The document is a report on the ethical and socially responsible practices of L'Oréal. It discusses L'Oréal's history and growth into a global cosmetics company. In 2006, L'Oréal began focusing on social responsibility by acquiring The Body Shop and appointing a new CEO. The report outlines L'Oréal's environmental sustainability efforts in sourcing ingredients and reducing waste. It also discusses community programs and the awards L'Oréal has won for its ethical practices from publications like Maclean's magazine. L'Oréal's goal is to ensure all products show social or environmental improvement by 2020.

1. 1 BUSI1033 Report Assignment 1 Rob Welsh
Report on Ethical and Socially
Responsible L’Oréal
Author: Robert Welsh
Date: Sunday, January 29, 2017
Course: BUSI1033 Introduction to Business
Instructor: Lisa Allen

2. 2 BUSI1033 Report Assignment 1 Rob Welsh
Contents
Introduction..................................................................................................................................... 3
L’Oréal The Company.................................................................................................................... 3
L’Oréal Historical Changes ............................................................................................................ 4
Ethical and Responsible Standards ................................................................................................. 4
a) Ethical Actions..................................................................................................................... 5
i. Environmental Sustainability ........................................................................................... 5
ii. Community Sustainability ............................................................................................ 6
b) Ethical Awards..................................................................................................................... 6
i. Maclean’s magazine......................................................................................................... 6
ii. Ethisphere ..................................................................................................................... 6
c) Ethical Future....................................................................................................................... 7
Conclusion ...................................................................................................................................... 7
References....................................................................................................................................... 8

3. 3 BUSI1033 Report Assignment 1 Rob Welsh
Introduction
The following is a report on social responsibility of one of the largest cosmetic companies in
the world that has gone through many transitions since 1909. Maclean’s magazine states that
L’Oréal is one of the “Top 50 Most Socially Responsible Companies in Canada” (Smyth, 2015).
Maclean’s articles are read by many Canadians and believed to be a reputable and honest
magazine. L’Oréal is a profitable global company that researches and develops product,
manufactures and sells their products internationally. In 2006, the organization has transitioned
itself to be a socially responsible company.
“Research shows that 30% of consumers do not trust ethical practice claims made by
companies in the cosmetics sector” (Market Line, 2012). This report evaluates how the company
has grown and analyzes if the company is doing this solely for profit and public relations or
because they truly believe that being socially responsible is important for business and the
general community.
L’Oréal The Company
“L’Oréal SA was founded in 1909 by Eugène Schueller” (L’Oréal, 2017) and “is one of the
largest cosmetics companies in the world” (Market Line, 2012) selling “hair care, skin care, sun
care, color cosmetics and fragrances” (MATUSOW, 2016), “with a workforce of 68,900
employees. The company’s 27 brands are sold in 130 countries” (Market Line, 2012) reaching
the top of global sales at “$27.6 Billion” (MATUSOW, 2016). Outselling many companies, such
as Unilever & Proctor & Gamble (MATUSOW, 2016). In Canada, sales have reached $145
Million in 2016 (EBSCO Host, 2016).

4. 4 BUSI1033 Report Assignment 1 Rob Welsh
L’Oréal Historical Changes
It is important to understand what changes the L’Oréal went through to reach the top. Did
the organization always build its empire on Sustainability?
Two significant and influential changes occurred first when “Nestle, based in Vevey,
Switzerland” purchased almost “30% of L’Oréal” in 1974 (FRPT Research, 2014) and second in
1963, L’Oréal starts its globalization, by listing on the New York Stock Exchange (Born, 2007)
Through 1976 to 1996 L’Oréal went through major changes, each time they purchased a
company or brand:
 In 1976, shortly after the major share purchase from Nestle
 In 1984, with the purchase of Warner Cosmetics
 In 1996 with the purchase of Maybelline and Redken brands
(Chailan, 2010)
Research indicates that L’Oréal started on a path to Social Responsibility in 2006 by
purchasing “The Body Shop” (Market Line, 2012) and becoming a member of the “Roundtable
on Sustainable Palm Oil” (Smyth, 2015). The Body Shop was founded on 5 core values that
are all Socially Responsible: “Support Community Trade, Defend Human Rights, Against
Animal Testing, Activate Self Esteem, and Protect Our Planet” (Market Line, 2012). Paul Agon,
with a socially responsible mindset, became CEO in April 2006 (Born, 2007, p. 12) L’Oréal
continued its growth and outperformed its market in 2011 (Market Line, 2012).
Ethical and Responsible Standards
L’Oréal’s credo is "Our Ethical Principles of Integrity, Respect, Courage and Transparency
are always upheld wherever we operate in the world, any time we make a decision, big or small"
(PR, 2014). The following statement from Nestle, a major shareholder of L’Oréal, leads one to

