How Lego is countering strategic laziness

“We strive to play our part in helping build a sustainable future and make a positive impact on society and the planet, which children will inherit.

“By engaging with our entire value chain, we aim for zero environmental impact while driving positive change for children by helping them develop critical skills to thrive today and in the future through Learning through Play.”

This is Lego’s “planet promise” on the “brand values” page of its website. Taken on its own, you could argue it’s meaningless: the vague messaging and tone is typical of environmental pledges you will see on any other company website.

However, it took on more meaning after seeing Lego’s recent financial results for the first half of 2024. While the triumphant headlines focused on financial performance - it posted a record operating profit of £916m, up 26% from the same period last year, with revenues increasing 13% to £3.5bn - at the bottom was a line about sustainability. It said 22% of the plastic resin used to make its bricks came from renewable and recycled sources, up 10%.

But what really caught my attention was a subsequent interview Niels Christiansen, Lego’s CEO, gave to the Financial Times about this approach.

“It is 40 to 50 to 60% more expensive in material terms,” he said. “We don’t pass that on to the consumer. It comes out of our ebit [operating profit] line.”

Christiansen now believes the company is on track to meet its goal of all products being made from renewable and recycled materials by 2032.

In my previous newsletter focusing on the leadership of Elon Musk, I mentioned a phrase I often use when assessing the corporate landscape: strategic laziness. Look at many companies and ask yourself a question: are their executives and boards strategically lazy? And by that, I don’t mean they don’t work hard - I mean they don’t voluntarily disrupt things. They are stuck in the status quo.

On the other hand, Lego’s work towards removing fossil fuels from its toys by 2032, and the way it is going about it by using its growing profits (which Christiansen said have been partly driven by partnerships such as with the popular Fortnite video game) to absorb the extra cost and not pass it onto customers, is the opposite of strategic laziness. 

Granted, there is a long way to go given the vast majority of the materials in its toys still derive from fossil fuels. There have also been high-profile bumps in the road, such as last year’s abandonment of plans to make its bricks from recycled plastic bottles.

Meanwhile, there are some critics of the so-called mass balance approach that Lego subscribes to. This involves using materials “that are a mix of both virgin fossil and renewable raw materials”. Lego says this approach is not the end goal, but one to “help us embark on the transition” to 2032.

Even taking this into account, Lego has still done what many large “strategically lazy” organisations fail to do. It has been prepared to accept the status quo - unlimited consumption of the earth’s resources - isn’t working, and started to act on it in a way which not only establishes links to society but also consumers.

For the past decade, I have regularly used a “mountain to mountain” metaphor as part of my teaching work with Saïd Business School, and as an executive coach.

See the two mountains side-by-side. The first represents legacy business models which are running out of road. The second represents business models of the future which need to be achieved to transcend disruptive challenges brought about by climate change, technology, political instability etc.

Lego is beginning to change things because it is taking a hit - by paying more for sustainable materials - while showing doing the right thing, in this case trying to address climate change, can work alongside generating more profit.

In short, Christiansen is seeing sustainability not as a risk, but an opportunity. Is Lego showing other companies the way up the second mountain?

A message from the author

Thank you for reading the 67th edition of the Leadership 2050 newsletter. As CEO of Transcend.Space and senior fellow of management practice at the University of Oxford’s Saïd Business School, my work, research and teaching focuses on how leaders transcend 21st century challenges such as disruptive technology change, the climate crisis and creating diverse and inclusive environments… alongside the ongoing challenge of delivering profitable growth. Through Transcend.Space and Saïd, where I direct the Oxford Advanced Management & Leadership Programme, I have worked with leaders from many geographies, industries and governments. All this has given me a deep understanding of how good leaders create value - and bad leaders destroy it. Never before has this topic been so important on a global stage, hence why I am undertaking this work.