“We do not pursue size or power” — An ESG analysis of Alibaba

Sasja Beslik
11 min readJun 28, 2020

To understand a business, you have to understand or at least sense the people behind it. After all, it is always and will be only about people. Don’t be mistaken by the numbers that you see further down in this piece. They can fool anyone, lead you astray.

It is about Jack, all of it. Although as simple as it may sound, Jack Ma has gone through a lot to get to where he is today. A true rags-to-riches story. Jack Ma was born in Hangzhou, located in the south-eastern part of China. He was born and raised along with an elder brother and a younger sister during the rise of communist China and its isolation from the Western regions. His parents were traditional musicians-storytellers and they didn’t make enough money to be even considered middle-class in those days.

Jack always wanted to learn English as a kid, and in order to improve his English skills he spent his early mornings riding on his bike to a nearby park where he gave tours to foreigners for free. It was then he met a foreign girl who gave him the nickname ‘Jack’ because his name was hard to spell for her. After graduating with a Bachelor’s degree in English, Jack worked as an English teacher at Hangzhou Dianzi University.

Jack Ma visited US in 1995 for a project related to the building of highways. It was then that Jack Ma was first introduced to the Internet and Computers. Computers were pretty rare in China then, given the high costs associated with them. And Internet or e-mails were non-existent. The first word he searched on the Mosaic browser was ‘Beer’, and out popped out results from different countries, but no signs of China anywhere. He then searched for ‘China’ and not a single result popped out.

He decided it was time for China and its people to get on the Internet.

Ma started Alibaba from his apartment. Initially, Alibaba didn’t had a single penny in investment from outside investors, but they later raised $20 Million from SoftBank and another $5 Million from Goldman Sachs in 1999. Building trust among the people of China that an online system of payment and package transfers is safe was the biggest challenge Jack Ma and Alibaba faced, a challenge that Jack will cherish for his lifetime.

Jack Ma is China’s richest man, with an estimated worth of $38 billion. After 20 years at Alibaba, Ma announced in September 2019 he’ll be stepping down as executive chairman. But don’t worry. Ma said he was actually happier when he was an English teacher. That makes you think.

Jack Ma at a tech congress in Paris, May 2019. Photo: Frederic Legrand via Shutterstock.

He still owns the apartment at Lakeside Gardens where he started Alibaba 20 years ago. It’s said he loves meditating, playing poker, and practicing tai chi, a hobby that led him to star in a kung fu film.

But if he does splurge, it’s in real estate. In 2015, he reportedly bought a house in Hong Kong’s most expensive neighbourhood for a whopping $191 million. At the time, the purchase broke the record for the most expensive home by square foot in Asia. He also dropped $23 million on a property in New York’s Adirondacks. And a year later, he bought a 210-acre vineyard in the south of France.

A vision for 102 years

Let this sink in: “We envision that our customers will meet, work and live at Alibaba. We do not pursue size or power; we aspire to be a good company that will last for 102 years.”

It’s Jack Ma’s vision for Alibaba, and it’s the perfect example of Chinese long-term thinking.

The company’s goal is to achieve $1 trillion in gross merchandise this year and to serve two billion customers by 2036. To achieve this, global operations are key and globalisation is better done now than later.

The question is if Alibaba can make large-scale sustainable success go on forever?

Alibaba provides technology, infrastructure and marketing to help merchants, brands and businesses to leverage the power of new technology to engage with their customers.

Originally founded as a B2B e-commerce portal to connect Chinese manufacturers with overseas buyers. Alibaba ranks among the top 10 companies in terms of market value.

The center of gravity of the entire business is the man behind it. He utilised the first-mover advantage and successfully planned entrepreneurial growth and corporate initiatives. This was also made possible because Alibaba explored and utilised the advantages of the network-effect on multi-sided platforms.

Today, Alibaba has around 66,000 employees in more than 70 offices globally. The e-commerce giant is proud of 636 million annual active buyers interacting with ten million sellers in 240+ countries. Alibaba is highly successful with an annual revenue of approximately $37 billion and annual profits of approximately $9 billion.

