Download 2003 Sustainable Development Report (PDF)

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Download 2003 Sustainable Development Report (PDF)

SUSTAINABLE DEVELOPMENT REPORT


AN ORGANISATION DEVOTED TO

SUSTAINABLE DEVELOPMENT

A Sustainable Development Steering Committee

is made up of managers from the functional and

operational Divisions within the company.

Seven working parties cover different aspects of

sustainable development: Vision and Strategy,

Corporate Governance, Finance and Economics,

Research and Development, Safety, Health and Environment,

Social and Human Affairs, Sponsorship and Partnerships.

The work is co-ordinated by the Director of

Sustainable Development.

Several subject areas are studied by the Committee,

in regular meetings with the Divisions concerned:

• enhancing the capacity of internal reporting and

measuring, with particular reference to the Global

Reporting Initiative recommendations,

• increasing the attention paid to all stakeholders,

• giving to group managers in all countries,

to operational and functional Divisions and to brands,

the means to take part in L’Oréal’s sustainable development,

• participating in the work of “progress circles”

that contribute to the development of these subjects and

which offer collective thinking (World Business Council for

Sustainable Development, etc.).

The concept

L’Oréal has produced its first Sustainable Development report

after examining existing practices and studying the recommendations

of international institutions and specialist organisations,

such as the UN, OECD, European Commission, WBCSD

(of which L’Oréal is a member). The Global Reporting Initiative

(GRI) reference guide, defined the objective to be reached in

terms of reporting, and helped guide the study.

L’Oréal’s Sustainable Development Steering Committee covers

seven working groups, each devoted to a different subject

area. Each subject area involves discussion of the issues facing

the company and the objectives to be attained. Data has been

collected, checked and consolidated in order to provide the

most effective description of the situation of the group.

Data relating to safety, health and the environment was examined

and certified by the Environmental Resources Management,

a firm specialised in this area. Social data and data relating to

purchasing and research, shown with an asterisk (*), were validated

by PricewaterhouseCoopers.

This report is a first step along the path of sustained progress,

which has always been an objective of L’Oréal. It will enable the

group to measure and improve its performance in the future.

For more detailed information,

consult the on-line version of this report

on the group Internet site

(http://www.loreal.com/).

This report was published in 2004.

It is based on data from fiscal year 2003.

Contact

Department for Sustainable Development

Winfried Hoelzer

+ 33 (0)1 47 56 86 55


1

Chairman’s Message

L’Oréal and sustainable development

Our values and professional conduct

L’Oréal and Corporate Governance

p2

p4

p6

p8

ECONOMIC AFFAIRS A sustainable and dynamic growth policy p10

A growing market

p11

A sustainable growth strategy

p11

Our business categories and brands

p12

Sustainable financial resources

p13

Creating value

p13

RESEARCH AND DEVELOPMENT Innovating each day for future generations p14

Research as a central strategic theme

p15

Responding to the specific needs of a diverse human population p16

Selecting raw materials

p16

Developing alternatives to animal testing

p18

SOCIAL AND HUMAN AFFAIRS Sharing and communicating our experience p20

A growing workforce

p21

International and multi-cultural executive recruitment

p22

Personalised career development

p23

Encouraging mobility

p23

A policy for the development of skills

p23

A pay policy to motivate everybody

p24

A permanent dialogue at all levels

p25

Integration and apprenticeship programmes

p26

Favourable working conditions

p27

SAFETY, HEALTH AND ENVIRONMENT Consideration and respect for all environments p28

Organisation and Management

p29

Limiting the impact of our industrial activities

p32

ERM Certification

p39

RESPONSIBILITY AND SOCIETY Commitment to the community p40

Our commitment to society

p41

L’Oréal-UNESCO For Women in Science

p41

Rewarding talent and encouraging vocation

p42

A partnership with international influence

p43

PWC* verification

p44


2

CHAIRMAN’S MESSAGE

From sustained growth to

sustainable growth

Going beyond the financial concerns of our organisation, as

detailed in the Annual Report, we wish to see this first document

as an expression of our values and of the principles which

guide us. They embody the conviction, built up over almost a

century, that growth should be both sustainable and responsible.

This report describes the most significant steps taken over

a number of years. It also sets goals for the future, for we are

fully aware of the work that remains to be done. We are determined

to move forward step by step thanks to initiatives that

are tangible and measurable.

Looking beyond a purely financial

business model

We have always been guided by a strong central idea: that

there can be no sustainable development for the company

without long-term economic growth. In 2003, for yet another

year, the growth in L’Oréal’s operating profit was measured in

double figures and all our energy is devoted to maintaining

this progress. That is our ambition. Nonetheless, true to our

corporate culture, we are absolutely convinced that, for that

growth to be truly sustainable, we must look beyond a purely

financial model. That is why we constantly seek to link our

financial performance to robust ethical principles and a genuine

awareness of our responsibility towards all within the

company, and to our environment and the wider community.

The ambition to be socially responsible is closely bound up

with our mission: L’Oréal is dedicated to serving all expressions

of beauty and well-being, which it seeks to make accessible to

women and men all over the world. Our cosmetic products

enable everyone to feel at ease with their body, to express

their beauty, to assert their identity and to express their

creativity. In that respect, they serve human beings in all that

is most profoundly human.

A social project

This corporate project is a thrilling one, and it relies first and

foremost on our 50,000 employees. Motivation, a sense of

belonging, and commitment to financial and societal objectives

are essential in a company whose business development

model is essentially based on internal growth. This great

human adventure is founded on one ambition: to make growth

an element of our social policy and our social policy an element

of growth.


3

Respect for different cultures and

the environment

We also wish our company to be open to diversity for we are

totally convinced that the differences between us enrich our

lives. That diversity shows again in our approach to brand

development. Since it does not seek to project a single image

of beauty, L’Oréal aims to encourage the expression of all the

forms of beauty that make up the incredible diversity of human

faces.

Respect for cultural diversity goes hand in hand with the will

to limit the impact of our activities on the environment. In an

industry which by nature generates little pollution and consumes

little in the way of resources, the Group has already

made significant progress over the past ten years or so and has

set new, ambitious objectives for the future.

Similarly, our responsibility is demonstrated through our commitment

to manufacturing our own products. This provides an

additional guarantee, not only of overall product quality, but

also of respect for social, ethical and environmental rules.

But for L’Oréal, corporate responsibility goes much further.

It is also reflected in actions that demonstrate our desire to

remain close to the communities in which the group operates.

We intend that this document should be factual, in order to

show in real terms how L’Oréal assumes its share of responsibility.

It is an initial report that we shall use as an instrument

for progress. The report and the objectives set out in it commit

the Management Committee, myself and all our employees

worldwide to adopting a much broader view of the corporate

development of L’Oréal. It is our way of asserting our vision of

truly sustainable growth for the future.

Lindsay Owen-Jones

Chairman and Chief Executive Officer of L’Oréal


4

L’Oréal and

sustainable development

Responsible behaviour includes respect for rules and ethical principles, care for the

environment, support for and development of the men and women within the

company, engagement with the communities in which the group is active. L’Oréal

aims to go yet further by emphasising a commitment focussed on five core values.

1

Contribution

to well-being based on scientific foundations

Through its brands, which respect different cultures and identities, L’Oréal is dedicated to the beauty and well-being

of women and of men all over the world. For a century, L’Oréal has worked continually to better understand consumers

and their expectations in order to provide for them. It is thanks to the knowledge acquired and to recognised scientific

expertise that the group can anticipate today the needs of tomorrow. L’Oréal’s continued investment in research

helps guarantee quality, safety and innovation in its products. The group puts on the market only products whose

effectiveness is proven and whose safety is guaranteed by rigorous testing for tolerance and absence of risk. Their

performance is scientifically recognised and proven.

2

Making its technology available to

as many people as possible

A major thrust of the group’s responsibility is towards making its products accessible and

the technology developed by its Research teams widely available. All the brands within

the group and all distribution channels ensure this accessibility. L’Oréal makes the most

advanced technology available to as many people as possible, whether in hygiene, hair

colouring, skincare and make-up products, or in sun protection products that guarantee

increased defence against the risks of exposure to the sun.


5

3

Encouraging

self-expression and diversity

Cosmetics are a time-honoured means of expression for all cultures and all peoples. Thus, since each of its brands

promotes an ideal of beauty in all parts of the world, L’Oréal is attentive to the diversity of skin types, to beauty rituals

and to the perception of beauty.

L’Oréal takes care not to favour any particular model of beauty, but to respond as effectively as possible to the needs

and the desires of all. It does so through:

• research open to the world. L’Oréal’s Research teams seek to discover and evaluate the varying characteristics of

skin and hair in different parts of the world in order to provide scientific responses tailored to the most diverse

requirements,

• a varied brand portfolio: L’Oréal offers a range of brands and beauty concepts, with diverse cultural origins,

• multicultural advertising. The challenge for each brand is to contribute to the diverse perceptions of beauty,

in particular through its choice of ambassadresses who express the many varieties of beauty.

L’Oréal is convinced that variety is synonymous with creativity and enriches the company, and it relies on the diversity

of its teams to ensure that international development respects local cultures.

4

Creating continuous value for

all the company’s partners

Creating value means offering consumers high-quality, technologically high-performing

products born out of permanent innovation. It also means ensuring that the company

performs well financially, for the benefit of its shareholders and all its partners. This

continuity is based on a strategy that gives priority to internal growth, promotes

investment in research, focuses on high added value areas of specialisation, on the

most buoyant market sectors, and on a unique worldwide brand portfolio. This strategy,

implemented on a continuous basis, led yet again to L’Oréal’s recording a year of doubledigit

growth in 2003.

5

Integrated, locally-based manufacturing

Almost 94% of products marketed by L’Oréal are made at the group’s manufacturing sites by group employees.

By controlling its production, L’Oréal can guarantee its commitment to quality, reliability and safety vis-à-vis its

customers and partners. Industrial production is built around local rather than external production facilities.

Most products come from manufacturing plants located close to the area where they are marketed. Production

integration and commitment to local production provide an assurance of respect for the law and for people.


