The global cosmetic market is expected to reach a value of USD 805.61 billion by 2023, The industry is not effected much by economic downturns and its growth remains steady (reuters.com 2018). The global cosmetic industry is also the source of environmental pollution both during and after production of finished goods. One of the burning environmental issues which cosmetic companies are facing is due to presence of plastic beads in their products which is washed into the marine ecosystem. The minute plastic beads are eventually ingested by small animals and travel up the food chain, thus harming all creatures including man. The paper would study this environmental issue taking world’s top cosmetic manufacturer and marketer, L’Oreal as the example. The paper would analyse the issue and then go on to delve into the outcome of the issue on the business of L’Oreal. This analysis would give way to recommendations to the apex management of L’Oreal on dealing with the issue of plastic beads in its products and ways to reduce them (loreal.com 2018).
L’Oreal S.A. is a French beauty product manufacturing company having its headquarters in Clichy, Hauts-de-Seine and has its registered office in Paris. The company is listed on the Euronext Stock Exchange and manufactures skin care products. The product line of the company consists of hair colour, skin care products, sun protection products, make-up products, perfumery and hair care products. As in 2017, the company owns 498 patents, 82600 employees and present in 150 countries worldwide. L’Oreal is the world’s top cosmetic brand group which includes Garnier and Maybelline. The group achieved sales of € 26.02 billion and € 4.68 billion operating profits (loreal.com 2018). L’Oreal is not only a beauty brand but also one of the most sought after fashion brand in the world which holds internal fashion shows and presents itself in international film festivals like Cannes Film Festival (festival-cannes.com 2018). The company faces several environmental issues while operating in the global market. The immense capital strength of L’Oreal is rendered by Bettencourt family owning 33.13 percent of the share, Nestle owing 23.17 percent share, institutional investors owning 29.28 percent share, 8.24 percent share is under French institutional investors and 4.74 percent by individual investors. 0.14 percent stock is under the ownership of treasury stock while 1.3 percent stock is owned by the employees as on December 31, 2017.
L’Oreal leads the world due to efficiency of its leadership under able managers who take appropriate decisions. The employees of L’Oreal holding managerial positions have years of experience and contributes towards high performance of the company. The manager in question is Malaysian and his mother tongue is Mandarin. He can also speak other languages like English, Bahasa Malay, Cantonese and Hokkein. He is also learning Chinese. The social skills of the manager includes strong diversity management skills. This is evident from his knowledge of different languages and cultures. He has the experience of working in telecommerce sector for over a year. He also has the experience of working at Deutsche Bank for over a year. This experience of the manager helps him fit in multinational companies.
L’Oreal manufactures skin products which have deep impacts on the environment. These impacts brings L’Oreal under scanner of various stakeholders like governments and international NGOs. The cosmetic giant uses microplastic in its products which act as cleaning agent. The microplastic particles in the face products are so minute that waste water management systems cannot capture or filter them. These particles can make their way into the ocean and into the base of the marine eco-system (theguardian.com 2018). The small sea creatures perceive these particles as food and ingest them. The microplastic particles are then passed up the food chain when other creatures feeding on these creatures ingest them.
According to BBC, the exact effect on small particles of microplatic is under investigation, yet the possible harmful effect of plastic on living organisms cannot be ruled out (bbc.com 2018). According to international NGO, Greenpeace, skincare products manufacturing companies like L’Oreal are responsible for polluting the marine ecosystem by using plastic beads in their skincare products. The issue has reached a severe level and the British Parliament has summoned the companies using microbeads in their products to appear in the parliament (theguardian.com 2018). This issue has also attracted actions from the Government of Australia. Environment Minister Greg Hunt has threatened to introduce a law to ban use of products with microbeads if the skincare products manufacturing companies continue to use it in their products (abc.net.au 2018). The governments of United States and Canada have also started on enforcing restrictions and measures to curb microbeads pollution. The analysis of the issue of environmental pollution caused by microbeads has emerged into a big issue for L’Oreal.
The following would be the impact of the issue of plastic beads in L’Oreal products on the business of the company:
The first and the most powerful outcome of microbeads pollution in L’Oreal would be government actions against the company. As already discussed above, governments, including the home and host governments are a key stakeholders of the multinational company. Governments are capable of bringing about laws to curb microbeads usage in products or ban products from these companies altogether. The outcome of these government actions on L’Oreal would lead to loss of markets and consumer bases. These restrictions by host governments would lead to massive business losses to L’Oreal which would devastate its financial sustainability. The governments can also initiate legal actions against the company hampering its business further. This analysis shows that environmental issue of marine ecosystem pollution can tantamount into government actions which would have long term effect on L’Oreal and its business (Xu and Gursoy 2015).
