An inside look at L'Oreal's sustainability makeover
For a large corporate firm chugging along in the ocean of international commerce, it takes a lot of effort to radically change direction. Itsturning circles are large and unpredictable, and during any maneuver it can find itself at the mercy of the elements, where storm clouds relating to customers, investors or regulators can gather at a moment's notice.
For L'Oreal, it has so far taken three years of hard work to set the transformation of its global beauty business in motion under its sweeping Sharing Beauty With All (SBWA) sustainability program — three years of steps to increase efficiencies, green its energy supply and redesign product formulas through an unrelenting process of incremental change.
But late last month clear signs emerged the strategy is working — that the various sustainability initiatives are adding up and the L'Oreal juggernaut is changing course. The company's latest sustainability report revealed the multinational has cut its carbon dioxide emissions by 56 percent against its 2005 baseline, while increasing production by 26 percent.
Now, L'Oreal is taking SBWA even further with the new headline goal of becoming a "carbon-balanced company" by 2020, as well as a host of targets to improve the ethical and environmental status of every product on its books.
To achieve its ambitious targets, L'Oreal will need to convince every employee sustainability is now at the heart of its company mission.
So as it embarks on the next phase of the SBWA journey, BusinessGreen caught up with L'Oreal's chief sustainability officer Alexandra Palt to uncover how a company with 78,000 employees, a worldwide manufacturing base and annual sales of over $28.5 billion goes about implementing a sustainable transformation at every level of the corporate ladder.
Leading by example
Firstly, it takes leadership from the top, said Palt. The implementation of the SBWA strategy has been spearheaded by L'Oreal CEO Jean-Paul Agon, whose leadership role is perhaps amplified by his position as head of a French company, Palt suggested.
"As a French company we are quite centralized, I think perhaps more than in other companies the leadership of our CEO is really extremely strategic," she said. "So if you have a CEO that is talking at each official occasion, every time the leadership team is coming together, talking about sustainability and SBWA, of course the issue takes a very clear place in the priority [of the business]."
But it takes more than just words to drive a corporate transformation program, admitted Palt. Sending the right signals — to employees, customers and investors — is vital. "Everybody will say sustainability is a strategic priority, but then afterwards do you do everything that shows that it is?" she said.
At the beginning of 2016, L'Oreal made two major changes to its corporate structures to send a clear message sustainability is at the core of the business strategy. Firstly, Palt's sustainable development team reports directly to Agon, which Palt claimed has added an "acceleration factor" to any corporate decisions on sustainability.
"Because the distance is so short [to the top], it allows you to take a lot of important decisions very fast, and that allows you to be more efficient and guarantee a faster roll-out of the targets," she said.
Similarly, from the beginning of this year all of L'Oreal's brand managers and country managers will have their bonuses linked to environmental targets.
When you want things to get done, you have to reward people for doing it.
Brand managers' performance will be rated against L'Oreal's three main SBWA product targets: improving the percentage of products which have an improved environmental or social profile; the brand's efforts to integrate sustainability into its customer interactions; and the contribution the brand is making to its environmental or social purpose. Meanwhile, country managers will be evaluated on how well L'Oreal has shared growth with employees and communities in each country.
The move follows in the footsteps of incentives already in place for L'Oreal's operations team, which since 2009 have seen executives judged against targets for reducing the environmental footprint of the company's industrial activity.
"In a company what gets measured gets done," Palt said. "Of course this is why you need targets, why you need KPIs and why you need compensation for achievement of the targets. So it's just basic management of a company that when you want things to get done, you have to reward people for doing it."
These management process changes are highly visible symbols of the change taking place throughout L'Oreal. But Palt admitted a challenge is still ahead to engage those employees whose everyday jobs do not generally interact with the green agenda.
"Of course, it would be surprising and definitely not honest to think that everybody commits in the same way with the same level of conviction towards sustainability," she said. "We have people who have been working for the last 10 or 20 years on this issue, such as our operations team in the plants and distribution centers. People in our innovation teams who work on green chemistry, they are of course very familiar with the issue. But when you go down the hierarchical line and also into countries where the sustainability awareness is very low, the level of awareness is different."
It's a challenge Palt's team is setting its sights on tackling this year. "This is one of the strategic priorities for my team for 2016," she admitted. "How do we get people on board where it's not obvious on a daily basis what they can do, and how do we get employees of all levels engaged?"
The key to this challenge will be changing the "details" of office life to ensure sustainability becomes a part of people's everyday experiences, she said. "We are working on the whole office part, to make the daily symbols very obvious for the employees," she said. "So they see that during their daily life on the campus things evolve and they can contribute to make them evolve."
Alongside the expected measures of more recycling opportunities and reminders to cut water consumption, all L'Oreal employees can "upskill" in sustainability by signing up to workshops and training sessions organized by Palt's team. Even top executives are involved — at this year's annual executive seminar, an eight-day meeting between top bosses at the company to discuss a strategic priority for the business, SBWA was the core focus.
As well as transforming L'Oreal's internal communications, Palt's team is also working on ways to convey its message to its customer base. Part of the challenge is how to get consumers excited about a process that, by necessity, is made up of thousands of slow, incremental steps.
"A big international company is not a social entrepreneur, is not a start-up," Palt reflected. "So we have to work on a consistent transformation to a more sustainable model. This is not about putting out some kind of aspirational sustainable innovation, some product or some co-operation with NGOs, but about saying we will work on everything, on every single product. It's much more difficult to communicate and make people be passionate about [that approach], because people are more passionate about visible innovations that are aspirational, but not about this small daily work for everybody."
To make the green marketing challenge a bit easier, later this summer L'Oreal will trial a new product assessment tool that will help product developers and marketers evaluate the environmental and social impact of every product the company offers. Next year, once the tool is embedded into every product line across L'Oreal, the firm will start communicating the information to customers.
"For the moment, we know that we are going to be able to evaluate the environmental and social footprint [of a product]," Palt said. "How we are going to communicate this to the consumer is our challenge for the second semester, because of course it has to be something that gives clear and simple information, but at the same time includes all the relevant information. So this is a big challenge we have to find the answers to."
L'Oreal is still only midway through its sustainability transition and has a long way to go before it can be sure of meeting all its 2020 targets. But it is a company undoubtedly intent on embedding sustainability as a key business priority.
"I cannot tell you that by 2020 we will succeed in everything, but what I can see what we are succeeding at is that every employee, every manager and every senior manager is thinking nowadays about sustainability," said Palt. And with every employee pulling in the same direction, L'Oreal looks to be well placed to chart a new course towards a sustainable future.
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