3.5.3.3. Legal and regulatory risks
Legal and regulatory risks/Risk of non-conformity  |
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| Risk identification | Risk management |
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Many general and specific laws and regulations apply to the Group, such as the European REACH and CLP (Classification, Labelling, Packaging) regulations intended to strengthen the human and environmental safety of chemical products, the European Cosmetics Directive governing animal testing of ingredients, legislation on competition law, corruption and the control of international flows, including economic sanctions policies. The diversity and constant reinforcement of the regulatory environment expose the Group to a risk of non-conformity or increased compliance costs. L’Oréal remains exposed to the risk of default or fraud, which could have an impact on its reputation, its business activities and its results. In the ordinary course of its business, the Group will potentially be involved in all types of legal actions and may be subject to tax, customs and administrative audits. |
In accordance with its Code of Ethics, L’Oréal attaches particular importance to compliance with the laws and regulations that apply to it. This obligation to comply with local legislation is reaffirmed specifically in the Group’s Legal Charter, which sets out the rules applicable within the Group in terms of contracts, corporate law, intellectual property and competition law, embargoes and economic sanctions, and protection of personal data. To ensure compliance with these rules, the Group has implemented a robust governance structure involving all of the Group’s operational entities and support departments. This governance enables the Group to monitor legislation on an ongoing basis and to take any measures necessary to comply with it in a timely manner. To ensure any embargoes are observed, the Group has put in place rules on the terms of delivery and transport of its goods, with the aim of ensuring the control and compliance of formalities in terms of customs imports and exports. Learning programmes about customs fundamentals are also delivered to all appropriate employees in the Operations Department. The Group’s Legal Department has set up dedicated learning courses in competition law for all appropriate employees. L’Oréal is also involved in an ongoing dialogue with national or regional authorities in charge of specifically regulating products in its sector through the professional associations to which it belongs. With regard to the REACH and CLP regulations, L’Oréal communicates proactively with its European suppliers in order to ensure a continuing supply of compliant raw materials. An action plan has been drawn up at L’Oréal in order to improve the design and methods used to assess the safety of raw materials. It led to the end of testing finished products on animals in 1989 (14 years before it became a legal obligation in Europe) and the development of predictive evaluation strategies to meet European regulations. In the areas of fraud and corruption, the deployment to all Group subsidiaries of programmes to prevent corruption (see subsection 4.3.4.) and raise awareness of fraud risk contribute to the management of these risks. In terms of taxation, the Group relies on a tax policy and the systems described in subsection 4.3.5. L’Oréal has no knowledge of any governmental procedures, legal or arbitration proceedings, which are pending or threatened, that may have, or have had over the last 12 months, material effects on the financial position or profitability of the Company and/or the Group, other than those described in note 12.2. “Contingent liabilities and significant ongoing disputes” of the notes to the Consolidated Financial Statements. The main legal risks are reported to the General Management and presented to the Audit Committee. |