AFI Transparency Statement 2019/2020
At AFI we respect human rights and do not tolerate any form of modern slavery. However, we recognise that no supply chain is without risk of modern slavery and it is our responsibility to ensure we understand these risks and work in partnership with our suppliers, contractors, partners, and customers to identify and mitigate them
Acacia Forest Industries Sdn Bhd (AFI) is a plantation forestry company that was formed as a Joint Venture company in 2003 between Sabah Forestry Development Authority (SAFODA), a Sabah Government department set up for plantation forestry development projects in Sabah, and a private company, now known as Hijauan Bengkoka Plantations Sdn Bhd (HBP). AFI is governed in equal parts by a Board of six Directors, with the Chairman of the AFI Board nominated by SAFODA. The AFI management team is led by the Chief Executive Officer who reports to the AFI Board. AFI is involved in plantation forestry on Government Gazette land in the Bengkoka peninsular in North East Borneo. AFI is operated as a sustainable and responsible plantation forestry company planting fast-growing tropical hardwoods of predominantly Eucalyptus species for sale into the Saw Log and Chip Log markets. It replants every tree that is harvested and will continue to do so until 2060.
We believe that the logs we sell to our customers should only be employed in adding value to society and not used in any way that is detrimental to the environment. For us, that means selling only to responsible customers with similar values and ideals to ourselves We are committed to giving our customers confidence that the products they buy from us are responsibly grown and harvested through our Forest Stewardship Council ® (FSC®) certification and compliance with the International Finance Corporation’s Performance Standards. This brings opportunities to develop closer and deeper relationships with a smaller number of suppliers and contractors, giving us more visibility over our supply chain and the ability to work in close partnership with suppliers and contractors to ensure they adhere to our ethical and sustainability standards.
Our Supply Chains
As a plantation forestry company, our log products are currently sold into the Malaysian and regional markets to customers who convert them into products for sale in the global market. In the course of managing and growing the trees that produce these log products, many suppliers are involved in providing materials or services not for resale, as well as contractors that assist us to plant and maintain our forests and transform our mature trees into logs for sale to our customers. At this time, we source goods and services not for resale from 41 key suppliers, and we have a further 34 contractors helping us grow our trees, and another 6 contractors involved in harvesting, transport, and shipping of our logs to market.
Our Targets and Commitments
Our commitment to respecting human rights is integrated into our long-term sustainable growth plan. This includes the following targets designed to promote and respect for human rights and address modern slavery risks:
— Ensure all goods suppliers meet our ethical and environmental standards by mid-2019. In order to meet our standards, we require all suppliers to answer a questionnaire on their commitment to respect human rights.
— Ensure all contractors meet our ethical and environmental standards compliance framework by mid-2019. In order to meet our standards, we require all contractors to undergo training in these standards, and be subjected to regular audits.
— Establish new and upscale existing strategic community programmes to achieve positive change in small business development and community out-grower schemes by mid-2019.
Many of our community programmes help to promote and protect human rights.
Our Company Policies
Our Human Rights Policy sets out our commitment to respect human rights, in line with international agreements and guidelines including: ILO Convention N.87, ILO Convention N.98, FPC Interim Standard: Principle 4, International Finance Corporation (IFC) Performance Standard 2, the United Nations Guiding Principles on Business and Human Rights; the International Bill of Human Rights (which includes the Universal Declaration of Human Rights); the UN Global Compact; the International Labour Organisation’s Declaration on Fundamental Principles and Rights at Work; the Children’s Rights and Business Principles and UN conventions on the elimination of discrimination, and the UK Modern Slavery Act of 2015. Furthermore, AFI subscribes to and supports the nine elements of the Ethical Trading Initiative Base Code.
AFI is in the process of entering into an Integrity Pact with its contractors and suppliers. This Pact lays out the ethical standards and human rights commitments that the company requires from its contractors and suppliers based on the ILO Fundamental Conventions on worker rights. Compliance with the standards is monitored through an ethical audit process (see Audit processes).
Our whistle-blower policy enables staff, contractors, and suppliers to report any concerns about modern slavery and any other human rights violations. All reports to the Compliance Officer or the Executive Director responsible for managing AFI are fully investigated, and followed up and the outcome is reported to the Audit Committee of the Board of Directors. The Audit Committee meets at least once a year, as the situation requires, and it has a number of objectives, including oversight of compliance with regulations and good governance, and determination of the adequacy of the Company’s internal control environment.
There have been no reports to date relating to modern slavery or human right violations made through our whistle-blower process or other reporting channels in the 2018 financial year. We require suppliers and contractors to maintain a means by which workers can openly communicate and share grievances with their management, without fear of reprisal, intimidation, or harassment. This requirement is included in our Contractor agreements. As part of our ethical audits, we check that contractors have grievance mechanisms in place (see Audit processes).
