From the July/August 2011 issue of Ethikos
An Ethikos Interview with: L’ORÉAL’s Emmanuel Lulin
L’ORÉAL, the giant French cosmetics company, has been at the forefront of the European business ethics movement. A U.N. Global Compact signatory since 2003, the company was one of the earliest to deploy a social and environmental audit program through its supply chain. In 2009, it sponsored the initial class of the new master’s degree program in Law and Business Ethics at the University of Cergy-Pontoise, the first degree of its kind in Europe (see Ethikos, January/February 2009).
Recently Ethikos spoke with the company’s group director of ethics, Emmanuel Lulin, a familiar presence in the global business ethics community. He is known to many U.S. practitioners as a director of the Ethics and Compliance Officer Association (ECOA).
Your company has been a leader in the business ethics movement. But what still needs to be done at L’Oréal?
Obviously, the ethics journey is never over. We are currently setting up a worldwide network of ethics correspondents who will no doubt play a major role in making this possible, together with our country managers. We currently have 38 ethics correspondents, which means that 95% of our staff has access to a local ethics expert.
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We are organizing a 2-day training program for our ethics correspondents this year to make them even more effective.
So much has been said recently about encouraging employees to “speak up” when they see something wrong. How exactly does an organization do this?
Creating a culture where people feel free and comfortable in airing their views, defending their opinions, and raising any concerns they may have is key. This is why we insist so much on our values of courage and transparency.
Employees are encouraged to contact their management or human resources. Additional resources are available in certain countries, such as ethics correspondents, staff representatives, grievance procedures or helplines.
Employees are able to contact me via the L’ORÉAL Ethics Open Talk website. This site provides a secure mechanism for raising a concern. It is currently available in 16 languages: Arabic, English, French, German, Greek, Hebrew, Hindi, Indonesian, Italian, Japanese, Korean, Mandarin, Polish, Portuguese, Russian and Spanish. A strict non-retaliation policy applies for all concerns raised in good faith and we monitor this.
But fundamentally, this type of reporting system serves one major purpose: offering our stakeholders assurance that no issue can be blocked at any level of the organization. This in turn ensures that local management is motivated to address all concerns and to deal with them appropriately.
As can be expected with any new system and following increased awareness about the importance of ethics, there has been a steady increase over the years in the number of concerns reported to us. But this is, in itself, neither positive nor negative. It really depends on what comes through the system. What is more important is the increase of managers contacting us to request guidance on how best to deal with ethical questions at a local level. This to me is proof of employees’ and management’s level of comfort in dealing with ethical issues.
When wrongdoing is reported, is it important to resolve cases quickly?
In this respect, I would say that being diligent is more important than speed. Some cases are more complex than others and therefore will require more time to be resolved. What is, however, important is to react quickly. Obviously, the more quickly a matter can be resolved, the easier it is to ensure confidentiality, which not only makes it easier to carry out an effective investigation but also ensures that people’s reputations are preserved.
This is central to any investigation: a person is innocent until proven guilty, and all persons must be treated with respect and dignity.
Is L’Oréal, a French company, feeling any effects of the UK Bribery Act? Increased enforcement of the FCPA? Does it see more convergence globally with regard to ethics/compliance programs and enforcement?
Thankfully, our industry is less exposed than others to major corruption issues. This does not mean, however, that we do not take it seriously. We have set a zero-tolerance policy regarding bribery and facilitation payments. We work closely with our U.S. and U.K. subsidiaries on such matters, as well as with our corporate legal department. Fundamentally, what’s most important is to convince everyone that it is possible to do something about corruption and that we are not alone in this fight.
With regard to global convergence, my impression is that there is definitely a better understanding between the more U.S.-based systems and the Europe-based systems. U.S. companies have, I think, come to realize that a system based on compliance only is a failure of the mind. On this point, I can quote our CEO Jean-Paul Agon who said in 2009 in his acceptance Speech for the Stanley C. Pace Leadership in Ethics Awards: “I believe that if you appeal to people’s intelligence and sense of responsibility, then compliance follows as a beneficial side effect. Systems based on a lack of trust and simple obedience of rules are doomed to fail. For example, I believe you get further talking about diversity rather than talking about discrimination, talking about integrity rather than talking about fraud, talking about loyalty rather than talking about conflict of interests.”
European companies on the other hand are waking up to the fact that a purely value-based system and trusting employees to do the “right thing” is not giving sufficient assurance to our stakeholders. It will be interesting to see how ethics and compliance develops in emerging markets, and we will no doubt have much to learn from these countries as well.
To what extent does L’Oréal demand ethical conduct from its suppliers?
Since 2002, L’ORÉAL has had a program to ensure that our suppliers comply with all applicable laws and respect basic human and labor rights. Our ethical expectations are set out in our standard contract terms and in what we call the ‘ethical commitment letter.’
To date, we have completed social audits at more than 2,500 supplier sites, 567 of which were carried out in 2010, and we aim to carry out a further 400 social audits in 2011.
But we want to go beyond this. In the “L’ORÉAL SPIRIT”, we say that “we actively seek out and favour business partners who share our values and our ethical commitments.”
