Corporate citizenship is defined as a corporate organization’s sense of responsibility towards the community in its area of operation and its surrounding environment from which it derives its resources (Business dictionary, 2010). According to the dictionary, firms exercise corporate citizenship through their participation in waste and environmental pollution management activities, contributing towards educational and social programs in the society and optimal utilization of the community resources.
Corporate citizenship operates on the premise that a company has an obligation to play a responsible role towards its employee’s lives (Stebbins, 2001). According to Stebbins, the social responsibility role by corporations must be carried on even when it places an additional cost to the company. It’s recognition that organizations have an obligation towards the social, culture, and environment of the community in which it wants to operate in. And to the stakeholders, the company has an equal responsibility in terms of economic and financial obligation. All these efforts are geared towards establishing and maintaining sustainable string of successes for the corporate organization and community at large.
Simpson, (2009) says that good corporate citizenship must be practiced as a habit rather than sporadic acts of charity. It must thus be integrated into a company’s culture and the company must always seek to expand its leverage not just in the financial performance but also in corporate responsibility. The firm’s decision making processes should amicably address the proper response to the needs of customers, company employees, and the surrounding communities. The success to which the company achieves this determines the company’s rate of success.
Background Information on Corporate Citizenship in the Arab World and UAE
Many people around the world are in agreement that we are in the age of corporate citizenship. The trend in many businesses around the world is moving towards recognizing their obligations towards their stakeholders. Besides undertaking their traditional role in wealthy creation, business organizations are realizing that they have an important role to play as part of their social and environmental responsibility (Boston College Center for Corporate Citizenship, N.d). As a result, corporate publications around the world today including the Wall street journal and the Economist are awash with issues to do with corporate citizenship. The growing interest in corporate citizenship is evident from the continuous creation expansion of educational facilities and research institution centered on corporate citizenship.
In the Arab world, corporate organizations have not been left behind in initiating their corporate citizenship strategies. The Arab world is mainly composed of oil producing countries and as a result many of the big corporate organizations are companies centered on the oil industry along its associated services. As a result, the companies are faced with the problem of environmental issues to do with waste and environmental pollution. This thus calls for environmental sustainability efforts from them as part of social corporate responsibility practice. Such companies as DHL and Aramex which are large international logistic firms have already been undertaking a string of measures to respond to the needs of the stakeholders including the shareholders, employees, and the society.
Those operating in United Arab Emirates, which is an important business centre have also followed suit to ensure their sustainability. More important in this region is that the corporate social responsibility practices have been structured to conform to Islamic culture and values which dominate both economic and social life of the people in this region. This means that any effective approach must be able to meet the needs of the society it is directed at. This idea informs the fact that Islam in the societies where it is practiced acts as a complete way of life. It influences the social, political, and economic ways of life of the people.
The Facets of Corporate Citizenship in the Arab World and UAE
Various corporate organizations have undertaken a variety of approaches to promote corporate citizenship in the Arab world and UAE. All these approaches are geared towards promoting the course corporate social responsibility in the region of operations. The various sides of the corporate citizenship activities can be high lightened as shown below:
Corporate Organizations Role in Corporate Social Responsibility
One of the companies that have been keen in exercising its corporate citizenship in the Arab World has been Aramex, a logistic company which rolled its plan in 2006 through what it dubbed as the first sustainability report in the Middle East. Its main objective has to become a pioneer in the carbon neutrality among logistic companies of the world (Conway, 2006). According to Fadi Ghandour, the company’s chief executive, becoming carbon neutral is one of the ways the company seeks to practice responsibility in the community. This is to be achieved through addressing environmental issues. The drive he says is driven by the fact that one of the major culprits of environmental pollution is the transport industry. This admission in itself is a big boost to the corporate citizenship.
According to the company’s customer magazine, it wishes to implement this move through planting of 10,000 trees south of the Port of Aqaba in Jordan. This is based on the finding that each tree will absorb 0.8 tonnes of carbon dioxide from the environment which is equivalent to 1,500 km of travel over a period spanning about 40 years of the trees lifetime. This plan is among the many schemes the company is initiating in several countries. This suggests that a small van can emit up to three tonnes of carbon dioxide in a month (Conway, 2006).
Among other initiatives adopted by the company as part of its corporate citizenship plan include use of hybrid cars to minimize carbon emissions. They are also intending to upgrade the company’s fleet in the Gulf region to conform to the latest European carbon emissions standards and also adopting the use of liquid gas to fuel their tracks (Conway, 2006). According to the company sources, liquid gas emits 25 % less carbon dioxide than the normal fuel. To make good their promise, 50% of their vehicles in Egypt are already running on the fuel. In addition, the company has launched a campaign to ensure that all its new warehouses in the Gulf region conform to the management standards enshrined in ISO 14000. These strategies are facilitated by the fact that the companies leases most of it warehouses and vehicles rather than buying them which makes it possible to exert pressure on the suppliers to upgrade them.
