Reputation And Reward: Understanding The UAE's New CSR Law For Businesses
It's here. After months in the works, the UAE's Ministry of Economy has released the first details of what has been dubbed the CSR law. The new legislation, which is part of the country's “Year of Giving” strategy, aims to promote corporate social responsibility among businesses operating in the UAE.
In mid-June, the Ministry of Economy announced 11 CSR initiatives. These include:
- CSR smart platforms: (still to be launched csr.uae.gov and csruae.com)
- National CSR Statistics
- National CSR Index
- Annual announcements of CSR results
- CSR Label: a special recognition for companies
- CSR Passport: to name five CSR excelling companies
- CSR privileges: to be afforded to CSR excelling companies
- CSR mandatory disclosure: to be incorporated in respective legislation and regulations
- Responsible procurement: to allocate a percentage of government contracts to CSR excelling companies
At first, the news was reported as a CSR tax, which wasn’t accurate as the legislation is voluntary for most companies. In other words, SMEs can opt-in. According to the Ministry, disclosure will be mandatory only for large companies. There will be no minimum spending or donating to charities as a percentage of revenues, such as was introduced in India in 2014. Section 135 of India’s Companies Act makes it mandatory for companies of a certain turnover and profitability to spend two percent of their average net profit for the past three years on CSR.
What the government hopes the legislation will lead to is a significant increase in engagement with, alignment for and support of the country's developmental, charitable and humanitarian work, both through monetary, in kind donations and volunteering. The UAE's government has adopted an approach that uses both reputation and reward to promote corporate social responsibility.
Reputation will be supported through:
- The CSR Label/Mark: Designed to recognize private sector companies that embrace CSR and reflect an outstanding contribution in the community. These awards will most likely be classified as Bronze, Silver and Gold.
- The CSR Passport: The CSR passport is a separate reward scheme in which a passport is given to companies excelling in CSR. With only a few handed out every year, the passport gives several exclusive privileges and opportunities to companies. The CSR Label/Mark is based on historical data sets, whereas the CSR passport is based on a combination of historical data and future commitments.
Whilst I don't have much information on the rewards, what I can say is that companies awarded a CSR label, CSR mark, or a CSR passport will benefit from a 5% positive weightage in the tendering process for government contracts, free extensions for business licenses, and priority in requesting government services.
And now to the measurement piece. Corporations will be rated based on a set of four criteria, including CSR policy, CSR strategy, and volunteering and contribution, either financial or in-kind, as per the scheme below. There is still no word as to whether CSR outcomes will be measured, rather than just outputs. The focus areas are UAE-tailored, and auditing will be undertaken presumably either by an independent auditor, or by both the Ministry of Economy and an independent auditor.
The process will begin in July, and businesses will have to register at www.csruae.ae to join the initiative. It’s still too early to tell how this will pan out, but here’s hoping we see more UAE businesses spearheading social initiatives in the country- that’d be something to watch out for.