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GLOBAL CLIMATE CHANGE

Our Work on Reducing our ImpactHistorical-Current-Prospective

Zack MansdorfL’Oreal

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Agenda

• A few words about L’Oreal• Why we care about Global Warming• Our situation• Our actions• Some issues• Conclusions

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What is L’Oréal ?

● N°1 Cosmetics company worldwide

● A Pure Player in Beauty

Haircare Haircolor Skincare Make-up Fragrances

15,790 €M Sales14.4 % market share(2006)

Focused on added-value categories

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Present in key distribution channels

HairSalons

Massmarket

SelectiveDistribution

Pharmaciesand

dermatologists

The Body Shop

What is L’Oréal ?

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LuxuryLuxuryProductsProducts

ActiveActiveCosmeticsCosmetics

The The Body ShopBody Shop

Consumer Consumer ProductsProducts

MIZANI

Professional Professional ProductsProducts

A unique portfolio of diverse and complementary brandsBrand power4

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Climate Change and L’Oreal

• We view climate change as presenting both risks and opportunities

• We are below European standards for mandatory carbon trading and have an aggressive carbon emission reduction program worldwide

• We see some product opportunities

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Global Climate ChangeIt is an issue of concern for our stakeholders

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Major Sources of GHG

• Sites– Fuels for heating and wash

water– Electricity for our highly

automated factories and warehouses, offices, etc.

• Other– Raw Materials– Packaging– Transportation– Employees

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What Is Our Situation?

• GHG reduction is a challenge with our growth ambitions

• We had direct (fuel) and indirect (electricity) CO2 emissions for factories and warehouses of 223 Ktons for 2006

• 83 Ktons (38%) from fuels and 140 Ktons (62%) from purchased electricity (81.6 in fuels for 2007)

• We can estimate emissions of +23% (~67 Ktons) from administrative sites for a total ~290 Ktons

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ESTIMATED CONTRIBUTION BY CATEGORY FOR TOTAL CO2 EMISSIONS(limited to electricity use for administative sites)

63%14%

23%

FACTORIES WAREHOUSES ADM SITES

What Is Our Situation?

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210221 227 230 223

236251

266282

298316

335355

377

399

0

50

100

150

200

250

300

350

400

450

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

actual

Projected CO2 emissions from on-site energy use in Ktons (gas, oil, electricity)**Excludes non-energy and off-site sources such as transportation

+69% in 10 yrs

Projections based on 6% growth per year

OUR GHG EMISSIONS WILL GROW WITH SALES GROWTH

221 estimated

What Is Our Situation?

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What Is Our Situation?The country where the electricity is generated (means of generation) has

a significant impact on emissions (e.g. France=~80% Nuclear)

0

100

200

300

400

500

600

700

800

900

1000

g CO2 / kWh of electricity

IND

IA

CH

INA

ISR

AEL

IND

ON

ESIA

USA

MEX

ICO

ITA

LY

GER

MA

NY

UK

JAPA

N

SPA

IN

BEL

GIU

M

CA

NA

DA

FRA

NC

E

BR

AZI

L

CO2 FROM ELECTRICITY PRODUCTION PER COUNTRY

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WHAT IS OUR SITUATION?Contributions by site vary greatly

0

2000

4000

6000

8000

10000

12000

14000

TONSOF CO2

CO2 EMISSIONS FROM ELECTRICITY AND FUELS USED IN FACTORIES DURING 2006

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Carbon Footprint Pilot Studies

5648

2167

819 592

184 74 -170

1000

2000

3000

4000

5000

6000

7000

TRAVEL

MATERIALS

ENERGY

BUILDIN

GS

FREIG

HT

INTE

RNAL EMISSIO

NS

WASTE

CES CLICHY BILAN CARBONE (Tons CO2 Equivalent)

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Carbon Footprint Pilot Studies

1459

1120986

890

17249

0

200

400

600

800

1000

1200

1400

1600

FREIG

HT

BUILDIN

GS

PACKAGING

ENERGY

TRAVE

L

WAST

E

ORMES WAREHOUSE BILAN CARBONE (Tons CO2 Equivalent)

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How Will We Continue To Reduce Our Emissions?

Broad Scope• Focus on

– Energy Efficiency– Process Change– Product Change

• Find green energy partners where feasible (e.g., Libramont)

• Purchase green energy where available• Make capital investments to improve

efficiency or recapture energy with an allocation for energy related projects in the existing Operations capital budget

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How Are We Going To Continue To Reduce Our Emissions?

