The sustainable development of cosmetic companies and the practice of ESG topics are receiving increasing attention.

Cosmetics is one of the gold tracks of consumer products, and in recent years, international cosmetics giants and domestic cosmetic enterprises have successively laid out ESG business, making it a mainstream trend in industry development. At the same time, the signal of ESG's transition from virtual to real is becoming increasingly strong, especially this year, the ESG disclosure regulatory standards have gradually become clear, and it is expected to enhance the effectiveness of ESG investment, making ESG more fully a new "benchmark" for measuring the value of cosmetic companies.

From the actual situation, there are few domestic cosmetic companies with representative or professionally recognized ESG credentials.

Referring to one of the most influential and reference-worthy ESG evaluation systems, MSCI ESG ratings on the international market, the highest rating obtained by domestic cosmetic companies is "A" grade, with only Yatsen Holdings receiving MSCI A rating for two consecutive years, continuously gaining high recognition from international authoritative institutions.

With Yatsen Holdings' release of the 2023 ESG report, a comprehensive display of the past year's ESG actions and achievements, it also unlocks a new observation window for us. Let's take a look at the characteristics that a high-quality ESG enterprise in the cosmetic industry should possess through Yatsen Holdings.

Leading practices in green and low-carbon

Under the guidance of the "dual-carbon target," all walks of life are practicing green and low-carbon transformation, and one of the key focuses of domestic cosmetic enterprises' ESG practices is on this. Yatsen Holdings has shown outstanding foresight and initiative in this area.

The MSCI rating report also shows that Yixian Group performs better than the industry average in terms of "product packaging and waste management", "product carbon footprint", "chemical safety", etc.

Specifically, according to the latest report, Yixian Group continuously pursues lightweight packaging and material sustainability. A typical example is that two products of the Perfect Diary brand have achieved a significant reduction in plastic packaging. The packaging material of the Micro Essence Foundation Liquid adopts a replaceable structure, reducing plastic usage by 91.6% for the travel size and 86% for the makeup remover milk foam using a custom eco-friendly refill bag.

At the same time, in 2023, all branded courier cardboard boxes under Yixian Group have obtained FSC certification, with approximately 1350 tons of cardboard derived from traceable forests. Some brands have started using eco-friendly paper and reducing paper consumption, such as Galénic in France releasing environmental version VC3 in single and 12-unit packs with paper usage reduced by 67% and 32% respectively.

Furthermore, eco-friendly packaging materials are essential for cosmetic safety, guaranteeing the purity and stability of cosmetics, in conjunction with the performance of "chemical safety".

In addition, Yixian Group has incorporated green and low-carbon practices into more aspects of the product's life cycle, extending to the industry chain and supply chain scenarios. For example, advocating green circulation to consumers, multiple brands have launched product packaging recycling projects; using energy-saving and clean energy to reduce carbon emissions generated in logistics and other processes; prioritizing the use of lower environmental and social impact raw materials and encouraging the selection of suppliers with outstanding environmental management performance to improve the environmental impact of the supply chain.

Behind these efforts, Yixian Group continues to optimize "frontend" support and provide clear guidance for green and low-carbon development.

Yixian Group initiated its carbon footprint verification early on, continuously clarifying the energy consumption and carbon emissions of products throughout their life cycles, fully identifying and tapping the potential for emissions reduction at each stage. According to the ESG report, by the end of 2023, carbon footprint verification has been conducted for the Perfect Diary's Transparent Mist Lip Glaze 299, Translucent Mattifying Oil Control Loose Powder Lock Color Edition, and Small Thin Heel Lipstick, and obtained product carbon footprint certificates.

In addition, Yixian Group will also launch a carbon target project in the second half of this year, carrying out external environment and peer benchmarking analysis, carbon inventory, emission trend and emission reduction potential analysis based on the carbon target, and finally formulate the company's overall and phased carbon reduction targets and release them to the public, entering the next step of green and low-carbon development.

In this process, Yixian Group not only demonstrates its strength as an industry leader, but also is expected to quickly enhance its recognition and trust in the public, increase its brand strength, which is a height that is difficult to achieve in pure business competition.

Proactively fulfill the "Triple Social Responsibility"

Social responsibility is equally important. Looking at Yixian Group's importance assessment of ESG issues, it is not difficult to see that for a cosmetic company, social responsibility has a fundamental and original meaning. Yixian Group actively fulfills higher and broader social responsibilities, mainly embodied in three aspects.

1) Innovatively meet consumers' high demand for products

Today, the quality and safety of products have become the core demands of beauty consumers. This means that the development and use of sustainable raw materials not only reduce the impact on the environment, but also concern the well-being of the people, and are the driving force to meet and reach consumers.

