S2 Workers in the Value Chain

Strategy and Governance

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For explanations of our overarching policies in respect of scope, accountability, impacts in the value chain, global applicability, accessibility to stakeholders and engagement thereof, see General Disclosures in our Sustainability Statement. Among other things, these include the BASF Code of Conduct, the BASF Policy Statement on Human Rights, our risk-based sustainability management for procurement as part of our procurement requirement, the Supplier Code of Conduct and our principles for the responsible sourcing of renewable raw materials.

A core element of our sustainability strategy is to respect and protect the dignity, rights, health and safety of individuals, both within and outside our own workforce. We view sustainability topics as holistically as possible, including the matters that have been identified as material – health and occupational safety and potential child labor. We aim to act as a role model for responsible and safe behavior along our entire value chain, and to work together in a spirit of trust with partners such as suppliers, service providers, contractors, joint venture partners and customers. We adopt a holistic strategic approach that includes all workers in our supply chains; however, the focus in our reporting is on the upstream value chain, in line with the results of our materiality assessment.

We are committed to complying with applicable laws and international standards. In this context, we are committed to the Universal Declaration of Human Rights of the United Nations (U.N.), both U.N. Human Rights Covenants, the Core Labor Standards of the International Labour Organization (ILO), the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, the Ten Principles of the U.N. Global Compact, the U.N. Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct and the Responsible Care^® Global Charter from the International Council of Chemical Associations. We also expect our partners to comply with the law and with standards, including the regulations governing health and occupational safety and child labor. Equally, we expect them to endeavor to enforce these standards at their own partners and take steps to ensure that they comply with this responsibility. We rely here on a systematic, integrated, risk-based approach and established monitoring and management systems.

For us, implementing supply chain-specific due diligence processes is a continuous and comprehensive task. We have embedded our responsibility for human rights and thus also for ensuring safe working standards and preventing potential child labor in BASF’s Code of Conduct and Supplier Code of Conduct and have set it out in more detail in our Policy Statement on Human Rights. All employees and leaders are responsible for ensuring that we act in accordance with our Code of Conduct and our Policy Statement on Human Rights.

• More information on the BASF Code of Conduct
• More information on the Supplier Code of Conduct
• More information on our Policy Statement on Human Rights

Human rights is an important topic for us and this is reflected in our organizational structures. The head of our Legal and Compliance organization also acts as Chief Human Rights Officer, who oversees the overarching risk management system with regard to human rights issues, especially in relation to due diligence under the German Supply Chain Due Diligence Act (LkSG), and reports regularly to the Board of Executive Directors and the Audit Committee on this. In addition, we have integrated sustainability-related assessments in our governance and decision-making processes, for example in relation to investment, acquisition and divestiture projects.

The overarching governance of human rights due diligence at BASF lies with the Compliance organization. In addition, a number of specialist units are responsible for steering specific human rights topics. As part of our Human Rights Expert Working Group, which is managed by the Compliance Department, we work on an interdisciplinary basis on the holistic assessment and further development of our approach to human rights due diligence. This allows us to ensure that we approach our human rights responsibility holistically and that we can continually improve our performance. The Expert Working Group comprises employees from the Corporate Center units Corporate Compliance, Corporate Legal, Corporate Human Resources, Corporate Environmental Protection, Health, Safety & Quality, Corporate Strategy & Sustainability and Corporate Communications & Government Relations, along with Global Procurement, Security and our operating divisions. Like Corporate Compliance, the aforementioned specialist units have their own global organization, which they train and which supports them in implementing the due diligence processes and measures worldwide in the countries in which BASF is active. The Expert Working Group provides support and advice in challenging and critical situations, on the development of internal processes and on the creation of information and training offerings, among other things. Relevant aspects of human rights topics are also part of the global qualification guidelines for security personnel and are incorporated into the standard agreements with contractors.

We use our Human Rights Advisory Council to access additional external human rights expertise. The council, which comprises independent international human rights experts, meets regularly. The trust-based dialog on human rights challenges helps us to better understand different perspectives and to deal even more openly with critical situations. The meetings held in 2024 were attended by representatives from Corporate Compliance, Corporate Strategy & Sustainability and Global Procurement, plus other experts from the operating divisions. The council provided external perspectives on our stakeholder engagement, on challenges in critical supply chains and on how to deal with situations posing dilemmas.

