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BASF says it is embracing the circular economy. Should we be skeptical?

While critics see virtue signaling, the company heralds the adoption of a green economic opportunity

by Alex Scott
February 7, 2021 | A version of this story appeared in Volume 99, Issue 5


Photo of BASF's chairman, Martin Brudermüller.
Credit: BASF
Transforming BASF into a circular company will require an enormous effort, BASF chairman Martin Brudermüller told journalists in December during a virtual meeting.

In a world gripped by economic uncertainty and the steady tightening of targets for reducing carbon emissions, now is the perfect time to transition to a business model that combines cheaper and more sustainable chemical production.

That’s the position held by BASF, which recently disclosed plans to make this transition by producing chemicals according to the principles of the circular economy. This approach grew out of the cradle-to-cradle production systems promoted in the 1990s by environmentalist and chemistry professor Michael Braungart; those systems aim to avoid waste, reuse products, and recover resources. They contrast heavily with today’s predominantly linear approach to manufacturing of “make-take-dispose.”

Principles of the circular economy

Sustainable design: Design materials and products to avoid waste and pollution.

No waste: Keep materials and products in use.

Regeneration: Regenerate natural systems when using biobased materials.

Renewable energy: Use only renewable resources.

Nontoxic materials: Exclude hazardous materials from recycling systems.

Systems thinking: Draw inspiration from nature, where one species’ waste is always another species’ food.

Deemphasis of efficiency: Focus on benefiting the planet—through methods such as storing carbon from production processes in soil—rather than on reducing environmental harm by increasing efficiency.

Sources: Cradle to Cradle by Michael Braungart and William McDonough; Ellen MacArthur Foundation.

BASF, the world’s largest chemical maker, insists that its new strategy marks a meaningful shift in approach. The firm aims to double its sales generated from circular economy products—made of materials that can be regenerated and that minimize disposed waste—to $20.5 billion by 2030. Its total sales last year were $72.3 billion. Being both sustainable and profitable is a laudable goal, but whether BASF has the will and means to achieve it is another matter, critics say.

BASF executives acknowledge they have a long way to go before the firm is truly circular. “The path to a circular economy will require enormous efforts on our part,” BASF’s chairman, Martin Brudermüller, told journalists in December during a virtual conference on the new strategy.

The cornerstone idea of BASF’s approach is the steady substitution of fossil fuel raw materials with renewable materials and waste feedstocks, including postconsumer plastic waste. Additionally, the firm plans to be a key player in the recycling of lithium-ion battery materials for electric vehicles and the sustainable production of biomaterials.

The German company is already dabbling in the area by substituting fossil fuel–derived feedstock with pyrolysis oil derived from waste plastics and tires to make industrial chemicals and polymers. BASF aims to convert at least 250,000 metric tons (t) of waste into pyrolysis oil by 2025.

BASF won’t state the percentage of its total annual consumption of fossil fuels that this would displace. But using data from BASF, C&EN calculates that, even if the firm achieves its 2025 target, the pyrolysis oil would represent less than 5% of the company’s total fossil fuel consumption.

Nevertheless, with more than 30 million t of plastic waste generated annually in Europe and 250 million t globally the approach has significant potential. “We see a huge opportunity for growth here,” Christian Lach, head of BASF’s ChemCycling project for using waste plastic as a feedstock, said at the December event.

To capitalize on this opportunity, BASF has developed a catalyst for the cracking and hydrogenation of plastic waste into an oil that is 99.9% carbon and hydrogen. “It takes a lot of effort and is feasible only if you can turn low-value waste into high-value product,” Lach said.

Pyrolysis oil needs to be purified to remove chlorine that can cause corrosion, sulfur that can poison catalysts, and oxygen that can trigger explosions. BASF is working to solve such problems in partnerships with technology firms, including the Norwegian chemical recycling company Quantafuel.

Some environmentalists think using pyrolysis to chemically recycle plastic waste is unsustainable. “Chemical recycling is only viable under limited circumstances and needs a lot of energy,” says Sonja Haider, senior business adviser at the Swedish environmental group International Chemical Secretariat (ChemSec).