The evolution of CSR has forced corporate organizations reevaluate their role in the society. Businesses are increasing their investment in CSR to boost their corporate outlook. This can be seen from their allocation of resources, recruitment and motivation of their workers, market promotion practices and their procurement activities which are tending to give focus to CSR. In addition, the activities are tailored in a manner that takes into account their possible impacts in the society and the environment. The corporate institutions in the Arab world have taken a lead role in recognizing the corporate social responsibility and promoting them for sustainable development and social welfare.
Importance of Corporate Citizenship to the Arab World and UAE
The aim of corporate citizenship is to advance human rights protection, highlighting health issues in the society and addressing them, production of safe commodities, and community development. The concept goes beyond the short term benefits to the company by looking at the long term gains to the stakeholders. Corporate institutions in the UAE and the Arab world in general have taken measures to address the needs of their stakeholders, complying and promoting ethical standards and campaigning for the creation of a healthy business environment. This has been dubbed as sustainable investment (Simpson, 2009).
Contribution of Corporate Social Responsibility (CSR) Programs to the Region
Though the corporate citizenship concept in United Arab Emirates is relatively new, many companies are gradually embracing it. The main focus though is on the economic efficiency, regulatory compliance, and involvement in charity activities. They have not however extended their corporate engagement to the stakeholders. Among the important initiatives rolled out in the UAE was the formation of Centre for Responsible Business which was started to champion for responsible business practice in the State. This was complemented by the founding of the Center for Corporate Value and the Masdar, which was an ambitious program aimed at developing a carbon and waste free city (Rettab & BenBrik, 2008).
As part of corporate citizenship, companies have taken a lead role in advocating for eradication of corruption in the political systems in the region. On their side, the companies have taken an active role in improving business ethics and upholding moral leadership within their circles. Transparency and accountability within the management level of the company and among employees has been taken as a key value by many companies in the region. This form of social responsibility by the company has been vital in ensuring the heavy foreign direct investment into the region. Corporate institutions have thus been very keen in developing and strengthening those institutions formed by the government to champion for free market democracy. This is by engaging in the fight against corruption and enhancing corporate governance within the region.
Advantage of Corporate Citizenship in the Region to the Company
The corporate social responsibility efforts applied by the Aramex Company have a commercial side of it to the company. This is reflected by the fact that some customers demand a record of social responsibility from the company. For example, some customers on Europe will not let a company to bid for a contract until it presents a sustainability report. As a result, global players in logistic industry operating in Dubai are armed with this requirement which prompted other companies in the Gulf region to follow suit. Due to the race to meet these requirements, competition is shaping up in this area so that the company with the highest level of conformity to these standards has a higher leverage in the market.
Aramex’s foresight thus enabled it to grab a substantial market share due to the continued implementation of these standards. With the ongoing trends in the market, those companies that demonstrate their carbon efficiency will be able to attract more business from manufacturers and shippers who are increasingly getting concerned about the environment. Of course the biggest winners in the quest for achievement of these standards are the environment and the residents of the Arab world who are benefiting from the reduction in environmental solution.
Over the last three decades, the need to attract foreign direct investments has forced companies in the Arab world to integrate socially responsible business practices into their operations. It also provided the authorities with the challenge of improving democracy and free market systems in order to create a favorable environment for investments in the region. The social responsibility gestures have also continued to ensure continuous capital flow into the region. As a result of these efforts, the private sector has emerged as the leader in injection of foreign capital into the Arab world.
Reputation and Brand Image of a Company
The voice of the leaders survey carried out in 2003 by the World Economic Forum found out that corporate reputation was thought to be one of the greatest determinants of corporate successes. In the survey, it was discovered that about two thirds of the 1500 executives polled believed that a good corporate reputation would contribute up to 40% of the market capitalization of a company. Another survey carried out by Fortune 1000 companies in the 1980s and 1990s revealed that the ability of the company to sustain its profitability and financial performance is highly pegged on good corporate reputation (Simpson, 2009).
Enhance Access to a Wider Pool of Capital
A good reputation which amounts to sustained financial performance of a company enhances the entity’s ability to access credit facilities. Those companies with an impressive record of corporate social responsibility attract more capital at relatively competitive rates. Many investors today are growing interest in the social aspect of companies and will put their investments in responsible companies. Responsible corporate institutions are known to promote the course of corporate governance which includes among others transparency and accountability, which are important factors in securing investments. In addition, economists have found a link between corporate responsibility and interest rates on loans.
The Employee Factor
Corporate responsibility is important in enhancing a company’s attractiveness to high quality pool of skilled labor. As a result of increasing publicity on the need for corporate social responsibility, employees are also taking keen notice of those companies that have taken steps especially on the area of environmental protection. Those companies that are more environmental friendly are thus attractive to employees hence enabling them to recruit highly competent labor force relative to their competitors.