• More information on the Human Rights Advisory Council

Our Procurement organization has set out guidelines for our upstream supply chain in a global, risk-based management system; these specify how we implement our due diligence processes. We have defined the standards for this in a global requirement. We continuously enhance our structures and processes so as to reflect changes in the general situation. Procurement requirements and targets are set centrally and are binding for all employees with procurement responsibility worldwide. We endeavor to ensure compliance with these requirements using a multistage control process. In this process, minimum standards drawn up by the Corporate Center units are used to support and monitor the individual risk management systems of our business units during implementation. The Corporate Audit unit, as the third instance involved, monitors the effectiveness and compliance of the risk management.

Our expectations of our suppliers are laid down in the global Supplier Code of Conduct. Topics covered by the Code of Conduct include compliance with human rights, the exclusion of child labor, forced labor and human trafficking, safeguarding labor and social standards, and antidiscrimination and anticorruption guidelines. The Code is regularly updated. It is available in the most relevant languages for our suppliers and integrated into electronic ordering systems and purchasing conditions across the Group.

We want to help shape the transformation toward climate neutrality in a socially just way (just transition). This is why we also focus closely on the processes used for sourcing renewable raw materials. Alongside positive environmental effects such as reducing greenhouse gas emissions, these can also have negative effects on social factors, depending on the raw materials. We include this point in our risk analyses and have drawn up specific principles for the responsible sourcing of renewable raw materials. These principles also refer to the ILO’s principles and its Declaration on Fundamental Principles and Rights at Work, which in turn include the topics of child labor and health and safety at work. At the same time, we seek dialog with our stakeholders to identify conflicting goals (see Renewable raw materials).

• More information on our principles for the responsible sourcing of renewable raw materials

As part of our new “Winning Ways” strategy, we are also focusing on our BASF Renewable Carbon unit within Global Procurement, which manages the sourcing of renewable raw materials and biomass for BASF’s operating divisions. This unit has access both to BASF’s existing expertise and to a wide range of cooperation models with suppliers, customers and partners.

Actions

We are implementing concrete actions to mitigate negative impacts and risks and at the same time facilitate opportunities related to workers in the upstream value chain. These aim at promoting open dialog, assessing and growing our suppliers, and improving conditions for their workers by taking preventive measures and through local initiatives. Our management processes come into play in the case of any specific incidents.

We rely primarily on the following actions:

• Engagement with workers via forums for dialog, advisory bodies and workshops
• Use of uniform global grievance mechanisms to channel the concerns and needs of workers in the value chain
• Supplier ESG risk analysis
• Risk-based evaluation of suppliers through online assessments (EcoVadis) or on-site audits, for example as part of the chemical industry’s Together for Sustainability (TfS) initiative
• Implementation of corrective measures at suppliers
• Support for suppliers in growing sustainability-related skills in the form of appropriate training

Engagement and grievance mechanisms

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We include the viewpoints of our partners and their workers in our decisions and actions using dialog forums and advisory bodies such as the Human Rights Advisory Council, which we established together with external experts, and the equivalent body for nature and biodiversity topics, our Nature Advisory Council (for more information, see S3 Contribution to the positive development of communities). The two councils maintain a regular dialog and meet up to three times a year. Since 2023, we have also used the Sustainability Lab, a new stakeholder engagement format in which around 100 external and internal experts discuss specific questions relating to sustainable development from a variety of perspectives (for more information, see General Disclosures, Interests and views of our stakeholders). We plan to continue using the Sustainability Lab format on an event-driven basis in the future.

Moreover, we also seek direct dialog with our suppliers. In Brazil, for example, we held a series of workshops on sustainability-related topics in 2024. Among other things, members of the TfS initiative and supplier employees were invited to discuss responsibilities, opportunities and challenges in the areas of human rights and labor standards. Further webinars with suppliers are planned for 2025.

One of the ways in which we obtain direct insights into the perspectives of particularly vulnerable groups is through our supplier diversity programs with supplier employees from North and South America. In addition, we use specific dialog formats in higher-risk business areas such as our seed business or when procuring castor oil.

The relevant Corporate Center units such as Sustainability Relations and Corporate Compliance, along with Global Procurement and the specialized units in our operating divisions are responsible for ensuring appropriate, regular dialog (for additional information on the allocation of responsibilities for the Corporate Center units within the Board of Executive Directors, see Management and Supervisory Boards).

We assess the effectiveness of our collaboration with workers in the value chain, for example in the course of our supplier assessments and follow-up evaluations (see S2 Assessing and growing our suppliers). We also assess the progress made with the actions we have taken, and with our initiatives and projects.

