The Gulf countries’ Sovereign Wealth Funds (SWF) are maturing and growing in importance, but these enormously wealthy bodies have yet to pay serious systematic attention to their corporate social responsibility (CSR). SWFs in the Gulf Co-operation Council (GCC) countries are, like their global counterparts, investment vehicles controlled by government agencies, but unlike some others around the world, the Gulf funds are fairly secretive. They do not publish their investment strategy and are not publicly accountable, which puts them even further away from adopting a clear CSR policy. The Islamic bases of the GCC states nevertheless provide an element of SWF CSR underpinning; and in any case, the situation of these funds in general is evolving in a way that will hasten their embracing principles of social responsibility.

Looking at specific funds in the Gulf region, the sheer numbers are staggering. To take but one of several in the GCC states, the Abu Dhabi Investment Authority (ADIA), with assets of over $800 billion, is the largest SWF in the world and substantially growing through government capital injections based on huge oil revenues. By other measures however, ADIA falls short. For a start, there is as yet no strong internal governance structure of the ADIA, which still lacks a true investment policy. The operational autonomy of the entity is in fact weak, which has a negative impact on development of policy, including that to do with CSR.

Secondly, nobody is able to say clearly exactly what ADIA’s assets are worth, a serious shortfall in terms of transparency. Governance is also an issue since according to its own information, 80% of its funds are managed by outside firms and the SWF’s investment strategy is determined by fund managers from foreign countries working with a small group of advisors.

ADIA and the West

At the same time, high-profile ADIA involvement in the US and Europe have heightened scrutiny by officials worried that investments could be used to further political aims that were not consistent with Western notions of CSR. The Bush administration, however, has appeared eager to fight any backlash at a time when the US economy could benefit from overseas capital. Thus, American Treasury officials work closely and quietly with the Abu Dhabi government and ADIA to help pave the way for further investment in the US. At the same time, to re-assure people in the West generally and Americans in particular, the government of Abu Dhabi has pledged that investments made by its SWF would be based solely on commercial grounds and not for political gain. On the other hand, such an orientation could in effect be detrimental to the adoption by ADIA of a coherent CSR policy.

In the context of an emerging democratization of the United Arab Emirates (UAE) and other Gulf states, local councils, the media, and public opinion have a relatively small impact; but without their potential lobbying, questions of CSR can become neglected. However, this could be changing, as representative government becomes more important on the UAE federal level, which could in turn start asking ADIA and other SWFs in the country about their CSR towards local communities. On the other hand, foreign influences are comparatively strong, including those companies or individuals that manage ADIA funds and advise it.

Disclosure of investment positions and of the currency composition of ADIA investments is extremely low, as is the home country regulation and oversight governing the authority. Commitments in particular with regard to the separation of the management of ADIA from political authorities are not forthcoming. In such a situation, ADIA will most likely simultaneously continue to be pressured into making investments in the US, while being persuaded to adopt greater transparency and better corporate governance, including stronger CSR.

Unlike ADIA, the Kuwait Investment Authority (KIA) is a leader in the wide scope and range of its global investments. Thought to manage assets of $250 billion, substantially growing through capital injections by the government based on soaring oil revenues, KIA is also under political pressure to rescue troubled Western businesses. However, Kuwait’s parliament leans towards a fundamentalist pro-Iran position that will increasingly question investments in the West in general, especially in the US. Signs may also emerge towards ethical investment that takes account of Islamic interests and values, which is a positive move towards a coherent CSR policy.

Structurally weak for CSR

However, there is as yet no clear allocation and separation of responsibilities in the internal governance structure of KIA. At the same time, the authority still lacks a true investment policy. The operational autonomy of the entity is in fact feeble, which has a negative impact on development of policy. Disclosure of investment positions and of the currency composition of KIA investments is still puny, as is the home country regulation and oversight governing the authority. Commitments in particular with regard to the separation of the management of KIA from political authorities are not forthcoming.

In such a situation, KIA will most likely continue to be pressured into making investments in the US, and to a lesser extent in Europe, that are not consistent with its declared investment policy. With American weakness in the region growing, and an uncertain situation prevailing in Western economies and stock markets, this clearly is a potentially unstable situation and could lead to increased tension inside the country between parliament, the media, and public opinion on the one hand, and the cabinet and the ruler on the other. In such an atmosphere, different points of view regarding CSR policy could emerge.

