sustainability reporting in the mena region

Communicating Corporate Sustainability in the MENA Region

A comparative study on non-financial reporting across 17 countries in the Middle East and North Africa

Published by:

Communicating Corporate Sustainability in the MENA Region

Published by:Deutsche Gesellschaft fürInternationale Zusammenarbeit (GIZ) GmbHResponsible & Inclusive Business Hub MENA

Registered offices:Bonn OfficeFriedrich-Ebert-Allee 40 53113 BonnGermany Tel. + 49 (0) 228 4460 – 0Fax + 49 (0) 228 4460 – 1766

Eschborn Office Dag-Hammarskjöld-Weg 1-565760 Eschborn GermanyTel. + 49 (0) 6196 79 – 0 Fax + 49 (0) 6196 79 – 1115

Email: [email protected]: www.giz.de

Lead Authors:Ahead of the Curve, Pascale Nader, Dina Sherif

Place and date of publication:Cairo, March 2014

On behalf of:Federal Ministry for Economic Cooperation and Development (BMZ)

Registered offices:Bonn OfficeDahlmannstraße 453113 BonnGermanyTel. +49 (0) 228 99 535-0Fax +49 (0) 228 99 535-3500

Berlin OfficeStresemannstraße 9410963 BerlinGermanyTel. +49 (0) 30 18 535-0Fax +49 (0) 30 18 535-2501

Email: [email protected] Website: www.bmz.de

This study was conducted to examine the current trends in sustainability reporting among main local private sector companies in the MENA region; rep-resented by stock-listed companies based in coun-tries from the MENA region. The study provides an integrated view of the incidence, frequency and con-tent of sustainability reports published by companies across 17 countries and over 25 industry sectors.

Findings show that nearly 60 percent of the com-panies studied are communicating commitments or performance on issues related to sustainability. While most companies maintain a broad view of their role in tackling sustainability issues, a notice-able shift is occurring towards a closer linking of the corporation with its operating environment and core competencies as a company.

Reviewing material sustainability issues facing different countries and industry sectors provided a larger context in which to evaluate companies’ sustainability efforts. Top priority sustainability themes shared in the region were identified as:

(i) Governance (ii) Water management (iii) Energy solutions (iv) Sustainable building practices(v) Sustainable finance

This document outlines many cases of MENA-based companies initiating strategic sustainability actions on issues that are material and impactful to its core business activity.

This report evaluates a range of reporting trends and concludes with the following:(i) There are higher incidences of reporting among companies operating in countries or sub-regional markets with strong governance priorities espe-cially regarding capital market authorities.

Executive Summary

(ii) Companies leveraging sustainability networks, industry associations, and capital market associa-tions benefit from stronger frameworks, support-ing material and knowledge; all of which positively influence reporting trends.(iii) Companies involved in stakeholder research and engagement are reporting extensively on sus-tainability performance and using internationally acknowledged sustainability report formats. (iv) MENA-based companies linking sustainability with business strategies are currently doing so in four main areas by expanding markets, developing new knowledge and policies, achieving operational efficiency and through stakeholder engagement.(v) A small percentage of companies (approximate-ly 7 percent of companies studied) are kicking off initiatives to report on their corporate sustain-ability and responsibility using metrics and data that add multi-dimensional layers of value to their company and society and further communicates commitments to stakeholders.

Based on these insights, it is recommended to en-hance efforts towards building an enabling envi-ronment for sustainability reporting that includes:Enhancing capital market authorities’ efforts to champion adopting sustainability, as well as de-veloping and enhancing the pool of business asso-ciations alongside other networks who champion sustainability reporting and practice;Development of national and regional organiza-tions / associations that focus on and specialize in sustainability issues and introduce platforms that allow different stakeholders’ (consumers, lo-cal communities, public sector, civil society, etc.) interaction around the topic;Introducing frameworks for sustainability aligned business development; and designing a tool kit for stakeholder engagement, which is shown to have a positive correlation with reporting and sustain-ability management.

Communicating Corporate Sustainability in the MENA Region4

6 A Word from GIZ7 A Word from the Authors8 Sustainability & the Importance of Reporting 10 Methodology & Approach

Comparative Trends in Sustainability Reporting in the MENA region

(Pages 12-24)

12 Patterns of Reporting 12 General

13 Countries

19 Sectors

24 Size

28 Governance

29 Water Management

29 Energy Production & Solutions

30 Sustainable Business Practices

31 Sustainable Finance

38 Adopting ESG Reporting 41 Linking Sustainability & Business Strategies 41 Expanding Markets, Products &

Innovation

41 Developing Knowledge, Policy

& Governance

41 Operational Efficiency

42 Stakeholder Engagement

48 Data & Metric-Driven Reporting52 Using Reporting Guidelines

Introduction (Pages 6-10)

Areas of Materiality (Pages 28-35)

Developments & Challenges in Reporting

(Pages 38-41)

Moving Towards Enhanced Reporting & Stakeholder Engagement

(Page 54)

Annex 1: Summary of Sample Findings

(Pages 56)

5Introduction

28 Governance

29 Water Management

29 Energy Production & Solutions

30 Sustainable Business Practices

31 Sustainable Finance INTRODUCTION


A Word from GIZ

When the Middle East and North Africa (MENA) region appears in interna-tional news headlines, the messages broadcast are typically not ones we can call positive. Messages portrayed make it seem as though the MENA region is either stuck in political turmoil or engaged in the creation of unsustainable cities on desert soil. This has so far been the cliché to which many subscribe to.

However, here at the Responsible & Inclusive Business Hub, short ice_ribh, we believe in a different, more diverse and more nuanced story of a region where people care and work together to shape their countries to be more sustainable and resilient; countries where economic growth is aligned with en-vironmental limitations and values of social inclusion. This may not be the mainstream story, but it is in fact a reality on the ground that is gaining speed. As with other regions, the MENA region’s private sector has an ever-increasing role to play in this regard and is starting to do so with much enthusiasm, skill and monetary resources. Together with a thriving civil society and governments, companies are beginning to innovate business models that cater to society’s demands for products and services that don’t compromise social and environmental welfare.

The increasing depth, transparency and professionalism with which companies from Morocco to Bah-rain report on their activities, achievements and challenges associated with their efforts to become more sustainable organizations is testimony to this paradigm shift away from the charity-driven Cor-porate Social Responsibility (CSR) approach to one that is in strategic alignment with core business. It is encouraging to witness that a number of large corporations from the region are engaged in open and constructive dialogue with stakeholders to improve how business is done. The return on time and money invested in doing so is often products that people really demand and innovations that people really need – resulting in the mutual benefit of both society and business.

Still, as encouraging as developments of the past years might have been, much still needs to be done for companies to fully embrace sustainability management of which reporting and communications are only the visual manifestation to the outside world. As this report on sustainability reporting aptly highlights, there are considerable differences in communication patterns between countries, sectors and organizations of different sizes. Too many companies are still mute on both their negative and positive impacts on economies, people and the environment. In a more and more challenging, de-manding and competitive environment, companies that embrace sustainability management and associated innovations and reputation gains are here to stay. All others risk to be left behind in the unraveling world of business as usual.

Bernhard RohkemperHead: Responsible & Inclusive Business Hub MENA

7Introduction

In today’s world of endless challenges and an increasing interconnectiv-ity, the adoption of sustainable business practice is no longer an option if a company wants to continue to exist and stay relevant. Environmen-tal stewardship, investing in society’s enhancement, good governance, transparency and fair labour standards are not just ways to make a com-pany look better, they are ways to ensure that companies perform better.

Furthermore, the profound impact that the corporate sector can have on its surrounding environ-ment is no longer debated. Just by looking at the number of significant publications that have put the issue of socially responsible business on their front cover, it is clear that business can no longer stop at making as much money as possible as quickly as possible, nor can they hide their impact in a world where information is not only easily accessible, but also easily disseminated through social media.

While reporting can be used to enhance a company’s image by disclosing elements such as how a company has invested in its community, at its core this is not what reporting is about. Sustainability Reporting is about RESPONSIBILITY – it’s about taking ownership of the negative impact that busi-nesses have on the environment through operations and the positive impact that businesses can have by choosing to take environmental performance seriously. It is about choosing to be accountable to stakeholders and applying principles of transparency and good governance. Most importantly, it is about realizing that companies are also citizens that have a significant role to play in shaping the so-cieties in which they exist.

While this report does in fact demonstrate that the majority of publicly listed companies in the region report on sustainability on some level, demonstrating that basic awareness does exist, we have a long way to go before detailed sustainability reporting becomes mainstream practice. When sustainability reports in the region come to a point where they clearly demonstrate how the adoption of sustainabil-ity management has led to an increase in the value and performance of business, then we will know that this region is no longer short term focused, but rather it is striving to stay “ahead of the curve.”

Dina Sherif & Mohamed El-Kalla Founding Partners, Ahead of the Curve

A Word from the Authors


Sustainability & the Importance of Reporting

Companies across the globe are moving towards the adoption of the different aspects of corporate social responsibility (CSR)/sustainability with re-gards to environmental, social, and governance performance. Shifting towards this approach of being stakeholder driven has been influenced by numerous factors ranging from consumer pres-sure to the corporate sector’s realization that sus-tainability does enhance operational processes, performance and bottom line, and that contrib-uting to socioeconomic development is impera-tive to the growth of the private sector itself.

Adopting sustainability by establishing sound governance systems that are engrained with the commitment to maximize overall stakeholder value; including shareholder value creation, social value creation, and environmental preservation; has been found to significantly enhance long-term corporate performance[1]. Moreover, sustainability management is enabling today’s corporate leaders to maximize economic value while simultaneous-ly mitigating environmental impact and promot-ing social welfare; what are often referred to as a company’s triple bottom line[2].

CSR/Sustainability reporting significantly en-hances sustainability performance; reporting en-ables companies identify their position regarding the different aspects of sustainability and estab-lish more efficient decision making processes[3]. Other benefits of sustainability reporting include

enhancing employee loyalty and retention, and enhancing risk mitigation through the early de-tection of anticipated risks in multiple dimen-sions (including communities of operation, com-pany processes, and the sustainability of resources needed to continue operations)[4]. Moreover, CSR/sustainability reporting plays a significant role in maintaining accountability and transparency to-wards a company’s main stakeholders. By openly disclosing information about current sustain-ability performance; strengths and weaknesses included; companies are gaining the confidence of investors and clients alike[5]. Increasingly, in-vestors are according more attention to integrat-ed reporting and non-financial performance in-dicators prior to making investment decisions[6]. Hence, sustainability reporting and the resulting improvements in sustainability performance are facilitating investor confidence and companies’ access to capital[7].

As globalization increases, cross national and regional business is becoming more common and global value chains are becoming the norm. Corporate leaders across the globe are according more attention to the impact of outsourcing their production and services on their own sustaina-bility and CSR performance. Increasingly, sourc-ing from and outsourcing to sustainable and re-sponsible counterparts is becoming a priority[8]. Given the current global shift towards prioritiz-ing sustainability, enhanced CSR performance

[1] Eccles, R. G., Ioannou, I., & Serafeim, G.. The Impact of Corporate Sustainability on

Organizational Processes and Performance. Harvard Business School Working Pa-

per Series 12-035, 2013 Retrieved from: http://www.hbs.edu/faculty/Publication%20

Files/12-035_a3c1f5d8-452d-4b48-9a49-812424424cc2.pdf

[2] Elkington, J. Cannibals with Forks: The triple bottom line of 21st Century Busi-

ness, 1997. UK: Capstone.

