Assignment 2 - LEGO - lego PDF

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Introduction Corporate social responsibility (CSR) is a broad and continually evolving subject that can be defined in many different ways (Sweeney & Coughlan 2008). The topic of CSR encompasses many complex ideas and practices viewed differently by different companies. Although many different definitions have been proposed, more recently the definition tends to focus on the responsibility firms have towards its various stakeholders (Sweeney & Coughlan 2008). Whether a company approaches CSR activities voluntarily or solely benefiting off its positive image, it has since become a critical part of an organization’s structure. A prime example of a company that thrives on its CSR work is The Lego Group. This report will explore the ways in which The Lego Group has gone above and beyond typical CSR activities. As one of the top firms for CSR activities (Reputation Institute 2019), the company is constantly striving to be the best, following their slogan “Only the best is good enough” (The Lego Group 2019). Through the consideration of their achievements and progress, recommendations on how their efforts may be improved are also explored. Arguments to the recommendations which are typically finding alternatives to plastic and using methods to reduce, reuse and recycle will be discussed.

Company Overview The Lego Group (hereafter referred to as “LEGO”) is a Danish toy production company that is best known for manufacturing interlocking plastic blocks, branding themselves as “LEGOs”. The company was formed in August 1932 by Ole Kirk Christiansen who worked as a carpenter prior to the production of toys (The Lego Group 2019). The inspiration of forming a toy production company came to him when he made a wooden duck toy for his children (The Lego Group 2019). The name “LEGO” derives from the Danish phrase “leg godt” which translates to “play well”; this phrase became the name and motto for their company (The Lego Group 2019). Fast forward to this day, LEGO has transformed into a modern, global enterprise with several amusement parks, known as Legoland, as well as operates numerous retail stores all around the world (The Lego Group 2019). Despite LEGO’s mass expansion over the years, it remains a privately held company that is currently owned by the grandson of Ole Kirk Christiansen, Kjeld Kirk Kristiansen (The Lego Group 2019). The mission statement of the company is to “inspire and develop the builders of tomorrow” (The Lego Group 2018).

Analysis of LEGO’s CSR activities Over the past 87 years, LEGO has gained a reputation as one of the most socially responsible organizations in the world. Recently, the company came in first place for Reputation Institute’s 2019 Global Corporate Responsibility Study (Reputation Institute 2019). Throughout the years, the company has not shied away from advocating their CSR policies as they believe that they bare a unique responsibility to children who are the “builders of tomorrow”, leading them to invest over $150 million in an effort to make all LEGO bricks as well as packaging sustainable by the year 2030 (The Lego Group 2018). This promise stems from their main CSR priorities of reducing wastage as well as tackling the rapidly deteriorating state of the climate (The Lego Group 2018). LEGO’s policies align with that of Crane et al.’s (2008) definition of CSR, or more accurately, the six characteristics of CSR. First and foremost, their ability to voluntarily go above and beyond the law by implementing numerous different ways to help the world and the environment coincides with Crane et al.’s (2008) first characteristic of CSR, which is to “voluntary activities that go beyond those prescribed by law”.

Use of responsible resources According to Vogel (2005), there are three possible factors of why companies choose to behave responsibly in the absence of legal requirements, it could be strategic, defensive or altruistic. In LEGO’s case, it could appear strategic or altruistic depending on one’s own perception. So far, LEGO has managed to find many sustainable alternatives to their operations. For example, not only did they manage to cut down the size of their packaging, they have also added “How2Recycle®” labels to their packaging in the US as well as introduced Forest Stewardship Council (FSC) certified packaging (The Lego Group 2018). Furthermore, LEGO has also hired over 100 employees to work on a sustainable materials project in Denmark in an effort to find a more sustainable way to make LEGO bricks so that they can achieve their goal of reducing wastage and have less of a negative environmental impact (The Lego Group 2018). In 2018, it was announced that LEGO had successfully achieved its goal of being 100% balanced by renewable energy due to the investments they made in offshore wind farms in Germany and the UK (Holbrook 2019). This was a big achievement for LEGO, especially because the amount of energy used to create LEGOs as well as powering offices and stores required more than 360

gigawatt hours of energy (Holbrook 2019). By purely using renewable energy sources, LEGO is also able to follow the second characteristic of Crane et al.’s (2008) characteristics of CSR which is by “internalizing or managing externalities”. Many of their goals, performance, progress and achievements are reported in their annual Responsibility Report that is shared to the public.

