Risk 4: climate change is expected to lead to an increase in the frequency and intensity of extreme weather events, with negative effects for agriculture, primarily in terms of changes in precipitation patterns. The analyses and estimates carried out to date indicate that the overall change in the costs of the main agricultural commodities (palm oil, coconuts, sugar cane and sugar beet, soy) would be more impacted in the medium term by changes in supply and demand than by the effects of climate change on the crop yield of these commodities. However, extreme weather events could occasionally affect the availability of certain commodities, forcing an increase in costs. The climatic phenomena el Niño and la Niña, for example, had an impact on the availability of plant commodities coming from Southeast Asia.
Opportunity 1: current and future regulations and standards, which are linked to the environmental footprint of products and their labels, will help increase consumer awareness to these subjects. In France, recent studies suggest that consumers are paying an increasing amount of attention to product labels and want to make more sustainable consumption choices.
This may offer players in the cosmetics sector who have opted for fair and transparent communication on their environmental and social impact a competitive advantage resulting in an increase in demand. The multi-criteria approach of L’Oréal to the impact of products beyond regulatory standards makes it a pioneer. The development of SPOT, followed by the environmental labelling system, meets the high expectations of consumers and informs them of the carbon footprint of products and a variety of other environmental criteria.
In 2021, L’Oréal committed to a sectoral approach by coming together with its competitors to form the EcoBeautyScore Consortium, which aims to develop a scientific methodology for measuring environmental impacts.
Opportunity 2: a market opportunity consists in innovating and developing products adapted for consumers located in areas of water stress. One of the consequences of climate change is the increase in the number of the world’s regions facing periods of water shortage, particularly in urban areas. The increasing frequency of these shortages could lead to changes in consumer habits in terms of showering and hair‑washing, for example.
In this context, L’Oréal could increase the development of new products, routines or new technologies that improve rinsing or save water in the use phase, thereby increasing consumer awareness of the challenges of water quality and availability.
Opportunity 3: globally, there is a trend towards an increase in the price of non-renewable energies in the medium term. This trend is linked to the regulations and taxes on fossil fuels, as well as the complex balance between supply and demand.
The progressive elimination by L’Oréal of the use of conventional fuels in favour of renewable energies would protect the Group from increases in the fossil fuel prices, contributing to operating costs that are lower than those paid by other manufacturers who are insufficiently committed to
this energy transition. L’Oréal has committed to using 100% renewable energy at all its operated sites by 2025, by developing projects for self-supply of renewable energies on‑site, as well as a 100% local and renewable energy supply(electricity, heat, biogas etc.). L’Oréal has already started on this path with, for example, the completion of a series of projects for its own consumption of renewable energy on-site in locations such as the United States, Western Europe, Brazil, China and Australia.
The Ethics, Risks and Compliance Department identifies and assesses risks with all departments concerned. An additional risk analysis is conducted within the operational entities, in particular for the physical risks associated with climate change.
Contributions are collected from the main operational managers and experts in this area worldwide, across all the Group’s business activities and geographic zones.Climate‑related risks are the subject of a regularly updated, specific approach that identifies and assesses their financial and strategic impact when the reputation or long-term growth of the Group are concerned.
The Group’s global risk map is reviewed regularly, validated by the L’Oréal Executive Committee once a year and presented to the Audit Committee. The Group’s risk review process and the regular update of the climate study allow for the constant adaptation of policies and priorities. The targets and action plans implemented as part of L’Oréal for the Future are a significant contribution to moderating the climate risks that have been identified.
In 2013, the Group defined a number of environmental indicators as part of the first generation of their Sharing Beauty with All commitments. Re-evaluated and completed in June2020 as part of L’Oréal for the Future, these indicators cover the Group’s entire value chain in the areas of greenhouse gas emissions, water, biodiversity, resources and waste. They support the goals for 2030. Their progress is published annually(see section 1.3.2).
In terms of climate change, the goals announced in the context of L’Oréal for the Future are aligned with the Science‑Based Targets initiative that L’Oréal joined in 2015. In this context, L’Oréal is committed to reducing greenhouse gas emissions over its entire value chain (Scopes 1, 2 and 3)by 25% in absolute value (tonnes of CO2 equivalent) and by50% per finished product by 2030, compared with 2016.In 2022, the Group’s total CO2 emissions fell by 6.2% compared to 2016.
In 2019, L’Oréal joined the United Nations Business Ambition for 1.5°C initiative and made a commitment to reach net-zero CO2 emissions by 2050.
A GHG balance is prepared and published annually and details emissions over all the items described by the GHG Protocol.
