NOTE 13. Sustainable development and the climate
13.1. Measurement of assets and liabilities
a) Environmental risks
The Group strictly complies with regulations and laws relating to environmental protection, and does not expect current regulations to have any significant impact on the Group’s operations, financial position, earnings or assets.
b) Measurement of assets
For many years, L’Oréal has shown a strong commitment to environmental, social and societal responsibility. L’Oréal placed sustainability at the heart of its strategy, with the launch in 2013 of the Sharing Beauty With All programme with 2020 targets focused on sustainable production, sustainable innovation, sustainable consumption and shared growth.
In June 2020, L’Oréal initiated the second phase of its commitments to sustainable development, under the umbrella of the L’Oréal for the Future programme, with a new set of particularly ambitious and concrete targets for 2030, in order to cover all the impacts associated with its value chain: its production and distribution sites as well as its supply chains and the impacts associated with the use of products by consumers.
For example:
- the Group undertakes to reach carbon neutrality for all Group sites by 2025, by improving energy efficiency and using 100% renewable energy;
- by 2030, 100% of ingredients in formulas and biobased packaging materials will be traceable and come from sustainable sources. None of them will contribute to deforestation;
- by 2030, 100% of the plastics used in packaging will be from either recycled or biobased sources;
- by 2030, L’Oréal undertakes to innovate to enable its consumers to reduce by 25%, on average and per finished product, the water consumption and greenhouse gas emissions linked to the use of its products, compared to 2016.
The above commitments do not jeopardise the value of the Group’s assets or the useful lives of our non-financial assets. In particular:
- our ongoing efforts to bring our products in line with consumer demand as part of L’Oréal for the Future are included in the Group’s short-term strategic plans used in impairment tests on intangible assets with an indefinite useful life;
- to date, the adaptation of our plants and product formulas has not led us to identify any risk of our production lines becoming obsolete or experiencing a reduction in their value in use.
13.2. Financing and investment
The Group’s L’Oréal for the Future programme rests on its financing and short- and long-term investment strategies.
a) Financing
The credit lines indexed to the Group’s sustainable development performance incorporate a borrowing cost adjustment mechanism.
The L’Oréal Group has a syndicated loan from 20 banks (€5 billion), which had not been used at the end of December 2021. This loan incorporates a mechanism whereby the margin is adjusted in line with the Group’s performance with regard to four ESG KPIs: climate, biodiversity, resources and social commitment.
b) Short-term investment
The Group’s available cash is mainly invested in SRI SICAV money-market funds. Investment in these types of SICAV accounted for 70% of all short-term investment in 2021.
c) Long-term investment
The Group recorded a total of €139 million in non-current financial assets related to sustainable development activities, measured at fair value through equity (see note 9.3).
- at the end of 2021, investment in the Circular Innovation Fund amounting to €50 million. L’Oréal is one of the main contributors to this impact investing fund, whose investment thesis is focused on the circular economy, structured around seven verticals including new packaging materials and solutions from the bioeconomy and the circular economy, green technology and waste and recycling collection services;
- in 2020, the creation of a fund for Nature Regeneration to financially support projects to restore natural marine, forest and agricultural ecosystems. This dedicated €50 million fund had already invested in three projects at the end of 2021 (creation of a Blue Carbon Facility, a reforestation project in Colombia and a pan-European project to reintroduce biodiversity);
- investment in start-ups (€39 million in total), including the Swiss environmental technology firm Gjosa, which developed innovative water saving solutions, the French biotech company Global Bioenergies, which developed a process to convert plant-based resources, and the green chemistry start-up Carbios, which developed enzymatic processes for plastic biodegradation and biorecycling.
