In 2021, BASF purchased a total of around 35,000 different raw materials from more than 6,500 suppliers. Using resources as efficiently and responsibly as possible and the concept of the circular economy are firmly embedded in our strategy and our actions, for example, by our Verbund structure and the increased use of renewable and recycled feedstocks. We expect our suppliers to source and produce raw materials responsibly.
At a glance
different raw materials purchased
1.3 million metric tons
renewable raw materials purchased
- BASF’s Verbund concept enables the efficient use of resources
- Recycled and renewable raw materials are gaining in importance
- Numerous projects to improve supply chain sustainability
Our strategy covers the entire value chain – from responsible procurement and the efficient use and recycling of raw materials in our processes to developing resource-saving solutions for our customers. We want to decouple growth from resource consumption with process and product innovations to accelerate 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 suppliers and raw materials.
Our expectations of our suppliers are laid down in our Supplier Code of Conduct. We take a closer look at suppliers in critical supply chains, for example mineral raw materials, renewable resources such as palm kernel oil, a number of pigments and 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 the supply of raw materials more sustainable in joint initiatives with suppliers and other partners. Examples include our cooperative ventures and investments to recycle batteries and our joint activities on certified sustainable supply chains for renewable raw materials such as palm, palm kernel 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 manufacturing of our products, for example through more efficient processes, innovative technologies and 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 and better biodegradability. Our products also improve our customers’ resource efficiency and sustainability in many areas. For example, BASF additives increase the service life and mechanical recyclability of plastics, which saves fossil resources and avoids CO2 emissions.
Fossil and petrochemical resources
BASF’s most important raw materials (based on volume) include gas and 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 mainly 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 engineering 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, the use of renewable energy can involve additional costs, which can have an impact on competitiveness. Another area of conflict arises, for example, when the increased consumption of renewable raw materials leads to greater land use. We raise awareness of these trade-offs through close dialog with our stakeholders. We are also involved in sustainability initiatives to develop and implement solutions in cooperation with partners.
Good to know
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 in our plants. Due to the simultaneous processing of fossil, bio-based and recycled feedstocks, the raw materials cannot be directly assigned to resulting derivatives. The share of bio-based or recycled raw materials can however be allocated to derivatives 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 conventionally produced products but have a better sustainability balance due to the use of bio-based or recycled raw materials. This method has already been applied to over 700 BASF products (2020: ~200 products), for example, engineering plastics such as polyamide, super-absorbents, dispersions and intermediates. We share our expertise in numerous stakeholder platforms, such as the European Commission’s Circular Plastics Alliance, to harmonize and standardize different allocation methods and certification schemes for mass balance products.
In addition to fossil resources, we employ renewable raw materials, mainly based on vegetable oils, fats, grains, sugar and wood. In 2021, we purchased around 1.3 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 and 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 (see box above). Examples include the Acronal® Eco and Joncryl® MB biomass balance binders for solvent-free paints and coatings, the HySorb® Biomass Balanced superabsorbent, various biomass balance versions from the Trilon®, Sokalan® and Protectol® product lines for the detergent and cleaner industry, and 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 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 in our supply chains with measures, projects and targeted involvement in initiatives. Our activities here concentrate on value chains that are relevant quantitatively or that do not yet have certification standards. We are also working on product innovations and on enhancing our production processes to improve the profitability and competitiveness of renewable resources. For example, we are developing innovative processes such as biocatalysis and fermentation for the production of vitamins and enzymes; and we are driving forward white biotechnology for the production of chemical components from renewable resources.
