The Middle East and UAE: CSR Best Practice

Introduction: The CSR Concept

Origins and Breadth

The present concepts of corporate social responsibility (CSR) have their origins in corporate giving for public relations purposes and in socialist governance policies that flourished in what became the European Union. Another important component of CSR is adherence to global norms of conduct, though one must concede this initiative comes from multinationals that chafe at the “backward” standards of developing nations. Fourth, the flawed corporate ethics that manifested themselves in the Enron scandal and the speculation in home mortgages that precipitated the current global recession are merely the latest in a long string of unsavoury events that fuelled calls for both increased regulation and voluntary “good corporate citizenship”.

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Public relations as a recognised discipline came into being when Edward L. Bernays and Doris Fleischman set up the first PR agency post-World War I (Bernays, 2010). In this era, the print media were key. Hence, PR was most active in crafting press releases for cost-free publicity alongside the usual paid print ad inserts. That this entailed petty bribery of editors and some arm-twisting of publishers did not matter as much the goal of getting the “good news” printed.

As PR flourished, moreover, there came the recognition that the profession needed to address multiple audiences on behalf of their corporate clients. The distinction between “audience” and “stakeholder” may seem clear to charities and foundations that regard themselves and aid recipients as the sole stakeholders in the success of fundraising efforts. In the broader sense of CSR, however, “stakeholders” include every audience that is impacted by corporate activities. For instance, the shareholders of the coal-burning Kingsnorth power plant potentially threaten everyone in the nation by adding to heat, carbon dioxide (CO2), grit and sulphur dioxide emissions. This makes all residents stakeholders. Since emissions inevitably diffuse, are carried this way and that by wind currents, and add the total concentration of CO2 in the atmosphere, the health and safety of every human on earth is potentially at stake.

It was not enough to regularly inform consumers about a new plant opening up in their hometown, a product introduction, a celebrity endorser, or a politician glad-handling the workers for a bit of dual-benefit publicity. PR practitioners advised clients to take care of multiple audiences, later to be renamed “stakeholders”: government, professionals, the retail trade, media itself and the financial markets. In a simpler era, business needed to address the government to pass favourable legislation and ease regulatory pressures. Firms had to maintain good relations with the trade so that distributors, supermarkets and hard goods stores would be predisposed to give the company’s products vitally-needed warehouse and shelf space. Pharmaceutical and medical/dental equipment makers deployed targeted print pieces and branded premiums against all who wrote prescriptions in National Health Service trusts because the brand-choice decision was really made at this level. Listed companies and those that issued debt paper in one form or another curried favour with financial analysts and regulators both, if only to deflect adverse reactions to the occasional market manipulation; mainly, creating a “buy” bandwagon effect among those who were notionally independent of the firm furnished a support floor under the stock price in the absence of positive business results. Finally, business maintained good relations with opinion-editorial columnists and reporters in order to generate greater prominence for good news and to tone down adverse coverage.

What mattered to businessmen, in the end, was that publicity appearing as the newspaper’s own editorial content was much more credible than paid advertising. Moreover, the out-of-pocket expense for public relations was virtually zero and yet, it had the potential to reap unlimited good will. Behind the public face, the company could continue going about the “business of business”: maximizing economic profit.

Labour is a prominent stakeholder missing from the attention span of public relations practitioners earlier in the 20th century. This omission was due in large part to the vigour of the union movement then, in response to the abuses of the late 19th century Industrial Revolution. By the time humanistic psychology had developed enough to make organizational behaviour and development the core of “strategic” human relations management in the 1970s, PR was already transitioning to CSR. Accordingly, taking care of one’s own labour force joined the external publics as concerns central to good corporate citizenship.

In contemporary times, the surrounding community as stakeholder has been institutionalised and expanded. Where companies were basically self-serving about giving to their employees by helping the surrounding community, it is now virtually mandatory for profitable enterprises to reach out to Africa and other developing nations to relieve the misery of hunger, the thirst for clean water and sanitation, domicile, power, health care, and basic (even primary) education.

