Analysis

The materiality issues L’Oréal is confronting

Sustainability Disclosure Topics

Environment -          Water Management

Business Model and Innovation -          Packaging Lifecycle Management -          Product Environmental, Health, and Safety Performance

Leadership and Governance -          Environmental and Social Impacts of Palm Oil Supply Chain

Water Management

           According to 2015 progress report, “L’Oréal has committed to a 60% reduction in water consumption per finished product by 2020, from a 2005 baseline.” Water is critical for this type of industry because of the coolant in the manufacturing process and the main input for many goods. As an example, shampoos are based on 70 to 80 percent of water. But now water is becoming harder to reach because of the climate change and everything that is happening around us.

           Also, water pollution in many emerging markets makes available water supplies, but sometimes it is expensive to treat. Many of our famous rivers are disappear because of the scarcity of water we have. This can be a very high supply cost and social tensions for the company and our society. Because of this shortage companies started to recycle as much as they can so they can lower the risk of water scarcity.

Packaging Lifecycle Management

           As we all know personal products are packaged and therefore, the packaging is a significant portion of expenses. In fact, packaging by themselves is an impact on transportation meaning that it is also vital to all the industry. For example, if we have a light-weighting packaging, it can reduce production and transportation costs by reducing the amount of material we use. Also, the energy needed to transport the product. Besides, this can also reduce environmental externalities because this represents a significant source of GHG emission.

           Based on L’Oréal, we have many different products that can lead to a dark or light weight package. For example, shampoo can be a large box but a lipstick and be a lightweight package. “Total weight of packaging, percentage made from recycled or renewable materials, a rate that is recyclable or compostable; and description of strategies to reduce the environmental impact of packaging throughout its lifecycle.” (SICS #CN0602 pg. 10)

Product Environmental, Health, and Safety Performance

           In this area, there is a lot of chemicals that industry used and products can end up with a negative environmental and health issues. For example, negative health consequences like carcinogenic chemical have placed the industry under a higher threat of legislation. In fact, some companies can’t replace this chemical, and this is a significant disadvantage. Companies with intangible assets can be very affected by how they respond to the health environmental concerns. On the other hand, companies that can adapt to change in the regulatory landscape and procurements standards will have a competitive advantage, and will increases their market share.

L’Oréal is helping the environment by installing solar Panels and creating recycle programs. Solar panels reduced carbon emission through solar energy in Kentucky and Arkansas in 2016.The new idea of using solar panel make Kentucky and Arkansas 100% renewable electricity goals for manufacturing, achieved 80% of this CO2 reduction from those two states. Also, L’Oréal have more than 5,000 solar panels in Kentucky which is about 2.8 million miles traveled by a passenger in a car per year. In addition, L’Oréal is partnership with Teracycle which is a recycle program. With this recycle programs L’Oréal is able to reuse or recreate those recycle items to make a new product.

Environmental and Social Impacts of Palm Oil Supply Chain

           Householder and personal products companies are visible to a big number of risks and combined with the supply chain like disruption, input price increases, regulatory cost, and reputational damages. Palm Oils is the first supply chain issues for companies inside this industry. As a result, Palm Oil can reduce the market share, and the impact will increase the future.

 People, Planet, and Profit

According to the 2015 Progress Report, “Innovating, Producing, Living, and Developing Sustainability” are the four fundamental components to L’Oréal and it also addressing the TBL. Innovating sustainably, as of 2015 “L’Oréal has gone from 64% in 2014 to 74% sustainability for new or renovated products that have improved the environmental or social profile. Looking to be at 100% by 2020 and to have a positive environmental or social profile.” With this L’Oréal, will help with the deforestation. So, they are going to appreciate more the environment. Producing sustainably, they have been able to have -56% reduction in CO’2 emissions in absolute terms, -45% reduction in water consumption per unit of finished products; as well as -31% reduction in waste per unit of finished product.” The objective is to clearly have these cuts doing better as each year goes by. Therefore, by 2020 L’Oréal will have reduced 60% C02 emissions, water consumption, and waste.

Living & Developing sustainably, L’Oréal has also made it be their obligation to demonstrate and execute to its consumers as well as employees how to live a sustainable lifestyle. As of 2015 34.3% of brands have conducted a consumer awareness initiative by placing stakeholders and over 800 institutions and NGO’s dialogue at the core of its approach. As well as to federate all its stakeholders in; Employees, suppliers, clients, consumers, NGO’s, Associates, experts, and the scientific community. This will provide the best situations for L’Oréal to continue sustainably and share growth by advertising entry to allow the availability of employment and social inclusion. L’Oréal has gone to underprivileged communities and provided work for 60,600 people since 2015 joining suppliers to meet the Group’s commitments. Of these providers, 51% of them has been assessed and elected by establishing on their environmental and social performance which goes hand and hand with innovating sustainable. Including 86.6% of their permanent employees have health care coverage that helps best practices in their country of residence. This year L’Oréal has agreed to stop testing their products on animals altogether.

