Raw Materials

Strategy

Our strategy covers the entire value chain – from responsible procurement and using and recycling raw materials efficiently in our own processes to developing green products and technologies for our customers. We want to decouple growth from resource consumption with process and product innovations to drive forward the shift toward closed-loop value creation systems. Alongside economic, environmental and social criteria, we also consider aspects such as product safety and supply security when selecting raw materials for our production processes.

Our expectations of our suppliers are laid down in the Supplier Code of Conduct. We take a closer look at suppliers in critical supply chains, for example for mineral raw materials, renewable resources such as palm kernel oil, for a number of pigments or highly toxic substances. Upstream stages of the value chain are assessed for serious sustainability risks and, if necessary, suitable remedial measures are identified. In addition, we develop and test approaches to make raw materials supply more sustainable in joint initiatives with suppliers and other partners. Examples include our cooperative ventures to recycle battery materials or our joint activities on certified sustainable supply chains for renewable raw materials such as palm and castor oil.

BASF’s Verbund concept is key to making the use of raw materials in our own processes as efficient as possible: Intelligently linking and steering our plants and processes creates efficient value chains. By-products from one facility are used as feedstocks elsewhere. This saves raw materials and energy. At the same time, the Verbund offers many opportunities to use renewable and recycled raw materials. We want to better leverage this potential going forward. For example, we are driving forward chemical recycling of mixed plastic waste and used tires in our ChemCycling™ project.

Resource efficiency and stewardship are also becoming increasingly important topics for our customers. That is why we are constantly working to reduce the resources consumed in the production of our products, for example through more efficient processes or the use of renewable and recycled raw materials. This enables us to offer our customers solutions that make a greater contribution to sustainability, like a smaller carbon footprint. Our products also improve our customers’ resource efficiency and sustainability in many areas. For example, metal pretreatment using our innovative Oxsilan^® thin-film technology requires significantly less material than conventional processes. At the same time, it can achieve water savings of up to 50% and reduce energy costs by up to 40%.

The mass balance approach

Many BASF value chains start in syngas plants or steam crackers, where fossil resources, mostly natural gas and naphtha, are converted into hydrogen and carbon monoxide or important basic chemicals such as ethylene and propylene. These are used to create thousands of products in the BASF Verbund. Alongside fossil resources, bio-based and recycled raw materials such as biomethane, bio-naphtha or pyrolysis oil can be used as feedstocks. It is not possible to physically or chemically match the feedstock to the output as our plants simultaneously process fossil, bio-based and recycled raw materials. The share of bio-based or recycled raw materials can be allocated to certain products using the mass balance approach, which is audited by a third party, and certification (such as the REDcert2 standard for the chemical industry). It is similar in principle to green power, which has been established for many years: Energy from renewable sources is fed into the grid and then charged to individual customers. Mass balance products are identical in quality to conventional products but make a substantial sustainability contribution to the use of bio-based or recycled raw materials. This method has already been applied to over 200 BASF products (2019: around 80 products), for example, for engineering plastics, superabsorbents, dispersions and intermediates. We share our expertise in various stakeholder platforms to harmonize and standardize different allocation methods and certification systems for mass balance products. For instance, BASF contributed to position paper on the mass balance approach published by the industry association PlasticsEurope in 2020.

More information on mass balance

Fossil and petrochemical resources

BASF’s most important raw materials (based on volume) include liquid gas and natural gas, as well as crude oil-based petrochemical products such as naphtha and benzene. We mainly use liquid gas and natural gas to generate energy and steam, and to produce key basic chemicals such as ammonia or acetylene. Naphtha is mostly fed into our steam cracker, where it is split into products such as ethylene and propylene – both important feedstocks for numerous value chains. We use aromatics such as benzene or toluene to manufacture high-performance plastics, among other products. Thanks to a high degree of forward and backward integration, we can produce many feedstocks for our value chains efficiently while conserving resources within the BASF Verbund. This increases supply security and reduces dependence on external supply sources to just a few key raw materials. We source these from different suppliers to minimize supply risks.

