Leadership & Governance Index

Content

Management of Legal & Regulatory Environment (RT-CH-530a.1)

Critical Incident Risk Management: Operational Safety, Emergency Preparedness & Response (RT-CH-540a.1)

Critical Incident Risk Management: Operational Safety, Emergency Preparedness & Response (RT-CH-540a.2)

Management of Legal & Regulatory Environment (SASB Code: RT-CH-530a.1)

Accounting metric

Discussion of corporate positions related to government regulations and/or policy proposals that address environmental and social factors affecting the industry

Information

Political dialog in compliance with corporate values and principles:

We support and promote responsible, accountable, transparent and democratic processes that benefit society at large. Hence, we respect the roles and responsibilities of the institutions and organizations we engage with and are open about the interests we seek to advance. Our interaction with politicians is based on evidence. We are open for dialog with all stakeholders. BASF is not affiliated with any political party, individual members of parliament or incumbents or candidates for a political office.

BASF pursues a constructive dialog with its societal stakeholders to ensure and improve its license to operate and as part of its commitment to develop sustainable solutions together with partners.

This exchange allows us to respond to changes in our environment, to understand trends and to anticipate regulatory expectations and developments, in order to effectively advocate for and communicate our views.

In this context, we commit ourselves to responsible, honest and transparent action based on our values and principles. We are committed to ensuring that our dialogue and advocacy is in compliance with our Global Code of Conduct, and the rules and principles set out in our policy.

Operational opportunities and risks:

Risks for us can arise from intensified geopolitical tensions, new trade sanctions, stricter emissions limits for plants, and stricter energy and chemicals legislation in the E.U.

Political measures could also give rise to opportunities. For example, we view measures around the world to increase energy efficiency and reduce greenhouse gas emissions as a strategic opportunity for increased demand for products such as our insulation foams for buildings, catalysts, battery materials for electromobility, or our solutions for wind turbines.

Strategic opportunities and risks regarding regulation and policy:

We expect continued regulatory and societal pressure to achieve climate-neutral energy production, climate-neutral energy consumption, and a climate-neutral resource and raw material base. The political approaches to address these issues will vary greatly from region to region. However, particularly in Europe, we expect measures with a continuously high level of detailed regulation, including changes to chemical and industry-related regulations, that have the potential to significantly impact the competitiveness of BASF’s operations and product portfolio as well as that of our customers.

Furthermore, we see the risk of the current geopolitical shift in balance of power leading to the establishment of uncoordinated or divergent global legislative standards and regulatory systems, not just in relation to chemicals or the regulatory framework for digitalization, but also to environmental, social and corporate governance criteria. We also see risks, but also opportunities, in the setting of international standards for specific product categories or technologies.

We explain our strategy in meetings with political decision-makers and social stakeholders. In doing so, we also inform ourselves of the changes we must undergo and advocate for a favorable and stable regulatory framework at both the national and international levels. We consider BASF to be in a strong position to contribute solutions toward achieving U.N. development goals, particularly regarding climate neutrality, through new technologies, innovative products and processes and our broad product portfolio.

Integration of ESG in Enterprise Risk Management:

The Governance, Risk Management, Compliance (GRC) Policy, applicable throughout the Group, forms the framework for risk management and is implemented by the operating divisions, the service and research units and the regions according to their specific business conditions.

A catalog of opportunity and risk categories helps identify all relevant financial and sustainability-related opportunities and risks relating to our targets as comprehensively as possible. Here, we take into account topics identified by the materiality analysis that we have an impact on and that have an impact on us, in line with the principle of double materiality. We also systematically assess opportunities and risks with effects that cannot yet be measured in monetary terms, such as climate and reputational risks. To reflect these, risks for companies in connection with the transition to a low-carbon economy (transition risks) as well as physical risks as defined by the Task Force on Climate-related Financial Disclosures (TCFD), among others, were added to this catalog.

Because global climate policy ambitions and the implementation of the relevant measures play a decisive role in the ongoing growth of the chemical industry and its customer industries, we defined and quantified global long-term scenarios (up to 2050) with various global warming paths. To assess the impact of different global climate policy approaches on our business units, the scenarios were discussed by the business units in workshops. Feedback was incorporated into the ongoing development of the scenarios. A dataset of scenario-specific macroeconomic parameters will be provided to test the economic feasibility of investments and business strategies.

We use standardized evaluation and reporting tools for the identification and assessment of risks. The aggregation of opportunities, risks and sensitivities at division and Group level using a Monte Carlo simulation helps us to identify effects and trends across the Group. We also aggregate qualitatively assessed risks at Group level using a risk portfolio. Our Group-wide Compliance Program aims to ensure adherence to legal regulations and the company’s internal guidelines. Our global employee Code of Conduct firmly embeds these mandatory standards into everyday business. Members of the Board of Executive Directors are also expressly obligated to follow these principles.

Source

BASF Report 2022: Opportunities and Risks: Risk management process, p. 158 – 159

BASF Report 2022: Opportunities and Risks: Operational opportunities and risks, p. 160 – 161

BASF Report 2022: Opportunities and Risks: Regulation/policy, p. 165

BASF website: Politics (basf.com)

BASF website: Political Communications & Advocacy (basf.com)

Operational Safety, Emergency Preparedness & Response (SASB Code: RT-CH-540a.2)

Accounting metric

Number of transport incidents

Information

Our goal is to minimize risks along the entire transportation chain – from loading and trans-portation to unloading. The transportation of dangerous goods is subject to mandatory national and international dangerous goods regulations as well as our global guidelines. The sites and subsidiaries are responsible for implementing transportation safety regulations and guidelines. Compliance is regularly monitored by the Environmental Protection, Health & Safety unit in the Corporate Center using globally standardized transportation safety reviews. A particular focus is incidents involving goods spillages that could lead to significant environmental impacts. These include dangerous goods leaks of BASF products in excess of 200 kilograms on public traffic routes, provided BASF arranged the transport.

We recorded three incidents in 2021 with spillage of more than 200 kilograms of dangerous goods* (2020: 2). None of these transportation incidents had a significant impact on the environment (2020: 0).

Source

BASF Report 2021: Transportation Safety, p. 125

Comment/Additional Information

More information on Transportation and Safety: Distribution Safety

*Hazardous goods are classified in accordance with national and international hazardous goods regulations