L'Oréal - 2018 Registration Document

2 Corporate Governance

RISK FACTORS AND CONTROL ENVIRONMENT

Business risks 2.8.5.3.1.

BUSINESS RISKS \ IMAGE AND REPUTATION Risk identification

Risk management

In order to reduce the risks that could result from events of this kind, L’Oréal has set up a system which monitors English- and French-language websites on an ongoing basis. The subsidiaries deploy their own social media and web monitoring systems under the aegis of their Director of Communications and must immediately report a media risk in their country to the Corporate Communications Department. L’Oréal has also set up a crisis management procedure which is tasked with preventing, managing and limiting the consequences of undesirable events on the Company across the globe. The Group crisis management officer reports directly to General Management. The deployment of the Code of Ethics throughout the Group aims at reinforcing the dissemination of the rules of good conduct which form the basis of L’Oréal’s integrity and ethics. These rules of good conduct seek to guide actions and behaviour, inspire choices and make sure that the Group’s values are reflected in the everyday acts of each employee. L’Oréal has also implemented a “Code of Good Practice for the Use of Social Media” by its employees. The Group’s principles and operational processes to be complied with relating to partnerships with influencers, have been disseminated worldwide to the employees in question. The Worldwide Safety Evaluation organisation specifically evaluates the safety of raw materials and finished products. It establishes the toxicological profile of the ingredients used and the tolerance of the formulas before they are launched on the market. The same safety standards are applied worldwide to ensure that consumers from across the globe have access to products of identical quality. L’Oréal goes one step further in safety assessments by monitoring the potential adverse effects that may arise once the product is on the market through its international cosmeto-vigilance network. This network collects, validates and analyses, using recognised rigorous methodologies, the adverse effects related to the use of a product. This allows for the appropriate corrective measures to be taken where necessary (see “Product quality and safety: a priority” within section 3.3.3.2). In terms of questions that civil society may ask regarding certain substances and their effects on health and the environment, three points summarise L’Oréal’s position: vigilance with regard to any new scientific data; s co-operation with the relevant authorities; s precaution leading to the substitution of ingredients in the event of a proven risk or a s strongly suspected risk. The Group has also put in place insurance policies protecting it in particular against third party liability claims related to its products (see Integrated worldwide programmes below). The measures taken in favour of consumer health and safety are described in further detail in chapter 3. Finally, production quality standards define rules governing the quality of products, for all stages from creation to production and distribution. Almost all plants are ISO 9001 certified for their production and follow Good Manufacturing Practices in accordance with the ISO 22716 standard. Risk management

The Company’s reputation and its brand image may be compromised at any time in a globalised world where information is disseminated rapidly. L’Oréal is not safe from an undesirable event, whether this involves the use or misuse of a product or reprehensible individual conduct. Circulation of detrimental information in the media, regardless of whether or not such information is founded, has been facilitated by the introduction of new technologies and the development of social networks, and could also affect the Company’s reputation and brand image. The development of collaboration with influencers whose behaviours, actions and positions may not be in line with the Group’s ethical principles may adversely affect the Group’s reputation given their position as opinion leaders for a significant subscriber community. BUSINESS RISKS \ PRODUCT QUALITY AND SAFETY Risk identification Consumer safety is an absolute priority for L’Oréal: safety assessment is at the heart of the development of new products and a prerequisite before a product is launched on the market. The principles governing the Group’s quality and safety policy are: satisfaction of customer needs; s compliance with safety requirements and legislation; s product quality and conformity across the supply chain. s

BUSINESS RISKS \ RESPONSIBLE PRODUCT COMMUNICATION Risk identification Risk management L’Oréal provides consumers with innovative products whose success is based on their quality and performance. The benefits of these products are highlighted in the Group’s communications. Despite all due care taken to guarantee the accuracy and fairness of the claims made in these communications, there is always a possibility that they may be challenged by the authorities, organisations or consumers.

Risk management

In order to reduce the risk of any such challenges arising, the Worldwide Claims Substantiation Department ensures the conformity of product communications before they are introduced on the market. The Group’s Code of Ethics sets out the fundamental principles of responsible communication and L’Oréal has made a commitment to implement the International Chamber of Commerce Consolidated Code of Advertising and Marketing Communication Practice and the Cosmetics Europe Charter and Guiding Principles on responsible advertising and marketing communication to which the key global cosmetics industry players in Europe adhere. The Group’s principles for “responsible product advertising and marketing communication” are described in an summary brochure disseminated worldwide in order to raise employee awareness about compliance with ethical principles, specific legal and regulatory requirements and operational processes for the prior control of product communications.

REGISTRATION DOCUMENT / L'ORÉAL 2018

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