Booz Company Jeddah April 2013 Sustainable CSR Saudi
Booz & Company Jeddah, April 2013 Sustainable CSR Saudi CSR Forum 2013 Session I: Achieving a Triangular Partnership in Social Responsibility By Salim Ghazaly (Principal Booz & Company) This document is confidential and is intended solely for the use and information of the client to whom it is addressed. 0
CSR is about businesses internally integrating and externally impacting social, economic and environmental concerns What is CSR? CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis Triple Bottom Line (TBL) approach defines the economical, social and environmental performance of a company as a criteria to measure its overall success The Global Reporting Initiative (GRI) has pioneered the development of the world’s most widely used sustainability reporting framework setting out the principles and indicators to measure and report their economic, environmental, and social performance Social success is defined by the adherence of the company to fair and beneficial business ethics towards labor and the community Environmental success is defined by the ability of business practices to reduce harm and increase benefits to the environment Economic CSR Economic success is defined by the capability to achieve business sustainability and answer stakeholders financial needs and aspirations Source: Desk research, Booz and Company analysis Booz & Company April 2013 CSR Forum Jeddah. ppt 1
CSR has evolved from risk mitigation to creating value and becoming a source of competitive advantage CSR Value Creation and Strategic Benefits LE P Brand Equity Value of CSR AM X TE EN I CL 1 Estimate Enterprise Value of the Firm USD 1. 4 Bn 2 Estimate Value of Brand Equity USD 270 Mn 3 Estimate Value of CSR Component USD 35 Mn (13%) Client CSR program will range depending on the level of sophistication of the program. USD 35 million represents CSR value corresponding to a best in class program CSR Reporting of Top 250 Fortune 500 companies increased from 52% in 2005 to 85% in 2010 CSR Strategic Benefits - CXO’s Perspective (Survey of ME Executives) (2010) 2% 3% 58% Maintain/Build Strong Reputation 40% Attract and Retain the Best Employees Foster Innovation Strongly Disagree Neutral Disagree Agree 33% 30% Capture New Markets and Market Share Attract New Customers Strongly Agree Source: Branding Insider, Booz & Company analysis Booz & Company April 2013 CSR Forum Jeddah. ppt 2
CSR clearly results in growth, human development, innovation, and better environmental performance CSR Correlation with Development Indices 6 Key Takeaways 5 Global Innovation Index Growth Competitiveness Index The Arab Responsiveness Competitiveness Index vs. Growth Competitiveness, Human Development, Innovation, and Environmental Performance Indices R 2 = 0. 66 3 0 § Clear positive correlation between front end policies regarding responsibility and actual growth competitiveness in the Arab World R 2 = 0. 75 0 53 60 68 50 Human Development Index 1 R 2 = 0. 80 0 53 60. 5 68 Arab Responsibility Competitiveness Index 60 70 Arab Responsibility Competitiveness Index Environmental Performance Index Arab Responsibility Competitiveness Index R 2 = 0. 18 53 60 § Governments and business leaders in the region have a strategic interest and various levers to activate: − Increase national competitiveness − Increase national income − Achieve social benefits − Promote human development and innovation − Etc. 68 Arab Responsibility Competitiveness Index Source: 2009 Responsible Competitiveness Index, 2009 Growth Competitiveness Index, Booz & Company analysis Booz & Company April 2013 CSR Forum Jeddah. ppt 3
In developing countries in particular, CSR is perceived as a means of social and economic development Perception of CSR ILLUSTRATIVE (Developed Vs. Developing Countries) Citizens want “Core” CSR Projects Ensuring productsare safe/healthy Citizens Want CSR to Promote National Development Increasing globaleconomic stability KSA Not harming the environment Reducing human rights abuses Treating employees fairly Helping reduce rich-poor gap Ensuring responsible supply chain Supporting charities / community projects Providing quality products / services at the lowest pric Solving social problems Applying same high standards globally Supporting progressive government policies Developed Countries Education Employability China Worker Safety Countering Pollution Developing Countries Source: Corporate Socieal Responsibility Monitor 2009, Booz & Company analysis Booz & Company April 2013 CSR Forum Jeddah. ppt 4
