Sustainability

Supply Chain Management

Sustainability

Supply Chain Management

Sustainable Development Goals
   





Positive and Negative Impacts

Managing supply chains for sustainability involves overseeing the entire chain, from source to end-user, with a focus that extends beyond mere economic gains. It requires considering the social and environmental impacts to ensure the long-term viability of the Company or organization and its sustainability for future generations.

PTT recognizes the importance and is dedicated to managing supply chains for sustainability. As such, it has refined its approach to supply chain management in line with sustainable operational practices, incorporating principles of business ethics, social responsibility, safety, and environmental stewardship. In its supply chain management efforts, PTT encompasses procurement and management processes across all sectors.

By integrating Environmental, Social, and Governance (ESG) principles into supplier procurement and management, PTT aims to achieve “sustainable supply chain management.” This approach serves not only as a means of risk management but also as a driver of business opportunities (Opportunity). It involves empowering suppliers to adapt to rapidly changing global business circumstances (Capability Building), fostering sustainable business growth collaboratively, and ensuring confidence in delivering products and services according to demand (Supply Reliability).

Objectives/Goals

Currently, PTT's procurement operates under the Public Procurement and Supplies Administration Act, B.E. 2560 (A.D. 2017). This Act underscores the importance of maximizing benefits to government agencies while upholding principles of transparency, efficiency, effectiveness, and auditability. It aligns with the government's policy to propel the industry forward through technology, creativity, and innovation, ensuring swift adaptation to changing business landscapes. In tandem with PTT's strategy of continual workflow enhancement through digitalization, the management of PTT's supply chain necessitates ongoing development and refinement to ensure efficiency and effectiveness amidst evolving trends.

To achieve this, PTT establishes operational objectives and engages with suppliers through seminars, websites, and various communication channels. These efforts aim to equip suppliers with the necessary readiness for sustainable business development, aligning with PTT Supplier Sustainable Code of Conduct that serves as a guiding framework for PTT's suppliers.


Progress of Key Plans/ ProjectsGRI 308-1, GRI 414-1, GRI 414-2
Plans2022 Goal2022 Performance2023 Goal2023 PerformanceLong-term Goals
Assessment of sustainable practices guidelines for critical/strategic suppliers in the area.

To assess 100% of critical/strategic product, service suppliers as targeted.

Assessed 8 product/service suppliers, representing 100% of the critical/strategic suppliers targeted. To assess 100% of critical/strategic product, service suppliers as targeted. Assessed 8 product/service suppliers, representing 100% of the critical/strategic suppliers targeted. Critical/Strategic suppliers (up to a maximum of 80%) can develop themselves and sustain their businesses effectively.
Sustainable procurement management according to ISO 20400 standards

To integrate sustainability into the procurement process through collaborative efforts among companies within the PTT Group, following sustainable procurement guidelines (ISO 20400), with a minimum of 3 initiatives.

Integrated sustainability into the procurement process through collaborative efforts among companies within the PTT Group, following sustainable procurement guidelines (ISO 20400), with a minimum of 3 initiatives, including:
1. Steel Drum
2. Jumbo Bag
3. Plastic Pallet

To integrate sustainability into the procurement process through collaborative efforts among companies within the PTT Group, following sustainable procurement guidelines (ISO 20400), with a minimum of 3 initiatives.

Integrated sustainability into the procurement process through collaborative efforts among companies within the PTT Group, following sustainable procurement guidelines (ISO 20400), with a minimum of 3 initiatives, including:
1. Drinking Water
2. Fuel Additive
3. Lube Oil

Collaborative procurement among the PTT Group can be conducted in accordance with ISO 20400 guidelines and in line with the established plans. 

Joint procurement of goods and services with companies within the PTT Group To conduct joint procurement of goods and services with companies within the PTT Group with the goal of achieving a 7% value-added from expenditure. Engaged in joint procurement of goods and services with companies within the PTT Group and generated a 13.10% value-added from expenditure. To conduct joint procurement of goods and services with companies within the PTT Group with the goal of achieving a 7% value-added from expenditure. Engaged in joint procurement of goods and services with companies within the PTT Group and generated a 21.04% value-added from expenditure. To procure goods and services jointly with companies within the PTT Group and generate a 10-12% value-added from expenditure.
Satisfaction of suppliers towards the communication of PTT's operational directions to foster understanding of the operations and procurement system of PTT through supplier seminars. The satisfaction score stands at 4.5 out of a perfect 5.0. The satisfaction score stands at 4.56 out of a perfect 5.0. The satisfaction score stands at 4.5 out of a perfect 5.0. The satisfaction score stands at 4.75 out of a perfect 5.0. The satisfaction score stands at 4.5 out of a perfect 5.0.

