BASF to base investment choices on sustainability

By SHEENAGH MATTHEWS

BASF is close to concluding a three-year review of its sustainability, and the findings will influence acquisitions at the world’s largest chemical maker as well as mark changes to its current business.

Product applications that fail to meet economic, social and environmental criteria such as impact on the climate or water use will be put on an improvement plan or discontinued, Dirk Voeste, head of sustainability strategy, said in an interview at BASF’s headquarters in Ludwigshafen, Germany. 

Any potential acquisition targets will be examined for sustainability as part of the selection process.

BASF’s assessment of 50,000 product uses across five continents found that applications with about 200 million euros ($258 million) of total annual sales had a “sustainability concern”. More and more end consumers are considering sustainability when making purchase decisions, prompting BASF’s customers to request chemicals that are biodegradable, non-toxic or emission-reducing.

“We are moving to a more proactive, driving mode,” Voeste said. “It’s about our long-term business success but also offering better products for our customers for their long-term business success.”

BASF shares rose 0.3% to 77.73 euros in Frankfurt trading. The stock has lost 2% in the past six months, for a market value to 71.4 billion euros.

The chemical maker found that 22% of product applications, measured by sales, are in a top category, defined as making a substantial contribution to sustainability. A further 73% meet standard market requirements. The bottom two categories, dubbed “transitioners” and “challenged”, have 4.5% and 0.5%, respectively.

BASF’s policy echoes moves at Clariant and European chemical makers that are shifting toward additives, ingredients and materials where scrutiny among customers is on the increase. Clariant CEO Hariolf Kottmann has placed sustainability on the same standing as other key company tenets that include increasing profitability and fostering innovation. At Royal DSM, sustainability is linked to executive bonuses.

BASF has completed the sustainability assessment for 80% of product applications and expects to finish the project by the end of the year, Voeste said. Then the company will set itself targets to move more uses of its chemicals into the top category, which it calls “accelerators.”

One application that BASF identified as “challenged” is the use of polyfluorinated substances as a fat barrier for paper coating on cereal boxes, Voeste said. Persistent and bioaccumulating ingredients led to environmental concerns. So the company started a research project and found an alternative called “Epotal”, a non-toxic paper coating.

Epotal is now classified in the top sustainability category because the BASF product shows better technical performance and is recyclable. BASF hopes to come up with similar solutions for other product applications, the manager said.

“There is a clear market demand,” Voeste said. “There is quite a lot of pressure from some markets on those topics but there is also a unique chance to differentiate and grow because of these kind of challenges.”