The outcome of the government actions would be losing of investors’ support which would hit the capital generation of L’Oreal. The immense global operations of L’Oreal stands on the capital the company obtains from stakeholders like Nestle (loreal.co.in 2018). Actions from governments would result in shareholders, both corporate and individual shareholders withdrawing their investments from shares of L’Oreal. This would result in crash in the share index of L’Oreal which means the company would not be able to generate the immense capital required to fuel its operations. This would weaken the financial base of the company and may disrupt its smooth operations.
The environmental issue of marine pollution by presence of plastic beads in L’Oreal products would considerably hamper the goodwill of the company. Government actions and loss of investor support would result in the fall in the products of L’Oreal due to dearth of government facilities like tax rebates and capital respectively. The company would as a result would not be able to support its innovation to develop better and new products. The outcome of this would be decline in the goodwill which L’Oreal products enjoy among the customers. The management bodies of magazines and film festivals would not continue their association with L’Oreal owing to its diminishing goodwill. The company owing its weakening financial position, customer support and government support would lose its supply chains. This would further disrupt in production of goods and hamper its goodwill even more. Gürhan-Canli, Hayran and Sarial-Abi (2016) mention that consumers today prefer products from companies which make environment friendly products. Thus, by using plastic beads in the skincare products L’Oreal is repealing a large consumer base especially in the developed markets like Australia and the US where awareness about environment is high. Thus, the company by polluting the environment is actually hampering its own market image and goodwill.
Conclusion:
The above discussion shows that environmental pollution is a very crucial issue which would have dire impact on the business of multinational corporations causing them. One can point out that presence of plastic beads in L’Oreal products does not only harm the small creatures in the sea but the entire food chain and consequently man. The issue of environmental pollution, if not dealt with or minimised would disrupt the entire business operation of L’Oreal and its goodwill.
The following are the recommendations which one can make to the management of L’Oreal in the light of the above discussion:
L’Oreal should manufacture products without plastic beads which would help it to contribute towards reducing marine pollution. The cosmetic giant can use ingredients like nuts and clay as cleansing and scrubbing agent in its products. This would enable the company to make its products environment friendly and keep their qualities in tact simultaneously.
L’Oreal should manage its wastes more effectively and stringently. This would ensure that the company reduces the level of environmental pollution stemming from its operations. The company should gradually shift towards using environment friendly and natural ingredients in its products. The company should treat wastes like water and sludge after production of cosmetic products.
L’Oreal must initiate innovation to bring about more environment friendly products and gradually introduce them into the market to replace its products containing chemicals. This would save the company or at least reduce the loss it would suffer by sudden phasing of plastic beads containing products in response to government warnings.
References:
ABC News. 2018. Act on microbeads or I’ll ban them, Greg Hunt warns cosmetic companies. [online] Available at: https://www.abc.net.au/news/2016-02-29/microbeads-ban-voluntary-environment-greg-hunt/7207482 [Accessed 30 May 2018].
Aldred, J. 2018. Microplastics: which beauty brands are safe to use?. [online] the Guardian. Available at: https://www.theguardian.com/environment/2016/apr/19/microplastics-which-beauty-brands-are-safe-to-use [Accessed 30 May 2018].
BBC News. 2018. Study into health risks of microplastics. [online] Available at: https://www.bbc.com/news/science-environment-43913597 [Accessed 30 May 2018].
festival-cannes.com. 2018. Festival de Cannes 2018. [online] Available at: https://www.festival-cannes.com/en/participer/prepare/partners [Accessed 30 May 2018].
Gürhan-Canli, Z., Hayran, C. and Sarial-Abi, G., 2016. Customer-based brand equity in a technologically fast-paced, connected, and constrained environment. AMS review, 6(1-2), pp.23-32.
loreal.co.in. 2018. KEY FIGURES. [online] Available at: https://www.loreal.co.in/group/company-overview/key-figures.htm [Accessed 30 May 2018].
Loreal.com. 2018. L’Oréal – L’Oréal Group. [online] Available at: https://www.loreal.com/ [Accessed 30 May 2018].
Park, T. 2018. From L’Oréal to Revlon, which brands are polluting the ocean with microbeads? – Greenpeace International. [online] Greenpeace International. Available at: https://www.greenpeace.org/international/story/7302/from-loreal-to-revlon-which-brands-are-polluting-the-ocean-with-microbeads/ [Accessed 30 May 2018].
Reuters.com. 2018. Global Cosmetics Products Market expected to reach USD 805.61 billion by 2023 – Reuters. [online] Available at: https://www.reuters.com/brandfeatures/venture-capital/article?id=30351 [Accessed 30 May 2018].
Xu, X. and Gursoy, D., 2015. Influence of sustainable hospitality supply chain management on customers’ attitudes and behaviors. International journal of hospitality management, 49, pp.105-116.
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