Management ApproachesGRI414-1

PTT Procurement Policy 

On February 12, 2019, PTT Group unveiled its procurement policy, officially endorsed by the Chief Executive Officer and President. This policy serves as a unified directive for all companies within the PTT Group, ensuring consistency and alignment in their procurement practices.

PTT Procurement Policy 
Furthermore, PTT is committed to fostering sustainable business growth, alongside governing and overseeing operations for the benefit of communities, society, and the environment, aiming to effectively achieve the established objectives. Therefore, PTT places great importance on managing its supply chain and aims to develop it ethically by overseeing its suppliers. This is achieved through the establishment of sustainable procurement policies and trader management practices by PTT Group in 2015.

To ensure that PTT's suppliers conduct business in line with sustainable organizational management practices that are adaptable to the current business landscape, PTT introduced the PTT Supplier Sustainable Code of Conduct (SSCoC) on April 1, 2012, with the latest update on November 1, 2022. This Code specifies the guidelines and scope of compliance with relevant regulations, laws, and provisions. It aims to encourage ethical operations among PTT's suppliers, emphasizing respect for human rights, ensuring occupational health and safety for employees, promoting environmental sustainability, and addressing key issues prioritized by PTT. These principles are categorized into four main pillars:

  1. Business Ethics
  2. Social Responsibility
  3. Safety
  4. Environmental Management 

Supplier Sustainable Procurement Policy
PTT Supplier Sustainable Code of Conduct


Governance Structure

PTT procurement governance 

PTT prioritizes the execution of procurement endeavors that are not only cost-effective, but also characterized by transparency, efficiency, and accountability, thereby fostering trust among all stakeholders. To ensure adherence to legal frameworks, regulations, guidelines, and operational procedures governing both material and non-hydrocarbon commercial procurement, PTT has instituted the PTT Procurement Management Audit Committees. The committees also provide consultation on appropriate procurement and contracting processes, fostering knowledge exchange within the organization and affiliated companies abroad. This collaboration leads to enhanced efficiency in improving procurement and contracting processes, with EVP, Organization Effectiveness, serving as the chairman of both committees.

The process/ mechanism for impact management

Supply chain management: Corporate


In the procurement of goods and general services, where a diverse array of suppliers exists in terms of both quantity and quality, PTT places paramount importance on systematic supplier management. This involves the development of comprehensive vendor management measures aimed at elevating supplier operations to meet prescribed standards, enabling them to meet heightened product demands, achieve objectives, maintain product quality, and foster positive relationships with PTT. Moreover, this initiative serves to enhance suppliers' awareness of organizational sustainability.

PTT sets forth standards for fair and transparent supplier selection, evaluation, and auditing, adhering strictly to principles of business sustainability and supplier reliability criteria. This encompasses vendors' capacity to meet PTT's requirements, as demonstrated by the creation of an “Approved Vendor List (AVL),” where suppliers are chosen based on evaluations covering commercial capabilities, techniques, quality, service readiness, production capacity, transportation, safety, health, environmental considerations, and industry standards. Suppliers are expected to demonstrate their ability to conduct business sustainably according to PTT's practices. Those meeting the evaluation criteria specified in the standards are granted inclusion in the Approved Vendor List. The management of the Approved Vendor List is overseen by the Vendor Selection Committee and the AVL working group. Additionally, PTT has incorporated various conditions into procurement terms to ensure that vendors operate in alignment with sustainable business practices.

PTT has established guidelines for sustainable business practices among its suppliers, covering a range of issues such as ethical conduct, social responsibility, safety management, occupational health, and environmental considerations. These guidelines are available in both Thai and English and are mandatory for suppliers involved in contracts exceeding 2 million baht and/or those with potential impacts on safety, health, and the environment. Moreover, suppliers seeking registration with PTT must adhere to these guidelines. Furthermore, PTT has implemented strategies to promote and manage supplier relationships, aiming to effectively communicate operational directions, best practices, and the Company's sustainable procurement policies to all suppliers. This communication is facilitated through various channels, including annual supplier seminars and the Company's website.

