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BASF creates chemistry for a sustainable future, combining economic success with environmental protection and social responsibility. The BASF Group’s more than 115,000 employees work on contributing to the success of customers in nearly all sectors and almost every country in the world. Its portfolio is organized into five segments: Chemicals, Performance Products, Functional Materials & Solutions, Agricultural Solutions and Oil & Gas. BASF generated sales of €64.5 billion in 2017. BASF shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA) and Zurich (BAS). Further information can be found at

BASF engaged in the Embankment Project for two reasons: first, to better understand the needs for disclosure of asset managers and asset owners regarding nonfinancial value creation, and second, to contribute the company’s expertise and learnings to the development of methodologies and metrics measuring different capitals beyond financials.

As a main takeaway, BASF has seen that during the sprints, asset creators, asset managers and asset owners improved their common understanding on nonfinancial value creation. However, the Embankment Project is just one starting point in a longer journey to achieve an agreed-upon vision of integrated, long-term value creation, and related methods and metrics.

A. Why was the best practice developed?

How can BASF demonstrate and evaluate its positive contribution to society as well as its efforts to minimize negative impacts in a way that is useful and relevant to all of the company’s stakeholders? That is the question BASF wanted to answer at a time when sustainability is a crucial concern for all parts of its business as well as for its customers, investors and regulators.

Since 2013, BASF has employed a comprehensive measurement, valuation and reporting process to assess the financial and nonfinancial impacts of its business activities through the value chain. In order to truly measure the company’s value contribution to, and impact on, the world, it realized the need for a new measurement framework, which would have to assess BASF’s contribution to society as holistically and specifically as possible based on the principles of materiality, practicability and feasibility. The framework also would have to take into account the different value chains BASF is part of with purchases from and sales in nearly every industry and country. And the framework would have to identify, quantify, value and demonstrate BASF’s economic, social and environmental impacts as a whole rather than in isolation.

To address that need, the company developed the Value-to-Society approach to measuring company performance. Value-to-Society quantifies and values both the financial and nonfinancial business impacts in society in one common unit — the euro. This allows, for the first time, the materiality of these impacts to be compared across financial and nonfinancial impact categories, as well as a better understanding of their interdependencies through the value chain. That way, BASF can accurately measure the company’s real benefits and costs so that it can build on how the company contributes to the wellbeing of the global society.

B. Summary of best practice

The Value-to-Society approach assesses BASF’s relevant impacts along the entire supply chain, operations and customer industries. It indicates long-term business risks and opportunities and their potential effect on the financial bottom line. It was devised in consultation with a Big Four firm and was tested at the corporate level; for business units, projects and strategic decisions; and at the product level.

By assigning a euro valuation to the benefits and costs to society, BASF is able to construct a direct comparison of economic, social and environmental impacts, and a better understanding of their interdependencies.

The approach assumes that impacts on society are generated by the company’s own operations and enabled along the supply chain and customer industries through procurement and sales activities. A precondition for the impact measurement and monetary valuation of business activities on society is the availability of data linking business activities to quantities of impacts.

To help illustrate Value-to-Society, consider how BASF evaluates the impact of greenhouse gas (GHG) emissions in the company’s value chain. BASF starts by looking at the output of GHG emissions as part of increasing concentrations in the atmosphere and related outcomes, including shifting climate patterns, sea-level rises, increasing extreme weather events and rising mean temperatures. Next, the company looks at the societal impacts of those outcomes on the associated externalities: human health, the built environment, economic disruption, agriculture and timber, desertification and other ecosystem services.

Positive contributions vs. negative impacts

These societal impacts are reflected in the so-called valuation coefficient, which is derived from welfare economics or total cost concepts. The price for GHG of €75 in the 2017 calculations was derived by a Big Four firm from the latest studies on the societal cost of carbon.

Since BASF first introduced Value-to-Society in 2014, the results have shown that the company’s positive contribution (net income, amortization, taxes, wages and human capital) considerably exceeds the negative impacts (environment, health and safety).

Qualifications and valuation concept: Example GHGs impact pathway

Example GHGs impact pathway

C. Learnings and next steps

Based on BASF’s experiences so far, the Value-to-Society measurements increase the transparency of the company’s real value contribution, help it monitor progress over time, improve BASF’s messaging and inform its decision-making by adding a macro-societal perspective to current assessments and evaluating the impacts on society.

By comparing financial and nonfinancial effects, BASF can identify upcoming business risks and opportunities, and based on scenario modeling, can better understand interdependencies among the 12 impact factors. The learnings and insights also improve the company’s integrated thinking and contribute to its long-term business success. Above all, Value-to-Society helps BASF demonstrate how its chemistry enables sustainable growth, ensuring the company’s license to operate around the world.

BASF is currently assessing Value-to-Society applications in strategy development as well as in business steering. In addition, the company is evaluating how the metrics developed in the Embankment Project will further improve its model.