Over recent years, personal product (PP) companies have faced an increasing demand for more inclusive product governance – from formulations to labels – and marketing that reflects the diversity of consumers. To grow sustainably within their communities and stay relevant for their target customers, such companies need to create value for society proactively. Some of the major players in this industry have already started paving the way for others.
In the Name of Beauty
In January – February 2021, a study commissioned by Unilever interviewed 10,000 participants across nine countries* to understand people’s experiences of the beauty and personal product industry [i]. According to the survey, the majority believed the industry could make people feel excluded as it creates a singular ideal of who or what is ‘normal’, thus making them feel they should look a certain way. More than 70% of the respondents also called for a more inclusive range of people captured by beauty and personal care brands, whereas the industry should focus on the “feel-good” rather than the “look-good” message.
In March 2021, Unilever announced the elimination of the word ‘normal’ from all its beauty and personal care brands’ packaging and advertising [ii]. This move is part of the firm’s new Positive Beauty vision and strategy, which sets out several commitments for its brands such as Dove and Axe, and “will champion a new era of beauty […] equitable and inclusive, as well as sustainable for the planet.”
After the rise of the Black Lives Matter movement in June 2020, Unilever also decided to remove the words ‘fair/fairness’, ‘white/whitening’, and ‘light/lightening’ from its products’ packs and communication, including the renaming of Fair & Lovely, a brand of its Indian unit, to Glow & Lovely [iii], [iv]. L’Oreal also decided to remove these words from all its skin evening products [v], having previously expressed its solidarity with the BML [vi]. In turn, Johnson & Johnson discontinued two product lines of skin-lightening products from Neutrogena and Clean & Clear [vii].
Managing Not-So-Pretty Risks
These examples illustrate how a company can address and mitigate risks associated with its management of responsibilities vis-à-vis customers and clients from the perspective of quality and/or safety of its products with an eye on the future. Sustainalytics identifies Product Governance as a Material ESG Issue (MEI) for personal care companies due to the consumer-facing nature of its business. Issues such as consumer complaints based on misleading packaging and marketing or inadequate labelling can lead to lost revenues and costs stemming from product recall and disposal, as well as class action lawsuits from customers in the tens of millions of dollars. For example, the PP giant L’Oreal has previously come under fire in the US. The Federal Trade Commission charged the company with deceptive advertising due to false and unsubstantiated claims that some of its products provided anti-ageing benefits by targeting users’ genes [viii].
Furthermore, producers of global brands are subject to brand damage from negative consumer sentiments and boycotts, which can lead to adverse financial and reputational implications. Our research indicates that a robust responsible marketing policy, combined with comprehensive product quality and safety systems, can substantially help to mitigate these risks. In exhibit A, we show how firms that identify and address emerging Product Governance risks and opportunities are generally in a better position to compete in a fast-paced market.
However, the initiatives mentioned above do not come in isolation. Beauty inclusivity, both in terms of product offering and product description, has been gaining prominence along with the increasing consumer demand for personal goods that are more sustainable in terms of environmental and social qualities. Therefore, E&S Impact of Products and Services is another MEI for PP companies; It includes inherent characteristics of input materials, both positive and negative, and impacts during use, disposal, and recycling. This MEI is a notable risk area for the industry, partly due to the growing regulations related to substances and ingredients harmful to human health and the environment. In the exhibit below, we illustrate the correlation between the companies’ ESG Risk Ratings Score and their score to manage this MEI.
Removing words from labels or renaming products will not resolve all social issues related to discrimination, inequality, or marginalization at large. Initiatives aimed at improving consumer experience by acknowledging and addressing such issues constitute an important step towards more equitable and sustainable communities.
Why it Matters to Investors
Investors who hold companies to higher standards for corporate social responsibility seek purpose beyond financial gains. Governance is now also measured against the value delivered to customers, strong ethical standards across operations and supply chain, and the returns to employees and communities. Together with consumers, investors call for companies to be future-proof, incorporating sustainability as a key component of prosperity.
* Unilever’s Positive Beauty research was conducted with 10,000 participants from the USA, Brazil, UK, Nigeria, South Africa, Saudi Arabia, India, Indonesia, and China.
[i] Unilever Global Company Website (09.03.2021), “We’re Saying No to ‘Normal’ and Yes to Positive Beauty,” accessed (31.03.2021) at: www.unilever.com/news/news-and-features/Feature-article/2021/we-are-saying-no-to-normal-and-yes-to-positive-beauty.html
[ii] Unilever Global Company Website (25.06.2020), “Unilever Evolves Skin Care Portfolio to Embrace a More Inclusive Vision of Beauty,” accessed (31.03.2021) at: www.unilever.com/news/press-releases/2020/unilever-evolves-skin-care-portfolio-to-embrace-a-more-inclusive-vision-of-beauty.html.
[iii] The Economic Times (02.07.2020), “HUL’s Fair & Lovely to Be Renamed ‘Glow & Lovely,” accessed (31.03.2021) at: economictimes.indiatimes.com/industry/cons-products/fmcg/huls-fair-lovely-to-be-renamed-glow-lovely/articleshow/76751322.cms?
[iv] Unilever Global Company Website, “Glow & Lovely,” accessed (31.03.2021) at: www.unilever.com/brands/personal-care/glow-and-lovely.html.
[v] The Guardian (27.06.2020), “L’Oréal to Remove Words like ‘Whitening’ from Skincare Products,” accessed (31.03.2021) at: www.theguardian.com/world/2020/jun/27/loreal-to-remove-words-like-whitening-from-skincare-products.
[vi] L’Oréal Paris USA (01.06.2020), “L’Oréal Paris Stands in Solidarity with the Black Community, and against Injustice of Any Kind. We Are Making a Commitment to the @NAACP to Support Progress in the Fight for Justice. #BlackLivesMatter,” accessed (31.03.2021) at: https://twitter.com/LOrealParisUSA/status/1267449907880824832
[vii] Reuters (19.06.2020), “Johnson & Johnson Drops Skin Whitening Creams,” accessed (31.03.2021) at: www.reuters.com/article/johnsonjohnson-whitening-idUSL1N2DW0MD.
[viii] Federal Trade Commission (03.07.2014), “L’Oréal Settles FTC Charges Alleging Deceptive Advertising for Anti-Aging Cosmetics,” accessed (31.03.2021) at: www.ftc.gov/news-events/press-releases/2014/06/loreal-settles-ftc-charges-alleging-deceptive-advertising-anti.