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Stakeholder theory, which underlies all CSR programs, creates severe demands on shareholders long attuned to maximizing profits. It takes unusually enlightened managements and shareholders to businesses cannot exist for themselves alone. Rather, they ought to see their raison d’être as harmonizing the interests of the full range of their stakeholders.

Returning to investing for profit, finally, alarm over the accumulation of greenhouse gases in the atmosphere and the potential consequences of global warming in the long term has made sustainable investing the new byword in CSR. No less a disinterested world body than the United Nations and the “International Council for Local Environmental Initiatives” (ICLEI, also known as “Local Governments for Sustainability”) have enunciated the “Triple Bottom Line” (TBL, otherwise known as the “three pillars”) principles of “People, Planet, Profit” for public sector accounting. True, private businesses are not necessarily bound by these policy statements. But then, there are no drawbacks to being recognised as doing good. And in the focus region of this dissertation, the Gulf, ruling family ownership of (or substantial interest in) the largest enterprises is a fact of life. Hence, there will inevitably be international pressure to conform to CSR and “Triple Bottom Line” standards.

The concern for human capital embodied in People embraces fairness and mutual benefit in dealing with the labour force and the surrounding community with which firms transact. The marketing discipline has long instructed businesses to behave responsibly – in point of product and packaging safety, pricing, advertising, sales promotion – or risk losing market share. But being “community-driven” also happens to be the rationale for filling education and health care gaps where government resources are inadequate.

An often-overlooked area of human capital, however, is taking care of the supply chain. The corollary of “fair trade” mandates rewarding resource gatherers, assemblers, subcontractors and other suppliers with equitable prices and reasonable loyalty. Going overseas, businessmen risk another blind spot with the assumption that occupational health and labour laws are just as protective in the UAE, China or India as in the home country.

From day to day, the popular media offers numerous reports and opinion columns around the Planet criterion so one need not elaborate too much on sustainable lifestyles and ways of doing business. Suffice it to say that a company may see the logic of investing in reduced emissions today but the cost of end-to-end safe disposal of products and packaging can be a truly enormous and long-term expense.

In turn, one discerns two elements in the TBL vision of Profit. The first is that sustainable ways of doing business put traditional shareholder value last in their system of priorities. The second is that CSR had best reckon the total social and economic contribution a firm makes to every nation and community where it operates, inclusive of economic returns to suppliers, media, and government coffers.

All these efforts coalesced fairly recently, In the 1980s and 1990s, into the all-embracing concept of corporate social responsibility and good “corporate citizenship”. Alongside rights and farseeing strategy businessmen engage, obligations to relevant stakeholders are at the core of citizenship (World Bank Institute, 2009). Today, large and small businesses confront expectations to provide, locally and overseas, where the resources of government, religious groups, schools, charities and health trusts do not suffice.

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Recognition and Rewards for Good Corporate Citizenship

Being able to claim deductions from tax liabilities, up to twice the book value of donations in kind for example, is the principal economic benefit for corporate giving (National Philanthropic Trust, 2007). Such philanthropy is usually funnelled via charitable trusts in the UK, private foundations (also available to individuals and families) and public charities (foundations or non-profit groups that raise money as in the much-publicised telethons for disaster relief in Haiti).

