The Imperative for Sustainability

PALMS:

PALMS:

Michael Yoe Aufa Al Ghifari Amaris Rea Ananda Michael Yoe

Aufa Al Ghifari Amaris Rea Ananda

Accelerate SNI Emission Goals

While surviving harsh market conditions

Proposed by Proposed by

PUK Team

Scaling Up a Holistic strategy to

Timeframe

2

Company Analysis Problem Analysis Strategy Conclusion Background

Climate change have imminent effects on the agribusiness industry while their progress on sustainability have been slow

Climate change effects could potentially cost the agribusiness industry millions..

…Yet, they are still one of the biggest causes of climate change and their actions has been very slow

Agribusines s activities accounts to

18,4% of GHG Emissions

Land use and Agricultural Expansion

Product Processing

Progress in sustainability is awfully slow

• 43%

of Forest 500 companies still do not have deforestation commitments

• 34%

of companies with deforestation commitment have not reported on their progress in the last two years

*Forest 500 companies are 500 companies and institutions that causes the most deforestations, mainly consisting of agri-companies

Climate Change Risks Implications^{Financial Cost of} Action Higher soil moisture evaporation

Behavioral change from pollinators Intense drought and wildfire

Intense rain and frequent floods

Transportation

Use of Fertilizers in Plantations

Magnitude of Impact

Likelihood of Occurance High

Low High

Fast

<1 Year Moderate 1-2 Year

3 1

1 – 10M /year 1 – 10M /year 1 0– 50M /year

1 – 10M /year 1M/site 3.5M/site

<100k/site 3M/site

2 4

1

3 2

4

Background Company Analysis

Problem Analysis Strategy Conclusion

3

So now, SNI is committed to becoming an agribusiness company with positive impact on social and environmental aspect

SNI, an agribusiness company providing processed

palm-oil tree products, is facing financial headwinds.. …Their revenue also still comes at a huge toll towards the environment

SNI’s energy mix still consist of 100% fossil

fuels (aside from

purchased electricity which is mostly fossil), with

notably high diesel consumption

3x

SNI’s GHG emissions is

among the highest in the industry, being

nearly 3x the average CPO mills

SNI’s Energy Mix in 2022

SNI’s GHG Emission per ton CPO produced compared to industry

average

CPO Palm Kernels PKO Palm Sugars Vegetables

SNI’s Product Offerings

With various industry headwinds, SNI is currently facing financial losses

CPO Price in 2022 SNI Financial Performance

Losses are mainly driven by dipping CPO prices and reduced CPO & PK

- 65,7%

Categories Output

Emissions (Ton CO₂e)

Financial

CPO Produced (Tonnes) Market Share (source: BPS)

Scope 1 Scope 2 Scope 3 Net Revenue

(idr bio) Net Profit

(idr bio)

262.532,2

0,5%

732.451 15.625 No Information

24.332 1.971

4.042 No Information

1.411.747 2.293 12.098

SNI

940.964,2

2,1%

700.000

1,56%

1.251.042 163.048 No Information

57.004 2.829

114.571

0,02%

114.415 54.155 No Information

Background Company Analysis

Problem Analysis Strategy Conclusion

We are taking a look further into the industry to identify SNI’s position within the market...

5

316,69 0,15

14.190 -77 1.053.400

32.060 0,04 458.000

1,02%

Within the CPO market, when compared with its competitor, SNI is in a dangerous position where it is losing in 3 categories (Output, emissions, and financials)...

*) Source: All companies listed are publicly traded; the data is sourced from their 2021 sustainability report

Comparing SNI with their competitors, we found out that SNI is inferior in

multiple aspects…

4

Furthermore, SNI also faces threats in their core palm oil business with the rise of sunflower oil in recent years

The rise of sunflower oils has threatened the palm oil commodity market…

…But, recent studies have found that while sunflower may be a good alternative to conventional palm oil, it is still insufficient

Problems with Sunflower

Oil

Sunflower oils cost $350-450/ton more compared to CPO. Also rocketed 1000% post Russian war.

Sunflower oils still require 6x more land to produce oil compared to CPO.

Ineffective Cost

Sustainability Doubts

Recent studies has shown that building a

more sustainable palm oil is better than fully transition to

sunflower oils.

This has led companies to reverse their ban on palm oil.

