Katja Scharpwinkel (BASF): Sustainability – Leading the change for future business success

Thank you very much again for the nice introduction. Thanks for inviting me and for having me. I'm very pleased to share with you what we believe how we can generate more value for our future, and actually how we can with the help of sustainability lead the change for future business success. I would like just to start with a little reminder: you certainly remember that the green deal was considered by Ursula von der Leyen as Europe's man on the moon moment. I wouldn't say it's a starting point because sustainability was already a huge trend, but certainly it was an additional call for action. In the meantime, not just the call for action for European member states, but reflecting the climate conference in Glasgow, it's a global topic. All the different countries, looking to China, USA, all coming up with their climate targets, ambitions, and also actions.

This call for action triggered a lot of activities in different companies, true for BASF as well. BASF is clearly committed to reach the Paris Climate Agreement. That's why early this year we communicated clear targets that we want to achieve in terms of carbon emissions. The first one is that we want to reduce our carbon emissions by 25 percent until 2030, and that we want to become climate neutral or CO2 neutral by 2050. This is considered a pretty ambitious target that actually needs a lot of innovation, creativity, and also transformation, not just of our processes. Targets are not enough; we also need clear actions. Along the value chain, there are different activities we want to drive. First, we want to source responsibly and sustainably from our suppliers, and of course there are main activities in our operations to produce safely for people, environment, and efficiently. Let me mention few key action areas. One we call 'grey to green' – we believe in the electrification of our processes, which means we have a high need for renewable energy. You might have noticed we have announcements for collaboration with Vattenfall for example in an offshore wind park, and just recently we signed a power purchase agreement with Ørsted. We also look into different technologies to operate our furnaces in the pro chemical production electrically, not anymore by fossil resources. For sourcing, we look into bio-based feedstocks which have the potential to replace fossil feedstocks as well.

But it's much more than looking into our production and making our processes carbon neutral. We also see a paradigm shift. If you look back the last decades, it was a lot about volume: chemical production grew year by year, driven by rising incomes and wealth in emerging countries. Looking forward, this is changing. There is a much higher awareness of consumers to reduce consumption and also to reduce waste. So we see this paradigm shift from volume to value, which means in future less will be more. Looking into value, we have identified three value pools where we want to participate. The first one is circular feedstocks. We all know about mechanical recycling, and we are adding one additional technology. For mixed plastic waste or old tires, which are difficult to recycle mechanically, we have developed a process of chemical recycling where through a thermochemical process we produce a feedstock for our crackers that can also replace fossil-based resources. Beyond recycled feedstocks, we also look into renewable feedstocks to replace a share of the fossil ones.

The second value pool is our material cycles. We design products or materials that help circularity, for example by adding chemicals to improve the performance of recycled materials or to enable the recycling process. The third value pool moves away from products: developing new business models, looking beyond the borders of chemistry into digital tools, digital solutions, and different services that we can link to our chemistry. Then the couple grows from resource consumption. Looking into those value pools, we see a real shift happening fast. From today and the past, where it was more about product play – innovation mainly driven by new products by advanced products – we see this moving into new business models: innovation based on the application rather than on the chemistry, combined not just with chemical know-how but with new technologies like digital tools. Over the last years and looking into the future, we see that the share of products will decrease while the share of solutions and services will increase significantly.

To manage this huge transformation, it requires innovation, new technologies, partnerships – because we need to look across usual boundaries – and strong leadership. On innovation and partnerships, I've mentioned earlier partnering for the offshore wind park collaboration. We look into many different types of partnerships. BASF has an in-house venture capital team founded 20 years ago, managing a fund size of 250 million dollars, with 15 investment professionals across the globe. These are often minority shares, joint investments with other venture capital companies. Main areas for investments include sustainability, new materials, digitalization, ag tech, and new disruptive business models. That's one source for collaboration and innovation. What is also required is leadership. We strongly believe we need strong leadership to manage this transformation. Leadership is about the how, how we work together with our teams across boundaries. This how is defined in our core values at BASF, which translate into our culture. CORE stands for Creative, Open, Responsibility, and Entrepreneurial. We believe these four core values are needed to take the team along this transformation. Our CEO quoted that leadership is the overall critical success factor – it's the duty of all managers at BASF. We all need to adjust our behaviors for the sake of BASF if we want to make it a success.

I mentioned collaboration, partnerships, and innovation – this requires creativity. Innovation requires openness, not just listening to each other but actively asking for additional inspiration and partnering with additional partners. You need to take responsibility to achieve your targets and act in an entrepreneurial way, try out things. We are convinced we will learn on our way; there will be learnings that we have to adapt and which will guide us to take next steps. To summarize: business success tomorrow means creating value for environment, society, and businesses. This is reflected in the purpose of our company: we create chemistry for a sustainable future. Chemistry is all around us – whatever you can touch – and we need to give it a start if we want to transform into a climate-neutral society. With that, I would like to finish my little impulse on how we believe we can create more value in the future through strong collaboration and leadership.