In the UK context, thought leaders like Business Link (n.d.) can cite CSR-driven initiatives that produce revenue streams and hence contribute directly to the bottom line:

  1. New business niches or market potential as a result of consumers developing greater ecological awareness. For example, “ecotourism” gave a boost to what had preciously been thought an already-saturated tourism market in the Dominican Republic.
  2. Orange or Vodafone promoting small donations to charitable trusts via short messaging service or downloading charity-branded games or other mobile phone gadgets.
  3. A solar panel maker offering free estimates and installation in order to accommodate the yearning of homeowners for living a “green” lifestyle.
  4. A soybean processor diversifying to textured vegetable protein using the by-products of soya milk extraction. The company then sells hot packed lunches at affordable prices to schoolchildren in economically disadvantaged boroughs.
  5. Accommodating the operating philosophy of, and partnering with “social entrepreneurs.” A whole new category of entrepreneurs has emerged who balance profits, benefits to the community and ecologically sustainable practices. They require the same policies and ethics of their suppliers and business-to-business customers (Skoll Foundation, 2010).

For the most part, one concedes, most CSR initiatives presently constitute outright corporate philanthropy. Hence, the most direct effect is evoking good will from the community, local and foreign consumers, governments and media. This is true of the Shell Foundation’s reaching out to communities in South Africa’s Flower Valley and establishing Early Learning Centres for both children and illiterate adults. Training adults in new occupational and trade skills obviously builds the economic capacity of the total community. In return, Royal Dutch Shell earns tax deductions and good will in a struggling nation just 15 years from gaining self-rule. Partner in this endeavour was Marks and Spencer, which entered into volume and fair trade guarantees for the fynbos and protea harvested since essences of these go into the chain store’s house brands of fragrances.

A minor benefit but vastly gratifying for businessmen nonetheless is that CSR provides plentiful opportunities for networking with higher-profile donors, even the Royal family.

Preserving stakeholder good will is also the benefit of the unremarked move by listed companies into annual reports employing recycled paper, making these available online as Adobe reader PDF’s, and cautioning recipients to think twice before printing what they download. The same can be said of all self-published authors who bypass publishers and sell online solely in downloadable PDF form.

In the Arab World

Special Concerns

In obedience to “Zakat”, CSR in the Gulf and elsewhere in MENA has consisted principally of official development assistance to a range of beneficiaries around the globe and, at home, philanthropy directed at local charities and special interest groups (Ronnegard, 2009). Beyond the imperatives of this Islamic precept (see also section III-B below), CSR in MENA nations and in particular, around the Gulf could do better in fostering community and economic development, as well as in environmental sustainability.

Table 1:

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UN MDG/CDIAC Data
Rank Country 2006
1 Qatar 56.2
2 United Arab Emirates 32.8
3 Kuwait 31.2
4 Bahrain 28.8
5 Aruba 22.3
6 Luxembourg 24.5
7 Netherlands Antilles 22.8
8 Trinidad and Tobago 25.3
9 United States 19
10 Canada 16.7
11 Australia 18.1
12 Brunei 15.5
13 Falkland Islands 17.2
14 Saudi Arabia 15.8
15 Nauru 14.1
16 Faroe Islands 14
17 Montserrat 12
18 Estonia 13.1
19 Finland 12.7
20 Oman 16.3
(Others not shown for brevity’s sake)
43 Libya 9.2
70 Iran 6.6
76 Lebanon 3.8
95 Jordan 3.6
105 Iraq 3.2
113 Tunisia 2.3
135 Morocco 1.5
150 Yemen 1
155 Pakistan 0.9
161 Western Sahara 0.5
170 Palestinian Authority 0.8
201 Ethiopia 0.1
208 Somalia 0
209 Afghanistan 0
Source: United Nations Millennium Development Goals Indicators

With respect to environmental concerns, conventional wisdom has it that the industrialized nations – led by the U.S.A., the U.K., Germany and China – are the worst polluters on account of the large numbers of automobiles, lorries and (for the U.K. and China especially) coal-burning power plants. Adjusted for population size, however, it turns out that Qatar, the UAE, Kuwait and Bahrain have the highest carbon dioxide emissions on the planet, significantly outranking the United States, Canada, Australia, China and all industrialised economies in the EU (see table alongside, United Nations Statistics Division, 2009). The Kingdom of Saudi Arabia itself is 14th in per-capita CO2 emissions. Oman rounds out the top 20 in the UN Millennium Development Goals/CDIAC rankings. As to the rest of MENA, Libya ranks near the bottom of the top quartile; Iran, Lebanon and Jordan are dispersed throughout the second quartile; Iraq, Pakistan, West Bank/Gaza, and the North African brethren are not particularly significant CO2 emitters on a global scale.

