Success and struggles to obtain FSC TM, with

particular attention on issues affecting land acquisition process, negotiations and benefits

for smallholders

Responsible Investment in Agriculture/Plantations

Regional Land Forum

MissionThe creation, development and management of timber plantation assets in Cambodia which are appealing to international institutional investors

Goals to realize the Missiono Creation of long term value for our shareholders o Establish industry leadership within the regional emerging markets in the following areas:

– Profitability / Return on Investment – Tropical Hardwoods Plantation Technical Expertise – Operating Procedures and Efficiencies – Environmental Sustainability – Social Responsibility

Grandis Timber Mission and Goals

Grandis Timber Limited is a commercial reforestation company, focused on establishment of timber plantations on previously deforested land.

Main activities include:

1- Establishment of a long-term plantation consisting mainly of Teak trees.• Environmental and Social Impact Assessment completed Dec 2010;

• To date, we have established 4,441ha.

2- Legally responsible for a 2,256ha Conservation Area (apart from the ELC)

• Baseline Wildlife Assessment done by Conservation International during March 2013.

• Close working relationship with both Conservation International, Wildlife Alliance and the Forest Administration.

Grandis Timber Background

Location

The Forest Stewardship Council TM (FSC

TM) is an independent, not for profit, non-government organisation based in Bonn, Germany.

• The mission of the Forest Stewardship Council is to support environmentally appropriate, socially beneficial, and economically viable management of the world's forests.

• FSC develops, supports and promotes international, national and provincial standards in line with its mission; evaluates, accredits and monitors certification bodies which verify the use of FSC standards; provides training and information; and promotes the use of products that carry the FSC logo.

What is FSC

Ensuring Responsible Investment

Grandis Timber’s primary tool to carry out its CSR strategy is through FSC certification. FSC was chosen because:

• A requirement from the investors.

• Worldwide recognized certification systemAs of 12 Jun 2016, 190,644,816 ha certified

• Gives investors and directors peace of mind that the company is operating on sound responsible principles and practices;

• Company and Operational practices and procedures are verified on an annual basis by external auditors (GFA).

PRINCIPLE #2: TENURE AND USE RIGHTS AND RESPONSIBILITIES Long-term tenure and use rights to the land and forest resources shall be clearly defined, documented and legally established.

Criterion 2.2 Local communities with legal or customary tenure or use rights shall maintain control, to the extent necessary to protect their rights or resources, over forest operations unless they delegate control with free and informed consent to other agencies.

Indicators: 2.2.1 Local communities with legal or customary tenure or use rights are identified, documented and mapped. 2.2.2 The FMU planning process includes participation of local communities or parties with legal or customary tenure or use rights. 2.2.3 Forest managers provide local communities control over forest operations to the extent necessary to protect their rights and resources. 2.2.4 Where communities have delegated control of their legal or customary tenure or use rights or parts thereof, this can be confirmed by documented agreements and/or interviews with representatives of the local communities.

Criteria and Indicators

Example of Principle 2 at work

• Pre-Audit – Dec 2012

• Initial Certification Audit – Apr 2013

• 1st Surveillance Audit – May 2014

• 2nd Surveillance Audit – Aug 2015

• 3rd Surveillance Audit – Jun 2016

FSC logo has been approved to be attached in email signatures and letter heads in 2014 after 1st Surveillance audit.

Certification History

Social Benefits

• Increased social benefits, community health and well-being through local

employment;

• Promotion and Protection of livelihoods

• Protection of native plants and animals through conservation management,

riparian buffer zone protection and soil erosion mitigation;

• Full title to privately owned land.

•Protection of community and worker rights

Environmental Benefits

• Protection of local water supplies through reforestation, riparian buffer zone

protection, soil erosion mitigation works and chemical and fuel management;

• Limitation of hazardous chemicals

• Prevent loss of natural forest cover

• Protect rare and endangered forests and wildlife

Company Benefits

• International recognition of the good work that is being carried out on the

project;

• Recognized as a responsible company, adding value to our products and

increased access to niche markets;

• Implementation of a Health, Safety and Environmental Management system

to ensure risks (environmental, social, cultural, health and safety) are

identified and risk mitigation measures are put in place;

•Secure Land Title

Grandis Timber firmly believes that to ensure a profitable business, both the environmental and social contexts in which it operates must also be responsibly managed, and has thus developed a Strategic CSR programme.

Objective: To create a framework that ensures Grandis Timber Ltd (Grandis) creates positive, sustainable impact, reduces company risk, and adds value to the business through action and evaluation.

