Executive Summary
In a region that is known for political instability and religious wars the United Arab Emirates (UAE) Federation is well known for its economic and political stability. This is a rare phenomenon in the Middle East.
The absence of political instability, visionary leadership along with other features has promoted UAE to be among the worlds most important business destinations.
Great multinational corporations have established their presence in UAE due to good business environment prevailing in the federation. Furthermore, big corporations such as shell, BP and many oil exploration companies have found themselves in UAE due to rich oil deposits available for exploits.
UAE is not only favorable for oil firms. Companies such as Intel, DHL have also registered there presence because of favorable economic viability. With numerous local and international firms working closely in the rapidly expanding economy, corporate social responsibility (CSR) becomes a major concern to such corporations.
Of greater significance are the CSR present and future roles within the local business setting. The paper discusses the UAE business performances in key areas of CSR that include community affairs, environment as well as consumer protection.
Each of the industry sectors performance in these key areas varies just as the performance of each major CSR areas varies. The role of Islam in the CSR progresses in countries such as UAE materializes to be of great essence.
Many enterprises appreciate the contribution of CSR to their growth and to the general development of the society. However, majority of these enterprises are not cognizant with the requirements of the CSR and how it can be integrated in their business goals.
Introduction
Despite many years that corporate social responsibility concept has been studied various definitions have been proposed though the universal definition is lacking. Nevertheless many scholars have come up with some ways in which they can define CSR.
To these scholars corporate social responsibility (CSR) refers to the continuing commitment by an organization to act ethically and contribute to economic growth while simultaneously enhancing the quality of life of the employees, their families, the local community, and the society at large.
Models of CSR suggest that businesses should take on philanthropic responsibilities, economic responsibilities, legal responsibilities and ethical responsibilities.
CSR function deals entirely with environmental issues, economic issues including marketplace as well as social issues such as the society and the government. The organizations’ argument for social responsibility is leveraged by several factors namely changing public expectations, public image, business resources and avoidance of regulations.
CSR is the economic, ethical, legal and flexible expectation that the society has of business at a particular time. It reflects the efforts of organizations in managing operations to spawn overall positive effects on the society. Companies are currently succeeding in global market competition.
To excel in a competitive market companies must increase profitability and service orientation towards stakeholders including employees, customers, suppliers, governments, communities and groups of interest.
Despite the need to invest more in time and capital to implement CSR activities, companies have realized CSR importance in shaping companies image and differentiating them from other competitors.
This paper evaluates the concept of corporate social responsibility in relation to its adoption in UAE in an effort to establish its importance and contribution to corporate strategy. The paper begins by evaluating the conceptual framework of CSR and then proceeds to relate what this concept means to the UAE business environment.
Conceptual and theoretical framework of CSR
The foundation of CSR of a business organization is on five basic elements. These elements include value creation, innovation, community sense, long-term consideration as well as opening and sensitiveness to policy makers.
Innovation means the constant introduction of new products in the marketplace to service consumers to create a competitive advantage. Community sense implies the liability an organization has to the community in regard to respect, requirements and provision of some products in terms of social, economic and education.
Value creation as an element of CSR is very important in all business considerations as it builds up trust merit in marketplace and thinks about the most important stakeholders to a business like investors, customers and employees (Karnani, 2010).
In this perspective it is imperative for an organization to create value through its operations. Indeed companies are working more for service motive rather than profit motive in an effort to enhance their competitive advantage.
All businesses have to operate under corporate governance or the set of rules and procedures that protects them from adverse market issues such as frauds. Therefore, businesses and organizations should abide by the policies set by the regulating bodies such as the government alongside other recognized governing bodies.
Moreover, businesses are widely recognized as long-term processes that should be sustained by considering the needs and expectations of all groups of interest (Katsioloudes & Brodtkorb, 2011).
Broader meaning of corporate social responsibility (CSR)
Some scholars argue that corporate social responsibility can be defined as the commitment of businesses to pursue those strategies, decisions and actions which relates to the goals and values of the society.
To some scholars, social responsibility refers to the commitment of a business or an organization beyond that which is ideally required by economics or law with respect to pursuing the long-term objectives that are favorable to the society.
Generally, the different definitions refer to ethical, behavior, the environment, sustainable development and the philanthropic ideas (Katsioloudes & Brodtkorb, 2011). CSR reflects the importance of businesses to commit and equally satisfy the expectations and moral responsibilities at the societal level.
