Corporate ethics: L’Oréal and New Zealand

by Pattrick Smellie / 02 June, 2016
The official conscience of the world’s largest cosmetics company says a slippery slope awaits those who stray into ethical grey areas.
Watchdog: Emmanuel Lulin, chief ethics officer at L’Oréal. Photo/Hagen Hopkins
Watchdog: Emmanuel Lulin, chief ethics officer at L’Oréal. Photo/Hagen Hopkins

Emmanuel Lulin picked an interesting week to be in New Zealand. The chief ethics officer for French beauty products manufacturer L’Oréal was hunkered down with a small group of Kiwi chief executives at Kingfish Lodge on the Whangaroa Harbour for a weekend of brainstorming on New Zealand corporate ethics. And the world was waking up to the Panama Papers.

The official conscience of a company named by New York think tank Ethisphere and Swiss reputation index Covalence as one of the world’s most ethical operators, Lulin found himself in one of the world’s most trusted countries, as measured by Transparency International, amid headlines that dubbed that country a tax haven. Perhaps, he muses as we end our conversation, New Zealand’s strong integrity ranking was because the country was “flying under the radar”.

The implication is that the country’s current ranking – we have slipped to fourth place on the index of least-corrupt nations – could drop further on the strength of the Panama Papers publicity about our cottage industry in poorly disclosed foreign-controlled trusts.

France, where L’Oréal is headquartered, ranks 23rd on the same index of perceived corruption, making it the 16th-ranked European nation. Ironically, it ranks below Switzerland (seventh) and Luxembourg (10th) – both of which are listed as tax havens on the 2015 list published by not-for-profit UK magazine Ethical Consumer.

New Zealand doesn’t make that list, but neither does Panama. That’s the thing about reputation and ethical behaviour: judgment is involved, and where the lines blur is where the trouble starts.

Lulin talks about the grey area that he calls “lawful but awful”. His role is to ensure that L’Oréal never falls into the trap of justifying “awful” just because it’s also “lawful”. His list of “red flag” questions (below) is a simple guide that anyone from the chair of the board to the lowliest employee can use as a barometer, and which ethics-challenged world football body Fifa could have done with.

When people start saying things such as “everyone does it” or “shred that document”, you can be almost certain you’re on the slippery slope.

The world’s largest cosmetics company, L’Oréal operates in 130 countries and has almost 83,000 employees, not to mention a host of third-party suppliers. The challenge to behave ethically includes examining the ethics of the beauty industry as a whole.

Emmanuel Lulin receives the 2015 Carol R Marshall Award for Innovation in Corporate Ethics.
Emmanuel Lulin receives the 2015 Carol R Marshall Award for Innovation in Corporate Ethics.

Stick-thin models

L’Oréal is leading the charge against photo­shopping women beyond human recognition or using stick-thin models in advertising. Lulin says the company believes in behaving ethically in the same way that defence manufacturer Lockheed Martin gained global recognition for its strict rejection of the kind of arms trade that made the John le Carré mini-series The Night Manager such compelling viewing.

“You may wonder why L’Oréal focused on ethics,” he says. “L’Oréal is a world leader in the beauty industry and we recognise that beauty comes from within as well. And ethics is the aesthetics of inside. So there is a link between being beautiful inside and being beautiful outside.”

To the sceptic, that’s a spiel out of the same brand handbook that gave L’Oréal its official values: integrity, respect, courage, and transparency. For many businesses, such feel-good words can be made to mean just about anything, especially in a company spanning every time zone and a global gamut of cultural norms.

Lulin isn’t fazed. “I think that the values are universal. I do not know any culture that would not cherish these values.”

They have also changed with the times. “Excellence” has been dropped in favour of “courage” and “transparency”. The latter is a basic requirement for ethical norms to take hold and for companies to get a look-in with millennial consumers. Courage, however, is tougher to measure.

“Courage is a bit like beauty. You recognise it when you see it,” Lulin says. “It is often easier to recognise a lack of courage. Depending on the circumstances and the latitude where we live, it’s a more or less rare commodity.

“It is easy to blame those who are lacking courage. You just need the courage not to put them in a position where they can harm.”

Suspended former Fifa president Sepp Blatter. Photo/Getty Images
Suspended former Fifa president Sepp Blatter. Photo/Getty Images

The bottom line

It would be wrong, however, to assume that behaving ethically is the route to a bonus at L’Oréal. Lulin doesn’t believe in rewarding someone for “behaving as they should”. Nor are sound ethics a commercial aim in themselves. Asked whether the budget for his role is expected to contribute to the bottom line, Lulin replies: “I never had any discussion with my boss, or with the board of directors, nor with the executive committee of the group about the direct financial benefits of developing a strong ethical culture.”

Not that he would necessarily have minded. “When you think about it, it would have been as much proper as improper to have such a discussion. There is no shame about being profitable,” he says. “From an ethical standpoint, the issue is more how do you reach the result than the results? So the way we operate, the way we obtain the results, is really important.”

If this all sounds a bit too good to be true, Lulin knows it. L’Oréal’s status as one of only three companies with a AA+ reputation score from Swiss corporate ethics rating firm Covalence doesn’t mean the company is perfect.

“I’m not saying that we are beautiful. I’m just saying that we recognise that it’s a good objective and an objective we must pursue.”

Off the record, he offers some hair-raising, real-life tales of the clash between ethical leadership and short-term business needs in parts of the world where the rule of law is shaky, political elites are used to getting their own way or local moral norms are repugnant to a liberal European. He concedes that in those circumstances, it helps to be a multinational company rather than a locally owned small business if you’re determined to make a principled stand.

So does anyone else in the world have a job like his? “It’s unfortunate, but …” he says, trailing off before starting again. “I know many colleagues around the world who have the same type of mission, but I don’t know anyone who’s doing it the same way and in the same spirit.

“That does not mean that it doesn’t exist, but it just means I don’t know.”

It’s a fair bet he’d know if he had peers. The secret of his unusual appointment appears to be rooted in a corporate culture of longevity. The firm is more than a century old, yet has had only five chief executives.

He attributes some of that stability also to the fact that Liliane Bettencourt, the daughter of founder Eugène Schueller, remains a cornerstone shareholder, although he doesn’t mention the 2010 brouhaha over the matriarch’s tax affairs and an investigation – later dropped – into political donations to then-president Nicolas Sarkozy.

Even the most dedicated ethics officer has to face the possibility that every now and again a big one’s going to get away. For Lulin, that escapee appears to be the banking industry. He has told others he knows of no bank that he would be happy to have managing his personal finances, but knows a multinational can’t do without global financial services.

Asked to explain, Lulin’s penchant for a long pause shows signs of breaking new records. “I will tell you what I think,” he says finally. “There are providers you must cope with despite the fact that in their industry there are huge unaddressed ethical issues. An example of such an industry is the financial and banking industry.

“It’s ahhh … ahhh … ummm – I think that’s enough on this subject.”

Ethics red flags

If someone says any of these things in the workplace, you can be sure something unethical is about to happen, says L’Oréal chief ethics officer Emmanuel Lulin:

“I don’t want to know.”

• “We didn’t have this conversation.”

• “Shred that document.”

• “No one will ever know.”

• “Everyone does it.”

• “Well, maybe just this once.”

• “I’m not taking a holiday this year” – said by someone who wants total control over their files, working relationships and output.

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