Business-Driving Strategies towards Sustainability

Strategic Framework for PTT Business Operations ^{GRI 2-22}

PTT is cognizant of the risks and opportunities stemming from the challenge of climate change. In tandem with future global shifts and trends, as outlined in megatrends and energy outlooks, these factors are integral in shaping the company's business direction, transparently reflected across PTT's vision, strategic frameworks, and operational plans.

Vision

In accordance with the organization’s new corporate vision, 'Powering Life with Future Energy and Beyond,' PTT is strategically oriented towards business transformation, encompassing diversification efforts geared towards future energy endeavors and ventures beyond the traditional energy sector. This strategic shift is meticulously aligned with evolving global trends, including megatrends and energy outlooks, thereby addressing both significant risks and opportunities arising from climate change. As part of this strategic realignment, PTT is committed to investing in the following key areas:

• Future Energy includes renewable energy, energy storage system, electric vehicle supply chain, as well as identification of opportunities in hydrogen usage. 
• Beyond Energy Business includes:
  
  • Life science, e.g., pharmaceutical business, medical equipment, healthy food
  • High Value Business
  • Mobility & lifestyle, including non-oil business
  • Logistics and infrastructure business
  • AI, robotics, and digital business

Strategic Frameworks and Goals

To translate the vision to concrete actions, PTT has formulated a corporate business strategy framework aligned with the aspiration "PTT by PTT" or "Powering Thailand’s Transformation.”


To serve as an energy institution propelling Thailand forward amidst change, the Company’s aspiration lies in three key areas: Partnership & Platform, Technology for All, and Transparency & Sustainability. Aligned with the new vision, PTT have set ambitious targets to be realized by 2030, underscoring its commitment to mitigation and its capacity for resilience & adaptation in the face of diverse risk factors, particularly climate-related changes.

While also setting 2030 new targets to reflect PTTs importance of mitigation impact, including increases in abilities for Resilience & Adaptation as follows:  

	Business Growth: Refining the energy investment portfolio with an emphasis on low carbon businesses. LNG: Scaling up LNG trade volume within the portfolio to 9 million tons/year. Power (Conventional): Augmenting investments in conventional power generation, including gas-to-power, to achieve a production capacity of 5 GW. Renewable energy: Amplifying investments in electricity generation from renewable sources to achieve a production capacity of 15 GW.
	New Growth: Enhancing the profitability of the Future Energy & Beyond segment to at least 30%.
	Clean Growth: Targeting a 15% reduction in greenhouse gas emissions across the PTT Group compared to 2020 levels. Additionally, unveiling PTT's ambition to achieve Carbon Neutrality by 2040, with the ultimate aim of attaining Net Zero  Emissions by 2050.

Operational Strategy

PTT has adopted a comprehensive "4R" operational strategy, comprising:

1. Resilience Cultivating adaptability and operational continuity. This involves maintaining liquidity, ensuring safety, and fostering operational excellence. Synergizing resources and optimizing asset utilization for maximum efficiency. Additionally, empowering employees to navigate dynamic business landscapes, emphasizing risk and crisis management.
2. Reenergize Enhancing the competitiveness of existing businesses by adding value across the supply chain, from upstream to downstream activities. Adjusting the portfolio to align with the energy transition away from hydrocarbons and toward carbon emission reduction in current operations.
3. Reimagination Initiation of business expansion to align with the emerging paradigm of the Next Normal. This includes bolstering energy sectors with growth potential, such as LNG and electricity. Accelerating the development and expansion of novel business models beyond traditional hydrocarbon domains, encompassing both the Future Energy and Beyond Energy business segments.
4. Reform Evaluating organizational structures and business models to ensure alignment with future trajectories. Preparedness for unforeseen circumstances through adaptive reform, ensuring readiness to confront unexpected challenges.

