10th April 2025

For the year ended 30 June 2024

The Directors present their Strategic Report on Lush Cosmetics Limited (the “Company”) and its consolidated subsidiaries and associates (together, the “Group”) for the year ended 30 June 2024.

Principal Activities
The Group’s principal activity is the manufacturing and retailing of fresh handmade cosmetics.

At the 30 June 2024, the Lush Brand operated through retail outlets in 50 countries and manufacturing facilities in 6 countries through its subsidiaries, associates and licensees. The total number of permanent shops at 30 June 2024 was 869 (2023: 857) of which 666 were in Group subsidiaries (2023: 668). The Group’s subsidiaries and associates are listed in Note 26 to the accounts.

We have a simple strategy. A product for every need. We have a series of large stores across the US and scattered across the rest of the world that have space for more products and spas that need more services, both with customers whose total needs aren’t being satisfied by our competitors. It’s our aim to fill these stores with products and increase the experiences to do the job. 

We have given the power of what to stock in our shops to the shop managers, who are curating their stores to match local needs; and we are increasing their choice in the product ranges available. We are also increasing the number of locations customers can shop with us opening more stores in our most successful and least volatile markets. 

We are anticipating new franchises in Italy and France and are working with new partners in India and Indonesia, due to open in 2026. We are targeting around 30 outlets in these regions over the next decade, as well as more imminent expansion in Turkey, and smaller markets such as Panama and Cyprus. While many of our competitors have closed large parts of their shop estates over the past three years, we are staying with the model of being available to our customers in as many places as possible. Re-opening in Russia remains off limits, as does expansion into Mainland China for the time being, despite positive changes in attitude towards compulsory animal testing. We are also exploring a Lush hotel with a British partner.  

Lush’s digital commerce continues to grow, with the app now accounting for 29% of digital sales. Due to launch in 2025, Lush Club will offer rewards, exclusive experiences, and community-driven content online and in stores. With 1.75M users on the app, we are focussing on staying connected with our customers through our own platforms rather than social media.  

We remain committed to an ethical approach to AI and social media practices and further reducing our reliance on Big Tech. We are reinforcing our commitment to digital independence by rolling out in house till and stock systems across the remainder of the Lush markets, providing our customers with more click and collect and the online opportunity with endless aisles.

We are anticipating more fun collaborating with movie studios and with The Poetry Pharmacy. If you would like to know how this works, we recommend The Poetry Business School by Deb Alma Mark Constantine and Kate Downy Evans published by Harper Collins and available in Lush stores and all good book shops. 

Having restored some aspects of profit, we will be looking for opportunities to build cash. To this aim, in 2024 we took the sad decision to close our Dusseldorf manufacturing site and consolidated North American production into our Toronto site. If as presently anticipated a 25% tariff is introduced, we anticipate passing this tax directly to our American customers. We don’t anticipate opening a factory in the US.  Dusseldorf’s production was moved to our UK factory in Poole.  Our next aim is to increase production in our Croatian site, and we are enhancing our many smaller ‘Fresh Kitchen’ production sites around the world to improve distribution, especially to EU stores. We’re overhauling our systems to support inventory management and efficiency and to meet additional regulatory requirements in North America and new partner markets. 

While many companies are using changes in political values as an excuse to return to their true form, we remain steadfast in our commitment to regenerating life and leaving the world Lusher than we found it for people, animals and the environment. We aim to have a positive impact through our ingredient sourcing, collaborating with suppliers to support wildlife, build climate resilience and address human rights risks. In our shops and factories, we are proud to be using 100% renewable electricity. Meanwhile, we will continue to work as corporate campaigners in two key areas; working with government, industry and NGOs to end animal testing by prioritising better science; and striving for ‘safe socials’, leading by example.

Noticing customer sentiment shifting away from highly advertised ultra-processed cosmetics, our focus is on communicating the key differences between us and the rest of the industry through word of mouth, starting with our staff. We remain proud that while our competitors spend billions on advertising our customers recognise our friendly service, our values, our famous scents, spa treatments, the treat of our Hair Labs and the impact our fresh products have on your skin’s microbiome and the quality of the ingredients we use. 

During challenging times across the world, people remain people. When faced with trauma they recover through human connection and feelings of safety. One customer once called us ‘an oasis of kindness’ on the high street, and we strive to live up to this claim.

Living Wage 

We continue in our commitment to pay above the government minimum wage in all our group markets, as set out in our ethical charter. This year we took steps to widening the gap to the minimum wage in several markets, committing to an increase to the base pay in Hong Kong & Macau, and across our North American business.

In North America (NA) we committed to a base pay of $15 dollars per hour across the US and Canada in the first half of the year. Simplifying our pay structure, our starting salary across our North American business is now between $15 – $22, depending on location. We went further than our $15 base pay commitment too: We increased the rates of pay across 226 shops, in 54 states/provinces. The total investment was CAD$3.095m. 

We continued our commitment to paying a Real Living Wage in New Zealand, Ireland and our UK retail business. In the UK the Real Living Wage rose by 10% this year, an annual investment of £3.2m in our retail business alone. In our manufacturing business we continue to pay Real Living Wage rates for all permanent staff. Additionally, we introduced new benefits in Germany and Hungary, including wellbeing benefits and food vouchers. 

Equity, Diversity and Inclusion (E,D&I)
The Group is committed to fostering inclusivity, practising equity, and diversifying the business. We continue to take a collective approach to actioning ‘All Are Welcome Always’ and Lush becoming the Company we want it to be. The Group values disabled applicants, offering fair consideration if they meet role requirements, and supports ongoing employment, development, and retraining opportunities for employees who become disabled. 

Our Co-create programme invites staff from across the business to collaborate in product research and development, focusing on cultural holiday ranges. This year, it has further evolved with a dedicated project lead to support the work. Lush staff have developed products for Diwali, Hanukkah, and Dia de los Muertos celebrations. Working with product inventors, expert formulators and copywriters, it is effectively a mini product development internship.

