E5 Resource Use and Circular Economy

Strategy and Governance

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We are pursuing a holistic strategy to establish a circular economy and, at the same time, to reduce our company’s environmental footprint. We want to offer our customers innovative products and solutions to enable their green transformation. Our business units are therefore in close contact with our customers in order to better understand their sustainability needs and offer tailored BASF solutions. The insights from this dialog are also incorporated in our research projects and in innovation processes.

Our strategy covers the entire value chain – from responsible sourcing and the efficient use of raw materials in our own processes and using by-products to developing resource-saving solutions for our customers. For explanations of our overarching policies in respect of scope of application, accountability, impacts in the value chain, global applicability, accessibility to stakeholders and engagement thereof, see General Disclosures in our Sustainability Statement.

Sourcing of raw materials

Alongside economic, environmental and social criteria, we also consider aspects such as product safety and supply security when selecting suppliers and raw materials. Our procurement organization has set out guidelines for our upstream value chain in a global, risk-based management system. We have defined the standards for this in a global procurement requirement. The BASF Group uses this requirement to ensure that procurement processes are in line with our standards and with the legal guidelines. The requirement includes a supplier risk assessment, which also examines their sustainability performance. The aim here, among other things, is to combat the negative impacts on the environment of the procurement of both fossil and renewable raw materials. We endeavor to ensure compliance with this guideline using a multistage control process. The unit-specific risk management systems of our business units are supported and monitored during implementation according to minimum standards set by the Corporate Center units. The Corporate Audit unit, as the third instance involved, monitors the effectiveness and compliance with risk management. We require suppliers to comply with internationally recognized environmental standards. Our expectations are laid down in our Supplier Code of Conduct (see S2 Strategy and Governance), which is integrated into our purchasing conditions. This Code of Conduct, which also aims to address the negative impacts caused by our sourcing of fossil and renewable raw materials, covers protecting human rights, compliance with valid environmental regulations and the efficient use of resources, among other things.

The global procurement requirement is supplemented by specific internal guidelines, for example, on sourcing palm-based raw materials or certain mineral raw materials. The requirements regulate the sourcing of raw materials in general. They do not address a reduction in the use of fossil raw materials. As part of our new corporate strategy, the BASF Renewable Carbon unit within Global Procurement is continuing to drive the sourcing of renewable raw materials and biomass for BASF’s operating divisions.

Use of fossil raw materials

We are focusing on actions and on our circularity target to increasingly replace fossil raw materials with recycled or renewable raw materials. For many years, we have already been pursuing BASF’s Verbund concept¹ to ensure the efficient use of raw materials. Intelligently linking and steering our plants and processes as set out in this concept creates efficient value chains. By-products from one plant 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. Going forward, we want to better leverage this potential.

Waste management in the value chain

We rely on our sourcing requirements and our Supplier Code of Conduct to address waste management in our upstream value chain. The responsible management of resources and waste in our own production as well as of the negative impacts resulting from this are core elements of our Responsible Care Management System. We want to use this system to fulfill our corporate purpose of creating chemistry for a sustainable future. Specifically, we intend to use it continuously to improve our processes in the areas of safety, environmental protection and resource use. Our global standards and guidelines relating to waste are defined in the Group-wide Environmental Protection corporate requirement. This includes compliance with the waste management hierarchy: prevention, reuse, recycling, energy recovery, incineration, disposal. The sites and Group companies are responsible for implementing this requirement. The Corporate Environmental Protection, Health, Safety & Quality unit in the Corporate Center conducts regular audits to monitor compliance with legal guidelines and internal requirements. BASF’s global network of experts shares information, experiences and best practices on an ongoing basis. Continuous monitoring, documentation and control of waste streams and contaminated sites as well as the implementation of improvement measures are an integral part of our environmental management.

Actions

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As part of our activities to achieve more sustainability, we are relying on recycled and renewable raw materials to replace fossil raw materials and reduce emissions along the value chain. We continuously evaluate whether fossil and petrochemical resources can be replaced with renewable or recycled alternatives. We are aiming to transition to a circular economy by focusing on using increased amounts of circular raw materials (both recycled and renewable), designing new material cycles and establishing new business models.

