2023 universal registration document

Industrial and environmental risks/Climate change
Risk identification	Risk management
The Group’s activities are exposed to the physical and transition risks related to climate change. The increase in risks of natural origin, both extreme and chronic, the loss of biodiversity, and the increased pressure on water resources could impact the availability of finished products by disturbing the Group’s operations and supply chain. The scarcity of resources and the implementation of the transition towards a low-carbon economy could also increase production costs (such as the increased cost of recycled plastic packaging). Insufficient consideration during product design related to the impact of their usage by consumers could represent a risk for sales in certain areas of the world affected by water stress or the lack of adapted infrastructures to collect and treat waste and wastewater. Consumer choices could 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 did not sufficiently anticipate all these impacts and did not initiate a voluntary process to reduce and adapt to climate change, its financial and non-financial performance as well as its reputation could be impacted.	Taking into account environmental challenges, and in particular efforts to combat climate change, is an integral part of L’Oréal’s business model Building on its previous achievements, the Group announced in June 2020 a second generation of particularly ambitious and specific objectives for 2030 as part of its L’Oréal for the Future programme. These objectives cover the CO₂ emissions in Scopes 1, 2 and 3 that are generated by the Group’s activities, and commit to a Science-Based Targets (SBT) approach, so as to track the 1.5°C trajectory by 2050. These commitments were validated in 2017 by the SBT initiative: by 2025, the Group will reach 100% renewable energy On the Group’s operated sites, excluding safety and security installations as defined in paragraph 4.5.1.3. Environmental data at all operated sites; by 2030, the Group will have reduced all its greenhouse gas emissions by 25% in absolute value compared to 2016 (Scopes 1, 2 and 3); and as a signatory of the UN pledge “Business Ambition for 1.5°C”, L’Oréal has made a commitment to reach net zero emissions by 2050. L’Oréal commits that by 2030 all water used in the Group’s industrial processes would be recycled and reused on its sites, prioritising the deployment of the required equipment according to the water situation of the watersheds in which L’Oréal operates. Management of potential consequences of extreme events is described in the section on “Product availability” risk. The Group also launched a programme entitled Green Sciences to evolve its raw material portfolio the development of ingredients with a favourable environmental profile, in minimising the environmental impacts associated with growing plants sources of these ingredients (deforestation, soil depletion, consequences on biodiversity, for example), and by relying on ecofriendly processes that prevent upstream pollution. To inform its consumers and enable them to make more sustainable consumer choices, the Group is developing an environmental display system for its products, with a rating ranging from A to E, which takes into account 14 factors of impact for the planet, including greenhouse gas emissions. This system has been deployed across 12 of the Group’s brands in 32 countries in Europe, North America and China. At the same time, L’Oréal actively contributes to the collaborative work of the EcoBeautyScore Consortium, which aims to develop a standardised scoring system across the entire industry. L’Oréal’s priorities and the main commitments of L’Oréal for the Future programme are described in chapter 4, which specifically comprises the information disclosed in the Non-Financial Performance Statement, including the recommendations of the TCFD.

Industrial and environmental risks/Climate change

Risk identification

Risk management

The Group’s activities are exposed to the physical and transition risks related to climate change. The increase in risks of natural origin, both extreme and chronic, the loss of biodiversity, and the increased pressure on water resources could impact the availability of finished products by disturbing the Group’s operations and supply chain. The scarcity of resources and the implementation of the transition towards a low-carbon economy could also increase production costs (such as the increased cost of recycled plastic packaging). Insufficient consideration during product design related to the impact of their usage by consumers could represent a risk for sales in certain areas of the world affected by water stress or the lack of adapted infrastructures to collect and treat waste and wastewater. Consumer choices could 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 did not sufficiently anticipate all these impacts and did not initiate a voluntary process to reduce and adapt to climate change, its financial and non-financial performance as well as its reputation could be impacted.

Taking into account environmental challenges, and in particular efforts to combat climate change, is an integral part of L’Oréal’s business model

Building on its previous achievements, the Group announced in June 2020 a second generation of particularly ambitious and specific objectives for 2030 as part of its L’Oréal for the Future programme. These objectives cover the CO₂ emissions in Scopes 1, 2 and 3 that are generated by the Group’s activities, and commit to a Science-Based Targets (SBT) approach, so as to track the 1.5°C trajectory by 2050. These commitments were validated in 2017 by the SBT initiative:

by 2025, the Group will reach 100% renewable energy On the Group’s operated sites, excluding safety and security installations as defined in paragraph 4.5.1.3. Environmental data at all operated sites;
by 2030, the Group will have reduced all its greenhouse gas emissions by 25% in absolute value compared to 2016 (Scopes 1, 2 and 3); and
as a signatory of the UN pledge “Business Ambition for 1.5°C”, L’Oréal has made a commitment to reach net zero emissions by 2050.

L’Oréal commits that by 2030 all water used in the Group’s industrial processes would be recycled and reused on its sites, prioritising the deployment of the required equipment according to the water situation of the watersheds in which L’Oréal operates. Management of potential consequences of extreme events is described in the section on “Product availability” risk.

The Group also launched a programme entitled Green Sciences to evolve its raw material portfolio the development of ingredients with a favourable environmental profile, in minimising the environmental impacts associated with growing plants sources of these ingredients (deforestation, soil depletion, consequences on biodiversity, for example), and by relying on ecofriendly processes that prevent upstream pollution.

To inform its consumers and enable them to make more sustainable consumer choices, the Group is developing an environmental display system for its products, with a rating ranging from A to E, which takes into account 14 factors of impact for the planet, including greenhouse gas emissions. This system has been deployed across 12 of the Group’s brands in 32 countries in Europe, North America and China.

At the same time, L’Oréal actively contributes to the collaborative work of the EcoBeautyScore Consortium, which aims to develop a standardised scoring system across the entire industry.

L’Oréal’s priorities and the main commitments of L’Oréal for the Future programme are described in chapter 4, which specifically comprises the information disclosed in the Non-Financial Performance Statement, including the recommendations of the TCFD.

On the Group’s operated sites, excluding safety and security installations as defined in paragraph 4.5.1.3. Environmental data

2023 universal registration document

3. Risk factors and risk management