Foundations for Sustainable Growth - ESG REPORT 2018 - Alibaba Group
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ESG REPORT 2018 Foundations for Sustainable Growth
OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
Welcome
We have always felt a responsibility to help
solve problems in society, because that is
implied in our mission – “to make it easy
to do business anywhere” – and we must
consider how we will continue to manage
risks and opportunities, including those
associated with environmental, social
and governance (ESG) factors.
Contents
01 OVERVIEW 07 GOVERNANCE 43 ENVIRONMENT
02 Letter from Jack Ma, 08 Corporate Governance
Executive Chairman at Alibaba 48 CONCLUDING
THOUGHTS
03 Alibaba Digital Economy
16 TRUST
04 Alibaba at a Glance 49 APPENDIX
17 Intellectual Property
05 Sustainability: At the Rights Protection 50 Our Board
Core of What We Do 51 Our Partners
25 Cybersecurity
06 A Focus on What
Matters Most: 29 Data Protection
Our ESG Priorities
32 SOCIAL
33 Human Capital
37 Social Impact
Alibaba Group Holding Limited ESG Report 2018 01
OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
Letter from the Chairman
Alibaba Group’s mission is to “make it easy understanding of Alibaba’s mission and Alibaba Group to our chief executive officer
to do business anywhere.” Having positive vision and the role played by the Alibaba Daniel Zhang. This report sheds light on
social impact has always been embedded Partnership, a unique organization of the how we manage leadership transition –
in our organizational DNA. We believe that most senior members of management with by focusing on human capital development
a profitable and prosperous business can the purpose of safeguarding our culture, and asking whether our mission, vision and
only be achieved and sustained by solving talent development and sound governance values are still intact – a process in which
large-scale societal problems. framework. the Alibaba Partnership plays a critical role.
Today, the Alibaba Digital Economy not only In 2010 we formed the Alibaba Partnership I hope you will take away something
supports the infrastructure of commerce but because we recognized that, in order for meaningful from engaging in a conversation
also serves hundreds of millions of consumers us to develop a sustainable business, we with us through this report. We also welcome
and tens of millions of enterprises, most of needed a system that could outlast the further comments and views you may have
them small businesses. This economy extends Alibaba founders. Our system of governance and look forward to hearing from you.
far beyond our immediate customers to transcends mere policies, rules, processes
impact the lives and businesses of all and procedures. The Alibaba Partnership Thank you for all of your support.
stakeholders in our ecosystem. Alibaba ensures that the company is driven by a clear
Sincerely yours,
has become an institution of public trust. mission, supported by a strong culture, and
inspired by the right leaders. At Alibaba, we
In this ESG report, our first such report for expect our leaders to walk the talk, honor
the investment community, we will share their commitments, own their mistakes, and
with you how we hold ourselves accountable approach problems with open-mindedness,
to the highest standards of public trust. This respect and humility. JACK MA
report complements what we already report Executive Chairman
September 17, 2018
domestically to stakeholders on a regular One of the most difficult yet most
basis and summarizes key information in one important governance issues challenging
place for easy reference. You will learn that public institutions is managing leadership
we are firmly of the view that the key to good transition. Succession planning is not only
governance and sustainability starts with about the selection of the right people but
a strong company culture and tone at the also continuity of mission, vision and values.
top from responsible leaders. That is why, Recently I announced that, on September 10,
in this report, we provide insights into an 2019, I will hand over the role of chairman of
Alibaba Group Holding Limited ESG Report 2018 02
OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
Alibaba Digital Economy
Our Mission is “to make it easy to do business Since 2010, the management team Our Goals
anywhere.” We and our affiliates are in the members who manage the Alibaba Digital
business of providing e-commerce, retail, Economy operate as a partnership that we
local services, entertainment, healthcare, refer to as the Alibaba Partnership (for
cloud computing and financial services to more details refer to Corporate Governance, As of fiscal year 2018 2036
both consumers and enterprises, which we page 07). The partners in the Alibaba
642 2
refer to collectively as the Alibaba Digital Partnership are custodians of the Alibaba
Economy 1. We apply our mission in every Digital Economy. Our job is to continue to
aspect of our operations to solve customers’
problems by removing barriers between
grow the Alibaba Digital Economy and
safeguard the interests of all its stakeholders.
M BN
producers of goods, services or content Understanding how we do this complex Annual active consumers 2
Consumers globally
and their end consumers. job is fundamental to understanding the
10 10
importance we put on our responsibility
As of March 31, 2018, we served 552 million and aim for sustainability.
annual active consumers in China and
another 90 million outside China. We provide M M
essential infrastructure and services to tens Small and medium sized Profitable businesses globally
of millions of small businesses within our businesses globally
digital ecosystem. Our vision is that by 2036,
36 100
we will serve 2 billion consumers globally and
help create 100 million jobs by supporting
10 million businesses to operate profitably.
M M
Jobs created directly and indirectly 3
Jobs created directly and indirectly
2 552M consumers in China and 90M outside of China from
Lazada and AliExpress
3 Source: According to a recent report by the Renmin University
of China, Alibaba created 36 million jobs in 2017 via its retail
ecosystem, including 14 million jobs for online retailers and
1 The Alibaba Digital Economy includes businesses 22 million jobs for upstream and downstream sectors such
under Alibaba Group, Ant Financial Services Group, Cainiao as R&D, design, manufacturing and logistics.
Network, Ele.me and Koubei, Alibaba Health, Alibaba Pictures See http://i.aliresearch.com/img/20180404/20180404144522.pdf
and their affiliated entities.
