2024 universal registration document

Investment indicator:

At the level of L'Oréal, several economic activities have been identified as individually sustainable, resulting in capital expenditure (CapEx) enabling certain target activities to contribute to the climate change mitigation (CCM) and climate change adaptation (CCA) objectives, and to the transition to a circular economy (CE) in terms of reusing water for industrial purposes. These activities are summarised in the table below:

Activities that are not enabling through turnover (net sales), as is the case for L'Oréal’s business, can only be eligible for the climate change adaptation (CCA) objective by purchasing specific CapEx as part of an adaptation plan. Only activity 14.2 (Flood risk prevention and protection infrastructure) currently meets this criterion. Other CapEx and activities contribute either to climate change mitigation (CCM) or to the transition to a circular economy (CE) objectives.

Long-term leases of heated buildings capitalised in accordance with IFRS 16 represent the main source of eligible CapEx (€407 million, or 83% of the total), which is included in activity 7.7 (Acquisition and ownership of buildings). These relate to long-term leases for administrative, industrial and retail sites. The remainder of the eligible scope (€86 million, or 17% of the total) includes:

• buildings and newly acquired heated buildings aligned with the sustainable property strategy (in addition to leases of heated buildings under IFRS 16 included in activity 7.7);
• certain equipment and facilities of the L'Oréal for the Future programme at operational and administrative sites, which are assigned to Taxonomy activities based on whether they contribute to climate (adaptation/mitigation) or circular economy objectives (activities 7.2, 14.2, 7.3, 7.5 and 2.2);
• IFRS 16 company car leases in Brazil (activity 6.5). These contracts, which run for three to five years, were signed in 2023 and were not renewed in 2024. In other countries, the monthly renewal of vehicle fleets, subject to insignificant overall price fluctuations, exempts them from the scope of IFRS 16.

The value of leases (as per IFRS 16) corresponds to the value recorded in the Group’s consolidated statement of financial position. The value of buildings and newly acquired heated buildings along with CapEx under the L'Oréal for the Future programme are taken from the Group's internal management reports and reconciled annually with the audited financial statements. This rigorous upstream analytical process means L'Oréal avoids inadvertently counting investments twice.

Certain projects, which were not material taken individually or for which it was difficult to prove their contribution to objectives, were not analysed for alignment and were therefore classified as non-aligned. The alignment analysis focused on a scope of material physical assets for which evidence of alignment was available, namely:

• IFRS 16 leases of heated buildings (excluding stores), by applying a financial materiality threshold targeting the most important leases (although all leases are subject to the Group's property due diligence criteria, only the most significant are analysed in depth for alignment purposes);
• investments of over €500,000 by L’Oréal SA linked to the L'Oréal for the Future programme. In 2024, no L'Oréal SA investment linked to the L'Oréal for the Future programme exceeded €500,000.

For IFRS 16 leases of heated buildings, alignment with the Taxonomy is based on three criteria:

• energy performance: an A-rated or equivalent energy performance certificate (EPC⁽¹⁾) has been provided. Alternatively, a recognised environmental certification (e.g., BREEAM, LEED, HQE, etc.) has been provided, along with evidence that the building is among the top 15% performers in terms of energy efficiency. Evidence that the building’s energy performance is monitored and managed (reports on consumption, etc.) has also been provided;
• climate change adaptation (DNSH): climate risks (e.g., heat waves) and their impact on business activities have been assessed and adaptation measures implemented (e.g., energy-efficient air conditioning and improved thermal insulation). The internal exposure analysis uses an expert tool based on RCP⁽²⁾ scenarios 2.6, 4.5 and 8.5, with projections from 2030 to 2100;
• compliance with the minimum safeguards: the Group meets the requirements on minimum safeguards set out in the Platform on Sustainable Finance's (PSF) report, via:
• its Code of Ethics and Vigilance Plan (to prevent risks of violations of human rights, fundamental freedoms, health, safety and the environment – see sections 3.2.1 and 3.5),
• its anti-corruption policy (see section 3.2.3),
• the integration of taxation into its sustainability statement (see section 3.2.4); and its Legal Charter (compliance with local legislation, particularly competition law – see section 3.6.3).

In accordance with the European Commission communication of 16 June 2023 on minimum safeguards (2023/C 211/01) and with the Sustainable Finance Disclosure Regulation (SFDR), the Group is not exposed to controversial weapons.