L'Oréal - 2018 Registration Document

2 Corporate Governance

RISK FACTORS AND CONTROL ENVIRONMENT

INDUSTRIAL AND ENVIRONMENTAL RISKS \ ENVIRONMENT AND EMPLOYEE SAFETY Risk identification Risk management

The Group’s Environment, Health and Safety (EHS) policy aims to minimise the impact on the environment and guarantee the health and safety of employees, customers and the communities in which L’Oréal carries out its activities. As a result of this policy, the risks inherent in our business activities are systematically identified and brought under control. This rigorous EHS policy has been implemented throughout the Group for many years. The Operations Division issues Internal Rules that set out the principles of L’Oréal’s EHS policy. An EHS officer is appointed at each site. Training programmes are systematically organised. EHS performance indicators are collected monthly from all production sites, distribution centres and from administrative and research sites with over 50 people. Fire risk is dealt with in the framework of very strict fire prevention standards (National Fire Protection Association standards). Moreover, under its Sharing Beauty With All programme, the Group pursues its initiatives aimed at reducing its environmental footprint by setting itself ambitious, concrete targets (see chapter 3). L’Oréal has undertaken to improve its production conditions to reduce its environmental footprint by 60% in 2020 from a 2005 baseline. In all its plants and distribution centres, the Group strives to reduce its greenhouse gas emissions, its water consumption and its waste generation. It also pledges to reduce the footprint from transportation of its products and to no longer send waste to landfill. As well as being implemented on all the industrial sites, EHS policy has been rolled out to all the Group’s research centres and administrative sites. The “Working Sustainably” programme, launched in 2016, which aims at reducing the environmental impact of these activities, has moreover reinforced the commitment by these sites to environmental issues. The Sharing Beauty With All programme also aims to reduce the environmental footprint of its product formulas and to respect biodiversity through a sustainable and responsible sourcing policy for raw materials, the eco-design of packaging and commitments to “zero deforestation” so that 100% of the products proposed by 2020 have an improved environmental or social profile. One of the objectives set by the Group as part of the Science Based Targets is that by 2025, 100% of the Group’s plastic packaging will be refillable, reusable, recyclable or compostable. This objective will have a direct effect on the end of life of packaging and stimulate the circular economy. The industrial sites classified as Seveso Top-tier Threshold are subject to strict regulations via the European Union’s Seveso Directive on the prevention of the risk of major accidents due to the storage of chemical or flammable products.

The cosmetics industry has a limited environmental risk profile. However, as with any production, distribution, research and general administration activity, L’Oréal is exposed to safety and environmental issues: fire, explosion, technical failure of facilities, information systems, or even human failure in the operation of existing facilities or works management. These industrial risks can result in human damage and/or accidental pollution (surface and groundwater, air, soil), within or outside the Group’s sites, particularly if these are located in inhabited zones.

Insufficient consideration of these impacts related to the use phase during the design of products could represent a risk for sales in certain areas of the world where access to water is difficult (water stress, quality of drinking water, etc.). Similarly, the use of predominantly plastic containers may represent an environmental risk resulting from the disposal of plastic waste, depending largely on the collection and treatment channels available.

The L’Oréal Group operates 97 industrial sites, three of which are classified as “Seveso Top-tier Threshold”.

Counterparty risk 2.8.5.3.4.

COUNTERPARTY RISK Risk identification

Risk management

The Group deals primarily with international banks and insurance companies which have the best ratings from the three main specialised rating agencies. When the Group makes financial investments, in the form of either bank deposits or marketable securities (see note 9.2. “Cash and cash equivalents” of the Consolidated Financial Statements, chapter 4), it gives priority to short-term transferable instruments from first-rate financial institutions.

The Group is exposed to the counterparty risk of financial institutions which it uses within the scope of its business activities. However, the Group considers that its exposure to this risk is low (see note 10.5. “Counterparty risk” of the Consolidated Financial Statements) in light of its management system.

REGISTRATION DOCUMENT / L'ORÉAL 2018

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