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We promote a culture in which critical issues and concerns can always be raised openly. To do this, we offer uniform grievance mechanisms at the operational level throughout the world. The key tool is our Compliance Hotline. Information on how the issues raised and addressed are tracked and monitored can be found under G1 Monitoring adherence to our compliance principles. The compliance hotline offers a way of reporting concerns, risks and violations occurring in BASF’s activities or in the value chain in confidence and also anonymously. This also includes potential concerns in relation to health and occupational safety as well as child labor. The hotline is available both to BASF employees and to all external stakeholders, and in particular to workers in our supply chains. In addition, complaints can be submitted to external entities such as the website maintained by the German Federal Office for Economic Affairs and Export Control (BAFA).

Our grievance mechanism is set out in our Supplier Code of Conduct, which is made available to our partners and service providers via our electronic ordering system as part of our purchasing conditions.

• Our Compliance Hotline
• BAFA complaints form

Assessing and growing our suppliers

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Suppliers are selected, and both new and existing suppliers are evaluated, on the basis both of economic criteria and in particular of ESG standards. This means that selecting, assessing and auditing suppliers are key elements of our sustainable supply chain and risk management activities, intending to ensure that suppliers comply with the laws, regulations and standards in force, and especially with those relating to our material topics of potential child labor and EHS standards. Due to the large number of suppliers, they are evaluated based on risk. We take both country- and industry-specific risks and our ability to exert an influence into account. Supplier assessment is mainly performed as part of the TfS initiative, of which BASF is a founding member. TfS performs online assessments via the EcoVadis rating agency or conducts on-site audits using TfS-approved auditors. A total of 118 raw materials supplier sites were audited in relation to sustainability standards on our behalf in 2024. We received EcoVadis sustainability assessments for 328 suppliers with potential sustainability risks. We also take into account other certification systems and external audits, such as the Roundtable on Sustainable Palm Oil, when assessing our suppliers. Depending on business requirements, we perform our own Responsible Care audits at selected contract manufacturers if material risks have been identified with respect to occupational safety, health and environmental protection. We use targeted checks on suppliers in higher-risk countries to prevent the risk of potential child labor; an example here is our seed business supply chain in India.

Our employees in procurement are supported in this process by a dedicated procurement-specific sustainability team. This consists of a core team plus a supplementary sustainability network comprising employees from the regions and procurement clusters concerned. In addition, we have access to a global audit team that audits EHS topics at contract manufacturers.

We carefully analyze the results of our assessments, which are summarized in audit reports or scorecards together with concrete plans for corrective actions, and document them in a central database. Where performance is insufficient, we contact the suppliers and request that they implement improvements. We review our suppliers’ progress according to a defined time frame based on the sustainability risk identified, or after three years at the latest. Over the past few years, we have identified some need for adjustment at our suppliers with respect to environmental, social and governance standards. Examples include deviations from health and occupational safety measures and labor law requirements. In follow-up audits performed in 2024, we identified improvements in these areas.

We support our suppliers in developing measures for improvement. The webinars held by TfS in various languages on sustainability and the implementation of corrective measures are an important part of supplier development. All in all, these were attended by a total of 990 employees of suppliers in 2024. In addition, the TfS Academy online learning platform is aimed at procurement staff and suppliers. It covers the entire spectrum of ESG topics, including child labor and health and occupational safety. There are currently over 300 courses available in 11 different languages. We also continued our partnership with East China University of Science and Technology in Shanghai, China, in 2024. A total of 92 employees from 68 Chinese suppliers received further training on ESG topics including child labor and health and occupational safety.

Preventive actions and local initiatives

The examples given below are locally organized activities, projects and initiatives. They have not been assigned to any centrally managed action plan. Rather, they are aimed at achieving continuous optimization and further development. This goes hand in hand with the BASF approach to sustainability steering (see General Disclosures).

We are aware of the challenges in specific supply chains. For example, in 2024, we continued our proactive work with our upstream supply chains, where we usually have no direct contractual relationships, less transparency and less influence. We are working together with partners and civil society and are active in cross-sector initiatives. Projects often start on the ground to build specific local expertise regarding sustainable and responsible supply chains. In addition to making environmental improvements, our particular objective is to promote social aspects such as safe working conditions, adequate wages, access to healthcare systems and opportunities for upskilling/reskilling. We discuss the appropriateness of measures on a case-by-case basis with relevant stakeholders such as NGOs and government representatives. We also discuss our plans in our external dialog forums, in the Human Rights Advisory Council and in the Nature Advisory Council. We measure the effectiveness of specific projects using progress reports on, and studies of, for example, developments in the areas of income and living conditions and the establishment of policy frameworks and regulations.

