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This is the golden age of ESG. Domestic policies are improving, and everyone in all industries, investment and consumption is talking about ESG. "ESG 36" is a new content IP created by the 36 Carbon team. Each issue will invite ESG leaders in different fields to describe the new ESG ecosystem through their stories and how it reshapes the business world with the power of a huge wave.

Photo courtesy of the interview

Interview | Su Jianxun, Xue Xiaowan

Text | Xue Xiaowan

Editor | Su Jianxun

This is a discussion about the "Tao and Art" of ESG between economist Chen Long and 36Carbon.

Over the past decade, Chen Long has been more present to the public as a corporate executive: he was the chief strategy officer of Ant Financial, chairman of Alibaba's Sustainability Management Committee, and president of strategic planning at Alibaba Group.His connection with ESG originated from a classic sustainable project - Ant Forest.

The prototype of Ant Forest was born in Chen Long's office. Recalling that experience, Chen Long admitted that he had no idea that it would become a phenomenal hit. "Not only did I not dare to have this dream, I was also discouraged at the beginning." He concluded that the success of Ant Forest lies in"Fun design" makes users enthusiastic about playing, and the underlying logic is to respect human nature and give full play to imagination.

Later, at Alibaba, Chen Long promoted ESG as the cornerstone strategy of the company and drew a classic "seven-petal flower" (the seven long-term strategic directions of Alibaba ESG). He recalled,At that time, I thought about all the businesses according to the logic of ESG.I drew on paper while thinking, and finally drew a flower-like shape. From strategy to governance to business integration, Alibaba's sustainable practice path has become a typical example for the industry to discuss how to integrate ESG into business.

Today, Chen Long has shed the label of an executive of Ant, Alibaba and other companies. He currently serves as the secretary-general of the open research institution Luohantang and founded the business consulting agency "Weixi". For him, this is a role change and a new positioning of himself. Breaking away from the past perspective, he has more thoughts on ESG.

In the hot July in Shanghai, during this year's Luohan Hall Digital Economy Annual Conference, 36 Carbon interviewed Professor Chen Long. In his understanding and narration, we saw different aspects of ESG - that is an interesting and imaginative business story beyond the traditional compliance and investment narrative.

More importantly, this allows people to look at the current ESG craze more calmly: companies at different stages of development are in different ESG temperature zones. Companies that want to promote sustainability must find the right pace and have reasonable expectations for possible difficulties. After all, even a successful company like Ant Forest faced the dilemma of no one willing to pay in its early stages.ESG is an extension of human nature.If you don’t understand human nature, you can’t do ESG well.

The following is the interview content between 36tan and Chen Long, the text has been edited:

To do ESG well, you need to understand human nature

36Carbon: You participated in the early creation of Ant Forest and served as the chairman of Alibaba's Sustainable Development Management Committee, promoting the implementation of ESG strategy in Alibaba. Looking back on these two experiences, what impressed you most?

Chen Long:Looking back, in an enterprise, even if you want to promote something very valuable, you actually need a certain amount of potential energy and fate, and you need a source.

In 2016, Ant was doing very well in promoting inclusive finance. At that time, the G20 Hangzhou Summit was underway, and the Paris Climate Conference had just been held. The Ant Strategy Department, led by me, was thinking about what we could do. We quickly realized that we could calculate the carbon footprint of users (reduced due to green behavior) and give them some rewards, thus encouraging consumers to develop green and energy-saving consumption and living habits.

We had a good idea, but we soon realized that no one was willing to pay for it. At that stage, people were more concerned about the industries that accounted for the largest share of carbon emissions.Although individual green behavior is meaningful, it ranks low on the list and no one is willing to pay for it.

We were a little dejected, but we soon realized that although we could not convert our personal carbon footprint into direct benefits, everyone had a feeling about planting trees, so we could start by planting trees. That’s when we thought of calling this project “Ant Forest.”

The most profound feeling is that it suddenly became a hit. There was no promotion at first, but everyone started playing it, and many people came in every day. We were very surprised, and it was considered the fastest-growing mobile Internet application project at the time. But it was actually somewhat accidental.

