudson

& Knight

Vietnam

Nhabe

SD

Biodiesel Malaysia Jomalina

Nuri

Kernel

Crushing

NuriAustral

Kempas

IndonesiaPT GHN

Refinery

Rantau

Kernel

Crushing

Netherlands

& UKUnimills Liverpool

Thailand

Morakot

Papua New

Guinea

Kumbango

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Key Parameters for Traceability

Plantation Estate

Oil Mill

Bulking Facilities

Refinery

Client

• Mill name

• Order number

• Date

• Quantity

• Bulking facility name

• Order number

• Security Seal number

• Bulk tank number

• Date

• Quantity

• Refinery name

• Order number

• Port details

• Ship details

• Date

• Quantity

• Client name

• Order number

• Date

• Quantity

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Pioneering Good Agricultural Practices in Plantation

Integrated Pest Management

Historically, we pioneered the development of good agricultural practices…

• Practice of felling and shredding old stands of oil

palm to decompose in situ

• Preserves and restores the chemical balance and

fertility of the soil

• Reduces associated carbon emissions

• Reduces risks of uncontrolled forest fires

Admission to the United Nations Environment

Programme’s (UNEP) Global 500 Roll of Honour

for Environmental Achievement during the Rio

Earth Summit in 1992.

Zero Burning Replanting Technique

• Use of leguminous cover crops (LCC) to assist in

soil conservation, soil biological activity and

moisture retention

• Use of compost and palm oil mill effluent as a

soil conditioner

• Rainwater capture and utilisation

• Water table management to minimise impact of

saltwater incursion and acidity levels

Soil and Water Management

Pheromone

trapping for

rhinocerous

beetles

Barn owl

populations

for rodents

Beneficial plants

for caterpillar

predator insectsCordyceps fungus for insect

population control

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Progressing Sustainable Practices in Plantation

… and continue to progress developments in this area.

• Adoption of a no peatland planting policy

• Adoption of rigorous water management practices on

existing plantations on peatland

Peatland Protection

• Emissions monitoring via annual carbon inventories

• Strategic emissions reduction initiatives and targets

Operational Carbon Management

• Adopted alternatives and stopped the use of

paraquat in the early 2000s

• Mitigated potentially harmful effects of paraquat on

the environment and high health and safety risks, if

used inappropriately

Alternatives to Paraquat

• Signatory of the Sustainable Palm Oil Manifesto,

which commissioned a scientific study on HCS

• The HCS Study aims to

– develop a definition of HCS forests

– identify methods to delineate HCS forests

– provide guidance on how to accommodate the

rights and livelihoods of local communities

High Carbon Stock (HCS) Study

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Annual Carbon Inventories

Sime Darby’s

Carbon Inventory

Across 8

Countries

Covers 517

Operating

Units

Includes

all

Divisions

More than

95% of

global

operations

Since 2011, we have been monitoring our carbon emissions annually and

aim to reduce emissions

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Sime Darby’s Carbon Emissions

Sime Darby Group Total Carbon Emissions (in million tonnes CO2e)

2.41

(93%)

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Profile of Plantation Carbon Emissions and Energy Use

On average, 69% of Sime Darby Plantation’s carbon emissions are from effluent treatment,

and 86% of energy is sourced from biomass.

Carbon Emissions Sources: Energy Use:

86%

6%3% 1%

4%

B20 BiodieselBiomass DieselElectricity Medium fuel oilNatural gas Petrol

Biomass

69%

13%

6%

7%1% 3% 1%

Effluent Treatment BoilersFertilisers Purchased ElectricityHeavy Machineries Electricity GenerationOther

EffluentTreatment

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Primary Carbon Reduction Target

Plantation Division’s Upstream Emissions Intensity(tCO2e/ mt CPO processed)

Sime Darby Plantation aims to reduce upstream emissions intensity by 40% by 2020,

from 2009 baseline levels.

2014

1.00

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Carbon Reduction Initiatives

Biogas

Capture from

Palm Oil Mill

Effluent

Composting

of Palm Oil

Mill Waste

Use of Low

Carbon

Fuels

Building

Energy

Efficiency

Programmes

Process

Energy

Efficiency

Programmes

Use of

Renewable

Energy

Peatland

Planting

Policy

With the majority of carbon emissions coming from effluent treatment, biogas capture

from palm oil mill effluent is a key feature of our carbon reduction strategy.

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Free, Prior and Informed Consent

“He who brings kola nut, brings life” – Liberian proverb

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Participatory Mapping

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Lean Six Sigma

Breakdown of Benefits by Division

In FY2015, LSS benefits exceeded the target of RM100 million for the year. We are on track on-

track to achieve our target of RM775 million cumulative cost savings from FY2013-FY2017

RM208.99 million

actual benefits

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Plantation Lean Six Sigma Benefits

Plantation Downstream,

46.8%

Plantation Upstream,

3.0%

Procurement Project, 50.2%

RM42.2 million

actual benefits

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Health & Safety

This year, we rolled-out a FELT Leadership Programme for the Sime Darby Group’s Management Team, to

ensure that an uncompromising health & safety culture is modelled and driven from the very top.

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Respecting Fundamental Rights

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Fire Management and Haze

Find out more at www.simedarby.com

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Implementation Our Values

Engage

Respect

Enhance

Protect

Empower

Disclose

Respect &

Responsibility

Integrity

Excellence

Enterprise

Core Values

Sustainability

Values

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Our Sustainability Journey

1985 Applied

zero burning

1990 Applied biological

controls for IPM

1992Elected to UNEP

Global 500 Roll of

Honour for

commercialisation of

zero burning

practice

2008First

certification

against

RSPO P&C

2004Founding member

of RSPO

2012Largest producer of

certified sustainable

palm oil

2014Commissioned

the HCS Study

with other SPOM

signatories

2011Group-wide carbon

inventory established

and COBC launched

2009Oil palm

genome

sequenced

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Sustainability: A Journey of Continuous Improvement

POIGNEXT

New standards seek to strengthen approaches to Human Rights, No-Deforestation, Climate

Change, community wellbeing and transparency.

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High Carbon Stock

Go /

No Go

A new method for sustainable land use planning

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LiDAR for Carbon Stock Mapping

The HCS Study proposes the use of new techniques to better balance environmental protection

and socio-economic needs of developing nations.

Source: HCS Study

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High Carbon Stock Study

Find out more at www.carbonstockstudy.com

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Meeting Customer Demand …

Source: RSPO

Current CSPO Commitments in Europe:

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… Regulatory Requirements …

Source: Adapted from Global Reporting Initiative

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… and Investor Expectations

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Mutual Growth and Development

Gbah town (2010)

Gbah town (2012)

A sustainable palm oil industry contributes to national and local economic development,

while balancing traditional needs and environmental protection.

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Thank You