BASF : in Greater China 2023

BASF in Greater China

Report 2023

Cover photo:

Researchers are joining forces to develop cutting-edge technologies in efficient heating, waste plastic recovery, and CO2 utilization for a more sustainable future.

On this page:

ecovio® is a high-quality, certified compostable biopolymer for which BASF established compounding capacities for the Asian markets from mid-2023.

Index

Index

About this Report																					3
BASF Group 2023 at a Glance													4
Welcome Letter from the President												5
The BASF Group																	6
BASF in Asia Pacific														14
BASF in Greater China												16
Business Development										18
Innovation											24
Supplier Management								26
Environmental Protection, Health and Safety					28
Employees and Society				36
Further Information			43

About this Report

The "BASF in Greater China" Report is published annually as a concise document about the performance of our activities across the three dimensions of sustainability - economy, environment and society - in Greater China. The reporting period for this publication is the financial year 2023. This report also carries an overview of the BASF Group along with its financial performance, prepared in accordance with the requirements of the International Financial Reporting Standards (IFRS), and, where applicable, the German Commercial Code as well as the German Accounting Standards (GAS). The emissions, waste, energy and water use of consolidated joint operations are included pro rata, based on our stake. The employee numbers refer to employees within the BASF Group scope of consolidation as of December 31, 2023.

In 2023, BASF completed the expansion of Innovation Campus Shanghai with two new R&D buildings, bolstering innovation and collaboration with customers in China and Asia Pacific.

BASF in Greater China Report 2023

3

BASF Group 2023 at a Glance

BASF Group

2023 - At a glance

Sales

€68.9 billion

(2022: €87.3 billion)

Greenhouse gas emissions

(million metric tons of CO2 equivalents)

40.1
	21.9	18.4
		16.9
1990	2018	2022	2023

EBIT before special items

€3.8 billion

(2022: €6.9 billion)

EBITDA before special items

€7.7 billion

(2022: €10.8 billion)

Capital expenditures (capex)

€5.2 billion

(2022: €4.1 billion)

ROCE

4.5%

(2022: 10.0%)

Free cash flow

€2.7 billion

(2022: €3.3 billion)

Employees at year-end

111,991

(2022: 111,481)

Research and development expenses Personnel expenses

€2.1 billion	€11.0 billion
(2022: €2.3 billion)	(2022: €11.4 billion)

Segment data

Chemicals						Million €
Sales	2023	10,369
	2022	14,895
EBIT before special items	2023	361
	2022	1,956
Materials						Million €
Sales	2023	14,149
	2022	18,443
EBIT before special items	2023	826
	2022	1,840
Industrial Solutions						Million €
Sales	2023	8,010
	2022	9,992
EBIT before special items	2023	625
	2022	1,091

Surface Technologies			Million €
Sales	2023	16,204
				2022	21,283
EBIT before special items	2023	938
				2022	902
Nutrition & Care			Million €
Sales	2023	6,858
				2022	8,066
EBIT before special items	2023	107
				2022	618
Agricultural Solutions			Million €
Sales	2023	10,092
				2022	10,280
EBIT before special items	2023	1,563
				2022	1,220

4	BASF in Greater China Report 2023

Welcome

Welcome Letter

from the President

At BASF, we harness our strengths to perform well in Greater China, even under pressure. The year 2023 is marked by a sluggishly recovering world economy, a slowdown in trade and investment, and rising geopolitical tensions. Despite these challenges, the BASF Greater China team showed remarkable resilience and dedication, maintaining safety performance, timely deliveries, and business continuity at all times.

For the full year 2023, we posted sales of approximately €9.4 billion to our customers in Greater China. Our actions and goals point to the same direction: We are taking a firm stance to reinforce our position in Greater China, the largest chemical market in the world. We are also looking beyond the present by expanding our local production footprint, strengthening R&D capabilities, and spearheading sustainability efforts in China.

