Alibaba Social Responsibility and Sustainable Development: A Case Study

Using the definitions from (Samson & Daft, 2012).
Sustainable development: involves making balanced and equitable decisions so that financial, environmental and social outcomes are achieved in both the short and longer terms.

Social Responsibly: the obligation of organisation management to make decisions and take actions that will enhance the welfare and interests of society as well as the organisation.

Introduction

This case examines Alibaba’s sustainable development (SD) and corporate social responsibility (CSR), aligning internal business practises with external financial, environmental and social responsibilities. Drawing upon existing literatures on SD and CSR, and referencing in-country empirical case-study research. Alibaba’s SD and CSR are growing in importance with the main drivers of the change being, “greater focus by shareholders on issues, recent corporate scandals, greater pressure from governments or regulators, greater focus by media on issues, evidence that it offers a competitive advantage, globalisation and offshoring, increasing customer power allied to consumers’ concerns in this area, and more effective action by non-governmental organisations and activists.” (Doebele, 2005) “The objective of these regulations is to achieve triple bottom line [TBL] based growth.” (Ray, 2013)

Encouraging areas of opportunity associate around China’s and India’s growing middle class, promoting the growth of the distribution system, accessibility to online marketplace, backwardness growth rates and social responsible investment. “What is generally considered to be “profit” consists, in large part, of the unaccounted costs to people, resources and the environment, in addition to the currently accounted for costs required to bring a product or service to the consumer.” (Raymond, 2010) Bearing challenges under consideration account Confucian influences on employees’ behaviour, rural to urban inequality, impact on offline retail, manufacturing and distribution infrastructure, protecting Alibaba Intellectual Property Protection Platform, corporate governance compliance with China’s unclear laws and regulations and focus on international one-way trade. “In fact, Alesina Baqir and Easterly (1999) quote a vast sociological literature that finds that preferences and conflicts over [policies] are more strongly correlated with ethnic as opposed to income differentials.” (Ugop, 2004)

Main barriers to an improvement to SD and CSR include, cost implications, unproven business benefits, not of high priority in industry, “fierce competition does not allow the luxury to worry about corporate responsibility, and the board and senior managers are not interested in the subject. (Doebele, 2005) Additionally, much criticism speculate CSR rarely extents from the business’s goals, CSR is perceived as greenwash to public relations, and CSR business agendas overlook arising developing world issues. (Banerjee & Terrachoice in Littlewood, 2015) However, “incorporating sustainability into strategic financial management, enhanced business performance can be achieved through a number of means including reducing the cost of external and equity funds, and helping to attract and retain staff.” (Marsh, 2010)

The findings point out indicators of Alibaba’s strategic intention, covering dependency on advertising revenue, helping small-to-medium sized enterprises (SMEs) through technology, financing and training, and “patent application filling trends towards strengthening a portfolio in specific technological and geographical areas.” (Barreiro, 2015) “[To] describe the case of Chinese company Alibaba in terms of the changing nature of international business and changing way of conducting business-to business (B2B) like developing a platform for small and medium sized enterprises.” (Barczyk, et. al. 2011) Covering a large CSR management requires a conceptual framework to learn from their previous successes and failures. (Ray, 2013) Key areas of measurement involve, record of compliance with laws and regulations, application of recognised standards in areas such as corporate governance, actual activities in environmental, philanthropic, ethical or social areas, the frequency and quality of communications with stakeholders, market reputation for corporate responsibility, and formulation and communication of internal standards.

Theoretical section

Alibaba believes in committing to social causes at all levels, how Alibaba fares and responds to crises of responsibility is to evaluate the efficiency and stakeholder support and empowerment. According to Exhibit 4.6 Criteria of Corporate Social Performance economic responsibility is not the only consideration for businesses today. Alibaba’s “CSR agenda takes shape on a triangle-shaped borderland: one determined by the company’s domain of operation, the needs resulting from national constraints and social expectations; and the way these constraints and expectations are translated into laws, norms, standards and codes of various types.” (Vermander, 2014)

Among, Alibaba’s main barriers to an improvement include much criticism towards CSR and SD, stem from the open interpretation of beliefs towards society’s welfare and the ambiguous and righteous of issues contribute to the many challenges management face. (Samson & Daft, 2012) Management of these criteria requires a record of corporate governance compliance and conceptual framework, such as the “[TBL] performance of an [organisation, which] involves measuring the three types of outcomes of an organisation’s activities, namely financial, environmental and community/social” (Samson & Daft 2012), establishing a long term reputation for trust and integrity.

