Sustainability

Climate Change Management

Sustainability

Climate Change Management

Sustainable Development Goals
 





Challenges and Opportunities

The report from the Intergovernmental Panel on Climate Change (IPCC) states that even with the targets on greenhouse gas (GHG) emission reduction set forth in the Paris Agreement, the global temperature cannot be prevented from rising less than 2 degrees Celsius. Thus, the IPCC has requested that all countries set more challenging targets. In response, Thailand expressed its stance through the National Climate Change Policy. The efforts from driving GHG emission reduction in the energy and logistics sectors resulted in Thailand’s accomplishment in reducing emission by 7-20% by 2020 and provided opportunities to set more challenging targets in the future. Recognizing the importance of the efforts and foreseeing the possible impact, PTT has taken action to embrace the challenges and has continuously committed to aligning and following the PTT Group’s climate change strategy starting from revising and setting the GHG emission reduction target to be more than 20 percent by 2030 until devising operational approaches and calculating the amount of GHG that the PTT Group can reduce and finally reducing GHG emissions according to the set target. PTT recognizes climate change as an opportunity to expedite and drive the education and selection of clean energy, which is in accordance with the Thailand Power Development Plan 2018-2037 (PDP 2018). On this aspect, the PDP 2018 stipulates that 20-35 percent of the total electricity generated must be renewable energy by 2037. Lastly, PTT’s commitment extends to developing innovation toward a low-carbon society with high efficiency.



Management Approach

Climate Change Management

As an energy business relying on fossil as the primary fuel, climate risks and opportunities are key issues to the PTT Group. Furthermore, Thailand signed the agreement in the Conference of the Parties: COP21 in Paris, pledging to reduce GHG emissions according to Intended Nationally Determined Contributions (INDCs) in all sectors by 20-25% within 2030. This is in addition to GHG reduction according to the Thailand Nationally Appropriate Mitigation Action (Thailand NAMAs) in the energy sector and transportation sector by 7-20%, compared to the business-as-usual level as of 2020. In respect to this aspect of the goal, Thailand successfully achieved this goal.

In response to risks and opportunities induced by climate change, as well as facilitating performance to ensure achievement of the national greenhouse gas reduction target, PTT established the "PTT Group Clean & Green Strategy" in 2018. This was a collaborative effort within the PTT Group, combining the climate change strategy with the PTT Group's business strategy. In 2020, PTT has set the control target of the PTT Group’s greenhouse gas emissions to be no more than 40.2 million tonne carbon dioxide equivalent. Additionally, PTT has revised its long-term target of the PPT Group’s greenhouse gas emission control in 2030 by increasing the share of the PTT Group's emission reductions to 27% of the total emission reductions of the PTT Group from business-as-usual operations in 2030. This arrangement enables PTT to effectively monitor its subsidiary's performance, ascertaining alignment towards the Group's climate change strategy. The strategy itself has been approved by the PTT Board of Directors and Executives already.


PTT GROUP CLEAN & GREEN STRATEGY

The PTT Group has developed a climate change strategy under the title “PTT Group Clean & Green Strategy”, which consists of 3 important approaches from controlling greenhouse gas emissions from business operations, increasing the quantity of clean and low-carbon products, and operating new businesses that are clean and low-carbon. It is executed through the PTT Group Clean & Green Alignment Working Team, which comprises of representatives from PTT and seven Flagship companies: PTT Exploration and Production Public Company Limited (PTTEP), PTT Global Chemical Public Company Limited (GC), Thai Oil Public Company Limited (TOP), IRPC Public Company Limited (IRPC), Global Power Synergy Public Company Limited (GPSC) and PTT Oil and Retailing Public Company Limited (OR). The working team was assigned by the senior management team of 35 members to implement the climate change strategy, as a driver toward the environmental dimension of the sustainability strategy. The goal on the environmental dimension is global conservation, focuses on seeking businesses geared towards a low-carbon society coupled with environmentally friendly business operations.




PTT Group Climate Risks and Opportunities Management Process

PTT’s climate change management is in line with the sustainable development approach, also in accordance with international standards and approach alike. The following demonstrates the PTT Group’s climate change management process.


