Putting Lipstick on a Planet

How L’oreal is setting the standard for sustainability in the beauty industry.

When thinking about climate change, we often feel the problem is just too large or complicated for us to do anything about it. With so many facts and figures thrown out and often used as part of a political agenda, it’s easy to feel overwhelmed and simply disengage from the conversation. L’oreal is proving that doesn’t have to be the case. We can impact climate change one corporation at a time, as long as we are willing to do our part and think creatively about the issues.

Company Pledge

L’oreal Group, an international beauty company with a portfolio of 32 brands, 2015 sales of over 25B and profit of over 4.4B [1], employs over 80,000 people worldwide [2]. Through its “Shared Beauty for All” pledge, the company has made a sustainability commitment to reduce its environmental impact by 60% by 2020 (from a 2005 baseline) [1]. This means reducing emissions at their factories and distribution centers, reducing water consumption and waste, and sourcing 100% renewable raw materials from sustainable sources. Also impressive is their commitment to “zero deforestation” by 2020. They intend to generate carbon gains corresponding to the amount of their greenhouse gas emissions [3]. This is quite an impactful pledge and one that sets the example for the $460B and growing global cosmetics industry [4].

 How will they get there?

While L’oreal has laid out a four-pronged approach, I will focus on just two of them.

  1. Innovating sustainably- formulas and packaging sourcing
    • One great example of L’oreal’s efforts toward a low-carbon sourcing model is in the West African villages of Burkina Faso, where the company helps the 22,000 women who harvest nuts used in shea butter to improve their cook stoves, thus requiring less wood consumption. This both fights deforestation and reduces their carbon footprint [5].
    • L’oreal is subsidizing farmers in Indonesia to grow multiple crop ingredients needed for perfume (such as patchouli and cinnamon) on the same land, to optimize the use of agricultural land [5]. Deforestation, often caused by converting forests to cropland, is a leading contributor to global climate change [6].
    • L’oreal has implemented a responsible packaging policy to “respect, reduce, replace.” To this end, all packaging is recyclable, and has been sourced from sustainably managed forests that preserve biodiversity [7].
  2. Producing sustainably – reducing CO2 emissions
    • Despite production volumes increasing by 21%, the beauty giant will reduce CO2 emissions by 60% at their plants and distribution centers [7]. How? By improvements in building design and insulation, and by optimizing the product manufacturing process with use of more energy-efficient technology [7]. Renewables represented 42% of energy used at plants and distribution centers last year. In fact, 9 of these sites have reached carbon neutrality [7]. The Environmental Protection Agency (EPA) lauded L’oreal for supporting the renewable energy market, for reducing air pollution, and for demonstrating that using green power is smart for business and the environment [8].

How is this “smart for business” and what does this mean for L’oreal?

This is a commitment that ultimately impacts both L’oreal’s operating model and bottom line. It impacts how they think about sourcing and transporting raw materials, and about waste and water usage for each product line at every step of production. They are putting their money where their mouth is by funding programs and advancements towards this mission to the tune of $35M [9].

Is there anything in it for them? YES! 45% of consumers are willing to pay more for a product from a company known for being environmentally friendly [10], so L’oreal does stand to gain. Millennials and Generation Z care about corporate responsibility – they take notice of companies doing their part for the environment.

What’s more? It is predicted that companies that address climate change are more likely to thrive as a decrease in availability of natural resources like water will shape future profit and loss and drive new markets [11].

Are they doing enough?

While L’oreal has garnered quite a bit of press and customer attention for their efforts, should they be doing more? Should they get rid of their packaging altogether considering people simply throw the box away when they get home? Perhaps they shouldn’t include the product claim insert and instead have people scan barcodes with their mobile device to show product benefits and ingredient listings digitally. And maybe they should reduce all print advertising if they really care about zero deforestation. Or is it all too little too late – should they be getting to their pledge sooner? What do you think?

 

(758 words)

 

Sources:

[1] L’oreal Group, 2015 Annual Report, p.197 [http://quicktake.morningstar.com/stocknet/secdocuments.aspx?symbol=lrlcy], accessed November 2016.

[2] L’oreal USA Press Release “L’oreal, Leading Company in Fight Against Climate Change” [http://www.loreal.com/media/press-releases/2016/oct/loreal-leading-company-in-the-fight-against-climate-change], 10.25.16, accessed November 2016.

[3] Carbon Disclosure Project “Case Study: L’oreal,” [https://www.cdp.net/en/articles/climate/case-study-loreal], accessed November 2016.