To further strengthen vendor satisfaction and foster positive vendor-PTT relationships, PTT organizes annual supplier seminars with the main objective of disseminating policy, directions, and business operation strategies. These seminars also provide opportunities for information exchange and feedback between suppliers and PTT. A satisfaction survey is conducted with suppliers following each procurement and contract management process, as well as upon the conclusion of contract management. This feedback is utilized to refine and advance the procurement and contracting procedures, ultimately striving to optimize their efficiency.

Performance

Percentage of New Suppliers

100 percent of new suppliers passed the selection process based on the Environmental, Social, and Governance (ESG) Assessment Criteria.

Percentage of suppliers who have contracts with PTT. 100 percent of suppliers who have contracts with PTT, with a value of 2 million baht or more and/or involve work that may impact safety and the environment, including suppliers seeking registration with PTT, have acknowledged, and complied with PTT Supplier Sustainable Code of Conduct: SSCoC


Analysis of procurement expenses during 2017-2023

Procurement During the Year

2018 - 2020

2019 - 2021

2020 - 2022

*2021-2023

Number of Vendors (Individuals) Tier-1 Suppliers 2,852 3,328  4,062  3,379
Critical Tier-1 Suppliers  25 31 32 37
Non-Tier-1 Critical Supplier 11 12 13 14

Spend Value (Billion THB)

66.40 67.56 77.35 77.79

Spend Value in Thailand (Billion THB)

63.26 64.22 74.69 72.15

Spend Value in Overseas (Billion THB)

3.14 3.34 2.66 5.64

Remark: 

Tier-1 suppliers refer to suppliers and contractors who have direct procurement contracts with PTT through the procurement process for Non-Hydrocarbon goods and products.
Critical Tier-1 suppliers refer to the group of Tier-1 suppliers and contractors with whom PTT aims to develop long-term relationships and business synergies to enhance business operations and create added value. These are suppliers/contractors engaged in high-risk operations that could have significant impacts on both themselves and PTT, as well as on the surrounding communities. These impacts can significantly affect buyers both in terms of business and organizational image.
*Data as of January 1 – December 31, 2023. 

Local product and service procurementGRI 204-1 (%)


Supplier satisfaction towards collaboration with the procurement department (%)

Supplier Risk Assessment

PTT has redefined its supplier registration framework to tightly manage vendor risks, ensuring alignment with sustainable procurement standards and safeguarding PTT's business continuity. This involves assessing supplier risks within the primary supplier groups across two dimensions within PTT's supplier registration system, namely:

  • Sustainability risk of suppliers is determined by considering sector-specific risk and/or commodity-specific risk, covering sustainability issues such as project delays, quality requirements for goods or services, air pollution, greenhouse gas emissions, water and wastewater management, waste management, energy usage, anti-corruption efforts, fair competition, labor relations, human rights, and safety.
  • Supply risk is defined based on the type of goods or services that may impact the operations of the Company, such as high-volume orders, critical items for operations, or items that are irreplaceable.


Performance on supplier risk assessment

Indicator

Result (FY 2023)

1.1 Total number of Tier-1 suppliers 1,655
1.2 Total number of significant suppliers in Tier-1 19
1.3 % of total spending on significant suppliers in Tier-1 22.23 %
1.4 Total number of significant suppliers in non Tier-1 14
1.5 Total number of significant suppliers (Tier-1 and non Tier-1) 33

Remark:

 Tier-1 suppliers refer to groups of suppliers and contractors who have direct procurement contracts with PTT through commercial procurement processes and supply non-hydrocarbon products.
Critical Tier-1 suppliers refer to the groups of Tier-1 suppliers and contractors with whom PTT aims to develop long-term relationships and business synergies to enhance business operations and create added value. These are suppliers/contractors engaged in high-risk operations that could have significant impacts on both them and PTT, as well as on the surrounding communities. These impacts can significantly affect buyers both in terms of business and organizational image.
Non-Tier 1 suppliers refer to groups of suppliers and contractors who do not have direct procurement contracts with PTT but have indirect relationships as suppliers/service providers with high-risk operations that could severely impact Critical Tier-1 suppliers of PTT.


Risk assessments of PTT products and services are a critical factor that impacts the supplier administration and management guidelines. The assessments are categorized into three levels as follows:

MANAGEMENT LEVEL FOR SUPPLIERSDEFINITIONMANAGEMENT STRATEGIESMANAGEMENT TOOLS
1. Critical/Strategic Supplier The group of suppliers engaged in high-risk activities that pose severe potential impacts not only on themselves but also on the surrounding communities. Such activities can have profound repercussions for buyers, both in terms of business operations and the overall reputation of the organization.

