Water Stewardship

Background

We use water as an ingredient to make our products, as well as for cleaning and cooling manufacturing equipment. Our R&D and Quality teams also rely on water to perform testing, in analyses, and to develop new products. Access to high-quality water is essential to our business, and we are committed to reducing our impact on local water resources through implementation of our water stewardship strategy. Additionally, we recognize that water stewardship is important to both mitigating and adapting to the effects of climate change.

Water Stewardship Strategy

At The Estée Lauder Companies (we, us, our, or ELC)¹, we are committed to responsible water management and developed our water stewardship policy to focus on key areas where we intend to make progress. This policy covers our own operations, supply chain,², and local communities. Furthermore, our policy offers opportunities for meaningful engagement in causes that matter to employees, consumers, communities, and suppliers.

Promote Water Circularity in Direct Manufacturing

Within our manufacturing operations, we use water as an ingredient in our products; however, this consumed water represents a small percentage of our total water usage. One of our main water uses is for cleaning and cooling manufacturing equipment and therefore, we established a goal to reduce water withdrawal at direct manufacturing sites by 20% by the end of calendar year 2025 (baseline: FY'19), focusing on our largest manufacturing facilities in water-stressed regions³. We are progressing toward our goal through implementation of efficiency measures, closed-loop cooling systems, and advanced wastewater treatment technologies. Through innovation and initiatives to reduce/reuse/recycle water, that in some cases are beyond regulatory compliance, we are advancing water circularity within direct manufacturing.

Engage Our Supply Chain

We work diligently to manage environmental and social impacts beyond our own operations and within our supply chain. In collaboration with key suppliers and certain other organizations, we are driving sustainability initiatives and collaborations forward, helping to innovate and connect at both local and global levels. We require our suppliers to adhere to the principles outlined in our Supplier Code of Conduct. In 2022, we established a collaborative initiative with key Third-Party Manufacturers (TPMs) to accelerate and drive improvement on aligned sustainability goals, leveraging internal expertise to share best practices, as well as existing tools such as the EcoVadis platform and CDP Supply Chain, to track and measure impact. Through this collaboration, we aim to increase awareness of water withdrawal and reduction measures within our supply chain and promote increased water efficiency.

We are also assessing suppliers’ sustainability initiatives, including measures to improve water efficiency. We have prioritized our Strategic and Joint Value Creation (JVC) Suppliers⁴ through EcoVadis Assessments and require them to achieve an “advanced” score and expect other suppliers to achieve at least a “satisfactory” score. We engage with suppliers who do not achieve a “satisfactory” score to help them improve, and we reassess them each year until they meet the “satisfactory” requirement. In 2022, we also invited key suppliers to disclose water risks and opportunities and actions taken to reduce their environmental impacts through CDP Water Supply Chain. Through these efforts, we aim to strengthen ties with these suppliers and seek to further engage with them on water-related issues.

Understand Shared Water Challenges

We assess global water-related risks to inform our business decision-making. At key manufacturing locations, we have also conducted Source Water Vulnerability Assessments (SVAs) to gather data, in alignment with the International Water Stewardship Standard (AWS Standard). The SVAs help us identify impacts and dependencies, community-shared water challenges, and important water-related stakeholders. We plan to leverage the SVA findings to define our future local water action plans to expand on existing ELC and brand initiatives to collaborate with external partners within the wider community context.

We are mindful of industrial wastewater discharge impact on water quality. ELC prioritizes the quality of local water resources through robust wastewater treatment and monitoring procedures to control pollution.

Track and Report Progress

At ELC, we:

• Collect certain data and track the performance of our efforts in respect of existing water-related commitments, publishing this information within our annual Social Impact and Sustainability Report (or other publicly-available report)
• Report progress through CDP Water, the leading framework for disclosing water-related information publicly
• Monitor our suppliers’ sustainability performance through the Supplier Code of Conduct due diligence program

Continuous Improvement

ELC recognizes that our water stewardship commitment is a journey. Therefore, we are working toward improving our operations by embedding a sustainability lens into our capital improvement process and industrial site master plans. We encourage water efficiency practices such as low flow fixtures at our key manufacturing, Research & Development (R&D)/innovation, and distribution centers, as well as in offices and retail spaces. Within R&D, we continue to improve ingredient selection and product formulation to accelerate progress towards our sustainability goals.

Additionally, our water stewardship strategy aligns with the UN Sustainable Development Goal (SDG) 6, which refers to the human right to water and sanitation and aims to “ensure availability and sustainable management of water and sanitation for all.” To that end, we aim to contribute to improving water security, including access to Water, Sanitation, and Hygiene (WASH), through stakeholder engagement and collective action in our key watersheds.

As we continue to make progress, we plan to periodically review our performance to inform and evolve our water stewardship strategy, with the intention of setting new goals and targets to drive water circularity and innovation. We also plan to proactively review this policy annually and make updates as needed.

¹ ELC, WE, US AND OUR REFER TO THE ESTÉE LAUDER COMPANIES INC. AND ITS SUBSIDIARIES. IN THE CASE OF RECENTLY ACQUIRED SUBSIDIARIES OR BUSINESSES, APPLICATION OF THIS POLICY WILL BE SUBJECT TO A TRANSITION PERIOD, THE LENGTH OF WHICH WILL DEPEND ON THE STATUS AND CAPABILITIES OF THE ACQUIRED BUSINESSES AND/OR ENTITIES.

² FOR PURPOSES OF THIS POLICY, “SUPPLY CHAIN” MEANS THIRD-PARTY MANUFACTURERS (TPMS) AND OTHER KEY SUPPLIERS OF ELC (EXCLUDING RECENTLY ACQUIRED BUSINESSES/ENTITES). SEE NOTE 1.

³ REDUCTION IS FROM A FISCAL 2019 BASELINE OF 1.5 MILLION CUBIC METERS WATER WITHDRAWAL AT ELC-OPERATED MANUFACTURING SITES. EXCLUDES BRANDS ACQUIRED BY ELC DURING OR AFTER FISCAL 2020 AND ANY MANUFACTURING SITES THAT ARE NOT FULLY OPERATIONAL [OR INTEGRATED] WITHIN THE TARGET TIMELINE.

⁴ WE DEFINE STRATEGIC AND JVC SUPPLIERS AS HIGHLY CRITICAL SUPPLIERS WITH BROAD AND UNIQUE CAPABILITIES, PROVEN VALUE CREATION IN ONE OR MULTIPLE PILLARS AND HIGHEST LEVEL OF COLLABORATIVE PARTNERSHIP. THESE SUPPLIERS COMPRISED MORE THAN HALF OF OUR DIRECT SPEND IN FISCAL 2022.