The scope of this case study is the analysis of the sustainability strategy of the French company L’Oréal, focused on the actions taken related to the Eco-Efficiency Green Firm – Specific Advantages.
Eco-Efficiency is a type of operational environmental practices that some companies try to develop and incorporate to their production processes and procedures, in order to mitigate their impact for the planet, the climate, natural resources and human life.
Through these practices, the companies aim to get a closed-loop production, by using innovation and sustainable technology for minimizing the resources and raw material consumption and reducing the carbon footprint.
Companies and firms can improve their products’ design and performance by introducing eco-efficiency advantages in their strategy. One perfect example is the current case of L’Oréal with the official release in 2013 of their Program for sustainability of L’Oréal: ‘Sharing Beauty With All .
Product-related environmental management capabilities and environmental design capabilities under eco-efficiency advantages help firms to integrate environmental concern throughout a product’s life cycle and achieve material eco-efficiency, energy efficiency, and operational efficiency . Following these guidelines, L’Oréal presented its program supported in four basic main pillars:
• Innovating Sustainability
• Producing Sustainability
• Living Sustainability
• Developing sustainability
About L’Oréal and the Eco-efficiency Green Firm-Specific-Advantage: ‘Sharing Beauty With All’
L’Oréal released its first sustainability report in 2006 after acquiring The Body Shop company. The company reports under the GRI Standards and also complies with UNGC guidelines.
It wasn’t until 2013 with the founding of its ambitious sustainability program, ‘Sharing Beauty With All’ — spearheaded by CEO Jean-Paul Argon — that sustainability practices within the company became an important part of the yearly agenda. “We have stepped up our metamorphosis to the new L’Oréal: more universal, more digital and more sustainable,” states Argon.
‘Sharing Beauty With All’ is divided into four pillars of sustainability each with its own particular targets aimed to be achieved by 2020.
L’Oréal has undertaken a profound transformation towards an increasingly sustainable model, to respond to its environmental and social impacts, as well as to the main challenges which the world is facing today.
The company’s strong ethical commitment, its ‘Sharing Beauty With All’ sustainability program, its policy of promoting diversity and the corporate philanthropy actions conducted with the support of the L’Oréal Foundation enables the Group to contribute to 14 of the 17 Sustainable Development Goals (SDGs) set by the United Nations.
L’Oréal has also been awarded a ‘A’ by the CDP two years in a row and rated 4.2 in FTSE .
Through its company-wide program L’Oréal has successfully proven that economic performance and sustainability practices are not mutually exclusive. The program aims to show that both practices can go hand in hand.
For example, in 2017, L’Oréal reduced its CO2 emissions by 73% while increasing its production by 33%.
The CEO has placed the Sustainability Department directly under his leadership. Previously, the department was within the communications and PR department. Argon has also set up bonus incentives for the managers. Thus, the managers must hit their sustainability targets in order to receive their bonuses. These two facts clearly show how serious Argon and L’Oréal are about becoming more sustainable.
L’Oréal Sustainability Evolution and Development
In 1909, Eugène Schueller founded L’Oréal when he developed the first commercialized hair dye. Although L’Oréal got its start in hair-color products, the company expanded into other beauty sectors. In 1963 the company became publicly-traded on the stock exchange and by 1980 L’Oréal had become world’s largest beauty company.
Through multiple acquisitions, the company has grown to reach 140 countries, catering to the needs of each specific culture. As one of the leaders in Personal & Household Goods products, the group is making tremendous progress towards reaching their 2020 sustainability targets .
The first step in the Corporate Social Responsibility path was taken in 1989. Cosmetics R&D industry implies the use of new chemical reactions and components which can be harmful for human skin. After years of controversial due to their research practices, L’Oréal completely ceased testing its products on animals 14 years before the regulation required, becoming pioneers supporting animal welfare.
L’Oréal has learned how to adapt to the new context with a strong company policy tackling crucial issues for the current society, by promoting diversity and inclusion. Also, to the new scenario that our planet presents, with the increasing danger of a worsen global warming, the already-known marine plastic invasion, the unstoppable fossil fuel combustion and the fear of a world with limited natural resources.
With its 2013 Sustainability Commitment, L’Oréal wants to achieve important goals by 2020. Among other actions completed, the company has contributed to the mitigation of the environmental impact with the implementation of different Eco-Efficiency Operational Green Firm-Specific Advantages .
