2022 Universal Registration Document

Main environmental risks
Risk related to changing stakeholder and consumer expectations in terms of environmental performance The choices made by certain categories of consumers may be increasingly influenced by the impact associated with the use of a product(its carbon footprint, its water footprint, its impact on biodiversity) and by the Group’s overall environmental performance, particularly in terms of reducing its CO₂ emissions in all Scopes. If the Group is unable to anticipate changes in such behaviours, meet stakeholders’ expectations, overcome major environmental and social challenges and respond in particular with appropriate product innovation, a significant contribution in the transition towards a low carbon economy and the preservation of water, natural resources and biodiversity within its value chain, the Group’s performance and reputation could be affected. Risk of regulatory non-conformity L’Oréal operates through subsidiaries located in many countries. Like any international business, L’Oréal is subject to a wide range of constantly changing local laws and regulations in the areas of safety and the environment. This mainly concerns the fight against climate change, and the preservation of water resources, biodiversity and natural resources. This exposes it to the risk of regulatory non-compliance or higher compliance costs for its activities in a global context of increasingly diverse norms.

Main environmental risks

Risk related to changing stakeholder and consumer expectations in terms of environmental performance

The choices made by certain categories of consumers may be increasingly influenced by the impact associated with the use of a product(its carbon footprint, its water footprint, its impact on biodiversity) and by the Group’s overall environmental performance, particularly in terms of reducing its CO₂ emissions in all Scopes. If the Group is unable to anticipate changes in such behaviours, meet stakeholders’ expectations, overcome major environmental and social challenges and respond in particular with appropriate product innovation, a significant contribution in the transition towards a low carbon economy and the preservation of water, natural resources and biodiversity within its value chain, the Group’s performance and reputation could be affected.

Risk of regulatory non-conformity

L’Oréal operates through subsidiaries located in many countries. Like any international business, L’Oréal is subject to a wide range of constantly changing local laws and regulations in the areas of safety and the environment. This mainly concerns the fight against climate change, and the preservation of water resources, biodiversity and natural resources. This exposes it to the risk of regulatory non-compliance or higher compliance costs for its activities in a global context of increasingly diverse norms.

Main social risks
Employee health and safety risk Given L’Oréal’s activities, particularly its industrial operations, the risk of occupational injuries or illnesses could become a reality. Psychosocial risks, exacerbated by the effects of the Covid-19 health crisis, may affect employees’ mental health. This could also have an adverse impact on their commitment and, consequently, on the Group’s performance. Human resources management risk 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 with in 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 and develop competent and involved employees who behave responsibly within diverse teams, the development of its activities and its results could be affected.

Main social risks

Employee health and safety risk

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

Human resources management risk

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 with in 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 and develop competent and involved employees who behave responsibly within diverse teams, the development of its activities and its results could be affected.

Main Human Rights risks
The Group expanded its mapping by identifying the potential key Human Rights risks worldwide and in all markets. L’Oréal relied on the reporting framework of the Guiding Principles on Business and Human Rights (UNGP Reporting Framework). This identification process takes into consideration the severity, scale and remediability, as well as the likelihood of its impacts for people throughout its value chain. This study was conducted with an NGO specialised in the area, providing independent analysis. The main risks are as follows: the Human Rights of L’Oréal’s employees (discrimination because of gender, age, disability, gender identity, and sexual orientation); the Human Rights of L’Oréal’s suppliers’ employees (child labour, forced labour, discrimination because of gender, age, disability, gender identity and sexual orientation, and lack of a living wage); the Human Rights of consumers (failure in the quality and safety of products, and lack of protection of personal data); and the Human Rights of communities (stereotypes in advertising). Another risk identified concerns the Human Rights of communities potentially impacted by the Group’s activities (respect for the environment, right of access to water, consideration of Human Rights in the choice of raw materials, and in particular, the right of access of local populations to their land and respect for their traditional knowledge under the Nagoya Protocol).

Main Human Rights risks

The Group expanded its mapping by identifying the potential key Human Rights risks worldwide and in all markets. L’Oréal relied on the reporting framework of the Guiding Principles on Business and Human Rights (UNGP Reporting Framework). This identification process takes into consideration the severity, scale and remediability, as well as the likelihood of its impacts for people throughout its value chain. This study was conducted with an NGO specialised in the area, providing independent analysis. The main risks are as follows:

the Human Rights of L’Oréal’s employees (discrimination because of gender, age, disability, gender identity, and sexual orientation);
the Human Rights of L’Oréal’s suppliers’ employees (child labour, forced labour, discrimination because of gender, age, disability, gender identity and sexual orientation, and lack of a living wage);
the Human Rights of consumers (failure in the quality and safety of products, and lack of protection of personal data); and
the Human Rights of communities (stereotypes in advertising).

Another risk identified concerns the Human Rights of communities potentially impacted by the Group’s activities (respect for the environment, right of access to water, consideration of Human Rights in the choice of raw materials, and in particular, the right of access of local populations to their land and respect for their traditional knowledge under the Nagoya Protocol).

Main corruption risks
L’Oréal operates in many countries where the risk of corruption can be significant and could lead L’Oréal’s employees, as well as third parties acting in its name or on its behalf, directly or indirectly, voluntarily or involuntarily, to adopt practices contrary to the Group’s ethical principles and the prevailing regulations. Corruption takes a variety of forms that are not necessarily easy for employees to identify. For instance, the exchange of gifts or invitations of excessive value could be perceived as corruption. The assessment of corruption risk is materialised by specific mapping, carried out at the Group level and by each country in its local context. The Group’s activities involve in particular relations with: public authorities and their representatives, either directly or via intermediaries or professional bodies, to obtain the authorisations necessary for the Group’s activities, for instance. The countries in which the Group operates must be given support in the fight against public corruption; the Group’s customers and suppliers; and journalists, doctors, etc., to whom products can be given so that they can recommend them. Relationships are also maintained with third parties that, beyond the Group’s products themselves, issue various or general opinions on L’Oréal. Any action potentially deemed as being intended to cause the persons in question to breach their obligation of loyalty must be avoided. Any breach of the Group’s corruption prevention principles may be detrimental to L’Oréal and its partners. Equally, any failure of a partner may be detrimental to L’Oréal.

Main corruption risks

L’Oréal operates in many countries where the risk of corruption can be significant and could lead L’Oréal’s employees, as well as third parties acting in its name or on its behalf, directly or indirectly, voluntarily or involuntarily, to adopt practices contrary to the Group’s ethical principles and the prevailing regulations. Corruption takes a variety of forms that are not necessarily easy for employees to identify. For instance, the exchange of gifts or invitations of excessive value could be perceived as corruption.

The assessment of corruption risk is materialised by specific mapping, carried out at the Group level and by each country in its local context. The Group’s activities involve in particular relations with:

public authorities and their representatives, either directly or via intermediaries or professional bodies, to obtain the authorisations necessary for the Group’s activities, for instance. The countries in which the Group operates must be given support in the fight against public corruption;
the Group’s customers and suppliers; and
journalists, doctors, etc., to whom products can be given so that they can recommend them. Relationships are also maintained with third parties that, beyond the Group’s products themselves, issue various or general opinions on L’Oréal. Any action potentially deemed as being intended to cause the persons in question to breach their obligation of loyalty must be avoided.

Any breach of the Group’s corruption prevention principles may be detrimental to L’Oréal and its partners. Equally, any failure of a partner may be detrimental to L’Oréal.