Taxonomy-aligned Turnover, Capital Expenditures and Operating Expenditures

The taxonomy-eligible activities identified by BASF can be classified as taxonomy-aligned if they make a substantial contribution to climate change mitigation and do no significant harm to other envi­ronmental objectives and, at the same time, ensure minimum social safeguards. The contribution to climate change mitigation and harm to other environmental objectives were reviewed in a three-step process. The first step involved a two-part analysis based on BASF’s internal product databases:

• The manufacture of products is analyzed with respect to the use of critical substances in accordance with Annex C¹ of the E.U. Commission’s Delegated Regulation 2021/2139 to ensure significant pollution prevention or control according to the E.U. tax­onomy. This also includes use in the production process. An assessment of the “essential use” of the critical substances used in the sense of the opening clauses according to Annex C, letters f) and g) has not been performed. The E.U. Commission announced further regulations on this in 2023.
• Plastics in primary form are analyzed with respect to the share of renewable raw materials in the product. They are only considered further if this share is at least 5% and thus potentially make a substantial contribution to climate change mitigation through partial or complete production from renewable raw materials. Shares allocated using mass balance approaches are not taken into account here because their acceptance under the E.U. taxonomy has not yet been definitively clarified. For this reason, BASF products based on chemically recycled raw materials are not considered further in the assessment at present either. Mechanical recycling does not play any role for BASF here.

In the second step, it was assessed whether the potentially tax­onomy-aligned products make a substantial contribution to climate change mitigation in accordance with the activity-specific criteria. Among other things, the greenhouse gas emissions of European and non-European plants to produce soda ash, organic basic chemicals and nitric acid were compared with the average values of the most efficient plants under the E.U. emissions trading system. For the production of hydrogen, chlorine, ammonia and plastics in primary form, the comparison was against activity-specific quantitative criteria, such as the energy or emission intensity of a product. This was based on a digital solution developed by BASF to determine product-specific carbon emissions.

Finally, in the third step of the process, it was assessed whether the products identified cause significant harm to the other envi­ronmental objectives. This included an analysis of risks arising from climate change using climate risk and vulnerability assessments. At sites with material climate risk, the existence of adaptation solutions was additionally analyzed and evaluated. The avoidance of significant harm to water and marine resources,² biodiversity and ecosystems,³ and pollution prevention and control were taken as given for production plants in Europe based on comprehensive and uniform regulatory requirements and additionally ensured through data queries. The conformity of non-European plants was assessed on a case-by-case basis. This was based on joint assessments by local and central experts using the evidence of local production requirements submitted.

The criteria for the minimum social safeguards as a further pillar of taxonomy alignment in accordance with Article 18 of the E.U. Taxonomy Regulation were reviewed for all activities across the BASF Group, independent of the step-by-step process for the “contribution to climate change mitigation” and “harm to other environmental objectives” criteria.

The recommendations of the E.U. Platform on Sustainable Finance of October 2022 on the four core topics of human rights (including labor rights), corruption/bribery, taxation and fair competition were taken into account here. Minimum social safeguards are to be ensured by a systematic, integrated and risk-based approach to safe­guarding our human rights due diligence obligations, by global labor and social standards, and by the Supplier Code of Conduct, among other things.

Taxonomy-aligned turnover accounted for 0.4% of the total sales revenue defined and reported in the BASF Group’s Consolidated Financial Statements in 2022. The “manufacture of organic basic chemicals” made the largest contribution (0.3%). Tax­onomy-aligned capital expenditures (including acquisitions and excluding goodwill in accordance with the E.U. taxonomy) accounted for 0.5% of the total investments reported in the Consolidated Financial Statements. The “manufacture of soda ash” contributed significantly here with 0.3%. Taxonomy-aligned operating expenditures accounted for 0.9% of total operating expenditures, with the largest contribution from the economic activity “manufacture of plastics in primary form” (0.5%). It is not possible to provide information on changes in taxonomy-aligned turnover, capital expenditures and operating expenditures as these are being reported for the first time in 2022.

The taxonomy-aligned figure is significantly lower than the tax­onomy-eligible figure due to various factors. Only a small proportion of plastics in primary form contain a share of renewable raw materials above the threshold value. In many production processes, sub­stances that fall within Annex C¹ are used to prevent or reduce pollution. As a result, these processes are no longer taxonomy-aligned, even if the substances are not released into the environment (for example, because they are exclusively used in a closed system in the production plant) and are used in accordance with existing chemicals legislation. This means, for example, that all production processes for the manufacture of battery materials must be assessed as not taxonomy-aligned. The proportion of taxonomy-aligned activities is also reduced by the fact that many plants exceed the benchmarks used by the E.U. taxonomy, such as the E.U. emissions trading scheme. In addition, plants that are not subject to emissions trading and thus cannot be assessed using the specified criteria were generally classified as not taxonomy-aligned.

For more information on sales revenues and investments, see the Notes to the Consolidated Financial Statements:

• Note 7
• Note 14
• Note 15