Sephora: Combining Beauty and Sustainability

Beauty giant Sephora is responding to climate change by taking a hard look at where emissions and waste can be eliminated from their supply chain.

Beauty giant Sephora sees opportunities to improve sustainability.

The global beauty retailer Sephora, a subsidiary of LVMH, is often considered a leader in the $460 billion beauty industry due to their scale and sourcing of up-and-coming beauty brands [1]. Part of that leadership has entailed responding to environmentalists’ concerns that beauty products and packaging contribute to climate change, for good reason: it’s estimated that personal care and beauty products currently contribute to a third of all landfill waste [2].

While Sephora and other beauty companies have addressed concerns about waste by transitioning towards using sustainable materials in packaging, offering refillable packaging, or removing packaging entirely from products, less visible sources of waste and emissions remain in product supply chains [3]. In the cosmetics and personal care sector, only 5% of emissions are concentrated in companies’ direct operations, while 95% of emissions stem from within the supply chain [3]. The imbalance between product composition and product production will continue to be relevant as consumers demand more sustainable products, therefore, companies like Sephora must be prepared to work with suppliers to ensure a more comprehensive approach to sustainability, from R&D through product disposal [4]. Beyond their own supply chain, Sephora’s partnerships with hundreds of other brands significantly expand their reach and their ability to mobilize the entire industry towards sustainable practices.

Sephora has taken steps to reduce their adverse impact on the environment.

Sephora has successfully executed several initiatives related to sustainability, and their ongoing priorities reflect four of LVMH’s five categories of sustainability concerns:

  1. Saving energy resources and combating climate change
  2. Protecting ecosystems and natural resources
  3. Waste recovery
  4. Reduction in impact of production and transformation of raw materials, specifically through eco-design [5]

For example, the retailer approached the development of their Sephora Collection line with the goal of monitoring the harmful chemicals typically included in cosmetic formulations. In doing so, they voluntarily developed a list of substances banned from products developed in-house due to either their negative environmental impact or toxicity [6]. Together with LVMH, Sephora also participates in the CEDRE program, which “is dedicated to the sorting, recycling, and recovery of all waste generated from the manufacture, packaging, distribution and sale of cosmetic products” [7]. The program results in a recycling rate of 88%, and it includes the economic upside of reselling materials to specialist recyclers [7].

In addition to their focus on sustainable products, Sephora is actively taking steps to reduce emissions across their own supply chain and network of stores. After scrutinizing their stores and offices in 2014, Sephora prepared a detailed carbon report, which identified the 10 most relevant measures to implement to reduce its overall carbon impact [5]. As a result, the retailer implemented electric transportation, LED lighting, and HVAC solutions to reduce energy use and emissions across all of its 2,300 stores [7]. The focus on reducing emissions extends to Collection supply chain: for instance, by eliminating the external packaging and sourcing different materials for a new face mask, Sephora is avoiding emitting 51 metric tons of CO2 into the atmosphere [5].

In the long term, Sephora plans to expand on their existing sustainability initiatives through a series of partnerships. They recently launched a startup accelerator for female-led beauty businesses innovating in technology and sustainability, which will support more than 50 businesses by 2020. Sephora also plans to evaluate the sustainability of their Collection supply chain by auditing their high-risk suppliers [5].

Can Sephora push the entire industry toward a sustainable future?

While Sephora leads the beauty industry in several ways, they have failed to consider the full scope of their ability to push their partners towards sustainability. They continue to promote partners that do not comply with their own sustainability standards, and they do not have visibility into the supply chains of the brands they work with. As a market leader, Sephora is obligated to consider the supply chains of their partners as an extension of their own to ensure that their climate change reduction objectives are met.

To achieve this objective, Sephora should look to their South Korean counterpart, the Amorepacific Group, for best practices. The Amorepacific Group requires all of its partner organizations to comply with its sustainability guidelines and participate in sustainability assessments, and if the partner is not adequate or would like to pursue additional training, they provide trainings, consulting, and mentoring [8].

Source: [8]

Sephora should consider incentivizing partners to comply with their expectations by placing a sustainability premium on wholesale prices and featuring green products prominently in stores and advertisements. In extreme cases, Sephora may want to discontinue partnerships that do not support their sustainable mission. As climate change worsens and consumers become increasingly aware of the impact of their purchases, Sephora must shift their operations towards a comprehensive focus on sustainability.