PTT Group Climate Risks and Opportunities Management Process
  1. Account for and Understanding Impact: Collect data related to management off climate risks and opportunities, such as:
    • Direct and Indirect GHG emissions (GHG Emission Scope 1, 2 and 3) for assessment of the PTT Group's overall emission performance, inclusive of emissions from operations under the PTT Group, emissions from purchased electricity and external heat, as well as GHG Emissions from use of sold products. The PTT Group’s calculation process for greenhouse gas emissions, for direct, indirect and others, are all in accordance with the PTT Group GHG Accounting and Reporting Standard. The activities are divided into three levels, which are Scope 1, Scope 2, and Scope 3.
      • Scope 1 refers to greenhouse gas emitting activities in which the PTT Group’s internal functions own. This is considered direct greenhouse gas emissions. Examples of Scope 1’s activities comprise of combustion in PTT’s production units, combustion in PTT’s vehicles, greenhouse gas emissions from petroleum process, and leakage of cooling substance, to name a few.
      • Scope 2 refers to greenhouse gas emitting activities from other parties. This may come as electricity generation and heat (in the form of vapors and cooling water, for example) provided to PTT Group’s internal functions. An example of such activities is natural gas combustion by electricity generator outside of PTT Group.
      • Scope 3 refers to activities owned by external parties but are results of operations of the PTT Group’s internal functions. This reporting is not on the list of compulsory emission accounting. This comprises of activities such as downstream product usage, stationary fuel combustion activities, mobile fuel combustion activities, raw materials and product logistics by service-providers outside of the organization, and transportation of employees relevant to the PTT Group’s business, to name a few. The data of GHG Scope 3 disclosed on the website is only on fuel combustion activities that PTT and PTT OR sells (use of sold products). 
        This data can be utilized to improve work efficiency and disclosed to relevant stakeholders.
    • Revenue from products refers to revenues from sales of low-carbon products, meaning it emits less during the production or the service period; this may refer to services or products that help customers cut down their own emissions. This facilitates measurement of the PTT Group's operation in reduction of Scope 3 GHG Emissions induced from the PTT Group's goods and services, as well as businesses, by measuring GHG Emissions from use of sold products.
      • Low Carbon Product refers to products (goods or services) of the PTT Group that emits lower greenhouse gas emissions during production or services compares to other products (goods or services) that serve the same functions, as follows.
        • Renewable Energy such as wind energy, solar energy, and hydropower, to name a few
        • Green Building & Green Service refers to buildings or services with reduced greenhouse gas emissions during the period of service, such as LEED-certified at Platinum level
        • Electricity generation from Co-generation system’s stream
        • Bioenergy
        • Energy Efficient Products refers to products whose production process has efficient energy usage and has lower carbon emissions (such as certified for greenhouse gas emission reduction, meaning it has reduced over 2% of its emissions)
        • Products from Cogeneration/ Tri-generation/ Combined Heat and Power
        • Products from Waste Heat Recovery
        • Products certified for Carbon Footprint Reduction Label from the Thailand Greenhouse Gas Management Organization (TGO)
    • Avoided Emission Product refers to products (goods or services) of the PTT Group that allows clients or users of products (goods or services) to reduce the amount of greenhouse gas emissions, compared to other product (goods or services) that serve the same functions. This may refer to both direct and indirect usage. Examples are as follows.
      • Gasohol E10, E20, E85 sold to car users
      • Biodiesel, Premium Diesel sold to car users
      • Natural Gas sold as fuel for electricity generation plant
      • Products (goods or services) whose Product Carbon Footprint during usage is lower than the Default value in the SimaPro database, or prior to improvement
      • Products certified for EGAT Energy-Saving No.5 label
      • Products (goods or services) of the PTT Group which are environmentally friendly, are labelled under GREEN FOR LIFE for environmental aspects and refers to the following.
        • Reduced Energy Consumption during usage
        • Products or packaging with whose carbon footprint (net greenhouse gas emissions throughout a product’s life cycle) is zero, or those already offset all carbon emissions.
      • Assessing the Global and Local Climate Change Situation: Monitor the climate change situation at both the global and local scale with potential impacts to sustainability, such as different laws and regulations, GHG emission management mechanisms (i.e., carbon tax, cap and trade), other approaches and standards related to climate change at an international level (i.e., WBCSD, CDP, DJSI, GRI). This includes participation in conferences and seminars on Climate Change, hosted by the public sector, private sector, and others.

