We Drive Sustainable Solutions
We drive sustainable solutions
Dr. Tim Balensiefer Investor Relations
Allianz Investor Day Frankfurt, June 5, 2018
1 Cautionary note regarding forward-looking statements
This presentation contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors; they involve various risks and uncertainties; and they are based on assumptions that may not prove to be accurate. Such risk factors include those discussed in the Opportunities and Risks Report from page 111 to 118 of the BASF Report 2017. BASF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements.
2 Sustainability along the value chain Our commitments
Suppliers BASF Customers
We source We produce safely We drive responsibly for people and sustainable the environment solutions
We produce efficiently
We value people and treat them with respect
3 Sustainable development UN Sustainable Development Goals and material aspects provide strategic frame
BASF material Energy Food Water Resources Responsible Products Partnering Employment aspects and and eco- production and and employ- BASF particularly climate systems solutions ability contributes to: 1 No poverty 2 No hunger 3 Good health 4 Quality education 5 Gender equality 6 Clean water and sanitation 7 Affordable and clean energy 8 Decent work and economic growth 9 Industry, innovation and infrastructure 10 Reduced inequalities 11 Sustainable cities and communities 12 Responsible consumption and production 13 Climate action 14 Life below water 15 Life on land 16 Peace and justice 17 Partnerships for the goals
Match High Medium Low
4 Sustainability along the value chain Our commitments
Suppliers BASF Customers
We source We produce safely We drive responsibly for people and sustainable the environment solutions
We produce efficiently
We value people and treat them with respect
5 We source responsibly Enhancing sustainability along the supply chain
. Joint initiative “Together for Sustainability” of leading chemical companies since 2011
. Standardized and shared supplier evaluations and audits
. Implementation of follow-up processes, development of action plans
. Sustainability assessments for 513 suppliers received from an external service provider in 2017 . 120 raw material supplier sites audited on EHS in 2017 . 2020 goal: evaluation of 70% of the relevant suppliers with regard to their sustainability performance (status 2017: 56%)
6 Sustainability along the value chain Our commitments
Suppliers BASF Customers
We source We produce safely We drive responsibly for people and sustainable the environment solutions
We produce efficiently
We value people and treat them with respect
7 Verbund – unique competitive advantage Actively managed in line with market requirements
Geismar Nanjing Antwerp Ludwigshafen
Freeport Kuantan
. Combined heat and power plants Synergies and integrated energy in and Verbund prevented logistics >€1 billion 6.5 million tons infrastructure, of cost savings minimization of per year of CO2 emissions waste in 2017
8 Waste management BASF Verbund helps to prevent and reduce waste
Waste is managed based on the following hierarchy: Global waste volume 2017 (million tons) 1. Avoid
2. Reuse Recycled or Incinerated or thermally recovered disposed of 3. Recycle 0.8 2.1 1.3 4. Energy recovery (e.g., waste-to-energy incineration)
5. Other incineration
6. Disposal such as surface or underground landfills
9 Resource efficiency Responsible use of carbon sources
. We are committed to resource efficiency and climate protection . BASF uses carbon raw materials responsibly: 82% of carbon converted to products, 17% consumed for process energy and 1 converted to CO2, 1% waste . Comparisons with European emissions trading benchmarks show that our chemical plants operate at above-average energy efficiency
. 23 million tons of CO2 emissions by BASF worldwide in 2017 compared to 10–30 million tons p.a. for one coal-fired power plant . Customers’ use of BASF’s climate protection products sold in 2017 avoided 570 million tons of CO2 equivalents (thereof 6% attributable to BASF)2 . In 2017, BASF achieved CDP leadership status once again
1 BASF carbon mass balance calculation (2017, non-audited) 2 Based on the chemical industry standard of the International Council of Chemical Associations (ICCA) and the World Business Council for Sustainable Development (WBCSD)
10 Energy efficiency Greenhouse gas emissions halved and volumes of sales products doubled since 1990
Greenhouse gas emissions . Specific greenhouse gas emissions per ton of sales product (indexed1; base 1990) declined by −75% (status 2017) since 19901
250 . 2020 goal: Reduction of specific greenhouse gas emissions per +104% ton of sales product by −40% versus 2002 (status 2017: −35.5%)1 200 . 2020 goal: Introduction of energy management system ISO 50001 150 at all relevant sites2 (status 2017: 54.3% of BASF’s primary energy demand) 100 −48%
50 −75% 0 1990 2017
