Number of sites partially or fully powered by emission-free electricity in 2020
We achieve long-term business success by creating value added for the environment, society and the economy. Sustainability is at the core of what we do, a driver for growth and value as well as an element of our risk management. That is why sustainability is firmly anchored into the organization as part of governance, compensation systems and business models.
Based on our corporate strategy and the global targets derived from this, we classify two of our sustainability targets (achieving €22 billion in Accelerator sales by 2025 and reducing our CO2 emissions by 25% by 20301) as most important key performance indicators. Carbon management bundles our global activities to reduce greenhouse gas emissions. We use the Sustainable Solution Steering method to manage our product portfolio.
Our products, solutions and technologies help to achieve the U.N. Sustainable Development Goals, especially Zero hunger, Gender equality, Clean water and sanitation, Decent work and economic growth, Industry, innovation and infrastructure, Responsible consumption and production and Climate action.
We evaluate key sustainability topics with our comprehensive materiality analysis. The relevant topics include climate and energy, resource efficiency and waste, health and safety / product stewardship, emissions to air and soil, and responsibility along the value chain.
The Corporate Development unit, which is part of the Corporate Center, steers the integration of sustainability into core business activities and decision-making processes.
The Board of Executive Directors and the Supervisory Board are regularly briefed on the current status of individual sustainability topics. The Board of Executive Directors makes decisions with strategic relevance for the Group and monitors the implementation of strategic plans and target achievement. The Corporate Sustainability Board, which is composed of heads of business and Corporate Center units and regions, supports the Board of Executive Directors on sustainability topics and discusses operational matters. A member of the Board of Executive Directors serves as chair.
BASF also established an external, independent Stakeholder Advisory Council (SAC) in 2013 and a Human Rights Advisory Council (HRAC) in 2020. In the SAC, international experts from academia and society contribute their perspectives to discussions with BASF’s Board of Executive Directors. The HRAC comprises external human rights specialists and internal experts, who advise senior management.
1 The goal includes Scope 1 and Scope 2 emissions, compared to the baseline 2018.
At our Capital Markets Day on March 26, 2021, we presented our roadmap to climate neutrality: BASF is setting itself even more ambitious goals than in the past and wants to achieve net zero emissions by 2050. Based on the most recent progress in developing low-emission and CO2-free technologies, we are also significantly raising our medium-term 2030 target for reductions in greenhouse gas emissions: BASF now wants to reduce its greenhouse gas emissions worldwide by 25% compared with 2018 – and to achieve this despite targeted growth and the construction of an integrated Verbund site in Zhanjiang, China. Excluding the effects of the planned growth, this means halving CO2 emissions in the current business by the end of this decade. Overall, BASF plans to invest up to €1 billion by 2025 to reach its new climate target and a further €2 billion to €3 billion by 2030.
BASF to replace fossil fuels with renewable electricity
At the heart of the long-term transition toward net zero CO2 emissions by 2050 is the use of new technologies, which will replace fossil fuels, such as natural gas, with electricity from renewable sources. Most of these technologies are being pioneered by BASF in collaboration with partners and are currently in a pilot stage. Broad scaleup of these technologies will only be fully realizable after 2030. In order to accelerate the avoidance of CO2 emissions prior to that date, BASF also continues to systematically implement continuous improvement processes for existing production plants. In addition, BASF will progressively switch to renewable sources to meet its electricity needs and intends to invest in wind parks to facilitate this.
From around 2035, the BASF Group’s electricity demand is expected to be more than three times higher than it is today. To meet our high demand for renewable energy, we will focus on two pillars. Firstly, we will purchase green power from third parties and thereby substitute grey with green power. Secondly, we want to cover our renewable energy demand by selectively investing in own renewable power assets. These two pillars will ensure additionality to effectively contribute to CO2 reduction. We want to build up a diversified portfolio, taking into account costs, flexibility, and availability.
Number of sites partially or fully powered by emission-free electricity in 2020
A broad technology portfolio for decarbonization
One of the most important new technologies BASF is currently developing is electrically heated steam crackers for the production of basic chemicals such as ethylene, propylene and butadiene. These chemicals are building blocks for numerous value chains and are essential for chemical production.