[3] Ernst & Young LPP & Boston College Center for Corporate Citizenship. The Value

of Sustainability Reporting, 2013 Retrieved from: http://www.ey.com/Publication/

vwLUAssets/ACM_BC/$FILE/1304-1061668_ACM_BC_Corporate_Center.pdf

[4] Ibid.

[5] Ibid.

[6] Ibid; The Association of Chartered Certified Accountants. Understanding Inves-

tors: Directions for Corporate Reporting, 2013 Retrieved from: http://www.accaglob-

al.com/content/dam/acca/global/PDF-technical/financial-reporting/pol-afb-ui02.

pdf

[7] Ernst & Young LPP & Boston College Center for Corporate Citizenship. The Value

of Sustainability Reporting, 2013. Retrieved from: http://www.ey.com/Publication/

vwLUAssets/ACM_BC/$FILE/1304-1061668_ACM_BC_Corporate_Center.pdf

9Introduction

and reporting in the MENA region will be at the core of enhancing the competitiveness of the re-gion’s private sector. Without according attention to their CSR performance and disclosure, MENA companies are decreasing their chances of inte-gration in global supply and value chains.

From a broader perspective, both social and envi-ronmental sustainability are playing a bigger role in the competitiveness of whole economies. In light of the MENA region’s “Arab Spring,” global leaders have been re-assessing the accuracy of the typical economic growth model[9]. Starting the year 2011, the World Economic Forum for example introduced the concept of sustainable competitiveness and introduced a sustainability adjusted Global Competitiveness Index (GCI)[10]. The new index takes into consideration issues of social sustainability including equity in access to basic needs and services, the extent of informal economy, and youth unemployment among sev-eral others. It also considers issues of environmen-tal sustainability including policies, resource use intensity and emission intensity. In short, the new index considers social and environmental sustain-ability as they relate to productivity and thus com-petitiveness in the long term[11].

In a region where youth unemployment rates are the highest in the world[12], 68% of the world’s base of the pyramid population reside; suffering social, economic and political marginalization[13]; and

demands for socioeconomic reform are at their peak, a strategic, socially responsible and sustain-able private sector has become a necessity.

By aligning its strategies and operations with the re-alities and priorities of communities in which they operate, the private sector will be able to enhance the overall competitiveness of economies in which it exists; increasing the private sector’s chances of continuing to exist and thrive over the long term.

CSR/Sustainability reporting and disclosure is one of the first and foremost steps the private sector can take towards becoming a sustainable and thus glob-ally competitive one.

[8] RobecoSAM & KPMG. The Sustainability Yearbook, 2013. Retrieved from: https://

www.kpmg.com/BE/en/IssuesAndInsights/ArticlesPublications/Documents/sustain-

ability-yearbook-2013.pdf

[9] World Economic Forum. “Sustainable Competitiveness,” n.d. Retrieved from: http://

www.weforum.org/content/pages/sustainable-competitiveness/

[10] World Economic Forum. Global Competitiveness Report: 2013-2014 Full Data

Edition, n.d. Retrieved from: http://www3.weforum.org/docs/WEF_GlobalCompeti-

tivenessReport_2013-14.pdf

[11] Ibid.

[12] World Economic Forum. Addressing the 100 Million Youth Challenge: Perspectives

on Youth Employment in the Arab World in 2012, Retrieved from: http://www3.wefo-

rum.org/docs/WEF_YouthEmployment_ArabWorld_Report_2012.pdf

[13] El-Darwiche, B., Sharma, A. Singh, M. & Abdel Samad, R. (n.d.). Digitization in

Emerging Economies Unleashing Opportunities at the Bottom of the Pyramid. Re-

trieved from: http://www.booz.com/media/file/BoozCo_Digitization-in-Emerging-

Economies.pdf


C

D

B

Methodology & Approach

This report presents research findings from a study conducted on the current state of sustainabil-ity reporting among stock-listed companies in the MENA region. Sustainability reports were used as the main source of information and were analyzed through desk research. The aim of the study is to identify the current status of sustainability report-

ing across the MENA region, as well as identify the most advanced countries and companies in this re-gard. The study is also intended to act as a basis for further understanding and activity planning for enhanced sustainability practice in the region. The study utilized a clear and systemic methodol-ogy, which was comprised of the following phases:

SAMPLE SELECTIONA total sample size of 170 companies was selected based on a set of criteria; 10 companies were selected from a total 17 countries in the MENA region. The criteria for selection were based on a purposive sampling method and were as follows:Listed Security: on the stock exchange (of the country of origin)Size: largest size listed companies (according to market capi-talization figures when available or 3-month traded volume

MATERIALITY ANALYSISAs part of the research preparation stage of the study, a ma-teriality analysis was conducted to accomplish the following goals: 1) to identify sustainability topics and information cat-egories that should be considered for further study (in phase (C) of the methodology); and 2) to identify key sustainability challenges in the MENA region. Using secondary research and through a desk review of on-line and published literature, over 110 references relevant to the MENA region and sustainability were reviewed. Main references included: news and research articles, working pa-pers, development reports and guidelines, online discussion groups/posts, blogs, national government development plans/

COMPANY INFORMATION COLLECTION/ANALYSISThe study utilized sustainability reports as the main source of information to review selected companies’ sustainability-related activities. For consistency, desk research at this phase was also conducted on reports published between the period 2011-2013, in English, Arabic and French. A database of company informa-tion was built by collecting and analyzing data points on the 170 MENA companies in our final sample. Data compiled in the database included: reporting formats, usage of international

REPORTINGAnalyzing data gathered as part of phase (C) of the methodol-ogy, and synthesizing findings into this report. Unless otherwise stated, all charts and information in this report were sourced from data collected as part of this study using a final sample size base of 170 MENA-based companies. Small sample bases (sample cells of less than 30) are identified using the (*) symbol on charts

data) in the year 2012.Sectors: A purposive representation of various industry sec-tors, if the 10 largest companies for a country do not repre-sent a distribution of sectors agreed upon by the GIZ and ATC. With that in mind, sample adjustments aimed to ensure rel-evant representation of industry sectors and to avoid skews towards one or two large sectors in our final sample.

policy papers and other strategic reports. Examples of sources used for such references are: national governments, academic institutions, civil society organisations, industry associations and MENA-based sustainable development associations. At this stage, published information sourced by companies (web-site posts, sustainability reports, press releases) was not includ-ed. Sources published during the period from Y2011 to Y2013, and documents in English, Arabic and French were included in the review. Information gathered from the desk review was audited and a list of material sustainability topics were identi-fied per sector and country for the 17 MENA markets included in the study.

reporting guidelines, and web links to online reports and com-pany contact details. Qualitative information was also listed in the database including: priority sustainability topics covered by companies (mentioned in sustainability reports, websites, annual reports, and in other online resources, etc.), existing (or non-ex-isting) channels for stakeholder engagement regarding sustain-ability performance and approaches towards sustainability man-agement within the company.

throughout the report. Finally, to enhance our analysis at the re-porting stage, findings from the earlier materiality analysis task of the study (as part of phase (B) of the methodology) provided a benchmark against which to compare how companies’ busi-ness strategy and value-creation efforts are aligned to the wider country and regional MENA context.

A

11Introduction

COMPARITIVE TRENDS IN SUSTAINABILITY REPORTING

IN THE MENA REGION


The current report on MENA-based listed com-panies’ communication of sustainability perfor-mance captured prevalent patterns in reporting. The below sections outline main findings on how reporting methods differed among companies and across countries, sectors and the size of firms.

GeneralAn overview of reporting trends shows that a large proportion of companies that are publicly listed in the MENA region are communicating their sus-tainability practices to the outside world through what has come to be known as sustainability re-porting. Trends also indicate that companies re-porting on their sustainability performance are differentiated by the relevance, extent and struc-ture of the information they publish.

40 percent of companies surveyed, can be described as ‘brief reporters’ who have referenced basic, or relevant, non-data driven (or non-metric) infor-mation about their corporate social responsibility or sustainability. These firms state their affiliation with sustainable development and/or CSR in rang-ing degrees, which vary from publishing a state-ment of intent in their corporate mission to length-ier descriptions of their CSR activities.

Brief Reporters also tend to use similar commu-nication channels, mainly sub-sections of their

Patterns of Reporting

CHART 1: Overview of Reporting Trends Among Companies

Base: All companies (170)

41%

Non-reporters40%

Brief Reporters19%

Extensive Reporters

annual report and/or corporate website to inform stakeholders of their sustainability and responsi-bility activities. Other characteristics of brief re-porters are lower incidences of strategic involve-ment with sustainability and the use of common frameworks or standards when communicating the social, environmental and economic impact of the company’s operations. Most commonly, companies post updates concerning their acqui-sition of environmental, health and safety certi-fication seals such as International Organization for Standardization (ISO), Occupational Health and Safety Advisory Services (OHSAS) and Health, Safety, Environment and Quality (HSEQ) and oth-er integrated management system certification through their websites.

A smaller segment of nearly 20 percent of compa-nies studied are more ‘extensive reporters’ publish-ing either full stand-alone or integrated reports dedicated to analyzing their company’s sustaina-bility issues. These issues are also embraced across the communication of the company’s mission, op-erations, products and governance developments, seen on their websites.

Extensive reporters are an active segment and demonstrate higher immersion with sustainabil-ity and corporate social responsibility. They are more likely to use reporting tools and guidelines. They are also distinguished by their tendency to communicate across multiple channels in an in-tegrated way.

Companies are independently making decisions to publish their initial rounds of sustainability reports, and most companies are at the stage of recognizing the scope of their corporate social responsibility by identifying and responding to stakeholders’ expec-tations. Some companies are creating frameworks

13Comparitive Trends in Sustainability Reporting in the MENA Region

or committing to formal reporting guidelines to enhance their reporting efforts. Best practice cases show that integrated reporting can provide a com-prehensive view of a company’s short-, medium- and long-term value and performance. [14]

CHART 2: Reporting Trends by Country


41%

40%

19%

47%

19%0% 50% 100%10% 20% 30% 40% 60% 70% 80% 90%

Extensive Reporters Brief Reporters Non-Reporters

UAE

Morocco

Kuwait

Egypt

Lebanon

Oman

Jordan

Palestine

KSA

Bahrain

Algeria

Qatar

Iran

Tunisia

Syria

Libya

Iraq

A remaining 41 percent of listed companies that were surveyed are non-reporters, or provide no in-formation on sustainability or corporate social re-sponsibility through any communication channel, or have not yet established a website.

[14] From the Global Initiative for Sustainability Ratings (GISR) Principles, accessed at

http://ratesustainability.org/standards/principles/


CASE STUDY: Palestine, Pharmaceuticals

Social Responsibility Report 2010Reporting frameworks: - NoneEmployees: 298Local company

Birzeit Pharmaceutical Company is Palestine’s leading manufacturer of generic medicines, producing over 160 products, based in Ramal-lah. Their facilities total an area of 15,000 square meters of modern production lines according to state-of-the-art technology.