Alibaba Group Holding Limited ESG Report 2018 03
OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
Alibaba at a Glance
China CORE COMMERCE Cross-Border & Global DIGITAL MEDIA &
ENTERTAINMENT
*
CONSUMER SERVICES
*
China WHOLESALE COMMERCE Cross-Border & Global INNOVATION INITIATIVES
Logistics
Payment & Financial Services *
Cloud Services
* Indicates entities that we do not consolidate in
our financial statements as of the date of this report.
Alibaba Group Holding Limited ESG Report 2018 04
OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
Sustainability:
At the Core of What We Do
Alibaba is an institution of public trust. The We believe public trust is earned by Our Mission
Alibaba Digital Economy spans a vast scale demonstrating that everything we do
of business operations with constituencies is sustainable. As a corporation with
that include consumers, merchants, shareholders who expect us to make
producers, creators, service providers,
business partners, regulators, employees
a profit, Alibaba defines “sustainability”
as focusing on long-term value creation To make it easy to
and of course our shareholders. With the
mission “to make it easy to do business
anywhere,” these stakeholders rely on us
that drives sustainable profits. The pursuit
of sustainability requires that we do the
right thing when our business impacts the
do business anywhere
to solve many of their business problems. environment and society, and we need a
We believe that solving people’s problems system of governance to ensure that we
and doing so ethically is the way to create are always choosing the right ethical path.
value for society, and hence derive value This report is about how we address these
for our company and shareholders. environmental, social and governance
(ESG) considerations, putting customers
and employees first and championing
small businesses.
Alibaba Group Holding Limited ESG Report 2018 05
OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
A Focus on What Matters Most:
Our ESG Priorities
For this first ESG report, we undertook In this first ESG Report, we highlight Alibaba’s sustainability priorities
a rigorous materiality assessment that our commitment to these sustainability
included input from internal and external priorities and show how we address the
stakeholders. Over the past year, we issues focused on by our stakeholders.
surveyed about 50 institutional shareholders
representing around US$65 billion of
We would like to thank the customers,
employees and shareholders whose Corporate governance Human capital
our market capitalization as well as input views guided us in publishing this report. Find out more, see page 07 Find out more, see page 33
from, among others, our customers and
employees. Their input and this process
led us to identify the seven issues (in box to
right) as most critical to the sustainability of Intellectual property Social impact
our business.
rights protection Find out more, see page 37
Environmental
Find out more, see page 17
Cybersecurity impact
Find out more, see page 25 Find out more, see page 44
Data protection
Find out more, see page 29
Send your comments and feedback
on the report and our ESG approach
to BABAESG@alibaba-inc.com
Alibaba Group Holding Limited ESG Report 2018 06
OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX Corporate Governance at Alibaba Alibaba has a unique governance model. To understand our system of corporate governance, it is important to understand the role of our Mission that guides us, our Vision that brings focus to our strategy, and our Partnership System that plays an active role in key decisions in the areas of leadership succession, human capital management, business ethics and social responsibility. Alibaba Group Holding Limited ESG Report 2018 07
OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
The Role of Mission and Vision
Typical public corporations SOCIAL RESPONSIBILITY DEFINES We ask that everyone joining our company Our Vision by 2036
OUR MISSION AND VISION commit to our mission and vision. If we
think of “corporate weren’t guided by a common mission, then
The belief in our mission – to make it easy to
governance” as a set of
To serve 2 billion
Alibaba would be a mere investment holding
do business anywhere – is the foundational company with disparate businesses. With
policies, rules, processes logic underlying our business decisions. We the collective pursuit of a clear vision, our
and compliance procedures.
The presumption is that
believe that we do not create value if we do
not solve the problems of society, and if we
do not create value for our customers, then
various businesses will work together to
generate synergies that drive long-term
sustainable growth.
consumers globally
the profit motive inherently the company will not be able to generate any
encourages risk taking by
revenue, much less profits, from customers. Because we believe Alibaba’s business
should be guided and driven by our mission Support 10 million
businesses to operate
We have stated publicly that we want Alibaba
managers that must be to last – “at least 102 years” which would span
and vision, socially responsible elements –
i.e., solving customer problems, earning
tempered by checks and three centuries from our founding in 1999.
profitably
consumer trust, helping small businesses
balances that reflect ethical Our vision – to serve 2 billion consumers
and creating jobs – are embedded in our
business model.
considerations. globally and help create 100 million jobs
Help create
by supporting 10 million businesses to
We do not view “growth” operate profitably by year 2036 – helps
us set long-term strategy and goals that
versus “governance” as a
zero-sum game. In fact, quite
are consistent with our values. This vision
focuses our priorities on consumer trust,
small business and job creation.
100 million jobs
the opposite. We believe a
company must be mission-
driven in order to achieve
sustainability.
Alibaba Group Holding Limited ESG Report 2018 08
OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
The Role of the Alibaba Partnership
The Alibaba Partnership (the HOW THE ALIBABA Admission of New Partners: The most of Alibaba Group. Newly admitted partners
important element of the Partnership is the are awarded shares in the Alibaba Group that
“Partnership”) is at the heart PARTNERSHIP OPERATES annual process of selecting and admitting vest over 10 years, and each partner must
Living Body: The Alibaba Partnership is
of our company culture and a dynamic group of people that operates
new partners to the Partnership. New partner retain a significant level of share ownership
candidates are selected on the criteria of that aligns the partners’ interests with the
identity. Currently comprised as a living body, adding new blood through stockholders of the company.
the admission of new partners each year.
of 36 senior management Partners are required to retire from the
• personal character;
Diversity and Experience: Of the 36 current
leaders who oversee the Partnership if they are no longer contributing • impact on our business;
partners of the Partnership, 12 partners (33%)
various aspects of the to the work of growing the Alibaba Digital
Economy. Since its founding, the Partnership
• demonstrated ability to live are women, and 32 of the partners (89%) have
and evangelize our culture; and been employed within the Alibaba Digital
Alibaba Digital Economy, the has expanded from the admission of new Economy for more than 10 years.
