2023 universal registration document

3. Risk factors and risk management

Business risks/Reputational crisis management
Risk identification Risk management

L’Oréal is subject to constant pressure from many competitors in all countries due to:

  • its size and the positioning of its brands in various markets in which major international groups operate;
  • local brands and new players coming from the digital economy;
  • rapid technological changes in emerging fields of research by new operators.

If the Group fails to anticipate or respond to changes in consumer expectations, especially in the areas of natural beauty, health, personalised services, connected things and environmental commitments, with innovative and adapted product offerings, its sales and growth could be affected.

The Group continually adapts its innovation model and is constantly increasing its investments in research and digital services. L’Oréal’s Research & Innovation team innovates to respond to the infinite diversity of beauty aspirations all over the world. The Consumer & Market Insights Department, within the Innovation Department, is constantly monitoring changes in consumer expectations by product category and major regions of the world.

These research programmes all form part of a long-term vision. They allow L’Oréal to rise to the challenges of innovation (see subsection 1.3.7.).

The Digital and Marketing Department is responsible for accelerating the Group’s digital transformation by helping the brands create enriched spaces for expression and helping teams to establish more interactive, close-knit and bespoke relationships with consumers.

Consumer expectations with regard to sustainability are also at the heart of the L’Oréal for the Future programme (see chapter 4). These are taken into account in developing the Group’s brand and product portfolio. The Group’s acquisition strategy always takes into account changes in the competitive environment.
Business risks/Data
Risk identification Risk management

As L’Oréal is a worldwide group of over 90,000 employees, which operates in 79 countries at more than 400 sites (excluding stores and point of sales outlets of distributor customers), it cannot exclude potential violations of its ethical commitments (Code of Ethics based on the four Ethical Principles  ntegrity, Respect, Courage and Transparency , its Human Rights policy, support of the United Nations Global Compact and the United Nations Sustainable Development Goals etc.), whether directly by its employees, or indirectly because of the activities of its partners, particularly its suppliers and subcontractors. In addition, civil society is expressing higher expectations with regard companies’ integrity and transparency and the way in which they manage scientific and technological innovations. These expectations may, for example, relate to the responsible use of artificial intelligence. Such noncompliance with its commitments or the lack of a response to new ethical questions could have an adverse impact on the Group’s reputation and expose it to criminal or administrative sanctions.

The Group’s policies on sustainability, social and societal responsibility, compliance and philanthropy are based on the Ethical Principles. The role and the resources granted to the Chief Ethics Officer allow him to succeed in his mission by relying on all the teams and resources of the Group (see subsection 3.2.1.). Specific learning for management teams, regular dialogue with stakeholders and the establishment of internal working groups, facilitate the inclusion of Ethics in the Group’s new policies and strategic decisions. The ethical risks are mapped and regularly updated, including for suppliers and subcontractors (see paragraph 3.4.5.2.). The deployment of the Code of Ethics and specific complementary policies throughout the Group, mandatory specific e-learning and ongoing communication campaigns via an Ethics Day ensure that employees are aware of the ethical standards. A network of 81 Ethics Correspondents around the world and regular contact between the Chief Ethics Officer and the Countries, ensure close relationships with these employees.

Compliance with the Code of Ethics is taken into account each year when evaluating the overall performance of employees.

Regular audits of the Group’s sites and those of its suppliers and subcontractors (see section 3.4), the Group’s whistleblowing line (www.lorealspeakup.com) opened in 2018 accessible to all Group stakeholders, as well as a procedure to collect and process reports, allow to manage potential violations.

In 2023, L’Oréal established its Reliable Artificial Intelligence policy. This was incorporated into the Code of Ethics, updated in 2023.