Develop long-term relationships and business synergy to strengthen capabilities in conducting collaborative business ventures and creating added value.
  • PTT Suppliers Sustainable Code of Conduct (SSCoC) 
  • Specific Terms of Reference (TOR) on business ethics, social responsibility, occupational safety, and environment for the critical/strategic group
  • Sustainability Performance Assessment
  • Suppliers' sustainability auditing
  • Supplier relations management
  • Supplier capacity building
2. Key Supplier The group of suppliers engaged in distributing products directly to consumers, which significantly impact buyers, both in terms of business operations and the overall reputation of the organization. Develop long-term relationships to manage expenses/risks and maintain competitiveness. 
  • PTT Suppliers Sustainable Code of Conduct (SSCoC)
  • General Terms of Reference (TOR) on business ethics, social responsibility, occupational safety, and environment
3. Managed/ Routine Supplier The group of suppliers primarily engaged in operational activities that may have minimal to moderate impact on the community or nearby areas and pose low to moderate risk to buyers. Maintain relationships based on performance and manage expenses and risks according to customer requirements.
  • PTT Suppliers Sustainable Code of Conduct (SSCoC)
  • General Terms of Reference (TOR) on business ethics, social responsibility, occupational safety, and environment

Example of Supplier Management in a High ESG Risk Group: Product Transportation

PTT places utmost importance on overseeing and regulating the transportation of petroleum products. This involves crafting guidelines and safety standards for transportation, along with deploying effective methods and tools to rigorously manage and supervise transport operators, ensuring strict adherence to regulations.

Petroleum Product Road Transportation:
1. Development of an Advanced Analytics for Road Safety system: This system leverages advanced analytics to analyze, process, and forecast accident risks during transportation. It integrates data from transport contractors, including driver behavior, maintenance logs, accident histories, and route information, to identify potential risks and proactively address them.
2. Implementation of Risk in Road Safety initiatives: These activities aim to enhance safety awareness among drivers involved in petroleum product transportation. The process includes:
  • Encouraging drivers to report identified risk points along transportation routes, highlighting potential hazards.
  • Reviewing reported risk data by PTT, assessing the severity of incidents and accident statistics in these areas. In cases of high risk, detailed inspections and assessments are conducted.
  • Implementing corrective, preventive, or risk reduction measures based on the findings of area-specific risk assessments.
  • Disseminating information about risk points to transport contractors through the PTT Group Transportation Safety Management Taskforce. Recognition and awards are granted to transportation companies and drivers based on predefined criteria. In 2023, the program attracted 264 participants who reported 354 risk points, all of which were documented in the database and discussed during PTT Group transportation safety management taskforce meetings.
Rail transportation of petroleum products
1. Collaboratively established safety standards and operational protocols for rail transportation in conjunction with the State Railway of Thailand, ensuring alignment with international norms like the Regulation Concerning the International Carriage of Dangerous Goods by Rail (RID).
2. Facilitated comprehensive emergency response and crisis management exercises for rail transport in partnership with PTT Exploration and Production Public Company Limited (PTTEP), the State Railway of Thailand (SRT), local community leaders, and governmental bodies in Phitsanulok province. These simulations included scenarios such as a derailment of crude oil tankers at the Bang Phra Oil Depot in Mueang district, Phitsanulok province. The primary aim was to enhance awareness and adherence to proper response procedures among staff, contractors, community members, and public agencies in the face of emergencies. Furthermore, these drills were subject to thorough evaluation, incorporating feedback from stakeholders, to continuously refine and enhance emergency response strategies.

Water transportation of petroleum products 
1. Spearheaded the adoption of the Marine Terminal Information System (MTIS) across the PTT Group, while actively facilitating the exchange of best practices in maritime safety among member companies. This collaborative effort was led by the Transportation Safety Management Taskforce of the PTT Group.
2. Orchestrated meetings of the maritime transportation safety taskforce within the PTT Group to formulate strategic blueprints and operational frameworks. These comprehensive discussions engaged the entire PTT Group, including transportation service providers, and focused on various aspects such as legal compliance, organizational governance, management of aging assets, skill enhancement for onshore and offshore personnel, and instilling a safety-centric ethos among management and staff at every echelon. The overarching objective was to strive for incident-free waterborne product transportation.

