How beautiful is the beauty industry really, when it comes to sustainability and social responsibility? In this article, we try to answer some of the questions that come to mind from both a consumer and an investor point of view. What do sustainability and ESG (Environmental, Social, and Governance) ratings really mean in this sector? How to choose and how to trust? And how can smaller brands change the game? In this article, KnowESG, an integrated sustainability data ecosystem that brings together relevant news, events, education, and business information decides to take this topic under the microscope with Hanna Azirar, the founder of KÖNSE beauty.
What does sustainability mean from a small business standpoint?
When it comes to sustainability in the beauty industry, there are a lot of unregulated ´buzz´ words used by many brands to claim they are ethical or sustainable, an infamous greenwashing practice that has been around for some time now. But with the right information, we hope that our readers will have the sufficient tools to spot the ´true´ sustainable brands.
Before we go further into the topic, we must begin by shedding some light into the concept of “absolute sustainability”. We can be rather frank and say that 100% sustainability does not exist. In the most generic terms, sustainability is defined as ‘the quality of causing little or no damage to the environment’, and therefore able to continue for a long time. To start with the obvious, almost any kind of production will have some level of environmental effect.
Sustainability is a little bit like love. You know when you are in love, but it is terribly hard to tell how much. We have embarked on a journey to explore the ‘shades of love’ and the more sustainable options out there. Whether you a conscious customer or an investor looking to support a brand in the growing sector of sustainable beauty, it is important to understand the brands’ green efforts, their sustainability journey, and the official language of ESG ratings.
From our experience, we would recommend to look for these five elements:
1. Conscious Packaging
One of the biggest problems and that which is most addressed in the beauty industry is plastic packaging. More and more brands are producing more recyclable materials for the packaging of their products, with the possibility to refill your beauty product container instead of throwing it away and buying a new one. When it comes to packaging of beauty products there is no black and white answer, this selection can be quite complex as, depending on your formulation, you would need a certain type of material, and with that comes cost as well, in particular for indie brands. Packaging is surely one of the more complex elements of the product and there are a myriad of variations – the most important thing to remember is to avoid any single-use options, especially plastic options. Look out for brands such as Dafna´s skincare who have designed their packaging to try and eliminate waste. All their bottles and containers are made out of black crystal instead of plastic. This material, as well as minimising environmental pollution, also helps conserve the product better preventinging any light from entering and changing its properties and composition. Additionally, all their boxes are made from recyclable materials and are biodegradable.
Also important to consider are the beauty samples that are used to intensify the shopping experience, especially for online retailers, as there are limited ways for customers to try the products. Each year, the beauty industry created 122bn units of sample sachets, most of them hard to recycle. At KONSE Beauty, we are currently working on an initiative to cut the use of samples by 2023.
2. Ethical Sourcing
The entire life cycle of a beauty product can involve a number of carbon-producing processes. The growing, harvesting, processing and shipping of raw materials that are required by beauty brands is something that we need to bear in mind. For example, certain ingredients found in sunscreen are known to damage coral reefs, so we recommend instead opting for mineral-based SPFs that, for example, contain zinc or iron oxide. This can help minimise environmental pollution as well. At KONSE Beauty it is important that all the brands we curate and our own suppliers for the teas can guarantee these practices. For example, Manasi 7, a Swedish makeup brand, have created a “Manifesto that sets the minimum requirements for the full production cycle called the Declaration of 7” : all the ingredients are natural, wild-harvested, plant-based, and certified organic, and, when possible, ingredients from 100 % circular farming are used. They are not focussed on mass production or low-priced products. Instead, the products are high quality, produced in small batches to minimise waste, and support small-scale farmers. The majority of the packaging is plant-based, reusable, and/or recyclable.
3. Resource & Waste Management
Having waste and resource management policies in place, such as water and energy management, where possible using renewable energy such as solar, using carbon offsets or recycling programmes, are all important to us as well. As a consumer, this is something you might not have access to. However, we encourage you to check the FAQs section of the brands or simply to contact them. Other things to look out for are brands that are carbon negative, developed through their supply chain to absorb more carbon than released during the supply chain to offset emissions that they cannot avoid, such as BYBI beauty.
