2024 universal registration document

3.6.3.3 Legal and regulatory risks

Legal and regulatory risks/Non-compliance
The Group is subject to many general and specific laws, such as the European REACH and CLP (Classification, Labelling, Packaging) regulations on cosmetic products intended to strengthen the safety of cosmetic and chemical products for humans and the environment, and legislation on competition and corruption and international trade controls, including policies on economic sanctions. The diversity and constant reinforcement of the regulatory environment expose the Group to a risk of non- compliance and increased compliance costs. L’Oréal remains exposed to the risk of default or fraud, which could have an impact on its reputation, its business activities and its results. In its communications, L’Oréal highlights the innovative nature, quality and performance (including environmental) of its products. These communications may be challenged by authorities, organisations or consumers, despite every care used to guarantee their accuracy and fairness. Such actions could affect sales or, more generally, the Group’s financial position, particularly if claims are made or products recalled. See also the "Legal Disputes" risk.	In accordance with its Code of Ethics, L’Oréal attaches particular importance to compliance with the laws and regulations that apply to it. This obligation to comply with local legislation is emphasised specifically in the Group’s Legal Charter, which sets out the rules applicable within the Group in terms of contracts, corporate law, intellectual property and competition law, embargoes and economic sanctions, and protection of personal data. To ensure compliance with these rules, the Group has implemented a robust governance structure involving all of the Group’s operating entities and Functional Divisions. This governance means that the Group is able to monitor legislation on an ongoing basis and to take any measures necessary to comply with it in a timely manner. The main legal risks are reported to General Management and to the Audit Committee. To ensure any embargoes are observed, the Group has put in place rules on the terms of delivery and transport of its goods, with the aim of ensuring the control and compliance of formalities in terms of customs imports and exports. Learning programmes about customs fundamentals are also delivered to all appropriate employees in the Operations Department. The Group’s Legal Department has set up dedicated training courses in competition law for all appropriate employees. L’Oréal is also involved in an ongoing dialogue with national or regional authorities in charge of specifically regulating products in its sector through the professional associations to which it belongs. With regard to the REACH and CLP regulations, L’Oréal communicates proactively with its European suppliers in order to ensure a long-term supply of compliant raw materials. An action plan has been drawn up at L’Oréal in order to improve the design and methods used to assess the safety of raw materials. It led to the end of testing finished products on animals in 1989 (14 years before it became a legal obligation in Europe) and the development of predictive evaluation strategies to meet European regulations. In the areas of fraud and corruption, the rollout to all Group subsidiaries of programmes to prevent corruption (see section 3.2.3) and raise awareness of fraud risk contribute to the management of these risks. In terms of taxation, the Group refers to a tax policy and the systems described in section 3.2.4. The Regulatory and Claims Substantiation Department checks that product communications are compliant with regulations in force before the products are introduced on the market. The Group’s Code of Ethics sets out the fundamental principles of responsible communication and L’Oréal has made a commitment to implement the International Chamber of Commerce Consolidated Code of Advertising and Marketing Communication Practice and the Cosmetics Europe Charter and Guiding Principles on responsible advertising and marketing communication to which the key global cosmetics industry players in Europe adhere. The Group’s principles for "responsible product advertising" are described in a summary brochure disseminated worldwide to raise employee awareness about compliance with ethical principles, specific legal and regulatory requirements, and operational processes for the prior control of product communications.

Legal and regulatory risks/Non-compliance

Risk identification

Risk management

The Group is subject to many general and specific laws, such as the European REACH and CLP (Classification, Labelling, Packaging) regulations on cosmetic products intended to strengthen the safety of cosmetic and chemical products for humans and the environment, and legislation on competition and corruption and international trade controls, including policies on economic sanctions. The diversity and constant reinforcement of the regulatory environment expose the Group to a risk of non- compliance and increased compliance costs.

L’Oréal remains exposed to the risk of default or fraud, which could have an impact on its reputation, its business activities and its results.

In its communications, L’Oréal highlights the innovative nature, quality and performance (including environmental) of its products. These communications may be challenged by authorities, organisations or consumers, despite every care used to guarantee their accuracy and fairness. Such actions could affect sales or, more generally, the Group’s financial position, particularly if claims are made or products recalled.

See also the "Legal Disputes" risk.

In accordance with its Code of Ethics, L’Oréal attaches particular importance to compliance with the laws and regulations that apply to it. This obligation to comply with local legislation is emphasised specifically in the Group’s Legal Charter, which sets out the rules applicable within the Group in terms of contracts, corporate law, intellectual property and competition law, embargoes and economic sanctions, and protection of personal data.

To ensure compliance with these rules, the Group has implemented a robust governance structure involving all of the Group’s operating entities and Functional Divisions. This governance means that the Group is able to monitor legislation on an ongoing basis and to take any measures necessary to comply with it in a timely manner. The main legal risks are reported to General Management and to the Audit Committee.

To ensure any embargoes are observed, the Group has put in place rules on the terms of delivery and transport of its goods, with the aim of ensuring the control and compliance of formalities in terms of customs imports and exports. Learning programmes about customs fundamentals are also delivered to all appropriate employees in the Operations Department. The Group’s Legal Department has set up dedicated training courses in competition law for all appropriate employees. L’Oréal is also involved in an ongoing dialogue with national or regional authorities in charge of specifically regulating products in its sector through the professional associations to which it belongs.

With regard to the REACH and CLP regulations, L’Oréal communicates proactively with its European suppliers in order to ensure a long-term supply of compliant raw materials.

An action plan has been drawn up at L’Oréal in order to improve the design and methods used to assess the safety of raw materials. It led to the end of testing finished products on animals in 1989 (14 years before it became a legal obligation in Europe) and the development of predictive evaluation strategies to meet European regulations.

In the areas of fraud and corruption, the rollout to all Group subsidiaries of programmes to prevent corruption (see section 3.2.3) and raise awareness of fraud risk contribute to the management of these risks.

In terms of taxation, the Group refers to a tax policy and the systems described in section 3.2.4.

The Regulatory and Claims Substantiation Department checks that product communications are compliant with regulations in force before the products are introduced on the market. The Group’s Code of Ethics sets out the fundamental principles of responsible communication and L’Oréal has made a commitment to implement the International Chamber of Commerce Consolidated Code of Advertising and Marketing Communication Practice and the Cosmetics Europe Charter and Guiding Principles on responsible advertising and marketing communication to which the key global cosmetics industry players in Europe adhere. The Group’s principles for "responsible product advertising" are described in a summary brochure disseminated worldwide to raise employee awareness about compliance with ethical principles, specific legal and regulatory requirements, and operational processes for the prior control of product communications.

2024 universal registration document

3. Risk factors and management

3.6.3.3 Legal and regulatory risks