Sustainable performance evaluation of suppliers

PTT has a process for auditing and evaluating suppliers to assess the effectiveness of their operations and risks, establish corrective action plans, and evaluate post-implementation results in accordance with PTT's basic requirements, including minimum legal requirements such as labor laws, environmental laws, and safety laws. Integration with relevant international management standards such as ISO9001, ISO14001, ISO45001, and compliance with anti-corruption policies are also emphasized. Auditing and evaluation of suppliers occur annually, with the ESG auditors of the PTT Group using ISO 19011:2018 guidelines for reference when reviewing and assessing data.

PTT has devised a strategy to audit and assess suppliers within departments engaging in high-risk operational activities, known as Critical/Strategic Suppliers. These activities have the potential to profoundly affect both the suppliers and the surrounding communities, consequently impacting the organization's business operations and reputation. This auditing and evaluation process has been consistently carried out since 2016, with the aim of achieving a 100% audit and evaluation rate for suppliers in high-risk operational activity groups. Furthermore, suppliers in these departments undergo re-audits and re-evaluations every three years.

Types of audits and evaluations to assess the sustainability performance of PTT's suppliers:
1. Desk Assessment
PTT has established a robust process for scrutinizing the Environmental, Social, and Governance (ESG) data of its suppliers. This involves using an assessment form to gauge their sustainability potential. Suppliers seeking registration on the Approved Vendor List, those involved in high-risk operational activities, or those categorized under the Strategic/Critical group are mandated to provide operational data pertinent to key assessment criteria. These criteria encompass four critical areas: business integrity, human rights, labor relations, workplace health and safety, and environmental management systems. Subsequently, this information is forwarded to PTT's ESG reviewers for evaluating sustainability performance. Should a trader exhibit significant operational risks during the assessment, PTT reserves the right to conduct an On-Site Assessment to validate the findings.
2. On-site Assessment
For suppliers who have undergone scrutiny and evaluation via desk assessment but still present notable sustainability risks, PTT is refining its review and performance assessment procedures. This entails conducting additional on-site evaluations at the supplier's facilities using sustainability potential assessment forms aligned with international standards (ISO 45001, ISO 14001, and ISO 9001). These evaluations are carried out in partnership with accredited third-party assessment. If suppliers persist in exhibiting high risks despite initial assessments, they are mandated to submit improvement plans. PTT will subsequently review and actively support the execution of these improvement plans on an ongoing basis.

Performance review to evaluate the sustainability performance of PTT's suppliers

Indicator

Result (FY 2023)

Target for
FY 2023

Total number of suppliers assessed via desk assessments/on-site assessments 8 100 %
% of significant suppliers assessed compared to the total number of suppliers that need to be reviewed 100 %
Number of suppliers identified with significant actual or potential negative impacts and the submission of an operational improvement plan is required 0 100 %
% of suppliers with substantial actual/potential negative impacts that have agreed to a corrective action/improvement plan 0
Number of suppliers terminated due to substantial actual/potential negative impacts 0
Total number of suppliers supported in implementing corrective action plans 0 100 %
% of suppliers assessed with significant actual or potential negative impacts supported in implementing corrective action plans 0


In 2023, there were inspections and evaluations conducted on suppliers with high-risk levels based on assessments of environmental, social, and governance (ESG) practices, along with an analysis of annual expenditure. A total of 11 suppliers were reviewed, which accounted for 100% of the annual plan. Through these inspections and evaluations of sustainable business practices (ESG), it was found that the assessment scores were equal to or greater than 2.5 out of a full score of 4, meeting the completeness criteria for all cases.

As a result of the ESG assessments, the following recommendations were proposed for suppliers to implement:

Environmental: E

Recommendations

Environmental Management
  • Arrange for training or additional communication to enhance understanding/awareness of environmental issues related to topics that support the Company's environmental plans/projects.

Social: S

Recommendations

Safety, Occupational and Environment in the Workplace

  • Compile a list of environmental, safety, and occupational health impacts on communities that may arise from activities of the Company, along with guidelines for mitigating/reducing those impacts.

Human Capital, Community, and Social Development

  • Organize community engagement activities utilizing the Company's resources, such as public property maintenance projects.
  • Internship programs for students (in relevant fields) and participation in supporting various community projects.

Labor Management and Human Rights

  • Organize the collection of knowledge assets deemed important for the future operations of the Company.
  • Communicate human rights policies, potentially based on fundamental human rights principles or international operational frameworks that are aligned with business models, to ensure internal organizational awareness and understanding.

Governance: G

Recommendations

Compliance with Laws and Regulations

  • Communicate sustainable development policies that demonstrate the commitment to operating in line with economic, social, and environmental principles to internal personnel.