We rely primarily on the following actions for this:

• Responsible sourcing of renewable raw materials
• Use of the mass balance approach
• Partnerships to drive forward chemical recycling
• Use of TripleS to steer our product portfolio toward more sustainability

Successfully transforming to a circular economy depends on a suitable framework. At present, global demand for circular products is growing more slowly than expected. In addition, there is currently not enough suitable waste available on the market, while technologies to enhance large-scale recycling of raw materials are being further developed. We are also observing uncertainties in the regulatory environment that are making the transformation more difficult.

As part of a Group-wide circular economy program, BASF teams have developed new approaches in over 50 initiatives since 2019. These relate to the main action areas of making greater use of circular feedstocks, designing innovative material cycles and establishing new business models. From 2025 onward, the respective business units will drive forward implementation of these initiatives in the long term.

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We help to close and expand loops by developing and implementing circular solutions for the materials that we source, continuing to optimize our operations and offering resource-efficient products and services that support our customers’ circular processes. We are also developing product-specific recycling technologies and are involved in cross-industry networks and initiatives to avoid plastic waste and strengthen the circular economy.

Sourcing and use of raw materials

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Fossil raw materials are still our most important feedstocks. Extracting and processing them causes greenhouse gas emissions, which contribute to climate change. We are trying to reduce these emissions by using alternative raw materials. However, these alternatives can also pose sustainability challenges, such as risks in the supply chain. We see one solution in a transition to a circular economy in which we use process and product innovations to decouple growth from resource consumption.

In line with our procurement requirements, our responsible sourcing of renewable raw materials takes the protection of biodiversity and ecosystems into account. The risk analyses that we perform in relation to our procurement processes also consider social factors such as working conditions and food security over the long term. We carefully weigh advantages and disadvantages, for example with life cycle analyses. At the same time, we seek dialog with our stakeholders to identify conflicting goals. The aim here, among other things, is to combat the negative impacts on the environment caused by the sourcing of both fossil and renewable raw materials. We also continuously include recognized certification standards, such as those from the Roundtable on Sustainable Palm Oil (RSPO), in our decisions. For our biomass portfolio, we are exclusively sourcing renewable raw materials that are certified according to recognized standards such as the International Sustainability and Carbon Certification (ISCC) or REDcert, the organization for sustainably produced biomass (see Metrics).

We are constantly working to switch to more sustainable raw materials and to reduce the resources consumed in the manufacturing of our products, for example through more efficient processes and innovative technologies. We are developing and testing long-term approaches to make the sourcing of raw materials more sustainable in joint local initiatives with suppliers and other partners. For example, we started operating a prototype metal refinery at our site in Schwarzheide, Germany, in April 2024. The plant will be used in the future to recycle lithium-ion batteries and waste from the production of electric vehicle batteries.

In addition, for example, we continue to deploy the mass balance approach in our production in the long term: Many BASF value chains start in syngas plants or steam crackers. This is where fossil feedstocks, mostly naphtha and natural gas, are converted into hydrogen and carbon monoxide or split into important basic chemicals such as ethylene and propylene. These are then processed further in the BASF Verbund to create thousands of products. In addition to fossil feedstocks, we feed alternative feedstocks from bio-based and chemically recycled sources, such as bionaphtha, biomethane and pyrolysis oil, into the Verbund long term at our production sites in Europe, North America and Asia Pacific. These alternatives are used in place of fossil feedstocks for our mass balance products. As fossil, bio-based and recycled raw materials are processed simultaneously, the feedstocks cannot be directly physically attributed to resulting derivatives. However, through monitoring by independent third parties such as TÜV Nord on the basis of recognized certification systems such as REDcert2 or ISCC PLUS, it can be verified that an adequate amount of alternative feedstocks has been used for the amount of mass balance sales product. This ensures that fossil raw materials are saved with every sale of these certified products. We aim to use the mass balance approach to help our customers to achieve their sustainability targets. This can help BASF to purchase fewer fossil raw materials and reach its sustainability targets.

