2024 universal registration document

4.5.3.1.3 Prioritising sustainably sourced renewable raw materials

L'Oréal has developed its sourcing strategy for biobased ingredients around respect for biodiversity, and promoting traceability and sustainability. The ISO 16128 standard on cosmetics defines ingredients as biobased when more than 50% of their carbon content is of biological origin. Ingredient traceability is made possible by precise knowledge of botanical and geographical origin and cultivation methods. Sustainability is assessed using the SCAN Index, which analyses environmental and social risks. If risks are identified, an action plan is put in place, with an independent third party where necessary, to ensure compliance with the Group's sustainable purchasing policy.

4.5.3.1.4 A "zero deforestation" approach

To combat deforestation, L'Oréal is seeking to implement an ambitious forest policy:

• traceability: L'Oréal remains vigilant regarding the origin of its raw materials subject to deforestation risk in order to verify that they are not sourced from deforested areas;
• specific action plans: action plans exist for product types that are particularly sensitive, such as palm oil, soya and wood fibre;
• risk management: an in-depth analysis evaluates the risks associated with supply areas, taking into account alerts from the media, NGOs and other stakeholders; and
• supplier engagement: L'Oréal works with its direct suppliers and throughout the value chain to promote sustainable sourcing practices.

To further transform its value chain, L'Oréal is focusing on two areas:

• industry transformation: working with stakeholders such as the CDP and industry coalitions on sensitive raw materials, particularly Action for Sustainable Derivatives (ASD) in the palm oil sector; and
• projects in the field: direct support for projects, such as in Indonesia and Malaysia to help small producers adopt sustainable practices and qualify for Round Table on Sustainable Palm Oil (RSPO) certification.

Improvement plans are in place with suppliers representing 70% of the volume of raw materials with sustainability challenges, according to the SCAN Index.

4.5.3.1.5 Results by commodity

L'Oréal has put in place specific actions for sensitive raw materials:

• palm oil, palm kernel oil and their derivatives: certified sustainable sourcing (RSPO), traceability to the palm oil mills (via ASD), and the use of tools such as the Sustainable Palm Index to assess suppliers and have them commit to best practices. L'Oréal aims to support small growers and encourage sustainable practices in the sector;
• soya bean oil: purchases in Latin America from certified sources (IP Proterra, RTRS, BIO, Fair For Life); and
• paper and cardboard: for packaging, use of FSC- or PEFC-certified materials, guaranteeing sustainable forest management and transparency of the country of origin.

L'Oréal is a member of the Forest Stewardship Council (FSC) and applies the FSC label to its paper and cardboard packaging. In terms of plastics, L'Oréal cease to manufacture finished goods PVC in 2018.

4.5.3.2 Restoring biodiversity

4.5.3.2.1 Implementing regenerative farming practices among suppliers

Regenerative agriculture is an approach to agricultural systems based on rehabilitation and conservation, and is developed in collaboration with local communities. It is based on four key actions:

• protecting and enhancing biodiversity on and around farms;
• improving or preserving carbon and water retention in the soil, by harnessing the power of plants, livestock and sustainable farming practices;
• strengthening the resilience of crops and nature, while reducing the use of pesticides and chemical fertilisers; and
• supporting the livelihoods of agricultural communities.

L'Oréal is initiating regenerative agriculture pilot projects within its supply chain. A concrete example of this, is an initiative in Indonesian palm plantations, where the Group, partnering with local stakeholders and research centers like CIRAD, is supporting the implementation of eco-friendly agriculture practices. Adapted models are used to restore soil and gradually reduce the use of chemicals, increase yields and raise the incomes of local populations, with the main aim of improving the resilience of natural ecosystems.

4.5.3.2.2 Supporting the regeneration of natural ecosystems

The L'Oréal Fund for Nature Regeneration, a €50 million impact investment fund, supports projects to restore soil and regenerate mangroves, and marine and forest areas. The ambition is to help restore one million hectares of ecosystems by 2030, capture 15 to 20 million tonnes of CO₂ and create hundreds of jobs, while avoiding carbon offsetting solutions. Since 2020, more than one hundred projects have been reviewed in the process of building up the investment portfolio.