Corporate Social Responsibility in the Saudi Arabia Kingdom

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Introduction

The role of corporate social responsibility (CSR) has been increasing continuously in the business concept within the last years. According to Bueble (1), the prominence of CSR in recent years is shown by the fact that 90% of the fortune 500 companies have explicit CSR initiatives today and an increasing number of companies that that report and communicate on corporate social responsibility (1).

The concept of corporate social responsibility (CSR) has lately become common within regional businesses in the kingdom of Saudi Arabia and also the media circles. According to Tamkeen, the economy of Saudi Arabia has business leaders who embrace values of good generosity on social engagement which provides an environment that is conducive for advancement of Corporate Social Responsibility. This also encourages the businesses in Saudi Arabia to play an effective role in developing the local society and economy.

Saudi companies do not face much adversarial tensions as compared economies of developed countries and this make them to get along well with the society. The supply-chain pressures that emerging economies like China face also does not affect Saudi Arabian companies. This makes it easier to engage in CSR initiatives (Boeger 92). The efforts put to CSR initiatives by the Saudi companies are initiated by the desire to address the urgent challenges facing the country, chief among them creating employment opportunities for s growing young population and addressing the skills gaps needed for a diversified economy (Tamkeen 1).

The challenges have created competitiveness among the Saudi companies responding to the entry or World Trade Organization that opened up the country for Foreign Direct Investment. This is a great opportunity for companies within the Kingdom of Saudi Arabia to come up with CSR strategies which will help the local communities and at the same time meet corporate goals. Despite having this golden opportunity, Saudi companies have some weaknesses on their CSR approaches. One of the challenges is the lack of systematic and organized strategies within the most companies to address the social issue in the right manner.

There are also no policies and organized structures for CSR that will make it easier to carry out, manage and communicate. The adverse effects of business activities on environment and health are largely neglected and unrecognized. These issues are also not completely brought to the attention of the media, regulators, consumer groups or researchers who are the right people to address the issue. The objective of this paper is to present a literature review on the application of CSR in the kingdom of Saudi Arabia.

Literature review

Application of CSR in the kingdom of Saudi Arabia

Saudi Arabia is a region that is highly reliant on oil as the main source of revenue. However, the private sector is currently playing a significant role in the diversification of the economy. Recent studies reveal that the private sector contributes to about 73% of non oil GDP. Saudi also has the largest domestic market in Arab region. Saudi has a relatively large GDP per capita and this gives it an opportunity to emerge as the regional power house.

The kingdom has corporations that can internationally be ranked among the largest. Most of these large corporations are owned by government and families (Alajlan 165). It is challenging that only about 50 of the large corporations in Saudi Arabia are listed in the stock market. There is also weak of corporate public reporting and this together with other challenges poses a challenge to studying and executing corporate practices (Naser and Nuseibeh 46). This also becomes an issue in the carrying out of corporate social responsibilities.

According to Emtairah, Al-Ashaikh, and Al-Badr (8), there is little academic literature written about the corporate social responsibility in Saudi Arabia. While compared to other emerging economies like China, Malaysia, South Africa and Brazil, Saudi Arabia is not fully explored in terms of involvement in CSR activities (Visser 476). The Arabic literature is scanty in the area of CSR since it s even difficult to get companies involved in CSR activities to family ownership of most companies.

Most studies that have been done have indicated that there is low priority given to social and environmental aspect of business enterprises and business leaders. According to Carroll (3), concurs with previous studies and concludes that most managers do not do not view CSR as their responsibilities and they argue that social objectives are less important than economic objectives. They take social objectives as a burden that should be shouldered by the government.

In recent years however, At-Twaijri, Al-Ghamdi and Luqmani (261) found out that following the Gulf War and the weakening of the Saudi economy, the corporate social responsibility has become prominent and has been ranked high among the goals of the corporations in Saudi Arabia. The states in the Gulf region gave social services to their people ad also provided to them education and health care services.