Focus on children Other than their efforts to reduce wastage and carbon footprint, their responsibility report also highlights their focus on children as their whole business idea relies on future generations (The Lego Group 2018). Their focus area is to maintain the highest standards for quality and safety in order to inspire and engage children in learning through the act of playing, which interlinks with their brand of “Only the best is good enough” (The Lego Group 2019). According to LEGO, playing with LEGOs allows children to develop their social, cognitive and emotional skills (The Lego Group 2018). By creating a game without discriminating against children whether it be their ethnicity, culture, gender or age, LEGO encourages the development of children’s imagination and creativity. Moreover, in an act of inclusiveness, earlier this year, LEGO announced that it would produce Braille bricks in an effort to teach Braille to blind and visually impaired children (Daley 2019). According to the treasurer of European Blind Union, Philippe Chazal, this will help boost the interest of visually impaired kids to learn Braille as Braille is an importance to helping users be more independent, have a higher level of education as well as a higher chance of employment (Daley 2019). The commitment to their core practice of putting the world’s needs ahead of their own are consistent with Crane et al.’s (2008) sixth characteristic of CSR which is known as “beyond philanthropy”. This characteristic is based on the assumption that CSR activities should be integrated into the day-to-day operations of a business; rather than the values being “bolted in”, they should be “built-in”.

Positive impact through partnerships Evidently, LEGO has done countless of selfless act in order to play their part in helping children, people and the planet. It is stated in their Responsibility Report (2018) that due to the deteriorating state of the climate, they believe that future generations will struggle. Crane et al.’s (2008) third and fifth characteristics of CSR, which are multiple stakeholder orientation, and practices and values correspond with LEGO’s interest to “make a positive impact on the lives of

children, colleagues, community and the planet” (The Lego Group 2018). In 2003, LEGO became the first toy production company to join the world’s largest CSR initiative and made a commitment to the United Nation’s (UN) Sustainable Development Goals (SDGs) (The Lego Group 2018). The UN Global Compact that SDGs posed as a guidance to their Brand Framework and approach to CSR. LEGO’s Brand Framework outlines their mission, aspiration, promises as well as their spirits and values (The Lego Group 2018). Since 2014, LEGO has worked with UNICEF and the World Wide Fund for Nature (WWF) in an effort to reduce CO2 emissions in their manufacturing and supply chain processes and promoting the global movement against climate change (The Lego Group 2018).

Reporting In addition, not only do LEGO report their CSR efforts on their annual responsibility report, they also ensure that their website has information regarding their events, product information, financial standpoint, their GRI index which helps stakeholders understand their impact on critical sustainability issues (Global Reporting Initiative n.d.). According to the company’s financial results for the first half of 2019, they met with a 4% increase in profitability compared to the same period a year prior (The Lego Group 2019). All of the above information provided by LEGO are consistent with the rest of Crane et al.’s (2008) characteristics of CSR which is known as “social and economic alignment”, as well as the factors in Carroll’s Pyramid (Schwartz & Carroll 2003). Crane et al. (2008) and Carroll’s pyramid (Schwartz & Carroll 2003) are similar in which both theories require an organization to be profitable, obey the law, be ethical and be a good corporate citizen. But due to the limitations of Carroll’s pyramid, the three domains of CSR as an expanded version of the pyramid argued that firms such as LEGO should seek to operate economically, legally and ethically wherever possible (Schwartz & Carroll 2003). From a normative perspective (Rasche et al. 2017), LEGO appears to have aligned themselves with the central segment of the three domains of CSR.