Thus to increase their competitiveness in the labor market, the companies are forced to raise their bar in the environmental sustainability efforts. The green concept is therefore increasingly gaining unprecedented prominence in the wake of this rising trend. The morale of the employees is boosted to a large extent by strong socially responsibility programs. Labor relations are boosted by a high rate of transparency and openness in the company’s business processes. Such companies as Aramex have been left behind in formulating strategies to make the necessary adjustment in a bid to create the right environment as a part of its corporate citizenship strategy in the Middle East.
Reduction of Business Risks and Costs
It is evident that those companies that are active on corporate citizenship programs get more favorable rulings for breach of law from courts. The ability of the firm to demonstrate its ability to avoid similar breaches of law in the future is able to reduce their exposure to fines. Furthermore, the public is more tolerant to those companies that can prove that they were not irresponsible and that they tried their level best to avert the breach. Similarly, those companies that undertake responsible business practices are able to avoid many disasters from happening.
Increased Cost Efficiency
Some corporate social responsibility initiatives have also been effective on minimizing costs in companies as witnessed by the Aramex strategy. As part of any efforts to reduce the amount of carbon emissions, the company has been undertaking measures to cut the number of airfreights as possible. It has also in the process earned some extra income through purchase of carbon credits although it was not their main objective as the chief executives says. In addition to this, the company is planning to develop a policy of sourcing airfreight services from the most carbon efficient airlines.
Enhanced Financial Standing
Several studies have established a strong link between the financial standing of a company to corporate citizenship. Those companies with elaborate corporate social responsibility programs have been found out to perform well financially. This is partly because the programs endear the company to customers. Suppliers and lenders also prefer working with companies with good social responsibility standing in the society which helps to improve the financial performance of the company. As mentioned earlier, a good corporate standing provides a big boost that enables the firm to propel its brand image. A strong brand image in turn helps to buoy the firm’s sales volumes.
Challenges of Corporate Citizenship
There is a gross misunderstanding of the role of corporate social responsibility among the majority of the companies in UAE, according to the Dubai Chamber CSR survey carried out in 2007. In the survey 70.8 % of those polled define CSR as the compliance in laws and regulations. It did not come as a surprise to find that only 20% saw it as encompassing the voluntary involvement in programs aimed at promoting the welfare of the society and the involvement in charity and community work.
The rapid growth experienced over the last ten decades led to an imbalance in the distribution of social welfare regionally. Since most of the development has been concentrated in urban areas, most of the social amenities have been developed in those areas leaving most of the countryside without proper social utilities. This poses a challenge to corporate institutions in trying improving the lives of the countryside. The high level of development and industrialization has placed a heavy premium on the environment. There has been heavy environmental damage through pollution and poor waste disposal.
The rapid growth of the economy has also placed a heavy demand on manpower leading to the importation of expatriates. This is because the growth on manpower has failed to match the growth in GDP. The rate of labor productivity has been declining as a result. The labor market has been dominated by high degree of temporary migration and an unprecedented rate of turnover among managers and employees leading to a breach of labor practices. This has been manifested by low wages to the employees (Tanmia, 2005).
Another challenge of corporate citizenship in UAE has been a sharp increase in population growth in the country at 5.6%. The growth rate which is rated as the highest in the world and mainly comprising of the young people below the age of 45 years has posed a huge challenge the CSR initiatives. The population explosion has caused an imbalance in the demographics applying immense pressure on the educational facilities, training, and capacity building which are important aspects of labor supply. The challenge is thus posed to the corporate entities to ensure stability of the future labor supply is secured.
Confusion and lack of solid decision over the strategic value of corporate social responsibility has led to the shunning of the initiative by some firms. Some companies are still unsure about it and even view it as a passing wave of fashion that will die out with time. These see it as having very little utility to the company and perceive it as potentially harmful to the performance of their companies. As a result, they see no value in promoting corporate social responsibility to their customers.
Monopolization of many companies in the Arab region has also reduced pressure on corporate organization to be accountable to their stakeholders. As a result these companies have not been keen in improving the social welfare of their stakeholders besides taking little measures to ensure environmental sustainability. Issues of environmental pollution have therefore tended to take the back seat with these companies. Another important challenge to CSR has been the lack of a comprehensive framework to guide company executives in identifying the most appropriate CSR approaches to suit their businesses and stakeholders. This too has become a bottleneck in development of the CSR initiatives by companies.
Yet another big blow to the CSR activities by companies in the Arab world has been a lack of a communication platform to transfer and to exchange information on the CSR activities among the stakeholders. There also lacks adequate social solidarity needed to spearhead the CSR advancement due to the growing cultural diversity as a result of heavy emigration into the region and also social stratification emerging from unequal distribution of economic resources.
