2022 Universal Registration Document

Chapter 3 : Risk factors and risk management

Business risks/Evolution of sales channels Moderate
Risk identification Risk management

To market its products, L’Oréal relies not only on traditional independent distribution channels and the development of direct-to-consumer distribution for certain brands (directly owned stores and e-commerce), but also on the use of social media.

For example:

  • by developing networks of Group brand ambassadors and communities to be part of the conversation around brands and products (partnerships with relevant influencers, advocacy marketing etc.); and
  • by promoting social seling to better target the needs and expectations of consumers who are increasingly turning to these channels.

The impact of the risk could be amplified, in particular by the emergence of social beauty, which is connected and shared, and by the role of influencers as opinion leaders with a significant following and/or subscribers.

Also, undisclosed advertisement or posts that materially mislead consumers or cause serious or widespread offence by an influencer on one of the brands in the Group’s portfolio, or neglecting the importance of new sales and marketing strategies on social networks, could impact results.

See also the "Crisis management" risk

The presence of the Group’s brands in all types of distribution channels allows the Group to offer its products and services, whatever the consumer practices. The departments concerned anticipate trends to adapt to these changes and, in particular, have steadily developed online sales with diversified partners (e-distributors, platforms, and market places).

The Group has set a solid internal control system, including the deployment of certain guidelines:

  • a Code of Good Practice for the Use of Social Media for its employees;
  • an Influencer Values Charter and a Social Selling Values Charter that each influencer or social seller with whom L’Oréal collaborates undertakes to respect;
  • the Group’s principles and the operational processes to be applied in relation to partnerships with influencers and social sellers have been circulated worldwide to all employees involved in advocacy marketing. The Group seeks to work with influencers & social sellers who share its values and Ethical Principles. Depending on the nature of the relationship, the Group reserves the right to pursue due diligence by way of reviewing information already in the public domain. These documents effectively complement the rules of conduct set out in the Group’s Code of Ethics;
  • a permanent online monitoring system. The subsidiaries deploy their own social media and web monitoring systems under the responsibility of their Director of Communication and immediately report a media risk in their country to the Corporate Communications Department.
Business risks/Risk related to Human Resources Low
Risk identification Risk management

One of the keys to L’Oréal’s success lies in the talent of its employees to ensure its growth. This is all the more true as L’Oréal is changing within a complex, highly competitive and rapidly changing environment (globalisation, diversity and inclusion challenges, sustainable development issues, acceleration of the digital transformation etc.) that requires specific expertise. The Covid-19 health crisis has left a significant mark on the job market, with new employee expectations regarding working methods, particularly with the introduction of a sustainable hybrid mode, alternating between on-site and remote working. If L’Oréal fails to identify, attract, recruit, retain, promote and develop competent and engaged employees who behave responsibly within diverse teams, the development of its activities and its results could be affected.

Moreover, given L’Oréal’s activities, particularly its industrial operations, the risk of occupational injuries or illnesses could become a reality. In addition, psychosocial risks, exacerbated by the effects of the Covid‑19 health crisis, may affect the well-being of Group employees. This could also have an adverse impact on their commitment and, consequently, on the Group’s performance.

The Group is developing a motivating, professional environment with respect for its ethical values, particularly diversity. The recruitment and development of employees occurs within a long‑term perspective, also to ensure the continuity of key functions within the Group, in which training plays a core role throughout an employee’s career.

The remuneration policy combines external competitiveness and internal fairness. It recognises both individual and collective performance.

The global Share & Care programme meets the essential needs of each of the Group’s employees in terms of benefits, healthcare, parenthood, flexibility and quality of life at work. Actions for stress prevention and workstation ergonomics are organised. In order to meet employees’ expectations in this new hybrid working environment, L’Oréal has developed a balanced Group policy to ensure that opportunities for cooperation, discussion and creativity are always prioritised.

The Group has set ambitious goals for the health and safety of its employees, defining high standards that often exceed legal obligations and involve personnel at all levels. Prevention is based on the GHAP (Global Hazard Assessment Procedure) and SHAP (Safety Hazard Assessment Procedure) programmes, which identify the hazards, generally and for each workstation, assess the risks and allow the implementation of the necessary means of control (see section 4.3.2.1).