BASF, SABIC and Linde have signed a joint agreement to develop and demonstrate solutions for electrically heated steam cracker furnaces. By using electricity from renewable sources, the fundamentally new technology has the potential to reduce CO2 emissions by as much as 90%. A multi-megawatt pilot plant at BASF’s Ludwigshafen site could start up as early as 2023, subject to a positive public funding decision.
For BASF, the CO2 emissions reduction potential in ammonia and hydrogen production is roughly the same as for steam cracking. In total, BASF’s global hydrogen demand amounts to around 1 million metric tons per year. We currently produce around 0.5 million metric tons ourselves, primarily through steam reforming of methane. To achieve CO2-free production of hydrogen, BASF is pursuing two processes in parallel: the commercially available water electrolysis and methane pyrolysis, for which BASF has developed a new process technology. In a first step, we want to integrate internally produced green hydrogen into our Verbund production in Ludwigshafen. We want to do this by starting up a large water electrolysis plant in 2024. The methane pyrolysis process requires less than one-fifth the electrical energy of water electrolysis. We are a pioneer in this area and have started up our pilot reactor. The first commercial methane pyrolysis plants are only projected to start up toward the end of the decade.
Another important lever to increase energy efficiency is the use of electrical heat pumps to produce CO2-free steam from waste heat. BASF’s goal is to gradually ramp up this technology to industrial scale in a partnership with Siemens Energy and use it for waste heat recovery at entire sites.
To bridge the periods until new technologies are implemented, we will also consider external offsetting measures to a limited extent. If we purchase certificates, we will use external compensation measures fullfiling high-quality criteria, such as the WWF Gold Standard.
Offering transparency with product carbon footprints
We offer our customers solutions that help prevent greenhouse gas emissions and improve energy and resource efficiency. More than 40% of our annual research and development spending goes toward developing these products and optimizing our processes, as well as toward research projects to make our processes more energy and resource-efficient and to prevent greenhouse gas emissions. With the technology portfolio to reduce BASF’s CO2 emissions, we will be able to offer more and more low-carbon products to our customers. As an integrated company with base chemical production, we are a key enabler in helping our customers decarbonize their value chains.
By the end of 2021, we will provide our customers with carbon footprints for all of our 45,000 sales products. With our proprietary digital solution, we can determine the overall CO2 emissions for each individual sales product. BASF’s customers have shown huge interest in this increased transparency. With our innovative solution, we are a front-runner when it comes to additional customer benefits through CO2 reduction.
The Verbund system is an important component of our energy efficiency strategy: Waste heat from one plant’s production process is used as energy in other plants. In this way, the Verbund saved us around 18.7 million MWh in 2020, which translates to 3.8 million metric tons less CO2 released into the environment. With combined power and steam generation as well as our optimized Energy Verbund, we were thus able to avoid a total of 6.2 million metric tons of carbon emissions in 2020.
CO2 avoided by the Verbund and combined
heat and power generation in 2020
million metric tons
ChemCycling™ is a vital lever in creating a circular economy for plastics. The project covers plastic waste for which high-value processing is not yet available and makes it possible to produce virgin-grade chemical products from recycled feedstocks. At the same time, greenhouse gas emissions are lower than for conventional products made from primary fossil resources as the waste is no longer incinerated. In 2020, we processed around 1,000 metric tons of recycled raw materials in the Verbund, saving the same amount of fossil resources. We plan to successively increase the use of recycled feedstocks over the coming years. The ChemCycling™ project will play a significant part in achieving BASF’s target of using 250,000 metric tons of recycled and wastebased feedstocks annually from 2025 onward.
In addition to fossil resources, we employ renewable raw materials, mainly based on vegetable oils, fats, grains, sugar and wood. In 2020, we purchased around 1.2 million metric tons of renewable raw materials. The mass balance approach allows us to allocate the amount of renewable resources used to a wide variety of end products.
Palm oil, palm kernel oil and their derivatives are some of our most important renewable resources. We aim to ensure that palm-based raw materials come from certified sustainable sources and have actively supported the Roundtable on Sustainable Palm Oil (RSPO) since 2004. We purchased more than 227,000 metric tons of certified palm oil and palm kernel oil in 2020. We therefore reached our goal of only sourcing RSPO-certified palm oil and palm kernel oil by 2020.