6

Our values and

professional conduct

A Code of Business Ethics to disseminate

L’Oréal’s values and guiding principles

L’Oréal’s corporate culture is based on strong ethical principles

compiled in a Code of Business Ethics that gives formal expression

to the fundamental values and guiding principles to which

L’Oréal is committed.

The Code of Business Ethics, a major reference document,

articulates what is expected of employees both in the way they

do business and in their day-to-day contacts with others within

the organisation. The Code of Business Ethics, available in

the languages of all countries in which the group operates,

focuses on six areas:

• respect for the law,

• respect for individuals,

• respect for the consumer,

• respect for the environment,

• partnership with customers, distributors and suppliers,

• the principles of loyalty and integrity.

The Code of Business Ethics was distributed to the group’s

50,000 employees in the year 2000, and every person coming

into the group is given a personal copy on joining.

Prohibiting child labour and the use of forced labour are issues

that receive special attention. The group forbids the employment

of anyone under the age of 16 and ensures that these

principles are respected by its subcontractors and suppliers, as

specified* in the group’s General Terms of Purchasing and

Payment. The preservation of privacy in the context of IT and

Internet access is covered by various documents adapted to

the legal framework of the countries concerned. The social,

humanitarian and environmental policy followed by L’Oreal for

many years illustrates the concrete expression given by the

company to its values and guiding principles.

Consciousness raising, training and improvement initiatives,

either in the business units or at product category level, ensure

that these values and principles are properly disseminated and

applied. These initiatives enable the development

of managerial capabilities that respect ethical principles.

In 2003, numerous training modules took place during our

induction seminars for line managers, whose job includes monitoring

the day-to-day application of the Code of Business

Ethics, and for the benefit of Management Committee members.

An international working party has been set up within L’Oréal

to specify, in the most concrete terms possible, the relevant

indicators for the measurement of the actual implementation

of the Code in an international environment. To achieve this,

the working party focussed on key universal principles and the

documents in which these principles are set down: the United

Nations Universal Declaration of Human Rights, the European

Union Charter of Fundamental Rights, European Directives on

equal treatment and discrimination, and the main Conventions


7

and Recommendations of the International Labour Organisation.

The strict application of the Code of Business Ethics is the duty

of the Group Management. The Human Resources Department

in each country is responsible for providing the necessary guidance

at local level. In addition, everyone has the option of

contacting the Office of the General Counsel, Human

Resources, of the group.

Lindsay Owen-Jones, Chairman and Chief Executive Officer of

L’Oréal, has delegated to François Vachey, Executive Vice-

President for Human Resources, responsibility for ensuring that

all of the values described in the group’s Code of Business

Ethics are strictly adhered to, in particular those concerning

Human Rights as defined in the United Nations Universal

Declaration of Human Rights.

Additional specific codes

In some business areas, the Code of Business Ethics is supplemented

by codes of practice, such as the one that defines

L’Oréal’s principles and practices applied to purchasing. Their

aim is to establish the relationship with suppliers within a

strict framework and to address specific issues to which the

group’s buyers may be exposed (conflicts of interest, courtesy

invitations, gifts…).

The group’s General Terms for Purchasing and Payment, introduced

in 2003, ensure that suppliers comply with all the laws

and regulations in force and that they respect the rules of conduct

stated in the fundamental Conventions of the ILO, particularly

on the abolition of forced labour, the eradication of child

labour, equality and freedom of association.

EXTRACT FROM THE CODE OF BUSINESS ETHICS

“Respect for the individual is a fundamental principle at

L’Oréal. It is applied daily and is the focus of human

relations within the company. L’Oréal believes in

the virtue of difference and diversity for the development

of its human assets: L’Oréal categorically rejects all forms

of discrimination, both in thought and deed,

notably concerning sex, age, physical disability,

political and philosophical opinion, union activity,

religious conviction, as well as race and social,

cultural and national origin. Each individual has a right to

respect and human dignity; all behaviour or acts likely to

create a hostile working environment and, in particular,

any form of sexual or moral harassment, will not be tolerated.

Respect for the individual is also demonstrated by L’Oréal’s

commitment to its employees and to those management

values upon which the Company sets great store.

Respect for the individual is maintained through an

ongoing dialogue between individuals and management.

Thus recruitment and career development are based on

competence and quality, appraised objectively in relation to

the Company’s needs.

The group’s Training and Development programmes play

a vital part in the development of each employee’s skills

and potential. L’Oréal is committed to facilitating

the professional integration of those who require

special attention: young adults, persons from disadvantaged

backgrounds and those with special physical needs.”

In June 2003, L’Oréal signed the

Global Compact declaration (a United Nations

agreement), thus committing itself to adopting

and promoting nine universal principles concerning

Human Rights, labour and the environment.


8

L’Oréal and Corporate Governance

L’Oréal is a Société anonyme (the equivalent in French law of a

joint stock company) with capital of €135,212,432 made up of

676,062,160 shares with a par value of €0.2 negotiable on the

Paris Stock Exchange.

At the end of 2003, Gesparal held a 53.85% controlling interest

in L’Oréal. As might be expected, eight members of the

Board were also on the board of this holding company.

Nevertheless, all Board members are aware of their duty to

represent all shareholders. The Board of Directors of L’Oréal

takes its decisions on a collective basis, in accordance with the

law and codes of good conduct, and guided by preliminary

studies carried out, on its instructions, by Review Committees.

Capital structure at 31 December 2003

Actively involved Directors with

complementary experience

The members of the Board have a range of complementary

experience and bring their expertise to bear on the work of the

Board; they are required to act with due vigilance and enjoy

complete freedom of judgement. Each Board member must

devote the required time and attention to his or her duties.

In 2003, the method of allocating directors’ fees was changed

by the introduction of a variable element based on actual

attendance at meetings.

Increasingly well-informed Directors

Madame Bettencourt

and her family

51%

Gesparal

100%

L’Oréal

Gesparal

53.8%

Public

42.3%

The aim is to provide Board members in advance with a coherent

set of information that is relevant, necessary and sufficient

for them to carry out their work, to facilitate their evaluation

of the operations and financial situation of the group, and to

prepare for discussions and decision-making.

Nestlé

49%

Self-held

shares

3.9%

Organisation of Board meetings

This structure is likely to change in 2004.

Members of the Board are aware of the need for responsible

corporate governance and effective and transparent practices.

In 2003, the Board adopted Internal Rules, which are published

in the Reference Document.

In 2004, following a proposal by the General Management and in

agreement with the Statutory Auditors, the Board decided to bring

forward by more than a month the publication date of the certified

results by examining and then closing the 2003 accounts at

a single meeting at the end of February 2004. The Board also held

a strategy meeting at which General Management commented on

the group’s situation and plans and at which the Board approved

the main strategic development priorities drawn up by the

company, whose steady economic growth has once again been

confirmed. The Directors draw attention to the fact that the strategy

is intended to be implemented over the long term.


9

Review of the Board’s modus operandi

At the end of 2003, the Board reviewed its modus operandi, as

it has done every year since 1996. Interviews were conducted

with regard to the regulations and recommendations in force.

The summary of the main observations and proposals showed

that the Board is well balanced, and that individual Board

members complement each other to a high degree. Dialogue is

open and discussions are constructive. Board members were

well briefed and were able to express individual views freely

and to propose changes to important aspects of their own work

and to that of the Review Committees.

The specific character of the internal audit

The Audit Committee had the opportunity to give a completely

independent hearing to the Internal Audit Department in the

presence of the Statutory Auditors. This hearing enabled the

Committee to acquaint itself with the current situation in

respect of internal auditing and risk management, and with the

ways in which standards and procedures are applied, particularly

with regard to financial, accounting and management

information. The Committee noted the importance of the information

and control systems currently in place, and which are

constantly upgraded. The Board was subsequently informed of

the Committee’s conclusions.

The Board’s Review Committees

The Board acknowledged the high quality of the work done by

its Committees, whose remits are set out in the Internal Rules.

The Review Committees have the duty to make regular reports

on their meetings to the Board in order further to facilitate

discussions at plenary sessions.

The Audit Committee

The Audit Committee met completely independently on four

occasions in 2003; each meeting was attended by all three

members. In accordance with the Board’s wishes, the Audit

Committee has enjoyed greater security, and has enhanced its

work, particularly as regards the financial statements, thus

leading to more detailed subsequent discussion.

The Committee familiarised itself with L’Oréal’s Code of Stock

Exchange Ethics, as updated by General Management, and

approved it prior to its publication within the company. The

Committee also reviewed a draft of the Internal Rules for the

Board of Directors; the draft was discussed and approved by

the Board at a plenary meeting.

The Management and Remuneration Committee

The Management and Remuneration Committee held three completely

independent meetings in 2003; they were attended by

all three members. The Committee may meet at any time it

deems appropriate, for example to evaluate the performance of

the Company’s senior management. The Committee reviewed

the ways in which the remuneration of Company officers is

fixed and reported its findings to the Board. It then put forward

proposals to the Board, which decided on levels of remuneration

for 2003. The Board’s decisions are set out and

explained in the Reference Document.

The Committee is also responsible for drawing up proposals for

the allocation of stock options, in accordance with the authorisations

given by shareholders at the Annual General Meeting

(AGM), and for reviewing the composition of the Board with a

view to recommending changes when appropriate.

For detailed information on corporate governance within the L’Oréal group,

please refer to the Management Report in the Reference Document, volume 3.


10

Financial reporting

The Chief Executive Officer, Lindsay Owen-Jones, and the Executive Vice-Presidents present

the dynamics of L’Oréal’s growth model. The expansion strategy is centred on innovation and

geographic expansion of the brands, particularly in the new Asian markets.

KEY FIGURES

Consolidated turnover (€ millions)

15,000

12,500

10,000

7,500

5,000

10,751

12,671

13,740 14,288 14,029

The group’s net operational profit

(€ millions)

2,000

1,600

1,200

800

827

1,028

1,229

1,456

1,653

Net dividend per share (in euros)

0.90

0.75

0.60

0.45

0.30

0.34

0.44

0.54

0.64

0,73

2,500

400

0.15

0

I

1999

I

2000

I

2001

I

2002

I

2003

0

I

1999

I

2000

I

2001

I

2002

I

2003

0

I

1999

I

2000

I

2001

I

2002

I

2003

The net dividend per share excludes tax credit.


