Note 13. Sustainable development and the climate
13.1. Measurement of assets and liabilities
a) Environmental risks
The Group strictly complies with regulations and laws relating to environmental protection, and does not expect current regulations to have any significant impact on the Group’s operations, financial position, earnings or assets.
b) Measurement of assets
For many years, L’Oréal has shown a strong commitment to environmental, social and societal responsibility. L’Oréal placed sustainability at the heart of its strategy, with the launch in 2013 of the Sharing Beauty With All programme with 2020 targets focused on sustainable production, sustainable innovation, sustainable consumption and shared growth.
In June 2020, L’Oréal initiated the second phase of its commitments to sustainability, under the umbrella of the L’Oréal for the Future programme, with a new set of particularly ambitious and concrete targets for 2030, in order to cover all the impacts associated with its value chain: its production and distribution sites as well as its supply chains and the impacts associated with the use of products by consumers.
For example:
- the Group undertakes to reach 100% renewable energy for its sites(1)Excluding safety equipment for all Group sites by 2025, by improving energy efficiency and using 100% renewable energy;
- by 2030, 100% of ingredients in formulas and biobased packaging materials will be traceable and come from sustainable sources. None of them will contribute to deforestation;
- by 2030, 100% of the plastics used in packaging will be from either recycled or biobased sources;
- by 2030, L’Oréal undertakes to innovate to enable its consumers to reduce by 25%, on average and per finished product, the water consumption and greenhouse gas emissions linked to the use of its products, compared to 2016.
The above commitments do not jeopardise the value of the Group’s assets or the useful lives of our non-financial assets. In particular:
- our ongoing efforts to bring our products in line with consumer demand as part of L’Oréal for the Future are included in the Group’s short-term strategic plans used in impairment tests on intangible assets with an indefinite useful life and have no impact on the book value of the assets;
- to date, the adaptation of our plants and product formulas has not led us to identify any risk of our production lines becoming obsolete and does not call into question the depreciation period of assets.
Furthermore, based on data from the climate study on environmental risks, the impact of climate change on consumer behaviour was taken into account in the business plans used for impairment tests of intangible assets and is, to date, considered as having no significant impact on the carrying value of the assets.
13.2. Financing, investments and compensation
The Group’s L’Oréal for the Future programme rests on its financing, short- and long-term investment and compensation strategies.
a) Financing
The credit lines indexed to the Group's sustainability performance incorporate a borrowing cost adjustment mechanism.
The L’Oréal Group has a syndicated loan from 20 banks (€5 billion), which had not been used at the end of December 2023. This loan incorporates a mechanism whereby the margin is adjusted in line with the Group’s performance with regard to four ESG KPIs: climate, biodiversity, resources and social commitment.
The Group issued in 2022 a €3 billion bond, one tranche of which in an amount of €1,250 million is sustainability-linked (note 9.1).
b) Short-term investment
The Group's available cash is mainly invested in SRI SICAV money-market funds (60% of all short-term investment in 2023) and term accounts (40% of all short-term investment in 2023 of which 70% in CSR STI).
c) Long-term investment
The Group recorded a total of €191 million in non-current financial assets related to sustainability activities, measured at fair value through equity (note 9.3).
- At the end of 2021, investment in Circular Innovation Fund amounting to €50 million. L'Oréal is one of the main contributors to this fund, that aims at financing innovative companies in the field of recycling, plastic waste management or even materials from the bioeconomy.
- In 2020, the creation of a fund for Nature Regeneration to financially support projects to restore natural marine, forest and agricultural ecosystems (€75 million of which €50 million intended to support the fund's actions).
- Investment in start-ups (€66 million in total):
- including the Swiss environmental technology firm Gjosa, which developed innovative water saving solutions, the French biotech company Global Bioenergies, which developed a process to convert plant-based resources, the Green Chemistry start-up Carbios, which developed enzymatic processes for plastic biodegradation and biorecycling and the French biotech Microphyt which developped a process with a low carbon impact to produce microalgae;
- in 2023, minority stakes were acquired, including the American biotech company led by Geno, whose aim is to create sustainable alternatives to key ingredients, as well as the American biotech company Debut, which specializes in the discovery, formulation and manufacturing of innovative natural and complex ingredients and products, usable in a multitude of more efficient and more sustainable beauty products.
