CSR in the Construction Industry

Sreya Vempatti

AESG

PO Box 1626, Dubai 2

1 Introduction

This paper aims to explore the relationship between Corporate Social Responsibility (CSR) and the construction sector, particularly in the UAE. Construction and affiliated industries such as real estate and facilities management are significant drivers of the country’s economy, and hence, studying the role of CSR in this realm and actively promoting its continued adoption could prove to have a very positive social and environmental impact.

The following research defines CSR and the most common themes among CSR definitions, explores the relationship between CSR and the construction industry, and looks at two case studies from prominent UAE construction companies.

2 What is CSR?

Corporate Social Responsibility (CSR) is a broad-ranging term that has had a multitude of definitions in academic literature, corporate reports, and general parlance. Most definitions involve social, environmental, workplace, and community initiatives that are conducted by companies in order to contribute to the local community as well as fulfill stakeholder interests.

Currently, there is no universally accepted definition for the term. Dahlsrud (2006) [1] analyzed the major CSR definitions online, as per their frequency in Google search results. The most common definition to appear was a 2001 definition from the Commission of the European Communities, which defines CSR as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” This definition incorporates all the major CSR themes, while also specifying the voluntary nature of CSR activities.

Therefore, since there are so many components in CSR strategy, it is to be expected that corporations would have varying motives for engaging in them. Garriga and Mele (2004) [2] analyzed major definitions in CSR and broke down the CSR motivations of companies into four categories:

• Instrumental – companies that merely view CSR as a public relations tool, and consequently as a way to make profit

• Political – companies that accept CSR initiatives from the perspective of being effective participants in the socio-political sphere

• Integrative – companies that are of the view that business and society co-exist, and consider CSR as a natural extension of that view

• Ethical – companies that foster CSR initiatives for purely ethical reasons

CSR in the Construction Industry

Sreya Vempatti

AESG

PO Box 1626, Dubai 3

3 CSR and the Construction Industry

Given that companies that operate in the construction industry tend to be quite large and involve several stakeholders and consultants, there is ample opportunity to create positive social, environmental, and marketplace impacts through the use of appropriate CSR initiatives.

CSR initiatives in the construction industry can be divided into two broad categories. The first group involves workplace activities such as occupational health and safety training, education, and ethical financial and supply chain practices. The second group directly concerns environmental sustainability issues, such as innovation in materials used, reductions in water and electricity usage, and effective waste management.

The UAE has a significant potential for integrating CSR into corporate practices in the construction industry, since construction activities are a major component of the country’s economic profile. There are existing initiatives launched by major construction companies in the country, and the government and private sectors have actively encouraged further initiatives through the help of specific programs.

The Dubai Chamber’s CSR Label is one such initiative by a governmental body. [3] The label is awarded to companies that demonstrate excellence in CSR practices as determined by the Chamber’s comprehensive framework. Many of the recipients of the label in the five years since its inception include large construction, real estate, and facilities management companies such as Al Futtaim Carillion, Emrill, and Six Construct. Another such platform for recognizing CSR initiatives is the CSR Arabia annual awards [4], past recipients have included Farnek and Dutco Balfour Beatty. Both the CSR label and the CSR Arabia awards are based on best management practices in CSR, which indicates that the numerous construction and facilities management companies that have been conferred with these honors are making legitimate strides in their CSR initiatives.

Overall, CSR is undergoing rapid implementation in the UAE. Since the country’s economy is extremely dynamic and involves large multinational and local companies in the construction sector, the concept of active CSR involvement has developed strongly in recent years. International standards such as the GRI, ISO 14001, and ISO 26000 are being used in corporate reports as well as project operations, and several companies have set their own CSR strategies and KPIs to monitor progress. However, one of the main challenges continues to be the fact that CSR is often not considered a serious component of business strategy, and is often done out of compulsion, which limits organisations from realizing the true business value and bottom line gains of a robust CSR strategy.

AESG

PO Box 1626, Dubai 4

4 Case Studies

Construction companies in the UAE undertake CSR initiatives across a wide range of categories. To learn more about this, two case studies were considered, that of Al Naboodah and Al Futtaim Carillion.

4.1 Al Naboodah

The Saeed and Mohammed Al Naboodah Group is a major conglomerate headquartered in the UAE, operating in a broad range of sectors including construction, real estate, logistics, and automotive. It was started in 1958 as a joint family venture, and has now evolved into a major business employing around 14,000 people. Within the construction industry in particular, the group has established itself as one of the leading players in the country, contributing towards many landmark projects such as Palm Jumeirah, Dubai Water Canal, and the Expo site.