Whatever the governments themselves might say, the investments of ADIA, KIA, and other SWFs in the Gulf region (or for that matter globally) are not purely about maximizing the value of their portfolio. On the other hand, these and other SWFs are not known to be primarily ethically driven, which is an important basis for CSR. However, a difference between Gulf SWFs and their counterparts elsewhere may be the strong Islamic culture that pervades the region, and the positive role that religion can play in business and public life in general. On the other hand, the relative weakness of Gulf SWF management structures could make it difficult for them to determine policy beyond the most short-term of investment horizons, thus letting CSR fall by the wayside. An example to the contrary is Norway, which has already excluded a number of arms manufacturers from its SWF for obvious ethical reasons. In the same spirit, the Norwegian SWF dropped the British mining and metals group Vedanta Resources, blaming it for environmental damage and human rights violations in India. The world’s biggest retailer, Wal-Mart, has even been excluded by Norway’s SWF for reasons of CSR. In the same spirit, but in a different cultural context, whether or not Gulf SWFs make good use of principles of Islamic ethical business remains to be seen.

Gulf SWFs, like any other investment institutions able to take significant stakes in companies, have obligations towards the stakeholders of those firms. However, GCC SWFs are unfortunately in a uniquely tricky position due to post-9/11 Western phobias. As a result, Gulf funds’ profiles and obligations are distorted and otherwise manipulated; and their loose governance just makes things worse. At the moment, many certainly still do not feel the need to follow best practice CSR, but it would clearly be better for the GCC SWFs to adopt recognized investment codes in order to allay silly Western fears.

The conduct of Saudi Arabia in relation to the al-Yamamah arms deal with Britain in the late 1980s — and the investigation into the bribery associated with this deal, which was abandoned in 2006 — reveal the way that some in the GCC do business. Transparency and accountability principles espoused by Western civil society organizations and progressive business advocates look irrelevant in this context, while controlling investment behavior and enforcing good CSR practice through shareholder activism may also not bear fruit. Some Gulf SWFs are in effect the private domain of a ruling family, and there are no shareholders to whom to appeal.

CSR advocates thus simply give up when faced with the opacity of many Gulf SWFs. Yet, some of these, like ADIA, frequently invest through foreign managers who themselves can be lobbied. Moreover, pressure can be placed on governments; the threat of boycott, for instance, would work to persuade an SWF to influence an investee company. It should also be remembered that many of the interests of SWFs and CSR advocates coincide. Given the sensitivity of GCC countries over the far-ranging and extensive nature of their investments, the last thing a Gulf SWF would want is to become entangled in a financial scandal or to be associated with a company breaching environmental principles.

SWFs need reminding that CSR makes good business sense. Part of the role in promoting CSR within SWFs must fall to the media and civil society. The most forward-thinking of the funds themselves see that annual CSR publications by SWFs and greater openness would be welcome. CSR guidelines would be a next step, but in the GCC states, Islam already provides a basis for this. Islamic sensitivities in investment are valuable in defining CSR for the Gulf’s funds. Serious stakeholder dialog with SWFs and activism on social and environmental issues from funds is the right way forward, and the publishing of annual reports would be a good start.

Long road ahead

Finally, it has to be remembered that the whole question of SWFs and CSR is a two-way street. Just as Gulf funds have to learn how and who to operate with locally, SWFs are sometimes unpopular in countries where they invest; and have been branded as locusts in Germany and piranhas in Japan. Such feelings are sometimes even translated into concrete action through boycotts. Perhaps not in the same vein but a boycott nevertheless, the UK’s Co-operative Bank revealed last May that it was blacklisting some SWFs because of the human rights records of their controlling governments. The bank declined to name the funds, but those on its list are thought to include SWFs controlled by Saudi Arabia, Dubai, and Qatar, among others. Clearly, this is a small but telling indication that there is still a long road that Gulf SWFs must yet travel in order to practice proper and effective corporate social responsibility policies.

Currently, the CSR scene across the Gulf is rather static. Fortunately, some industry leaders believe it has started to “become a main concern” on the “region’s agenda” in recent years, as noted by Mahmud Muhammad al-Tukistani, head of the CSR unit at the National Commercial Bank of Saudi Arabia (NCB). Jamil Ezzo — director general of the ICDL GCC Foundation — stressed that the GCC has “major problems” and is trailing “behind in education.” According to those interviewed by Executive, the most crucial areas where CSR is needed in the Gulf are: youth education reform, environment, human resources/development and health issues. Tackling these issues will take enormous, ongoing efforts from all sides — the private sector, the public sector and civil society.

