Alibaba Employs Social Engagement to Reduce COVID-19 Impacts

Alibaba [BABA:US] has been evaluating methods to incorporate sustainability into the firm’s long-term strategy, looking to achieve business development in a socially responsible manner. The Chinese conglomerate has leveraged its tech and services to help global anti-pandemic efforts and accelerate economic recovery in the post-pandemic period. As of March 31, the firm, its affiliates, and its public welfare funds have invested RMB3.36bn in total in epidemic prevention and control, including RMB2.76bn in investment from Alibaba Group and RMB591m from its fintech arm, Ant Group.

On October 16, several Chinese state-backed research institutes, including Beijing Normal University Internet Institute, released a corporate social responsibility (CSR) report on Chinese internet enterprises, with an emphasis on the anti-pandemic performance of 240 companies from 18 industries including e-commerce, healthcare, and online education. After being evaluated on social engagement amid the epidemic, Alibaba’s e-commerce marketplaces (Taobao and Tmall), and fintech unit Ant Group were ranked first in their respective sectors while AliHealth [0241:HK] ranked second among other medical services providers.

Overview of Alibaba’s social responsibility performance during the pandemic outbreak

Travel, transportation limitations, and other restrictive measures imposed during the nationwide lockdown in China have caused significant difficulties to maintain normal manufacturing activities and daily supplies. In response, Alibaba took multiple measures to reduce pandemic impacts on social and economic development in the country. The following table lists how Alibaba has socially engaged in epidemic prevention and aided in business recovery.

Insights from Alibaba’s ESG practices

Taking social responsibility helps build up an enterprise’s soft power

The incorporation of social responsibility to business operations builds up an enterprise’s soft power, which refers to unquantifiable characteristics of a firm in shaping corporate culture, improving governance, forming leadership, innovating, etc. The capabilities are internally related to a firm’s hard strengths based on financial performance. Specifically, companies that strive to maintain sustainable development tend to innovate more on products, management systems and processes, which improve manufacturing efficiency, identify new market opportunities, and hence upgrade profitability models.

While the global epidemic slowed down China’s economic growth, many small businesses faced increasing pressure to continue operations. To support small and medium-sized enterprises (SMEs) overcome the crisis, Alibaba relaunched its “Spring Thunder Initiative” this past April, offering assistance in foreign trade, digitalization, finance, etc. Under the program, Alibaba would extend the incentive of exempting all merchants from 1H20 commission fees on its Tmall platform for another three months. Although the incentive policy reduced short-term profit from Alibaba’s online services, small businesses could continue their operations, which enabled Alibaba to maintain growth in the long-term. In detail, according to Alibaba’s earnings report for the quarter ending on June 30, the gross merchandise volume (GMV) on Tmall increased by 27% YoY during the three months, back to pre-pandemic levels in December 2019.

Overall, Alibaba has employed multiple measures to reduce or exempt seller’s operating costs on its e-commerce platforms and support their digitalization during the pandemic. This, in turn, enables Alibaba to avoid long-term losses which would occur from fewer online merchants on its platforms.

Companies that stick to social responsibility promote economic and environmental sustainability

Leveraging its digital capability, Alibaba formed a business model that not only boosted its expansion but also helped address social problems associated with poverty, unemployment, and so on. China is seeing more clusters of online retailers in rural areas, which are defined as Taobao Villages or Taobao Towns by Alibaba’s research arm, AliResearch. A Taobao Village gathers e-retailers within an administrative village where at least 10% of residents sell products via Alibaba’s Taobao and records an annual online transaction volume of over RMB10m. A Taobao Town refers to a larger cluster of an e-commerce business. According to AliResearch, China formed 5,425 Taobao Villages and 1,756 Taobao Towns as of this October, booking a total transaction volume of RMB1tr in 2020. According to a report released by the School of Labor and Human Resources, Alibaba created 69.01m direct and indirect employment opportunities in 2019, including 49.76m e-commerce related jobs. Such formation of e-commerce clusters has not only created ample employment opportunities but also increased income in China’s poverty-stricken areas.

Moreover, Alibaba is creating an environmentally friendly ecosystem that lowers resource waste and reduces environmental damage. For instance, Alibaba’s Ant Forest initiative, which allows users to plant real trees in China’s regions undergoing desertification, encourages paperless scenarios including making online payments and issuing of electronic receipts as well as other green practices. As of May 2020, carbon emission reduction via Ant Forest amounted to 245,000 tons.

To conclude, in order to reduce COVID-19’s impacts to China’s economic and social stability, Alibaba has taken various measures to maintain medical and daily necessity supplies, enable companies’ continued operations and support SMEs. These measures indicate how Alibaba has been prioritizing and capitalizing on market opportunity through social responsibility, which improves its soft power and financial strength. Moreover, Alibaba’s supply chain has played an active role in China’s poverty alleviation and environmental protection.

References:

http://www.alijijinhui.org/Uploads/file/20200716/5f10328ba887b.pdf

https://www.time-weekly.com/post/274523

https://news.futunn.com/stock/14545302?src=3

http://finance.eastmoney.com/a/202007101550678730.html

https://news.futunn.com/post/5083750

http://www.xinhuanet.com/tech/2020-08/20/c_1126393140.htm

https://news.stcn.com/sd/202008/t20200820_2251931.html

https://www.sohu.com/a/309121753_137462

https://finance.sina.com.cn/chanjing/gsnews/2020-10-15/doc-iiznctkc5688079.shtml

https://www.12reads.cn/32387.html

http://www.aliresearch.com/ch/information/informationdetails?articleCode=126860487966199808&type=%E6%96%B0%E9%97%BB&adcode=&villageCode=&villageYear=&item=%E6%B7%98%E5%AE%9D%E6%9D%91