Suppliers

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. In order to achieve this, we set ourselves an ambitious goal: By 2020, we aim to evaluate the sustainability performance of 70% of the BASF Group’s relevant suppliers¹ pursuant to our risk-based approach and develop action plans for any necessary improvements. The proportion of evaluated relevant suppliers was at 31% by the end of 2015. Furthermore, our Procurement competence center supports BASF’s business units in developing solutions to stand out from the competition in addressing market-specific requirements.

Worldwide procurement

From our suppliers, we obtain raw materials, technical goods, and services – from technical to logistics and building facility services. BASF acquired raw materials, goods and services for our own production totaling approximately €35 billion in value from more than 75,000 suppliers around the world in 2015. Around 90% of this was locally sourced. With regard to our suppliers, there were no substantial changes in our value chain in 2015.

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 on 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. As a result of the country-related risks identified in South America and Asia, we queried around 1,500 suppliers in 2015 on their commitment to the values of our Supplier Code of Conduct. Moreover, we provided training to a total of 525 suppliers with an elevated sustainability risk, especially in Asia and South America.

In addition, we instructed 363 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 assessments and audits
• 135 raw material supplier sites audited

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. With the help of TfS, we advance sustainability in the supply chain. The 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 by a globally uniform questionnaire. The initiative’s members conducted a total of 2,580 sustainability assessments and 179 audits in 2015. The number of members rose from twelve to 18. Together with the TfS initiative, we conducted a Supplier Day in São Paulo, Brazil, in 2015. TfS also held a joint conference in Shanghai, China, with the China Petroleum and Chemical Industry Federation (CPCIF) with the goal of enhancing mutual understanding of the challenges associated with sustainability.

In 2015, we held our first global Supplier Day in Ludwigshafen in order to set up new modes of collaboration together with selected suppliers.

Using TfS evaluations, we pursue a risk-oriented approach with clearly defined, BASF-specific follow-up processes. We drive these processes through a sustainability-oriented IT tool. Suppliers with an elevated sustainability risk are identified using risk matrices. Furthermore, our purchasers indicate the suppliers for whom they see a potentially elevated sustainability risk. We additionally check various information sources to see if any suppliers have been observed in connection with negative sustainability incidents. Based on these analyses, we conducted sustainability standard audits for a total of 135 raw material supplier sites and initiated 1,044 sustainability assessments through an external service provider in 2015.

In 2015, for example, we audited a supplier of mineral raw materials in South Africa and identified room for improvement primarily in the areas of environment and safety.

If we identify potential for improvement, we support suppliers 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 are unable to confirm any improvement, we reserve the right to terminate the business relationship.

This occurred in four cases in 2015. 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 optimization.

Supplier training

In 2015, we continued the collaborations begun 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 by 2019. We are pursuing the same approach in Brazil together with the Espaço ECO^® Foundation. Through these cooperations, 485 suppliers already received training in 2015.

Audit results

Our audits have revealed some deviations with respect to working hours and payment of the minimum wage, especially in China. Here, we have called for improvements on the part of our suppliers. None of our 2015 audits identified instances 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 or other human rights violations in 2015.