- The benefits of Natura’s investments in local development (US$3 million in 2009) and sourcing/partnership model continues to be reflected in its net income statement and growing market share.
- Decisions based on business strategies adds value to products.
- Higher consumer awareness is helping the valuation of sustainable products.
- It is possible to achieve balance between social development and economic success.
Andiroba, cupuassu, buriti and Brazil nut are well past the stage of being unknown products of the Amazon rain forest to being well-regarded natural beauty ingredients. But it is quite possible that their many benefits for skin and hair care may have remained relatively unexplored and regionally restricted if it wasn’t for Natura.
Wandering around Natura’s 678,000 square-meter property just outside São Paulo (boasting more than 80% green space in addition to production, management and fulfillment facilities), it is difficult to picture the company in 1969, when it was created and operated from a laboratory and a small shop. Five years later, Natura’s founder Antonio Luiz Seabra had already established the company’s direct sales distribution/retail channel, which would be one of the company’s hallmarks. But it was during the 1980s, when Natura’s revenue grew more than 30 times, that its first socioenvironmental policies flourished—a concept that wasn’t widespread in Brazil at the time.
More than a decade of research and investments culminated in the launch of the Natura Ekos line, which now includes 80 products, all of them developed from active ingredients of the Brazilian biodiversity. Since then, Natura’s projects linked to and focused on the sustainable use of natural resources have grown so much that a specific department was created to coordinate them. That’s when Marcos Vaz was chosen to be the voice of the company’s sustainability projects and biodiversity management.
Before joining Natura in 2006, the chemical engineer worked in product development at Unilever, and held technical positions in Mexico and the U.K. “I had the privilege of experiencing societies with diverse cultures that observe conflicts from different perspectives,” Vaz tells GCI magazine. “It helped me understand the dilemmas and difficulties in achieving sustainability goals.”
Sourcing Ingredients; Partnerships
Natura definitely didn’t choose the easy way. “Instead of buying our raw materials from major suppliers, we decided to purchase them directly from extractive communities throughout Brazil,” Vaz says. Currently, 26 groups and 2,084 families have trade agreements with the company, and most of the oils and essences used in their products are extracted from plants collected by small cooperatives and associations.
When identifying potential partnerships with new suppliers, Natura must have guarantees that the production will be carried out within the environmental capacity. “We’ve discovered substances with potential use in the industry, but decided to abort the project because the operation was not sustainable,” Vaz explains. “We would need a very large amount of plants to obtain the desired quantity of raw material.”
Nevertheless, the communities that succeed Natura’s stringent quality control gain several benefits—beyond simply reaping income from the raw materials. All of Natura’s contracts are based on benefit sharing, taking into account the use of genetic resources, intellectual property rights and traditional knowledge. This means that when Natura makes profit from a product sourced from the Brazilian biodiversity through the use of local knowledge, it must be equally shared.
Last but not least, the company claims to invest in local development—which includes improvements in infrastructure, training, handling and certification of raw materials. According to Vaz, in 2009, the total resources directed to supplier groups grew 30% to $3 million (R$5.5 million). In 2010, Natura intends to increase this value by 44%. Is all the work worth it? Guilherme Leal, former director and shareholder of the Natura since 1979, has always said the company’s projects have nothing do to with welfare policies. As with any business, the ultimate goal is to make profit. “It’s a combination of intelligence and opportunity. Our decisions are based on business strategies, and this adds value to products,” Leal said while he was still part of Natura’s board (a position from which he resigned in June 2010 when he was officially announced as Brazil’s Green Party vice presidential candidate).
The success of the model chosen by Natura is reflected in its figures. The company ended 2009 with net income of $2.72 billion (R$4.9 billion), 18.6% over 2008. In the same period, its market share grew from 21.4% to 22.5%, according to the Brazilian Association of the Cosmetic, Toiletry and Fragrance Industry (ABIHPEC).
