Supply chain management

Our objective is to secure competitive advantages for BASF through professional procurement structures. Our suppliers are an important element of our value chain. Together with them, we aim to create value and minimize risks.

The graphic depicts the different stations along the value chain. The topics in each chapter address the station shown in dark green. (here: Suppliers) (graphic)

Strategy

With our sustainability-oriented supply chain management, we contribute to risk management by boosting our suppliers’ awareness of our expectations and standards, and by supporting them in carrying out our specifications. We count on reliable supply relationships and want to make our suppliers’ contribution to sustainable development transparent. Furthermore, we support BASF’s business units in developing solutions to stand out from the competition in addressing market-specific requirements. Our suppliers are evaluated based on risk due to the size and scale of our supplier portfolio.

Worldwide procurement

From our suppliers, we obtain raw materials and technical goods as well as all kinds of services, from technical to logistics and building facility services. BASF acquired raw materials, goods and services for our own production totaling around €40 billion in value from more than 75,000 suppliers around the world in 2014. Around 90% of this was locally sourced. In terms of our suppliers, there were no substantial changes in our value chain in 2014.

What we expect from our suppliers

  • Global Supplier Code of Conduct
  • Country-specific risk analysis forms basis of new supplier selection

Both new and existing suppliers are selected and evaluated not only on the basis of economic criteria, but also with respect to environmental, social and corporate governance standards. Our Supplier Code of Conduct is founded on internationally recognized guidelines, such as the principles of the United Nations’ Global Compact, the International Labor Organization (ILO) conventions and the topic areas of the Responsible Care Initiative. Available in 26 languages, the Code of Conduct covers environmental protection as well as compliance with human rights, labor and social standards, and antidiscrimination and anticorruption policies.

A country-based risk analysis forms the basis of our selection process for new suppliers. Due to the country-related risks identified in South America and Asia, we queried around 700 new suppliers there in 2014 on their commitment to the values of our Supplier Code of Conduct. Moreover, we provided training to a total of 495 suppliers with an elevated sustainability risk, especially in Asia and South America.

In addition, we instructed 519 procurement employees on sustainability-oriented supplier management. These are ways in which potential supply chain risks can be identified and minimized together with our suppliers.

Evaluating our suppliers

  • Together for Sustainability initiative aims to harmonize and standardize supplier assessment and audits
  • 120 raw material supplier sites audited
  • Cooperations begun in China and Brazil for supplier training

BASF is a founding member of the Together for Sustainability (TfS) initiative of leading chemical companies for the global standardization of supplier evaluations and auditing. This initiative aims to develop and implement a global program for the responsible supply of goods and services and improve suppliers’ environmental and social standards. The evaluation process is simplified for both suppliers and TfS member companies through a globally uniform questionnaire. The initiative’s members conducted a total of 2,605 sustainability assessments and 93 audits in 2014. The number of initiative members rose from six to twelve. As part of the TfS initiative, we conducted a Supplier Day in Shanghai, China, in 2014. The activities in Brazil and India were also expanded.

Based on TfS evaluations, we pursue a risk-oriented approach with clearly defined, BASF-specific follow-up processes rolled out in 2014 worldwide using an IT tool. We have developed risk matrices that help us identify suppliers with a high sustainability risk given their respective country risks. Our purchasers indicate the suppliers for whom they see a potentially elevated sustainability risk. Furthermore, we check various information sources to see if any suppliers have been observed in connection with negative sustainability incidents. Based on these analyses, we audited a total of 120 raw material supplier sites on sustainability standards and initiated 538 sustainability assessments through an external service provider in 2014. Our goal is supplier enhancement. If we identify potential for improvement, we support this supplier in developing measures to fulfill our standards. We conduct another review according to a defined timeframe based on the sustainability risk measured. If the weak points discovered were particularly severe and we cannot find any improvement, we reserve the right to terminate the business relationship. This occurred in seven cases in 2014. We use this approach to evaluate suppliers with an elevated sustainability risk at least every five years. The approach itself is reviewed every two years to identify possibilities for improvement.

In addition, we initiated cooperations in China and Brazil in 2014 to instruct suppliers on sustainability standards. We have developed a training program together with the East China University of Science and Technology in Shanghai, and plan to educate around 2,000 suppliers over the next five years. We are pursuing the same approach in Brazil together with the Espaço ECO® Foundation. Through these cooperations, 65 suppliers already received training in 2014.

Audit results

Our audits have revealed some reservations with respect to working hours, payment of the minimum wage, and payment of overtime, especially in China. Here, we have called for improvements on the part of our suppliers. Our 2014 audits did not identify any cases of child labor. For the suppliers we reviewed, persons under 18 were excluded from overtime, night shifts and dangerous work. We did not find any incidences of forced labor in 2014. We were also able to rule out human rights violations.