Increasing environmental regulations. Evolving retailer requirements. Shifting consumer preferences. Beauty and personal care brands are under growing pressure to demonstrate their commitment to sustainability—beyond just eco-friendly products or packaging. Today, the focus extends to how brands manage their operations, supply chains, sourcing of ingredients, and the lifecycle of their products.

Meeting these growing demands can be particularly challenging for smaller or independent beauty brands. Limited in-house resources, budget constraints, and a lack of sustainability expertise often put them at a disadvantage compared to larger brands within parent companies.

New Regulations. Higher Expectations

As sustainability pressures increase, new regulations are evolving to hold brands accountable. These regulations, like the EU's Corporate Sustainability Reporting Directive (CSRD), set high standards for sustainability reporting. The CSRD’s reach is vast, requiring compliance from over 50,000 European and an estimated 3,000 U.S. companies. While it primarily targets large, multinational corporations, its ripple effects extend across supply chains. For smaller beauty brands, this could mean new expectations—obligations, even—to collect and disclose detailed sustainability data, including emissions, water usage, social impact assessments, responsible supply chain practices, and governance information. 

California passed two new laws that require companies to disclose their greenhouse gas emission and the threats they face as a result of climate change. Under California Senate Bill (SB) 261, certain public and private companies must report on climate-related financial risks, including those arising from climate change impacts, regulatory shifts, and market changes driven by environmental concerns. California's SB 253, the "Climate Corporate Data Accountability Act," mandates that companies with over $1 billion in revenue doing business in the state must report their greenhouse gas emissions annually. This includes emissions from direct operations (Scope 1), energy consumption (Scope 2), and broader, indirect emissions such as those from supply chains, travel, waste, and water use (Scope 3).  Again, these requirements may require smaller and independent brands to report climate-related data, such as their carbon emissions, to their own customers further up the value chain.

These regulations raise the bar for transparency and accountability, placing added pressure on brands of all sizes to comply.  Failing to prepare now for these changes could mean missed opportunities or, worse, the termination of vendor contracts. 

Customer Requirements

Consumers' changing expectations add to the regulatory pressures that brands face. According to Euromonitor International's Unlocking Sustainability Opportunities in Health and Beauty report, sustainability is increasingly a competitive advantage, with sustainable product sales growing at a 9% compound annual growth rate (CAGR) from 2020 to 2023, outpacing sales of their non-sustainable counterparts. CleanHub's Clean Beauty Survey 2023 reports that 81% of consumers expect brands to reduce plastic packaging, while 40% always or usually research a beauty brand’s sustainability credentials before making a purchase in-store or online, underscoring the need for brands to be transparent about their environmental commitments. And, capturing the zeitgeist of the day, it notes that the hashtag #cleanbeauty has garnered 1.9 billion views on TikTok and 6.1 billion tags on Instagram.

In response to both regulatory and consumer demand—and demonstrating the trickle-down effect sustainability has—large retailers are increasingly asking partner brands to implement sustainability initiatives and report relevant data as part of their own corporate commitments. Brands that comply with these expectations and demonstrate similar values may receive recognition or incentives.

For example, in 2023, Ulta Beauty set an ambitious target for 68% of its suppliers by emissions volume to set Science-Based Targets for carbon reduction. Sephora's Planet Aware program also establishes over 30 sustainability criteria across product development, packaging, sourcing, and transparency, which brands must meet to participate.

Implications

Independent brands must clearly define sustainability's role in their overall business and product strategy and develop a thorough understanding of the regulations with which they must comply. Sustainability goals should align with broader business objectives, disclosure requirements, and available resources.

To meet these demands, brands must embed transparency throughout their value chain—from supplier relationships to internal reporting and consumer education. This could involve strengthening responsible supply chain practices or sourcing new suppliers for sustainable formulations and packaging. Ensuring ingredient traceability is vital to building credibility and trust with retailers and consumers. Transparent practices ensure that the information shared with consumers is accurate.

Independent brands will also need to adopt new ways of working, including collecting and reporting data through platforms like the Carbon Disclosure Project and Ecovadis or aligning with frameworks such as the GHG Protocol or Science-Based Targets Initiative (SBTi). Brands must also take steps to prevent greenwashing—making false or misleading claims to appear more environmentally friendly or less damaging—which could damage brand reputation and consumer trust.

Sustainable Growth

Mid-sized beauty brands can successfully navigate sustainability requirements through a phased and strategic approach. By leveraging creativity, innovation, and partnerships, brands can make meaningful progress without sacrificing growth. Cost management will be essential, and brands should think strategically about resourcing—whether through internal teams, fractional experts, or outsourcing to consultants, depending on what best fits their needs and budget.

Embracing the Opportunity

While these challenges may seem daunting, they present a unique opportunity for brands to differentiate themselves. Companies that embrace sustainability not only ensure compliance but can lead the industry by fostering trust, driving innovation, and creating long-term, sustainable growth.

¹ Dieter Holger, "At Least 10,000 Foreign Companies to Be Hit by EU Sustainability Rules," Wall Street Journal, April 5th, 2023, https://www.wsj.com/articles/at-least-10-000-foreign-companies-to-be-hit-by-eu-sustainability-rules-307a1406