Kao, Apical and Asian Agri Launch ‘SMILE’ Program to Help Oil Palm Smallholders Improve Yields, Acquire Certifications, and Secure Premiums

JAKARTA, INDONESIA – Media OutReach – 15 October 2020 – Three leading companies
in the palm oil industry — Kao
Corporation, Apical Group, and Asian Agri — have launched a new
sustainability initiative to help independent oil palm smallholders in
Indonesia improve their yields, acquire international certification, and
eventually secure sales premiums from selling certified palm oil.

Known as SMILE or the SMallholder
Inclusion for better Livelihood & Empowerment program,
the collaboration is between downstream producer Kao
Corporation, mid-stream processor, exporter and trader Apical Group, as well as
upstream producer Asian Agri .

The 11-year initiative
seeks to continue to build a more sustainable palm oil value chain by working
with independent smallholders. Independent smallholders contribute more than
28% to Indonesia’s overall palm oil market^[1].

The collaboration recognizes
that independent smallholders are private business owners who are challenged to
increase their yield and productivity but may neither have the knowledge nor
the technical expertise to do so.

As the world’s most
widely used vegetable oil, palm oil has a wide range of uses, including
processed foods, cooking oil, biodiesel fuel, and as a raw material for
detergent manufacturing. Global production of palm oil stands at 75million
tons per year^[2]and
is expected to grow to 111.3 million tons by 2025^[3].
There
is now a greater focus in Indonesia on improving palm oil productivity while minimizing
the need for the extensification of existing agricultural land. This not only
helps to safeguard food security, but serves to balance social, environmental
and economic needs.

Kao Corporation, Apical
Group, and Asian Agri are implementing activities in accordance with the
framework provided by the Roundtable on Sustainable Palm Oil (RSPO), and
working to ensure traceability as far as the oil palm plantation, in order to
build an environmentally-friendly, socially-aware supply chain. While the palm
oil industry has moved forward with national certification schemes such as Indonesian
Sustainable Palm Oil (ISPO) or multi-stakeholder led collaborations like the RSPO,
certification for independent smallholders has only recently gained momentum.
SMILE seeks to bridge the knowledge gap of independent smallholders by
partnering with them and leveraging on the success that companies such as Asian
Agri have demonstrated with its long-time partnerships with smallholders.

SMILE will assemble a
team of experts with extensive experience in the areas of plantation management
and agronomy to work with 5,000 independent smallholders that manage approximately
18,000 ha of plantations in the provinces of North Sumatra, Riau and Jambi. Through
customized seminars and workshops, the team will:

• Educate farmers on how to improve their yields and sustainably manage
  their farms, as well as on the importance of staying committed to sustainable
  practices such as no-deforestation and zero-burning, no
  exploitation.
• Provide support for RSPO Certification.
• Provide training on how to implement robust safety measures across their
  estates, and safety equipment (including safety helmets, gloves, and fire
  extinguishers).

This upscaling and
provision of equipment will be implemented from 2020 to 2030 with a view of helping
independent smallholders secure RSPO certifications by 2030. Once certified,
these smallholders will be eligible to receive certified palm oil premiums
averaging 5% higher than non-certified palm oil. As part of RSPO requirements
as well as the companies’ commitment to help the community collectively realize
the UN Sustainable Development Goals (SDGs), SMILE includes initiatives that
promote greater inclusion and improved livelihoods via empowerment initiatives
for communities.

The goal to improve the livelihoods of the independent smallholders
will be through enhanced productivity with no-deforestation, no-peat land and
no-exploitation. Throughout SMILE’s implementation, the three companies will
regularly engage various stakeholders such as NGOs, NPOs, and community leaders
to ensure competent delivery of training, adequate allocation of equipment,
timely provision of needs at the estate and community level, as well as optimized
collaboration towards building a more sustainable and traceable supply chain.

About Kao

Kao creates
high-value-added products that enrich the lives of consumers around the world. Through
its portfolio of over 20 leading brands such as Attack, Bioré, Goldwell, Jergens, John Frieda, Kanebo, Laurier, Merries and Molton Brown, Kao is part of the
everyday lives of people in Asia, Oceania, North America and Europe.

Combined with its
chemical division, which contributes to a wide range of industries, Kao
generates about 1,500 billion yen in annual sales. Kao employs about 33,000
people worldwide and has 130 years of history in innovation.

For more information,
please visit the Kao Group website: https://www.kao.com/global/en/

The Kao Group ESG Initiatives

Recognizing its
responsibility as an enterprise that provides products which people use on a
regular basis in their daily lives, the Kao Group takes active steps to reduce
the environmental footprint of its products throughout the entirety of the
product lifecycle. The Kao Group has received evaluation from many external
organizations such as “Dow Jones Sustainability World Index” (DJSI
World), which selects companies with excellent sustainability performance,
developed by S & P Dow Jones in the United States and Robeco SAM in
Switzerland. In April 2019, Kao launched the Kirei Lifestyle Plan, its ESG
strategy, which incorporates 19 key leadership actions. By integrating ESG into
the core of its company management, Kao will drive business growth and better
serve consumers and society through its enhanced products and services. This
particular project forms part of the Responsibly Sourced Raw Materials action,
one of the Kirei Lifestyle Plan’s 19 key leadership actions.

