ESG Analysis

Environmental

The cosmetics industry is one of the most impactful industries on the environment since
companies regularly use chemical ingredients, animal testing, irresponsible sourcing, water
consumption, plastic pollution, air pollution and transportation. That's why nowadays
companies like L’Oreal, Estee Lauder and Shiseido Co. need to take care of their
environment score to maintain or improve their ESG score by being a much more
responsible company.

In this analysis on the environmental aspects of the company’s ESG score we will analyze
the Total Energy Consumption since this is the aspect that has mainly changed through the
years.

During 2020 L’Oreal decreased its uses of energy in 3.73% compared to their 2019 total
consumption, reaching as the company’s web page states, by the end of 2020 72 sites that
use 100% renewable energy including 19 factories. 2020 was a year of change in L’Oreal,
since they’ve lounched the program called L’Oréal for the Future which states its
compromise of reaching a more sustainable model for the future, some of the advances that
they achieved based on their 2020 Responsability the development of a Bar Shampoo using
plant based ingredients and being 99% biodegradable, also L’Oréal has been recognised as
a global leader in sustainable development by the CDP. L’Oréal is the only company to have
ever received A ratings in all three areas assessed by the CDP combating climate change,
protecting forests and sustainably managing water for five years in a row.

On the other hand Estee Lauder announced that during the year 2020 they fulfilled their
demand of products using 100% renewable energy, that means a net-zero emissions
operation through investments in energy-efficient technologies and processes implementing
a two-pronged approach, consisting of onsite generation and Virtual Power Purchase
Agreements (VPPAs) as Edie Newsroom stated. This helped the company decrease their
energy consumption in 8.54% compared to what they used in 2019. Based on their
responsability report for 2020 we can see that their primary goal for that year was to reduce
their environmental impact on land, water and air by using concious ingredient extraction,
clean energy with net zero - carbon emissions and a inteligent water usage.

Lastly Shiseido Co during that year achieved a 33% of renewable energy used for all their
operations, however their usage of energy increased in 2020 by only 0.20%, but as their
official web page states they introduced a new energy management system at the
Kakegawa factory (Japan). In order to reduce wasteful power consumption, they expect to
reduce by 7% the annual CO2 emissions, as is stated in their anual responsability report for
2020 in which they also mention they’ve been using water power for operations of their
factories by using the cannels designed to power their plants through water flows while it
makes it’s way to the ocean. Combined with the usage of solar pannels in different locations
they can assure that in total, renewable energy accounts for 33% of electricity consumed at
their sites, and that they’ve increased by 95% the usage of hydropower and solar power in
2020 compared to 2019.
As we can see the three companies are working to improve their usage of energy to reduce
their impact on the ecological aspect of their business, however with this information we can
notice that L’Oreal and Estee Lauder are the companies that are more advanced in their
goals to achieve a cleaner operation environment for the company since they are the ones
that have reduced their carbon footprint the most and utilize the energy consumption in a
much more efficient way for example Estee Lauder who fulfilled their demand with 100%
renewable energy or L’Oreal who reached 72 sites to be net-zero carbon emissions in the
same year.

Social
Estee LAUDER, L’OREAL, SHISEIDO CO., are all three companies in the Cosmetic
Industry, this industry in the U.S. alone is consumed by more than 161 million women, within
our society being socially responsible has become a trending topic that more companies
have been aware of, since this industry is highly consumed by women it has become part of
the industries ethic that they are able to have more women work in the industry. Overall we
see a growth within 3 companies, the Social Disclosure score for Estee Lauder increased
from 28.2 in 2017 to 47.7 in 2020. The Score for L’Oreal in 2017 was 36.91 and 38.88 in
2020. And lastly for SHISEIDO CO. in 2017 the score was 25.18 and in 2020 it increased to
60.79. There is also a growth within the # of women in the industry. Although for Estee
Lauder it became an issue when in 2020 the Corona Virus hit, we are able to see a
decrease in the Pct Women in Workforce from 2019 where it was at 84.3 and it decreased in
2020 to 80.2, this is due that Estee Lauder was planning on cutting 2,000 jobs worldwide
due to the CoronaVirus Pandemic that potentially affected the company, The cuts are
expected to save 400m a year. They also revealed its net profits more than halved to $680m
in the year to June. The fall came despite the group making $800m worth of savings
including cuts to advertising, travel and a recruitment freeze. A quarterly dividend due in
June was also ditched. Online sales were able to go up but this negatively affected retail
outlets around the world, this is why many jobs were cut off, their sales were algo affected
due to the lack of air travel that affected trade within the company. Although for the other 2
companies they were able to stay relatively the same and were not as affected as Estee
Lauder. Overall we see these companies, being more socially responsible and inclusive
within their workspace, L’Oreal since 2015 has become an active member of the
International Labor Organization’s Global Business and Disability Network. Today 70% of the
employees globally for L’Oreal are women, 46% of the Board of Directors, 33% of the
Executive Committee and 48% of the Management committees. One of the main focus for
L’Oreal was hiring people with disabilities where in 2019 it was calculated about 1,280
people with disabilities were employed by L’Oreal and around 87% of the strategic suppliers
are selected based on their environmental and social performances. And have been able to
work strategically with their suppliers.