Continuously invest in the Chinese market

Our strategy is to produce where our customers are and where the market growth is, so we keep fortifying our market position in Greater China with our continuous investments. One example is the construction of our new Verbund site in Zhanjiang, which will be BASF's largest single investment with a total of around €10 billion. Following the startup of the engineering plastics plant in 2022, we announced the inauguration of the thermoplastic polyurethanes (TPU) plant in January 2024. This TPU plant is BASF's largest single TPU production line globally, catering to the soaring demand in Industrial, eMobility and new energy markets.

We want to stay close to our customers and develop our value chain accordingly. One way to achieve this is to forge strong joint ventures with local business allies. Together with our partner Sinopec, we inaugurated the expanded downstream chemical plants at the Nanjing Verbund site in November 2023. The expansion will increase the production of high-quality chemical intermediates. We also modified or expanded several production sites nationwide, especially in the Surface Technologies, Nutrition & Care, and Materials segments, to better serve the evolving needs of our customers in China.

Drive innovations for a sustainable future

For BASF, innovation is our key differentiator; we lead by advancing our local R&D capabilities. In June 2023, we inaugurated the expansion of the Innovation Campus Shanghai. From this nexus of collaborations with BASF's customers and partners in China and across Asia Pacific, we can expect more inspiring co-creations to come.

With leading customers in China, we keep innovating products and solutions that contribute to sustainable development and circular economy. In the long term, we aim to boost sales and earnings with new and improved products - especially with products that make a positive environmental impact along the value chain.

Transform towards climate neutrality

BASF has set itself the goals to achieve net zero carbon emissions by 2050. In China, we are making steady progress towards this goal.

We are shifting our energy supply from fossil fuels to more and more renewable energy sources through a "make and buy" approach. We have also partnered with Mingyang to operate an offshore wind farm in South China, which will power renewable electricity to the Zhanjiang Verbund site as planned.

We make every endeavor to enlarge our portfolio of low-carbon products. In 2023, several plants in China obtained ISCC PLUS certifications, demonstrating BASF's commitment to sustainable development.

We strive to be a responsible corporate citizen. We joined hands with NGOs and business partners to promote sustainability topics. Our staff volunteered for the annual Clean-up activities and our Kids' Lab program continued to spark wonder among kids nationwide. We also hosted events with the Zhanjiang Mangroves and Wetlands Conservation Foundation to raise ecological awareness among the public.

Progress through teamwork

Our employees are key to BASF's success in China. We support our team members to develop their professional and personal skills, helping them thrive in every phase of their career journey. I am particularly pleased to share that BASF has been recognized as the Top Employer in Greater China for the 14th consecutive year. I want to express my gratitude to all our employees in Greater China for their contribution to our company's success.

I have faith that we will overcome the current challenges and continue to grasp growth opportunities in China. We have a solid plan in place and more importantly, we have a team who possesses resilience and wisdom to bring the plan to fruition. Together with our stakeholders, I look forward to making meaningful impact for a sustainable future in Greater China!

Dr. Jeffrey Lou

President and Chairman Greater China, BASF

BASF in Greater China Report 2023

5

The BASF Group

The BASF Group

At BASF, we create chemistry for a sustainable future. We combine economic success with environmental protection and social responsibility. Around 112,000 employees contribute to the BASF Group's success worldwide. Our business comprises the Chemicals, Materials, Industrial Solutions, Surface Technologies, Nutrition & Care and Agricultural Solutions segments.

At a glance

111,991	234
Employees around the world	Production sites worldwide

• Six segments with eleven operating divisions
• Verbund structure ensures efficient and reliable production
• High-performanceorganization for greater customer proximity, increased competitiveness and profitable growth
• Over 78,000 customers1 are at the core of our strategy
• More than 70,000 Tier 1 suppliers2

Sites and Verbund

As one of the world's largest chemical companies, BASF is present in 93 countries. We operate 234 production sites worldwide. We laid the foundation for the Verbund concept in Ludwigshafen, Germany, in 1865 - and it remains one of our key strengths to this day. Intelligently linking and steering our Verbund plants creates efficient value chains - from basic chemicals to high value-added solutions. The Verbund enables us to manage our production in a resource­ efficient, carbon-optimized and reliable way. By-products from one facility are used as feedstocks elsewhere, for example. This saves raw materials and energy, avoids emissions, lowers logistics costs and leverages synergies.