Responsible Procurement

  • Communicate company policies (including the PTT Suppliers Sustainable Code of Conduct) to suppliers within its supply chain and establish channels for data collection.


Remark: The criteria for evaluating suppliers' sustainable business practices (ESG) have a full score of 4 points. Suppliers must score equal to or higher than 2.5 points to be considered as meeting the criteria.


Communicating operations to stakeholders

To foster information and knowledge exchange between PTT and its suppliers, as well as to enhance suppliers' capabilities in supporting PTT across environmental, social, and governance (ESG) domains, and to ensure business continuity, PTT regularly hosts annual seminars for suppliers. In 2023, four events were held at various locations including the main office, the Natural Gas Separation Plant in Rayong, the Natural Gas Pipeline System Department, and the Natural Gas for Vehicles Department. These seminars communicated PTT's business trajectory toward achieving the Net Zero goal by 2050 and introduced new business prospects in the Life Science sector to suppliers. Furthermore, they provided a platform for business partners to exchange information and ideas, fostering continuous improvement in operations. Under the Digital Procurement project, PTT adopts cutting-edge technology in procurement processes to adapt swiftly to evolving circumstances and anticipate global shifts that may impact business operations. PTT is committed to imparting knowledge to suppliers to develop sustainable business practices. Additionally, PTT prioritizes transparent, fair, and equitable responses to the needs and practices of all stakeholders, particularly suppliers along the supply chain. PTT places significant emphasis on developing and supporting its suppliers, including offering training and increasing awareness regarding vendor registration with PTT's Approved Vendor List (AVL) to enhance opportunities for suppliers to qualify with PTT. Furthermore, in 2023, PTT conducted training programs aimed at enhancing the sustainability capacities of suppliers. Embedded within the training curriculum was a strong emphasis on human rights considerations within business practices. Notably, all participating traders, accounting for 100% of the cohort, engaged in the program. This initiative aims to foster enduring business partnerships with a steadfast commitment to sustainability.

Supply chain management: Business level

PTT has established a strategy for managing the supply chain of refined oil and liquefied petroleum gas, emphasizing quality and accurate delivery quantities, speed, safety, environmental friendliness, and transparent operations. This applies to both PTT and its suppliers, aiming to support and promote value creation within the overall company group involved in the supply chain of refined oil and liquefied petroleum gas.

Furthermore, in the process of drafting short- and long-term procurement contracts and specifying purchasing quantities and delivery timeframes with refinery group suppliers, there are environmental and social operational requirements outlined. These include excellence criteria aligned with sustainable trading practices. Moreover, ethical business considerations, social responsibility, safety, and environmental (ESG) factors are considered minimum criteria for the quantitative or qualitative selection of suppliers, both existing and new contract holders. This assessment aligns with PTT's supply chain management strategy, which encompasses aspects such as quality, safety, occupational health, environment, economy, and community welfare.

In managing supply chain risks, PTT Group implements emergency management plans and crisis management strategies, including Business Continuity Management (BCM), through its Emergency and Crisis Management Center. These plans are regularly exercised annually by both internal and external units of the organization. This comprehensive approach covers post-incident management, return to normal operations procedures, and continuous monitoring of BCM plans by external units to ensure effective management and alignment with prevailing circumstances. To control and mitigate risks, particularly concerning energy shortages in the country, PTT actively participates in emergency response drills with the Ministry of Energy, the Electricity Generating Authority of Thailand (EGAT), and oil suppliers governed by the Petroleum Act. For instance, in 2020, PTT simulated an emergency response plan for energy shortages at the provincial level, focusing on Lampang province, following a severe earthquake scenario that disrupted the Mae Moh Power Plant's electricity supply to five northern provinces. This simulation included practicing emergency response procedures, reporting to management, and communicating with the media in the event of equipment failure at gas quality blending stations or Common Header facilities, both critical components in the supply chain. After analyzing simulated scenarios and their impacts on natural gas and petrochemical value chains, PTT took proactive steps to forge connections with the Emergency Management and Continuity Management Center of the Ministry of Energy, as well as several business entities, including PTT Oil and Retail Public Company Limited (PTT OR). This collaboration aimed to deepen our understanding of crisis management protocols, enhance stakeholder communication, and refine various management practices. Furthermore, in 2021, PTT partnered with the Ministry of Energy and the Electricity Generating Authority of Thailand (EGAT) to conduct comprehensive drills, preparing diligently for potential disruptions in natural gas production in Myanmar due to internal unrest. Such disturbances posed a risk of Thailand being unable to import its required natural gas supply from the western side. These efforts were geared towards ensuring PTT's operational resilience, thereby safeguarding the nation's energy security and aligning with our commitment to prioritize stakeholder welfare and pursue sustainable business practices. Moving into 2022, PTT joined forces with the Ministry of Energy, the Electricity Generating Authority of Thailand (EGAT), and designated oil traders under Section 7 of the Petroleum Act to collectively brace for energy emergencies, notably concerning the transition of natural gas recipients (G1). Persistent technical issues hampered natural gas production, compounded by the ongoing Russia-Ukraine conflict, which disrupted Spot LNG procurement. Domestic tensions between the government and the public escalated, prompting economic sanctions from the United States and impeding natural gas imports. This posed significant challenges to Thailand's energy security. In 2023, PTT collaborated with the National Cybersecurity Committee (NSC), regulatory bodies, and key infrastructure agencies to conduct drills and test contingency plans for cyber threats at a national crisis level. The Distributed Control System (DCS), vital for managing operations at natural gas separation plants, fell victim to Ransomware attacks, rendering it inoperable. In response to this critical security breach, plant operations were halted, causing disruptions in the transportation of natural gas products to customers, including power plants and petrochemical facilities.

