June 2021 Progress Update: ELC's Commitment to Racial Equity

This letter was shared with Estée Lauder Companies global employees on June 8, 2021

Dear ELC Family,

One year ago, we came together for some of the most pivotal discussions in our company's history regarding race, and throughout the year, we continued this meaningful dialogue. The Estée Lauder Companies has long held inclusion and diversity among its core values. However, the movement in the aftermath of George Floyd's murder in May 2020 sparked a deeper, necessary conversation, one that encouraged all of us to hold one another to a higher standard of understanding, action, and accountability. We pledged to more fully understand the systemic issues surrounding race, identity, and representation and as a company, dedicated ourselves to being part of the solution for the long term.

Over the last year, we know that many of our employees experienced moments of profound pain as other communities felt the impact of social and racial injustice. Continued violent acts of hate and intolerance within our diverse communities-coupled with stress caused by political and religious divides and disparities highlighted by COVID-19-have lasting impact on our global employees and their sense of belonging. ELC will always condemn violence and acts of hatred in any form. While these matters are complex, we recognize that we can and should focus on what we can measurably achieve within our walls and in support of our global employees, all of whom bring different experiences and perspectives to the table and are deeply valued.

Our entire global ELC family has been part of a process to help one another understand what divides us and, imperatively, what unites us. Today, we want to express our gratitude and our pride for the compassion and support you have shown for one another and our global communities. Thank you also for being the catalysts of a closer connection to our consumers and to a more equitable future.

As we look to the future, we are hopeful. Our Racial Equity Steering Committee- led by Tracey Travis, Executive Vice President of Finance and Chief Financial Officer, and Michael O'Hare, Executive Vice President, Global Human Resources- laid the groundwork for sustainable, long-term change with our commitments to our Black employees and consumers. The goals serve as the foundation for our forward-looking and global approach to equity and engagement for all employees. Progress across several areas-including Listening and Learning, Talent and Opportunity, Representation, Suppliers, and Investing in Change-enables us to better address the systemic issues within our own internal structure and, ultimately, have the most impact over the long term. Notably, the company developed a new Equity and Engagement Center of Excellence (COE). This critical capability, led by Nicole Monson, Senior Vice President, Equity and Engagement, will not only drive progress and accountability for our commitments to the Black community, but also develop a long-term strategy to achieve equity across our organization and a pathway to further opportunity and advancement for all employees.

This past year, we accomplished the following as it relates to our commitments to racial equity across ELC in the United States:

Listening and Learning

• 94% of U.S. corporate and field employees completed unconscious bias trainings and training has begun in the U.K. The learning will continue as new trainings and programs are rolled out globally over the next fiscal year.
• 100% of the Executive Leadership Team completed one-on-one trainings, as well as team talent evaluations and support, through a newly launched Inclusive Leadership Behaviors and Talent Planning program.
• Our Inclusion and Diversity COE organized over 35 skill-building workshops globally on issues of race and micro-aggressions for specific brand and corporate audiences.

Talent and Opportunity

• The internal mentorship program, 'From Every Chair,' launched in February 2021 as a sponsorship and mentorship program for Executive Director-level, Black employees in the U.S., matched every participant to a leadership level sponsor or mentor.This program will continue to expand in the next fiscal year.
• We expanded the public disclosure of our U.S. employee race and ethnicity metrics by EEOC category and gender and racial pay equity disclosures through our Citizenship and Sustainability reporting.
• As part of our external recruiting efforts, we deepened partnerships with recruitment firms and national diversity organizations, such as the Executive Leadership Council and the National Black MBA Association.
• We launched 'She's Howard, Own Your Power,' a multi-year program in collaboration with Howard University that aims to recruit alumnae to participate in experiential learning, career advisement, professional training, and self-empowering mentorship opportunities.
• As of June 2021, 9.2% of new roles within the year in the U.S. were filled by Black candidates, a 3% increase year-to-year.

Representation

• Our Research and Development and Legal Task Force on Inclusive Beauty expanded capabilities and testing for inclusive skin tone and ethnicity. We also increased our collaboration with brands on growing product concepts, claims, and opportunities for Black skin and Black cultural relevancy.
• In February 2021, we launched an External Creative Advisory Board that meets quarterly with brand and creative leadership to accelerate our creative partnerships, expand our network of Black artists, and encourage the development of groundbreaking and relevant concepts and creative to connect to our Black consumers.
• As of June 2021, the majority of our brands developed unique internal councils and long-term strategies in line with their identities and areas of opportunities. All ELC brands made progress to increase representation within their teams, develop meaningful collaborations with external talent, and increase product offerings and culturally relevant campaigns and activations for consumers.

Suppliers

• We created a new role to lead our supplier diversity efforts. As part of this work, ELC joined the National Minority Supplier Development Council (NMSDC) and renewed its membership with the Women's Business Enterprise National Council (WBENC) to build connections and enable new supplier engagements with minority- and women-owned businesses. As of Q3 FY21, the company purchased more than $175M USD in goods and services from diverse and small-owned suppliers.

Investing in Change

• We initiated $5M USD to support external organizations and non-profitsthrough The Estée Lauder Companies Charitable Foundation and through ELC Good Works, ELC's global charitable matching gifts and volunteerism program. Employees made over 4,400 donations to various racial equity nonprofits through ELC Good Works, totaling $3M USD in employee donations and company matches. The company's matching of employee gifts is part of ELC's pledge to donate $10 million USD over the next three years to support racial and social justice initiatives and to continue to support greater access to education through groups such as NAACP Legal Defense and Educational Fund, Inc.; the Equal Justice Initiative; and The Young Women's Leadership Schools (TYWLS), a program of the Student Leadership Network.

This has been a year of foundational growth and a reaffirmation of our purpose for the future: to be the most inclusive and diverse company in the world.

We will continue to communicate our progress. Over the next fiscal year, you will see updates from other ELC leaders, including our newly formed Equity and Engagement team, as we expand programs and activities on racial and social equity to address additional critical areas within our employee population and our business.

Our gratitude is with each and every one of you, as well as the Racial Equity Steering Committee, our Executive Leadership Team, partners, and consumers for your dedication to this journey. The steps taken this year will allow us to progress even further in the year ahead. Thank you for taking the time to respect, show empathy for, and listen to one another. Together, we are paving the way for a continued bright future.

Sincerely,

William Lauder Executive Chairman The Estée Lauder Companies

Fabrizio Freda President and Chief Executive Officer The Estée Lauder Companies