11

ECONOMIC AFFAIRS

A dynamic and

sustainable growth policy

L’Oréal is the world cosmetics leader in a growing market. It is dedicated to a single

business activity, and has achieved strong growth for many years. The group has

demonstrated that it is possible to combine financial success and social commitment

while implementing a strict environmental policy.

• DIVIDEND put forward at the Annual General Meeting on

29 April 2004:

0.73 euro, up 14.1% compared with 2003.

• WORKFORCE: over 50,000 employees of approximately

100 different nationalities at 31 December 2003.

• WORLDWIDE PRESENCE:

the group is active in 130 countries and has 290 subsidiaries.

• INDUSTRIAL PRESENCE:

the group has 42 factories worldwide.

• INVESTMENT IN RESEARCH:

·3% of turnover devoted to research,

Almost 2,900 scientists engaged in cosmetics and

dermatological research,

·515 patents registered in 2003.

A growing market

Since 1990, average annual growth in cosmetics has equalled

twice the average growth of global GNP. This growth is continuing

in developed countries, thanks to new demands and new

markets, and it has been stiking in countries that have recently

converted to the market economy.

A sustainable growth strategy

L’Oréal considers internal growth to be the main focus of its

development. The group ensures healthy long-term geographic

and sector-based balance for its brands and increases the rate of

its international expansion through a highly selective acquisition

policy. As a result, L’Oréal has enjoyed double-digit growth

in earnings for many years.

L’Oréal manufactures more than 94% of its products. Control

over its processes is an essential strategic issue and proof of

its civic responsibility. L’Oréal looks to the growth of new markets,

especially in developing regions such as South East Asia.

However, the group’s growth is never at the expense of a

responsible attitude: by manufacturing locally as soon as practically

possible, it contributes to local economic development

and applies the principles outlined in its Code of Business

Ethics.


12 ECONOMIC AFFAIRS

Our business categories and brands

L’Oréal is active in cosmetics (98% of consolidated sales in 2003) and dermatology.

In cosmetics, L’Oréal is structured in terms of distribution channels.

DIVISION SALES MISSION BRANDS

(€ millions)

Professional Products 1,900 Development of products for L’ORÉAL PROFESSIONNEL

hairstyling professionals

MATRIX

REDKEN

Consumer Products 7,506 Development of beauty products accessible to all, L’ORÉAL PARIS

by offering the most innovative products

at affordable prices through the widest

range of distribution channels.

GARNIER

MAYBELLINE NEW YORK

SOFTSHEEN.CARSON

Luxury Products 3,441 Development of prestige global brands sold LANCÔME

through a selective distribution network

designed to add value to the products, and

providing both advice and service based on

a personal relationship with the customer.

BIOTHERM

HELENA RUBINSTEIN

GIORGIO ARMANI

RALPH LAUREN

CACHAREL

KIEHL’S

SHU UEMURA

Active Cosmetics 749 Development of dermo-cosmetic brands VICHY

that meet the highest standards of

skincare safety and effectiveness

(proven by clinical tests), confirmed by

the recommendation of the pharmacist.

LA ROCHE-POSAY


13

Sustainable financial resources

Localised production

The group is committed to a strategy of growth in developing

countries. The group’s presence in the market is frequently

accompanied by the setting up of manufacturing facilities in

the country, creating jobs and directly contributing to the

expansion of the geographic region.

Turnover and production of cosmetics

by geographic zone

Creating value

Net operational profit per share before exceptionals

(in euros)

3

2.5

2

1.5

1

0.5

0

1.22

I

1999

1.52

I

2000

1.82

I

2001

2.15

I

2002

2.45

I

2003

n 2003 cosmetics turnover

€ millions

100

80

60

40

20

0

53%

7,221

55%

2,108

I

Western Europe

27%

3,784

27%

1,052

I

North America

n Cosmetic production

in millions of units produced,

excluding acquisitions in 2003

20%

2,699

18%

693

I

Rest of the World

10-year investment in L’Oréal shares (in euros)

Purchase of 75 shares at €198.95 on 31 December 1993 (1) 14,921.25

Dividend reinvested

Valuation at 31 December 2003 (1) 59,995.00

(923 shares at €65)

Capital invested multiplied by: 4

Total shareholder return (maturity): 14.3% per year

(1) There was a ten-for-one share split on 3 July 2000.

Increasing investment

In creating products, the group sets itself the highest standards

in quality and innovation to ensure total consumer satisfaction.

This approach involves considerable investment in technology,

whether in terms of production or research.

Capital expenditure in cosmetics and dermatology

(€ millions)

L’Oréal is firmly committed to a policy of improving its financial

information. The Reference Document, the AGM and the

modern financial communication resources intended for international

shareholders are channels that the group is actively

developing. Indeed, they are all regularly recognised as being

of high quality by financial information professionals and by

the shareholders themselves.

600

500

400

300

200

309

339

438

468 490

ááá L’Oréal is included in the main stock exchange

indices that include sustainable development

criteria, such as the FTSE4Good and the DJSI.

100

0

I

1999

I

2000

I

2001

I

2002

I

2003

For detailed information on the group’s financial data,

consult the group’s Annual Report or www.loreal-finance.com


14

Clean room in L’Oréal’s cutaneous bio-engineering centre, in Gerland,

in the suburbs of Lyons, France

Each week, more than a hundred Episkin reconstructed skin plates are produced for the evaluation of

product safety. The Episkin skin model has been validated as an alternative method to animal testing

for chemical corrosion.

KEY FIGURES

Research budget

(€ millions)

600

500

400

325

383

432

469 480

Personnal engaged in Research

3,000

2,500

2,000

2,350

2,564

2,743 2,823 2,860

Number of patents registered annually

600

500

400

391

420

493 501 515

300

1,500

300

200

1,000

200

100

500

100

0

I

1999

I

2000

I

2001

I

2002

I

2003*

0

I

1999

I

2000

I

2001

I

2002

I

2003*

0

I

1999

I

2000

I

2001

I

2002

I

2003*


15

RESEARCH AND DEVELOPMENT

Innovating each day for

the benefit of future generations

Since it was set up in 1907 by a chemical engineer, Eugène Schueller, L’Oréal has

constantly invested in cosmetics research with one specific objective – to ensure

that all the group’s products derive benefit from the scientific advances of its

laboratories.

Research as a central strategic theme

Each year, L’Oréal invests more than 3% of its revenues in R&D,

the equivalent of about €3bn over the last ten years. L’Oréal has

made it a priority to create its own molecules in all its strategic

product categories: hair styling, hair care, make-up, skin care,

sun protection and body care. Thus, over the last 40 years, more

than 120 different molecules have been developed by the company’s

Advanced Research facilities. Laboratories in France, the

USA and Japan employ almost 2,900 people specialising in some

thirty areas, including chemistry, biology, medicine, physics,

physico-chemistry and toxicology.

To consolidate the competitive advantage resulting from its

technological advances, the group is careful to encourage the

registration of patents. Over the last ten years, more than

3,300 patents have been registered, including 515 in 2003.

The aim in Research is to bring to the market products which

are effective and safe, and which respect the natural qualities

of the skin and hair.

To achieve this aim involves:

• improving knowledge of healthy skin and hair,

• studying the mechanisms of skin and hair ageing (wrinkles,

loss of elasticity, dryness, blemishes, whitening and hair loss),

• synthesis of new, active molecules,

• design and development of new products in all areas of cosmetics:

skin and hair care, hair styling and colouring, sun protection,

body care, make-up and fragrance. Each year, over

3,000 new formulas are developed by our laboratories and marketed

worldwide.


16

RESEARCH AND DEVELOPMENT

The pursuit of optimum quality is the driving force at every

stage of a product’s design. The aim is continually to improve

a product’s current performance or to add an as yet unknown

property. Performance is assessed at every point in the

research process.

One of the main objectives of our Research effort is to eliminate

from the substances being studied any ingredient that

might pose a threat to the consumer or the environment.

Before any ingredient finds its way into a product, L’Oréal tests

it using all the scientific knowledge and techniques available

to it for assessing human and environmental safety.

The International Safety Assessment Department closely examines

the toxicological profile of all ingredients used and

assesses the safety and tolerance of all formulations before

they are accepted and put on the market. Products which are

on the market undergo monitoring by a global network of specialist

doctors set up by L’Oréal over twenty years ago.

Testing centres have been set up by L’Oréal Research in a large

number of countries in all five continents. These centres

enable the group’s laboratories to test new formulas directly

among the people for whom they are intended. Thanks to this

structure, the different product categories in the group benefit

from studies and tests that take into account the whole

range of requirements, attitudes and characteristics of people

all over the world. Large-scale cosmetics testing studies are

carried out in Latin America, the USA and China, with a view

to identifying the skin and hair types of women of African,

Hispanic and Asian origin.

Selecting raw materials

L’Oréal attaches great importance to the selection of the raw

materials used. To ensure constant improvement in product tolerance

and effectiveness, all of the 2,800 raw materials used

are continuously being renewed - at a rate of 150 per year.

As part of its environmental policy, L’Oréal Research submits

its formulations to risk assessment by outside international

experts.

Responding to the specific needs of

a diverse human population

L’Oréal’s Research scientists direct their efforts towards providing

a scientific response to the most varied requirements.

In vitro, human skin models obtained from cultures of skin

cells from donors of different ages and ethnic groups facilitate

the constant improvement of knowledge of the variations

between skin types. In vivo, hair samples from all over the

world are meticulously examined in terms of colour, composition,

structure, resistance to the effects of contact with

mechanical equipment and reaction to hair treatment. They are

also cultivated in vitro.

The group is in permanent dialogue with its suppliers all over

the world, with a view to obtaining the highest quality fats,

surfactants, solvents, polymers, plant extracts, propellants,

dyes, pigments, UV filters, active biological ingredients,

preservatives and antioxidants.