The oil revenues were used to finance these programs and therefore the business community was not encouraged to pursue social objectives. The Post-first Gulf War was characterized by the deterioration of economies and oil prices making the quality of social services that governments were providing slump in quality. Saudi Arabia was among the states adversely affected. This created the need to involve the private sector in developing the agenda of provision of social services.

Mallin (1), Corporate Social Responsibility (CSR) has gained an increasing high profile in recent years. The tern CSR could be defined as the ways in which a business seeks to align its values and behaviors with those of its various stakeholders. These stakeholders may include the employees, customers, suppliers, government, interest groups and wider societal interests on whom the operations of the business may have an impact.

In the contemporary world, Corporate Social Responsibility is the language under which the role of business in society in business is discussed and debated (Emtairah, Al-Badr, and Al-Ashaikh, 1). Though the term might seem unfamiliar to people in Saudi Arabia, there is much business- society interdependence taking place. It is believed that the Saudi business can play a significant role in developing Saudi Arabia through the social responsibility programmes. The kingdom has faced many development challenges.

The issue of giving back to the society is not a new thing among the Saudi businesses. The CSR language is used in the Kingdom to address the proactive nature on the part of the businesses to address the social consequences of the business activities and also put in insight to development needs. The study by Emtairah, Al-Badr, and Al-Ashaikh (1) indicates that the companies in Saudi Arabia are more engaged in social issues than what is usually published.

This lack of complete dissemination of CSR activities in Saudi Arabia has underrepresented Saudi CSR in international benchmark. The measures used have therefore shown that the companies in Saudi Arabia are doing too little in the field of Corporate Social Responsibility. This challenge however has not deteriorated the business leaders stance on the importance of CSR to the success of the society and the businesses. This shows that the rationale of Saudi companies for their CSR activities is still upheld.

According to Emtairah, Al-Badr, and Al-Ashaikh, The use of the term CSR may be new in the Saudi Arabian context, but the underlying connections and interdependence between business and society are indisputable in a market economy (1). It is recognized that businesses need a healthy society for them to succeed and vice versa. According to Porter and Kramer (78), the responsibility of ensuring a healthy business and society are intertwined and that it is a complex role.

According to The National Commercial Bank (1), many organizations in the Kingdom of Saudi Arabia have been carrying out CSR activities which have created consumer trust, community development, sourcing and retention of employees, and improved the financial performance of the companies. The study by The National Commercial Bank, in conjunction with YouGov Siraj revealed that there is currently widespread awareness about the corporate social responsibility in the kingdom of Saudi Arabia.

The report further found out that the priority given to CSR in Saudi Arabia is largely dependent on the geographical area and the specific community needs. The stakeholders interviewed during the study revealed that there is positive impact of CSR in the region. Mostly, the companies concentrate on charitable giving that is meant to improve the standard of living of the needy people in the region. Other CSR activities carried out in the region include initiatives that positively impact unemployment and encourage entrepreneurship in the region.

The main challenge in this case is to communicate the value of the CSR strategy and activities to the relevant group of people so that they can understand the value of the activities. The CSR activities are regarded as being paramount in serving the people that are more unfortunate in the society and also create religious fulfillment in the region. It has also been found that the organizations that are involved in CSR in the Kingdom of Saudi Arabia have developed a positive image in the society and also created loyalty with their customers and workers.

CSR Activities in Saudi Arabia and the Impact of Their Application

There has been a lot of effort put to enhance awareness of CSR throughout the kingdom of Saudi Arabia. Company that have been participating in CSR initiatives have majorly concentrated on the area of health, safety and environment which are of major concern in the region. There has also been focus on other areas like ethics and corporate governance, giving back to the communities in which these companies operate and commitment to their workers. The approach given to all these activities depends on the respective organization the norms of the industry in which the organization operate and also what the industry stakeholders expect.