Knowledge is power 

The biggest impediment to any success lack of knowledge, which is exactly what characterizes the GCC  in terms of CSR. Najeeb Al-Ali, executive director at the Dubai Center for Corporate Values (DCCV), said CSR is a “relatively new concept” in the region and will gain momentum in the near future. Regardless, the Gulf is in dire need of strategic and well-organized awareness campaigns to promote this rewarding concept. While the business economy of the Gulf is booming, CSR is lagging. While the Levant seems to be more concerned with the need for CSR, maybe because the concerns in that region need more immediate attention — restoring infrastructures from wars, security issues, extreme poverty, etc. — but if the GCC does not identify what its needs are now, they will suffer later.

The Gulf’s plan to expand operations into the international arena must first revamp its business models to suit new markets and novel ways of operating. It is well known that the nations making up the GCC are overflowing with liquidity, yet unfortunately members of the private sector are simply not doing enough in terms of social responsibility. Before starting to branch out, the private sector needs to be ‘in the know’ about CSR.

As Shabib Mohammed Almaamary, executive director of Injaz Oman, noted that the GCC has “a lot of resources, [but] not enough volunteerism.” The first and foremost is the need to create a collective regional awareness campaigns on the definition, necessity, and benefits of devising CSR initiatives and engaging the concerned parties. The GCC’s excess of resources should make this task easy. Also, it is important to ingrain in private and public sector minds that “CSR can always be a vehicle,” according to Al-Ali, to address the issues faced by the region. Next, the question arises as to whose responsibility it is to generate these campaigns and spread the CSR-word. Opinions on this vary: the majority of top industry leaders interviewed believe the government and the private sector both need to do more.

Role of private sector

A recent survey by MVM Events Dubai noted only 18% of companies in the emirate had increased their awareness of CSR issues related to corporate events in the last 12 months. Unsurprisingly, MVM revealed that a mere 15% of those surveyed said media attention relating to conferences and events had influenced them to implement CSR initiatives. Regrettably, of the few GCC companies concerned with CSR, initiative tend to be image-driven rather than issue-driven. Al-Tukistani highlighted this problem, stating in the region “there is a big need for corporations to separate their marketing and PR activities from CSR.”

“In the GCC in general, the private sector hasn’t done enough in terms of CSR,” said Samir Al Shamma, general manager of Intel GCC. It is imperative for the private sector to know that CSR is not a static scene — one essential element to successful initiatives is constant innovation. The private sectors in the Gulf need to grasp the idea that being CSR-savvy is not set in stone — changes, alterations, adaptations and extensions should be made to company initiatives as a company’s surrounding societies, economies, environments, stakeholders and employees change.  What is more is the need for the private sector to differentiate public relations from CSR. Al-Tukistani thus upholds that “CSR should run with or without marketing and PR presence.”

One of the biggest challenges noticed by Al-Ali is getting “commitment from the private sector, [and] for them to do their practices.” However, he asserted that, “the picture is changing today, [as] companies are interested in [CSR] and even government departments are [becoming] interested to take part in socially responsible activities.” Overall, most executives find the private sector lacks a desire to get involved. “When you have the interest and the will, things will happen,” emphasized Al-Ali, adding that today the region is “in a better shape” in terms of motivation and inclination towards CSR. Raji Hattar, chief sustainability and compliance officer at Aramex, blamed the unchanged “lack of awareness” of CSR on the private sector and thinks it should ask itself “how it can both benefit the community and satisfy shareholders.” The private sector “has to play a bigger role” and needs “to become bolder in their initiatives,” remarked Hattar.

Similar to other industry leaders, Ezzo finds the biggest challenge currently presented by CSR “is really engaging the private sector,” firmly suggesting that an actual, “closer partnership” between the government and the private sector be formed, as well as a “closer interaction [with] the people, to really see what they are lacking.” Ezzo emphasized that “interaction is critical between the government and the public sector,” and highlighted that “not enough is being done, generally” in terms of CSR. Making sure not to point the finger at one side, Ezzo contended the private sector’s rare presence in CSR is the result of “a combination” of lack of awareness and overall reluctance, as “they don’t seem to understand the win-win equation of CSR.”

With a significant deficiency of socially responsible initiatives in the Gulf, one cannot refute the dire need for the private sector to engage itself much more aggressively than it is doing today, and possibly partake in long-term partnerships with their respective governments.

Role of government

In a tax-free, wealthy region, governments are faced with the challenge of how to motivate the private sector to get involved with CSR programs. Thus, a way to move forward is for the governments to provide incentive formulas for the private sector to participate in CSR. Al-Tukistani believes that “governments plays a big role by supporting all CSR activities […] like helping to develop small businesses, health and educational activities; we believe the government’s role will expand in the coming years.”

