E.U. Taxonomy

In accordance with the E.U. Taxonomy Regulation and the supplementary delegated acts, the Nonfinancial Statement includes the share of the Group’s taxonomy-eligible and taxonomy-aligned sales, investments and operating expenses for 2023 relating to the environmental objectives of climate change mitigation and adaptation to climate change. In addition, in accordance with the second legal act adopted in the reporting year, we are reporting for the first time on the taxonomy-eligible economic activities for the environmental objectives of sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control and protection and restoration of biodiversity and ecosystems.

BASF activities that are not yet covered by the E.U. taxonomy, and as such, are not relevant under the taxonomy, are reported as taxonomy-non-eligible in accordance with the delegated acts. These include large parts of BASF’s activities that may nevertheless be in line with the E.U.’s environmental objectives and make a considerable contribution to avoiding CO₂ emissions. We systematically analyze the sustainability performance of all BASF products using our TripleS method.

In order to derive the financial indicators, an analysis of our product portfolio identified the following economic activities within the meaning of the E.U. taxonomy under the environmental objective of climate change mitigation as relevant for BASF:

• Manufacture of batteries¹
• Manufacture of energy efficiency equipment for buildings¹
• Manufacture of hydrogen
• Manufacture of soda ash
• Manufacture of chlorine
• Manufacture of organic basic chemicals
• Manufacture of anhydrous ammonia
• Manufacture of nitric acid
• Manufacture of plastics in primary form

The description of the economic activities by the E.U. Commission for the four other environmental objectives not related to the climate was published in November 2023. According to these requirements, the following economic activity under the environmental objective of pollution prevention and control will be additionally relevant for BASF for the first time from 2023 within the meaning of the E.U. Taxonomy Regulation:

• Manufacture of active pharmaceutical ingredients (API) or active substances

As the relevant activities only contribute to one environmental objective in each case, the tables supplementing the templates via footnotes in accordance with Annex II of Delegated Regulation (E.U.) 2023/2486 have been omitted.

To avoid double counting, assignment to an enabling activity is only made if a taxonomy-eligible product or project had not already been included under another activity. BASF products also enable the production of technologies for renewable energy or low-emission mobility. However, since the E.U. taxonomy focuses on the manufacture of technologies and thus excludes precursors, we have classified these activities as taxonomy-non-eligible under the E.U. taxonomy.

In addition to our core business, the production of chemical products, we have identified further activities that we have analyzed for their materiality in terms of their share of sales, investments or operating expenditures. In determining the materiality, we were guided by the materiality concept established in financial reporting and also assessed the economic activity “acquisition and ownership of buildings” as relevant in the environmental objective of climate change mitigation for the 2023 reporting year. The remaining immaterial activities neither exceed the value limit we have set for each economic activity, nor do the immaterial activities in total exceed the defined value limit for each reportable indicator (KPI). Immaterial activities include activities in the sectors forestry; water supply, sewerage, waste management and remediation; transport; information and communication; professional, scientific and technical activities; and accommodation activities. In addition, we have identified the following immaterial activities in the energy sector: Electricity generation using solar photovoltaic technology; production of heat/cool from bioenergy; production of heat/cool using waste heat; electricity generation from fossil gaseous fuels; high-efficiency cogeneration of heat/cool and power from fossil gaseous fuels; production of heat/cool from fossil gaseous fuels in an efficient district heating and cooling system. For the purposes of the templates set out in Annex XII to the Delegated Regulation 2021/2178, we would like to point out that we conduct activities in the areas of electricity generation, cogeneration of power and heat/cool, and production of heat/cool from fossil gas. As shown, these are not material in terms of sales, investments and operating expenditures. BASF does not conduct any nuclear energy activities.

Furthermore, BASF does not report any taxonomy-eligible activities under the environmental objective of climate change adaptation. This is firstly to avoid double counting with economic activities already recorded under the climate change mitigation objective. Secondly, in accordance with the notice issued by the E.U. Commission, a prerequisite for taxonomy eligibility under the adaptation objective is the submission of an investment plan for implementing adaptation solutions, which is not present on the part of BASF within the meaning of the E.U. Taxonomy Regulation.

Taxonomy-eligible sales revenue, capital expenditures and operating expenditures for all six environmental objectives

We assessed the taxonomy eligibility of our sales revenue based on sales as defined and reported in the Consolidated Financial Statements of the BASF Group. Taking into account all six environmental objectives, taxonomy-eligible sales revenue accounted for 12.2% of total sales in 2023. The largest contributions were from the activities “manufacture of plastics in primary form” and “manufacture of organic basic chemicals.” Both activities are assigned to the environmental objective of climate change mitigation. Taxonomy-eligible capital expenditures (including acquisitions and excluding goodwill in accordance with the E.U. taxonomy) accounted for 23.1% of the total investments reported in the Consolidated Financial Statements. Capital expenditures on the “manufacture of organic basic chemicals” and in the “manufacture of batteries” contributed significantly here. These activities also contribute to the environmental objective of climate change mitigation. Operating expenditures include uncapitalized costs that relate to research and development,² maintenance and repair, and short-term lease expenses. The definition of operating expenditures follows the E.U. Taxonomy Regulation and they are not reported in the Consolidated Financial Statements in this form. All of the capital expenditures and operating expenditures of a production facility with taxonomy-eligible activity are counted as taxonomy-eligible. Taxonomy-eligible operating expenditures accounted for 12.4% of total operating expenditures. The largest contributions under the objective of climate change mitigation were from the activities “manufacture of organic basic chemicals” and “manufacture of plastics in primary form.”