Natura – A Sustainable Cosmetic Company

The Brazilian cosmetics multinational Natura began operations in 1969 and has become one of Brazil’s largest publicly held corporations. With a value system focused on the belief that life is a series of interdependent systems, Natura strives to improve all the relationships that connect their business to the environment and society. To achieve this kind of sustainable thinking, Natura embarked on a journey to develop integrated reporting that included environmental and stakeholder engagement aspects in their business processes. They have used economic, social, and environmental data to inform and drive performance by focusing on the most material items for their business. This integrated approach also includes establishing future vision and goals to ensure their business model continues to create value in the short, medium, and long term. Natura’s early adoption of integrated reporting has positioned them well for a future where economic, social, and environmental factors are increasingly becoming critical requirements for continued business success.

Background

Since Natura was first founded, the company has become the largest multinational cosmetic company in Brazil. Since Brazil is at the heart of environmental protection issues like deforestation, the company has always had a belief that they were a “living organism” part of a larger system (Eccles, Serafeim, and Heffernan 2013, 2-3). This thinking led to a belief and vision that everything is connected in interdependent relationships and that striving for improvement in all connections is critical to increasing well-being for all of the world as a whole (Natura Cosmeticos 2018, 4). Natura published their first integrated report in 2002 before going public in 2004. These first steps were their way of presenting their economic, social, and environmental focus to the public to showcase their commitment to sustainable development in a transparent way (Eccles and Krzus 2015, 35). Integrated reporting was not only an extension of their prior sustainability efforts, but it also helped to reinforce their vision by providing a better understanding of those relationships and an ability to track and share their performance towards goals with the public.

Natura’s focus on circularity in their business model is an important piece of how they achieve their sustainable vision. Improved sustainability involves utilizing the full potential of the resources that they are using in their business model. This improved efficiency leads to greater productivity with a reduced environmental impact (Natura Cosmeticos 2018, 15). The interconnected aspects of their business model lead to self-reinforcing and systematized business activities that work to achieve their environmental, social, and economic goals. Many businesses start with financial reporting and then begin to incorporate environmental elements, followed by social capital impacts (Eccles and Krzus 2015, 38). However, Natura had already been holistically viewing their business’ interconnected relationships and developed a model to account for those factors. Their adoption of integrated reporting was a codification and full immersion of those elements into their business model to drive more value creation and improved sustainable thinking. Some elements, like environmental and stakeholder engagement, have been improved upon by implementing business processes supporting their vision of sustainable transparent development.

Process

Since being the first company to publish an annual report in accordance with the Global Reporting Initiative (GRI), Natura has kept its focus on the triple bottom line (TBL). As the driving element of the TBL approach, environmental reporting is a key component within Natura’s integrated reports. These are used to enhance their sustainable vision of the environmental effects of their businesses in terms of managing environmental resources, developing the potential of biodiversity, and keeping the forest standing (Natura Cosmeticos 2018). These enhanced visions lead to actions that transform Natura into a company that generates a positive impact which mitigates the effects of its activities and promotes environmental welfare. With the six core priorities of climate change, waste, water, social biodiversity, education and transparency in mind, Natura has collected data to analyze and create solutions.

The above stated priorities, or material themes, were defined through dialogue between senior company management and some stakeholder groups which included employees, suppliers, consumers, consultants, advisors, specialists in specific areas, the press, government agencies and nongovernmental organizations (Natura Cosmeticos 2014, 77). Within these engagement sessions 4,200 online questionnaires were answered, 40 personal and telephone interviews were taken, and a discussion panel with 18 participants from different stakeholder groups was carried out (Natura Cosmeticos 2018, 107).  Beyond the stakeholders and senior management, Natura also incorporated considerations made by some shareholders and by representatives of surrounding communities within Brazil. This open communication with these associated parties gives Natura the opportunity to resolve additional issues, answer their questions, and receive constructive criticism. The extension of Natura’s materiality matrix reflects their integrated reporting approach by utilizing their own stakeholders’ social and ecological footprints to find ways to improve performance overall within the value chain. Providing credibility, intelligence, and collaboration is essential in achieving a triple bottom line.

Natura has been successful transitioning the company into thinking in three dimensions, although challenges have been presented when developing valuation models that provide clarity on the relationship between the financial and nonfinancial performance. Through guidance of the GRI standards, Natura was able to present data that demonstrated the connection between sustainable development and value creation. These models present collected data that pertains to the material topics. For example, greenhouse gas emission inventory, volume of recycled waste, and water consumption are data points that target the material topics of climate change, water, and waste.

The results from the collection of data focus on continued transformative actions such as greenhouse gas emission reduction initiatives, emission offsetting projects, adoption of lower impact logistic systems, multisector recycling initiatives, and utilizing renewable materials. Each of these transformative actions are examples of ways Natura is managing their environmental performance.