• at least five years tenure of service
Partnership has had a clear partners each year; currently there are
to the Alibaba Digital Economy.
36 members of the Partnership.
purpose since it was formed Admission of new partners requires the
in 2010: to sustain the culture Partnership Charter: The Partnership is
approval of at least 75% of all partners.
ALIBABA PARTNERSHIP
governed by a Partnership agreement (the COMPOSITION
of the founders of Alibaba “Partnership Charter”) and operates under Collective Decision-Making: All Partnership
in order to ensure that we principles, policies and procedures that have
evolved with our business. The key provisions
votes are made on a one-partner-one-vote
By Gender
basis. Each partner has a vote equal to that
stay on course in defining of the Partnership Charter address, among of any other partner on matters that come Male (67%)
and executing our mission, other things, the criteria and duties of the to the Partnership for decision: election of
Female (33%)
partners, their right to vote on matters of new partners, expulsion of partners, selection
vision and values. importance to the Partnership, and meeting of Partnership-nominated board members
quorum and voting procedures. to Alibaba Group, and amendment of the
Partnership Charter, to name a few.
Stock Ownership: Another important
12 Female Partners
element of the Partnership is that each
partner has share ownership in Alibaba
Group that is substantial relative to their net
24 Male Partners
worth. The average partner has no less than
a majority of their net worth in the shares
Alibaba Group Holding Limited ESG Report 2018 09OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
The Role of the Alibaba Partnership continued
BOARD COMPOSITION HUMAN CAPITAL MANAGEMENT • energy, As in the case of other public companies, our
Based on our articles of association, AND LEADERSHIP SUCCESSION • ability to influence, board determines leadership succession at
the Alibaba Partnership has the right to the highest level by selecting and appointing
One of the most important roles of public • strategic mindset,
nominate a majority of the board of directors our chairman and chief executive officer.
company boards is the selection and
of Alibaba Group, although the Partnership • open-mindedness, On leadership succession, board members
appointment of their company’s senior
may choose not to fully exercise that nominated by the Partnership fulfil their
leadership, in particular the chairman and
right. Board candidates nominated by the • resilience, directorship duties by counseling and
chief executive officer. Through Partnership-
Partnership, as well as independent directors offering their knowledge about potential
nominated directors, the Partnership • self-awareness, and
recommended by the board’s nominating internal senior candidates to the
plays a crucial role in advising our Board
and corporate governance committee, are • humility. independent directors.
in developing senior management talent
elected to the board by the majority vote from within and planning for leadership We expect that partners fulfill their Because Partnership-nominated directors
of all of Alibaba Group’s shareholders. succession. This process reduces the risk of responsibility as culture carriers and are familiar with the company’s senior leaders
leaving succession management to chance. demonstrate the ability to evangelize through the talent development process
Currently, five of the eleven board our mission, vision and values to our
members (Jack Ma, Joe Tsai, Daniel Zhang, as partners, our board is afforded a much
The continuous cultivation and annual customers, employees, shareholders
Eric Jing and Michael Evans) are nominated more complete and transparent view of the
selection process of admitting new partners and other stakeholders. Partners must
by the Partnership, five of the board company’s human capital and leadership
into the Partnership is the vehicle for us to continuously serve in the businesses of the
members (C.H. Tung, Walter Kwauk, Jerry succession alternatives when the critical time
identify talented individuals throughout Alibaba Digital Economy and have a track
Yang, Börje Ekholm and Wan Ling Martello) comes for senior management transition.
our organization who exemplify our culture record of contribution, performance and
are independent directors nominated by and embody the required leadership traits positive impact to our business.
the Board’s nominating and corporate we look for in managing our business.
governance committee, and one director These leadership traits include: Because each partner has been carefully
(Masayoshi Son) is nominated by SoftBank selected through the partner development
Group which has been a long-term investor • integrity, and admission process with a focus on
in Alibaba Group since 2000. leadership and cultural traits in addition
• intellect,
to proven performance and management
• emotional intelligence, ability, the pool of partners provides the
• ethical conduct, primary source of talent for our leadership.
Alibaba Group Holding Limited ESG Report 2018 10OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
The Role of the Alibaba Partnership continued
ETHICAL CONDUCT the short-term profit motive. We believe Worthy of note are the Jack Ma Foundation, In summary
that if our customers are well-served by which focuses on rural education, poverty
The Alibaba Partnership is the steward of our
our employees, then our shareholders will and entrepreneurship, and Lakeside
company’s conscience. Partners are expected
benefit from the resulting value creation. Modou Foundation, a foundation collectively We believe our Partnership system is a
to not only conduct themselves with integrity
established by the 12 women partners in strong positive feature of our corporate
but also to monitor the ethical conduct of all Integrity is at the center of how we expect the the Partnership to provide care and a better governance framework in the following ways:
of our employees as well as their business partners in the Partnership to demonstrate future to women and children in rural and
practices. Through the established procedure leadership. Specifically, in management and • The high standards of personal character
underdeveloped areas of China.
