Strategic Sustainability Framework for Business

Sustainability Strategy and Management System ^{GRI 2-22, GRI 11.2}

PTT is aware of and recognizes the plausible risks and opportunities that may have arisen due to climate change. Coupled with changes regarding Megatrends and Energy Outlooks in the future, PTT subjects’ high importance on these two factors when determining the strategic business direction and operations. The company's vision, strategic framework, and business plan clearly outline and reflect this.

Under PTT's new corporate vision concept of "Powering Life with Future Energy and Beyond," PTT emphasizes business diversification strategies to expand its future energy business and operations best, which encompasses new businesses beyond energy production in line with mega and Energy outlook trends, as well as mitigating key risk factors and opportunities arising due to climate change. Thus, investments have been directed to the following:

• Future Energy as Renewable Energy, consisting of renewable energy sources, energy storage systems, electric vehicle supply chains, and research into hydrogen-related opportunities, are being conducted.
• Beyond or businesses beyond PTT's energy business offerings:
  
  • Life sciences such as pharmaceuticals, medical equipment, and nutritional products
  • High-value business chemicals
  • Mobility and lifestyle businesses, including non-oil retail-related offerings
  • Logistics and infrastructure
  • AI, robotics, and digital business

To drive knowledge and vision transfer into concrete actions, PTT has established a guideline framework for the organization's business strategy, as shown, in line with its Aspiration “PTT by PTT or Powering Thailand’s Transformation” is an energy organization that drives Thailand through transformational changes by choosing to place focus on the three business mentioned above direction areas, Partnership & Platform, Technology for All, and Transparency & Sustainability.


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

	Business Growth: Transform portfolios to focus on low-carbon businesses. LNG: Increased LNG trade volume in the portfolio to 9 million tons/year Power (Conventional): Increase investment in conventional power generation capacity such as gas-to-power into 8 GW Renewables:  Increase efforts in renewable power generation capacity to 12 GW
	New Growth: Increase profit shares from Future Energy & Beyond sector to no less than 30%.
	Clean Growth: Reduce PTT Group's greenhouse gas emissions by 15% compared to 2020, announce PTT's carbon-neutral goal by 2040, and aim for net zero greenhouse gas emissions by 2050.

PTT’s "4R" strategic, operational plan includes

1. Resilience Creates flexibility and continuity of business operations while maintaining liquidity. Promote safety and operational excellence to encourage synergies and best utilize existing company assets. Encourage employees to remain agile and resilient with preparedness to cope with changes regarding business situations and focus on risk management and crisis management.
2. Reenergize Strengthen market competitiveness for current businesses. Generate added value throughout the company's supply chain from upstream to downstream. Adjust existing portfolios to support the transition of hydrocarbon energy and reduce carbon emissions from existing business operations.
3. Reimagination Initiation of business expansion to support the next normal transition, including energy businesses that have demonstrated potential to expand, such as LNG electricity. While also accelerating the development and growth of new business models beyond the hydrocarbon business, both within the Future Energy business and beyond.
4. Reform Evaluation and adjustment of existing organizational structure or business models per the future business/strategy direction, thus ready to adapt to unforeseeable changes in the future.

All strategic frameworks have been transferred into PTT's business plans on relevant agencies, including subsidiaries within PTT Group. This movement includes operational plans conveyed to specific operations for responsibility as well as critical mechanisms and methods for driving PTT's sustainability business, such as regulatory structures, defining various indicators to ensure that operations can be effectively driven towards the vision and goals set for effective and systematic results.

Sustainability Strategy Direction^{GRI 2-22}

Under PTT's aspiration on PTT by PTT (Powering Thailand's Transformation by Partnership & Platform, Technology for All, and Transparency & Sustainability), In terms of Transparency & Sustainability outlooks, PTT diverts adequate attention to formulating transparency and sustainable business development practices to support the implementation of Sustainable Development Goals (SDGs), by placing importance upon balanced responses regarding requirements and expectations of all stakeholders related parties.

PTT has defined its "Strategic Sustainability Direction" within the "Sustainability Management Outlook Plan" to demonstrate corporate social and environmental responsibility.

