Climatetech Leadership Series: A Q&A with Wayne Smith, CEO of BASF Corp.

BY EMILY REICHERT

We have entered the decade of bold climate action. At Greentown Labs, we are committed to providing the best place in the world to build a climate-focused startup company. To do so, we are actively identifying, supporting, and working to scale technology-based solutions to the global climate crisis. We believe partnerships are paramount to the success of the entrepreneurs we support and we are fortunate to work with dozens of corporations that have announced bold science-based climate and sustainability goals.

The leadership of large corporations is critical to society’s transition to a sustainable economy and to addressing climate change. From reducing their own carbon footprints to driving carbon pricing policy forward to working with pioneering cleantech startups to bring innovative technologies to market, corporations have a major responsibility and the power to drive substantial change and climate action.

At Greentown Labs, we work with corporations that see sustainability as core to their mission and make robust climate commitments. I recently spoke with Wayne Smith, Chairman and CEO of BASF Corporation and Member of the Board of Executive Directors, BASF SE, to learn about how his company is setting and achieving climate goals and how the COVID-19 crisis is affecting BASF’s view of sustainability and innovation.

BASF has been a dedicated partner to our cleantech startup community for years. They were instrumental in getting our 1,800-square-foot wet lab up and running and were the Founding Partner of that lab space in 2018. In 2019, BASF partnered with us to run the Circularity Challenge, a startup-corporate partnership accelerator program focused on breakthroughs in the plastics, energy storage, and recycling value chains to advance a circular economy.

This interview is the first in my Climatetech Leadership Series, which profiles C-level executives from Greentown Labs’ most committed and climate-oriented partners. Stay tuned for more insights into how corporations are taking climate action!

ER: How do you think about sustainability and its role in business?

WS: We have a responsibility to our shareholders to create economic value by producing products that are useful to society. But at the same time, we recognize we have a responsibility to society to protect the environment, to behave in a socially responsible way. We cannot separate these responsibilities—we know that we must have an integrated approach. So we came out with our company purpose statement in 2011, which says, “We create chemistry for a sustainable future.” We put that bold statement out there so everyone can see it—our customers, our employees, our partners, the communities we operate in. We want people to understand that this is core to how we operate as a company.

We definitely look to BASF as a company that is leading the charge in this area, and I think the fact that you can point to something from 2011 very much underlines that that is the case. Could you speak about how you work with other CEOs to lead the way on climate and sustainability?

We’re just one company and being a big company in our sector is not enough—we need to partner with a lot of other players. We joined an organization within the last year called the CEO Climate Dialogue, which is an advocacy organization meant to work with the political framework in Washington, D.C. to try to develop a reasonable path going forward.

This organization does advocate for an economy-wide price on carbon, but along certain sets of principles—it should be market-based, it should do no harm, and there should be no penalties for energy-intensive industries just on that basis. On the surface, it may seem a little bit strange for a big, energy-intensive company like BASF to advocate for things like a sensible carbon price, but we say no, that fits perfectly, because we need to have a set of rules that we can all live by and we can make good investment decisions by.

I’ve been watching that group, and really admiring that leaders of these organizations that are very critical to our economy are stepping up and saying things like, “We need a price on carbon, and we need to do this in a way that’s integrated and transparent and that we all know what the rules of the game are.” Because I don’t think there’s another way this is going to work. I think we all need to come together—as a community, as a country, really as a globe—and decide, this is how we need to do this.

In terms of the sustainability goals that you’re setting at the C-level, how do those align with the innovation goals that someone that’s working in the mid-levels of the company would be hearing and acting on?

Let me come back to our purpose statement: we create chemistry for a sustainable future. We want people to understand that we're serious with this, and it must start with our employees. We began this in a big way at the end of 2018 when we launched our new long-term goals for our corporate strategy. We put out non-financial, long-term goals, which are around sustainability. First, we want to grow our company by at least 50 percent in the next 10 years, but without adding incrementally any CO₂ to our annual output. We put together goals around accelerator products, which are products that actively contribute to sustainability topics in society and can make a positive difference—whether they’re energy-based topics or related to food or nutrition or clean water. We also set financial goals: we said we will build our portfolio up to €22 billion worth of annual sales of these types of products by 2025. So, we have firm targets that we have made externally available. If we don’t set the KPIs boldly, externally, and then also internally with our teams, we won’t make progress.

We’ve talked a bit about how you’re engaging with other CEOs externally. Are there any other stakeholders that you would like to highlight, in terms of how you work with them to drive climate action or sustainability across the marketplace?

As one example, we were a founding member of the Alliance to End Plastic Waste. Collectively, we've committed more than $1 billion of investment over the next five years to work on projects to tackle this problem.