Palm oil, palm kernel oil and their derivatives are some of our most important renewable raw materials. 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. To this end, we have endorsed the Roundtable on Sustainable Palm Oil (RSPO) since 2004 and are engaged in other national and international initiatives, such as the German Forum for Sustainable Palm Oil, the Polish coalition Polska Koalicja ds. Zrównowazonego Oleju Palmowego and the High Carbon Stock Approach organization. Based on our Group-wide Supplier Code of Conduct, we have outlined our expectations of suppliers in the palm-based value chain in an additional sourcing policy (BASF 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 242,946 metric tons of palm oil and palm kernel oil in 2021 (2020: 227,213 metric tons). We again met our own voluntary commitment to source only RSPO-certified palm oil and palm kernel oil. This avoided more than 330,000 metric tons of CO2 emissions compared with the procurement of conventional palm oil and palm kernel oil. By 2025, we aim to extend our voluntary commitment to sustainable procurement to the main intermediate products1 based on palm oil and palm kernel oil. We were able to trace 96% of our global palm footprint to oil mill level as of the end of 2021 (2020: 95%2). In addition, we continued to drive forward the RSPO supply chain certification of our sites for cosmetic ingredients. At the end of 2021, 26 production sites worldwide were certified by the RSPO (2020: 25). In line with raised awareness for sustainability, we continue to see growing demand for certified palm-based products from our customers. We are expanding our range of certified sustainable products in accordance with the RSPO’s mass balance supply chain model. This helps our customers 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 expand our supplier base for RSPO-certified palm oil products while strengthening 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. With the aim of establishing a certified sustainable supply chain for castor oil, we launched the Sustainable Castor Initiative – Pragati in 2016 together with the companies Arkema and Jayant Agro and the NGO Solidaridad. The initiative is intended to improve the economic situation of castor bean 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 Pragati, 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, SuCCESS. Since the project was initiated, more than 5,800 smallholders and over 13,300 hectares of land have been certified for sustainable castor cultivation. Yields from this land were 35% higher than average amounts for the region published by the local government for the 2020/2021 harvest cycle. In addition to SuCCESS, the Sustainable Castor Association (SCA), which was launched in 2019 by the founders of the Pragati initiative, has also developed a sustainability code for the wider supply chain. This will allow castor beans obtained from the program to be further processed into certified castor oil and derivatives and to be introduced into the downstream supply chain. We were able to source the first certified sustainable castor oil from the program in 2021 following the successful audit of our supply chain by an independent certification body. In the coming years, we want to increase the share of this oil in our total demand.
Our bioactives for cosmetics are based on plants. Through sustainable sourcing practices, we aim to preserve ecosystems and enable sustainable management for those who depend on them. To this end, we have set up various programs that unite economic, ecological and social aspects in holistic approaches. One example is our rambutan program in Vietnam’s Dong Nai province. We have been collaborating since 2014 with two local small plantations which supply us with sustainably produced, organically certified raw materials. Upcycling the rambutan tree’s shells, leaves and seeds, previously disposed of as waste, creates new income streams for farmers and expands our portfolio of natural active ingredients. The partnership focuses in particular on responsible farming practices and social inclusion, including gender equality, safe working conditions and fair incomes.
Another example of sustainable supply chains and responsible innovation is our Castaline™ product, derived from the leaves of chestnut trees. These are harvested in late summer by forest owners in France. The chestnut forests are organically certified and are mainly used for the cultivation of chestnuts. By upcycling the leaves as a by-product of chestnut extraction, we generate additional income opportunities for forest owners and provide our customers with a product of completely natural origin. We are pursuing other similar initiatives, for example, in Morocco for our argan-based products, and in India for our active ingredients based on the moringa tree.
1 Fractions and primary oleochemical derivatives as well as vegetable oil esters
2 The figure for 2020 was adjusted from 96% to 95% due to a data correction.
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.
A focal point of our activities 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 technology partners use the pyrolysis process 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 as an alternative to fossil raw materials and use it to make new products. These have exactly the same properties as products manufactured from fossil feedstocks. We use a certified mass balance approach to allocate the percentage of recycled content to the end product. In 2021, we were able to further expand our portfolio of these Ccycled™ products. It now comprises around 50 products that our customers use, for example to manufacture transport cases for medicine, high-performance plastics for the automotive industry, packaging materials and functional textiles. We also signed a memorandum of understanding in 2021 with our technology partner Quantafuel and Remondis, a global leader in waste and water management. Its subject matter is the assessment of a joint investment in a pyrolysis plant for plastic waste.
We have also made further progress with the chemical recycling of used mattresses made of flexible polyurethane. It is based on a wet chemical process developed by BASF. After initial successful trials, our teams continued developing the process in 2021. Precursors recovered from old mattresses can now be used to produce new mattress-sized blocks of flexible polyurethane foam. The new process is currently being optimized and tested on a larger scale.
We have many years of experience and a high degree of specialization in recycling precious metals such as platinum, palladium and rhodium. They are used in automotive catalysts as well as in process and chemical catalysts. We primarily use the precious metals recovered in this way as feedstocks in catalyst production. With the expansion of our refinery plant in Seneca, South Carolina, and the acquisition of assets from Zodiac Enterprises in Caldwell, Texas, we are further expanding our leading position in platinum group metal recycling.