Sustainability as a Guide

Birzeit Pharmaceutical Company’s efforts to achieve quality standard certificates such as Cur-rent Good Manufacturing Practices (CGMP) and ISO quality systems, as well as educating and training staff are among the many strategic in-vestments the company has made. While there remains room to improve their rate of reporting and providing data and metrics on their sustain-ability performance, they have been successful in approaching and identifying sustainability prior-ity areas.

Through an organic approach and policies, the company has been selecting their corporate so-cial responsibility activities and practices based on a social priority to serve the wellbeing of peo-ple, mainly employees and community-members. They innately believe that sustainability is the measure for business success, and seek to mirror that in their communal values, culture, economy and growth. Their convictions have led to the identification of material issues in, for example: safety and health, diversity and gender equality, living conditions and employability, and particu-larly in environmental protection.

They report on their environmental dimension of sustainability performance as a management of risks and opportunities and have launched initia-tives in pharmaceutical waste control from their manufacturing processes. BirZeit also addressed material water drainage issues, where the company assesses the amounts of water consumed monthly, and has built a system for the reuse of about 1000 litres of treated water per hour. Other priorities include managing solid waste from operations, recycling, proper gas usage, energy efficiency and introducing a green car policy to improve fuel ef-ficiency and reducing greenhouse gas emissions.

CountriesThese different types of reporting trends among companies were tracked across the 17 MENA countries surveyed. Just fewer than 20 percent of companies published a stand-alone or inte-grated report on sustainability issues specifically. Chart 2 illustrates Morocco and the UAE, as well as Kuwait as lead countries, followed by Egypt and Lebanon, in terms of corporate readiness and investment in structured and guided sus-tainability reporting. Looking at brief reporters, companies based in Egypt, Palestine, Iran and KSA tend to disclose shorter but very relevant information in higher frequency, followed by smaller markets such as Lebanon and Jordan. While reporting in Syria and Oman may not be as frequent when compa-nies do report it is in more detail and structure.

The Bir Zeit Pharmaceutical company based in Palestine has been developing its business over the years by applying principles of sustainability in their management approach.

Best practice cases show that integrated reporting can provide

a comprehensive view of a com-pany’s short-, medium- and long-

term value and performance.

15Introduction

Countries lagging in sustainability reporting are locations that face considerable political or organ-isational challenges to effective governance and transparency, namely Iraq, Libya and Syria, as well as Oil & Gas wealthy Qatar and Algeria [see Chart 3]. Political instability and conflict may appear to be a main cause for lower incidences and frequency of reporting by businesses in MENA countries such as Iraq, Libya, Tunisia and Syria. However, contra-ry to what one may have assumed about the region, our research found that 80 percent of companies in Lebanon, 70 percent of companies in Palestine and a third of companies in Syria provided brief reports of their corporate social responsibility pro-gress as wars continue in the Levant sub-region of the MENA where they operate. In addition, com-

panies based in oil-wealthy stable economies, namely Qatar and Algeria, lagged significantly in transparency and reporting.

More so, a relationship between the extent of the development of the country’s securities market or exchange systems and companies’ reporting activity was noted, by comparing the growth of listed companies on respective country exchanges and the national focus on capital market govern-ance recorded in our materiality analysis of MENA sustainability issues. As examples, markets in Algeria and Tunisia have been slow to opening to foreign investment and privatizing public firms, leading to a partitioned and less communicative business sector. While on

CHART 3: Countries Reporting No Information (By Country)


0% 100%40%20% 60% 80%

Percentage of CompaniesEgypt

UAE

Palestine

Morocco

Lebanon

Oman

Kuwait

KSA

Jordan

Iran

Bahrain

Algeria

Qatar

Tunisia

Syria

Libya

Iraq

Comparitive Trends in Sustainability Reporting in the MENA Region


the other hand, the United Arab Emirates (UAE) market has established three stock markets and governance authorities along with business associ-ations that have had a positive influence on compa-nies’ awareness of transparency and sustainability requirements at both local and sub-regional levels.[15]

Egypt provides another example: the shift in na-tional focus towards governance, and establish-ment of entities such as the Egyptian Institute of Directors (EIOD) and the Egyptian Corporate Re-sponsibility Center (ECRC) alongside the introduc-tion of an ESG index into the local stock exchange was reflected in a higher propensity towards dis-closure among companies [see Chart 3]. The above observations imply that higher levels of national priority placed on corporate governance and hav-ing institutions implement policies in this regard works effectively in increasing the rate of corpo-rate reporting.

[15] Accountant Middle East, “Resetting the green button”, September 12 2013.

17Introduction

The Libyan Stock Market (LSM) reopened, for the first time since the fall of the Gaddafi regime, in March 2012 (Reuters, 04/03/2013). The LSM currently has 10 listed companies’ securities on their exchange.Tunisia’s post-revolution interim government is directing well-funded public sector companies op-erating in competitive sectors to list themselves on the Bourse de Tunis. By raising their own capital through stock market listing, the government aims to alleviate state budgets and to ensure more transparent management (All Africa, 1/11/2012). First established in 1993, the Algerian Stock Exchange has been slow to launch mainly due to low li-quidity in the economy as well as regulatory restrictions on investment. By making the stock market more accessible to foreign investment, the exchange projects companies listed on the Algeria Stock Exchange to grow from 4 to between 40 to 50 companies over the next 5 years, at a rate of at least 8 entities per year (Reuters, 21/11/2013).There are three stock exchanges established in the United Arab Emirates (UAE). The Dubai Finan-cial Market (DFM) the Abu Dhabi Securities Exchange, and the NASDAQ Dubai which has 10 listed companies. The DFM, which runs securities trading in Dubai, made a net profit of $22.5 million in the three months to Sept. 30 2013. (Reuters, 04/11/2013). The role of Islamic-based finance is growing in the MENA region, particularly being led by GCC cap-ital markets such as the UAE and Qatar. Sharia-compliant investment instruments (such as bonds

“sukuks”) are expected to fund both planned government infrastructure investment as well as cor-porate sector growth in the region’s economic outlook. Some MENA governments are promoting the issuance of sukuk for projects related to clean technology, renewable energy and climate change solutions also called “Green Sukuks” (Hawkamah, 2012).

Developments in Building MENA Capital Markets



MENA Securities Markets Listed Companies

Iran Tehran Stock Exchange (TSE) 314

Egypt The Egyptian Exchange (EGX) 212

Kuwait Kuwait Stock Exchange (KSE) 210

Saudi Arabia Saudi Stock Exchange (Tadawul) 163

UAE Dubai Financial Market (DFM)Abu Dhabi Securities Exchange (ADX)NASDAQ Dubai

656710

Oman Muscat Stock Exchange 124

Jordan Amman Stock Exchange (ASE) 120

Iraq Iraq Stock Exchange 87

Morocco Casablanca Stock Exchange 75

Tunisia Bourse de Tunis 60

Palestine Palestine Exchange (PEX) 49

Bahrain Bahrain Stock Exchange (BSE) 43

Qatar Doha Stock Market (DSM) 43

Syria Damascus Securities Exchange 22

Lebanon Beirut Stock Exchange 10

Libya Libyan Stock Market (LSM) 10

Algeria Algeria Stock Exchange 4

TABLE 1: Number of Listed Companies on Securities Exchanges in MENA Region

Source: Data on listed companies posted on respective stock exchange website. Data for Algeria from Reuters news.

There are over 1,688 companies listed on stock

exchanges across the MENA markets surveyed.

19Introduction

SectorsEfforts towards reporting on corporate sustain-ability also vary by business sector. Looking at ex-tensive reporting trends, technology/telecommu-nication, chemicals and basic resources sectors are noticeably represented [see Chart 4]. This is partly related to their large to medium market cap size and their substantial economic significance to the formal economy. Banking, as the most prominent sector amongst listed companies across MENA markets, is also represented by about 28 percent of firms reporting extensively.

However, compared to the telecommunication industry for instance, the banking and financial services sectors overall are weighed down by high incidences of non-reporting. As a cluster, the fi-nancial sector, which includes banking, financial services and insurance, tends to fall behind oth-ers in reporting. Nearly 70 percent of financial services firms, and almost 40 percent of banks surveyed, communicate limited to no informa-tion on sustainability issues. Due to the privacy and confidentiality embedded within the culture of the finance sector, specifically banking and pri-vate equity, it will take time to introduce a culture of transparency and disclosure within the sector. The finance industry in general tends to also be under less public scrutiny as their impact is most pronounced through their investments rather than high-exposure direct operations, such as in mining or basic resources industries.

Characteristic to the region, a fundamental chal-lenge to implementing common corporate gov-ernance frameworks to conglomerates and to banks specifically relate to policies of ownership, mainly family and state-owned. The majority of MENA-based banks are federal/municipal entities or state-owned, where leadership tends to be scat-tered across different ministries or government bodies[16], operating without unified governance policies or centralized reporting. The substantial role of family-owned banks (publicly listed) in the region may also present barriers, as non-family shareholders tend to hold lower stakes and do not participate in the banks’ governance[17].

Following the financial sector, the construction (and real estate) and as well as sectors related to the food industry that are characterized as sig-nificant contributors to MENA equity markets also lag behind in their degree of sustainability and governance reporting [see Chart 5], An inter-esting finding considering the industrial magni-tude of these and their major importance to the region’s economy.

[16] Saidi, N. “The Arab Spring emphasizes better corporate governance of state-

owned enterprises”, 2012.

[17] OECD, “Policy brief on improving corporate governance of banks in the MENA

region.” 2009.



53

%

11%19%0% 50% 100%10% 20% 30% 40% 60% 70% 80% 90%

CHART 4: Reporting Trends (By Sector)


Extensive Reporters Brief Reporters Non-reporters

Technology

Chemicals

Basic Resources

Telecommunications

Utilities

Health Care

Banks

Food Processing

Construction

Transportation

Real Estate

Financial Services

Mining

Retail

Oil & Gas

Travel & Tourism

Industrial Goods

Agriculture

Insurance

Media

Education

Automotive

21Introduction

CHART 5: Companies Reporting No Information (By Sector)


0% 100%40%20% 60% 80%

No Information

Technology

Chemicals

Telecom

Retail

Oil & Gas

Basic Resources

Utilities

Mining

Real Estate

Banks

Construction

Travel & Tourism

Industrial Goods

Food Processing

Transportation

Health Care

Agriculture

Financial Services

Insurance

Education Services

Automotive



CASE STUDY: Morocco, Food & Beverages

Social Responsibility Report 2011First social responsibility report

Reporting frameworks: GRI 3.0Employees: 4,000

Local Company

Groupe Centrale Laitiere is the first Moroccan pro-ducer of packaged milk and fresh dairy products, in 2012, the company’s majority shareholder became the Danone Group. Their business vision rests on a social dimension to deliver nutrition and health through high quality food, to as many customers possible.

Recognizing Stakeholders along the Value Chain

Food manufacturing involves an intricate value chain with operations that span many sectors in-cluding agriculture, food processing, logistics, fi-nance and technology. Through their process of social responsibility reporting, Groupe Centrale Laitiere states its first breakthrough as the recog-nition of different stakeholders at each step of the company’s value chain. By accounting the needs of their stakeholders and enforcing their interests and fundamental rights, Groupe Centrale Laitiere had found the appropriate definition for their corpo-rate social responsibilities. The company maintains dialogue with their stakeholders starting from their supply chain partners of 120,000 local milk produc-ers all the way to the end-consumer. They credit the process of sustainable development for realizing unaccounted-for value along the chain that has led to increased capacity to their core business, to pro-duce quality food consistently and responsibly.

