The Gulf Cooperation Council has enjoyed decades of economic prosperity and rapid transformation owing to exponential revenues generated by the increase in oil prices since the mid-1990s.
Growing at an average annual rate of 10.5 per cent, and with the consolidated GDP of the region combined mounting to $1.64 trillion in 2014, the region witnessed a dramatic surge in wealth leading to other complex challenges. This was particularly apparent in 2016 when fluctuations in oil prices lead to economic volatility and other complex social and environmental issues surfaced.
Social and environmental issues are increasingly challenging the sustainability of the countries comprising the GCC. Although rife in economic fortune, in a recent report from Oliver Wyman entitled The Social Impact Imperative, pertinent issues such as youth unemployment and water depletion are highlighted as an ongoing concern, posing a possible threat to the prosperity and high standards of living for the citizens of the region.
According to the report, governments in the GCC addressed these complexities initially through the influx of oil revenue with high cost temporary measures rather than permanent solutions. With the severe fluctuation in oil prices since 2014, measures to revise the current developmental model have been taken as governments have responded to challenges by introducing ambitious reforms.
However, the government cannot action reforms alone. It is becoming increasingly apparent that the private and non-for profit sector are in dire need of aligning with governments to drive sustainability agendas in the region. Oliver Wyman’s recent report highlights initiatives led by the two sectors and the findings in the report identify that corporations are far from where they need to be in order to be effective partners with governments.
While sustainability initiatives remain low in the private and non-for profit sector, through careful and strategic planning, there are a number of corporations, foundations and NGOs that have led the agenda in fulfilling their corporate social responsibility.
In order to delve into the nature of the CSR initiatives taken by corporations, it is vital to understand the concept of CSR regionally.
With many private corporations establishing sustainable programmes today, there is a widespread misconception that corporate philanthropy equates to full ‘corporate sustainability’. While philanthropic measures are a step in the right direction, leaders of corporations are integrating sustainability into their main corporate strategy and are working towards adopting business models inclusive of sustainability visions.
The report conducted a survey focusing primarily on the UAE, Saudi Arabia and Qatar, to recognise regional efforts in sustainability. The results portrayed that a large majority (86 per cent) of decision makers across the GCC share a sense of urgency when it comes to addressing the region’s social and environmental challenges.
The findings also showed that a majority (68 per cent) of organisations report that sustainability is a priority across their leadership teams.
These positive figures are encouraging and indicate that change and action must begin with creating awareness among the senior leadership, whose vision and values shape trajectories of organisations. Currently, too many players wrongly perceive sustainability as a budget constraint. Even when a firm fully comprehends the potential short and long term benefits of sustainability, the phenomenon often seems long, difficult and full of uncertainty.
The current crisis of youth unemployment and water depletion, posing direct threats to government and citizens across the GCC might push for a systemic change. Changing social approaches can be achieved through youth-led social media campaigns across the region as well as integrating sustainability into an organisation’s DNA. The pioneers in the GCC today pose as role models for organisations with a growing interest in sustainability.
They invest copious amounts of time and resources in identifying new opportunities, building a strong value proposition and in turn implementing a strategy enhancing business benefits.
Organisations must look towards training and incentivising staff for specialised skills. These members of the management team are typically equipped to lead the transformation process across all departments of a company. Our survey identified that only 32 per cent of organisations currently have taken steps to hire new staff with expertise in sustainability.
Along with training staff, it is imperative to focus on setting up an ‘impact measurement’ structure in line with international reporting guidelines for companies to adhere to.
This initiative invokes the collaboration between policy makers and the private and non-profit sectors, as this cross-sector collaboration is crucial in determining whether countries in the GCC can respond rapidly to avoid social and environmental crises.
Furthermore, organisations can rely on external support from international networks to report their ‘measurements’ to. Bodies such as the Global Reporting Initiative, the UN Global Compact, or the London Benchmarking Group, are all equipped to provide sophisticated reporting frameworks to help organisations adopt them.
Even though comprehensive work has gone into regulatory frameworks by governments in the GCC, there is still a pressing need for closer coordination and communication to ensure government policies and initiatives meet the precise needs of their expected beneficiaries.
Greg Rung is a partner at Oliver Wyman