C O R P O R AT E S O C I A LRESPONSIBILITY IN DUBAICURRENT PRACTICES, CHALLENGES AND FUTURE OPPORTUNITIES

DUBAI CHAMBER SURVEY:

SMEs REPORT

NOVEMBER 2020

TABLE OF CONTENTS

01 Introduction

02 Definition

02 SMEs and the Global Context

03 SMEs and the UAE Context

03 CSR Survey Methodology

03 Survey Results - CSR Motivators and Drivers

06 Survey Results - CSR Reporting Barriers

07 Recommendations

08 References

INTRODUCTION

Companies of all sizes around the world are increasingly realizing the potential value of Corporate Social Responsibility (CSR). As a result, more and more companies are revisiting their business models and processes to create positive societal and economic value through strategic CSR practices.

As companies’ priorities and ways of doing things change over time, so do the challenges and opportunities.

To track the key trends in CSR in Dubai and help managers make informed decisions, the Dubai Chamber Centre for Responsible Business (DC-CRB) has been running the Dubai Chamber CSR survey since 2006. As the longest running CSR survey in the region, the objective of the Dubai Chamber CSR survey is to put together a comprehensive database to map-out the state of CSR in Dubai, identify challenges, opportunities and areas for improvement with regards to the development and implementation of effective CSR practices, and develop recommendations and tools to improve such practices. The full report can be accessed by clicking here.

In this report we present the results of the Dubai Chamber 2019 CSR survey but with a specific focus on small and medium-sized enterprises (SMEs). This report is divided into three parts. The first part provides definitions and context to SMEs. The second part presents the methodology and results of the survey, specifically relating to the drivers and barriers for CSR within SMEs. The report will conclude by giving recommendations on how SMEs can incorporate CSR into their operations.

SMEs Report 1

DEFINITION

Small and medium-sized enterprises (SMEs) are non-subsidiary, independent firms that employ fewer than a given number of employees (OECD 2005). Typically, the upper limit number of employees for an SME is 250. This can range between 200 - 500 however, depending on how the limit is set by an individual country and/or sector. Small enterprises generally have less than 50 employees (Micro if less than 10 employees) whilst medium enterprises have between 51 - 250 employees.

In 2005, the European Commission introduced a financial measure in the definition of an SME in order to grant higher levels of national and regional aid than compared to large companies. This figure was set at EUR 50 million annual turnover and EUR 43 million balance sheet (EC 2005).

SMES AND THE GLOBAL CONTEXT

SMEs play a vital role in the global economy. According to the Organization for Economic Co-operation and Development (OECD) (2017a), SMEs account for 60% of total employment and generate 50%-60% value add to developed economies. In the United States alone, there are over 30 million SMEs (classified as under 500 employees) representing 99.9% of the total business community (Deloitte 2019). In addition, SMEs account for 45% of total employment and 33% of gross domestic product (GDP) in emerging economies (OECD 2017b).

At governmental level, institutions are working to identify policies that stimulate SME growth and development (OECD 2017a). The intended result being that SMEs are better positioned to compete in the open market. One prevalent option is to provide SMEs with access to finance by offering the financial support they need, such as lower interest rates, higher borrowing amounts or smaller collateral requirements. For example, the European Commission offers a range of programs designed to facilitate access to finance through financial institutions. One such program, the European Fund for Strategic Investments (EFSI), has a dedicated window for SMEs offering a total of EUR 5.5bn through the European Investment Fund (EC 2019).

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SMES AND THE UAE CONTEXT

Across the UAE, the SME sector represents more than 94% of total companies and employs over 86% of the private sector workforce (Ministry of Economy 2019). Within Dubai, SMEs contribute to 95% of companies and employ 42% of the workforce, contributing to 40% of Dubai’s GDP (Ministry of Economy 2019). In recognition of the value that SMEs bring to the Dubai economy, the Department of Economic Development (DED) established Dubai SME in 2002. The aim of Dubai SME is to develop a resource for support, information and outreach with the goal of promoting innovation and leadership across all segments of the SME sector (Dubai SME 2017).

CSR SURVEY METHODOLOGY

A survey questionnaire was sent to the Dubai business community in January - June 2019. 152 responses were received. 8 responses were discarded because of missing information. 62% of respondents were SMEs and 38% of respondents were large organizations.

