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Supply Chain Management

Raw materials, equipment and supplier services are essential to GPSC business operations. When suppliers do not abide by the regulations, company’s operations may be affected. GPSC as therefore placed emphasis on supply chain risk management, cut delivery cost and time, and improved suppliers’ businesses to grow sustainably together. The company set the following Supply Chain Management Policy and approaches to create efficient supplier chain management that aligns with the Sustainability Management Policy.

Sustainable Procurement and Supplier Management Policy

GRI 103-2

GPSC's supply chain management includes sourcing of raw materials: natural gas, raw water, and clari fied water. PTT is our most critical supplier providing these raw material. Other suppliers that pr ovide non-fuel goods and other services include construction and design service, mechanical equipment, machinery, IT service and many more.

GPSC is committed to the effective procurement and management of su pplies, insurance, and other aspects of operations related to business sustainability. The company introd uced the Sustainable Procurement and Supplier Management Policy to ensure excellence in procurement with transparency, fairness, and alignment with global practices.

Sustainable Procurement and Supplier Management Policy
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Supplier Sustainable Code of Conduct

GPSC recognizes the importance of encouraging suppliers to uphold governance principles with social and environmental responsibilities in their business operations. Therefore, the company created the Supplier Sustainable Code of Conduct to communicate the rules which require strict compliance by suppliers. The content of the Supplier Sustainable Code of Conduct ranges from business ethics, human rights, to safety, and environmental management.

Supplier Sustainable Code of Conduct
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Supply Chain Management : Vision – Missions – Goals

Vision 2020-2024
  • Be a Preferred and Trusted Partner of GPSC Group Users
Missions
  • P - Process Compliance & Good Governance
  • P - Proactive Procurement
  • E - Effective Procurement
Goals
  • Saving
  • Supplier Management
  • Process Development

Supply Chain Management Approach

GRI 103-2
GPSC Supply Chain Management
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Supply Chain Risk Management and Program Design

Supply chain risk management and program design have been implemented at GPSC to manage and assess supplier risk to prevent and mitigate environmental, social, and governance risks from anywhere along the supply chain. Implementation of the program consists of following 4 processes:

1. Supply Chain Analysis

GPSC conducts the following analyses on suppliers which are deemed to pose potential risk to the business: spend analysis, critical analysis, and dependent analysis. The analytical results are used as input into formulating appropriate management strategies by applying the supply position model.

2. Environmental Social and Governance (ESG) Risk Assessment

GPSC assesses suppliers on the likelihood and severity of environmental, social, and governance risks. Details of each dimension are as follows:

Environmental risks are greenhouse gas emissions, noise and vibration pollution, water use and waste water release, power usage, waste and hazardous materials management, and biodiversity impacts.

Governance risks are corruption, tax evasion, fair business competition, and intellectual property.

Social risks are labor management, human rights, health and safety, and legal compliance.

Supplier Selection & Pre-Risk Assessment
  • Supplier Selection & Screening through supplier pre-qualification process
  • Initial ESG evaluation for suppliers
Supplier Characterization & ESG Risk Assessment
  • Spending Analysis
  • Critical Analysis
  • ESG Risk Assessment
Supplier Comprehensive ESG Risk Assessment
  • Sustainable Supplier Audit and Assessment for gaps and opportunities for improvement
Supplier Risk Mitigation
  • Supplier Risk Mitigation and Improvement through GPSC Group programs

*The process covers GPSC Group Tier-1 and Non-Tier 1 Suppliers

GPSP has adopted the system of vendor list and supplier selection to ensure that suppliers deliver products and services that meet the company's requirements. The scope of assessment covers suppliers' capabilities based on GPSC's criteria laid out in the ESG supplier assessment form (69% ESG weight included). Suppliers approved through the supplier selection process will be registered on the Approved Vendor List (AVL) in the SAP system by GPSC's procurement staff.

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GPSC evaluates suppliers using ESG assessments and overall evaluation through the supplier registration form. This will be based on the general information of the suppliers, production or service assessment, certified standards, training in security, safety, occupational health and environment management, and business operations under the principles of good corporate governance and business integrity. The supplier selection committee or supply sourcing operation officer will consider using ESG assessments with an additional supplier qualification assessment form, consisting of 6 main sections:

Business (weight = 10%)

This section evaluates the quality of material or service of suppliers including quality, packaging/cleaning, transportation/delivery, technical support, contract/document and etc.

Production (weight = 30%)

This section evaluates source of products and services, production and distribution capacities, stock and resource management

Distribution (weight = 20%)

This section evaluates distribution efficiency, time and frequency of the delivery, distribution standards

Occupational Health and Safety (OHS) (weight = 15%)

This section evaluates internal policy, management, standards on OHS issues including safety record, PPE, and quality control

After sale service & Technical support (weight = 15%)

This section evaluates support on after sale service and technical of the business and product warranty

Corporate Social Responsibility (CSR) (weight = 10%)

This section evaluates CSR policy, environmental management system and human rights

Suppliers shall meet a minimum of 70% in order to get approved into GPSC Approved Vendor List (AVL)

Evaluation criteria
Score 81 - 100% Level A: Over expectation
Score 61 - 80 Level B: Meet requirement
Score 40 - 60% Level C: Need improvement some problems
Score < 40% Level D: Unsatisfied or Disqualified

GPSC also specifies economic, environmental, and social issues consistent with the Supplier Sustainable Code of Conduct in the Terms of Reference (TOR). All suppliers are required to sign the acknowledgement form of GPSC Supplier Sustainable Code of Conduct to ensure compliance with the agreements and requirements.