The growing demand for electromobility is also increasing the need for lithium-ion battery recycling. As a leading producer of battery materials with future local production capacities in the three main markets – Asia, Europe and North America – BASF has in-depth expertise in battery chemistry and process technology. We are utilizing these competencies to address battery recycling as an additional growth market in cooperation with partners along the value chain. In this way, we want to ensure that valuable metals remain in the production cycle for as long as possible. This conserves resources while enabling production of cathode active materials in Europe with a significantly lower carbon footprint compared with the industrial standard. At the Schwarzheide site in Germany, where a cathode active materials plant is already under construction, we will also build a prototype plant for battery recycling by 2023. The prototype plant will allow for the development of new operating procedures and optimization of technology to deliver superior recovery rates of lithium, nickel, cobalt and manganese from end-of-life lithium-ion batteries. The plant will also recycle metals from scrap of cell manufacturers and battery material producers that do not meet product specifications.
Mineral raw materials
We procure a number of mineral raw materials, which we use to produce automotive and process 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 automotive and process catalysts and using these as secondary resources (see “Recycled feedstocks”).
Sourcing mineral raw materials responsibly is important to BASF. We implemented measures to meet the requirements of the E.U. Conflict Minerals Regulation by the January 1, 2021 deadline. This defines supply chain due diligence for tin, tantalum, tungsten, their ores and gold (3TG) imported into the E.U. from conflict-affected and high-risk areas (CAHRAs). To supplement our Supplier Code of Conduct, we introduced a Group-wide Supply Chain Policy for Conflict Minerals in 2021. It contains expectations for our suppliers from CAHRAs and outlines voluntary commitments.
In addition to responsible procurement of the 3TG minerals, BASF is committed to responsible and sustainable global supply chains for other mineral raw materials as well. These include cobalt, a key component in the production of battery materials for electric vehicles, among other applications. Our cobalt supply chain is organized according to special sustainability criteria. Our goal is to not purchase cobalt from artisanal mines and to exclude this in supply chains as long as responsible artisanal production cannot be verified.
Together with BMW, Samsung SDI, Samsung Electronics, Volkswagen and the German Agency for International Cooperation (GIZ), we have been involved in the cross-industry Cobalt for Development initiative since 2018. It aims to improve working and living conditions for artisanal miners 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. Since October 2020, 14 mining cooperatives in Kolwezi have participated in training on topics such as occupational safety and environmental management. Cobalt for Development also works closely with local NGOs and the Good Shepherd International Foundation to create additional income opportunities for families and improve access to education. The joint activities are beginning to show results according to an evaluation of the initiative: Participants of the program since its launch have seen an increase in average income and savings. Since construction of the new public primary and secondary schools in Kisote, the majority of children have enrolled in school. Overall, several thousand members of the participating communities are already benefiting. In 2021, the initiative also made an action pledge to eliminate child labor as part of a global campaign by the International Labor Organization (ILO). Three mining cooperatives around Kolwezi are receiving assistance to implement occupational safety measures and a zero-tolerance policy against child labor.
We 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 material production in Europe. In cooperation with Eramet, we are also assessing the development of a state-of-the-art hydrometallurgical refining complex in Indonesia, which is expected to secure access to more sustainably sourced nickel and cobalt as of the mid-2020s.
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 promotes dialog between 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 the GBA Battery Passport. In the future, this “digital twin” will contain information on the sustainability of a battery to increase transparency in the value chain. The GBA, as well, made an action pledge with the ILO campaign against child labor, also focusing on the Democratic Republic of Congo. BASF is also an active member of the Responsible Minerals Initiative.
Furthermore, together with Daimler, Fairphone, and Volkswagen, we launched the Responsible Lithium Partnership in 2021. It advocates for the responsible use of natural resources in Chile’s Salar de Atacama, home to the world’s largest lithium reserves and a significant portion of global production. As a first step, the German Agency for International Cooperation (GIZ) was commissioned to organize a local multi-stakeholder platform on the opportunities and risks of lithium mining and other economic activities such as copper mining and tourism. The goal of the platform is to reach a common understanding on the status quo and to jointly develop a vision for the future of the Salar de Atacama watershed. In addition, potential risks are to be mitigated and opportunities promoted through the development and implementation of joint action plans.
Another mineral raw material that BASF processes is mica. We use both raw mica and effect pigments derived from mica, mainly in the production of coatings. BASF is conscious of its social responsibility with regard to mica sourcing and applies high standards which, among other things, exclude child labor. Suppliers are asked to source mica in accordance with our Supplier Code of Conduct. As a member of the Responsible Mica Initiative (RMI), we advocate for the eradication of child labor and unacceptable working conditions, specifically in India’s mica supply chain. The initiative focuses on labor standards, strengthening local communities and legal frameworks. According to an RMI study, activities in the relevant regions of India have already led to improved income and living conditions. These include improved access to clean drinking water through the installation of pumps and filtration systems and improved access to health care through doctors’ visits in villages and enrollment in public health insurance plans.