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This is one of the four chapters comprising the Vogue Business 2023 Beauty Index and should be read in conjunction with the others. Please use the table of contents below to navigate between the chapters of the Vogue Business Beauty Index.
Key takeaways:
- Packaging continues to be a pressing issue for the beauty industry, but efforts in sustainability need to complement brand identity. When looking for alternatives, brands should consider a range of factors, including transportation emissions, consumer acceptance and luxury feel.
- Many beauty brands fall short on communicating ESG to consumers and suppliers alike. Over half (57 per cent) of consumers are relying on word-of-mouth to access ESG information about brands. There is a need for greater transparency, while standardised tools should be embedded within the consumer purchase journey.
- Social impact should not be limited to representation — consumers value diversity and inclusion, as well as fair labour practices, just as much as positive environmental policies.
Unfolding beauty’s packaging problem
Aesop emerged as the leader for ESG within the Beauty Index, with its approach to packaging and waste reduction helping it achieve the top spot. With 120 billion units of packaging produced globally by the personal care and beauty industry every year, beauty has a packaging problem, with brands generally being responsive to this.
Eighty per cent of brands assessed have some kind of policy for reducing plastic packaging — i.e. “reducing plastic packaging by X amount by X date”. However, a closer look reveals that Aesop is ahead of the curve; the L’Oréal-owned brand already predominantly uses recycled PET plastic, which contains 97 per cent post-consumer recycled material, with the aim of 100 per cent of all packaging to be recyclable, reusable or compostable by 2025. However, with terms like reusable and compostable not being regulated, more demonstrable action is needed across the beauty industry for real, sustainable change. Looking at the audited metrics within the pillar, the competition between the top three brands for ESG is extremely narrow, with Aesop sharing its success with The Ordinary and Glow Recipe. All three feature a selection of refillable products, although it is unclear how widely they offer this option or how strongly they incentivise consumers to engage with it — and offering refillable products does not guarantee their success, particularly in the face of the many complexities associated with providing this.
However, with 95 per cent of all cosmetic packaging thrown away, according to the British Beauty Council, it’s clear that slow rollouts of refillable product options are not enough. To properly tackle packaging waste, many strategies are needed.
Recycling is a particular challenge because there is so much variability from one country to another, even one municipality to another, in what materials can be recycled — and because recycling centres require uniformity and predictability in the materials that come in for recycling, yet brands are designing products and packaging to look unique and stand out. However, increasing recycling rates is not impossible and, in fact, can provide brands with meaningful opportunities for customer engagement. The Ordinary, for example, dedicates a web page to educating shoppers on the best way to recycle or replenish products, including offering separate instructions for markets, like Italy, with localised recycling guidelines.
Bridging sustainability’s communication gap
Sustainability in beauty still has a communication issue. Of the five brands that scored highest in an audit of environmental policies, only two are considered sustainable by consumers. This suggests that some brands are making progress internally with their sustainability efforts but are not getting credit for it with customers. While it’s far riskier for a company to falsely communicate what it is doing to improve its footprint — aka greenwashing — than to be understated about it, it’s also true that consumer perception matters. Brands must recognise the importance of not just doing the work but communicating it as well.
Aesop benefits from a much stronger reputation for sustainability than its rivals, despite the fact its efforts are primarily communicated through separate channels like FAQ pages rather than product display pages. Arguably, this suggests that Aesop does a better job of educating shoppers about the strides it is making in ESG, putting it front of mind for beauty consumers prioritising sustainability. However, there remains a real need for improvement across the industry in how brands communicate progress towards their goals to consumers and not just to industry watchdogs. For example, when assessed for environmental policies and stance on labour equality, Unilever-owned Hourglass achieved similar scores to brands leading the ESG pillar, buoyed by its parent company policies. Yet when consumers were asked how sustainable they believe the brand to be, it received one of the lowest scores indicating discrepancies between parent company and brand-level initiatives.
At present, many brands still embed communications about sustainability in corporate pages or take a siloed approach, focusing on vegan and cruelty-free products or packaging waste. This approach requires the consumer to do far more mental labour if they want a holistic understanding of how sustainable a brand is. One way to mitigate this is to improve the ease of understanding eco-labelling. L’Oréal Group, for example, launched environmental and social impact labelling in France in 2020, piloting with Garnier hair products, while in February 2022, the Eco Beauty Score Consortium went live, seeing 36 companies within beauty and cosmetics working together on a standardised tool. The consortium aims to bring a common scoring system to consumers, meaning brands would no longer be able to hide behind siloed eco-labelling approaches and in turn, reducing confusion for consumers. While a great step towards a more transparent beauty industry, embedding this approach into the purchase journey is key to widespread consumer adoption. Currently, 57 per cent of consumers rely on word of mouth to find out brand information, with 53 per cent using online retailers and 52 per cent using a brand’s own website.