As the company progresses in its social responsibil-ity, Groupe Centrale Laitière plays a strategic role in Morocco’s social and economic development, “pro-viding steady incomes to hundreds of thousands of Moroccans working on farms, in dairy cooperatives and in food processing industries.”

Operating in the food and dairy industry, Groupe Centrale Laitiere based in Morocco offers some best practices to recognising corporate social re-sponsibility along a complex value chain.

Overall, companies operating in traditionally prominent economic sectors such as Transporta-tion, Oil & Gas and Tourism demonstrate an incli-nation towards limited and brief reporting on their company operations. Similarly, a conflict of inter-ests based in companies’ ownership structure stag-nates greater progress in corporate governance and sustainability performance. For example, pub-licly listed companies managing public resources, such as in the petroleum and natural gas indus-tries or national aviation companies, tend to be large state-owned enterprises where management is less autonomous from political and bureaucratic priorities.[18]

The conglomerate SABIC is a publicly-listed state-owned enterprise which offers a successful case of engaging stakeholders and learning about their ex-pectations for greater disclosure from the company.

[18] Saidi, N. “The Arab Spring emphasizes better corporate governance of state-

owned enterprises”, 2012.

23Introduction

CASE STUDY: Saudi Arabia, ChemicalsSABIC, a state-owned enterprise, is a global leader in the petrochemical industry, involved in the produc-tion of chemicals, polymers, plastics, metals and fer-tilizers. The company mission is “to provide quality products and services responsibly through innova-tion, learning, collaboration and operational excel-lence, while sustaining maximum value for [their] stakeholders.”

Stakeholder Engagement and Kicking off the Mate-riality Process

SABIC presents best practices while developing their own approach to sustainability management, which the company describes as a continuous jour-ney. SABIC considers the publication of their first sustainability report as a crucial milestone requiring public discussions of their most material sustaina-bility issues, and seeking feedback on their reporting from a relevant audience. Their sustainability report was downloaded over 15,000 times and received hundreds of comments via their website.

Preparing their first report was a crucial stepping-stone, enhanced dialogue with its stakeholders pro-vided a rare opportunity to reflect on sustainability priorities and vision. Following direction from ex-ternal sustainability experts (KPMG, BSR, GreenOr-der and others) on their reporting strategy, SABIC then, for the first time, developed an extensive stakeholder map, which included more than 100 en-tities (NGOs, industry associations, CSOs etc.) across key regions. Giving priority to feedback from stake-holders most aware and involved with the company, a list of material issues guides their sustainability reporting process.

SABIC’s current sustainability report answers stake-holders’ feedback and includes responses to con-cerns, particularly towards providing more data and metrics on their sustainability performance. The company views its compliance as a demonstration of commitment to sustainable management of re-sources. Other issues of concern to stakeholders are: more disclosure of critical issues (human rights, gender diversity, supply chain, biodiversity), higher collaboration and innovation in addressing sustain-ability goals.

Sustainability Report 2012Second annual sustainability reportReporting frameworks: GRI 3.1 (Application Level B, self-declared); UNGC member 2012 (this report is their official UNGC Communication on Progress).Employees: 40,000Global operations: 80+ countries



CASE STUDY: Egypt, Technology/Telecommunications

Sustainability Report 2010/2011Third sustainability reportReporting frameworks: GRI (Application Level B), UNGC member (2008), MDGs.Employees: 12,082Global operations: 7 countries

Orascom Telecom is a leading global telecommu-nications company operating GSM networks in high growth markets in the MENA region and in Asia. Following Orascom Telecom Holding’s parent company Wind Telecom’s merger with VimpelCom Ltd., it is now the sixth-largest subscriber-based tel-ecommunications company worldwide.

Coordinating Materiality among Large (mega) Mul-tinational Corporations

Identifying and then reporting on materiality is-sues can be a challenge for very large multinational companies whose operations span across many countries and several continents. Especially so, as in Orascom Telecom’s recent case, when the merger of two large companies and their internal opera-tions and processes is occurring.

A decentralized approach to CSR practices has helped in implementing environmental, social, and govern-ance (ESG) initiatives recommended on group level across countries, so that ESG sustainability manage-ment and initiatives can be tailored to meet local market needs. The mother company’s CSR team plays a guiding role ensuring initiatives are of the-matic relevance to both the telecommunications industry and communities. For example, on the technology dimension, their core business, operat-ing companies are responsible for delivering results on their commitments towards energy efficiency as agreed in partnership with the holding group’s en-ergy efficiency reduction targets. At an implementa-tion stage, tactical decisions are left to the company’s local CSR practitioners in different markets where they operate, because they hold a better understand-ing of stakeholder needs in their country.

As seen in other cases of best practices in sustainability management in the MENA region, Orascom Telecom Holding shows high CEO and top management’s in-volvement and support on all CSR activities.

SizeThe average size of companies in the sample in terms of market capitalization is $ 4.21 bn[19] and trends show a positive correlation between increased com-pany size and rates of reporting. Chart 6 illustrates 43 percent of large market cap (over $4 bn) and a quarter of medium market cap companies are full reporters, compared to 17 percent and 3 percent of small and micro size companies respectively. While large cap companies lead in extensive re-porting there’s a large variance in disclosure meth-ods by different sectors among large companies. Large banks and telecommunication companies are beginning to communicate on sustainability more fully. And while 40 percent of companies operating in the Financial Services and a third of Oil and Gas companies in our sample are large cap firms, their sectors are not represented among ex-tensive reporters.

[19] Straight average of market cap size data of 140 companies

25Introduction

CHART 6: Company Size Segments (By Reporting Trends)

%

36 % 21%

%

44 % 30%

17%

%

%

50% 33%

3% 29% 68 %

Base: All companies with market cap data (140)

Extensive Reporters Brief Reporters Non-Reporters

Large Cap ($4 billion +)

Medium Cap ($1.0 to 3.9 billion

Small Cap ($100,000 to 900,000)

Micro Cap (Less than $100,000)


26

43

A few MENA-based companies with global opera-tions show experience in managing sustainability concerns across markets as in the case of Orascom Telecom Holding. Brief reporting is more frequent among medium and small cap companies [see Chart 6] and a similar sectoral analysis shows medium and small cap companies operating in construction, real estate and retail sectors tend to drive more basic reporting currently [see chart 7] compared to other sectors.Micro cap companies (under $ 100 million) are seen to lag significantly in reporting compared to other segments. Over two-thirds of micro-com-panies do not report on sustainability issues.A sectoral profile shows that most micro cap firms in our sample operate in the financial, construc-tion and food processing industries [see chart 7]. Relatively smaller, but influential, sectors such as Education and Media are more mute on sustain-

ability reporting in the MENA region. Finally, as an outlier case, ascertaining the market cap data, and sustainability reports of companies operating in the Agriculture sector was relatively challenging.

A rare case, Groupe Elloumi is a small-size company operating in the agriculture sector based in Tunisia, it recognises that its industry’s sustainability de-pends on the quality and safety of their production and is investing in research and development along those objectives. The company has also identified ‘cleaner production’ as another area of materiality where they are creating policies to reduce their op-erations’ consumption of resources and ensure best practice in waste management.[20]

[20] Groupe Elloumi company website, accessed December 5 2013.


Construction

Financial Services

Telecommunications

Banks

CHART 7: Company Size vs. Sector


Food Processing

Oil & Gas

Real Estate

Utilities

Transportation

Health Care

Insurance

Retail

Basic Resources

Trade & Tourism

Agriculture

Mining

Chemicals

Automotive

Technology

Industrial Goods

Education

Media

Large Cap($4 billion +)

Medium Cap($1.0 to 3.9 billion)

Small Cap($100,000 to $900,000)

Micro Cap(Less than $100,000)

Unknown Size

118 8 7 5

8

4

2

1

1

2

1

1

3

1

2

2

1

3

1

21

1

11

4

2

5

2

4

2

2

1

2

3 1

2

3

1 1

1

1

1

1 1

2 2 4

2 7

4 2

3 4 1

3 1

1 1 2

1 3

2 1 2

1 1

2

Chart 7 shows the distribution of company market cap size by sectors in the sample of companies surveyed.

27Introduction

AREAS OF MATERIALITY


Governance

An identification of the most prominent sustain-ability challenges in the MENA region, raised by sources such as the media, civil society organiza-tions and national governments[21], is used as con-text to understanding the sustainability issues being covered by companies. This analysis indi-cates the top sustainability issues by country in the MENA region; countries were found to share common areas of materiality. The top three the-matic categories identified are: Governance, Wa-ter management and Energy solutions.

The need for enhanced governance is a prominent thematic issue across MENA region countries. Governance issues ranging from national politi-cal capacity building to more specific sustainabil-ity concerns related to land use and resource al-location were identified. Corporate governance sustainability issues most commonly cited were: transparency, disclosure, accountability and sus-tainable leadership (Board of Directors and man-agement). Progress in creating and implementing rules-based frameworks are frequently discussed in this area.

At a national level, research shows how the events and demands of the Arab Uprisings have high-lighted political governance capacities as crucial to sustainability. Waves of protests in directly-affected countries, as well as across the region, highlight the public’s concern with social jus-

tice stemming from weak political and economic governance[22]. Other specific governance issues identified were for example land governance[23], a top priority sustainability issue particular to Mid-dle Eastern countries such as Palestine and Iraq[24]. Moreover, efforts being made towards greater public budgetary management and transparency were found to be of significance such as in Moroc-co[25], where there is a focus on public disclosure by the government to keep citizens informed and provide accountability on the spending of public funds and budgetary policies.

Change in the system of distribution of basic goods and services, traditionally provided by state-owned enterprises, is a dimension of social justice that MENA populations seek. Too often, natural resources and national assets are accumulated by special inter-ests, pushing-out citizens’ reach to public goods[26]. In addressing corruption and poor public sector man-agement, steps towards strengthening municipal structures and citizen engagement are high priority governance principles for sustainability.In addition, state control of the telecommuni-cations sector, print and other media is hinder-ing society’s voice, and in turn, the sustainability of MENA countries as operating environments.[27] In Bahrain for example, political strength and sustainability were rated on a decreasing trend by risk assessment tools[28] due to limitations placed on public expression, such as a government decree obligating all telecommunications companies and internet service providers to block over 60 speci-

[21] A materiality analysis covering over 110 secondary research sources for

this report

[22] Saidi, N. “The Arab Spring emphasizes better corporate governance of

state-owned enterprises”, 2012

[23] landgovernance.org. “Palestinian Territories: Food security and land gov-

ernance factsheet.” 2012.

[24] US Institute of Peace, “Land, property and the challenge of return for Iraq’s

displaced.”

[25] The World Bank, “Transparency and open budget, the true stakes in Mo-

rocco’s governance reform.” 2013

[26] Saidi, N. “The Arab Spring emphasizes better corporate governance of

state-owned enterprises”, 2012

[27] Ibid.

[28] The World Energy Council, Sustainability Index 2013 – Bahrain, at: http://

www.worldenergy.org/data/sustainability-index

[29] Bahrain Media Sustainability Index (MSI), IREX website, accessed Novem-

ber 19 2013.