• More information on the mass balance approach

Mass balance products are identical in quality to conventionally produced products, but due to the alternative feedstocks used they contribute to more sustainability, for example, through fewer CO₂ emissions and lower demand for fossil raw materials. In 2024, we expanded our mass balance portfolio in many areas, for example to include Ccycled^® automotive refinish coatings, biomass balanced products for customers from the detergent and cleaner industry, and products for selected chemical intermediates.

One focal point of our activities in the area of circular feedstocks is the chemical recycling of plastics. We use this complementary technology to mechanical recycling to help reduce the amount of plastic waste that is disposed of in landfills or thermally recovered in the long term. Chemical recycling breaks down plastics into their building blocks or converts them into basic chemicals. Different methods are used for this, such as depolymerization or pyrolysis. Chemical recycling has impacts on the entire value chain – from the sourcing of raw materials and the use of recycled raw materials in the manufacture of products to the downstream value chain, in which waste is not disposed of but can be used as a feedstock. To give one example, in chemical recycling, our technology partners use the pyrolysis process to extract pyrolysis oil from used tires or from mixed plastic waste, which is not mechanically recycled as of yet. As part of ChemCycling^®, we feed the pyrolysis oil into the BASF Verbund at our production sites in Europe, North America and Asia Pacific as a substitute for fossil feedstocks and manufacture Ccycled^® products by applying the mass balance approach. In 2024, we established a long-term partnership with Encina Development Group to source benzene that has been chemically recycled from plastic waste. We also aim to use this feedstock to manufacture our Ccycled^® product portfolio.

Our Agricultural Solutions division’s xarvio^® HEALTHY FIELDS digital solution is a good example of a business model that contributes to a circular economy by reducing resource consumption. The solution creates incentives for our customers to use resources as efficiently as possible when growing winter wheat and barley. It offers a customized, field-specific fungicide strategy that guarantees leaf health at the end of the season. If the guaranteed leaf health level is not reached, BASF pays compensation to its customers. In 2024, agricultural machinery manufacturer Stara started marketing a crop protection sprayer in Latin America that can detect and treat weeds in real time. The technology combines xarvio^® Digital Farming Solutions’ agronomic intelligence with high-tech cameras and software to optimize the use of herbicides.

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We are also pursuing the goal of closing product loops. One example of this is loopamid^®. BASF developed this innovative solution to support the circular economy in the fashion industry and recycle polyamide 6 (PA6) textile waste. The technology behind loopamid^® tolerates all fabric blends, including PA6 and elastane, enabling textile-to-textile-recycling of industrial textile waste and used clothing from the downstream value chain. The fibers and materials can be recycled over multiple cycles. At the same time, the material’s characteristics are identical to those of conventional polyamide.

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A significant tool for the long-term global steering of the product portfolio based on the sustainability performance of our products is our TripleS method (Sustainable Solution Steering). We use this method to assess our relevant product portfolio² and categorize products by their applications and regional aspects, including with respect to resource use and the circular economy. This steering method also allows us to enhance our portfolio with respect to the aspects of the circular economy and resource use. By doing so, we aim to contribute positively to reducing the sourcing of fossil raw materials by supporting the use of recycled feedstocks and closed-loop product cycles. The latter could further reduce waste along the entire value chain. If products with sustainability concerns are identified within TripleS, we classify them as either Monitored or, in the case of significant concerns, as Challenged. A description of possible measures is mandatory for both categories. In the case of Challenged products, we develop our own action plans. These include research projects and reformulations to optimize products or replace them with alternatives. To systematically make our portfolio more sustainable, we are generally phasing out all Challenged products within five years of their initial classification. For more information on the TripleS method, see Sustainable steering of our product portfolio in the chapter General Disclosures.

Waste management

We are committed to minimizing material consumption along our value chain. We require suppliers to comply with internationally recognized environmental standards. We support our suppliers in developing and implementing measures for improvement, for example in waste management.

