Business success tomorrow means creating value for the environment, society and business. Our innovations contribute to a sustainable future. We support our customers in being more sustainable through our solutions and create new business opportunities that reinforce our customer relationships and attract new customers. In doing so, we want to contribute to achieving the U.N. Sustainable Development Goals (SDGs). These were adopted by the United Nations as globally recognized economic, environmental and social objectives.
We are constantly working to broaden our positive impact on key sustainability topics and reduce the negative impact of our business activities. The integration of sustainability into core business activities and decision-making processes is steered by the Corporate Development unit. From 2020 onward, we will also bundle the global steering of climate-related matters in this unit, such as the coordination of measures to reach our climate protection target. The Board of Executive Directors is regularly informed of the current status of individual sustainability topics as well as of sustainability assessments as part of other business processes (such as investment plans), makes decisions on these with strategic relevance for the Group, and monitors the implementation of strategic plans and target achievement. The Corporate Sustainability Board, which is composed of the heads of business, corporate and functional 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.
We also established an external, independent Stakeholder Advisory Council in 2013. Here, international experts from academia and society contribute their perspectives to discussions with BASF’s Board of Executive Directors, helping us expand our strengths and address potential for improvement.
We systematically evaluate sustainability criteria as an integral part of decisions on acquisitions and investments in property, plant and equipment or financial assets. In this way, we not only assess economic dimensions, but also the potential impacts on areas such as the environment, human rights or the local community.
We present the relevance of sustainability topics for our stakeholders and the impact of these topics on our business in a materiality matrix. We selected and clustered key sustainability topics from a list of around 100 potentially relevant topics identified using tools such as the Value to Society approach.
The relevance of these topics for our stakeholders was assessed using a big data analysis, based on external publications. The results were complemented and confirmed by surveys and interviews with external experts.
Business units were surveyed to determine the impacts of sustainability topics on BASF. The evaluation also took into account the result of an analysis where business units assessed the positive and negative impacts of individual sustainability trends on their business. This analysis was based on a metastudy on sustainability trends.
We also validate the impacts of our business activities along the value chain with our Value to Society approach. This enables us to quantify positive and negative impacts along the value chain in monetary terms. Topics with impacts that cannot be expressed in monetary terms, or only with difficulty (for example, human rights), are included based on expert assessments. Our stakeholders also confirmed the materiality of the nonfinancial topics that the Value to Society approach identified as having an impact along the value chain.
The societal challenges that we have identified as having an impact on our business, and which we also have impact on, are therefore material within the meaning of the Nonfinancial Statement.
We have defined sustainability focus areas in our corporate strategy to position ourselves in the market and at the same time, meet the growing challenges along the value chain:
Relevant topics resulting from these commitments – such as energy and climate protection, portfolio management, supply chain responsibility, employee engagement, resource efficiency, responsible production and water – form the focal points of our reporting.
Since 2007, BASF publishes an integrated report combining economic, environmental and social performance. Using specific examples, we illustrate how sustainability contributes to BASF’s success and how we as a company create value for our employees, shareholders, business partners, neighbors and the public.
A significant steering tool for our product portfolio, based on the sustainability performance of our products, is the Sustainable Solution Steering method. By the end of the 2019 business year, we had conducted sustainability analyses and assessments for 96.3% of our relevant portfolio1 of more than 50,000 specific product applications, accounting for €51.9 billion in sales.2 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 re-assess our product portfolio.
1 The relevant portfolio is defined in the Sustainable Solution Steering Manual at basf.com/en/sustainable-solution-steering
2 Excluding the construction chemicals activities presented as discontinued operations; the figures for 2018 have been adjusted accordingly
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. Based on our corporate strategy, we have therefore 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. In 2019, we achieved sales of €15.0 billion with Accelerator products (2018: €14.3 billion).1 The construction chemicals activities, which are presented as discontinued operations, are no longer taken into account. The resulting decline in sales of Accelerator products was however offset by the first-time assessment of the strategically relevant trading business portfolio. At the same time, this first-time segmentation increased sales of Transitioner products.
If, during re-assessment of our portfolio, we identify products with substantial sustainability concerns, we classify these as “Challenged.” We develop and implement action plans for all products in this category. These action plans include research projects and reformulations to optimize products, or even replacing the product with an alternative.
To systematically align our portfolio with contributions to sustainability, as of 2018, we will phase out all Challenged products within five years of initial classification as such at the latest. We strive to offer products that make a greater contribution to sustainability in their area of application to live up to our own commitments and meet our customers’ demands. This is why our Sustainable Solution Steering method is used in areas such as our research and development pipeline, in business strategies as well as in merger and acquisition projects.
1 Excluding the construction chemicals activities presented as discontinued operations; the figures for 2018 have been adjusted accordingly
Accelerator products make a substantial sustainability contribution in the value chain. By 2025, we will increase the sales from Accelerator products to €22 billion (2019: €15 billion).
Gas and steam turbines in combined heat and power plants enable us to fulfill more than 70% of the electricity demand of the BASF Group. Compared with separate methods of generating steam and electricity, we saved 12.4 million MWh of fossil fuels and prevented 2.5 million metric tons of carbon emissions in 2019. In 2019, internally generated power in the BASF Group had a carbon footprint of around 0.26 metric tons of CO2 per MWh of electricity and was below the national grid factor at most BASF Group locations. The figure for purchased electricity in 2019 was around 0.46 metric tons of CO2 per MWh (market-based approach). As part of our carbon management, we therefore aim to reduce the carbon footprint of purchased electricity.
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 19.2 million MWh in 2019, which translates to 3.9 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 prevent a total of 6.4 million metric tons of carbon emissions in 2019.
BASF has participated in CDP’s program for reporting on data relevant to climate protection since 2004. CDP is an international organization representing more than 525 investors with over $96 trillion in assets and more than 125 major purchasing organizations with $3.5 trillion in purchasing power. In 2019, BASF achieved a score of A–, thus attaining Leadership status again.
In the scoring framework used by CDP in 2019, BASF is ranked among the best 20% of the participating chemical companies. In their assessment of the company’s climate protection efforts and disclosure, the analysts identified, for instance, some potential for further development in the area of power supply from renewable energy sources. In the context of BASF’s strategic goal of CO2-neutral growth until 2030, such options are currently being explored.
In the CDP assessment for sustainable water management, BASF achieved the top grade of A and thus Leadership status. The assessment takes into account how transparently companies report on their water management activities and how they reduce risks such as water scarcity. CDP also evaluates the extent to which product developments can contribute to sustainable water management for customers of the companies assessed.
BASF continued to be included in the MSCI ESG Ratings in 2019 with a score of AA. The analysts highlighted BASF’s Verbund system as a key competitive advantage for resource-efficient processes. BASF’s emissions intensity for greenhouse gases and air pollutants – one of the lowest compared with competitors in the chemical industry – was also assessed positively.