Raw Materials

Strategy

The Verbund system is an important component of our resource efficiency concept: The by-products of one plant often serve as feedstock elsewhere, helping us to use raw materials more efficiently. The value created by our Verbund is also part of our contribution to a circular economy. One example is our ChemCycling project (see box below).

In 2018, BASF purchased a total of around 30,000 different raw materials from more than 6,000 suppliers. Important raw materials include naphtha, natural gas, methanol, ammonia and benzene. In addition to fossil resources, we also employ renewable raw materials where appropriate. We use these to manufacture products that either cannot be made with fossil resources, or only at significantly greater effort, for example. Depending on the application, either fossil or renewable raw materials could be the better solution. Renewable raw materials are not sustainable per se, but can contribute to sustainability by, for example, reducing greenhouse gas emissions.

Chemical recycling

Recycling is becoming increasingly important due to the growing awareness of sustainability in the markets and regulatory developments. In 2018, BASF launched a project to manufacture products from chemically recycled plastic waste on an industrial scale.

In the ChemCycling project, our partners use thermochemical processes such as gasification or pyrolysis to transform plastic waste into syngas or pyrolysis oil. The first pyrolysis oil derived from plastic waste by our partners was fed into the BASF Verbund in 2018. The resulting products are of equal quality to products manufactured from fossil feedstock. Introducing this recycled feedstock back into the beginning of the value chain also means that we can calculate the percentage of recycled materials in certain products manufactured in the Verbund and offer our customers certified products. The project’s long-term goal is to make plastics recyclable that cannot yet be recycled, such as mixed plastics or plastics with residues. In the future, chemical recycling can make a significant contribution to reducing the amount of plastic waste that is disposed of in landfill or incinerated, while saving fossil resources. We are conducting Eco-Efficiency Analyses to ensure that this approach is sustainable compared with thermal recovery.

For more information, see basf.com/en/chemcycling

Renewable raw materials

• Numerous projects and cooperative ventures to improve sustainability along the value chain

In 2018, around 5.3% of the raw materials we purchased worldwide were from renewable resources. To make the use of these materials more competitive, we work on product innovations based on renewable raw materials as well as on enhancing production processes. We also further established our biomass balance approach on the market in 2018. The goal here is to replace natural gas and naphtha at the beginning of the value chain with biogas and bio-naphtha from certified sustainable production. Should a customer select a biomass balanced product, the proportion of renewable feedstock to be used is calculated based on the formulation. The calculation model is certified by an independent third party (TÜV Süd). Our Verbund production ensures that the characteristics and quality of all end products remain unchanged and that our customers can use them as usual. This method has already been applied for more than 60 BASF products – for example, for superabsorbents, dispersions, plastics such as polyamides and polyurethanes, and for intermediates available on the market as “drop-in products.” These can be used in place of previously employed products in the production process without having to change the process itself.

Palm oil, palm kernel oil, and their derivatives are some of our most important renewable raw materials. We aim to ensure that these raw materials come from sustainable, certified sources, and actively support the Roundtable on Sustainable Palm Oil (RSPO). In 2018, we published our second progress report – the BASF Palm Progress Report – for greater transparency in the value chain. Based on our voluntary commitment to sustainably source palm oil products, we purchased 127,000 metric tons of certified palm kernel oil in 2018. This represents around 70% of our total volume.

Demand for certified products increased significantly again. As a result, in 2018 we increased sales volumes of certified palm oil and palm kernel oil-based products for the cosmetics and detergent and cleaner industries by more than 50% compared with the previous year. We are expanding our offering of certified sustainable products in accordance with the RSPO’s Mass Balance supply chain model. This helps our customers to meet their obligations to customers, consumers and stakeholders. BASF also continues to drive forward the RSPO supply chain certification of our sites for cosmetic ingredients. In 2018, 22 production sites worldwide were RSPO certified. Our goal is to only source RSPO certified palm oil and palm kernel oil by 2020, provided it is available on the market. By 2025, this voluntary commitment will be expanded to include the most important intermediate products based on palm oil and palm kernel oil; these include fractions and primary oleochemical derivatives as well as edible oil esters.

