Corporate Eye

Saudi Arabia’s unique direction | CSR Around The World

Think Saudi Arabia: think oil.

Which isn’t surprising.  The country’s home to Al-Ghawar, the world’s largest oil field which pumps out a stonking 5 million barrels of crude oil per day.  Ironically (or perhaps fortunately?) it lies under the world’s largest single stretch of sand, the Rub’ al-Khali or “Empty Quarter” which covers over a quarter of the country.

The country has some other more surprising “world’s largest” facts: it’s the world’s second largest country without any major permanent water sources and the world’s twelfth largest country overall.

All of which gives me pause for thought.  Part of CSR and the business sustainability agenda is to create robust and socially inclusive economies.  Saudi Arabia’s economy is pretty well single industry and, to put it delicately, it’s not renowned for being particularly socially inclusive.

So when I “met” Bushra Azhar on Twitter, founder of Middle Eastern business sustainability consultancy Good Business Sense and based in Saudi Arabia … well, I just had to get hold of her and ask her all about it!

CSR as part of Saudi corporate life

The first thing I was interested in finding out about was how great a role CSR and sustainability play in Saudi corporate regulation and activity.

“The regulatory situation when it comes to CSR and Sustainability is somewhat passive,” Bushra replied. “Although the government maintains that it encourages the involvement of corporate sector in the sustainable development … there is no enabling mechanism.  There is a need for a more strategic umbrella for CSR at the governmental level that encourages, incentivizes and supports companies considering taking the leap.”

“As far as CSR reporting is concerned, it is in its very early stages in the kingdom. So far, only 6 companies have issued their sustainability report and this speaks volumes about the overall culture. Transparency is rarely expected and the companies which spent most on community initiatives are considered the best.”

However this shouldn’t be taken as meaning responsible business doesn’t exist within Saudi Arabia.  As an Islamic country its society is bound by the Quranic principles and the concomitant Shariah Law.

This means there is a fundamentally different approach to how business is conducted.  For example, interest bearing loans are considered sinful within Islamic finance, so speculative investments are often made through a profit sharing agreement where one side gives finance and the other time and skills.  If the project is a failure both sides lose, if a success both sides win.  This means the financial speculator only makes a profit if the venture is successful, which seems fairer and can only encourage responsible investment strategies.

Similarly, there is a very strong connection between companies and their social environment.  Bushra describes this as “a strong and deeply embedded culture of ‘giving’ [which] already exists in the corporate sector especially in family owned businesses with separate charity offices and family constitutions that define how the funds will be used for community welfare”.

Two things strike me about this.  The first is that it echos very strongly what Akhila Vijayaraghavan, founding director of the international CSR consultancy The Green Den, told me when I asked her about CSR in India.  The second is that it highlights the cultural aspect of  responsibility, meaning that all sides can learn from each other through CSR.  This new model of business shouldn’t be based upon a new economic model based upon western capitalism, but a free dialogue of different  cultural business models to form what should be a globalised sustainable model for the future.

The gender issue

One of the biggest “social responsibility” issues in Saudi Arabia, through western eyes, is the perceived gender inequality.  I had to ask Bushra about this and whether businesses were actively engaged in trying to correct the apparent imbalance.

“Culturally men and women have different roles in Saudi society,” she said. “These conventional pre-determined gender responsibilities will take many years to be overcome. Unless this cultural contrast is overcome, any company seeking to address this is in danger of being alienated and even scorned.”

However Bushra also cites Glowork, the first dedicated female recruitment agency in the Gulf Cooperation Council (a political and economic union of some Arabian Peninsular countries).  Glowork cites figures from a 2008 Booz & Co survey which found that only 15% of all workers in Saudi Arabia are women and 60% of women with PhDs are unemployed.

So the problem is recognised and there are efforts underway to try and correct it.  But instead of addressing the issue head on, companies have become more creative in how they address it.  For example, the 2011 Nitaquat programme (PDF) requires that retail and wholesale companies must have between 10% and 25% Saudi employees.

Matching these levels is a challenge for many sectors (including, ironically, petrol stations) and the ambition of the government is to push the level up to over 30% in the coming years.  However those businesses which wish to see greater social inclusion in the business world have spotted an opportunity and are using the requirement to hire more women in order to meet the targets.

Should CSR address life after oil?

This was my final question but possibly the most important one.  If social responsibility and sustainability really mean something on the broad spectrum, surely a country like Saudi Arabia ought to be moving away from an economy focused upon just oil and start to diversify into other areas?

This is exactly what the country’s ninth development plan (PDF) (running 2010-14) is aiming to do, by “deepening of the process of horizontal and vertical diversification of its production base in order to realize tangible increases in employment opportunities and in the contribution of non-oil sectors to GDP and to exports.”

So, as Bushra puts it in a much more accessible manner: “The corporate sector also realizes that contributing to or being part of non-petroleum based businesses is not only good for the economy but is also great in earning brownie points with the government … (Therefore) it has become much more common over the last few years with family businesses and conglomerates branching out into retail and manufacturing. Financial Institutions have also started giving entrepreneurial loans for SMEs and universities offer start-up grants for technological innovations.”

These last two I would argue are just as fundamental to CSR as environmental protection, carbon emissions and waste reduction.  To be socially responsible a business has to consider social inclusion and economic sustainability, both locally, nationally and internationally.

So while Saudi Arabia may be a deeply Islamic country whose mores are at times fundamentally different to the West’s, it is progressing on the path of responsibility and sustainability just as other countries around the world are; quite possibly more so, given that its unqiue position and direction are leading it to fundamentally reform the social and economic constructs of yesteryear.

Picture Credit: Hayat Sindi PopTech 2009 by poptech under CC Share Alike License trimmed by Chris Milton.

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A former CTO, Chris has a broad and varied background. He’s been involved with blue chips, consultancies & SMEs across a wide variety of sectors and has worked in Europe, the Middle East and Australia. In 2007 he decided to combine his knowledge of business and IT with his passion for all things sustainable and has been busy writing ever since. However, his greatest ambition remains to brew the perfect cup of coffee.