Malaysia has an Anti-trafficking in persons and anti-smuggling of migrants act 2007 (Act 670) and a Penal Code (Act 574) with a section on Kidnapping, Abduction, Slavery and Forced Labour (sections 357-374), and has pledged its commitment to end forced labour, modern slavery, and human trafficking, at the 72nd United Nations General Assembly in New York. Malaysia also has a National Action Plan on Anti-Trafficking in Persons (2016-2020) and have ratified the 2015
Asean Convention against Trafficking in Persons (ACTIP).
Audit Processes (Due Diligence)
In 2016, AFI undertook to become fully compliant with the IFC Performance Standards (IFC PS). An initial compliance assessment by an external auditor indicated a 40% overall compliance level. Over the course of the next year AFI had a further four IFC compliance audits until we achieved 90% compliance against the IFC PS, increasing to 92% at the end of December 2018. AFI is certified against the FSC Forest Management standard and is subject annual surveillance audits by an FSC accredited certification body. Furthermore, AFI is audited annually by the Sabah Forestry Department for the Malaysian TLAS certification. AFI also conducts regular internal audits with about 10 audits per month undertaken in our operations.
AFI’s most significant human rights and modern slavery risks are in our supply chain. AFI undertakes monthly audits of its forestry contractors, and audits its external suppliers once every two years. These audits are conducted through the use of checklists that include the AFI ethical standards and human rights commitments referred to previously. While all our contractors have been trained on our policies and procedures, we undertake regular Audits to check compliance to these policies and procedures. This includes annual third-party audits by FSC and TLAS, and ad-hock audits for IFC Performance Standards compliance.
AFI requires suppliers and contractors to act swiftly to address non-conformances and to ensure the welfare of workers. We monitor the effectiveness of their performance through our audit programme and tracking the number and type of nonconformances that are found and remedied (see Effectiveness of measures: contractor audit results).
Our Bongkol Forestry Office has held, and will continue to hold workshops for contractors on human rights and ethical standards. As part of our community strategy, we engage with key community leaders and stakeholders in the Gazette area under AFI control and provide support to community groups, education organisations, and employee workers committees, to understand the issues they face and find ways to promote the rights of workers and support local communities wherever we operate.
AFI uses a web-based Event Management System called “People Tray” to record the results of all our audits, and this system requires management oversight to ensure all events reported are correctly described, root causes are identified, and controls are in place to mitigate or prevent a re-occurrence. The history of events, and the risk assessment carried out by management have identified 80 potential risks of all types to the business, and those deemed to be extreme risks, of which there are ten, are reported to the AFI Board at every board meeting, along with actions management has taken to reduce, mitigate, or eliminate these extreme risks.
While our internal controls and practices are robust, we have a large number of suppliers (41) and contractors (34) operating in our supply chain so we need to take a risk-based approach to preventing modern slavery and human rights issues, including health and safety in our supply chains.
Effectiveness of Measures: Contractor Audit Results
AFI aims to drive up ethical standards in our supply chain through our contractor engagement and ethical audits (see Audit processes). We monitor the effectiveness of our audit programme by implementing a grading system for contractors according to their performance and tracking the number of non-conformances that have been identified and remedied. Over time, we aim for our contractors to improve their performance to internationally acceptable standards. The majority of non-conformances relate to health and safety, which include use of Personal Protective Equipment, fire safety issues such as provision of fire extinguishers, or hygiene or housekeeping in the remote forestry camps.
Training and Awareness
AFI is working to build awareness of modern slavery and ethical sourcing issues among employees, particularly those responsible for overseeing our modern slavery audits referred to previously, as well as buyers of products and services on behalf of AFI. It is particularly important that our procurement and operations teams are able to spot warning signs of modern slavery and also understand the potential impact of our actions on workers in our supply chain. For example, employees should avoid unrealistic operational targets that could encourage excessive overtime. All the AFI staff and contractors have received training in preventing modern slavery in AFI.
Through our Contractor Development Project, we will continue to identify risks and undertake audits to help tackle potential modern slavery and human rights abuses. Over the next year, our key priorities are to:
—— Roll out contractor development programs and follow-up ethical audits to all our contractors;
—— Further develop and roll out our modern slavery and ethical training programmes to our employees;
Transparency Statement Approval
This transparency statement was approved by the Board of Directors of AFI on 13th December 2018 and is signed by the AFI Chief Executive Officer
Lim Song Kuan
Chief Executive Officer
29 November 2023