- The adoption of- and the awareness about- CSR is on an upswing in the MENA region.
- The progress of CSR in MENA is not resting on the shoulders of corporates (and their employees) alone, as governments and not-for-profits in the region have also taken many steps over the years.
- current CSR practices are still heavily rooted to the concept of philanthropy and are not aligned to the region’s actual needs, thereby leaving a lot to be desired in terms of their on-ground impact.
- For CSR initiatives to result in a truly sustainable future, MENA governments need to put together the necessary regulatory framework and engage all stakeholders, while corporates need to move from purely philanthropic activities to sustainable programs addressing development challenges.
The good news first: the adoption of – and the awareness about – CSR is on an upswing in the MENA region. The importance (or the lack of it) attached to corporate social responsibility (CSR) as a practice area came into prominence in the early 90’s when leading footwear and clothing giant – Nike – was found using sweatshops for production of its goods, leading to widespread criticism and the resulting adoption of CSR practices by North American and Western European firms.
- Corporations in the MENA region, however, started accepting CSR at the turn of the century, most notably after the creation of the United Nations Global Compact (UNGC) in 2000. Over the years, this trend has gained momentum – the number of MENA corporations that have signed the UNGC currently stands 306; even though that represents a mere ~4 percent of the global signatory count, it is a large improvement over just three signatories in 2003. Further, BAYT.com’s recent survey of employees across 13 MENA countries points to the fact the enthusiasm towards CSR is not limited to the board room only – nearly two-third employees in the region already participate in some form of charity or community service work, and 95 percent wish to increase their commitment towards CSR causes. Even as consumers, nearly 90 percent of these respondents would prefer to buy products and services from socially responsible companies.
- Of course, the progress of CSR in MENA is not resting on the shoulders of corporates (and their employees) alone, as governments and not-for-profits in the region have also taken many steps over the years. HAWKAMA – MENA’s regional Institute for Corporate Governance was established in 2006 in Dubai to advance corporate governance reforms, in addition to multiple public–private partnerships (PPP) being promoted by many countries at a national level. Awareness about CSR is also being permeated through not-for-profits and networks like CSR Middle East, whose members are companies and NGOs, agencies and organizations interested in communicating their corporate citizenship, sustainability, and socially responsible initiatives through the network.
- When analyzed together, the above facts point to the following unmistakable trends:
- MENA region, as compared to the developed world, was late in adopting CSR practices but adoption and awareness have improved significantly over the past decade and are currently at an all-time high.
- With stakeholders across the spectrum (governments, corporations, employees, and not-for-profits) realizing the importance of CSR, adoption can only go in one direction from here – north.
- Corporations can no longer afford to take CSR lightly, since their reputation as an employer and that as a product/service provider is being cultivated as much through their social actions as through their business decisions.
And now for the not-so-good news: adoption aside, current CSR practices are still heavily rooted to the concept of philanthropy and are not aligned to the region’s actual needs, thereby leaving a lot to be desired in terms of their on-ground impact. As per the World Bank, CSR is the commitment of a business to managing and improving the environmental, economic and social implications of its activities. On the environmental front, Arab countries currently house >60 percent of the global oil reserves, but only 0.5 percent of its renewable fresh water resources, thereby creating an acute shortage of water, need for better waste management, and concerns over poor air quality. On the economic and social front, unemployment in the MENA region has been above 10 percent in the past few years (World Bank data). Further, with half the region’s population currently under the age of 25, World Economic Forum estimates that the region needs to create 75 million jobs (and the corresponding education system) by 2020 to sustain current employment levels. In such a scenario, one would expect CSR initiatives to be focused on addressing these key need areas.
- However, a closer look at the current practices in the region alludes that CSR is still synonymous to philanthropy for most corporates, and key focus areas remain unaddressed. The 2013 BAYT survey found that the most common CSR activities of MENA corporations are feeding, housing or clothing the poor (25%) and working with orphans and underprivileged children (13%). Activities aimed at alleviating the environmental, educational, and medical conditions in the region are clearly not a priority for corporates, which still view CSR as a medium to enhance their public image, and not as a tool for preparing the region for a sustainable future. Even within the corporate sector, practices adopted by MNCs tend to focus on driving their global CSR mandates through local subsidiaries, rather than focusing on key local issues. While government owned and other private locals businesses are more aware of the local CSR needs, their cultural inclination towards philanthropy means that other needs continue to remain underserved, thereby resulting in lower on-ground impact.
CSR Initiatives of MENA Corporates – 2013 (Source: Bayt.com)
- Further, the above focus on philanthropy as the core focus area of CSR initiatives has remained unchanged over the past decade. A 2006 report by World Bank found that while CSR in the North American & European regions was largely institutionalized or market driven, activities in the MENA region were driven more by altruistic traditions and were not institutionalized. The same sentiment was echoed by the Corporate Social Responsibility Monitor in 2009 which found that developed economy citizens wanted CSR projects to focus on core issues such health, environment protection, labor welfare, etc.; on the other hand, their counterparts in MENA and other developing regions viewed CSR as a tool for supporting charities, and solving their national and social problems.
For CSR initiatives to result in a truly sustainable future, MENA governments need to put together the necessary regulatory framework and engage all stakeholders, while corporates need to move from purely philanthropic activities to sustainable programs addressing development challenges.
- Clearly, creating an environment conducive to CSR is the logical first step towards ensuring its success. And the responsibility to do that rests with the respective national governments, which need to legalize and formalize CSR as a practice area (a la the Western world) through regulations and protocols, and simultaneously engage senior corporate stakeholders to ensure a quick and smooth adoption of such requirements. For example, as a first of its kind step in the MENA region, the Center for International Private Enterprise (CIPE) worked closely with the Egyptian Junior Business Association (EJBA) to establish a taskforce on corporate governance, that also went on to publish a manual on “Corporate Governance in Family Businesses”.
- Not-for-profits and the academia, that have so far focused their efforts on trying to explain the importance of CSR to MENA corporations, now need to channelize their energy towards disseminating global best practices and to-do’s on how to implement CSR programs and measure their effectiveness. We believe that incorporating sustainability and CSR in the curriculum of business courses is one effective way of achieving these goals.
- Most importantly, however, corporates will need to take a holistic view of CSR and focus on economic development (education, jobs, fair trade, and infrastructure development), social management (community involvement, child labor, medication) and environment management (emissions, water management, waste management) in addition to their existing charity efforts. Further, multinationals setting-up shops in the region will need to adopt a localized CSR approach by proactively identifying issues and working with local communities and governments to solve them. The below table lists examples of organizations that have taken such steps – we believe that it will take such and more initiatives on part of the corporates and governments to ensure the development of a sustainable future for the MENA region. (Source: ABR Research, Coca Cola Company, Booz & Company, WesternZagros)