      • Identifying Climate Changes Risks and Opportunities: identify corporate-level climate change risks and opportunities as follows:
        • Risk and opportunities from regulatory change
        • Risks and opportunities from climate change-induced physical changes
        • Other risks and opportunities
      • Setting the strategy based on the data collected on climate change, both on the global and local scale, and identifying risks and opportunities within the operations in 2 aspects:
        • Mitigation Action: Work on controlling, mitigating and absorbing carbon dioxide in the atmosphere to mitigate climate change impacts.
        • Adaptation Action: Work on climate change adaptation to ensure business’ sustainable competitiveness.
      • Monitoring and communicating performance: Monitor and review progress according to strategy and work plan, including reporting progress to both internal and external stakeholders.

      PTT Group Climate Risks and Opportunities Assessment

      The PTT Group integrates climate risk and opportunity analysis with strategic planning and enterprise risk management. PTT is using climate-related scenario analysis to explore and develop an understanding of how the physical risks and transition risks of climate change might impact the business over time in 2 PTT business scenarios including a “Balancing Case” and “Low and Long”. Balancing case scenario is comparable to Thailand’s NDC, IEA state policy and IEA current policy. Low and long scenario is comparable to IEA SDS and IEA 2DS. Physical risk and transition risks assessment are cover 3 business units including upstream, downstream and technology & engineering. The physical risk analysis is more qualitative rather than quantitative, but transition risks analysis is both qualitative and quantitative. Both analyses are still in business unit level not in asset level. PTT considers climate-induced risk and opportunities in alignment with recommendations from the Task force on climate-related financial disclosure (TCFD). This comprises of the following.

      Transition Risk: Due to Change in Energy Production and Utilization
      • Policy and Legal: qualitative assessment is conducted and mainly focus on Thailand’s NDC target and policy, Thailand’s climate change act (draft) with corresponding of carbon taxation, and trading system for emission rights, encompassing risks from policy, targets, strategic plans, and laws stipulated by governing Thai government.
      • Market: quantitative assessment is conducted and mainly focus on volatility of product price and demand shift in each scenario, refers to customers' changing behavior, such as reduced fossil fuel demand.
      • Technology: qualitative assessment is conducted and mainly focus on low-carbon technology or future energy that will replace fossil-fuel business such as renewable energy, electric vehicles and highly efficient batteries.
      • Reputation: qualitative assessment is conducted and mainly focus on needs and expectations of investor which mostly concern about climate change management and transition to low-carbon business.
      Physical Risks:
      • Natural disasters, including both sudden natural disasters, or gradual climate change impacts, such as increasing temperature and rising sea level.
      Opportunities: 
      • Technology with greater energy efficiency at a lower price
      • Opportunity to invest in alternative energy or renewable energy, which is becoming more economically viable
      • Access to cleaner and environmentally friendly energy markets and products
      • Access to funds supporting environmental works, both nationally and internationally

      In the past, PTT has continuously applied recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) on its climate change report and in our core processes such as strategic planning and risk management. The report correlates the performance on Governance, Strategy, Risk Management, and Metrics and Targets of the past 4 years. Climate-related risks and opportunities have been identified and were used as inputs data for annual strategic planning along with scenario analysis. Some of climate-related risks will be evaluated and promoted to corporate risk profile and will be managed by enterprise risk management on monthly basis. In 2020, PTT emphasized the importance of developing operations to be aligned with the requirements on Strategy through education on and selection of approaches on analyzing the monetary aspect of 3 climate scenarios, namely, Business as Usual (BAU), Nationally Determined Contribution (NDC), and 2˚C (2DC). The results of the analysis become the Key Financial Driver of the climate scenario in order to evaluate the magnitude of financial impact from climate-related risks and opportunities to PTT financial performance, which PTT applies to its business plan scenario. Ultimately, the results are used to design the strategy and business plan as well as the financial projection and financial planning of the following year.



      The PTT Group assesses and reports results on climate change risk and opportunity analysis to the Board of Committee and stakeholders through annual sustainability reports and annual One Report Type 56-1. There are measures responding to risks and changes occurring in various circumstances in an effective manner and in alignment with the aim of being a leading international Thai energy company. PTT has produced tangible innovation, from alternative energy comprising of E20, E85, PTT UltraForce Diesel B10, Diesel B20, and synthetic materials made from biomaterials, which are used to develop hi-tech equipment that is lightweight, durable and environmentally friendly, such as composite LPG gas tanks and biodegradable plastic for use in coffee cups and popcorn buckets. Furthermore, innovation focuses on electricity generation from waste to energy power plant, and developing solar photovoltaic system.



