Logo: L'Oréal

2021 UNIVERSAL REGISTRATION DOCUMENT

Annual Financial Report Integrated Report

Contents

Detailed chapter contents can be found at the beginning of each chapter.

**This information forms an integral part of the Annual Financial Report as provided in the article L. 451-1-2 of the French Monetary and Financial Code.

Universal
Registration
Document

2021

Including the Annual Financial Report - Integrated Report Corporate and Social Responsability

Logo AMF

This Universal Registration Document has been filed on March 17, 2022 with the Autorité des Marchés Financiers (AMF), as competent authority under Regulation(EU) 2017/1129, without prior approval pursuant to article 9 of said regulation.

The Universal Registration Document may be used for the purposes of an offer to the public of securities or admission of securities to trading on a regulated market if completed by a securities note and, if applicable, a summary and any amendments to the Universal Registration Document. The whole is approved by the AMF in accordance with Regulation (EU) 2017/1129.

This Universal Registration Document including the Annual Financial Report is a reproduction of the official version which has been prepared in ESEF format and is available on the issuer's website www.loreal-finance.com

This document is a free translation of the original 2021 Universal Registration Document issued in French Language and is provided solely for information purposes. In case of discrepancy between the French and the English version, the French language version of the Universal Registration Document shall prevail.

Prospects: Jean-Paul Agon, Chairman of the Board of Directors of L’Oréal & Nicolas Hieronimus Chief Executive Officer of L’Oréal

Photo of Jean-Paul Agon
I have immense confidence in L’Oréal’s future”
JEAN-PAUL AGON
Chairman of the Board of Directors of L’Oréal

2021 was a decisive year for L’Oréal.

Firstly, both in the financial and extra-financial spheres. Thanks to its robust and balanced business model, coupled with the strategic choices made over the past few years, the Group has come through the crisis remarkably well and continued its virtuous path. The exceptional financial performance achieved in 2021—a combination of very strong sales growth, market share gains and a record increase in profitability—enables us to pursue our dynamic shareholder return policy.

L’Oréal has again made huge progress in sustainable development, gender equality and inclusion. It is vital to continue accelerating in tackling today’s huge environmental and societal challenges. This is what we do particularly with L’Oréal for the Future. This programme, launched during the pandemic, aims at a more radical transformation of our company towards being an ever more exemplary, responsible, and supportive corporate citizen.

This dual excellence-financial performance and environmental, social, and societal exemplarity‑forms the backbone of our strategy.

On behalf of the Board of Directors and myself, I would like to warmly thank and congratulate each and every one of L’Oréal’s 85,400 employees. It is they who-through their quality, creativity, engagement, and desire to act responsibly-create lasting, shared value.

2021 was also a year of change with regards to governance and shareholder structure, in order to strengthen L’Oréal’s position in the years to come.

Following the dissociation of the functions of Chairman and Chief Executive Officer, in May Nicolas Hieronimus became in May the sixth CEO in L’Oréal’s 112-year history. The transition, prepared long in advance, took place seamlessly and in the spirit of continuity, true to the tradition of our company. The two roles are complementary and clearly defined. As Chairman, I will oversee the definition of the strategic orientations and ensure effective governance. I am particularly honoured to continue serving the company I have devoted my life to.

I am convinced that our commitment to continuously improving our governance will be a fundamental asset for the Group in the long term. In this regard, receiving the 2021 Grand Prix Award for Corporate Governance from l’AGEFI is a source of great pride and encourages us to intensify our efforts.

Another strategic milestone was the reinforcement of the shareholder stability around the Bettencourt Meyers founding family and Nestlé. The agreement, approved by the Board, for the repurchase by L’Oréal of 4% of its capital held by Nestlé, is in the interest of L’Oréal and all its shareholders.

I have immense confidence in L’Oréal’s future.
Driven by the vision, talent, and commitment of Nicolas Hieronimus and all our teams, a new era of the L’Oréal Adventure is beginning.

It truly promises to be remarkable. 

Photo of Nicolas Hieronimus
L’Oréal is uniquely positioned to succeed in 2022 and beyond”
NICOLAS HIERONIMUS
Chief Executive Officer of L’Oréal

2021 in three keywords?

Historic: L’Oréal sales grew by +16.1%(1), twice the growth of the beauty market.

Balanced: we grew in all Zones, all Divisions and all categories, showing the true power of our unique business model.

Responsible: our strong financial results enabled us to share our success with our employees and invest in our social and environmental commitments.

What was behind the historic results in 2021?

2021 saw the beauty market bounce back to almost its 2019 levels. As the world’s leading beauty company, we continued to drive the market with strong innovations. One of the most interesting things to note is our balanced business model and our unique portfolio of brands.