• Initiate studies for capital investment in alternative energy sources on-site and energy efficiencies through new or novel equipment and insulation

• Require all new major projects/launches to include energy/carbon footprint, water and waste impacts

• Apply our new Sustainable Buildings policy on new building and renovation standards for water, waste and energy efficiency/carbon footprint

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Participation In Initiatives

• L’Oreal actively participates in various peer groups on the climate change issue

• We participate in the Carbon Disclosure Project and received a “60” rating

• Merrill Lynch rated us as a leader (Aug 2007)• We are participating in the Supply Chain

Leadership Coalition and will follow other initiatives concerning our supply chain

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SOME ENERGY PROJECT EXAMPLES

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FAPROGIPre-heating of Wash Water Using

Recovered Heat

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Exchanger-Steam

3,7 T/h

Wash and Waste Water System

WastewaterExchanger900kWf

Production Wastewater20 m3/h average

60°C

Waste Water

60°C

Storage 22m3

CIP

35m3/h15°C

Wash Water

15°C70°C

Storage

22m3

-First rinsewater and demineralizewash

20°C

WastewaterTreatment

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Installation of a waste heat recovery system for wash water

Wastewatercooler

900kWf

WastewaterTreatment

Steamexchanger0,7 T/h

22°C60°C70°C 20°C

Plate Type HeatExchanger1700 kW

35 m3/h

65°C35m3/h

15°CStorage

22m3

First rinsewater and deminerizerwash

Stockage30 m3

StorageCIP

22m3

20 m3/h average

Waste washWater

45°C exchange

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ENVIRONMENTALENVIRONMENTAL

PRODUCTIVEPRODUCTIVE

ECONOMICECONOMIC-- SavingSaving energyenergy: :

Gas consumption: - 15% = - 1,8 GWh/yrElectric consumption: -5% = - 0,6 GWh/yr-- ReductionReduction of of stackstack emissionsemissions: :

C02 reduced by 300 tons/year

--InvestmentInvestment/Capital:/Capital:250k€

--SavingsSavings fromfrom lesslessfuel/fuel/electricelectricconsumptionconsumption: -85k€/an

--PayPay Back:Back: 35 mois

--SavingsSavings due to not due to not investinginvesting in extra in extra heatingheating//coolingcoolingcapacitycapacity: - 375k€

--IncreasedIncreased capacitycapacity for for washwash waterwater--AllowsAllows for installation of a CIP for installation of a CIP systemsystem--ReductionReduction in maintenancein maintenance

Win/Win Results

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Use of Green Energy

• Renewable “green”energy use– Solar cells at our

factory in Burgos, Spain

– Solar water heating at our factory in India

– Geothermal at our new research center in Chevilly-Larue

– Wind power in New Jersey

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LIBRAMONT CASE STUDY

• Outside consortium of constructors, contractors and financiers have proposed a bio-methane “co-generation”facility

• Using corn as the feed stock to produce methane for on-site production of steam, hot water and electricity

• Process is considered “carbon neutral”• Sited on our property• Turnkey operation with pricing at 80% of market rates• Will have a residual ~10% emissions from fuel use• Contracts signed and operations to being in 2008

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Solar Water Heating in Monaco

• Sofamo solar water heating for sanitary water

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High Efficiency Proximity Lighting

Old 250Watt Metal Halide Fixture w/lamp

Sensor

Aisle area lighting 2X2 T8’s w/sensor

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Administrative Sites

• Motion sensors for the office lighting in our USA Headquarters in NYC and a number of other offices

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Other Areas of Concern

• Supply Chain Aspects• Water• Waste

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- 5.5 gPACKAGING LIGHT WEIGHTING-FRUCTIS

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OUR RECORD IN CONSERVING WATER

Water (Liters/f inished product)

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0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

2002 2003 2004 2005 2006 2007

Water 2002-2007= -24%

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OUR RECORD IN REDUCING WASTE

Transportable w astes less returnable packaging (g/PF)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2002 2003 2004 2005 2006 2007

Waste 2002-2007= -30%

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ISSUES

• What reporting method should be used?• What should be included in your carbon

foot print?• Double counting (supplier and you)• How does one control what is done outside

your company (raw materials, transportation, packaging, etc.)?

• Monitoring and recordkeeping is an immense problem

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CONCLUSIONS

• We are committed to reducing our environmental footprint with an emphasis on reducing, in absolute terms, our GHG emissions. Water and waste are also issues

• We believe there will be significant brand benefits to these initiatives

• This effort fits within our goal to be recognized as a “Great Citizen of the World”