      For risks and opportunities arising from climate change at the operational level, PTT takes into account natural risks such as rising sea level and extreme weather events. Appropriate actions are taken to minimize the impacts of such risks. Preparation in prevention and mitigation against these risks is achieved through the implementation of Business Continuity Management System (BCMS). This system covers an emergency response plan for incidents which may occur naturally or anthropogenically. Each business unit is responsible for monitoring and ensuring business continuity on a quarterly basis. The plan with specific targets to implement adaptation measures for physical climate risks to existing and new operations will be carried out within a 5-10 year-timeframe.



      PTT Group Greenhouse Gas Accounting and Reporting Standard & Calculation Tool

      PTT has conducted Greenhouse Gas Accounting to track its GHG inventory, in emissions, absorption and storage continuously since 2006. This mechanism tracks and reports direct GHG emissions (Scope 1), indirect GHG emissions (Scope 2), and other indirect GHG emissions (Scope 3). GHG data is externally verified by an independent third-party organization on an annual basis.

      PTT had developed the PTT Group GHG Project Standard based on ISO14064-2. The standard is integrated with PTT's GHG emission inventory and is used as the standard for the PTT Group to assess and analyze GHG reduction efforts in accordance with international standards.

      • Direct GHG Emissions (Scope 1) and Indirect GHG Emissions (Scope 2)
        • Direct GHG emissions (Scope 1) encompasses operational activities from combustion, carbon dioxide separation, release of hydrofluorocarbons (HFCs) and sulfur hexafluoride (SF6), fugitive emissions, vented emissions, flares, and other process emissions.
        • Indirect GHG emissions (Scope 2) refer to the release of GHG from the consumption of purchased energy, such as electricity, heat and steam in PTT's business operations.
        • PTT has an approach in GHG emission reduction, either direct GHG emission (Scope 1) or indirect GHG emission (Scope 2), by focusing on management process to increase energy efficiency, alternate fuel used, generate electricity from co-generation power plants, and utilize waste heat. These are the efforts taken to facilitate progress towards the set goals.
      • Other Indirect GHG Emissions (Scope 3)
        • PTT's other sources of indirect GHG emissions (Scope 3) include the transportation of raw materials and products, employee traveling by air, as well as combustion from products sold.
        • PTT's approach for reducing other indirect GHG emissions focuses on reducing product carbon footprints through product research and development to meet market needs in correspondence with the Pride and Treasure of Thailand strategic direction and Alternative Energy Development Plan (AEDP). In addition, PTT plans to expand manufacturing of biofuels in order to serve the increasing demand for biofuel in Thailand.


      Key Performance

      Progress against plan

      Climate change is a highly prioritized issue at PTT. The awareness is reflected through management in accordance with the PTT Group Sustainability Management Framework. The components and preferred approach with regards to climate change are as follows: setting emission target in alignment with the PTT Group's target, conduct sensitivity analysis in monetary impacts, and giving considerations on large scale project investment, either new project, expansion or significant changes to fundamental utility infrastructure, climate change adaptation, and implementation according to climate change work plan. In 2020, PTT revised its goals and key operations according to the PTT Group Clean & Green strategy through 3 approaches, as follows.