CAGR 5,2%

Global Sunflower Oil Market Growth

Palm oil regulations in the European market

has led to a growing demand for palm oil alternatives, one of it

being sunflower oil growing at 5,2%.

Sunflower Oil Production in 2020

The biggest producers of Sunflower oil is

Russia and Ukraine. The war

has made sunflower oil prices

rockets by 1000%

GHG Emission for different oil variants

Background Company Analysis Problem Analysis Strategy Conclusion

Key Question

How can SNI’s palm oil reduce their GHG Emission for their core palm business and survive current conditions?

According to The Edge Research (2021)

Source: Maximize Market Research Ltd (2021)

Root Cause Breakdown–

Issue Tree Analysis

Problem Statement

How could SNI tackle Challenges among its environment, social, and governance to achieve net zero emissions goals by 2030 while surviving the market conditions?

To reduce GHG Emission in their core business, SNI must encounter the following problems

Problem Analysis

Background Company Analysis Strategy Conclusion

6

Root Cause Analysis

Strategy

Company Analysis Problem Analysis Conclusion

Background

7

PALMS Strategy vs. Root Problem

Governance

Environment Social

Polyculturing

Energy

Energy Transition to

Biomass Independent

Farmer Development Agri-Efficiency

Improvement

√

√

√

Waste

Management Crop Emission Soil

Management Farmer

Awareness Lacking Emission Goals

√

√

√

√ √

√

√

√ √

√ Strategy

Now how does the PALMS strategy correlate to the identified problem?

P.A.L.M.

S.

P.A.L.M.

S.

1. Polyculturing

2. Agri-Efficiency Improvement 3. Leading Farmers Program 4. Moving to Biomass

5. Slow Diversification 1. Polyculturing

2. Agri-Efficiency Improvement 3. Leading Farmers Program 4. Moving to Biomass

5. Slow Diversification

Strategy

> >

Issue Tree

Strategy

Slow

Diversification Building a safety net for SNI and create future business opportunities

S

Strategy

Company Analysis Problem Analysis Conclusion

Background

8

PALMS Strategy:

A L M

P

As SNI have expanded to sell vegetables and other products, polyculturing is necessary to reduce cost

Cost savings. Reduced overall cost of water and fetilizer usage.

By implementing Polyculturing, SNI would improve net profit by 1,67 mio USD and reduce CO2e scope 1 by 35% by

year 2030

Additional Profit. Although there is less palm oil can be planted, the additional revenue gathered from supporting plants contributes to 43%

more revenue per m²

Potential Plants. such as rubber, cassava, corn, or beans are shown (through research) for palm tree

polyculturing

Effects on CO₂ emissions:

Up to 60% Less Emissions*

Compared Yield Effect:

Up to 120% More Crop physical-yields

Polyculturing, intercropping, or tumpang sari is the practice of growing multiple species of agricultural crops within the same space &

time.

Corn

Oil Palms

Key Takeaway

*) Dhandapani, Selvakumar, et al. (2020). Is Intercropping an Environmentally-Wise Alternatice to Established Oil Palm Monoculture in Tropical Peatlands?

A M S P

Strategy

Company Analysis Problem Analysis Conclusion

Background

9

PALMS Strategy:

L

Improving Agri-efficiency Is a crucial step to upgrade the upstream production

Vermicomposting Nursery Improvement Drip Fertigation

Less water consumption

Drip fertigation is a method of mixing

water and

fertilizer within the drip system

35

%

Agri-Efficiency

Yield improvement are done at the start of the process, which includes:

1. Genetic Engineering

technology through CRISPR and collaboration with research institutes.

2. Selective breeding plants which tends to produce more yield and more.

3. Improving seedling

development techniques Effects up to:

Drip fertigation leads to farming efficiency and inclusive nutrient

distribution

*) Rupani, Parveen Fatemeh, Ibrahim, M. Hakimi. (2014). Vermicomposting biotechnology: Recycling of palm oil mill waste into valuable products. USM

Eliminating 80% PPF and POME waste and transportation emissions via local vermicomposting

Research* shows 25-35% richer

nutrients, good physical properties, and optimal maturity in vermicomposts

Vermicomposting reuses POME sludge and PPF through earthworm to create friendly

fertilizers.