Alibaba operates as a middleman between buyers and sellers, a facilitator in an online global value chain that stays open 24 hours a day by creating efficiencies and connecting SMEs and other consumers. Volume, speed and scale. Tree magic ingredients are at the heart of what Alibaba is good at.

The climate — what if we only have 20 years left…

E-commerce in China is set to eclipse that of the United States, United Kingdom, Japan, Germany and France combined, but it is generating a massive amount of packaging waste and air pollution. Industry players say solutions are in sight.

China is ground zero of the e-commerce boom, which is creating a growing mountain of waste and fuelling carbon emissions worldwide. Already the planet’s largest carbon emitter, China’s online retail market was said to hit almost US$ 2 trillion in 2019. Delivery packaging is accounting for 93 percent of solid waste growth in China’s megacities.

There are credible estimates that China would need to reduce its carbon-dioxide emissions by at least 50 per cent by 2050 to keep to a 2°C temperature rise scenario set out by the Intergovernmental Panel on Climate Change (IPCC).

This requires consolidation of a highly fragmented freight system. There are over 13 million trucks on the road in China, 90 percent of which are still owned by individual drivers who are unlikely to invest in better technologies.

Compared to counterparts in the US and Germany, Chinese trucks are also more likely to be running empty, i.e. not carrying goods, which makes situation even more complex.

China’s infrastructure is second to none. But its logistics is highly inefficient when you factor in the cost of congestion and emissions.

Alibaba has committed to using only biodegradable packaging in its logistics arm Cainiao’s operations, a move met with a degree of contention, since the biodegradability of the packaging is debatable. To right its wrongs Alibaba announced on August 2019 that it would be installing 1,000 recycling boxes in Shanghai for the reuse and recycling of parcel packaging.

Jack Ma’s has also been allocating 0.3% of the company’s annual revenue to an environmental fund, donating over $47 million in 2016 alone. Additionally, in 2017, Alibaba Foundation teamed up with several environmentalist entities to form an alliance dedicated to the protection of water resources.

But it is not just the swelling eco-consciousness that’s pushing China’s tech giants to embrace sustainability. While the pivot to sustainability is beneficial for China, it also reflects on the Chinese companies’ international image. Nowadays going global requires not only massive capital but also a commitment to improving living conditions on the planet, not least in the relation to environmental issues. For Chinese companies this postulate is ever more prescriptive, since Beijing is still struggling to fend off the image as the world’s severest polluter that at times mires the reputation of the local enterprises.

If we look at the climate trajectory of Alibaba it is clearly on the path towards 1.5 Celsius degrees. It is surprising and positive to see that carbon intensity per dollar made by Alibaba is going down. Total emissions are going up. So it is a tricky picture, not only for this reason, but also for the fact that most of the impact is in the scope 3 bucket — and data for the part is still missing.

Alibaba is on a 1.5-degree Celsius path, aligned with IPCC’s ambition and better than the target set in the Paris Agreement. Source: J. Safra Sarasin.

The Gordian knot of ESG investing

E-commerce — the ultimate magnet for mankind’s brightest innovations and the largest wealth generating machine mankind ever invented — is actually pulling things in the opposite direction. It is shaping up to be a mismatch of epic proportions.

Profound economists have always looked upon “internalising the environmental externalities” as the ultimate solution to the sustainability problems we face. The premise being that increased costs due to the internalisation of environmental externalities would raise prices and therefore reduce the demand and the consumption of materials and natural resources.

What’s happening with e-commerce is just the opposite (you may want to call the effect the “externalisation of internalities”), and judging from its unparalleled momentum as an economic force, the effects will be simply overwhelming. Historians will look back on our era as an extraordinary moment. They will chronicle the 40 years from 1980 to 2020 as the key years of a remarkable transformation. In the developed countries of the West, new technologies will lead to big productivity increases that will cause high economic growth. And then the relentless process of globalisation, the opening up of national economies and the integration of markets, will drive the growth through much of the rest of the world.

Meanwhile, this is a nightmare for those looking for ways to implement sustainable development. Technological advances are pushing the developed countries of the world onto new “S curves”, giving them the impetus for faster growth otherwise unimaginable in these “mature” economies.

