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(Re)-building blocks

29 September, 2023

Earlier this week, the FT broke a story on Lego’s environment strategy U-turn. The world’s largest toy manufacturer has ditched efforts to transition from oil-based plastics to recycled polyethylene terephthalate (PET) to make its much-loved building blocks; emissions from recycled PET generated over the product’s lifetime would have been higher than the original oil-based plastics.

There’s a lot to unpack here. Let’s start with the drivers of the comparatively higher emissions of the solution that Lego had placed its bets on. While the shift to recycled PET aligned with Lego’s ambitions to eliminate fossil-fuel-based plastics by 2030 and become a more circular business, it would require investment in manufacturing equipment to produce this at scale, costing not only money but generating emissions too.

Recycled PET bricks would perform worse in terms of safety and durability (as those of us with bags of childhood Lego stored away know, oil-based Lego lasts for a very long time), requiring additional materials to be added to keep standards high – another driver of the increase in product lifecycle emissions. Lego is now shifting its focus to reducing the emissions intensity of its original formula to meet its 37% emission reduction target by 2032.

We suspect that Lego adopted a data-driven approach to reveal these insights, much like we do with our clients. Building a dynamic model to assess the potential impact (both positive and negative) and evaluating the feasibility of implementing various levers to decarbonise business operations and products is an invaluable tool when developing a net zero strategy. It can also highlight how solutions to address various sustainability goals can create conflicts – as Lego’s experience shows.

Businesses often reach the point of diminishing returns when striving to achieve emissions reductions from efficiency improvements, where growth in production output outpaces improvements to the emissions intensity of the product. Infinite resource use is not possible on a finite planet and that there are limits to what we can extract. We also know that continued fossil fuel extraction is incompatible with net zero.

Many businesses will have to undergo a complete business model transformation. Lego is exploring how to fundamentally change its business model to meet its 2032 (and beyond) goals. It will also work on phasing recycled materials into its bricks in the interim, phasing out the use of oil over time.  So, while this so-called set-back might seem like the first of many hurdles that Lego, and many other businesses with challenging targets, will inevitably face when adopting a holistic approach to sustainability, a change in strategic direction informed by data-driven insights seems sound to us.

By Jovontae Catline

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