Beyond financial growth, Natura’s performance highlights also present components of their integrated management vision that include results of reduced carbon emissions that reflect strategic measures which enhance process efficiency and product portfolio (Natura Cosmeticos 2018). These nonfinancial performance highlights are helpful for stakeholders to better understand and visualize the value environmental management creates.

With a long-term self-interest to adopt integrated reporting that provides transparent and balanced reporting on both positive and negative financial and nonfinancial performance, Natura’s decision on adopting the GRI approach was based on facilitating stakeholder engagement. Natura realized that integrated reporting required the perspectives of a broad group of stakeholders and that enhanced engagement was necessary to better understand the company’s true impacts on the community and on the environment (Eccles, Serafeim, and Heffernan 2013, 6). The GRI’s specifications regarding stakeholder engagement recognizes the importance of a multi-stakeholder outlook in promoting transparency and that is something Natura has been advocating since inception.

Performance

Astute progression has always been commonplace since Natura & Co. (rebranded as of 2018). With integrated systems foresight, along with early adoption of GRI’s framework of specific and non-specific topic reporting (first annual report published in 2002) Natura & Co. led the way to the top of sales and brand preference in Latin America (Natura Cosmeticos 2014, 7; Natura Cosmeticos 2018, 8).

Over the period of 2010 to 2018, there were many landmark achievements and institutions founded to further the brand with sustainable design and steward-like principle at the helm of operations. At the beginning of this timeslot in 2010 came the sourcing of at least 30% of all Natura Brazil inputs to locally grown reagents from the Pan Amazon region (Natura Cosmeticos 2014, 15). In the same year, Natura & Co. started to replace conventional polyethylene for their packaging to a sugarcane derivative, or a “Green PE” (Natura Cosmeticos 2014, 17). In 2011, the Amazônia program was conceived: It consisted of a three-pronged approach using innovative, emerging technologies, sustainable chain of supply, and institutional backing to promote biodiversity in the Pan Amazon region (Natura Cosmeticos 2014, 22).

With 2012 came the Natura Amazon Innovation Center (or NINA); NINA being a coalition of global and local scientists and innovators to ultimately support biodiversity in the same vein as the Amazônia program. The next year brought the SOU product line, boasting unprecedented reductions in plastic and carbon emissions (70% and 60% respectively), while espousing consciousness in consumptive behavior. (Natura Cosmeticos 2014, 4). In 2014, the Ekos line launched refill services on perfume products in a 100% recycled container, further dropping greenhouse gas emissions 73% (Natura Cosmeticos 2014, 17).

Seeking further transparency to pertinent actors (stakeholders, investors, NGO’s, employers) traceability of manufacturer input materials along the supply chain is enumerated in the 2018 report. Reportedly half of the overall chain is accounted for as of 2015 and strives to continue to 100% for 2020 as a sustainable design goal. Advancements were made in 2016, with the adoption of the Environmental Profit and Loss methodology (akin to natural capital protocol) which innovatively calculates externalities created by Natura & Co.’s value chain in terms of monetary value to society (Natura Cosmeticos 2018, 34).

The year of 2017 brought the launching of the Commitment to the Climate initiative partnered with Itaù Unibanco and Instituto Ekos Socal organizations (Natura Cosmeticos 2018, 42). The Commitment to the Climate initiative is a platform where regulators select emission offsetting projects – the first ten were dedicated to separate socio-environmental sectors (renewable energy, conservation, and rural technical integration). Another advancement out of this specific event was the mobilization of capital markets in Brazil to follow/join this initiative in order to promote sustainable business precedence. In 2018, newly rebranded Natura & Co. is dubbed the 14th most sustainable company in the world by Canadian media outlet and research company Corporate Knights – this same year Natura & Co. would earn two more international certifications for ethical biotrade and cruelty free operations (Natura & Co.’s comprehensive product catalog is animal testing free).

Though this timeline is impressive in terms of scale and how quickly initiatives are acted upon, there are a few shortcomings to sustainable development to take grievance within some sectors. It was not until 2012 that Natura & Co. started using biofuels or ethanol in Cajamar factories (Natura Cosmeticos 2014, 20). With the prevalence of biodiesel/biofuel in other developed countries, this comes as a real surprise that it took so long for biofuels to be implemented into reducing transportation emissions and energy consumption tied to fossil fuels.

Another point of contention is the lack of any real progress on water resource management on the company’s part – the period of 2016 to 2018 displays a decrease in overall water recycled/reused and water recovered from wastewater treatment by 10% in each respective category (Natura Cosmeticos 2018, 98). Even the business practices and models are vague in the wording of the prospective action – “define strategy for water” which speaks to a struggle noted by both Natura Cosmeticos articles. Great progress has been made, but there are still areas that Natura is focused on to improve their business activities.