L M S P A

Strategy

Company Analysis Problem Analysis Conclusion

Background

10

Leading Farmers Development Program can help solve bottlenecks in the supply side; raising farmers’ awareness and sustainability capabilities

4 Months Training-Development Program

Sustainable Farming

Process Management

^• Financial Support for Sustainable Farming Implementations

• Guaranteed markets for palm oil fruits with

certain quality standards

• Environmentally friendly plantations

Needs training and involvement from all

smallholders

Infoware

• Reduce scope 1 emissions

1. Unskilled farmers in implementing sustainability 2. Low awareness levels among farmers

SNI Farmers

Independen t Farmers

Plantation Developmen

t

Maintenance

• Land Preparation

• Plant Insertion

• Sustainable Planting Technologies

• Weed control

• Ablation

• Sustainable Fertilization

• Harvesting Method

• Documentation of Activities

• Sustainability reporting

• Standards, norms and guidelines

Bottlenecks in sustainable

sourcing

• Access to higher quality palm oil fruits

Benefit for FarmersBenefit for Farmers

Benefit for SNI

P A L M S

Strategy

Company Analysis Problem Analysis Conclusion

Background

11

Biomass is a renewable energy to substitute traditional fossil fuel usage made from living organisms, such as plants and animals.

Lower risks than fossil fuel Build circular economy scheme

• Burning biomass merely releases the CO2.

• But, as long as the amount of CO2 released as a fuel matches the amount absorbed during its development, it is carbon neutral.

• Production os SNI lead to wastes and residues that don’t have any economic value.

• It can be used as a potential bioenergy source, allowing to extract all of the potential energy.

Waste Digestor Treatment Fuel and

Electricity Engine

Solid waste (oil palm, fibre, shells)

and liquid waste (fresh fruit brunches)

are collected

With 600C, wastes are processed in order to achieve homogenous

composition

Stabilized substance by

decreasing temperature using

plate heat exchanger

Biodegradatio n of substance to be biomass

75% - 85%

efficiency increased

WHA T

WHY

HOW

Increasing 4.93% of scope 1 GHG emission from 2021 to 2022 urge SNI moving energy source to biomass

PALMS Strategy:

BENEFITS

Lower risks than fossil fuel

M S

P A L

With the new alternative to the market, SNI must assess other options in the market in order to stay relevant

PALMS Strategy:

Strategy

Company Analysis Problem Analysis Conclusion

Background

How to Integrate SFO into the SNI’s portfolio

• SFO is growing rapidly with 5,2%

CAGR

• The Russian-Ukraine war has left a gap in the SFO market export

By slowly diversifying, SNI would gain access to more profit and protection from market changes.

Key Takeaway

WHY HOW

SNI will ride the upstream momentum on all markets (CPO and SFO)

By 2030, SNI will profit by owning more than 0,02% SFO market shares (globally), SFO contributing to 40% of SNI’s profit.

Diversification is a way to protect SNI’s Assets from future risks in the CPO market

Leveraging market &

geopolitical momentum by slowly reinvesting in potential cash cows, such as SFO

DIVERSIFICATIO N

1 .

Building cost structure and slowly harvesting market cash

2

cows

.

CAGR*

CPO vs. CFO

5,2 2,75 %

%

Source: GAPKI News Report. Indonesia (2017). Proyeksi Vegetable Oil Dunia 2025

Integrating current strategies for decarbonization efforts as SNI has access to the infrastructure and knowledge for this effort

3 .

12

Strategy

Company Analysis Problem Analysis Conclusion

Background

13

FEASIBILITY ANALYSIS: Financial Projection and Environmental Analysis

Financial Impact

24%

IRR in 2030

135

Cash Flow in 2030 (million USD)

Up to_Profit

27%

increasing

View Appendix A1. for detailed Financial Analysis

Cashflow Analysis

FINANCIAL PROJECTION (in USD million)

2023 2024 2025 2026 2027 2028 2029 2030

Revenue 76,7 84,37 92,807 102,0877 112,29647 112,8579524 124,1437476 117,9365602

Net Income (Total Cash

Inflow) 21,348 42,759 61,117218 70,58862594 82,73148606 87,31347121 103,1451416 104,4597043

Polyculturing 1,37 1,507 1,6577 1,82347 2,005817 2,2063987 2,42703857 2,669742427