In other words the organization and businesses must have the right conduct of accounts for the welfare of the entire local society.
Corporate social responsibility has a critical role to play in enhancing the reputation and brand image of an organization. It assists in improving sales as well as customer loyalty both locally as well as at the international levels (Karnani, 2010). It is also an important instrument used to attract and retain workers.
The CSR is purposeful devised and used to provide all business organizations with a higher capability to create sustainable development and is indeed associated with such facets of sustainability. As a result many organizations have been attracted to CSR because of its contribution to increased sustainability devoid of creating negative consequences.
Economic responsibility
The very formation of a company is based on the economic value, the effort to provide quality products and services to each and every member of the society. The profit motivation drives the incentive for entrepreneurship.
During their conceptions business and organizations entities are looked upon as the fundamental economic units in the society. Therefore, the key obligation is provide and equally distribute products that members of the society needs and desire besides making satisfactory profits out of the production and distribution processes.
As the business grows it comes a time when the idea of getting profits shifts to that of maximizing every returns or profits (Karnani, 2010). In fact, this now becomes the permanent value onwards for most organizations. All other obligations are influenced by the economic responsibilities of the organization as they become contentious considerations without them.
Legal responsibility
The major purpose of any business is to serve the society and therefore UAE organizations are not merely expected to focus on profit making. All together they are expected to abide by the stipulated laws and regulations that have been enacted by the government as the fundamental rules upon which the business must run.
To partially fulfill the social contract between the firms and the society most of the existing organizations are required to pursue their corporate strategies within the needs of the legal framework. Legal responsibilities ensure that the organizations have codified ethics which enthusiastically combine with economic responsibility to form the basis of free enterprise system (Karnani, 2010).
Ethical responsibility
Despite the fact that the UAE legal and economic obligations have an ethical base regarding justice and fair practice, ethical obligations involve those activities that are restricted by the societal members although they are not included in the governing law or rules and regulations.
These responsibilities frame those norms, principles in addition to the expectations that demonstrate concern for what stakeholders deem as fair justice in maintaining the ensuing respect and similarly protect their moral rights. Into the bargain ethical obligations can be perceived as the emerging societal values and norms a firm is expected to meet yet they may not demonstrate a higher level of performance than that demanded by the law.
Philanthropic responsibility
Philanthropic obligations include those business actions that respond to the expectations of the society and clearly demonstrates and ensures that organizations being good corporate citizens.
This means that UAE organizations are actively engaged in various programs and activities with sole aim of enhancing peoples’ goodwill and promote the welfare (Katsioloudes & Brodtkorb, 2011).
These may include firms’ contribution of finances and executive time for the sake of the community-based programs. As a result the philanthropic responsibility is somewhat discretionary on the firms’ part though the society expects the organizations to provide it.
The corporate social responsibility of an organization within the Unite Arabs Emirates thus involves the fulfillment of the organization’s economic, legal, ethical, and philanthropic obligations. Any responsible organization should and is obligated to make every effort of maximizing the accruing profits while obeying the law, acting ethically and becoming good corporate citizens.
Importance of corporate social responsibility in UAE
Corporate social responsibility is among the essential instruments with the most important role in governing any business irrespective of size. The more the organization fulfils social obligations the greater the chances to survive in a global and domestically challenging market environment.
For instance, to prosper in the current competitive environment every business should reward the public (Mesbah, 2011). Even though businesses and the society are inter-linked as well as inter-dependent, their contribution to CSR will reflect their goodwill.
In essence, corporate social responsibility widely endowed in the United Arabs Emirates tends to reduce the negative effects which might accrue to the stakeholders and creates wealth and value for them.
Businesses situated within the UAE have their own capabilities to choose their employees, customers, investors and other stakeholders so that they are always given the deemed necessary priorities. The locality, size and nature of operations of such organizations and businesses often define the stakeholders’ existence.
Their expectation is recognized when the business presents some effects on them in any manner. At this point an important tactic to apply in UAE environs is stakeholder mapping or the representation of the different relationship that the business has with the stakeholders according to their strength and relative proximity.
In spite of the approaches broadly used in UAE it is imperative to include all relationships where the organization and the society influence each other.
The organization may contemplate stakeholder involvement in order to understand its impacts and assist in articulating its mission, strategy, values, commitment and executions. Basically this in turn facilitates the process of regulatory approvals to take part in measurements and reporting to enhance the existing relationships.