It is active in promoting and developing the use of raw materials

from natural, renewable sources. In 2003, 39.7% of raw

materials by volume came from plants*. Ethanol, for example,

can be obtained from beetroot, and coconut can be used to

produce fats and surfactants. The remaining raw materials are

either synthetic or products that are very commonly found in

nature (iron or titanium oxides, clay and schist).


17

A PRE-EMPTIVE APPROACH TO HUMAN AND ENVIRONMENTAL SAFETY

When the first scientific data on the potential hazards associated with the outbreak of bovine spongiform encephalopathy (BSE)

in the United Kingdom became available, L’Oréal took immediate action.

Although the conclusions of the experts were reassuring, the group asked its suppliers of bovine extracts to provide certificates of

origin and of production process. From 1992, long before regulations made it compulsory in 1996, all ingredients derived from

organs defined as high risk by the WHO were eliminated from our formulations.

Chlorofluorocarbons (CFCs) were suspected of depleting the ozone layer in the upper atmosphere as early as the 1970s.

As a precaution, under the aegis of the United Nations, the Montreal Protocol was signed in 1987 and has been amended several

times since. Some 160 countries have committed to the Protocol, the aim of which is gradually to phase out the production,

sale and consumption of substances that deplete the ozone layer.

The Montreal Protocol resulted in a European Regulation issued in 1994. L’Oréal had already replaced CFCs used as aerosol

propellants by 1989.

L’ORÉAL INSTITUTE FOR ETHNIC HAIR AND SKIN RESEARCH

This Advanced Research institute was created in Chicago in 2000, in order to increase knowledge of the properties and

specific requirements of the skin and hair of people of different origins, in particular those of African descent.

It is the first of its kind in the world. In addition to its own research, it collaborates with Northwestern University in Chicago and

Howard University in Washington.

In order to share and disseminate knowledge on the ethnicity of hair and skin from all over the world, L’Oréal initiated a series of

symposiums. The first, held in September 2001, was entitled Ethnic hair and skin: what is the state of the science? and brought

together 170 participants, mainly research scientists from universities and industry, dermatologists and cosmetic surgeons.

The most recent, on Ethnic hair and skin: new directions in research, took place in September 2003 and was attended by

even more participants.


18

RESEARCH AND DEVELOPMENT

The principle guiding our choices is the wish to balance product

quality, the health of employees, professionals and consumers,

and respect for the environment. These new raw materials are

the product either of L’Oréal Research or of research carried out

in partnership with our suppliers. This diversified approach has

enabled much progress to be made in the selection of raw materials,

and the group intends to develop it in order to achieve

greater respect for the environment and for biodiversity.

Developing alternatives to animal testing

The group’s research laboratories have always devoted considerable

resources to ensuring the safety of its products and, in

addition, to developing and validating alternative methods to

animal testing. In 1989, L’Oréal had already stopped this practice

and had developed alternative methods used routinely to

assess tolerance of new formulas. These methods include cell

culture testing and testing on reconstructed skin models

(Episkin). They enable the study of several areas of toxicity (eye

and skin irritation, photo toxicity and percutaneous absorption).

EPISKIN

The Episkin model is used routinely in L’Oréal laboratories

to evaluate skin tolerance of formulas and ingredients.

It is manufactured by the group on an industrial basis at

the Cellular Bioengineering Centre recently built in Gerland,

near Lyons, France.

Episkin has been scientifically validated in Europe as

an alternative method for the carrying out of skin corrosion

tests. L’Oréal is currently involved in the campaign to

validate Episkin for skin irritation testing, and is pursuing

its work in other areas, in collaboration with industrial and

academic partners, the ECVAM (European Centre for the

Validation of Alternative Methods) and the OECD.

Suppliers of chemical ingredients are required to guarantee

their safety and harmlessness before they reach the market.

At the present, most testing required under the various regulations

can be carried out only on animals.

For a number of years, L’Oréal has also been committed to

research, development and validation of methods leading to

reducing and replacing animal testing of the chemical ingredients

used in cosmetics.

There are currently three areas of toxicity for which alternative

methods have been validated and which replace animal testing:

skin corrosion, phototoxic potential and percutaneous

absorption. L’Oréal Research has contributed extensively to the

development, validation and international regulatory acceptance

of these tests.


19

As part of the search for alternative methods, L’Oréal has developed

original in vitro techniques, particularly in the area of

human skin models. Among the different models developed,

the group’s research teams are credited with the world’s first

skin model containing Langerhans cells, which play a crucial

role in allergic response.

L’Oréal conducted this research as the lead laboratory within a

European Commission programme. In the future, if this model

were reproduced on an industrial scale, it could be put forward

as an alternative to skin allergy testing, alongside other cellbased

tests.

Looking beyond the progress already made, industry and scientific

research as a whole face a complex challenge: that of

developing and validating alternative methods of evaluating

chemical ingredients in fields where there are currently

no alternatives to animal testing – and within the timeframe

set by the seventh amendment to the European Cosmetics

Directive.

L’Oréal is committed to bringing all its skills to bear on developing

these new methods.


20

Permanent dialogue, sharing knowledge, comparing ideas

At L’Oréal, teamwork is part of everyday life, and takes place in an environment that is dynamic,

international and convivial.

KEY FIGURES

Growth of the workforce

Breakdown of personnel by

geographic zone in 2003*

Breakdown of managers by gender in 2003*

60,000

50,000

40,000

30,000

20,000

10,000

0

43,039

I

1999

48,222

I

2000

49,150 50,491 50,500

I

2001

I

2002

I

2003

France

30%

Europe

excluding

France

29%

11% Asia

Latin America

7%

Africa/

Oceania

4%

North

America

19%

n Women

n Men

51% 49%


21

SOCIAL AND HUMAN AFFAIRS

Sharing and communicating

our experience

L’Oréal has based its Corporate plan on the determination to establish a close link

between economic performance and social achievement. The clear aim is to be one

of the most dynamic companies in terms of remuneration, career development, profit

sharing and overall attractiveness to employees. The monitoring of expectations all

over the world ensures that motivation and commitment to the company go hand in

hand with a share in the group’s continued success.

The quality of L’Oréal’s products, as well as the group’s overall

development, depend on every employee at every level of the

organisation, who now benefit from local profit-sharing

schemes in line with the growth of results in each country.

Growth and forward planning enable us to carry out changes

in the interest of employees and to anticipate restructuring

initiatives.

For L’Oréal, developing a sustainable human resources policy

means adopting the following objectives:

• motivation of our teams, particularly through a highly

dynamic approach to remuneration and mobility,

• recruitment of talented people from multicultural backgrounds

and encouragement of diversity,

• offer of exceptional international career opportunities,

• promotion of personal and professional development through

the training programmes offered by Continuing Education and

through contrasting experience,

• encouragement of social dialogue,

• support for the inclusion of people in difficulty, especially

youngsters and those who are handicapped. L’Oréal intends to

maintain this activity as a principal focus of its Corporate

Social Responsibility initiatives,

• guarantee of the best possible working conditions.

A growing workforce

The group’s expansion brings about the creation of many jobs.

In 10 years, L’Oréal’s workforce has risen from 32,261 to

50,500 employees. L’Oréal is convinced that variety is a source

of enrichment, and attaches great importance to the development

of a highly diverse workforce: 94 different nationalities

are represented within the group*. The group has built a database,

currently limited to managerial staff, that gives precise

figures for the number of people joining and leaving the company

or moving within it, as well as for in-house training and

the size of the workforce in each country.


22

SOCIAL AND HUMAN AFFAIRS

The group carefully monitors the male/female balance of its

workforce worldwide; women represent 51% of managerial staff

and, on average, a third of all Management Committee members*.

International and multi-cultural

executive recruitment

The recruitment of executives is a key aspect of L’Oréal’s sustainable

development strategy.

RAISING AWARENESS OF OUR ACTIVITY AND

PASSING ON KNOWLEDGE

To share its management expertise, make L’Oréal’s skills

more widely known and identify talented individuals,

the group has developed the L’Oréal e-Strat Challenge and

the L’Oréal Marketing Award.

E-Strat Challenge

This corporate strategy game gives students from all over

the world (undergraduates and MBA students) the opportunity

to take the virtual helm of a leading international cosmetics

company.

In 2003, L’Oréal e-Strat Challenge was won by a cosmopolitan

team from INSEAD (see photo above).

Marketing Award

This competition, which focuses on creativity and marketing,

is intended for the students of targeted colleges and

universities. Teams of 3 students are required to imagine

a new product range with its associated packaging and

advertising campaign.

The Universum 2003 survey involved 6,776 students

from 81 schools and universities in 18 European countries.

L’Oréal was ranked second among both men and women and

first among women as the company they would “most like

to work for”.

Developing diversity and openness

Whether in terms of culture, qualifications, training or nationality,

L’Oréal’s policy is to continue to enrich its workforce by

recruiting talented, open-minded people from diverse backgrounds.

For L’Oréal, earlier education or training is not the only criterion

for selection. L’Oréal attaches great importance to candidates’ personality

and individual qualities: creativity, capacity for commitment,

openness to the idea of a truly international organisation.

An international focus

In 2003, L’Oréal recruited 1,418 managers of 70 different

nationalities in 53 countries*. 11% of candidates recruited in

2003 were of a nationality other than that of the country in

which they were recruited.

Developing partnerships with universities

The group’s involvement with universities has been increased

and it now has close partnerships with 125 universities in all

parts of the world*. These take different forms: endowment of

chairs, business games, business case-studies, lecture series or

internships. The internship scheme is the key to a first practical

experience of work. An internship is not merely a brief period

spent in the company: more often than not it is the first

stage of a career within the group. In 2003, 1,916 internships

were offered in 46 countries*.


23

Personalised career development

Encouraging mobility

It is the group’s intention to give its employees outstanding

and personalised career opportunities.

Showing trust in young people by

giving them early responsibility

L’Oréal gives priority to recruiting young graduates with a view

to constructing careers over the long term. Of the future managers

recruited worldwide in 2003, 47% were either beginners

or people with less than 3 years’ work experience*. The group

thus includes a pool of talented young individuals to whom it

entrusts responsibilities at an early stage.