Al-Ali of the DCCV noted that the government “is obviously always a stakeholder in the matter,” and provided a comparison of the role it plays in the Gulf versus its role in the West. He finds that in the West governments encourage the private sector by providing tax breaks on CSR programs but, seeing as the Gulf is a tax haven, “that option is out of the way.” The solution thus must be tailored to the local situation. According to Al-Ali, “the government can go out of its way to encourage other initiatives, i.e. by putting their own index on board in terms of ranking companies; the stock markets can introduce an index within the markets.” Also, governments can “introduce incentive schemes for companies and organizations who are socially responsible to encourage more and more companies to actually enter the field [of CSR].” This would be a brilliant task for the government to undertake, and may actually help CSR move in the right direction. Similarly, George Khawam, marketing director of McDonald’s Kuwait, stressed the need for “more governmental support to CSR in general, and to socially responsible companies.” Khawam suggested that governments can play two major roles in the implementation of CSR: “They can depict needs that require social responsibility and raise those needs to the corporate attention, and set new rules for CSR applications as opposed to commercial and promotional applications. Doing this would help socially responsible companies in their CSR implementation.” Also, he added, “it would yield more corporate penetration [in]to the CSR field.”

Steve Vaile, founder and CEO of H2O New Media, insisted that the government’s role in CSR implementation is critical and called for legislation “mandating CSR policies and an audit policy to ensure compliance, [to make] a country’s commercial infrastructure much more profitable, sustainable, and environmentally friendly.” Generally, whatever the government chooses to do — be it providing legislation, indexes, incentives, etc. — it must act quickly and efficiently for CSR to grow and thrive.

Since the formation of the UAE in 1971, the country used the early oil revenue to kick-start a series of projects and investments that would lay the foundations for long-term economic growth.

With such a swift transformation and the resulting impact to the local culture and society in correlation with the rapid economic development, it became necessary for both the public and private sector to attract and employ expatriate workers to help build the infrastructure and economy.

One of the most radical changes to the local society was the establishment of compulsory education for Emirati children. The late president of the UAE and ruler of Abu Dhabi, Sheikh Zayed Bin Sultan Al Nahyan, placed great emphasis on the need for an educated population to drive the country forward.

Pattern of growth

Since 1972, and in particular during the period since the end of the first Gulf War, the UAE economy has grown exponentially. From 2002 to 2006 the UAE recorded one of the highest GDP growth rates in the world due to strong oil prices, the proliferation of large-scale construction projects, high levels of public spending and an increase in development of the non-oil sector. With the nominal GDP growth in 2007 jumping approximately 16.8% from 2006 levels, there is much discussion on whether such growth is sustainable. Taking into consideration plans for further development and the increasing efforts to attract foreign direct investment (FDI) to the UAE, it is becoming evident that a major concern emerging from this rapid growth is increasing levels of unemployment amongst Emiratis. Reliance on expatriate workers will remain high in the long term yet there are increasing concerns with regard to the challenges of finding suitable employment for Emiratis in the short and long term, and this poses a serious challenge to the government.

The UAE population is growing at an annual rate of 6% and in 2006 Emiratis made up approximately 12% of the population. This imbalance can be considered a reasonably normal phenomenon throughout the GCC states since the discovery of oil. However, with more than 13,000 Emiratis graduating each year and with growing levels of unemployment, the pressure to find them employment is building.

Education is seen as an increasingly important factor in the development of UAE nationals, and the private sector has the opportunity to take an active role in supporting educational initiatives as part of their corporate social responsibility (CSR) and sustainability management initiatives. A high quality education has the potential to equip the national workforce with the capabilities of dealing with the demands of a growing and diversified economy. It is recognized that the existing education system has not provided Emiratis with the tools to compete in the job market. According to UNESCO’s Statistical Office in 2006 public expenditure on education accounted for 1.6 % of GDP and 22.5% of the government’s overall expenditure in the UAE. Only 3% of this was distributed towards tertiary education, yet gross enrollments in tertiary education were slightly above the regional average.

Even while it is recognized that education is vital to building a sustainable workforce, the provision of an accessible and high quality further or higher education system is threatened by lack of government funding. The lack of funding results in constraints on state institutions such as the Higher Colleges of Technology or UAE University in terms of the number of students they can accept per academic year. With the majority of Emiratis preferring to enroll in public institutions, and in order to be competitive with other countries to achieve international standards, an increase to a level of over 3.5% in GDP funding for higher education has been required since 2005 (Funding Students First, MOE).

