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Cover Page

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Assesment Sheet

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AbstractL’Oréal is the worlds largest cosmetic and beauty product manufacturer and supplier in the

world with factories across the globe. In a position such as its, it is necessary to maintain a series of solid business ethics in order to maintain a positive reputation. L’Oréal Group has done this by maintaining good relationships with suppliers, using renewable raw materials, making their manufacturing more efficient, limiting their environmental footprint, and undergoing extensive cutting-edge research into safer and more effective products. Therefore, L’Oréal is an ethical company that continues to set the standards for others.

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Table of ContentsIntroduction................................................................................................................................................5

Ethics and Methods of Production.............................................................................................................5

Ethics and the Acquisition and Utilization of Raw Materials.....................................................................6

Ethics of Sustainability and Environmental Footprint................................................................................7

Ethics in Research and Development.........................................................................................................7

Conclusion...................................................................................................................................................8

References..................................................................................................................................................8

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Introduction

L’Oréal has long been the world’s largest beauty and cosmetic supply company, as well as a prime example of positive business ethics. Headquartered in a Paris suburb, the company has developed a large number of cosmetic products that focus on hair colour, skin care, sun protection, make-up, perfume, and other assorted haircare products. Additionally, L’Oréal has a long-standing research tradition and is active in the fields of pharmaceutics, dermatology, and tissue engineering. The company is also the leading nanotechnology patent-holder in the United States (Pitman, 2006).

The company was founded on 31 July 1919 by a young French chemist named Eugène Schueller. A decade prior, in 1909, Schueller had developed a new hair dye formula which he called Auréale. A one-man-show, Schueller developed his own formulations and manufactured all of his own products, which he sold to hairdressers in the city of Paris. The company was originally registered as the Safe Hair Dye Company of France and was founded upon principles that L’Oréal still stands for to this day. Namely, the guiding principles of research and innovation.

The company began to grow in the early 20th century, hiring 3 chemists in 1920 and expanding by 1950 to employing teams that were one hundred-strong. By the 80s this number reached as high as 1000 per team and has climbed to nearly 2000 today. These teams are responsible for not only the development of hair colors (products for which the company was founded), but also enabled the company to branch into cleansing and other beauty products. Today, there are over 500 L’Oréal brands and thousands of individual products that run the gamut from hair colour to makeup and fragrances. Additionally, their products are found in a large number of channels, from hair salons to perfumeries and supermarkets to pharmacies.

Staying true to the original principles for which the company was founded, L’Oréal has six R&D centers across the world located in France, the United States, Japan, China, and India, with plans for another US plant. It made its breakthrough into the pharmaceutical industry with the acquisition of Synthélablo, which through a series of mergers eventually became Sanofi-Aventis in 2004. Its manufacturing capabilities were also significantly expanded in 2012 with the opening of a $100 million dollar factory in Cikarang, Indonesia (2011).

L’Oréal has also been at the forefront of a number of self-esteem movements in the United States. This is exemplified by the advertising slogan “Because I’m worth it”, which was later replaced with “Because you’re worth it” and “Because we’re worth it”. These changes reflect not only the desire to create a deep consumer connection but to provide greater satisfaction, since the idealization of women has long been a criticism of the beauty product industry.

This is one of the important ethical foundations of the company that has allowed it to succeed since its inception. It has over the years developed more efficient means of production, in addition to using renewable raw materials in its manufacturing processes. Most importantly, its focus on R&D has led to the development of safer and more environmentally friendly cosmetics. These factors add together to lead to the conclusion that in the 94 years since its inception L’Oréal has always set a high standard for business ethics.

Ethics and Methods of Production

L’Oréal has adopted a system of ethics that is similar to what was described by the Toyota Motor Corporation as “lean manufacturing”. The claim made by the company is that it is the ethical responsibility of the manufacturer to encourage certain behaviors that act as a code of excellence for the consumer. These principles were defined in terms of respect, and included respect for value, respect for the workplace, respect for people, respect for time, and respect for problems (Carver, 2013). While

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this system of ethics was specifically adapted by Toyota, it can be applied broadly and L’Oréal is no exception.

