Loyalty Program Benchmark 2023 by SiaXperience
Purchasing behaviour is evolving towards more responsible and sustainable consumption as consumers become more aware of the importance of the environment.
As environmental awareness among consumers grows, their purchasing behavior is evolving towards more responsible and sustainable consumption, considering the impact on the environment and society. This shift is further influenced by media and consumer associations that highlight the importance of the following factors on purchasing decisions: whether products can be recycled, whether they're sustainable, and whether the packaging is biodegradable. The "L'Oréal Sustainable Consumption Initiative 2017" study shows that 92% of consumers are looking to purchase from brands that prioritize the protection of people and the planet. This trend is even more significant among Millennials, with a Nielsen report in 2015 revealing that 73% of this generation is willing to pay more for sustainable products.
Natural, vegan and local cosmetics continue to grow in popularity, with consumers becoming increasingly aware of the ingredients, sustainability and traceability of the products they purchase. Consumers buying natural ingredient-based face and body care products increased, on average, from 18% of sales in 2017 to 24% of sales in 2021. The largest increase is in France, from 23% in 2019 to 32% in 2021.
Environmentally conscious consumers are willing to pay more for sustainable and natural products. "Eco-active" households spend more on beauty products than the average household, especially in France, where "eco-actives" spend 5% more per shopping trip on this type of product. Moreover, the zero-waste movement is gaining momentum, with 41% of households wanting more bulk hygiene and beauty products in their stores.
Corporate Social Responsibility (CSR) regulations are evolving regularly and impacting the cosmetic sector. For instance, the Anti-Wastefulness for a Circular Economy law (AGEC) of 2020 will profoundly transform the French economy by 2040. The cosmetics industry is a sector that will be particularly affected by this law. Indeed, it will no longer be possible to sell rinsed cosmetic products containing microplastics and other concerning substances, or to use single-use plastic. It will also be necessary to introduce new logos and nomenclatures on packaging to inform the consumer about the product. To anticipate the changes and reduce the operational impacts of these new regulations, companies in the sector will have to quickly adapt their strategies.
Faced with this awareness and increasing legal pressure, CSR has become a clearly stated strategic pillar for cosmetics companies. Four major strategic CSR objectives stand out:
In an effort to minimize their environmental footprint, companies are placing a growing emphasis on domestic production and shortened supply chains. Christian Dior, for instance, aims to slash its operational emissions by 46% by 2030 (in comparison to 2019) and to power all of its facilities with 100% renewable energy and bio-gas by 2023. Similarly, L'Oréal has achieved an impressive 81% reduction in CO2 emissions at its manufacturing and distribution facilities between 2005 and 2020, and aspires to achieve carbon neutrality by 2050.
There is a growing trend among brands to prioritize the use of natural ingredients in their cosmetic products. To achieve this, many brands are altering their formulas to substitute synthetic components with natural alternatives. For instance, Paraben is being replaced by more organic preservatives, such as grapefruit seed extract. Sephora is one such brand that is focusing on developing cosmetic products using natural and vegan ingredients. They have launched their GOOD FOR product selections, which encompass "Good for you" (containing at least 90% naturally sourced ingredients), "Good for a better planet" (made with responsibly sourced ingredients), "Good for vegan" (free from animal-origin ingredients), and "Good for recycling" (with packaging that can be recycled or repurposed through Sephora's program).
Initiatives have been set up to promote transparency and traceability of cosmetic products to meet consumer expectations. For example, Coty, Estée Lauder, L'Oréal and LVMH are part of the EcoBeautyScore consortium with more than 40 other players in the beauty sector. This consortium aims to develop an evaluation method and a rating system for the environmental impact of products for the entire sector.
To comply with changes in the legal framework and new market expectations, inclusion and equality are strategic CSR pillars for companies. The challenge is to strengthen the employer brand on the one hand and to meet these new requirements on the other. At Coty, a 10-point increase in the corporate equality index was a stated goal for 2022. L'Oréal is committed worldwide to the promotion of women. Indeed, L'Oréal was a forerunner in calling on INED (National Institute of Demographic Studies) as early as 2007, to conduct an analysis of the annual compensation of employees. Companies are also strengthening inclusion and diversity in their communication campaigns to reinforce their brand image, for instance by using models that the current generation can easily relate to.
The demand for sustainable packaging is on the rise, not only to meet environmentally conscious consumers expectations, but also to apply law. For example, the AGEC law is a French law designed to encourage businesses to eliminate waste and adopt more circular practices. This law imposes the cosmetic industry to review 56% of packaging. Here are the main trends in terms of CSR innovations in the field of packaging and cosmetic production through examples.
In the cosmetics industry, companies are increasingly adopting sustainable practices in their packaging choices. As well as using traditional glass packaging, many brands are turning towards plant-based, recycled, or biodegradable materials. The Body Shop, for instance, is leading the way in using biodegradable packaging options such as paper, cardboard, and biodegradable materials like corn and wheat.
L’Oréal has made significant strides in sustainable packaging, with 80% of its cosmetic packaging now recycled. However, the company is not stopping there and has teamed up with TerraCycle to handle the remaining 20% of packaging that is currently not recyclable in France. TerraCycle is a cosmetic packaging recycling program that offers public collection points where customers can drop off the waste to be recycled. Similarly, Sephora has also taken measures to encourage recycling by installing recycling boxes in its stores. In 2019, Sephora was able to recycle 400 tons of perfume bottles, resulting in savings of 184 tons of CO2 emissions.
Mugler, a brand under the L'Oréal group, has been a trailblazer in sustainable practices for over a decade. They have introduced refill options through fountains in stores like Sephora and Marionnaud, with 40% of their sales coming from refills. L'Oréal has also followed suit by incorporating refillable options for every new perfume launch, such as the My Way line by Armani. Furthermore, Hermès has recently introduced a range of "refillable" lipsticks to encourage consumers to avoid repurchasing the entire packaging.
Cosmetic brands are making efforts to reduce their environmental impact by innovating in product conception. One example of such eco-friendly innovation is the use of highly rinsable technologies (THR) to reduce water and energy use. L'Oréal has developed the "L'Oréal Water Saver" solution, which reduces water usage by 20% and energy usage by 30%, by allowing soaps and shampoos to dilute faster. Additionally, in response to the zero-waste movement, brands are launching solid products. L'Oréal, for instance, offers solid shampoos for their Dop and Garnier brands. Lush Cosmetics, offers a range of solid cosmetic products made from natural and organic ingredients, packaged in reusable materials. Some brands are entirely committed to the zero-waste principle, like The Naked Shop or Cozie in France, which replace packaging with deposits.
The cosmetics industry recognizes the importance of CSR as consumers become increasingly environmentally conscious and demand sustainable packaging and natural products. With stricter legal requirements for CSR, cosmetic companies must reinforce their strategies by:
At Sia Partners, our experts can provide valuable guidance to help brands align their CSR strategies with their values and meet the expectations of environmentally conscious consumers.