A study of banks in the UAE reflects how the Islamic culture of philanthropy has influenced corporate responsibility practices in the Emirates
Local culture and values play a central role in shaping the definition and practice of corporate responsibility – and the banking sector in the United Arab Emirates is no exception.
In every country and every culture “corporate responsibility” means something, but not always the same thing. In the UAE, corporate social responsibility strongly draws on cultural traditions of philanthropy, business ethics and community embeddedness, all of which are deeply rooted in the teachings of Islam. These teachings emphasise generosity and community involvement, and stretch beyond the private realm to encompass business activities.
The UAE is a country where collectivism runs high. In such societies, community welfare and family ties are primordial. Very often the social responsibility of firms is related to the cultural and Muslim traditions of giving. In this environment, corporate responsibility is viewed as a religious or cultural duty. It is not perceived as a concept tied to business strategy, as it is increasingly in western, developed economies.
Culture and Islam
Over the past few decades, the UAE has established itself as a leading international business hub. The majority of foreign multinationals settling in the region will either choose Dubai or the capital Abu Dhabi for their regional headquarters. A western-based management approach is prevalent across the UAE, which has embraced foreign management techniques in the quest to achieve global status.
This westernisation of business and management practices, however widespread, exists in parallel to the fundamental teachings of Islam. The UAE operates on sharia law, the moral code of Islam, with an estimated 80% of the population belonging to the Muslim faith. (1) This consolidation of western business practices with deeply rooted cultural and religious traditions make up the UAE’s business landscape.
The religion of Islam rests on five central pillars of practice. The pillars guide people in their everyday lives – including their business acumen – by helping them develop a righteous existence. As such, in the UAE, culture and religion are very much intertwined.
Fatih Mehmet Gul, chief executive of csrmiddleeast.org, the first website dedicated to corporate responsibility news and opportunities in the region, agrees that the moral teachings of Islam extend well beyond the individual’s private life to encompass business activities.
Gul says: “In personal life or business life, Islam always instructs Muslims to behave responsibly. Customer relationships, employee rights, environmental concerns and responsibility to the community have all been well defined by Islamic rules.” He adds that there is almost “a full match between Islamic rules and corporate responsibility principles”.
Three out of the five pillars of Islam – praying, fasting and the practice of zakat (charitable giving) – focus on strengthening the sense of community, improving collective welfare, and encourage generosity and solidarity.
As the teachings of Islam influence everyday life, including business practices, they de facto impact corporate responsibility practices.
Habiba Al Marashi, chief executive of Arabia CSR Network and board member of the UN Global Compact, says: “The five pillars of Islam teach people at all levels of society to interact and to provide mutual support. The pillars provide a focus on obligations and duties as well as rights and relationships of each other, by removing social hierarchies and barriers, and encourage the development of individuals and the community – spirituality, morally and socially.”
She adds: “Part of business solutions should also include strategies for inspiring and uplifting people spiritually, nurturing positive thinking and motivations and stronger inter-personal and social relationships. This very same principle has been captured in modern corporate responsibility as the empowerment of people and the community.”
As such, Islam provides much of the foundation for corporate responsibility in the UAE.
Of the many teachings of Islam, the most influential and most embedded in business practices are best evidenced by zakat. Zakat is the requirement of the individual to provide financial support to the community, particularly the needy, for the purpose of ensuring a better society. (2) This influence has often resulted in corporate responsibility being understood by local businesses as the corporate equivalent of zakat, leaving corporate responsibility very much tied to religious duty.
It has led to corporate responsibility activities taking the form of corporate philanthropy, rooted in the Islamic tradition of giving. As a result, and perhaps not surprising, a comprehensive study on corporate responsibility in the UAE conducted in 2010 by the Center for Responsible Business (CRB) found that a third of companies implement (a form of) corporate responsibility in the UAE in order to comply with Islamic values and the practice of zakat. (3) Cultural and religious traditions are hence the key factors that drive corporations to engage in corporate responsibility.
As a religion, Islam has very specific rules concerning business and economic life. This influence expands well beyond the duty of zakat, or compulsory charity. Business practices in Muslim countries tend to follow sharia law, which governs nearly every aspect of Muslim life. It imposes certain restrictions on investments in asset types that are considered sinful.
