BASF Report 2021 Management’s Report – Opportunities and Risks 159 assess the potential impact of climate change in the coming Acquisitions, divestitures and cooperations Sustainability decades. Here, we focus on a climate protection scenario, supple- In the future, we will continue to expand and refine our portfolio Opportunities and risks that could arise from material sustainability mented by two scenarios with medium and high levels of global through acquisitions that promise above-average profitable growth, topics can only rarely be measured in specific financial terms and 1 warming. The most common potential impact is an increase in heat are innovation-driven or offer a technological differentiation and help have an impact on business activities, especially in the medium to and drought. The findings can be considered in the development of achieve a relevant market position, and make new, sustainable busi- long term. site strategies. ness models possible. We reduce potential risks in the areas of environmental protection, The availability of our infrastructure, production plants and supply The evaluation of opportunities and risks plays a significant role safety and security, health protection, product stewardship, com- chains can be negatively affected by system downtime, confiden - during the assessment of acquisition targets. A detailed analysis pliance, supplier relationships and labor and social standards by tiality breaches, or manipulation of data in critical IT systems and and quantification is conducted as part of due diligence. Examples setting ourselves globally uniform requirements. These sometimes applications. The threat environment has changed in recent years, of risks include increased staff turnover, delayed realization of syner- go beyond local legal requirements. Our globally applicable Code of as attackers have become better organized, use more sophisticated gies, or the assumption of obligations that were not precisely Conduct defines a binding framework for the activities of all BASF technology, and have far more resources available. quantifiable in advance. If our expectations in this regard are not employees, leaders and members of the Board of Executive Direc- met, risks could arise, such as the need to impair intangible assets; tors. To ensure compliance with our internal standards, we have Portfolio development through investments however, there could also be opportunities, for example, from global management systems in place and monitor their implementa- We expect growth in chemical production in emerging markets additional synergies. tion internally by means such as global surveys and audits. Expec- to remain above the global average in the years to come. This will tations of suppliers are laid down in our global Supplier Code of create opportunities that we want to exploit by expanding our local Divestitures also play a key role in the development of our portfolio. Conduct. We have suppliers with a high potential sustainability risk presence. In addition, regional value chains help mitigate risks from Risks could arise from divestitures as a result of potential warranty evaluated by third parties, either through sustainability evaluations trade conflicts and barriers that pose a challenge to global markets claims or other contractual obligations, such as long-term supply or on-site audits. The monitoring systems are complemented by and supply chains. agreements. grievance mechanisms such as our compliance hotlines. For more information on our acquisitions and divestitures, see page 41 Decisions on the type, scope and location of our investment Furthermore, ongoing climate change poses both opportunities and projects are made on the basis of established comprehensive Recruitment and long-term retention of qualified employees risks for BASF. As an energy-intensive company, climate-related assessment processes. They take into account long-term forecasts BASF anticipates growing challenges in attracting qualified employ- risks arise particularly from regulatory changes, such as in carbon for market, margin and cost development, raw material availability ees in the medium and long term due to demographic change, prices through emissions trading systems, taxes or energy legisla- as well as country, currency, sustainability and technology risks. especially in North America and Europe. As a result, there is an tion. In addition, BASF’s emissions footprint and intensity could lead Opportunities and risks arise from potential deviations in actual increased risk that job vacancies may not be filled, or only after a to a negative perception and reduced appeal among external stake- developments from our assumptions. delay. We address these risks with measures to integrate diversity, holders such as customers or investors. We counter these risks with employee and leadership development, and intensified employer our carbon management measures and by transparently disclosing Investments in more sustainable technologies represent a long-term branding. At local level, demographic management includes succes- our positions on and contributions to climate protection (such as opportunity, even though they may not be competitive or profitable sion planning, knowledge management and offerings to improve the political demands, progress in the implementation of our climate in the short term, depending on the market and the prevailing regu- balance between personal and professional life, and promote healthy strategy and how our products help to protect the environment) in latory framework. living. This increases BASF’s appeal as an employer and retains our publicly accessible sources (such as this annual report or on the For more information on our investment projects, see page 150 onward employees in the long term. BASF website) and in direct dialog with external stakeholders. For more information on individual initiatives and our targets, see page 97 onward 1 The assessment model was based on the IPCC climate change scenario SSP1-2.6, supplemented by SSP2-4.5 (medium global warming scenario) and SSP5-8.5 (high global warming scenario).