How Will Customers React to the L’Oréal- Estée Lauder Child Labour Scandal?

From ethical stances to corporate social responsibility – what do customers expect from their brands?

Bottle of perfume with flowers on color background
Voice of the CustomerInsights

Published: May 29, 2024

Rhys Fisher

Children have been used to pick ingredients for suppliers of major beauty brands, L’Oréal and Estée Lauder. But how will customers react?

Reported by BBC earlier this week, the news provider’s investigation revealed that jasmine used by Lancôme and Aerin Beauty – subsidiaries of L’Oréal and Estée Lauder respectively – was picked by minors.

With approximately half of the world’s jasmine flowers produced in Egypt, the BBC spoke to industry insiders in the country who claimed that companies that own luxury brands are tightening budgets and lowering pay, forcing Egyptian pickers to involve their children.

While all the brands mentioned in the report state that they have a zero tolerance policy on child labour, the investigation recorded evidence of one picker who was helped by her four children.

Following a full shift where the family collected 1.5kg of jasmine flowers, they were left with an estimated £1.18, after paying a third of the earnings to the landowner – a typical agreement for independent pickers in the area.

On viewing the investigation’s evidence, Tomoya Obokata – The UN Special Rapporteur on contemporary forms of slavery – questioned the authenticity of the brands’ zero tolerance child labour stances, commenting:

On paper, they [the industry] are promising so many good things, like supply chain transparency and the fight against child labour. Looking at this footage, they are not actually doing things that they promised to do.

While the news has drawn plenty of criticism and condemnation, it will be interesting to see the response from customers who, now more than ever, expect strong ethical practices and stances from their brands.

Boycott or Blow Over?

While L’Oréal and Estée Lauder are the latest high-profile brands to get caught up in a child labour scandal, they are far from the first.

Nestle, Apple, Samsung, Sony, and Hershey are just some of the names that have been accused of benefiting from child labour in the last 10 years.

Yet, despite plenty of finger wagging and disapproving shakes of the head, there does not appear to have been any significant customer backlash, with each of the brands still amongst the most successful in their sectors.

One example that does appear to buck the trend, however, is online fashion retailer Boohoo. Back in 2020, the company was accused of modern slavery, when a Sunday Times investigation revealed that it had been paying some of its UK factory workers £3.50 per hour – over £5 less than minimum wage at the time.

The fallout of this scandal resulted in several investors and partners cutting ties with the company, which has seen its share price drop dramatically, from roughly 400p at the time the news broke to currently hovering at around 35p.

While it would be unfair to attribute all of the losses to the scandal, it did and continues to play a significant part, with it being reported late last year that the company was the subject of a £100m lawsuit from some of its investors due to the allegations of modern slavery, which erased over £1bn from the retailer’s value.

Interestingly, although Booho’s unethical business practices have negatively impacted the business financially, it does not appear to have driven away customers. Indeed, a Statista report revealed that between 2020 (the year the modern slavery news broke) and 2023, Boohoo’s customer base grew by over four million.

The evidence from Boohoo and other brands who have experienced similar scandals suggests that generally there isn’t a knock-on effect in terms of customer reactions or backlash.

But will this change in a climate where customers are more selective and considerate of the brands that they do business with?

Customer Experience and Brand Ethics

Currently, the scrutiny surrounding brands and businesses has never been higher. Not only are customers expecting companies to take strong moral and ethical stands, but with customer satisfaction at an all-time-low and loyalty plummeting, consumers are more than happy to go elsewhere if they are dissatisfied.

Moreover, customers are now shrewder when it comes to tokenism and empty gestures.

They want authenticity from their brands, not hypocrisy – something that Brewdog found out to their cost, when customers discovered that the brewery had signed a distribution deal with Qatar during the 2022 Men’s Football World Cup, despite running a campaign critiquing the country’s human rights record.

The need for brands to legitimately “stand for something” was discussed by Abdul Khaled – Head of Digital, CX and Digital Products for E.ON Next:

I think we’re a much more conscious generation, where we learn to understand the values and principles of businesses that we are engaging with.

“There’s a small niche of loyal customers who really believe in the values that we are offering and they will stay with us based on those values.”

Whilst Abdul refers to a “small niche” of customers, in many sectors it is a growing one that more and more brands are catering to – particularly those with a younger demographic who are more proactive when it comes to social and ethical causes.

An example of this is cosmetics company Lush, which closed down its major social media accounts in November 2021 in a stand against the damage that the platforms were causing users.

Lush’s combination of a legitimate record of taking strong ethical stances and a large portion of their consumer base consisting of shoppers aged between 16 and 24 (38%), and 25 and 34 (27%), means that their decision to boycott social media didn’t damage their company, but actually worked in its favor by boosting sales and improving the brand’s reputation.

Gen Z’s increased interest in the social responsibility of brands was also discussed by Steve Leigh, Managing Director of Research at Sensu Insight:

“We know that younger people, in particular, are expecting more from brands, with ethical business practices considered a non-negotiable.

From our report into attitudes towards employer brands, for example, results suggested an almost three-fold increase in the importance that Gen Z places on the social consciousness of organizations, in comparison to the attitudes of older counterparts.

How Should Brands Respond?

While the L’Oréal and Estée Lauder story is an extreme example of unethical practices that will not be relatable to most brands, the wider strategy of enhancing a company’s corporate social responsibility (CSR) policy can still be an effective way of elevating the customer experience.

One of the major issues with CSR is its lack of buy-in from the c-suite, with many viewing it as a necessary tick box exercise that can bolster a brand’s reputation, rather than a legitimate CX tool.

This issue was discussed by Niraj Ranjan – CEO and Co-Founder of Hiver – in a recent Forbes article, where the CEO explained how CSR often becomes “siloed” due to areas like operational metrics and strategies taking precedence.

For Ranjan, overlooking the potential of CSR could be costing companies considerable customer experience, engagement, and satisfaction improvements:

“What if your CSR programs could make your customers more loyal, more engaged or even more satisfied? Could a well-executed CSR strategy help you stand out in a saturated market?”

Might it even serve as a magnet for attracting top-tier talent who are driven by values as much as by compensation?

In expanding on these suggestions, Ranjan outlined how companies can maximize the potential of their CSR policies, while also discussing why they don’t always yield CX improvements:

CSR Checklist

  • Align CSR and customer support teams, and train agents on CSR initiatives to ensure cohesive and informed customer interactions.
  • Be genuine in your CSR efforts, integrating them into your company culture to reflect authenticity in customer interactions.
  • Measure the impact of CSR on customer loyalty and lifetime value, not just customer satisfaction scores, to understand the true impact on customer experience.

CSR Shortcomings

  • The impact of CSR on employee attitudes depends on how well these initiatives are communicated and integrated into company culture.
  • Frustrations with fundamental customer service, like account recovery issues, can overshadow any goodwill generated by CSR programs.
  • There is a dissonance when a company’s public CSR commitments don’t align with the actual customer experience, highlighting the need for both to be consistently executed to be effective.

Whether or not the child labour accusations will cause any lasting damage for L’Oréal and Estée Lauder remains to be seen.

Despite Gen Z’s championing of social and ethical causes, there are enough historical examples to suggest that this scandal may well join the myriads of others that have been swept under what must be a fairly sizable rug.

However, there are also clear CX advantages to pursuing certain causes, which could please and incentivize customers while also impacting the bottom end, as Ranjan explains:

“Could the synergy between CSR and customer experience create a virtuous cycle, where doing good for the world also means doing well as a business?”

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