The entire strategic framework has been seamlessly deployed and integrated into the business plans of relevant departments, including companies within the PTT group, with designated responsible individuals assigned. These business plans delineate operational strategies and outline vital mechanisms and methodologies aimed at propelling PTT's endeavors towards sustainability. Key components of this approach include the establishment of a robust governance structure and the implementation of various performance indicators to ensure the effective alignment of operations with the envisioned objectives. This systematic approach ensures that PTT's business direction remains both effective and purposeful.

Sustainability Strategy Direction

Within the realm of Transparency & Sustainability, integral to PTT's overarching commitment of "Powering Thailand's Transformation by Partnership & Platform, Technology for All, Transparency & Sustainability," PTT diligently endeavors to foster transparency and cultivate sustainable business practices. In alignment with the Sustainable Development Goals (SDGs) outlined by the United Nations, PTT places paramount importance on addressing the needs and expectations of all stakeholders in an equitable manner. To this end, PTT has delineated a "Sustainability Strategic Direction" within its "PTT's Sustainability Management Master Plan for Social and Environmental Responsibility for 2021 - 2025", encompassing three key dimensions: environment, society, and governance. This strategic blueprint delineates short-term, medium-term, long-term goals, and strategies aimed at driving success while upholding social and environmental responsibility. PTT is committed to achieving sustainability performance that ranks in the 1^st Quartile of prominent international indicators, such as the Dow Jones Sustainability Indices (DJSI), thereby reinforcing its alignment with the 20-year national strategy and steadfast support for the SDGs.

Supporting the Sustainable Development Goals (SGDs) 

PTT meticulously assesses the priorities of sustainable development goals (SDGs) pertinent to its business operations, considering them as pivotal input factors in charting the strategic direction and enterprise plan of the organization. Aligned with key sustainable development objectives, PTT employs a comprehensive 3-step review process, outlined as follows:

1. Conduct an in-depth analysis of significant internal and external factors affecting the organization, encompassing the corporate vision and strategic direction. This entails sustainability materiality issues, policies, strategic directions, goals, and operational plans, alongside discerning trends and shifts in global sustainability that could impact business operations across the value chain. Moreover, it involves understanding the diverse needs and expectations of stakeholders. 
2. Define priorities and response levels to the Sustainable Development Goals (SDGs) by consulting operational manuals at the international level, such as the UN Global Compact's SDG Ambition Integration Guide, the UN Global Compact's SDG Compass, IPIECA's Mapping the Oil and Gas Industry to the SDGs: An Atlas, and the SDG Sector Guide. Additionally, utilize roadmaps provided by WBCSD and manuals like "Accelerating Action: An SDG Roadmap for the Oil and Gas Sector" developed by IPIECA in collaboration with WBCSD. Ensure alignment with the master plan outlined in the 20-year National Strategy (2018-2037) and The Thirteenth National Economic and Social Development Plan (2023-2027), relevant to PTT's operations. Prioritize SDGs into two groups: the first comprising 10 goals integrated into core business processes ("Integrated into Core Business"), and the second involving 7 goals that necessitate collaboration with sustainability networks or stakeholder participation ("Collaborate with Other Stakeholders"). Goal 17, particularly emphasized, serves to support and facilitate the achievement of other SDGs.
3. Explain the prioritization process and operational directives to related departments, serving as a blueprint for formulating enterprise plans. Develop strategies and initiatives supporting the management of critical sustainability concerns, alongside establishing frameworks for fostering relationships with stakeholders in responsible domains.

Governance Structure and Policies for Responsible Business Operations

Sustainability Governance Structure^{GRI 2-9, GRI 2-13}

PTT has instituted a robust governance framework to propel its sustainability agenda forward. This framework outlines clear roles and responsibilities across the Board of Directors, management, executives, and internal departments, ensuring concerted efforts to advance, support, monitor, and evaluate overall sustainability initiatives as illustrated in the provided diagram. This structure facilitates the collection, analysis, and reporting of operational outcomes in alignment with the " PTT's Sustainability Management Master Plan for Social and Environmental Responsibility for 2021 – 2025”, underscoring PTT's commitment to social and environmental stewardship, to the Governance, Risk, and Compliance Management Committee (GRCMC) and the Corporate Governance and Sustainability Committee (CGSC) on a quarterly basis. Moreover, performance and reviews of sustainability management process, as well as annual sustainability management plans, are reported to the PTT Board of Directors.