Community Networks (employee resource groups) are embedded in Lush to enable employee participation in ED&I direction, and share valuable insight into employee engagement as well as provide feedback to the business. We have appointed six new Community Network chairs in the UK for a two-year term. In both UK and NA, the Community Networks are enabling Lush Google licences which is seeing a growth in members of 17%. In summer 2024, a mentorship programme was launched in both UK and NA, pairing these chairs with senior leaders to enable reciprocal mentorship and development through guidance, career development advice, and networking opportunities.

There are many other initiatives being worked on in UK and NA, such as a Crisis Management pack to consider how we can work more proactively and collaboratively to make sure everyone is supported in a crisis situation. Also, working with various teams we hope to improve the diversity of models featured in campaigns, embed ED&I in job descriptions, recruitment and training sessions, and develop inclusive leadership practices and campaigns.

Employee Benefit Trust
10% of our shares are held on behalf of our staff in the Lush Employee Benefit Trust (EBT). We believe the Trust, which was established in 2017, will protect the prosperity of the Lush business and the company ethics through the Lush Ethical Charter, while recognising the contribution our employees make to its success. The EBT has grown in size, profile and trust within the business and is developing to successfully fulfil its intended purpose for the business and our staff.

The total number of beneficiaries continues to sit at around 13,600 people in 27 countries and our total number of EBT Representatives is 827 – democratically elected by the staff through companywide elections.

The EBT and its representatives play a pivotal role in championing our values: Facilitating two-way communication between all Group colleagues and the business, providing vital, timely insight into staff sentiment and encouraging equal opportunity for contribution in our mission to leave the world Lusher than we found it. We enjoy continued engagement through our first staff only publication ‘The Lush Insider’, regular operational and performance updates, and direct communications from leadership through a multitude of in-person and digital channels, including all-staff events to ensure knowledge and information is shared directly with all colleagues.

The Trust Board continues to be composed of two company appointed Trustees, two staff-elected Trustees and one independent Trustee. We currently have a staff-elected Trustee based in Australia and the other based in Germany, providing international representation on the Trust Board. To maintain experience on the Trust Board, we continue to ensure appointments are staggered, and our next staff Trustee election is scheduled for 2025.

We are still in the development stages of our Employee Ownership journey and are enjoying building on our knowledge and experience to further develop our EBT and employee ownership culture at Lush. We are now 7 years into our employee ownership journey and are considering how we can embed the principles of employee ownership into every area of the business, with the aim of effectively representing employee voice and preserving Lush’s ethics and independence for the future. 

The intention is that the EBT will be offered re-issued shares by the Company to replace cancelled shares sold back to the Company from the shareholders when they wish to sell them. Those shareholders are currently active in the business and have agreed to a valuation method for their shares using the higher of net asset value or a multiple of five times the average post-tax profits of the last three financial years. Over time a future EBT shareholding of 35% is envisaged.

In our financial year ended 30 June 2024 Lush worldwide (including all subsidiaries, associates, licensees and franchisees) raised and set aside funds of £6,604,000 (2023: £8,168,000) and donated a total of £5,700,000 (2023: £9,786,000) of funds to charities and other good causes. Of the total amount donated, £5,569,000 (2023:£9,488,000) was from the Lush Group. Funds raised in the year but not donated are carried forward for distribution in the following year. Our charitable giving has always focused on innovative, effective giving through support of small, grassroots organisations working in the areas of environment, human rights and animal protection. We aim to support causes and organisations that are overlooked by others and also address the root causes of issues through campaigns, education and activism. Our support is not limited to registered charities. 

The majority of funds raised in the year were through the sale of Charity Pot body lotion sold online and in our shops. Some of the good causes during 2024 were as follows:

Lush USA funded the Andean Cat Alliance (aka Alianza Gato Andino or AGA), the only organisation dedicated to the protection of the Andean cat, the most endangered feline in the Americas. AGA leads interdisciplinary and cross-border initiatives to protect this beautiful cat in its four range countries (Peru, Bolivia, Chile, and Argentina). The project Pawsitive Actions comprises of a public engagement program, complemented by field work to track and monitor the health of wildcats, with a goal to increase responsible ownership of domestic animals in order to reduce harmful impacts to wildlife, livestock and humans.  

Lush USA also provided a grant to WaterLegacy. The group was formed by residents concerned with a proposed sulfide mine and the impact it would have on the wetlands and wildlife, as well as water contamination with toxic metals, mercury levels in fish, and impairments of tribal rights. With the support of a grant from Lush, WaterLegacy won their appeal to the Minnesota Supreme Court! WaterLegacy’s victory protects fish, wild rice, and other cultural and nutritional resources for Tribes and communities in the region.

Lush New Zealand funded the New Zealand Anti-Vivisection Society (NZAVS), Aotearoa’s primary charity defending animals used for science. They have been fighting to end animal testing since 1978! NZAVS works to end animal experimentation and the harmful use of animals for science in NZ because of the many related ethical and scientific problems. Based on research NZAVS has conducted, using animals to try and model human outcomes in research is unreliable and fails over 90% of the time.

Lush Italy supported Vanvera, who organise projects aimed at the prevention of gender-based violence, the promotion of safe practices in the sexual and affective sphere, and gender equality and equity. They support the production of “Il Cuore scoperto”, the Italian version of French podcast “Le Coeur sur la table”, a journalistic investigation on love relationships that deconstructs gender stereotypes and proposes respectful and egalitarian practices in the sexual-affective sphere. 

Red Flare are anti-fascist investigators, concerned by the re-emergence of British fascism and the potential for this to create a climate even more hostile to minority groups and progressive political voices. They use cutting-edge open source and investigative methods to document, expose and oppose the far right in Britain. They work with journalists to publish stories about far-right groups, their organisers and activists and also share information with groups threatened by the far right as well as those engaged in opposing it. Lush UK&I Charity Pot funds were donated towards the cost of purchasing surveillance equipment for undercover work against British fascist groups.

Lush UK&I funded Stop Sizewell C who opposes the construction of twin nuclear reactors on the Suffolk Heritage Coast due to the environmental impacts, community impacts and because Sizewell C is too slow, risky and expensive to solve our Climate emergency. 