Through targeted waste management, which is set out in the Environmental Protection corporate requirement, we aim to reuse materials by recycling them, for example, and to keep waste disposal volumes as low as possible. In this continuous process, we systematically track our material flows and follow a clear hierarchy: We aim to avoid waste as far as possible, for example, by continuously optimizing our processes or developing new production methods. This is where our Verbund structure with its networked plants and value chains comes in: The by-products of one plant serve as feedstock elsewhere in the BASF Verbund, avoiding waste and enabling us to use the feedstocks deployed as efficiently as possible. If they cannot be used within the Verbund structures, we assess whether they can be recycled or thermally recovered. We have established processes for the safe, proper and environmentally responsible disposal of materials that we cannot recover or where recovery is not legally permitted. If we use external waste disposal companies, we conduct regular audits to verify that waste is disposed of properly. In this way, we also contribute to preventive soil protection and keep today’s waste from becoming tomorrow’s contamination.

Global Targets

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We use our TripleS method to categorize our relevant product portfolio³ into five segments: Pioneer, Contributor, Standard, Monitored and Challenged. Taken together, the Pioneer and Contributor products make up our Sustainable-Future Solutions. Products allocated to these categories make a positive sustainability contribution in the value chain. Examples are bodycare products made from bio-based and biodegradable polymers or insulation foams that save energy for customers. Our Sustainable-Future Solutions allow us to make a positive contribution with our product portfolio. This also includes resource use and circular economy. For example, an increasing amount of recycled feedstocks are used in these products. We have set ourselves the goal of ensuring that more than 50% of BASF’s sales relevant to TripleS are attributable to Sustainable-Future Solutions by 2030 (2024: 46.3%). With TripleS, we are steering our product portfolio as well as our research and development units toward sustainable solutions. We are aiming to reduce the negative impacts of the sourcing and use of fossil raw materials, for example, by using more recycled feedstocks and deploying circular solutions to make more efficient use of raw materials. This can also reduce the waste produced along the value chain. For more information on the methodology behind this target, see Sustainable steering of our product portfolio in the General Disclosures chapter.

In addition to this target, with which we aim to increase the proportion of our more sustainable products, we have set ourselves a new target for the circular economy in 2024. The target was set by BASF’s Board of Executive Directors in 2024 on the basis of the TripleS method. This methodology and the associated target are based on clearly defined criteria in the respective ESG topic areas that are comprehensible in the methodology manual. There is currently no general quantitative scientific framework for the steering of a product portfolio based on business performance and sustainability contribution that companies could use as a guide when setting targets. Among other things, regional legislation on the circular economy and the guidelines set out therein, which we expect that our customers will have to meet, were taken into account when setting the target. We aim to generate sales of €10 billion from Loop Solutions for our customers by 2030 (2024: €5.7 billion). We define Loop Solutions as products that are categorized as Pioneers or Contributors in line with TripleS and that hence make a positive contribution to the circular economy. The total sum of absolute sales for these products represent our Loop Solutions. These are products that are based wholly or partly on renewable or recycled feedstocks, support recycling processes, increase durability of materials or prolong their lifetime. For example, multilayer packaging produced with our water-based Epotal^® adhesives can be easily separated into its individual recyclable materials during recycling, allowing them to be reused. Our aim with this target is to reduce waste along the value chain and to make a positive contribution to the more efficient use of raw materials. The annual review of our TripleS target also includes a review of those products that contribute to the circular economy target, so as to measure and evaluate our progress toward achieving it.

In this way, BASF is pursuing a holistic strategy to support a circular economy and at the same time achieve our sustainability targets. To meet these two product-specific targets, we will enhance the sustainability of our raw material base in the direction of a more circular economy. We have drawn up both policies and actions to do this. We aim to use our targets to check whether our strategies and actions are having the desired effect and whether we are contributing to the circular economy.

There are no plans to introduce a dedicated waste management target. Our focus is on the efficient use of our raw materials in our plants. We are continuously increasing this efficiency thanks to the focused measures we are taking (see Waste Management) and hence are also reducing the volumes of waste generated during production.

