Spotlight on LEGO Group

TL;DR

• The LEGO Group is one of the world’s largest toy manufacturers. It produces approximately 125 million moulded plastic pieces each day and sells 75 billion bricks a year to consumers in over 140 countries.

• Despite its core product using 80% oil-based materials, the Group is committed to making its operations more sustainable and has set ambitious targets.

• Alongside experimenting with renewable resin as an alternative to plastic in its products, LEGO has introduced renewable energy to its factories, drastically cut the amount of waste it sends to landfill and introduced clean water initiatives.

• It is also a prolific investor in renewable energy, contributing impressive sums to projects like the Burbo Bank Extension wind farm in Liverpool and carbon removal specialists Climeworks.

• The progress the company has made, its continued investment, and holistic approach to tackling its carbon emissions serves as an inspirational example for similar multinationals built on fossil fuels.

The detail

As one of the world’s most famous toy brands with its own film franchise, theme parks and interactive discovery centres, the LEGO Group is internationally renowned. Thanks to its partnerships with intellectual properties like Formula One, Harry Potter, Disney, Marvel and more, it attracts collectors of all ages, and its monthly releases are major events for brand enthusiasts.

Founded in Denmark in 1932 by carpenter Ole Kirk Christiansen, LEGO got its name from an amalgamation of the Danish phrase ‘leg godt’, which translates as play well in English.

But is it possible to play well and protect the environment?

Despite its different offshoots, LEGO’s main product is its iconic plastic brick. First patented in 1958, it’s estimated that 400 billion LEGO bricks have been produced in the last 66 years – equivalent to 62 bricks for every person on the planet – and they continue to be manufactured in vast quantities today. Approximately 125 million moulded plastic pieces are produced each day and LEGO sells 75 billion bricks each year with markets in over 140 countries.

In 2023, the LEGO Group’s reported revenue was approximately 66 billion Danish kroner, which equates to roughly 8.8 billion euros, and it has 1031 stores worldwide. There are currently 780 products in its portfolio and 50% of those sets are new lines, all produced in its own factories. The Group manufactures its bricks in five countries - Mexico, China, the Czech Republic, Hungary, and Denmark - with two new factories in the works in Virginia, USA, and Vietnam.

Unsurprisingly, a company of this size and scale has a substantial carbon footprint; its bricks are made from oil-based plastic, after all. However, one of the most refreshing aspects of the LEGO Group is that it acknowledges it has a problem and has pledged to make sustainability a priority. Its many initiatives address the environmental impact of everything from its products and packaging to the operations in its factories and its global supply chain.

Its targets are ambitious. The LEGO Group has pledged to achieve net zero by 2050, send zero waste to landfill, and increase its investment in carbon emissions reduction and sustainability measures from 2023 to 2024 by $1.4 billion. This builds on the 60% increase in spending on environmental initiatives that the company already achieved between 2022 and 2023.

Solving the plastic problem

Bricks are arguably the most pressing problem – and there’s no immediate solution on the horizon. 80% of the LEGO Group’s bricks are made from oil-based materials and, despite having tested over 600 replacement materials, success has been limited. Potential alternatives like recycled polyethylene terephthalate, for example, have been discounted as they would have produced more carbon emissions over the product’s lifetime than existing materials.

Even so, some more sustainable materials are already being used. A new material known as arMABS is crafted from a type of recycled artificial marble and is typically used in kitchens, yet LEGO has found a way to use it in around 60% of its sets. ePOM is another success story; made from biowaste such as cooking oil or food industry waste fat, which replace the virgin fossil fuels used in plastic production. ePOM will soon be found in LEGO elements such as wheel axles.

With an overarching aim to make all its products from renewable and recycled materials by 2032, LEGO has chosen to invest in renewable resin. In fact, it is paying up to 70% more for certified renewable resin than its existing materials as it hopes this investment will encourage the companies making this more sustainable substance to increase their volumes and eventually lower prices. Its sustainability is measured using the mass balance method, an auditable way to trace sustainable materials through the supply chain. In 2024, 18% of all the resin LEGO purchased was certified according to mass balance principles and 12% came from renewable sources. These figures represent an 83% increase in the amount of renewable content in LEGO bricks during the first half of the year.

