LEGO Embraces Recycled Plastic Despite Rising Production Costs

LEGO, the Danish toy company, will replace the fossil fuels used to manufacture its bricks with recycled plastic. This move represents a significant increase in production costs, which the toy maker is willing to absorb following growing profits in 1H24.

LEGO is the most successful toy company in the world, with an estimated value of €7.5 billion (US$8.2 billion), according to a report by Brand Finance. In line with its sustainability goals, the company plans to produce all its products from more sustainable materials by 2032. LEGO announced at the end of August that it intends to gradually reduce the oil content in its bricks and pay up to 70% more for certified renewable resin, the raw plastic used to make the bricks, to encourage manufacturers to increase production.

Neils Christiansen, CEO, LEGO, explained that the company is on track to ensure that more than half of the resin it needs in 2026 is certified according to the mass balance method, compared to the 30% used in 1H24. The mass balance method is a way to increase the amount of renewable and recycled inputs in the raw materials purchased by the company. This is done by mixing virgin fossil sources with certified renewable and recycled sources (such as used cooking oils or plant-based oils) to produce the material used in LEGO products.

In the past, the company has tested more than 600 different materials to develop a new material that could completely replace its oil-based brick, but with limited success. In 2021, the company created a prototype brick made from PET plastic bottles. However, after two years of continuous development, it did not achieve the necessary global carbon reduction to meet the company's goals, so the project was discontinued.

Christiansen pointed out that these changes represent a significant increase in the cost of producing a LEGO block. “For a family-owned company committed to sustainability, it is a privilege to be able to pay more for raw materials without having to charge customers more. We do not see that consumers are really willing to bear that cost,” he said during an interview with CNN.

The Danish company reported that its profits in 1H24 increased by 26% to DKK$8.1 billion (US$1.2 billion). Moreover, consumer sales grew by 14% due to strong demand for its diverse portfolio, especially in the Americas and Europe. LEGO’s results came despite global toy sales being affected as consumers cut back on non-essential spending. In this regard, Hasbro (HAS), the American toy maker, announced plans to cut 20% of its workforce at the end of last year due to declining sales, as reported by Reuters.

Other measures taken by LEGO to reduce its carbon footprint include the use of recycled materials. Since 2018, the company has been using bio polyethylene (bio-PE), which is obtained from sugarcane, to manufacture flexible elements included in its toy sets. The sugarcane is sourced from Brazil, following WWF guidelines to ensure sustainable farming practices and food security for supplying communities. Additionally, the transparent elements in its toys contain 20% recycled materials from artificial marble kitchen countertops.

The LEGO Replay program aims to collect used bricks to give them a new life in the United Kingdom, the United States, and Canada. Furthermore, the company encourages customers around the world to donate bricks they no longer need to friends or family, to charities, or to local schools, to help ensure that LEGO bricks are used over and over again.

The recycled or renewable plastic market is still in its early stages. According to Neste, the world's largest producer of renewable raw materials, fossil-based plastic costs about half or a third of the price of sustainable options. This is due to several factors, including major investments by leading oil companies in petrochemical products and the use of raw materials to produce subsidized biodiesel, which is blended with transportation fuels.