Our success can also be explained by our virtuous growth model. We continued to invest in our brands and in game-changing innovations, despite all the uncertainties of the market, fuelling more growth while still delivering on profit. In addition, we saw incredible agility and outstanding results from our teams. And, we continued to leverage our digital edge. We accelerated in e-commerce, optimised consumer engagement in the new O+O(2) world and reinvented beauty experiences.

How are you approaching 2022?

I am confident in the continued growth of the beauty market. In the years to come, this growth will be further driven by expanding middle classes and increased premiumization. L’Oréal will continue its transformation to become a Beauty Tech(3) powerhouse.
By harnessing the power of data, AI(4) and strategic tech partnerships, we will redefine the future of beauty. And let’s not forget Green Sciences(5). Already well underway, this approach will help us reconcile performance, safety and sustainability, and meet our L’Oréal for the Future commitments. L’Oréal is uniquely positioned to succeed in 2022 and beyond. In a global context that remains volatile at the beginning of the year, we are confident in our ability to outperform the market in 2022 and achieve another year of growth in sales and profits.

Watch the full interview with the CEO on lorealannualreport2021.com

(1) Like-for-like: based on comparable structures and identical exchange rates.
(2) Offline + Online.
(3) New technologies for the beauty industry.
(4) Artificial intelligence.
(5) Wide range of disciplines, from agronomy to biotechnologies and green chemistry by way of formulation science, upon which L’Oréal relies to meet its sustainable development goals all while creating safe, high-performance products.

*This information forms an intregral part of the Annual Financial Report as provided in Article L.451-1-2 of the French Monetary and Financial Code.

As the sixth edition of L’Oréal’s Integrated Report, this chapter aims to present the well–balanced business model of the L’Oréal Group, its strategic orientations, its 2021 results, its non-financial performance, and its relationships with its stakeholders, particularly in the context of its programme representing its commitments to sustainable development L’Oréal for the Future(1).

1. Presentation of the Group integrated report
  • 1.1. The L’Oréal Group: the fundamentals

1.1.1. Our Sense of Purpose (raison d’être)

The desire for beauty has existed since the dawn of humanity. It is a universal aspiration that flows through time, countries and cultures.

Beauty is a powerful force that moves us.

Beauty is not just about appearance. It gives us confidence in who we are, in who we want to be, and in our relationships with others.

For more than a century, we have been in the unique business of creating beauty. True to the pioneering vision of our founder and with the unstinting support of his family who have always accompanied our development.

Our goal is to offer each and every person around the world the best of beauty

in terms of quality, efficiency, safety, honesty and responsibility to meet all needs and desires for beauty in their infinite diversity.

Because beauty is a permanent quest,

we harness the power of our innovation to continually enhance the performance of our products and services.

Because we value diversity, we leverage each of our brands to celebrate all expressions of beauty.

Because we strive to be exemplary with a long-term vision, we anchor our actions in our strong values and demanding ethical principles.

And because we are the global leader in beauty, we are aware that everything we do can have a meaningful impact.

Therefore:

We act to shape the future of beauty

by leveraging the best of science and technology, increasingly inspired by nature. We act to drive social innovation by offering the best working conditions, training and social protection for our employees. We act to build an enterprise with inclusivity at its heart by ensuring we are as diverse as the consumers we serve. We act to nurture lasting partnerships with our clients and suppliers, based on mutual trust and collaboration. We act to create value for all our shareholders, by sustaining a robust business model. We act to champion the cause of women and to strengthen the communities with which we engage. We act to protect the beauty of the planet by fighting climate change, respecting biodiversity and preserving natural resources.

At L’Oréal, we share a common purpose to:

Create the beauty that moves the world.

(1) See section 1.3.2. “Corporate Social Responsibility (CSR): shared and lasting growth” of this document.

L’Oréal’s purpose (raison d’être) is a core principle for the Group, to see ourselves as a high-performing, committed, responsible, inclusive company showing solidarity in decades to come. L’Oréal’s raison d’être is included in the strategies defined by its Board of Directors and its business model.

L’Oréal’s raison d’être was developed following work implemented over almost two years, initiated and driven at the highest level by Mr Jean-Paul Agon and Mr Nicolas Hieronimus, as well as several members of the Executive Committee. L’Oréal’s raison d’être was the result of dialogue with Group employees in three of its key countries (France, the United States and China) and many external stakeholders, including consumers. The progress made was discussed several times in the Executive Committee. For L’Oréal, the aim was to collect and formalise what it contributes to the world as a company, its values and its commitments in one document.

This raison d’être was approved on 6 February 2020 by the Board of Directors, who incorporated it into their Management Report published in the 2019 Universal Registration Document and presented to the Annual General Meeting of Shareholders on 30 June 2020.