of expulsion (via the vote of over 50% of the leadership positions, partners are expected and ethical conduct required of partners
partners), the Partnership may expel partners to walk the talk, approach issues with honesty The partners believe that philanthropy ensure that we set the right tone at the top;
who do not fulfil expectations on integrity and openness, own their mistakes and honor must be sustainable, which means that their
and ethical conduct or repeatedly breach our commitments. initiatives should inspire others to action • Unlike companies controlled by
stated values. and leverage all available societal resources their founders with a dual-class voting
We believe that the expectations we put on beyond their own. For example, when the structure, Alibaba Group is not susceptible
Partners have a duty to set the tone at the partners who lead our businesses will to the same kind of key man risk and
Jack Ma Foundation initiated a program to
the top. Through day-to-day management influence our entire workforce by setting vagaries of a single controlling shareholder;
improve education for children in poverty
of businesses within the Alibaba Digital the right tone at the top. stricken areas, the Foundation created an • The Partnership assists our board
Economy, they are expected to communicate
annual prize to select and award 100 model in human capital management and
the values of the company to employees SOCIAL RESPONSIBILITY rural teachers and recruited international leadership succession, especially the
through actions and various interactions with
Partners in the Alibaba Partnership are architects to help design dormitories selection of the company’s chairman
employees such as meetings, speeches and
expected to make personal contribution of featuring clean sanitary conditions and and chief executive officer;
group discussions. Among the values we have
time and financial resources to solving social caring community spaces for school
identified as important to sustainability, we • The collective decision-making process
problems that require long-term investment children on a pro bono basis.
especially emphasize “customer first” and of the Partnership ensures that matters
and therefore do not receive the attention of
“integrity” as the core values that guide our that come up for decision have been
the commercial sector.
ethical conduct. carefully debated and deliberated, and
Partners have established individual that no single individual controls key
Our customer-first mentality ensures that Partnership decisions; and
and joint foundations to carry out their
we put serving those who give us our raison
philanthropic activities. Some of the focus • The system of admitting new partners
d’être as the highest priority. We believe that if
areas include education, eradication of and retiring old partners represents a
we adhere to the principle of doing right by
poverty, environmental improvements, and continuous process of invigoration to
our customers, our employees will make the
economic and social mobility for women. ensure excellence of our management
right judgment and do the right thing when
the interests of our customers conflict with team, continuing innovation and
sustainability of our business.
Alibaba Group Holding Limited ESG Report 2018 11OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
The Role of the Board
and Board Committees
The Alibaba board is Our board of directors has established an We maintain a Related Party Transaction Compensation Committee
audit committee, a compensation committee Policy that stipulates that, unless otherwise The Compensation Committee oversees
responsible for the long-term and a nominating and corporate governance pre-approved by our board of directors, our compensation policies; reviews the
success of the company committee. All members of our audit committee all related party transactions, including performance of our directors and executive
are independent directors. A majority of the transactions involving directors, officers, officers; determines the compensation to our
through nominating members of our compensation committee and other members of senior management, executive officers, approves the aggregate
independent directors, and nominating and corporate governance must be approved or ratified by the bonus pool allocated to the partners of the
committee are independent directors. Audit Committee. Alibaba Partnership who are our employees;
selecting the chairman and monitors policies and magnitude of
and chief executive officer, Brief descriptions of these committees We have an internal audit department equity incentives to our employees as a
follow, and more detail can be found in of 29 employees and our head of internal whole. The compensation committee is
monitoring strategy and our annual report on Form 20-F. audit reports directly to the Audit Committee. chaired by independent director Jerry Yang,
management execution, Audit Committee
The internal audit function conducts co-founder and former chief executive officer
independent and continuous testing of the
setting senior management The Audit Committee oversees our integrity and robustness of our financial
of Yahoo! Inc.
compensation, and providing accounting and financial reporting reporting, operational system controls, IT Nominating and Corporate
processes and the audits of our financial general controls and design of key policies Governance Committee
oversight to the company’s statements; selects, evaluates and and procedures. Our internal audit staff The Nomination and Corporate Governance
financial reporting, internal supervises our independent auditor; meets as frequently as twice a month Committee recommends independent
oversees our internal accounting controls with the chair of the Audit Committee director nominees; reviews board composition
control systems, business and audit procedures; reviews and approves and quarterly with other members of the with regards to characteristics such as
conduct and code of ethics. related party transactions; oversees Audit Committee to review their work. independence, knowledge, skills, experience
procedures for employee complaints and and diversity; advises the board on corporate
concerns; and reports regularly to the full governance and compliance matters. The
board of directors. The Audit Committee is nominating and governance committee is
chaired by Walter Kwauk, an independent chaired by our board chairman Jack Ma.
director with 25 years of senior leadership
experience in the audit industry with KPMG.
Alibaba Group Holding Limited ESG Report 2018 12OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
Related Party Transactions
“Related party transaction” For example, a commercial contract One particularly significant instance of
between Alibaba Group and a company in high standards of scrutiny is our agreement
is both a legal and ethical which Alibaba Group is a 30% shareholder announced earlier this year for Alibaba
concept. Certain legal is by definition a “related party transaction” Group to terminate a profit interest, and
under the U.S. securities rules governing instead acquire a 33% equity stake in,
definitions of transactions foreign private issuers and the analysis our Ant Financial and ancillary transactions.
between “related parties” board must make to ensure the fair and Because Ant Financial is a company in which
arms-length nature of the transaction is the partners of Alibaba Partnership and the
do not create a conflict no different from the analysis that one employees of Alibaba Group have significant
of interest between the would apply to transactions between equity shareholding, the transactions went
unrelated parties. through a rigorous process of evaluation
company’s management, and scrutiny by our board. The transactions
directors or major On the other hand, transactions between were carefully reviewed and approved by a
the company and a director, officer or
shareholders and major shareholder could potentially raise
committee comprised of only independent
directors and the non-executive director
the interests of its the issue of conflict of interest that requires appointed by SoftBank Group. The
stricter scrutiny by our board and its audit
independent shareholders. committee. It is with this philosophy in mind
committee was advised by independent
legal and financial advisors. In addition, the
– knowing the distinction between technical Audit Committee of the board, comprised
related party transactions and transactions of only independent directors, reviewed
that give rise to apparent or actual conflict – and approved the transaction.
that we created the governance framework for
the board and our management to evaluate
and approve related party transactions.