Procurement of Natural Gas (NG)

The procurement process for natural gas at PTT involves six key steps

  1. Definition and Compliance: This stage entails outlining the specific details and compliance requirements for procurement. This includes aligning with customer demands, legal mandates, specifications for pipeline connectivity, and internal PTT guidelines.
  2. Supplier Selection: PTT evaluates and selects suppliers or trading partners based on stringent criteria. Factors considered include adherence to PTT's evaluation standards, compliance with relevant regulations, and overall performance and potential.
  3. Communication and Contracting: Communicate procurement requirements and criteria, negotiate, and prepare natural gas purchase contracts with natural gas suppliers (gas suppliers/deliverers)/ counterparts.
  4. Contract Management:  PTT exercises diligent control over supplier or trading partner operations through natural gas trading contract management.
  5. Supplier Development: Continuous improvement and development of suppliers or trading partners are fostered through monthly operation meetings, regular training sessions, and seminars. These initiatives aim to enhance communication channels, address quality and quantity discrepancies, and align with customer needs and expectations.
  6. Performance Evaluation and Planning: Evaluate delivery performance, including assessing the service capabilities of suppliers/trading partners monthly and notify for improvement if the evaluation results fall below standards or abnormalities occur. Additionally, reliability in delivery performance from the past year will be assessed to develop natural gas procurement plans and contingency plans in case suppliers/ trading partners are unable to carry out deliveries.

Procurement of Liquefied Natural Gas (LNG)

PTT's procurement of liquefied natural gas (LNG) operates under two main frameworks: long-term/mid-term/short-term contracts and spot market transactions (Spot LNG). This procurement process meticulously assesses customer demand and a spectrum of related specifications, including legal mandates, Third Party Access Code (TPA Code) stipulations for LNG station service, and internal PTT regulations. Supplier selection follows stringent evaluation criteria, encompassing overall performance and potential, leading to negotiation and contract development. Rigorous contract management ensues to ensure alignment with PTT's missions and strategies. Beyond safeguarding national energy security, the LNG procurement strategy fosters an environment conducive to competitive LNG business dynamics. Consequently, PTT must undertake risk management for procurement and strategically plan LNG Portfolio management to ensure cost-effectiveness. This involves procuring LNG through various means including short-term, medium-term, long-term contracts, and Spot LNG, to meet the nation's needs efficiently.

Sustainable Procurement

PTT and its affiliated groups place great emphasis on mitigating risks in procurement processes and instilling trust in supplier services. They actively promote sustainable procurement practices in line with international standards. In 2023, PTT embraced the ISO 20400:2017 standard to govern collaborative procurement efforts among its subsidiary companies, initially focusing on three procurement categories. Moreover, it aims to expand this approach to encompass all departments within a five-year timeframe.

PTT Green Procurement 

PTT has introduced its Green Procurement Policy in accordance with governmental environmental directives. Suppliers selected through the bidding process are obligated to disclose their utilization of eco-friendly products, known as Green Products, when engaging with PTT. This information is conveyed via the PTT Vendor Management system, specially developed to facilitate procurement processes aligned with environmental considerations. The system aggregates data on PTT's environmentally conscious spending (Green Spending) from suppliers. In 2023, a total of 23 procurement projects involving environmentally friendly products and services were undertaken, amounting to a cumulative value of 494 million baht.