L’Oréal was ranked first for the “promotion of leaders” in the

survey carried out by Hewitt Associates in October 2003.

Organising a personalised and

imaginative approach to career tracking

The group is attentive to the career plans and expectations of

its employees. L’Oréal relies on its worldwide human resources

network as a measure of the quality of its career development.

To ensure that the needs and aspirations of individuals are

taken into account, L’Oréal has developed a formalised appraisal

system that ensures transparency and includes a reference

guide covering managerial skills and job-specific skills*.

The intention is that each employee should have the benefit of

a year-end appraisal interview giving them quality time in

which to engage in dialogue with management; young managers

(less than 5 years in the company) also benefit from a

mid-year appraisal interview.

The diversity that L’Oréal seeks relies on a policy of geographical

and occupational mobility.

Encouraging international mobility

International mobility is part of L’Oréal’s strategy for the

growth and development of its business, which is increasingly

international. L’Oréal seeks to enhance the quality of its international

management and local workforce by the addition of

young or experienced expatriates. They contribute to the

group’s development while broadening their knowledge and

honing their skills.

At the end of 2003, 493 expatriates of 47 different nationalities

were employed in management roles in 53 countries*.

21.5% were women.

To support and facilitate these international movements, the

group offers employees a handbook and a set of guidelines to

provide a framework for expatriates and their families during

their missions abroad, and on their return home.

Enabling occupational mobility

Internal mobility gives employees the opportunity to acquire

skills in various areas and to gain early access to jobs involving

responsibility. As a result of their varied experience, they

are better able to pass on L’Oréal’s know-how. In 2003, 27% of

executives took on new responsibilities.

A policy for the development of skills

L’Oréal expects all its employees to be part of an ongoing

process aimed at increasing and enhancing their knowledge

and their skills.


24

SOCIAL AND HUMAN AFFAIRS

Providing quality training

In 1970, L’Oréal set up a Corporate Continuing Education

Department in order to make career development a real lever

for the group’s growth strategy.

This Department is backed up by the training departments in

the divisions and the Management Development Centres based

in Singapore, New York, Rio and Paris. In 1971, the European

Centre for Continuing Education (CEDEP) in Fontainebleau,

France, was set up by a number of international companies,

including L’Oréal, in conjunction with INSEAD. CEDEP enables

L’Oréal to develop management training programmes adapted

to its own aims and business categories, with the advantage of

academic input at the highest international level.

Adapting training and development initiatives

to individual needs

In 2002, L’Oréal launched the “Talent Development” project,

accompanied by a vast publicity and training campaign*. This

evaluation programme is intended to facilitate listening and

dialogue; it centres on 9 managerial competencies for which

specific training or development action may be provided.

Many countries, including France and the USA, immediately

made the programme available to all employees.

Introduction of indicators

A global reporting system provides for the analysis of Training

activity. In 2003, 42% of employees (60% of managerial staff)

underwent training, for an average period of 5 days.

Better access to training for all

By devolving training, the Management Development Centres

have made it much more accessible and opened up high quality

programmes to many more people. An educational kit entitled

“Discovery” has been distributed in all the subsidiaries.

Everyone who joins L’Oréal is provided with essential information

about the group and made aware of the management

values set out in the Business Code of Ethics.

Diversity is being gradually incorporated into management

training programmes at CEDEP.

“COOL” (CAREERS AND OPPORTUNITIES ON LINE)

“COOL” is an intranet-based job exchange. It encourages

employees’ occupational and geographical mobility by

giving them access to all vacancies in a particular country.

An international and inter-Divisional Corporate Training Course

was given in New York to raise managers’ awareness of the multicultural

nature of L’Oréal’s brands and workforce.

A pay policy to motivate everybody

“COOL” was developed and launched in April 2000 by

L’Oréal USA. In 2003, 26.3% of job vacancies were filled

internally via “COOL”.

In May 2002, “COOL” was introduced in France,

chosen as the pilot country for Europe. The system shows

all job vacancies available, with the exception of those at

management level. Of the 264 job vacancies posted online

in 2003, 122 (46%) were filled via “COOL”.

L’Oréal’s global pay policy reflects its recognition of its employees’

involvement in the company’s development and simultaneously

aims to attract talented individuals.

Although it applies to all the group’s employees, the application

of the policy varies according to the job and to the level of

responsibility involved.


25

Recognising individual qualities

A permanent dialogue at all levels

L’Oréal offers competitive rates of pay. Remuneration is linked

to the job and takes into account potential as a means of playing

a role in managers’ long-term development and involvement.

In 2003, 2,500 managers, a fifth of the group’s managers

worldwide, benefited from stock-options.

Sharing in collective achievement

L’Oreal gives financial rewards to all employees, in line with

collective achievement. Since 2001, a “Worldwide Profit Sharing”

(WPS) scheme has been implemented in every country*. It is a

variable and collective share of remuneration, depending on

the results of each country, and is a mainstay of the group’s

remuneration policy – similar to profit sharing in France, which

represents 16% of employees’ overall remuneration. The group

hopes that WPS will strengthen its employees’ sense of belonging

and increase their motivation. In 2003, L’Oréal’s General

Management required countries to pay employees the equivalent

of two and a half weeks’ salary if performance objectives

were fully met*. The group looks to continue the development

of WPS, with the aim of bringing it up to 4 weeks’ salary by

2005/2006.

The quality of the “social climate” within the group is the

result of permanent dialogue and of the pursuit of consensus

between Management, employees and their representatives.

These exchanges are facilitated by decentralised structures of

representation, both legal and informal.

In 1996, an agreement was reached between the Management

and French and European trade unions (FECCIA and EMCEF) for

the setting up of L’Oréal’s European Social Dialogue Works

Council (IEDS).

This agreement, renewed each year, anticipates the integration

of 10 new Union European member countries in 2004. The purpose

of this body is to inform and consult staff representatives

(social exchange and dialogue) about the group’s current situation

and its economic, financial and social prospects. In 2004,

the IEDS is made up of 30 members representing 15 countries,

for whom economic and social training is provided. A Secretariat

for Liaison, in which at least two nationalities must be represented,

is responsible for maintaining links between Management

and the members.


26

SOCIAL ET HUMAIN

Integration and apprenticeship

programmes

L’Oréal is developing an active apprenticeship policy and

numerous vocational integration initiatives in France and

internationally.

Welcoming apprentices

Passing on experience and know-how to young people is a tradition

that is strongly anchored in the corporate culture of the

group. L’Oréal sees apprenticeship as a means of achieving

excellence by:

• training young people and giving them their first work experience,

• developing a channel for recruiting high-calibre personnel in

some of its business areas (a third of qualified apprentices has

been taken on in France).

In France, 1,750 apprentices have been taken under the wing of

almost 1,200 apprenticeship supervisors since 1993. In 2003,

they numbered 401 (or 3.3% of the workforce), and 89% of

them were studying for qualifications involving 2 years or more

of post A-level study*.

Internationally, the concept of work-based training takes different

forms:

• work-based training in Belgium, Spain, Italy, the UK (Student

Sponsorship scheme) and the USA,

• international programmes for French apprentice engineers.

Encouraging integration of the socially

disadvantaged and giving disabled employees

access to the workplace

In order to facilitate professional integration of the disadvantaged,

particularly the young and disabled people, L’Oréal has

set up partnerships with specialists in professional integration:

• establishment of integration programmes for unemployed

young people who lack qualifications,

• a policy for the employment of disabled people: internships,

adapting sites and tools, cooperation with specialist centres,

• solidarity initiatives,

• providing neighbourhood services in the workplace.

In Brazil, the “Viva Rio” programme provides hairstyling training

for women from the “favelas”. At the end of the training

programme, they are awarded a certificate to promote their

professional and social integration.

The L’Oréal plant in Burgos, Spain, collaborates with the

ASPANIAS sheltered workshops (subcontracting) and has set up

full training programmes.


27

L’Oréal Thailand launched the “Coiffeurs du cœur” project in

partnership with the Pakkred women’s integration and training

Centre in the province of Nonthaburi.

The aim is to provide unemployed or disadvantaged women

with training leading to a qualification in cutting, styling and

colouring techniques.

In France, L’Oréal increased its involvement with the Association

Valentin HAUY in 2003; the Association helps the blind and visually

impaired to overcome their disability through:

• internships,

• short-term and long-term contracts,

• employment workshops: preparation of a curriculum vitae and

covering letters, interview practice.

A wealth of resources is provided to help employees in their

day-to-day work: a worldwide directory, L’Oréal intranet,

Internet access, etc.

Looking after employees’ health

Keeping employees healthy is a permanent priority for L’Oréal:

• removal of biomechanical causes by the phasing out of packing

lines that involve a lot of manual handling,

• increasing awareness and training initiatives for employees

and management,

• carrying out job and design ergonomics studies,

• dissemination of best practices,

• personalised medical care.

Recognising initiative and sharing experience

Sharing experience: the group seeks to pass on the results of

successful actions carried out on one site to all other units.

With this in view, the “L’Oréal Apprenticeship Award” is made

every 2 years, alternating with the “L’Oréal Integration Award”.

These awards provide an opportunity for L’Oréal to show its

appreciation to the partners on which it relies.

L’ORÉAL FINLAND - “GENEROSITY PROGRAMME”

Since May 2002, 5 beauty advisers have been giving their

services to sick people and children, within the framework

of a partnership between L’Oréal Finland and three

institutions based in Helsinki:

Favourable working conditions

L’Oréal attaches great importance to creating the best possible

working conditions.

Creating spaces for living and working

Working and interacting with others in a convivial atmosphere

are additional factors affecting staff motivation. Communal

facilities such as a company restaurant, a café and meeting

rooms are particularly appreciated. Particular attention is paid

to interior features such as plants and lighting. Special facilities

provide access for those who are disabled.

• Mental Health Clinic

This psychiatric institution cares for people with serious

mental problems. Skin care and make-up sessions are held

once a week and are very successful.