PTT's outlook for 2021-2025 consists of 3 dimensions: environment, social, and governance (ESG), with a formulated set of indicators for short, medium, and long-term goals alongside strategies to maximize success. This outlook is in line with the 20-year national strategy and supports the following SDGs:

Sustainable Development Goals (SDGs) Contribution

PTT scheduled an assessment of its priorities regarding sustainable development goals related to its business operations for sustainable development goals to be incorporated within the company's strategic vision and aligned with its strategic and enterprise plans. The three assessment steps are as follows:

1. Explore significant internal and external factors, including the organization's vision and new strategic direction, Corporate Sustainability Key Issues Policy, Sustainability Strategic Direction Policies, Targets Action Plans, and various global sustainability trends and directions that may affect business operations throughout the value chain including the needs and expectations of stakeholders.
2. Prioritize level of response and importance of Sustainable Development goals according to the international frameworks and guidelines such as the SDG Ambition Integration Guide, UN Global Compact's SDG Compass, IPIECA's Mapping the Oil and Gas Industry to the SDGs: An Atlas, WBCSD's SDG Sector Roadmaps, and IPIECA and WBCSD's Accelerating Action: An SDG Roadmap for the Oil and Gas Sector. In addition, assessments will be made in consideration for alignment to Thailand's 20-year National Strategy (2018-2037) and the 12th National Economic and Social Development Plan (2017-2021) deemed relevant to PTT's operations. Said rankings of sustainable development goals were then concluded through the categorization of 2 categories. Ten goals were to be Integrated into Core Business, while the other seven goals were to fit into Collaboration with Other Stakeholders; notably, goal 17 is vital in facilitating the remaining goals' success.
3. Justify prioritization and management approach to relevant departments for organizational development to consider feeding frameworks into the development of state enterprise plans, work plan, and projects supporting sustainability material topics, as well as engagement plans with stakeholders in subjected areas.

 

Governance Structure and Policies for Responsible Business Conduct

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

PTT establishes a governance structure for its business spearheaded towards sustainability. Succinct clear responsibilities are directed through board-level management, managers, and internal departments to drive support and monitoring coupled with a review of its overall sustainability management. To achieve its stated goal efficiently, as shown below, the company has collected, evaluated performances, and reported results in accordance to "PTT's Sustainability Management Master Plan for Social and Environmental Responsibility" for the year 2021-2025. The progress is regularly reported to the Governance Risk Management Committee (GRMC) and Corporate Governance and Sustainability Committee (CGSC) to demonstrate its commitment to social corporate and environmental protection along with quarterly and performance reports reviews of the ongoing sustainability management process and its annual sustainability management plan for the PTT Board of Directors as well.

Regarding the management of key sustainability topics, each key specific issue is designated a responsible committee along with close supervision assistance ranging from management to the PTT Board of Directors. For more information, please refer to the Materiality Assessment section below.

Policies on Responsible Business Practices^{GRI 2-9, GRI 2-13}

PTT recognizes and upholds the great importance of responsible business operations and has expressed its commitment to the various policies as follows:

• PTT Sustainability Management Policy, Signed by the Chief Executive Officer and President of PTT Public Company Limited, consists of three-dimensional commitment intentions to manage, namely the environment, society, and governance sustainably.
• PTT Corporate Governance Policy  Signed by the Chairman of the Board of Directors of PTT Public Company Limited to enable PTT Public Company Limited (PTT) to conduct its business efficiently, have good corporate governance, and excellent management by focusing on extending sustainable benefits to shareholders with consideration of stakeholders as a whole and maintaining business ethics, transparency, and accountability.
• PTT Human Rights Statement Signed by the Chief Executive Officer and President of PTT Public Company Limited

Nonetheless, PTT's policies have also been formulated to demonstrate the company's commitment to managing key issues for greater clarity as deemed appropriate as follows:

• PTT Quality, Security, Safety, Health, and Environment (QSHE) Policy
• PTT Stakeholder Management Policy
• PTT Anti-Fraud and Corruption Policy

Policies are subjected to a timely review of content annually to align with the changing landscape and key sustainability prioritization within the organization.

PTT Group Companies Governance^{GRI 2-24}

PTT has since established PTT Group's Governance Policy through the publication of its PTT Group Way of Conduct, serving as a compilation of guidelines, principles, and procedures regarding working dimensions concerning PTT and PTT Group subsidiaries to remain consistent as a tool for implementing uniformed standards where PPT is a shareholder through selected representatives of the company. The members mentioned above are assigned to perform directorial, executive, and work-related decisions to foster unity within its operations, strengthening the potential and international competitiveness of PTT Group so that PTT Group can continue maintaining good business practices and growth within a transparent and sustainable manner.