This points to a specific overlap between western corporate responsibility and the area of Islamic finance in particular. A restriction on investments in sectors or products deemed sinful under sharia law is similar to ESG (environmental, social and governance) screening. This is probably one of the most evident overlaps between the two concepts.
Comparable to negative screens made popular in the US by Christian groups (also known as faith-based investing), which prohibits investments in alcohol or arms manufacturing, in Islam similar screens are applied to all things considered sinful, including alcohol, gambling and pornography.
Interest and usury are also banned under sharia law out of concern for the moral, social and economic well-being of society. Sharia law deems such profit unjustly generated, as it is based on the absence of work and the absence of shared risk between lender and borrower. Under these criteria, it could be argued that corporate responsibility has existed in the UAE for as long as religion and business have existed.
Some local banks do acknowledge a strong overlap between Islamic teachings and corporate responsibility. One bank says the peaceful, ethical and responsible way of living which the Muslim faith encourages strongly influences the way it understands and practises corporate responsibility. Another says the moral teachings of Islam are embedded throughout the organisation and all its business operations.
Habiba Al Marashi explains: “From an Islamic perspective, corporate responsibility is a moral obligation and promotes coexistence of business and society, as they are both dependent on each other. The Quran clearly spells out the importance of being more socially responsible and actively striving to balance the rights of all stakeholders based on fairness, justice and dignity, and distribution of wealth.
“The Quran prescribes the process of shura [consultation] for problem solving at all levels, in the affairs of the family, business, community, society and state. Shura is the spirit of stakeholder engagement in the modern corporate responsibility concept.”
Rather than a link or overlap, some UAE banks believe corporate responsibility and Islamic values to be complementary. This view is also held by Al Marashi, who says: “The issue is not about overlapping, but it is more about reinforcing each other. Sharia is the guiding principle.”
As a solution to avoid this confusion or the potential overlap between the two concepts, one bank believes it is best to be “careful not to focus on the relationship between corporate responsibility and sharia law, as it could easily confuse”.
A growing awareness
The CRB report found that out of seven sectors surveyed, including oil and gas, real estate and hospitality, the financial sector held the highest percentage of corporate responsibility awareness at 68%. (4) In contrast to this positive indicator, however, is the fact that only 10% of these firms believed corporate responsibility to be central to business strategy. (5)
Upon interviewing a number of local banks, it emerged that corporate responsibility is often defined as a charitable contribution rather than a responsibility tied to business strategy. One bank defined corporate responsibility as a contribution to the well-being of the community, being environmental, social and financial. Another said corporate responsibility was the way in which an organisation positively contributes to the community in which it functions.
But these contribution-based definitions do not diminish the sense of responsibility. One bank says responsibility has been embedded in its corporate culture since inception, while another indicates that it has always been mindful of its responsibility to give back to the community.
While a sense of responsibility is omnipresent, the philanthropic nature of this responsibility clearly ripples through the examples of corporate responsibility provided by each of the banks.
One bank labelled the sponsorship of events organised by the UAE Red Crescent, such as providing meals for the needy, as corporate responsibility. Examples of corporate responsibility from other banks included organising blood drives and the sponsorship of health awareness campaigns.
Lack of strategic focus
While corporate responsibility is gaining traction in the Gulf as a whole, many “corporate responsibility” activities still focus on donations and charity, lacking a strategic business element. The overlap of corporate responsibility with corporate philanthropy is holding back the strategic focus of corporate responsibility at UAE banks.
The 2010 study by the Dubai Chamber in fact revealed that only 17% of companies in the UAE find corporate responsibility to be central to business strategy. (6) The numerous community-focused initiatives provided by the banks illustrate this figure, not because they target community well-being, but because they lack strategic focus.
This can be explained by the fact that, in some cases, banks believe corporate responsibility to be synonymous with philanthropy. In others, they consider there to be a strong cultural link between the two. This link is thought to be based on the core Islamic responsibility of zakat. Ignoring such duties would be morally wrong, one bank explained.
In the west, the philanthropic aspect of corporate responsibility can be traced back to 19th century industrial revolutions. During that time, poor working environments called for business owners to provide healthier working conditions, reflecting a sense of paternalistic philanthropy. (7)
Over the years, corporate responsibility in the west has taken a calculated turn towards more strategic integration. In the UAE where corporate responsibility is still a maturing concept, seeds of change are starting to sprout.