Governance

Estee Lauder, L’Oreal, Shiseido Co. all of these three companies are cosmetics companies
that have a governance structure of mostly women on board. In ESTEE LAUDER there are
about 44% of women on the board in 2021 LOREAL 50% of women on the board in 2021
SHISEIDO 37.5% of women on the board in 2021 which is a lot better than how all of them
started. A lot of companies used to struggle a lot in the past for letting women into the board.
That's why the numbers are lower. Of eight directors, four members (50.0%) are highly
independent external directors who meet the “Criteria for Independence of External Directors
and Audit & Supervisory Board Members” of the Company. The directors include three
females (37.5%).Of five audit & supervisory board members, three members (60.0%) are
highly independent external audit & supervisory board members, and two are full-time
members with career background in the Shiseido Group. The members include three
females (60.0%).Of the total 13 directors and audit & supervisory board members, seven
members (53.8%) are highly independent external directors or external audit & supervisory
board members, and six members are female (46.2%).

L'Oréal USA has been named one of the 2019 NAFE Top Companies for Executive Women
by the National Association for Female Executives (NAFE). NAFE and Working Mother
Media recognize trailblazing companies for their efforts to support female leaders and are
dedicated to exploring the challenges women face in the workplace. This is L'Oréal USA's
fifth year on the list.

"At L'Oréal we believe that diversity is an essential source of creativity, innovation and
performance," said Angela Guy, Senior Vice President of Diversity and Inclusion at L'Oréal
USA. "With women representing 70% of the company's global workforce, and 68% in the
U.S., we remain committed to creating an environment that ensures women are thriving and
advancing into leadership positions."

On the other hand Estee Lauder does not do so well in this department, the company
performs poorly among its other two competitors on the matter of integrity of corporate
governance. But the company is a top performer when it comes to diversity of leadership,
based on its peers as well as companies in similar geographic regions. On the other hand
Shiseido strives to maximize medium-to-to-long-term corporate and shareholder value by
implementing and enforcing corporate governance to maintain and improve management
transparency.
References:
Estee Lauder Environmental, social, and corporate governance profile. censible.co. (n.d.).
Retrieved April 4, 2022, from
https://esg.censible.co/companies/Estee-Lauder-environmental-social-corporate-governance
-profile

Estee Lauder Companies. Forbes Names The Estée Lauder Companies as a Best Employer
for Women. (2018). Retrieved April 4th, 2022
https://www.elcompanies.com/en/news-and-media/newsroom/company-features/2018/forbes
-names-the-estee-lauder-companies-as-a-best-employer-for-women

Estée Lauder. (n.d.). Sustainability. – The Estée Lauder Companies Inc. Retrieved April 6,
2022, from https://www.elcompanies.com/en/our-commitments/sustainability

L'Oréal. (2021, January 29). L'Oréal recognised as a leader in Gender Equality. L'Oréal.
Retrieved April 4, 2022, from
https://www.loreal.com/en/press-release/hr-and-diversity/loreal-recognised-as-a-leader-in-ge
nder-equality/

L'Oréal. (2020, January 23). L'Oréal group : Fighting climate change. L'Oréal. Retrieved April
4, 2022, from
https://www.loreal.com/en/commitments-and-responsibilities/for-the-planet/fighting-climate-c
hange/

L’Oréal greenhouse gas (GHG) emissions 2020 - L'OREAL. (n.d.). Retrieved April 4, 2022,
from
https://www.loreal.com/-/media/project/loreal/brand-sites/corp/master/lcorp/documents-medi
a/publications/commitments/bilanges2020lorealen.pdf

L’Oreal. Sharing Beauty With All : THE L’ORÉAL SUSTAINABILITY COMMITMENT (2019).
Retrieved April 4th, 2022
https://www.loreal-finance.com/system/files/2020-06/EN_2019%20L%27Oreal%20Progress
%20Report.pdf

L'Oreal. (2020). The L'Oreal Sustainability Commitment.

https://www.loreal-finance.com/system/files/2021-03/SBWA_PR_GROUPE_2020_ENG.pdf

L'Oreal. (n.d.). Responsibility - 2020 annual report. Rapport Annuel 2020 – L'Oréal Finance.
Retrieved April 6, 2022, from
https://www.loreal-finance.com/en/annual-report-2020/responsibility-1-4-0/

Newsroom, E. (2020, November 2). The estée lauder company reaches net-zero operational
emissions, 100% renewable electricity. edie. Retrieved April 4, 2022, from
https://www.edie.net/the-estee-lauder-companies-reaches-net-zero-operational-emissions-1
00-renewable-electricity/

Shiseido Co., L. (n.d.). Governance. Governance | INVESTORS | Shiseido Company.

Retrieved April 4, 2022, from https://corp.shiseido.com/en/ir/governance/
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Shiseido Co. (2020). Sustainability Report 2020.

https://corp.shiseido.com/en/sustainability/pdf/2020.pdf