Learning at home and abroad

Traditionally, the more affluent members of the Emirati community studied overseas or through scholarships provided from both public and private sector sources. However, with the proliferation of Western universities across the UAE and following 9/11, changes are occurring in this practice.

With the continued rise in numbers of UAE national graduates entering the workforce annually, and taking into account the number of nationals already unemployed (33,000 or 5% reported by Gulf News in July 2006, while Emirates Business reported the figure as 3.71% in 2008), it has also become unsustainable for the government to continue the habit of job-creation for Emiratis by increasing public sector jobs. With the government sector virtually at saturation level through the absorption of Emirati employees, restructuring of governmental departments is now underway and efficiency and productivity has been highlighted as part of the reform. ‘Emiratization’ has now become a pressing issue and attempts have been made to implement it in various sectors such as public relations (immigration and government relations positions), secretarial positions and for human resource managers. Private sector jobs in banking and insurance have been highlighted as priorities for Emiratization and quotas have been imposed on companies.

At a federal and local government level, educational reforms and initiatives are being implemented with the establishment of programs such as Schools for Tomorrow (Madaris al-Ghad) from the Ministry of Education to revamp the public education system to create a ‘world-class’ education system. The Emirates Nationals’ Development Program (ENDP) has been established to support a policy of Emiratization in the private sector, by assisting graduates to find positions in the private sector.

Generally, and in particular amongst private sector employers, Emiratis are seen to be unable to compete in the job market against other more qualified, educated and experienced expatriate workers. Emiratis are also seen to have unrealistic expectations in terms of positions of seniority, salary and working hours. The private sector has long held the belief that complications arise from the employment of Emiratis and finds it difficult to attract high-potential UAE nationals with the right skill-base and experience. With the reform taking place in education there needs to be greater private sector awareness of the responsibility of businesses to establish UAE National development programs. Cross-sector partnerships will go a long way towards bridging the gaps between the skills available and the skills required in the job market. The greatest levels of impact will be achieved through the implementation of training, mentoring and development initiatives, including comprehensive knowledge-transfer programs to support and encourage skill-based Emiratization.

The establishment of local government education councils, ENDP and the ongoing work of Tanmia to educate, train and find employment for Emiratis in the private sector signals progress. The construction of educational establishments and creation of ‘education free zones’ are designed to encourage overseas institutions to set up and invest in the UAE. Will this be considered enough to meet the needs of the growing Emirati population? Probably not. Along with the educational reform taking place, the private sector needs to demonstrate accountability to the community in which they do business. Such contributions can lead to significant change in their specific industries and lead to higher levels of prosperity through investment in relevant and where appropriate vocational and skills-based training, the provision of internships, and increased awareness of the resulting business benefits from playing a key role in preparing the UAE national workforce to become attractive propositions to prospective employers in private organizations.

Dilemmas for the future

There are some difficult issues to be addressed. Education, training and employment are key CSR requirements for organizations to contribute to building a sustainable workforce. While it is recognized that the dependence on expatriate workers will continue for many years, questions are being raised about the rights of Emiratis to find employment, thereby avoiding unemployment problems in the short and long term. The paradox appears to be that while the UAE is forging ahead with innovative real estate projects in order to attract investment from expatriates, as diversification of the economy is being keenly pursued and encouraged, there is a question about the value of diversity in the UAE workforce.

With projections of millions of square feet of office space being developed, the huge residential community projects and expected result of job creation, where will the people with the right skills and experience come from — especially now with rents and inflation continuing to rise and with the current instability of global financial markets.

It is clear that there are certain steps that the private sector can implement and drive across the UAE to address the challenges facing Emirati graduates and prospective employees. As the UAE moves towards a more knowledge-based economy, the local government and more recently at federal levels seems to be moving towards redressing the balance between the public and private sectors by aligning themselves more with the private sector style of business. This seems to be resulting in more parity with salaries, benefits and working conditions and with the result of attracting more nationals to the private sector.

For the future, public-private sector partnerships which proactively encourage the development of the Emirati workforce through strategic CSR programs to educate, train, develop and employ UAE nationals will have the potential not only to create a model for other GCC countries but to drive change across the region.

Belinda Scott is the CSR officer at the National Bank of Abu Dhabi (NBAD)

Although people may not be aware of it, in part because of the fancy Western-sounding name for it, Islam has much of corporate social responsibility in its teaching. As sharia requires operating in a morally, ethically and socially responsible manner, it is correct to state that CSR is embedded in Islam. As a Muslim, one has a duty to promote social harmony, prevent harm on living beings whether they be human, animal or vegetal, alleviate hardship, strive for relationships to be just, fair and balanced, and to protect the interests and rights of all — that is exactly what CSR is all about.

