BASF Report 2021 Management’s Report – Supplier Management 110 2025 target electronic ordering systems and purchasing conditions across the Good to know Group. We revised our Supplier Code of Conduct in 2021 and 90% 80% added our expectations around the procurement of conflict minerals (tin, tantalum, tungsten, their ores and gold). Around 5,900 new Share of relevant spend covered Percentage of suppliers suppliers committed to the Code of Conduct in 2021. by sustainability evaluations with improved sustainability performance upon re-evaluation BASF conducts audits and assessments to ensure that suppliers reserves comply with the applicable laws, rules and standards. BASF We acquired raw materials, goods and services for our own produc- the right to discontinue business relationships for non-adherence to tion worth approximately €43.5 billion in 2021. Of this, around 90% international principles. The same applies to failure to correct viola- Together for Sustainability (TfS) 1 was procured locally. There were no substantial changes to our tions, or for displaying patterns of non-compliance with these stan- supplier structure. dards. Our Code of Conduct expressly points out that potential BASF is a founding member of Together for Sustainability (TfS). violations of laws, rules or standards can be reported – including The initiative was established in 2011 to improve sustainability in anonymously – to our compliance hotlines. Each case is docu- the supply chain. The focus is on standardizing and simplifying What we expect from our suppliers mented and investigated, and appropriate measures are taken as supplier audits and evaluations globally. This increases trans- necessary. parency and creates synergies: Suppliers only have to complete Together with our suppliers, we want to improve sustainability in the an assessment process once. The results are then made available supply chain. Consequently, we expect our suppliers to comply with to all TfS members and are mutually recognized – saving time and the applicable laws in full and to adhere to internationally recognized Selection and evaluation of our suppliers money for both parties. Suppliers are evaluated by independent environmental, social and corporate governance (ESG) standards. experts either in on-site audits or online assessments. The latter We also expect our suppliers to make an effort to enforce these New suppliers are selected and existing suppliers are evaluated not are conducted by EcoVadis, a ratings agency specialized in sus- standards at their suppliers. In addition, we ask our suppliers to only on the basis of economic criteria, but also ESG standards. As tainability analyses. acknowledge, support and abide by our Supplier Code of Conduct such, selection, evaluation and auditing is an important part of our – or to demonstrate and ensure their commitment to the principles sustainable supply chain management. Processes and responsi- A new program on Scope 3 emissions was launched in 2021. The specified in the Code of Conduct, for example in their own code of bilities are defined in a global guideline. Due to the large number of aim is to develop a methodology for the chemical industry to conduct. suppliers, they are evaluated based on risk. We take into account calculate upstream greenhouse gas emissions in particular. TfS the materiality of the supply relationship and country and industry- members can use this data to implement and manage emissions Our global Supplier Code of Conduct is founded on internationally specific risks. We also use observations from our employees in reduction programs. recognized guidelines, such as the principles of the United Nations’ procurement and information from internal and external databases, At the end of 2021, TfS had 34 members with a combined Global Compact, the U.N. Guiding Principles on Business and such as TfS assessments. procurement spend of around €267 billion. A total of 284 audits Human Rights, the International Labor Organization (ILO) conven- and 5,817 online assessments were performed. As a TfS mem- tions and the topic areas of the Responsible Care initiative. Topics We have suppliers with a high potential sustainability risk evaluated ber, BASF itself is assessed and in 2021 was ranked among the covered by the Code of Conduct include compliance with human by third parties, either through sustainability evaluations or on-site top 1% companies worldwide in the sustainable procurement rights, the exclusion of child and forced labor, safeguarding labor audits. The list of suppliers to be assessed is updated every year. category. and social standards, antidiscrimination and anticorruption policies, Sustainability evaluations and on-site audits are mainly conducted For more information on Together for Sustainability, see tfs-initiative.com and protecting the environment. The Code of Conduct is available in according to the TfS framework. A total of 86 raw material supplier the most relevant languages for our suppliers and integrated into sites were audited on sustainability standards on our behalf in 2021. 1 “Local” means that a supplier is located in the same region (according to BASF’s definition) as the procuring company.