Our world, including the region we live in, is undergoing an exciting transformation as the awareness of corporate responsibility gradually grows, in-turn positively impacting the way in which we do business. While this is undoubtedly a good thing – for companies, the economy, and communities alike – conditions are ripe for organisations to embrace the concept of corporate accountability, and in-turn reap the benefits and value creation that this mind-set will generate for them and their stakeholders alike.
What exactly do we mean by corporate accountability? While it is easy to confuse the concept with corporate responsibility or corporate social responsibility, there are distinct, albeit complimentary, differences between the three. Corporate responsibility is an integral reflection of the belief that companies have a responsibility to all their stakeholders; to their employees’ welfare, their shareholders’ interests, their customers, and more broadly, to any individuals or communities they have a connection with. Corporate social responsibility, or CSR, is taking active steps to enhance the company’s positive impact on social welfare and the environment, and refers to related specific acts that go beyond regulatory requirements.
Corporate accountability, however, is used to describe a company’s commitment to be transparent in the way it accounts, reports and publically accepts responsibility for its activities, including financial, social, cultural and environmental performance – all of which are indicators of its overall sustainability. It is applicable to all companies, regardless of their size. In fact, small enterprises can arguably benefit the most from embracing the principles of corporate accountability by increasing their appeal to their investors, employees, partners and customers, which can in-turn help them grow faster and steadier than they otherwise would.
At its very heart, corporate accountability is the best tool for generating trust. Unlike reputation, which is based on an aggregate of past experiences, trust is a forward-facing metric of stakeholder expectation. And generating trust with these stakeholders is no longer simply a nice-to-have; instead it is something that is increasingly considered invaluable for businesses that aim to be sustainably successful. As Larry Light, CEO of Arcature that specialises in creating, building and managing brands, elegantly stated: “Trust is what drives profit margin and share price. It is what consumers are looking for, and what they share with one another.”
Therefore, trust, and consequently the levels of accountability and transparency that inspire it, is a critical component to driving positive change on several levels. Within the company, it generates confidence of employees in senior management. Over time, its status within the community as a trusted organisation will ensure that it is also an employer of choice – something that is especially important when encouraging young nationals across the Gulf Region to join the ranks of the Private Sector. Similarly, external stakeholders, including partners, suppliers and, crucially, customers will recognise a trusted brand as being a preferred one, and will be more likely to recommend it to their family and friends.
With Expo 2020 bright on the UAE’s horizon, our Country’s leadership is making a push for there to be greater transparency and accountability amongst the companies that operate here. There are several major boons to this:
First, by establishing the UAE as a strongly ethical, transparent place in which to do business, we are creating a nucleus for foreign investment. International businesses will be much more inclined to enter the market, either by establishing local bases, or by investing in or partnering with existing local businesses. In addition, with higher levels of confidence and a resulting lower risk premium, foreign investors will not expect or require abnormally high returns on their investments that they might otherwise seek. Naturally, this will deliver significant boosts to the economy, and will drive increased returns from the massive undertaking that the Expo 2020 is.
Second, a more vibrant economy will encourage more would-be entrepreneurs to take the plunge and start up new ventures. As is widely recognised, cultivating a culture of entrepreneurship is key to driving innovation and sustainable national growth.
Which brings us to the third, and possibly the most essential benefit: a thriving economy supported by well-governed businesses leads to much-needed job creation. The International Monetary Fund expects the GCC labour force to grow by 4 percent each year for the foreseeable future, meaning that by 2018 we will require an additional 1.6 million jobs for GCC citizens entering the labour market.
There are existing standards by which accountability can be benchmarked, and they provide a solid springboard for companies to venture in this direction. What is required, however, is a set of guidelines and standards that are specifically tailored to meet the unique requirements of our locality. This subject will be at the core of the discussions at the upcoming Pearl Initiative and United Nations Global Compact Regional Forum, which will take place in Dubai on the 16th April amongst international business leaders, representatives from UN organisations, government and civil society around the theme ‘Corporate Accountability Matters; Business Integrity and Value Creation Beyond 2015’.
In essence, corporate accountability is the greatest pathway to sustainability, surmounting the limitations and practical constraints of corporate social responsibility and corporate responsibility. That’s not to say it renders the latter two obsolete. An amalgamation of all three, steered by accountability, will doubtless prove the most robust way in which to have a significantly positive, sustainable impact on the world we live, work, and play in.
As featured in The National on 5th April 2015.