November 2020 Progress Update: ELC’s Commitment to Racial Equity

This letter was shared with Estée Lauder Companies global employees on 13 November 2020.

Dear Colleagues,

Our collective vision is for The Estée Lauder Companies (ELC) to be the most inclusive and diverse beauty company in the world, and to be both the employer of choice for diverse talent and the brands of choice for diverse consumers. Our commitment to driving Racial Equity across our business is central to us achieving our vision.

When we released Our Commitment to Act on Racial Equity in June, we emphasised the importance of continuous listening and learning as we work towards that goal. We recognise that this is the first step and want to thank you for your continued participation and passion in this effort.

Since our last update in August:

• 1,600 employees from around the world joined a Global Town Hall meeting on Racial Equality in September.
• More than 4,500 employees attended virtual employee engagement events hosted by corporate functions and our employee resource groups (ERGs).
• We hosted Global Inclusion & Diversity (I&D) Week from 21-25 September with approximately 6,000 employees attending live, virtual events in five regions.
• 3,000 employees attended virtual Unconscious Bias trainings, and numerous smaller team meetings have taken place with leadership and employees across our ERGs and other parts of the business to help us continue to learn.
• We would also like to thank and recognise ELC's Network of Black Leaders and Executives (NOBLE) who have organised a number of events for leadership and NOBLE ERG members, and who are partnering with the Global Talent and Inclusion & Diversity Centre of Excellence teams to develop a sponsorship and mentorship programme for Black employees.

Employees around the world have also continued to share feedback. While many have shared appreciation for the steps ELC is taking, employees are interested in updates on progress regarding recruiting and growing talent.

Questions received since September show a desire to understand our progress in this area:

• 53% focused on talent growth and development, equity and transparency
• 23% on how we will measure success
• 16% on how we will ensure advancement and foster an environment of inclusion for all minorities and ethnicities in our diverse employee base
• 6% on the expectations and training of senior leadership
• 2% on ELC’s progress on the hiring of Black-owned businesses and involvement in the product development and creative process

While future Racial Equity updates will focus on progress across the entirety of our commitments, today we felt it was important to focus specifically on talent. We are pleased to announce several actions underway as of 12 November 2020:

1) Progress Against Our 2025 Parity Goals

In June, we committed to reaching US population parity for our Black employees across all levels in the next five years. Progress includes:

• While our promotions and hiring have been disrupted by the necessary adjustments our business has made during the COVID-19 pandemic, our hiring is showing signs of forward momentum.
• We have doubled our rate of hiring Black employees, with representation of Black employees accounting for approximately 14% of corporate employees in the first part of this Fiscal Year; indicating we are making progress towards our goal of racial parity by 2025.
• While we focus on the professional advancement of our existing talent, we are also engaging prospective job candidates from a wide and varied pool.

2) Leadership Responsibility

• Managers across ELC are responsible for employees’ growth and career mapping by ensuring access to skill development, talent planning and conversations about progression within the Company, early and often.
• By the end of the calendar year, each brand, region and function leader in our US Executive Leadership Team will receive personalised dashboards on the diversity of their teams.
• Each leader will play a critical role in increasing diversity over time, including having diverse slates of candidates for all Executive Director and above positions in external and internal searches before employment decisions can be made, and ensuring diverse talent is represented in talent progression plans as well as recruitment plans and pay equity.
• We have increased dedicated resources across HR and I&D to ensure we are training our leaders effectively, while taking steps to ensure our progress is sustainable, process-driven and transparent.

3) Employee Diversity Data

As part of our ESG (Environmental, Social, Governance) reporting, we disclosed our US workforce diversity metrics and pay equity data in ELC's Citizenship and Sustainability Report, published on 2 November.

• Today, we have launched an internal Racial Equity page where employees can access data updates and information on the diversity of our US workforce.
• The US workforce data shows that non-White employees, or employees that self-identify as people of colour, make up approximately 48% of our total US employee population.
• Within that percentage, employees who self-identify as Black or African American comprise approximately 13% of the overall population across corporate, retail and manufacturing and distribution. Approximately 4% of Directors and above and 4% of VPs and above identify as Black or African American.

4) Employee Pay Equity Data

We have taken several actions to continue to cultivate a community of trust and transparency, including the decision to engage the expertise of a labour economics consultant from a globally reputable firm to assist us in completing a pay equity study for our global workforce. As part of this study, we conducted an in-depth statistical analysis of employee compensation, based on like-for-like jobs, considering factors such as grade, experience, time in role, location and performance, among others.

Results show:

• All else being equal, the results of this study show that globally there is a modest, statistically significant pay gap for women, who earn 98.2% of what men earn and that overall, in the United States, there is statistical parity with White employees for Black and LatinX, as well as other non-White employees collectively, resulting from a small gap in the aggregate.
• We are strongly committed to closing the remaining gaps and believe that gender and racial pay parity is an important step towards achieving full equity in all aspects of employment at The Estée Lauder Companies. We also believe that achieving equity requires a holistic approach; one that further invests in our diverse talent through career advancement, development programmes, hiring practices and enhanced talent management to ensure sustainable progress over the long term.
• We already have many programmes underway in support of this, such as the Women’s Leadership Network and the Racial Equity Programme, which we will continue to expand and scale. We are developing a strategy to close any existing pay gaps in a way that addresses identified sources of pay differences and protects against their re-emergence over time.

Our Progress Continues

While there is more work to do, we want to thank you, and particularly our teams across HR and I&D, for this strong work on talent, as well as our Racial Equity Operations Committee for their continued, daily efforts and focus that keep us moving toward our goals. We encourage employees to visit the new Racial Equity page regularly for updates on progress and exciting collaborations happening across our brands and functions. As always, be kind to one another, support one another and continue to share your feedback.

Sincerely,