Lush Japan: The staff at Lush Aeon Mall supported their community by volunteering with Peace Boat Disaster Relief (a group supported by FunD) at a local volunteer centre. Over 4 days, the staff provided hand massages to residents working long hours to clean up after heavy floods devastated 3,200 homes. They heard many thanks and words of praise including: “My fathers house had recently flooded from the heavy rains in July and he was exhausted every day from cleaning up. When he went to the hospital, he would not speak to his doctor, was sullen and looked exhausted every day when he came home, saying he was tired. On the 25th, when I came home from work, he told me about the massage. He told me that a lady called Sato-san had told him that she had come today to make everyone feel better, and that my father was very happy about that and had talked a lot with her. My father also said, ‘Seeing her laughing face cheered me up too, it really cheered me up’. It had been a long time since my father, who was exhausted from the heavy rain, had looked so happy, and I cried tears of joy listening to him.”

Lush France funded ANV-COP21, who offer training in non-violent action and civil disobedience, and organises non-violent actions to help create a mass civil disobedience movement for climate justice. The grant is supporting the creation of an IT tool to monitor groups as well an event tour to build capacity of local groups to accelerate a just transition.

This year, the world watched as over 11.3 million acres of rainforest burned in the Amazon, a third of which was primary rainforest. Our FY24 Climate and Nature Progress report will outline how the impact of climate change has increased its toll on our supply chain, as well as what further climate risks we anticipate our operations as a whole to be exposed to. Whilst we plan out our own decarbonisation pathway as a business, it’s clear that climate resiliency and immediate adaptation is also now an equal priority, as we invest into a fossil fuel-free future. The 2023 IPCC report outlines that approximately 3.3 to 3.6 billion people live in contexts that are highly vulnerable to climate change. Many of these people will be within communities within our supply chain locations. Climate justice, adaptation and mitigation are therefore more important than ever.

The impacts of climate change have fuelled our ambitions for an action-oriented approach further, this year. Although the EBITDA loss generated in the financial year ended 30 June 2024 (“FY24”) has meant Capital Expenditure (“Capex”) was limited for our more ambitious de fossilisation projects, our continued ambition to ‘leave the world Lusher than we found it’, for the planet, people and animals has taken us to new projects, opportunities and mitigation strategies. This report will also demonstrate how we’ve been able to begin to adapt and mitigate climate-based scenarios (and their financial implications) this year. Our strength as a business lies in being able to react quickly – reformulate inhouse, manufacture products across 7 sites globally, redevelop our product categories and business model, and distribute funds to grassroots organisations working on climate change mitigation and justice. Innovation and agility are core to how we have built our business, which also gives us a good standing when it comes to climate response and mitigation. 

Our Climate and Nature Progress Report has been split into the three following sections:

1.0. Progress on Lush’s Climate & Nature Plan

2.0. Carbon Footprint and Streamlined Energy and Carbon Reporting (SECR) reporting
3.0. Climate Related Financial Disclosures

Progress of Lush’s Climate & Nature Plan 

The future of our business is deeply connected to and reliant on the health of forests, soils, oceans, and wildlife. This connection to nature is our driving force to leave the world Lusher that we found it. 

Our overall focus is to reduce as much fossil fuel use as possible from our direct operations by 2030. This will require significant commitment and investment from the business. Our ambition is to also invest in our supply chain landscapes to create opportunities for nature to thrive around the world. To rally the entire business around these aims and contribute, we have summarised our mission into five broad actions that all our colleagues, suppliers and customers can be part of. You will find our FY24 annual progress against each pillar. 

Our core strategy is to use our supply web and buying power to help protect biodiversity hotspots and carbon sinks like mangroves, wetlands, forests, and healthy soil. Reducing the risk of deforestation in the supply chain and increasing the number of materials that are supporting protecting or rewilding landscapes is a key part of this strategy. 

In FY24 we were able to use our supply chain mapping software to map more than 80% of our tier 1 suppliers (the companies we buy from directly), each of whom have signed up to the software and are actively engaging. So far, we have full visibility on almost 20% of our full supply chains with 4,319 indirect suppliers being declared through the system. We use this platform to gather crucial documentation and information to comply with our environmental standards and EUDR. This year, we also onboarded a new satellite-based software to upload GPS data of our ‘deforestation high risk materials’, and layer in land use change over time. This will allow us to ensure none of our materials are sourced from land subject to deforestation, and to mitigate risks of deforestation occurring where there is risk. 

This year, through our continued effort to remove palm derivatives from our products, we were able to use 1,164 tonnes of palm-free alternative feedstock out of a total 2,505 tonnes of what would normally be palm based. Historically, this had a significant impact in lowering our overall deforestation risk within our supply chain. We have also made significant progress towards our biodiversity monitoring work, to understand how our work to protect forests was impacting wildlife within those locations. We were able to install new camera traps within our key conservation project locations. We were able to capture footage of jaguars, pumas, orangutans, tigers and pelicans from Lush funded projects. 

We were able to support multiple projects within our sourcing landscapes, with the aim of protecting priority landscapes. This included a land use mapping project in Borneo with 350 community members, an exercise to understand which intact forest areas are in need of land title deeds and social forestry project status to preserve the remaining primary forests in which we source illipe nuts. 

We incentivised staff to complete the global Commuter Survey with a commitment to plant 1 tree for every 5 surveys completed. We received enough responses to plant 500 trees, and the business matched this to double the number. We were able to connect this opportunity with Alumalum, our Lush Investments partner farmer in Uganda. They planted 1,100 African mahogany seedlings.

We funded rewilding and regeneration of the cork landscape in Portugal as well as the Lush Hubs sandalwood project in Timor, where the hub team have partnered with WALHI Nusa Tenggara and Green Justice Indonesia to produce and replant sandalwood seedlings in Sumba and Timor (target of 30,000 by the end of the year).  Collectively, it is hoped that these actions not only support local forests and communities by preventing further degradation but also help to reduce future exposure to climate related risks, by increasing the resilience of these landscapes. 

This is a combination of powering down – reducing energy demand first, replacing all fossil gas and powering up with renewables. We invent, manufacture and retail our products in buildings that we control but don’t own, so we need to partner with landlords for fabric improvements, invest in energy efficiency like LED lighting, source our electricity from deep green suppliers wherever it is possible, and buy renewable energy certificates where it is not possible. We are almost fossil gas-free in retail and are gradually electrifying our factories.

