How LEGO is Building Towards a More Sustainable Future
In a toy industry grappling with market downturns, LEGO has not only maintained its position at the top of the tree, but has also posted record-breaking results for the first half of 2024.
The Danish toymaker's success, however, goes beyond profit margins. LEGO's commitment to sustainability, particularly within its supply chain, is setting new standards for the industry and providing a blueprint for responsible manufacturing.
Sustainable materials as a foundation of change
Recently, LEGO has made huge strides in increasing the amount of sustainable materials it uses in its iconic little bricks. During the first half of 2024, the company reported that 30% of all the resin it purchased was certified under the mass balance principle, translating to an estimated 22% of material sourced from renewable and recycled sources.
This marks a substantial improvement from 2023, when only 18% was certified mass balance, equating to 12% sustainable sources for the full year. If LEGO continues to make year on year progress like this, there is hope that its products could be 100% sustainable within the next two decades.
Carsten Rasmussen, COO at the LEGO Group, says: "We continue to invest in expanding our global supply chain network, maintain a strong focus on harvesting productivity and have made significant progress on our sustainability ambitions by increasing the amount of sustainable raw material used in our products."
Ambitious targets for a greener future
LEGO's sustainability efforts are not just a token gesture. The company has set ambitious targets for the coming years, aiming to purchase more than half of its raw materials from sustainable sources, with a view to reducing its use of virgin fossil materials.
The first half of 2024 also saw LEGO intensify its focus on reducing greenhouse gas emissions. A key initiative in this area is the launch of a Supplier Sustainability Programme, which mandates that suppliers set emission reduction targets by 2026 and further targets by 2028. LEGO has even linked annual carbon emissions reductions to employee bonuses, creating strong incentives for its sustainability team.
Supply Chain Innovation: A Global Approach
As with all good business decisions, LEGO are thinking a few steps ahead with their sustainability strategy. You can see this when examining how well their sustainability goals and supply chain strategy dovetail.
LEGO is focusing on expanding its supply chain and operational capacity, but they are doing this by locating production and distribution facilities closer to major markets.
This approach not only reduces emissions related to transport but also allows for more efficient resource management.
Recent developments include the opening of a new European Regional Distribution Centre in Belgium and ongoing construction of factories in Vietnam and Virginia, USA, set to open in 2025 and 2027 respectively.
These additions to LEGO's global manufacturing footprint are clearly designed with sustainability in mind.
The Business Case for Sustainability
LEGO's sustainability initiatives are not just good for the planet, they're also proving to be good for business. The company reported revenue growth of 13% and consumer sales growth of 14% in the first half of 2024, significantly outperforming the toy industry. Operating profit grew by 26% and net profit by 16% compared to the same period in 2023.
Niels B Christiansen, CEO at LEGO, emphasised the importance of sustainability in the company's overall strategy: "We're very pleased with our strong performance in the first half. We delivered double-digit growth on the top- and bottom-line and made significant progress on increasing the amount of sustainable materials used in our products.
“We used our solid financial foundation to further increase spending on strategic initiatives, which will support growth now and in the future to enable us to bring learning through play to even more children."
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