The 'Father of Modern Marketing,' Philip Kotler, once said that a great brand must be filled with goodwill, with its ultimate goal being to create not only business value but also societal value. Against the backdrop of the widespread consensus on green, low-carbon, and sustainable development, emphasizing the Environmental, Social, and Governance (ESG) aspects of sustainable development has become a global trend, even evolving into the second financial report for companies, as companies strive to create both environmental and social value.
As ESG becomes a new trend across various industries in China, an increasing number of companies are putting the ESG principles into practice. Specifically in the beauty and cosmetics industry, there is a natural alignment with ESG characteristics such as low pollution, low energy consumption, a focus on marketing, and a commitment to research and development.
In recent years, as the beauty and cosmetics industry has shifted from quantity to quality, "sustainable beauty" and "pure beauty" have emerged as new hot topics. With the beauty industry entering a period of raw material dividends and the shift in research and development towards trends like biotechnology, the ESG-driven force in the beauty and cosmetics industry has become particularly evident. Green beauty and sustainable development have also become major topics, drawing attention and discussions from leading companies in the global beauty and cosmetics industry.
The overarching framework of JALA Group's ESG sustainable development philosophy is centered around green beauty. Sustainable development is a theme introduced by JALA at this year's International Cosmetics Conference. While advancing its business, JALA is dedicated to benefiting humanity through philanthropic endeavors, committing to the protection, inheritance, and innovation of traditional Chinese culture, as well as promoting education and environmental conservation. Ensuring the sustainable development of our mission is the entirety of our sustainable development philosophy, Dr. Jenny CHEN, General Manager of Public Affairs of JALA Group, shared.
JALA Group, established in 2001, is a digitally-driven biotech beauty enterprise that has successfully incubated and nurtured well-known domestic beauty brands such as MAYSU, CHANDO, Botanical Wisdom, SpringSummer, and BIORRIER. Its new brands include the perfume brand ASSASSINA and the maternity brand imine.
As a leading representative of Chinese beauty enterprises, what efforts has JALA made in ESG development? What experiences can JALA share with the industry in terms of ESG development? How should domestic beauty brands navigate the path of green and sustainable development? As a participant in the international market, how can Chinese beauty enterprises present their "green business card" of ESG to the global market? Below is an excerpt from EqualOcean's conversation with Dr. Jenny CHEN, General Manager of Public Affairs of JALA Group.
The Next Trend in the Beauty Industry: Green Beauty
EqualOcean: As someone with many years of experience in the beauty industry, what new changes and trends do you see in the beauty industry now?
Dr. Jenny CHEN: There are roughly two trends. The first trend is that people are paying more and more attention to sustainable development, envisioning a sustainable future for beauty through ESG.
This year, we have put forward a very important core concept: "Green Beauty for a Sustainable Future." I can also see the entire industry thriving. Beauty is an industry centered around aesthetics and health, and it is a large industrial cluster. From international brands to leading beauty enterprises in China, everyone is talking about a common theme, which is ESG. The three letters of ESG represent: Environmental aspects - green packaging, green raw materials, green production; Social responsibility - care for people, including employees and consumers, advocating for gender equality; Corporate governance - digital transformation and intellectual property protection. We believe that the entire beauty industry is moving upwards and towards beauty.
The second trend is continuously providing consumers with better products and services through technological innovation.
Compared to the Japanese, Korean, and Western markets, there is still a lot of room for growth in per capita consumption in the Chinese market. Taking skincare as an example, from the original three-step skincare routine to the current eleven-step skincare routine, consumers still have a lot of room for improvement in this field alone, not to mention the gradual transition from skincare to makeup and fragrance. We continuously create value for consumers from the perspective of the brand. Of course, there is currently discussion about topics related to consumption upgrades and downgrades, but as long as we can provide better products and services, I don't think there is a distinction between consumption upgrading or downgrading. Therefore, we will see that the entire market still has very strong growth potential for the beauty industry.
ESG is not only a philosophy but also a practice
EqualOcean: What will be the focus of ESG development in the future for the beauty industry?
Dr. Jenny CHEN: I think the ESG development in the beauty industry first needs to have industry consensus or standards, based on a specific framework for the beauty industry.