With a constrained Capex budget this year we’ve been prioritising low hanging fruit and preparing for priority Capex spend when the Group is in a stronger cash position. Within our manufacturing property portfolio, we have conducted a thorough energy audit for our facilities in Japan, giving us a clear priority list for energy improvements in FY25. We spent £5k on an LED roll out in our ballistics facilities in the UK and the Croatian team have been scoping out net zero building options as part of our relocation/ lease renewal in Croatia. Similarly, with retail, we’ve been prioritising alterations to new shop fits for the year, such as using double doors to reduce energy waste for the new Glasgow store as well as using LED lighting. We also launched a new communications pack around powering down at the beginning of the year as well as a video with energy saving measures for retail implementation.

This year we have made significant progress in our renewable electricity procurement. Through a combination of moving more markets to deep green tariffs (i.e. an energy utility that only generates and/ or supplies renewable energy) and purchasing good quality Renewable Energy Certificates (RECS), we have now achieved 100% Renewable electricity status (excluding partner markets). This is a major milestone in our move to renewable power. We are in the process of negotiating the same standards for our partner market contracts. Our Germany and North America (NA) markets have also continued to procure their gas from renewable sources, using renewable landfill gas. In the process of reviewing RECS, we also celebrated Italy, Australia and New Zealand moving over to deep green tariffs, leaving us with a total of 40% of our properties on deep green renewable tariffs vs 60% on standard electricity tariffs with matching REC purchase. Our next year will be focused on moving more markets over to Deep Green Renewable Tariffs, where it’s available.

Our most ambitious task is looking towards creating a net positive supply web for our materials and making our packaging circular – with people and livelihoods at the heart of our initiatives. This means prioritising sourcing of materials from regenerative farming like agroforestry, funding regenerative interventions in the landscapes we source from and investing in farmer training and demonstration sites. We have been on this journey for nearly 15 years. On the circular front, we are focusing on eliminating waste, circulating materials at their highest value and regenerating nature. To eliminate waste, we invented, developed and manufactured ‘naked’ cosmetics. Since 2008, we have sourced recycled or used organic materials for our pots, bottles, gift packaging and more.

This year, through our ‘insetting scheme’ we spent £75k with core suppliers on carbon removals and reduction projects. With water being one of the most important considerations this year,  a special focus on arid and semi-arid regions has seen us start an agroforestry trial in lemon and mandarin plots in the south of Italy, support 250 families in Niger to receive training on direct seeding of marula and balanites, and fund the planting of 1,000 metres of green fence using species native to the Ica desert in Peru. We also supported an ongoing tree planting project in Piauí, Brazil with our honey supplier Casa Apis which will provide food sources for honey bees during the dry season. A new project with our argan oil supplier in Morocco is scheduled to start soon.

In other biomes, we co-funded the establishment of a tagua nursery, to support forest regeneration and agroforestry, in the rainforest in Ecuador. On Nias Island, Indonesia, 150 farmers were trained in regenerative agriculture methods to enable them to transition to a polyculture, planting new coconut trees with vegetable crops and fruit trees. The farmers also received training on how to manage an internal organic certification system. Many of them have abandoned conventional agriculture techniques, in favour of more regenerative practices.  We are awaiting the publication of the FLAG methodology in order to start the work to calculate our land use removals and reductions, in order for these efforts to be quantified in carbon terms.

When it comes to contributing to a circular economy, the last financial year saw customers return nearly 2.7 million pieces of packaging through our Bring it Back scheme, an average return figure of 15%, and a total of 63.5 tonnes of plastic processed. FY24 also saw the sales of nearly 18 million ‘naked’ items, close to 64% of unit sales, with countries in Europe leading the trend. We signed off increased recycled content for our sprayers and pumps to between 55-65% recycled content, moving us closer to our goal of 100% recycled plastic packaging for all categories. 

Through a combination of having our inhouse recycling centre in the UK and the use of 3rd party vendors with better end of life for waste, we were able to reach a total diversion rate of 68.4% for our overall global manufacturing waste through recycling, composting or reuse.

Reducing transport emissions remains one of the most challenging actions to tackle, as our supply chain means that we’re dependent and waiting on new technologies and shifts in global transport infrastructure. It may not be possible to completely eliminate emissions from transport by 2030, but we can begin to drastically reduce business flights and air freight, electrify road freight, both for our own vehicles and through our freight partners, and support early adopters of new alternative fuels with proven sustainability benefits. We are conscious that utilising transitional strategies like HVOs from waste fats and oils may come with unintended environmental impacts and have used them with care where needed. 

This year we set a target for the year to mitigate air freighting, globally. All manufacturing entities agreed to an 80:20 air to ocean freight split for volumes of product and raw materials imported from the UK HQ. Markets adjusted their ordering frequency and planning in order to keep to this target, resulting in the figures in the table below. 

In Canada we launched a task force team to identify key work streams to reduce our road and air footprint in NA. The taskforce re-focused logistics teams on prioritising rail over road to achieve the 73% rail in between our Vancouver and Toronto manufacturing sites. Whilst this is a great result, increasing rail strikes means this service is sometimes interrupted. We also consolidated fresh shipments to one per week and worked on better planning to prioritise EC ocean shipment. We moved 25 stores to include a last mile service, allowing customers to order from their local stores rather than manufacturing sites which we’re hoping to implement in FY25.

In Croatia, we initiated a partnership with GO GREEN to purchase sustainable aviation fuel (SAF) in an effort to reduce our portion of air freight. We also launched a Green Bonus scheme which rewarded our staff for choosing to cycle to work.  

In the UK, we reduced our diesel vehicle consumption by 40 tons by expanding our electric forklift assets and consolidated estates. 

Those least responsible for causing the climate emergency are already suffering its worst impacts. Reducing the harm communities are already facing, being in solidarity with climate activists and indigenous communities, and doing all of the actions above from a lens of climate justice is key. Lush is a British business, and the UK has a historic responsibility to do more than its fair share. We vow to educate and raise awareness about climate justice inside and outside Lush, listen to, support and stand with frontline communities, and apply a climate justice lens across our decision making. This work is supported by our campaigns, charitable giving and fossil fuel divestment efforts. 

