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Key takeaways:
Refills reinforce waste efforts. Minimising packaging is important to consumers and it’s a key focus for brands, but some of these efforts are not being leveraged as well as they could — and impact is lagging. While a significant portion of brands offer product refills, just one offers discounts to incentivise consumers to take part. A true leader on this has yet to emerge, making it a big opportunity to amplify a brand’s commitment to sustainability.
Differentiate with certification. Elf Cosmetics is the only brand using Fairtrade-certified factories, while Honest Beauty is the sole purveyor of USDA-certified organic ingredients and just four of the Index cohort can call themselves B-Corp brands; markers that can be tough to achieve, but remain a real differentiator within the industry, giving consumers added confidence about their purchases.
Labour rights stand out. Beauty consumers care more about fair wages than any other sustainability issue. Some big names, including L’Oréal, have set the benchmark with commitments on guaranteeing fair wages across supply chains, although they are yet to share details on the strategy for achieving this or on the investment for doing so. Brands without a plan for achieving similarly ambitious targets should think about how they will take action, and more importantly, see it through.
What is new?
The Vogue Business Beauty Index ESG pillar has been overhauled to add a number of new metrics across both environmental and labour policies, as well as more challenging criteria for brands looking to earn points against the metrics of the prior edition. The aim of these reforms is to capture how brands are holding themselves publicly accountable for the ESG targets that many are setting. To achieve this, progress reporting, external certification, evidence of complying with both labour standards and equal opportunities were each taken into account. While nearly all evaluated metrics concern information that is held within the public domain, what companies say they are doing is not always consistent with the progress being made. For the first time, brands have also been invited to participate in a questionnaire, which will be reflected in the scores of those who respond and meet the required criteria.
These changes, in addition to brand-led initiatives introduced over the past year, have resulted in The Ordinary securing first place in ESG. Since its full acquisition by Estée Lauder Companies, and beyond its prior sustainability plays, The Ordinary has benefitted from the extensive ESG commitments of its new parent company. (Deciem Beauty Group, of which The Ordinary remains the flagship brand, was acquired by ELC earlier this year.)
That is true of all top players: last year’s pillar leader, Aesop (L’Oréal), now sits in third place behind Farmacy (Procter & Gamble). Larger conglomerates often face mounting pressure compared to indie names to make ambitious sustainability pledges, and the smaller brands within these corporations benefit by association (although face the risk of being caught up in any corporate scandals and crises that befall large, complicated businesses). For example, 13 per cent of brands have committed to a total phase-out of virgin plastics for products; three brands — La Roche-Posay, Cerave and Kiehl’s, through L’Oréal — have a 2030 target for this initiative, while Fenty Beauty falls under the more ambitious LVMH target of a phase-out by 2026.
These pledges often aren’t met. Commonly, due to a lack of investment or commitment from the top, failures can also be down to an absence of innovative solutions — something that large conglomerates are not always set up to develop and implement quickly. It is often indie brands who can — and have previously — pushed significant strides within the industry. They can be more nimble, while larger corporate structures are often risk-averse by nature. Take Ethique, for example, who launched its plastic-free shampoo and conditioner bars in 2012, nine years ahead of L’Oréal-owned Garnier’s shampoo bar launch.
There remain plenty of areas where brands can break through and take leadership. Among these is refillable products, which remains a messy area for the beauty industry. While 20 out of the 30 Vogue Business Beauty Index brands offer product refills in one form or another, these schemes rarely involve incentives, meaning take-up is largely reliant on how committed consumers are personally to avoiding waste. The exception is Charlotte Tilbury, which offers some discounts for customers sending products in for refill.
Nearly two-thirds of consumers (65 per cent) globally say that waste reduction and ethical sourcing are important factors when considering which brands to purchase from. Italian consumers are particularly influenced by this issue, with 69 per cent saying it factors into their buying decisions.
Labour rights are front of mind for beauty consumers
Global beauty consumers care more about labour rights than any other sustainability issue. Sixty-eight per cent say it is important for a brand to pay a living wage, while a brand’s commitment to diversity and inclusion (65 per cent) is almost just as crucial. The prominence of these metrics, and other social impact factors, indicates that environmental commitments and equity progress are increasingly seen as table stakes in the eyes of shoppers who expect brands to do better. Ultimately, improving social impact is a way for brands to differentiate and go above and beyond.
In some ways, inclusive representation seems like a strength of the beauty industry. Over half of Index brands have at least one female founder, while nearly nine out of 10 (87 per cent) have a diversity, equity and inclusion (DE&I) policy in place; with 83 per cent having introduced some sort of process to evaluate the impact of these policies.
Fenty Beauty communicates its commitment to diversity most effectively, according to consumers. Survey respondents aware of the brand rate it an average of 7.33 out of 10 when considering whether it “is a brand that champions diversity”, and 7.22 on whether it “is a brand that caters to all gender identities”; compared to Index averages of 6.23 and 6.46, respectively.
Few would say the hard work is done. Despite studies that suggest the beauty sector is more diverse than others, men still fill the majority of C-suite roles in European beauty firms — though the figures are inching closer to parity.
Beyond the story in HQs, recent reports of child labour being used to pick fragrance ingredients on behalf of major conglomerates have demonstrated the challenges of integrating labour standards throughout the entirety of supply chains (recent efforts to step up traceability, unpacked in the innovation chapter, could support this).
Brands are still hesitant to share information on employee benefits, with only three beauty brands out of 30 providing information on their family leave policies when requested by Vogue Business, and just two brands providing information on annual leave policies more generally. Flexible working and generous parental leave are key ways to ensure workers with families can progress in the workplace.