JALA's ESG reporting framework is based on the UN's 17 Sustainable Development Goals (SDGs), and some core issues to focus on within the three areas of ESG. We share some of the efforts and practices JALA has made in terms of environmental sustainability, social responsibility, and corporate governance.
EqualOcean: What are the characteristics or pain points of the beauty industry in terms of ESG, and what challenges has JALA Group faced in setting ESG goals and advancing them?
Dr. Jenny CHEN: For Chinese cosmetics, I think there are three core competencies: product power, technological power, and brand power, which are crucial and all related to innovation.
The first is product power. How can products change with the digital age and consumer demands, developing personalized products? There is a high demand for product innovation. Novel products and technologies have always been a challenge for all cosmetics. For example, the setting spray that has been popular on Xiaohongshu recently is much better than setting powder. Through this example, we find that consumer demands are constantly changing. When the cognitive boundaries of each consumer continue to rise, we will find that consumer demands are becoming more personalized, and product innovation is crucial.
The second is technological innovation, such as ingredients. Some in the industry call us the "Huawei of the cosmetics industry" because we are constantly innovating. In terms of ingredients, we have introduced an extraordinary Chinese ingredient called HiMuchaSin (喜默因）, which is also the core component of cosmetics. It can solve the bottleneck problem. Since yeast is mostly imported from abroad, our self-developed yeast, HiMuchaSin（喜默因）, has reduced the cost of purchasing cosmetics raw materials from Europe by 90%. However, its effectiveness is much higher than the previous ratio.
The third is the brand power. Many brands, whether it's Shiseido or L'Oréal, have a history of over 100 years, but in fact, Chinese brands are all relatively new, with 20 years or even shorter.
The DNA of the Himalayas is firmly held byCHANDO. We will find that many brands originally used Himalayan ingredients, but when it comes to the Himalayas, it is associated with CHANDO. So, this is a manifestation of brand power.
We believe that whether it's in product power, technological power, or brand power, it's a pain point or challenge for many in the beauty industry. But we think it's not just a challenge, but more of an opportunity. For JALA, the opportunities far outweigh the challenges.
EqualOcean: Can you talk about the achievements JALA Group has made in ESG so far?
Dr. Jenny CHEN: JALA Group has gone through 22 years of development, and since 2011, we have started publishing Corporate Social Responsibility (CSR) reports. Apart from building brand, technology, and product power, our philanthropic philosophy is called "Take from Nature, Give Back to Nature" because all our ingredient inspirations come from the Himalayas. For instance, we have a philanthropic project called "Planting Grass in the Himalayas," which we started in 2016 in collaboration with the China Environmental Protection Foundation. We established the CHANDO Himalaya Environmental Protection Philanthropic Fund.
Starting from 2017, we chose Shigatse, the sister city of Shanghai, as our ecological and environmental protection project. Every year, we plant one million square meters of green barley grass in Shigatse to protect the local environment. As of 2023, CHANDO has been planting 5.66 million square meters of green barley grass in the Shigatse region of Tibet for seven consecutive years.
This project has three significant meanings. First is ecological protection. Green barley grass is a plant developed by the Chinese Academy of Sciences for the plateau. Its roots are very developed, and it can deeply root in the barren soil, improving soil structure. In two to three years, after planting green barley grass, the soil can be used to plant potatoes. So we say its ecological value lies in transforming barren land into arable land.
The second is economic value. We hire local Tibetans. Starting from late April to early May, they help us sow one million square meters of green barley grass, followed by maintenance. By the end of October, we harvest, and the entire process incurs labor costs. After harvesting, the barley grass is first given to local herdsmen for their cattle and sheep as fodder, so they don't have to buy grass separately. The second is to sell the barley grass to more remote areas in northern Tibet to obtain more alternative income. In just one year, more than 600 villagers in the Sicheng Township of Shigatse County in Tibet have an income exceeding 50% of the previous year.
