Sustainability Statement


Overview

The Company is a licence-holder of Sustainable Forest Management Licence Agreement 06/97 ("SFMLA 06/97"), covering an area of 71,293 hectare of natural forest in the Lingkabau Forest Reserve, Forest District of Kota Marudu, Sabah. Subsequently, the Company has on 12 April 2018 entered into a Sustainable Forest Management Licence Agreement ("Supplemental") under the 100 years SFMLA 06/97 for conversion of 15,438.30 hectares into Protection Forest Reserve ("Class One") and excise 10,195.28 hectares for socio-economic purpose. Pursuant to the exercise, the remaining licensed area is 45,659.42 hectares.

Our activities and commitments to Corporate Responsibility are consistent with the concept, principles and practices of the sustainable forest management to ensure the sustainability of our forest resources.

Under the SFMLA, we are mandated to manage the licenced forest area based on the principles of sustainable forest management "to ensure forest remaining large, healthy, diverse and productive".

The principles of sustainable forest management entail the following:

In achieving the above principles, the Company has set the following Policy Statement:


Forest Resource Management

The forest management practices adopted by the Company are basically in line with those a dvocated by Sabah Forestry Department and comprise the following:


The table below depicts the key performance indicators of the forest resource management:


No.Performance measureTarget (ha)Achieved (ha)
1.Timber harvesting2456 1454
2.Silviculture treatment700 383
3.Timber plantation8166

Timber harvesting during the year is concentrated in salvage harvesting in Industrial Tree Plantation area while RIL harvesting in the natural forest area was carried out circumspectly in full compliance to RIL guidelines.


Environmental Protection

The mandatory requirement of Environmental Impact Assessment ("EIA") for activities associated with land development and utilization of natural resources in Sabah is stipulated in the Conservation of Environment Enactment 1996 and the Conservation of Environment (Prescribed activities) order 1999. To this end, all activities carried out within the licenced area are in compliance with the provisions of the act mentioned above.

Three phases of EIA for Industrial Tree Plantations area and one phase of EIA for Natural Forest Management ("NFM") area have been approved separately by the Environmental Protection Department of Sabah in 2005 and 2007. In 2018, apart from for the final quarter, all Environmental Compliance Reports ("ECR") of the areas were submitted by the environmental consultant of the Company to the Environmental Protection Department of Sabah without any major concerns raised.


Social And Community Development

Sustainable Forest Management is closely linked with the socio-economic development of the local community through social projects implemented by Sabah Forestry Department and the Company as well as the local communities. As a committee member for the "Gana Resettlement and Integrated Development Project ("GRID")", the Company continues to provide inputs to the projects in 2018. The Company also maintains its support to the European Union Reduced Emission from De-forestation and De-foliation ("EU-REDD+") Project in Kampung Gana. One of the proposed project is the eco-tourism development for Kokobuan Waterfall as part of the project’s sustainable livelihood activities for the Kampung Gana Communities. As the waterfall is in the Lingkabau Forest Reserve, the Company may preserve some portion of the area to ensure the waterfall remains undisturbed.

The Company's involvement in the local communities in 2018 includes the following:

  1. Conducting consultations with local communities via formal and informal dialogues in Kampung Dampiron, Kampung Tagapalang and Kampung Gana.
  2. Verification and survey of ancestry graveyard for Kampung Dampiron and Kampung Tagapalang.
  3. Verification and survey alleged old graveyard in Compartment 60 of Lingkabau Forest Reserve.
  4. Monitoring and verifications of the identified High Conservation Value Forest ("HCVF") with active inputs and participation of the relevant community including the proposed eco-tourism development for Kokobuan waterfall in Compartment 138 of Lingkabau Forest Reserve.
  5. Contributed materials for the repairs of building in Sekolah Kebangsaan Abuan and Nor Hidayah Surau in Kampung Abuan.
  6. The Company has also contributed in kinds for the activities organised by Gereja SIB Kampung Abuan and Persatuan Panel Penasihat Klinik Kesihatan Abuan.

Figure 1: Locating and verifying grave site in Kampung Dampiron.


Economic, Environmental and Social ("EES")

In line with the Sustainability Reporting Guide and Toolkits ("the Guide") released by Bursa Malaysia Securities Berhad ("Bursa Malaysia") on 8 October 2015 and the subsequently released second edition on 13 December 2018, all PLC are called to adopt a holistic approach to business management, taking into consideration the Economic, Environmental and Social ("EES") key matters alongside financial implications.

As part of its sustainability process, especially in determining the key matters that are important for the Company and its environment, the Company has engaged various stakeholders namely, the Investors/Shareholders, Suppliers, Bankers and Auditors, and Employees through a Survey held on 29 August 2018 that sought to identify, evaluate and manage the material sustainability key matters and improve awareness of the key matters that could significantly impact the Company and its stakeholders. The list of key matters was based on the EES provided in the Guide. The survey was in printed as well as in online forms to reach all the intended participants.