In addition to Ludwigshafen, Germany, BASF operates five other Verbund sites in Antwerp, Belgium; Freeport, Texas; Geismar, Louisiana; Kuantan, Malaysia; and Nanjing, China. Another Verbund site is being built in Zhanjiang in the southern Chinese province of Guangdong. Following the startup of the first plant producing engineering plastics in 2022, the second plant for the production of thermoplastic polyurethanes came on stream in 2023 as planned and announced its inauguration in January 2024.

Organization of the BASF Group

We steer our six segments along our value chains to address the needs of our customers with differentiated solutions and business strategies.

• Chemicals: The segment supplies BASF's other segments and customers with basic chemicals and intermediates.
• Materials: The segment offers advanced materials and their precursors for the plastics and plastics processing industries.
• Industrial Solutions: The segment develops and markets ingredients and additives for industrial applications.
• Surface Technologies: The segment provides chemical solutions for surfaces and automotive OEM coatings, as well as battery materials and catalysts.
• Nutrition & Care: The segment produces ingredients and solutions for consumer applications such as human and animal nutrition, cleaning agents and personal care.
• Agricultural Solutions: The segment is an integrated solutions provider of seeds, crop protection and digital solutions for the agricultural sector.

This segment structure enables us to steer our businesses according to market-specific requirements and the competitive environment. We provide a high level of transparency around the results of our segments and show the importance of the Verbund and value chains to our business success. The operating divisions, the service units, the regions, research and development and the corporate center are the cornerstones of the BASF organization. This organizational structure lays the foundation for customer proximity, competitiveness and profitable growth. BASF aims to differentiate its businesses from their competitors to enable BASF to perform even more strongly in an increasingly competitive market environment.

The divisions bear strategic and operational responsibility and are organized according to sectors or products. They manage the 49 global and regional business units and develop strategies for 70 strategic business units.

Five service units provide competitive services for the operating divisions and sites: Global Engineering Services, Global Digital Services, Global Procurement, European Site & Verbund Management and Global Business Services (finance and controlling, human resources, safety, intellectual property, communications, procurement, supply chain and in-house consulting services).

BASF's regional and national companies represent the Group locally and support the growth of the operating divisions with local proximity to customers. For financial reporting purposes, we organize the regional companies into four regions: Europe; North America; Asia Pacific; and South America, Africa and Middle East.

Our specific research and development units are integrated into the divisions, and activities with broad relevance for our businesses are

1. The number of customers refers to all external companies (sold-to parties) that had contracts with the BASF Group in the business year concerned under which sales were generated.
2. BASF considers all direct suppliers of the BASF Group in the business year concerned as Tier 1 suppliers. These are suppliers that provide us with raw materials, investment goods, consumables and services. Suppliers can be natural persons, companies or legal persons under public law.

6	BASF in Greater China Report 2023

The BASF Group

bundled in a research division. This division is globally positioned with research centers in Europe, North America and Asia Pacific. With this setup, we are focusing our research activities even more strongly on our customers and their needs.

The Corporate Center supports the Board of Executive Directors in steering the company as a whole. This steering includes central tasks from the following areas: strategy, finance and controlling, law, compliance and insurance, tax, environmental protection, health, safety and quality, human resources, communications, investor relations, corporate audit and the Net Zero Accelerator unit.

Procurement and Sales Markets

BASF supplies products and services to over 78,000 customers1 from various sectors in almost every country in the world. Our customer portfolio ranges from major global customers and small and medium-sized enterprises to end consumers.

We work with over 70,000 Tier 1 suppliers2 worldwide. They supply us with important raw materials, chemicals, investment goods and consumables, and perform a range of services. Important raw materials (based on volume) include naphtha, liquid gas, natural gas, benzene and caustic soda.