In the management of materiality, each issue is meticulously assigned to a designated department with clear responsibilities. Oversight is conducted by dedicated committees at both the management level and the PTT Board of Directors. For detailed insights into the process and outcomes of evaluating these critical sustainability matters, please refer to the section on "Assessment of Materiality."

Policies on Responsible Business Practices^{GRI 2-23}

PTT acknowledges the paramount importance of conducting business with responsibility and has articulated its commitment through various policies, outlined as follows:

• PTT Sustainability Management Policy, jointly signed by the Chairman of the Board of PTT Public Company Limited and the Chief Executive Officer and President, underscores the organization's commitment to managing sustainability across all three dimensions: environment, society, and governance.
• PTT Corporate Governance Policy, signed by the Chairman of the PTT PCL’s Board of Directors, aims to foster PTT as an efficient entity in conducting business with excellent corporate governance and management practices. It emphasizes creating sustainable value for shareholders, prioritizing stakeholder interests, maintaining ethical business conduct, and ensuring transparency and accountability.
• PTT Human Rights Statement signed by the Chief Executive Officer and President, underscores PTT's commitment to upholding human rights principles in its operations.

Additionally, PTT has formulated policies addressing specific key issues to provide clarity and reinforce its commitment to responsible management, including:

• PTT Group Quality, Security, Safety, Occupational Health, and Environment Policy
• PTT Stakeholder Management Policy
• Anti-fraud and Corruption Policy of PTT Public Company Limited

Each policy undergoes periodic review to align with evolving circumstances and issues related to corporate sustainability.

PTT Group Companies Governance^{GRI 2-24}

PTT establishes the PTT Group governance policy through the creation of the PTT Way manual and the implementation of the PTT Group Way of Conduct. This comprehensive set of guidelines, principles, and work processes encompasses various dimensions of PTT and its subsidiary companies, ensuring consistency and harmony across the organization. It serves as a tool for controlling companies within the PTT Group, promoting uniform standards throughout the organization. To enforce these standards, PTT designates representatives to serve as directors, executives, and practitioners, tasked with implementing and upholding the established guidelines. This approach aims to foster unity within the PTT Group, harnessing collective strength and potential to enhance international competitiveness. By operating cohesively and adhering to transparent and sustainable practices, the PTT Group can continue to evolve and thrive in the global marketplace.

PTT Sustainability Management Standard

In 2021, PTT embarked on the initiative to review and enhance the PTT Group Sustainability Management Framework, originally established in 2016, evolving it into the "PTT Sustainability Management Standards." This transformation aims to align with contemporary standards and practices, both nationally and internationally, which have advanced and modernized over time. These standards include but are not limited to ISO26000 for social responsibility guidelines, the United Nations Global Compact (UNGC), Sustainable Development Goals (SDGs), Global Reporting Initiative (GRI) reporting standards, and criteria of State Enterprise Assessment Model (SE-AM). The revised framework comprises three main components:

1. Sustainability management principles consist of 7 principles as follows:

• Accountability: Upholding organizational governance while managing risks and opportunities, including the management of key sustainability issues and the establishment of a governance structure.
• Transparency: Disclosing organizational activities impacting the economy, society, and environment with clarity, accuracy, timeliness, and completeness.
• Ethical behavior: Abiding by fair business practices in all agreements to ensure fairness for other organizations and consumers.
• Respect for stakeholder interest: Engaging with stakeholders effectively and fairly, providing comprehensive feedback, and considering their interests.
• Respect for the rule of law: Adhering to laws, regulations, and various legal requirements, and periodically reviewing compliance with them.
• Respect for international norms of behavior: Respecting the rule of law, avoiding actions that contradict these standards.
• Respect for human rights: Safeguarding the human rights of individuals both positively and negatively affected by PTT's business operations. 