[4] Business Wire, “Research and Markets: Global Cosmetics Market 2015-2020: Market was $460 Billion in 2014 and is Estimated to Reach $675 Billion by 2020,” [http://www.businesswire.com/news/home/20150727005524/en/Research-Markets-Global-Cosmetics-Market-2015-2020-Market], 7/27/15, accessed November 2016.

[5] L’oreal USA Press Release “L’oreal Announced New Carbon Balanced Ambition for 2020” [http://www.loreal.com/media/press-releases/2015/sep/loreal-new-carbon-balanced-ambition], 3.9.16, accessed November 2016.

[6] V. Kasturi Rangan, Michael W. Toffel, et al., “Sustainability at IKEA Group,” HBS No. 9-515-033 (Boston: Harvard Business School Publishing, 2015), p. 6

[7] L’oreal Website [http://www.sharingbeautywithall.com/en/innovating], accessed November 2016

[8] L’oreal USA Press Release “EPA Recognizes L’oreal USA Among Nation’s Leading Green Power Users” [http://www.lorealusa.com/media/press-releases/2016/aug/pressrelease], 8.18.16, accessed November 2016.

[9] “L’oreal USA reduces CO2 emissions by 57%” (2015). Global Warming Focus, 357. Retrieved from [http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1678791019?accountid=11311], accessed November 2016.

[10] Rebecca M. Henderson, Sophus A. Reinert, et al., “Climate Change in 2016: Implications for Business,” HBS No. N2-317-032 (Boston: Harvard Business School Publishing, 2016), p. 10

[11] United Nations Environmental Programme, “Geo-5 for Business: Impacts of a Changing Environment on the Corporate Sector” [http://web.unep.org/geo/sites/unep.org.geo/files/documents/geo5_for_business.pdf], accessed November 2016.

 

Previous:

Redefining the Considerations of an Automaker – Volkswagen

Next:

Jetblue & Sustainability – Is it all just a bunch of hot air?

7 thoughts on “Putting Lipstick on a Planet

  1. I had no idea that L’oreal was improving its sustainability practices via a low-carbon sourcing model! I am curious about how much of an impact their work has been thus far: for example, you mention that L’oreal reduces its carbon footprint when the women of Burkina Faso, who harvest nuts for shea butter, improve their cook stoves. Is there a way to measure this? How large of an impact does a change in cookware have, relative to some of the suggestions you included in the end (e.g. getting rid of packaging all together)?

    Loved the shout out that L’oreal is benefitting from using sustainable practices, thanks to millennials who care about corporate responsibility.

  2. Yarden, I loved this article and I was especially impressed with how L’Oreal has experimented with some extremely creative solutions.

    I was also intrigued by your idea about thinking through how can we simplify packaging. I don’t think we can get rid of product claim inserts due to FDA regulations (http://www.fda.gov/Cosmetics/Labeling/Regulations/ucm126444.htm). Furthermore, not everyone has access to internet and mobile devices, so it would be tough to only offer digital information regarding ingredients and product benefits. That said, you are completely right that there is a lot of frivolous packaging just for marketing purposes! I am specifically thinking about my first GlamGlow (Estee Lauder brand) purchase. GlamGlow prides themselves on making the purchase experience an extremely memorable one. To get to the final product, you have to open 3 boxes! I was shocked at how much trash there was for just one small 1.4 oz bottle. On this point, one cosmetics manufacturer I really admire for its sustainability efforts is Tata Harper (http://www.tataharperskincare.com/why-we-are-different). In Tata Harper’s own words: “we buy renewable energy from the state of VT to run our facilities, we buy recycled paper and packaging material, we use recyclable glass bottles for our products and we keep all activity in one place to cut down on our carbon footprint. We believe that if companies talk the talk, they should walk the walk – no greenwashing!” I would encourage L’Oreal to learn from some of Tata Harper’s packaging material methods.

    I am also wondering if we could somehow provide solutions for already loyal customers who are just trying to refill on their staple items? Beauty is a category where consumers tend to engage in repeat purchases and are highly loyal. Once I am convinced on a product, I am usually a lifetime customer and do not need the packaging or information every time. I would definitely be willing to just go to a store, and “refill” on the traditional items. Could L’Oreal, for items like face cleansers and lotions, provide larger containers or “refill” stations (similar to the way we can refill soap or water?) This idea is likely a stretch and introduces new challenges, but I definitely agreed that the sustainability conversation needs to include less packaging (and more sustainable packaging).