Based on the summary of the survey shown above, the Company conducted an in-house Sustainability Workshop on 3 October 2018 which aims to cover the following objective:

Compliance Focused
1.Set the objectivesTo meet with the regulatory requirements.
2.Identify the TopicsCovers a range of required sustainability topics.
3.Collect the InformationSelective case studies and limited ad-hoc data.
4.Communicate the ResultsMinimal content made publically available on an inconsistent basis.

The activities conducted during the workshop:

a) Summary of Stakeholder, Stakeholder Engagement Method, and Challenges Faced or Anticipated and How to Improve (Table A);


b) Stakeholder Prioritisation Process & Matrix (Table B);


c) Influence on Stakeholder Assessment and Decisions (Table C)


d) Materiality Matrix (Table D)


From the Stakeholder Prioritisation Process & Matrix, the Company has identified 2 stakeholders whom have high influence and high dependence to the Company. There are the Contractor and Employee. Based on the Materiality Matrix (Table D arising from the EES, the areas has significant impact and influence to the Company are illustrated in the table below:

StakeholderRelevant EES Matters
1.ContractorLabour and Management Relations
Weather Condition
2.EmployeeTraining and Education

Contractor

Contractor have high influence and high dependence to the Company and their most significant impact and influences key matters are Labour and Management Relations and Weather Conditions.

In our Company, the engaged contractors for harvesting, silviculture, liberation treatment, planting and maintenance were all briefed prior to commencement of activities on requirements to observe environmental mitigations such as prohibition of any activities along the river/stream reserve. They also observed the open burning prohibitions.

Labour and Management Relations


During the year, with regard to labour and management relations, the Company have incorporated in the engagement contract agreement that the contractor shall ensure that all the employees involved in forestry activities in the assigned area are registered with Forestry Department by filling of the ‘Certificate of Identity' and ensure that the annual endorsement of the certificate is carried out. The contractors have also initiated effort to regularize its workers with all the relevant authorities. For the forthcoming year, the Company plans to inculcate more safety and environmental awareness to the contractors.

For the year 2018, all contractors have fulfilled the TLAS audit with respect to safety related and environmental mitigation principles. However, the Company intend to further educate the Contractors in order to make them aware that the actions taken is not only as part of their obligation but more on working etiquette.

Weather Conditions

The contractors are required to update a daily weather chart and submitted to the office on weekly basis commencing mid of 2018. The rainfall occurrences are counter checked by the Company field rangers and the record kept in the site office.


Employee

The Company having a diverse, multi-cultural workforce consisting of skilled and technical employee including team of professional in the senior management level.

Training and Education

The Company places much emphasis on its staff training and development programmes. As with its Board of Directors, staff are also encouraged to undertake continuing professional education to equip themselves with the latest technical and statutory updates to stay relevant and be prepared for their jobs.

In year 2018, a total of 7 trainings related to the Company’s operations were held for all levels of employees. The trainings are as listed below:

No.Continuing Education Programme AttendedMonth Attended
1.WWF High Conservation Value ("HCV") Intro and Refresher TrainingJuly 2018
2.Sustainability Engagement Series for CFO and CSOJuly 2018
3.Bursa Malaysia with MIA partnership "Evolutions of future CFO"August 2018
4.Sabah Timber Legality Assurance System stakeholders ConsultationOctober 2018
5.Sabah Forestry Department "Sustainable Forest Management Implementation and other related issues"November 2018
6.MTIB "Strategy Workshop of National Timber Industry Census study"November 2018
7.Sabah Forestry Department "The Sixth Project Steering Committee (PSC) Meeting of the EU Funded Programme Tackling Climate Change Through Sustainable Forest Management And Community Development"December 2018

For the upcoming year, the Company have included in Annual Work Plan 2019 to conduct further training as indicated below:

Table 1: Tentative schedule for staff training in 2019.
Type of TrainingPersonnel InvolvedImplementation
RIL Operator RefresherTractor operators Timber Fellers Hookman2nd Quarter
Wildlife awareness course In collaboration with World Wildlife Fund (“WWF”)Supervisors Rangers Selected staff3rd Quarter
First Aid training Safety Committee3rd Quarter

Moving forward, the Company will continue the practice of measuring, disclosing and accounting for corporate performance towards the goal of sustainable development. Sustainability key matters are complex, inter-connected and continually evolving. Thus, this report essentially describes the Company’s performance in its forest resource management, and initiatives on environmental and social responsibility during 2018, and presents our commitments for the future years.