1 BASF Group excluding Oil & Gas; International Financial Reporting Standards 10 and 11 since 2013; Volumes of Absolute GHG Specific GHG figures for 2012 restated; no restatement for 2011 and earlier sales products emissions emissions 2 Representing 90% of BASFʼs primary energy demand
11 Global water stewardship Strong commitment to local water management
. Further increase of water stress areas expected worldwide (climate change, population growth and economic development)
. Growing competition among water users expected (e.g., households, agriculture, industry)
. In 2017, BASF was again awarded with the top “A” leadership grade for sustainable water management from CDP
. 2025 goal: Introduction of sustainable water management at Verbund sites and sites in water stress areas2 (status 2017: 45.2%)
1 Representing 93% of BASF’s entire water abstraction
12 Process safety and occupational safety Global safety standards at all sites to minimize risk and impact of incidents
Gobal safety standards Process safety incidents (PSI)1 1 (rate ) . PSI rate: 2.0 in 2017
. 2.5 2025 goal: reduction of the worldwide PSI rate to ≤0.5
2 Lost-time injuries (LTI)1
1.5 . LTI rate: 1.4 in 2017
1 . Average LTI rate in the German chemical industry: 9.4 (in 2015)
0.5 . 2025 goal: reduction of the worldwide LTI rate to ≤0.5
0 2010 2011 2012 2013 2014 2015 2016 2017
Process safety incidents (PSI) Lost-time injuries (LTI) 1 BASF Group, per one million working hours; global alignment of reporting systems 2014
13 We create chemistry for a sustainable future Sustainability goals – overview and status 2017
Procurement 2020 goal 2017 Product stewardship 2020 goal 2017
Sustainability performance Risk assessment of products2 >99% 76.2% 70% 56% assessment of relevant suppliers
Energy & climate protection 2020 goal 2017 Employees 2021 goal 2017 Greenhouse gas emissions3 −40% −35.4% Women in leadership positions 22-24% 20.5% Introduction of ISO 50001 energy management 4 90% 54.3% Long-term goal 2017 system
Non-German senior executives 38.9% Water 2025 goal 2017 Senior executives with >80% 84.6% Sustainable water management at Verbund sites international experience 100% 45.2% and sites in water stress areas
Production 2025 goal 2017 Products & solutions 2020 goal 2017 Process safety incidents1 ≤0.5 2.0 Proportion of sales generated by “Accelerators”5 in 28% 27.3% Lost-time injury rate1 ≤0.5 1.4 product portfolio
1 Per one million working hours Annual goal 2017 2 For products >1 metric ton per year 3 Per metric ton of sales products; excl. Oil & Gas, baseline 2002 Health Performance Index >0.9 0.97 4 At all relevant sites (primary energy demand, local energy prices) 5 Products with substantial contribution to sustainability
14 Sustainability along the value chain Our commitments
Suppliers BASF Customers
We source We produce safely We drive responsibly for people and sustainable the environment solutions
We produce efficiently
We value people and treat them with respect
15 Sustainable Solution Steering® Methodology to steer our portfolio
. >60,000 product applications analyzed (€58.4 billion in sales, 97.5% of BASF’s portfolio) Substantial sustainability 27.3% contribution in the value chain . 27.3% Accelerators − strong growth in their markets − deliver margins above the average Meets basic sustainability standards on the market − represent majority of BASF’s R&D pipeline . 68.3% Performers 68.3% Specific sustainability issues . <1% Challenged products which are being actively addressed . 2020 goal: increase the share of Accelerators from 23% (2014) to 28% Significant sustainability concern, action plan in development 4.3% 0.1%
16 Innovations for a sustainable future Examples with significant contributions to sustainability
SLENTITE® high-performance Trilon M® alternative to phosphate Acronal® MB – from biomass to insulation material for dishwashing detergents dispersions
ecovio® biodegradable polymer Green Sense® resource-efficient FWC™ Four-Way Conversion solution concrete production catalyst removes particulates
17 Sustainability along the value chain Our commitments
Suppliers BASF Customers
We source We produce safely We drive responsibly for people and sustainable the environment solutions
We produce efficiently
We value people and treat them with respect
18 We drive sustainable solutions Systematic sustainability performance assessments since 1996
Advanced Eco-Efficiency Investment Sustainable IT solutions Analysis SEEBALANCE® Carbon Footprint AgBalance™ evaluation Solution Steering® for customers Value-to-Society
2017
2015
2013
2012 2011 2007
2004 Corporate 1996 Portfolio and digital solutions
Products in the value chain
19 Value-to-Society: changing the perspective Assessing and valuing how business changes the well-being of people
Traditional reporting Impact valuation / Value-to-Society
Quantified output (€, CO2e, LTI…) Valued financial and pre-financial impacts (€)
Input – raw materials Output – tCO2e Outcome – climate change Impact – costs of floods etc.