To assess suppliers' performance, GPSC has established a supplier performance measurement procedure to be carried out with suppliers on the vendor list that deliver products or services to the company during the assessment period. The purpose of the assessment is to ensure that suppliers can deliver products and services that meet the company's needs and comply with the company's Procurement Policy.

GPSC annually conducts the analysis on supplier spending, ESG Risk Assessment and Critical Analysis which are deemed to pose potential risk to the business. The analytical results are used as input into formulating appropriate management strategies and mitigation measures.

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Critical suppliers of GPSC refer to those who has high expenditure, are critical components, and non-substitutable to GPSC.

  • High-volume spending: annual spend more than 50 million baht
  • Critical component suppliers: such as feedstock suppliers
  • Non-substitutable suppliers: such as advanced construction and engineering and feedstock suppliers
  • Strategic Relationship (Parental Company) as GPSC Group's strategy and direction needs to align and comply with parental company's business strategy

High Sustainability Risk Suppliers

  • Refer to Suppliers who has high sustainability risks on the ESG issues that can cause significant both financial and non-financial impacts on GPSC Group. This includes the following criteria
Governance

Business Ethics and Integrity, Cybersecurity and privacy protection, sustainable sourcing

Environmental

Environmental Management

Social

Employee, Human Rights, Human Development, Social Responsibility, OHS

  • Suppliers who has score > 73 will consider as high sustainability risk.
ESG Risk Level Risk Management Measures
Low
  • Internal monitoring and assessment
  • Self ESG-Assessment by suppliers
Medium
High
  • Internal monitoring and assessment
  • Self ESG-Assessment by suppliers
  • Comprehensive ESG-Audit with corrective action plans
  • External Sustainability Audit
  • Supplier performance follow-up
Very High
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Supplier Risk Mitigation -Comprehensive ESG Audit

To support the sustainable development of suppliers, GPSC Group performs a comprehensive company on-site to access environmental, social, and governance risks on suppliers. The audit results are used as input into identifying solutions or ways to improve suppliers' efficiency and compliance with the Supplier Sustainable Code of Conduct. The details of the minimum audit criteria are as follows

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  • Supply Chain Management
  • Quality Standard
  • Law and Regulation Compliance
  • Business Continuity Management
  • Supplier Code of Conduct and Anti-Corruption
  • OHS
  • Environmental Management
  • Human Rights
  • Emergency Preparedness and Response
  • Social Responsibility

Findings, gaps, and recommendations will provided to supplier for improvement to meet GPSC Group's expectation where GPSC Group conducted a monitoring and follow-up based on annual basis.

Score Level Definitions
3.26 -4.00 : Excellence
Sustainability practices have been implemented at the excellent level. Monitoring is not required.
2.51-3.25 : Good
Sustainability practices have been implemented at the good level. Improvement can be achieved in some areas but monitoring is not required
1.00-2.50 : Fair
Sustainability practices have been implemented at the fair level. Suppliers must propose plan and timeline to improve performance in environmental, social, and governance area (ESG Corrective Action Plan), which has to be completed within the timeframe.
ต่ำกว่า 1.00 : Poor
Implementation of sustainability is at the poor level. Supplier must propose a plan and timeline to improve performance in environmental, social, and governance area (ESG Corrective Action Plan) before any bidding can take place.

Note: The full score is 4 where suppliers must earn more or equal to 2.5 point in order to pass GPSC's ESG assessment

3. Risk Management

GPSC uses results from supplier ESG risk assessment to formulate the risk management approach by categorizing suppliers into 3 levels as follow:

Strategic suppliers refer to the group of vendors whose business activities are characterized as high risk with severe impacts on the suppliers themselves and potential spillover to surrounding communities, creating severe impacts on buyers both from the business and the corporate image standpoints.

Key suppliers refer to the group of vendors whose business activities involve products widely distributed to consumers which have high impacts on buyers both from the business and the corporate image standpoints.

Managed suppliers refer to the group of vendors whose main business activities involve operations which may affect surrounding communities or areas, imposing a moderate level of risk on buyers.

4. Program Design

GPSC has developed the program design by setting strategies and management tools suitable for variouse risk factors, supplier's businesses, and supplier's levels of importance.

