BASF Report 2021 Management’s Report – Our Sustainability Concept 47 Measuring sustainable value added Overall, the Value to Society method helps us to continually monitor be piloted by all member companies and the results will be fed back our progress. It complements existing concepts for assessing risks to the VBA for further development. We are aware that our business activities can have both positive and and business opportunities by providing a macro perspective and For more information on this method and the results of Value to Society, negative impacts on the environment and society. We aim to enables us to derive the necessary business steps. see basf.com/en/value-to-society increase our positive contributions and minimize the negative For more information on our sustainability tools, see basf.com/en/measurement-methods impacts of our business activities. To achieve this, we need to under- We are a founding member of the value balancing alliance e.V. (VBA) For more information on value balancing alliance e.V., see value-balancing.com stand how our actions and our products impact society and the and have contributed our knowledge and experience to this cross- environment. industry initiative. We support the development of an accounting and reporting standard that makes the value companies provide to Our stakeholder management We already have many years of experience in this area from evaluat- society transparent and comparable. The aim is to present the finan- ing our products and processes using methods such as Eco- cial, ecological, and social impacts of business activities on the basis Our stakeholders include customers, employees, investors, sup- ® Efficiency Analyses, the SEEbalance Socio-Eco-Efficiency Analysis, of a standardized framework. The VBA is supported by major audit- pliers, the communities surrounding our sites, and representatives our Sustainable Solution Steering portfolio analysis, BASF’s corpo- ing firms, the Organisation for Economic Co-operation and Develop- from industry, academia, politics and society. Parts of our business rate carbon footprint or the calculation of Product Carbon Footprints. ment (OECD), leading universities and other partners. Together with activities, such as the use of certain new technologies or our envi- the OECD and the Business for Inclusive Growth (B4IG) coalition, we ronmental impacts, are often viewed by stakeholders with a critical We want to holistically capture the value we contribute to society are pushing to further expand the social indicators. Here, BASF eye. We take these questions seriously, initiate dialogs and partici- along the value chain and make this transparent. However, there are leads the Impact Measurement working group together with pate in discussions. Such ongoing exchange with our stake- still no uniform, global standards for measuring and reporting on partners. Through the VBA, we are involved in the E.U.’s Platform on holders helps us to even better understand what matters to groups companies’ overall impact that cover economic, environmental and Sustainable Finance. Together with the VBA and other partners, we of society, what they expect of us and which measures we need to social aspects of business activities along the value chain. This is supported the establishment of the International Sustainability pursue in order to establish and maintain trust, build partnerships, why we developed the Value to Society method in 2013 together Standard Board (ISSB), are involved in the work of the World Eco- and increase societal acceptance for and the sustainability of our with external experts. We can use this methodological approach to nomic Forum (WEF) and are part of the G7 Impact Taskforce. Our business activities. In doing so, we want to harness potential for compare the significance of financial and sustainability-related Corporate Finance unit is also involved in the work of the European mutual value creation and strengthen societal acceptance of our impacts of our business activities on society and show their interde- Financial Reporting Advisory Group’s (EFRAG) Project Task Force on business activities. For important topics, we systematically identify pendencies. The results illustrate the positive contributions and European sustainability reporting standards. key stakeholders at an early stage to discuss critical questions negative effects, both at BASF and in our value chains. Positive fac- with them. Relevant considerations here include their topic-specific tors include taxes paid, wages, social benefits, employee training The method developed by the VBA was enhanced and refined on expertise and willingness to engage in constructive dialog. 1 and our net income. Negative contributions include environmental the basis of feedback from the scientific community and member impacts such as carbon emissions, land use and emissions to air, companies. Amendments include the addition of two social indica- We established an external, independent Stakeholder Advisory soil and water, as well as health and safety incidents. The positive tors and the calculation of downstream impacts, as well as revisions Council (SAC) in 2013 and the Human Rights Advisory Council 2 impacts of our economic activities declined in 2020, primarily due to to financial indicators, for example. This enhanced method will again (HRAC) in 2020. In the SAC, which is led by the Chairman of the the economic conditions caused by the coronavirus pandemic, Board of Executive Directors, international experts from academia which led to lower economic value added. In addition, higher water and society contribute their perspectives to discussions with BASF’s consumption and increased land use in supplier and customer Board of Executive Directors. The HRAC is an advisory body com- industries had a greater impact on the environment. prising external human rights specialists and internal experts. This helps us to critically reflect on our positions and address potential for improvement. 1 The net income of BASF’s production presented in the Value to Society is calculated using the BASF Group’s net income, adjusted for the interest result, the other financial result and noncontrolling interests. 2 Value to Society results are calculated annually following the publication of the BASF Report. Accordingly, the statements on this in the BASF Report 2021 refer to the evaluation conducted for the 2020 business year.