With regard to palm oil
procurement, which is the category of raw material procurement that has the
largest environmental footprint over the entire product lifecycle, Kao has developed
the Sustainable Palm Oil Procurement Guidelines. Besides demonstrating support
for reducing forest destruction to zero, Kao is also promoting sustainable
procurement that takes ethical issues into account, and is implementing
effective traceability. Kao is a member of the Roundtable on Sustainable Palm Oil (RSPO)
since 2007, and completed the acquisition of SCCS certification for Kao’s all plants
in 2018. Kao is also one of directors of the Japan Network for Sustainable Palm
Oil (JaSPON), which was established in 2019.

In the SMILE program, Kao
plans to provide farmers with its functional agrochemical adjuvant^*4,
which helps to boost productivity while also reducing the burden on the environment,
along with technical guidance on how to use the product effectively with Apical
and Asian Agri. Kao is also collaborating with NGOs and local NPOs to implement
questionnaire surveys and analysis regarding how effective the support being
provided is in terms of boosting productivity and improving smallholders’
working environment, and regarding any areas where further improvements could
be made.

^*4 Kao
has developed the Adjuvant series, a new type of vegetable oil based,
high-wettability agrochemical spreader, which is designed to be particularly
effective on highly waxy plants that droplets of agrochemicals tend to bounce
off when the agrochemicals are being applied; in this way, the agrochemical
adheres better to the plant surface and the agrochemical can be applied to the
crop more rapidly.

■Kao > Sustainability
> Responsibly Sourced Raw Materials

https://www.kao.com/global/en/sustainability/topics-you-care-about/procurement/

■Kao launches new ESG
Strategy “Kirei Lifestyle Plan” to support consumer lifestyle changes

https://www.kao.com/global/en/news/sustainability/2019/20190422-001/

About Apical

Apical Group is one of
the largest exporters of palm oil in Indonesia, owning and controlling an
extensive spectrum of the palm oil business value chain from sourcing to distribution.
It also engages in the refining, processing and trading of palm oil for both
domestic use and international export. Its operations are located in Indonesia,
China and Spain, and include five refineries, three biodiesel plants, an oleo
chemical plant and a kernel crushing plant.

Apical’s business is
built on a broad sourcing network in Indonesia with integrated refinery assets
at strategic locations. These are strengthened by efficient logistic channels
supported by Apical’s own infrastructure to deliver to a wide range of clients
from international trade houses to local industrial buyers. With its unique
business model, Apical has been able to control product quality and address
sustainability and food safety issues, while running highly efficient
operations at its world-class refineries and integrated storage and bulking
facilities.

For more information,
please visit the Apical website: https://www.apicalgroup.com/

Apical Group Sustainability

Since launching the
Apical Sustainability Policy 2014, Apical has made strides in its
transformation journey by adopting global standards and best practices within
its operations, subsidiaries and in partnership with suppliers.

Apical refineries have
been certified by the International Sustainability and Carbon Certification
(ISCC) since 2010. It has been a Roundtable on Sustainable Palm Oil (RSPO) member
since 2011. It achieved full traceability to mills in 2015 and has targeted
full traceability to plantations by 2020.

The Group promotes the
protection of high conservation value (HCV) and high carbon stock (HCS) areas,
peatland and towards positive socio-economic development. It partnered with
Earthworm Foundation, Proforest and Daemeter to integrate its supply chain
transformation, ensure responsible sourcing and continuous improvement in its
supply chain. Since 2017, Apical has been a partner of Tropical Forest Alliance
2020 (TFA 2020), a global public-private partnership that brings together
governments, private sector, and civil society organizations to reduce
deforestation associated with the sourcing of commodities such as palm oil,
beef, soy, and pulp and paper.

Apical is committed to
sustainable sourcing and operations as the fundamental core of its business to
deliver high value products for today’s global market demands.

About Asian Agri

Asian Agri is one of
Indonesia’s largest palm oil producers. Found in 1979, the company today manages
100,000 hectares of plantation land and employs over 25,000 people. A pioneer
of the Indonesian government’s Trans-National Government Migration (PIR-Trans) program,
Asian Agri currently works with 30,000 Plasma Scheme smallholders in Riau and
Jambi who operate 60,000 hectares of palm oil plantations, and independent
smallholders who manage a total 41,000 hectares.

Implementing a strict “no
burn” policy since 1994 and best practices in sustainable plantation
management, Asian Agri has helped its smallholder partners improve
productivity, yield and supply chain traceability, while assisting them obtain
certifications. The company’s mills are technologically advanced and energy
self-sufficient, minimizing greenhouse gas emissions.

Asian Agri (PT Inti Indosawit
Subur) is a member of the Roundtable on Sustainable Palm Oil (RSPO) since 2006.
More than 86% of its owned plantations in North Sumatra, Riau & Jambi
provinces and 100% of Plasma Scheme smallholder plantations in Riau & Jambi
provinces have been RSPO certified. All its owned plantations and those owned
by scheme smallholders ISCC (International Sustainability & Carbon
Certification) certified since 2014. In 2019, the company also achieved 100%
ISPO (Indonesian Sustainable Palm Oil) certification.

The company’s operations
are ISO 14001 certified, while its Learning Institute and nursery research
center in Riau province, Indonesia are both ISO 9001 certified. Asian Agri’s
laboratory at the Center for Research and Development in Tebing Tinggi is accredited
by the National Accreditation Committee under the ILAC Mutual Recognition
Arrangement (ILAC MRA).

For more information,
please visit the Asian Agri website: https://www.asianagri.com/en/