• Radiotherapy Hospital

Patients spend the day in this hospital for intensive cancer

care. Skin care and make-up sessions are now provided for

them every Thursday.

• Children’s Hospital

A beauty adviser makes a weekly visit to this hospital for

children and teenagers.


28

Transferring raw material to a manufacturing vat

At each stage in production, health and safety rules are respected.

KEY FIGURES

The conventional frequency rate

12

10

8

6

4

11.2

9.7

7.8

6.0

4.3

Transportable waste recycling coefficient

(in %)

100

80

60

40

78.7

87.3

83.3 86.3 88.9

Water consumption per finished product

(in litres)

1.10

1.00

0.80

0.60

0.40

0.85 0.83 0.85 0.84

0.82

2

20

0.20

0

I

1999

I

2000

I

2001

I

2002

I

2003

0

I

1999

I

2000

I

2001

I

2002

I

2003

0

I

1999

I

2000

I

2001

I

2002

I

2003

The conventional frequency rate represents

the number of L’Oréal personnel involved in

an accident (absent from work on the day after

the accident) per million hours worked.

The recycling coefficient represents the relationship,

expressed as a percentage, between the mass of

transportable waste recycled and that of all

transportable waste.


29

SAFETY, HEALTH AND ENVIRONMENT

Consideration and respect for

all environments

Faithful to its commitment to improve industrial safety, occupational health conditions

and environmental protection, and to meet well-defined objectives, L’Oréal has followed

a strict Safety, Health and Environment (SHE) policy for a number of years.

This policy involves in particular:

• respect for the law and local standards in terms of Safety,

Health and Environment,

• manufacturing compliant with SHE standards developed by

L’Oréal, in addition to the required minima,

• encouraging employees to improve SHE practices and implementing

a permanent process of improvement,

• ensuring that individuals and companies with whom L’Oréal

has dealings respect these principles,

• implementing environmental initiatives and active policies,

notably for the reduction of energy and water consumption,

• recycling of waste in all areas of activity.

Organisation and management

L’Oréal has implemented practices that lead to optimum environmental

performance on all its sites: manufacturing sites,

research laboratories and office buildings throughout the world.

The group has put in place the mechanisms needed for this

task: dedicated organisation and management, staff training

and an audit process.

The Production and Technology Department (DGT) ensures functional

responsibility for the protection of people, property and

the environment at all the group’s sites through the SHE and

Sustainable Development Departments. These Departments are

linked to each operational entity through SHE managers who

coordinate the actions of local experts at each of their sites.


30 SAFETY, HEALTH AND ENVIRONMENT

The SHE Department is responsible for:

• internationally available technical assistance in relation to

Safety, Health and Environment,

• the supervision of experts and SHE specialists at all levels of

the organisation,

• on all manufacturing sites,

• monitoring the application of standards,

• circulating best practices in the interest of constant

improvement.

The Sustainable Development Department is responsible for:

• informing, training and raising the awareness of employees

throughout the world,

• coordinating environmental and sustainable development

programmes,

• informing people both inside and outside the group of the

results obtained.

Together, the two Departments set the objectives to be

achieved and monitor progress.

Resources in support of SHE management

The RIO and RIS (organisation and safety of industrial risks)

are in-house documents issued by the Production and Technology

Department setting out the rules governing L’Oréal’s overall

policy regarding SHE. They define the responsibilities of each

person, the information systems, training, and measures for

improvement to be implemented, as well as the means for

monitoring results.

The “Safety, Health and Environment” performance indicators

are used on all sites. Each month, they record 65 accident

prevention parameters, provide information on incidents and

report on figures relating to water and energy consumption,

atmospheric discharges, effluents, waste and recycling. They

are carefully analysed by the group’s SHE experts and form the

basis for corrective action to enable objectives to be met.

The SHE Awards are in-house prizes designed to motivate

employees to improve risk management and contribute to environmental

protection:

• award for the best safety initiative (factories),

• award for the best environmental initiative (factories),

• award for the best safety, health and environment initiative

(distribution centres and office buildings),

• award for the best improvement (factories, distribution centres

and office buildings),

• Production and Technology Department SHE awards for excellence

(factories, distribution centres).

The aim of the awards is to pass on the fundamental values of

continued improvement: initiative, improvement and stability.

SHAP (Safety Hazard Assessment Programme) is an analytical

programme for risk prevention. The SHAP identifies the risks

involved in different areas of activity; when standardised

across the group, it provides a precise cartography of inherent

risks at each plant, enables their extent to be assessed and

leads to new methods for monitoring residual risks.


31

Training and informing employees

Each employee, regardless of position, is made aware of safety,

health and environmental issues, thanks to specific modules

incorporated into the group’s and the sites’ training programmes.

Information about SHE initiatives carried out and the results

obtained is an integral part of communication within the group.

It is circulated to all employees in the company, through internal

publications such as En direct and Usine, the group intranet

site, videos, CD-ROMs, etc.

Industrial production

L’Oréal has 120 industrial sites (factories and distribution centres),

of which five are rated “Seveso” high.

A quarter of L’Oréal’s plants are audited each year

Monitoring through multiple audits

An in-house and/or external audit programme for industrial

sites has been in place for about ten years. It aims to give a

systematic assessment of the progress of the sites in terms of

SHE management.

A quarter of the plants is audited each year, which means that

each plant undergoes an in-depth inspection every four years.

In 2003, 10 plants out of 42 were audited. Outside consultants

perform about a third of these audits.

Audits are also carried out at the factories and distribution

centres by insurance companies. In 2003, 9 such inspections

dealt with environmental issues and 30 with safety conditions.

Factories and distribution centres operate the group’s policy

for their decentralised purchasing: units within the group carry

out audits of their suppliers, and these include aspects related

to SHE.

Specific Safety, Health and Environment training in

the workplace


32

SAFETY, HEALTH AND ENVIRONMENT

Limiting the impact of our industrial

activities

Scope: environmental and safety indicators apply to

100% of the 42 factories and 78 distribution centres,

almost the whole of the group’s activity.

Occupational safety at manufacturing sites

The reduction of accidents and occupational illness at all manufacturing

sites means:

• adhering to local regulations and in-house rules that apply to

the whole group in terms of health, safety and working conditions,

• developing and improving the constructive work process with

employees or their representatives,

• carrying out constant checks and implementing corrective

action,

• communicating “best practices” in the interests of constant

improvement.

During the reporting period in question (since 1999), no fatal

accidents at work were recorded and the work injury frequency

rate was reduced by 62%.

ááá THE TARGET: zero accidents

In 2003, 55 distribution centres and 11 factories hit the “zero

accident” target. These were Tours, Saint-Quentin and Villepinte

in France, Settimo in Italy, Suzhou in China, Savannah, Linden

and West Caldwell in the USA, Gujarat in India, Carrascal in

Chile and Cosmelor in Japan.

The accident severity rate

0.30

0.25

0.20

0.15

0.10

0.05

0

0.24

I

1999

0.25

I

2000

0.19 0.19

I

2001

I

2002

0.14

I

2003

The accident severity rate expresses the number of days lost by L’Oréal personnel (as a

result of accidents at work) per 1,000 hours worked.


33

Energy consumption

Although the cosmetics industry consumes little energy compared

with other areas of activity, the group pursues an active

policy of limiting its consumption, for both environmental and

financial reasons.

Total energy used

n Total consumption

in million kWh (1)

t

900

750

600

450

300

150

0

562

191

I

1999

Breakdown by energy source

(in million kWh (1) )

601

184

I

2000

693

I

2001

(1) One million kWh is equivalent to 3.6 gigajoules.

1999 2000 2001 2002 2003

Electricity 252 264 306 336 355 44%

Gas 271 297 333 354 387 49%

Fuel oil 38 39 54 55 57 7%

Total 562 601 693 745 799 100%

(1) One million kWh is equivalent to 3.6 gigajoules.

Consumption for 1,000 finished products

in kWh

745

199 198

I

2002

799

204

I

2003

tx

230

220

210

200

190

180

170

productivity, have also contributed to a significant increase in

energy consumption.

Even though the group has achieved a high standard in this

area and the possibilities for saving energy are at present limited,

reduction in energy consumption remains our objective.

L’Oréal’s energy policy exploits the experience built up over ten

years as a means of seizing every opportunity in this area.

Water consumption

The group’s water consumption is linked to the water content

of its products. Some products, such as shampoos, require more

water in their manufacture than others. The composition of the

group’s product portfolio therefore has a direct impact on the

average water consumption per finished product.

Total water consumed

n Total consumption

in thousand of m 3

t

3,500

3,000

2,500

2,000

1,500

1,000

0

2,487

I

1999

2,674

I

2000

2,914

I

2001

Consumption per finished products

in litres

3,214 3,280

0.85 0.83 0.85 0.84

0.82

I

2002

I

2003

tx

3

2.5

2

1.5

1

0.5

0

Supply

Electricity used by the sites locally is provided by local utilities

with their own means of production. It is therefore difficult to

trace the energy required by each site to produce the electricity

used by L’Oréal factories.

Performance analysis

The rise in energy consumption at L’Oréal’s manufacturing sites

is the result of increase in production and the acquisition policy

of the last five years. The automation of manufacturing systems

and the improvement of health procedures to enhance

safety and working conditions for employees, and to increase

Performance analysis

The manufacture of products like shampoos, which require the

most water, has increased during the last three years. In spite

of this, over the past ten years technological innovation and

the day-by-day vigilance of employees have reduced the

amount of water needed for manufacturing by 27%: in 1993,

1.16 litres were used per finished product.


34 SAFETY, HEALTH AND ENVIRONMENT

ááá THE TARGET

5% reduction in water consumption

per finished product in the next two years

All manufacturing sites have a drop-off centre

Initiatives

To reduce waste, the cooling water for machines and products

is recycled and reused. In addition, during demineralisation of

the water needed to manufacture products, several factories

recycle the mineral-concentrated water and use it for cleaning

purposes.

Since 2003, a special programme focused on reducing water

consumption includes the development of new cleaning technologies

and methods to identify and reduce water loss.