Time and time again, L’Oréal has shown positive ethics in their manufacturing, particularly with respect to the value of their products. They have worked consistently through the years to give their products value to the customer by offering many different brands and choices for all cultures, races, and backgrounds following the company’s “Beauty for All” campaign. This is directly coordinated with one of the company’s ethical principles, namely its quest for excellence (l'Oréal, 2013). According to the company, they are in “constant pursuit of perfection”, and in doing so they act ethically towards their consumers.

Additionally, L’Oréal has shown tremendous ethical fortitude with respect to its supply chains. Much like the principles of respect of time, the workplace, and people, L’Oréal’s own ethical standards ensure that its supply chains are efficient, that its workplace is motivating and stress-free, and that its suppliers and factories are transparent and free of corruption. To combat this, the company began its “Buy & Care Program”. This program sets a system of ethical standards and rules for dealing with suppliers and the potential issues stemming from involvement with foreign companies. This program ensures that human rights are respected in the supply chain that people are not being held against their will or that they are not being harassed or discriminated against (L'Oréal, 2012).

This is also helped with the development of an in-house production system, wherein the supplier’s machinery and other equipment is integrated with the production facility. This ensures greater oversight into the conditions of their supplier’s workplace and also allows for a more efficient delivery of product, eliminating the need for a long supply chain and minimizing costs to the consumer. Minimizing the time and cost of production as well as maximizing the safety and working conditions of its factories is directly related to the ethical principles laid out by both Toyota and by L’Oréal (L'Oréal, 2011a).

Ethics and the Acquisition and Utilization of Raw Materials

For any business, it is the ethical responsibility of those in charge to ensure two things: that their suppliers are operating within the law and in an ethical manner and that the raw materials being used are environmentally friendly and sustainable. L’Oréal is no exception and as such has established teams which overlook the suppliers to ensure such ethical activity (L'Oréal, 2011b). Additionally, in 2005 they developed the Raw Material Sustainability Assessment Framework to assess the impact of raw materials on five fronts; consumer and employee health, environmental protection, biodiversity conservation, air trade, respect for human rights. The primary goal of this is to work with suppliers to define plans to minimize the impact of raw materials throughout their life-cycle. L’Oréal’s objective is to assess the several thousand raw material references used in the manufacturing of cosmetic products. In 2008, the tool was deployed on 98% of the perfumes used as raw materials (L'Oréal, 2011b).

In keeping with its sustainable raw material initiatives, L’Oreal has a strict policy of forestry certification for its paper and cardboard packaging, requiring an FSC certificate. Before this only applied to wood but now it has been extended to include cardboard and paper products. Half of L’Oreal’s products and up to 90% of their cardboard boxes are certified by the FSC. By doing so, L’Oreal has reduced the weight and volume of their packing products.

Raw material is a purchasing activity affected by “Solidarity Sourcing”, used in organic formulas in Europe and of which Aloe vera is a representative example. Aloe vera is a plant that is well known and has been used in the treatment of many conditions both commercially and in non-western medicines. Aloe vera has been purchased by L’Oréal since 2011 from a region of Guatemala called “Tierra del

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Calor”. The fair trade group that works with L’Oréal has nearly 30 families of farmers that is specializing in organic agriculture. They have guaranteed a reasonable price for their output. Added the volume of trade generates premiums that benefit the community’s development projects. In 2010 a water pump was installed to irrigate the land of 25 families in El Jicaro and by 2011 60 families in Piedra Parada benefited from water purification system. Thus, L’Oréal has engaged in ethical activities with regards to its raw materials and suppliers.

Ethics of Sustainability and Environmental Footprint

It is also the responsibility of such a large corporation to avoid polluting and maintain a safe and healthy environment for future citizens to enjoy. L’Oréal is reducing its carbon footprint via reductions and greater eco-efficiency, as well as maintaining a safe and healthy workplace. L’Oréal has established three significant long-term environmental targets for the period of 2005-2015, applicable to its factories and warehouses: to cut in half its greenhouse gas emissions (In 2011, the total CO2 emissions was reduced 29.8 %), to cut in half its water use per unit of finished product (in 2011, the water consumption was reduced 22.6%), and to cut in half its waste generated per unit of finished product (in 2011, the waste generated per unit of finished product was reduced 24.2%). Doing this has allowed them to save water and reduce CO2 emissions.

