LOREAL_Registration_Document_2017

2 Corporate governance *

RISK FACTORS AND CONTROL ENVIRONMENT

Industrial and environmental risks 2.8.5.3.3. In order to improve the efficiency and productivity of its industrial processes, L’Oréal carries out most of its production in 41 plants, each specialising in a specific type of technology.

INDUSTRIAL AND ENVIRONMENTAL RISKS \ PRODUCTION AND SUPPLY CHAIN Risk identification Risk management Products must be made available on the market on the scheduled dates to meet time-to-market and customer demands, in order to enable new product ranges to be referenced by distributors in a cosmetics market that requires companies to be increasingly responsive. A major stoppage of activity at a plant or distribution centre could therefore have an adverse effect on the achievement of commercial objectives. INDUSTRIAL AND ENVIRONMENTAL RISKS \ SUPPLIER DEPENDENCE Risk identification L’Oréal is dependent on its external suppliers for the delivery of materials (raw materials and packaging items) that are essential for the manufacture of finished products, which may therefore suffer a disruption as the result of a failure by an important supplier. INDUSTRIAL AND ENVIRONMENTAL RISKS \ EMPLOYEE SAFETY Risk identification The cosmetics industry has a limited environmental risk profile. However, as is the case for any production, distribution, research and general administration operations, L’Oréal is exposed to safety and environmental issues (for example related to the use of certain raw materials, the use of machines or electrical equipment in production or storage areas, handling operations liable to cause accidents involving bodily injury, waste water treatment, etc.). The main risk for the Group’s industrial sites is the risk of fire due to the inflammable materials used in products (alcohol, propellant gases, powders, oxidants and solvents) and the storage of combustible products and chemicals. The Group’s activities are subject to laws and regulations which require it to comply with increasingly strict standards for the environment, health and safety and could increase the cost of compliance. In addition, over the past few years, changes resulting from global warming have increased the unpredictability, frequency and severity of natural catastrophes. The risks related to climate change, pursuant to Article L. 225-100-1 of the French Commercial Code, are described in chapter 3. Risk management Risk management

To prevent this risk, business continuity plans exist for each operational site. The Group is currently deploying a single methodology of business continuity plans at all its plants and all its distribution centres. These plans aim at planning for the unavailability of part of the Group’s supply chain as far as possible and resuming business activities as quickly as possible.

L’Oréal analyses the risks associated with its purchasing channels and suppliers on a regular basis. The Group secures its supplies based on these analyses (for example by developing alternative sources of supply or by duplicating the packaging moulds for its strategic products).

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

REGISTRATION DOCUMENT / L'ORÉAL 2017

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