At many sites, the pipes transporting the product are cleaned

at the end of each cycle by a special cleaning system. A “pig”

is propelled through the pipe, scraping the inner surface as it

goes. This system not only reduces the amount of water consumed

in the cleaning process, but also leads to less product

loss, less waste and less residue in the effluent.

Waste is sorted at source


35

Atmospheric discharges

Greenhouse gases

None of L’Oréal’s manufacturing processes directly emits greenhouse

gases. Only steam production and oil-fired heating of

the group’s buildings produce CO2 emissions.

Other atmospheric emissions

SO2 emissions are related to the use of oil for heating. In order

to limit these emissions, the group uses natural gas to fuel its

heaters whenever possible.

SO2

CO2

n Total emissions

in thousands of tonnes

t

90

75

60

45

30

15

59.6

62.8

77.2

Emissions per finished product

in grams

84.2

89.0

20 22 22 23

19

tx

90

75

60

45

30

15

n Total emissions

in tonnes

t

75

60

45

30

15

0

40

14

I

1999

41

13

I

2000

60 58

17 15

I

2001

Emissions per finished product

in milligrams

I

2002

65

17

I

2003

tx

50

40

30

20

10

0

0

I

1999

I

2000

I

2001

I

2002

I

2003

0

Waste

Motor vehicles are a major source of CO2 emissions.

Comprehensive detailed information about the discharges due

to their use in transporting the group’s products and as a

means of transport for employees is not however available.

Nonetheless, the group has for many years been developing

less polluting transport solutions, such as the use of electric

vehicles for certain urban sites and the adoption of combined

road/rail transport methods. Some of the main initiatives in

this area have been carried out on the France-Italy and France-

Spain links, as well as for supplying northern Norway from the

Copenhagen distribution centre.

Gases that deplete the ozone layer

The only gas emissions that deplete the ozone layer come from

propellants for aerosols. The main offending gases (CFCs) have

not been used by L’Oréal since 1989, well before the final ban

came into effect in 1995.

The group makes reducing waste a priority and sets precise

annual targets at each manufacturing site. In the manufacture

of its products, L’Oréal generates various types of discharge,

including so-called “transportable” waste, as opposed to effluent

or atmospheric emissions. Transportable waste is waste

resulting from the manufacturing process that is intended to

leave the manufacturing site (pallets, packaging, building

debris, leftover finished products and materials used in the

manufacturing process).

Transportable waste

n Total transportable waste

in thousands of tonnes

t

150

125

100

75

50

25

0

110.2

I

1999

108.6

I

2000

118.3

I

2001

Transportable waste per finished product

in grams

127.3 128.1

37.5 33.2 33.2 33.9 32.7

I

2002

I

2003

tx

120

100

80

60

40

20

0


36 SAFETY, HEALTH AND ENVIRONMENT

Transportable waste (in thousands of tonnes)

Performance analysis

1999 2000 2001 2002 2003

Special

technical 28.4 31.1 34.0 38.7 40.0 31.2%

waste (1)

Sludge 9.7 8.2 8.0 10.0 10.3 8.0%

Packaging 17.3 15.2 14.1 14.3 14.8 11.6%

Other

transportable waste 54.8 54.1 62.2 64.3 63.0 49.2%

Total 110.2 108.6 118.3 127.3 128.1 100%

(1) Special technical waste is made up of finished or semi-finished products, solvents,

raw materials, used oil, cleaning water containing large amounts of product, etc. This

type of waste is subject to regulations and its treatment is strictly controlled.

L’Oréal has set up a waste recycling programme. Dumping

waste is an option only when incineration is not available.

39 manufacturing sites do not dump any of their waste.

ááá THE TARGET: zero landfill for all sites

Transportable waste recycling coefficient

n Total quantity of recycled waste

in thousand of tonnes

t

120

100

80

60

40

20

0

109.6 113.8

86.5

94.6 98.2

78.7

87.3 83.3 86.3 88.9

I

1999

I

2000

I

2001

I

2002

Recycling percentage

%

I

2003

tx

100

75

50

25

0

Transportable waste recycling in 2003

(Factories and distribution centres)

Landfill: 7%

Destruction: 4%

Less than 11% of waste from L’Oréal is not re-used or recycled.

Initiatives

89% Re-used, recycled and

converted waste

n Recycling: 44%

n Re-use: 24%

n Energy value: 21%

The Karlsruhe plant in Germany has put in place best practices

to enable it to achieve the zero non-recycled waste target.

To this end, two systems for treating aerosol waste and sludge

from the purification plant have been set up.

Thanks to a partnership with a company specialised in recycling,

aerosols, including the leftover product and gas, are recovered

or recycled in their entirety: the various components of the

product are separated and reused, the gas is used for other

aerosols, the metal parts are recycled and the plastics are used

to generate energy.

The sludge is dried and transformed into a powder which will

be burned as a source of energy. The water vapour produced by

the drying process will be condensed and retreated in a purification

plant.


37

Effluent

Scope: this indicator concerns only factories. The

distribution centres do not discharge any waste

water other than that resulting from the normal

activity of an inhabited building (sanitary waste)

and are not therefore included in this indicator.

In the majority of its factories, L’Oréal pre-treats waste water

before sending it to local treatment plants. However, all the

waste water is tested before being sent to such plants or discharged

into the ecosystem.

COD – Chemical Oxygen Demand (1)

n Total COD waste

in tonnes

t

9,000

7,500

6,000

4,500

3,000

1,500

0

6,213

I

1999

6,771

I

2000

6,889

I

2001

COD waste per finished product

in grams

7,269

I

2002

8,019

2.1 2.1

2 1.9 2.1

I

2003

tx

6

5

4

3

2

1

0

Raw material storage areas

(1) Chemical oxygen demand (COD) – the amount of oxygen needed to oxidise all the

pollutants contained in the effluent – is the value commonly used to measure the properties

of waste water.

Initiatives

The Rambouillet plant in France has a novel water treatment

plant. Instead of treating the waste water using first a physico-chemical

then a biological process (the usual technique), it

performs only the biological (bacterial) stage, combined with

an innovative filtration process.

This technique has the benefit of avoiding the production of

sludge, caused by the use of the reactants required for physicochemical

treatment, and of increasing the total purification

capacity of the plant by the same amount.


38 SAFETY, HEALTH AND ENVIRONMENT

Packaging

L’Oréal is responsible for the design and production of its own

packaging, although it is not manufactured in-house. L’Oréal

sees its approach to packaging one of the elements that set

the group’s products apart, by using packaging that is as safe

as possible to use and that shows respect for the environment.

The innovative approach of having in-house teams dedicated

to packaging research leads to continuous improvement in

terms of aesthetic appearance, intelligible information, ease of

transport and storage, ergonomics and environmental impact.

Permanent quality and safety checks of packaging

from design to end production.

Reducing the environmental impact of the packaging used by

the group is governed by four basic principles:

• reduction at source,

• promoting recycling,

• use of recycled materials,

• prolonging product life.

Numerous developments have been introduced, such as refills

and reusable pump systems and the elimination of heavy metals

from plastics dyes and printing inks.

Some examples of reduction at source:

• Vichy Laboratoires: information leaflet discarded in favour of

information printed on the back of the box, saving 4 tonnes of

paper each year,

• Garnier: the weight of Synergie cleansing milk and toner bottles

reduced from 26g to 20g and box replaced by film wrapping,

saving 3 tonnes of cardboard per year,

• L’Oréal Germany: four brands reduced the weight of shampoo

bottles, resulting in a reduction in plastics consumption of

200 tonnes each year,

• Lancôme: smaller cardboard box for samples, making them

40% lighter and saving 59 tonnes of plastic and 110 tonnes of

cardboard each year.

The reuse of transport packaging has been extensively developed.

Raw material containers are now returned to the supplier

for reuse,


39

• thermoformed plastic trays for delivering glass bottles can be

reused 15-25 times,

• large plastic bags used by suppliers to deliver plastic bottles to

the manufacturing sites are returned to the supplier when empty,

• boxes for plastic bottles can be reused 5-10 times.

REDUCING THE CONSUMPTION OF MATERIALS AT SOURCE:

ELSÈVE

Elsève (Elvive, El’Vital) shampoo bottles have been improved

and now require almost 25% less material, the equivalent of

saving of almost 450 tonnes of polyethylene a year. In addition

to this reduction, the indirect effects on transport and

recycling are also minimised.

ENVIRONMENTAL RESOURCES MANAGEMENT (ERM)

Scope and methodology

Environmental Resources Management (ERM) was called upon to

certify the Safety, Health and Environmental (SHE) data relating

to L’Oréal production sites published in this report, concentrating

particularly on:

• the SHE data collection process;

• the SHE data management process;

• the SHE data and tables presented in the report.

ERM has reviewed the data and data management systems. To

date we have visited 14 factories out of 42 and interviewed the

staff responsible for collection, management and analysis of data.

Reducing the environmental impact of packaging at the manufacturing

stage is a key objective. But the group is also especially

interested in what happens to packaging after it has

been used by the consumer. That is why it is conducting

advanced research in this area, and so influencing design.

L’Oréal is also taking part in various programmes – such as

“Eco-emballages” in France and “Der Grüne Punkt” in Germany

– to organise the recycling of consumer product packaging.

Findings

The review has indicated that, in the representative sample concerned,

the data collection and management systems provided

accurate and reliable information. Some minor inaccuracies, of

little importance for the consolidated group results, were identified

and quickly corrected. Progress has been made in 2003 to

improve the precision of data and the monitoring and consolidation

of key SHE indicators. The selection of indicators published

is pertinent, even though the scope of the review might

usefully include research and administrative activities for information

involving safety.

Opinion

We believe that the SHE data for 2003, as set out in this report

in the text and diagrams, provide a fair, transparent and reasonable

representation of the factories’ and distribution centres’

performance in these areas.

Recommendations

For future improvement, however, we recommend:

• increasing the consistency of accountability reporting in safety

training and the validation of equipment safety,

• improving the assessment of SO2 emissions,

• considering reasonable ways of broadening the scope of the

examination of data related to safety.

Paris, March 2004.