In 2011, L’Oréal Mexico began to use wind energy, which was able to reduce the electric energy from fossil fuels needed to operate the plant. Now, 84% of the electrical energy used by the Mexican factory comes from wind. Doing this has been able to reduce carbon dioxide emissions by 60%, as compared to emission levels in 2005. Additionally, a project was begaun in the Ychang factory in China. The Ychang factory in China is complete with over 2,000 solar tubes, which are installed to preheat water and allows a 6% cut in its fuel consumption.

Much like the Chinese factory, L’Oréal’s Factory in Pune, India uses solar energy to preheat the washing water that enables a 7% reduction in its overall energy consumption. It is installed with 320 solar panels spread over 970 square meters. In Piscataway, New Jersey, L’Oréal will also soon have reduced its CO2 emissions by 60% via the installation of LED lighting and solar panels on the roofs of the site. Doing so will allow it to achieve a reduction equivalent to 1,000 metric tons of CO2. These are prominent examples of L’Oréal’s ability to reduce its carbon footprint and maintain a safe and healthy environment for all.

Ethics in Research and Development

L’Oréal also engages in cutting-edge research in the fields of dermatology and nano-technology. Naturally, such research brings up a significant number of ethical concerns. While the potential negative nature of the research is important, it is more important to consider the positive and what L’Oréal is doing to benefit mankind. In addition, research can often be a wastely endeavor and so the company has engaged in revising its experiments on a smaller scale to minimize waste (L'Oréal, 2011b). The objective is to reduce the quantity of substances used during tests.

For example, when testing a hair colour product it was necessary to use hundreds grams of hair. To reduce the usage of both hair and chemical products, the company decreased the quantities of hair used down to mini-locks, then to samples in small test tubes, and then finally to the stage of hair powder. Now L’Oréal only uses 10 milligrams of hair and just a few milligrams of chemical products are used for our hair colour, hair care and make-up tests. The miniaturized tests limit waste and not only

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can save money but handling small sample will also bring productivity gains as test are widely automated. Therefore, time is saved and more experiments can be run.

Pro Xylan is an ultra-potent molecule obtained after 7 years of research by L'Oréal. Two steps of chemical synthesis are required to produce Pro-Xylane, and they aim to use less energy and produce less waste. Not only that, Pro-Xylane is also a biodegradable, non-persistent, bioaccumulative, and non-toxic chemical. In 2011, they improved the processes used to obtain Pro-xylane, a natural sugar derivative extracted from beech wood by reducing the quantity of solvents used. Thus L’Oréal has engaged in positive research that affects the community positively but is doing so in an environmentally friendly manner.

Conclusion

In conclusion, L'Oréal is an ethical company. L'Oréal has ethical methods of production that bring the value of their products to their customer by having various brands and choices for them. L'Oréal is also aiding in the maintenance of the environment by reducing the use of plastic and wood in their production. Furthermore, their research and development teams discover more ways to reduce waste and find new formula for better production. L'Oréal takes care of the environment for healthy future and for a better life for all and this above all else makes them an ethical company.

References

2011. L’Oreal to build its largest factory worth $50m in Jababeka [Online]. The Jakarta Post. Available: http://www.thejakartapost.com/news/2011/02/18/l%E2%80%99oreal-build-its-largest-factory-worth-50m-jababeka.html 2013].

CARVER, M. 2013. Lean Manufacturing Is a Form of Ethics [Online]. iSixSigma. Available: http://www.isixsigma.com/community/blogs/lean-manufacturing-is-a-form-of-ethics/ 2013].

L'ORÉAL 2011a. Suppliers at the heart of L'Oréal. Sustainable Development Report. p. 34L'ORÉAL 2011b. Sustainable Development Report.L'ORÉAL. 2012. California Transparency in Supply Chains Act of 2010 [Online]. Company Overview.

Available: http://www.lorealusa.com/_en/_us/html/our-company/operations/socially-responsible-supply-chain.aspx.

L'ORÉAL. 2013. Our Values and Ethical Principles [Online]. Available: http://www.loreal.com/group/who-we-are/our-values-and-ethical-principles.aspx.

PITMAN, S. 2006. L'Oréal builds on skin testing capabilities [Online]. Cosmetics Design-Europe. Available: http://www.cosmeticsdesign-europe.com/Formulation-Science/L-Oreal-builds-on-skin-testing-capabilities 2013].