As part of our efforts to improve sustainability, we are continuously investigating whether fossil and petrochemical resources can be replaced with non-fossil alternatives. We carefully consider economic, environmental and social aspects, as well as other important criteria like supply security and product safety. Our aim is to increase the share of renewable and recycled feedstocks in our value chains. This brings with it challenges and compromises in the supply of both energy and resources for carbon-based organic chemistry, for example, in striking the balance between competitiveness and the additional costs of using renewable energy, or between renewable resources and land use. We raise awareness of these trade-offs through close dialog with our stakeholders and our involvement in sustainability initiatives, and help to find solutions.

Renewable resources

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

In addition to fossil resources, we employ renewable raw materials, mainly based on vegetable oils, fats, grains, sugar and wood. In 2020, we purchased around 1.2 million metric tons of renewable raw materials. For instance, we use renewable resources to produce ingredients for the detergent and cleaner industry, or to source natural active ingredients for the cosmetics industry. We also use renewable feedstocks such as biomethane or bio-naphtha in our Verbund as an alternative to fossil resources. The mass balance approach allows us to allocate the amount of renewable resources used to a wide variety of end products. Examples include the biomass balance polyisobutene OPPANOL^® BMBCert™ or the biomass balance versions of our Styropor^®, Neopor^® and Styrodur^® insulation materials.

As for fossil raw materials, we also consider how renewable resources impact sustainability topics along the value chain. Alongside 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. This is why we carefully weigh up the advantages and disadvantages of using renewable resources, for example using Eco-Efficiency Analyses. We also take recognized certification standards such as the Roundtable on Sustainable Palm Oil into account in our decisions. We want to minimize raw material-specific risks and increase sustainability with measures, projects and targeted involvement in initiatives. Our activities here concentrate on value chains that are relevant quantitatively, such as palm-based raw materials, or that do not yet have certification standards, such as castor oil. We are also working on product innovations and on enhancing production processes to improve the profitability and competitiveness of renewable resources.

Palm oil, palm kernel oil and their derivatives are some of our most important renewable resources. We mainly use these raw materials to produce ingredients for the cosmetics, detergent, cleaner and food industries. We aim to ensure that palm-based raw materials come from certified sustainable sources and have actively supported the Roundtable on Sustainable Palm Oil (RSPO) since 2004. Based on the Group-wide Supplier Code of Conduct, we have laid down our expectations of suppliers in the oil palm value chain in an additional Palm Sourcing Policy. This addresses aspects such as forest and peat conservation, respect of human and labor rights, smallholder inclusion, and certification and traceability standards. The annual BASF Palm Progress Report reports on our measures and progress toward more sustainability and transparency in the value chain.

We purchased 227,213 metric tons of certified palm oil and palm kernel oil in 2020. We therefore reached our goal of only sourcing RSPO-certified palm oil and palm kernel oil by 2020. By 2025, we want to do the same for the most important intermediate products based on palm oil and palm kernel oil, including fractions and primary oleochemical derivatives as well as vegetable oil esters. We were able to trace almost 95% of our global palm footprint to oil mill level as of the end of 2020. In addition, we continued to drive forward the RSPO supply chain certification of our sites for cosmetic ingredients. At the end of 2020, 25 production sites worldwide were certified by the RSPO.

We continue to see growing demand for certified palm-based products from our customers. Sales volumes rose by more than 30% compared with the previous year. We are expanding our range 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.

We source most of our palm-based raw materials from Malaysia and Indonesia. Smallholders account for around one-third of the total volumes produced there. We have worked together with The Estée Lauder Companies, the RSPO and Solidaridad in Indonesia since 2019 to strengthen smallholder structures and sustainable production methods at local level. The project in the province of Lampung supports around 1,000 independent smallholders in improving their livelihoods and the sustainable production of palm oil and palm kernel oil. The focus is on efficient and sustainable farming practices and health and safety standards. The goal is for at least one-third of program participants to become certified according to the RSPO Smallholder Standard in three years.