Agri-Efficiency

Improvement 2,978 3,4834 2,10764 1,475196 1,3767429 1,46944071 1,604015037 1,760930258

Leading Farmers

Development Program 0,166 1,0226 1,12486 1,0164 1,11804 1,229844 1,3528284 1,48811124

Moving to Biomass 0,6 3,842 1,7292 0,97992 0,576432 0,3343392 0,19599552 0,115754112

Slowly Open Diversification 2,8 2,315 2,27025 2,0746125 2,007343125 2,029502531 2,116379095 2,252569107

Total Cash Outflow 7,314 9,855 6,6194 5,294986 5,0770319 5,24002261 5,579877527 6,034538037

Total Cash Flow 14,034 32,904 54,497818 65,29363994 77,65445416 82,0734486 97,56526404 98,42516626

Strategy

Company Analysis Problem Analysis Conclusion

Background

14

EMISSION ANALYSIS: GHG Projection and Environmental Analysis

Emission Impact

Reduced Carbon Emission by Year

By 2030, SNI’s carbon emission is

53,8% Less than

2021

(689.907,07 tonnes less)

SBTi Framework

What temperature goal should SNI align its Scope 1 and Scope

targets?

What type of Scope 1 and Scope 2 target SNI should set?

Is a scope 3 target required?

What type of Scope 1 and Scope 2 target SNI should set?

Scope 1

596.81 0

(tCO2e in Y8)

Scope 2

42.882

(tCO2e in Y8)

Scope 3

50.216

(tCO2e in Y8)

In preindustrial level

1.5°C

Limiting warming to

Scope 3

<

Hence, Scope 3 emission is

40%

not the first prioritization

86,5%

FLAG Sector Approach:

Reduction 3.03%/yr until 2030

FLAG Commodity Approach:

Reduction 3.1%/yr until 2030

6,22% 7,28%

: Scope 1 emission

*based on SBTi FLAG Guidance (globally, 2050)

4.6 1 1.69 1.63

1.3

Scope

1 &2 Scope 3

*FLAG sector, by 2050

-95% -67%

Land Use Change

Improved Agriculture

Improved Sustainable Forest

Management Reserved Soil

Enhanced Agricultural Soil

Carbon

GtCO2/yr

Strategy

Company Analysis Problem Analysis Conclusion

Background

15

All the initiatives above are meaningless if SNI doesn’t set feasible targets through roadmap

2024

2025

2026

2028

2030

...Moving Faster… ...Scaling Up…

Initial Targets

• Cut off 16% use of fossil fuel-based usage

• Prioritize SNI farmers to get educated by leading farmers

development program

• Achieve 10% less water consumption

• Achieving 3/10 waste efficiency.

• All SNI farmers successfully pass leading

development program

• Producing better quality (<20%

fault) and higher quantity

• 5/10 waste is used to

generate clean energy

• Water efficiency reaching 35%

• All independent farmers are attending leading development program

• Maintain relationship and expand 30%

partner (independent farmers)

• 7/10 waste used to provide energy

efficiency

• Higher quantity (+40%) production from 2023

• 100% clean energy usage

• Increased 57%

soil quality driving to higher quality of CPO, PK, and PKO

• -42% land usage and -25% cost savings

Roadma

p Year

Strategy

16

Company Analysis Problem Analysis Conclusion

Background

FEASIBILITY ANALYSIS–Timeline

The P.A.L.M.S Solution can viably be implemented according to a 3-year timeline for the moving faster phase. The 5-year rest of the timeline are reserved to gradually upscale the startegy to existing production process

Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 ^{Q4 2024} Q1 2025 Q2 2025 Q3 2025 Q4 2025 Planning

Land Preparation

Research and Testing

Gradually scaling the implementation Research and Testing

Procurement

Gradually scaling the implementation Planning

Leading Farmers Development Program Farmers Recruitment

Planning

Research and Testing

Procurement

Implementation Planning

Polyculture

Agri-efficiency Initiatives

Leading Farmers Development

Program

Moving to Biomass Fuels

P A L

M

Stakeholder

Alignment Stakeholder

Alignment

Stakeholder Alignment

Stakeholder Alignment

Slowly

Diversifying

S

RnD and Planning Infrastructure

Development Implementation and Decarbonization Improvement

Strategy

17

Company Analysis Problem Analysis Conclusion

Background

SNI Should be Able to Mitigate the Risks that has been identified…

Impact

Li ke lih o o d

These are the key risks identified..