The corporate social responsibility in the UAE context
Environment
A research that has been done in the UAE companies shows that there is compliance with the UAE environmental regulatory measures (Katsioloudes & Brodtkorb, 2011). The compliance with these laws remains the same across the industrial sectors.
Ideally this implies that UAE industries are fully aware of the role CSR play to the surrounding environment. Several environmental laws as well as regulations were enacted by the UAE government to oversee the corporate behavior concerning the protection of the environment.
The UAE federal government developed regulations that oversee the environmental impact assessment for new projects by major corporations. In return many corporations have shown their responsibility by conducting the requisite environmental impact assessment before they undertake any major project.
However, there is a wide variation according to UAE industrial sector. Trade, hotel and restaurant industries which are also regarded as the largest in UAE record seem to have insignificant rates of environmental assessment.
This may be due to lack of tolerance and awareness of the local as well as international standards of environmental controls. Therefore, new environmental concepts such as eco-tourism alongside the renowned eco-hotels should be promoted and adopted by these industrial players as part of there CSR (Katsioloudes & Brodtkorb, 2011).
This is the process purposely meant to improve the business or organizations CSR and consequently their performances within UAE.
Another way in which many companies in the UAE respond to the environmental responsibility is through internal sanction especially the medium sized companies.
The main reason being that the environmental impact assessment in most cases encompasses more advanced ecological management schemes whereby environmental guidelines and commitment play an integral role (Katsioloudes & Brodtkorb, 2011).
But this could require a more detailed examination into the level and scope in which these internal sanctions are implemented.
Another important aspect in the UAE environment is the impact assessment executed to the business suppliers. Basically scores of companies situated in the UAE are obliged to report any environmental impact assessment to their suppliers.
Though the pattern is uniform across the industries it is important to look into what these companies consider when conducting the assessment in the supply chain. It also important to note that, UAE has no strong regulatory framework that would provide proper enforcement in conducting fair assessment to the suppliers.
Against this backdrop of fragile regulatory framework many companies have developed templates that are essential in monitoring the environmental impact assessment to the suppliers (Katsioloudes & Brodtkorb, 2011).
In general, majority of the firms in the UAE have shown a strong commitment and compliance with both international and local environmental laws.
Nevertheless not all the firms have implemented the environmental impact assessment either to the new projects or to their supply chain or even put in place the internal procedures that avoid actions which are duly deemed destructive to the environment (Katsioloudes & Brodtkorb, 2011).
Therefore it is necessary that firms put more emphasis on issues of environmental while considering their engagement in the CSR. Companies corporate social responsibility activities should be geared towards environmental protection as well as initiatives that go beyond the rules and regulations that have been put.
Community affairs
Basically, several companies in the UAE engage in projects that promote goodwill activities to the surrounding communities. Corporate goodwill is totally distinct from Zakat (also known as Muslim charity) which is very common in the Middle East. Corporate goodwill is driven by the broader concept of corporate responsibility and citizenship (Katsioloudes & Brodtkorb, 2011).
The extent of the companies involvement in the development of the communities in which they operate is essentially a motive worth noting. For example, various companies have clear policies that are embedded on their goals and strategies on how the resources would be spent towards this endeavor.
Companies that have integrated and aligned social goals in their strategies have shown sustainable improvement in their performance.
This remains to be a clear indication that UAE companies should make more efficient their CSR processes and investments within the business strategies. In a situation where the alignment is not attained the corporate can achieve the realignment through a viable strategy dubbed as the multi-stakeholders approach.
United Arabs Emirates firms are also socially sensitive to the community development and needs through engagement in goodwill activities. Some firms are allocating their resources towards the community goals that are generally beneficial both to the public along with the businesses.
Many of these companies have come to the realization that the nature and degree of involvement in the community development is helpful in streamlining as well as directing their social initiatives (Katsioloudes & Brodtkorb, 2011). In contrast there is little realignment that currently exists between the companies’ business objectives and the community social giving.
Consumer protection
It is a requirement in the UAE that the companies conduct tests and trials that are newly launched into the market for safety and security purposes especially for those companies that are found within the manufacturing sector.
Companies in the manufacturing segment are highly expected to adopt the best practices while launching their new products both in the domestic and international markets. All the same, the UAE government would not assume that corporations will act responsibly.