This year, we donated £6.6m to grassroots organisations with 57% of this fund going towards environmental protection, and a further £200k going to fund frontline defenders around the world, protecting intact ecosystems and indigenous land territories. We used our global retail and digital platforms to raise awareness and call for action around environmental justice issues such as everyone’s ‘right to roam’, highlighting everyone’s right to connect with nature. In Malaysia, the team once more supported coral planting with the local group in collaboration with Marine Ecology Research Centre, part of a long-term project to help coral reefs recover and create more habitat for marine life. We supported 7 Indigenous and anti-fossil expansion activists to attend COP28. 
We have also reached a few milestones in our fossil fuel divestment journey in FY24. It was our first full financial year with divested banking for our giving accounts (Charity Pot, Ethical Campaigns funds, Staff Sale, Staff Hardship fund). We also moved our excess cash into an ethical bank, free from fossil fuel investment.

Our carbon footprint

In line with the Climate-related Financial Disclosure Regulations incorporated in the Companies Act 2006 (the ‘Regulations’), we are now looking to understand the most material climate and environmental based risks to the business, and to embed the conversations in all areas of the business, of which management of our carbon footprint is a key area of focus. 

The chart and tables below outline quantifiable carbon emissions for the financial year ended 30 June 2024. These emissions have been calculated for the Lush Group and have endeavoured to capture emissions from all global markets. The coverage of emissions data is detailed in Table 1. 

Figure 1. Carbon emissions FY24 broken down by emission source

Scope	Emissions source	tCO2e	%
1	Gas	2,455.8	1.2%
1	Bath bombs	328.6	0.2%
1	Refrigerants	482.3	0.2%
1	Fleet fuel	322.7	0.2%
1	Sourcing hub fuel	140.2	0.1%
2	Electricity	8,559.7	4.3%
2	Sourcing hub electricity	9	0.0%
3	Supply chain (raw materials & packaging)	76,266.2	38.6%
3	Customer use	61,366.0	31.1%
3	Indirect spend	13,015.8	6.6%
3	Freight	18,999.7	9.6%
3	Business travel	3,815.0	1.9%
3	Commuting	3,276.8	1.7%
3	Franchises	2,919.7	1.5%
3	Upstream energy	2,723.6	1.4%
3	Waste	1,602.2	0.8%
3	Digital fulfillment	686.3	0.3%
3	Customer use (Bath bombs)	657	0.3%
Total		197,627	100%

As can be seen from the chart and table above, Scope 3 emissions account for 93.8% of our overall carbon emissions, with the majority of this coming from the raw materials and packaging in our supply chain (38.6%) and customer use (31%) of sold products. Emissions attributed to the customer use of sold products are calculated based on assumptions of typical hot water demand for different lush products and the emissions associated with the resultant energy consumption. Although 31% of total emissions, Lush has limited influence to reduce these emissions other than to shift consumers towards products that require less hot water. Despite this, we recognise our role as drivers of these emissions and find inclusion of this category within our emissions profile provides accountability for carbon that would otherwise not be accounted for. 

Although emissions from scope 1 and 2 only account for approximately 6.2% of total emissions, these are emissions where Lush has more direct control & opportunity to move to fossil-free operations. Whilst the Group has more concrete decarbonisation strategies for Scope 1 and 2 emissions, a reduction of available Capex within the business in FY24 has meant prioritising smaller initiatives with high ROI such as LED lighting & energy efficiency tweaks to buildings. We have prioritised the time in understanding the carbon intensity for each sqm of our manufacturing and retail buildings to be able to prioritise Capex spend accordingly when available. 

For supply chain-based emissions we are making gradual progress year on year in getting direct and granular supplier based data to remodel for an accurate picture of changes needed to decarbonise each ingredient. Our insetting interventions have been implemented over the last three financial years and include mostly land-based or energy efficiency strategies to support reducing the carbon impact and increasing carbon removal in the sourcing landscapes while delivering co-benefits to biodiversity, farming communities, soil health, and overall ecosystem-based resilience (as can be seen in our progress report above). 

Global freight makes up 9% of our overall emissions, sitting at just over 16,000 tCO2e. Air freight has a disproportionate impact, making up only 14% of tonne kilometres but represents 72% of the carbon impact. Sea freight accounts for 59% of the tonne kilometres, but only 4% of the carbon impact. Road freight is 25% of tonne kilometres travelled and 23% of the baseline emissions. 

The remainder of scope 3 relates to indirect purchases i.e., all spending that does not include the purchase of raw materials, and other emissions e.g., business travel and waste. Collectively these represent approximately 8% of total carbon emissions. 

In order for us to push on continual improvement on data accuracy and granularity the table below gives an updated commentary on the data quality per area of emissions. We hope to improve on this further in our FY25 carbon footprint analysis.

100% Renewable Energy Everywhere

Although Capex constraints prevented us from investing more into replacing gas use this year, we hit a big milestone of achieving 100% renewable electricity – and we will continue to maintain this status through ringfencing future funds in our ongoing expenditure. Although this isn’t represented in the overall emissions chart above (as we use location-based coefficients), we’ve managed to reduce the market-based electricity emissions to 0tCO2e. 

Across Lush’s building’s portfolio, a renewable electricity designation has been assigned based on how each property meets our renewable electricity commitment i.e., a green tariff from a standard utility, a deep green utility (one that only supplies renewable electricity), a Renewable Energy Certificate (REC) or equivalent, or ‘N/A’ (not applicable), for example in cases where the electricity is provided by a mall landlord and is out of the control of Lush. 

Whilst Lush is committed to 100% renewable electricity, through deep green tariffs and the purchase of high-quality RECs, there remain some residual emissions relating to locations where we have limited control e.g., where the landlord bills us back for electricity in retail. Where this is the case, and in recognition that Lush are drivers of this electricity demand, we have overpurchased RECs to compensate for the lack of control in the direct purchase of electricity through a deep green tariff. 