To ensure sustainable CSR, companies need to coordinate and align with governments, academia, and civil society organizations Sustainable CSR Framework § Provide regulatory incentives § Issue CSR legislations § Institutionalize CSR ILLUSTRATIVE Governments on ate l t din a or tion en Co Na opm l s ve al De Go § Seek and Challenge CSR commitments from companies § Advocate CSR regulations Aw Build Aro aren un ess d. C SR Companies Civil Society Partner on es Organizations su Social Is § Integrate CSR in academic curriculum § Support CSR research Academia Source: Booz & Company analysis Booz & Company April 2013 CSR Forum Jeddah. ppt 5
The MENA region has started witnessing some emerging CSR trends, however several steps could be followed going forward ILLUSTRATIVE Current MENA Trends and the Way Forward MENA Trends Looking Forward Engage Senior Leaders MENA Companies Joining UN Global Compact (*) 34% have CSR guidelines 10% communicated CSR goals 3% have CSR office 67%: CSR benefits our company +259 65%: CSR is our responsibility § Majority in Iraq (61), UAE (41), Syria (32), and Egypt (36) Strengthen Corporate Governance and Transparency Bank Muscat: Fullfledged CSR Department § Only 4 in KSA 2003 2012 EXAMPLE Egypt - Care with Love § Improve the living conditions of those in need for short or long term health care § Provide Job opportunities for unemployed young people in the field of health care Greater Autonomy to MNC MENA Subsidiaries § Donate books and provide teacher training to 132 schools in Looking Forward Social Businesses / Entrepreneurship Proliferation Integrate with the Operating Model Both internal and external events § The program was awarded an International Business Award for CSR Program of the Year in the ME CSR should be part of the business strategy Leverage Business Capabilities Employee Skills Technology Capabilities Social networks Partner with Experts Civil Society Organizations Public-Private Partnerships (PPP) Social Business Ventures 11 countries across the ME § More than 250 HSBC volunteers helping with community “Al Muhaidib Group: Corporate Governance Creates a CSR Agenda” Measure Results Currently: Measure Input Target: Measure Results (*) A strategic policy initiatives for businesses committed to aligning their operations and strategies to 10 principles in the areas of human rights, labor rights, environment, etc. Source: Corporate Social Responsibility Monitor 2009, Booz & Company analysis Booz & Company April 2013 CSR Forum Jeddah. ppt 6
In addition, a successful CSR environment requires efforts from government, private sector, and non-governmental organizations Potential Activities Synopsis CSR Impact Assessment ILLUSTRATIVE Government Academia Civil Society Governments have an evident interest in CSR as it is a very cost-effective means of enhancing sustainable development World-class academic institutions play an important role in promoting CSR through their curricula, regional academia should follow Civil society organizations are growing in the region and attracting more support as governments are partnering with them Enact Legislation to Promote CSR (e. g. corporate governance laws) Include CSR in Higher Education Partner with Private Sector Companies Develop a CSR Institutional Framework Train Teachers on CSR Lend Credibility to CSR Initiatives Provide CSR Incentives Include CSR in School Plans Monitor Private Sector and Government Performance Provide CSR Training and Launch Promotional Campaigns Produce CSR Research Promote “Venture Philanthropy” Partner with Companies on CSR Initiatives Source: Booz & Company analysis Booz & Company April 2013 CSR Forum Jeddah. ppt 7
Over time, Booz & Company CSR program developed to become integrated within the company’s DNA Management Consulting CSR Maturation Process High § Intensive interactions through high profile programs and partnerships § Mainly with pro-bono consulting services, on-going support, etc. Resources / Investment § Indirect engagement § Limited scope of activities § Mainly in the form of monetary and inkind donations § Opportunistic engagement with selected organizations § Mainly in the form of co-marketing effort, employee volunteerism, fundraising, etc. . Current Booz & Company positioning Philanthropic Transactional Integrative Low CSR Maturation Booz & Company April 2013 CSR Forum Jeddah. ppt 8
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