In addition to developing and maintaining relationships with the communities, which is an intricate job in itself, time and bureaucracy are also obstacles for companies willing to invest in sustainable projects in Brazil. Vaz got used to dealing with these issues even before heading the sustainability department. Since joining Natura, he was responsible for product safety and technical and regulatory matters. “For a new community to be added to Natura’s chain, it takes about six months of articulation with NGOs, anthropologists, independent consultants, and even the government,” he says. A case involving Natura and a cooperative of producers from Esperantinópolis, in the northeast of Brazil, is an example on how delays may jeopardize projects. Aiming to replace the mineral powder used in its makeup with babassu flour, Natura first contacted the Esperantinópolis community in 2004. The trade agreement was only signed in early 2008, and the product is yet to be launched.
Vaz believes that meeting the prerequisites imposed by Brazilian law are even more complicated than closing deals with the communities. The most criticized of these prerequisites states the need of prior approval from both the local community and the government before starting any research on a new ingredient. Specialists say this not only creates expectations about a product that may never reach the market but also limits R&D resources.
Natura currently has 49 pending projects waiting for approval from the Genetic Heritage Management Council. “Such legal hurdles may culminate in an environment of vulnerability for organizations that want to develop technologies or products from the Brazilian biodiversity,” says Vaz. “Several companies that could promote environmental conservation, fair trade and social development tend to abandon their projects, or [execute outside the boundaries of] the system.”
Effort Pays Off in Consumer Response
The barriers, however, are offset by consumers’ response. Vaz is optimistic about the level of awareness of the Brazilian people—revealed in the last Biodiversity Barometer conducted by the Union for Ethical Bio Trade (UEBT). With 94% of consumers surveyed having heard of biodiversity, Brazil appears as a champion. Out of these, more than one out of two defined the term correctly, a marked difference from consumers in Europe and the U.S. where 60% of consumers indicated they had heard of biodiversity.
According to the report, companies wishing to expand in the emerging Brazilian market should take this information to heart. UEBT’s annual overview also stated beauty companies should be prepared for increased scrutiny of their biodiversity sourcing practices. To date, only 21% of the top-100 beauty companies report on biodiversity.
Projects in the Rain Forest
Since 2002, ABIHPEC has an agreement signed with the Amazon Biotechnology Center to identify and invest in research projects in the Amazon region. According to ABIHPEC president João Carlos Basilio, the demand for cosmetics with natural ingredients will keep growing. “In less than 10 years these products will no longer be just a niche in the beauty industry,” says Basilio. “They will account for 15% to 20% of the sector’s [sales]. If Brazil is not well-positioned in this segment, other countries will certainly be.”
And they already are. Amway, Aveda and L’Occitane are examples of companies that use Brazilian active ingredients in their formulations. Before being sold to L’Óreal, The Body Shop had bought Brazil nut oil produced by the Kayapó indians for many years—conflicts between neighboring villages culminated, however, ended the partnership. “The magnitude and longevity of a company is measured by its ability to promote sustainable development to the society,” says Vaz. According to him, more and more people are concerned about such issues as environmental impact, water saving, forests preservation and the reduction of carbon emissions due to global warming.
Natura’s figures show that, in 2009, its emissions of greenhouse gases were reduced by 5.2%. In the same period, the company recorded its highest rate in the use of renewable raw materials: 79.2%, compared to 77.5% in 2008. “Higher consumer awareness is helping the valuation of sustainable products,” Vaz concluded.
While celebrating the 10th anniversary of Natura Ekos, Natura announced its latest sustainability project: the launch of soaps containing 20–50% natural oils purchased from eight new partner communities. The program alone allowed the inclusion of 263 families in Natura’s chain. “In 2009, we allocated more than R$1.3 million (US$720 thousand) for supplying communities. With the new soaps, this value is expected to increase to R$2.6 million (US$1.44 million),” Vaz says.
In 2010, the International Year of Biodiversity as declared by the United Nations, Natura continues to play its role in preserving one of the world’s largest environmental heritages and shows it is possible to achieve the perfect balance between social development and economic success.
Fernanda Bonifacio is a Brazilian journalist who focuses on the beauty industry, and has been published in the U.S. and Europe. During 2002–2008, she represented ABIHPEC and its member companies globally.