The study carried out by the National Commercial Bank (6) has revealed some major CSR activities that are carried out in the kingdom of Saudi Arabia. The first activity identified is creating job opportunities for the unemployed in the kingdom. There has also been encouragement on entrepreneurship and attempt to conduct anti-smoking campaigns to end the smoking habit in the regions. The companies also conduct other activities like medical support, providing training to the physically challenged, providing computer literacy to the people among others. Despite this effort, there are still some areas that have been neglected and where CSR awareness is significantly low. For example, womens programs, anti obesity campaigns and career counseling are the areas not satisfactorily addressed in the CSR initiatives.

Most studies have revealed that CSR activities have positive impacts on the reputation, image and creating royalty by a company. It promotes good corporate reputation and also enables the company to attract more customers and increase market share. It has also created commitment on the side of employees working for the companies involved in CSR initiatives. The recruitment, retention, motivation, innovation and productivity have also improved in businesses engaging in CSR activities.

Drivers to the application of CSR in the Kingdom of Saudi Arabia

There are a number of factors that have contributed to the allocation of CSR activities in the Kingdom of Saudi Arabia. According to the National Commercial Bank (6), the main drivers of CSR in Saudi Arabia are need for societal improvement or reformation. This is an objective of every CSR initiative and is also embraced by Saudi companies. Also, since Saudi Arabia is Islam dominated society with people with strong faith in Islam, CSR is taken as a way of fulfilling ones religious duties of helping and serving the less privileged and impoverished in the society. This is a strong driver to the application of CSR.

These drivers are those created out of the need to serve the community (Solomon 281). These drivers are also of great benefits to the businesses. These benefits are also drivers on the side of the management of the businesses. These benefits include enhancing corporate reputation, gaining community trust, strengthening the product brands that lead to creating business opportunities, and also gaining approval of government agencies. The government also has a favorable opinion of organizations that engage in CSR activities. According to the National Commercial Bank, Government and charitable organizations appear to positively respond to organizations engaged in CSR (6). Since the government cannot fulfill all the social and societal needs, it tends to support the organizations that help in fulfilling this objective of society betterment.

Conclusion

The issue of corporate social responsibility has recently gained prominence in the kingdom of Saudi Arabia. This has mostly taken place within regional business and media circles. The reporting about the CSR in the news papers has also increased tremendously especially between 2005 and 2006. However, there are some groups of business leaders who still regard CSR as a foreign concept. Though the language of CSR may seem fresh to some people, the connection between businesses and he community has taken roots in the kingdom. The society and the businesses both need each other in their success.

Although there is little literature written about corporate social responsibility, the few researches carried out by proponents like The National Commercial Bank, Tamkeen, Mallin, Emtairah et al among others have revealed that CSR is no longer a mystery among the businesses and the society in the kingdom of Saudi Arabia. However, the initiative has faced many challenges in its development. These challenges include the lack of systematic and organized strategies within the most companies to address the social issue in the right manner.

There are also no well set policies and organized structures for CSR that will make it easier to carry out, manage and communicate. Also, the adverse effects of business activities on environment and health are largely neglected and unrecognized. These concerns are also not completely brought to the attention of the media, regulators, consumer groups or researchers who are the right people to address the issue.

Based on the literature gathered in his paper, it is clear that CSR in Saudi Arabia is taken as a strategy to serve the less unfortunate in the society. It is also taken as a way of fulfilling religious obligations of individuals. The organizations that engage in CSR activities are believed to have a positive image in the community and also have high profile in customer loyalty and employee commitment (Carroll 3).

Another view is that people believe that the CSR is undertaken by companies that are financially profitable and can allocate some money to the initiative. This may raise the creditworthiness of the business (Swanson, 46). The companies that are committed to CSR also attract talented people who also seek to be employed in such organizations. The companys enjoyment of the full benefits of CSR is only restricted by limited awareness about it. Initially the role of CSR was taken as a burden of the government but the private sector has now embraced it.

Works Cited

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The National Commercial Bank. Corporate Social Responsibility in the Kingdom of Saudi Arabia 2009: National Commercial Bank Surveys Perceptions on Corporate Social Responsibility across the Kingdom of Saudi Arabia. Saudi Arabia: The National Commercial Bank, Corporate Social Responsibility Department, 2009. Print.

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