Within the cosmetics and personal care sector, Portfolio 21 seeks companies that minimize ingredients with impacts on human and environmental health. Companies that demonstrate an ability to reformulate products and increase use of renewable raw materials will ensure availability of resources over the long term. Governments around the world are implementing legislation to restrict controversial chemicals, which also creates regulatory risk for companies in this sector. L’Oreal shows leadership with its eco-design approach, which incorporates indicators on the traceability of ingredients, their reactions in water and air, and their impact on biodiversity. L’Oreal is actively expanding its Green Chemistry program, based on three principles: 1) the use of raw materials from renewable sources; 2) the development of processes that reduce waste and the amount of energy needed for production; and 3) the generation of environmentally friendly ingredients. L’Oreal has also implemented a biodiversity assessment tool, which examines the upstream impact of the raw material being sourced. The company is currently working to eliminate or reduce the use of risky chemicals, such as phthalates, long-chain parabens, secondary amines, triclosan, nitrated musk, siloxane D4, and heavy metals. Acknowledging the trend in consumer preference towards natural and/or organic products, approximately 30 organic or fair trade ingredients were recently added to the company’s portfolio and L’Oreal is in the process of increasing the number of its products that have been eco-certified. L’Oreal has also implemented numerous measures to decrease its manufacturing impacts, including the use of renewable energy and investments in more efficient boilers. As a result, L’Oreal has reduced its energy consumption while increasing production capacity. Using 2005 as a baseline, L’Oreal has a goal to reduce its carbon dioxide emissions, water usage, and waste by 50% per finished product unit by 2015.
Overall, L’Oreal is well positioned to succeed in a world of diminishing resources and increasing regulations. However, to maintain competitiveness over the long term, Portfolio 21 urges L’Oreal to expand its Green Chemistry and product reformulation efforts.
To the best of our knowledge the above information is accurate and was obtained from sources we believe to be reliable. Neither the information presented above nor any opinion expressed shall be construed as an offer to sell or a solicitation to buy the security. The views expressed are those of portfolio management as of 1/31/13 and may not reflect current opinions or subsequent events.