Finally, social significance. Because of this project, from May to the end of October, which is relatively the best season in Tibet, villagers do not have to go out to work. Through the project, more assistance can be provided for rural revitalization. We continue to work on the Planting Grass in the Himalayas project, and every day, we are constantly innovating. So, we have received many awards, including the UN Biodiversity 100+ Typical Cases award, with nearly 50 awards.
EqualOcean: The topic of women has always been a hotspot for us to discuss. It's also an essential aspect of ESG. How do you view the role of "Her Power" in economic development?
Dr. Jenny CHEN: "Her Power" is a very good term. For JALA, we start with employees, and "Her Power" accounts for over 70% of our workforce because more than 70% of our employees are women. We are in the beauty industry, and over 70% of our consumers are also women. From the core employees to the largest consumer group, "Her Power" is crucial. For JALA, the female demographic is a group we pay close attention to, and we accompany them in various ways in their growth.
On the consumer side, we create several impactful advertisements every year, interpreting the brand spirit of CHANDO, called "You are naturally beautiful." For example, these include Mother's Day "Unique, You are already beautiful," International Women's Day "No man passed the interview," onboarding season "Charge! Kids," subculture "Be a tributary, not a mainstream," and other similar advertisements. Through consumer-side content and creation, we connect with consumers.
Returning to the employee sector, from the perspective of female employee benefits, there are monthly benefits, quarterly activities, including dedicated lactation rooms for mothers during the breastfeeding period. Holidays are not to be mentioned. We provide more care for them. We believe this is something a responsible company should do.
On the societal front, I especially want to mention "Her Power." As a leading Chinese cosmetics enterprise, we should create a better life for more women. In addition to environmental protection, we also help local Tibetan female university students. We have an activity with the China Children and Teenagers' Fund called the Natural Beauty Chunlei Scholarship Action.
We have been cooperating for 12 years, starting from caring for girls to providing adolescent sexual health education, to this year's Chunlei Scholarship Action. In May 2023, CHANDO, in partnership with the China Children and Teenagers' Fund and the Women's Federation of the Tibet Autonomous Region, initiated the " CHANDO Chunlei Scholarship Action," providing scholarships to 251 outstanding and financially disadvantaged Tibetan girls from the Tibet Agriculture and Animal Husbandry College, Tibet University, and the first and second high schools in Linzhi City. The goal is to help them complete their studies and conduct training on scientific literacy, making them women who are kind, independent, confident, and responsible.
Next year, in early spring, we will go to Lhasa, Tibet University, to continue similar projects. We hope that "Her Power" can reach more female consumers through brand communication and influence. We hope to use empathy to help them understand the true goodness and beauty of the world. We also hope to not only provide higher quality cosmetics but more importantly, to reach their inner world, gain recognition and trust, and grow together. These are some small actions we take for "Her Power."
EqualOcean: JALA Group has implemented many measures in ESG. What is the most significant impact on the company's operations?
Dr. Jenny CHEN: The first impact on the company is actually an impact from the inside out, from near to far. It lets everyone know that the entire long-term strategy of JALA is based on sustainable development. Because if even your employees and partners don't know what you are doing, how can you convince consumers to identify with your brand?
The second is to do well in ourselves and then drive upstream and downstream companies in the industry to participate. In this way, it will cover the entire beauty and health industry.
The third is actually to expand social influence, not only to expand social influence but also international visibility. Because we will notice, as I just came back from Oxford, that ESG is a particularly important international topic. People may not pay attention to the trends of China's economic development, but they will definitely pay attention to China's commitments and actions on climate change. Because it is related to the global and the Earth, so I think ESG will become increasingly important in the future because it is a true community of destiny for all humanity.
Success in embracing ESG relies on continuous innovation in technology
EqualOcean: For green beauty, it's easy to change the green packaging. Does CHANDO have any new initiatives in ESG?
Dr. Jenny CHEN: Firstly, for a cosmetics company, green packaging is fundamental.
Speaking of green packaging, we have a star product called CHANDO. It starts with a drop of water from the 5,128-meter-high Himalayan glacier. Glacier water, being a small molecule water, provides thorough hydration.
