Evaluating a company's impact (the case of BASF)

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This week’s read time: 3 minutes

You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

The insights and analyses presented in Green Digest Impact are brought to you by a partnership between Green Digest and Impaakt, a Swiss-based impact data provider. Contact Impaakt here to explore how they can assist you.

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THIS WEEK’S COMPANY

BASF

This week we dive deep into BASF’s environmental and social impact.

BASF is the largest chemical producer in the world. The company’s portfolio is diverse, covering chemicals, materials, industrial solutions, surface technologies, nutrition and care, and agricultural solutions.

Some interesting facts:

• BASF was founded in 1865 and initially focused on producing dyes. The company’s full name, “Badische Anilin- und Soda-Fabrik,” reflects its early focus on manufacturing dyes (aniline) and soda (sodium carbonate).

•  In 1913, BASF became the first company to use the Haber-Bosch process to produce synthetic ammonia on an industrial scale. This breakthrough allowed for the mass production of fertilizers, revolutionizing agriculture and helping to increase food production worldwide.

COMPANY’S IMPACT

BASF’s overall impact score

BASF has a general impact score of -2.84 (on a scale from -5 to +5). Its impact is spread across 12 UN Sustainable Development Goals (SDGs) and 12 topics, split between positive and negative analyses.

In the socio-economic sphere,

as the world’s largest chemical company, BASF significantly influences many aspects of daily life and the company’s innovations make possible many items we use daily. Its chemicals and materials are integral to a wide range of everyday products, from automotive parts and electronics to cosmetics and food packaging. In agriculture, its solutions help millions of farmers boost yields and produce billions of tonnes of crops, contributing to global food security and fostering economic growth. With over 90,000 customers across 93 countries and a workforce exceeding 111,000, BASF offers competitive salaries above the national and industry averages. However, the company has yet to achieve gender parity at any level.

Despite their advancements, BASF has faced criticism for the environmental impact of its chemicals. Certain pesticides and herbicides produced by BASF have been linked to negative effects on human health, biodiversity, water quality, and soil health. A report found that almost 25% of BASF’s active ingredients are highly hazardous, while another study revealed that around 22% of the company’s sales are generated from chemicals found to pose chronic health hazards. According to ChemSec’s SIN (substitute it now) list, BASF also produces 25 “persistent” substances (a class of compounds that have high resistance to degradation).

Environmentally,

BASF emits over 111 million tonnes of CO₂ equivalent annually, equal to the emissions of 29 coal-fired power plants for a year. The company also uses more than 69 million m³ of water annually, 42% in medium-high, high, or extremely high water-stressed areas. Additionally, it generates approximately 2.2 million tonnes of waste, while it sustainably manages 47.5% of it. It also sources over 12 million tonnes of raw materials, which require thousands of hectares of land for cultivation, thus contributing to land degradation.

_{*The impact score is current as of September 2024 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology here and the information sources here.}

ESG VS IMPACT SCORE

What is BASF’s ESG rating?

For comparison, BASF has an A rating in MSCI's ESG evaluation.

However, ESG Ratings from MSCI ESG Research are designed to measure a company’s resilience to financially material ESG risks and they provide a window into one facet of risk to financial performance. They measure how effectively companies manage ESG risks, not their impact on these factors.

SCORES BY SDG

BASF’s impact scores by SDG

Positively (and by weight), the company scores the highest in the Industry, Innovation, and Infrastructure SDG (+3.03), followed by Decent Work and Economic Growth (+0.71), and No Poverty (+2.84).

Negatively, the company scores the worst in the Good Health and Well-being SDG (-2.02), followed by Responsible Consumption and Production (-3.94), and Climate Action (-4.20).

*the analysis takes into account the weight of the SDGs

CONCLUSION

Materiality Map & Final Words

So, BASF’s key social and environmental impact lies in …

its significant role as the world’s largest chemical company, providing essential materials and solutions that impact daily life and contribute to global food security. BASF supports millions of farmers, helping to increase crop yields and ensuring the availability of food worldwide. With over 90,000 customers and 111,000 employees, the company drives economic growth and social stability across 93 countries, offering competitive wages that exceed national and industry standards.

However, BASF also grapples with serious environmental and social challenges. A substantial portion of its chemical products have been linked to negative effects on human health, biodiversity, and ecosystems, and nearly a quarter of its active ingredients are classified as highly hazardous. Environmentally, BASF is a major emitter of GHG, and the company’s significant water usage and waste generation further add to its environmental footprint.

BASF’s overall impact score of -2.84 reflects the balance between its contributions to global economic growth and productivity, alongside the serious environmental and health-related concerns arising from its operations.

If you’d like to delve deeper into BASF’s impact, you can explore it here.

Next week, we will analyze the impact of the first company to mass-produce insulin, which transformed diabetes treatment, Eli Lilly. 🟢

If you'd like to learn more about the scoring methodology, you can do so here.

Do you have a specific company you'd like us to cover? Send your suggestions to [email protected]