When it comes to the growing importance placed on corporate social responsibility (CSR), how can companies in the Middle East's sea freight industry ensure their current business practices are up-to-date?
In global business circles, corporate social responsibility (CSR) continues to move onto another level. No longer simply acknowledged under the sole remit of doing good deeds to earn industry reputation points, CSR is fast evolving into an imperative component of any successful business in the 21st century.
Whilst the sea freight sector has generally been acknowledged as one of the most environmentally sound methods of transporting goods around the world, companies in the region are waking up to why adopting a more cohesive approach to CSR is part and parcel of a successful global strategy.
"A more holistic and complete approach to awareness about the impacts of the respective business is essential," maintains Ralph Thurm, associate director business engagement and development, Global Reporting Initiative (GRI).
Apart from some early movers such as Aramex, Middle East companies are just starting to understand the benefits of the CR logic."
An international body, always on hand to provide advice to companies wishing to up the ante with their CSR, GRI recently visited Dubai to share its expertise with the region's businesses.
Thurm strongly believes that efficient CR, the term he prefers, relies upon a genuine commitment from management.
"From a management perspective, it is imperative that sustainability really gets into the DNA of the company. Sustainability management as an add-on will fail and requires both the bottom-up engagement as well as getting necessary top management attention," he recommends.
Indeed, as Thurm pointed out, the 'early mover' Aramex has been very proactive in pushing itself forward as a leader in CSR within the transportation sector.
The company was recently the first in the region to participate in the United Nations Ã¢â‚¬ËœGlobal Compact' initiative, created to engage the private sector in positive global corporate practices covering human rights, labour, the environment, transparency and anti-corruption. Furthermore Aramex's Corporate Sustainability Report 2006 has been another first of its kind in the Middle East.
"By adopting sustainability reporting we are sending a clear message to our stakeholders: community development is a strategic responsibility for which we will hold ourselves accountable," explains Fadi Ghandour, CEO of Aramex.
Respecting our environmental surroundings is a principle that is deeply ingrained in our corporate culture, and our ambitious goals in that area are a reflection of how seriously we take the issue.
The report is audited through benchmarks set by the GRI, allowing companies to measure and report their economic, environmental and social performance. "Whilst we have our own specific commitments towards specific solutions, we feel this can be used as an example to the Middle East transport sector in general," he adds.
For a major global player such as Aramex, sustainability is a key part of its future development and direction. "Sustainability fits. It fits with our goal of creating long-term values for our investors by being the company of all our key stakeholders.
It fits with our corporate culture, which has always focused on entrepreneurship and innovation, opportunities for growth and development, diversity across our global network and respect for others," says Ghandour.
However, smaller more local companies in the region have also been taking steps to heighten CSR within the sector. One example of this can be found in the Arab Shipbuilding and Repair Yard (ASRY), winner of the employee care award at last year's Supply Chain and Transport Awards (SCATA) in Dubai. The Bahrain-based company has worked hard to improve the living and working conditions of its largely expatriate workforce.
The management of the ASRY views its corporate social responsibility very seriously and therefore places great importance on the following welfare measures of the employees," emphasises Dr Salman Karim, personnel manager, ASRY.
As part of this, ASRY provides a fully-equipped medical centre, as well as incentivising social activities such as sports tournaments for its employees.
The UAE-based UNASCO is another example of a smaller regionally-based company making inroads in terms of CSR, particularly in terms of charitable and community contributions. Recent years have seen the sea freight services provider running campaigns to collect donations for victims of the Pakistan earthquake.
We asked our contacts to provide donations and items for the victims, all of which we sent free of charge. It was only a small contribution as we are a small local firm, but we feel that it is important to encourage our staff, clients and partners to be involved in such social work," explains Nadia Abdul Aziz Alkhan, managing director and partner for UNASCO.
As well as the appeal, the company is active with local community events and promoting inclusive employment opportunities. Alkhan hopes that the CSR message will continue to be spread further within the local shipping industry. "As local companies, we need to set an example to all the other companies on CSR. Not only that, it is part of our religion and culture to give back, help the needy and protect the environment," she emphasises.
Being great in business and being active in CSR can differentiate a company from its competitors and create greater preference within the target market selected."
Annelies Hodge, corporate social responsibility consultant at Dubai Chamber of Commerce and Industry's Centre for Responsible Business, agrees that charitable activity, such as supporting causes in cash or kind by providing transport free of charge, is an important part of corporate social responsibility.