But apart from this green ingredient, we've also used advanced production processes and energy-saving environmental protection technology. For packaging, we've upgraded our technology, calling it a one-time plastic multi-layer gradient technique. This technology can replace traditional paint spraying. So, each bottle can reduce carbon dioxide emissions by up to 90%. This product has sold over 80 million bottles in 12 years, and for every 10 million bottles, it can save 9.97 million tons of sodium dioxide emissions. Just this product alone can reduce carbon dioxide emissions by up to 90%.
Additionally, we also use PCR boxes for internal and trunk transportation to reduce the use of cardboard boxes. Over five years, we've saved 60,000 trees from being cut down.
Besides these green packaging efforts, JALA has three renewable biotechnologies. JALA is a digitally-driven biotech beauty company. Biotech beauty companies start from research and development, and we extensively use renewable biotechnology. One of the technologies is plant cell tissue culture. China has many wild plants with a long history of medicinal use and remarkable skincare, haircare, and health benefits. For example, CHANDO's scalp essence comes from an ancient Tibetan formula called Five Flavors Ganlu. Our inspiration comes from skincare and haircare methods of various local ethnic minorities. For instance, the Yi ethnic group's daughter honey, where they brew rose flowers in honey for 28 days, forming a unique component called Daughter Honey, used for skincare.
However, many of these things are very rare and cannot be commercially applied. So, CHANDO's approach is not to destroy or exploit but to use "cell farmers," our scientists. They use biotechnology and plant cell tissue culture techniques to complete large-scale breeding of plant tissue cells inside cell farms. They then add these cell-level raw materials to products.JALA has been using cell primary culture technology to develop raw materials since 2014, and in February 2018, reached a strategic cooperation with the Nyingchi Municipal Government.
In June 2019, we established the Himalayan raw material factory and R&D center in Nyingchi, Tibet, where we have a plant cell tissue culture workshop called the Plant Cell Tissue Culture Workshop. It is metaphorically referred to as a cell farm. It is not a traditional farm but an image metaphor. Our scientists, like farmers, use biotechnology and plant cell tissue culture techniques to obtain seeds from cell nodule intestines. In the cell farm, the tissue culture of our plant cells is used to plant cells, cultivate cells, harvest cells at the right time, and produce cells in a cyclical production to produce high-efficiency plant cell raw materials for skincare and hair care products. This is our cell farmer and cell farm.
Currently, we have developed two cell-level raw materials for rare plants. One is Snow Lotus, known for its preciousness in the Himalayas, with very specific efficacy. However, it can not be exploited, so we are developing raw materials through cell tissue culture technology, and this development is entering a crucial stage.
The second is microbial fermentation technology, as mentioned earlier, HiMuchaSin. It is a renewable resource. We started developing microbial fermentation raw materials in 2013. Starting in 2022, we began using the fifth generation of fermentation technology to produce polar yeast HiMuchaSin. It comes from the hinterland of the Himalayas, extracted from 558 strains of yeast, and is outstanding in terms of mechanism of action, anti-aging efficacy, and safety and mildness. This yeast is widely used in products such as Himalayan Essence, Time Frozen Essence Fifth Generation, and CHANDO Scalp Care Series. In October of this year, China's top dermatology experts and microbial fermentation experts jointly compiled a fermentation technology white paper – "Application and Prospects of Fermentation Technology in the Skincare Industry," affirming the anti-aging efficacy of HiMuchaSin.
The third is live flower fragrance collection technology. Because we know that nature has many unique plants, and these plants have many fragrances. I have been to Tibet 27 times, and I often go deep into alpine pastures. We find that some plants cannot be picked. So, without destroying the original plant ecology, we collect unique fragrances from natural plants. A glass cover is used to cover the plant, and by analyzing the components of these fragrances, successive molecular structures are obtained. Then, using molecular replication technology, the fragrance is remade through technology to obtain the same taste or a more concentrated purity of the fragrance. This achieves the sustainable development of Himalayan natural resources.
Green packaging is something every company is doing. However, innovations in leading materials technology, like this, are only done by JALA.
ESG is a key aspect of corporate long-termism
EqualOcean: How does JALA consider ESG in the tension between business revenue and social value? In the face of some companies' greenwashing and green marketing, how do you view this issue?