This is always preferable rather than trying to apply standards to suppliers who do not believe in what you are trying to achieve.
Our approach consists of setting out our expectations in a clear and transparent manner, finding suppliers that share our values, monitoring performance to identify issues, addressing problems if they arise, and most importantly, helping build capability and supporting supplier ownership.
Are there effective ways to incorporate ethics into the management appraisal process?
L’ORÉAL employees are appraised not only on their results but also on the way in which such results are obtained. Two ethical competencies are now part of L’ORÉAL’s appraisal system worldwide for all employees — ‘Act/Lead with Human Sensitivity’ and ‘Obtain Results with Integrity.’
Improper behavior should not be sanctioned, regardless of position, seniority or performance, and it is as important to reward employees who are proactive in integrating ethics in their everyday work.
Is more attention being paid to corporate social responsibility (CSR) matters than in the past?
I prefer to refer to corporate responsibility rather than corporate social responsibility, as the latter can only cover a limited aspect of our role as a good corporate citizen. Clearly, awareness on this subject is growing as communication is globalized and as people search for a greater sense of purpose.
The sustainability of our company depends greatly on maintaining relationships of trust with all our internal and external stakeholders. Quite simply, the global leaders of tomorrow are those companies who have integrated ethics into their strategic planning but also their everyday business practices. A company with strong values is a strong company.
But again, the key is doing what we do because we believe in it and not just because it is what is expected of us.
In terms of the larger challenge of building an ethical culture, how far has L’Oréal traveled along this road?
Ethics is far from a new subject at L’ORÉAL. It may not have been called ‘ethics’ at the time, but throughout the years, L’ORÉAL’s management has always referred to our values: integrity, respect, excellence, courage and transparency. This is part of what we call the L’ORÉAL Spirit.
In recent years, we have become more structured in our approach. Our first Code of Business Ethics was released in 2000 because it was no longer possible to only depend on our values being transmitted by example and word-of-mouth.
In 2007, I was appointed the first group director of Ethics. My role consists first and foremost to act as an ambassador in promoting and embedding good ethical practices throughout the group, offering help and guidance in ethical decision-making at all levels of our operations.
From the very beginning, Ethics was positioned as central to our business, which is namely why I report directly to our CEO, Jean-Paul Agon.
In 2007, a new, more user-friendly, practical edition of our Code of Business Ethics was launched. It is translated into 43 languages and is available to all our stakeholders on www.loreal.com
You are right: Ethics is a kind of journey with a number of milestones you reach along the way.
It’s far more than a just a code. We have created an annual worldwide ‘Ethics Day’ centred around a live webchat with our CEO. This global event across 64 countries gives our CEO and country managers the opportunity to show their ethical leadership and personal commitment. Last year, approximately 17,000 employees participated in this webchat and sent in nearly 800 questions. Talking about ethics once a year is not sufficient, which is why we encourage our business units to ensure a continued communication on this subject. Communication on ethics-related themes has, in fact, increased by 62% since 2008 in the countries throughout the group.
We also recognize the importance of educating our people in ethics because it can sometimes be quite a complex matter. We developed an “Ethics Training Model” recognized as a best practice by The Conference Board and [have] two types of training, General Management and Professional Training (job specific). Ethics is now mandatory in all induction programs. We specifically concentrate on ethical decision-making skills, namely by using case studies.
Creating an ethical culture through training and communication is essential, but not sufficient. One of the key areas we cover is dealing with allegations and investigations. This is essential to ensuring that our code is respected. We have created the L’ORÉAL Ethics Open Talk website — a way for people to report concerns confidentially. On average, 36% of reported concerns give rise to corrective measures and/or disciplinary proceedings.
Risk management is also central to any ethics program, not only at group level but in the countries in which we operate. We therefore provide tools which our local management can use to take ownership of their ethics risk assessments.
Our Code of Business Ethics is our “constitution,” but we also regularly issue policy and guidance on specific issues (e.g., our recent policy on the employment of friends and family or on how to manage the issue of child labor within our supply chain).
No ethics program can be effective if it is not regularly monitored through hard data. We have had an annual reporting system in place since 2005 which allows us to do so and we are also, to our knowledge, the first ethics department in the world to have been certified ISO 9001 [an internationally recognized quality management system]. This supports our continuous improvement mindset and strengthens the credibility of our work.
Our online Sustainable Development Report contains a wealth of information. We were honored to receive an award from Ethical Corporation this year for its innovative reporting.
Finally, we do realize that we cannot travel on this road alone. We share and work closely with major associations and institutes to benchmark and understand trends and contribute to the development of ethics outside L’ORÉAL, for example, by developing new references and soft-law or with the L’ORÉAL for Ethics Excellence Bursary which helps students who want to study business ethics.
What is the key to building a successful integrity program?
When it comes to ethics, you need to be humble.
From my experience, according to a fashionable catch-phrase, I would say that what really counts is getting the culture right: basically making sure that we have the right tone at the top, mood in the middle, and buzz at the bottom.
— Andrew Singer