BASF’s pyrolysis yield, however, is about 70%, which is similar to that of the more widely accepted option of mechanical recycling of plastics, Lach said when questioned on the issue. From a sustainability perspective, he added, pyrolysis is best applied to mixed-plastics waste that cannot readily be mechanically recycled.

We see a huge opportunity for growth here.
Christian Lach, head of ChemCycling, BASF

Braungart, founder of the environmental consulting firm EPEA and professor of ecodesign and ecoeffectiveness at Leuphana University Lüneburg, asserts that BASF has much more to do to recycle plastics sustainably and be more broadly sustainable.

“The company’s approach is greenwashing and just a nightmare,” Braungart says. “BASF is very busy trying to be more efficient at reducing its environmental footprint, whereas to be truly sustainable, BASF and the wider chemical industry must ask far more fundamental questions and deploy systems that benefit the planet, such as making products by taking CO2 out of the atmosphere,” Braungart says.

Braungart laments that Brudermüller, also a chemist, who in 2018 became chairman of BASF and until recently was also the firm’s chief technology officer, hasn’t advanced the firm’s thinking about sustainability beyond that of his predecessors. “BASF’s thinking is still linear,” Braungart says. “It’s a pity. I had so much hope for the new CEO, Martin Brudermüller.”

BASF also appears to have substantial room for improvement when it comes to carbon emissions. Its climate change goal is to keep its greenhouse gas emissions flat through 2030 even with increases in production. This is a relatively modest commitment compared with the goals of many of its peers—including Dow, DuPont, Eastman Chemical, and PetroChina—which have all committed to becoming carbon neutral by 2050.

While the reduction of carbon emissions is often subsidized, especially in Europe via its Emissions Trading System, there is no equivalent financial benefit to waste avoidance, a principle of the circular economy. “Near-term capital expenditure and operating costs for novel circular technologies could have marginal near-term economic benefits, and the approach is not without risk,” warns Sebastian Bray, a stock analyst at the German investment bank Berenberg.

The company’s approach is greenwashing and just a nightmare.
Michael Braungart, founder, EPEA, and professor, Leuphana University Lüneburg

And even with subsidies, some projects for reducing carbon emissions still look expensive. As an example, Bray flags the potentially significant expenditure that could arise if BASF converts the heat source for its petrochemical crackers from fossil fuels to renewable electricity. “The change, whilst necessary, could take 20 years and be costly,” Bray says.

Brudermüller, though, is convinced that the firm’s circular economy approach will yield significant financial and environmental benefits. “Companies that can provide solutions to the transformation to a circular economy will have a crucial competitive advantage,” he said.

To help companies such as BASF make the transition, the European Chemical Industry Council, Europe’s main chemical industry association, is lobbying the European Commission to provide subsidies for circular production systems. The EC has promised billions of euros to European businesses, and the council hopes that the chemical sector will be a major beneficiary.

Even without government support, BASF has circular technologies that it expects will be financially viable. An example is recycling materials—including the metals lithium, cobalt, and nickel—from electric car batteries.

By 2030, 1.6 million t per year of waste car-battery cells will be generated annually around the world—enough feedstock to support multiple industrial-scale recyclers, BASF says. Current recycling processes have a carbon footprint that is at least 25% lower than that of any metal mining process, but recycling metal is still energy intensive and generates large volumes of waste salts. Moreover, state-of-the-art recycling processes generate lithium carbonate, which must be further processed to make lithium hydroxide, the starting material generally required to make batteries.

The firm has an edge over the competition with selective leaching additives that enable it to extract the lithium from old batteries directly as lithium hydroxide, Kerstin Schierle-Arndt, BASF’s vice president of research for inorganic materials and synthesis, said at the virtual meeting. “This allows us to build the value chain in a simple and cost-effective way,” Schierle-Arndt said. The company plans to open a pilot plant for the process in 2022.

Unlike Braungart, some environmentalists applaud BASF for the good intentions of its circular economy program. “Generally, it is positive that such a ‘tanker’ like BASF is starting the path towards circularity and also that they have high ambitions,” ChemSec’s Haider says. Any foot-dragging, though, and the company can expect the criticism to fly.


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