Lego to other Vietnam producers: Stop chasing cheapest cost

[Viet]

​

Country must be 'damn serious' about going green, says toymaker with $1bn factory

Lego says companies and countries must stop trashing their own environment. A factory in Vietnam is its first to be carbon-neutral, the Danish toymaker says. (Photo by Lien Hoang)
LIEN HOANG, Nikkei staff writerJune 2, 2023 15:11 JST


HO CHI MINH CITY -- Factories relocating to Vietnam must stop putting profit before the environment, Danish toymaker Lego said, as the supply-chain shift from China continues to funnel new business into the country.

Speaking at an environmental, social and governance (ESG) forum in Ho Chi Minh City on Thursday, Lego Vice President Preben Elnef also criticized companies' short-term fixation on the bottom line, suggesting they must bear the cost of clean production.

"There's been a lot of focus on, 'Let's find a place where it's cheap to manufacture, so we can just sell our product at the highest profit,'" Elnef said. "But we have to change that."

Prices have been fairly stable in Vietnam, but are rising elsewhere, prompting some governments to intervene to cool inflation. At the same time, an influx of electronics and other manufacturers moving from China has pushed up the Southeast Asian country's wages and rents in recent years.


The model of the LEGO factory in the Vietnam-Singapore Industrial Park III. (Photo: VNA)


Lego, which said it is building a $1 billion carbon-neutral factory in the country, also had a message for Vietnam, namely that the investment is contingent on protecting the environment. "You need to be damn serious about your environmental targets," Elnef said, adding that the company "will be monitoring" progress on meeting them.

While Vietnam has pledged to hit net-zero emissions by 2050, the one-party state also plans to ramp up the burning of cheap coal in 2030 and has imprisoned environmentalists opposing the fossil fuel.

ESG promises can be a challenge for the private sector, too. Europe and the U.S. have threatened fines, and have already imposed some, for corporate greenwashing, or false eco-friendly marketing, for example.

Lego broke ground on its Vietnamese factory on a site the size of 60 soccer fields in November. The world's biggest toymaker chose the southern province of Binh Duong, based on conditions for waste handling, water savings and solar power, Elnef said.

He added that the company is looking for ways to attract staff, like guaranteeing their mortgage applications. Migrant workers often live in temporary housing or have difficulty enrolling children in school, and Lego asked local authorities for support in these areas, he said.

Nearly everything at Lego's groundbreaking in Binh Duong, Vietnam, was made of toy bricks, from flower settings to dragon dancer statues. (Photo by Lien Hoang)


Lego's approach, according to Elnef, was initially met with bemusement. Vietnamese officials were "surprised" when the toymaker sought renewable energy and worker support instead of tax breaks, he said.

"They're used to having companies approaching, [saying], 'We want a special tax deal for the next 10 years or 20 years or some other kind of financial support,'" he said at the forum hosted by consultancy Raise Partners and marketer Vietcetera.

Elnef happened to be speaking days after Reuters reported that Vietnam's biggest foreign investors had pushed the country to give them $200 million a year in total because of expected tax rises. More than 130 countries plan to set a global minimum tax of 15% to combat a "race to the bottom," whereby governments vie for investors through ever-lower tax rates.

Lego to other Vietnam producers: Stop chasing cheapest cost

Country must be 'damn serious' about going green, says toymaker with $1bn factory

asia.nikkei.com