Natura Cosmeticos is a cosmetics company that operates under a direct selling model and currently involves 1.6 million resellers worldwide. The company primarily operates in Brazil and Latin America, although a recent acquisition increased its international scope.
Global demand for organic personal care products totaled $7.6 billion in 2012 and is expected to reach $13.2 billion by 2018, growing at a cumulative annual growth rate of 9.6% from 2012 to 20181. Companies that utilize responsibly sourced ingredients in their products, including organic or other certifications, could have a competitive advantage over industry peers.
In 2013, 44% of Natura’s natural raw materials had organic or Forest Stewardship Council certification (for non-timber forest products). In 2012, 82% of raw materials were from renewable plant sources. Additionally, the company has targets to ensure the traceability of 100% of the inputs produced by direct manufacturers by 2015 and from the rest of its manufacturing chain by 2020.
Consumers and regulators are putting greater pressure on personal products companies to increase ingredient transparency and eliminate or reduce controversial ingredients in formulas. As a result, the main environmental risk, and subsequent opportunity, revolves around reformulating products to minimize or remove controversial ingredients with the potential for future chemical restrictions.
Natura uses the precautionary principle when examining controversial ingredients. The company uses a system to detect controversial ingredients worldwide, which enables it to monitor scientific developments for possible adverse effects of any raw materials on human health, anticipate trends, and acting preventively. As a result of these efforts, Natura stopped using triclosan and phthalates in 2008, and completely eliminated parabens from its product formulations in 2011.
Packaging plays an important role in the environmental impact of personal products. Packaging that contains recyclable material, post-consumer recycled content or minimizes the use of materials gives companies the opportunity to reduce their environmental footprint by reducing their waste output. Companies that introduce eco-friendly packaging in their products will be at an advantage in mitigating their environmental impact.
Natura uses life-cycle assessment methodology to estimate and monitor the impact of packaging, including the extraction of raw materials, energy, processing, transportation, and disposal of the product. The company developed eco-efficient packs, which consist of 50% post-consumer recycled material or represent a reduction of at least 50% in weight compared with a similar regular pack. In 2013, the company expanded its eco-efficient packaging to its new Sou product line. This resulted in a 21.5% eco-efficient packaging rate for the whole company. Natura’s 2020 goals include having 74% of its product packaging be recyclable, with at least 10% post-consumer recycled material in the total mass of packaging.
Although Natura considers water consumption and energy use part of its sustainability ambitions for 2020, the company has not set any measurable reduction targets. Portfolio 21 would like to see a more developed environmental impact mitigation strategy in both areas.
By failing to set any long-term goals,Naturahas not clearly defined its sustainability vision for 2050. Additionally, the company has not established how its 2020 goals fit in with its new long-term strategy. Portfolio 21 would like to see a more structured environmental vision with specific targets.
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 7/31/14 and may not reflect current opinions or subsequent events.