PTT Sustainability Management Standard^{GRI 2-24}

In 2021, PTT reviewed and revised the 2016 PTT Group Sustainability Management Framework as "PTT Sustainability Management Standards" to uphold consistency with various standards and practices at both the national and international levels to reflect current issues. Furthermore, measures introduced and applied include ISO26000 Social Responsibility Guidelines, United Nations Global Compact (UNGC), Sustainable Development Goals (SDGs), Global Reporting Initiative (GRI) standards, as well as State Enterprises Assessment (SE-AM), consisting of three parts as follow.

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

• Accountability: Corporate governance coupled with risk, opportunity, and sustainability management of key issues and establishing governance structure.
• Transparency: Disclosure of the corporate's activities that affect the economy, society, and environment with clarity, accuracy, timeliness, and completeness
• Ethical behavior: Adherence to the principles of fair business practices in any agreement may put other organizations and consumers at a disadvantage.
• Respect for stakeholder interest: Promote effective and fair engagement with stakeholders as well as provide comprehensive feedback.
• Respect for the rule of law: Compliance with regulations and various requirements, as well as review compliance with the law.
• Respect for international norms of behavior: Respect for the rule of law and avoid violation of policies and wrongdoings in line with international guidelines.
• Respect for human rights: Protecting the human rights of those who may be positively and negatively affected by PTT's business operations.

2. Sustainability core subjects consist of 7 components as follows:

    1) 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 4 steps as follows:

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

PTT defines the materiality assessment process following the Global Reporting Initiative (GRI) Standards' Sustainability Reporting Guidelines, the International Integrated Reporting Council's (IIRC) framework, and the principle of double materiality to identify environmental, social and governance issues, which have both positive and negative impacts to stakeholders throughout the organization's value chain, as well as matters that trigger financial impacts to the enterprise value. PTT conducts materiality assessment annually to review significant changes to the organization and stakeholders. The assessment of key sustainability material topics is carried out in 4 steps as follows:

1. Understand the organization’s context
Analyze both internal factors (such as company’s vision, strategic objective, organizational operation, etc.) and external factors (such as relevant standards, requirements, guidelines, global trends and risks, material topics from PTT Group companies and industry peers, etc.). Additionally, PTT also examines stakeholders’ needs and expectations toward 15 business functions, as well as conducts corporate stakeholder survey annually with PTT’s 6 key stakeholder groups to identify material economic, environmental and social topics for further prioritization.

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. For negative actual and potential impacts, PTT explores the cause of impacts that the organization causes, contributes to, or is directly linked to for business benefits from the organization’s value chain. Next, PTT identifies the positive impacts that have occurred and have opportunities to deliver value for sustainable development in the future. The results are shown separately because positive and negative impacts cannot offset each other.

3. Assess the significance of the impacts
Negative impacts: Assess the significance of actual negative impacts, by considering the level of severity (scope, scale, and irremediable character). For the potential negative impact assessment, severity and likelihood are taken into account.
Positive impacts: Assess the significance of actual positive impacts, by considering the scale and scope of impacts. For the potential positive impact assessment, scale, scope and likelihood are taken into account.

4. Prioritize the most significant impacts for reporting
Prioritize the significance of all impacts and select the top three material topics, ranked within the high and critical/ extreme levels from positive and negative impact assessment, for reporting. The assessment result has been jointly reviewed by relevant functions, experts, and approved by the management and board committees such as the Governance, Risk and Compliance Management Committee (GRCMC) and the Corporate Governance and Sustainability Committee (CGSC), respectively. Furthermore, the material topics have also been verified by experts and external parties to ensure comprehensiveness, accuracy, credibility and transparency. PTT has taken notes of observation from experts and external parties to continuously improve the operational process and disclosure.