In FY24, Lush matched just over 100% of the electricity used with renewable electricity purchases (bundled and unbundled).  Our ‘surplus’ renewable electricity purchase is 110 MWh.  Specific markets that purchased less than they used have been ‘balanced out’ by markets where we purchased more RECs than were actually used. In line with the RE100 guidance, it is acceptable to exclude small loads of up to 100 MWh/year per market due to landlord-tenant issues (i.e. where Lush does not have control of the electricity purchased on our behalf).  Additionally, it is acceptable to claim exclusions of up to 500 MWh/year in total (with no more than 100 MWh/year in one market). We remain committed to achieving 100% renewable electricity in general accordance with the RE100 guidelines. 

In addition, emissions calculated using location-based emissions factors show a decline from historical quantification, which can be attributed to both an increase of renewable energy available to the national grid in our main markets like the UK and efforts to reduce electricity demand in our operations.

UK Streamlined Energy and Carbon Reporting (SECR)

Our UK SECR report provides insight into our energy use and carbon emissions associated with the four main UK entities: Lush Retail, Manufacturing, Limited and Cosmetic Warriors. 

Activity data has been gathered from multiple locations including invoices and billing for fuel and energy. Where data is unavailable, e.g., in landlord-controlled retail units or where invoices are missing, appropriate estimates have been used to gap fill on a pro-rata or floor area basis. Refrigerant losses were calculated from engineer log sheets. Emissions associated with the production of bath bombs in our Ballistics facilities have been estimated based on known stoichiometric chemistry and mass loss during bath bomb curing. Activity data was converted to carbon emissions using HM Government conversion factors published by DEFRA for the relevant reporting year. 

The following data is pulled from our annual SECR report, with the intention of giving further insight into our energy and carbon data associated with our main operational hub at the Lush HQ in Dorset, UK.

By normalising energy consumption and carbon emissions over floor area we can show how our overall carbon emissions have reduced in intensity over time, despite fluctuating energy intensities.

Our overall consumption has been rising year-on-year, in-line with increases in property floor area. This is mainly due to a shift in global manufacturing to UK sites. However, our overall emissions have reduced by approximately 28% despite our estate growing in floor area by 35% since FY15/16. This is primarily due to a reduction in the UK grid intensity from an increased uptake of renewable energy generation. We are also gradually transitioning to an electrified estate to support our decarbonisation journey. Examples include: induction hobs, electric hot water, electric vans, electric forklifts, electric only properties (Unit 1, Unit 17, Beak St, DQ, most of Retail estate etc).

Consumption reduction projects, electrified operations and maintaining a high-quality renewable electricity supply; will be vital for Lush to achieve any form of 2030 net-zero emission figure. 

Lush UK has a vegan renewable electricity across the majority of our estate, helping to ensure that we are as responsible and as low impact as a business that we can possibly be. Across the UK&I, we have 85% of our estate supplied by Ecotricity’s 100% renewable electricity tariff and 90% with Ecotricity’s carbon neutral gas supply. The graph below shows the movement in absolute carbon emissions over time with location and market-based coefficients. 

Climate Related Financial Disclosures

The business recognises resilience as the ability to withstand and quickly recover from disruptions. A key part of cultivating resilience is to deeply consider the potential risks and opportunities that various possible future scenarios may pose to the business, and to adjust the business processes and strategies in response. This need is especially relevant to climate risk, which has the potential to impact Lush’s business model at all points along the value chain. 

This report outlines Lush’s steps toward understanding and managing climate risk, for the purpose of cultivating lasting resilience, and “leaving the world Lusher than we found it.” This ongoing process will be continuously updated, in response to the rapidly changing impacts of the climate emergency.

Management considers that the Group’s climate-related disclosures are consistent with the recommendations and recommended disclosures set out under the Climate-related Financial Disclosure Regulations 2022 (the ‘Regulations’). We have used the Task Force on Climate-related Financial Disclosures (‘TCFD’) as the framework to help analyse, understand and disclose the required information under the Regulations. These disclosures set out how Lush incorporates climate-related risks and opportunities into governance, strategy, risk management, what we are doing to reduce our environmental impact and our key metrics and targets.

Governance 

ETHICAL CHARTER: The Ethical Charter sets out Lush’s guiding principles and is protected from change or abuse through the terms of the legally binding EBT Trust Deed, which the whole company is responsible for upholding. Lush’s core values and ethics are detailed in the ethical charter. One of these principles includes Lush’s ‘environmental policies’: “Lush will always seek to challenge itself over all its uses of the world’s resources. We aim to reduce and minimise our impact with policies that meet the needs of a changing and constantly evolving world situation. We will challenge and target areas such as air transport, energy use, materials into landfill, recycling rates, pollution and waste outputs”.

EBT: As a company 10% owned by staff, the Employee Benefit Trust acts as the caretakers of our Ethical Charter, which lays out our responsibilities to a living planet. The EBT Trustee circle includes representation from staff, an external trustee and two Board members. BOARD & LEADERSHIP: Lush’s senior management team (leadership) is made up of all formal board or director members. Regular senior management meetings are held to engage the board of directors and founders with top leadership on issues of planning and strategy. Two of Lush’s Global Earthcare leads participate in leaderships’ monthly ‘mafia’ meetings to inform the leadership team of climate-related issues which are often discussed at length. Lush was founded in part by environmental activists, so an understanding of the threats of the climate and ecological crisis have been present from the start. With a core approach to doing business that is based on relationships, climate-related issues have been visible to our leadership and colleagues through direct exposure to those issues and regular conversations. It is expected of each finance business partner, manager and program team member to incorporate earthcare into their roles under our principle ‘every job is a climate job’. 

GLOBAL EARTHCARE TEAM: Lush’s climate and nature related issues are worked on by the Global earthcare team under a comprehensive ‘climate and nature to do list’ as seen in the progress report. There are three key management roles within this team covering the three areas – operations, intelligence and reporting, and engagement. 

