L’Oréal - GEP emerged triumphant in Best Initiative to Build a Diverse Supplier Base Category

L’Oréal - GEP on earning the Best Initiative to Build a Diverse Supplier Base Award and creating substantive positive social impact!

The Best Initiative to Build A Diverse Supplier Base award recognises supplier diversity excellence. In the landscape of a pandemic that has disrupted the overseas supply chain, this award is particularly relevant with a shift towards engaging local suppliers to maintain supplies. Moreover, a more diverse supplier network also contributes to the recovery of economies devastated by the pandemic. Diversity in the supply chain is also in the spotlight as the new generation of employees is more Woke and wants to see tangible actions reflecting a more ethical approach from corporates (CIPS, 2022).

L’Oréal, a world leader in beauty products, is one of the largest consumer goods companies in the world. Over the past decade, L’Oréal has undergone a massive supply chain transformation, climbing in ranking from 71st to the top 10 in the annual ranking of top supply chains in the world by Gartner, the supply chain advisory firm (IMD, 2022).

For this project, L’Oréal China has partnered with GEP to implement a successful sustainable sourcing initiative in China as part of their global sustainability program, named Solidarity Sourcing. With the goal of diversifying their supplier base by including underprivileged communities as part of their supply chain networks, a target of providing 500 FTE employees in China in 2021 was set. In response, GEP developed a strategic approach and operating model, implementing process flows and best practices. Judges were impressed with the results: L’Oréal China exceeded the goal of 500 FTE by 27%!

The GEP project team.

One of the main challenges faced is that the concept of ESG and its related practices is still new to many in China. Those who understand ESG place more emphasis on the environmental pillar as the foundation of the concept and understate the importance of the social pillar. For instance, the Chinese government has had to push for strengthening the social component of ESG in the technology sector in 2021 to reduce inequalities in the industry. Indeed, the primary questions of why what and how have put ESG under the spotlight. The move to make “common prosperity” a key policy agenda to reduce income and wealth inequality President Xi Jinping has also meant that the social in ESG is becoming more relevant than ever. 

To attain their objectives, there were some important things L’Oréal-GEP did:

Localization of strategy: L’Oréal-GEP localized the global strategy and toolkit for China. This was crucial in the facilitation of approval process and to avoid any regulatory risk.

• To determine underprivileged focus groups, 15 globally defined groups’ social, economic, and political status were researched.
• It proposed to the global team that in China, minorities were a vulnerable group and should be added as a beneficiary, with approvals from the China HR, PR and legal teams.
• To facilitate global approval, L’Oréal China had an agency conduct a study on ethnic minorities in China.
• After a four-month effort, the approval came through. Of the 15 groups, eight were selected for L’Oréal China, including veterans, minorities, and local employment in vulnerable zones.
  

Developed an operating model: An operating model was drawn up that would convert potential FTE from shortlisted suppliers into approved FTE. With clear process, RACI and standardized templates, the average cycle time for global approval improved by 75%.

Road map for new suppliers: In 2021, only existing suppliers were in scope. To address future potential FTE from new suppliers and amplify social impact, the team created a mid-term supplier lifecycle management road map for 2022 and 2023 that incorporated a Solidarity Sourcing section in Request for Proposal (RFP) and supplier performance evaluations.

Disclaimer: Photo does not indicate the entire L’Oréal project team.

The social impact was undeniable

At the end of the project, there was a clear indication of success — L’Oréal China exceeded the 2021 goal of 500 FTE by 27% to achieve 634 FTE. Notably, the social impact also emerged and the results were impressive! Everyone in L’Oréal’s business ecosystem established a solid understanding of the social pillar of ESG, which is gradually empowering underprivileged communities. Some other key outcomes include:

• Increased recognition and support for partner NGOs: NGOs dedicated to supporting underprivileged communities that collaborated on the project received more credit as well as financial and social support from L’Oréal and other multinational corporations to improve their operations and expand their presence. Extra financial support in particular, is significant given that most NGOs find it difficult to meet sufficient and continuous funding for their work.
• Potential partnerships with new NGOs: A few new NGOs have actively reached out with collaboration proposals, such as jointly running career fairs on a regular basis, with the aim of scaling up the positive impact. Indeed, especially in an autocratic economy like China, a potential western MNC and local NGO collaboration offers the NGO an opportunity to shift the balance of power across geographical territories, and this helps the NGO leverage competencies and resources to facilitate the adoption of sustainable practices by local suppliers within the MNCs’ global supply chain networks.

Watch: ProcureCon CIPS Asia Awards 2022: L’Oréal - GEP - Best Initiative to Build a Diverse Supplier Base

Lalith Nambirajan – Vice President, Consulting, GEP shares his thoughts candidly.

When asked about how it feels like to win the award, Nambirajan remarked, ‘It feels great to win the award. For us, it was quite important, because it was about providing social equity to disadvantaged sections of society.’

We’ve all come to know L’Oréal as a well-liked beauty consumer brand. Who knew they would also come to be recognised for supply chain diversity excellence? L’Oréal-GEP has also come to understand that by working hand in hand with suppliers and NGOs who understand that giving back to society and business growth can be achieved simultaneously, the social impact will grow exponentially. Once again, kudos to L’Oréal for winning this award in collaboration with GEP. Yet another example of business excellence in the CIPS Asia Excellence in Procurement Awards 2022, we see here how L’Oréal-GEP has paved the way for future businesses to engage in social sourcing to attain ESG goals in an effective and inspiring manner.