Raw Materials

Strategy

We strive to procure responsibly and use raw materials efficiently. That is why we take an interest in our suppliers, their products and the entire supply chain. 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. We also contribute to the circular economy with our ChemCycling™ project (see box below).

In 2019, BASF purchased a total of around 30,000 different raw materials from more than 7,000 suppliers. Important raw materials (based on volume) include naphtha, liquid gas, natural gas, benzene and caustic soda. In addition to fossil resources, we also employ renewable raw materials. We use these to manufacture products that either cannot be made with fossil resources, or only at significantly greater effort, for example. In addition, our biomass balance approach enables us to allocate renewable raw materials to many of the products in our portfolio. Independent certification confirms that we have replaced the fossil feedstock needed for the sold biomass balance product with renewable resources. Products manufactured using this approach are indistinguishable from those produced solely from fossil raw materials. As for fossil raw materials, we also consider how renewable raw materials impact sustainability topics along the value chain. As well as positive effects like saving greenhouse gas emissions, these can also have negative effects on areas such as biodiversity, land use or working conditions, depending on the raw material. We aim to minimize these raw material-specific risks with measures, projects and targeted involvement in sustainability initiatives in the relevant value chains.

At a workshop in Ludwigshafen, Germany, we discussed with more than 90 recycling and standardization experts how the mass balance approach can be standardized to drive forward circular economy models. The starting point for discussions was a white paper from the CE100 (Circular Economy 100) initiative of the Ellen MacArthur Foundation, to which BASF sustainability experts had also contributed.

Renewable resources

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

In 2019, 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 2019. This approach aims to replace natural gas and naphtha at the beginning of the value chain with biomethane 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). In June 2019, BASF switched from TÜV Süd to the chemical industry’s REDcert2 standard for the certification of its biomass balanced products.

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 to more than 80 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 certified sustainable sources, and actively support the Roundtable on Sustainable Palm Oil (RSPO). In 2019, we published our third 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 140,400 metric tons of certified palm kernel oil in 2019. This represents around 83.5% of our total volume of palm kernel oil.

Demand for certified products increased significantly again. As a result, in 2019 we increased sales volumes of certified palm oil and palm kernel oil-based products for the cosmetics and detergent and cleaning industries by more than 40% 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 continues to drive forward the RSPO supply chain certification of our sites for cosmetic ingredients. In 2019, 24 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 are stepping up our efforts to improve transparency and traceability in the supply chain. We were most recently able to trace 90% of our overall oil palm exposure.

BASF and Henkel have cooperated with the development organization Solidaridad since 2016 to more closely 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. Between the start of the project in 2016 and June 2019, a total of more than 2,000 smallholders have completed a training program as part of the Farmer Field School initiative.

BASF, The Estée Lauder Companies and the RSPO have also partnered with Solidaridad to promote sustainable palm oil and palm derivatives production in the Indonesian province of Lampung. The project supports around 1,000 independent smallholders to improve their livelihoods and their sustainable production of palm oil and palm kernel oil. The project’s target is that a minimum of one-third of the supported smallholder farmers become certified according to the RSPO Smallholder Standard in three years.

BASF cooperates with Cargill, Procter & Gamble and the German governmental agency for international cooperation (Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH) in a development partnership under the develoPPP.de program commissioned by the German Federal Ministry for Economic Cooperation and Development to establish a certified coconut oil supply chain and improve the livelihood of coconut farmers in the Philippines and Indonesia. Thanks to the initiative, the first certified sustainable coconut oil was produced in the Philippines in 2018. Between November 2015 and October 2019, more than 4,100 coconut farmers were trained in Good Agricultural and Practices and farm management. About 1,600 farmers received additional training and were certified according to the Rainforest Alliance Sustainable Agriculture Standard. Farmers who were trained and certified earn 47% more on average than farmers who did not participate in the program.

There is a growing demand for sustainably produced castor oil, but there are no standards defined and adopted across the globe that can certify the same. Castor beans are mainly grown by Indian smallholders and there are few incentives for the producers to comply with the generally accepted quality standards. The Sustainable Castor Initiative – Pragati, a joint initiative established by BASF together with Arkema, Jayant Agro and Solidaridad, made further progress in 2019. 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 sustainability code to optimize their yields, reduce the impact on the environment and be able to offer certified sustainable castor oil on the global market. BASF can start procuring sustainably produced, certified castor oil from 2020 onward. Based on the total volume required, we want to increase the share of sustainably produced castor oil over the long term. Since the project was initiated, more than 3,000 smallholders and over 5,000 hectares of land have been certified for sustainable castor cultivation. The smallholders certified under the program have been able to increase their yields by at least 50% compared with the 2016 baseline. The project has been 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 and battery materials. We support our customers by tracking 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 in suspicious cases. We reserve the right to have suppliers audited and, if necessary, terminate our business relationship. Our suppliers 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 E.U. regulation defines supply chain due diligence for 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.

BASF does not purchase cobalt from artisanal mines in the Democratic Republic of Congo and aims to avoid this in the supply chain as well. In accordance with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, we have analyzed our supply chains for cobalt for battery materials and conduct audits based on a specific risk assessment. BASF and Nornickel have signed a long-term supply agreement for nickel and cobalt from Nornickel’s metal refinery in Finland. The agreement ensures locally sourced and secure supply of raw materials for battery production in Europe.

BASF continues to be actively involved in the World Economic Forum’s Global Battery Alliance (GBA), which it co-founded in 2017. The GBA has around 70 members, who are committed to creating a socially responsible, ecological, economically sustainable and innovative value chain for batteries.

The Responsible Cobalt Initiative (RCI) was re-established in 2019 with a focus on China. It remains an important partner for us. BASF joined the Responsible Minerals Initiative in December 2019 to systematically promote supply chain transparency for conflict materials and cobalt. We also continue to be involved in Cobalt for Development, 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. Together with authorities in the province of Lualaba, the project has selected a legal artisanal mine site 20 kilometers south of Kolwezi to pilot the approach. GIZ is working together with the international nongovernmental organizations IMPACT and Good Shepherd International Foundation/Bon Pasteur on the first activities in Lualaba.

BASF uses raw mica as well as mica-based effect pigments. Our demand is largely met with mica from our own mine in Hartwell, Georgia. Some of our businesses source exclusively from this mine. 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 ban child labor in the mica business. The initiative aims to eradicate child labor and unacceptable working conditions in the mica supply chain in India.

Automotive catalytic converters contain valuable precious metals like platinum, palladium and rhodium. They help to eliminate engine emissions such as carbon monoxide. The recycling of spent automotive catalysts is a complex process that enables the re-use of their precious metals. BASF recycles the platinum group metals (PGMs) contained in scrap automotive catalytic converters and chemical catalysts. All of the metal we recover is used to supply our mobile emissions catalysts and chemical and process catalysts businesses.