Starting at the source

As the product is proving to be one of the most challenging parts of operating more sustainably, LEGO has turned its attention to improving its emissions in its factories. The two new sites in the USA and Vietnam have been designed with solar energy in mind, building enough on or off-site solar facilities to meet their energy needs. Across its existing factories, LEGO increased its investment in solar capacity by 16%, adding 2.2 MWp. By the end of 2024, it plans to have increased its renewable energy production capacity by 60%. At its HQ in Billund, Denmark, a solar park is also in the works, which aims to cover the energy demand of the offices and sites across town, helping LEGO double its renewable energy production by the end of 2026.

Solar isn’t the only type of renewable energy the Group is adopting. In Hungary, the factory is installing a geothermal energy system, which should replace most of the natural gas it uses for heating, cooling, and machine operations. Its Billund site is also phasing out the use of natural gas and hopes to reduce its total Scope 1 and Scope 2 emissions by over 10%. This move away from fossil fuels in factories is being complemented by water clean-up and conservation activities; in Hungary, a sand filter optimisation project is underway while Mexico is pioneering an ultrafiltration project that uses treated wastewater from the local community.

Waste management has also been high on the company’s agenda. Its packaging has been improved with the introduction of paper-based bags, and it’s on track to eliminate single-use plastic bags in 2025, while 2023 marked the second year in a row that less than 1% of waste from LEGO factories went directly to landfill. Instead, almost all the waste generated was either reused, recycled, composted, or sent to non-landfill waste treatment centres.

Beyond renewable energy, water conservation, and waste management, the LEGO Group is also taking action to reduce its absolute carbon emissions by 37% by 2032. The company has changed its policies to reduce the amount of employee travel taking place and, since 2023, has tied the compensation of some of its executives to the Group’s emission reduction performance. After identifying that 98% of its emissions footprint originates in its supply chain, the Group now also works with suppliers through its Engage to Reduce programme to encourage them to reduce their environmental impact. For consumers, LEGO is experimenting with the circular economy, introducing the Replay programme to encourage shoppers to donate their unwanted bricks, have them sorted, cleaned, and then redistributed to charities.

Investing in the future

One of the more unique ways that the LEGO Group is addressing its shortcomings in making its product sustainable is by investing in renewable energy initiatives outside of its core business. To quantify the benefit of its investments, the Group uses its own financial tool known as shadow carbon pricing, which places a monetary value on the carbon emissions linked to a project. LEGO is a prolific investor; since 2012, the Group has supported the development of more than 160 megawatts of renewable energy.

In 2017, the LEGO Group bought a 25% stake in the Burbo Bank Extension, a wind farm off the coast of Liverpool in the UK. The farm is expected to generate power for over 230,000 households and meant that LEGO met its 100% renewable energy milestone three years ahead of target as the total output from its renewable investments now exceeds the energy consumed by all LEGO factories, stores, and offices.

Burbo Bank isn’t the only UK venture that LEGO is helping to fund. The Kristiansen family, who founded the LEGO Group, has an office known as KIRKBI, which contributed to Highview Power’s recent £300 million investment round. This money will be used by Highview to construct a 50 megawatt long-duration energy storage project in Carrington, Manchester using its proprietary liquid air energy storage technology. As Kasper Trebbien, VP Head of Energy Transition Investments at KIRKBI explains, “With this important investment…we are looking to support the UK’s first commercial-scale liquid air energy storage facility and play a positive role in the UK’s energy transition.”

As well as Highview Power, the LEGO Group is also investing in innovative new carbon removal technologies. In 2024, the company entered into a £2.4 million carbon removal contract with Climeworks. Operators of the largest direct air capture facility in the world, Climeworks makes technology that filters carbon dioxide emissions out of the air and can capture and storing 4,000 metric tonnes of CO2 each year.

This impressive investment portfolio coupled with the LEGO Group’s ambitious carbon reduction targets and its continued attempts to find sustainable alternatives to oil-based plastics prove that all companies can and should do more to limit their environmental impact. If a business of this size and scale – and one that is built on fossil fuels – can find so many different ways to curb its carbon emissions and invest in renewable energy, there is no reason why similar multinationals can’t do the same. It also exposes the variety of different ways that carbon emissions can be addressed by taking a holistic approach that spans every sector of the business.

The LEGO Group still has a way to go when it comes to making its core product one that is compatible with a sustainable company, but its progress serves as an example to all. Looking at its results so far, its really a company that others should look up to.

— Lew 👋

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