The world’s largest cosmetics company lines up an ambitious set of sustainability goals. Will consumers buy them?
Beauty is in the eye of the beholder. So runs the age-old adage. But is it true? That depends on context. Take two shades of lip gloss: one raspberry sorbet, say, the other strawberry cocktail. At an aesthetic level, their respective merits are indeed for every person to decide.
Yet, seen in a different context, perceptions may shift. What if one of the two products is made from natural products and the other from petroleum-derived materials? What if the raspberry isn’t raspberry at all, but a chemical compound with dubious implications for human health? Suddenly, beauty shifts into a more objective, more tangible sphere, where different grades of “beauty” can be distinguished.
For a global cosmetics industry, the issue of what comprises real, authentic beauty is an intriguing one. And it’s one that global cosmetics brand L’Oréal now finds itself grappling with.
As far as conventional perceptions of beauty go, the Paris-based manufacturer of skin and hair care products, fragrances and make-up has had more than a century to perfect its approach. Iconic names such as Giorgio Armani Beauty, Saint Laurent Paris and Lancôme are among its portfolio of brands. With sales of €16.5bn for the first nine months of 2014, a like-for-like increase of 3.3% on 2013, its efforts clearly coincide with the expectations of consumers.
Yet, sustainability brings a new challenge. L’Oréal is, relatively speaking, a newcomer to the sustainability scene. Although it has developed a number of environmental programmes and widely recognised responsible employer initiatives over the years, it only spelt out a clear set of goals and targets 18 months ago.
By 2020, L’Oréal has committed to:
- reduce by 60% its environmental footprint (from a 2005 baseline)
- incorporate all its strategic suppliers into its supplier sustainability programme
- ensure 100% of its products deliver an environmental or social benefit
- empower all its consumers to make sustainable consumption choices while enhancing the beauty of the planet
- provide all employees with access to health care, social protection and training, wherever they are in the world enable more than 100,000 people from underprivileged communities to access work
To its credit, the list of commitments makes for ambitious reading. By 2020, the company promises to incorporate 100% of its strategic suppliers into its sustainability programme. It also pledges to help 100,000 people from underprivileged communities into work and to provide all its employees – currently there are 77,451 – with financial protection in the wake of disability or other “unexpected life events”.
But the most ambitious objectives of L’Oréal’s new-look sustainability strategy, entitled “Sharing Beauty for All”, focus on consumers. The company is setting out to “bring beauty” to 1 billion new consumers, while reducing its environmental (water, carbon and waste) footprint by 60%, from a 2005 baseline.
So how will it do it? In essence, the strategy is two-fold, says Alexandra Palt, the company’s chief sustainability officer. The first task lies in its production processes and, beyond that, with its suppliers.
The logic of the position is clear: if L’Oréal’s millions of consumers are to buy more sustainably, then the company needs to provide more sustainable products for them to buy. That starts with research and development, says Palt. Every product sold under a L’Oréal brand by the end of the decade must have at least one sustainability attribute. That could mean cutting water or waste – L’Oréal has committed to reducing both by 60% per product unit come 2020 – or being less carbon intensive – the company has an aggressive target to reduce its net CO2 emissions by 60%.
“We always used to look at two criteria: performance and economic value. But now responsibility has to be part of the mix, too,” Palt says. “This is now taken into account every time we work on a new product or update an old one.”
A substantial part of realising this ambition will be L’Oréal’s ability to source its raw materials sustainably. The company already buys 100% of its soya and palm oil from sustainable sources, for instance, and is on track to achieve the same for sustainable-certified board in its packaging. L’Oréal is also developing direct relationships with local producers in more niche commodity areas. It sources all its argan oil from women-led cooperatives in Morocco. Similarly, it buys sesame oil from a certified smallholder-based cooperative in Nicaragua.
Case Study: Babassu oil in Brazil
Native to the Amazon region, the babassu palm produces seeds that, when processed, produce a clear vegetable oil with many of the same properties as coconut oil. Historically, native communities have used its fruits to make flour, animal feed, medicines and drinks. Cosmetics companies prize the oil for its moisturizing and nutritional properties. It is also used in hair care products for its anti-frizzing and smoothing effect.
Over recent decades, babassu nuts have become an important subsistence resource in Maranhão, a region in the north-east of Brazil. The Body Shop, which became part of L’Oréal back in 2006, has been sourcing babassu nuts from a local cooperative since 1994. Its long-term partnership with the Cooperative of Agricultural Producers of Lago de Junco (COPPALJ) provides a ready source of income for 850 families in nine communities. The cooperative’s members, most of whom are women, have also received agricultural training as well as assistance with the purchase of machinery. Last year, L’Oréal extended its partnership to other small-scale babassu harvesters in Brazil.
Babassu oil is currently used in The Body Shop skincare lines Nutriganic and Spa Wisdom, as well as in the Matrix hair care line Biolage Advanced Control Total.