Metrics

Resource inflows

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BASF’s most important raw materials (based on volume) include gas and crude oil-based petrochemical feedstocks such as naphtha and benzene. We use liquid gas and natural gas as fuels to generate energy and steam, and as raw materials to produce key basic chemicals such as ammonia or acetylene. Naphtha is mainly fed into our steam crackers, where it is split into products such as olefins and aromatics. Olefins such as ethylene, propylene and butene are important feedstocks for numerous value chains at BASF. We use aromatics such as benzene or toluene to manufacture engineering plastics, among other products. Further details about water as a resource are given in chapter E3 Water. Investments in property, plant and equipment such as the construction of new production plants or the expansion of capacities at existing production plants are of crucial importance to us as a chemical company. Information on these investments is given in the chapter Material Investments and Portfolio Measures of the Consolidated Financial Statements. Thanks to a high degree of forward and backward integration, we can produce feedstocks for our value chains efficiently within the BASF Verbund while conserving resources. We continuously evaluate whether fossil and petrochemical resources can be replaced with renewable or recycled alternatives.

Our renewable raw materials are mainly based on vegetable oils, fats, grains, sugar and ethanol. We use these to produce ingredients for the detergent and cleaner industry and natural active ingredients for the cosmetics industry, for example. We also use renewable feedstocks such as biomethane and bionaphtha as an alternative to fossil feedstocks in our Verbund (see Sourcing and use of raw materials).

We document the volumes of raw materials that we source by determining and adding together their weights. Solids are weighted directly, while for liquids and gases, the volumes are measured and the weights then calculated using their density. We comply with our global, binding procurement requirements when sourcing raw materials and expect our suppliers to adhere to our Supplier Code of Conduct.

When using fossil and renewable raw materials, we consider economic criteria, supply security, process and product safety issues, the availability of various raw materials and potential impacts on sustainability along the value chain. All in all, we purchased 30.4 million metric tons of raw materials in 2024, which we generally also use in the same year. Renewable raw materials accounted for 1.2 million metric tons of this amount and were mainly based on vegetable oils, fats, grains and sugar.

We purchase renewable raw materials in accordance with our principles for sustainable sourcing. Our expectations of our suppliers are laid down in our Supplier Code of Conduct. We are developing and testing approaches to make the supply of raw materials more sustainable in joint initiatives with suppliers and other partners. Our principles for the responsible sourcing of renewable raw materials cover both environmental and social criteria.

A total of 24% of the renewable raw materials purchased by us in 2024 were certified, for example by RSPO, REDcert-EU, ISCC EU or ISCC PLUS. Certification standards are not available for all renewable raw materials. As part of our commitment to more sustainability, we are focusing on those areas where they are still missing.

Palm oil, palm kernel oil and their derivatives are some of our most important renewable raw materials. We mainly use these 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. We have been a member of the RSPO since 2004 and are involved in other national and international initiatives, such as the German Forum for Sustainable Palm Oil (FONAP) and the High Carbon Stock Approach (HCSA) organization. Building 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 for labor rights and the rights of Indigenous peoples, smallholder inclusion, and certification and traceability standards. Our goal here is to address negative impacts that could arise as a result of our sourcing of renewable raw materials specifically for palm-based raw materials. As part of our supplier and risk management, we use the Palmoil.io internet platform from the tech firm MapHubs to monitor potential deforestation activities that violate our Palm Sourcing Policy. Our Care Chemicals division has published a comprehensive annual Responsible Sourcing Report since 2023. In it, we report on our measures and progress toward more sustainability and transparency in the palm value chain and the value chains for other renewable raw materials.

We sourced 11.3 kilotons of recycled raw materials in 2024. This corresponds to 0.04% of our raw materials. The figure includes pyrolysis oil, which is extracted from plastic waste or used tires via chemical recycling (see Sourcing and use of raw materials).