Also important for BASF, albeit at a much smaller scale, is castor oil. We use castor oil to manufacture products such as plastics and ingredients for paints and coatings, as well as products for the cosmetics and pharmaceutical industries. We established the Sustainable Castor Initiative – Pragati in 2016 together with Arkema, Jayant Agro and Solidaridad as there were previously no globally defined and recognized certification standards. The aim is to improve the economic situation of castor oil farmers in India and, at the same time, raise awareness of sustainable farming methods. Around 80% of the world’s castor beans are produced in India, mainly by smallholders. As part of the project, smallholder farmers receive training on topics such as cultivation methods, efficient water use, health and the safe use of crop protection products based on a specially developed sustainability code. Since the project was initiated, more than 4,500 smallholders and over 8,700 hectares of land have been certified for sustainable castor cultivation. Yields from this land have risen by at least 50% compared with baseline 2016. We will source the first certified sustainable castor oil from the program in 2021. In the long term, we want to increase the share of this oil to cover our total demand.

Our raw materials for cosmetic active ingredients mainly come from plants. Two examples of holistic programs that consider the various aspects of sustainability are our products based on rambutan and argan. The rambutan tree belongs to the soapberry family. Its fruit is mainly sold for food. Our research and development discovered a method to extract the bioactives contained in the peel, leaves and seeds. The commercialization of the rambutan tree’s by-products, which were previously disposed of as waste, creates new income streams for farmers and expands our portfolio of natural active ingredients. As part of our rambutan program, we have worked closely together with two small plantations in the Vietnamese province of Dong Nai since 2014, which supply us with sustainably produced, certified organic raw materials. The partnership focuses in particular on responsible farming practices and social inclusion, including gender equality, safe working conditions and fair incomes.

We have cooperated with Targanine in the region of Agadir in Morocco since 2005. The network of six argan oil cooperatives supplies 16 products – including argan oil, essential oils and bee products – to BASF under fair trade conditions. Some 2,000 women from rural areas now work in the cooperatives. Commercialization helps to preserve the argan forest and strengthens local communities, for example, by providing additional income and through literacy programs and health initiatives. In 2020, the certification organization Ecocert awarded our cosmetic active ingredient Lipofructyl™ Argan the “Fair for Life” label for the fourth time in a row, confirming the sustainability of the supply chain.

Recycled feedstocks

Recycling is becoming increasingly important due to limited resources, growing sustainability requirements in the markets and regulatory developments. We want to increase the use of recycled feedstocks with our Circular Economy Program. From 2025 onward, we aim to process around 250,000 metric tons of recycled and waste-based raw materials every year worldwide, replacing fossil raw materials.

One focus here is chemically recycling plastic waste. This technology complements mechanical recycling and can help to reduce the amount of plastic waste that is disposed of in landfill or thermally recovered. Chemical recycling breaks down plastics into their building blocks or converts them into basic chemicals. Different methods are used to achieve this. In our ChemCycling™ project, our partners use the thermochemical process of pyrolysis to extract pyrolysis oil from mixed plastic waste or used tires, which were not previously recycled. We can feed this pyrolysis oil into our Verbund structure as an alternative to fossil raw materials and use it to make new products. These have the same properties as products manufactured from fossil feedstocks. We use a certified mas balance approach to allocate the percentage of recycled materials to the end product. Since 2020, we have been able to offer our customers the first commercial Ccycled™ products. After investing in Quantafuel AS in 2019, we expanded our supply base with pyrolysis oil from used tires in 2020 with a partnership with New Energy and an investment in Pyrum Innovations AG.

We also took a crucial step forward in the chemical recycling of used polyurethane foam mattresses in 2020: A wet chemical process developed by BASF can be used to break down soft polyurethane foam to recover the polyol originally used, which can be used to produce new polyurethane foam. The first test foams show promising results.

BASF continues to recycle the precious metals used in automotive, process and chemical catalysts. These contain precious metals like platinum, palladium and rhodium. Treating and recovering resources from spent automotive catalysts is a complex process. All of the precious metals we recover in this way are reused as feedstocks in catalyst production.