A single sentence epitomises L’Oréal’s sense of purpose (raison d’être): “Create the beauty that moves the world.” It is defined in concrete actions made to consumers, employees, clients, suppliers, shareholders, service providers and communities. L’Oréal is committed to fighting climate change, by respecting biodiversity and preserving natural resources, and to championing the cause of women.

In its Management Report, L’Oréal’s Board of Directors reports on the implementation of the commitments included in its raison d’être, and on the progress towards the goals set:

  • for L’Oréal, economic performance is inseparable from its corporate social responsibility performance. The results of the Group’s non-financial performance, which are reviewed by external auditors along with its financial performance, reflect the achievements of L’Oréal arising from its raison d’être. Chapter 4 of this document, “L’Oréal’s Corporate Social Responsibility”, reports on the social, environmental and societal policies and progress, inclusion and ethics within the L’Oréal for the Future programme covering the Group’s commitments to sustainable development;
  • L’Oréal also presents its progress and achievements in non-financial areas through its annual reporting made to the United Nations Global Compact;
  • this chapter also reports on the Group’s financial performance, particularly through its business model (see section 1.2. “Business model: Economic and societal excellence to create lasting value for all” of this document); and
  • the Group’s Corporate Social Responsibility performance is one of the factors considered in determining the variable portion of the remuneration of L’Oréal’s executive corporate officers (see section 2.4. “Remuneration of directors and corporate officers” of this document) and the Group’s senior managers.

1.1.2. A clear mission and strategy 

L’Oréal has defined a clear vision that is broken down into two points: its sense of purpose (raison d’être), which is detailed above, and Beauty for All. L’Oréal aims to offer women and men around the world the best in cosmetics in terms of quality, effectiveness, safety, sincerity and responsibility in order to meet all their needs and all their beauty wishes in their infinite diversity. More than ever, L’Oréal’s vision takes on its full meaning and represents a strong anchor in this increasingly unpredictable and complex environment.

L’Oréal’s strategy is Glocalization, meaning the globalisation of its brands with a detailed understanding and respect for local differences. The goal is to offer beauty by responding to the specific aspirations of consumers in every region of the world. In contrast to standardisation, it is based on careful attention to consumers and a deep respect for their differences(1).

1.1.3. The challenge of innovation: the strength of Research, Innovation and Technology

L’Oréal believes that beauty happens when science and technology come together to impress and meet the needs of consumers who expect new experiences over and above products and services.

On the one hand, the beauty of the future is now focused on Green Sciences as a new frontier of Research that reconciles efficiency, naturalness and sustainability to give the Group’s products, formulas or even packaging a competitive advantage; and, on the other hand, on Beauty Tech to enhance science via cutting-edge technologies on a large scale and to offer unparalleled beauty experiences.

Innovation is at the heart of the model and, coupled with technology, is a driving force for growth and discovery of new areas of beauty. Data, artificial intelligence, robotics and nanotechnologies will strengthen and speed up the Group’s innovations to help make it a champion of Beauty Tech. L’Oréal invents the beauty of the future while becoming the company of the future.

(1) The strategy of the L’Oréal Group is detailed in section 1.2.4. “Meeting the global demand for beauty” in this document.

1.1.4. The dual goal: economic and corporate excellence to create lasting value for all

For L’Oréal, the economic and financial performance is not sufficient. Because there will be no economic growth without sustainability in the future, L’Oréal has set itself the dual goal of excellence, in both the economic and ESG (Environmental, Social and Governance) domains. It will be the condition for its success and its long-term existence. Because L’Oréal is the global leader in beauty, it has the duty to contribute to the beauty of the planet and be the champion in corporate social responsibility. And it is because L’Oréal is a social, environmental, societal and ethical leader that it will achieve greater performance in the future. The two performances go hand in hand and mutually enhance each other, as L’Oréal has demonstrated to date.

1.1.5. Stable governance

The stability of the Group’s governance in a changing world makes it possible to work towards long-term objectives and to ensure regular growth.

Loyal shareholders, stable capital structure

SHAREHOLDERS AT 31 DECEMBER 2021


(1) Consisting of Ms Françoise Bettencourt Meyers, Mr Jean-Pierre Meyers, Mr Jean-Victor Meyers and Mr Nicolas Meyers, along with Téthys SAS.
(2) Concerns the current and former employees of L’Oréal. Pursuant to law no. 2015-990 of 6 August 2015, since 2016, the percentage also includes the performance shares granted in accordance with Article L. 225-197-1 of the French Commercial Code. Including 0.89% as part of the L’Oréal Employee Savings Plan and employee investment fund as defined by Article L. 225-102 of the French Commercial Code.

