August 28, 2024 – In a major push toward sustainability, Lego, the world-famous toymaker, vowed to switch the company’s iconic bricks from plastics made using fossil fuel to renewable and recycled options by 2032. This ambitious step aligns with the Lego Group’s broader environmental ambition and shows how determined this leading company of the toy industry is toward steering it into a greener future with arising production challenges.
A Strong Financial Backdrop to Sustainable Growth
Lego reported strong financials for the first half of 2024 and announced it is going to invest in using more renewable materials. The company’s profits increased by 26%, reaching 8.1 billion Danish krone, or about $1.2 billion. Such growth underlines the resilience that Lego has shown and how its products continue to maintain strength, even in a very challenging market environment where competition is high today.
Our product portfolio resonates super well across ages and interests,” CEO Neils Christiansen told CNN. Strong demand for Lego is what undergirds the company’s financial stability to absorb the higher costs attached to its sustainability programs without increasing prices on consumers.
Investing in a Greener Future
Greatly invested and innovative, Lego’s road to sustainability has had more than 600 different materials tested, as the company pursues an alternative feedstock to oil-based plastic that is substitutable in its production, with a target of only renewable and recycled materials by 2030. The move, however, is not without its challenges; among them is the immense rise in the production cost.
Now, Lego invests in the development of certified renewable resins with a view to gradually reducing the oil content in the bricks. That transition could surge production cost up to 70%. The strong family ownership and commitment toward sustainability of Lego have thus far enabled it to give more value to environmental responsibility than to short-term profit margins.
That means a very big increase in the cost of making a Lego brick,” Christiansen told Reuters, underlining what such a sustainable transition can carry along with it in financial costs. Yet, he added that strong business performance and committed family owners allow Lego to absorb such costs without passing them on to consumers. “With a family-owner committed to sustainability, it’s a privilege that we can pay extra for the raw materials without having to charge customers extra,” Christiansen added.
Leading the Market in Sustainability
By 2026, Lego is committed to ensuring more than half of the resin it uses is certified under the mass balance approach, which is a sustainable practice for mapping the origin of materials throughout the supply chain. This represents an almost doubling from the 30% achieved in the first half of 2024. Beyond creating a new benchmark within the toy industry, Lego Group now is in the forefront in the global movements for sustainable business operations.
LEGO’s move into renewable materials is happening in a market filled with cheap virgin plastics, due to heavy investments in petrochemicals by major oil companies. That market dynamic lends additional challenge, as renewable materials are often more expensive and less available than those sourced from fossil fuels.
Undeterred, Lego’s suppliers have started innovating with bio-waste derived from used cooking oil and waste fat from the food industry to replace virgin fossil fuel. That wider push to improve Lego’s sustainability fits into the building block company’s ambitions to reduce its carbon footprint.
Christiansen remains optimistic about the future of sustainable materials. “We sense more activity and willingness to invest in this now than we did just a year ago,” he said, although he would not disclose details about suppliers or pricing. This is all part of a wider industry trend, whereby companies increasingly realize the worth of sustainability within their operations .
Challenges and Opportunities Ahead
LEGO’s strategic move to replace oil-based plastics with renewable alternatives shows the company’s long-term vision for sustainability. As other companies might refrain from making the transition due to increased costs of production, LEGO will be leading the market, and also setting a good example, by absorbing the extra cost of production. As the industry leader, Lego has set a very high benchmark for its commitment to sustainability, not only for its immediate competitors but also places it at the forefront of significant changes in the toy industry to greener practices.
Hasbro and Mattel have taken steps in the name of sustainability, but neither has committed as firmly, or publicly, to a full transition away from virgin plastics. Lego’s bold move is likely to influence the whole industry, with other companies probably moving in for more feasible sustainability practices.
In this light, Lego’s strategic choice to invest in renewable materials and absorb the costs of the process is one more manifestation of environmental responsibility. Though painful, it is the right thing to do in accordance with Lego’s long-standing values and its cherished vision of a sustainable future: “This challenge is a privilege for the LEGO Group, and it complements our long-term commitment to leading the toy industry towards a more sustainable and responsible future.”.