Yixian Group focuses on finding natural ingredients and uses substances extracted from natural plants such as coconut oil and oats as raw materials for cosmetics. It continues to purchase and advocate the use of sustainable palm oil (one of the basic raw materials for cosmetics) in the supply chain, providing healthier and safer products. In 2023, it also completed the filing of a plant fermentation raw material. This innovative raw material uses microbial fermentation technology to enhance the efficacy of natural plant extracts while reducing toxic side effects.

It is not difficult to see from this that with the iteration of core demands, the importance of technological innovation is becoming more and more apparent, and it contains new solutions that can solve multiple problems and bring multiple benefits. This is also the confidence of Yixian Group to continue to fulfill its commitments to consumers and achieve sustainable development.

At present, Yixian Group has deep technological accumulation and maintains a leading position in research and development investment, consistently consolidating its technological innovation and application transformation capabilities.

According to the ESG report, Yixian Group has made significant achievements in patent technology. As of the end of 2023, it has applied for 203 patents worldwide, including 91 invention patents, and has been granted 57 patents. In 2023, Yixian Group's R&D investment reached 0.112 billion yuan, accounting for 3.3% of the total revenue, and its R&D expense ratio has maintained a leading position in the global first-tier.

In the same year, Yixian Group embarked on the "Yixian Technology Road", including building a global advanced beauty factory and three independent research and development centers, and jointly establishing six major laboratories with internationally renowned institutions to identify, research and apply cutting-edge technologies in the beauty industry worldwide. With its support, Yixian Group's multiple brands have successfully implemented various technological innovations.

For example, Perfect Diary's lip biomimetic film Biolip has launched the first lip essence lipstick that combines lipstick, lip essence, and lip mask functions. It has become the first lipstick verified by dermatology.

2) Create a high-quality workplace to meet the needs of employees at different levels.

While bringing a better lifestyle to consumers, Yixian Group also insists on people-oriented principles internally, creating a diverse, fair, and inclusive high-quality working environment. The ESG report also shows that Yixian Group has won the "2023 DEI Employer Award" awarded by the Employer Brand Research Institute, and has been recognized by authorities for talent development and the construction of a fair workplace.

Behind this, Yixian Group has established the "Yixian Learning and Development System", providing personalized career training content for different groups of employees. The Yixian New People Program has been launched for 4 sessions, covering 1384 employee times, and the Yixian Leadership Program has been launched for 3 sessions, covering 94 employee times.

At the same time, Yixian Group insists on providing equal career development opportunities for employees, providing smooth promotion channels for different types of employees, as well as organizing a variety of employee activities and providing diverse benefits to meet the needs of employees at multiple levels.

3) Explore the road of characteristic public welfare to enhance social value

In addition, Yixian Group pays attention to the social situation, actively participates in public welfare undertakings, and further conveys the warmth of the brand and the power of goodness.

In specific practice, Yixian Group has formed a social responsibility strategic system with its own characteristics, focusing on discovering the beauty of women, protecting the beauty of nature, and conveying the beauty of goodwill. For example, Yixian Group has cooperated with the China Women's Development Foundation to carry out the "Creative Beauty Life" beauty public welfare training project, helping a total of 282 women to master employment and vocational skills in the past three years, with an employment/entrepreneurship ratio of 88.5% in the 1-3 training sessions in Sichuan. This year, the second quarter activities have also been successfully launched in Guangzhou, attracting 120 women in distress to participate.

In addition, Yixian Group responds to the revitalization of rural education and contributes to the construction of caring computer rooms in rural schools. By the end of 2023, it had donated 306 computers to towns such as Shaoguan and Qingyuan, helping nearly 3000 children in mountainous areas improve their conditions for information education and promoting the balanced distribution of educational resources.

These three dimensions have their own characteristics, while also having a close internal connection, fully reflecting Yixian Group's feedback to stakeholders and the fundamental goodness of business.

In conclusion,

In the ESG field, there is a saying: the annual report summarizes the company's past, while the ESG report shows the company's future and points to long-termism. Regardless of whether this analogy is rigorous, it is enough to demonstrate that ESG is leading a new era of business.

Focusing on reality, conforming to improved regulations, brand leadership, and the awakening of consumer awareness, these elements are gradually converging into a powerful force, which brings more possibilities for the unified growth model of economic value and social value, and determines the true sustainability of ESG.

Looking at the cosmetics industry alone, the sustainable cosmetics market is steadily expanding, and consumer awareness is constantly improving. Market research data shows that in 2019, the capacity of the sustainable cosmetics market was about 39 billion US dollars, and it may reach 48 billion US dollars by 2024; 89.2% of consumers are aware of the concept of "sustainable beauty", and 76.7% will actively search for related information.

In this market context, ESG will become one of the ways for differentiation and competition. Companies that have been early in their commitment to ESG may not immediately show significant commercial value or market breakthroughs, but over time, these companies will eventually reap long-term and immeasurable space and value.

Similarly, if Yixian Group continues to persevere, this path will definitely be an uphill battle and will be able to reshape its intrinsic value.