(796 words)

Sources

[1] Jones, G., Profits and Sustainability: A History of Green Entrepreneurship, (Oxford University Press, 2017), pg. 201-2015

[2] “Why Eco-Friendly Beauty Packaging is on the Rise in 2017”, Allure, (April 10, 2017), https://www.allure.com/story/eco-friendly-beauty-packaging-trend-2017

[3] “Beauty Faces Up to Sustainability”, Quantis, (October 25, 2016), https://quantis-intl.com/wp-content/uploads/2017/02/cosmetics_report_2017_01_30.pdf

[4] “Driving the big shift to sustainability: How Forum for the Future took system innovation to the beauty and personal care product industry”, Forum for the Future, (October 27, 2015), https://www.forumforthefuture.org/sites/default/files/BPC_Think_Piece.pdf

[5] “LVMH Environmental Report 2016”, LVMH, https://r.lvmh-static.com/uploads/2017/04/lvmh_rapport-environment_2016en.pdf

[6] “Amazon Playing Catch-Up in Push to Police Chemicals in Products”, Bloomberg, (November 13, 2017), https://www.bloomberg.com/news/articles/2017-11-14/amazon-plays-catch-up-in-push-to-police-chemicals-in-products

[7] “CEDRE recycling platform”, LVMH, https://www.lvmh.com/group/lvmh-commitments/environment/cedre-recycling-platform/

[8] “2016 Amorepacific Group Sustainability Report”, Amorepacific Group, (May 12, 2017), http://www.apgroup.com/int/en/misc/sustainability-reports.html

 

 

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10 thoughts on “Sephora: Combining Beauty and Sustainability

  1. I was really stunned to the fact that personal care products currently contribute to one third landfill waste. Although eliminating some of the packaging might reduce the waste, I think it requires the entire beauty industry to draw an action plan and solve the root cause of the issue. It seems that the major sustainable action that Sephora has taken so far is reducing their total stores energy consumption to reduce emissions, which does not necessarily solve the landfill problem. Ultimately, I do agree, it is a challenge especially when there are multiple partners in the chain.

  2. Aportland, thank you for the article, it was a very interesting read. Although I completely agree that Sephora must shift their operations towards a comprehensive focus on sustainability, I would like to offer my view on the idea of charging a wholesale premium or discontinuing partnerships that do not support their sustainability mission.

    Having worked for a similar company than Sephora, I learnt that this type of retailers are in high need for traffic driving brands that attract consumers to the stores. Without traffic, sales don’t exist and revenue targets are not met. For example, a traffic driving perfume would be Chanel number 5, the worlds’ most famous and best selling perfume for more than two decades.

    In that respect, although I am a strong advocate of doing business in a sustainable way, I would recommend Sephora launches the sustainable policies you suggested in a restricted way and with partners that are not key for the business in the short term (even if we are not aware of it, a lot of beauty brands are owned by the same parent company, giving more power to the supplier vs. Sephora). A reasonable way to do it would be by launching pilots in certain geographies and with certain brands so that the company can test the true impact in its bottom line.

    I believe that the approach Sephora should take is continue growing its private label brand under sustainable conditions so that it both secures higher margins and ensures full control of the supply chain.

  3. This piece raises the challenging question of how a company’s sustainability equation has to change when it is primarily selling other companies’ products rather than its own, as is the case with Sephora – as well as who has the power when it comes to dictating standards. Is Sephora a significant enough distributor for major cosmetic brands that it would have the leverage to mandate a set of sustainability standards partners must comply with in order to be stocked on Sephora shelves? And even if Sephora did have that leverage, should they choose to use it on sustainability?
    On another note, I wonder how actual changes to the ingredient composition of Sephora products (e.g., elimination of certain chemicals) changes the perceived quality or functionality of the products. While swapping FSC-certified wood for non-certified wood at IKEA shouldn’t (in theory) make a difference in a table, I imagine that without certain ingredients, there may be a difference in makeup that’s noticeable to the consumer. If so, I’m not sure that the Sephora customer cares that the product is sustainable – or that Sephora should even tout it as such in its marketing, for fear that. Consequently, I wonder if Sephora can be doing more not so much by developing sustainable products itself, or by requiring them from partners, but by helping smaller companies with full lines of sustainable products to grow, and expanding their presence and brand awareness through Sephora’s vast and highly-visible retail footprint.