5. 5 BUSI1033 Report Assignment 1 Rob Welsh
believe that they are not sincere: “Nestlé Pure Life is a healthy, eco-friendly choice” and that
“bottled water is the most environmentally responsible consumer product in the world” (Market
Line, 2012). With “85% of water bottles ending up in landfills” (Dolesh, 2014), Nestle’s
statement is clearly not a sustainable one. The rest of this report will outline a more sincere
approach with L’Oréal’s “Sharing Beauty with All” program describing their actions, awards and
the future of L’Oréal in regards to ethical and Social Responsibility.
a) Ethical Actions
Since 2006, L’Oréal has taken great steps to be ethical and socially responsible in the
manufacturing and distribution of many of their products. Although, the actions may have been
perceived as slow for some, they have been steady and significant.
i. Environmental Sustainability
L’Oréal has been a member of Roundtable on Sustainable Palm Oil (RSPO) since 2006.
“Shea butter and palm oil are two ingredients that are at the centre of the company's ambitious
initiative to source responsibly” (Smyth, 2015). RSPO ensures that the suppliers process these
plants in a manner that “none of its products is associated with deforestation” (L’Oréal, 2017).
These ingredients are now 100% collected from certified sources (Smyth, 2015).
L’Oréal boasts a reduction of 50% from 2015. (Smyth, 2015) They are also “improving their
biodegradability, i.e. their ability to be broken down by microorganisms found in the natural
environment” and “reducing their water footprint, which represents the impact of products on the
aquatic environment.” (L’Oréal, 2017)
Two other key points that L’Oréal points out is that “more than 50% of raw materials used by
L’Oréal are renewable and more than 4,900 tonnes of post-consumer recycled (PCR) materials

6. 6 BUSI1033 Report Assignment 1 Rob Welsh
were used instead of virgin materials in 2015” (L’Oréal, 2017). These are measurable and
significant results, supported by suppliers, packaging processes and customers.
ii. Community Sustainability
L’Oréal has taken on The Body Shop’s Community Fair Trade program, with a mission to
“help economically vulnerable people find long-term access to work and an income.” (Market
Line, 2012). This is reflected when L’Oréal started the “Beauty for a Better Life”. Since 2009, it
has been an objective to train 100, 000 underprivileged people providing free, high-quality
training in beauty professions. As of 2016, they have trained 60,600 underprivileged (L’Oréal
2017, p. 9).
b) Ethical Awards
i. Maclean’s magazine
Maclean’s magazine along with Sustainalytics voted L’Oréal the top company in its industry
in a study to find the “Top 50 Most Socially Responsible Companies in Canada.” (Smyth, 2015)
and indicated that “they know it's smart business to consider global issues and the broader
community” (Smyth, 2015). Sustainalytics is an organization with members in the investment
community (Sustainalytics, 2017). The criteria used is good business, measuring “strong
performance across important sustainability issues such as resource efficiency, impact on local
communities, treatment of employees and responsible supply-chain management” (Smyth,
2015).
ii. Ethisphere
For the fifth time, L’Oréal has been “recognized by the Ethisphere Institute, an independent
center of research promoting best practices in corporate ethics and governance, as a World's
Most Ethical Company®” (PR, 2014).