A third of the brands assessed still do not report on the progress they are making towards achieving sustainability goals to consumers. The lack of information is not just a challenge for consumers but could also represent a barrier to growth for brands. For instance, considering the role that multi-brand specialists, like Sephora, and department stores play in getting products to shoppers, a more concerted effort is needed to improve access to information. A paucity of information on sustainability can result in challenging negotiations with retail stockists, which are coming under increasing pressure to comply with local legislation — not to mention internal sustainability objectives. However, improvement in transparency and reporting can help boost merchandising opportunities and trade partnerships by making it easy for retail buyers to identify the sustainability credentials of brands they’re considering.
Striving for higher standards in supply chains
In many ways, the beauty industry has been a vanguard for representation, with LGBTQ+ culture paving the way for brands including Makeup by Mario and Jeffree Star cosmetics. This also opens up conversations about gender conventions and who beauty is for. Japanese luxury skincare label Shiseido, for example, has relaunched its men’s skincare collection, recognising the opportunity that the men’s skincare revolution holds. While some brands thrive on the stardom of their founders’ activism in marginalised spaces, others are finding new ways to appeal to mainstream consumer groups.
Similarly, innovation and entrepreneurship in the beauty industry has led to a significant improvement in the availability of products designed for BIPOC consumers. Within the index, brands such as Fenty Beauty and Huda Beauty have cultivated a reputation for serving a wider range of consumers, particularly with melanin in mind. That noted, while Fenty holds specific policies on labour equality, diversity and inclusion, a number of other brands still fail to publish detailed information about their stance on these issues.
This means that while externally, consumers might perceive brands to value diversity, equality and inclusion (DE&I), it is much harder for consumers and professionals to evaluate how these principles are being applied within businesses, both in terms of recruitment within the brand and compliance by partners in the supply chain. Huda Beauty, for example, has an extensive statement on its site about the standards it expects from suppliers and third parties. Across the assessment, most brands seek to comply with minimum legal requirements when it comes to labour practices, such as minimum wage and limits on working hours, as well as preventing the exploitation of migrant workers. How they approach actual governance and enforcement of the standards is less clear, however. Rarer still are brands that are vocal about issues that go beyond the minimum legal requirements, such as closing the gender pay gap or paying a living wage. Shiseido is an exception to this, stating that its 2022 self-assessment confirmed the basic salary for employees is designed to exceed the living wage, while L’Oréal has committed to ensuring its strategic suppliers pay a living wage by 2030. This goes to show that efforts to go beyond legal minimum requirements — both to pursue such efforts, as well as how to enforce them and verify impact — remain discretionary. With consumers placing equal importance on diversity, inclusion and equal opportunity for workers (70 per cent) as they do on environmental policies (71 per cent), these policies also remain key to consumer favourability.
Case study: Aesop’s people-first approach
One area where Beauty Index ESG leader Aesop stands out is its social impact. The brand became a certified B Corp in 2020, joining a network set to benefit people, communities and the planet. The brand’s 2017-founded Aesop Foundation drives community funding to charities across education, vocational training, environmental causes and human rights.
Beyond the Aesop foundation, the brand has supported LGBTQ+ representation, with this year’s Pride campaign seeing the return of the Aesop Queer Library in a number of stores, partnered with the ACLU Foundation in the Americas region. This sees the brand clear out its stores in favour of offering complimentary copies of books — including literature that has been banned in various settings for its queer content. Aesop’s efforts are paying off in consumers’ eyes, with the brand receiving a mean score of 6.3 out of 10 on standing for values that consumers support, falling just behind The Ordinary, Rare Beauty and Honest Beauty. The brand would benefit from further consumer-facing activism occurring year-round.
Expert interview: Catherine O’Dea, GM of strategy, sustainability and growth, Aesop
What are the biggest sustainability demands you see from your customers?
We know our customers really look for, and value, our core ethical commitments, such as vegan and cruelty-free status. Increasingly, these factors are absolutely central to customer consideration.
Our customers also hold brands to increasingly rigorous standards around sourcing and packaging. One topic that customers are interested in is packaging, particularly around recyclability and refill. Refill options are something we also continue to progress — we have rolled our in-store and at-home refill trials in various markets; a pumpless refill format launched globally for some of our key body care lines; and there is a ‘rinse and return’ recycling programme in many of our stores in Asia.
We must offer choices to our customers that suit their lifestyle and make it easier for them to take more sustainable actions and encourage repeat behaviour. Making the behaviour sustainable is necessary for long-term circularity, waste and carbon reduction.
What do you expect to emerge as the next frontier in ESG?
More than half of the world’s economic output is highly dependent on nature — $44 trillion of economic value generation, according to the World Economic Forum. Yet, businesses pay more attention to carbon impacts compared to the impacts on nature, biodiversity and climate. The focus of September’s Climate Week in New York was biodiversity and nature and the need for businesses to create mitigation and restoration strategies. The Taskforce on Nature-related Financial Disclosures also published new guidance in this space.
Another clear theme from this year’s Climate Week was that climate action and justice must go hand in hand, supporting communities at the front line of climate change to adapt. Through the Aesop Foundation, we continue to fund projects that facilitate indigenous communities’ contributions as the custodians of nature, such as the Karrkad Kanjdji Trust, offer aid in emergencies like Médecins Sans Frontières and provide resources for refugees when they reach their destinations, such as the Asylum Seeker Resource Centre.
*Not included in the index ranking
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