Other data suggests that the situation in the UAE, Qatar, Kuwait and Bahrain holds in other countries that are small population-wise but have busy refinery complexes that flare off a great volume of natural gas: Gibraltar, the U.S. Virgin Islands, the Netherlands Antilles, Trinidad/Tobago, Singapore and Brunei. By sheer volume of estimated CO2 emissions from such flaring (and disregarding population size), top OPEC producer Saudi Arabia is the worst off in the Middle East, spewing no less than 424 million metric tons as of 2006 (Energy Information Administration, 2008).

These are certainly pressing environmental issues but CSR is unlikely to be the main mover for solutions. After all, the populations of the UAE and other Gulf nations (except Iran) is so small that moving aggressively to replace every vehicle in sight with hybrids or solar power trains may not have as much impact in reducing CO2 emissions as halting the wasteful burning off of unused natural gas. Government interest in the refineries, the need for policy incentives and costly investments all mean that only governments can move to: a) pipe the gas to energy-poor countries such as India, as Iran and the Ukraine are currently doing; or, b) attract energy intensive manufacturing such as aluminium smelting or steel making to locate near refineries and thus absorb the surplus of natural gas.

On a more mundane level, it is theoretically possible to reduce the “carbon footprint” of the Gulf nations if entrepreneurs were to interest Gulf consumers in more energy-efficient goods, those with a greater proportion of recycled material or home and office plumbing that use much less fresh water (from power hungry desalination plants). Developers could conceivably design buildings that either let in more natural lighting or reduce the need for air conditioning. Importer-retailers might boast that their goods were sourced by TBL-conscious companies.

It would take a technological marvel, none commercially available at present, to replace air conditioning that is extremely vital, given the punishing heat and humidity prevalent in the region. And for rest, it bears asking whether opinion leaders and the man on the street will ever be truly interested in socially sound and environmentally-conscious products and services.

Hence, the situation in the UAE and around the Gulf, Ronnegard (2009) attests, is marked by intellectual curiosity about CSR practices in the West but little conviction about moving towards TBL standards. These are, after all, cultures that have launched themselves on the path to industrialisation and greater sophistication in financial services only in the last generation. The firm beliefs about individual freedoms, social justice and fair labour practice that resonate on both sides of the Atlantic have not quite developed yet in what is, after all, a vastly different Arab and Islamic culture.

The stage of economic development means, for one, that most businesses are family-owned. Accordingly, the prevailing notion of CSR centres on philanthropy heavily skewed towards fellow-religionists and special interests related to the family. As well, it is observed, businessmen seem to wait for government to make the first move with tax incentives for favoured forms of CSR and steep tax rates for CSR initiatives the government would rather not support.

It is precisely this combination of “parochial thinking”, inefficiency, economies rife with unregulated informal sectors and endemic corruption that multinational companies, chiefly from North America and Europe, would like to bring more in line with “global norms” (World Bank Institute, 2007). Under the aegis of the World Trade Organisation, Western businesses seek untrammelled access to all markets in MENA but unsurprisingly encounter inhospitable business climates where personal networks and insider trading are more the rule than the exception. Hence, multilateral institutions are marshalled to make good corporate citizenship mandatory, to impose one standard of corporate governance when the Arab notion of trade is more pragmatic and inclined to one-sided advantage. Where autocratic regimes and Sharia-guided law prevail, foreign governments, businessmen and multilateral financial institutions urge multi-partner efforts to foster development and equity but fail to ask themselves whose model of development should be followed and at what pace? Good corporate citizenship thrives in an atmosphere of cooperation and transparency but the UAE and other GCC members must also ponder their own national security concerns when warlike neighbours surround them and terrorists can strike at anytime.