7. 7 BUSI1033 Report Assignment 1 Rob Welsh
The award emphasises independent research. How independent is it when Emmanuel Lulin
Senior Vice President and Chief Ethics Officer of L’ORÉAL is on the editorial advisory board
(Ethisphere, 2017), all competing organization are rated based on the information that is
provided by each company in a survey of 150 questions (Ethisphere, 2017) and the organization
is funded in part by the company receiving the award? It is not to say that the award is not valid
or the company that wins it, isn’t an ethical company, but there is an appearance of it and could
also be seen as a conflict of interest.
c) Ethical Future
The Goal defined on L’Oréal’s website and relayed in the Top 20 Global Beauty Companies
article is that “by 2020, L’Oréal will ensure that 100% of our products show environmental or
social improvement” (MATUSOW, 2016) (L’Oréal, 2017). On that merit alone, the goal may
not be seen as substantial. However, on pages 8 and 9 of their 2015 progress report, they outline
some very specific and substantial 2020 targets and are taking social responsibility very
seriously. For example, “L’Oréal will send zero waste to the landfill” (L’Oréal, 2017).
Conclusion
"I always said I was sure this would be successful," Agon says of The Body Shop (BORN &
Weil, 2015). L’Oréal is successful and has been in business for over a century. There have been
defining moments that supported growth and creation of wealth through out it’s history. Since
2006, when L’Oréal started its crusade of Social Responsibility within its organizational culture,
sales during this period have taken it to the top of the cosmetic industry. Surprisingly this is not
just a fad, short-term solution or a public relations ploy. Their Social Responsibility activity has
made a real impact for the better good and L’Oréal has incorporated it to support profits.
Another defining moment for the company.

8. 8 BUSI1033 Report Assignment 1 Rob Welsh
References
Body Shop goes back to ethics. (2008). Marketing (00253650), 3.
BORN, P., & Weil, J. (2015). VISIONARY OF THE YEAR. WWD: Women's Wear
Daily, 210(32), 42-48.
Born, P. (2007). AGON IN COMMAND. WWD: Women's Wear Daily, 193(106), 30-
37.
Chailan, C. (2010). From an aggregate to a brand network: a study of the brand portfolio
at L'Oreal. Journal Of Marketing Management, 26(1-2), 74-89.
doi:10.1080/02672570903461130
Dolesh, R. J. (2014, 05). The problem with bottled water. Parks & Recreation, 49, 36-38.
Retrieved from
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EBSCO Host, (2017). Search for L’Oreal company information. Retrieved on January 12,
2017 from
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&db=cix&bquery=CO+l%26%2339%3boreal&type=15
Ethisphere, (2017). Ethispeher.com retrieved on January 13, 2017 from
http://www.ethisphere.com/
Fine, J. B. (2015). LEADERS IN CHANGE. WWD: Women's Wear Daily, 210(32), 8.
FRPT Research, (2014). L'oreal to buy back shares from Nestle for $8.2 billion. FRPT-
Finance Snapshot, 13-15.

9. 9 BUSI1033 Report Assignment 1 Rob Welsh
L’Oreal, (2017). L’Oreal Group, retrieved on January 13, 2016 from
http://www.sharingbeautywithall.com/sites/default/files/cms/sbwa-progress-
report-2015_english.pdf
MATUSOW, J. (2016). Top 20 Global Beauty Companies: All Over the Map. Beauty
Packaging, 21(7), 44-86.
Market Line. (2012), Natural, Organic, and Ethical Cosmetics. (2012). Natural, Organic
& Ethical Cosmetics: L'Oréal's Acquisition of The Body Shop, 1-18.
PR, N. (2014, March 20). L'Oreal Recognized As One Of The World's Most Ethical
Companies. PR Newswire US.
Sharing Beauty, (2017). L’Oreal Group, retrieved on January 13, 2017 from
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Smyth, J. (June 15 2015). The bottom line: Be good. Maclean's, Retrieved from
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Sustainalytics, (2017). Retrieved on January 13, 2017 from
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