Jacques Roman, Manager, Corporate Advisory Services.


40

Professor Lucia Mendonça Previato, L’Oréal-Unesco “For Women in Science” Award winner

for Latin America, in the Institute for Biophysics at the Federal University of Rio de Janeiro,

which she shares with her husband, Professor José Previato.

Her career has been principally devoted to the study, treatment and prevention of Chagas disease.

This often fatal condition, transmitted to humans mainly via an insect, is endemic in Latin America,

where it is thought to affect some 16 to 18 million people.


41

RESPONSIBILITY AND SOCIETY

Commitment to the community

L’Oréal is a socially responsible company, and seeks to support projects that

contribute to the public good, through long-term sponsorships and partnerships that

are consistent with its values. The most striking and symbolic example of L’Oréal’s

social commitment is the international programme For Women in Science, developed

in partnership with UNESCO.

Our commitment to society

Since L’Oréal’s business is at the centre of people’s everyday

lives and well-being, the group is closely involved in the life

of the communities in which its facilities are located. L’Oréal

has a duty to conduct itself as a socially responsible company

and seeks to support projects that are for the public good, in

the form of long-term sponsorships and partnerships.

These are often local initiatives focusing on specific, clearly

identified issues – women and science, solidarity, education –

that are consistent with the values that the group has advocated

for almost a century. The aim of these initiatives is to

provide a strong foothold in the economic and social life of the

countries in question.

The group endeavours to preserve what gives these initiatives

their strength and effectiveness, namely the independence of

our locally-based companies and their ability to adapt to specific

cultural environments.

L’Oréal-UNESCO

For Women in Science

Six years ago, L’Oréal decided to work alongside UNESCO, a global

organisation that speaks on behalf of all the world’s cultures.

By supporting an organisation that facilitates understanding of

cultural identities and recognition of their diversity, L’Oréal

seeks to participate in the dialogue between cultures and to

work for a better understanding between men and women from

different traditions.

For L’Oréal, 55% of whose research teams are women, science

and women stand out as the two best vehicles for progress in

the global community. The group therefore chose to give support

to women scientists who, through their research work,

contribute to the progress of the modern world, and to highlight

those women students who will carry their work forward

into the future.


42 RESPONSIBILITY AND SOCIETY

Rewarding talent, and encouraging

women to follow their vocation –

an international partnership

Following the first Awards in 1998, L’Oréal and UNESCO made a

commitment, in September 1999, “through agreed and concerted

cooperation, to set up joint projects to improve the situation

of women internationally, and in particular to promote

their scientific work.” (Extract from the Partnership Agreement

signed by L’Oréal and UNESCO).

The For Women in Science programme

has three parts

The L’Oréal-UNESCO Awards

Each year, the L’Oréal-UNESCO Awards go to five outstanding

scientists, representing all continents, for their contribution to

the advancement of science in areas not related to the group’s

activities. With the 2003 Awards, 26 scientists have received

this distinction.

The L’Oréal-UNESCO Awards are presented in alternate years to

women engaged in scientific research in the Life Sciences and

in Material Sciences.

The two juries for the L’Oréal-UNESCO Awards are made up of

eminent scientists from twenty countries and are chaired by a

Nobel prizewinner. For the Life Sciences, they are Professor

Christian de Duve, winner of the 1974 Nobel Prize in Medicine

and Founding President of the L’Oréal-UNESCO Awards, and

Professor Günter Blobel, winner of the 1999 Nobel Prize in

Medicine. For Material Sciences: Professor Pierre-Gilles de

Gennes, winner of the 1991 Nobel Prize in Physics.

The UNESCO-L’Oréal Fellowships

Each year, the UNESCO-L’Oréal Fellowships help 15 young

women scientists, involved in promising, exemplary projects,

to pursue their research in laboratories throughout the world.

By sponsoring these young scientists, the programme aims to

increase the role of women working in scientific disciplines.

Forty-five young scientists from forty countries, including

South Africa, Morocco, New Zealand, Bangladesh, Peru,

Albania, Congo, Nigeria, Azerbaijan and China have received

recognition since the UNESCO-L’Oréal Fellowships were set up.

National Initiatives

The L’Oréal-UNESCO partnership reaches many different countries

through national programmes in support of women scientists,

in collaboration with UNESCO’s national commissions.

• A “Girls’ Mentorship Program” has been launched in Canada

with Actua, a non-profit organisation dedicated to increasing

the scientific and technical literacy of young Canadians of both

sexes. This programme offers “Mentor Fellowships” to young

women research scientists every year.

• National Fellowships designed to promote young women scientists,

as in Poland where, for the second year running, five

Fellowships have been awarded with the support of UNESCO’s

Polish National Commission.

• In Spain, L’Oréal has sponsored the publication of a book,

compiled under the direction of Margarita Salas, President of

the Spanish Institute and winner of the L’Oréal-UNESCO Award

in 2000. The book, entitled “Nosotras Biocientíficas Españolas”,

profiles over 250 Spanish women scientists.

• In Germany, the ministry of Education and Science, with

L’Oréal’s support, has set up a series of some twenty seminars

entitled “Kick-off for your career”, aimed at helping young

scientists studying in the country’s top universities in their

studies and careers.

• Many other initiatives have been launched, including in the

Republic of Korea, Finland, Romania, the UK and Turkey.

All the national initiatives, taken in a large number of countries,

help to improve the position of women in science all over

the world.


43

Philippa Marrack Christine Petit Jennifer Thomson Nancy Ip

A partnership with

international influence

“For Women in Science” highlights work whose quality helps to

change the perception, particularly among scientists, of the

role of women in furthering knowledge, and gives support to

young women from all over the world who wish to pursue a

career in the sciences.

The quality of the relationship forged with UNESCO and its

representatives all over the world during the past six years has

led L’Oréal to carry this collaboration further. It has drawn

inspiration from the ideas and projects that have emerged in

this global environment to increase its own understanding of

global cultural issues and of less well-known identities.

Philippa Marrack, winner of the Award for North America,

is known for her work on T cells, which help the body to fight

disease.

Christine Petit won the Award for Europe, in recognition of

her work on the molecular and cellular bases of deafness and

other hereditary sensory defects in human beings.

Jennifer Thomson, winner of the award for Africa, has

devoted much of her research career to the development of

transgenic plants that are resistant to viral infections,

drought and other risks.

ááá L’Oréal’s initiatives are a way of asserting

the group’s social responsibility. But, sponsorship

and partnership initiatives must on no account

displace the first priority of any company,

that of behaving responsibly in its “role”

as a citizen.

Nancy Ip, a Chinese neurobiologist, won the Award for the

Asia-Pacific region. Her studies have led to the identification

of neurotrophic factors as potential pharmaceutical agents

in the treatment of neurodegenerative disorders, such as

Alzheimer’s and Parkinson’s diseases.


44

Statutory Auditor’s statement on certain information relating to corporate

affairs and R&D contained in the 2003 Sustainable Development Report

As Statutory Auditor for the L’Oréal Group and in accordance with the request made of me, I undertook the work described below

relating to the procedures for collecting and consolidating certain information published in the present report and identified by

an asterisk (*). Since this is the first year these measures have been in force, neither the implementation of the procedures in

the subsidiaries nor the information itself came within the scope of my remit. General Management was responsible for preparing

the information. It is my duty to inform you of the results of my review.

Nature and extent of the review

I carried out the following tasks:

• For each set of information reviewed: meeting with the various parties listed below, who are responsible for the organisation

of reporting and data consolidation at group level:

· for corporate information: Group Department of HR Information Systems, Apprenticeship and Training Department, Continuing

Education Department, Department of International Corporate Relations, International Mobility Department, International

Recruitment Department, General Purchasing Department;

· for R&D information, within the Research and Development Department: Management Control Department, International

Department of Central Functions, International Industrial Property Department, International Raw Materials Department.

• Working with these various parties and on the basis of interviews and documentary evidence (instructions sent to subsidiaries,

subsidiary reporting, group consolidation), we ascertained:

· that formalised and precise instructions regarding the definitions of the data to be collected and the methods of calculation

have been drawn up;

· that reporting and consolidation procedures are in place;

· that the information published is consistent with the area to be covered;

· on the basis of surveys, that the data generated by the reporting systems have been duly taken into account in the consolidation;

· that the general conditions governing purchasing, production, promotional items and POS advertising drawn up at Head Office

contain clauses forbidding the employment of young people under 16 years of age.

In carrying out this review, I was assisted by experts in the Sustainable Development Department at PricewaterhouseCoopers.

This review was not intended, and therefore does not enable me, to draw any conclusions expressing moderate (1) or reasonable (1)

confidence in the information reviewed.

Observations

My investigations lead me to make the following observations:

• With regard to the information reviewed, the L’Oréal group has put in place formalised and precise reporting and consolidation

procedures.

• A rigorous methodology has been used in drawing up these procedures.

• Their implementation at Head Office is based on a clearly structured organisation and well-defined responsibilities.

Paris, 5 March 2004

Pierre Coll, Partner

(1) The Statutory Auditor’s reports on the Sustainable Development Reports include a conclusion expressing moderate or reasonable confidence (the latter being the higher level)

in the information and/or procedures. Given the limitations of the Statutory Auditor’s review, the purpose of the declaration reproduced above was intended solely to describe our

observations.


Photographs: Craig McDean (cover), Jillian Edelstein

(portrait of Mr Owen-Jones); Research and Development:

Patrick Messina; Social and Human Affairs: Amid Fadavi,

Jean-Jacques Pallot, David Arrenz, Richard Gardette,

Richard Pak, Patrick Messina, Raphaël Trapet; Responsibility

and Society: Micheline Pelletier / Gamma; X.

Design and production

133, avenue des Champs-Elysées, 75008 Paris.


http://www.loreal.com

Incorporated in France as a “Société Anonyme”

with registered capital of €135,212,432

632 012 100 R.C.S. Paris

Headquarters:

41, rue Martre

92117 Clichy - France

Tel.: +33 1 47 56 70 00

Fax : +33 1 47 56 80 02

Registered Office:

14, rue Royale

75008 Paris - France

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