The Philanthropic Imperative of Islam

As virtually everywhere else in the Middle East, Islam is the official religion of the countries comprising the Gulf Cooperation Council. This means that managers have long been imbued with the “Zakat” mandate and comply honestly with the obligation for those with means to donate a percentage to charity (Ronnegard, 2009). The third pillar of Islam and institutionalised as gift-giving during the blessed month of Ramadan, Zakat-ul-Fitr obligates pious Muslims to donate at least 2.5% of their annual income or resources in order to: a) help propagate the faith, including all those involved in Dawa; b) show friendship to would-be converts; c) support imams and mullahs; d) contribute to the administrative costs of those who confirm the status of the poor and needy recipients; e) rescue those of modest means who are debt-ridden; f) build facilities for pilgrims and other walking travellers; g) build schools, clinics and hospitals; and, h) defend Muslims under attack. Such systematic charity excludes acts of kindness and generosity not covered by the above. Zakat rates exceed the 2.5% benchmark and rise to 10% for farmers dependent on rainfall and 20% for owners of land from which oil or gold is extracted.

All these implies that the Muslim faithful already recognise their obligation to the poor and needy. However, Surah 9, verse 60 was written in simpler times when climate change was not at hand. And it certainly does not cover fair trade practices.

Case Examples: United Arab Emirates

In an expansion of the pious mandate to donate to the poor and needy, one of the emirate’s larger dairy operators, Dubai Investments-owned Marmum Dairy Farms (Laban milk, yoghurt and juice) forged an alliance with the Ministry of Social Affairs’ “Be My Friend” to promote inclusion of the handicapped and physically disadvantaged in mainstream schools. Putting the campaign logo on no fewer than 100,000 product packs may, in the larger scheme of things, seem like insignificant incremental cost. Nonetheless, it would appear that acceptance of CSR in the UAE has advanced enough so that businessmen can count on favourable media attention and good will for initiatives that require no cash exchanging hands at all.

Arab companies that operate globally are certainly ripe for accommodating the Western consensus for CSR and good corporate citizenship. Airlines are an excellent example. Bahrain’s Gulf Air flies to more than 40 nations and therefore tasked its expatriate Chief Strategy Officer and a local man in the human resources department to shape the carrier’s approach. The result was a three-pronged series of initiatives launched in September 2008. Acceptance of CSR terminology and rationale is evident in the fact of moving forward from the single-minded focus on community-based philanthropy in the past and diversifying into both environmental sustainability and people-oriented measures for operating efficiency. As well, the airline revealed that shareholders were keen on being seen as a responsible carrier (Kaczynska, 2008). So far, Gulf Air has consulted with Boeing about retrofitting the existing fleet for fuel savings and reduced emissions. As well, the airline announced its readiness to move forward with human resource discipline and with investments designed to address both tariff growth and governance.

On the ground, there is the case of Dubai Metro, already operating the Red Line since September 2009 and due to open the Green Line in this year. When all the planned lines are completed, Dubai will have the distinction of being first on the Arabian Peninsula with a mass transit system and having the longest driverless route in the world, beating out Vancouver’s Skytrain, the previous record-holder. Besides solving congestion (and gasoline wasted in traffic jams) at ground level, the electricity-driven system will: a) Provide reliable transit times for employees who commute from the suburbs to the business centres in Dubai Municipality; and, b) Support economic development with capacity that will accommodate industrial and tourism growth well into the next decade. Since the climate virtually made it mandatory to enclose and air condition all stops, the two things Sheikh Mohammed bin Rashid al Maktoum and the Roads and Transport Authority (RTA) as sole stockholder might do to reduce “carbon footprint” even further is to be vigilant about using only non-CFC refrigerant gases and install solar panels on station exteriors to replace the electricity used by power-hungry air handling units.