The power of certification
Unlike the fashion industry, where there is a palpable gap between brands (especially those under the Kering umbrella) taking the most action towards sustainability and the recognition of those efforts by consumers, in beauty, it appears shoppers have a generally good gauge of who in the Vogue Business Beauty Index are ESG leaders. This represents an improvement on last year, when just two of the top five brands for environmental policy were recognised by survey respondents as trailblazers in ESG.
While the industry has experienced many failings on ESG metrics in the past, a focus on natural cosmetics and minimising harm to the environment has helped brands to gain traction. The Body Shop emerged amid high-profile debates around animal rights in the ’70s, while the ’90s ‘clean eating’ movement translated quickly into the beauty industry and helped brands such as Origins and Aveda grow.
Animal rights remain a key issue to this day. Eight out of 10 brands have some form of public policy on being vegan or cruelty-free, while 60 per cent are certified by an external body like Peta.
The struggle for consumers to unearth the sustainability credentials of a brand is often made harder by ambiguous business names. Fifty-seven per cent of consumers who are aware of Honest Beauty say it is a sustainable brand; for consumers, the brand’s name is a reminder of its mission to skip harmful chemicals — and its butterfly logo illustrates a connection to nature. Other ESG leaders doing well here are The Ordinary, which emphasises simplicity, and Farmacy, which draws a link to agriculture, though there are other brands on the sustainability circuit that go overlooked.
The efforts of Innisfree and Paula’s Choice, two brands with relatively strong performances across ESG metrics, fail to be acknowledged by consumers, where the relationship between name and ethos is less clear. Consumers are likely to see through and confront any beauty brand that takes a name it does not live up to, yet it is a key lesson for fledgling brands with clear missions to pick a name that emphasises its social and environmental wins.
One way of bridging the gap might be to secure credentials that consumers recognise. Honest Beauty, for example, pairs its name with USDA certification on its organic products. No other brand has achieved this: 27 per cent of Index brands report organic ingredients but do not benefit from the added assurance that USDA confers, especially for US consumers who take greater comfort in the standards USDA guarantees. Meanwhile, given consumer concerns around labour rights, Elf Cosmetics’s move to become the first brand in the Vogue Business Beauty Index to use Fairtrade-certified factories is paying off.
Just four brands — Aesop, Tatcha, Paula’s Choice and Hourglass — have B Corp certifications, though this is far from an easy task, despite recent criticism. Performance is better on FSC certification (53 per cent), targeted at forest protection, and RSPO certification (43 per cent), which reflects a responsible approach to palm oil. Critics have raised concerns about the credibility of these certifications, however, with more details needed from beauty companies to draw more confident conclusions on their sourcing of packaging materials and palm oil.
Case study: The Ordinary’s boardroom-to-bottle ESG approach
The Ordinary may have made its name in affordability and science-backed solutions, but consumers have also taken note of parent company Deciem’s sustainability priorities, including “responsible packaging, fighting climate change, better waste management, responsible sourcing and product lifestyle, and water conservation”. Consumers rate the brand an average of 7.13 out of 10 for offering “products that are sustainable and ethically sourced”, a better score than any other brand within the Vogue Business Beauty Index.
Deciem is a relative leader in tackling beauty’s waste problem. The company aims to make 85 to 100 per cent of all packaging recyclable, refillable, reusable, recycled or recoverable, in the next year. As for the share of post-consumer waste used in packaging, Deciem hopes to increase this by half, along with all of its forest-based fibre cartons. If all three aims are achieved, FSC certification can be awarded. The lack of USDA-approved organic ingredients and the absence of product-refill schemes are areas where it can improve.
Deciem has the strongest combined score of any company in the Vogue Business Beauty Index on environmental policies, while its approach to labour rights is on par with the industry standard. At board level, the brand has clarified its structure, ensuring the sustainability team does not form part of the marketing department and has even tied compensation to the achievement of sustainability goals.
Expert interview: Annie Olivier, head of growth, B Lab UK
B Corp looks not just at environmental sustainability, but also at the impact of businesses on people and the community. Why are both elements so important, and how do these intersect?
Running a business will have an impact — whether it’s positive or negative — on a number of different stakeholders, and often in intersecting ways. For instance, to have a positive impact on the climate, a business must also engage its people — the people that make up its workforce, supply chain and local communities. We can’t solve problems in silo; businesses that focus on one stakeholder over another are missing a huge opportunity to purposefully contribute to shaping the future we need.
How do networks such as B Corp or company consortiums support collective action?
We need to think beyond individual companies if we’re to address the scale of social and environmental problems we face. B Corps in the beauty industry recognise the importance of collective action. The B Corp Beauty Coalition was founded over a year ago by 26 beauty B Corps with the aim to strengthen sustainability standards in the beauty industry. It’s now made up of 60 B Corps across six continents that champion using beauty as a force for good. Recently, they launched the B Beauty Navigator tool, a free tool that enables beauty brands and customers to make more informed decisions around ingredient sourcing, packaging and logistics.
What do you expect to emerge as the next frontier in ESG?
I’m excited about the emerging focus on new business models, whether that’s rethinking how profit is shared in a company through employee ownership or reinvesting in local communities, or a shift towards circular and regenerative models of production. The way we’ve been doing business for the past few decades cannot continue, and it’s going to take innovative leadership to help us think outside the norm and design a truly inclusive and regenerative economic system. I’m optimistic about the role that B Corps can play both in reimagining how business is done and in advocating for widespread change here in the UK.
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