BASF sales by industry 2023

Direct customers

>20%	Chemicals and plastics | Transportation (respectively)
10%-20%	Agriculture | Consumer goods (respectively)
	Construction | Electronics | Energy and resources | Health and

<10%	nutrition (respectively)

Business and Competitive Environment

BASF's global presence means that it operates in the context of various local, regional and global developments. These include:

• Global economic and political environment
• Legal and political requirements
• International trade agreements
• Industry standards
• Environmental agreements (such as the E.U. Emissions Trading System)
• Social aspects (such as the U.N. Universal Declaration of Human Rights)

BASF holds one of the top three market positions in around 80% of the business areas in which it is active. Our most important global competitors include Arkema, Bayer, Celanese, Clariant, Corteva, Covestro, Dow, DSM-Firmenich, Evonik, Huntsman, SABIC, Sinopec, Solvay, Syngenta, Wanhua and many hundreds of local and regional competitors. We expect competitors from Asia and the Middle East in particular to continue to grow in significance in the years ahead.

Corporate Legal Structure

As the publicly listed parent company of the BASF Group, BASF SE takes a central position: Directly or indirectly, it holds the shares in the companies belonging to the BASF Group and is also one of the largest operating companies. In the BASF Group Consolidated Financial Statements, 260 companies including BASF SE are fully consolidated. We consolidate nine joint operations on a proportional basis and account for 21 companies using the equity method.

For more information on the companies belonging to the BASF Group, see basf.com/en/corporategovernance

Rethinking energy supply

Electricity from renewable sources is a key component for BASF on the path to climate neutrality. To ensure that we can meet our growing demand in the future, we are gradually converting our supply contracts to green electricity and investing in our own plants. In 2023, we successfully advanced our plan for a power supply from renewable sources.

BASF in Greater China Report 2023

7

The BASF Group

Our Strategy

Chemistry is our passion. We make use of this passion for our customers: We want to offer them the best possible solutions and help them achieve their sustainability goals. With our products and technologies, our innovative and entrepreneurial spirit and the power of our Verbund integration, we want to grow profitably and, at the same time, create value for society and the environment. This is our goal, which is embedded in our corporate purpose: We create chemistry for a sustainable future.

Humankind is facing enormous challenges in order to preserve a world worth living in for future generations. The climate is changing, natural resources are becoming scarcer, pressure on ecosystems is increasing and our growing world population needs to be fed. More and more urgently than ever, solutions are needed for a sustainable future. Chemistry plays a key role here. In almost all areas of life, it can pave the way to greater sustainability and accelerate the transformation needed to achieve this. Our innovative products, solutions and technologies help to improve quality of life and protect the environment as well as the climate. We achieve this by using raw materials more efficiently, reducing waste and enabling the production of healthy and affordable food as well as climate-smart mobility.

At the same time, BASF is also undergoing profound changes. We are transforming our company and breaking new ground to increase our profitability and achieve climate neutrality. We are facing up to the challenge of making this change socially just. This involves managing long-term policy decisions like the European Green Deal, overcoming the consequences of current geopolitical conflicts and driving forward digitalization. Concurrently, these challenges also open up numerous opportunities for new business areas and innovative products. All of

this requires a clear vision, responsible action as well as a high degree of creativity and flexibility.

We want to grow profitably and sustainably. To this end, we have set ourselves ambitious targets and defined concrete measures to achieve them: To increase our profitability, we are strengthening our competitiveness with our cost savings program focusing on Europe and we are adapting our Verbund structures in Ludwigshafen, Germany, to ensure the site remains future-proof. We are investing in growth markets, particularly in Asia, with China as the largest and most important growth driver of global chemical production. Further- more, we are undergoing a fundamental transformation in the way we steer our company. As part of our Differentiated Steering concept, we are implementing new financial steering indicators tailored to each business. Our operating divisions are also continuing to adapt their specific business models and processes - supported by customized process structures, IT systems and governance frameworks.

To further embed sustainability in our business activities, we are driving innovations for a sustainable future, focusing our portfolio on growth areas and developing products with a lower carbon footprint. We are pioneers in climate-neutral production. This means we are gradually converting our energy supply from fossil fuels to renewable sources, developing new, pioneering emission-free and low-emission production processes for our products as well as strengthening the circular economy through the use of alternative raw materials and new recycling technologies.