Seeds

In 2022, BASF, Syngenta and Arisa joined forces to set up a multistakeholder initiative in the vegetable seeds business in India. Called Wage Improvements in Seed Hybrids (WISH), the initiative addresses combating child labor and paying fair wages in the vegetable seeds sector in the Indian federal states of Karnataka and Maharashtra. The first phase of the project consisted of a survey of more than 4,100 households, in which roughly 6,900 children, 200 farmers, 400 workers and other stakeholders took part, identified focus topics for improving conditions on the ground. In the second phase of the project, which has been running since 2023, the partners are now using a variety of instruments to address these areas. Examples include training and upskilling/reskilling, networking, stakeholder integration (since 2024), advocacy efforts at local and international level, digital documentation and the dissemination of best practices. BASF, Syngenta and Arisa aim to maximize the positive impact of the project by also engaging in a dialog with other national and international companies in the seeds business. Since the beginning of 2024, external NGOs have been providing training and upskilling/reskilling for more than 390 farmers in 28 villages in the project area; this involves a variety of stakeholder groups including 2,100 workers. The goal of the project is to achieve tangible improvements with respect to increasing wages and avoiding child labor in the vegetable seeds business by the end of 2025.

Renewable raw materials

Palm oil, palm kernel oil and their derivatives are some of our most important renewable raw materials; these are described in detail under E4 Biodiversity and Ecosystems (see E4 Sourcing of renewable raw materials, Governance approach and E4 Sourcing of renewable raw materials, Actions). Based on our 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). These address not only certification standards, traceability and environmental aspects, but also the observance of employee rights and the rights of Indigenous peoples as well as the inclusion of smallholder structures.

• More information on our voluntary commitment to palm oil products and the Responsible Sourcing Report

Another important raw material 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 were a founding member of, and have been active since 2016 in, the Sustainable Castor Initiative – Pragati, with the aim of establishing a certified sustainable supply chain for castor oil in India. As part of Pragati, smallholders receive training, which is based on a specially developed sustainability code, SuCCESS, on topics such as health, the safe use of crop protection products to minimize occupational safety risks, and cultivation methods.

• More information on sustainable castor oil

Plants also form the basis of many other products in our portfolio for cosmetics. This applies, for example, to our biopolymers and bioactives. Through resource-conserving sourcing practices, we aim to preserve ecosystems and enable more sustainable management for the people whose livelihoods depend on them. For example, we have been combining economic, environmental and social aspects including improved, safe working conditions and access to medical care for several years now in our holistic procurement initiatives for argan (Morocco), rambutan and galanga (both Vietnam). We have consolidated our bioactives activities in our Responsibly Active program.

• More information on the Responsibly Active program

Mineral raw materials

We have relationships with a large number of suppliers of mineral raw materials, which we use to produce automotive and process catalysts or battery materials for electromobility, among other products. We have implemented the EU’s Conflict Minerals Regulation, for example by carrying out a compliance check for the import of conflict minerals in our ordering system. The regulation aims to combat the financing of armed conflicts and human rights issues such as child labor and forced labor. It also defines supply chain due diligence for tin, tantalum, tungsten and their ores as well as gold (3TG) imported into the EU from conflict-affected and high-risk areas (CAHRAs).

• More information on the BASF Conflict Minerals Report 2023

We also attach importance to certification, such as the LBMA certificate for gold, the LPPM certificate for metals of the platinum group and the Responsible Minerals Assurance Process of the Responsible Minerals Initiative. Furthermore, 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. We have organized our cobalt supply chain according to established sustainability requirements such as the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals. Our goal is to not purchase cobalt from artisanal mines as long as responsible labor, social and environmental standards cannot be verified.

Together with BMW Group, Samsung SDI Co. Ltd., Samsung Electronics Co. Ltd., Volkswagen AG, Stihl AG & Co. KG and Deutsche Gesellschaft für Internationale Zusammenarbeit (German Corporation for International Cooperation, GIZ), we have been involved in the cross-industry Cobalt for Development initiative since 2018. It is intended to improve working and living conditions for artisanal miners in the Democratic Republic of Congo and to explore and implement opportunities for legalizing artisanal mining. To achieve this, the initiative offers programs such as training on important environmental, social and governance aspects of responsible mining practices. In the second phase, which started in the spring of 2023, mining cooperatives continued to receive training on topics such as occupational safety and environmental management. In addition to technical support in mapping and sampling the deposits, joint strategies were developed together with stakeholders from the Congolese government to create a legal basis for the miners to continue operating the mine.