SHARE OF TOTAL PROCUREMENT SPEND CONTRIBUTION FROM CRITICAL SUPPLIERS
86.99%
NUMBER OF GPSC'S SUPPLIERS 2021
1,580
CRITICAL TIER 1 SUPPLIERS
53
Total Tier-1 Suppliers 1,580 (Y2021)
Total Spend 54,670 MTHB
Category No. of Suppliers Spend (MTHB)
Feedstock: Gas 2 34,680
Feedstock: Coal 6 7,787
Feedstock: Water 6 565
Other Services 698 5,155
Maintenance service 480 2,501
Construction and Design Service 87 912
Mechanical Equipment 387 869
Electrical Equipment 246 649
Other Materials 315 617
Machinery 226 384
Instrument Equipment 289 371
Process / Production 51 130
Safety 75 50
Grand Total 1,580 54,670*

*Note: 1 Supplier can supply more than 1 category

Country No. of Supplier Spend (MTHB)
Thailand 1,439 47,704
Singapore 28 3,133
Indonesia 4 2,823
Italy 2 251
Japan 9 187
USA 24 178
Korea 17 155
Australia 3 68
China 11 40
United Arab Emirates 2 31
Taiwan 7 26
Belgium 5 17
Netherlands 1 13
United Kingdom 9 7
Malaysia 4 7
Switzerland 2 7
Finland 1 6
Austria 1 6
Germany 2 5
Hong Kong 1 2
Vietnam 2 2
Hungary 1 1
India 1 0.4
Myanmar 1 0.2
France 1 0.2
Scotland 1 0.1
Slovenia 1 0.03
Grand Total 1,580 54,670
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Supply Chain Strategy

GPSC Group's Supply Chain Management Strategy is established, endorsed, and aligned to make an operating framework which maximizes economic value and minimizes risks for all procurement activities. GPSC Group has announced "GPSC Sustainable Procurement and Supplier Management Policy" in order to conduct business in a fair, sustainable, and accountable manner as well as provide good governance when dealing with communities and environment. GPSC Group's supply chain strategy is implemented by considering 5 main priorities.

Key ESG Objectives Integration in the Supply Chain Strategy
To enhance Green Procurement Policy and build organization wide awareness in suppliers

GPSC Group places emphasis to increase green procurement within value chain.Therefore, GPSC Group applies green procurement in the supply management system and increase our spending with green procurement within the organization. In addition, GPSC Group encourage suppliers to adopt Green Procurement Policy and build awareness on green procurement in their operations to support a purchase of goods or services that impose less environmental burden than the ones performing the same functions. The Green procurement considers the effect of the goods/service throughout its life cycle, spanning from design, procurement of raw materials, production method, packaging, transportation, usage, to disposal after use in order to maximize resource efficiency. Moreover, GPSC Group is planning to integrate green procurement aspect as part of supplier selection in the future which can also fulfill our supply chain strategy and vision effectively.

Additionally, GPSC Group encourages suppliers to get certification for Green Industry (at least Level 2 or equivalent Green Activities) according to Green Industry Standard by Ministry of Industry Thailand, in which the supplier shall have environmental policy, conduct sustainable resource use, conduct climate change mitigation and adaptation as well as protect and restore of the natural environment.

To enhance awareness of GPSC supplier Code of conduct

GPSC Group place emphasis on sustainable procurement by integrating ESG into supply chain management system. Thus, GPSC Group enhances an acknowledgement and awareness of GPSC supplier Code of conduct to enhance transparency, fairness, and efficiency in suppliers in order to get products or services that meet the desire outcomes. Suppliers that comply with supplier code of conduct are considered in the GPSC supplier selection process as part of ESG evaluation.

Green Procurement Guideline
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GPSC aims to use products and services that minimize environmental impacts by implementing the Procurement Policy which requires environmentally friendly procurement practices. Specifically, the consideration of the environmental friendliness of a product or service spans the entire life cycle from obtaining raw materials to managing products past the expiration dates.

GPSC supports local procurement within Thailand, which brings both direct and indirect benefits to the company. The direct benefits of local procurement are lower costs and faster transportation which directly affect the company's procurement efficiency. Moreover, the company also gains indirect benefits by supporting a local economy and creating jobs and income for local residents. The goodwill created by this process helps strengthen relationships with local communities which, in turn, engenders trust for the company.

Supply Chain KPIs

GPSC Group set quantitative KPIs on supply chain management to ensure sustainable supply chain management throughout the year.

KPI 2019
(Actual)		 2020
(Actual)		 2021
(Actual)		 2022
(Target)		 2023
(Target)
Environmental, Social, and Governance (ESG) Audits by external organizations (number) 8 Tier-1 Suppliers 15 Tier-1 Suppliers1 16 Tier-1 Suppliers1 15 Tier-1 Suppliers 15 Tier-1 Suppliers
Suppliers Trained in Environmental, Social, and Governance (ESG) 40 114 139 120 120
Suppliers Signing GPSC's Supplier Sustainable Code of Conduct 100% of Tier-1 Supplier 100% of Tier-1 Supplier 100% of Tier-1 Supplier 100% of Tier-1 Supplier 100% of Tier-1 Supplier

Note:

  1. Online ESG Comprehensive Assessment
Updated as of February 2022

The above content is prepared in accordance with the sustainability reporting standards by the Global Reporting Initiative (GRI Standards), which is validated by external parties and provides a limited level of assurance of reporting information (Limited Assurance).

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