At the present time, when looking at CSR in the Middle East, the UAE stands out as an obvious country to look closer at among Arab nations. While CSR in many Arab countries is virtually absent, the UAE has started, although slowly, to familiarize itself with and attach great significance to the concept.
The UAE Economy and Managerial CSR Awareness
The UAE's expatriates account for 80% of the population and 95% of the county's labor force. Its $163 billion economy is heavily reliant on oil which contributes 26% of the UAE's GDP, most of which is extracted in Abu Dhabi, accounting for about 60% of the GDP.
About 72% of local managers surveyed in the UAE responded that they were "highly or very highly aware" of CSR concepts, but only a mere 24% of local companies reported any such activities. Although 22% of managers said that "Social Responsibility and Community Involvement" is integral to their company's reputation; out of 9 (corporate reputation significance) ???the criteria only ranked 8th.
CSR Activities in the UAE
One would expect multinational corporations (MNCs) to be more engaged in CSR activities as they import their corporate practices from abroad, and this certainly does hold true to some extent, but they "tend to do substantially less activities in the UAE than elsewhere." MNCs have largely adapted to local conditions and expectations and thus the type of CSR activities that are performed differ only slightly between them and local companies. By far the most common CSR activities in the UAE are corporate philanthropy and Emiratization, however environmental concerns and employee health & safety are also gaining attention. Local companies tend to focus a bit more on corporate philanthropy and Emiratization, while MNCs have a better record of engagement with environmental and health & safety issues.
Corporate Philanthropy
Corporate philanthropy involves donations by corporations to charity organizations or directly to needy individuals. A typical example is Al Ansari Exchange that donated AED 7 million towards the Ministry of Health's initiative of setting up medical facilities to people residing in the remote area of Shoukah in the emirate of Ras Al Khaimah.
Corporate donations tend to be more forthcoming during the holy month of Ramadan and when disasters strike, as was the case with the 2004 Asian Tsunami and more recently with 2009 Philippine typhoon and the Japanese quake. UAE corporations tend to donate to local causes and sometimes to regional ones, such as the plight of children in war-torn Iraq and Palestine. It is notable that these donations seldom have a strategic dimension, i.e. the donations are not connected with the strategic goals of the corporation.
Emiratization
What is known as Emiratization is the national effort to educate and prepare young Emiraties for the workplace as well as securing job opportunities for them. The citizens of the UAE are very young, with 45% below the age of 15. Furthermore, 20% of women and 9% of men are unemployed. Emiraties often lack incentives to take up available jobs (as many belong to wealthy families) and they also lack the ability to compete with a skilled and relatively cheap expatriate workforce.
Corporate Emiratization activities are both voluntary and compulsory. Voluntary activities tend to be educational. For example, Mubadala is a local semi-private investment company that manages a diverse portfolio. The company donates generously to three foundations that it has helped set up, among which is Tawteen that works to foster education and career guidance. The Dubai International Financial Centre says that its major area of CSR focus is on "education and empowering people with special needs, in order to build a sustainable skill-based workforce in the UAE". Likewise, MNCs like Shell and ABB contribute to Emiratization. Shell has started a program called Intilaaqah to promote entrepreneurship and business skills, and ABB says that it has an education and mentorship program which it uses to build capacity and nurture talent. Emiratization also connects with corporate philanthropy in that donations are sometimes used to sponsor job-training programs. There is also a significant compulsory element to Emiratization relating to securing job opportunities for Emiraties. The UAE government has issued targets for different industries requiring that a certain percentage of nationals must be employed by corporations, when companies have more than 50 employees. The target in the insurance industry is 15%, and in the banking and trading industry the target is to increase the number of nationals at a rate of 4% and 2% per year respectively.
Environmental Concern
The UAE has the world's largest carbon footprint per capita. This is largely because the country uses fossil fuels for electricity production coupled with the huge electricity demand from air conditioners, water desalination plants, and aluminum smelting plants. However environmental management is not typically considered a CSR issue by local companies.
Nonetheless, there are companies that do work on reducing their environmental impact. For example Dubai Aluminum Company Limited, the world's seventh largest producer of premium aluminum, has set targets for reducing carbon emissions towards carbon neutrality, and is investing in technology development to significantly improve the energy efficiency of the smelting process.
Marriot Hotels have a global program called Environmentally Conscious Hospitality Operations (ECHO) aiming to reduce waste, improve recycling, participate in clean up campaigns and engage in partnerships to reduce carbon dioxide emissions.
Explaining the Current State of CSR in the UAE
There are a number of factors that help explain the UAE's current CSR focus on corporate philanthropy, Emiratization, as well as other related issues. These influences come most notably from religion, government, family governance of firms and to a limited extent from civil society.
Religion
The UAE is a non-secular Islamic country. Islam has a far reaching social significance that influences all aspects of life including business. Muslims regard Islam as the religion of trade and see no contradiction between profit seeking and morality. Religion in the UAE is the key factor that drives corporations to engage in corporate philanthropy. Such corporate donations are "driven and rooted in moral reasoning connected to religious and cultural traditions such as Zakat". Zakat, or almsgiving, is the fourth pillar of Islam and requires Muslims with disposable means to donate 2.5% of their income to the needy. Although the Islamic duty of Zakat is the primary explanation for corporate philanthropy in the UAE, it is important to understand that Zakat is considered a personal duty rather than a duty of the corporation.
Government
The government in the UAE has a history of active involvement in furthering the welfare of its citizens. Not only is there no personal income tax, but "the rulers in the UAE give money, land and other facilities to their people". This active involvement also stretches to the promotion of CSR in the country. The Abu Dhabi government's report on the social obligations of the private sector says that:
"Plans, policies, laws and incentives -material and otherwise- are provided by the Government of Abu Dhabi to bolster the role of the private sector in the Emirate's economic development in the forthcoming stage... Under economic diversification plans, Abu Dhabi economy is being restructured in such a way as to multiply the role of the private sector which is crucial to the success of the Emirate's welfare plans."
Family Firms
Among the countries of the Gulf Cooperation Council (including the UAE) more than 90% of companies are family firms. About 80% of firms have less than 10 employees. Secondly, international corporations must have a national sponsor (a UAE citizen) who owns at least 51% of the shares, except in the designated industrial free zones. This naturally leads to family majority ownership of enterprises whenever a foreign company wishes to enter the UAE market. The concentration of family owned business helps to explain some of the CSR activities in the UAE.
Although most firms in the UAE are family owned there is a significant amount of foreign investment. For example, the Al Futtaim Group is the agent for 29 foreign brands including Toyota, Volvo, Jeep, Chrysler, IBM, and Panasonic. The desire to attract investment forces pushes local firms "to take note of the global corporate agenda as they recognize the need to raise local practices to meet those of an internationally accepted standard in issues such as financial transparency, accountability and responsibility".
Civil Society
In the West, civil society organizations pressure corporations to act on social issues that they believe are not being adequately addressed. In the UAE there is a lack of independent civil society organizations. There are a few organizations with non-profit agendas but they do not qualify as non-governmental organizations (NGOs) because they are initiated and/or financed by the government. For example, the Emirates Environmental Group that promotes greening of the UAE is financed by the government, and the Dubai Ethics Resource Centre that promotes CSR is a department of Dubai's Chamber of Commerce and Industry.
Although CSR in the UAE may develop in a strategic business direction as in the West, it is unlikely in the near future to move away from corporate philanthropy and Emiratization due to its deep cultural and religious underpinnings. It is still something to build on.
About the author
Dr. David Ronnegard is an INSEAD Senior Research Fellow of Ethics and Social Responsibility.
© Capital ME 2011
