Lego is looking at whether it could offer a rental service to fans of its brightly coloured plastic building bricks, in a sign of how traditional business models are evolving as consumers press for more environmentally friendly products.
Tim Brooks, vice-president responsible for sustainability, said the world's biggest toymaker was "totally open" to the idea of a product rental scheme. "But it has to come down to the value proposition," he said.
“We have to start at the point that says what is in it for the consumer. That is what we are just unpicking at moment. It is possible, [but] there are some technical barriers.”
These include the complexity of Lego kits, some of which contain thousands of pieces. “What are the chances of giving them to an eight-year-old child and getting them all back again?” said Mr Brooks. “There is a lot of technical thinking that needs to be done . . .We are right at beginning of that.”
Mr Brooks stressed that a rental scheme was just one of several ideas being looked at with a view to producing the highest value from products, while consuming the least amount of resources. Many of the ideas would “probably never see the light of day” and there was as yet no plan to trial a rental scheme.
Lego is facing pressure over sustainability due to its overwhelming use of plastic in its products, with billions of bricks owned around the world. It has promised to phase out fossil fuel-based plastics by 2030 but apart from a small breakthrough with pieces representing trees and flowers it has yet to find a substitute that offers what it calls “clutch power” – the ease of putting bricks together and pulling them apart.
Environmental impact
Lego's comments highlight a growing interest from traditional manufacturers in the potential for rental services to improve the environmental impact of their businesses, while also generating new revenue streams. The Business and Sustainable Development Commission, launched in Davos in 2016, estimates the revenue and savings opportunities for manufacturing could come to $1 trillion globally by 2030.
Other Nordic companies have already started trials of renting out their products. Ikea, the world's largest furniture retailer, has launched several tests this year and has had early success with students and short-term expatriate workers, according to chief executive Jesper Brodin.
Volvo Cars has started a subscription service that covers everything for a vehicle except fuel and where customers can choose to change cars after 12 months.
Ingersoll Rand's Trane division, a global leader in climate control systems, launched a rental service about five years ago. Jose La Loggia, vice-president of Trane Europe, said the rental of chilling equipment now accounted for 20 per cent of annual revenues and was growing significantly faster than the product sales division.
“It means we are building fewer things than in the past. But you are still generating revenue and taking less resource out of [the] ground, so everybody is happy,” he said. “I can see a future where maybe we don’t sell equipment any more.”
Fashion and automotive
According to Joss Bleriot, at the circular economy charity the Ellen MacArthur Foundation, rental models are becoming increasingly common in a variety of sectors, such as fashion and automotive.
"If we doubled the average number of times a piece of clothing is worn, it can help to almost halve the greenhouse gas emissions of the entire fashion industry, " he said.
“We are also seeing carmakers shifting from selling individual vehicles to selling mobility as a service. With-two thirds of travel in a shared car system, material requirements can fall by 70 per cent, cutting the carbon emissions from production of vehicles by 40 million tonnes a year,” he added.
David Rakowski, managing consultant at PA Consulting, said rental models were pushing manufacturers to rethink the design of their products, further reducing waste. "You will want to design to disassemble, remanufacture and to keep that asset in use as long as possible," he said.
Lego’s bricks are compatible with all those made since 1959. Last week the group launched a programme called Replay, which allowed users to donate their old bricks to children’s charities in the US. – Copyright The Financial Times Limited 2019