              As a result, L’Oréal love to empower its consumers to make sustainable choices, which means that this company wants the best for its consumers and at the same time they are making a social impact in its products. “Sharing growth its internal and external stakeholders is a priority for L’Oréal,” meaning that L’Oréal ensures to take advantages of the benefits that they provide (including their suppliers.) Also, like many others organizations, L’Oréal has adopted the triple bottom line to create a better business value and better performance. According to the 2015 Progress Report, it has now been two years since L’Oréal introduced the “Sharing Beauty with All programmer to set out the 2020 targets, in live with the long-standing tradition of responsibility.” With these strategies, they have seen real progress in their economic, and this encourages them to continue protecting the climate.

 Shared value

 Creating Shared value means that you create new products, improve your value chain and create local clusters.  How does L’Oréal do any of those?  

Value chain is essentially a tool to help recognize the methods on how value is developed by a company. L’Oréal can use the process of evaluating its competitive position. Value chain is an agreement of primary and secondary activities. The value is very dependent on how well the departments work and the balance between the units.

            Dealing with cosmetic products in value chain, L’Oréal has addressed many difficulties back in the 1990’s has become dull to sales and revenues. They didn’t want to have that status, so they had to change their supply chain model and concentrate more on their distribution. After doing so, L’Oréal has evolved more into a market leader. This lead having local beauty brands and being able to branch out into three factories and regional warehouses. Also, two national warehouses and 394 wholesalers. Additionally, they deliver products to 40 clients. They do this through company transportation on trucks or trains. The train is safe and easier to get around during the winter. Using a truck would increase the cost of going on roads and delays.

L’Oréal Luxe technical development takes the captain role in the Division’s product development process.

This job is what makes it function from “dreams into reality,” coming from a product’s creative and clever idea to its marketing brand.

“Each year, this centre and its staff of 80 develop 1500 new products for the Lancôme, Armani, Yves Saint-Laurent, Biotherm, Helena Rubinstein, Diesel, Cacharel, Victor & Rolf, Stella McCartney and Maison Martin Margiela brands.”

This is essentially just emphasizing on the fact that it correlates and ensures the consistency of the key aspects of creating new products which are first knowing well of the product, such as being able to define, design, and manufacture.

Defining a product well is being able to have it accompanied by designers, marketing teams and is expecting an industrial utility of a product concept. Next, is design phase which compacts of forming the product ideas into industrially accessible which then enables advancement and industrialization of the packaging, formulas and production resources. The last stage here is production, which in fact comes together to collaborate with the supply chain teams.

They all are fundamental for showcasing the 40,000 L’Oréal Luxe products points-of-sale worldwide. The advancing is well fitting for the demands of brands and outputs from the designing phase and making its way to marketing. Which is why L’Oréal Luxe Operations brilliantly combined the artistic craftsmanship with technical excellence.

Back in 2012, L’Oréal Luxe reported having an 8.3% growth increase on comparable data and a 16% growth rate on published data. For each quarter, the division goes above and beyond while out achieving its market growth from the success of Lancôme and for dominantly carry out the performances in North America as well as Asia. In the global fragrance market L’Oréal, Luxe has accomplished being number one. Also, in the same year, L’Oréal Lux has achieved launching Lancôme's La Vie est Belle, along with other products launched which helped strengthen the brand’s head position.  In fact, in 2012 in the women’s fragrance market the launch of Lancôme's La Vie est Belle was the biggest world launch anyone has had. Last is the “Made In” label. This specific label is designed for the industry of luxury. Most groups that have luxury brands that are yes produced in France, but what most people don’t know is the Kiehl’s is made in the United States and is also an American brand. As well as Shu Uemura is a Japanese brand which is made in Japan. L’Oréal does this to hold an account to each brand origins.

L’Oréal is all about having international brands that cover many different lines of cosmetics such as skin-care, perfume, hair-care and make-up which makes them unique and stands out above other beauty brands. By having this, it makes it possible for L’Oréal to allow its consumers to benefit and while exceeding expectations per his or her own lifestyle and to also accommodate to the distribution conditions that are local and anywhere across the globe.

L’Oréal is a well know international group that has many accomplishments in the cosmetic line and proved themselves to above the rest. L’Oréal has shown that they’ve created new products by creatively coming up with and defining products then straight to manufacturing. It makes it a breeze for them because they are very consistent with giving products and projects that their consumer’s needs. All of which guides their value chain to improve daily by being an impact globally as well as locally.               