A bank that in 2007 considered encouraging blood donations among staff to be corporate responsibility, redefines it in its 2011 corporate responsibility report as “smart community involvement”. One example is the implementation of e-waste and recycling policies, which are environmentally smart and make business sense. In 2012, another bank turned to renewable energy with the launch of two solar powered ATM machines. Corporate responsibility as practised by banks in the UAE seems to be heading towards more strategic integration, albeit at a slow pace. This move can be attributed to the natural evolution of corporate responsibility, irrespective of national borders.
Corporate responsibility awareness levels in the UAE, while still lagging compared with the level of strategic integration found, for example, in the US and Europe, are on the rise.
There clearly is a greater amount of information available in the shape of company website content, annual corporate responsibility reports and the increasing number of corporate responsibility conferences across the country. In spite of the absence so far of macro strategic direction, corporate responsibility at UAE banks seems to be heading towards a more integrated approach. They are moving away from corporate responsibility as philanthropy to corporate responsibility as value creation.
The Abu Dhabi government itself realises that corporate responsibility is about more than just charity. The department of planning and economy believes that social commitment programmes are not just about donations, but fully integrated plans that are needed to bolster sustainable development.
Today UAE banks have the opportunity to incorporate the best of both worlds into their approach to corporate responsibility: to assimilate best practice by integrating corporate responsibility into business strategy while tailoring their corporate responsibility focus to issues and initiatives which resonate with their local culture and religion. This would allow their corporate responsibility to become more strategic while maintaining their societal fabric of high collectivism.
The five pillars of Islam
1. Declaration of faith: The belief that must be declared “that there is no god but Allah and Mohammad is the Prophet of Allah”.
2. Prayers: The rituals of prayer are to be performed five times a day facing Makkah in Saudi Arabia. By performing such frequent prayers, one maintains God-consciousness and discipline. These prayers can be performed individually or communally. However, communal prayers are required for those who are able to attend. Communal prayers promote equality and a strong sense of community.
3. Zakat: Muslims are required to pay a fixed proportion of their possessions for the welfare of the whole community, and the poor in particular.
4. Fasting: During the month of Ramadan, all adult able Muslims must abstain from all food, drink and sexual activity from dawn to dusk. Fasting promotes God-consciousness, spiritual growth, self-purification, patience, self-restraint, generosity, sympathy for the poor, and communal solidarity.
5. Pilgrimage to Makkah: At least once a lifetime, all adult able Muslims should make a pilgrimage to Makkah, where Muslims from around the world converge annually to perform the Hajj. (8)
The United Arab Emirates is a relatively young country established in 1971, and comprising seven Emirates. It is part of the Gulf Cooperation Council (GCC), a region famous for its oil and gas reserves.
Over the past four decades the UAE has transformed itself from a desert community to a modern international business hub. In its efforts to diversify away from oil, the country has delved into financial services.
This sector has become one of the main contributors to economic activity. The UAE is emerging as a top player in financial services globally, and as the leading banking sector across the Middle East region. As of 2011, the UAE market had 23 domestic banks and branches of 28 foreign banks. (9)
(2) Katsioloudes, M. et al. (2007). “Corporate Social Responsibility: An Exploratory study in the United Arab Emirates.” SAM Advanced Management Journal. Vol: 72, Iss:4. P.11.
(3) Rettab, B. et al. (2010). “Corporate Social Responsibility in the United Arab Emirates.” Dubai Chamber, Center for Responsible Business. Dubai, UAE. P.11.
(4) Rettab, B. et al. (2010). “Corporate Social Responsibility in the United Arab Emirates.” Dubai Chamber, Center for Responsible Business. P.66.
(6) Rettab, B. et al. (2010). “Corporate Social Responsibility in the United Arab Emirates.” Dubai Chamber, Center for Responsible Business. P.19.
(7) Blowfield, M. and Murray, A. (2008). Corporate Responsibility: A Critical Introduction. Oxford: Oxford University Press. P.44.
(8) Adapted from Barise, A. (2005). “Social Work with Muslims: Insights from the Teachings of Islam.” Critical Social Work. Vol:6, Iss:2.
(9) Moukahal, W. (2011). The Banking Industry in the UAE. Report by Deloitte. Available atbusiness culture business strategy corporate responsibility Emirates Nadine Hawa