2. The materiality encompasses 7 key areas:

    1) Organizational Governance
    2) Human Rights
    3) Labor Practices
    4) Environment
    5) Fair Operating Practices
    6) Consumer Issues
    7) Community Involvement and Community Development

3. Sustainability management process consists of four key processes outlined below:

Assessment of Materiality^{GRI 3-1, GRI 3-2}

The process of sustainability materiality assessment at PTT is aligned with the Global Reporting Initiatives (GRI) Universal Standards 2021 and the Corporate Sustainability Reporting Directive (CSRD) requirements. This process identifies sustainability risks and opportunities across environmental, social, and governance dimensions, considering human rights throughout the organization's business operations.. It encompasses both actual and potential impacts, both positive and negative. It evaluates the impacts on stakeholders, society, and the environment (Impact Materiality) and the impacts of external factors on the organization's financial performance (Financial Materiality) throughout the value chain, following the concept of Double Materiality. Due diligence materiality assessment is conducted annually and integrates into the annual enterprise risk assessment process to review changes in the context of internal/external factors and evolving circumstances, with 4 main steps as follows:

 

Step 1: Understand the organization’s context
Consider internal factors (such as vision, mission, strategic objectives, organizational risks, and operations/ activities) and external factors (such as standards, requirements, best practices, global trends, and relevant risks), as well as consider material topics from PTT Group and industry peers. Additionally, PTT also analyzes internal and external stakeholders' needs and expectations throughout the value chain from organizational activities through surveys/ public hearing/ interviews for material topic grouping and prioritization.

Step 2: Identify actual and potential impacts
Identify actual and potential impacts, both positive and negative, in Environmental, Social, Governance dimensions with the consideration of human rights impacts throughout the organization’s operations. It starts from actual and potential negative impacts that may happen in the future. This includes those the organization causes, contributes to, or is directly linked to for business benefits from the organization’s value chain. Next, identify the positive impacts that have occurred and have potential in the future to deliver value for sustainable development.

Step 3: Assess the significance of the impacts
Assessing the impacts on society and the environment (Impact Materiality) and the impacts on the organization's financial performance (Financial Materiality) by analyzing both quantitative and qualitative aspects of both positive and negative impacts.

Negative impacts
When evaluating the potential impacts, it is important to consider both the negative and positive impacts. The severity of negative impacts should be assessed by considering their scale, scope, and whether they are irremediable. Additionally, the likelihood of negative impacts occurring in the future should also be taken into account.

Positive impacts

The significance of positive impacts should be evaluated by considering their scale and scope. The potential positive impacts that are likely to occur in the future should be determined by considering both their scale, scope, and the likelihood of occurrence.

Step 4: Prioritizing Impacts for Reporting Purposes

Prioritize the impacts and select materiality topics for management and disclosure purposes in the 56-1 One Report and PTT website. The company conducts a thorough analysis of the Impact Materiality on society and the environment and the Financial Materiality on the organization's financial performance. This assessment undergoes a collaborative review with relevant functions and experts. It is all under the oversight and approval of PTT's committees at the management and board levels, including the Governance, Risk and Compliance Management Committee (GRCMC) and the Corporate Governance and Sustainability Committee (CGSC), respectively. In addition, materiality assessment process verified by a third-party assurance provider. PTT engages external experts and agencies to review and assurance the process and outcomes of the materiality assessment. This is to ensure completeness, accuracy, reliability, and transparency. The company considers observations from these experts and external agencies to continuously improve operational processes and information disclosure practices.