As Westerners are exploring ways to integrate this concept into their corporate business models and plans, Muslims should be able to help them with this daunting task, if it were not for a recent study revealing that interest in CSR, although high, is still lower for Muslims than for non-Muslims. This study shows that “a significantly lower proportion of Muslims expect firms to set higher than normal ethical standards than people in the other groups.” It also reveals that in the areas of environment, quality and employee treatment, Muslims have lower expectations than non-Muslims.

It may be because of the Western-sounding concept, or it may be because the corporate world in general may appear to be more on the haram (i.e. non-halal) side of things, that Muslims apply a lower standard to it than to their personal everyday life and religion. But who today can avoid noticing the impact businesses have on our environment? Can we permit ourselves to neglect the social aspect of having employees? Should businesses continue to ignore the fact they are an entity in a community?

Muslims, and non-Muslims, should recall this: the Qur’an states that all business transactions should be done within a clear and transparent ethical framework (2:282), corruption, deception and bribery are outlawed, and shareholders, suppliers and competitors must be treated fairly and with respect. The Qur’an also reports that God has appointed man as his vicegerent on earth, therefore expecting him to protect the environment from abuse (2:30). As for quality standards, the Qur’an states to “Give just measure and cause no loss (to others by fraud). And weight with scales true and upright. And withhold not things justly due to men, nor do evil in the land of working mischief.” (26:181-183) Mohammed’s teachings also encourage fair treatment in the workplace and discourage discrimination against minorities or other groups.

These four criteria, ethics, environment, quality and employee treatment, are exactly those which were mentioned in the study mentioned above. So let’s encourage MENA companies to engage in the general international trend of voluntary CSR initiative, and invite foreign companies operating in Muslim countries to think about how Islam can influence the environment they operate in and to acknowledge it in their CSR initiatives.

NAJEEB AL-ALI is the executive director of the Dubai Center for Corporate Values (DCCV)

Toiling in the desert has have become a corporate social responsibility (CSR) issue in the Gulf countries. There are roughly 9 million migrant workers in the Middle East, most of them in the Gulf region. Construction firms sometimes exploit migrant labor from lower-wage economies, but as more companies in the GCC begin adopting CSR principles, this trend could now be changing.

This is nowhere seen as clearly as in the United Arab Emirates (UAE), where after mounting international pressure and incidents on various building sites, a government decree in June 2008 banned outdoor labor between 12:30 pm and 4:30 pm, when temperatures can reach 50 degrees. The ban is welcome, but may be inadequate by itself to address abuses of migrant labor rights. The government might lack the resources to enforce compliance and the powerful construction lobby needs to adopt a more favorable CSR attitude to make such a measure work. The UAE government for its part accused construction companies of an inhuman attitude, and said the practice of forcing laborers to work in the sizzling heat at building sites without shade goes against religious values and societal norms. (The invocation of CSR alongside religion is an interesting phenomenon in the Gulf countries, where Islam is a powerful force in daily life, as well as the formal underpinning of national laws.) For their part, property developers say changes to the law must be reasonable.

For years, the International Labor Organization (ILO), unions, and some Western governments have been applying pressure on the UAE and other Gulf states to comply with internationally recognized laws and improve the conditions of hundreds of thousands of migrant workers, mainly from South Asia, employed in construction. An irony of the UAE success story is that the luxury resorts, shopping malls and gleaming towers are built on the backs of workers labouring under often poor conditions. The booming building industry in the UAE, fuelled by rising oil revenues, is dependent on this cheap migrant labor. Migrant laborers are paid wages often as low as about $100 a month. They live in overcrowded dormitory-style shacks, lack basic facilities, and often work 12-hour shifts under unsafe conditions. Last year, five laborers died when a reinforcement cage supporting a wall at the construction site of the new Dubai airport terminal collapsed. In short, for the past few years, the migrant labor situation in the UAE and the rest of the Gulf was becoming explosive and the migrant labor backlash was growing: In April of this year a mob of Bangladeshi migrant workers in Kuwait stormed and vandalized the Embassy of Bangladesh there to highlight their plight.