On 7 December 2021, L’Oréal entered into an agreement with Nestlé to repurchase L’Oréal shares with a view to cancelling them. The conclusion of this contract was authorised by the Board of Directors at its meeting of 7 December 2021, after having reviewed the findings of the independent expert’s report. The shares repurchased on 15 December were allocated to the cancellation target.

This transaction with Nestlé constituted a further strategic step in strengthening L’Oréal’s shareholder stability, in the interests of the Company and that of all its shareholders.

On 9 February 2022, the Board of Directors cancelled 22,260,000 shares repurchased by L’Oréal from Nestlé effective as of 10 February 2022.

Following this cancellation, the stake held by Ms Françoise Bettencourt Meyers and her family is 34.69% of the share capital, while Nestlé’s stake is 20.10%. As at 10 February 2022, the Company no longer holds any of its own shares (see section 7.3.2.“Changes in allocation of the share capital and voting rights over the last three years” of this document).

Separation of the offices of Chairman of the Board and Chief Executive Officer with effect from 1 May 2021

On 14 October 2020, on the recommendation of the Nominations and Governance Committee, the Board of Directors announced its intention to dissociate the functions of Chairman and Chief Executive Officer, to renew Mr Jean-Paul Agon’s mandate as Chairman of the Board of Directors, a position he had held since 2011, and to appoint Mr Nicolas Hieronimus as Chief Executive Officer.

This new governance took effect on 1 May 2021, by decision of the Board of Directors at the meeting held following the company’s Annual General Meeting on 20 April 2021.

The Board of Directors is convinced that the proposed organisation will guarantee the sustainability of the performance, values and commitments of the Group, as well as the quality of its governance.

A balanced and committed Board of Directors, which fully plays its role of reflection and strategic impetus

The Board of Directors defines the strategic orientations of L’Oréal and monitors its implementation, in accordance with its corporate interest, taking the social and environmental challenges of its business activity into consideration. It oversees the management of both the financial and non-financial aspects, and ensures the quality of the information provided to shareholders and to the market.

The composition of L’Oréal’s Board makes it possible to take into account the specific nature of its shareholding structure while guaranteeing the interests of all its stakeholders.

At 31 December 2021, the Board of Directors comprised 16 members:

  • the Chairman, Mr Jean-Paul Agon;
  • the Chief Executive Officer, Mr Nicolas Hieronimus;
  • three Directors (one of whom is the Board’s Vice-Chairman) from the Bettencourt Meyers family, which owns 33.30% of the share capital(1) – Ms Françoise Bettencourt Meyers, Mr Jean-Victor Meyers and Mr Nicolas Meyers;
  • two Directors (one of whom is the Board’s Vice-Chairman) linked to Nestlé, which owns 19.30% of the share capital(1) – Mr Paul Bulcke and Ms Béatrice Guillaume-Grabisch;
  • seven independent Directors: Ms Sophie Bellon, Ms Fabienne Dulac, Ms Belén Garijo, Ms Ilham Kadri, Ms Virginie Morgon, Mr Patrice Caine and Mr Alexandre Ricard. 50% of the Directors are independent (7 out of 14 excluding the Directors representing the employees); and
  • two Directors representing the employees: Ms Ana Sofia Amaral and Mr Georges Liarokapis; their term of office expires at the end of the General Meeting of 21 April 2022 (see section 2.2.1.3. "Two directors representing the employees since July 2014" of the document).

(1) At 31 December 2021.

The Board takes steps to ensure that the Directors come from different backgrounds, and most of them have international experience acquired in groups with a global dimension and complementary skills: entrepreneurial, financial, non-financial (including human resources and sustainable development), manufacturing, digital, etc. The diversity of skills and expertise on the Board (see section 2.2.1.2. “Diversity Policy applied to the Board of Directors: experienced Directors who complement one another”) means that the Board understands rapidly and in detail the development challenges with which L’Oréal is faced, the leader in a highly competitive globalised cosmetics market, in a rapidly changing world.

L’Oréal is attentive to compliance with the principle of balanced gender representation on the Board: 50% of its members are women (excluding Directors representing employees), and three Board Committees out of four are chaired by women.

Ethics, at the heart of the Group’s governance and commitments

L’Oréal has built up its business on the basis of strong ethical principles that guide its development and contribute to establishing its reputation: Integrity, Respect, Courage and Transparency.

These principles underpin the Group’s culture and business model and our compliance, responsible innovation, sustainable development, corporate social responsibility, philanthropy, and Human Rights policies, alongside diversity, equity and inclusion.

L’Oréal’s commitments to act ethically and responsibly are set out in L’Oréal’s Code of Ethics. This document is available in 45 languages. It is distributed to all employees. Country Managers (or for Corporate or Zone staff, the members of the Group’s Executive Committee to whom they report) are responsible for ensuring compliance with the Code.

438 pages