The Board of Executive Directors’ and the Supervisory Board’s Handling of Sustainability Topics

ESRS-Kennzeichnung:ESRS 2 GOV-1, ESRS 2 GOV-2

Organization and responsibilities for monitoring sustainability-related impacts, risks and opportunities

Sustainability is systematically incorporated within the strategy, operations and assessment, steering and compensation systems of BASF.

Risk management and the internal control system are the responsibility of the entire Board of Executive Directors, which defines the basic requirements and processes as well as the organization of the risk management system. The Board of Executive Directors also defines the processes for approving investments, acquisitions and divestitures. It is supported by the units of the Corporate Center. Global opportunity and risk management falls under the responsibility of the Corporate Finance unit, which reports to the Chief Financial Officer, and systematically records sustainability-related opportunities and risks. Sustainability-related impacts on the business are analyzed by the Corporate Sustainability unit, which is part of Corporate Development. Corporate Development reports to the Chairman of the Board of Executive Directors. Decisions regarding investments, acquisitions and divestitures take into account comprehensive assessments of sustainability impacts. The Risk Committee, which comprises representatives from various Corporate Center units, reviews the Group-wide risk profile and any necessary adjustments to measures at least twice a year and informs the Board of Executive Directors accordingly. The Corporate Audit unit regularly audits the effectiveness and appropriateness of the risk management system, internal control system and the compliance management system and reports to the Board of Executive Directors and the Supervisory Board on these matters.

The supervisory and advisory activities of the entire Supervisory Board also include the Board of Executive Directors’ consideration of sustainability topics with regard to corporate management and strategy development. Supervision of the risk management system and the internal control system, the internal auditing system, the appropriateness and effectiveness of the compliance management system, and compliance with statutory provisions and internal health, safety and environmental regulations falls within the responsibility of the Audit Committee. The Audit Committee also deals with follow-up assessments of key acquisition and investment projects. The Audit Committee also monitors sustainability reporting and its auditing as part of its supervision of accounting and auditing. For additional information on organization and responsibilities in connection with the management of opportunities and risks, see Opportunities and Risks.

As part of the development of the corporate strategy communicated in September 2024, the Board of Executive Directors identified the transformation of the BASF Group toward a more sustainable portfolio as a strategic lever to enable the green transformation of BASF’s customers as their preferred chemical company. The Strategy Committee of the Supervisory Board was closely involved in developing this strategy and in the decision-making process. In 2025, the Supervisory Board as a whole was regularly informed of the status of implementation.

Sustainability topics are discussed regularly and managed collectively by the Board of Executive Directors. When making its decisions, the Board of Executive Directors continuously considers the results and recommendations from sustainability evaluations of business processes. It makes decisions with strategic relevance for the Group and monitors the implementation of strategic plans and their target achievement. The Supervisory Board is regularly briefed by the Board of Executive Directors on the development of individual sustainability topics, on sustainability targets and the status of target achievement.

If potential negative impacts are identified, for example, in planned investments, these are presented transparently in the internal decision-making process together with possible mitigation measures. In the business year under review, the Board of Executive Directors therefore again took appropriate and careful account of compromises developed in connection with the impacts, risks and opportunities of significant transactions and the risk management process, and discussed these compromises with the Supervisory Board.

Pursuant to the Statutes of the company and the Rules of Procedure of the Supervisory Board, investment, acquisition and divestiture decisions of the Board of Executive Directors, the commencement of new business areas and the discontinuation of existing ones require the consent of the Supervisory Board insofar as they are of material significance for the Group as a whole. The Supervisory Board is thus always involved comprehensively and at an early stage in the aforementioned evaluation of sustainability criteria in connection with strategic decisions of the Board of Executive Directors.

In order to achieve the sustainability targets and implement the measures contributing to them, appropriate organizational structures have been put into place: Together with specialists from operating divisions and service units, the various Corporate Center units are responsible for integrating the sustainability targets into decision-making processes as well as for corresponding management and reporting. The Corporate Environmental Protection, Health, Safety & Quality unit, which reports to the Industrial Relations Director, and thus to a member of the Board of Executive Directors, develops Group-wide requirements and guidelines for collecting emissions and energy data, for energy management and for occupational safety and health. The unit conducts regular audits to monitor the implementation of and compliance with internal and legal requirements by the BASF sites and Group companies. In her role as Chief Compliance Officer (CCO), the head of the Legal and Compliance organization manages the development and implementation of the compliance management system and reports directly to the Chairman of the Board of Executive Directors. She is supported in this by compliance officers worldwide. The Corporate Sustainability unit is responsible for the global steering of the sustainability portfolio, CO₂ management and the circular economy concept, as well as the development of appropriate levers for achieving targets. The Global Procurement unit, together with Corporate Sustainability, is responsible for purchasing processes and procurement requirements with regard to our raw materials-related targets. Global Procurement reports to the Chief Financial Officer. Once a year, the Board of Executive Directors reports in detail to the Supervisory Board on the sustainability targets and the status of target achievement. Group-wide CO₂ emissions (Scope 1 and Scope 2) have also been anchored in the BASF Group’s steering and compensation systems as the most important nonfinancial key performance indicators since 2020 (see Compensation of the Board of Executive Directors and Supervisory Board).