The growing demand for electromobility is also increasing the need for lithium-ion battery recycling. As a leading producer of battery materials with local production capacities in the three main markets – Asia, Europe and the United States – in the future, BASF has in-depth expertise in battery chemistry and process technology. Together with our partners, we are leveraging this expertise to develop a closed-loop system for the raw materials used to produce cathode active materials, such as nickel, cobalt, manganese and lithium. The objective is to further increase sustainability in the value chain for batteries. In 2020, we launched the project “Recycling lithium-ion batteries for electric vehicles” (ReLieVe) together with Eramet and SUEZ. The project received €4.7 million in funding from the European Union. The aim is to develop an innovative, large-scale process to recycle batteries along the entire value chain – from collecting end-of-life batteries and recovering mineral raw materials to using these in the production of new battery materials.

Mineral raw materials

We procure a number of mineral raw materials, which we use to produce mobile and process emissions catalysts or battery materials, among other products. We are continually improving our products and processes to minimize the use of primary mineral raw materials. At the same time, we are driving forward the recycling of mineral raw materials, for example, by recovering platinum metals from mobile and process emissions catalysts and using these as secondary resources (see “Recycled feedstocks”).

Sourcing mineral raw materials responsibly is important to BASF. We have selected suppliers confirm to us that they do not source minerals as defined in the Dodd-Frank Act from the Democratic Republic of Congo or its neighboring countries. If there is cause for concern, we reserve the right to audit suppliers and, if necessary, terminate the business relationship. We implemented the E.U. Conflict Minerals Regulation by the deadline in early 2021. This 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 responsible and sustainable global supply chains for other mineral raw materials. These include cobalt, a key component in the production of battery materials for electric vehicles, among other applications. Our cobalt supply chain for battery materials is organized according to special sustainability criteria for cobalt procurement. For example, we do not purchase cobalt from artisanal mines and also aim to exclude this in supply chains through our supply chain management as long as responsible artisanal production cannot be verified. In addition, we have signed a long-term supply agreement with Nornickel for nickel and cobalt from a metal refinery in Finland. The agreement ensures locally sourced and secure supply of raw materials for battery production in Europe.

Together with BMW, Samsung SDI, Samsung Electronics, Volkswagen and the German governmental agency for international cooperation (Gesellschaft für Internationale Zusammenarbeit, GIZ), we have been involved in Cobalt for Development since 2018. The cross-industry initiative aims 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. To achieve this, the initiative offers programs such as training on important environmental, social and governance aspects of responsible mining practices. Training for 12 mining cooperatives in Kolwezi started in October 2020. The initiative aims to train more than 1,500 artisanal cobalt miners on topics such as occupational safety and environmental management by mid-2021. Cobalt for Development also works closely together with local nongovernmental organizations and Bon Pasteur/the Good Shepherd International Foundation to create additional income opportunities for families and improve access to education. For example, a new building for Kisote’s public elementary and secondary school was constructed and training was held on topics such as farming.

We are also involved in various international initiatives to strengthen sustainability and innovation in the value chain for batteries. These include the Global Battery Alliance (GBA), which we co-founded in 2017. It brings together business, government and civil society and develops standards and tools to create a socially responsible, ecological and economically sustainable, and innovative value chain for batteries. For instance, BASF is working with the GBA on a battery pass. In the future, this “digital twin” will contain information on the sustainability of a battery to increase transparency in the value chain. The first test version will be developed in 2021 and the battery pass should be ready to be used by the end of 2022. BASF is also an active member of the Responsible Minerals Initiative (RMI).

Another mineral raw material that BASF processes is mica. We use mica to produce pigments, which are used in products such as coatings. For the majority of our demand, we use mica from our own mine in Hartwell, Georgia, and some of our businesses source exclusively from this mine. Third-party suppliers are requested to source mica in accordance with internationally recognized standards which, among other things, exclude child labor. As a member of the cross-industry Responsible Mica Initiative, BASF actively contributes to the eradication of child labor and unacceptable working conditions in the Indian mica supply chain.