The success of these measures depends primarily on the ideas and commitment of our employees. This is why we want to create an environment in which they can thrive and contribute to BASF's long- term success. Moreover, the diverse potential of digitalization used in our processes and business models further contributes to the successful implementation of these measures.

Our transformation along the value chain

Supply chain

Energy

Renewable energy, low-emission hydrogen, combined heat and power generation

Raw materials

Renewable and recycled raw materials, raw materials based on the use of CO2

Infrastructure

Network expansion and infrastructure for the transportation of hydrogen and CO2

Suppliers

Sustainability evaluations, Supplier CO2 Management Program

Production

Customer-focused production

Minimized transportation routes

Optimized Verbund structures

Efficient value chains

Digitalization and automation

Efficient processes

Operational excellence

Energy and resource- efficient processes

Emission-free steam generation

Electrified processes, energy recovery

Pioneering technologies

Emission-free and low-emission processes

Key technologies: batteries, polymers, biotechnology

Circular economy

New material cycles and recycling technologies

Products

Solutions for a sustainable future

Low-emission, innovative products (pioneers, contributors)

Climate-smart mobility; healthy, affordable food; efficient construction

Business models

Digitalized and circular approaches

Services

Transparency (product carbon footprint, corporate carbon footprint), take-back systems

8	BASF in Greater China Report 2023

Our Strategic Action Areas

BASF's strategic direction is based on a comprehensive analysis of our markets, competitors and the economic environment. We continuously monitor global trends and short-term developments and anticipate the resulting opportunities and risks. In doing so, we keep a close eye on the demands of our customers and the transformation of our company. The following six strategic action areas enable us to strengthen our leading position in a competitive environment.

Our six strategic action areas

Innovation, sustainability, production, digitalization, portfolio and employees

Innovation is the bedrock and driver of our success. BASF is a leader in the chemical industry with around 10,000 employees in research and development and R&D spending of around €2.1 billion in 2023. We want to further strengthen this position by driving forward our research activities, especially in agriculture, battery materials, polymer technologies and catalytic and biotechnological methods.

We see sustainability as an integral part of our strategy as well as our targets, steering processes and business models. Our approach covers the entire value chain - from the responsible procurement of our raw materials and safety and resource efficiency in production to sustainable solutions for our customers. We are focusing our product portfolio even more strongly on resource efficiency, climate change and energy as well as circular economy. That is why we have updated our Sustainable Solution Steering (TripleS) methodology for steering the product portfolio based on sustainability criteria.

For more information on TripleS see basf.com/en/sustainable-solution-steering

Our core business is the production and processing of chemicals. Our strength here lies in the Verbund and its integrated value chains. It opens up numerous synergies and advantages to us, for example in the development and application of new technologies. We are therefore continuing to invest in our Verbund structure. At the same time, we are strengthening our presence in growth regions in order to produce locally for the local markets and thus close to our customers.

We want to leverage the diverse growth potential of digitalization and seize the associated opportunities to the benefit of our custo- mers. To achieve this, we promote digital skills among our employees, cooperate with partners and make digital technologies and ways of working an integral part of our business.

Investments, acquisitions and divestitures play a key role in stregth- ening our portfolio. Following major acquisitions in recent years, we plan to further develop our portfolio through smaller, bolt-on acquisitions in the future. We are steering our portfolio toward innovation-driven growth areas.

Our employees are key to BASF's success. That is why we believe that it is important to have an inspiring working environment that

The BASF Group

fosters and develops employees' individual talents and enables them and their teams to perform at their best.

Our Values and Global Standards

As an international chemical company, we operate in markets and countries with different requirements and conditions. We always follow our corporate values and standards in order to act responsibly and secure our license to operate. By living these values every day, we ensure a culture of respect for our customers, partners and employees.

Together with our Code of Conduct and our global standards, our CORE values lay the foundation for responsible conduct and trust-based relationships with our stakeholders. They define how we want to work together:

• C - creative: We make great products and solutions for our customers. This is why we embrace bold ideas and give them space to grow. We act with optimism and inspire one another.
• O - open: We value diversity, in people, opinions and experience. This is why we foster feedback based on honesty, respect and mutual trust. We learn from setbacks.
• R - responsible: We value the health and safety of people above all else. We make sustainability part of every decision. We are committed to strict compliance and environmental standards.
• E - entrepreneurial: We focus on our customers, as individuals and as a company. We seize opportunities and think ahead. We take ownership and embrace personal accountability.