• Environmental Reporting and Intelligence. The roles under this area are responsible for understanding our global environmental impact, analysing it and developing decarbonisation pathways and intelligence to the business. It is also the main team/area responsible for our carbon calculations for all scopes as well as compliance with the Regulations. 
• Environmental Operations. This is made up of operational partners for different departments in the business e.g. supply chain impact, manufacturing, retail – as well as energy specialists who manage our renewable energy procurement and de fossilising our assets. The environmental partner roles are to embed environmental best practice and improvements in each area of the business. For some areas of the business, the environmental partners participate in departmental leadership meetings e.g. manufacturing board.
• Environmental Engagement. The responsibility of this team is to engage each member of staff and customers with climate and nature-based issues – whether it be through press, shop campaigns or training workshops for staff on climate literacy. Lush’s staff have historically been attracted to the company for Lush’s ethical principles and work and so it was important for our leadership that each staff member has the opportunity to be involved in our movement towards ‘leaving the world Lusher than we found it’. 

Many of the team members across these areas come together weekly for our Environmental Core KPIs working group with the aim of being able to report on progress against our climate and nature related targets. This is then often fed back to the board and leadership teams. This year, we also recruited for an ESG Compliance Lead to support us in ensuring we are compliant against all upcoming ESG based legislations as well as to support further improving our governance for climate and nature-based issues within Lush.

STRATEGY: The Lush board’s direction has always been to focus on climate actions over targets. This has gifted us with a focus on a practical and ‘to do’ approach over the years, making our journey towards decarbonisation much shorter than it would have otherwise been. We were early adopters of vegan, renewable energy and began our regenerative agriculture journey over 13 years ago. However, the practice of formally mapping risk and forming mitigation strategies is newer to us and has required more work to bring to the forefront of conversations and work.  

This year we started to see ‘potential’ climate related risks from previous years become reality, as we have been impacted by weather-driven store closures in North America and supply-side cost increases being exacerbated by climate variations.  Whilst these were not material in nature in the current financial year, this has only furthered our desire to continually review and strengthen our climate related risk strategy. It was also evident from this year’s climate related issues, that Lush’s historical drive to become an ‘agile’ and ‘innovative’ company has already gifted us with the ability to mitigate such impacts. Further geo-political events and wars (and therefore supply, energy and freight issues) have also furthered the desire to better understand and mitigate our risks. 

Through a series of climate risk workshops, leadership discussions across various value chain segments have got together to map out our short, medium and long-term risks. These conversations will need to be built on, annually. 

SHORT, MEDIUM AND LONG-TERM RISKS: Through stakeholder engagement, management has established time horizons for climate-related planning, with a preference for a short-term perspective and taking into account short-term extremes, instead of long-term averages. These horizons consider asset life cycles and the challenges of improving ageing manufacturing buildings.

Short-term: 0-2 years 

Medium-term: 2-5 years 

Long-term: 5-10 years

During our initial review in May 2023, we considered the transitional and physical risks and opportunities presented by rising temperatures, climate-related policy and emerging technologies and agreed on the methodology for assessing and quantifying financial impacts. Physical risks arise out of the physical aspects of climate change, for example extreme weather events or global temperature increase. Transition risks are those which arise from the transition to a lower-carbon economy, such as policy changes. 

During FY24 there were 330 partial or full day weather-related store closure events in North America, affecting 143 (56%) of our stores in the US and Canada. This has outlined the need to have better analysis of future climate impacts on a more granular level, in regions that are more vulnerable. We will be looking to create a tracker for these regions more specifically, to review sales x weather. This will be used to review the need for parametric climate-based insurance to mitigate the financial losses in the future. 

Although climate-related risks have been identified, we have not to date formally incorporated specific climate-related issues into our financial planning as the potential financial impact of risks and opportunities have not been fully quantified. However, there is considerable appetite to quantify the most material risks over the next financial year, especially considering the historical impacts that we have already observed and how this has affected financial performance. It is recognised that the analysis to support this is also ongoing, however we anticipate that this will support more realistic future performance calculations e.g., from different geographical regions depending on the materiality of the risk that they are exposed to or expected to be exposed to. 

SCENARIOS 

Through engagement with key stakeholders, we identified the following two scenarios to explore in detail for our ongoing analysis. Climate scenarios are hypothetical plausible future states under different levels of global warming and states of transition to a low carbon world. Our intention is to explore scenarios with high physical risks or high transitional risks, although we recognise that a 1.5-degree scenario is now very unlikely. 

As this is likely to overshoot, we do need to prepare a more serious scenario in next year’s report and have a measurable likely financial impact against each risk. The two scenarios are shown in the screen grab and table below.

RESILIENCE UNDER SCENARIOS: Lush is exploring long-term strategies to enhance climate resilience, including new product ranges, back up formulations, global manufacturing locations against climate resiliency and improvements in manufacturing buildings for energy, internal environments, and flood defences. While strategy development for climate risks is still emerging and currently presented qualitatively, the supply chain has been a focus for a number of years. The buying team continues to shift towards materials from regenerative agriculture and resilient suppliers, promoting practices like cover cropping and agroforestry to bolster farm resilience against climate impacts. 

Our supply chain is where we see a lot of evolving strategies emerging. Using the one planet bioregion tool, we have been able to look at landscapes with an ecology lens to understand what triggers a collapse in each ecosystem, impacting our material supply. Our next big chapter in reviewing supply chain resiliency will be developing community based economic resiliency plans, as many of our trade partnerships are reliant on one commodity for trading. We hope to develop an inward and outward looking plan on how we safeguard against climate change triggered crop loss. 

FINANCIAL IMPACT ON PERFORMANCE: As mentioned on page 29, we are already beginning to see climate-related issues impacting on our ability to trade ‘as normal’, and we anticipate this will continue in the future. In the metrics section, and in the developing Risk Registry we have identified metrics to inform financial impact which will be monitored continuously. 

Lush don’t tend to work on long term business planning as the innovation of the business takes us in many different directions year on year. That said, we have a strong annual process for forecasting for each department and this is the area where we are able to start putting financial scenarios to climate risk to adjust our annual sales and budget forecasts. Climate related risks are also built into the forecasting process at the beginning of each financial year, as the buyers receive communication around forecasted crop yield changes. 