Exhibit 4.6 Criteria of Corporate Social Performance

Source: (Carrol in Samson & Daft, 2012)

“Alibaba Group is committed to the highest standards of business conduct in our relationships with each other and with our users, customers and suppliers, shareholders and other business partners.” (Alibaba Group Holding Limited, 2014) Leading by example managers promote employee feedback represented in Alibaba’s decision-making processes. Feedback is gathered via ethical structures, such as: “informal dialogue with line managers, open forums with senior managers, formal dialogue with line-managers, formal employee surveys, and formal employee representatives, such as trade unions.” (Doebele, 2005) Feedback is important for Alibaba to building on the principle-based and policy-based code of ethics.

Alibaba’s independency from advertising revenue provides a progressive competitive advantage and long-term financial performance. “[The bottom of the pyramid the] idea that large corporations can both alleviate social problems and make a profit by selling goods and services to the world’s poorest people.” (Samson & Daft, 2012) Besides, connecting marketplaces and allowing mutually-advantageous exchange, Alibaba understands that helping SMEs through technology, financing and training can better market edge. Taking account, “[Milton Friedman’s] maxim that the social responsibility of business is to maximize profits within the bounds of the law goes against the inspiration of most business
and society work that examines the impact of business power on society.” (Davis in Husted & De Jesus Salazar, 2006)

Description of the company and background for the problem

Jack Ma foundered Alibaba in 1999 now China’s leading (business-to-business) e-commerce Company, operating a conglomeration of various e-commerce sites including Taoboa (consumer-to-consumer), Allipay (online payment system), Tmall and AliExpress (business-to-consumer). Speculating Alibaba’s need for sustainable development within figure 1.1 China’s and India’s international trade has grown with the 80 percentage reduction in tariffs, from 1992-2006. Despite, Alibaba promoting the growth of the distribution system, domestic India and China are not profiting as much, distinguishing these differences and downturns speculation arises as to the long-term growth and sustainability of Alibaba’s reliance on these two economies. “Federal Reserve chairman Ben Bernanke began making comments about tapering money stimulus that spooked investors in Asia, introducing further volatility to markets already worried about a slowdown in growth in China and India.” (Anuj, 2013)

Figure 1.1 Emerging Trading States

Source: Average Import Tariff Rates on Non-agricultural and Nonfuel Products in Percentages. (UNCTAD in Holslag, 2010)

China has been steadily growing its share of the world’s IP and finally taken its place atop the world’s list of patent filers. Patent application filling trends can explain and predict Alibaba’s strategic intentions, whether “towards strengthening a portfolio in specific technological and geographical areas.” (Barreiro, 2015) This can be proven in the ratio of domestic to foreign applications when Alibaba was able to withstand the dotcom crash, introducing the B2C strategy focused on improving business in China rather than focusing on global markets. Now Alibaba are seeking protection in international markets, such as India rather than domestic patents. China’s ageing population represents a key to why Alibaba is expanding to India and global outsourcing.

“Despite the IT success in India and the higher education boom in China, less than 8 percent of their citizens have access to the Internet.” (Holslag, 2010) Alibaba provides SME’s accessibility to an online marketplace, however declining offline retail infrastructure impair SME at a faster rate. “China and India clearly stand out as the two largest middle-income countries of origin”. (WIPO, Cornell University, & INSEAD, 2014) Alibaba benefit from China’s and India’s growing middle class is greater than Alibaba’s benefit to China and India’s rural to urban inequality. “Rural poverty is understated by the consequences of overwhelming pressures on lower officials whose careers are judged by reports of developmental success.” (Friedman, Gilley, & Ebrary, 2005) Heeding, the frequency and quality of communications with stakeholders, and Alibaba’s market reputation for corporate responsibility. Here there is a greater ratio imbalance and need to give back through activities in environmental, philanthropic, ethical or social areas. “A major factor for this disparity of innovation prowess is the quality of human capital linked to the innovation activities carried out in these nations.” (World Intellectual Property Organisation WIPO, Cornell University, & INSEAD, 2014)

Statement of managerial issues under analysis

With an increasing reliance on stakeholders “Alibaba’s management structure [raises] questions about concentration of shareholder power.” (Swartz & Strauss, 2014) Consumers and investors both possess a growing demand and concern for sustainable and socially responsible goods/services. “Current and future needs should be met in a complimentary and sustainable way ensuring that environmental, economic and social dimensions are integrated into the business plan and strategy.” (Marsh, 2010) To adopt and survive in a changing environment Alibaba must acknowledge the unintended social and less apparent costs of not adopting sustainable strategies. “Each urban range of diversity implies a different impact on the environment.” (Clini et. al., 2008) Since contributions toward society are ambiguous and consist of varying righteousness beliefs, it is necessary to find a proxy for this variable.