[30] CIPE, IFC. “Advancing corporate governance in the MENA.” February 2011.

29Introduction

Water Management

Areas of Materiality

fied websites due to their political orientation[29]. Stakeholders, usually in the form of national gov-ernments and financial industry authorities, are calling upon companies to deliver higher levels of governance as a part of their corporate responsi-bility. Implementing a common framework by the type of ownership base the company has, wheth-er fully or partially family- or state-owned, is a characteristic challenge to corporate governance in the MENA region. In this respect, separating ownership or national political interests from the company’s sustainability and performance are key corporate governance hurdles, particularly among banks and large firms.[30] Expectations for im-proved governance include more transparency, ac-countability and disclosure of company structures and procedures. Reporting on companies’ sustain-ability performance is an increasingly important priority in corporate governance.

Water sustainability issues are most inter-related to other material themes such as political stabil-ity/governance, health, energy, technology and urban development. In global comparison, the MENA region is more severely affected by water scarcity than any other part of the world[31]. This, in turn, leads to drastic social, political and economic consequences. Water conservation and managing existing water supply, particularly among Arabian Gulf countries as a sub-region, are current action areas, as well as monitoring industrial consump-

tion of water resources and its operations’ impact on water quality. A common barrier to pricing wa-ter, in order to encourage efficiencies, is linked to government policies, which subsidize utilities.[32] In relation to these issues, the cost-benefit analysis of water desalination as a sustainable source of wa-ter is often evaluated. Water sustainability issues related to agriculture and food security are popular themes in Egypt[33], Palestine and Lebanon[34]. De-veloping irrigation systems to cater to sustainable water use and desert-appropriate irrigation tech-nology is a water sustainability trend in the MENA region.

Jordan[35] and Syria in particular are defined as among the worst drying countries in the region, experiencing significant droughts. Water misman-agement due to lack of governance or technology exacerbate these challenges[36]. As corporate citi-zens, companies are expected to contribute their share in mitigating consumption of water and oth-er natural resources in its’ operational production and procedures. Going beyond conservation, the business sector can be a source of technological or managerial solutions to satisfy a range of criti-cal needs under the sustainability theme of water management.

Energy management and production are vital ma-teriality themes across the MENA region for com-panies, governments and citizens alike. Linked

[31] Hawkamah.org, “Harnessing green sukuk for sustainable development in

the MENA.” July 11 2012.

[32] Germanwatch.org. “Desertec and Human development at the local level in

the MENA region.” October 2011.

[33] Sustainable Agriculture Review, “Sustainable Agriculture and climate chang-

es in Egypt.” 2013.

[34] Ecomena.org. “The Agriculture scenario in the MENA.” April 15 2013.

[35] USAID Jordan, “Jordan country development cooperation strategy 2013-

2017.”

[36] CNN Blog, “Why water is key to Syria conflict.” September 17 2013.

Energy Solutions


Sustainable Building Practices

to climate change through emissions, urban air pollution and industry, the search for more sus-tainable energy sources concern many countries. Energy conservation, similar to the water utilities sector, and efficiency are also platforms for sus-tainability in many countries. Diversifying energy sources and strategies to develop power-gener-ating alternatives by looking into solar, wind or biogas power are at the forefront of materiality as well.[37] Studying the energy costs of current or potential sustainable solutions to other sustaina-bility themes, such as water scarcity arises, in this domain.

Government programmes or regulations to develop the energy sector are a current priority across most MENA countries[38]. National policies are power-ful catalysts for action on the sustainability issue of renewable energy. As a case, Jordan will be the first country in the MENA region to adopt an energy pol-icy similar to feed-in tariffs, which have made Eu-ropean countries like Germany and Spain leaders in renewable energy. Private companies will be able to directly submit energy proposals to build wind, solar, biomass and biogas projects with a guaranteed tariff for the power they produce as incentive[39].

Industrial production’s impact on energy con-sumption and sustainability is a main area of con-cern among companies themselves and national governments. The environmental impacts of en-ergy production on protected or bio-diverse areas are also being highlighted by various groups of

stakeholders[40]. These realities are driving corpo-rate innovation to explore new approaches and technology, such as waste-to-energy solutions[41].

The MENA region is currently experiencing rapid population and urbanization growth, accompa-nied by increasing demand for housing and ur-ban infrastructure. Given limited available land for urban growth[42] in many MENA countries, means that to cater to these needs requires a sus-tainable approach. Sustainability solutions under this theme range from sustainable urban planning issues, implementing national and international green building standards and participatory ap-proaches to urban development.[43]

Aiming at affordability and ensuring fairness in access to housing and public space, governments must increasingly engage its’ citizens and tackle the distribution of land ownership and property rights. Other regional urban development themes that seek an integral approach that strengthen munici-pal structures include the promotion of local eco-nomic development, urban environmental protec-tion and management of resources and the usage and new interpretation of cultural heritage.[44]

Real estate industry leaders outline the most ma-terial sustainable building challenges which cause the MENA region to fall behind globally in its’ re-action to the environmental, economic and social sustainability of the built environment.[45] They

[37] International Council for Science, “Future Earth regional workshop for the

MENA.” June 3 2013.

[38] The United Nations Environment Programme (UNEP), “Global outlook on

sustainable consumption and production policies.” 2012.

[39] Ratcliffe, Verity. “Jordan leads on energy tariffs.” The National, December

15 2013.

[40] The United Nations Development Programme (UNDP), “Environmental

sustainability issues highlighted in national reports to Rio+20” March 2013.

[41] Ecomena.org. “Waste-to-Energy Outlook for the Middle East.” Jan 31 2013.

[42] TU Berlin, “Good governance and sustainability in residential land admin-

istration in Muscat Oman.” 2012.

[43] Nour, AM. “Challenges and advantages of community participation as an

approach for sustainable urban development in Egypt.” Canadian Center of Sci-

ence and Education, February 2011.

[44] GTZ, “Integrated urban development in the Mediterranean and Middle

East region.”

[45] Kelly, D. “MENA region faces unique sustainability challenges.” The Fifth

Estate, July 1 2013.

31IntroductionAreas of Materiality

consider the main barriers to be a lack of legisla-tion to enforce change, absent financial incentive to command a premium for building sustainably for suppliers, and finally a limited awareness of envi-ronmental issues among consumers linked to state subsidies of energy, water and waste disposal.

The roles of finance and banks are frequently cited in relation to sustainability on ESG dimensions at a national level. Responsible banking is expected to expand access to capital among entrepreneurs and SMEs who venture into the economy with sustain-able or social business models.[46]

Civil society institutions raise sustainable finance is-sues such as microfinance and other financial inno-vation tools to increase financial inclusion. Within the financial services, the insurance industry is seen as integral to a key economic region such as the MENA as it is linked to sustainable development[47]

through its roots in risk management.

In some MENA countries the urgent need to fi-nance the rise of clean power, energy efficiency or carbon reduction projects has led economists to look to changing capital strategies. For exam-ple, the use of Shariah-compliant capital market financing instruments such as ”green sukuk[48]” to meet the investment requirements of Islamic-compliant investors from the GCC, Asia and global institutional investors aware of the benefits of

[46] Egyptian Institute of Directors, “Corporate social responsibility and corpo-

rate citizenship in the Arab world.” November 2012.

[47] UNEP Finance Initiative (UNEPFI), “UNEP FI Principles for sustainable in-

surance consultation heads to the MENA.” September 18-19 2011.

[48] Bonds

[49] Saidi, N. “Harnessing Green Sukuk for Sustainable Development in MENA.”

July 11 2012. Hawkamah, 2012.

[50] Ibid.

sustainable investment.[49] Still in its early stages, the Clean Energy Business Council of the MENA (CEBC) in partnership with the Climate Bonds Ini-tiative and the Gulf Bond and Sukuk association have launched a Green Sukuk Working Group to direct expertise and best practices towards devel-oping green sukuk products along international industry standards. Saudi Arabia is expected to in-vest over USD 100 billion in clean energy, with the UAE and other MENA countries following suit over the next 10 years, presenting many viable projects to attract sukuk investors.[50]

Sustainable Finance


ALG

ERIA

BA

HR

AIN

EGYPT

IRA

N

IRA

Q

JOR

DA

N

KSA

KU

WA

IT

LEBA

NO

N

LIBYA

MO

RO

CC

O

OM

AN

PALESTIN

E

QA

TAR

SYRIA

TUN

ISIA

UA

E

GovernanceCorporate Governance: Codes, Remuneration, CSR

General: Transparency, Information, Accountability

Water ManagementScarcity: Management, Conservation, Consumption, Pricing

Improving Water QualityIrrigation, Desert-Appropriate Water Technology

Alternative Sources: Re-use, Recycling, Desalination

EnergyEnergy Management: Efficiency & Consumption

Energy Supply & Production, R&D renewal alternative

Energy Subsidies, Pricing Utilities

Urban & Real Estate DevelopmentInfrastructure Service Delivery: Sanitation, Transport

Sustainable Urban: Standards, Affordability, Services

Green Design: Standards, Adaptation

Land Ownership & Property Rights

FinanceGovernance: Transparency, Integrated Reporting

Access to Capital: SMEs, entrepreneurs, green/social business (economic development, responsible banking

Poverty, Financial Inclusion, Housing, Microfinance

Risk Management & Insurance

Inadequate Financial Aid, Donations, Charity

TABLE 2.1: Priority Sustainability Issues

National government priority being placed on a sustainability theme at a general level

Areas currently being addressed by companies

33Introduction

ALG

ERIA

BA

HR

AIN

EGYPT

IRA

N

IRA

Q

JOR

DA

N

KSA

KU

WA

IT

LEBA

NO

N

LIBYA

MO

RO

CC

O

OM

AN

PALEST

INE

QA

TAR

SYRIA

TU

NISIA

UA

E

LabourLabour rights: Workplace conditions, wages, legal

Sustainable human development (skills, decent jobs)

Child labour

TransportClimate change: Carbon, GHG emissions

Public transport development in urban areas

Construction

Environmental impact: pollution, waste, resource consumption

Sustainable building: standards, rating systems

Urban air pollution (materials, cement, transport)

AgricultureR&D: Land improvement, soil, irrigation, farming

Rural development: smallholders, income, inclusion

Environmental impact: biodiversity, deforestation, crop residue disposal, water scarcity, food security

Food nutrition, health (organics, GMOs, obesity)

Resource management & community development

Waste ManagementInfrastructure building: Urban service delivery

Waste management innovations, technologies

Urban waste management (solid, water)

Industrial waste management, treatment, recycling, disposal, responsibility, R&D

TABLE 2.2: Priority Sustainability Issues (Continued)

National government priority being placed on a sustainability theme at a general level

Areas currently being addressed by companies



There are many instances of MENA companies initiating strategic sustainability actions to drive their business forward, and most crucially, in issues that are material and impactful to their business. The following examples illustrate is-sues covered by companies and how they relate to materiality issues in the region.