Future Goals

Natura uses the triple bottom line approach with a goal to “generate positive economic, social, environmental, and cultural impacts (Natura Cosmeticos. 2014, 17). The company focuses on changing the corporate structure rather than simply “offsetting the negative impacts of our activities” (Natura Cosmeticos. 2014, 19). Similar to the Environmental, Social, Governance model (ESG), the vision is structured into three pillars: Brands and Products, Network, and Management and Organization (Natura Cosmeticos. 2014, 20). Each goal stated in the 2050 plan is broken down into one of four stages based on their level of initiation: 1) not initiated, 2) at the planning stage, 3) at the execution stage, or 4) at implantation stage.

The goals under the Brand and Product pillar seek innovation and focus on environmental sustainability and transparency. In this spirit of openness, Natura is in stage two of disclosing the environmental and social impact of all products (Natura Cosmeticos. 2014, 27). To ensure full transparency, a traceability program will be implemented allowing consumers to verify direct manufacturers (Natura Cosmeticos. 2014, 49).

Packaging creates major environmental impacts, so Natura has created hefty recycling ambitions for the company. These goals include 74 percent recyclable material with 10 percent recycled material in packaging and 40 percent eco-friendly packaging (Natura Cosmeticos. 2014, 31). Additionally, the cosmetics company looks to collect and recycle half of the waste create in packaging (based in metric tons) (Natura Cosmeticos. 2014, 45)

Natura seeks to reduce relative greenhouse gas emissions by 33 percent with an absolute reduction of emissions by 10 percent (Natura Cosmeticos. 2014, 35-36). To achieve these goals, the company plans to implement a renewable energy source for operations in Brazil (Natura Cosmeticos. 2014, 39).

The second pillar, Our Network, focuses heavily on human capital throughout the Natura operation. They seek to increase not only consultant earning, but also educational offerings available to them (Natura Cosmeticos. 2014, 55). The company also seeks a culture of inclusivity by creating a corporate culture that seeks to help those with disabilities gain employment (Natura Cosmeticos. 2014, 59). A push for gender equality in the workplace is seen in this vision as well seeking females to account for 50 percent of leadership roles (Natura Cosmeticos. 2014, 59). In their vision, Natura also seeks for their suppliers to strive to maintain these goals as well (Natura Cosmeticos. 2014, 67).

The theme of inclusivity is continued with the company’s goal to improve the local communities by tracking key social indicators (Natura Cosmeticos. 2014, 63). A heavy reliance on open dialogue with local populations and actors help mold these programs allowing for the development of social biodiversity (Natura Cosmeticos. 2014, 63).

The final pillar, Management and Organization, shows the company’s vision in regard to governance, ethics, and sustainability. Natura seeks honesty when it investigates its ESG impacts and even welcomes debate to their definition of materiality (Natura Cosmeticos. 2014, 73). This openness expanded with the company’s goal of creating an Advisory Board made up of external specialists to gauge their progress (Natura Cosmeticos. 2014, 81).

Conclusion

Natura has shown initiative in its push to become a sustainable corporation. The use of their three pillars creates a framework that encompasses the ESG model that is accepted by many to be needed for a sustainable community. Many of the goals set by Natura continue to hit major markers towards completion, with several goals already close to achieved (Natura Cosmeticos. 2014).

The company has seen the value created in integrated reporting. Reporting has led to clear goals and achievements in all areas of ESG. The clear articulation of ambitions in each area allows stakeholders in the company to easily access information in the area important to them. The use of the GRI allows the company the final determination in materiality, that which Natura seeks an open dialogue on their definition.

Natura creates great clarity in its goals and a detailed record of its history in each area. They create a compelling case showing the copious benefits of integrated reporting and the positive benefits of transparency.

Authors: Logan Callen

References

Eccles, Robert, and Michael P. Krzus. 2015. The Integrated Reporting Movement: Meaning Momentum, Motives, and Materiality. New York: Wiley.

Eccles, Robert, George Serafeim, and James Heffernan. 2013. Natura Cosméticos, S.A. Boston: Harvard Business School Publishing.

Natura Cosmeticos. 2014. Think Positive Impact: 2050 Sustainability Vision. Accessed October 8, 2020. https://www.rspo.org/acop/2015/natura-logistica-e-servios-ltda/M-Policies-to-PNC-landuseright.pdf.

Natura Cosmeticos. 2018. Annual Report. Accessed October 8, 2020. https://js.rede.natura.net/html/home/2019/agosto/natura_annual_report_2018.pdf.