For more information on how we
handle related party transactions
see our annual report on Form 20-F.
Alibaba Group Holding Limited ESG Report 2018 13OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
Asset Ownership in
Compliance with Regulations
In order to comply with Alibaba Group has entered into a series during the then-ended fiscal year. In other
of agreements with such entities, that words, the vast majority of Alibaba Group’s MINIMAL REVENUES FROM VIEs
relevant laws, rules and under accounting rules are referred to assets, revenues and cash flow belong to Wholly owned
regulations in China as “variable interest entities” or VIEs, and wholly owned entities of Alibaba Group in entities (87%)
governing foreign investment
their Chinese national owners, such that
Alibaba consolidates the VIEs on its financial
which we have sole legal title and control.
In addition, most of the critical assets of
87% 13% VIEs (13%)
in certain types of internet statements because Alibaba, among other our business, such as user data, customer
things, (i) bears the economic risk and contracts, intellectual property, technology
businesses, we use a benefits of the VIEs, (ii) through contracts infrastructure and software source code
corporate structure such as technology and licensing agreements, are held in controlled or wholly–owned
is entitled to substantially all of the profits subsidiaries of Alibaba Group.
similar to that adopted of the VIEs, (iii) has an exclusive option to
by many peer companies acquire the shares or assets in such VIEs if Subject to foreign currency regulations
in China, our shareholders have direct
in our industry. permitted by law, and (iv) holds the voting
proxy with respect to such VIEs. access to substantial cash flows generated MINIMAL ASSETS IN VIEs
by Alibaba Group’s businesses because
Our Internet Content Provider Licenses Assets not held
required to operate certain internet
We believe that we have structured our VIEs
to be best-in-class from the point of view of
much of our assets and business activities
that generate cash flow are owned by or
92% 8% in VIEs (92%)
Assets in VIEs (8%)
businesses in China are held by entities
financial integrity, economic participation, conducted through subsidiaries that are
whose direct or indirect owners are
asset security and control over free cash controlled or wholly owned by Alibaba
Chinese nationals that are either founders
flow of the business. As of the end of Fiscal Group. Access to cash flow is a key feature
or employees of Alibaba or members of
2018 (March year-end), assets in the VIEs that rating agencies take into consideration
the Alibaba Partnership.
in aggregate do not exceed 8% of the when assigning a credit rating. Alibaba
total assets of Alibaba Group, and the Group has the best credit rating (A1 by
VIEs generated approximately 13% of Moody’s/A+ by S&P/A+ by Fitch) among
consolidated group revenues and less than all private Asian corporate issuers.
5% in consolidated operating cash flows
Alibaba Group Holding Limited ESG Report 2018 14OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
Supportive Governance Mechanisms
As outlined in our corporate governance policies: Read more
We encourage shareholders to engage with us and make
1 CORPORATE
their views known to the board or to the independent GOVERNANCE
directors as a group, especially at the time of our annual
GUIDELINES
general meeting and by writing to our Company Secretary.
For more information,
click here
Our independent directors have the chance to meet
2
in executive session with no management members
present at all regularly scheduled board meetings.
CODE OF ETHICS
For more information,
Our Integrity Compliance Department has the power
3
click here
to conduct investigations of any suspected non-compliance
with the law or our Code of Ethics, and has authority
over all directors, officers and employees. We conduct
mandatory annual training to help prevent violations, and
we are transparent about violations that have occurred.
Alibaba Group Holding Limited ESG Report 2018 15OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX Trust This section describes our performance in and commitments to intellectual property rights protection, cybersecurity and data protection. A common thread weaving these priorities together is the pivotal importance of trust – from merchants, consumers, partners and regulators. Alibaba Group Holding Limited ESG Report 2018 16
OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
Intellectual Property
| INTELLECTUAL PROPERTY RIGHTS PROTECTION | CYBERSECURIT Y | DATA PROTECTION |
Rights Protection
The protection of intellectual property rights (IPR)
is core to the operation of a healthy marketplace.
Trust is essential for the health and sustainability of
Alibaba’s business, and consumers and merchants
place tremendous trust in our online marketplaces.
We have established an industry-leading IPR operation
that ensures we are a source of branded, authorized
goods, and that strongly deters the sale of illicit or
unauthorized goods, in order to protect the interests
of rights holders, brands and consumers.
Alibaba Group Holding Limited ESG Report 2018 17OVERVIEW GOVERNANCE TRUST SOCIAL ENVIRONMENT APPENDIX
| INTELLECTUAL PROPERTY RIGHTS PROTECTION | CYBERSECURIT Y | DATA PROTECTION |
Intellectual Property
Rights Protection
We are proactive in our This unit is led by our Chief Risk Officer, who Brands and brand owners are key come from the automotive, digital content,
is also our Chief Platform Governance Officer, constituents of our platform. We proactively apparel, electronics, luxury goods, food,
approach, aiming to identify and she reports directly to our CEO. Over established the Alibaba Anti-Counterfeiting pharmaceutical, and personal care sectors.