• More information on the Cobalt for Development project

The Global Battery Alliance (GBA), which was cofounded by BASF in 2017, is also relevant in connection with battery materials. It has over 150 members and promotes dialog between businesses, governments and civil society. The GBA develops the tools for steering a sustainable and responsible circular economy for batteries – and aims to establish these by 2030. It acts as an nonpartisan platform to develop widely accepted rules for comprehensive and standardized reporting of ESG topics. These include environmental protection issues, child labor and human rights, among other things. The GBA rules were used in two pilot projects in 2024 and should be ready from 2025 onwards for the future Battery Passport, the digital battery identification document provisioned by the EU’s Batteries Regulation.

• More information on the Global Battery Alliance

Another mineral raw material that BASF processes is mica.¹ As a base for effect pigments, it is mainly used in the production of coatings and seed coatings. As an active 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 is focusing on labor standards, strengthening local communities and legal frameworks in the period up to the target year of 2030. As the RMI’s recent progress report shows, 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 healthcare through doctors’ visits in villages and enrollment in public health insurance plans.

• More information on the Responsible Mica Initiative

Dealing with specific incidents

If we learn of irregularities or violations in the course of our audits or from other sources such as media reports or our Compliance Hotline, we take them extremely seriously, react immediately and require our partners and suppliers to implement corrective measures without undue delay and to stop the violations. In the case of serious violations of the standards defined in our Supplier Code of Conduct or of international principles, such as intolerable working conditions or child labor, we reserve the right to impose commercial sanctions. These can go as far as termination of the business relationship. The same applies to failure to correct violations, or for displaying patterns of noncompliance with these standards. No direct business relationships were terminated in 2024.² We are in close contact with our suppliers, especially in higher-risk areas and regions, and monitor the implementation of relevant standards and necessary measures for improvement.

For example, action plans have now been developed and implemented for the cases of infringements of the German Supply Chain Due Diligence Act (LkSG) that were identified in 2023.

No severe human rights issues or incidents related to workers connected to its upstream and downstream value chains were reported to BASF in 2024 (for more information on the topic of S3 Affected Communities, see S3-3).

We have advanced the negotiations to divest our shares in the two joint ventures in Korla, in the northwestern Chinese province of Xinjiang, a process we initiated for strategic reasons at the end of 2023, and signed an agreement to divest our shares. Our external audit scheduled for March 2024 was conducted as planned. It showed no current indications of severe incidents or infringements.

Global Targets

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Our global corporate target of responsible procurement (for additional information, see Targets and Target Achievement) aims to holistically improve our suppliers’ sustainability performance: It covers both comprehensive sustainability matters and the matters of health and occupational safety and potential child labor that are material for the Workers in the Value Chain topic. BASF has not set itself a specific target for the Workers in the Value Chain topic.

The supplier target was updated in the reporting year so as to advance sustainability in the supply chain even more effectively, and to focus on suppliers with an increased risk in terms of sustainability: For the time frame up to 2030, BASF is concentrating on improving sustainability performance of those suppliers that generated inadequate results in evaluations. We are striving toward ensuring that annually, 80% of suppliers who underwent a sustainability evaluation during the reporting period, and who had inadequate results in a prior comparable evaluation, improve their sustainability performance. An improvement could result, for example, from a positive development of the EcoVadis score or successful implementation of corrective measures in a follow-up audit. In 2024, the figure was 76%. In order to achieve our target of 80% annually by 2030, we began establishing a tracking process involving specialists from the compliance organization in 2024. They contact suppliers with inadequate results and monitor the implementation of corrective measures.

For us, a supplier evaluation is valid for three years. We then carry out a new classification internally using a risk assessment and derive appropriate follow-up measures based on this. The new global target will be embedded in the targets set for employees with procurement responsibility.

In addition, we strive as a matter of principle to avoid child labor, negative impacts on occupational safety and health protection as well as impacts on other sustainability-related topics. These requirements are set out in a globally binding form in our Supplier Code of Conduct and are overseen using multistage, risk-based monitoring systems. We are steering toward our suppliers complying with the requirements set out in the Supplier Code of Conduct. We take action if we become aware of severe violations in the areas of health and occupational safety or child labor. We contact the suppliers concerned, offer them training and explicitly request that they implement corrective measures within a defined time frame. We systematically track implementation, since we aim to achieve improvements in these areas. If we find that infringements have not been remedied or minimized, we can impose commercial sanctions or even terminate the contracts concerned.

Stakeholder expectations are continuously incorporated into possible objectives. We ensure this is the case through regular meetings with external stakeholders. These are held as part of our strategic stakeholder engagement as well as in meetings with investors (see General Disclosures, Interests and views of our stakeholders), in which we discuss the sustainability topics material for BASF.