4. Avoiding palm oil-derived products
More and more people are interested in reading the ingredient labels and question the use of unnecessary fillers, mineral oil, palm oil, parabens, and silicones when there are other – usually more expensive – options available. Ingredients, such as surfactants, emulsifiers, and emollients, are made of palm oil, which is mostly unsustainably produced. Brand founders need to find providers who source raw materials and are able to provide the appropriate certifications, since we know that palm oil plantations contribute to tropical deforestation, and notably that of the Amazon.
5. Charitable Giving
As a consumer brand, we need to find ways of offsetting our carbon footprint. At KONSE Beauty we give a percentage of our sales to Tree Sisters, an ONG that helps plant trees all over the globe as a way to offset our logistics and packaging energy use. Brands like Seventy One Percent, Dafna´s Skincare and others are doing this as a core feature of their business operations. If social impact is something you care about, we would encourage you to check out the company’s websites and packaging – the brands typically communicate this information openly.
What is the definition of sustainability amongst the big brands?
As is common in life, there is much to be learnt from the new kids on the block. Therefore, the same five screening principles can be applied when choosing a product of a more renowned brand. While the world of smaller brands could be dominated by eco-certifications, the other side of the spectrum is screened through an ‘ESG lens’ – Environmental, Social, Governance impact.
Let’s have a look at the four biggest cosmetics brands by revenue – L’Oréal, Unilever, Procter & Gamble, and Estée Lauder. There are a myriad of ESG rating agencies using in-house methodologies to assess companies’ sustainability performance. Because of the lack of standardisation, we are dealing with a lot of noise in ESG ratings – meaning that the same company can get different ESG ratings. Needless to say, this makes it very hard to really tell how sustainable a brand really is.
We took a look at the ESG performance of our “big four” beauty companies at the KnowESG Rating platform:
Environmental
When we zoom in to the Environment pillar, we can see that all four companies are being consistently ranked in the “sustainability leaders” zone:
Sustainalytics ranks all four brands in the zone of “negligible” environmental impact, with L’Oréal and Unilever performing the best. Refinitiv is similarly kind to all companies’ environmental impact – with scores above 75 points, assigning an excellent sustainability performance to all four of them. It is worthwhile noting that Refinitiv sees L’Oreal’s environmental performance as the worst among the competitors – a significant difference with Sustainalytic’s ranking. MSCI continues the trend of favourable environmental performance: with an implied temperature rise of below two degrees Celsius – in line with the ‘less ambitious’ Paris Agreement target, it indicates that all four companies are aligned with the global decarbonisation goals. L’Oreal’s carbon footprint is the lowest, according to MSCI.
Social
Similarly as per the Environmental scores, these four brands earn very favourable assessments in the category of their Social impact. Sustainalytics scores all four companies in or very close to the zone of “negligible” social impact and gives L’Oreal the best social performance rating.
Similarly, Refinitiv plots three out of the four companies in the zone of “excellent” social performance, with the exception of Estée Lauder, which – with the score of 73, finds itself in the category of “only” good social performance.
Governance
Lastly, let’s take a look at the Governance assessment. Finally, we see some more significant variations and scores which indicates that the top four brands do have space for improvement in the area of Governance. While Sustainalytics places all companies in the zone of “negligible” negative impact, Refinitiv is more critical towards Procter & Gamble (low bound of good performance) and particularly Estée Lauder, which finds itself in the “satisfactory area”.
How to tell if ‘you are in love’
Sustainability may be a little bit hard to quantify – just like love. But the good news is that we are not in the land of the unknown. We hope we have given our readers tips on what to look for when choosing beauty products and what critical questions to ask, even when it comes to complicated topics like ESG ratings. With this article, we hope to start a series of posts on this topic – if you are an expert or a small brand owner, get in touch with us. The power to change is in doing it together.