problems early before we 300 professionals work in this business unit Alliance (“AACA” or the “Alliance”) in January We also partner with law enforcement
including senior global team members who 2017. AACA’s 105 brand members include agencies to provide leads of suspected
receive complaints. Our communicate with global rights holders Adidas, P&G, Mars, Adobe, Danone, Hasbro, illicit manufacturing facilities. We believe it’s
IP Protection Department and brand associations on a regular basis. Samsung, and L’Oreal. With their support, the equally important to attack the bad actors
Alliance is effectively using internet technology at the source in the physical world. The goal
is charged with the critical To effectively protect the rights of brand and data to combat IP infringement more is to encourage all parties to collaboratively
responsibility of maintaining owners on our large online platform, efficiently and transparently. We recently fight counterfeiting through communication
we make extensive use of cutting edge, launched a program of IP Protection and information exchange.
a healthy and dynamic proprietary technology. Our proactive Roadshows in countries around the world
business environment monitoring and takedown system for where we present to global brands about the We openly communicate our IPR efforts
problematic listings is driven by sophisticated to the public by publishing an Intellectual
throughout Alibaba’s data-base algorithms and textual analysis
tools Alibaba offers to fight IP infringement.
Additionally, we have a scheme to support Property Rights Protection Annual Report
e-commerce ecosystem. and photo, optical character and behavior small brands who may not have the same and Intellectual Property Rights Protection
recognition technologies. Our philosophy level of resources to protect their original Handbook. We regularly report our progress in
is to partner with brands, understand their designs or patents. this program; our results speak for themselves.
particular product characteristics, and utilize
our technology to proactively monitor our Working with brands is not enough.
platforms. Then, we make it easy for brands We also take the fight offline to work
to report and track complaints – which over with trade associations, governments and
time has allowed us to continually improve law enforcement agencies in the fight to
our IP Protection Program. protect IPR. Industry groups we work with
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Intellectual Property
Rights Protection continued
PORTAL FOR PROACTIVELY Results 2017
RESOLVING IP PROTECTION
ISSUES
We have a one-stop portal with authorized
access for brands (https://ipp.alibabagroup.
com) to manage our Notice and Take-down
(“NTD”) processes. The portal allow brands
to track the status of their complaints and
17 42 240,000
%
Increase in the
%
Decrease in Number of Taobao stores closed
review sellers’ appeals. Following new number of registered takedown requests due to bad merchant behavior
procedures launched in mid-2017, 95% of accounts in our IP
takedown requests were processed within protection system
24 hours which represented a 68% reduction
in processing time. In many cases, offending
Taobao stores are simply shut down by us.
24-hour takedown
24 hr 95 68 %
Takedown requests
were processed
%
Representing
a reduction in
within 24 hours* processing time**
* From June 2017 to December 2017
** Average processing time compared to 2016
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Intellectual Property
Rights Protection continued
1
Proactive takedowns PROACTIVE MONITORING
enabled by technology (2017) TECHNOLOGY
We use state of the art technology to
partner with brands to understand their
27
specific product characteristics and, using
our sophisticated algorithms and robust
X
data processing and analytics technology,
we detect, identify, block and remove
suspicious product listings from our
More listings proactively
platform and penalize bad actors.
removed than reactively
taken down in response
to requests from rights In 2017, Alibaba’s real-time information
holders scanning capabilities enabled the company
to proactively remove vastly more listings
The most powerful weapon against
97
than those flagged by rights holders. All
but a few of these listings were eliminated counterfeiting today is data and
before a single sale took place.
% analytics, and the only way we
Number of all proactive
can win this war is to unite. With
takedowns removed our robust data technologies, we are
before a single sale
occured confident the Alliance will accelerate
the digital transformation in our
global fight against counterfeits.
JESSIE ZHENG
Chief Risk Officer and Chief Platform
Governance Officer, Alibaba Partner
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Intellectual Property
Rights Protection continued
HOW WE ENGAGE WITH BRANDS
The Alibaba Anti-Counterfeiting
Alliance (“AACA”) fosters transparency
and communication among stakeholders
and provides a forum for coordinating
offline investigations and referrals to
law enforcement. Here is a small selection
of the 105 brands who are our members
and allies.
This alliance focuses on:
• Building up brand and product-related
knowledge for proactive monitoring
• Test buy programs for rapid enforcement
• Educating the public and launching
campaigns to raise awareness among
consumers
• Increasing quality of leads provided
to law enforcement
• Taking problem merchants to court
• Sharing best practice and industry
experience with relevant stakeholders
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Intellectual Property
Rights Protection continued
Law enforcement crackdowns (2017) UNPRECEDENTED SUCCESS WINNING LAWSUITS AND
SUPPORTING LAW TAKING BAD ACTORS TO COURT
ENFORCEMENT In conjunction with the public appeal for
Our online portal and our technology stricter enforcement of IP laws in China,
tools both generate leads, complaints and Alibaba was the first platform operator
1,910 1,606
data evidence about IP infringers’ actions. in China to bring civil lawsuits against
Based on the information we collect and merchants who misuse its services for
our ongoing engagement with brands, the sale of counterfeit goods.
we approach and assist law enforcement
officials in offline criminal and civil
Number of leads Number of arrests investigations.
provided to the police made based on
Alibaba referrals In 2017, Alibaba supported local police in
23 provinces and cities throughout China
in their efforts to crack down on the sale
of counterfeit or otherwise inferior quality
goods, leading to the arrest of more than
1,600 suspects and the closure of more
1,328 4.3
than 1,300 facilities.
¥ BN
Number of illicit locations Total estimated value
closed down by law of goods involved
enforcement
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Intellectual Property
Rights Protection continued
Case Case
study study
We adopt a zero-tolerance attitude toward
counterfeiting, and firmly preserve the
Mars Inc.
rights and interests of consumers, as well
In January 2017, Alibaba Group sued two In July 2017, after investigating and collecting as brand’s reputation. Mars is determined
vendors selling fake Swarovski watches via
Taobao. This was the first-ever instance
evidence in cooperation with Mars Inc.