This directly impacts Alibaba’s financial stability and performance which is at present critical on mobile users. Worryingly, if Alibaba experiences an “increased use of mobile devices for mobile commerce but are unable to monetize that increased use, [the] business may not grow or could decline, and [the] revenues and net income would be materially reduced” (Swartz & Strauss, 2014). With rapid environmental shifts at cause Alibaba’s list of potential risks “[range] from slower economic growth and rising investment costs to “intense competition” from traditional brick-and-mortar retailers and rival e-commerce players.” (Swartz & Strauss, 2014) These pose continual management issues among moving from an old workplace to a new workplace, with the vast ecosystem of managerial issues. Where if SD and CSR overlooked as unimportant can be easy and disastrous mistakes for stakeholders along with the organisation.

During “Alibaba’s Initial Public Offering Chinese law caused “limits on the disclosures Alibaba and its auditors” and were criticised by a lack of transparency whether priced fairly or overvalued.” (Swartz & Strauss, 2014) Increasing concerns from investors toward environmentally and financial efficiency are viewed as a major influence to their resulting funding decision. (Marsh, 2010) The environmental impact is also a top priority for Alibaba and must implement new productive processes to maximise the use of resources, while by products are recycled. “A more articulated concept of urban metabolism rises from such consideration, which is based on an input/output approach: input standing for matter, energy and information, while output standing for information/knowledge, goods/services, heat and waste.” (Clini et. al., 2008)

Analysis

Alibaba recognised the cost of not adapting to SD and CSR and has took “steps to reduce inequalities by implementing a more balanced development strategy (particularly, to induce investments in inland regions) and ensuring more progressive redistribution of income through social welfare and services.” (KIN-MANCHAN, n.d.) Alibaba Group Chief Executive Officer Jonathan Lu said “Right now, there is 34% of the Chinese people in urban areas use the e-commerce, but only 9% of Chinese people in rural areas use e-commerce, so we consider this is a big opportunity for long-term.” (Q3 2014 Alibaba Group Holding ltd earnings call – final, 2014) Additionally, stakeholder power continues to keep managers in check with corporate governance compliance, through various feedback methods. “And Ali Power is helping SMEs to start to build lasting and sustainable companies.” (Q3 2014 Alibaba Group Holding ltd earnings call – final, 2014) Alibaba is confident that it is meeting the “Alibaba [Group] mission [to] make it easy to do business anywhere.” (Alibaba Group Holding Limited, 2015)

Alibaba now considers SD and CSR high priority in decision making and “introduced incentives to encourage employees to come up with environmentally sound approaches in their work (for example, at Alibaba, an employee who has demonstrated a commitment to the environment may merit a better parking space!).” (Irwin, 2012) Social responsible investment and transparency in corporate dealings has allowed Alibaba to work “with suppliers and competitors to introduce new practises, known as Extended Producer Responsibility (EPR), in which manufacturers are responsible for waste generated at the end of the product’s life.” (Samson and Daft 2012) Reducing corruption and protecting Alibaba Intellectual Property Protection Platform. Alibaba also contribute to a number of activities in philanthropy, environmental, social, and community outreach efforts, with air and water quality top priorities.

Discussion

Alibaba fares and responds to crises of responsibility is to evaluate the efficiency and stakeholder support and empowerment. Additionally, Alibaba’s implementation of open and candid communication programmes with stakeholders provides industry knowledge surrounding financial stability and performance. In turn, this information of long-term return motivates and develops the manager’s ability to communicate and transpire SD and CSR through the organisation, via various internal and external decision making processes. “It is argued that sustainable communication lets the company reach past the relationships that the company needs to ensure sustainable development.” (Harrison, 1992) Leaders at Alibaba are an example for other organisations, with their efficient decision-making processes and radicalisation of social values, culture and beliefs.

Better businesses practises surrounding SD and CSR equally result in better independency within the market and long-term financial gain. Besides, connecting marketplaces and allowing mutually-advantageous exchange, Alibaba understands that helping SMEs through technology, financing and training can better market edge. At the heart of any SD and CSR initiative is human capital towards innovation and creating better environmental and community business practises, “community development as a process by which the efforts of the people themselves are united” (Mori, 2013).

