Helping hand: CSR in the region

Corporate social responsibility is no longer a buzzword but a widely accepted means of giving something back to stakeholders and the community around you and your company. And with corporate governance top of the agenda at May’s World Economic Forum in Sharm El Sheikh in Egypt, the region is slowly but surely coming round to the idea. CEO Middle East investigates

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By  James Bennett Published  March 13, 2006

Helping Hand: CSR in the region|~||~||~|According to William Clay Ford Jr, chairman and CEO of Ford Motor Company, there is a difference between a good company and a great company. “A good company offers excellent products and services. A great company also offers great products and services, but also strives to make the world a better place.” Never have these words rung more true than today. The role of businesses in 21st century society has shifted dramatically and the pressure on companies to comply with, and publicly display their awareness of environmental and ethical issues around them is more intense than ever before. Announcing huge profits without being open and honest and not giving anything back is simply not the way things are done anymore – embracing corporate social responsibility in all its guises is. Often referred to as the ‘triple bottom line’, due to its three core elements, CSR is, in essence, the willingness of companies to look beyond the traditionally perceived capitalist mandate of purely making a return on investment for the company’s owners or shareholders, to managing its social, environmental and economic impact. Many large global players across the western business world have grasped and implemented CSR for many years but the Middle East has been much slower to react and adapt. Compared to more international organisations such as Microsoft or Cisco Systems, the region is only just experiencing the benefits of CSR; however, over the last few years and alongside booming national economies from Jordan to Dubai, things are changing. Construction giant Emaar, for instance, brands CSR not just by its full name but calls it ‘corporate reputation’ because often if a company cannot get it right then it is its reputation that is well and truly on the line. Mohamed Ali Alabaar, chairman of Emaar, says that reputation will be a “key competitive differentiator for successful companies for many decades ahead." He also warns that the Middle East should be “as concerned with the risks that can damage business reputation as with the risks that can cause immediate financial loss”. The creation of its own advisory council is proof the issue is spreading in importance throughout the region. Tae Yoo, vice president for corporate affairs at Cisco Systems, says that in “some ways CSR has always been there with a strong theme of community”, however Abbe Le Pelley, manager for consulting and training at the Dubai Ethics Resource Centre (DERC), argues that the region and its local companies in particular, are often unaware of what CSR stands for and the message they should communicate to stakeholders. “The issue is fairly recognisable in the Middle East, but this is largely headed by government led organisations. Businesses such as the Kanoo Group and Nakheel realise the value that adhering to internationally recognised CSR regulations can bring, “ she says. “But the main perception problem here is that it is thought of as simply giving money to charity, but that is not the case. CSR is about good corporate governance, business ethics as well as giving or putting something back into the community.” Le Pelley says that DERC is working hard under various initiatives such as its future leader programme to educate local companies about why they should seriously consider the merits of a solid corporate responsibility strategy. As an international cross-cultural issue, CSR is not simply regarded as a case of apportioning a certain company percentage to one or more charities, but in the region this is a different matter. DERC found that corporate responsibility, or ‘corporate philanthropy’, as it is sometimes known, is often deeply intertwined with ‘Zakat’, a 2.5% ‘charity tax’ paid by wealthy Muslims to the poor and needy. If their wealth exceeds a certain level then a payment must be made as a Zakat – one of the pillars of Islam. Making the world, or the local community in many cases, a better place is admirable and should be encouraged, say experts, but CSR goes far beyond charity, says Le Pelley. “Corporate responsibility done properly is not an exercise in public relations, it is not just about giving money to charity and it is not an excuse for weak business performance,” she says. “CSR has arisen from the need for companies to adapt to the changing global landscape such as the increased access to real time information and the greater sense of awareness and concern for society and the environment that is held on a global scale.” She argues that the changing economy is repositioning corporate stakeholder dynamics as expectations of business responsibilities rise and stakeholders themselves increasingly adopt social, ethical and environmental criteria in their decision making. “Just think of the rise in the ethical consumer with organic products, the socially responsible investor, that is a huge phenomenon in Europe, and the socially concerned employee or business partner,” she adds. CSR opponents, including many economists, argue that an organisation’s sole purpose should be to maximise returns to shareholders. The CSR mantra, however, disputes this suggesting that this train of thought ignores the basic principles of CSR. Naturally, some companies that have been thought to have model CSR programmes have proved disreputable and shown that CSR can, in some cases, be a cloaking device for unscrupulous activities. These include Enron, WorldCom and Arthur Andersen, which have all been involved in corporate scandals. But these are a minority and a business’s primary role under CSR is not only to create wealth for the community, but to also behave both openly and responsibly.