Sustainability in all areas

COSSMA: Six months ago, you became Senior Vice President of BASF’s European Personal Care business. What do you find stimulating about the cosmetics industry?

Marko Grozdanovic: The cosmetics industry is particularly interesting to me because it involves being close to the customer. In my previous job I was heading BASF’s distribution business in Europe. I am therefore very much growth-driven and customer- oriented. Operating in a fastmoving consumer goods (FMCG) environment means it is highly dynamic, so customer focus and agility are essential for success. The personal care business is an exciting area to work in because it offers many opportunities for growth, both for us and for our customers. To be able to support our customers, understanding consumer trends and needs and translating them into solutions is a crucial prerequisite and one of our core competencies. Public opinion is today shaped by the general trend for more sustainable products and by influencers on social media, especially in the beauty sector.

This opens a new world of possibilities for marketing and communication, also for us as ingredient supplier. These developments are driving the industry more than ever before to come up with even more sustainable innovations. We clearly see a lot of potential here.

Maintaining a close relationship with customers is challenging during a global pandemic. How is Covid-19 affecting your business?

Corona took us all by surprise, but we coped well with the crisis and responded flexibly as a team to the challenges and opportunities it presented. Now more than ever, a digital mindset is essential if we are to safeguard our competitive edge. When it became clear that no trade fairs or face-to-face customer meetings would be able to take place for the time being, we quickly started having virtual customer meetings and events. Although they cannot replace direct customer contact, they were nevertheless successful as they also showed us new ways of doing business. Despite the difficult circumstances, some of our business segments made a good contribution last year and demonstrated their resilience to the crisis. This overall good performance compensated for weaknesses in areas such as our UV filter business and certain applications in the leave-on cosmetics’ segment that were negatively impacted by the travel restrictions and by people spending less time outside and on vacation as well as by the closure of spas and salons. However, for 2021 we expect our business to return to higher levels and that we will resume the growth trajectory from before the crisis. Overall, we are in a good position and I am confident about the future. We have an excellent team, a viable portfolio and the potential for more innovation and sustainability to take us forward.

What are your drivers for innovations in the personal care segment?

Sustainability is one of our most important drivers of innovation. Our customers as well as the end consumers expect holistic sustainable solutions from us, not only when it comes to the development and supply of personal care ingredients but everything around this. This includes the complete value chain: from the raw material sources and the traceability of our products to manufacturing processes, transportation as well as the naturalness and finally biodegradability of the ingredients. Our contribution to less CO2 emissions including the evaluation of the products’ carbon footprints and the usage of renewable-based raw materials play a crucial role here. When we develop new ingredients for the personal care market, we take an array of relevant factors into account, including the raw material source and the choice of production process, as well as efficiency and the ecological profile – not only because this is a requirement of consumers but we are all responsible for preserving the planet for future generations. Our overall objective is to make the best use of available resources. That is why we fully support the “European Green Deal” and Europe’s ambition to go climate neutral by 2050. This is in line with BASF’s commitment to achieve CO2-neutral growth until 2030. Our customers see us as a longterm partner on this journey and trust that we will help them to create sustainable solutions for the future. This is the promise we want to keep. Additionally, we can observe a trend towards more individuality in the beauty sector. People’s images have become more individualistic: beauty is for everyone, no matter who you are, what you want or where you go. This is also reflected in the establishment of small indie brands and the rise of social media influencers. They are shaping the public opinion and create a demand for more sustainable solutions. New technologies open additional sales channels and offer new means of communication. We see opportunities here to learn more about consumer needs and to stay in tune with the developments in the market.

Where are you in terms of digitalisation?

The digital transformation is influencing both the commercial aspects of the industry and everything behind the scenes, too: from R&D, supply chain and production to marketing. We are embracing these changes to stay on top of the wider transformation and to become more efficient and effective. Recently, we used artificial intelligence to develop a naturally derived active ingredient that protects the skin and scalp against silent inflammation¹. Another important aspect for us is to make it as easy as possible for our customers to develop new product innovations. This prompted us to bring new digital tools such as our “Emollient Jockey” to our customers which enables users to find the ideal solution with the full array of sensory variants at their fingertips. There are more innovations in the pipeline that will help our customers’ marketing and technology teams to speed up their product development and time-to-market. These will build on our knowledge and sound understanding of the markets, brands, and

solution options. We are also ready to introduce a new generation of our “Sunscreen Simulator”, which will offer an improved user experience by providing an extended number of performance features. It will be directly linked to other tools like the “EcoSun Pass”, a methodology to assess the environmental impact of UV filters used in sunscreen formulations.

What recent developments have been made in sustainable ingredients?

