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As a chemical company that has been around for nearly 150 years, BASF is good at managing risks. “Risk mitigation is in our DNA at BASF,” said Dirk Voeste, vice president of sustainability strategy at BASF.
In fact, the company’s intrinsic safety culture also carried over into the broader acceptance of sustainability at first. “Those who were very careful in the beginning about sharing some of the sustainability challenges the company has faced are now very convinced of the value of being transparent,” he explained.
The Starting Point
Three years ago, BASF began a review of its product lines. The sustainable solutions steering initiative has included both direct involvement from a “top down” perspective — driven by a sustainability board chaired by a member of the board of directors — to a “middle out” perspective, with every business unit in the company investigating its own products and matching them against strict sustainability criteria.
Getting sustainability built into BASF’s core businesses didn’t happen overnight. It took buy-in from top management. Voeste is the secretary of the corporate sustainability board, which includes 12 company presidents. The corporate sustainability board took a step-by-step approach. It made an initial proposal to the board of executive directors to introduce the product portfolio sustainability review, and then went to the business units to get buy-in from the business unit managers and strategize how to make the needed changes happen.
Armed with business unit specifics and challenges, the committee then returned to the board and presented their findings. With approval for deep dives into core businesses, the committee then created its “sustainable solutions approach” — a plan that would enable them to move forward with an analysis of every product line within the company.
Sustainability plays a key role at BASF. In 2011, in an update of its strategey, the company defined a company purpose: “We create chemistry for a sustainable future.” The sustainable solution steering committee is an important element in the implementation of this strategy.
“One of the first significant steps was moving sustainability from EH&S [environmental health & safety] to the strategic planning department,” Voeste explained. BASF was able to integrate sustainability across all business units in the entire company rather than keeping it in a single department that dealt with the risks of “dangerous substances,” he said. Sustainability has even made its way into the core competencies of every employee in the company. Today, 1 out of 8 of the core competencies on every employee’s performance review is called “driving sustainable solutions.”
Evaluating BASF’s Product Portfolio
As part of the broader shift within the company to sustainability, BASF has been systematically assessing its product portfolio. The company has evaluated 80% of its product portfolio so far, which accounts for 50,000 product applications, and placed each product into one of four categories: (1) accelerators, which are sustainability all-stars that make a significant contribution to the market; (2) performers, which meet basic market standards; (3) transitioners, which are actively addressing sustainability issues; and (4) challenged, which are products that have significant sustainability concerns for which action plans are being created.
Voeste shared one success story that took a “challenged” product line and turned it into a successful “accelerator” product line. The chemicals in this line were polyfluorinated compounds (PFCs), which are grease and stain repellents used in food packaging — think microwave popcorn bags or pizza boxes — and, until recently, other products such as Scotchgard and Teflon. These chemicals bioaccumulate (build up) in humans over time, with adverse effects on health. Certain PFCs already have been phased out by the EPA, while others that meet current regulatory requirements and are still used in the food packaging industry are still on the market.
BASF’s new accelerator products, however, are staying ahead of regulations — meeting the needs of the packaging industry with products that avoid the safety concerns associated with PFCs, Voeste said. A few of the accelerator products that they’ve identified as having a significant sustainability impact on the market in the food packaging industry include: Epotal® SP-101 D, a barrier coating for food safe paper packaging made from post-consumer recycled fibers; ecovio®, a biodegradable paper coating for coffee cups; polyamide films for cheese packaging and water-based resins Joncryl FLX® for frozen food packaging. BASF engineered these products to meet market demands for reduction of weight and environmental impact by focusing on the use of renewable raw materials, capacity for recycling, and the kinds of health and safety issues presented by PFCs and similar chemicals.
The business case is solid for creating these highly sophisticated, sustainability-centered products. Accelerator products like these in BASF’s product portfolio account for $10 billion Euros, or almost 18% of the company’s total annual relevant product sales of $56 billion Euros. And to ensure that the message of each product’s sustainability benefits reaches customers, the BASF sales force is provided with a product card for each product that outlines the product’s sustainable characteristics, such as recyclability or reduction of water use in manufacturing, Voeste noted.
Voeste admits that support for sustainability within the company has taken time, and moving a “tanker ship” of 112,000 employees is no small task. But identifying business risks and sustainability risks at the core business level with business units throughout the company has allowed BASF to create market solutions that would not have happened otherwise. “The challenges opened up opportunities for us to co-create with customers,” Voeste said.
“It’s not enough to take care of the risks and drive sustainability,” he said. “We need to drive value.”