The group’s 2015/2016 annual CSR report is available publicly and describes initiatives that the group undertook in 2015 across various realms of CSR. The following table shows a breakdown of some of the major initiatives, split into four categories. [5]

Table 1: Al Naboodah Group's CSR initiatives

Category Initiative

Environment • Recycling program in partnership with the Emirates Environmental Group

• Active participation in the Clean Up The World campaign, organized by the Dubai Municipality and United Nations Environmental Program

• Waste oil, batteries, tyres are recycled in partnership with established recycling entities

• Electricity consumption is monitored across the group to identify ways to reduce energy usage

Community • Donations, and other goods are collected in two annual drives

• Annual Ramadan Forum sponsors guest speakers and brings employees together for Iftar

CSR in the Construction Industry

Sreya Vempatti

AESG

PO Box 1626, Dubai 5

• Annual blood donation offers employees the chance to donate at several locations throughout the city

Marketplace • Supplier policies are in place for all sectors in the group, and these are updated on a quarterly basis

• Group continually reviews ethics policy and makes sure all divisions are aware of it

• Regular surveys conducted to gather customer feedback and appropriately tailor services

Workplace • Regular HSE training sessions are offered to employees

• Health and wellness camps and community competitions organized regularly in labor accommodation

• Sports committee organizes events for all employees

From the table above, it can be seen that Al Naboodah Group is active in CSR initiatives. Many of these policies are quite applicable to the construction industry, such as introducing competitions in labor accommodations and recycling materials like tyres and batteries. Since the group is a major player in the construction industry, ensuring that their suppliers also conform to certain marketplace and ethical standards has a positive spillover effect on the whole supply chain.

4.2 Al Futtaim Carillion

Al Futtaim Carillion (AFC) is a large construction and civil works company located in the UAE. It has been involved in several key projects across the country, such as the development of Yas Island, Al Bahr Towers, Festival City, and Raha Beach. The company was set up in 1999 and currently employs nearly 9,000 people.

The table below shows AFC’s major CSR activities, split across three categories. [6]

CSR in the Construction Industry

Sreya Vempatti

AESG

PO Box 1626, Dubai 6

Table 2: AFC's CSR initiatives

Category Initiative

Environment • During 2015, the company reduced its carbon footprint by 69%

• All existing operations conform to ISO 14001 standards

Community • Employees volunteered their time at Operation Smile, a non-profit organization

• AFC contributed towards Radisson Blu’s Box Appeal Campaign, which collected boxes of supplies for underprivileged workers

Marketplace • Innovation in sustainable materials, such as developing a variant of PVC made with recycled plastic

• Corporate commitment to CSR reflected in AFC’s award from Arabia CSR, and the CSR label from Dubai Chamber

Thus, AFC has been active in their approach towards CSR activities, spearheading initiatives in several categories. Initiatives like developing a new type of PVC have saved the company money, as well as contributed to more sustainable practices in the projects involved. Enforcing ISO 14001 standards across all existing projects is also a highly effective practice, since doing so ensures that each project complies with internationally mandated best practices for environmental work.

5 Conclusions

From the research conducted, it is evident that CSR is highly applicable in the construction industry. There are several areas that construction companies can choose to conduct CSR activities, ranging from occupational health and safety training to innovation in the use of materials, many of which positively contribute to profitability of the organization. The UAE has an active CSR network, as reflected in programs such as the Dubai Chamber’s CSR label and the CSR Arabia awards. These provide good incentives for companies to work towards developing more robust CSR strategies so as to achieve the dual purpose of improved market recognition as well as community involvement. Furthermore, CSR activities can directly and indirectly contribute to a country’s economic growth. For example, spearheading environmental friendly materials can give a boost to a country’s sustainability industry, contributing to the growth of sector and job creation.

Setting KPIs with measurable targets is essential for the long-term tracking of goals, and can assist with standardization and benchmarking across the industry. This could be achieved through the adoption of international standards such as ISO 14001 and ISO 26000, as well as publishing annual CSR reports as per the GRI standard. Additionally, engaging third party verification would

CSR in the Construction Industry

Sreya Vempatti

CSR in the Construction Industry

Sreya Vempatti

AESG

PO Box 1626, Dubai 7

introduce an added layer of reliability and transparency to the process, helping ensure that construction companies maintain the highest standards across all CSR practices.

Sreya is an Environmental Coordinator at AESG, working on a range of projects including EIAs, waste management strategies, and green building design. With an educational background in environmental science, geology, and urban planning, she has gained a good understanding of all three disciplines and their interplay in sustainability and environmental projects through her experience working with city government, non-profits, and private sector entities.

6 References

[1] Dahlsrud, A. (2006). How Corporate Social Responsibility is Defined: an Analysis of 37 Definitions.Corporate Social Responsibility and Environmental Management, 15, 1–13. doi:10.1002/csr.132

[2] Garriga, E., & Mele, D. (2004). Corporate Social Responsibility Theories: Mapping the Territory.Journal of Business Ethics, 53, 51–71.

[3] Dubai Chamber of Commerce. (2016, April 2). The Dubai chamber CSR label. Retrieved November 2, 2016, from http://www.dubaichamber.com/what-we-do/business-excellence/centre-for-responsible-business/the-dubai-chamber-csr-label

[4] Arabia CSR Network. Arabia CSR network. Retrieved November 2, 2016, from http://www.arabiacsrnetwork.com/

[5] Sustainability. (2016). Saeed & Mohammed Al Naboodah Group. Retrieved November 2, 2016, from http://www.alnaboodah.com/About_us/Csr.aspx

[6] Sustainability. (2007). Al Futtaim Carillion. Retrieved November 2, 2016, from http://www.afcarillion.ae/strengths/sustainability.html