Out with the old, in with the new

The problem is that the region’s feudalistic system is at odds with modern labor practices. Gulf economies such as that of the UAE, which are keen to modernize, need to jettison outmoded ways that have given the region a great deal of bad press in recent years. This is where CSR comes in. Important steps have been taken towards heightened social responsibility in Dubai where a couple of dozen firms, some from the construction industry, are already members of the United Nations Global Compact, an international accord designed to promote CSR by combining human rights with business. Additionally, in July of this year a company from Abu Dhabi for the first time joined the UN compact, which bases CSR on 10 universally accepted principles (including labor ones) derived from various treaties.

Another positive development that is promoting awareness of labor issues in the Gulf is increased research on these subjects, including a two-year project to consider how multinationals can limit the exploitation of migrant workers in their supply chains. Announced in July 2008, it is led by US-based Business for Social Responsibility (BSR), which is beginning pilot projects and research studies in Qatar, the UAE, and other countries that supply or receive labor, with the aim of identifying how multinationals should intervene to improve the treatment of migrant workers. BSR, a non-profit network focusing on CSR, launched the initiative to help protect the rights of international labor migrants along global supply chains in South and Southeast Asia, the Gulf States and other regions. Representing the private sector alongside a diverse group of stakeholders, BSR will also issue a trends report that includes initial recommendations for the private sector on protecting the rights of labor migrants.

Movement toward CSR adoption

Trade union activism is also pushing the envelope on labor and CSR, especially by the Building and Wood Workers’ International (BWI) labor organization, which is working to raise the importance of freedom of association in the Gulf region in general and the UAE in particular. For the first time in the Emirates, representatives from employer groups aware of CSR, governments, international trade unions and civil society met in Dubai this summer to discuss ensuring corporate social responsibility in labor management in the construction industry throughout the Gulf region. BWI recognized the positive steps that some GCC countries have taken towards addressing the key points of ILO conventions, and urged other countries in the region to ratify these measures and at the very least implement national legislation in line with international standards so that the right of workers both native and migrant workers are equally protected. In other words, raised awareness of CSR among firms is an important step towards improving the lot of migrants in the Gulf, but moves by government are also necessary.

To that end, officials from labor importing and exporting countries met in Abu Dhabi in January to discuss the regulation of the market for Asian migrants amid growing calls for their protection from abuse. The meeting, co-organized by the International Organization for Migration, included Asian labor-exporting countries that meet under what is known as the Colombo Process to discuss their contract migrant workers. The Abu Dhabi gathering brought together for the first time the 11 Colombo Process states with the six GCC states, Yemen and three additional Asian countries of destination, namely the Korea, Malaysia and Singapore.

The result of all this activity is that there are hopes for better working conditions for migrants in the Gulf states; heightened CSR is part of this trend, but clearly only one piece of the puzzle, which also includes efforts by civil society, governments, unions and international organizations.  It will be interesting to watch how this process evolves when summer comes around again and worker tempers flare in the heat. The difference in 2009 of course could be that the building boom in the GCC countries will start to wind down as the world economy goes into recession. Whether or not that happens, however, a lot of migrants will still be in the UAE and neighboring countries over the next few years. With them will come problems and issues to be settled; but the good news is that there is now a growing realization that improved CSR is one of the ways in which the situation of migrants and the state of the economy as a whole can improve and become more sustainable.

Riad al Khouri is co-founder and principal of KryosAdvisors, and senior fellow of the William Davidson Institute of the University of Michigan

Explaining corporate social responsibility (CSR) in the GCC is quite a daunting task — while the definition is globally uniform, its role across the Middle East is not. Although the Levant has a lot of work to do before it can reflect the textbook definition of CSR, in comparison to the Gulf the public and private sectors there seem to be a bit more CSR-savvy. This may be quite surprising to most, as the GCC is generically viewed as more organized, better informed, and overall more up to date with the latest business trends. Think again. Yes, the oil rich countries of GCC are awash with liquidity and have a wider range of large local and multinational companies — but unfortunately most of them have turned a blind eye to the growing importance of CSR. Those companies or organizations that have not are still warming up to the idea, and those practicing CSR — few and far between — are actually setting quite a good precedent for the rest to follow suit.

Common to both regions though, is the misconception of what CSR truly means. This is largely due to lack of regional awareness and overall unavailability of in-depth research, statistics, reports, etc on the presence and progress of CSR in the Middle East. By engaging with top managers across all industries in the GCC, Executive was able to uncover the most significant issues faced by the underdeveloped field of CSR in the Gulf. Although findings indicate that CSR still has a long way to go, the private and public sectors of the Gulf are optimistic that it will start to gain momentum across the GCC. In this special report, Executive follows-up with its September special report on CSR in the Levant and examines the role, presence, as well as the issues and concerns of CSR throughout the GCC.

