Organizational Governance

LEGO Employee Pay Now Linked to Meeting Climate Goals

The toymaker has announced a new annual KPI to encourage all salaried employees to help the company lower emissions across its factories, stores and offices around the world.

Published 6 months ago | About a 3 minute read

Image: LEGO Group

LEGO Group has become the most recent corporate giant to tie its compensation packages to progress toward its climate goals — specifically, reducing its operational carbon emissions. But LEGO’s move is unique in that it’s applying the new performance-management program not just to its senior leadership — the toymaker will now incentivize and reward its entire global, salaried workforce for contributing to its carbon-reduction targets.

In a recent post, the company revealed details of a new annual KPI aimed at engaging its colleagues around the world in helping achieve its goal of reducing its absolute carbon emissions by 37 percent by 2032 and achieving net zero by 2050.

“We have a new annual KPI to encourage colleagues to help make a positive impact as we lower emissions across our factories, stores and offices," the post explains. "The KPI measures carbon from our operations (scope 1 and 2 emissions) and one scope 3 emission category (business travel) and compares this with how many bricks have been manufactured over the same period to get a carbon-intensity metric that we can track.

“From 2024, a portion of our salaried employees' bonus payments will be tied to annual emissions. Over time we will expand it to cover scope 3 emissions, as we progress towards our goal to become a more sustainable business.”

A growing number of companies — including Chipotle, Nike, Mars, Ralph Lauren, Microsoft and Danone — have committed to tying executive compensation packages to various social and environmental KPIs. But as As You Sow pointed out in its 2022 Pay for Climate Performance report, the devil is in the details of these commitments; inclusion of a measurable climate metric and measurable pay in the long-term incentive plan — such as linking CEO pay to quantitative emissions-reduction performance — are key to ensuring the necessary impact and accountability.

While LEGO didn’t disclose that level of detail, including all salaried employees in the new climate-performance management program bodes well for broader engagement from the over 18,000 people who directly affect LEGO’s performance on the ground — and while lower-level employees might struggle to understand how their actions and choices could help move the needle, their everyday operational decisions across the globe could add up to major impacts across the company.

“Inside most businesses, only a handful of people with ‘sustainability’ in their title consider climate issues as part of their workday. But the scope and scale of the climate challenge calls on all of us to find our inroad,” Jamie Beck Alexander, then-Director of Project Drawdown’s Drawdown Labs, said in 2021 when it released Climate Solutions at Work — a free playbook that aims to help global employees, regardless of their role, step into their power and shift the private sector achieve substantive climate action as quickly, safely and equitably as possible.

In the meantime, LEGO continues its multi-pronged approach to meeting its climate goals — which, on the product front, includes increasing the sustainability of the over 60 billion bricks produced per year through ongoing R&D into viable plastic alternatives, and increasing the circularity of existing LEGOs through take-back and recycling programs.