Later, when I was working on ESG at Alibaba, what I remember most clearly was:From the very beginning, we wanted to make ESG both compliant and imaginative.

36Carbon: When talking about ESG, we always think of compliance. How do you understand the "imagination" you mentioned?

Chen Long:When doing ESG, we should design a smart mechanism to benefit participants and make everyone willing to inject energy into it. This is the same as the operation of the economy. An important sign of a good economic operation is that everyone is willing to participate.The same is true for ESG. It is not enough to just talk about reason.Everyone understands the truth.

So we need to understand the essence of ESG in business and its value to the business. Based on this logic, I basically thought about all of Alibaba’s businesses at the time, and the relationship between these businesses and ESG, and that’s how the “seven petals” were drawn. (Note: “Seven petals” refers to Alibaba’s seven long-term strategic directions for ESG.)

This kind of business design is not a deterministic action, it requires imagination. ESG should not only be about compliance, but also about solving a problem and even growing a new vitality. All business progress is a creative process. Doing ESG requires innovation in value creation, so that companies will rush over and players will be willing to do it. This is the starting point of all business designs.

This is also the smartest sustainable mechanism.If we want ESG to be sustainable, we need to respect human nature.——Human nature is the fun part of business design. We cannot judge from a moral high ground, but should let companies and users benefit from it. ESG should not be cold and heartless, otherwise it will be soulless and most people will not come in to participate.

36Carbon: Are there any specific cases that reflect the "imagination" and "humanity" in ESG?

Chen Long:Ant Forest is one of them. Especially when we started in 2016, ESG was not a popular concept yet. We didn’t think too much about it, and we didn’t even think about integrating it with the business. We just thought we should let users play together. Of course, we didn’t think about using it to bring in traffic, and it might not work even if we thought so.

We just wanted to make a fun product. Looking back now, it actually has some of the most important factors: making green behavior measurable and having a reward mechanism. When different companies do business design, the width of the incision and the scope of coverage are different. Ant Forest is actually a very small incision, and we didn't expect it to grow so big. I definitely didn't dare to have this dream at the time.

Consumers are really the sun of the enterprise. If they pay attention, the enterprise will pay close attention. Therefore, it is very important to make all parties involved motivated and enthusiastic. In the final analysis, it is still necessary to understand human nature.

36Carbon: You later worked for Alibaba, promoting ESG through strategy. Do you think this positioning is appropriate? If a company wants to promote ESG, what kind of organization or role will be more effective?

Chen Long:It depends on what companies consider ESG to be.

When I first started at Alibaba, Xiaoyaozi (Zhang Yong) told me that I should think carefully about whether ESG is a compliance issue or a strategy. I thought about it from a strategic perspective from the beginning.

There are a few things that are very important: first, we need to think about the positioning of ESG and its relationship with the company; second,If we want to make ESG a reality, we need a governance mechanism.This mechanism is not affected by personal preferences and leadership changes. Third, ESG should be integrated into the business so that everyone can see its positive effects on the business.Deep integration with the business requires business design.

For example, "Scope 3+" is a creative design, a typical platform thinking. "Scope 3+" is something we came up with ourselves, which shows that ESG is not just about compliance. We need to continue to do it on this basis. This is related to the platform business and future certainty. Enterprises should make early arrangements. Doing this itself will also help enterprises grow a lot of capabilities. (Note: "Scope 3+" means driving and enabling platform ecological emission reduction.)

36Carbon: Is this a replicable path for other companies?

Chen Long:The steps mentioned above, from strategy to governance to business integration, are applicable to larger companies. Large companies are more mature in terms of social responsibility and brand awareness. However, different companies have different development rhythms, and we must respect this rhythm.

Different companies have different perceptions and needs. You can’t just ask them to copy it like you wrote a PPT. Many companies can’t do it right now, and they don’t have enough motivation. If you push it hard, there will be a lot of resistance within the company.

I think we still need to clarify the relationship between business and ESG based on the company's development status - this also determines whether ESG is compliance, strategy, or business for the company, where the entry point is, and what to do first and what to do later.

36Carbon: What do you think of the various ESG standards that have been introduced recently?