In addition, our BASF Palm Sourcing Policy addresses the requirements for protecting and preserving forests and peatland, as well as the involvement of local communities. At the same time, we will step up our efforts to improve transparency and traceability in the supply chain. We were most recently able to trace 79% of our overall oil palm exposure.

BASF and Henkel have cooperated with the development organization Solidaridad since 2016 to better involve smallholder farmers in Indonesia and improve their living conditions. Smallholders complete farming and environmental training as part of the Farmer Field School initiative, with a focus on efficient and sustainable growing practices and health and safety standards. Since 2016, more than 1,800 smallholders have completed a training program as part of the Farmer Field School initiative.

BASF continues to promote the establishment of a certified and transparent supply chain for coconut oil in the Philippines and Indonesia in a joint project with Cargill, Proctor & Gamble and the German governmental agency for international cooperation (Gesellschaft für Internationale Zusammenarbeit, or GIZ), supported by the Rainforest Alliance and the Philippine Coconut Authority. Thanks to the initiative, the first certified sustainable coconut oil was produced in the Philippines in 2018. The project is partly financed by the develoPPP.de program of the German Federal Ministry for Economic Cooperation and Development (BMZ). It is expected to improve income and living standards for around 3,300 smallholders.

The Sustainable Castor Initiative – Pragati, a joint initiative established by BASF together with Arkema, Jayant Agro and Solidaridad, made further progress in 2018. With the initiative, the project members aim to improve the economic situation of castor oil farmers and their workers in India. Smallholders are trained and audited based on a newly developed sustainability code. The goal is to optimize their yields, reduce the impact on the environment and be able to offer certified sustainable castor oil on the global market. Since the project was initiated, more than 2,700 smallholders and over 2,000 hectares of land have been certified for sustainable castor oil cultivation. The smallholders certified under the program have been able to increase their yields by 55% compared with the 2016 baseline. In 2018, the project was extended for another three years, from 2019 to 2022.

Mineral raw materials

Sourcing mineral raw materials responsibly is important to BASF. We procure a number of mineral raw materials, such as precious metals, which we use to produce mobile and process emissions catalysts, as well as various minerals for the production of battery materials.

In suspicious cases, we track the origins of minerals as defined in the Dodd-Frank Act – including tin, tantalum, tungsten, their ores and gold – to see if they come from mines in conflict regions. We reserve the right to have suppliers audited and, if necessary, terminate our business relationship. The suppliers addressed have confirmed to us that they do not source minerals matching this definition of conflict minerals from the Democratic Republic of Congo or its neighboring countries.

We intend to implement the E.U. Conflict Minerals Regulation published in 2017 by the 2021 deadline. The regulation defines supply chain due diligence obligations that must be met by importers and processors of certain mineral raw materials originating from conflict regions and high-risk areas.

In addition to responsible procurement of conflict minerals, BASF is committed to a responsible and sustainable global supply chain for cobalt and mica.

For instance, BASF is a founding member of the Responsible Cobalt Initiative and the World Economic Forum’s Global Battery Alliance. These initiatives were created by companies in collaboration with international organizations such as the OECD and UNICEF to address fundamental challenges in the supply chain of battery materials. The most effective way of addressing these challenges is in cooperation with partners along the value chain. One example of this is our involvement in a joint pilot project launched in 2018 with BMW, Samsung SDI, Samsung Electronics and the German governmental agency for international cooperation (Gesellschaft für Internationale Zusammenarbeit, or GIZ). The companies tasked GIZ with setting up a three-year pilot mining project to identify how to improve working conditions in artisanal mines, as well as living conditions in the surrounding communities in the Democratic Republic of Congo. Although BASF does not procure cobalt from artisanal mines in the Democratic Republic of Congo and our suppliers confirm that they do not either, we support the cross-industry project as it contributes to the goals of the Global Battery Alliance.

BASF mainly uses the mineral raw material mica and mica-based effect pigments in the production of coatings. Our demand is largely met with mica from our own mine in Hartwell, Georgia. We require our mica suppliers to comply with internationally recognized standards, including the prohibition of child labor. As a member of the Responsible Mica Initiative, BASF is actively working to eradicate child labor and unacceptable working conditions in the mica supply chain in India.