20 Impact valuation gains momentum It is not a question of if, but rather when impact valuation is implemented
Business examples Disclosure Standardization
. WBCSD Redefining Value . CDP (formerly Carbon Disclosure . Natural Capital Protocol . Impact Valuation Roundtable Project) . Social Capital Protocol . Increasing number of companies . Dow Jones Sustainability Index . Natural and Social Capital Sector is piloting in all sectors . Reporting schemes started the Guidance . First companies go public discussion . ISO 14007 and 14008
21 Value-to-Society: a comprehensive assessment Economic, social and environmental impacts in monetary terms based on a PwC model
Contributions to gross domestic product Contributions to society (value added) beyond gross domestic product
Net income Air emissions GHG Wages Human capital Amortization Water emissions Land use Taxes Health & safety Depreciation Water consumption Waste
Economic Social Environmental
Impact categories Value chain . Consistent application at corporate, project, . Corporate level: “production cycle” – supply chain, own operations, customer industries and product level . Project and product level: use phase and end-of life integrated on a case-by-case basis
22 BASF’s Value-to-Society 2016 Net positive contribution to sustainable growth in each step of the assessed value chain
Full external supply chain1 Own operations Customer industries2
Net income
Amortization
Taxes
Wages & benefits
Human capital
Health & safety
Air emissions
GHG
Land use
Waste
Water consumption Water emissions
-10 0 10 20 30 -10 0 10 20 30 -10 0 10 20 30 billion € Value contribution from BASF procurement Value contribution from BASF operations Value contribution from BASF sales
1 Indirect suppliers, direct suppliers 2 Customers in industries supplied by BASF
23 Benefits and limitations of Value-to-Society Complementary information to demonstrate relevance and interdependencies
Positioning Progress monitoring Decision making
. Communication . Over time . Risk exposures
. Reporting . Industry benchmark . Business opportunities
. Advocacy . Relevance of impacts
Required data accuracy and granularity
Required maturity level of quantification and valuation methods
24 We create chemistry for a sustainable future Sustainability is a core part of our strategy and fully integrated into our management systems
. Sustainability creates growth opportunities.
. We assess our contribution to a sustainable future along the entire value chain.
. We improve our understanding of the inter-dependency of financial and non-financial impacts.
. Our “Value-to-Society” approach is aligned with existing standards, and is pragmatic and auditable.
. We engage in relevant networks to share our learnings.
25 BASF SRI Story, November 2017 26 SLENTITE® High-performance insulation panel for construction
SLENTITE® . PU aerogel as solid panel with best in class thermal insulation . Flexible scope of design thanks to very slim panel (25–50% less than industry standard) . Construction solution for reduced energy consumption
Perspective . Strong growth potential in a market of €1.3 billion ® ® . First boards from pilot plant are being commercialized Slentite . Start of large scale production in 2021 SLENTITE
1930 1950 1990 2018 1990
27 Trilon® M Chelating agent for more sustainable detergents and cleaners
Trilon® M – alternative to phosphate for automatic dish washing . Fast growing global market demand driven by regulatory changes and consumer demand . 2015: Start-up of a new Trilon® M world-scale plant in Alabama, USA . 2016: Expansion and flexibilization of production facilities in Ludwigshafen
Compared with alternative chelating agents Trilon® M . is readily biodegradable and shows high performance . meets eco-label requirements . has better eco-toxicology profile
28 Acronal® MB From biomass to dispersion for premium paints
Biomass balance approach . First BASF binder for interior paints based on the biomass balance approach launched in 2016 . Replacing fossil raw materials with renewable feedstock at the beginning of the production process . Less greenhouse gas emissions
Premium paints
BASF Verbund production steps . Enabling interior paints that combine environmental responsibility with uncompromising premium quality Feedstock Products Renewable Fossil Allocated Conventional . 91% of interviewed professional painters in Germany see an increase in sustainability aspects in tenders
29 Epotal® and Ecovio® paper coatings From a “Challenged” product to a business opportunity
1. Identification of the “Challenged” product: Polyfluorinated substances as coatings for paper packaging (environmental concern)
2. Development of action plan: Start of a research project
3. Launch of “Accelerator” product substitution: Recyclable Epotal® and biodegradable ecovio® paper coating
30 30 Green Sense® concrete technology Contributing to sustainable construction
Green Sense® Concrete system consists of: 1. Innovative admixture products
Low 2. Concrete mix services 3. Eco-efficiency analysis
BASF’s Green Sense® . Replaces up to 78% of cement with recycled materials 1 . 45% less CO2 emissions Environmental Impact Environmental . 26% less energy needed Reference . Applied in the construction of landmark projects,
High Concrete e.g., One World Trade Center, NYC
High Total Cost of Ownership Low
1 3 31 Data based on 1 m compared to a reference mix Four-Way Conversion catalyst (FWC™)
FWC™ reduces emission of gaseous pollutants and particulates . FWC™ HC Combines a 3-way conversion catalyst with CO integrated filter on a ceramic substrate NOx
Particulates . Reduces gaseous emissions Precious metal-based catalytic coating removes N2 exhaust gases from engine emissions2
CO2
H2O . Removes particulates Filters and combusts particulates 1 Leading position: Global mobile emissions catalysts patents . Complies with emissions limits 150 Helps OEM meet EU 6c regulatory standards
100 . FWC™ introduced in 2013 Sustains BASF’s leading technology position 50
0 BASF Competitors
1 2009 – 2013 2 Hydrocarbons, carbon monoxide, nitrogen oxides
32 BASF SRI Story, November 2017 33