Banks and financial services firms acknowledge environmental risks, opportunities and impact on the larger economy, society and in-turn their own business. In adoption, the BLC Bank in Leb-anon states their investment decision-making approach is itself a pillar of their corporate so-cial responsibility. They think of CSR as a way to expand capital markets through product de-velopment for example innovating ‘eco-loans’ to disburse among entrepreneurs effecting green business models.[52]

Two companies in the Kingdom of Saudi Arabia (KSA) are addressing the same energy sustain-ability issue from different vantages. SABIC, a chemicals and energy conglomerate is leverag-ing the national government’s electric ‘energy consumption efficiency’ platform to conduct preliminary studies and introduce utilities pric-ing, a significant energy-related sustainability is-sue across MENA’s highly subsidized markets.[53]

In the stream of knowledge-creation, the Saudi Electricity company (KSA) makes donations to

[Tables 2.1 and 2.2 maps priority sustainability is-sues identified by external sources and instances where companies are addressing those issues (or not), by country. (Shaded teal boxes indicate na-tional government priority being placed on a sus-tainability theme at a general level[51], shaded grey boxes indicate areas currently being addressed by companies).Some sustainability issues such as energy man-agement and sustainable finance are areas where national focus is high and MENA-based compa-nies are very active. MENA governments do not appear to be launching specific national plans addressing waste management for example, but it is a popular sustainability engagement area for many companies currently.

In some crucial cases there is an evident discon-nect in the concern and action taken by both the government and corporate sector’s approach to issues communicated as highly significant to the country or region. For example in the areas of sustainable construction, transport and agricul-ture (or food security) showing pressing social and environmental sustainability issues. Address-ing needs for water management, a critical mate-rial issue to the overall region, is also lagging in company initiatives.

[51] Adapted from “Table 2”, page 192 in the UNEP’s “Global outlook on SCP

policies” report 2012.

[52] BLC Bank, Corporate Social Responsibility Report 2011, Lebanon.

[53] SABIC Group, Sustainability Report 2012, Saudi Arabia.

35Introduction

CASE STUDY: Egypt, Construction & Materials

Sustainability Disclosure Report 2011First Sustainability Report

Reporting frameworks: World Business Council for Sustainable Development – Cement Sustainability

Initiative (WBCSD-CSI) 2011.Employees: 4,622

Local company

Suez Cement (Italcementi Group) is comprised of an industrial network of five cement production plants located throughout Egypt, with an annual produc-tion of approximately 12 million metric tons.

Governance & Frameworks for Sustainability

Following its recent acquisition and subsequent changes in management, the Suez Cement Group is aiming to adopt best practices in business perfor-mance and sustainability at the core of its operational strategy, culture, responsibility and competitiveness. The company reports its Sustainability Policy covers key themes affecting their business, eg.: human rights, business integrity, health and safety, labor practices, supply chain, energy and environment.

The companies use group-level corporate govern-ance principles to monitor and disclose sharehold-ing structures, authorities, powers and procedures. Other governance programmes include: Anti-brib-ery compliance, Antitrust Compliance and Enter-prise Risk and Compliance. Internal governance capacity-building deliver benefits of risk mitigation and corporate social responsibility. After Egypt’s January 2011 Revolution, the Group has been man-aging the restructuring of company policies and working conditions for its’ employees and contrac-tors through union agreements and overtime reduc-tion, as examples. The Group’s new Social Initiatives Policy aims to build relationships with ‘all the rel-evant stakeholders and define rules for supporting organizations and social projects.’

In its first sustainability report, the company is re-porting safety, health and product responsibility performance supported by quantitative data and information. In addition, Suez Cement Group is de-veloping KPIs for its performance on environmen-tal protection, which include key environmental sustainability themes, eg.: climate and energy, en-vironmental management, air emissions, water and natural resources, and quarries. Committing to its vision, Suez Cement published its’ 2015 Sustainabil-ity Objectives in key sustainability areas supported by metrics and KPIs. The company employed an independent assurance report on its’ CO2 emissions which was based on the World Business Council for Sustainable Development reporting criteria for the Cement Sustainability Initiative (WBCSD-CSI).

knowledge development in areas related to en-ergy and electricity in-line with the sector in which it operates, specifically research and de-velopment into efficient power sources, trans-mission, generation and distribution. Part of the company’s sustainability strategy is to use this education towards finding ways to deliver elec-tricity to potential customers in villages in re-mote areas and in urban informal settlements[54]. The Suez Cement company based in Egypt pre-sents a case of initiating best practices in busi-ness management to cater to sustainability concerns in key areas impacting the company’s operations.

[54] Saudi Electricity company website (at http://www.se.com.sa/SEC/Arabic/

Menu/Corporate/SResponability/) accessed December 5 2013.


37Introduction

DEVELOPMENTS & CHALLENGES IN REPORTING


Adopting ESG Reporting

As seen in this report, the majority of listed compa-nies reporting from the MENA region is involved in sustainability efforts and reaping benefits from their activities. A few companies progressing on sustainability performance are indicating what the next levels of sustainability reporting and strategy are for the region. Adopting ESG reporting in or-der to address the most significant sustainability issues and linking these issues to business strate-gies are the main areas looking forward.

Similar to global trends, companies in the MENA region that substantially address important sus-tainability issues tend to address a few key dimen-sions. Among the action points which make some companies “walkers” instead of “talkers” on sus-tainability issues are: developing a sustainability strategy and business cases, making sustainability a top management issue and measuring progress on corporate sustainability performance[55].

Most listed companies reporting from the MENA region can be described as brief reporters, posting spontaneous information about their sustainabil-ity performance on their websites and sometimes in annual company reports. Unstructured, and non-data driven, reporting presents various chal-lenges to understanding the company’s sustain-ability practices such as identifying sustainability issues and tracking a company’s progress.

Nearly a quarter of brief reporters are using an-nual reports to communicate their corporate sus-tainability management practices, mainly issued by large and medium sized companies. Usually the priorities of annual reports are to communi-cate financial performance, corporate governance, quality management certifications/operations and employee development. Increasingly sections dedicated to Corporate Social Responsibility (CSR) and philanthropic activities are being added to an-nual report publications.

[55] Kiron, D. “Sustainability’s Next Frontier: Walking the talk on the sustain-

ability issues that matter most.” MIT Sloan Management Review, 2013.

39Developments & Challenges in Reporting

CORPORATE GOVERNANCE OPERATIONAL CERTIFICATION- Coordinating company performance and ESG factors to enhance product innovation, quality and service

- Gearing production and operations towards sustainability- Aligning sustainability with commercial strategies- Producing needs versus wants or expectations

- Certification achievements: ISO, HSE, OHSAS, HSEQ- Achieving operational excellence as a good corporate citizen

- Integrated quality management- Green building, sustainable urban design

HUMAN DEVELOPMENT CSR & PHILANTHROPY- Training, skills development, health and safety- Charity, emergency relief funds for employees- Social security benefits and health insurance- Nationalisation (in GCC countries)- Workplace conditions (few)- Gender equity (few)

- Donations and grants, philanthropic events or more generic social investment in community health, sports and education.

- Humanitarian relief- Donations and grants to environmental protection, local communities

- Community outreach

TABLE 3: Brief Reporters on Sustainability & Corporate Social Responsibility Issues in Annual Reports and on Websites

Integrating Environmental, Social and Govern-ance (ESG) factors in annual reports presents a huge opportunity for adopting ESG reporting with the same thoroughness as financial reporting, needed to fully assess a company’s sustainability performance. In addition, information presented along formal frameworks of reporting guidelines would help synergize companies’ efforts and help to highlight sustainability opportunities and chal-lenges. These best practices ultimately position companies’ responsibility strategies to address material sustainability issues, as extensive report-ing companies tend to do more effectively.

A few companies are utilizing this route to begin dialogue on sustainability issues, sharing snippets of their perspectives. Solidere (Lebanon) discusses material sustainability issues to the Real Estate and Construction sectors as it impacts the MENA region as well as the local site locations where the company constructs. As a sub-section in their annual report,

headline statements gave basic indications to is-sues such as producing sustainable urban building designs and the land degradation challenges along waterfront and coastal construction sites.Currently an emphasis on reporting corporate ac-tivities related to financial donations to environ-ment, health and culture as a form of social respon-sibility is a prominent reporting theme among the banking and financial services sectors for exam-ple. Only one company mentioned intentions to review internal policies related to corporate social responsibility.

Linking CSR and sustainability to business strategy would be the next step, as companies such as the Ahli Bank in Jordan, get more strategic in their ap-proach to CSR management. By developing a sus-tainability strategy with top management involve-ment and a CSR manager and budget for the first time, the company is addressing key dimensions towards actual sustainability practice.

As reported by brief reporters (base: 68) in their annual reports and on their websites.


CASE STUDY: Jordan, Banking

Corporate Responsibility Report 2012Reporting frameworks: GRI (Application Level C), Corporate Responsibility framework of Jordan Ahli Bank, planned signatory of UNGC (2013),Employees: 1,311Global operations: 4 countries

Jordan Ahli Bank is a leading local institution and one of the earliest public shareholding companies established in the country.

Approach Towards CSR Management

Jordan Ahli Bank used their corporate social re-sponsibility report 2012 to communicate the re-sults of an assessment of the bank’s CSR efforts, in order to identify a renovated direction and fo-cus areas for the bank to align its vision and busi-ness strategies with.

In an “honest self check”[56] the bank boldly decid-ed to shift their approach, which had been based on a long heritage of social contribution through different programmes and means. The bank dis-covered that “while attempting to serve as many societal causes as it could, in widely diverse areas, the CSR investments and contribution could achieve an even higher impact on society and stakeholders with a more strategic approach.”[57] The bank recognised that its’ CSR activities could be formed to achieve both more impactful busi-ness and sustainable development results.

With this new direction, Jordan Ahli Bank reports their ‘fresh way of thinking’ included a renewed corporate vision, a revamped mission statement and new corporate social responsibility strategy and focus areas.

Internally, they plan to align their operations and strategies with United Nations Global Compact (UNGC) 10 universally accepted principles in the areas of human rights, labour, environment and anti-corruption. Fi- nally, the bank’s commit-ments to “walking the talk”[58] is a focus area where it reports its direct impact on the environment and society, supported by internal, social and en-vironmental performance indicators.

[56] Ahli Bank Corporate Responsibility Report 2012

[57] Ibid.

[58] Ibid.


An air of change is driving a few MENA-based companies towards new thinking and improved approaches towards sustainability and corporate social responsibility management. While the majority of companies still tend to take a broad view of their role in tackling sustainability issues, a noticeable shift is occurring towards adopting a closer connection between the corporation and its’ operating environment as a matter of long term survival. Companies can no longer function in iso-lation of their communities.

Reviewing the information companies are com-municating on their corporate social responsibil-ity, this study noted initiatives that involve a com-pany’s core business, new commercial ventures/products or internal reengineering (operations, processes) or changing business models due to the impact of ESG factors in their operating envi-ronment. About 21 percent of firms, or 36 of the total companies surveyed are activating plans to link sustainability with their business strategies, demonstrating impressive examples. What seems to motivate these companies’ actions are aims to mitigate business risks, to create new frameworks to keep the company’s sustainability and respon-sibility activities relevant and impactful, and to communicate responsibility and commitment to company stakeholders.An analysis of companies’ reports and briefings yielded four different areas under which these initiatives are happening.

