L'Oréal - 2018 Registration Document

Corporate Governance RISK FACTORS AND CONTROL ENVIRONMENT

Ethics Day: an annual day on ethics Ethics Day has been held since 2009: a live webchat with L’Oréal’s Chairman and Chief Executive Officer enables all of the Group’s employees to ask questions and discuss the day-to-day application of L’Oréal’s Ethical Principles. Each member of the Ethics Committee and each Country Manager also organises local ethics discussions. In 2018, at the 10 th Ethics Day, over 60% of employees took part in this discussion and more than 6,800 questions were asked worldwide. In addition to the Ethics Day, employees receive regular information about the Group’s ethical policy and have a dedicated Intranet site. It is now many years since L’Oréal began a profound transformation, across every area of our organisation, in order to help us adapt to the great changes we see in our world. Sustainable Development is a fundamental pillar of our transformation and a strategic priority for all our teams. In the firm belief that Sustainable Development is an essential factor for success and durability, L’Oréal has adopted an ambitious corporate social, societal and environmental policy, which is shared by its management and teams (see section 3.3.). In 2013, the policy was taken once step further with the implementation of the L’Oréal Sustainable Development Sharing Beauty With All programme. Clear commitments were set for end 2020 in terms of innovation, production, meeting the challenges of sustainable consumption, and sharing the Group’s growth (see sections 3.1 and 3.4.). The 60 Sustainable Development Coordinators worldwide are tasked with helping the Country Managers/Area Managers implement the Sharing Beauty With All programme at their subsidiary. Progress of local implementation of the Sharing Beauty With All commitment is monitored by means of an annual reporting system. The Social, Environmental and Societal risks, and the progress of the policies put in place to deal with these risks, are reviewed regularly as part of the Internal Audit process. It should be noted that the financial risks related to the effects of climate change and the measures taken by the Group to reduce them through the Sharing Beauty With All programme are set out in chapter 3. Human Resources policy The quality and skills of male and female employees are key components of the Internal Control system. Human Resources policy within L’Oréal is defined by the constant search for excellence in recruitment and by the development of talent within the Group, so as to ensure that it has the required level of skills in all areas. The Learning teams all over the world offer technical training and personal development programmes, including programmes to help employees with integration or management; such programmes are tailored to different job profiles and aimed at providing mastery of different skills in all areas of activity. The international Share & Care programme, which meets the essential needs of each of the Group’s employees in terms of social protection, healthcare, parenthood and quality of life at work, is deployed in all of the Group’s subsidiaries. It also encourages each subsidiary to launch its L’Oréal corporate social, societal and environmental responsibility

The role of the 75 Ethics Correspondents throughout the world is to assist the members of the Executive Committee and the Country Managers in implementing the ethics programme and to provide all employees with a local point of contact, whilst promoting the normal routes for handling concerns by management and Human Resources. The Ethics Correspondents benefit every year from a specific coordination and training programme. The Senior Vice-President and Chief Ethics Officer regularly visits the Group’s entities all over the world (head offices, plants, distribution centres and research centres) to meet employees at all levels of the Company and visit the various sites. Since the end of 2013, he has carried out 91 country visits. Ethical risks are assessed on the basis of the indicators of the Verisk Maplecroft business integrity and human rights compliance index. A practical tool has been created to enable Country Managers to evaluate and analyse any local ethical risks and to take the necessary measures to prevent them. An annual reporting system allows to monitor the implementation of the ethics programme. The countries are informed of their potential areas for improvement by the Ethics Department. Ethics risks are systematically reviewed during audit assignments, through individual interviews. These interviews are conducted separately with the Country Manager and the Administrative and Financial Director. For prospective acquisitions, the responses to the “Ethics and Human Rights questionnaire” submitted to target companies serve to identify whether they have taken account of the risks, specifically those related to business ethics. A specific and compulsory e-learning course on ethics is available in all countries. As of 31 December 2018, 82% of the employees with access to the online module had completed this course. The Ethics Department also dispenses classroom training as part of the ongoing training of managers and some functions. In 2018, 19 ethics training courses were delivered by the Ethics Department and Purchasing Department to 381 employees, representing 972.5 hours of training (Country Managers, Buyers and Human Resources). Compliance with the Ethical Principles is integrated in the annual appraisal system for all employees which incorporates three skill sets: “Takes accountability with courage and transparency”, “Delivers both sustainable and short-term results with integrity” and “Treats all individuals in a respectful and consistent manner”. L’Oréal’s “Speak Up” policy enables employees to raise any concerns they may have directly with the Group’s Senior Vice-President and Chief Ethics Officer including via a secure website. In 2018, 529 possible ethical violations were identified either via the secure website, or via the Ethics Officers, and local or international management. All cases reported are thoroughly examined and appropriate measures are taken, where applicable. This policy was re-distributed worldwide in 2108. The Speak Up website was also opened up to temporary employees and stakeholders. In 2018, employees were notified of the number of cases of discrimination and sexual and other types of harassment reported at Group level worldwide in 2017, the number of complaints fully or partially upheld and the corrective measures put in place.

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REGISTRATION DOCUMENT / L'ORÉAL 2018

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