A significant steering tool for the product portfolio, based on the sustainability performance of our products, is the Sustainable Solution Steering method. By the end of the 2020 business year, we had evaluated 98.4%1 of the relevant portfolio2. This refers to the BASF Group’s sales from products in its strategic portfolio to third parties in the business year concerned. By the end of 2020, sustainability analyses and assessments had been conducted for more than 57,000 specific product applications, accounting for €54.1 billion in sales. These consider the products’ application in various markets and sectors. New market requirements arise as a result of the continuous development of new product solutions in the industry or changing regulatory frameworks. This has an effect on comparative assessments, which is why we regularly reassess our product portfolio.
Transparently classifying our products on the basis of their contribution to sustainability enables us to systematically improve them. Accelerator products make a substantial sustainability contribution in the value chain. These include catalysts that reduce emissions to the environment, biodegradable mulch films for agricultural applications, and high-performance insulation materials for higher energy savings and reduced material use in building construction. Based on our corporate strategy, we have set ourselves a global target: We aim to make sustainability an even greater part of our innovation power and achieve €22 billion in Accelerator sales by 2025.
1 Parts of the relevant portfolio have not yet been evaluated, including the integrated polyamide business acquired from Solvay in 2020.
2 The definition of the relevant portfolio and further information can be found in the Sustainable Solution Steering manual at basf.com/en/sustainable-solution-steering
We engage in worldwide initiatives with various stakeholder groups. For instance, we have been a member of the U.N. Global Compact (UNGC) since its establishment in 2000. As a recognized LEAD company, we contribute to the implementation of the Agenda 2030 and the associated goals. We support UNGC Action Platforms, for example on Good Health and Well-being, and contribute to the UNGC Expert Network. To celebrate the 75th anniversary of the United Nations in 2020, we reaffirmed our commitment to the UNGC and pledged our support for the Women’s Empowerment Principles and the CFO Principles on Integrated SDG Investments and Finance. We are also active in 16 local Global Compact networks.
Our political advocacy is conducted in accordance with transparent guidelines and our publicly stated positions. The same applies to our activities in associations. For instance, we published an Industry Associations Review comparing the energy and climate protection positions of BASF and the most important associations of which we are a member, with explanations on our approach.
We stipulate binding rules for our employees with standards that apply throughout the Group. In doing so, we consider, respect and promote internationally recognized principles such as the 10 principles of the U.N. Global Compact, the Universal Declaration of Human Rights, or the Core Labor Standards of the International Labor Organization (ILO). We also established a Human Rights Advisory Council (HRAC) in 2020. It comprises external human rights specialists and internal experts, who advise senior management. This helps us to build on our strengths in how we handle human rights and address potential for improvement.
As a chemical company, we depend on ecosystem services like the availability of renewable resources and air, water and soil quality, while also influencing them. Protecting biodiversity is therefore a key element of our commitment to sustainability.
Thanks to responsible procurement practices, the efficient use of raw materials, our product solutions and involvement in numerous initiatives, our business conduct is consistent with the United Nations’ Sustainable Development Goals and we reduce our negative impact on biodiversity.
The business activities of our raw materials suppliers often involve land use and the associated impact on biodiversity, whether it is in natural gas and crude oil production, mineral extraction or cultivation of crops such as oil palms and castor-oil plants. Our expectations with regard to environmental, labor and social standards in the supply chain are laid down in the Supplier Code of Conduct.
We published our Position on Forest Protection in June 2020. In it, we commit to the preservation of areas of High Conservation Value, High Carbon Stock forest areas and peatlands when procuring renewable raw materials. Our aim is to prevent these areas from being developed for intensive economic use.
We want to understand the value we contribute to society and make this transparent. Our Value to Society approach, which we developed in 2013 together with external experts, allows us to better understand our contribution to a sustainable future. In addition, we can use it to compare the significance of financial and nonfinancial impacts of our business activities on society and show their interdependencies.
The results illustrate the positive contributions and negative effects, both at BASF and in our value chains. Positive factors include taxes paid, wages, social benefits, employee training and our net income1. Negative contributions include environmental impacts such as carbon emissions, land use and emissions to air, soil and water, as well as health and safety incidents. We aim to increase the positive contributions of our business activities along the value chain and minimize the negative impacts.
1 The net income of BASF’s production presented in the Value to Society is calculated using the BASF Group’s net income, adjusted for the interest result, the other financial result and noncontrolling interests.
The overview provides examples of how we create value for our shareholders, our company, the environment and society. It is modeled on the framework of the International Integrated Reporting Council (IIRC).