The European Taxonomy primarily targets sectors that the European Commission has identified as having a strong potential for contributing to the Taxonomy’s environmental objectives: climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, prevention and reduction of pollution, and protection and restoration of biodiversity and ecosystems. The beauty sector, to which L’Oréal belongs, is not one of the sectors identified by the Taxonomy to date.
Reminder of the regulatory environment and the L’Oréal sustainability strategy
Pursuant to the European “Taxonomy” Regulation, L’Oréal is required to publish indicators for the 2023 financial year highlighting, since 2021, the eligible share, and from 2022, the aligned share of its sales, investments and operating expenses considered sustainable within the meaning of this Regulation. Until 2022, disclosure requirements only covered the proportion of aligned financial figures in respect of the first two objectives of the Taxonomy Regulation, which are climate change mitigation and climate change adaptation. Since 2023, the Regulation has included the eligible proportion in respect of the four new environmental objectives(1)The four new objectives of the Taxonomy Regulation are: sustainable use and protection of marine and water resources; transition to a circular economy; prevention and reduction of pollution; protection and restoration of biodiversity and ecosystems.. In order to comply with these disclosure requirements, the Finance and Legal, Operations, Real Estate, CSR, Research & Innovation Departments have jointly conducted a detailed analysis of all the Group’s activities within the consolidated entities.
Eligible activities and their rate of alignment with the Taxonomy Regulation have been identified in accordance with the instructions of the Delegated Acts by verifying whether they contribute substantially, whether any of the five other objectives set by the Taxonomy Regulation have not been met and whether they comply with the minimum guarantees.
In its classification system, the European Commission prioritises business sectors with a strong potential for contributing to the achievement of the European Union’s environmental objectives. Within the meaning of the Taxonomy Regulation, L’Oréal’s beauty activities are not considered to make a significant contribution to these six environmental objectives. The low rate of eligibility and alignment of the Group’s Taxonomy indicators is not a reflection of L’Oréal’s sustainability strategy nor of its strong commitment to combating climate change, preserving water resources, implementing the principles of the circular economy, preventing pollution or preserving biodiversity throughout its value chain, a commitment it has demonstrated for many years.
The objectives of L’Oréal for the Future and the 2023 results are described in greater detail in subsection 4.3.1 and section 4.4.
Presentation of the eligibility and alignment results for 2023
Sales indicator: like in 2021 and 2022, the Group has not identified any eligible turnover. L’Oréal is dedicated solely to the beauty industry and, as such, its activities are not considered, within the meaning of the Taxonomy, as making a significant contribution to the six environmental objectives and the sector remains a non-priority sector in terms of those targeted by the Taxonomy. In particular, its industrial activities in the production of raw materials are not covered by the Taxonomy Regulation under the heading “Manufacture of organic basic chemicals” under the mitigation and adaptation objectives.
Investment indicator: As there was no eligible turnover, there were no investments corresponding to activities related to sales, i.e. the manufacture of beauty products, that could be qualified as eligible. The Group’s industrial and manufacturing investments are thus classified as ineligible by the Taxonomy Regulation.
In addition, eligible investments do not include the €100 million allocated to Impact Investing funds intended to finance the regeneration of damaged natural ecosystems and develop circular innovative solutions. Investments made in funds are not considered eligible expenditure under the Taxonomy Regulation. The objectives of these investment funds and the 2023 results are described in greater detail in subsections 1.4.2 and 4.3.1, paragraph 4.3.1.5 and section 4.4.
Accordingly, the eligibility analysis of the investments was therefore focused on “individual measures” with regard to the climate-related objectives, as well as on the four new objectives(2)The four new objectives of the Taxonomy Regulation are: sustainable use and protection of marine and water resources, transition to a circular economy, prevention and reduction of pollution, protection and restoration of biodiversity and ecosystems.. These investments do not reflect the entirety of the Group’s financial efforts towards implementing the sustainability strategy.
Eligible investments identified under the climate mitigation and adaptation objectives primarily correspond to leases on premises that are capitalised in accordance with IFRS 16 (94%). The breakdown of eligibility between these objectives is specified in the regulation tables.
Other eligible investments under the two climate objectives have been identified in other activities, mainly enabling activities, as shown in the regulation tables (6%).
Analysis of the last four objectives of the Taxonomy Regulation identified eligible investments related to recycled water production facilities on industrial sites under the transition towards a circular economy objective. These investments were finally evaluated as not significant with regard to the total investments. They were therefore not reported as part of the Taxonomy activities defined for the circular economy objective. This investment does not reflect the action plans and results obtained by the Group in terms of preserving water resources, biodiversity, resources and waste reduction on operated sites, as described in subparagraphs 4.3.1.1.4, 4.3.1.1.5 and 4.3.1.1.6.