SURVEY RESULTS - CSR MOTIVATORS AND DRIVERS

A survey questionnaire was sent to the Dubai business community in January - June 2019. 152 responses were received. 8 responses were discarded because of missing information. 62% of respondents were SMEs and 38% of respondents were large organizations.

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CSR Motivators

The survey reported that a number of factors are motivating SMEs in the Dubai business community to engage in CSR initiatives, as shown in figure 1. ‘Improve the community within which we operate’ scored the highest with 3.61 out of 5. This was followed by ‘Enhance corporate reputation’ with 3.56, then ‘Enhance brand value’ with 3.52. ‘Improve customer satisfaction’ and ‘Stay ahead of potential future regulatory requirements’ followed with 3.48 and 3.43 out of 5 respectively.

The lowest scoring motivator was ‘improve revenue’, scoring 3.09 out of 5. This was preceded by ‘comply with international regulations and standards’ with 3.17, then ‘Attract new customers’ with 3.18 out of 5. ‘Increase competitive advantage’ and ‘comply with internal regulations and standards’ followed with 3.26 and 3.28 out of 5 respectively.

3.28

3.28

3.17

2.91

3.43

3.61

3.39

3.28

3.56

3.41

3.33

3.48

3.52

3.18

3.09

3.26

2.50 2.70 2.90 3.10 3.30 3.50 3.70

Recruit and retain talent

Comply with internal regulations and standards

Comply with international regulations and standards

Stay ahead of potential future regulatory requirements

Improve the community within which we operate

Reduce environmental hazards

Enhance operational efficiency

Enhance corporate reputation

Meet stackeholders’ CSR expectations

Develop new markets

Improve customer satisfaction

Enhance brand value

Attract new customers

Improve Revenue

Increase competitive advantage

(for subsidiaries of multinational firms) Comply withstandards imposed by international HQ

Fig 1: CSR initiative motivating factors within SMEs

SMEs Report

Fig 2: CSR Drivers for SMEs within the Dubai Business Community

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CSR Drivers

The survey results demonstrated that numerous factors motivate the uptake of CSR initiatives across SMEs within the Dubai business community. From this, the DC-CRB established the key drivers by grouping the motivating factors into four CSR driver groups, as shown in figure 2.

As shown in table 1, all four drivers were demonstrated within the five highest scoring motivators. ‘Society and environment’ was the top driver within the SME business community in Dubai. This was followed by ‘Corporate Reputation’, the most numerous driver within the top five. ’Stakeholders’ was the subsequent top driver, then ‘Governance and Financial’. The lowest reported driver was ‘Governance and Financial’. Additionally, out of the lowest five scoring drivers it appeared four times (along with ‘Stakeholders’).

CSR DriversSociety andEnvironment

CorporateReputation

Governanceand Finacial

Stakeholders

Rank CSR Motivator Score (out of 5) Driver

Improve the community within which we operate

Enhance corporate reputation

Enhance brand value

Improve customer satisfaction

Stay ahead of potential future regulatory requirements

Meet stakeholders' CSR expectations

Reduce environmental hazards

Develop new markets

Enhance operational efficiency

Recruit and retain talent

Comply with internal regulations and standards

Increase competitive advantage

Attract new customers

Comply with international regulations and standards

Improve revenue

Society and Environment

Corporate Reputation

Corporate Reputation

Stakeholders

Governance and Financial

Stakeholders

Society and Environment

Governance and Financial

Governance and Financial

Stakeholders

Governance and Financial

Governance and Financial

Stakeholders

Governance and Financial

Governance and Financial

3.61

3.56

3.52

3.48

3.43

3.41

3.39

3.33

3.28

3.28

3.28

3.26

3.18

3.17

3.09

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

Table 1:CSR Drivers

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SURVEY RESULTS - CSR REPORTING BARRIERS

To further drive the uptake of CSR initiatives it is important to also identify the barriers to CSR reporting across the SME business community. From the survey, it was possible to identify a number of barriers being faced by SMEs when conducting CSR reporting, as highlighted in figure 3 below.

With a score of 2.75 out of 5, the greatest barrier to CSR reporting for SMEs was ‘Lack of time’. ‘Not enough benefit/cost’ was another high scoring barrier to CSR reporting with a score of 2.71.

The least reported barrier for SMEs, by a relative margin, across the sectors was ‘Nothing new to report about’ with 2.52 out of 5. Another low reported barrier was ‘No stakeholder pressure’, which scored 2.58 out of 5.