Another example relates to our innovation partners. Our alliance with Greentown Labs is a perfect example of that. There's a lot of excitement out there—we had more than 100 applicants for the Circularity Challenge we conducted together and we partnered with five exciting startups. Battery materials recycling, plastics recycling, digital systems to be able to certify and track sustainability or circularity claims—these are core to many of the activities that we’re trying to drive internally, and we want to find partners on the innovation side to help us get there.

Speaking of startups, as the CEO of BASF Corp., a very large company, what role do you think startups play along the road to having a more sustainable future?

Startups are absolutely critical. While we're proud of our innovation capabilities internally, we can't operate with the speed and the creativity of a lot of the startups that are out there. Just absolute horizontal thinking, tremendous creativity, tremendous nimbleness and lightning speed—we need this, and we need people who bring disruptive technology ideas.

To that point, what advice would you give to a startup that’s interested in working with BASF?

I would say don't be shy. Reach out to us and don't get frustrated if you have trouble finding the right avenue into us, because we are a big company. Keep trying to make the right contacts, because in principle, we want to find more opportunities together—we just need to make the right contacts and get the right people linked.

I think for our part, that’s certainly something that we can help with, being very familiar with the workings of startups and familiar with the workings of our partners. We’re happy with programs like the Circularity Challenge to help startups get access to the right people within the organization and get their ideas to the point where they can be evaluated.

BASF has pledged to keep its CO₂ levels to a 2018 baseline through 2030. What steps are you taking to make that happen?

This is our biggest and boldest commitment to sustainability going forward because the inherent energy-intensiveness of our business makes it a significant challenge. We think we can grow our product volumes by 50 percent in the next 10 years, but not add to our CO₂ footprint.

We have three pillars: one is ongoing operational excellence; the second step is we recognize we have to start procuring renewable energy in a much more significant way; the third, most fundamental one, is looking for some breakthrough process technologies that can fundamentally reduce the CO₂ emissions of our processes. There are no easy solutions here, but we have a couple big, bold ideas that we’re working on. One is we’re investing heavily in early-stage research to electrify steam crackers. If we can electrify steam crackers and then supply that electricity via renewable power generation, we could reduce the CO₂ emissions by more than 90 percent. We’re driving this hard. This could be eight, 10, 12 years away—there’s a lot of technological challenges, but we’re going for it.

Electrifying the steam crackers is a really amazing example. If you all can solve that, that gives me hope across a whole bunch of industries that need to deeply reduce CO₂ emissions.

We meet many companies that are at different stages, both in terms of their innovation directives and their sustainability directives. Some of them are just getting started in how they think about this—they’re feeling the market signals and the pull of their new employees to do so. What advice would you have for other leaders who are just starting to get their feet wet in this area?

The core learning that I’ve gained from being around a while at BASF is don’t waste time. The whole topic of sustainability is evolving so rapidly, and the pressures from the outside world—whether it’s general society, it’s government, it’s NGOs, or it’s customers—is accelerating at unbelievable speeds right now. You must be prepared.

I know BASF has taken extraordinary steps to aid in the COVID-19 crisis, from manufacturing and donating disinfectants and personal protective equipment to supporting critical nonprofits. Within BASF, how has this crisis affected your approach to innovation and sustainability?

As a global chemical industry leader with more than 150 years of industrial expertise, BASF has well-established crisis management and response protocols in place to protect its employees, business partners and the communities in which we live and work. The COVID-19 crisis has reinforced that the chemical industry plays a critical role in supplying goods that are essential to supporting the vital needs of the public and the welfare of our communities. As you pointed out, we are providing products that go into cleaning and disinfection products, food, medicine, transportation, construction and infrastructure, energy and more. That said, we are also being impacted by the coronavirus like other companies. Yet this doesn’t change our commitment to our long-term goals for innovation and sustainability, in fact it bolsters our efforts, especially in terms of the social responsibility aspect of sustainability. In addition, BASF recently issued its first green bond on the capital market. Based on sustainability criteria, our green finance framework enables the company to finance sustainable products or projects offering a clear benefit to the environment and society with green bonds on the capital market.

COVID-19 has also impacted sustainability trends. For example, the narrative on plastic waste has changed as the sanitation and hygiene benefits of single use plastics are leading to the suspension of plastic bans. We expect this to lead to an increased focus on recycling.

Regarding innovation, we are utilizing our enormous research and development capabilities as another way we can contribute to combating the coronavirus pandemic. This includes providing support to academic research groups in their search for a suitable active ingredient to treat patients infected with the coronavirus. With these actions and more, BASF wants to contribute to a world that provides a viable future with enhanced quality of life for everyone and helps to overcome new challenges.

Emily Reichert is the CEO of Greentown Labs, the largest cleantech startup incubator in North America, on a mission to support entrepreneurs tackling the biggest climate and environmental challenges.