Defining CSR

It is important to note that while there is a widely accepted definition of CSR, its interpretation remains subjective, especially in the Middle East. Overall, CSR is defined as a concept whereby organizations consider the interests of their stakeholders including society, employees, suppliers, regulators and respective governments by taking accountability for their corporate activities and even taking a step further by creating their own CSR initiatives to ‘give back’ to and to fulfill their responsibilities to the aforementioned parties. Furthermore, CSR is the general obligation of corporations to be held accountable to all of their stakeholders throughout each of their activities, with the core aim of achieving long-term, sustainable development — be it economic, social and/or environmental. CSR in the GCC has a long way to go before fully manifesting this definition, but it possesses plenty of potential for the region to flourish in the coming years.

Understanding CSR

Known for its exceptional wealth, the GCC is having trouble differentiating between philanthropy and CSR. As a Muslim region, the Gulf is no stranger to the idea of giving — known as zakat, this culturally institutionalized notion is usually illustrated through philanthropic acts in the GCC. While the concept of philanthropy is of good nature, especially on an individual basis, nowadays it is not enough for the corporate world to get by. Most importantly, in order for CSR to truly bloom in the Gulf there needs to be a comprehensive division between zakat and CSR. The private and public sectors of the GCC equally need to understand the corporate aspect of CSR. As highlighted by the founder and CEO of H2O New Media, Steve Vaile, CSR is “very misunderstood in the UAE” as “many are still stuck in a charity mindset.”

Similarily, Mahmud Mohammed Al-Turkistani, head of the CSR unit at the National Commericial Bank of Saudi Arabia, feels that both the private and public sectors of the region “need more awareness on CSR and how it’s different from philanthropy.” CSR should not be an add-on to a company’s operations. Rather, it should be expected that all members of the private sector are responsible businesses and, most importantly, that CSR is at the core of a company’s programs and strategies. To be fair, there are some companies that understand this (see CSR Initiatives section) and who are involved in CSR. The National Bank of Abu Dhabi (NBAD), for example, consciously chose CSR “as a way to do things differently through changing our practices to improve our impact on an economic, environmental, or social level,” according to Belinda Scott, CSR officer at the bank. One way for companies to catch a similar drift is by comprehending the basic benefiting character of CSR, which is a method to properly manage business responsibly and sensitively for long-term success, and overall sustainable development. Thus, the need to make CSR synonymous with sustainable development has never been more of a necessity than it is now. The key to such progress and eventual success of CSR is for businesses, big and small, to actually believe in sustainable development through being socially responsible — it is not just the right way to do business, it is also the most advantageous. Ultimately, there needs to be a cultural change where it becomes second nature for everyone to view business from this perspective and for CSR to flourish in the most natural manner possible.

What to do?

Without a doubt, the presently dim light of CSR needs to shine much brighter in the Gulf in order for it to really make any sort of impact. According to the Dubai Center for Corporate Values (DCCV), “Businesses can no longer avoid the [CSR] issue anymore, because information is easily accessible and consumers are ready to reward to the ‘good’ companies by buying their products over products produced in an unethical, unsocial, or unsustainable manner.” As noted by the DCCV, companies involved in CSR have realized that it benefits them in a number of ways: by improving the relationship with their employees — and thus strengthening their motivation and retention rate; improving relationships with suppliers — they made transactions and operations run smoother and acquire more control over their own supply chain. There really isn’t anything to lose with CSR; it is a win-win equation: participating in CSR initiatives creates positive brand awareness, and thus consumers will respond emphatically to the brand and the company as a whole. Also, employees and stakeholders will be satisfied and generally more content. It’s time to stop avoiding and start acting.

One way to move forward is by creating a tailor-made learning program on CSR, encompassing everything from basic awareness and comprehension to applicable knowledge. Whether this task is the governments’ or the private sector’s responsibility, a campaign needs to be initiated. Once ignited, businesses will be able to look at their strategic decisions through a sustainable development lens, and thus fuel the CSR fire that needs to erupt around the region. If three crucial criteria are evaluated by the private sector through this ‘lens’, a significant step will be made. First, there needs to be an understanding of the triple bottom line — i.e. society, environment, and employees — and economic impacts, and managing them thereafter as part of normal day-to-day operations. Second, companies need to balance their short-term priorities with long-term needs. And last, companies should be seeking out the views and opinions of others (i.e. stakeholders, employees, legislatures, etc.) before taking final decisions.