Corporate Citizenship and Islam
In the countries where it is practiced, Islam forms a society complete way of life and hence posing considerable ramifications to the countries social and economic way of life. As a result it affects the way a responsible corporate institution will carry out its corporate social responsibility activities in the society. In addition, Islamic countries are found in either developing or undeveloped world which also has an effect on the role of these entities in these societies (Tariq, 2008). In United Arab Emirates, corporate citizenship is guided by the traditional and culture of charity and collectivism. The foundation of Islamic values is founded on the need for individuals and corporations to contribute towards charitable work and social equality (Kinnicutt & Mirvis, N.d). All corporate organizations operating in the region are obligated to contribute these while at the same time complying with state laws and securing the environment.
As a result of the uniqueness of the Islamic culture along its practices, the corporate social responsibility requirements of the region are usually cultural specific. The importance of this is to address the particular unique needs of the society. The greatest strength of Islam in our context is that its economic values are built upon strong principles of social responsibility. Its core economic principles emphasize on social justice rather than economic efficiency and generation of profit (Tariq, 2008). Thus, proper understanding of their responsible business practice is important on formulation of any meaningful and effective corporate social responsibility policy framework. Muslim has a practice called Zakat, which is a form of donation whose motivation is charity and social assistance.
The tenets of Islam dictate that the development of human life requires the necessary resources needed for sustenance of human being and the society. It also demands for the possession of knowledge of the principles of individual and social behavior necessary for self fulfillment and maintenance of social justice in the society and peaceful coexistence (Ahmad, 1971). To illustrate another aspect of corporate citizenship in Islamic worship, Muslims are called upon to serve Allah through good behavior in their daily lives and in business. There are several verses in the Qur’an that encourage economic and commercial activity. The haram in Islam prohibits engagement in some form of business practices that put the human health and life at risk. These are inclusive of trade on arms, tobacco, alcohol, and gambling. The prohibitions extended to involvement in speculative practices which are regarded to be selfish and aimed at individual gain at the expense of the rest of the society which causes exploitation of the poor who can least afford. This exemplifies the Islamic role in promotion of corporate citizenship.
Role of Government
The government is one of the greatest stakeholders in the corporate social responsibility in any given country. It helps in formulation of a favorable institutional framework that guides the operations and practice of corporate organizations. The government of UAE provides an enabling environment for the businesses to engage freely in corporate social responsibility. The government does not coerce any institution to engage in the CSR activities. It only plays a complimentary role in the process which enhances their performance of CSR.
Another role of the government has been the institution of regulatory policies to push for transparency and accountability. It has also been on the frontline in curbing corrupt practices and fraud alongside promoting health and safety, protection of human and labor rights, and championing for responsible investment. The government has also embarked in creation of consumer awareness on responsible consumption which helps to boost CSR.
To make the United Arab Emirates an investment destination of choice, the government has embarked on a relentless campaign to boost protection of human rights, improve governance, and ensuring a level playing ground for all investors in the market. This has helped to minimize legal and economic uncertainties to investors. A study carried out by the International labor organization among 127 countries revealed that investors will be attracted by countries with good record of civil liberties irrespective of their cost of labor. This is thus a wakeup call for the government to improve efficiency on the market and also to instate openness in its political systems. The governments in the Arab world are increasingly integrating firms and business associations in the decision making processes. This encourages ownership of the policies and ensures faster and effective implementation of these policies.
Corporate citizenship is a corporate organization’s sense of responsibility towards the community in its area of operation and its surrounding environment from which it derives its resources. It is a way of recognizing that organizations have an obligation towards the social, culture, and environment of the community in which it wants to operate in. The company has an equal responsibility to its stakeholders in terms of economic and financial obligation. Environmental sustainability efforts from these companies are part of social corporate responsibility practice. The corporate social responsibility practices in the Arab world have been structured to conform to Islamic culture and values. This means that any effective approach must be able to meet the needs of the society it is directed at. Aramex aim of becoming carbon neutral is one of the ways the company seeks to practice responsibility in the community.
One of the major importances of the corporate citizenship is that it encourages advocacy by companies leading to accountability and good governance. It also helps the Arab world and UAE to attract foreign direct investment. The company benefit through improving their corporate standing, improved financial performance, and attraction of skilled labor. The company is also able to acquire a wider pool of capital from the financial market, strengthen its brand image, and reduce its costs and business risks.
One of the major challenges of CSR is the misplaced understanding by some companies, population explosion in the Middle East, lack of communication platform and existent of monopolies among others. The government plays a key role in corporate citizenship through formulation of policy guidelines to guide CSR activities. The tenets of Islam on the hand are in agreement with principles of corporate citizenship hence playing an important role in encouraging CSR.
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