But who is really benefiting from this ultimate business magnet? While the gaps between the haves and the have-nots are widening in the rich economies, the gaps between rich and poor countries are widening even faster with no signs of closing in sight. The richest 15 percent of all humans now account for 88 percent of the world’s Internet users. At the same time, 65 percent have never even made a single phone call. While the developed economies take economic growth for granted, economic “decline” is actually the norm for more than 100 countries with a combined population of 1.6 billion in the developing world. In Africa, for example, the average households consume 20 percent less today than it did 25 years ago.

Material ESG factors can also be misleading to investors who fail to understand business model differences. Even when companies do improve on material social and/or environmental issues, they rarely report on the economic benefits that accrue. The idea that companies should focus their social and/or environmental impact on improving their reputations make them eager to be seen as “doing the right thing,” but, sadly, reluctant to acknowledge that they profit from it. In many cases, companies actually conceal the economic benefit from investors, which reinforces investor ignorance about the importance of social and environmental innovation as a source of economic value.

Companies can achieve superior economic performance only through a distinctive value proposition that either offers better value to target customers (differentiation) or achieves structural efficiencies that support lower cost versus competitors (cost savings). What has been overlooked historically in ESG thinking is that social innovation on key issues within every industry can profoundly affect strategic positioning in both differentiation and cost savings.

If Alibaba says, in their reports, that it has improved its energy or water intensity 5 percent last year, was it good? Yes and no. If the company’s sales grew 10 percent, then 5 percent efficiency improvement was not good enough. Now, if that company dematerialised certain natural resources 20 percent, which was twice its 10 percent revenue growth, was it good? Still yes and no. Very large gains in material intensity reductions are most often the results of certain old technologies being phased out. The aggressive targets usually end when the phasing-out is done (and the focal point of the next report would be shifted to something else).

There is a very simple rule: The company needs to focus on its most crucial, material sustainability issues, and set dematerialisation targets at equivalent or greater than the company’s growth rate on a continuous, year in and year out basis. If the company’s environmental performance targets fall short of that, it is not doing enough to stop the accumulating environmental impact brought on by its own existence, let alone contributing to the welfare of the world as a whole.

Three key questions on Alibaba (and the answers)

– Is Alibaba creating new products that address emerging social needs or open currently unserved customer segments?

Not really. It does provide a 24/7 e-commerce platform for B2B, but that is both replicable and does not address emerging social needs. These needs have been there for as long as we have. Serving unserved customer segments in China particularly is a great business thing. But what true sustainable benefit do we really get?

– Is Alibaba enhancing productivity in the value chain, whether by finding new efficiencies or increasing the productivity of employees and suppliers?

Yes and no. It is significantly improving its direct environmental impact. Being on a 1.5 Celsius path is very good given its size and reach. However, very little is known on what they do in relation to supply/client side, where their biggest impact and challenge lies. Split score.

– Is Alibaba investing to improve the business environment or industry cluster in the regions where the company operates?

Yes. Any structural investment to increase environmental efficiencies in China and wider Asia makes a huge, huge difference. In many ways Alibaba personifies all elements of globalisation, both good and bad.


As is often the case, the conclusion on Alibaba depends a lot on the ESG style and outcome you are looking for.

A hard-core mission driven ESG investor would find it hard to see this stock as truly sustainable. Given Governance “dark-box” and Chinese context, i.e. surveillance etc., it makes it very complex to state full ESG credibility.

An ESG libertarian will recognise the risks and go for the stock as “all of the others do” given that Alibaba has a huge potential if managed properly. It has a very good climate trajectory and is improving in some areas. Engaging is absolutely an option.

A true LTA (long-term active investor) will assess real economic-value creation, which seeks out companies that achieve excellent economic performance by innovating to meet important societal needs. And in this case, if you take into account that 33% of the world population will be living in Asia in 2030, and that all of them need not only “stuff” but sustainable “stuff”, then you understand what you need to do.

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Sasja Beslik

MD, Head of Sustainable Finance Dev. at J. Safra Sarasin, the world’s leading private bank on sustainable finance. Author of “Guld och gröna skogar” (2019).