There is a strong correlation between organisations to protect IP, as of Alibaba Intellectual Property Protection Platform strengthening a portfolio in specific technological and geographical areas. There are similar strategic intentions with other organisations to seek protection and spread costs to international markets and attract a wide range of consumer base. In a related case study by World Intellect and Property Organisation (WIPO) conducted on an organisation called Shinetech. “Shinetech believes that only through collaboration can healthy and sustainable partnerships be formed. […] By incorporating IP protection in its long-term development strategy, and by applying it properly, Shinetech has been able to attract a wide range of clients, which eventually made it one of the leading software outsourcing firms in China. ” (WIPO, Cornell University, & INSEAD, n.d)

Recommendations

It is recommended that Alibaba continues its current SD and CSR practises which demonstrated consistent communication methods offering and gathering informed opinion on current issues and good practice with stakeholders. Management could make communicating with stakeholders a frequent business practise, to reinforce the importance of obtaining feedback for SD and CSR. As human capital is at centre of societies issues and linked to innovation, management must continue to inspire and incentivise employee contributions.

Alibaba should continue to invest in successful community development according to Exhibit 4.6 Criteria of Corporate Social Performance. Alibaba could explore the organisations impact and encourage SD and CSR in other organisations and the community using the TBL framework. Additionally, there is potential opportunity within China’s and India’s untapped rural market for long-term sustainable growth. Competitors of Alibaba must not be viewed as having more sustainable initiatives in comparison, as this can detract from the true meaning of discretionary responsibility and community outreach.

Increasing economic problems must not be ignored. Employees must strive to report the truth on issues and not feel pressure from top management on the status and consequence of losing their job. Transparency is key in reporting; however Alibaba is restraint and have overreliance on undeveloped Chinese law covering IPO and other international business law. Alibaba must employ direct and frequent research in any slight change of law that can detract Alibaba’s good CSR image. If this activity is not maintained Alibaba is at risk unknowingly to a conflict of interest between international laws or regulation. Corruption within India and China can also arise from differences in business cultural norms, such as backhanders and whistleblowing which must be supported by training and development workshops for employees.

Crucial to Alibaba’s stability and survivability in the ever changing environment, Alibaba must improve on financial reliability moving away from being entirely dependent on emerging markets. Managers should keep up with publishing practical reports to help identify solutions to business dilemmas before they arise. To prevent downturns in long-term growth and sustainability management must distinguish differences between domestic and international focus, with the patent application trends seeking protection in varied markets.

Conclusion

This case study investigates Alibaba’s strategic intention on sustainable development and social responsibility. Current business performance has proven to succeed in turbulent times, mainly due to management’s ability to instil cultural values that represent stakeholder’s values. Overreliance on unstable economies and developing market trends does show variance and volatility which requires consistent monitoring from management if it intendeds on sustaining long-term profitability. Additionally, Alibaba’s orientation towards helping SMEs has greatly contributed to increasing societal welfare and CSR community image.

As human capital is at centre of societies issues and linked to innovation, management is looked upon to continue to inspire and incentivise employee contributions. Overcoming management’s internal costs to provide external benefits will be a great achievement for future gain. Sustainable communication for external and internal stakeholders that provides industry knowledge surrounding financial stability and performance. Long-term growth rates are suspected to grow from Alibaba’s independency from advertising revenue and patent application fillings which provide a progressive competitive advantage for long-term financial performance.

Having begun operation and launched Alibaba in 1999 now China’s leading (business-to-business) e-commerce Company, operating a conglomeration of various e-commerce sites that build upon strategic direction and stages of development. Adapted to resource and product markets Alibaba requires consistent compliance to differing cultural and social values, law and regulation. Prepared market entry strategies will provide a conceptual framework that organisations today will resort to, such TBL framework that covers financial, social and environmental responsibilities.

However, the manufacturing sector which dominates most of Alibaba’s stakeholders is at a stage of industry maturity, which requires Alibaba to seek out and retain the dominant India and China customer base. Competition for the growing middle-class is fierce. Requiring them to compete with not only well established international e-commerce organisations but help inspire competition on a local scale.

With the termed coin Chindia Alibaba expects to have such a joint cooperation rather than compete, it is expected to provide double financial sustainability. Equally, the doubling social and environmental responsibility presents ever changing challenges that Alibaba can use previous lessons to adapt and overcome this instability. Where Alibaba will continue to manage cross-culturally. Operating within a borderless ecosystem of mutually-advantageous exchange Alibaba has set an example for SD and CSR for other organisations and community at large.

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