An unethical executive team. Poor working conditions. Environmental liabilities. It has been a pattern in the past for these issues within a company to come to light through investigative reporting, inevitably followed by a public apology and promise to reevaluate and make changes for the better. These incidents can not only cause significant fiscal damage, but also leave a bad taste in the mouths of consumers and investors long after financial recovery.
From globalization to the coronavirus pandemic to climate change, there is much about the world right now that feels uncertain. Additionally, the advent of social media has brought with it an increased demand for transparency across the board. However, rather than see this as an inhibitor to a company’s operations, smart organizations understand that transparency can be used as a tool to promote resilience and adaptability.
An increasingly popular way to provide such transparency in recent years has been through creating comprehensive reports on environmental, social and governance (ESG) factors. Originally developed as a set of criteria through which investors could make informed decisions on the long-term potential and overall sustainability of a company, today there have been a number of models developed to accurately measure how an organization is aligning themselves to these principles.
JD.com, the Chinese internet company that has been called “the Amazon of China,” recently released its second annual ESG report. One of the world’s largest ecommerce companies, JD.com is known for its comprehensive supply chain capabilities, utilization of information technologies and growing B2B business extending these advantages to others.
The 2021 report has over 50 pages of information and is available in both Chinese and English. In 2014, JD.com became the first comprehensive e-commerce platform in China to go public in the United States, and in 2020 it completed its secondary listing on the Hong Kong Stock Exchange. In a message provided at the beginning of the report, founder of the company and chairman of the board of directors Richard Qiangdong Liu said that JD.com intends to make ESG “a top-down consistent guiding direction and evaluation mechanism through continuous
institutional improvement.”
This year, JD.com has aligned its climate change-related reporting with the Task Force on Climate-related Financial Disclosures (TCFD) for the first time. Formed in 2015 by the G20-established Financial Stability Board, in 2017 the TCFD began putting forth recommendations for companies on how to best go about disclosing information related to climate change with the aim of providing organizations with a guideline they could base their reporting on. The TCFD’s goal is to see more businesses report on their own unique risks and opportunities they face as a result of climate change. In this way, there is more transparency throughout the business sector and an economy can be built that is more resilient to the uncertainties brought about by climate change.
JD.com conducted a climate scenario analysis for its external business environment in 2025 and 2030, including a low emission scenario with strict climate change policy intervention as well as a high emission scenario without climate change policy intervention. While there is much hope that the world will be able to achieve the low emission scenario, JD.com has shown its business philosophy of long-termism by evaluating the effects both will have on its business as a whole.
However, the worst effects of climate change can only be mitigated by intervention on a global scale, JD.com has still maintained a strong commitment to doing its part. The ESG report indicated that by 2030 JD.com intends to have reduced carbon emissions by 50 percent when compared with its 2019 levels. In order to achieve this, JD Logistics, the branch of JD.com that manages its comprehensive logistical network, intends to invest $150 million (RMB 1 billion yuan) to build a greener and more integrated supply chain. Known as its “Green Stream Initiative”, the five-year plan takes a multi-pronged approach to its sustainability efforts, including offering a greater amount of low-carbon products and engaging a wider range of merchants and customers together to practice responsible production and consumption.
One part of the Green Stream Initiative involved replacing disposable delivery boxes with reusable ones made of 100 percent recyclable materials. Encompassing the participation of over 200,000 merchants and hundreds of millions of consumers, by the end of 2021 China’s ecommerce logistics sector has reduced the use of its disposable packages by nearly 10 billion, with the reusable delivery boxes having been used 200 million times.
JD.com also built China’s first carbon-neutral logistics park, the Asia No.1 Logistics Industrial Park located in Xi’an. At the end of 2021 JD.com had also completed the installation of solar panel systems at 13 of its logistics parks, and the next warehouse set to be carbon neutral is the Asia No.1 located in Suqian which is targeting a goal of carbon neutrality by 2023.
Additionally, JD Logistics has put into use 20,000 new energy vehicles in over 50 cities across the country. According to the report, this has cut carbon dioxide emissions by 400,000 tons per year. JD Cloud’s green data centers achieved a PUE (Power Usage Effectiveness) of less than 1.1 which in turn lowered 30 percent of its infrastructure’s energy usage and 10 percent of its carbon emissions year-over-year. The Green Building Label, China’s sustainable architecture evaluation system, graded the company’s newly-completed eco-friendly headquarters building at three stars, the highest grade possible.
Richard Liu noted that JD.com is “an enterprise with both the genes and attributes of a real economy enterprise and possessing digital technologies and capabilities”, making it uniquely positioned to bring about transformations to businesses large and small. With a mission of being “powered by technology for a more productive and sustainable world”, JD.com is no longer simply a retail company. Instead, it has recognized the value its assets can bring to other businesses.
2021 saw the company’s inventory turnover days decrease to reach a world-leading level of 30.3 days, and it also further developed its R&D platform for consumer-to-manufacturer products and expanded its cloud computing infrastructure, spreading across 70 cities. These developments have seen JD.com provide digitally intelligent solutions that support the quality growth of businesses across sectors. Small and medium-sized businesses were still those most affected by the continued ramifications of the coronavirus pandemic in 2021, and JD.com was able to provide these enterprises with smart supply chain competencies as well as introduced fee-waiving policies that enabled many businesses to remain in operation through difficult times.
JD.com has also made supporting farmers and agricultural development in China a high priority level, with the ESG report showing that JD has provided secure job opportunities for over 300,000 frontline workers to date with over 80 percent of them coming from rural areas. The company has also gone above and beyond delivering packages to rural areas, collaborating with over 1,000 agricultural production zones, co-creating over 70 modernized farms, and establishing over 700 online markets to support the promotion and circulation of premium agricultural products. According to the report, this has generated $4.8 million in production value and increased income for millions of farmers.
Sustainability is a word that has become synonymous with the “environmental” aspect of ESG, but in reality it is a holistic term that indicates an organization’s ability to survive and thrive in an increasingly uncertain world. Through ESG reporting, companies like JD.com have the ability to show stakeholders – their customers, investors, workers, and the communities in which they operate – that they are committed in the long-term to building a sustainable future for everybody.