(a global producer of confectionary, pet food,
to work with Alibaba and other parties to
of an e-commerce platform taking
a counterfeiter to court in China, sending
and other food products), Alibaba won a keep the market order, and build a healthy
landmark civil lawsuit in China against a
a strong warning to illegal vendors and seller infringing upon Mars Inc.’s products. and lively market environment with all efforts.
demonstrating our determination to fight
fake products. The international brand
A Shanghai court found the vendor guilty
and ordered the defendant to pay damages.
We look forward to continuing to working
Swarovski said in a statement that it is The case is believed to be the first of its kind with Alibaba and others to dismantle the
committed to protecting its brand and
consumers from fraudulent selling activity,
in China, where an e-commerce platform has
successfully sought compensation
supply chain of counterfeit goods, and to
and it lauded Alibaba’s efforts to protect
brands and its platforms’ integrity.
from one of its online retailers. create an environment where counterfeiters
can no longer hide.
SCOTT THOMPSON
General Counsel of Marketing Properties at Mars Inc.
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Intellectual Property
Rights Protection continued
THE EVOLUTION OF IP PROTECTION IN ALIBABA
2002 2004 2008
Milestones
IPR protection IPR protection Launch of
Email-based Notice Submission initiatives on initiatives on Taobao AliProtect
Alibaba.com started Marketplace started
Online System & Proactive Monitoring
2012 2011 2010
Proactive Launch of Offline cooperation
Online to Offline Anti-Counterfeiting Monitoring Team TaoProtect mechanism
established
Multi-party Cooperation 2015 2016 2017 2018
Introduction Integration of Express IPP; 100+ AACA Members
AACA of Good-faith AliProtect and Establishment of Alibaba
Establishment
Mechanism TaoProtect systems Anti-Counterfeiting
of Alibaba IP Research
Alliance (AACA)
Institute
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Cybersecurity
| INTELLECTUAL PROPERT Y RIGHTS PROTECTION | CYBERSECURITY | DATA PROTECTION |
Security and accuracy of all the e-commerce
transactions completed on our platforms are mission
critical to consumers who spend money and to
merchants whose business depend on making sales
on our platforms. Because security is mission critical to
our customers, we must treat it as our utmost priority.
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Cybersecurity continued
We have developed Our Chief Risk Officer (CRO), supported Multi-layer security system
by our Chief Technology Officer (CTO), is
industry-leading responsible for cybersecurity. Both the CRO
cybersecurity technology and CTO directly report to our CEO. Our Data Security
CRO oversees the integrity of our IT system,
and practices that safeguard ensuring that our systems are sound and
our e-commerce platforms. well-defended. Our cybersecurity teams,
Data Leakage Prevention
who report to the CRO, focus on security
We recognize that consumers standards, processes and breach avoidance.
and merchants rely on us We also have a Cybersecurity and Data
Protection Committee chaired by the CRO
to protect their data on that oversees data security issues for all
our platforms to ensure platforms and products across the Group. Business Operations Security
business sustainability. On a continual basis, our CRO’s cybersecurity
team provides a comprehensive framework Transaction Security Spam Prevention Content Security
We also run the leading cloud computing Account Security Fraud Prevention
of compliance training, risk assessment and
service in China that many other businesses
security testing to the CTO and other teams
depend on to safely store data and process
across our platform. The CRO team also
transactions, and our network security
provides continuous monitoring of potential
must be designed to withstand attempted
breaches or incidents, including before an Platform Security
intrusions.
incident (through risk assessment), during an
We invest heavily and strategically in incident (through intrusion interception), and
proprietary systems, cutting-edge after an incident (with source tracking of data Web Security PC Security
Mobile Security IoT Security
technology, and R&D to build and safeguard breach). We also place security teams in each Blockchain Security System Security
a secure and protected environment across functional department to help implement
all our business units, in related companies Alibaba’s security strategy and manage daily
and with ecosystem partners. Our multi-layer security issues.
security system provides a comprehensive Infrastructure Security
data security infrastructure for continuous
monitoring and system protection
throughout all platforms.
Server Security Hardware Security Network Security Data Center Security
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Cybersecurity continued
EVIDENCE OF OUR BUSINESS • We are constantly improving our intrusion Certificates and Standards
SECURITY AND CYBERSECURITY detection and prevention capability. We have
a professional “red alert” team that simulates
CAPABILITIES realistic external cyber attacks, in order to Alibaba follows best practice
• Our real time risk management engine can stress test our abilities to block intrusions. international standards. We meet ISO
do 30 billion protective scans per day at peak. 27001 international certification standards,
• By deploying Security Development Lifecycle the global benchmark for information
• Our remote personal authentication system
(SDL) to all the applications, we are continually security management systems. Alibaba
for merchants is based on biometric
reducing the number of vulnerabilities to Group is certified by international
identification.
improve application security quality. standards* for data security and privacy
• Our emergency management system measures, including:
responds to emerging data crisis situations. • The cybersecurity team offers a “bug bounty”
It ranks incidents and situations by levels of program to incentivize individual security • ISO27001 for information security
potential damage, so we can evaluate the developers to report bugs in our system. management system
scope of impact and assess the resources
• In order to continually prepare for security • ISO22301 for business continuity systems
required to respond immediately.
challenges in the future, we operate several to protect against, reduce the likelihood
• Our security systems have the capacity R&D labs dedicated to researching innovative of occurrence, prepare for, respond to,
and resources to protect ourselves. We and pioneering security technologies, as well and recover from disruptive incidents
successfully defended the largest known as Internet of Things (IoT) and blockchain.