Our standards are based on, and in some cases, exceed existing laws and regulations and take internationally recognized principles into account. We respect and promote:

• The Universal Declaration of Human Rights and the two U.N. Human Rights Covenants
• The 10 principles of the U.N. Global Compact
• The core labor standards of the ILO and the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy
• The OECD Guidelines for Multinational Enterprises
• The Responsible Care® Global Charter
• The German Corporate Governance Code

The main guidelines are primarily summarized in our Group regulations on compliance, human rights, labor and social standards and in the Supplier Code of Conduct. We want to ensure that we act in line with the applicable laws and uphold our responsibility to the environment and society with our comprehensive management and monitoring systems.

See basf.com/humanrights for more information on the Policy Statement on Human Rights and

a comprehensive­report on the implementation of due diligence in accordance with the requirements of the National Action Plan developed by the German government, and in accordance with the

U.N. Guiding Principles on Business and Human Rights

For more information on the Human Rights Advisory Council, see basf.com/human-rights-council For more information on labor and social standards, see basf.com/labor_social_standards

BASF in Greater China Report 2023

9

The BASF Group

Our Targets and Target Achievement 2023

Our objective is profitable growth with the following targets up to and including 2023: We want to grow sales volumes faster than global chemical production, further increase our profitability, achieve a return on capital employed (ROCE) considerably above the cost of capital percentage and increase the dividend per share every year based on a strong free cash flow or at least maintain it at prior-year level.

In addition, we have set ourselves broad sustainability targets. We want to considerably reduce our CO2 emissions in the coming years. In addition to the targets for reducing our emissions from production (Scope 1) and the purchase of energy (Scope 2),1 we set ourselves a new target for our purchase of raw materials (Scope 3.1)2 in 2023. We have also added Scope 3.1 emissions to our net-zero target for greenhouse gas emissions by 2050.

We want to further improve safety in production and since 2023 we have been reporting according to a new system that focuses on high-severitywork-related accidents and incidents.

We aim to increase the number of women in leadership positions and create a working environment in which our employees feel that they can thrive and perform at their best.

The objective of these targets is to grow profitably, and at the same time, contribute to the United Nations' Sustainable Development Goals (SDGs). We are focusing here on issues that we as a company can influence: especially SDG 2 (Zero hunger), SDG 5 (Gender equa- lity), SDG 6 (Clean water and sanitation), SDG 7 (Affordable and clean energy), SDG 8 (Decent work and economic growth), SDG 12 (Responsible consumption and production) and

SDG 13 (Climate action).

Profitable	growth		2023
			target
	2023	2023	>1.7%
	target
	status
2023	>9%	-8.4%
status	SDG		SDG
4.5%

Most important key performance indicator

Achieve a return on capital employed

Grow sales volumes faster

(ROCE) considerably above the cost of ca-

than global chemical production

pital percentage every year

every year

2023

2023

target

2023

2023

3%-5%

status

target

status

€3.40

>€3.40

-28022.7%

status

SDG

SDG

Increase EBITDA before special items by

Increase the dividend per share

3% to 5% per year

every year based on a

strong free cash flow

Effective climate protection

2018

2022

2023 status

2023

2023

1.61

2023 target

21.9

1.583

status

target

million

kg CO2 /

kg CO2 /

1.34

16.9

kg raw

16.4

kg raw

metric

materials

kg CO2/

million

million

materials

kg raw

tons

SDG

SDG

metric

metric

materials

tons

tons

Most important key performance indicator

Reduce our absolute CO2 emissions

Reduce our specific CO2 emissions

(Scope 1 and 2) by 25% by 2030

(scope 3.1) by 15% by 2030

(baseline: 2018) 1

(baseline: 2022) 2

10	BASF in Greater China Report 2023