Which can be averted through..

Very Rapid (<1 mo) Moderate (1-3 years)

Rapid (< 1 year) Rapid (< 1 year) Slow (>3 years)

Critical Line

Low engagement from farmers for farmers development program

1

2 3

4

1

4

Provides benefits through multiple partnership

schemes

Financial risks

3

Look for co-financing

schemes with other CPO companies/governments

Resistance to change from stakeholders

5

Establish clear

communications early on and accountable reporting

2

Varying plants to be

intercropped with oil palms Polyculturing results in

lower-than-expected yields

Biomass waste are insufficient for energy conversion

Source biomass waste from smallholders/other palm oil companies

5

Conclusion

18

Company Analysis Problem Analysis

Background Strategy

Conclusion By implementing P.A.L.M.S. strategy, SNI will not just become environmentally sustainable but also economically stronger

All in all, P.A.L.M.S. Solution will result in 46,13% less scope 1 carbon emission whilst gaining from an increased revenue of 130 Mio USD for SNI in 2028.

P P A A L L M M

Polyculturing has significant effect on water usage, waste generation, final yield, and carbon emissions for Oil Palm plantations.

Agri-Improvement, consists of drip fertigation, vermicompost, and nursery improvement which leverages technology to focus on upstream production.

Leadership for Farmers Program (LFP) aims to educate small to middle sized oil palm farmers to enhance CPO production.

Moving to Biomass eliminates the need of biomass transportation within SNI and refocusing PPF and POME waste to circular source of energy.

Reduce overall cost of production by 27% whilst reducing 34% CO₂e

100% all outsourced raw FFB are produced from LFP farmers by 2030

Act as an intermediate source before SNI adopts zero-emission energy

Multibeneficial relation between oil palms and surrounding crops

S S

Slowly diverse business model by producing sustainable sunflower oil to expand market and follow demand.

SFO as core product in SNI’s total portfolio and further GHG reduction efforts introduced

Thank You.

Thank You.

Michael Yoe Aufa Al Ghifari Amaris Rea Ananda Michael Yoe

Aufa Al Ghifari Amaris Rea Ananda

Proposed by Proposed by

PUK Team

Appendix A1. Financial Projection Analysis (1)

CASH INFLOW (in USD million)

2023 2024 2025 2026 2027 2028 2029 2030

Income from CPO and PK (Based

on volume of production) 76,7 84,37 92,807 102,0877 112,29647 112,8579524 124,1437476 117,9365602

Income from Sunflower Oil (Based on volume of

production) 0 15,34 18,408 20,2488 24,29856 29,158272 34,9899264 41,98791168

Income from Other Branch

(Palm Sugar and Vegetables 10,24 14,336 25,8048 28,38528 31,223808 34,3461888 37,78080768 41,55888845

Total Income 86,94 114,046 137,0198 150,72178 167,818838 176,3624132 196,9144817 201,4833603

Operating Expenses 60,12 63,126 65,01978 66,9703734 68,9794846 71,04886914 73,18033521 75,37574527

Gross Margin (-Net Operating

Expenses) 24,138 45,828 64,800018 75,37626594 88,95541806 94,78218961 111,3607318 113,4968536

Payment to Providers of Capital 2,79 3,069 3,6828 4,78764 6,223932 7,4687184 8,21559024 9,037149264

Net Income 21,348 42,759 61,117218 70,58862594 82,73148606 87,31347121 103,1451416 104,4597043

CASH OUTFLOW (in USD million)

2023 2024 2025 2026 2027 2028 2029 2030

POLYCULTURING Local Collaboration and

Marketing Budget 0,17 0,187 0,2057 0,22627 0,248897 0,2737867 0,30116537 0,331281907

Implementation Cost 1,2 1,32 1,452 1,5972 1,75692 1,932612 2,1258732 2,33846052

AGRI-EFFICIENCY IMPROVEMENT

Research and Development Cost 0,194 0,291 0 0 0 0 0 0

Mixer Drip Fertilizer Technology 1,3 1,56 0,312 0,0624 0,01248 0,002496 0,0004992 0,00009984

