Our Strategic Levers

Under the Focus lever, we have redefined our portfolio management approach. BASF now makes a distinction between core businesses and standalone businesses, which serve specific industries and operate independently. The core businesses comprise the Chemicals, Materials, Industrial Solutions and Nutrition & Care segments, which are integrated into BASF’s value chains and Production Verbund at major sites. They generate value through efficient use of resources, operational excellence and cost efficiency. The portfolio of our core businesses ranges from basic chemicals to specialties. The standalone businesses, which have greater flexibility and operational independence, comprise the Surface Technologies segment with the Environmental Catalyst and Metal Solutions (ECMS), Battery Materials and Coatings divisions as well as the Agricultural Solutions segment.

In the coming years, we will focus on strengthening our core businesses and growing profitably in these areas – both organically as well as through value-increasing acquisitions: We see the expected consolidation of the chemicals industry as an opportunity for BASF. We want to operate our core businesses in an even more cost-efficient and leaner manner in order to secure their profitability and competitive advantage over emerging competitors, in particular from the Middle East and China.

Our standalone businesses ECMS, Battery Materials, Coatings and Agricultural Solutions compete with pure-play peers that are subject to their own market trends. To empower these businesses to respond quickly to the specific requirements of their customers, we want to further promote their entrepreneurial freedom and thus strengthen their competitive position. To that end, we are pursuing a Differentiated Steering concept with industry-specific financial steering indicators, adjusted governance structures, tailor-made processes and standalone ERP (enterprise resource planning) systems. These measures increase the businesses’ accountability and the transparency of their performance compared with competitors. We intend to make further investments in our standalone businesses in the future and will continue to actively pursue portfolio options:

• Our ECMS business was carved out in 2023. It operates in a low-growth industry but continues to deliver a strong cash contribution. We are open to a value-increasing transaction in the future.
• Our Battery Materials business operates in a rapid-growth environment characterized by high market and technology risks. We are de-risking the path forward by focusing on filling existing capacities and adapting our expansion plans. We are exploring opportunities for collaboration with partners.
• For our Coatings division, we are assessing strategic options for value creation. In February 2025, we have signed an agreement to sell our decorative paints business in Brazil.
• For the Agricultural Solutions segment, we will complete the legal separation and the introduction of a separate ERP system by 2027. By then, we also want to create the conditions for a potential IPO. In the medium term, a minority share listing is an option.

To focus more strongly on cash generation and strengthen our capital discipline, we are changing our internal steering processes for capital and resource allocation. We are moving from a largely project- based approach at BASF Group level to a strategic allocation approach for our divisions. We have developed medium-term value creation plans for the divisions based on their respective roles in the BASF portfolio. These plans are the basis for capital allocation. Within this framework, the divisions are empowered with increased autonomy to make business decisions – and with it their accountability for business success.

The strategic focus on profitable growth also means prioritizing high-growth markets. In particular, we want to expand our presence in China, India and five ASEAN countries (Indonesia, Malaysia, Singapore, Thailand and Vietnam) by strengthening local organizational structures, our production sites and our R&D activities. These seven countries will account for almost 80% of global chemical growth by 2035.

With the Accelerate lever, BASF is targeting more speed in value creation. We will streamline the way in which we collaborate and complete tasks at BASF and become faster as a result. To this end, we want to empower our business units through lean and differentiated steering, simplify our organizational structure and increase the use of artificial intelligence (AI).

The accountability of the divisions will be a central element of the BASF Group’s steering. The Board of Executive Directors will focus on topics that are important to BASF as a whole: strategy, portfolio management, capital allocation and talent development. By contrast, individual divisions will have greater ownership of specific business decisions and accountability for business success. In line with this, we will further develop the performance management system for our leaders and employees and establish a closer link between incentives and unit-specific performance.

We are making our organization simpler and leaner by sharpening role clarity, establishing flatter hierarchies and by reducing bureaucracy and internal alignment processes. Spans of control will be broadened to increase individual ownership. An important step in this direction is dissolving the regional dimension of our organizational structure. With this simplified organizational setup, we are aiming to accelerate decision-making in all areas of our company.

BASF wants to harness the potential of AI to advance productivity and accelerate innovations. We aim to gradually enable the global BASF team to utilize AI for their respective areas of work. Here, we target key functions such as sales, marketing, R&D, production, procurement and services and focus on applications with added value confirmed by fast and effective pilot projects.

