A private privilege? Why being unlisted makes sustainability more achievable

Lego’s CSO is the latest to point out the joys of having no public shareholders

Being sustainable comes at a cost. 

If it didn’t, there’d be no need for regulatory and civil society pressure – companies would already be doing what was needed.    

So what enables some to stick with their long-term environmental and social ambitions when they’re proving expensive, while others back away?  

According to Lego’s chief sustainability officer, two things are needed: a deep-rooted commitment, and long-term investment cycles.  

Discussing efforts to make the firm’s iconic plastic toy bricks from more sustainable materials, Annette Stube said: “There’s not just one quick fix. Nobody has found one material that can just replace what we’re using today.”

In 2023, the Danish firm abandoned plans to switch to recycled plastic, because of the increase it would drive in its carbon footprint.  

At that point, it had explored more than 300 alternative materials. By the following year, that figure had doubled to 600.  

Stube told attendees at a sustainability conference hosted by Reuters in London this week that Lego remains committed to shifting to sustainable materials, but that it’s “very expensive” work, which incurs “costs most companies just can’t take on”. 

So what makes Lego willing and able to bear it?  

In large part, it’s what Stube calls the “power of a family-owned business”. 

Lego is owned by the Kirk Kristiansen family, who “are willing to forgo profits in order for us to innovate on sustainability,” she explained. 

Being unlisted

Many of the boldest and most steadfast corporate sustainability champions are unlisted companies.  

IKEA, for instance, which has been widely recognised for its efforts on topics like circularity, is owned by a dedicated foundation rather than institutional investors. 

A spokesperson for the Swedish furniture firm told REP that being privately-owned meant it was “able to take a long-term perspective – thinking in terms of generations, rather than quarters – when shaping our sustainability strategy and investments”.  

In 2022, US clothing retailer Patagonia was transferred to its own trust, giving it the freedom to prioritise climate change in its business model. 

At the time, founder Yvon Chouinard said a number of options were considered, including taking the company public. 

“What a disaster that would have been,” he wrote in a blog. 

“Even public companies with good intentions are under too much pressure to create short-term gain at the expense of long-term vitality and responsibility.”

Four years earlier, UK supermarket Iceland made headlines all over the world when it teamed up with Greenpeace on an advert about the environmental damage caused by palm oil, which was swiftly banned by authorities for being too political. 

Alongside the ad, the privately-owned retailer made the “ethical” decision to ban palm oil from its products, costing it “millions of pounds”, according to its managing director, Richard Walker. 

Would the move have been possible if Iceland had had to get sign-off from a slate of mainstream investors? 

Judging by a ground breaking experiment undertaken in 2020 by one listed property developer, the answer is a resounding: ‘no’.  

The ‘green dividend’ experiment

After years of investor letters and meetings asking it to decarbonise faster, German real estate investment trust Alstria decided it was time to be blunt with its shareholders.  

All these ESG initiatives weren’t necessary, it argued on its website, because “any investment that yields positive financial returns and is sustainably beneficial will be undertaken in any case”. 

The real problem is that market-driven investments won’t generate the changes needed to reach the world’s sustainability goals. 

So, Alstria invented something it called a ‘green dividend’. 

Shareholders could vote at its annual meeting to receive €0.01 for every share they owned, or to let the company keep that money to spend on specific green projects “that would not be financed solely based on financial criteria”. 

The result? More than 95% of investors opted to take the payment for themselves.  

Shareholder pressure

Alstria isn’t the only listed company to be stuck in the midst of this conflict between short-term returns and long-term sustainability progress.  

In 2020, Danone’s shareholders approved a change to its articles of association, so that they included its commitment to benefit broader stakeholders.    

Less than a year later, following a campaign by an activist investor who argued that then-CEO Emanuel Faber “did not manage to strike the right balance between shareholder value creation and sustainability”, he was ousted.  

Fellow consumer goods giant Unilever has scaled back its world-leading environmental and social ambitions significantly after similar backlash from investors. 

And in the energy industry, Engie CEO Isabelle Kocher tried to shift its business from fossil fuels to renewables and energy efficiency, but was sacked in 2020 because investors were concerned about the firm’s share price.   

As Lego’s Stube said this week, when sustainability becomes costly, a privately-owned company has fewer shareholders to convince.  

“A lot of companies are just not able to do the same [as us], because they don’t have that privilege.”