Vermicompost Development 0,903 0,9933 1,09263 1,201893 1,3220823 1,45429053 1,599719583 1,759691541

Genetic Engineering Technology 0,581 0,6391 0,70301 0,210903 0,0421806 0,01265418 0,003796254 0,0011388762

Appendix A1. Financial Projection Analysis (2)

LEADING FARMERS DEVELOPMENT PROGRAM

Training and Operation Cost 0,166 0,1826 0,20086 0 0 0 0 0

Financial Support for

Stakeholders 0 0,84 0,924 1,0164 1,11804 1,229844 1,3528284 1,48811124

MOVING TO BIOMASS Research and Development

Cost 0,6 0 0 0 0 0 0 0

Digestor Infrastructure 0 1,29 0,774 0,4644 0,27864 0,167184 0,1003104 0,06018624

Treatment machine 0 1,44 0,288 0,1152 0,0576 0,02304 0,009216 0,0036864

Biogas Engine Converter 0 1,112 0,6672 0,40032 0,240192 0,1441152 0,08646912 0,051881472

SLOWLY OPEN DIVERSIFICATION Harvesting (Shelling and Pre-

Pressing) 1,1 1,21 1,331 1,4641 1,61051 1,771561 1,9487171 2,14358881

Extraction Machine 1,7 1,105 0,93925 0,6105125 0,396833125 0,2579415313 0,1676619953 0,108980297

Total Cash Outflow 7,314 9,855 6,6194 5,294986 5,0770319 5,24002261 5,579877527 6,034538037

Income After Initiatives (Totel

Cash Flow) 14,034 32,904 54,497818 65,29363994 77,65445416 82,0734486 97,56526404 98,42516626

Appendix A2. Carbon Emission Analysis

Yearly Progress (Ton CO2eq)

Strategy Year 1 (2023) Year 2 (2024) Year 3 (2025) Year 4 (2026) Year 5 (2027) Year 6 (2028) Year 7 (2029) Year 8 (2030)

Polyculturing 1.465,49 14.654,85 58.619,40 73.274,25 117.238,80 131.893,65 131.893,65 146.548,50

Drip Fergiation 0,00 576,66 1.153,32 1.729,98 2.594,97 3.459,96 4.324,95 5.045,78

Vermicomposting 0,00 11.827,40 17.741,10 23.654,80 35.482,20 47.309,60 53.223,30 65.050,70

Nursery Improvement 0,00 1.152,67 1.729,00 2.305,33 11.526,66 57.633,32 92.213,30 103.739,97

Leading Farmers Program 0,00 105.502,87 168.804,59 179.354,88 183.574,99 185.685,05 185.685,05 185.685,05

Moving to Biomass 9.191,85 36.767,42 73.534,83 110.302,25 147.069,66 183.837,08 183.837,08 183.837,08

Subtotal 10.657,34 170.481,86 321.582,24 390.621,48 497.487,28 609.818,65 651.177,33 689.907,07

Strategy Current CO2e Source

Current CO2e (Ton

CO2eq)

Sum of Current CO2e (Ton

CO2eq)

Reduced

Emission (%) Method of Calculation Polyculturing Crop

sequestration 418.710,00 418.710,00 35,00%https://www.frontiersin.org/articles/10.3 389/ffgc.2020.00070/full

Drip Fergiation Fertilizer use 57.666,00 57.666,00 10,00% Benchmarking with FMCG company

Vermicomposting Palm Oil Effluent 118.274,00 118.274,00 100,00%https://www.researchgate.net/publicati on/297849624_Studies_on_Vermicompost_P roduction_of_Palm_Oil_Mill_Effluent_Sl udge_Using_Eudrillus_eugeniae Nursery Improvement

Reduced fertilizer 57.666,00

678.039,00 17,00%Reduced fertilizer and land conversion due to higher yield

Land Conversion 620.373,00 Leading Farmers

Program

Fertilizer use 57.666,00

678.039,00 31,12%Forest fire reduction and land conversion reduced

Land Conversion 620.373,00

Moving to Biomass

Gasoline, pertalite,

kerosene 21.322,00

186.881,00 98,37%IPCC Special Report on Renewable Energy Sources

Diesel 147.954,00

Purchased

Electricity 17.605,00

Appendix B. Companies Reversing Their Ban on Palm Oil