• Payment Card Industry Data Security
DDoS attack to date in March 2018, which Standard (PCI DSS)
hit our platforms at a peak volume of
776Gbps. • Report on System and Organization
Controls SOC 1 and 2 by AICPA for data
security, confidentiality and data privacy
Furthermore, Alibaba Cloud is the first
cloud services provider to be certified
with the ISO27001 Information Security
Management System Certification and
to receive the CSA STAR Certification in
China. Cainiao Network is the first logistics
provider to be issued with the industry
SOCII report.
* Source: China’s Certification and Accreditation Unified Business
Information Search Platform http://cx.cnca.cn/; International
Standards Organization https://www.iso.org/standards.html;
https://www.alibabacloud.com/trust-center
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Cybersecurity continued
Case
study
Operating such a massive e-commerce platform,
how do we guard against risks like malicious 2017 11.11 Global
attacks, hackers, and fraud? Of course, we Shopping Festival,
cannot take a case-by-case approach. We have a real testimony to
to aggregate large numbers of logins or events our security capability
to monitor security. We are continuously training
our systems on the huge volumes of data we During the 2017 11.11 Global Shopping
Festival, the total amount of paid
handle, and the system is becoming increasingly transactions was RMB168.2 billion
intelligent. We are the world-leading use case for (US$25.3 billion) with 90% of the
transactions executed via mobile devices.
artificial intelligence – and that is our advantage. The Shopping Festival marked the biggest
online shopping day in the world and was
325,000
the most important marketing, promotion
JESSIE ZHENG
Chief Risk Officer, Alibaba Partner
and sale event of the year for participating
merchants – the smooth working of the
transaction platform was mission-critical
for our customers.
In order to protect consumers and
Peak orders successfully merchants from cyber-attacks and
processed per second
fraudulent transactions, our cybersecurity
team put in place robust security measures
to filter out malicious activities and IP
256,000
addresses to ensure transaction validity.
On that day, the systems of Alibaba and our
affiliate Ant Financial successfully processed
peak orders of 325,000 per second, and
256,000 peak payment transactions per
second, and our logistics subsidiary Cainiao
Peak payment transactions managed 812 million total delivery orders.
per second
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Data Protection
| INTELLECTUAL PROPERT Y RIGHTS PROTECTION | CYBERSECURIT Y | DATA PROTECTION |
We put our users first in all aspects of our business,
including data protection. Earning and keeping users’
trust is a key factor in the sustainability of our business.
One way we do that is by clearly explaining to users in
plain and simple language how their data is collected
and used, as well as how to amend settings or opt out.
We also employ rigorous internal control procedures
and the use of advanced technology to ensure that
data is protected.
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| INTELLECTUAL PROPERT Y RIGHTS PROTECTION | CYBERSECURIT Y | DATA PROTECTION |
Data Protection continued
Data handling protocols are Data must be used for agreed objectives DATA CLASSIFICATION, • We have robust measures, including
or purposes, in a relevant way, and within ACCESS, AND USAGE proprietary mobile device management
centralized and organized an agreed scope. Analysis of personally (Alilang) and data leakage prevention
At the heart of how we manage data is
to ensure accountability; we identifiable data is done on an aggregated,
the way we classify it. We have a detailed
(Cloud Shell) software, which can prevent
anonymized basis. We are committed to best data leakage by monitoring abnormal
enforce stringent guidelines practices such as limiting access to data only protocol for categorizing data along a behavior of employees and giving timely
spectrum of usage as well as sensitivity. We
and rules. We collect, classify to designated personnel and minimizing data
designate sensitive data as either customer’s
alerts to their managers.
collection and retention. Operation logs are
and manage data in a kept, and disaster recovery and backup personally identifiable data, business data • We are continually improving our data
flow tracing capability, such as traceable
rigorous and systematic mechanisms have been established to generated from our platforms, or Alibaba
corporate data. Then we further classify watermarks embedded in company files.
help guarantee data integrity.
manner to protect user data and assign security levels appropriately, • For our open platform, we encrypt level-3
privacy. We follow clear standards for sharing data into either public (level 1), internal (level 2), and level-4 data before transfering to our
among affiliates and related third parties, confidential (level 3), or secret (level 4- authorized sellers’ independent software
and we provide a self-developed secure data the highest). vendors.
upload tool for affiliates and authorized third
parties to access desensitized customer data. The use of all data requires identity Alibaba Group and our affiliates, such as Ant
verification of the user applying for data Financial Services and our logistics subsidiary
We comply with applicable laws and access as well as authorization by designated Cainiao Network, have a well-established
regulations in the markets where we operate responsible persons, and authorization is framework in place to share certain types of
when sharing personal data of our customers subject to time limits. data in controlled environments in order to
with third parties, and we obtain opt-in or improve our service offering to customers.
opt-out consents as required. In 2018, we Differing levels of sensitive data are We have implemented strict rules and
have been devoting considerable resources protected appropriately, so as to guarantee protocols for data sharing with affiliates,
to complying with the European Union’s the safety of data use by our employees. including physical storage, prohibition of data
General Data Protection Regulation (GDPR). For example: duplication and a data oversight committee.
Our Chief Risk Officer oversees both • For massive data usage scenarios, it is
cybersecurity and data protection. We have mandatory for our staff to use our proprietary
a large team dedicated to developing our data leakage prevention tool to ensure data
data protection policies and procedures, cannot be downloaded to the local hosts.
More information on policies
regarding our Data Sharing and we are engaged with data privacy
Agreement with affiliates can be experts worldwide, constantly learning
found in our most recent annual from leading industry practices.
report on Form 20-F, page 201.
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