Local procurement

PTT is dedicated to facilitating the procurement of goods and services from local suppliers (defined as those operating within Thailand). Additionally, PTT promotes sourcing products from the immediate vicinity of business establishments to stimulate the local economy, foster job creation, and augment income for residents. This approach offers distinct advantages such as cost efficiency and expedited transportation, underscoring PTT's enduring commitment to community engagement. As a result, PTT has garnered trust and collaboration from local communities. Furthermore, PTT encourages suppliers to embrace social responsibility, community welfare, and local procurement practices, thereby reducing overall product costs. 

Digital procurement system development

PTT has embraced technological advancements to streamline and enhance its procurement procedures and workflow stages. This includes establishing an internal procurement database, creating annual procurement plans, generating procurement requests, defining job scopes, selecting vendors, preparing purchase orders and contracts, managing contracts, conducting inspections and acceptances, handling invoicing and payments, as well as evaluating vendor performance and soliciting feedback from stakeholders. In 2023, PTT upgraded its PTT Bid Submission system and maintained constant communication with suppliers, facilitating the procurement and submission of documents, proposals, and pricing online. This initiative enables suppliers to conduct transactions conveniently at any time and from anywhere. Additionally, email notifications are issued at each step of the process, promoting transparency in procurement operations through a controlled system for document procurement and submission.

Promotion of transparency throughout the supply chain 

PTT consistently shares its procurement data on a monthly basis with the public, aiming to facilitate easy access as part of its commitment to transparency and sustainability strategies. This aligns with PTT's adherence to the government's Information and Communication Technology Committee's directive, ensuring that procurement information from state agencies is accessible to the public under Section 9 (8) of the Official Information Act, B.E. 2540 (A.D. 1997). Furthermore, PTT has entered into a memorandum of understanding with the National Anti-Corruption Commission (NACC), the Office of the National Economic and Social Development Council (NESDC), and other state enterprise units to support the national strategy for preventing and combating corruption. PTT also proposes procurement projects with budgets exceeding 1,000 million baht or construction projects with budgets exceeding 500 million baht to the Central Procurement Committee for consideration in participating in the Anti-Corruption Cooperation Project for State Procurement. Additionally, PTT implements Integrity Pact according to the criteria set by the National Anti-Corruption Commission (NACC), demonstrating its commitment to transparent practices. In recognition of its efforts, PTT received the Transparency Organization award for the fifth consecutive year from the National Anti-Corruption Commission (NACC) in 2023.

Enhancement of procurement staff capabilities 

PTT and its subsidiary companies prioritize the annual review and development planning of procurement professionals to bolster their efficacy and adaptability within the organization. These efforts encompass a spectrum of initiatives, including training sessions, knowledge dissemination through various channels, and the implementation of robust Knowledge Management (KM) processes. Through these endeavors, employees are equipped to seamlessly integrate information technology systems into procurement operations, particularly within the Digital Procurement framework pioneered by PTT. This framework not only streamlines procurement processes but also enhances flexibility and reduces turnaround times, thereby amplifying operational efficiency and overall productivity. Moreover, there is a concerted effort to augment employees' comprehension and familiarity with pertinent laws and criteria governing procurement practices. This is pivotal to ensuring that procurement processes are executed more accurately, expediently, and effectively.

Furthermore, a variety of additional training courses are conducted, such as hands-on workshops that implement sustainable procurement guidelines according to ISO 20400:2017. These workshops are designed to enhance the skills and comprehension of employees, company’s buyers, and internal stakeholders with sustainable procurement practices. Additionally, there are initiatives to develop the capabilities of PTT Group ESG Auditors and training programs on Human Rights fundamentals. These aim to provide employees, company’s buyers, and internal stakeholders with knowledge and understanding of the criteria used to assess the sustainability performance of suppliers through the PTT Group ESG Questionnaire. These training initiatives cover fundamental auditing principles, guidelines, and procedures for becoming proficient assessors. They can be tailored or integrated into the assessment processes of individual suppliers, facilitating sustainable business operations. Furthermore, employees receive training on public procurement and supplies administration laws. This enhances their understanding of legal principles not explicitly outlined in the laws. The objective is to empower employees of PTT Group companies to manage procurement activities effectively and efficiently in line with their responsibilities, ensuring suitability and efficacy.