      Management ApproachTargetPast Key Performance
      Controlling greenhouse gas emissions from business operations
      • Reduce the PTT Group’s greenhouse gas emissions by 20% compared to business-as-usual scenarios by 2030 (base year 2012)
      • Flagship Control greenhouse gas emission intensity at the business unit level and Flagship company level
      • Applied the “Circular Economy in Process” approach – i.e. in business operations – by using the 3Rs principle, Reduce, Reuse, Recycle, and renewable energy and materials
      • Reduced waste, or reused waste for other purposes through reusing and recycling equivalent to 1,680 tonnes, and for recovery heat equivalent to 7,100 tonnes.
      • Reduced waste, or reused waste for other purposes
      • Consumed energy from renewable sources, such as by installing solar panels in office areas and PTT stations
      • Increased the share of the PTT Group's emission reductions to 27% of the total emission reductions from business-as-usual operations in 2030 (base year 2012)
      Increasing the quantity of clean and low-carbon products
      • เIncrease the proportion of PTT Group’s revenue from low-carbon products by 2023
      • Increase the proportion of PTT Group’s revenue from low-carbon products by 2023
      • Conducted studies and developed electric vehicles
      • Developed and manufactured products that help to reduce greenhouse gas emissions during their use, such as Gasohol 91, Gasohol 95, Gasohol E20, Gasohol E85, Diesel B10, Diesel B20, and Diesel Ultra Force. These products help users to reduce greenhouse gas emissions during their usage period by approximately 3 million tonnes carbon dioxide equivalent per year
      Operating new businesses that are clean and low-carbon
      • Implemented an approach for using an internal carbon price in investment decisions, which are considered and approved by top-level executives
      • Operated businesses with the goal of creating a low-carbon society, according to the “Circular Economy in Product and Value Chain” approach by setting up the largest integrated plastic recycling plant in the country, in line with international standards

      Carbon Disclosure Project (CDP)

      2020 Targets2020 Performance
      Report GHG data and performance through participation in the CDP program annually C

      Greenhouse gas emission intensity of direct and indirect GHG emissions from PTT Group activities (Scope 1 and 2): Kilogram CO2 per barrel of oil equivalent



      Greenhouse gas emission intensity of direct and indirect GHG emissions from PTT activities and the combustion of fuel products sold by PTT (Scope 1, 2, and 3)

      Remark: The scope of data covers companies in Thailand in which PTT holds direct shares of more than 20%, holds the majority of shares, or indirectly shares of 100%.

      PTT Group’s Direct and Indirect Greenhouse Gas Emissions1 : Million tonnes of CO2 equivalent

      Direct GHG emissions (Scope 1)

      Indirect GHG emissions (Scope 2)



      GHG emissions from the combustion of fuel sold by PTT (Scope 3) (2,3)


      Remarks:

      1 The scope of data companies in Thailand in which PTT holds direct shares of more than 20%, or indirect shares of 100%.
      2 Scope 3 GHG emissions cover the combustion if PTT's and PTT Oil and Retail Business Public Company Limited’s fuel products (natural gas, gasoline, diesel, jet fuel oil, liquefied petroleum gas, and kerosene). PTT manages the volume of its Scope 3 GHG emissions by setting a target to reduce direct and indirect GHG emissions (Scope 1 and 2) per unit of PTT products sold, as defined by the State Enterprise Performance Appraisal (SEPA).
      3 The scope of data for Scope 3 GHG emission covers PTT and PTT Oil and Retail Business Public Company Limited.


      The scope of data for Scope 3 GHG emission covers PTT and PTT Oil and Retail Business Public Company Limited.

      Total direct methane emissions (Metric tonnes)


      Total non-renewable energy consumption (MWh)

      Carbon Pricing Mechanism for PTT’s Investment Criteria

      Carbon pricing mechanisms, used as part of PTT’s investment consideration criteria, serve as a tool supporting investment for greenhouse gas reduction projects. Such projects may help reduce impacts from climate change and facilitate PTT’s business operations towards low-carbon economy. This is in alignment with the PTT Group Clean & Green Strategy, with approval from the Strategic Investment Management Committee (SIMC) and PTT Management Board. In 2020, a project that applied the carbon pricing mechanism and was approved for investments was the chiller water system for Energy Complex Company Limited.

      Approach in Carbon Pricing Mechanism for PTT’s Investment Considerations is as follows

      • Integration of carbon pricing mechanisms as part of investment considerations for PTT’s greenhouse gas emission reduction projects, both direct and indirect emission.
      • The form of carbon price mechanisms used is Shadow Price at a carbon price of 20 USD per tonne CO2 equivalent, of which the Investment Management Committee may use as part of investment considerations.

      Benefits to PTT following Implementation of Carbon Pricing Mechanisms

      • An approach facilitating PTT towards business operations for low-carbon economy. This helps reduce risks and creates further opportunities relevant to climate change in the long run.
      • Enhancement of all stakeholder groups’ trust, particularly for investors. This demonstrates PTT’s business commitment to the low-carbon society transition.