Beyond this, the company will have to look to the impacts of its own operations and those of its suppliers. L’Oréal is relatively exceptional in an age of outsourced manufacturing in that it produces about 90% of its goods in-house. It isn’t starting from scratch. Efficiencies in its factories and logistics operations, coupled with investment in renewable energy generation, helped cut overall carbon emissions by 39% from 2005 to 2012.
As for its strategic suppliers, L’Oréal says it intends to make its training tools available to all its business partners to assist them with developing their own sustainability policies. It will also work with its main suppliers to ensure all have completed a self-assessment of their sustainability policies. This follows on from an existing programme of third-party social audits that L’Oréal already conducts, which has totted up more than 4,400 audits since 2006.
With 28 international brands and a procurement spend of €3.69bn (2013), L’Oréal will have its work cut out to meet its upstream commitments. Yet, at least these are, to some extent, within its gift to manage. Trying to manage up the value chain and influence the behaviour of its consumers is a different matter.
Palt is frank about the challenge. “Unfortunately, consumers do not reward us yet for sustainability … and few take this into their buying decisions,” she says. Demand is latent, however. Two-thirds of L’Oréal’s consumers feel a responsibility to shop sustainably, according to the company’s own research. These good intentions just don’t transfer to the tills. Not yet, at least.
Palt says the industry’s own marketing efforts are partly to blame for this. In continental Europe, the selling of sustainability has been characterised to date by “very guilt-loaded” and “not very aspirational” messaging. The opposite has to happen. There is a minority of consumers that are “particularly interested” in sustainability, she says. The rest just wants high-performing, sustainable products with no fuss.
So how to make them see sustainability as “desirable”? L’Oréal is still working on that. It organised a global conference in late 2013 to explore the issue with brand experts and key stakeholders. One obvious answer is to remove the obstacles currently putting consumers off. Ensuring that a product’s sustainability credentials don’t increase its price or decrease its performance is essential.
Beyond that, Palt is a strong advocate of local differentiation. “It is a mistake to say we will find some sort of logo or universal messaging. This has not worked,” she says. “What we have become aware of is that there are enormous cultural differences about sustainability.” An emerging preoccupation for L’Oréal’s sustainability chief, therefore, is to tap into what moves and preoccupies distinctive audiences. Once the company does this, Palt believes, it can begin to “encourage them towards more sustainable lifestyles”.
How to achieve that in practice remains the million-dollar question, but there are some early clues within L’Oréal’s existing portfolio. Innovative marketing campaigns by luxury skin care company Biotherm and mass market cosmetics brand Garnier, for instance, have helped sensitise consumers to water efficiency and recycling, respectively. La Roche-Posay, meanwhile, has been successful at educating its shoppers about cancer through its sun cream brands. It was one of the first in its category to warn consumers about the link between excessive exposure to the sun and skin cancer.
In the same way, L’Oréal’s individual brands have established connections with specific consumer groups over time. Hair product brand Softsheen Carson, for instance, closely associates with the black community. Vichy connects with those looking for more natural cosmetics. L’Oréal Paris appeals to professional women. In terms of breaking down its client base into specific interest groups, therefore, the cosmetics giant already has a foot in the door.
Two other factors promise to help L’Oréal connect sustainability with consumers’ concerns. The first is its experience at stakeholder dialogue. Before launching its sustainability commitments, the company carried out 14 structured workshops with key audiences around the world. The two-year process saw the involvement of 754 organisations in eight countries: China, the UK, Brazil, India, South Africa, Denmark and France. L’Oréal is planning to introduce a consumer sustainability panel to replicate the same principle of dialogue with those who buy its products.
The second factor is data. All too often, companies lack the kind of sustainability information that consumers want. When they do have it, they communicate it in a way that is “not comprehensible” to the average shopper, Palt says. L’Oréal is working on a product assessment tool, likely to be ready by mid-2015, which will solve the first of these problems. The test then will be to find ways to engage consumers with the data. The “how” still remains sketchy, but web and phone-based applications are both on the cards.
Palt has no illusions that considerable challenges lie ahead. Internally, much will depend on L’Oréal’s ability to join up the dots and “completely integrate this into the business”, she says. A big part of pulling this off will be senior management’s ability to make sustainability “relevant” and “aspirational” for employees across its operations.
Connecting to the individual tastes and desires of its vast consumer base is the other make-or-break factor. Palt believes the ultimate answer here lies outside L’Oréal’s immediate market. The consuming public as a whole needs to start aspiring to a more sustainable model of consumption, not just in cosmetics, but across the board.
“All consumers say that sustainability is so important, but so few take it into account when they buy a product,” Palt says. “How do we get to the tipping point when people do what they think they should do?”
We’re all attracted to beauty. So anyone who can mould our aesthetic sense to see beauty in sustainability has to be onto something. L’Oréal hasn’t cracked that yet. If anyone can, however, then a corporation that lives and breathes beauty is perhaps as good a bet as any.
L’Oréal at a glance (2013)
- Industry: Cosmetics
- Headquarters: Paris
- Employees: 77,451
- Operating countries: 130
- International brands: 28
- Net profits: €3.1bn
- Consolidated sales: €23bn
- Research and Development spend: €857m
- Charitable contribution: €32.8m
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