Download 56-1 One Report

2023 Materiality Assessment ^{GRI 3-2, GRI 3-3}

In the 2023 materiality assessment, the material issues emerged concerning both social and environmental impacts, as well as the influence on the financial performance of the organizations. The top 3 priority topics and the issues that have changed from 2022 are as follows: 

• Climate Action remains a top priority following the previous year, as it remains an internationally significant global agenda. The issue was emphasized during the 27^th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP27) to limit the increase in temperature to 1.5 degrees Celsius compared to pre-industrial levels. As a national energy company under the Ministry of Energy, PTT has a mission to reduce Thailand's greenhouse gas emissions in the energy sector. Therefore, PTT integrates climate change risks and opportunities assessment into its annual strategic planning and risk management processes. This involves considering energy transition risks, financial impacts related to climate change, and identifying new business opportunities in the transition to a low-carbon economy. PTT has set long-term targets and strategies to prepare for this risk by transitioning its business toward "Future Energy and Beyond". These targets include New Growth, Business Growth, and Clean Growth through Portfolio Transformation. These strategies have been clearly outlined in the organization's strategic plan, which aligns with the vision of "Powering Life with Future Energy and Beyond” and aimed at expanding operations towards a low-carbon society and achieving Net Zero Emission.
• Innovation and Technology have increased their ranking significantly due to new business development and expansion in which innovation and technology play important roles. Companies are focusing on developing new sustainable products and services that cater to the needs of their current and future stakeholders. This includes supporting the energy transition following the vision "Power Life with Future Energy and Beyond", which involves expanding into new businesses that go beyond energy, adjusting investment portfolios to include low-carbon businesses, such as renewable energy, electric vehicles, and life sciences. PTT emphasizes the importance of promoting creativity and innovation both within and outside the organization. This includes developing new products and services, improving work processes, and creating new businesses that improve efficiency and effectiveness. These efforts aim to increase business competitiveness and achieve sustainability goals. To achieve these goals, PTT has set ‘New Growth’ corporate target for increasing revenue from growth in the future energy value chain and expanding into new businesses. The company has also developed the "PTT Innovation Management Master Plan" to guide its operations and strategies. In addition, the business expansion has a potential impact on the "Water Management" in the future involving physical and transition risks that may arise from climate change.
  
  
• Occupational Health and Safety PTT employees and contractors are at risk of exposure to hazards arising from their work in the oil and natural gas industry that may lead to irreparable health injuries/ illnesses or loss of life. All of these can financially result in the cost of property damage, loss of income from business disruption, remedies, fines, etc. PTT is therefore committed to improving management, safety, and business continuity of the company to be efficient, flexible, and ready to accept all types of risks without affecting business operations and stakeholders. PTT has set strategic direction “Promote safe working environment and respecting the human rights principles” in the “Sustainability Management Master Plan for Social and Environmental Responsibility for 2021 - 2025” in the Social dimension to leverage occupational health and safety operations, such as compliance with basic and task-specific safety rules, health surveillance, analysis and management of process safety event risks, Bow Tie and Barrier Validation, PTT health reporting system, and transportation safety management.    

Targets and Key Indicators for Material Topics

Sustainability True Value Assessment

PTT conducts a comprehensive assessment the true value of the organization, considering both the positive and negative impacts on sustainability across environmental, social, and governance dimensions. This approach provides stakeholders with genuine insights into the organization's performance, effectively capturing the external impacts of its operations in monetary terms. By quantifying these impacts, stakeholders can better understand the true value generated by the organization and the associated risks and opportunities. This enables PTT to identify areas for improvement, mitigate negative impacts, and enhance business practices to align with sustainability goals. Moreover, the assessment serves as a valuable tool for future planning and decision-making across various company projects.

Assessing the true value of the organization involves a structured approach encompassing five key steps. These steps outline the scope of the assessment, focusing on pertinent information regarding PTT’s annual business operations (excluding companies within the PTT Group). There are as follow:

1. Examine the organization's policies, strategies, and operational plans pertaining to sustainability management.
2. Select material sustainability topics for the year. These topicss are instrumental in determining relevant indicators that reflect both direct and indirect impacts.
3. Collect data related to selected indicators and their corresponding value variables to analyze both positive and negative impacts associated with each indicator, including direct and indirect effects.
4. Calculate the value of positive and negative sustainability impacts by multiplying the sustainability performance data with the respective value variables associated with each indicator.

5. Integrate the values derived from each indicator, encompassing both positive and negative impacts, to calculate the sustainability true value of the organization.