Information of the Board of Executive Directors and the Supervisory Board on sustainability aspects

The Board of Executive Directors and Supervisory Board are regularly briefed on sustainability aspects, including the process of the double materiality assessment and its findings. Corporate Finance provides the Board of Executive Directors twice a year with information on the aggregated opportunity/risk exposure of the BASF Group. New individual risks with an impact of €10 million or more on earnings, as well as risks with significant impacts on the sustainability targets and reputation of BASF must be reported directly to the responsible member of the Board of Executive Directors and the Chief Financial Officer. The Audit Committee is informed annually about short-term operational opportunities and risks as well as the risk management system and its further development, and reports on these matters to the entire Supervisory Board. The Corporate Development unit addresses strategic opportunities and risks annually to the Board of Executive Directors and Supervisory Board. Furthermore, the Board of Executive Directors reports to the Supervisory Board once a year on the achievement of the sustainability targets and the effectiveness of the strategies, measures and parameters decided upon.

The Corporate Audit unit is responsible for regularly auditing the effectiveness and appropriateness of the risk management system, the internal control system and the compliance management system. It reports to the Audit Committee on these matters each year. The Audit Committee addresses the effectiveness and appropriateness of these systems as part of its monitoring activities.

The Board of Executive Directors and the Supervisory Board are regularly informed about the implementation of due diligence: At the beginning of each business year, the CCO and the head of the Corporate Compliance unit report in detail to the Board of Executive Directors on compliance, including human rights issues, as well as on initiatives and the organizational development of Corporate Compliance. In addition, the head of the Corporate Compliance unit reports to the Audit Committee twice a year. The Corporate Center unit Corporate Environmental Protection, Health, Safety & Quality reports to the Board of Executive Directors at the beginning of each business year on the Responsible Care audits conducted in the previous year, as well as on the audit planning for the current year. Once a year, the Chief Financial Officer reports to the Audit Committee on the Responsible Care audits conducted in the areas of environmental protection, health and safety in the previous business year, as well as on the audit planning for the current year.

The Board of Executive Directors and Supervisory Board dealt with the following material impacts, risks and opportunities of BASF during the reporting period:

For more details on information processes, see Opportunities and Risks.

Competence of the Board of Executive Directors and Supervisory Board in monitoring sustainability aspects

Sustainable and responsible behavior is firmly enshrined in BASF’s corporate purpose, strategy, objectives and business operations. For instance, BASF’s innovations, products and technologies help to use natural resources more efficiently, meet the demand for food, enable climate-friendly mobility, reduce emissions and waste, or increase the efficiency of renewable energy. At the same time, BASF causes CO₂ emissions, uses water and sources raw materials from suppliers, which may involve a potential risk of violating environmental or labor standards. Sustainability thus represents a material topic that cuts across operating divisions and segments – and is dealt with by each member of the Board of Executive Directors within their respective area of divisional responsibility. Therefore, sustainability-related expertise, particularly in relation to sustainability topics that are of material importance to BASF, is broadly anchored within the Board of Executive Directors.

The Board of Executive Directors possesses in-depth knowledge on the material topics of climate protection and energy as well as resource use and circular economy: Dr. Markus Kamieth, Michael Heinz, Dr. Stephan Kothrade and Dr. Katja Scharpwinkel were directly involved in a project that focused on the provision of renewable energy, avoiding and managing CO₂ and safeguarding access to renewable raw materials. On account of his former position as a member of the Executive Board of Wintershall Holding GmbH and his current role on the Board of Harbour Energy plc, Dr. Dirk Elvermann possesses in-depth expertise in the energy sector. As Chief Financial Officer, he also deals intensively with sustainability reporting in accordance with CSRD requirements and is familiar with sustainable finance. On account of his many years of experience as the Site Director of the Nanjing Verbund site, Dr. Stephan Kothrade is familiar with climate-related topics at Verbund sites, as well as with the material sustainability topics of air and water pollution. Based on his career in the Catalysts division, Anup Kothari holds expertise in air pollution in addition to battery recycling and the responsible sourcing of raw materials. Thanks to Dr. Markus Kamieth, Dr. Dirk Elvermann, Michael Heinz and Industrial Relations Director Dr. Katja Scharpwinkel, the Board of Executive Directors has broad knowledge of health and safety at its disposal, both in relation to the company’s own workforce and the workers in the value chain, as well as the prevention of child and forced labor. By virtue of their many years of leadership experience within BASF, all members of the Board of Executive Directors are fully conversant with corporate governance, culture and policy, in particular in relation to the protection of whistleblowers and the prevention of corruption and bribery.

The Supervisory Board as a whole possesses a broad spectrum of sustainability-related expertise. Dr. Kurt Bock and Prof. Dr. Stefan Asenkerschbaumer have in-depth knowledge of corporate governance and corporate policy thanks to their decades of management experience. Thanks to his research activities in the field of organic chemistry, Prof. Dr. Thomas Carell is fully versed in the topic of substances of concern and substances of very high concern. Due to his former role in the chemical industry, Liming Chen possesses expertise in the areas of air and water pollution. On account of her previous position as chief financial officer of a publicly listed international company based in the EU, the Chairwoman of the Audit Committee, Alessandra Genco, is fully conversant with sustainability reporting and the CSRD requirements. She also boasts expertise in circular economy and recycling processes. In terms of the monitoring of sustainability aspects, Tamara Weinert contributes relevant expertise from her former management positions in the energy sector, which is important for BASF, and her operational and strategic management experience in the area of water withdrawals and consumption and in circular solutions. As part of their respective activities, all shareholder representatives on the Supervisory Board regularly deal with climate protection matters. Sinischa Horvat, Natalie Mühlenfeld and Michael Vassiliadis possess broad expertise in the field of health and safety, both in relation to the company’s own workforce and workers in the value chain. As part of their trade union and works council activities, all employee representatives on the Supervisory Board have been dealing intensively with the topics of adequate wages and secure employment for many years. In-depth expertise on the topic of training and skills development is available among both the shareholder representatives and employee representatives. Where necessary, the members of the Supervisory Board also have the option of consulting external experts on specific topics.