  3. To Jessie’s point above, I’ve always been amazed by how much packaging comes along with my little tube of cleanser, lipstick, etc. I’ve also experienced the unwrapping of multiple layers of cardboard to get to my GlamGlow mask and it has done nothing but frustrate me. It’s great to see that L’oreal is taking steps to remedy this in the industry. Hopefully smaller up-and-coming beauty brands will follow such a giant industry player.

    On the other hand, I hadn’t really thought much about how they’re impacting the environment in a more broader sense. I would love to see them do two different things:
    1) Look into a packaging recycling program. So many makeup containers could be refilled. If you think about how most L’oreal consumers buy makeup at drugstores, this may not be as difficult to implement as it would be in other industries.
    2) Instead of simply subsidizing farmers, I would like to see L’oreal use this money to educate them on better farming practices. This could have widespread impacts on the use of water and land, outside of just L’oreal’s raw materials.

    Thanks for a great post, Yarden!

  4. Yarden, the beauty industry has a long way to go when it comes to sustainability but I was so glad to hear about how L’Oreal has taken a strong position on the issue. As a market leader in the industry, it is imperative that they set a standard and require their peers to match it. You alluded to this point at the end, but I would love to see L’Oreal advertise their efforts more as a way to make the entire beauty industry more accountable. As a consumer of their products, I had no idea that they had put in place these initiatives which is surprising with the amount of advertising spend they have. L’Oreal has taken a much needed first step but as you mentioned, but there is more they can be doing to effect broader change across the beauty industry.

  5. Thanks for sharing this piece, Yarden. It is refreshing to see how a player in the beauty industry, and a major one at that, is taking a leading role in sustainable practices as it is quite uncommon. While L’oreal’s efforts are commendable, I am deeply curious about the more detailed effects to the P&L that these initiatives have and continue to pose for them. Admittedly, I am somewhat skeptical of high-margin industries taking leadership roles in terms of sustainability as it often requires a willingness to bear high upfront costs with little to no return, at least not in the immediate future. After all, $35M is only 0.14% of a $25B-revenue company, so I do think that much more concerted efforts can be done, which you pose towards the reader at the end of your article. I am curious if some of the costs of these new sustainability measures have been shifted to consumers or borne by the company. Also curious how capital-intensive some of the changes to their manufacturing plants are and how they communicated these changes to their executive leadership, assuming that such sustainability measures would not lead to immediate returns, if any.

  6. Great post Yarden! I would not have instinctively thought of the beauty industry in regards to climate change. What is also really interesting is the way the unique dynamics of climate change and this industry. A number of life-cycle analysis studies show that the highest environmental impact of cosmetic products is at the consumer level. Therefore, I believe one of the inherent part of L’oreal’s plan against climate change should be creating consumer awareness around the impact of beauty products on the environment. Educating the with safe disposal methods and sustainable usage practices can make a huge impact on environment conservation.

    While these measures might seem counter-productive to most beauty companies as it usually means higher costs/lower consumptions, given L’oreal is also making great strides in this direction, it might be complimentary to their existing action plan.

  7. This post does a great job of highlighting some of the methods L’oreal is taking to significantly decrease their carbon footprint over the next 4-5 years, both in its packaging and sourcing, and in its overall operations. While reviewing, I found myself wanting to quantify and compare some of the targets that they’ve set out. In particular, one of the most interesting components of their plan to me, was their goal to have 0% deforestation caused by L’oreal by 2020. Absolutely this is an important and impactful goal, but is this time frame too long? Do they really make that significant of an impact to deforestation at this point that this effort is actually impressive?

    I did some investigation and found that deforestation is happening at a rate of 620k hectares per year. [1] This is an exceedingly higher rate than what I expected, however, it is still unclear what L’oreal’s actual contribution to this rate is. This is largely because when they set their targets in 2014, they were unclear as to the full supply chain of where their palm oil comes from in each of their markets. [1] Without knowing this metric, not even L’oreal can determine how much of an impact to deforestation they’re making. Without this information, it is impossible to know if these are low hanging fruit targets, or actually admirable. Regardless, having a goal is better than not, and they should be commended for that.

    [1] Talocchi, Joao.”5 reasons to applaud L’Oreal’s No Deforestation Policy (and how it could be even better)”.http://www.greenpeace.org/usa/5-reasons-we-like-loreal-new-no-deforestation-policy-and-how-it-could-be-even-better/, accessed November 2016.

Leave a comment