3. Risk factors and management
3.2 Internal Control and risk management system and tax policyThe governance structure for the Internal Control system applies to all of the Group's activities and is based on the three levels of control shown in the diagram below:
This diagram shows the governance Structure for the Internal Control System.
The governance structure for the Internal Control system applies to all of the Group’s activities and is based on three levels of control:
Level 1 – PERMANENT CONTROL
Conducted by:
Employees
Operational management
Description:
Conducted by each individual employee and line management as part of their day-to-day duties.
Level 2 – PERMANENT CONTROL
Conducted by:
Operational support functions
Internal control managers at entity level
Functional departments
Risk management and internal control departments
Description:
Conducted by the Functional departments in their fields of expertise.
Define cross-functional policies/standards.
Support management in implementing them.
Level 3 – PERIODIC CONTROL
Conducted by:
Internal and external audits
General Management
Board of Directors / Audit Committee
Description:
Conducted by Audit (internal or external).
Assesses how well the system is working and contributes to its improvement.
3.2 Internal control, risk management system and tax policy
3.2.1 Control and oversight organisation, environment and activities(1) CSRD
The control environment is critical to the Internal Control system. It ensures that risks are managed properly and that appropriate procedures are effectively implemented. It is based on behaviours, the organisational structure and employees. At L’Oréal, it forms part of a culture of rigour and commitment modelled by senior managers in line with the Group’s strategic choices.
The Group’s Ethical Principles
L’Oréal’s development and reputation are built on strong Ethical Principles: Integrity, Respect, Courage and Transparency. The Group’s policies on sustainability, social and societal responsibility, compliance and philanthropy are based on these Ethical Principles.
L’Oréal’s Code of Ethics is available in 30 languages and as an audiobook in English and French. It was completely overhauled and expanded in 2023. It is distributed to all employees around the world. It uses simple rules and concrete examples to explain how they can apply these Ethical Principles in their behaviours and actions.
The Code of Ethics applies to all employees, directors and corporate officers, as well as members of the Executive and Management Committees.
Chief Ethics, Risk and Compliance Officer
The Chief Ethics, Risk and Compliance Officer reports directly to the Chief Executive Officer and keeps him informed on a regular basis. The Chief Ethics, Risk and Compliance Officer regularly updates the Board of Directors and the Executive Committee. Regarding Ethics, he is responsible for:
- promoting and embedding best practices within the Group by informing ethical decision-making;
- overseeing employee training;
- overseeing the management of alerts and directly managing those related to General Management positions; and
- measuring and assessing the Company’s ethical performance.
He has a dedicated budget and team, and unrestricted access to all information about the Group’s business activities. He can call on any of the Group’s teams and resources to support his work.
(1) This section incorporates by reference the information required by the CSRD (G1 GOV-1) for the sustainability report (section 4.13.2.1).