  4. One third of all landfill waste?! – I never would have guessed that high. It definitely signifies the need for many of these sustainability practices.

    However, Sephora does have a fine line to walk here, especially if they were to consider penalizing top brands that do not abide by their sustainability standards. Because of Sephora’s size, they do have power and leverage in the industry. But (although I’ve never been in this space), I would imagine that there are beauty brands that Sephora carries that hold the power in the relationship. Sephora needs to make sure that they know their consumer very well and don’t alienate consumers. Yes, consumers are trending towards desiring more sustainable products, but their purchasing decisions don’t always reflect that.

  5. As a retailer, Sephora definitely has the bargaining power to put sustainability requirements on every single one of their beauty partners, Especially, the bigger beauty brands like Clinique with deeper pockets. I am a little concerned about the smaller beauty brands in Sephora’s incubator program. These brands may be spending a lot of cash to bring their products to markets and the additional sustainability requirements could break the bank. However, this is something that Sephora executives need to be thinking about. Love this article!

  6. Annie – thanks so much for spending time researching and writing on this. I’m frankly amazed by the fact that, particularly for beauty products that are all interacting directly with our bodies, that not all are completely “clean.” Despite the progress Sephora is making, I like how you challenge them to do more. The comparison to their South Korean counterpart is insightful. There is no question they should be learning from their best practices and adapting accordingly. There is no question this is a challenge, but the fact that personal care products make up one third of the world’s landfill is mind-blowing, and requires drastic progress.

  7. I agree with Mohammed in that I was stunned to learn how much landfill is contributed by personal care and beauty products. As such, I agree that a market leading firm such as Sephora has a duty to invest in order to minimise the environmental footprint of its operations and products. Learning that 95% of emissions stem from the supply chain, this is obviously a critical area for Sephora to focus on. However I do see a tension between having rigorous standards for its suppliers and the ability to monitor/enforce these standards. In selling third-party products through their retail channels, it can be argued they have limited scope to enforce these stricter standards in supply chains they do not own. It is easy to argue that they have bargaining power through their sheer size, but simultaneously I believe the financial aspect speaks loudly if they were ever to consider dropping a best-selling product due to supply chain standards. Paying a sustainability premium in the wholesale channel is a good solution which aligns incentives; the only thing to bear in mind is that the end consumer will ultimately bear the cost of this through increased prices. A coordinated consumer education process would help in making customers accept this price increase.

  8. Annie, Thank you so much for this analysis. Like everyone else that has commented, I was shocked that personal care and beauty makes up 1/3 of landfill waste.

    I asked a similar question in my problem set (Amazon and sustainability) concerning a marketplace enforcing standards on the companies that use it, but I wonder how far a current player in the industry can press regulations on other companies. If Sephora does introduce standards similar to Amorepacific Group, how far can they go before a competitor undercuts them by not mandating the standards and they begin losing business? I agree that they have to take this step–I just worry that the first big companies that do are putting a large target on their back.

  9. Really insightful article Annie. This brings up the question of consumer demand and how it may or may not drive company changes. What percentage of Sephora’s buying customers truly demand sustainable products? Does Sephora have a responsibility to drive these changes even if they do not improve its bottom line? One way Sephora can begin to talk this transformation is too further vertically integrate, selling sustainably sourced raw materials to its own vendors.

  10. Hi Annie!

    Really insightful article. As a Sephora customer, I was very invested in reading your article and learning more about the views of a brand that on sustainability. I had two reactions to your article that I consider to be equally interesting:

    1. I had no idea that Sephora focused so much on sustainability as a company. As I was reading your article, I was both shocked and pleased to learn that Sephora had made so many active steps towards being a business that is lowering their global footprint.

    2. I wonder how much Sephora being sustainable will effect my customer behavior with them. As an American consumer, I do not feel as though sustainability is an as commonly discussed topic as it should be. This in return supports a customer sentiment that does not take into consideration the sustainability of a company prior to making a decision as whether or not buy a product from that particular vendor. For those reasons, if the recommendations that you made towards to end of your article do not come to fruition for Sephora, I truly do not think that it will have any effect on the top line of the company’s revenue. I would really like to see the US government take a more active role in boosting their sustainability awareness efforts across multiple industries to be more competitive with our competitors in Asia and beyond.

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