Compliance

Compliance Program and Code of Conduct

• Compliance standards integrated into corporate values
• Regular compliance training for employees

Based on international standards, BASF’s Compliance Program combines important laws and company-internal policies – themselves exceeding legal requirements – with external voluntary commitments to create a framework that regulates how all BASF employees interact with business partners, officials, colleagues and society. At the core of our Compliance Program is the global, standardized Code of Conduct received by every employee. All employees and managers are obligated to adhere to its guidelines, which describe our principles for proper conduct and cover topics ranging from corruption and antitrust laws to human rights, labor and social standards, conflicts of interest and trade control, and protection of data privacy.

Abiding by compliance standards is the foundation of responsible leadership. This has been expressly embedded in our values, where we state: “We strictly adhere to our compliance standards.” We are convinced that compliance with these standards will not only prevent the disadvantages associated with violations, such as penalties and fines; we also view compliance as the right path toward securing our company’s long-term success.

Our efforts are principally aimed at preventing violations from the outset. To this end, all employees are required within a prescribed time frame to take part in basic compliance training, refresher courses and special tutorials dealing with, for example, antitrust legislation, taxes or trade control regulations. Training takes place in different formats, including face-to-face training, e-learning or workshops. The course materials and formats are constantly being updated. In total, more than 25,000 participants worldwide received around 40,000 hours of compliance training in 2016.

BASF’s Code of Conduct

Compliance culture at BASF

We firmly believe that for corporate responsibility to be a success, there must be an active culture of living these guidelines within the company. This culture takes years to develop, and requires the consistent, reliable application of compliance standards. Because we introduced our Code of Conduct early on, these standards have already been firmly established and are undisputed. In our last Global Employee Survey, conducted in 2015, the vast majority of our employees confirmed that their work environment places high value on proper conduct in alignment with internal company guidelines and standards. Starting in 2015, we have now investigated all cases in which the answer to the corresponding question showed unit-specific anomalies, and held, for instance, additional seminars or workshops as necessary.

Monitoring adherence to our Compliance principles

• Central role of Chief Compliance Officer and compliance officers
• 56 external hotlines worldwide
• Numerous internal Compliance audits

BASF’s Chief Compliance Officer (CCO) reports directly to the Board of Executive Directors and manages the implementation of our Compliance Management System, supported by 104 compliance officers worldwide. The CCO regularly reports to the Board of Executive Directors on progress in the program’s implementation as well as on any significant findings. Furthermore, the CCO reports to the Supervisory Board’s Audit Committee in at least one of its meetings each year on the status of the Compliance Program as well as any major developments. In the event of significant incidents, the Audit Committee is immediately informed by the Board of Executive Directors.

We particularly encourage our employees to actively and promptly seek guidance if in doubt. For this, they can consult not only their managers but also dedicated specialist departments and company compliance officers. We have also set up 56 external hotlines worldwide which our employees can turn to anonymously. We make sure that all concerns are processed and answered in a swift manner.

In 2016, 278 calls and emails were received by our external hotlines (2015: 357). Concerns involved questions ranging from personnel management and handling of company property to information on the behavior of business partners or human rights issues – such as labor and social standards. We continued to observe increasing awareness when it came to potential conflicts of interest. We launched case-specific investigations, in accordance with applicable law and internal regulations, into all cases of suspected misconduct that we became aware of. Confirmed violations were penalized, up to and including dismissal. This involved making sure that the necessary action was taken in accordance with standardized company criteria.

BASF’s Corporate Audit department monitors adherence to compliance principles, covering all areas in which compliance violations could occur. They check that employees uphold regulations and make sure that the established processes, procedures and monitoring tools are appropriate and sufficient to minimize potential risk or preclude violations in the first place. In 2016, 63 Group-wide audits of this kind were performed (2015: 92). The audits confirmed the effectiveness of the compliance management system. No irregularities were shown in the audit’s focus areas of antitrust and trade controls and embargo, nor was there a major need for action identified beyond these topics.

Based on the Guideline on Business Partner Due Diligence introduced in 2015, we monitor our business partners in sales for potential compliance risks. This is done by means of a checklist, a questionnaire distributed to business partners, and an internet-based analysis. The results are then documented. Depending on the results, conclusions are drawn regarding whether and how to maintain the business relationship. We furthermore expect all suppliers to know of and act in accordance with our global Code of Conduct.

We support the United Nations’ Guiding Principles on Business and Human Rights and are constantly working to enhance our internal guidelines and processes in keeping with these principles. For example, we introduced a new internal guideline to respect international labor and social standards. Outside of our company, as well, we support respect for human rights and the fight against corruption: We are, for example, a founding member of the United Nations Global Compact. As a member of Transparency International Deutschland and the Partnering Against Corruption Initiative (PACI) of the World Economic Forum, we assist in the implementation of these organizations’ objectives.