Strategic CSR

Strategic CSR Principles:1. Uphold Community Relations2. Maintain conservation3. Strengthen tenure

Some challenges are external and can not be overcome by responsible management.

Tenure security remains an ongoing challenge for Grandis Timber on a number of fronts, namely:

• Granting of formal title

• Boundary adjustments

• Pressure on Riparian zones

Spotlight on CSR Principle 3: Strengthen Tenure

Social and Environmental Responsibilities

• First and only company in Cambodia to obtain FSC certification

• Apart from the Conservation Area, all riparian and other sensitive areas within the concession land is protected

• Over 42km of roads through the concession used by Grandis and community, with 2.5km of road outside the concession maintained by Grandis

• Cattle grazing on the concession• Contributions for local infrastructure and

various social donations• Site infirmary and two day-care centres• Promote the use of local products,

purchased by GT for nursery purposes • Conservation management plan and

conservation guards

Social contributions

Cambodia Sub-Decree #146 on Economic Land Concessions

Article 4An economic land concession may be granted only on land that meets all of the following five criteria:

1. The land has been registered and classified as state private land

2. Approved Land use plan from the Provincial-Municipal State Land Management Committee

3. Environmental and social impact assessments completed

4. Resettlement issues are addressed lawfully

5. Stakeholder consultations

Article 5

Evaluating Economic Land Concession proposals shall be based on the following criteria:

• Increase in agricultural and industrial-agricultural production by using modern technology;

• Creating or increasing employment;

• Promotion of living standards of the people;

• Perpetual environmental protection and natural resources management;

• Avoidance or minimizing of adverse social impacts;

• Any linkages and mutual support between social land concessions and economic land concessions;

• Processing of raw agricultural materials, to be specified in the concession contract.

Cambodia Sub-Decree #146 on Economic Land Concessions (cont’d)

Land Acquisition Process

ELC

Proposal

•Grandis submitted an ELC proposal to MAFF

MAFF Assessment

•MAFF demarcated boundary and cut out occupant’s land and protected areas on proposed concession

ELC Agreement

•Grandis signed an ELC agreement with initial size of 9,820 hectares (soft title)

Master

Plan

•Grandis prepared a Master Plan for the land designated under the ELC

Land Registration Process

•Process to reclassify land to private state owned land begins upon approval of the ELC agreement

June 23, 200

9

December 31, 2009

July 2,

2010

Current

Land Acquisition Process (cont’d)

A public consultation was approved within terms of conditions

After the public consultation, MAFF is informed that all legal processes were followed

Provincial Cadaster issued land title as State Public (Hard Title)

Ministry of Economics and Finance needs to approve the conversion from State Public to State Private

Land Negotiation (Directive 001)

On the basis of the 01BB order (7/5/2012):

• Provisionally suspend the granting of ELCs;

• Under the motto old policies - new action, in June 2012 the Cambodian Prime

Minister initiated a massive land registration campaign on untitled former forest land.

Private people now receive full property title;

• Ministries, institutions and responsible authorities to implement the policy (and in

particular the policy of the “leopard skin formula”);

• RGC shall seize ELC where companies have not complied with the existing legal

procedures or with the contract;

• In case an ELC has received agreement in principle from the RGC before the date of

this order, the additional legal principles and existing procedures can be continued;

Map (before and after)Title Map – Before and After

• Grandis Timber lost 1,121.70 hectares

(01BB) to three villages.

• The concession also lost 649.38ha due

to an overlapping boundary with a

neighboring social concession;

• During 2015, Grandis lost an additional

152.81ha.

• 7,896.11 hectares had been registered

with 17 tittles.

Map (before and after)Difficulties during process

• Land grabbing during demarcation process

• Pressure on un-used land (i.e. Riparian zones)

• Land brokers selling land to un-suspecting buyers

• Illegal encroachment on the conservation area (35 illegal charcoal kilns destroyed to date)

• Forest Fires

• Training on SOP’s

Map (before and after)Summary and way forward

• Grandis Timber believes a valuable investment requires the responsible management of

economic, social and environmental issues.

• FSC is a positive management tool to ensure that all of these issues are adequately

addressed and improved upon.

• Despite good tools and management, some challenges remain external to

management, yet remain a threat to the investment.

Call for Advocacy and Action

It is the responsibility of those involved in land-based investments (responsible investors,

NGOs, policy makers) to bring attention to and resolve tenure uncertainty issues. This is

the only way that development, society and environment can all thrive together.

Thank you for your attention