Chen Long:For most companies, if there is no external force to promote it, it is difficult for ESG to be ranked high in the company ranking. When there is a conflict between economic interests and carbon neutrality goals, there will be vacillations and trade-offs even at the national and government levels, not to mention companies.

I think these standards also provide an opportunity for enterprises. Specifically, how can enterprises improve their brand and user mindset by being more responsible to the society?ESG provides a new window and communication mechanism for companies to express themselves.

In the past, companies did not have such a mechanism. In the past, people evaluated a company based on whether it was profitable, healthy, and growing. However, the relationship between the company and society and the health of its internal governance were not fully reflected in the financial statements. With the ESG mechanism, it actually provides companies with a huge opportunity to express themselves externally.

But ESG cannot be achieved in a short period of time. It needs to be done over a long period of time. In this process, ESG is not just about compliance or idealism. The most important thing is to understand human nature. The essence of business is to benefit oneself and others, and ESG is a link in the middle.

AI is not a burden to sustainable development

36Carbon: Recently, there has been a lot of discussion about the relationship between AI and sustainability. What do you think?

Chen Long:This is a good ESG topic.AI must not be a burden to sustainable development.

But the tug of war between the two is inevitable at this stage. People are discussing whether energy will be the final bottleneck of AI development, and are already considering the layout of new energy sources. This is because AI is still in the stage of "great effort to achieve miracles", that is, a stage of high energy consumption.

This has put a lot of pressure on energy efficiency and production methods, but in turn, this practical demand will certainly promote the improvement of various capabilities. For example, data centers have now become a key pillar, and their combination with new energy power generation will greatly promote the overall process of AI and sustainability. There are many business opportunities in this.

36Carbon: Compared to the past, the current era is one where technological evolution and sustainable development are particularly closely integrated. Many people have been thinking about how AI can be integrated with green and sustainable development since day 1.

Chen Long:This is the ESG of technology.Only when the ESG issues involved in technology are resolved can technology develop.For example, Alibaba Cloud, we decided at the time that we had to transform into a clean cloud as quickly as possible, otherwise we would become someone else's cloud3.

As technology develops, technology must also meet ESG standards. This needs to be done as soon as possible, and green will become a differentiated competitive advantage. AI and sustainability want to move in the same direction, and this issue cannot be avoided.

Be a Drucker with coaching temperament

36Carbon: You left Alibaba at the end of last year and are now the Secretary General of Luohan Hall. What is your current working status?

Chen Long:In a blink of an eye, I have worked at Ant and Alibaba for 9 and a half years. I feel that I can graduate from some things at Alibaba, but I still have to continue doing some things, such as Luohan Hall.

(Note: Luohan Academy was established in Hangzhou on June 26, 2018. It is an open research institution initiated by Alibaba Group and co-sponsored by top scholars from around the world, including seven Nobel Prize winners in economics.)

As a scholar, I have also been working in the enterprise for nearly ten years.I realized that the longest distance in the world is the distance between thinking and practice.Scholars can think, but they are too far away from the real business world and are a bit out of touch with reality. On the other hand, people in companies are busy with practice and are not good at systematic thinking. I hope to break down this barrier between them.

So after leaving Alibaba, I continued to work at Luohan Hall and also founded a business consulting agency called "Weixi" to accompany more entrepreneurs in their evolution and shorten the distance between thinking and practice. For entrepreneurs, how to apply their business knowledge in practice and how to prioritize decisions are difficult questions. Entrepreneurs often have to spend a lot of energy to understand the changes in the environment, what opportunities there are, how it is relevant to themselves, and how to distinguish between truth and falsehood. I hope to provide some value in this regard.

36Carbon: Thinking and practice, scholar and entrepreneur, how do you position yourself in it?

Chen Long:I once wrote a message on WeChat Moments one night, titled "Going to the Deserted Wilderness".

Because I found that people who do well in every industry are the representatives of the industry's advancement. Advancement means innovation. And the process is to go to the wilderness where no one is, to explore unknown things, and to find the answers. I like to find the truth like a detective.

In addition, I also hope that my thinking and exploration are valuable, otherwise I may not know where to go. I like management expert Drucker, and I hope I can become a Drucker with coaching temperament - able to think comprehensively and have practical value at the same time.