Recommendations Alternatives to plastic LEGO started off its production with a form plastic that was known as “cellulose acetate”, but it has since moved onto ABS (acrylonitrile butadiene styrene) polymer as they are more durable compared to their previous design (Elks 2014). Over the years, LEGO has faced backlash over its reliance on plastic for its production of toys long before environmental concerns made themselves apparent as a global issue. Furthermore, although ABS polymer is classified as a “low-hazard material”, it stills poses a few health risks to children (Kemper n.d.). Even though LEGOs are generally made from ABS polymer are seemingly more durable, they can also sometimes be difficult to pull apart; often leading to children using their teeth to break two pieces of LEGO bricks apart (Kemper n.d.). This can sometimes result in children ingesting LEGO pieces. As previously mentioned, LEGO has already invested over $150 million to fund the research project of looking for a more sustainable alternative to plastic LEGOs. Though they managed to successfully use polyethylene using ethanol from sugarcane (The Lego Group 2018) to make LEGO trees and bushes, there is still a long way to go for LEGO to make their entire line of toys more sustainable. However, contrary arguments were made that state “plastic made from plants really isn’t sustainable” (McKay & George 2018). According to RecycledPlastic.com (n.d.), to make 1kg of ABS plastic, it takes 2kg of petroleum; this type of plastic can be recycled but it is not typically collected in household recycling schemes. Although replacing ABS polymer with sugar cane is a step in the right direction in terms of carbon footprint, farming sugarcane is a “huge stress on the environment” as it requires huge amounts of water as well as pesticides, herbicides and fertilizers (McKay & George 2018). There are other alternatives to making LEGO pieces rather than using sugar cane, such as using blue-green algae which can be collected from household waste or residue of coffee production (Möllers et al. 2014; Nishimura 2017; Woldesenbet 2016). Ultimately, finding an alternative to traditional plastic LEGO pieces is a costly and timeconsuming procedure, but LEGO continues to pursue this goal. Although LEGO’s criteria for its alternatives are extensive, it is also necessary because the pieces must click together, last long, keep their color and shape overtime across different temperatures, in order to keep up with the quality and standards of their brand (Chaudhuri 2019). However, the benefits that come with

achieving this goal is the ability for them to not only strengthen their reputation and build a competitive advantage, it could also create a mutually beneficial situation through synergistic value creation (Lindgreen & Swaen 2019).

Reduce, reuse, recycle At this point, LEGO has thought of almost every way possible that they can better themselves for the sake of the people, the children and the planet. Of course, LEGO already has a recycling scheme in place (The Lego Group 2018). For those who decide they do not want to play with LEGO pieces anymore, the company encourages households to donate them to schools and charities to allow other kids an opportunity to learn and play with LEGO pieces (The Lego Group 2019). Additionally, due to their aim of sending zero waste to landfills by 2025, LEGO sometimes grinds the pieces down to make new pieces, donates them to charities worldwide, or sends the extra pieces to their suppliers so that they can turn them into other plastic products (The Lego Group 2019). However, there are other methods of reducing waste that LEGO can approach. Back in 2018, the spokeswoman for LEGO admitted that the company had overproduced LEGO pieces which led to a decrease in profits due to selling off excess stock cheaply (BBC News). The company could have approached the situation very differently and more efficiently that did not require a loss in profits. For example, because they already had a sustainable form of packaging, the company could have repackaged the excess pieces and created a new design from the pieces they already have; this would not have an impact on the planet and reduces wastage, thus following their core CSR practice. By following this method, LEGO would not have had to consume more energy into remolding those LEGO bricks into new pieces or experience a loss in profits. As a company that encourages imagination and creativity, another method LEGO could have used was to repackage those extra pieces of LEGOs into a box that did not have a design and allowed children to use their imagination and creativity to form their own designs. Although LEGO already has individual sets that has no designs in place, there are only six specific sets sold (refer to Appendix 1). The smaller sets are limited to a certain number of pieces in certain shapes whereas the larger sets are understandably more costly. Lastly, LEGO can also encourage customers to return extra LEGO pieces that they have no use for via a point-based system. For instance, every 10 pieces returned equals to a point earned, and

once a certain number of points is earned, LEGO could provide those customers with free gifts or a discount. This method encourages customer loyalty as well as teaches kids that just because they have no use for them, it does not mean that they are useless.

Conclusion Much can be said about the CSR work done by LEGO, and although their work is impeccable and commendable, there are still some ways that LEGO can improve on. Following CSR as defined by the European Commission, a company’s CSR is an important tool that can redefine the purpose and legitimacy of a business in today’s society, this goes beyond just the traditional aspect of the triple bottom line approach (Moczadlo 2015). The toy production company’s goal is to ensure that they follow through with their promises to make the lives of people and the planet better while ensuring that their business is profitable enough to stay afloat. Ultimately, the recommendations listed above will assist LEGO in reducing waste, reusing LEGO pieces, and recycling waste to lessen their impact on the environment; thus, helping them take a step into the right direction.

References 1. BBC News 2018, LEGO admits it made too many bricks, BBC News, viewed 27 Sept 2019,

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Appendices Appendix 1...