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Corporate Social Responsibility

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The Impact of Corporate Social Responsibility on the United Arab Emirates

The current trend of globalization has made businesses realize the fact that effective competition in the modern environment requires clearly defined business practices with a focus on the public interest. Corporate Social Responsibility (CSR) is one of the initiatives, which meets social interest. It is defined as an integration of stakeholders environmental, cultural, social, and other concerns into business operations. In most cases, the importance of CSR activities is attributed to such main factors as sustainability, reputation, moral obligation, and license to operate. The major corporate ethical disasters influence the environment, human resources and community in general making public companies highlight the demand for the disclosure of CSR activities. As a result, CSR has become one of the major issues in the business world. Many multinational companies find it necessary to develop programs of CSR to meet societal expectations. Therefore, CSR is often treated as the effective tool that synergizes corporate efforts and the social sector agencies towards sustainable development and societal objective growth (Vishnubhai, 2012).

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Nowadays, the UAE has already started to familiarize itself with the CSR concept and get engaged in activities under the CSR banner. Hence, CSR has become a part of the UAE business lexicon. However, there is still a low level of CSR practice in the country. An overwhelming majority of companies failed to adopt CSR practices. In spite of the fact that companies report about the importance of CSR, almost none of them states that CSR is the key element of their business strategy. Furtheremore, this shows that there is a significant gap between the CSR awareness and readiness to get involved in CSR activities as well as the ability and willingness to develop and implement CSR initiatives. Rettab, Brik and Mellahi (2009) find that there are main barriers that limit a companys efforts in implementing CSR practices including lack of awareness and knowledge of CSR, inability to accommodate the CSR function, lack of resources, perceived high cost of CSR projects, top management commitment, invisibility of CSR results and lack of government support (p. 4).

The UAE is considered to be among the countries in the region that is greatly interested in social welfare through the provision of public services aiming to maintain an advanced level of economic and social stability. This includes the provision and development of infrastructure, education, health and municipal services. As the country has just started to familiarize itself with the modern concept of CSR, it is necessary to differentiate between multinational corporations (MNCs), which operate in the country, and are familiar with CSR practices in the West and local companies, which treat it as a new concept. In fact, MNCs tend to be more active while implementing CSR strategies than local companies. Meanwhile, MNCs have adapted to local culture, conditions and expectations. Thus, the type of CSR activities performed by these companies differ only to some extend.

Among the most common CSR activities in the country are emiratization and corporate philanthropy. However, employee health, safety and environmental concern are also gaining increased attention. As local companies try to bring nationals into the labor force, they tend to focus more on corporate philanthropy and emiratization. At the same time, MNCs are more focused on the health, safety and environmental issues.

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The CSR agenda in the country is in the transformation process. It was found that CSR activities in the UAE have already begun to be integrated into core business processes. However, these changes are proceeding rather slowly and take time to be visible. The UAE companies should take into consideration that their responsibilities are two folded (to the primary and to the secondary stakeholders). Sustainable business practices provide them with the opportunity to fulfill their responsibilities in a better way. This plays a vital role in providing a business with market benefits and competitive advantages. For example, the sustainable management and use of social and environmental capital ensures a consistent economic yield over a longer period. It has been also found that CSR activities add to the brand value creation (Werther & Chandler, 2005). In the competitive business environment, reputation and brand value are considered to be the most valuable business assets as corporate goodwill that is created via CSR activities is invaluable, with increased customer loyalty and positive new product reception. Adoption of CSR practices also results in the ability to attract a better quality workforce, increased commitments among employees, decreased turnover rates and reduced misconduct.

In spite of the fact that the corporate world is increasingly seen to be integrating social responsibility, there are still a lot of critics who continue to see CSR as a myth. Hence, companies find that CSR activities have also negative sides. For example, such CSR is not a very profitable approach for them. The CSR process requires a high support level and management vision. The design of CSR activities needs a careful planning and implementation mechanism. Cost is another issue, which arises arguments against CSR adoption as a policy. Programs that aim to reduce environmental impact in most cases require expensive changes in the companys equipment or ongoing costs. In addition, a company has to pay for efficient waste management programs and more employee training. Another challenge of CSR implementation is the possible negative perception of shareholders since not all shareholders are happy to invest in companies, which make aforementioned expenses.

The concept of CSR in the UAE has always been present since the earliest Islamic times. In recent years, there have been increased worldwide initiatives to focus on investing profits in saving the environment and community life. In spite of the fact that a lot of big companies have to face CSR strategies, the CSR concept still remains confusing for many businesses, and the implementation of CSR strategies is in a very immature stage. Unfortunately, it still remains one of the least understood initiatives. However, in spite of the fact that CSR implementation in the country is rather poor, some companies try to do their best to take part in the CSR activities as they realize that sustainable business practices lead to the productivity increase and enhanced relations with the government and community. It results in the long-term positive relations with stakeholders. CSR initiatives also build better relationships with other stakeholders, host governments and local communities, and can enhance a companys reputation and credibility as well as be important with regard to its future investment decisions

The sustainable business practices lessen the burden on environmental resources provide the local community with an opportunity to enjoy a better livelihood. As a result, it adds to the natural capital protection and ensures its long-term use. CSR also ensures that a company is accountable for the social and environmental impacts created for the society, and runs its business in an ethical manner. Thus, CSR practices in the UAE have been developing in the direction of a strategic business as in the West. Lastly, in the near future, it may move away from emiratization and corporate philanthropy as positive CSR strategy enhances creativity, innovation, learning and intellectual capital.

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