MENA companies, particularly large market cap companies, report confidence in improving prod-uct and service quality and innovation by coordi-nating company performance and ESG respon-

sibility. Aligning sustainability with commercial strategies has inspired companies to innovate their products and services to cater to new markets. For example, telecom firms developing technology so-lutions that expand communication connectivity, closing the digital divide to impact overall socio-economic and rural development, or expanding their reach into less privileged market segments and enhancing the affordable availability of their product and/or service.

Creating frameworks and adopting new ap-proaches are key efforts companies are focusing on to remain relevant and competitive. Com-panies are exerting effort into getting internal policies in place for sustainability performance. With other strategies, companies are supporting public research, private studies and education in sustainability issues that affect their business and industry. The majority of companies in the MENA region are at the stage of identifying sus-tainability issues, or relating to the environmen-tal, social, economic and governance issues most material to their business and aligning them with the company’s priority focus areas.

Moving beyond achieving certification standards (such as ISO) and recognition for operational ex-cellence as a good corporate citizen, companies are progressing towards an approach that takes pride in finding competitive business advan-tages through social and environmental protec-tion. For example, reducing industrial operations’ resource and energy needs for improved profit-ability, or implementing sustainability across the

1 Expanding Markets Product Innovation

2Developing Knowledge, Policy & Governance

3 Operational Efficiency

Linking Sustainability & Business Strategies


company’s supply chain for increased capability. Some companies are looking to achieve higher in-tegration of corporate operations and processes, including financial reporting practices and corpo-rate governance, in order to transform their sus-tainability and social responsibility management.

Achieving excellence in stakeholder engagement is an active area for a few companies developing corporate sustainability strategies. Going from

the broader view of contributing to strengthen-ing fence-line communities, companies are look-ing for opportunities for competitive advantages gained through integrating a social value propo-sition into business strategy. Companies demon-strate how their sustainability framework is built on stakeholder needs. Companies also embed sustainability into corpo-rate operations by identifying stakeholder groups (such as customers, employees, local communi-ties, civil society, suppliers and shareholders), de-termining their top issues and tailoring business strategies to address them.

22% of companies operating in the MENA region are

involved in some form of stakeholder engagement.

CHART 8: Percentage of Companies Managing Stakeholders (by Country)

4 Stakeholder Engagement


Percentage of Companies

Egypt

Morocco

UAE

Oman

Palestine

Kuwait

Lebanon

KSA

Syria

Bahrain

Iraq

Jordan

Libya

Tunisia

Algeria

Iran

Qatar

0% 100%40%20% 60% 80%


EXPANDING MARKETS

- Coordinating company performance and ESG factors to enhance product innovation, quality and service- Gearing production and operations towards sustainability- Aligning sustainability with commercial strategies- Producing needs versus wants or expectations

How Companies are Linking Sustainability with Business Strategies

KNOWLEDGE, POLICY & GOVERNANCE

- Financial donations to support issues related to own industry or sector for R&D, market research, policy development- Research to support entrepreneurship and SMEs to expand banking and capital markets- Education to improve labor and expand capital- Compliance with sustainable development regulations within the overall company vision- Formulating policies for sustainability performance- Creating frameworks to identify material sustainability issues, areas for appropriate contribution/impact- Reviewing internal policies and strategies for CSR and SR

OPERATIONAL & PROCESS EFFICIENCY

- Certification achievements: ISO, HSE, OHSAS, HSEQ- Achieving operational excellence - Developing processes and operations through environmental protection- Reducing needs (non-renewable resources, energy) in operations - Balancing economic growth, environmental protection and social responsibility to anticipate and manage business risks- Implementing sustainability across the company’s supply chain- Improved coordination of operations for transformative sustainability strategy development: reporting, financial reporting processes- Corporate Governance: Transparency, financial reporting, management- Embedding sustainability and CSR strategies in the business- Linking transparency and corporate governance to enhance company performance, risk management and delivery of ‘quality’

STAKEHOLDER ENGAGEMENT

- Embedding sustainability by identifying stakeholder groups, collecting feedback, policy development- Identifying ‘voiceless stakeholders’- Building the company’s sustainability framework based stakeholder top issues, priorities.- Strengthening communities- Labor development for industry sustainability and growth- Sustainability and responsibility as non-financial incentives to boost employee motivation and satisfaction

As reported by companies in their sustainability or annual reports or on their websites.


0 1 2 3 4 5

Morocco

UAE

KSA

Kuwait

Egypt

Lebanon

Algeria

Bahrain

Iraq

Iran

Jordan

Libya

Oman

Palestine

Syria

Qatar

CHART 9: Companies linking sustainability and business strategies (by Country)


Number of companies

Companies based in Morocco and in the UAE (see Chart 9) tend to report about integrating sustain-ability principles into their core businesses at a relatively higher rate within the MENA region. In Morocco these five companies come from varying sectors, while in the UAE banks and telecommuni-cations companies appear to invest more in their sustainability management announcing develop-ments in corporate governance and stakeholder engagement activities.

Sustainability activity among companies in other countries also demonstrates a few cases of strate-gic practices. For example, the Chadormalu Min-ing and Industrial Company in Iran mention no-table accomplishments briefly on their website, regarding ways the company is handling material sustainability issues related to the mining sector. For example, they established a dedicated research and development (R&D) unit to find ways to de-crease chemical waste and pollution (dust, waste)


CASE STUDY: Morocco, Utilities Lydec or Lyonnaise Des Eaux de Casablanca, is in-volved in electricity and water distribution in Mo-rocco, as a publicly listed company on the Casablan-ca Stock Exchange.

Synergies – Enhancing Company Responsiveness to Sustainability Concerns

Lydec describes its operating environment as fast-evolving, where their stakeholders’ expectations are stronger than ever before regarding their quality of service and commitment to their performance. To enhance their responsiveness to material issues, the company is directing new reporting and manage-ment tools that will unify and mobilize their business around common guidelines.

By launching a new business project “Synergies 2020” LYDEC aims to adopt a more participatory approach to their sustainability management to be more acces-sible and performance driven. They intend to assess the needs of all their stakeholders in greater depth and to make better use of this knowledge by using it as inputs into their strategies and also to focus on sharing insights throughout the organization.

A central aim for the company is that employees share a sustainability vision aligned with the stra-tegic objectives of the company. Eventually every employee will be aware and involved in tackling the company’s sustainability concerns and held account-able through new management procedures such as adding sustainability objectives to employee perfor-mance reviews on a quarterly or annual basis.

Activities Report 2012Reporting frameworks: - NoneLocal company

from their operations, and are conducting a study on applications of waste material in creating a new mineral product[59]. In-line with inclining expectations from sectors such as utilities, as well as telecom and banking in-dustries in the region, companies in these sectors are promptly linking sustainability and business, to stay in line with global practice. The Attijariwafa bank of Morocco for example is beginning to inte-grate national development and bank performance statistics to develop a sustainable business strategy. Linking transparency measures and other corporate governance measures to bank’s economic perfor-mance are frameworks that allow the bank greater risk management capacity but also platforms for improved product and service quality.

Grappling with high priority sustainability issues in the MENA region, related mainly to water manage-ment, energy production and urban development companies operating in the utilities sector face ris-ing demands. The LYDEC company in Morocco is implementing a business plan to transform their abilities to respond to sustainability challenges. [60]

[59] Chadormalu Mining & Industrial Company website (http://www.chadorma-

lu.com/en/about_us.aspx), accessed Nov 19 2013.

[60] Attijariwafa Bank Social Responsibility Report 2012 (Rapport de Responsa-

bilite de l’Entreprise 2012)


CASE STUDY: Oman, Telecommunications

Sustainability Report 2012First sustainability reportReporting frameworks: GRI (Application Level C)Employees: 2,875Local company

Oman Telecommunication Company (Omantel) is the country’s leading provider of telecommuni-cation services, and since the merger with Oman Mobile in 2011, has an expanded portfolio offering fixed, mobile and internet broadband services.

Recognising Responsibility

With its first sustainability report, Omantel seeks to communicate a review of its’ activities and ac-complishments as they operate in the growing Oman telecom industry. The company’s moti-vation is also derived from the recognition of re-sponsibility as a large-scale operation that has sig-nificant impact on its country’s economic growth and human development. At this time, the com-pany views Environmental Social and Govern-ance (ESG) performance reporting as a framework for organizing priorities and communicating its’ performance to large groups of stakeholders as it takes on these challenges.

As a best practice to keep their sustainability re-port relevant, they prepare a materiality matrix. Based on stakeholder engagement sessions, the company uses the matrix as a tool to benchmark the priority of topics and to appreciate the interre-lationship between the relevance of sustainability issues to external stakeholders and the potential impact on their business. Higher priority topics are reported on in more detail and supported by metrics and social performance indicators guided by the GRI index published within the report.

As seen in this report, the telecommunications industry plays a substantial role in MENA econo-mies and has potential to impact the social devel-opment of countries in which companies operate. In recognition of the impact of their large-scale operations on their country, Oman, the local company Omantel makes commitments to sus-tainability reporting.

47Introduction

CHART 10: Companies linking sustainability and business strategies (by Sector)

Industrial Goods

Media

Education

Automotive

Transportation

Technology

Retail

Oil & Gas

Mining

Health Care

Insurance

Agriculture

Financial

Chemicals

Basic Resources

Real Estate

Food Processing

Utilities

Telecom

Construction

Banks

Travel

Number of companies

00 1 2 3 4 5 6 7 8Base: All companies (170)



Data & Metric-Driven Reporting

Full reporting on sustainability performance ulti-mately lies in a company’s capacity for non-finan-cial reporting that is backed by data. About 12 firms, or 7 percent of companies studied, are kicking off initiatives to report on their corporate sustainabil-ity and responsibility along frameworks supported by quantitative indicators and analysis. Leading data reporting companies tend to be large cap firms and companies based in Morocco and the UAE, followed by Egypt.

7% of companies are providing data and metrics on their

sustainability performance.

Thinking about business sustainability along ESG factors is leading companies to identify new oppor-tunities and tackle challenges more efficiently. Sus-tainability reporting allows companies the chance to review corporate and social responsibility polic-es, identify material sustainability issues and track progress against previous commitments made on environmental, social and governance issues.

The telecommunications company Du in the UAE showcase their experience in their second annual sustainability report in this way, using metrics and KPIs to review their sustainability performance over the years.

CHART 11: Number of Companies Reporting Data (by size)

0 1 2 3 4 5 6

Large Cap Companies (6)

Medium Cap (3)

Small Cap (3)

Micro Cap Companies (0)


49Introduction

CASE STUDY: UAE, Telecommunications

Sustainable Development Report 2012Second annual sustainable development reportReporting frameworks: GRI 3.1 (Application Level B+), UNGC member (2008) Ranked first in MENA’s Standard & Poor/Hawkamah Envi-ronmental, Social and Corporate Governance Index in 2011.Employees: 1,910Local company

Du offers mobile and fixed telephony, broadband connectivity and IPTV services, as well as carrier services for businesses, with a vision “to enhance your life; anytime, anywhere.”

Executing Sustainability Strategies, Managing Per-formance

As companies, like Du, garner experience in stake-holder engagement and developing sustainability strategies, they are eager to see these plans imple-mented throughout the organization. Du uses the Balanced Scorecard (BSC), a framework that helps organizations outline key management themes and their corresponding strategic objectives and action points. The company’s CEO conducts an annual progress review of the BSC with all em-ployees, deciding how to embed sustainable devel-opment priorities into the overall corporate score-card. They use this tool to, for example, implement energy efficiency management into different busi-ness functions.