Dr. Jenny CHEN: I think greenwashing or using ESG as a gimmick is a significant problem that exists in reality. However, we genuinely understand and practice green beauty. This is what we do. In the industry, we may influence others through positive and constructive behavior, but first, we need to do well ourselves.
Firstly, we believe ESG is a collaborative and win-win behavior, especially for the upstream and downstream of JALA. This is the first issue we need to pay attention to. For example, from employees to customers, including channel agents, distributors, suppliers, and then to our community, government, media, and consumers, this entire value chain is ESG stakeholders.
We notice that consumers are increasingly concerned about environmentally friendly brands. In the CHANDO Himalayan Afforestation Project, we launched a public welfare mechanism for consumers. For every bottle of CHANDO purchased, we donate 5 yuan to the China Environmental Protection Foundation. For every bottle of CHANDO Time Frozen Essence Fifth Generation purchased, we donate 10 yuan to the China Environmental Protection Foundation for green barley planting in the Shigatse region of Tibet, protecting the ecological environment of the Himalayas. So, the most important thing is to have a dialogue and cooperation with stakeholders, which is a very important premise.
The second point is that JALA sees ESG as a corporate strategy. JALA believes that for a company to be sustainable, it must invest in key ESG issues. But as you mentioned, there is certainly tension between revenue and value. Because ESG must have risk management, but there is risk in everything we do, not just only ESG.
For example, ESG has so many indicators, and it is impossible for every company to excel in each one. Regarding the JALA, we highlight what we can do well and, in areas where we fall short, like reducing carbon, where we currently lack a digitized quantifiable indicator, it's okay. I acknowledge it; this is my shortcoming. Next, I may invest more time and effort to improve it. So, in evaluating and managing ESG risks, we need to recognize our shortcomings and take small, quick steps to fill the gaps. This is what I think needs to be considered.
In addition, business revenue is divided into the long term and the short term. JALA is a brand that achieves long-termism. So, sometimes we may sacrifice some short-term benefits because we want to create a world-class brand for the Chinese people. ESG is about long-termism, and in many respects, we will make corresponding trade-offs.
EqualOcean: How does JALA Group further enhance consumer education and influence in the sustainable environmental protection process?
Dr. Jenny CHEN: I will illustrate how JALA Group communicates more with consumers about ESG through two cases.
Firstly, let's talk about the CHANDO originating from the Himalayas, Firstly, in the continuous 7-year " Planting Grass in the Himalayas " project, we have proposed a public welfare mechanism for consumers. In recent years, we have cooperated with platforms such as JD, Tmall, and Douyin to promote ecological and environmental protection projects in the Tibetan area. Many consumers can participate in the identification of sowing, and consumers can also obtain a certificate of public welfare partners, giving them a sense of participation.
In addition to this, we have recently launched a bottle recycling plan. We have set up bottle recycling points in department stores across the country. Many beauty brands are doing this, and it is also a very good thing. Empty bottles can be exchanged for points, and these points can be used to offset or exchange for cash vouchers.
In the future, more products will be invested in the empty bottle recycling plan. We will regularly collect, sort, and environmentally process the collected empty bottles, and use our regeneration art project to give the bottles a second life. Moreover, we can continue to use our bottles as packaging. We will also turn them into art installations to interpret the brand image of sustainable development.
Accelerating the pace of going global in the next step
EqualOcean: CHANDO entered Australia and Southeast Asia through cross-border e-commerce in 2016. Can you share with us the current situation of JALA Group's overseas expansion and its future plans for going global?
Dr. Jenny CHEN: Currently, the CHANDO has already covered Southeast Asia, North America, and parts of Europe. We mainly reach consumers through cross-border e-commerce, and at the same time, we customize products based on the different needs of local consumers. For example, CHANDO ranks first among Chinese brands and domestic brands on the Lazada e-commerce platform. We have also achieved good results in Singapore and North America. Starting from next year, we will enter countries along the Belt and Road Initiative, accelerating our pace of going global.
EqualOcean: What are the key development keywords for JALA Group in 2024?
Dr. Jenny CHEN: Green beauty, ESG sustainable development, and internationalization are currently the three keywords for the development of JALA Group.