"Companies that support community initiatives benefit by enhancing their reputation, ensuring their continued licence to operate, building employee pride, as well as developing new opportunities," she highlights.
However, as she is quick to point out, CSR does not begin and end with charity as is very often believed in the GCC region. "Companies in the shipping sector, as in all other sectors, also need to address the environmental impacts of their business, as well as how they treat their workers, and deal with their business partners from suppliers through to customers.
All of these areas - community, workplace, marketplace and environment - provide significant opportunities for businesses to enhance their profits while contributing towards a more sustainable future," she adds.
According to Hodge, implementing CSR is becoming more and more of a necessity for today's businesses. "The market value of a business is no longer in its tangible assets like its fleet of ships, but rather its intangible assets like its brand or reputation," she maintains.
Companies who have been deemed as not socially responsible have seen hundreds of millions of dollars wiped from their value.
Such companies, she points out, are in increasing danger of being punished by investors, governments, consumers and the media. On the other hand, responsible businesses are rewarded in all these respects. "This is the great win-win of corporate social responsibility," Hodge enthuses.
Leading the way towards this win-win situation for the regional shipping sector is global ocean carrier Maersk Line. "Being a good corporate citizen is nothing new to the A.P. Moller - Maersk Group," says Robbert Van Trooijen, Maersk Line regional manager for the Middle East.
It has always been an integral part of the way we do business. It implies that we believe in constant care and that we strive to be upright, responsible and environmentally conscious in our activities - globally as well as locally.
Over the past years, the company has felt the need to become more explicit about its values, business principles and corporate citizenship. "We wish to be an active part of the communities in which we operate and respected as good corporate citizens.
To us, this means a respectful interaction with our employees, the environment and the communities in which we operate," Trooijen emphasises.
For Maersk Line, CSR is also about exchanging ideas of cooperation that go beyond any obligations. "It further allows raising awareness and understanding of the real situation within the countries where it operates, which contributes to the creation of programmes and projects within their scope of operation," says Trooijen.
He is quick to point out that the shipping world is already recognised by environmental groups as one of the most sound methods of transporting goods and the group further supports initiatives promoting environmental responsibility within the industry.
"This has involved a balanced and sustainable approach to long term economic growth and quality of life, while seeking solutions that help protect the environment," Trooijen explains.
Indeed the company's environmental policy has included priorities such as reducing greenhouse gas emissions, carbon footprint calculating, and generally reducing other air emissions.
This year also saw Maersk Line launch its environmental brochure, which was distributed among customers and business partners to increase awareness and share in its initiatives.
With such a holistic approach to CSR, companies like Maersk Line can ensure their position in the fast moving sea freight industry. Indeed with the concept of CSR becoming more and more important for survival in the modern business world, better education and awareness on the issue of corporate social responsibility is clearly called for in the region.
As Hodge ultimately forewarns
"In the context of more demanding customers, global competition, increasing resource costs, and significant environmental threats such as global warming, it is evident that the shipping companies who will survive in the future will be those who have the most efficient and responsible practices.
What is CSR?
CSR is the willingness of companies to look beyond solely making a short-term return on investment for the firm's owners or shareholders, to instead managing its continued social, environmental and economic sustainability.
Can you explain the business case for CSR?
CSR is a stakeholder approach to management and enables companies to explore and respond to the pressures they face as a result of the changing global economy.
It is the function of CSR to look at the long term sustainability of the firm, mitigating the risk of its management by promoting transparency, introducing mechanisms of accountability, responding to stakeholder expectations and evaluating performance to ensure continuous improvement and identify potential new business opportunities.
What are the possible Consequences for companies not engaging in CSR?
Failure to engage and respond to these expectations can impact the financial bottom line as stakeholder pressure takes numerous forms, such as consumer boycotts, a lack of confidence and trust from investors, reduced loyalty and productivity from the workforce, and disruption caused by the disintegration of key business relationships.
So, how can companies ensure CSR is taken seriously?
Like any managerial approach, in order to be effective it must be aligned to the core business strategy, embedded in the organisation's culture, and supported by a visible and demonstrative commitment from the top. This will help to ensure its long term success.
And the last word?
CSR provides companies with the opportunity to explore new markets, assists in contributing to product and service innovation and diversity, provides firm's with a competitive edge, creates community good will and enhances brand value and loyalty. In other words, it is a clear win-win for business and society.
The Centre for Responsible Business was established by the Dubai Chamber in 2004 and aims to promote awareness and practice of CSR in Dubai. For more information, visit www.dubaichamber.ae.