Ethical values for business success: A conversation with L’Oréal’s Chief Ethics Officer
Individuals are generally considered morally responsible for their actions. But who is responsible when those individuals become part of a business organization? Can we impute moral responsibility to the organization itself?
The imperatives of day-to-day performance in large organisations are compelling and there is little time to divert attention to the ethical dimension of management decisions. But increasingly, companies realise that they bear the responsibility for an individual’s misdeeds in their entire value chain as well as globally as a company.
More and more companies though are actively shaping organizational ethics and seize this as an opportunity to create a corporate culture that strengthens the relationships and the reputation on which their success depends. Is business ethics the key to long-term success? CSR Asia asked Emmanuel Lulin, Senior Vice President and Chief Ethics Officer for L’Oréal.
How do you define ethics and how has L’Oréal formalised it?
Ethics is about the principles we define for ourselves, in terms of how the company operates as well as how people behave within the organisation. In the case of L’Oréal, it was a proactive approach which started in 2000. L’Oréal was one of the first companies to establish a Code of Ethics and appoint a Chief Ethics Officer in 2007.
L’Oréal articulates ethics around four ethical principles: Integrity, Respect, Courage and Transparency. These principles are expressed in the daily operations of our teams around the world and must be understood by all L’Oréal employees. Acting with integrity for instance is vital to building and maintaining trust. Respect because what we do has an impact on many people’s lives. Courage because ethical questions are difficult ones but they must be addressed. Transparency is something we envisioned as a key trend a while ago, it affects all our activities, our communication and our engagement with stakeholders. Transparency is critical to be truthful, sincere and to be able to justify our decisions.
How is ethics different from compliance?
Ethics simply goes beyond compliance. It is about creating a corporate culture and it is based on sincerity. The pace of innovation is such that we see new ethical issues emerging all the time. Legislation simply can’t follow and move fast enough. If we can’t fully rely on legislation and compliance, it becomes even more important that companies develop a proactive approach to ethics.Ethics also comes before compliance. Often the discussion starts with questions around ethics and is later transformed into a legislation. The debate around consumer data for instance is now being translated into data privacy and protection regulations.
Most companies now start to understand that a lack of integrity and transparency is putting them at risks whereas a company with strong ethical principles is a company you can trust. Trust is one of the biggest competitive advantage a company can have. It is a great investment to focus on ethics but it takes time to drive change. Most companies who try to rapidly develop ethics programmes purely based on compliance usually fail to create a strong culture of ethics. When we look at some of the biggest corporate scandals that occurred over the last few years, we can see that most of these organisations had rigorous compliance systems in place which did not stop individuals from making unethical choices.
How did you create this culture of ethics a L’Oréal?
When we started 10 years ago, we acknowledged that first and foremost, we needed to promote an open environment to encourage our employees to speak up if they have concerns and ensure that managers are able to listen. In most countries, this is still extremely challenging, as many people haven’t been educated to air their views, express their opinions and report unacceptable demands and behaviour.
As Chief Ethics Officer, I can rely on a network of 74 Ethics Correspondents whose role is to support Country Managers in deploying L’Oréal’s Ethics Program. Each year, this network is reinforced, giving all employees access to a local correspondent. The Country Manager is in charge of ensuring that the Code of Business Ethics is respected in his or her country. L’Oréal also holds an Ethics Day every year for the entire workforce. Employees all around the world are invited to put questions on ethics directly to our Chairman and Chief Executive, Jean-Paul Agon. This year, we received over 5,700 questions from our employees all over the world.
Can you give some examples of the questions that were asked?
When we started the Ethics Day we had a lot of HR-related questions. Employees would ask about remuneration and compensation, work hours, sometimes about harassment or management styles. These were recurring topics and mostly personal issues. The topics that emerged over the last few years have more to do with organizational ethics, relating to how the company operates and how we do business in general. For instance, the questions we receive may be related to the products we develop, the markets where we sell our products or our diversity. These are important and valid questions because Ethics for L’Oréal encompasses all functions within the group from marketing, to HR, finance etc… All stakeholders within the organisation are actively contributing to Ethics. Our sourcing department for instance is conducting regular audits of our suppliers on the base of L’Oréal’s Code of Business Ethics.
[L’Oréal Singapore Employee Engagement on Ethics]
Can we transmit this culture of ethics outside the company?
Yes, this is the objective. Driving change outside the organisation. If we really believe in our values, it becomes natural to select business partners and suppliers who share similar values. I believe that companies can transmit their culture overtime but it needs to be really authentic to be contagious. It also needs to starts from the top. If L’Oréal succeeded with its ethics programme, it is because we have a genuine interest from leadership and it is supported by a dedicated organization. Authenticity is a critical success factor here. As much as management needs to be vocal on the topic of ethics, they need to walk the talk.
How do you monitor performance and measure success?
The deployment of L’Oréal’s ethics program is based on three major levers. First, a steering and monitoring system including tools for ethical risk analysis and assessment, a country reporting system and regular audits. Our strong commitment around Ethics, have drawn the attention of the public, our investors and NGOs, it is therefore essential that it happens in a measurable way and we report our progress to external stakeholders. We measure ethics at the leadership and management levels for instance, evaluating how managers manage and their personal involvement to promote this culture of ethics. All managers have key performance indicators related to ethics. The Board of Directors and the Executive Committee look at our progress as they look at our business and financial performance. The two other levers are awareness-raising and engagement to promote the involvement of employees at all levels of the group on ethics and promoting a culture of dialogue and transparency, the “Open Talk” policy.
Do you think L’Oréal ethical principles resonate well in Asia or does ethics need to be localised somehow?
Our Principles are universal but in some countries, there may be a confrontation between traditional and modern values. Our approach was to first work towards a global alignment to our ethical principles and then, recognising that each country has a different context and challenges, we are having local discussions on values and priorities. The difficulty is that there aren’t many best practice examples that we can leverage to know that we are on the right track. It is a journey and we are learning every day.
This year I am visiting each country where we operate. I’m meeting the management board and working on concrete issues related to ethics. This helps us map and prepare ourselves globally to address future issues such as big data, responsible sourcing or transhumanism. Human rights are universal regardless of the culture and tradition. This year, L’Oréal launched a human rights policy and this is an important step which allows us to explain more clearly how we respect our commitment in practice. As an example, human rights are taken into consideration when choosing our natural ingredients. Our research and innovation teams therefore have to ensure that the local populations producing these ingredients have access to their land, to their natural resources and ensure the respect of their traditional knowledge.
Are you optimistic?
Yes, I’m optimistic. Ethics drives business value as well as differentiation and innovation. It is not in any company’s DNA, it can be developed, but it requires time and a dedicated approach.
Emmanuel Lulin joined L’ORÉAL in 1999 as Group General Counsel for Human Resources. In 2007, under the leadership of Jean-Paul Agon, he set up the Office of the Group Chief Ethics Officer. Before joining L’ORÉAL, he was admitted to the Paris Bar in 1988 and practiced as a corporate and tax attorney at Debevoise & Plimpton in Paris and New York.
L’Oréal’s ambition is to be an exemplary company worldwide and integrates ethics into the very heart of its business practices. In 2017, the group was recognized for the eighth time by the Ethisphere Institute as one of the “World’s Most Ethical Companies”.