2.75

2.52

2.58

2.71

2.66

Lack of time Nothing new to report about

No satakeholderPressure

Not enoughbenefit/cost

Lack of knowledge on howto develop CSR reports

2.50

2.60

2.70

2.80

Fig 3: Barriers to CSR Reporting for SMEs

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RECOMMENDATIONS

It is evident that the Dubai SME business community is driven to improve its social and environmental impact. Meanwhile they are facing barriers with the time and perceived benefit available to meet their CSR reporting requirements. By conducting a full review of existing CSR initiatives and their key performance indicators (KPIs), SMEs could be well positioned to systematically assess and identify the key drivers and barriers behind those initiatives. This in turn will enable the SME business community to further push the drivers and mitigate the barriers. The CRB therefore recommends that Dubai-based SMEs consider the following strategies

1. Enhance Socio-environmental Impact: The results show that SMEs put strong emphasis on societal and environmental drivers. Added to this they are typically more agile with their strategic approach than compared to their larger counterparts. The DC-CRB therefore recommends that SMEs consider how their business model and/or operations could incorporate initiatives designed to deliver positive impact to communities and the environment. Particular consideration should be made for initiatives that are aligned to the wider business strategy.

2. Strengthen Corporate and Financial Governance: The results indicate that SMEs are less driven by corporate governance and financial factors. Evidence suggests however that corporate governance is often a pre-requisite or an integral component of effective CSR. The DC-CRB therefore recommends that the duties of directors’ within SMEs are expanded to ensure that accountability is established with senior management. SMEs could also aim to develop incentive schemes, such as bonus schemes, that include CSR-related metrics.

3. Invest in CSR Reporting: SMEs reported that they do not have sufficient time to conduct CSR reporting. Without effective CSR reporting however organizations will be less equipped to measure and communicate the performance of their CSR initiatives. The DC-CRB therefore recommends that SMEs should establish clear KPIs for their CSR initiatives. This would enable them to measure and review the impact of CSR initiatives against set targets. This would facilitate reporting against international standards (such as the Global Reporting Initiative).

4. Realize the Benefit: From the results it was evident that SMEs are not currently receiving enough benefit from CSR reporting. It is important that benefit is generated in order to secure commitment to CSR strategies in the longer term. The DC-CRB therefore recommends that SMEs develop a systematic process for monitoring CSR KPIs against value generated for the business (such as return on investment). CSR performance could also be benchmarked against competitors and/or industry best practice to better assess the returns.

SMEs Report

REFERENCES

Deloitte., 2019. The performance of Small and Medium Sized Businesses in a digital world. https://ww-w2.deloitte.com/content/dam/Deloitte/es/Documents/Consultoria/The-performance-of-SMBs-in-digital-world.pdf (Accessed 19 December 2019)Dubai SME., 2017. About Us. http://www.sme.ae/English/aboutus/Pages/default.aspx. (Accessed 19 December 2019).

EC., 2005. Small and Medium-Sized Enterprises (SMES). https://ec.europa.eu/eurostat/web/structur-al-business-statistics/structural-business-statistics/sme (Accessed 19 December 2019)

EC., 2019. Financing programmes for SMEs. https://ec.europa.eu/info/business-economy-eu-ro/growth-and-investment/financing-investment/financing-programmes-smes_en (Accessed 19 Decem-ber 2019)

Ministry of Economy., 2019. The impact of SMEs on the UAE’s economy. https://www.govern-ment.ae/en/information-and-services/business/crowdfunding/the-impact-of-smes-on-the-uae-economy (Accessed 19 December 2019)

OECD., 2005. Glossary of Statistical Terms. https://stats.oecd.org/glossary/detail.asp?ID=3123 (Accessed 19 December 2019)

OECD., 2017a. Trends in SME Performance and Business Conditions. https://read.oecd-ilibrary.org/industry-and-services/small-medium-strong-trends-in-sme-performance-and-business-conditions_9789264275683-en#page1 (Accessed 19 December 2019).\

OECD., 2017b. Enhancing the contributions of SMEs in a global and digitalized economy. Meeting of the OECD Council at Ministerial Level: Paris, France. https://www.oecd.org/mcm/docu-ments/C-MIN-2017-8-EN.pdf (Accessed 19 December 2019).

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