Our company is the largest provider of raw materials for natural and organic products according to Cosmos, and we are continuing to build up our portfolio with more eco-friendly, sustainable solutions for the personal care industry. In Europe, 120 cosmetic ingredients by BASF have been approved according to the Cosmos standard; globally, this figure stands at 145 products. Last year, we introduced a product² to stabilise ingredients in skin and hair cleansing formulations that is derived from 100% renewable feedstock and is readily biodegradable. Another recent product innovation is a very mild, innovative anionic surfactant³ based on sustainable, RSPO certified renewable resources. It is readily biodegradable and suitable as an alternative to sulfate-based surfactants. However, our sustainability commitment goes far beyond developing new ingredients. While this is certainly one of our core competencies, we are also promoting sustainable sourcing. With our Rambutan Program, for example, we have established a socially and environmentally responsible supply chain for the sustainable production of bioactive compounds. Working in close cooperation with our partners in Vietnam, we are sourcing the ingredients, which are extracted from rambutan trees (Nephelium lappaceum), from the first organically certified rambutan gardens in Vietnam. Furthermore, we have cooperated with Cargill, Procter & Gamble and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in a development partnership under the develoPPP.de program commissioned by the German Federal Ministry for Economic Cooperation and Development (BMZ) to establish a certified coconut oil supply chain and improve the livelihood of coconut farmers in the Philippines and Indonesia. Thanks to the initiative, the first certified sustainable coconut oil was produced in the Philippines in 2018. Between November 2015 and October 2019, more than 4,100 coconut farmers were trained in good agricultural and practices and farm management. About 1,600 farmers received additional training and were certified according to the Rainforest Alliance Sustainable Agriculture Standard. Farmers who were trained and certified earn 47% more on average than farmers who did not participate in the program. And of course, we are continuing our journey toward sustainable palm where 100% of our palm (kernel) oil comes from sustainable, RSPOcertified sources.

BASF was among the first companies to launch RSPOcertified ingredients. Where are you now with this?

In 2020 we reached a huge milestone on our path toward sustainable palm: we fulfilled our goal to source only RSPO-certified sustainable palm oil and palm kernel oil. We purchased 227,213 metric tons of certified sustainable palm oil and palm kernel oil. This represents 100% of our total volume as RSPO certified. We also made further progress regarding traceability: we were able to trace almost 95% of our global palm footprint – totalling 441,107 metric tons – back to oil mill level.

Additionally, as in previous years, we recently published our product carbon footprint (PCF) for sourcing certified sustainable palm (kernel) oil. Compared to conventional sourcing, our company avoided more than 300,000 metric tons of CO2 emission in 2020. RSPO-certified production of palm kernel oil shows around a 36% lower global warming impact than non-certified production.

What will happen next?

We are now fully focused on the other part of our 2015 commitment: to also include the commitment of certified sourcing to those significant intermediates which are based on palm oil and palm kernel oil by 2025, e.g. fatty alcohols and fatty acids.

Looking at the sun care segment, there is lively public discussion surrounding the eco-friendliness of sunscreens. How do you help manufacturers to formulate sunscreens that meet the demands of eco-conscious consumers?

Our broad portfolio of UV filters and our wide range of emollients and emulsifiers allow manufacturers to create effective sun care products that help to protect the skin against the harmful effects of UV radiation and – with frequent intensive exposure – an increased risk of skin cancer. Public discussion currently focuses primarily on the damage UV filters may cause to ecosystems, given that they tend to be released directly into the environment. To assess the environmental impact of UV filters used in sunscreen formulations, BASF has developed the “EcoSun Pass”. This methodology supports the transparent and holistic assessment of UV filters based on internationally recognized criteria. It considers eight different parameters, including acute and chronic aquatic toxicity, endocrine suspicion, and biodegradation. Our “EcoSun Pass” is a scientifically sound and transparent system to evaluate the environmental impact of UV filters and offers a way to develop sunscreens with improved environmental compatibility. It is based on the latest scientific findings, which improves regulatory acceptance. The use of UV combinations of highly efficient filters requiring low-use concentrations with the best ecotoxicological profiles allows manufacturers to develop optimised, ecologically sustainable sunscreens.

Will Covid-19 change the personal care market in the long term?

The past year was extremely tough for most industries. While the personal care market was no exception, it is in a relatively strong position compared to other consumer categories and is expected to remain attractive in the long run. While some segments were hit harder by the crisis, others showed their resilience due to enhanced self-care routines, and preventative health principles. The pandemic has the potential to expand the demand for functional beauty while boosting hygiene, antiviral properties, and protection, and promoting healthy skin, mental well-being, and clean, conscious beauty in the long term. Additionally, it has increased digital engagement, such as the use of social media and online shopping and will continue to accelerate developments of this kind.

What are your goals for the next few months?

The creation of a positive customer experience leading to highly satisfied customers remains our primary goal. We have a strong portfolio with some major growth opportunities for our customers that we want to exploit. In the last few months, we have been able to make some key adjustments, such as further improving our supply and successfully working in the virtual space, and we will continue to build up our speed and flexibility. Additionally, we will continue to pursue innovations and further drive sustainable solutions, also by using new technologies to interact and work with our customers. Our customers are not only looking for an ingredient supplier but a smart solution provider offering competent and swift support. I see effective ways for us to further simplify and accelerate our processes, and to set ourselves apart from the competition so that we remain the market leader in the long term.

References

¹ PeptAIde 4.0

² Lamesoft Balance

³ Texapon SFA