Lanolin oil is extracted by putting sheep's wool through a centrifuge machine that separates the oil from other chemicals and debris. The process is performed after the sheep is sheared so the extraction of lanolin causes no harm to sheep. You may already be using products that contain lanolin oil without realizing it.
Are sheep killed for lanolin?
Technically-speaking, sheep do not die as a direct result of lanolin production because it is obtained from their wool. However, as sheep age, their wool production gradually slows (just as humans lose density in eyelashes, eyebrows, and hair).
How do they collect lanolin?
Lanolin is extracted by washing the wool in hot water with a special wool scouring detergent to remove dirt, wool grease (crude lanolin), sweat salts, and anything else stuck to the wool. The wax is then obtained using either centrifugal separation or solvent extraction.