We have many years of experience and a high degree of specialization in recycling precious metals such as platinum, palladium and rhodium. These are used in mobile emissions catalysts as well as in chemical catalysts. We primarily use the precious metals recovered in this way as feedstocks to manufacture new products for the automotive, specialty chemical, semiconductor and green hydrogen industries.

Another focus is on recycling mineral raw materials. For example, we are driving forward innovative technologies and solutions for recovering metals such as lithium, nickel, cobalt and manganese from end-of-life lithium-ion batteries. With the growing market for electric vehicles, there is also an increasing need for recycling lithium-ion batteries. As a leading producer of battery materials with 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.

Resource outflows

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The production and processing of chemicals is our core business. Our extensive product portfolio ranges from chemicals and materials to industrial solutions, surface technologies, nutrition and care and agricultural solutions. We supply products and services to around 74,000 customers⁴ from various sectors in almost every country in the world. Our customer portfolio largely comprises major global customers and medium-sized enterprises, which process them in downstream production. Only isolated products, such as in the agricultural area, are also sold directly to end consumers. Because of this, we assume that our products do not have a significantly high material use rate or recyclable content.

Our products are frequently used to manufacture durable, high-performance solutions such as electric motors for vehicles or insulation foams for the construction industry. We are making increasing use of alternative feedstocks and processes in the manufacture of our products, so as to close material loops and reduce waste (see Actions). These include, in particular, our Ccycled^® products; we use the mass balance approach to attribute pyrolysis oil – which is fed into the BASF Verbund as a substitute for fossil feedstocks – to them. We are helping to strengthen the circular economy and increase resource use by offering our customers products that support the recycling process, increase the durability of materials or prolong their lifetime. We have embedded the TripleS method in the assessment of our research and development (R&D) processes so as to incorporate the guidelines formulated by the European Commission in its Safe and Sustainable by Design framework, among other things. Our use of TripleS creates transparency regarding the contribution to sustainability made by our product portfolio and future products developed by R&D and also takes circular design principles into account. We are reviewing the sustainability-related challenges facing our products and steering our portfolio in the direction of more sustainable solutions. As part of our circular economy program, we also investigate the recyclability of our own products, among other things. One example of this is loopamid^®, a product enabling textile-to-textile recycling of industrial textile waste and used clothing (see loopamid^®).

One of the ways in which we can reduce the use of fossil raw materials is to partially or fully use renewable or recycled feedstocks to manufacture products. This is done by feeding in recycled or bio-based feedstocks into the production of certain BASF products and attributing them to the end products. We use the mass balance approach for this. As fossil, bio-based and recycled raw materials are processed simultaneously, the feedstocks cannot be directly physically attributed to resulting derivatives. This attribution is monitored by independent third parties such as TÜV Nord on the basis of recognized certification systems including REDcert2 or ISCC PLUS. These enable BASF to verify that an adequate amount of alternative feedstocks have been used for the amount of mass balance sales product. This ensures that fossil raw materials are saved with every sale of these certified products.

• More information on the mass balance approach

BASF generated 2.18 million metric tons of waste in 2024. As is normally the case in the chemical industry, this includes metals, plastic waste as well as reaction and distillation residues, among other things. A total of 1.09 million metric tons of this waste was disposed of. Based on the concept of the circular economy, we are continuously examining recycling or thermal recovery options for all waste. In this way, we were able to find new uses for 1.09 million metric tons of our waste in 2024. A total of 1.70 million metric tons (77.8%) of our waste could not be recycled. We continuously identify and evaluate the safest and most environmentally sound disposal routes for nonrecyclable waste. The hazardous waste disposed of in landfill is mainly contaminated construction waste that cannot be recycled due to legal guidelines. BASF classifies waste before its disposal in line with the applicable legislation and the volume is determined by weighing it at the disposal company. The data produced by weighing serves as the basis for the treatment or disposal costs that are due. A general description of our measurement methods and of the process used to capture environmental data, including waste volumes, plus general information on estimating or rounding specific sustainability parameters can be found in the General Disclosures chapter of our Sustainability Statement.