ESG INTEGRATION IN SUPPLY CHAIN MANAGEMENT · Supply chain management in O&G industry. The business of sustainability We have seen evolution of O&G Supply Chain 2014-2017 15 Wave

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The business of sustainability

ESG INTEGRATION IN

SUPPLY CHAIN MANAGEMENT


The Challenge

2

Stressed Natural Systems,

Depleted “Natural Capital”

Increasing Population

and Consumption

3 Billion in 1965

7 Billion in 2015

10-15 Billion

??

Air Quality

Clean Water

Wetlands

Arable Land

Biodiveristy

Forests

Fisheries

Climate

By 2050, 9 billion people live well, and

within the limits of the planet


Industry Megatrends

Low Carbon Future

Global Energy

Transition

3

Disruptive Technology

Circular Collaborative

Ecosystem


Low carbon energy transition

4

BUSINESS

IMPLICATION


Global scenarios by BP 2018

Energy Outlook

5

BUSINESS

IMPLICATION


Digital & technology transformation

6

Multiple uses of drones, ROVs, self driving vehicles

and robotic solutions with numerous advantages:

Cost-effective operations and access to data

Reduced HSE exposure and footprint

Less downtime due to poor weather conditions

Increased access to restricted, remote, or frontier areas

Respect and protection of environmentally sensitive

areas such as coral reefs

BUSINESS

IMPLICATION


Shifting trends in supply and demand are reshaping the industry

7

Source: World Economic Forum/Accenture analysisDigital Transformation Initiative Oil and Gas Industry, January 2017


Capturing Value of Sustainability

in Oil & Gas

8


Capturing Value of Sustainability

9

The Business of

Sustainability: McKinsey


Maximizing Value in Oil & Gas

10

Source: World Economic Forum/Accenture analysisDigital Transformation Initiative Oil and Gas Industry, January 2017


Supply Chain Sustainability

in O&G Industry


12

Focusing on own business’ sustainability

impacts is clearly a priority for efficiency and

growth. But the IMPACTS AND RISKS IN

SUPPLY CHAIN CAN BE SIGNIFICANTLY

GREATER than direct impacts.


Different sectors have different level of exposure

13


14

■ O&G producers are heavily reliant on large contractor workforces to conduct the

majority of their high risk and high value activities.

■ Leading O&G producers have addressed such exposure through their supply

chain standards and monitoring programs, with particular focus on compliance

with the company's environmental, health, safety, labor policies, and anti-

bribery and corrupt practices.

Supply chain management in O&G industry


We have seen evolution of O&G Supply Chain 2014-2017

15

Wave 1

Reducing pricing &

costs, incl. renegotiating

existing contracts and

pricing with suppliers to

right size for reduced

activity

Wave 2

Increasing efficiency,

incl. collaboration

between operators &

contractors in similar

operation areas to

optimize logistics and

mutually reduce costs

Wave 3

Extended operator &

contractor collaboration

by identifying

opportunities to simplify

and standardize design

and components

Wave 4

Circular supply chain,

to reuse materials

and waste products

to reduce cost and

achieve higher

sustainability

Oil price

drop in 2014


Getting the Basic Right through ESG

Integration

16


UN Global Compact – Basic responsibilities

17


UNGPs & OECD expectations

18

The OECD Guidelines, UNGPs say

Business should:

1. POLICY: Have a public commitment to respect

rights, embedded through an ongoing process of

human rights due diligence

2. RISK ASSESS: Identify areas where risk of

adverse human rights impacts is significant

3. INTEGRATE: findings into decision making and

actions (mitigation)

4. TRACK EFFECTIVENESS: to verify if impacts

addressed by performance contracts & reviews,

surveys, audits, and grievance mechanisms

5. COMMUNICATE: and Report efforts internally

and externally


Code of conduct and policies

19


Supply chain ESG risk identification

20

Example of human rights risk mapping


Supply chain ESG risk management

21

Sustainable Sourcing Policy and Supplier

Guiding Principle

Risk & Exposure Assessment

Risk Management Measures

Contract ClauseSupplier Selection

& Retention

Collaborative

InitiativesCapacity Building

Supplier Audit Program

Self Assessment

Third Party SR Audit

Measurement and Disclosure


Integrate supply chain conditions findings

22

Rank (1-5). Track record on: Supplier 1 Supplier 2 Supplier 3

Price competitiveness 4 3 4

Quality reliability 3 4 2

On-time shipping 3 4 5

Local option 1 1 0

Labour standards 3 4 2

Environmental standards 2 3 3

Innovation/ Product Development 3 4 4

Total Score: 20 23 20

And recommends a Balanced Scorecard in Tender/Bid process:

Wins this Tender : Rewarded for better Environmental/ Social


SHIFT IN SUPPLIER / CONTRACTOR MANAGEMENT

OLD WAY

Audit questionnaires asking if

compliant

Excessive auditing by different

customers

Pass/Fail (drives cheating) rather

than grading results

Disincentive to supplier for social/

environmental compliance as

buyers move to cheaper

competitors

NEW WAY

Survey to understand suppliers

Strengthen audits & capacity

building with industry

collaboration if possible

Support capacity building-training

& monitor improvement

Improved buying practices,

rewarding suppliers through

balanced scorecards and

incentives


PTTEP Supply Chain Sustainability in Action

24


PTTEP – Corporate Governance Principle

25


PTTEP – ESG Integration in Procurement Process

26

Bid Strategy

In the past year, 84% of the total procurement value is processed

through tendering

Selection Criteria Screened by PC, BOD, etc.

Vendor Selection

Annual Procurement Plan Announcement

Pre-Q for New Business - Contact Category and Vendor

Management Team for Technical Capability Assessment via Pre-Q

Contract Management – Working together to achieve Performance Excellence


Supply Chain Collaboration and Capacity Building

27


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Today, implementing Responsible Supply Chains is a

MUST for companies. Leading companies have made

a step change from service-driven supply chain

strategies to more holistic concepts which drive

profitability and socio-environmental benefits

simultaneously.


PTTEP’s Contribution to the Global Goals

29

The Global Goals

Priority to PTTEP


Thank You

Nat Vanitchyangkul

Asian Growth Initiative Leader

ASEAN Corporates

Email: [email protected]

Mobile: +66899218488

179 Bangkok City Tower, 24th Fl., South Sathorn

Road, Bangkok 10120, Thailand

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ESG INTEGRATION IN SUPPLY CHAIN MANAGEMENT · Supply chain management in O&G industry. The business of sustainability We have seen evolution of O&G Supply Chain 2014-2017 15 Wave