Avon Products Inc.
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Key Impacts, Risks and Opportunities

Economic | Environmental | Social

Economic

As a direct-selling company, Avon depends on its global base of approximately 6.5 million active Sales Representatives. Avon was founded in 1886, and the first official sales agent was a woman – Mrs. P.F.E. Albee. Today, the vast majority of Avon's Sales Representatives are women, all of whom are independent entrepreneurs managing their own Avon businesses. Avon is committed to providing its Sales Representatives with the materials and tools to succeed and does not require an outlay of personal capital to cover the cost of customers' orders. Rather, Avon provides product inventory to Sales Representatives on credit, and generally, the company does not receive payment until after it is collected from the Sales Representative's customers. As such, the company may be considered one of the largest micro-lenders to women in the world, with approximately U.S. $1 billion extended in credit on any given day. For more information, see Empowering Women.

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Environmental

Avon's core business is focused on cosmetics, fragrances, skincare and personal care (beauty products), which represented 71 percent of the business in 2010. In addition, Avon develops and markets a range of other products, including apparel, accessories and jewelry as well as home and decorative items. Avon manufactures virtually all of its beauty products in Avon-owned or managed-facilities, while all "non-beauty" products are manufactured by third parties.

Managing the impacts associated with developing, manufacturing, distributing and marketing its core products involves:

  • Designing products to be safe, effective and of the quality consumers expect from Avon. This includes testing all ingredients and raw materials used in the products to ensure they are safe for personal use and the environment.
  • Manufacturing products in a manner that is consistent with the company's Code of Conduct, global quality and safety standards, and environmental initiatives and policies. This includes implementing manufacturing processes to avoid unnecessary usage of energy, water and raw materials; and employing energy- and water-efficient technologies and practices that reduce the company's environmental impact. In addition, the company seeks to employ best practices for the disposal of its various waste streams. The risks associated with manufacturing products in its company-owned and operated plants are minimal. The manufacturing of its products in contract factories poses more potential risk, which therefore requires the company's oversight and ongoing engagement with its suppliers to ensure compliance with its policies and expectations. All actions of both Avon suppliers and Avon-owned facilities are guided by the Avon Supplier Code of Conduct.
  • Distributing products in an efficient manner to minimize fuel usage and costs. This includes maintaining centrally located distribution centers around the world to streamline the process of shipping inventory to Sales Representatives; partnering with shippers on route optimization; as well as designing products with minimal packaging so more product can be consolidated and shipped in smaller packaging.
  • Minimizing the impacts of marketing materials and brochures, which are essential tools for Avon's direct-selling model that does not have a "bricks and mortar" presence. A global focus on leveraging technology has enabled many Sales Representatives and customers to conduct business transactions online, but Avon continues to utilize a good deal of printed sales materials. The greatest impact associated with marketing Avon's products is the volume of paper used to create the product sales brochure – the catalog that serves as the "store." The company has adopted the Avon Paper Promise to address this impact.

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Social

Avon has a long history of supporting philanthropy, which was formalized with the creation of the Avon Foundation in 1955. Avon philanthropy is a unique partnership between the corporation and the Avon Foundation for Women, a U.S.-based public charity and an independent entity. The signature programs today, supported by both Avon and the Avon Foundation, are the Avon Breast Cancer Crusade and Speak Out Against Domestic Violence, addressing two causes of great importance to women around the globe, including Avon's community of Sales Representatives, Associates and customers. Avon is the leading corporate supporter of the breast cancer cause and since 2004 has been expanding its support to help end violence against women.

The company's enduring commitment to these causes, both through the sale of Avon fundraising products and contributions to The Avon Foundation for Women, has served to strengthen the bonds women have to the brand. Avon's long-term ability to sustain its support for these causes is an opportunity to continue engendering brand loyalty while driving meaningful change worldwide.

As with any corporate philanthropy, fundraising can be impacted by broader social and economic circumstances. For example, while Avon remains committed to philanthropy, an economic downturn or high unemployment rate can affect the level of fundraising product sales and the success of Avon Foundation events such as the Avon Walk for Breast Cancer series.

If such a decrease occurs in charitable giving, it can directly impact the amount of money a company has available to donate to philanthropy. And therein lies a risk of disappointing stakeholders should a company's support for its dedicated causes decrease due to external forces.

More information on Avon's philanthropic programs is available here.

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