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October 21, 2021
LEGO is the second largest toy company in the world by revenue, according to the latest figures, and has plenty of examples to show how sustainability and ESG can be embraced. Find out more in this Commercial Awareness Update.

Market Context

Each year, more than 330m tonnes of plastic is produced worldwide. Danish toy manufacturer LEGO is responsible for 100,000 tonnes of it.

LEGO also sees one of the largest worldwide revenues of a toy company: in 2020, LEGO’s revenue superseded Hasbro (American toy and board game conglomerate) and Mattel (owner of Barbie, Hot Wheels, Thomas & Friends and Fischer Price). It’s second only to Bandai Namco (video-game developer), according to Statista.

However, LEGO is also an industry-leader in its approach to sustainability, having unveiled a number of climate-oriented initiatives over the last few years.

Moving Away From Plastic

LEGO currently uses oil-based bricks, and manufactures between 110-120billion plastic pieces each year. These are made from ABS, a petroleum-based thermoplastic, which recycles poorly and takes a long time to breakdown. A study at the University of Plymouth predicts that LEGO bricks could survive in the ocean for any time between 100 and 1000 years.

In response to this, LEGO pledged $155million of its 2015 annual income into a new Sustainable Materials Centre, which has since been testing a variety of sustainable products to replace the ABS in their plastic bricks. In 2018, the company set a target to manufacture all of its products from sustainable materials by the end of 2030.

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Experimenting With New Materials

The first tangible result came from a polymer made of sugar cane. However, the company does not believe sugar cane can be scaled beyond 2% of its bricks.

In June this year, LEGO unveiled its prototype for a brick made from recycled drinks bottles. A one-litre plastic water bottle will yield roughly 10 standard LEGO bricks. CEO Niels Christiansen would like these recycled bricks to retail within the next two years and begin to replace those made from plastic in the years to come.

No More Plastic Packaging

In line with its 2018 target, LEGO has also already started phasing out plastic packaging. In 2020, the company made a £310m commitment to make all packaging sustainable by the end of 2025.

This target will be accompanied by the use of more renewable energy in LEGO”s manufacturing processes. The firm currently emits 1.2m tonnes of carbon each year, one-third of which is from manufacturing the bricks.

Embracing Green Investments

More broadly, LEGO’s family-owners the Christiansen’s have embraced green investments. The family’s Kirkbi fund was founded to build a sustainable future and has recorded sustainable investments in ventures such as Quantafuel, which converts almost all kinds of plastic into green fuel and chemicals.

Talking points:

  • What are LEGO’s rivals doing to become more sustainable?
  • How can smaller toy companies with less money and resources compete when investment into renewable energy and bio-products is more expensive?
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