For example, by reducing the CO2 emissions of its plants and distribution centers by 73%, in absolute terms, compared to 2005, while increasing its production volume by 33% within the same period. The group reinforced its ability to combine economic growth with ambitious climate commitments.
Moreover, the 76% of products launched during the last 2017 improved its environmental or social profile. Every time a new product is created or renovated, the Group considers its contribution to sustainability as well as its performance and profitability.
The number of people from underprivileged communities who gained access to employment through one of L’Oréal’s programmes at the end of 2017 was 53,505. The company’s goal is to reach 100,000 people by 2020.
Furthermore, the company has already conducted an assessment of the environmental and social impact of more than 91% of their brands.
Finally, other important challenge was the complete elimination of PVC its packaging by 2016.
We can see the L’Oréal trends by the development of Eco-efficiency Green FSAs and practices under two main pillars from the company sustainability strategy: ‘Producing Sustainability’ and ‘Innovating Sustainability’.
As explained, L’Oréal adopted 14 of the 17 Sustainable Development goals — most of them aligned with these two pillars (see exhibit 1); this, reinforcing the Company’s Eco-efficiency strategy focused on the development of more sustainable products by using more sustainable processes.
Some of the negative ESG (Environmental, Social and Governance) hotspots from L’Oréal that they should take in account for improvement are the product packaging, which they state they are already working on, and the issue ofwater consumption.
Most of L’Oréal products contains many different single-use plastic and paper components, with the implications for the environment, from the extraction of natural resources all the way through to the disposal of the product.
Extracting finite natural resources to produce raw material depletes our resources and requires a significant amount of energy.
In addition, plastic and paper manufacturing process releases an immense amount GHG into the atmosphere.
Regarding the water issue, many of their products also involves water intensive processes along its entire life cycle. Therefore, L’Oréal is trying to reduce water consumption by 60% per finished product unit by 2020. Plastic extraction and cellulose treatment for the paper manufacturing, imply water uptake.
Nowadays, L’Oréal is the biggest beauty brand in the world, generating about 27.2 billion dollars in sales in 2017.
The adoption of this sustainability corporate policy by the company could initially imply big efforts for the group, such as, substantial upfront costs or important changes in the supply chain.
However, due to the important role that L’Oréal plays in the cosmetics industry market, the company can also have a positive and remarkable impact by mitigating CO2 emissions, decreasing fossil fuel use or reducing plastic use and pollution.
Any changes towards sustainability or eco-improvements will directly affect the L’Oréal ecological footprint, bringing great benefits for the environment and for all of us. L’Oréal states that
‘The path from fundamental research to the finished product involves an ultimate challenge, packaging innovation. This is what ensures that the product will be delivered in the best conditions of performance, safety and practicality’.
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Author Laura Malo Yague is a full-time candidate in the Master of Science in Sustainability Management at Columbia University. She was graduated with a degree in Industrial Technical Engineering – Industrial Electronics in Spain and has seven years experience in Product and Project Management. She was a valued intern-analyst at G&A Institute in 2017.
From Laura, some additional background: From Spain to New York City — with a professional background of seven years working as an engineer and a great lover of the environment, I arrived in 2016 seeking for a change in my career path. During the last two years I have been training myself in Project Management, focused in monitoring and evaluation, Corporate Responsibility and Sustainability at New York University (NYU).
I collaborated as a volunteer in the NGO ‘Engineering Without Borders’ for eight years participating in sustainability and development projects focused on environmental problems, eco-efficiency climate change and taking responsibility of our planet’s health, trying to do things better.
I love travelling with my ukulele, where I can combine my passions discover new cultures, meet people and enjoy the diversity of our planet. I would like to work in sustainability strategy to improve the accountability of market and industry process and development.
More information is at: https://www.ga-institute.com/about-the-institute/the-honor-roll/laura-malo-yague.html
Note to readers: This content was prepared for completion of the Certification in Corporate Responsibility & Sustainability Strategies offered by G&A Institute, with dual credentials from the Swain Center for Executive & Professional Education at the University of North Carolina Wilmington Certificate. The course work is prepared by Professor Nitish Singh, Ph.D., founder and consultant at IntegTree LLC, and Associate Professor of International Business at St. Louis University, Boeing Institute of International Business. Information: http://learning.ga-institute.com/courses/course-v1:GovernanceandAccountabilityInstitute+CCRSS+2016/about