Download 56-1 One Report

2022 Materiality Assessment ^{GRI 3-2, GRI 3-3}

Following PTT's 2022 materiality assessment, the top five material topics, from high to critical/ extreme levels, are as follows:

• Climate Action remains at the highest rank due to the global tension to tackle climate change for achieving the goal of limiting global temperature to well below 2^oC and net zero GHG emissions by mid-century. PTT, as a state-owned national energy company regulated by the Ministry of Energy, has a direct mission to contribute to Thailand’s emission reduction, especially for the energy sector. Therefore, PTT integrates risk and opportunity assessment for climate change into the enterprise risk management by considering the risk factors from the energy transition and climate-related financial impact as well as considering possible opportunities for new businesses to the transition to a low-carbon economy.
  
  

  With PTT’s vision “Powering Life with Future Energy and Beyond”, PTT is driven to achieve the mission to expand into businesses toward a low-carbon society with 3 corporate targets: 1) New Growth, 2) Business Growth, and 3) Clean Growth. Specifically, Clean Growth focuses on reducing greenhouse gas emissions to reach carbon neutrality and net zero emissions targets. In addition, PTT established the 3P Decarbonization Pathways to serve as a framework with “Pursuit of Lower Emissions” strategy to reduce greenhouse gas emissions with operational decarbonization initiatives such as carbon capture utilization and storage, hydrogen energy, renewable energy in operations, etc.

• Business Diversification became more focused corresponding to PTT Vision's "Powering Life with Future Energy and Beyond" to transform the business direction to enable future competitive advantage. The new business model increases opportunities of revenue growth from renewable energy businesses and other businesses beyond the energy industry. The corporate target ‘New Growth’ focuses on accelerating and diversifying new business models to replace the share of growth in hydrocarbon value chain, in the areas of “Future Energy and Beyond”. In addition, under the 3P Decarbonization Pathways, the “Portfolio Transformation” strategy serves as a framework to invest in businesses such as renewable energy, battery, EV value chain, AI & robotics, life science, etc.
  
  
• Occupational Health and Safety is always in the spotlight as our workers and contractors in the oil and gas industry may face the hazards that lead to injuries, illness, irremediable health damage, or loss of life. All of these can financially result in the cost of property damages, loss of revenue from sudden halts of critical operations, remedy, fines, etc. The challenges created opportunities for PTT to improve the company’s security, safety, and business continuity management to be more efficient and resilient, prepared for risks in every shape and form without any impacts on business operations and stakeholders.
  
  PTT has set the sustainability strategic direction in its “Sustainability Management Master Plan” by considering three ESG (environmental, social, and governance) dimensions. Specifically, the Social strategic direction covers “promote safe working environment and respecting human rights principles” by implementing key actions related to occupational health and safety such as Life Saving Rules execution, health surveillance, Bow Tie Analysis and Barrier Validation, PTT Health Reporting system and an accident forecasting system for NGV transport vehicles, etc. Regarding the COVID-19 pandemic, PTT could systematically and effectively manage the pandemic, enabling employees and contractors to take appropriate actions and promptly receive aid when needed.
  
  
• Innovation and Technology had a high impact following the business expansion, which is related to the innovation and technology development for products and services, to accommodate new business opportunities.
  
  
• Corporate Citizenship played an important role as communities and society expect PTT to support public health safety amidst the COVID-19 pandemic, generate jobs and revenues, and restore the national economy following the abovementioned impacts.

Targets and KPIs of Top Material Topics

Sustainability True Value Assessment

PTT has assessed the true value of the organization from both positive and negative impacts on sustainability to provide investors with real insights into the performance of the organization, reflecting positive and negative externalities from the operations of the organization in the form of monetary value. It also allows the company to see opportunities to improve its operations to mitigate potential negative impacts and risks to the business and its stakeholders. This can lead to proper management, including being able to use in planning and making decisions in the implementation of various projects of the company in the future as well.

The true value assessment of corporate sustainability can be divided into 5 main steps, where the scope of the assessment covers PTT's business performance in each year (excluding PTT Group companies) as follows:

1. Study the organization's policies and strategies related to sustainability management.
2. Select material sustainability topics according to corporate policies and strategies to determine indicators that reflect direct and indirect impacts. Most of these indicators are constantly collected and reported in the organization's 56-1 One Report.
3. Gather indicator data and valuation factors to analyze positive and negative externalities, including direct and indirect impacts, by considering all dimensions of sustainability.
4. Assess the value of both positive and negative externalities using quantitative sustainability performance data multiplied by the valuation factors of the indicators.
5. Sum up the value of each indicator on both positive and negative externalities to calculate the organization's true value.