Sustainable Strategy

Now, L’Oréal’s strategy for sustainability can be viewed as eco-efficiency as well as eco-branding. It incorporates the two while emphasizing one more than the other. Eco-efficiency has taken shape through L’Oréal as well as many companies, more so sustainability has taken over many companies. L’Oréal has taken the strategy of eco-branding more so by taking the responsibility to change the way to develop, innovate, promote, as well as sell their products. L’Oréal has gone as for to make a campaign for their strategy with “Sharing Beauty with All.” Exactly three years ago, back in 2013 is where this specific campaign has begun which they have set out to be an agent of change with four major parts. Helping the environment, its social profile, and its consumers all together.

L’Oréal has used eco-branding to shape the way they brand themselves and move as a company and is steadfast to holding its commitments to improve every year in sustainability.

Sustainable Supply Chain

L’Oréal sustainable supply chain is essentially a business issue which affects an organization supply chain or logistics such as the risks, waste cost, and the environmental impact. Throughout L’Oréal’s different groups, projects, and overall presence they have practices that has deals with sustainable supply chain.

            One of the practices that’s evident at L’Oréal is reverse logistics. Reverse logistics allows L’Oréal to reuse products and to making value out of a product. While using reverse logistics, L’Oréal makes an efficient and effective plan to expand more of their business in Indonesia with the company CEVA. L’Oréal has grown a lot while in Indonesia, helped the company to be stronger in its distribution center, which gained an increase for resources and making the best for space usage. Currently L’Oréal is the only cosmetics company that has been able to handle and preserve distribution channels in Indonesia. That allows L’Oréal to stand out and to have a clear advantage over other cosmetic companies of the amazing the fast-economic growth.

Another practice that L’Oréal fulfills is having ethical labor policies in place. L’Oréal does this by allowing one of its main priorities of recruiting is promoting diversity by realizing the differences. These policies include Health, Safety and Security, Diversity, Sexual harassment, Privacy, Conflicts of interest and harassment and Bullying. For an example, SA8000 which holds assurance over third party audits because they’ve signed the “Ethical Commitment Letter”. These audits are securely based on SA8000 and carried out by independent third party which comes with workshops, factory visits, offices, on-site accommodation and individual interviews with employees.

Green IT to Sustainable Innovation

To start with, HP can utilize as an example for L’Oréal because of the similarity that both have. L’Oréal is a corporation that is trying to reduce carbon dioxide. They set a goal that by 2020 they will balance the C02 and by doing this, they are going to innovate a new business model. Also, they are going to do what HP will do “raise the profile of innovations that could be both commercially successful and reduce greenhouse gas emissions.” (American Conference on Information System (AMCIS) 2010). Another reason of why HP can be used as an example for L’Oréal is because by reducing carbon dioxide they are going to open the possibility to innovate “sustainable products or solutions that provide social, environmental and economic value.” (American Conference on Information System (AMCIS) 2010), which is was L’Oréal is doing. L’Oréal is creating sustainable products by making sure that all their products have social benefits.

Moreover, L’Oréal is using IT because it “responds to regulations and reducing energy & waste.” Regulations are the primary focus of IT, and that’s why L’Oréal is focusing on reducing footprints. By 2020 L’Oréal will have reduced about 60% of its environmental footprint from its plants and distribution. Also, IT and L’Oréal pursue an environmental sustainability so they both can provide valuable products.

L’Oréal Place in the Five Stages of Sustainability and IT Investments

            L’Oréal is in the third stage of sustainability because they are creating sustainable products to provide their customers. With this new product's L’Oréal want to satisfice customers needs and make an impact in the environment. As a result, they research determined that L’Oréal will reduce 60% of water consumption, waste, and CO2 emission.

Besides, on what type of IT is implemented into stage 3; is the market-facing informate asset, which means that organizations will have the facilities to innovate their products.  Because of the using of social media system which contributes with stakeholders to help companies to innovate themselves by sharing sustainable products with customers (Abraham & Mohan 2015). Now the resource prescribed for this stage is that “investment in informate resources will strengthen the relationship between an organization’s sustainability strategy and organizational innovation” (Abraham & Mohan pg. 7).

 

System Thinking

System thinking and reduction focus in organizational structures, culture, and business environment. Also, system thinking helps organizations with their needs and to interact with human beings. System thinking could be applied to L’Oréal as a role model to understand and give the best customers service, and to have a good work environment for the employees. Furthermore, system plays an important place in L’Oréal because it helps to provide new products, services, business environment and an organizational structure.