Summary and Prospects

For the UAE and other members of the Gulf Council, piety already predisposes assistance to the poor and needy. Having the advantage of surpluses generated by crude oil, they must ponder what development model suits the other needs and aspirations of their people. Does the Saudi model of industrialisation with foreign workers and modern military equipment truly assure national security? Is the self-reliant stance of Iran the way to go? Or does the Abu Dhabi aspiration to be both regional financial centre and tourism magnet hold the key to sustainable development and modernisation for the benefit of the populace?

Propagating CSR and good corporate citizenship will demand receptive governments and business partners. Ill will and suspicion of foreigners as partners in CSR should not be a hurdle. After all, Arab traders ranged far and wide for centuries, south to modern-day Zambia, and Zimbabwe and east to the Indies. Except for having to cope with religious antipathy, there is no reason to believe that Arabs as a whole do not know how to learn, work alongside, and profit from, foreigners hewing to a different concept of responsible business conduct.

Nevertheless, local conditions and culture pose some hurdles in the pursuit of responsible competitiveness. A good start might well be the “people” part in TBL. Specifically, one refers to the treatment of contract or migrant workers from South and Southeast Asia. Rather than handling them as barely tolerable visitors who should be paid as little as possible, it is time that Gulf employers transition to integrating foreigners as valued workers at all levels. Secondly, as its absence in the above case examples will show, it is only a matter of time before foreign reporters discover and decry the high per-capita volumes of CO2 that afflicts the UAE and others in the Gulf. It is never too early to reduce the carbon footprint of the Gulf in general by attracting the foreign direct investments that will turn wasted natural gas into a productive resource.

The presence of many multinational regional headquarters operating alongside local businesses in the UAE should already ensure greater interest in CSR and good corporate citizenship by simple osmosis and informal networking. Nevertheless, government has been supportive and business organisations have fostered peer approval for CSR.

Examples of official recognition include Sheikh Mohammed awarding Memon Investments a plaque in the course of the “Vision of Dubai” celebration for foreign charitable work and support for the local breast cancer awareness campaign; as well, His Highness also S.S. Lootah Contracting for its track record in community and environmental protection. The multi-stakeholder EEG CSR Network has also put in place the Arabia CSR Awards, commencing with the announcement of the first recipients in October 2008, and workshops on translating CSR thinking to ethical human capital development where Emirate citizens. More optimistically, some companies have already published reports in compliance with Global Reporting Initiative requirements. More could follow suit as the Dubai Chamber Centre for Responsible Business hosts another run of the “Creating Value through Sustainability Reporting” workshop.

References

Bernays, E. L. (2010). In Encyclopædia Britannica. Web.

Bronner, E. (2010). For Israelis, mixed feelings on aid effort. The New York Times, A11.

Business Link (n.d.). Corporate social responsibility: The business benefits of corporate social responsibility. 2010. Web.

Energy Information Administration (2006). International energy annual. Washington, DC: EIA.

Kaczynska, K. (2008). Gulf Air launches corporate social responsibility initiative. Web.

Katsioloudes, M. I. & Brodtkorb, T. (2007). Corporate social responsibility: An exploratory study in the United Arab Emirates. S.A.M. Advanced Management Journal. Cincinnati, 72 (4); 9-21.

National Philanthropic Trust (2007). In the news. Web.

Ronnegard, D. (2009). CSR in the Gulf: Corporate philanthropy likely to remain key for now. INSEAD Centre for Executive Education and Research in Abu Dhabi. Web.

Skoll Foundation. (2010). By social entrepreneurs, for social entrepreneurs. Web.

United Nations Statistics Division (2009). Millennium development goal indicators. Web.

World Bank Institute (2007).Corporate social responsibility and corporate citizenship in the Arab world. Washington, DC: World Bank.

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