There are regulatory and market requirements that are clearly put in place in the manufacturing sector to ensure high degree of safety and security tests. The regulatory measures furthermore conduct post-market surveillance for new commodities and services sold to the consumers (Katsioloudes & Brodtkorb, 2011).
Like many companies around the world, the UAE companies use consumer complaints to improve their business processes. As a key performance indicator customer complaints are in most cases taken as an important tool that arise from the stakeholder’s engagement process.
This is the process purposely meant to improve the business or organizations CSR and consequently their performances. Companies that are focusing on the constant improvement are obliged to fundamentally use other important stakeholder’s engagement tools such as the employee opinion surveys (Katsioloudes & Brodtkorb, 2011).
On the other hand stakeholder engagement tools have however been underutilized by many companies in the UAE and therefore there is the need to highlight the benefits businesses gain from using such tools. For instance such tools in most instances have been essential in promoting relevant stakeholders view by providing the CSR related key performances (Katsioloudes & Brodtkorb, 2011)
Interestingly many corporations in the UAE still use consumer complaints as the main performance indicator that is essential in their daily improvement for the business processes.
In addition loads of firms conduct tests along with trials of new products and services before they are launched into the market for safety and security purposes. In fact those firms that engage in the manufacturing sector materialize to be the best performers.
The challenges
One of the greatest challenge facing UAE as well as the firms that operate within the country is how to come up with a well defined CSR policies that articulate international practices whilst reflecting the particular customs of the country.
The best way firms can demonstrate the significance of CSR best practices according to UAE context is to prove that the business undertakings are consistent with and equally corresponding to the principles and shared teachings of the Islamic religion (Katsioloudes & Brodtkorb, 2011).
How these policies would be turned into actual performance can be fast tracked through education and constant training to all workers including the companies’ chief executive officers (CEOs).
Besides there is the need for the government to tender support not only to encourage firms to adopt the best CSR practices but also to efficiently and accurately implement accompanying CSR policies.
Conclusion and the way forward
With numerous local and international firms working closely in the rapidly expanding economy CSR becomes a major concern to such corporations. Each of the industry sectors performance in these key areas varies just as the performance of each major CSR areas varies.
Many enterprises appreciate the contribution of CSR to their growth and to the general development of the society. However, majority of these enterprises are not cognizant with the requirements of the CSR and how it can be integrated in their business goals.
It is true that many firms in the UAE are fully aware and adopt the CSR concept in their policies and practices. According to researches that have been done over ninety percent of the UAE companies both foreign and local are strongly committed to the CSR concept.
There is also an indication that there is a strong correlation between CSR practices and the companies’ performance. In deed the major drivers of the CSR are majorly the impact CSR has on the performance of the company as well as the fulfillment of the laid down rules and regulations.
Putting all these facts together the conclusion that can be drawn is that there is indirect yet strong responsiveness of CSR in the UAE. This is greatly supported by the responsiveness of the UAE firms towards the environment, consumers and the community or societal affairs.
All these responses are also supported by the strong belief in Islamic culture of giving. Islamic influences not only make such corporate responsibilities an integral part of citizens but also a necessity to the success of the businesses.
Despite such awareness it is vivid that UAE companies still lack clear understanding of the CSR concept as it promulgates in other countries such as in Europe and America. Firms in UAE have no well defined CSR policies and practices except in cases where they are required to comply with the laid down regulations.
It seems as though UAE firms lack expertise in the CSR that would be able to formulate CSR policies and practices according to the international standards. Without a doubt majority of the firms appreciate the importance of CSR but they rarely understand CSR policies and practices and how these policies should be put into operation.
Overall there are several benefits associated with CSR best practices especially to the Islamic countries like UAE. Adoption of CSR will not only make possible for UAE firms to emerge in the international scene but would also improve their profits and relations with score of other the international corporations.
The greater impact is that many foreign companies would be attracted to the country. Therefore if countries such as the UAE properly adopt and successfully implement CSR policies then there are higher chances of their businesses developing.
References
Karnani, A. (2010). The Case against Corporate Social Responsibility. Web.
Katsioloudes, M. I. & Brodtkorb, T. (2007). Corporate social responsibility: an exploratory study in the United Arab Emirates. Web.
Katzman, K. (2011). The United Arab Emirates: Issues For US Policy – Analysis. Web.
Mesbah, R. (2011). Arabia CSR Network, Embassy of Sweden and Swedish Trade Council work towards corporate responsibility in UAE. Web.