The Transform lever represents shaping and successively implementing our market-oriented green transformation toward a more sustainable product portfolio. Going forward, we will intensify our focus on products with sustainability attributes where we see increasing customer demand.

We see sustainability as an integral part of our strategy as well as our targets, steering processes and business models. We remain fully committed to our climate protection targets. Our ambition goes beyond the green transformation of our own production: Our key customer industries are facing tremendous challenges in achieving their transformation targets. We therefore want to be the preferred chemical company to enable our customers’ green transformation with our broad portfolio as well as our product and process innovations.

As market developments and therefore also the speed of the green transformation vary between regions and customer industries, we are adapting our transformation approach: Rather than focusing primarily on our own corporate targets, we will prioritize a market-oriented approach in the future. By driving transformation in a more differentiated and focused way as well as in line with market growth and increasing customer demand, we are forging a new path toward profitable growth. With our market- oriented concept, we are simultaneously mitigating the investment and business risks resulting from capital-intensive new technologies and the varying transformation speed of our customer industries. We want to intensify our focus on specific opportunities for our business and increase volumes of products with sustainable attributes according to customer needs. To that end, we are prioritizing projects where we see customer demand growing or that impact our license to operate.

Over time, we will stagger further transformation projects based on these priorities. We have already procured significant amounts of renewable energy to operate our plants. Furthermore, we are currently piloting new technologies in selected value chains, using alternative raw materials and have launched products with new sustainable attributes such as a reduced or net-zero product carbon footprint (Low/ Zero Product Carbon Footprint; LowPCF/ZeroPCF). In the next phase, we will focus on ramping up the use of bio-based and recycled feedstocks in our existing plants and thus offering more products with a reduced carbon footprint and other sustainable attributes at low capital expenditure. At the same time, we will continue evaluating new business models and technologies. As markets for sustainable products grow, we want to be in a position in the medium to long term to apply and scale up the new technologies we are currently developing and in some cases already piloting. The gradual approach is also reflected in spending: Transformation-related spending is expected to be moderate from 2025 to 2028, averaging €600 million per year. We assume that most major capital expenditures for our green transformation will be made after 2030.

BASF’s integrated Verbund system offers fundamental advantages for the transformation approach of prioritizing projects based on customer demand and gradually driving them forward. This is due to the energy and resource efficiency provided by the Verbund and the numerous entry points that offer feedstock flexibility. We can be flexible and scalable in how we employ renewable and recycled feedstocks in existing plants. We therefore expect that our largest site in Ludwigshafen, Germany, with its integrated Verbund, as well as BASF as a whole, will benefit from the change and growth momentum in connection with the green transformation. In the medium to long term, our goal is to successfully develop Ludwigshafen into a leading, sustainable chemical site for Europe with an improved competitive position in the European market. To that end, we have conducted a thorough analysis of our production asset structure based on current and future market and customer demand: Selected plants and production lines are no longer delivering sufficient earnings or are at risk of losing competitiveness. However, the majority of the assets in the Ludwigshafen Verbund are competitive in their respective markets.

The Win lever is how we want to drive change in corporate culture throughout the entire company. Our “Winning Culture” is based on three cultural topics – Accountability (Own it!), Speed (Drive it!) and Improvement Mindset (Excel in it!) – that are central to BASF evolving into an even more performance- driven organization. This transformation to a “Winning Culture” is a decisive factor for us in successfully implementing our “Winning Ways” strategy.

To this end, we have developed nine actionable Winning Behaviors: They define the behavior that we expect all our employees to demonstrate and show in a concrete way how each and every individual can contribute to successful change. We want to drive a corporate culture that honors accountability, prioritizes speed over perfection and rewards the best solution over compromises.

Accountability:

• We give and take ownership over narrow supervision.
• We strive for results, not staying in the comfort zone.
• We take action on low performance, not dragging it along.

Speed:

• We prioritize speed over perfection.
• We spread motivation and inspiration, not skepticism.
• We focus, not do a bit of everything.

Improvement Mindset:

• We fight for the best solution over compromises.
• We give candid and constructive feedback, not empty phrases.
• We learn from external perspectives, not just from internal views.

Our CORE corporate values (creative, open, responsible, entrepreneurial) will remain the guide for our behavior.

Further developing our corporate culture goes hand in hand with an enhanced performance management system for leaders and employees with a closer link between incentives and unit-specific achievements.