||**||Helping hand: CSR in the region|~||~||~|Transparency and the standards of corporate governance in the region have also often been criticised due to the slow pace of financial reform with many companies still run by families, but this is also an area of change. The UAE government, for example, has plans to introduce ‘basic’ guidelines for listed companies in order to increase confidence in the country’s capital market. During a seminar Abdullah Al Turaifi, chief executive of the Emirates Securities and Commodities Authority, called corporate governance and transaction transparency “crucial to the development of functioning markets in the UAE that are linked to and realise the benefits of the global marketplace”. How long these will take to materialise and match more rigorous international standards is another matter, but the initial signs are positive. In the region, DERC also found that CSR was strongly driven by media attention given to certain international disasters such as the Asian Tsunami relief effort. When DERC interviewed several local businesses, for instance, it found that philanthropic contributions were often considered an “optional business expense”, and that few companies use their corporate giving in a strategic way to advance their own corporate interests. Many, however, have bucked the trend and ‘given something back’. As part of its CSR programme for 2005, for example, the Dubai International Financial Centre (DIFC) made a ‘significant’ undisclosed donation to the Dubai Autism Centre (DAC) with one of its board members, Dr Omar Bin Sulaiman director general of the DIFC, joining the centre as vice chairman. CSR also forms a vital element in the National Bank of Abu Dhabi’s (NBAD) strategy. In a statement it says that as a policy, CSR is encouragingly not viewed as a “one-off philanthropic gesture” with the focus instead to support and engage its stakeholders in “sustainable initiatives”. A recent example was its contribution of AED10 million to the Institute of Applied Technology in Abu Dhabi. Le Pelley, explains that the “global nature” and “drive for foreign investment” in the Middle East and Dubai are forcing companies to pay closer attention to CSR. “Dubai’s business means that local companies are increasingly held to account by pressure from the international media and related communities,” she says. “There is also a growing awareness by local shareholders of the importance of the CSR agenda, particularly with reference to aspects of corporate governance. Institutions such as the DIFC are helping to raise the bar with enhanced listing requirements, and Dubai Healthcare City through its desire to promote a ‘citywide’ approach to CSR.” Internationally, communications network giant Cisco Systems is one of the leaders in CSR and has carried out work across the globe with its nine-year old ‘Networking Academy Program’ – now one of the largest e-learning initiatives in the world. Its main objective is to help students acquire the skills needed for IT-related jobs and for higher education in engineering, computer science, and related fields – effectively helping them to participate in the global economy. Yoo says that the best investment a company can make is in education. “Consistently investing in the education of your labour force and in the education of others can keep on repeating itself and bring benefits to your company and the community year after year.” One example is Cisco’s Jordan Education Initiative (JEI) that launched in June 2003 with the tagline of a ‘high-quality education program that harnesses technology to boost development’. The Kingdom-wide initiative resulted from an appeal to business leaders at the World Economic Forum in January 2003 by Cisco’s CEO, John Chambers who called for like-minded companies to “work in partnership to narrow the gap between developed and less developed countries through better education”. From there it succeeded in gaining support from 45 other organisations, including international and local companies and government ministries in Jordan. Cisco is also pushing further boundaries by focusing on other issues core to its CSR values including health and women in the Middle East. “We have a strong gender focus and are trying to get more women involved in the IT knowledge economy, one example is our support of Dubai women’s college,” adds Yoo. Microsoft has also invested heavily in CSR throughout the Middle East through its ‘corporate citizenship’ initiatives. Charbel Fakhoury, general manager for Microsoft in Gulf, says that the IT company invested US $10 million throughout the region and North Africa in 2005 in community projects, grants and software donations and that this investment will continue. “My first citizenship project was in Lebanon in 1997 where we established community training learning centres and the first Microsoft electronic library in Beirut. This targeted young people who had no computers in their schools or homes. Later on we realised there was a high demand from parents and now we have the same concept all over the Middle East from Kuwait to Yemen.” Microsoft’s core mission, says Fakhoury, is to target disadvantaged people who don’t have the chance to gain access to IT skills. “The objective is not a company objective, it’s an investment in the future of those people. One day you hope that they will contribute to the overall wealth of the country which will then require more usage of technology.” Oil giant Shell has also carried out CSR work in the UAE, including coral reef monitoring projects and the creation of the ‘Comprehensive Environmental Awareness & Education programme’, reaching some 125 000 children through more than 400 schools in the UAE. The Middle East is broaching the subject of CSR; however, progress is slow with only a few multinationals, mainly in IT, and a minority of large local businesses, organisations and governments involved. Regional CSR activities also need to broaden. Good work is being done in areas such as education, technology and some charities but issues such as business ethics, corporate governance and transparency and the environment also need serious attention if the region is to match its western neighbours. Corporate responsibility is very young in the Middle East and only a careful blend of added investment, both foreign and local, and time, will enable companies to reach out and lend a helping hand to those who really need it.||**||

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