Here are some of our assumptions of how climate risk may impact financial performance of our business from now up to 2030, based on trending figures:

• COGS increase (attributed to climate change and other factors) +£5.5m – last 2 years (6.1% increase of overall cost of materials) — if we continue to see around 5% increase every 2 years — additional £15m by 2030. 
• Footfall drop continues along the same trend – another 25% by 2030. This is assuming the business doesn’t have strong mitigation strategies in place to mitigate the drop in sales (we have managed to mitigate against this, this year. We’re currently making this up by adding experiences, increasing conversion rate and also making our digital platforms more accessible. We will be looking at parametric insurance for certain NA stores and using a daily climate x footfall tracker. 
• Retail loss of sales due to extreme weather – due to better monitoring, we’re able to more easily predict the financial impacts of NA based store closures due to extreme weather such as hurricanes, wildfires and storms. Based on publicly available climate prediction models we’re predicting an increase of 112-200 stores being impacted by a closure within a year and a predicted loss of CAD $700k-1.2m by 2030.

RISK MANAGEMENT 

Lush does not currently have a formal risk management framework for climate related risks to be incorporated into – therefore climate risk identification is currently treated as a separate exercise. Consequently, this level of formal risk management is new to the business and is an evolving system being informed as more analysis is incorporated. The earthcare team and the TCFD groups have been engaging leadership from different areas of the business to map both existing and potential climate risks, opportunities and impacts. Engagement started in 2021 with the mapping of potential risks and some analysis on the climate and associated risks for our retail and manufacturing sites and we continued to build on that initial engagement.

We are also working with other key stakeholders across the organisation e.g., the buying team responsible for sourcing product ingredients, and global manufacturing representatives to understand future risks and existing exposure related to climate impacts specific to each area of the business across multiple time horizons. We are also moving to working on doing deeper risk analysis on key materials within the bioregions they grow. 

RISK IDENTIFICATION: The TCFD working group identified physical and transitional risks, including an early appraisal of potential materiality of these risks, through engagement with multiple stakeholder groups representing different areas of the business’ value chain. These stakeholders were classified for engagement as follows:

• Business Model & Innovation
• Supply Chain
• Manufacturing & Logistics
• Retail Property
• Consumers & Community

Engagement with these groups are done on an annual basis in order to capture any newly observed risks and to understand if the materiality of any previously identified risks has changed. The different areas of the business also report on climate risk impacting financial performance as part of our quarterly and annual reporting to directors and founders. We are therefore able to capture these occurrences on a quarterly basis. At present, most risks have been identified through dialogue or captured through departments quarterly reports. 

DATA COLLECTION INFRASTRUCTURE: An environmental risk register has been developed with a view that all areas of the business will be able to add any potential future risks, including quantification of potential financial impacts for different areas of the business. It is a live document that will be updated as new risks are identified. Initially we have focussed on material risks but will move towards taking a deeper look into opportunities going forward. The TCFD working groups agreed on short-, medium- and long-term timelines based on the overall strategy and outlook of the business. These timelines are being incorporated into the environmental risk register. 

For climate risk data impacting our supply chain. There is already a robust process for reviewing and collating each quarter, coinciding with crop planting and harvests. As we review our internal ERP systems and data capture software for the group, we are always seeking for better tagging of data associated with climate risk and impact such as product loss in manufacturing systems. It will take some time to build out a comprehensive picture of our full climate risk with these improved processes in place.

Metrics and Targets

TARGETS – The Climate and Nature Progress Report in the Directors Report addresses the aspirations we are working towards, under our Climate and Nature plan, for example, 100% renewable power by FY30. These targets have also not yet specifically been linked to climate-related risks and opportunities, although it’s recognised that some of these targets are linked to identified transitional risks. We are at the start of a complex and challenging journey and our strategy with respect to targets will continue to be refined as we develop our risk assessment and management analysis.

METRICS – To understand the efficacy of different interventions that would lead the business to increase its resilience, it’s important to ensure these metrics will enable performance to be measured over time.

We have historically collected and analysed environmental metrics at a market level for the markets with dedicated teams to this task. We now have a comprehensive list of global metrics and improving the global data around these metrics (as can be seen from this year’s footprint). We report these metrics internally on an annual basis on our We Are Lush Website and in the Director’s Report. 

The following are examples of the metrics we are currently voluntarily tracking to address double materiality under our current reporting structure based on the to-do list for Climate and Nature. The metrics that are most relevant to climate and carbon emissions are indicated in bold the table below:

Overall carbon metricsAbsolute scope 1, 2 & 3 emissions, including historical years where availableRemovals following Science Based Targets, Forest, Land and Agriculture (FLAG) guidance	Make our Materials Regenerative and Circular Naked% naked products in range% of naked sales (units and value) Waste Total Waste in Manufacturing & Retail Waste diversion in Manufacturing & Retail Waste Intensity Retail: kg of waste per £ of sale (corrected to the Price Index) Waste Intensity Manufacturing: kg of waste per units manufactured % product waste in Retail (% of costs) and Manufacturing (% of units) % of manufacturing product waste donated Bring it Back  Bring it back units returned Bring it back weight returned Bring it back % per shop and market  Packaging % of recycled, organic or regenerative packaging materials by weight (internal vs customer facing packaging) % of feedstock material used Total quantity of materials used for packaging  Packaging Intensity Manufacturing: kg of packaging per units manufactured Supply Chain Land use of natural material (ha): % under improved management: biodiversity friendly, perennial, agroforestry or polyculture, soil protection practices, rain-fed, pesticide-free Number and tonnage of materials with environmental co-benefits Number and tonnage of materials with social co-benefits Raw Material Land Pressure combined risk index, including carbon intensity and climate risk.
Protect Forests, Protect Wildlife% of materials that contain a palm derivativeNumber of ingredients from wildlife protection partnerships% of ingredients by weight natural, naturally derived, synthetics	Radically Reduce Transport Emissions Total emissions from transport% allocated to each type: people or product% emissions from use mode Tonne km % from air, road and sea freight
100% Renewable EnergyTotal Energy consumption (kWh)Energy intensity for Retail: kWh/m2 • kWh/£ sale Energy intensity for manufacturing: kWh/m2 and kWh/unit manufactured% renewable electricity from total global consumption	Water metricsTotal Water use in Manufacturing & Retail Water Intensity Retail: litres of water per £ of sale (adjusted) Water Intensity Manufacturing: litres of water per units manufactured Bath sales % per water stressed countries