Strategic objectives are tracked through Key Per-formance Indicators (KPIs) with tangible targets at-tached, and performance is reviewed on a monthly basis. A mechanism to cascade sustainability tar-gets, employee performance appraisals are also linked to the Balanced Scorecard. Du’s Sustain-ability Report communicates quantitative results of corporate social responsibility themes material to its’ operations.

Each chapter of their Sustainability Report (cover-ing employees, customers, environment and com-munity) begins with a scorecard intended to track progress on previous commitments on key mate-rial issues. This is further supported with detailed metrics and quantitative data reporting various initiatives such as results in environmental respon-sibility regarding waste management, measuring the impact of introducing a new hazardous waste policy or the recycling rates achieved by the com-pany over the year.



CHART 12: Companies Reporting Data (by Country)

A common entry point among MENA listed com-panies is the endorsement of reporting frame-works or initiatives, particularly Global Reporting Initiative (GRI) tools such as the GRI 3.0 frame-work and corresponding index. Subscribing to the United Nations Global Compact (UNGC) is also an early stepping-stone towards more detailed re-porting that included a higher level of disclosure; since UNGC subscribers must submit communi-cation on progress (COP) reports that include their overall sustainable performance with little focus on the detail of GRI reporting for example. Moving forward, a few companies are using data to set key performance indicators (KPIs) and internal targets in ESG domains that can be monitored as an exam-ple of best practice in sustainability management.Statistical disclosure is seen as the basis to antici-pating and managing business risk. Data and met-rics can transform companies’ sustainability man-agement to be more strategic and integrated in the core business, allowing companies to benchmark and report their progress against commitments made in previous years’ sustainability reports. To improve data credibility and validation, leading reporting companies seek third party assurance, performed by external consultants, to validate data credibility as a part of their sustainability re-porting procedures. About 8 companies in our sur-

vey had the data disclosed in their sustainability reports validated externally. The most prominent benefit achieved from reporting on sustainability performance backed by data and metrics, as cited by companies engaging in the practice, is that it provides a tangible way to communicate commit-ment to their corporate social responsibility and gaining their stakeholders’ trust.

The small segment of surveyed companies in-volved in publishing full sustainability reports supported by data and tracking metrics show ten-dencies towards covering material sustainability issues relevant to their business and industry. And in relation, they also tend to be highly involved in stakeholder engagement in developing their sus-tainability strategies, and tailoring those strategies to address their needs.In the construction industry in Lebanon, Holcim Li-ban has begun reporting extensively on their mate-riality issues. They report their environmental per-formance in areas of emissions, resource materials consumption and the corporation’s water manage-ment practices. Putting high emphasis on dialogue with their stakeholders and data management, the company’s social responsibility strategy is linked to business objectives ultimately aimed at building sustainable construction for society.


0 1 2 3

Number of companies

Morocco

UAE

KSA

Kuwait

Egypt

Lebanon

Jordan

51Introduction

CASE STUDY: Lebanon, Construction & Materials

Sustainable Development Report 2012First Sustainable Development report published in 2006 (published every 3 years), Third sustain-able development reportReporting frameworks: GRI Employees: 295Multinational Corporation, local

Holcim Lebanon is a leading cement company in Lebanon and the only producer of white cement in the country, with a total annual cement production capacity of 2.5 million tons currently. Their vision is

“to provide foundations for Lebanon’s future.”

Prioritizing materiality issues and extensively re-porting sustainability performance

Holcim Lebanon employs a business risk manage-ment system (BRM), which integrates corporate risks and opportunities to address sustainability is-sues of the highest priority. The firm has been con-ducting research amongst its stakeholders since 2008, giving them an early-starter advantage. Every reporting cycle, Holcim repeats a materiality review to re-assess risks and opportunities found within stakeholder needs and expectations. Through nu-merous rounds of their materiality review, the com-pany has been able to build on their knowledge of sustainability concerns and data/information col-lection. This experience is reflected in a best practice they adopt of prioritizing material issues according to stakeholders perspectives on economic, social and environmental areas.

Holcim Lebanon provides one of the most extensive performance reports among surveyed companies regarding its progress against KPIs in environmen-tal, social and economic dimensions. Performance indicators are measured through a far-reaching monitoring programme, ensuring data accuracy and consistency.

Reliable data and information sources in the com-pany’s view are: annual plant environmental per-formance reports, management reports, annual CSR reporting material and other internal and external reports. Continuous data collection and perfor-mance measurement systems have facilitated their reporting process and credibility.



Using Reporting Guidelines

Reporting guidelines help companies to select material content and key performance indicators. More than half the companies publishing full re-ports mention the endorsement or subscription to externally developed principles, charters or initia-tives to address sustainability issues.

More than half of extensive reporters are using reporting guidelines recommended by

advisory entities.

These firms tend to employ more precise tools such as the Global Reporting Initiative’s (GRI) perfor-mance indicators and guidelines in particular GRI 3.0 and GRI 3.1. Other tools such as the UNGC’s COP, the International Finance Corporation’s (IFC) risk rating on social and environmental impact, KPMG sustainability data and Millennium Development Goals (MDGs) are also popular. A small group, that includes 11 percent of companies reviewed, are us-ing more than one framework in their reporting practices. [see Chart 13].

Adherence to guidelines is significantly higher among listed companies who are issuing full re-ports (at 50 percent), and comparatively lower, among brief reporters, at just 7 percent. Fifteen

companies or 47% of extensive reporters are acti-vating the first or second round of their sustain-ability reports while using GRI mechanisms. Com-panies in Banking and Telecommunications report along GRI guidelines most frequently. The top three countries in this regard are the UAE and Mo-rocco followed by Oman. Most companies based in Morocco are using the GRI guidelines while they report data, alongside their own sets of social per-formance indicators. In addition, the majority of companies who follow GRI guidelines also report on metrics related to sustainability issues and tend to have higher strategic involvement and stake-holder engagement in their sustainability manage-ment practice.

CHART 13: Reporting using Guidelines

Base: Extensive reporters, all companies publishing stand alone or integrated sustainability reports (32)

Popular reporting frameworks used by companies in the MENA re-gion come from the Global Reporting Initiative (GRI) and the United Nations Global Compact (UNGC)

%%

%

53Reporting

using guidelines

Using more than one framework

47Reporting

without guidelines

11

MOVING TOWARDS ENHANCED REPORTING

& STAKEHOLDER ENGAGEMENT

53Introduction

MOVING TOWARDS ENHANCED REPORTING

& STAKEHOLDER ENGAGEMENT


As more companies come to the realization that business as usual that focuses merely on bottom- line returns, will not allow them to exist in the long term, the adoption of an integrated sustain-ability management paradigm becomes more and more at- tractive. Furthermore, where good governance and accountability may not have been of high materiality pre the Arab Uprisings, these are areas that can no longer be ignored. For companies to continue to exist, specifically in post Arab Uprisings countries where stakehold-ers have found their voice, transparency and disclosure are necessary. As companies continue to tap into the innovation and increased layers of value derived from adopting sustainable practic-es across the operations of their companies and in how they interface with their external envi-ronment and surrounding community, reporting and disclosure become a natural manifestation.

In order to continue to see an increase in detailed sustainability reporting, below are recommenda- tions for a way forward:

• Continuing with current efforts of sustainabil-ity networks, industry associations, and capital market associations in raising awareness around sustainability and the business case for sustain-ability, as well as introducing frameworks of practice. In light of international research on the topic, it is also necessary for such associations to:

- Target senior management and executives since

their commitment is one of the main pre-requisites for the successful adoption of CSR/sustainability[61]

- Create sector and industry specific working groups that focus on sustainability practices within their respective industries; this is especially important given the varying areas and degrees of materiality across different sectors which translate into different needs and priorities. Sector/industry specific working groups and associations would tailor discussions and ser-vices to the needs of their respective sectors as opposed to offering a “one size fits all approach” solution that does not necessarily address sector specific materiality topics thor- oughly.

• Developing a more enabling environment with government incentives and policies that pro-mote sustainable business practice,

• Developing capital market authorities and as-sociations alongside other networks who cham-pion sustainability reporting,

• Development of platforms that allow different parties and stakeholders to voice their opinion and interact with the private sector,

• Provision of subsidized training and capacity-building initiatives by the public sector and do-nor community,

• Development of a tool kit for stakeholder en-gagement, which is integral to sustainability management, and

• Increased public recognition of companies who have applied sustainability practices across their business.

Enhanced Reporting & Stakeholder Engagement

[61] Kiron, D. “Sustainability’s Next Frontier: Walking the talk on the sustain-

ability issues that matter most.” MIT Sloan Management Review, 2013.

55

ANNEX 1. A SUMMARY OF SAMPLE FINDINGS


List of Extensive Reporting Companies CountriesAbu Dhabi National Energy Company (Taqa) UAEAgillty (Logistics) Public Warehousing KuwaitArab Potash JordanAttijariwafa Bank MoroccoBank Audi LebanonBank Muscat OmanBBK BahrainBirZeit for Pharmacutical PalestineBLC Bank LebanonBMCE Bank MoroccoCentrale Laitiere MoroccoEmaar Properties (DXB) UAEEmirates Integrated Telecommunications Company (Du) (DXB) UAEEtisalat (AD) UAEGlaxo Smith Kline EgyptHolcim Liban LebanonJordan Ahli Bank JordanKuwait Finance House KuwaitKuwait Food Company (Americana) KuwaitLYDEC MoroccoManagem MoroccoMaroc Telecom MoroccoNational Bank of Abu Dhabi UAENational Mobile Telecom (Watanyia) KSANational Bank of Kuwait KuwaitOman Telecommunication (OMANTEL) OmanOrascom Telecom Media & Technology EgyptQatar National Bank QatarSABIC KSASuez Cement EgyptUnion National Bank (AD) UAEWataniya Telecom Algerie Algeria

57Introduction

LIST OF ACRONYMS & ABBREVIATIONS

ATC Ahead of the CurveBSC Balance ScorecardBSR The Business of a Better WorldCGMP Current Good Manufacturing PracticesCSO Civil Society OrganizationsCSR Corporate Social ResponsibilityCEBC Clean Energy Business Council of the MENA DFM Dubai Financial MarketECRC Egyptian Corporate Responsibility CenterEIOD Egyptian Institute of DirectorsESG Environmental, Social & GovernanceGCC Gulf-Cooperation-CouncilGIZ Gesellschaft für Internationale ZusammenarbeitGRI Global Reporting InitiativeHSE Health, Safety & EnvironmentHSEQ Health, Safety, Environment and Qualityice_ribh Responsible & Inclusive Business HubIFC International Finance CorporationISO International Standards OrganisationKPI Key Performance IndicatorsKSA The Kingdom of Saudi ArabiaMDGs Millennium Development GoalsMENA The Middle East and North AfricaNGO Non-Governmental OrganizationOHSAS Occupational Health and Safety Management SystemR&D Research and DevelopmentSMEs Small Medium EnterprisesSOE State-Owned EnterpriseUAE The United Arab EmiratesUNGC The United Nations Global Compact


A comparative study on non-financial reporting across 17 countries in the Middle East and North Africa.

Published by GIZ2014

Communicating Corporate Responsibility

in the MENA Region